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Magic Bullet for T-Bonds

The SCW to HTC as QEII strikes the Treasury bond market...

THERE ARE many difficulties associated with being lazy and inattentive like me, such as superficially interpreting the title "Gold Vs Treasuries: Which Do You Believe?" – which is an essay by Michael Pento, Senior Economist of Euro Pacific Capital – writes the Mogambo Guru in Tampa, Florida for The Daily Reckoning.

This title is initially perplexing to me, because neither Gold Bullion nor Treasury debt obligations have voices with which to speak any truths or lies, which means it is some kind of metaphor that I don't immediately understand. I was going to make a big stink out of Mr. Pento's insensitivity to us dimwits out here – who, as we say, "ain't so bright."

Perhaps this is why he soon changes his approach. He writes, "Bonds are flashing a warning sign of deflation, while gold and the Dollar presage hyperinflation," which leaves unanswered the question of why bonds are "flashing," but gold and the Dollar merely "presage."

Naturally, I consider this to be a Secret Code Word (SCW) surreptitiously placed there by the Mogambo Guru to indicate the need to immediately buy as much gold, silver and oil as we can...except that I am the Mogambo, and I didn't put it there, which indicates either some weird kind of telepathic ESP or another mix-up in my medications. I dunno.

Anyway, Pento goes on:

"Today, the environment is similar to what the country confronted 30 years ago. Like then, our monetary base has surged – but this time even faster. Instead of merely doubling in eight years as it did under Burns' watch, Alan Greenspan and Ben Bernanke have tripled the base in twelve years (from $621 billion in 2000 to over $2 trillion today).

"Accordingly, the Dollar price of gold has more than quadrupled, from $280 per ounce in 2000 to over $1300 today. Over that time, the Dollar has registered a 35% drop in value. However, in stark contrast to 1980, the yield on the 10-year Treasury note has collapsed from 6.6% in 2000 to less than 2.4% today."

That T-notes have been bid up so high that they have an effective yield of 2.4% when inflation is running north of 5% is an indication of several things. One is that a humongous clot of money being created by the Federal Reserve was being used to buy all that Treasury debt, which increased the national debt by an astounding $1.7 trillion in the last 12 months.

Another thing it means is that bond buyers are morons. As an article titled "The Magic Bullet" in The Economist puts it:

"Traders see the central banks as putting a floor under bond prices. So QE is a kind of magic bullet, helping all asset prices to rise. That may help to explain why gold and Treasury bonds both performed so strongly in the third quarter, an unusual combination."

This is a statistical oddity, as it turns out that there were "only four other quarters since 1980 when gold, equities and Treasury bonds have strengthened simultaneously."

So, four times in 30 years certainly seems like one of those "outlier" events, but before you get carried away with computing probabilities and all the rest of that statistical mumbo-jumbo, Dhaval Joshi of RAB Capital says that "the four previous periods of triple strength since 1980 were all followed by falls in Treasury-bond prices."

And it also turns out that equities and stocks usually perform inversely to one another, which means that as bonds go up, stocks are going to Hit The Crapper (HTC), and gold and silver will soar, soar, soar in price in the confusion and panic of the bonfire of the stupidities!

This makes it all so, so easy that I literally roar in delight, "Whee! This investing stuff is easy!"

Buying Gold today...?

Terrifying New Central Bankers

Yikes! The Fed's new nominee sparks an MHOA...

I KNEW THE INSTANT that I read the article's title, "Fed Nominees Seek Economic Boost", in the Wall Street Journal, that I was probably going to be outraged and end up screaming a fearful and angry Mogambo Howl Of Anger (MHOA), says the Mogambo Guru in Tampa, Florida, writing for The Daily Reckoning.

It was, alas, a feeling of doom that soon gave way to stark fear when I saw that the accompanying photo was captioned "Fed nominees – Janet Yellen, Peter Diamond and Sarah Bloom Raskin – at a Senate hearing Thursday."

I am already petrified of this Yellen woman and the horrifying things that she has said over the years, and probably done, for all I know, and maybe far worse than even I expect. In fact, I am so distrustful of the "sacrificing the minority to benefit the majority" insanity that I am sure that they would have no qualms about killing all the first-born sons if it meant a higher standard of living for the remaining population, a proud tradition she perpetuates when she embarrasses herself by testifying:

"Over the next few years, the Fed must craft policies that ensure that our economy accelerates its progress along the recovery path it has begun to trace."

Yikes!

Because I was paying so much attention to my sudden crushing chest pains and my left arm going numb at what she said, and the fearful inflationary implications thereof, I was not sure if my hands were shaking at the prospect of the Fed creating enough money to "ensure that our economy accelerates."

So I stood up, raised my hands and loudly asked, "Hey! Are my hands shaking?"

Well, almost everyone said something rude along the lines of, "Shut up, you creepy little weirdo" or, "Hey! I'm on the phone here, moron!" but a few acknowledged that, yes, my hands were shaking. So I said:

"Of course my hands are shaking, you morons! Yours should be, too, when you read about the staggering amount of money and credit that the Federal Reserve is willing to create, according to this horrid woman, which is sufficient to be deemed 'all the help that the Fed can provide over the coming year,' which is a truly terrifying thing for those of us who fear the terrible miseries of inflation in consumer prices that such monstrous inflation in the money supply will bring!"

