I woke up in the famous
Mogambo Fortress Of Paralyzing Fear (MFOPF) just
before dawn, bathed in sweat after another
restless night of nightmares about inflation. The
nightmares come in two varieties, in case you were
wondering. The first variety is that my wife,
children, family members and creditors are all
demanding that I give them more and more money,
while social workers and judges are standing
behind them, urging them on, and I am running and
running, but I can't seem to get away. Over my
shoulder I yell, "You'll never take me alive!" and
they all yell back, "That suits us fine, you
Stinking Mogambo Tightwad (SMT)! We just want your
money!" and I scream and scream and scream at the
prospect.
The other variety of nightmare
is that little microbes that look
just
like
Alan Greenspan (former chairman of the Federal
Reserve whose insane monetary policies have
destroyed the dollar and the American economy and
have condemned us, for One Big, BIG Thing (OBBT),
to death by inflation in consumer prices, and God
knows what all else, too, because there will be
lots of "elses", all of them bad) are literally
eating my internal organs, which causes an intense
pain in my wallet, and I am running from doctor to
doctor looking for a cure, but all the doctors
look like Hillary Clinton shrilly demanding
everything I own (probably because her bright idea
is to come up with more and more unfunded mandates
to force more and more healthcare providers to
provide more and more healthcare to anyone who
asks for it, whether they can pay or not, which
they can't, or they don't, which is why they all
turn to me to pay for everything, which is
probably why I am having this nightmare all the
damned time).
But now awake, I brushed the
sleep and tears from my swollen eyes and yelled
into the intercom for somebody to please bring
daddy a cup of coffee ("Or else!"), when I noticed
that it was quiet. Too quiet. And anybody who has
ever seen an old movie on TV knows that when
things are quiet, too quiet, it means danger,
mostly in the form of bullets or arrows suddenly
flying your way, at which point you turn to your
own bullets and arrows, and it's a hell of a
tussle from then on.
Sure enough, no
sooner had I decided that I did not have enough
bullets and arrows in prepared response to this
sudden quietude than I discover the reason for the
quiet; total Fed credit at the Federal Reserve was
down by US$4 billion last week! And the total
amount in this fount of miraculous credit is
seemingly stuck at $864 billion, which is not only
down for the freaking week, but is also down since
last freaking YEAR at this time!
My hands
shook so much at this news that I dropped some
bullets and arrows, which is usually a bad thing
to happen. The reason for my being so startled was
that this total Fed credit is the magical stuff
from which loanable funds magically appear on the
books of the banks, which is turned into money
when somebody borrows it from the bank.
That's how the money supply grows these
days, which means that money literally comes from
debt, as unwholesome and bizarre as that sounds,
and as unwholesome and bizarre as that actually
is. But this is not leading to one of my
Predictable, Loud And Tiresome Mogambo Editorials
(PLATME) about the absolute stupidity of the fake,
fiat money that we use as currency, or the sheer
preposterousness of allowing the banks to act so
stupidly in creating so much money and debt, or
about sheer insanity of disregarding the
requirement, per the Constitution, that money be
only of silver and gold so that money would not
lose buying power due to over-issuance of money,
mostly because that boat has sailed and now we are
freaking doomed.
Instead, this is about
the terrifying ramifications of not doing it
anymore, as seems to be the case, which is where
we find out exactly what is meant by the word
"doomed".
In short, once you get started
with an idiotic economic system like this, debt
must never stop growing because everyone owes both
the money AND interest, and that means that money
must never stop growing, even if you are just
paying the interest that is due this money that
was borrowed!
Therefore, your blood should
run cold when you see that total Fed credit, the
actual source of new dollar debt, is not growing.
As I was contemplating how my blood got suddenly
colder, I was taking a long pull from a bottle of
really cheap tequila to try and calm my ragged
nerves about this lack of additional credit thing.
It didn't work. I just got sloppy drunk.
And I dropped the bullets and arrows again, which,
fortunately, stopped it from being quiet, too
quiet. But I am still, obviously, nervous and
drunk, and for good damned reasons, too. I think
I'm going to puke, and for a lot of reasons, 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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