|
-- Posted Monday, 27 March 2006 | Digg This Article
London, England Monday, March 27, 2006 --------------------- *** Pay no attention to the man behind the curtain - just keep your eyes on the easy money... *** Good news! The world really is going to hell in a hand basket... *** Bill Bonner and Howard Stern: kindred spirits?...sliding off the Leaning Tower of Pisa...and more! --------------------- Today's the big day. We get to see the new Fed chief in his splendor at the first meeting of the Federal Open Market Committee. You don't even have to peep behind the curtain to find the humbug; it's right there where you can see it. The express purpose of the Open Market Committee is to subvert the open market. Price fixing is illegal in other industries, but the honchos of central banking are allowed to collude to fix the most important price in an economy, the price of money. Every single one of them praises a free and open market. All read Adam Smith nodding their heads approvingly. None would dream of resorting to central planning on the Soviet model. But, not one of them would give up his membership in the elite centralized club of apparatchiks that determines Americans' short-term lending rates. What makes them think they can know the precise rate at which we should borrow or lend? What makes them think that their judgment is better than that of the market itself? Why can't short-term lenders and short-term borrowers get together at whatever rate they want, rather than at the rate urged by the Fed? Don't even bother to ask, dear reader. No one has an answer - save that these sages of easy money will help make sure the economy has the money it wants, rather than the money it actually has. There are times when lenders get worried, frightened, and tight. They think they see trouble coming and are reluctant to give up the bird in the hand for the two in the bush. They want to see three birds in the bush - or four. Maybe then they'll consider parting with their cash. It is at times such as these that the Fed flies to the rescue of the economy, all aflutter, with birds twittering in both fists. But, we are getting off our subject. It is Monday morning; we will have to save the influence of ornithology on central banking for later in the week. Besides, we are still in "Good News" mode and there's no good news in the Fed's work. [Ed. Note: Ah, the Fed to the rescue once again... Thanks to years of their reckless interest rate manipulations, the entire house of cards underpinning the U.S. economy cannot help but fall apart. This could be disastrous for all Americans - except the investors who were smart enough to protect themselves as early as possible: Portfolio Insurance http://www1.youreletters.com/t/347134/4459110/784548/0/
We have more good news below; in the meantime, let's turn to our currency counselor... -------------- Chris Gaffney, reporting from the EverBank world currency trading desk in St. Louis: "The focus will continue to be on the FOMC meeting. While a 0.25% rate hike is 'in the bag,' the markets will be looking to see what new Fed Chairman Ben Bernanke has to say regarding future interest rate moves." For the rest of this story, and for more insights into the markets, see today's issue of The Daily Pfennig http://dailyreckoning.com/Writers/Butler/Articles/032706.html-------------- Bill Bonner, with more rambling thoughts on this Monday morning... *** Our good news, today, carries over from last week. We were delighted to discover - in the figures from economist Walter J. Williams - that the world really is going to hell in a handcart, just as we thought it was. If they did the numbers correctly, or even as they used to do them, unemployment would be twice today's reported levels, inflation would be higher, and the GDP would be shrinking. This makes us feel better. Not that we want to the United States to go into recession - not at all - but we are pleased to see that what ought to happen...really does happen. Otherwise, we'd have to go back and examine our whole outlook on life. Maybe we'd become day traders, or put on saffron robes and join the Hare Krishna. We might even begin reading Thomas Friedman's work with admiration. We are spared! We'd hate to lose the little dignity we have left. So, we thank the gods for these little signals...these little reassurances that things still work the way they are supposed to work. And yes, we saw another hint this weekend. We stood in front of the Uffizi museum in Florence and studied a sculpture at the entrance. The "Blue Guide" explained that it represented the "eternal and inevitable triumph of virtue over evil...reminding Florentines that good behavior was always rewarded, while sin and error were always "punished" or words to that effect. Well there! That's the way it ought to be, isn't it? We looked again at the statue. It was a bronze of a beautiful woman with bare breasts and a sword in her hands about to cut off the head of some poor man. She had him on the ground, with her knee on his back and her left hand holding onto his hair. He was a goner, for sure. And, if a people spend more than they can afford...if we borrow more than we can comfortably repay...if we become too concerned with the things of this world...coveting our neighbors' houses, perhaps, or envying