-- Posted Thursday, 25 September 2008 | Digg This Article
| Source: GoldSeek.com
I had cleverly and wisely taken the precaution of locking myself in the Mogambo Bunker Of Screaming Homicidal Anger (MBOSHA) before gobbling a couple of handfuls of various tranquilizers and washing them down with bourbon, but even so, I was not prepared for the shock of Total Fed Credit shooting up by an historic $43 billion last week alone! Gaaaahhhh!
And this ain't no ordinary, everyday increase in credit! No, sir! This is the infamous Total Fed Credit, which is the increase in credit that appears in the banks as if by magic, which the banks can compound via the equally-infamous "fractional reserve banking" where a single dollar of deposits can be used as the "reserves" against $150 in new loans, as I surmise from the fact that Total Reserves in the banks is still a miniscule $47 billion (which is actually the highest of the last decade!) against about roughly $7,000 billion in liabilities and another $7,000 billion in loans and assets! Hahaha! We're freaking doomed!
Part or all of that, I assume, is to create the credit that creates the money that buys government debt that prevents the implosion of a monstrous deflation in asset prices, in the short-run, as from Bloomberg.com we learn that "The Treasury is selling $100 billion in short-term debt to enable the Federal Reserve to expand its balance sheet, a sign of the strains created by the biggest extension of central bank credit to financial companies since the Great Depression." Whoa!
"To enable the Federal Reserve to expand its balance sheet"? What in the hell is THAT supposed to mean? Instantly, I smelled a rat, which was a welcome change from smelling my own feet, which are always referred to in various degrees of "stench", and was soon on the aforesaid feet, screaming my head off at the outrage of it all and how all this new money is going to create inflation in prices that is going to freaking kill us all!
Then, I was midway through my opening remarks ("We're freaking doomed, you morons!"), when I realized that this new technique is too, too tasty to leave to government scumbags!
Instantly, I was out the door, into the car, careening crazily down the streets on my way to the bank! Bursting into the loan officer's office, I said, "How much money you got? I'll borrow it all!"
You should have seen the look of happiness on his face, and soon we were having a wonderful time, and everything was going along swimmingly until he wanted to know what I wanted the money for. So I explained, "First off, jerk, this is a way to enable this local bank to 'expand its balance sheet' by making a big loan to me, just like the Federal Reserve is creating the new money to buy the new debt offered by the Treasury! You're expanding your balance sheet, you moron! That's obviously all you need to know! You're expanding your damned balance sheet! So shut up and give me the money!"
Well, the loan officer is obviously a dimwitted little provincial lowlife bastard who ain't up on the latest banking wheezes, and I did not get a loan, but neither did they expand their balance sheet, so I am expecting them to call with an apology and a loan any second now.
Anyway, while I am striking out locally, the government and Fed are succeeding, as Bloomberg goes on, "The program started today with a $40 billion auction of 35-day bills" and "Another $60 billion will be sold tomorrow", although when "today" and "tomorrow" are, I do not know, as it is not important, and if you think they are, then you are detail-minded like my boss, who is always prying, "Where in the hell have you been all morning?", or "Where in the hell have you been all afternoon?", or "What in the hell is that stench in your office?"
Later on, we learn, "The proceeds will 'provide cash for use' by the Fed as it seeks to boost liquidity in credit markets struggling from $515 billion in writedowns and losses since the start of last year. The new bill auctions will help to ensure financial institutions have ready access to Treasury securities, which have been in short supply recently as firms try to maintain liquidity."
From CNN we get the news that it is not just us Americans, as "central banks around the world are pumping billions of dollars into money markets in a bid to ease the current financial turmoil", which makes sense if you are a stupid halfwit lowlife investor who is only smart enough to look at the nominal gains, but is too, too stupid to look at the real inflation-adjusted losses that you will suffer from such an expansion of the money supply.
Perhaps this foreign central bank monetary expansion crap is to what Mr. Paulson was referring when the Financial Times quotes him as saying, "I will be pressing my colleagues around the world to design similar programmes for their banks."
Anyway, the level of this particular fraud is that the world is full of corrupt morons, as it adds up to a "package of up to $247 billion" that "comes from the U.S. Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of England, the Bank of Canada and the Bank of Japan."
As if it was felt necessary, the article said, "The injection of cash, which amounts to an expansion of up to $180 billion in available funds, is an effort to fuel economic activity."
With this happy news in hand, I go back down to the bank and again burst into the loan officer's office, and say, "I know that you are hiding under your desk, you worthless bastard! So come out here and give me my loan, because not only will it 'expand your balance sheet', but you can swap pieces of my loan for worthless assets from bankrupt people! It will fuel economic activity! Now get out here and give me my money, you treacherous little coward!"
Again, not only did I not get a loan from this small-minded little coward, but we learned who is small enough to fail, and the true power of an "effort to fuel economic activity" by offering new loans to guys who can't make payments on the loans they already have!
And how does this translate into buying gold, silver and oil? Either buy it and prosper or watch and learn! Hahaha!
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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, 25 September 2008 | Digg This Article | Source: GoldSeek.com
