Bill Bonner notes that "Here at The Daily Reckoning ... we stand back ...
aghast ... agog ... paralyzed by the whole spectacle ... from the lunatic
assumptions of the credit bubble ... to the solemn farce now taking place in
the US Congress."
I can't actually verify this "aghast and agog" thing, although I could hear
them in there, hiding in his office with the door closed and locked, and while
I never heard anyone actually say the words "aghast" or "agog", I did hear
several people say, "Shhh! Don't open the door! He's still out there!"
But I am pretty aghast and agog, too, now that the despicable Congress has
passed a staggering US$850 billion emergency spending bill, and so I felt a
certain kinship with Mr Bonner and The Daily Reckoning people who were, as he
said, aghast and agog. As I stood there in the hallway listening to them
furtively
whispering, "Is he gone yet?" I felt alone, comforted only by the companionship
of my imaginary friends, as we were drawn together by our shared abilities to
mentally intercept coded messages from outer space directing us to eat
char-broiled steaks, various entrees containing yummy pork products and to rail
loudly against the whole stupid concept of letting the Federal Reserve expand a
fiat currency by creating excess money and credit, unlimited fractional-reserve
banking, unlimited debt, off-balance-sheet accounting, and the economic suicide
of huge collectivist governments growing like a cancer, made possible only by
the excessive creation of money, credit and credit, and only sustainable by the
continued exponential creation of more excess money and credit, and we are
tightly bonded together by our mortal dread of the terrifying inflation in
consumer prices as all of this new money and credit diffuses through the
economy.
I could hear them whispering to each other behind that closed and locked door,
and they were saying, in shocked tones, that "The Federal Reserve, on its own
initiative, began passing out the cash - $49 billion last Wednesday alone went
to the banks. That same day, the Fed lent $146 billion to investment firms. By
the time people went home for the weekend, $410 billion had passed from the Fed
to private firms. The money was lent, says the Bloomberg report, at about 2.25%
interest."
As a point of reference, I got an e-mail where Oliver Garret of Casey Research
by way of The Daily Reckoning which said, "To put this amount into perspective:
if you had spent one million dollars a day, from the birth of Christ until
today, you would have only spent about $732 billion."
This is, indeed, a lot of money, and I know two things about it: 1) I will not
get any of it; and 2) all of this new monetary inflation will cause more
inflation in prices, which will be felt as a loss of buying power of the
dollar.
And speaking of that, I have the uncanny ability to never be at a loss of words
when I can cruelly mock people who are smarter than me, better looking than me,
taller than me, richer than me and/or any other petty envy that strikes my
childish fancy at the time.
It's a gift, I guess, which unfortunately does not make up for the woeful lack
of gifts in all other areas, cruelly dashing any dreams of being a great
ballerina ("You're a man, for God's sake!"), or an artist pouring out his pain
on canvas ("That painting really sucks!"), or a great musician/composer ("Your
music sucks worse than your painting!"), or being anything ("You suck at
everything!").
So it is with great relish that this week, my Gratuitous Mogambo Attack (GMA)
is the "Economic Focus" column in The Economist magazine, this one titled "The
Resilient Dollar", which I thought would be interesting, in that not only is
the dollar strangely going up against other currencies, but still going down
against inflation, as are all the other countries in the world that are showing
positive rates of inflation, which is, oddly enough, ALL the other countries in
the world! Hahaha!
Equally weird is that gold is also paradoxically going down in price, even
though the dollar is going down in buying power because inflation is higher
than the yields the dollars can buy, and the only strength of the dirtbag
dollar is that it is appreciating against other currencies, but it is only
because those other currencies are a worse bunch of dirtbags!
The article starts off with a question about what to use as "store of value" in
these uncertain and unsettling times, and before I could jump into the
conversation and say how everybody else in the whole history of the freaking
world scrambled to get their wealth into gold and out of a depreciating
currency, they cut me off by noting that "Gold is for the really scared".
What's more, the evidence is that there are plenty of scared people, as the
price of gold "has risen by about one-fifth in the space of three weeks", and
those who produce gold bars "are struggling to keep up with demand."
In the ultimate irony, they report, "Even central banks now seem less keen to
swap gold for paper currencies"! Hmmm!
Anyway, they note, "Gold tends to do well when the dollar struggles. And there
are good reasons to be anxious about the dollar", which is a pretty flimsy
code, telling you to "go out and buy some gold, because it is going to go up in
terms of how many dollars (which increasingly nobody wants) it takes to buy one
ounce of gold, which every body wants."
Anyway, I loved the line, "Bailouts and state guarantees to shore up the system
may help, but they also strain public finances and raise concerns that the
government may be tempted to inflate away its debts by printing money." Hahaha!
Now we get to the part where I am rude and scornful. "Tempted?" Did they say
that the government "may be tempted to inflate away its debt by printing
money", when at the beginning of the article they acknowledge the existence of
a wildly expensive, historically unprecedented "rescue package"? Hahahaha!
Let me get this straight; a sudden injection of (now) more than $850 billion
into the economy to buy up bad debt and bail out the hapless owners of all that
bad debt so that they can spend this new money on other things to drive their
prices up, and they still think that the government is NOT trying to "inflate
away its debts by printing money"? Hahaha!
I have got to get a job as an editor of The Economist, hopefully with a huge
salary, fabulous benefits package and a nervous, wimpy boss who can be
intimidated by finding, for example, voodoo dolls on his desk, because they
need my help to screen for the use of the word "may" in describing the motives
of a corrupt, spendthrift, economically-ignorant, socialist government in
trying to save itself by creating more money, which everybody agrees will
gradually, faster and faster, destroy the currency until each dollar buys so
little stuff that it takes heaps of dollars to buy anything at all!
Like gold, silver and oil, all three of which will make a mockery of Fed
chairman Ben Bernanke, Congress and the financial services hustlers and con
men! Whee! Investing 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 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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