Junior Mogambo Ranger (JMR) Brad W sent from the Ludwig von Mises Institute the
essay "Our Financial House of Cards and How to Start Replacing It With Solid
Gold", to which I say, "Hahaha! Good luck, dude!" because to think that banks
would give up their powers to create money with which to enrich themselves, or
that the US Congress would make banks stop creating more money with which
Congress can spend on itself and its nasty little friends, makes me laugh and
laugh and laugh, until my stomach hurts and I am tired of laughing, and I
realize, "Hey! This isn't funny!"
Then we read the most astonishing sentence, "Currently, untold billions more of
banks' capital now hinge on the survival of bond insurers striving to insure
more than two trillion dollars of outstanding bonds on the basis of capital of
their own of roughly
ten billion dollars."
In other words, every dollar of insurance on bonds issued by some deadbeat
governments and corporations is leveraged 200 times! Man! Talk about leverage!
Now, I am not the biggest math whiz in town, especially word problems, and it
was years later that I finally understood the apparently indecipherable
equation that someone had written in my high school year book:
"2 ugly 2 be 4 given for being such a creepy little pest and ruining everything
for everybody and it's no wonder nobody likes you." Well, 2 plus 2 two equals 4
I understand ... But ugly be given? What was THAT supposed to mean?
Well, I recognized my mother's handwriting immediately, of course, and the math
thing is still a bit of an embarrassment. But even a dolt like me can see that
if that aforementioned US$2 trillion in bonds declines in value by one-half of
one percent (0.5%) for one reason or another, all of their $10 billion in
capital is gone! Wiped out!
And this is only a couple of lousy trillions of dollar's worth of bonds! The
total value of the existing global gargantuan globular glut of derivatives is
estimated to be more than $700 trillion! Compare this stupefying fact to the
associated fact that global GDP is only about a lousy $50 trillion!
Hell, the population of the whole freaking planet is about 6 billion people,
all neatly divided into categories of either "with me" or "them", so the
derivatives market alone represents $116,666.66 per each person on the whole
freaking planet! Hahahaha! This is incomprehensible!
Naturally, I am drawn to the "666" motif, which has some very appalling
Biblical connotations, which makes everything even SCARIER, as if the very idea
of that much money being bet on derivatives wasn't enough to fry your brain
neurons at 20 feet.
But there are plenty of things that can fry your brain these days, like
CaseyResearch.com reporting that "Occupying center stage yesterday was Bad Ben
Bernanke, who for the first time uttered the dreaded 'R' word in front of
Congress, saying that the possibility of recession cannot be ruled out."
In fact, Mr Bernanke is quoted as having said, "It now appears likely that real
gross domestic product will not grow much, if at all, over the first half of
2008 and could even contract slightly."
I thought Mr Casey was going to mention the huge increases in prices. Instead
he reported something that seems so incongruous with rising prices, namely,
"Among the day's data were numbers from the Commerce Department on demand for
US-made factory goods, which dropped for the second month in a row in February,
as factory shipments hit their lowest level since September 2006. Overall
factory orders fell by 1.3%, after dropping by 2.3% in January. That exceeded
economists' expectations for a decline of only 0.7%."
Lower production, higher prices. It can only mean something bad.
The Mogambo Sez: I grow tired of saying, "Buy gold, silver and oil!" and let
their prices speak for themselves, which cruelly mock you and whisper, "See how
much money you lost because you did not buy gold, silver and oil like you
should have, you stupid nitwit?"
But I am too, too nice to call you a slovenly, stupid, lowlife, bed-wetting
low-IQ nitwit if you don't buy them in the face of overwhelming evidence to do
so. But I'm thinking it!
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
