Around here, Today's Big Burning Question (TBBQ) is "Will the stupid Mogambo
ever shut up and actually get any work done?" while I am consumed with my own
version of TBBQ, which is "Can the Federal Reserve continue to lower interest
rates forever, to zero and beyond, perhaps to negative infinity?"
You will probably agree with me that "negative interest rates" is a very
interesting theory, as is "negative infinity" and the concept of a totally flat
yield curve where all interest rates for every maturity period, from
three-month T-bills to 30-year bonds, all pay the same interest rate! Weird
stuff!
Obviously, it is something that we would have hoped would be
delved into more deeply, as the headline "Treasury Curve Flattens on
Speculation Fed May Go Beyond Cuts" seems to so richly imply.
Alas, it was not to be, and thus the fascination of theoretical "negative
interest rates" remains just another amazing artifact of mathematics, like the
artificial "consumption function" that is at the root of the econometric
neo-Keynesian crapola that is practiced by Ben Bernanke of the Federal Reserve
to actually try and guide monetary policy, which they have done to such
disastrous consequences, and which is a theory that was previously taught by
him as the actual head of the economics department of Princeton University,
where nobody in the math department or the history department ever questioned
him, his ridiculous theories, or even said, "You must be some kind of moron to
think the stupid equation-laden crap coming out of your stupid mouth is real
economics, when any semi-literate halfwit can see that the Classical and the
Austrian schools of economics are obviously right, whilst you low-wattage
'constant stimulus via deficit spending' morons are going to destroy the dollar
and the US economy with your econometric insanity!" which, I think, says all
you need to know about the intellectual prowess of Princeton University.
Instead of helping me shame Princeton for promoting the equivalence of
astrology as a science and how America is now ruined for it, I found that I had
accidentally missed the whole point of the article, and the headline "Treasury
Curve Flattens on Speculation Fed May Go Beyond Cuts" was significant in that
the important point was that the Fed "may go beyond cuts" in interest rates,
and that Ben Bernanke admitted that "there was limited room to lower rates",
and now has "suggested" that "the central bank would consider buying Treasuries
to prevent yields from rising"!!
Notice the part at the end where I added the two exclamation points as my
clever non-verbal editing way of saying, "The freaking Federal Reserve is
creating money and credit for its own use so that it can buy increasing amounts
of newly-issued Treasury bonds for itself, and other securities and assets, in
order to manipulate the supposed free market while giving the government oodles
and oodles of new money to spend because the Congressional lowlife morons have
now spent us into the grave and are so panicked that they will reflexively
respond with MORE deficit-spending for the Federal Reserve to finance by
creating the money and credit to pay for it, which will cause inflation and
economic distortions a-plenty!!!"
Notice again the use of, not two, but three exclamation points, which is again
my clever non-verbal editing way of saying, "I am freaked out at the blatant
corruption and fraud that is happening right in front of our noses by Wall
Street, Congress and the Federal Reserve, and people ought to be sending me
money with which to do emergency research into animating the dead so as to
raise an Army of the Undead to descend upon Washington, DC, and eat the brains
of anyone tainted with the stench of Congress and the Federal Reserve!"
Mr Bernanke is apparently not afraid of my threats of mobilizing an army of
vengeful zombies to send against him and his loathsome ilk, and ignoring me
completely, defiantly said that one option open to the Fed is to buy
"longer-term Treasury or agency securities on the open market in substantial
quantities", which seems really odd, coming as it does at the same time as
"International investors purchased a net US$34.6 billion of Treasury notes and
bonds in October, compared with purchases of $20.7 billion a month earlier."
Or maybe it isn't odd, as "Investors sold US stocks, corporate bonds and a
record amount of debt issued by mortgage-finance companies Fannie Mae and
Freddie Mac and other agencies, according to the Treasury."
Bloomberg quoted Suvrat Prakash of BNP Paribas Securities saying that "There is
still a lot of demand for assets at these yields. Whenever risky assets are
performing as badly as they are now, you see people flock to safe assets."
Safe? Did he say safe? Hell, yes, it's safe! It's as safe as any fiat currency
can be; if the government needs a little money to pay you back, it merely gets
its central bank to create some credit in the banks from thin air, which
becomes money when somebody borrows the money to buy the government debt!
Hahahaha! What a racket!
So, since all the world's currencies are now fiat currencies, and they can all
be easily inflated by infinite amounts until they are as worthless as a
Zimbabwean dollar, thus they are all equally as safe and ultimately as
valuable, too! Hahahaha!
About this time, you would normally expect me to switch to a rant on why this
means that you should be buying gold, silver and oil, and indeed all
commodities, but I will not, as your mere expectation proves that you
understand this stuff perfectly!
I am very proud of you, my darling Junior Mogambo Ranger (JMR)!
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
