-- Posted Thursday, 5 June 2008 | Digg This Article
| Source: GoldSeek.com
My feet hit the floor at almost the same instant alarms starting clanging in the famed Mogambo Bunker Of Iron And Steel (MBOIAS), which is a stupid name, I know, but it sounds so manly: "iron and steel"!
Think of Tennessee Ernie Ford singing, "One fist of iron and the other of steel, if the right one don't get you, then the left one will. I loaded sixteen tons, and what do you get? Another day older and deeper in debt", which seems so, so apropos to the workaholic, debt-crippled, debt-addled, debt-besotted idiocy of America, thanks to the loathsome entity called the Federal Reserve, which is directly responsible for the roaring inflation and the crippling debt, because the Fed created all the money that made it possible!
And at interest rates so low that they were less than the rate of inflation, which made the attraction of debt to finance mindless consumption so overwhelming that people could not stop themselves! Hahahaha!
I smile that famous Mogambo Enigmatic Smile (MES) that bespeaks volumes, mostly signaling an upset stomach, diarrhea or a resigned acceptance of, "We're freaking doomed!"; and we are, truly, doomed because we are idiots who believed the stupidity that crushing ourselves under a mountain of debt to finance gluttonous final consumption and a welfare state produces national and personal wealth! Hahahaha!
But without looking at the alarm system, I knew what was causing the problem; Total Fed Credit shot up again, which is the source of all that excess money and credit. Inflation in prices is higher than it has been for decades, thanks to unremitting creation of money and credit by the Federal Reserve, and here they are making it worse!
Stumbling to turn off the damned blaring alarms that were painfully reminding me that I had a killer hangover, I looked at TFC and saw, with horror, that I was right; it was up $6.8 billion last week, which is made clearly alarming when you realize that in the last 12 months, TFC was only up $24 billion. In a year! And now, suddenly, it is up $6.8 billion last week! Up by more than a quarter! Almost a third! Yow!
But that was not the only thing that was causing mayhem with the Mogambo Economic Alarm System (MEAS), as the Federal Reserve itself sold off another $11 billion of its government debt last week! Yikes! And foreign central banks bought up a whopping $16 billion of government and agency debt through their accounts at the Fed!
Before I could get off another comment like, "What in the hell is going on in this brain-damaged country?", I was stunned to note that non-borrowed reserves in the banks are still a negative $111 billion, while total reserves are still only $42 billion, which is so bizarre a concept that I cannot even begin to comprehend it, as it sounds like money goes backward to anti-money in an inter-dimensional time-warp or something.
Anyway, I get dizzy when I try to think it through, and then I fall off the bar stool and the bartender says, "That's enough for you, you Drunken Mogambo Bastard (DMB)!" and I tell him, "No, I am not that drunk yet! I just get dizzy from trying to understand how $42 billion in reserves in the banks is possible with non-borrowed reserves being a negative $111 billion! What does it mean?"
He says, snatching my glass away, "It means you've had enough, you weirdo!"
Well, you can imagine that my mood was suddenly soured, not made any better by noting that there seems to be a lot of this "mood souring" going around, as MarketWatch.com reports that "U.S. consumer sentiment dropped in May to the lowest level in 28 years as worries about inflation grew, according to the University of Michigan/Reuters consumer sentiment index. The UMich index fell to 59.8 in May from 62.6 in April, the lowest since June 1980."
And what happened in 1980? Hahaha! Volcker had to jack interest rates to 15%, and more, to eliminate the raging 14% inflation in prices, like we are having right now, that was caused by massive government spending, like we are having right now, which brings us to the point that the Treasury reported that the federal deficit (spending higher than income) hit a new high of $311 billion for the first half of the government's fiscal year! Yikes!
And the reason? Falling corporate profits and the tax revenues, as "Taxes on corporate income decreased $36.9 billion in the first quarter, compared with a decrease of $15.0 billion in the fourth", which is to be expected when "Profits before tax decreased $133.3 billion in the first quarter, in contrast to an increase of $0.2 billion in the fourth." Wow!
This brings up the other point that makes me Grind My Teeth In Anguish (GMTIA), which is that the federal government is borrowing and spending us to an early grave, as the increase in the Gross Public Debt (the national debt) in the last 12 months is reported as $571 billion, taking the government's total official indebtedness to $9.39 trillion, which is $93,900 per non-government worker in the country, and at 4% interest, is $3,756 per non-government worker per year just to pay the interest!
And now we are looking at $622 billion more debt this year? Gaaaahhh! We're freaking doomed!
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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, 5 June 2008 | Digg This Article | Source: GoldSeek.com
