The monetarist school of economic
assassins By The Mogambo Guru
Total Fed Credit, the actual source of the
fabled Money From Thin Air (MFTA), was
surprisingly down by US$8.7 billion last week,
which is NOT the kind of thing you need if you are
trying to buy your way out of the big stinking
mess you have made. And you can believe me as a
guy who has tried to buy his way out of a lot of
embarrassing messes over the years!
First
thing you do, usually, is carefully forge your
wife's signature on some stupid forms so that you
can quietly draw down your savings or tap the
kids' college funds or something. Sure enough, the
Fed's own stash of government debt was suddenly
down another $28 billion last week, about 5% of
their total stash gone in one week, as those Fed
weenies flail around in their hysterical panic at
the mess that they have made with their ridiculous
neo-Keynesian, econometric theory and laughable
computer models.
One of the supreme
stupidities of the Federal Reserve is thinking
that there is no upper
limit on debt, and now they believe that growth in
asset prices via additional money and debt is more
important than controlling inflation in consumer
prices, which is caused by the additional money
and debt! Hahahaha! Theater of the absurd at its
best!
And it isn't just the Alan Greenspan
and Ben Bernanke weenies, but also Milton
Friedman, the "father of the monetarist school of
economics", who never saw too much debt as a
problem, and who only cautioned that the money
supply should not grow too quickly. As Darryl
Robert Schoon of drschoon.com writes:
Markets dependent on credit-based
paper money produce increasing levels of debt
until the amount of debt becomes unsustainable.
This is where we are today. The growth,
contraction and coming collapse of debt based
credit markets is Friedman's legacy, not free
markets. Friedman's theories gave bankers the
intellectual cover they needed to indebt America
beyond its ability to repay and indeed survive.
Hailed as the champion of the free market,
Milton Friedman was, instead, its leading
assassin.
As a result of all of this
monetary madness in the past year alone, the
dollar is down roughly 20% in comparative
purchasing power against key currencies! In one
year! What this means to you and me is that, on a
stand-still basis for foreign exporters, we would
have to pay prices that are 20% higher for our
imports, just for them to break even when
converting dollars back into their native
currencies! Hahaha! We pay more for things!
Welcome to the hell of a falling currency!
But there is so much panic that the Fed
and the government are doing weird things, and
sure enough, even a cursory glance at the repo
market, as made handy at 321Gold.com, shows that
absolutely astonishing sums of money are flying
around through the banks, being lent on a
short-term basis, to the tune of (hold onto your
freaking hat!) $40 billion per DAY! And more! Per
day!
And all of the money being pounded
into the economy by the federal government and the
Federal Reserve is finally making the prices of
commodities rise in a general inflation.
But with all this new money being created
by the central banks looking for somewhere to go,
the world is not producing any more commodities,
as we learn from an interview of Jimmy Rogers,
identified as a "private investor" in Barron's
this week, who says, "the commodities market
started in early 1999. But nobody had brought on
any new supply of anything in the last 25 or 30
years. The last gigantic oil field was discovered
in the 1960s. The number of acres devoted to wheat
farming has been declining for more than 30 years.
Food inventories are the lowest they've been in 60
years."
In short, be prepared for huge
inflations in food prices, and generally all
commodities, too, which will get so bad that it
will "end in a bubble and hysteria", which he
figures will peak in 2018. Maybe.
Anyway,
he summarizes that "the real problem is that our
foreign debt is increasing at a rate of $1
trillion every 15 months". Yikes! He's right!
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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