With all the panic born of desperation happening all around us, it is not
surprising that Total Fed Credit expanded US$8.5 billion last week, taking us
back to $867 billion of pure bank credit, which was turned into money when
somebody borrowed it from a bank, increasing the money supply and providing the
financing for inflation in prices. Wonderful. Just freaking wonderful.
Interestingly, even with this latest boost, growth in TFC is still slowing,
which would be obvious if we plotted the thing out on logarithmic graph paper,
which I don't do partly because I don't understand logarithmic graph paper but
mostly because it would
mean doing actual work. And since I am already not doing work I am supposed to
be doing because I am lazy, screw that!
But if TFC was plotted out on this mysterious logarithmic paper, the line on
the graph would be sloping down, even though the line on the familiar linear
graph of TFC would still be going up! One graph of Total Fed Credit is going
down while the other is going up! Weird! People want to know, "What can it
mean?"
It can mean a lot of things, I guess, but mostly it means that money is still
being created, although it is not being created as fast as it is usually being
created, probably thanks to me personally calling the Federal Reserve all the
time so that I can clue them into how economics really works, since they seem
to be so clueless.
And to let the receptionist know right off the bat that I am a force to be
reckoned with and that I know what I am talking about, I always demand to speak
to, "Fed Chairman Ben Bernanke, the idiotic neo-Keynesian econometric halfwit
loser who is in charge of handling the disastrous inflationary consequences of
his damnable predecessor, the satanic Alan Greenspan!"
Well, I never actually got through to Mr Bernanke, but I am sure that I am
having an effect at the Fed, because just as the receptionist is putting me on
hold, I can hear her saying, "It's him! That Lunatic Mogambo Moron (LMM) is on
line six!"
But we are not here to talk about how I can't get through to the dim bulb
chairman, or how the receptionist staff at the Fed has a pool where they place
bets on how long I will stay on hold before hanging up in disgust, how long
before I start making disgusting slurping noises while eating or drinking
something, and I hear there is also a long-shot side-bet of "audible fart". No,
we were talking about how the linear graph of Total Fed Credit is going up,
meaning that more money is being created, but the logarithmic graph of Total
Fed Credit is going down, indicating that the rate of money creation is going
down.
And since almost every dollar in existence was created out of thin air at the
instant someone borrowed from a bank (as that is the bizarre kind of economy
that we have in the United States), every one of these borrowers was then
obligated to pay back more than was borrowed, and all that interest compounds
and compounds, which means that the money supply must keep growing in a
geometric fashion forever, too, compounding and compounding.
But irrespective of whether it does or it does not, you should be getting very
panicky about this monetary crap, and you should be buying as much silver, gold
and commodities (like oil) as you can get your frightened, grubby mitts on,
thus getting rid of the little bit of dollar-money you have left over after
building an expensive fortified bunker in the back yard, and supplying that
sucker with armaments, stored food and beverages, because a money supply that
grows in a compounding fashion like that makes consumer prices rise in a
corresponding geometric manner, which causes social unrest, such as we see in
the headline at NYTimes.com, "Rising Inflation Creates Unease in Middle East".
The article starts right off with, "Even as it enriches Arab rulers, the recent
oil-price boom is helping to fuel an extraordinary rise in the cost of food and
other basic goods that is squeezing this region's middle class and setting off
strikes, demonstrations and occasional riots from Morocco to the Persian Gulf",
and, "In Yemen, prices for bread and other foods have nearly doubled in the
past four months, setting off a string of demonstrations and riots in which at
least a dozen people were killed." Killed!
The good news is that none of the killed people were named Mogambo, so I'm OK,
and the difference between them and The Mogambo is that one has a bunker, gold
and some serious firepower, and at least a dozens others don't.
There is a lesson there for all of us!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
