The astonishing news to me was that the US Federal Reserve has pledged to plow
US$540 billion into the money market, which is composed of very short-term
debt, which is, as I already said, pretty astonishing since the total money
market is about $3.5 trillion, and which has had (according to Doug Noland in
his Credit Bubble Bulletin) "a year-to-date expansion of $423 billion, or 16.8%
annualized". And in an odd bit of symmetry to the just-pledged $540 billion, he
goes on to report that "Money Fund assets have posted a one-year increase of
$566 billion (19.1%)." And now they need half a trillion dollars? Half a
freaking trillion?
And since we are talking about things that are astonishing, get this: Total Fed
Credit jumped by another $63.2 billion last week! I was going to try and add up
the astonishing amounts of credit
that the Fed has cooked up in the past month or so, but I am so Scared Out Of
My Freaking Mind (SOOMFM) at what I might find that my hands are shaking too
much to handle a calculator. That's my excuse, anyway, and it's a lot of work,
besides.
Naturally, being the lazy little coward that I am, I decide to simply abandon
the task and instead run like a scared little rabbit to the Mogambo Bunker Of
Invincibility (MBOI) while I still have enough coordination in my hands to lock
and bolt the door, adjust the Security Settings to "Repel Boarders" and put a
slice of pizza in the microwave with which to calm my Frazzled Freaking Nerves
(FFN) at all this monetary expansion.
Afterward, I remembered that I had intended to add up all the credit that those
filthy bastards at the Federal Reserve have created lately, and I shuddered
anew at the prospect of the work involved, and of what I would find.
But there is something in the Cosmic Force that wants me to see this, as Doug
Noland's Credit Bubble Bulletin was still on my computer, and there, big as
life, I read not only that "Federal Reserve Credit expanded another $63.2
billion to a record $1,803 billion", but that this latest whopping glop of
credit from the Fed has reached "a historic six-week increase of $915 billion."
Yow!
Almost a trillion dollars of new credit in six weeks! Gaaaahhhh! My hands now
mysteriously clenched into Mogambo Fists Of Outrage (MFOO), I am forced to
clutch a pencil between my teeth and try to laboriously calculate that if
$1,803 billion in Federal Reserve credit is up $915 billion in six weeks, then
the percentage change is, ummm, wait a minute, ummm, carry the one, ummmm,
well, the percentage change is, ummm, well, who the hell cares what the damned
stupid exact percentage is when you can just freaking LOOK at the problem to
see that TFC has about doubled? Yow! A 100% gain! In six weeks!
My brain is staggered! In six lousy weeks, all of the total credit in the
banking system created by the Fed since 1913 was almost instantly (poof!)
doubled! Gaaaahhhh! We're freaking doomed!
This is the second worst news possible, right behind finding out that getting
married and registering your marriage at the county clerk's office makes it
some kind of a binding deal that has ramifications and duties far, far beyond
what I was prepared for, and I thought she would work and I would stay at home
and watch TV all day. Maybe play a little golf and do some "social" drinking.
That kind of thing.
It sure as hell didn't work out that way, and when the kids started coming it
got a lot worse, which is ALSO something that nobody tells you about
beforehand!
But this monetary expansion thing is the stuff of nightmares, too, and one day
soon you will wake up screaming in the middle of the night, bathed in sweat,
jolted out of a nightmare of financial misery and suffering that is all but
unimaginable even to Dante, and you finally realize, "Hey! These morons at the
Fed and Congress with their ridiculous neo-Keynesian, permanent-stimulus
theories and econometric stupidities are killing me by killing my money by
creating so much of it! What is the only correct economic theory and who can I
sue to get my money back?"
The correct theory is, since you asked, the Austrian Business Cycle Theory, as
perfectly explained at Mises.org, and reinforced by Milton Friedman, who
perfectly explained that "Inflation is always and everywhere a monetary
phenomenon", which means that you, as the citizen who is forced to use an
abused fiat currency, is doubly screwed; prices are going up faster than wages,
particularly food, and you can't sue anyone.
In fact, an argument can be made that inflation in food prices is already here,
as from Florida we get the news that the Department of Families and Children
handled 1.3 million calls about getting food stamps last year, and already this
year the number of calls has doubled!
And don't get me started on foreclosures, falling earnings, falling employment,
insane levels of money and credit creation, or the horrors of inflation,
because then I will also get started yammering about how gold, silver and oil
have got to be the biggest bargains out there right now, and trust me when I
tell you that you do not want to get me started!
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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