I have, as part of my Official Mogambo Duties (OMD), spent many an evening at
local bars, sampling various beverages and making goo-goo eyes at the barmaids
while waxing loud and lyrical about the ludicrous extremes of
fractional-reserve banking extant in the world today, a device where banks can
loan out huge multiples of any money deposited, keeping only a fraction of the
original deposit as reserves to insure against loans not being repaid.
As you may not know and about which I have a hard time believing myself,
voffering free economic education to stupid drunken people has not made me very
popular at these establishments, and I am starting to think I have wasted a lot
of my Precious Mogambo Time (PMT) with those losers.
I say this because I just got back from visiting one of my favorite
hangouts where I entered the place and asked, "Is everybody here upset at the
degree of fractional-reserve banking that the stinking Federal Reserve has
allowed in the banks, and how it is bankrupting banks all over the country?"
where I expected them to say, "Yes, we are worried sick about it, Glorious And
Wonderful Mogambo (GAWM), thanks to you educating about it! Let us buy you
drink after drink until you are really loaded as a way of showing our
everlasting appreciation!"
Alas, I was disappointed when they all shouted back, "No! Now shut up and go
away!"
I'll bet they would not be so rude to Chris Mayer of Capital and Crisis
newsletter, as he has the exact facts and figures that could educate those
lowlife drunken morons and, perhaps, break through to them and make them
realize the dangers!
Alas, I have tried and, obviously, failed, even though I did exit gracefully by
yelling, "You're all a bunch of stupid lowlife drunken morons, just like my
mother warned me about and my wife warns me about to this day!"
I can only imagine with a sense of joy the look of Total Mogambo Enlightenment
(TME) on their faces if I had shown those losers his newsletter where he wrote,
"The typical bank has only 4 cents of tangible equity for every dollar of
assets. That means a 4% drop in asset value wipes out the equity - making the
bank insolvent."
A drop of a lousy 4% will wipe them out! No wonder the Federal Reserve pumped
about US$60 billion into reserves at the banks last week, bringing the total to
a whopping $805.772 billion in total reserves, and it added about $76 billion
in non-borrowed reserves, bringing that total to $417.9 billion, last week
alone!
This seems like a lot of money when you realize required reserves, the money
held in cash by the bank as an insurance cushion against many trillions of
dollars in loans and deposits, is still only a laughably pitiful $61.9 billion,
although up from the ridiculous less than $50 billion in reserves that
prevailed since 2000! Hahaha!
It has all resulted in total, unmitigated failure (just like it always has, in
all the monetary booms, in all of history!), which I easily prove by merely
standing up, going over to the window, whereupon to look out upon the landscape
and, in a breathtaking performance of the story of Man, his spirit broken by
looking into the future, who is despondent to the point of crying the
heartbreaking Tears Of The Mogambo (TOTM) at the sight of such suffering and
bankrupting misery as it unfolds anew through the window!
Obviously, it is enough to thrill and chill even the most jaded theatergoer
with a blazing performance of theatrical incandescence of despair and anger
that should, in a just world, win a prestigious award of some kind just for the
way I melodramatically and memorably scream, “Nooooooooo!" as if my very soul
was in mortal torment at the prospect of the disaster of inflation in consumer
prices that will result from such insane amounts of Fed-created money, if
nothing else.
As fabulous as it is to see such a terrific performance in the category of a
short informational or educational film concerning an economic, social,
religious, race or other cult subject in a primarily documentary format, the
point is that this is all especially bad news, including anyone wanting a job
in the future, as new jobs come from expanded reserves, which come from
expanded deposits and expanded loans, expanded business investment and expanded
consumption.
As if to prove me right, although nobody can quite remember what I was talking
about, for some reason it led to Byron King writing at Whiskey and Gunpowder
that, last week, "the Fed made a shocking prediction. It forecast that the US
economy would add NO NET NEW JOBS over the next five years!"
Dan Amoss of the Strategic Short Report newsletter reports that BusinessWeek
magazine found that "the public sector of the US economy created 2.4 million
jobs over the past decade - twice as many as the private sector."
Being the gentleman that he is, Mr King does not say something Mogambo-like,
such as, "We're freaking doomed, and you are doomed, too, you moron, unless you
are building bunkers in the backyard and buying gold, silver and oil with every
dollar you can get your filthy hands on, because the dirtbag government is
going to use this lack of gains in employment as an excuse to act even MORE
insane with deficit-spending, and the Federal Reserve will, in turn, use it as
an excuse to print up the excessive amounts of fiat money and credit necessary
to pay for it all, meaning that inflation in consumer prices will destroy us
all!"
I would have ended the outburst by dramatically proving my point, repeating,
"Print up all of the fiat money and credit to pay for it all, meaning that
inflation in consumer prices will destroy us all! It’s not only Completely
Freaking True (CFT), but it even rhymes, as if to prove it all over again!
Can't you see that? Don't you see the obvious connection, you morons?"
Mr King chooses, instead, to say merely, "Whoa!"
"No net new jobs?" he asks. "That ought to scare you. The Census Bureau
predicts that the US population will grow over five years. But the numbers of
new jobs will remain static. That is, for every job gain there will be a loss."
I am particularly sensitive to losses in total jobs, having lost my own job so
many times, and ALMOST lost it many times before that, since I seem to always
get jobs with anal-retentive perfectionist Stalinists who want me to show up at
the job every day, like it is some kind of "crime" to stay up too late drinking
and partying with my hoodlum friends, and thus accidentally oversleep by a few
hours every few days.
Instead, they wanted me to get to work at the same time every morning with all
the "little people" who, herd-like, shuffle and moo as they pass the time
clock. How degrading!
And then - get this! - my bosses get all upset when I do manage to get to work
on time, and use it as an perfect opportunity to greet my fellow employees
merrily clocking in and give them - absolutely free! - the Best Financial
Advice (BFA) they ever got by telling them to buy gold, silver and oil because
their stupid government is allowing the creation of excess money and credit,
which is doing exactly what they should NOT be doing, which is why the Founding
Fathers, who were men who had the wherewithal and inclination to look into
history to discover that a fiat currency in the hands of a government
determined to spend more than it should got destroyed Every Freaking Time
(EFT).
Like most employees everywhere, they all just looked at me with that stupid,
uncomprehending bovine expression on their stupid cow-like faces, which
explains why, from then on, I always called them "moo people", which was a lot
more clever that what they called ME in return, which was simply "jerk", which
shows a serious lack of imagination in selecting nicknames.
But it takes no imagination, or even smarts, to quickly see that history is
full of examples of governments with a fiat currency getting into trouble by
creating too much of it, which always makes gold go up when priced in a fiat
currency in trouble, which makes me exclaim with undisguised glee, "Whee! This
investing stuff is easy!"
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 2009, 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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