-- Posted Thursday, 13 March 2008 | Digg This Article
| Source: GoldSeek.com
My emotions ran the gamut as I prepared to learn of the latest level of Total Fed Credit, ranging from a carefree, "What in the hell do I care? I'm rich! Or at least I will be when gold soars in response to the Inflationary Bonfires From Hell (IBFH) that the Fed is unleashing on us with their disastrous, 'the-sky's-the-limit' monetary policy!", to the distinctly more hostile, "Kill everyone and burn their houses to ashes before they can get me!", which is where you always get bogged down wrestling with that old question, "Does this include family members, too?"
So I was ready for anything, even family members trying to kill me with a pre-emptive strike (which is now, of course, legitimized as the new theory and practice of the damned federal government), when I saw that Total Fed Credit was up $6.7 billion last week, which is a hefty sum, taking the total to $873.3 billion, which may seem like a lot of money to you and me, but is apparently just chump change for the average CEO these days, no matter how incompetent.
And to help out, foreign central banks bought up another $8.6 billion in government and agency debt and stuffed it into their custody account at the Fed, bringing their total ownership of American future debt obligations and American future tax dollars, in this one account alone, to $2.15 trillion! Hahaha! We're freaking doomed!
I shake my head in bewilderment that America can wail in dismay about how slavery was common, Bible-sanctioned and perfectly legal for the last 30,000 years up until about 150 years ago, and then enact legislation bestowing wildly un-Constitutional special rights and privileges on black people and all minorities to somehow atone for it, but this same country is completely guilt-free about happily selling its children, and grandchildren, and great-grandchildren, and great-great-grandchildren into financial bondage to foreigners in exchange for some money to splurge on itself today! Hahaha!
Of course, since we are talking about hypocritical America, this is the same intellectually bankrupt country whose own Constitution literally requires that inflation in prices be zero (through the handy and fool-proof expedient of money being only coins of gold and silver), but which is a country that actually has a money that is neither gold nor silver, but instead its exact freaking opposite; a 100% phony-baloney fiat money! Hahaha! How corrupt can you freaking get?
And this fake money is multiplied over and over through unlimited fractional-reserve banking, so that the banks can take a measly $1 of a new deposit and use that as a "reserve" to make $10 of new loans, or make $100 of new loans, or make $1,000 of new loans, or $1,000,000,000 of new loans, or any number you can think of, as it is literally unlimited, and the only thing standing in their way is a lack of qualified borrowers.
And then one is terrified when one is reminded that all of that new money is actually the classical definition of "inflation", and the effect of inflation in the money supply is the disastrous inflation in consumer prices, and there are food riots everywhere, and pretty soon the desperate and the curious start nosing around the Mogambo Bunker Of Defensive Hostility (MBODH), which is the worst mistake they will have made all day and a huge expenditure in ammunition for me.
And inflation in prices will grow worse with all the slashing of interest rates by the Federal Reserve as it grows evermore desperate to administer soothing monetary palliatives as the economy thrashes painfully around in its death throes, and everybody will be dragged down, like interest rates on Certificates of Deposit going waaaAAAAaaay down, delivering a devastating whack to the wallet to people foolish enough to try and save money by buying Certificates of Deposit. Hahaha!
I laugh like this because the average rate that actual small-time savers will receive on a six-month bank CD, as reported in Barron's, is a ludicrous, laughably low 2.75%. Hell, the best-case-scenario, "official government estimate" of inflation is 4.3%! So buyers of bank Certificates of Deposit are down 1.55% from the get-go! Yikes!
So, as astonishing as it is to say, every dollar is losing purchasing power at the rate of 4.3%, but a bank CD pays a lousy 2.75%, meaning that not only is the investor taking a real (inflation adjusted) loss, but that lousy, stinking 2.75% of interest income is fully taxable, compounding your loss! Hahaha! We're freaking doomed, because this is the nation's own government and central bank doing this to people!
And the good news is that CD buyers are looking downright intelligent compared to the morons buying two-year notes, which have been bid up so high that they are nominally yielding less than 1.5%! This means that, after deducting 10% for taxes and 12% for inflation, these notes are yielding a highly NEGATIVE interest rate of over 10%! Hahaha! Morons!
In discussing possible alternatives, I am sorry to announce that the Mogambo Hedge Fund (MHF) has gone "belly up", or would have, if any investors had been stupid enough to put any real money into it. Fortunately, nobody did, and the whole thing never got past the drawing board.
Of course, that has not stopped me from trying some other scam, since investors have proved themselves to be idiots, especially when you dangle the promise of big returns. So, I have cleverly used this as a central marketing tool, and I am peddling the new Mogambo High Yield Bonds (MHYB) with an interest rate of 25%, which is higher than you get anywhere else! Anywhere!
And yet, as unbelievable as it sounds, I am unable to unload this massive issue of worthless bonds! I'm offering 25% interest, but nobody wants them!
Well, to be fair to the intelligence of the investors, it is not exactly a big secret that none of the previous issues of Mogambo High Yield Bonds (MHYB) have ever paid any money in interest payments, and in fact every previous MHYB has immediately defaulted and gone into bankruptcy and everybody lost everything, where it was subsequently revealed that this was my Mogambo Business Plan (MBP) all along; sell bonds that were worthless, and use a slow Ponzi scheme to pay myself a huge salary and benefit program with a lot of the money, as I dole out a few outsized dribbles to the early investors, saving the rest to hire lawyers to defend me against the inevitable lawsuits filed by the late investors who got nothing (Hahaha! Nothing! Suckers!) and to legally drag, drag, drag things out until the plaintiffs grow old and die or just get tired of pursuing me or something. Hahaha! What a great plan!
My legal defense is two-pronged, in that I not only claim that a Ponzi scam is the essence of most bonds these days, especially government bonds, but I also allege that the bond market is predicated on pure idiocy, because it is idiocy to think that the M3 money supply can inflate at 17% a year (Thanks, John Williams at shadowstats.com!), consumer prices can inflate at over 10% a year in real life (and at still-staggering 4.3% in "government life"), have both the CRB the PPI indexes of inflation running north of 10%, oil selling at over $100 per barrel, and yet in light of this staggering evidence of roaring inflation in prices, providing ample warning to "Keep away! Overly-expensive! Guaranteed loser! Run for your freaking life!", you are nonetheless buying 10-year bonds that yield 3.6 percent and 30-year bonds that yield less than 5 percent? Hahaha!
Pardon me for laughing, but losing purchasing power at the rate of about 10% a year to lock in a long-term return of less than 5% a year makes me squeal, "Caution; professional money manager at work"! 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. Click here to visit the Mogambo archive page.
-- Posted Thursday, 13 March 2008 | Digg This Article | Source: GoldSeek.com
