-- Posted Thursday, 1 November 2007 | Digg This Article
| Source: GoldSeek.com
I knew something was wrong when I woke up; it was quiet. Too quiet. The house was eerily quiet, and I quickly found that the wife and kids were gone, too. Gone somewhere, who knows where? Perhaps missing, perhaps abducted by extraterrestrial life forms or the CIA. Perhaps their orifices were being probed right now, as far as I know!
So I amble into the kitchen to get a cup of coffee, thankful that (for a change) nobody is yammering at me to give them money, or throwing toast or kitchen cutlery at me, and I was chuckling to myself as I wondered how their orifices liked being probed. As I pass the kitchen window, I hear my next-door neighbor say, "He's up! Run for it!" In the distance I hear wolves howling. Somehow, putting it all together, I sensed that something was amiss!
So you can imagine that I gulped audibly as I noticed that Total Fed Credit was, again, essentially unchanged, up by some relatively miniscule $757 million, as TFC seems to be relatively unchanged since the first of the year! Oops! How can you sustain booms if the Federal Reserve is not creating the excess money and credit necessary?
But the banks, as arrogant as ever, don't care what the stinking Ben Bernanke and his stupid Federal Reserve want! They are going back to business as usual! For example, the repo market took in $42 billion last Thursday! In one day!
And Total Reserves in the banks collapsed to a laughably miniscule $39.7 billion, which is money held as reserves against about $9 trillion in deposits, and loss reserves against another $9 trillion or so in outstanding loans and leases! A stinking $39.7 billion does all of that! Hahaha!
Unfortunately, as if to make matters worse, SafeHaven.com featured an essay by Charles Zentay of thinkinvest.blogspot.com, who reports that "bank capital had declined by $40 billion since the beginning of August. According to Merrill Lynch economist David Rosenburg, 'This has never happened before over such a short timeframe and this is rather serious because such a steep and sudden compression in large-bank capital has the potential to create a negative lending environment. The large banks have been forced to take commercial paper back on their balance sheets and as a result are choking on assets they did not plan on having - thereby tying up regulatory capital.'"
Fortunately, the economy can be sustained for another few days with the goodly chunk of money that came in from foreign central banks, who bought up another $12.3 billion in U.S. government and agency debt last week, taking their new total to over $2.030 trillion.
So you can imagine the heights of my delight with "Empowering the Fruitcakes", the title of an essay by Martin Hutchinson's essay at PrudentBear.com, which is both funny, profound and tragic, as, "The long world boom, driven by cheap money and resulting in high commodity prices, has had one overwhelming disadvantage: it has empowered a series of economic fruitcakes - national leaders and private sector investors who operate on principles that make no economic sense." Indeed!
For instance, the stock market! Which is rising! Even though earnings are anemic, unemployment is rising, costs are exploding, taxes are rising, and blah blah blah, one piece of Bad, Bad Economic News (BBEN) after another.
And, speaking of weird, I almost cannot believe how bond prices are rising (reducing the investor's yield) even though inflation in prices is roaring! It's insane! They are "investing" to get back less purchasing power than when they started! It's insane! Fruitcakes, indeed!
And the whole thing is made even more farcical when they are doing this after having been advised by Jim Sinclair at jsmineset.com, who has already said, "This Is It". If you ask him why he says this, he replies, "This is it because the U.S. dollar has completed a major head and shoulders bear formation, pulled back to the underside of the neckline and thereafter declining below the major support line drawn from the beginning of the big dollar bull under Chairman Paul Volcker. Volcker made the dollar and Greenspan gave it all back to Asia."
The significance of this is that "The dollar break below the recent and most important major, major support line drawn from 1980 to now is the fundamental basis which will push Gold to $1650. The US dollar is without any doubt in my mind is going to .7200, followed by .6200."
Those of you who comprehend economics will understand why this made my blood congeal in my veins, and the reason why he goes from the falling dollar to a call to action, namely "Ladies and gentlemen, prepare to defend yourselves."
In that regard, I have some good news. JMR Len M. introduces "The Magnificent Mogambo's U.S. Dollar Index Predictor." You paint a dollar sign on a rock, which you can also use to defend yourself, and (according to the instructions), "Hold the rock in an outstretched hand, making sure the rock is well away from your body, then say aloud 'Oh, Magnificent Mogambo U.S. Dollar Index Predictor, what will the dollar's value be over the long run?' then let go of the rock." It's uncanny how accurate it is! And just in time for that holiday gift-giving season, too! Hahahaha!
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Editor'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.
-- Posted Thursday, 1 November 2007 | Digg This Article | Source: GoldSeek.com