their big screen TVs...we will be goners, too. Now comes more bad news. First, the knockdown: New house sales fell 10.5% last month - the biggest drop in almost 10 years. Then, the knee to the back: Gasoline prices rose 15 cents in the last two weeks, says the AP. Finally, , the terrible swift sword: Personal bankruptcy filings went up 30% last year. More than two million people went broke. We can't help but like Italy's head of state, Silvio Berlusconi. Asked what he would say to poor people, he didn't lie or mumble. He stated, "I'd tell them to earn more money," he said. But what can you say to America's lower-middle classes, who are growing poorer every day? Earn more money? How? On the globalized labor market, they are already overpaid. Maybe they should learn some new skills? But what's this? "Retraining laid-off workers...for what?" asks the New York Times. We wonder too. *** Here's a comparison we've never heard before: "You probably won't like this, but Bill Bonner frequently reminds me of Howard Stern. Not in the content department, of course," writes a DR reader from Melbourne, Florida. "Stern's radio program showcases the strange and bizarre things that people will do and just stands back, watches and reports what is occurring. The Stern show does not follow conventions. It develops its own ideas and follows through on them unconcerned about anyone else's opinion. Howard Stern is nothing if not completely honest about his own life and what he observes in the world. Howard has assembled a team of people with the same sensibilities and they have a great synergy going. Sound familiar? "Bill Bonner - Howard Stern "Addison Wiggin - Robin Quivers" Heh. We're not sure if we should be offended or not... *** What a lovely place Europe is! There is now so much of it available to you, these days. This weekend was Elizabeth's birthday, so we decided to celebrate by going off to Florence. The airport in Florence is closed for repairs, so you have to fly to Pisa and then take a one-hour train ride. Ryanair offers low-cost tickets to various cities in Europe. You can fly from London to Limoges, for example, for as little as 29 pounds. Easy-Jet is another competitor in the low-cost, no frills airline business. Between the two of them, you can get around Europe easily and cheaply. The flight to Pisa was quick. We left London on Friday evening, but the airport is only a few miles from the heart of town, so we were able to check into our hotel and then go out for dinner. We offer a hotel recommendation: The Royal Victoria is a marvelous hotel. In the 10th century the Winemakers' Guild erected the oldest tower in the building. It served as an inn and as their headquarters, the "Università de' Vinajoli," which eventually became the University of Pisa. In the 16th century, when Florence overcame Pisa, the tavern became known as the "Locanda della Vittoria" (Inn of the Victory). The hotel, as it is today, was built in the 19th century (1837), and has scarcely been changed since. The rooms are a bit Spartan - not luxurious - but it is what an Italian hotel is supposed to be. And, you can get a room with a view for under $200. On Saturday morning, Elizabeth came back from her run, excited: "You won't believe it. This is more than I imagined. I mean, I've seen pictures of it, but when I saw the Leaning Tower of Pisa and the Duomo...I was stunned. There was no one there, and the white marble against the gray sky...it looks unworldly." After breakfast, we walked over. By 9:00 a.m., crowds of tourists were already forming up, but Elizabeth was right. When the tower came into view, we couldn't believe it was real. It really does lean over so much...it seems to defy gravity. It is a colossus of stone, rising what seems like hundreds of feet above the town and tilting over at a striking angle - as if it were in the middle of falling down. How come it hasn't already fallen? We don't have an answer. We bought tickets and climbed to the top. It gave us an odd sensation, marching up the stairs, listing as we rose. The marble stairs were worn by so many generations of gawkers - the handrails, too. When we finally got to the top, the sensation was startling. It felt as though you might slip and slide right off. We worried that the tower would finally come down - that some fat tourist would walk over to the sinking side. We began to think that the whole thing had remained standing all this time only by luck - waiting for that last leaf to fall, a twist of wind and weather, or a big derriere that would finally bring the whole pile crashing down. "What a way to go," said Elizabeth. "There would be something gloriously historic about it. It would be like going down with the Titanic, or getting scorched in Pompeii. Our children would have to say something every time they mentioned us: "Oh...Mom and Dad were standing on the top of the Leaning Tower of Pisa when it fell over." --- Advertisement --- The "Cure" for Medical Lawsuits - And Your Chance for 5,000% Gains! Don't risk your money in big pharmaceutical companies yet. Lawsuits are tearing apart the industry apart. Merck is facing over 9,000 lawsuits from VIOXX alone! Now one tiny biomedical company has a solution - a way to take the guesswork out of medical testing... forever! Very soon, EVERY big