I had thoughtfully turned off all the audible alarms to the circuits monitoring
the nefarious activities of the US Federal Reserve, but you could tell by the
way the indicator lights were furiously flashing and the recording pens were
scratching maniacally across the seismograph paper that something important was
up.
Sure enough, my paranoid suspicions were right! Federal Reserve credit, which
is the stuff that the Fed creates out of thin air that becomes Whole Freaking
Multiples (WFM) of that amount in actual money when somebody borrows this new
"larval money" from a bank, jumped a whopping US$45 billion last week!
$45 billion! In one week! One! Week!
As if my heart was not already pounding in my chest and my breath coming in
ragged gasps was not enough of a blow to my
system, I foolishly divided this $45 billion increase in Fed credit by the
fractional-reserve ratio (the part of any new deposit that a bank must keep on
hand as reserves, while remaining free to loan the rest of the new deposit),
which is currently less than 1%. This means that the Fed has, with this one
act, enabled the possible creation of (at the current fractional-reserve ratio)
another $4.5 trillion! In one week! In case you weren't paying attention
earlier, I repeat that this is in One Freaking Week (OFW)!
I comically gulp in horror, which was a bad thing to do, as I had just bitten
off a fresh mouthful of a delicious burrito, the involuntary ingestion of which
made me choke and gag, and start coughing my guts out, which was pretty
unpleasant, but which was made even MORE unpleasant by the idea that kept going
though my head, which was that "This is more than a third of gross domestic
product (GDP) in One Freaking Week (OFW)", which deserves at least two
exclamation points, which I now supply thusly: "This is more than a third of
GDP in OFW!!"
I am sure that you, as a Junior Mogambo Ranger (JMR), recognize the
significance of the two exclamation points as the punctuation of the preceding
sentence, indicating a special emphasis, probably in the "We're freaking
doomed!" vein.
Naturally, JMRs around the world realize that the secret punctuation code is
calling attention to the huge increase in Federal Reserve credit, which will
(so the Fed hopes) become a vastly increased money supply when people borrow
the new "money" and get it into circulation, which means that inflation in
consumer prices will increase horrifically as this new money is used to bid for
a static-in-the-short-run supply of goods and services, which means that the
number of people that will suffer a falling standard of living will increase
dramatically because they don't have more money with which to pay higher
prices, and then these poor people come over to my house and ask me to loan
them some money, like I am going to loan money to someone so stupid that they
do not buy gold, silver and oil when I tell them to buy them, which is "all the
time" for more than a decade, because 1997 is when Alan Greenspan, then
chairman of the disastrous Federal Reserve, started really, really, really
creating Fed credit in the books of the banks, which in turn created Whole
Freaking Multiples (WFM) of money when this credit was loaned with a marginal
fractional-reserve ratio of literally zero so that it could finance the biggest
explosion of borrowing and pandemic economic stupidity in history to inflate
huge, bankrupting bubbles in stocks, bubbles in bonds, bubbles in houses,
bubbles in consumer spending, bubbles in derivatives and bubbles in size of
government, with astonishing, towering, crushing debt, debt, debt everywhere
you look!
Now that I am all worked up, one of the other bubbles was the "college
education bubble", which is where everything intellectual was "dumbed down" and
colleges were funded with taxpayer money so that the dumbest cluck in high
school who managed to stick around long enough would be graduated and could
actually go to college on a "scholarship", whereupon to emerge with a college
degree in something easy with which to qualify as a teacher or a menial
government job unrelated to their degree, where they can do a crappy job (look
at the results!) and whine full-time until they get more wages and benefits
until, now, our "public servants" are making, on average, more than the rest of
the people who "hire" them! Servants make more than their masters! More! I
laugh mirthlessly "Hahaha!"
And a person does not have to be a paranoid, gold bug, gun nut, conspiracy
freak (like me) to see treachery in everything and rogue government agents
everywhere spying on me, shooting dangerous mind-control rays into my brain
while they root around in my computer and steal all my best porn.
In short, we are freaking doomed because the short version of the economic
history of the world is that the economy collapses and gold soars in value when
a government is so stupid, so brain-dead, so abysmally ignorant, and so
monumentally corrupt as to allow a creation of excess money and credit, like
Congress allowed the Federal Reserve to do, which paid for all the bubbles that
are now popping and handing out losses and misery by the bucketful.
But, notice, not a gold bubble! There WILL be a gold bubble, to be sure, but
the top of the bubble in gold is a lot higher than this, and so high, in fact,
that the upper limit is "infinity dollars per ounce", which is not out of the
question now that the US government is spending, and the Federal Reserve is
creating, so much money that the dollar could fall to zero value.
And anything less than "infinity dollars per ounce" for gold, when I can now
buy the stuff at less than $1,000 an ounce, makes me squeal with schoolgirl
delight, "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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