Alan Greenspan, the raving lunatic who was the chairman of the Federal Reserve
from 1987 until 2004 and who single-handedly rigged the Federal Reserve to
provide the financing for the biggest and most ruinous bubbles in American
history, has advised the oil-exporting gulf region to sever their currency's
ties to the dollar in order to combat inflation, which is actually a smart
thing to do since Bernanke, the raving lunatic who took over from Greenspan at
the Fed, is still creating so damned much money that the dollar is
precipitously falling in purchasing power, and any idiot country that is tying
its currency to the dollar is obviously, and stupidly, suicidal.
And how bad is inflation over there? Bloomberg quotes the Saudi's Ministry of
Economy and Planning, which said, "Saudi Arabia's inflation accelerated to a
record 7% in January as the cost of
rents and food soared, increasing pressure on the kingdom to revalue its
currency with the weak dollar. Rents jumped an annual 16.7% in January, while
food and beverage prices increased 7.9%."
JMR Patrick T has a pithy comment about that kind of silly crap: "If ye think
ye can dance with the devil, the devil will dance with you." And in light of
that, we look to Bloomberg.com to read, "Derivative trading fell 21% to US$539
trillion in the fourth quarter, the biggest drop in at least 14 years, as the
freeze in money markets reduced the need to hedge risks, the Bank for
International Settlements said."
This is made plainly horrific when one notes that global GDP, the sum total of
all the goods and services produced on the entire planet in an entire year, is
about $50 trillion. So derivative trading dropped to "only" more than 10 times
global GDP! We're freaking doomed!
And why do they do that? Darryl Schoon writes, "Hyman Minsky, the late American
economist whose predictions about capital markets were once ignored, foresaw
the current state of economic disarray - where credit-based capital markets
become increasingly fragile as increasing amounts of credit-based capital chase
fewer and fewer opportunities leading to a situation where capital is
increasingly invested in highly leveraged unsafe investments in the search for
greater returns."
And the damnable Federal Reserve created all that money, which forced all the
other central banks to create more money so that all those devalued dollars
would not cause their currencies to get so strong that their exports would be
too expensive. Now all of this money finally wound up in someone's pocket and
is looking for somewhere to go as an investment, and which is, unfortunately,
looking like it is going to produce a loss.
For example, Mish's Global Economic Trend Analysis newsletter is one of the
places you can go to see the utter calamity looming, as, "there are $45
trillion of credit default swaps out there. A default on a mere 10% would cause
an economic disaster. Unfortunately, it's guaranteed to happen."
Note the use of the word "guaranteed". There are many people who look askance
at the word "guaranteed", and for good reason, like the people who bought the
instructional pamphlet, "Overnight Success In Love! Guaranteed!" from Mogambo
Hyper-Galactic Sales Corp, and who foolishly thought that the word "guaranteed"
meant what they thought it said, rather than what I thought it said, which is
that the only thing guaranteed around here is my utter contempt at the
customers for buying such a piece of crap, who thus deserve to lose their
money, and the reason they are not loved is because they are stupid enough to
buy anything from an outfit called Mogambo Hyper-Galactic Sales Corp. in the
first place.
But Mish is right, as there is no known example, in the history of the world,
where a fiat currency was debased in a wild fractional-reserve multiplication
by the greedy banks that did NOT end badly. And 100% of the time is as close as
you can get to "guaranteed".
He goes on, "If you think the banks are a mess, try taking a quick look at the
balance sheets of companies like Lehman (NYSE:LEH) and Bear Stearns (NYSE:BSC).
These companies have balance sheets that are literally 40 times their
shareholder equity. They also own three times their equity in what is known as
'Level 3 assets' - those that can't be accurately priced, and can't even be
estimated based on a model. Level 3 is 'mark to management's best guess'."
I think Ambrose Evans-Pritchard of Telegraph.uk.co speaks for us all when he
writes under the headline, "The Federal Reserve's Rescue Has Failed" that "For
the first time since this Greek tragedy began, I am now really frightened."
Me, too, Ambrose. Me, too.
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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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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