drug company could be knocking on its door. And that's just ONE way this stock could help you make 50 times your money - or more! Get the details here: http://www1.youreletters.com/t/347134/4459110/785905/0/ --------------------- The Daily Reckoning PRESENTS: Do you realize what the Fed has done to the value of the dollar since 1913? You don't? Never fear, the Mighty Mogambo is happy to enlighten us... FULL FAITH AND CREDIT! by The Mogambo Guru I am sitting, alone, in the Impenetrable Mogambo Bunker Of Ultimate Defensive Posture (IMBOUDP), and voices that insist they are my "family" are begging me to open the blast-proof door and at least give them back the TV remote control. So, I decide to ask them an easy question to find out if they are really my family or, as I suspect, nefarious imposters. So, I shout out, "Hey! Morons!" and someone shouts back, "We don't like being called morons, daddy!" And so, I say, "Okay, Einstein. Do you know what the Federal Reserve has done to the value of your money since the Fed was created in 1913, only faster, and faster, and faster, until you can't catch your breath anymore? Huh? Do ya, moron?" And they admit, "Well, no. But we know that's why you have locked yourself in there with the TV remote!" Triumphantly I exclaim, "Then you're all morons!" Please notice that I asked them an easy question, when I could have asked them something more difficult due to its recent-osity, such as: "Do you know how much more debt the U.S. Congress just authorized to be loaded onto our breaking backs?" The answer is, in case you were wondering, $781 billion, bringing the total official U.S. Treasury debt limit to just under nine trillion dollars. In case you, for some reason, like seeing all the zeroes, it is written out as $9,000,000,000,000.00. That's nine huge, insanely gigantic trillion dollars, which comes to roughly about $90,000 for everybody who has a job in the whole country. At 5% interest, your government will pay out $450 billion a year just in interest payments alone! Which is, again, roughly about $4,500 for everybody who has a job. Anyway, the Senate Finance Committee Chairman, Charles Grassley, who is, they say, a Republican Senator from Iowa, said that they are passing the huge increase in the national debt limit because "It is necessary to preserve the full faith and credit of the federal government." Hahahaha! Meanwhile, this same Senator and his fellow Senate buddies have also, according to the Associated Press, been working on their proposed version of next year's budget, and have "adopted a $2.8 trillion budget blueprint that anticipates deficits greater than $350 billion for both this year and next." Wait a minute! The government he so proudly represents, budgets only a $350 billion deficit for the next fiscal year and yet, the same government, at the same time, allowed the U.S. Treasury to issue $781 billion in new bonds, which is only enough to last them about a year? That is more than twice as much? Hahaha! This is too rich! "Full faith and credit!" This is the Senate Finance Committee Chairman saying this! Hahaha! "Full faith and credit!" Wiping bitter tears of laughter from my eyes, I next read that, as a kind of comic coda, Ben Bernanke, chairman of the horrid U.S. Federal Reserve, has announced that the sheer reputation of the Federal Reserve will be enough to keep interest rates lower than they otherwise would be. Hahaha! Another example of "full faith and credit." Hahaha! This is the same U.S. Federal Reserve that, last week, created another $4.7 billion in Total Fed credit, which itself is the subject of the popular Mogambo Scout campfire song, "Fount of Fiat Money from Thin Air," which ends with the famous Mogambo Death Chant (MDC): "We're all very doomed! We're all very doomed!" I laugh because this is true "theater of the absurd" at its absolute best! It reminds me of one of my first junior-management jobs, when I proudly proposed that we tell the stockholders that we are going to have a $30,000 deficit (which sounded better than "That stupid Mogambo idiot produced a loss after only three weeks on the job"), but instead, we borrow massively against the "full faith and credit" of the company to get as much cash as we could get our filthy hands on - more and more, until it added up to a fortune for each of us. Then, we all quit the stupid, now-bankrupt company and it's board of directors, and we retire in splendor! Like Senator Grassley, R-Iowa, I thought it was a great idea! Maybe my Greatest Mogambo Idea (GMI) ever! Alas, my budding career as hot shot executive and "world's youngest zillionaire" was cut tragically short by the pandemonium in the boardroom following my presentation, what with the chairman slumping in his chair, clutching his chest in pain and pointing his stupid finger at me, screaming, "He's the anti-Christ! He's the anti-Christ!" But, this Grassley dork gets re-elected time after time for the exact same thing! See? I told you everyone is always out to get me! Forbes magazine reports this as U.S. Treasury Secretary John Snow warning Congress that they had better pony up $781 in new borrowing authority because it was "critical to provide certainty to financial markets that the integrity of the obligations of the United States will not be