Drunk with absolute purchasing
power By The Mogambo Guru
As usual, I got completely sloshed before
I found the nerve to look at Total Fed Credit last
week, as those Federal Reserve weenies have
apparently made it their mission to destroy the
United States by destroying the dollar by
continually creating more and more money and
credit, which produces an increase in debt and the
money supply, which makes more dollars chase a
relatively static (in the short run) supply of
goods and services in the auction process that is
the essence of a free market, which bids up
prices, which makes everybody really grumpy
because things cost more, and then the wife and
kids come whining about how they don't have enough
money to buy all the things they want, and I tell
them "Welcome to the club, morons!" which, for
some unexplained reason, they deem an insufficient
response.
So holding one bloodshot, bleary
eye open with an oddly-benumbed finger, I see that
TFC was actually down last week,
but
only by a
piddly US$253 million, which is mostly a rounding
error as far as I can see.
This may be, as
Rick Ackerman of Rick's Picks reports, because
demand for loans is going down, so there is no
need for the Fed to create more money. But the
important thing is that more money was NOT created
out of thin air last week by the despicable
Federal Reserve, which predictably makes me aghast
and fearful, just as I thought it would, because
no matter what the Fed does now, it is too, too
little and too, too late.
But foreign
central banks, staffed as they are with idiots,
too, are still busily buying up federal government
and agency debt through their "custody" account at
the Fed, and last week they bought up another $11
billion to add to the $17 billion they bought the
week before that, which makes me howl -
aaaooooooOOOOOooow! - in outrage.
And
speaking of $17 billion, that is slightly less
than the inverse of the amount of non-borrowed
reserves at the banks! Hahaha! A negative $17.2
billion! Hahaha! Negative reserves! Hahahaha!
Idiot banks!
In short, by destroying our
money we are transforming ourselves and our
children into slaves of foreigners, who are all
evil, which you already know if you have ever
watched any movies in the "Us Versus Them Action
Flick" genre, such as any of the exciting
escapades of Bond, James Bond, or something
involving creatures from outer space landing here
and killing us with ray guns, tentacles and/or
mutant spores.
The fact that they are evil
is the reason why they want our children to be
indebted to them; and in the meantime the debt is
also a hefty club to beat us into submission about
a whole range of issues, like maybe how the Air
Force wants to buy some airplanes from Airbus, a
European aircraft manufacturer (and is therefore
riddled with foreigners, all of whom are, of
course, necessarily evil), all to the chagrin of
Boeing, which wanted the contract, and which says
that it will "appeal" that decision.
I can
see where Boeing would want to appeal, as it shows
a remarkable outbreak of common sense and sanity
in military procurement. But if Boeing wants to
win the contract, then they simply have to
redesign their airplane to give the customer what
was wanted, and slash everybody's overly-generous
wages by half or more to get the price down.
Simple!
But this is not about airplanes,
but about money, because all the money that the
Federal Reserve creates day after day after day
ends up, mostly, in the hands of foreigners,
either through the trade deficit that is running
at an unbelievable $815 billion a year, or as mere
interest payments on the money that foreigners
have loaned to us, which (since I was talking
about it) totals $2.141 trillion in government
debt in this one foreign central bank account at
the Fed alone!
Now, paying an average of
5% interest on this one stinking account, this
means that we are forking over $107 billion a year
to these foreign central banks already.
And when interest rates finally rise to
the point where the yield of bonds offsets
inflation because bond holders finally realize to
their horror that they invested a whole 14-inch
pizza and now have an asset that is only worth a
12-inch pizza, plus this little, tiny little 5%
sliver of pizza (the interest they made), they
will say, "That Disgusting Mogambo Moron (DMM) was
right! I can't believe such a raving lunatic could
be right about anything, but inflation is killing
us in general and me in particular! The purchasing
power of my money is constantly being eroded by
the Federal Reserve creating so much more money
and credit, and so it makes things cost more, and
more, and more! Oh, woe is me! What shall I do to
extricate myself from this stinking quagmire of
fiat currency and unlimited fractional-reserve
banking along with monstrous government spending
that measures almost 25% of GDP that produces
inflation in prices until I am standing here,
looking like an idiot, going bankrupt while
extolling someone as loathsome as The Mogambo?"
I straighten my necktie to hopefully
lessen my loathsomeness before answering the
question as to an alternative investment, namely
gold and silver, as history proves that everyone
always runs to precious metals at the end of the
boom and the beginning of the bust, which I can
prove with a terrific visual aid of Fred
Flintstone atop a dinosaur rigged up as a crane,
and he is mining gold! Gold! This is proof that
gold has always been valuable!
But I was
having a difficult time getting the damned display
out of my satchel, as a stupid stray cord was
twisted around the neck of a toy dinosaur, which
was jammed under the little miniskirt of Wilma
Flintstone, which I cleverly made out of Barbie
doll to complete my little stone-age tableaux. But
her little plastic feet were shaped for high-heel
shoes, and when I put them on her, she started
looking pretty good, especially after I added the
miniskirt, a lot of cheap makeup and lipstick. I
was sure it would be a hit with men, but it turned
out not to be such a big hit with either
schoolchildren ("That looks like my older
sister!") or their horrified teachers ("That looks
like my daughter!"), so I only carry her now out
of nostalgia.
So there was an awkward
silence as I cursed and struggled with the tangled
display items, which was thankfully filled when
James Turk of GoldMoney.com said that the problems
of "disappearing purchasing power" can be solved
with gold, which he proves by showing that, for
instance, "When viewed in terms of gold, the price
of crude oil is essentially unchanged throughout
the (last) six decades. It is the dollar that is
volatile, not gold."
So if people could
buy oil with gold, the price would have been
unchanged for 60 years! Wow! Now you see the
beauty of gold as money; prices never change! Your
purchasing power is absolute!
By this time
everybody is applauding Mr Turk for his terrific
suggestion, and I am sitting there looking like a
chump. Just me and Wilma. At least we have each
other.
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
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