compromised." Hahaha! Integrity? At the last possible minute the debtor got his creditors to extend more emergency credit, and this is your "integrity?" Hahahaha! Or maybe "integrity" is the government lying about inflation, which tricks somebody into loaning their money too cheaply to the lying government, and thus, the United States pays back the loans with cheaper dollars, thus screwing the lender out of precious buying power. Hahaha! "Integrity!" This is also the same U.S. Treasury that, the day after President Bush signed the enabling legislation, somehow sold $78 billion in government debt in one day, taking us from $8,270 billion in national debt to $8,348 billion! Hahaha! Ten percent of the entire increase in the debt limit, in one lousy day! Hahaha! "Integrity!" Afterwards, instead of having a cigarette and telling me that he will respect me in the morning while pressing cab fare into my hand, Mr. Snow complimented Congress for "protecting the full faith and credit of the United States" by allowing him to plunge the massively over-indebted nation further into debt by another $781 billion. Parenthetically, why $781 billion? I explain thusly: Because $780 billion would be too little, see, and $782 billion would be too much. Thus informed, you think to yourself, "Gosh! Ya think so?" Well, no, I don't, and I don't think that the Washington Post does either. They report, "Mr. Bush has managed to rack up more new debt during his five years in office than the entire debt amassed by the United States through 1988. And there is more to come: The president's budget envisions the debt rising to $11.5 trillion by 2011." Well, it looks like the President and The Mogambo disagree as to what we "envision" the national debt rising to by 2011, because I say it will be a lot higher than another $3 billion (30% higher) in five years! Look at the graph! It's exploding! We're talking another $5 or $6 trillion - at least! So much debt makes me howl like a banshee in my fury! OwwwwWWWwwww! Okay, I see that the police have arrived and are demanding that I stop screaming, "We're doomed!" over and over. They also want me to come down off the roof. My lesson plan shows that I was going to launch into a Senseless And Ceaseless Mogambo Tirade (SACMT) about how increases in debt and money lead to price inflation and economic collapse. But all is not lost! You can learn the same lesson if I turn things over to Doug Noland, of the Credit Bubble Bulletin at PrudentBear.com, who calmly reports, "The February Consumer Price Index was up 3.6% y-o-y. February Import Prices were 7.4% higher than a year ago." I pause on my way down to pay attention to the response of the crowd to this terrible news about inflation in import prices. Nothing! Instantly, I return to the studio and hit the "replay" button, and sure enough, Mr. Noland clearly and unequivocally said, "February Import Prices were 7.4% higher than a year ago." And yet, there was no response from the crowd! Somebody coughed nervously. Otherwise, it was eerily silent, except that in the background you could faintly hear The Mogambo screaming, "Noooooo - 7.4% inflation! We're doomed!" as they dragged him into the back of a police car. And then it was quiet, and finally, everyone went home. Until next week, The Mogambo Guru for The Daily Reckoning Mogambo sez: I notice that the gold lease rates posted at Kitco.com are again converging to a rough singularity. In fact, short rates are actually higher than longer rates! If this resolves like it usually does, then soon the price of gold will shoot up and the lease rate spread will widen. It works to the advantage of the market manipulators in the same way that the yen-carry trade works, except that the rate spreads in gold are easier to manipulate, move a lot more, and move a lot faster. The SEC has approved the Barclays' proposed silver Exchange Traded Fund! Let the fun(d) begin! Hahaha! But these are just mere trading observations, when the obvious truth is that any time is the right time a) to be in love, and b) to buy silver, gold, oil and damned near any commodity you can name - and for a long time, too! And you can buy both gold and silver - and not have to worry about annoyances like shipping costs and hefty storage fees - with EverBank's Metals Select. Click here for all the details: Trade Gold and Silver From the Comfort of Your Own Home http://www.everbank.com/direct.asp?idpage=pro_met_lan&referID=11639Editor's Note: 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. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. If you're inclined to read more, you'll find the whole Mogambo here: Sunshine Monetary Policy http://dailyreckoning.com/Writers/Mogambo/DREssays/MG032106.html
-- Posted Monday, 27 March 2006 | Digg This Article
Previous Articles by Bill Bonner, Chris Gaffney, & The Mogambo Guru, The Daily Reckoning
We'd like to offer you The Daily Reckoning, a FREE daily
e-mail service written by entrepreneur and master financial
newsletter publisher Bill Bonner. It offers a 'refreshingly
witty, erudite... sensible' look at the day's stock news.
One reader says The Daily Reckoning offers 'more sense in
one e-mail than a month of CNBC.'
You can begin your free
subscription by clicking
here, entering your email into the box, and
clicking 'Subscribe'.
|