Well, everyone went back to work, most of them shaking their heads and muttering under their breath, so I went back to reading the article, and saw that Ms. Yellen apparently mentioned something along the lines of, "the Fed achieved price stability for a generation," which made me want to laugh, and would have, too, if I wasn't so angry that I was grinding my teeth together so hard that sparks were flying out of my mouth.

So, to distract myself, I looked up the definition of "generation" and found that a "generation" is 30 years, which really, REALLY makes me want to laugh that Ms. Yellen would be so boldly, so brazenly, so bereft of brains that she would DARE say that the Fed has achieved price stability for 30 years!

Even the Bureau of Labor Statistics calculator shows that $1 in 1980, 30 years ago, had the buying power of $2.65 today! That's 3.3% a year, compounding for 30 years, for crying out loud!

As Exhibit A in my persecution of Ms. Yellen, according to thepeoplehistory.com, "In 1980 the average cost of new car was $7,210.00," and now the average cost of a new car in the United States is $28,400, according to the National Automobile Dealers Association.

I apologize for bringing up the cost of cars because you and I both know that the car we really, really want is not an "average car" that costs $28,400, but one that costs at least $75,000, and usually more, lots more. Of course, we can't afford either of them, like we are some kind of big-shots who could even afford the insurance on a snazzy ride like that, which we find, after careful research, that we could actually swing if the spouse left and took all the kids, vowing never to return, but who kept paying the mortgage!

Then you realize that THAT sure ain't gonna happen, either, and this is just one MORE thing to be angry about, as if you didn't already have enough heavy crosses to bear.

Well, peoplehistory.com also notes, probably as Exhibit B, that "From Our 80s Price of Food Section," milk was 85 cents a 1/2 gallon, while I easily find that the average price for a half-gallon today is $2.06.

So, Ms. Yellen, price stability? Hahaha! A stable currency? Hahahaha! Isn't the expressed mission of the Federal Reserve to provide a stable currency? Hahaha! I laugh at you! This is outrageous inflation!

Again, the more frightened and enlightened among us scream in dismay in the dark, dank dismay of doom and destruction, where all we have is a depreciating currency and gratuitous use of alliteration, meaning higher prices day after day, and month after month, and year after year, and decade after decade, each of them filled with people suffering because their incomes did not rise as much as inflation in prices because they were old, young, infirm, ignorant or just plain lazy, or otherwise had nothing to offer with which to bargain for higher incomes to offset inflation in prices.

So congratulations to the horrid Federal Reserve, and congratulations Ms. Yellen, for inflicting continuous financial pain on the population, despite the fact that the freaking mission of the Federal Reserve is to preserve the stability of the buying power of the Dollar. Hahaha! Failures all!

So while everything else was a crappy investment that barely broke even in nominal terms, they were dismal failures when adjusting for inflation, although you might happily note that buying gold and silver were fabulous investment decisions over the last 30 years, and for the 2,500 years before that, too!

And, I might add, just like right now. This amazing, wonderful consistency of precious metals makes investing so easy that you cannot stop yourself from happily laughing and clapping your hands together, saying, "Whee! This investing stuff is easy!

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A Nice Little Yacht Made of Paper

...and tossed on an angry sea of losses and bankruptcy...

EVER GET the feeling that you are in some kind of weird dream, where someone is holding a pillow over your face so that you can't breathe, and you can dimly hear your children asking, "Is he dead yet, mom?" and I am thrashing around and yelling out, "No, I'm not dead, you morons!" but nobody is paying attention? asks the Mogambo Guru from Tampa, Florida for The Daily Reckoning.

Me, too!

And I get the same feeling watching the collapse of the economic system, as was always confidently predicted by the Austrian Business Cycle Theory and proudly on display at Mises.org, as my head is spinning, spinning, spinning around with wild conspiracy theories to try, desperately, to explain how a country that has so many colleges and universities, and which have graduated so many self-important alumni, for so long, has allowed this to happen!

Cold comfort as it is, it's not just us here in the United States. Everybody, in every country, is in the same boat, a nice little yacht made of promises and paper instead of fiberglass and steel, now being tossed and battered by an angry sea of losses and bankruptcy instead of water and waves, which, if you have ever made a paper boat out of a sheet of paper and put it in the water, always results in disaster when it gets soggy and ends up as a wet, useless, misshapen lump of soggy paper, ending your dreams of building a paper boat big enough to hold you so that you could just sail away to someplace where you could stay up as late as you wanted, and you could eat cookies and cake for breakfast if you wanted, anytime you like, and you didn't have to listen to anybody tell you that Keynesian economics is not the piece of crap that it is, or that the Federal Reserve is not the treacherous, traitorous, ruination-by-inflation piece of crap that IT is.

Extending the metaphor (since I seem to be on something of a roll), the Euro sits in that part of the paper boat sinking fastest. Yet The Economist magazine is ever-optimistic, and says that "the Euro's decline, in contrast, should bolster exports for big manufacturers (particularly in northern Europe) and luxury goods companies while boosting tourism across the continent" – which makes me wonder where in the hell people are getting the money to go on a European vacation and buy luxury goods, because there is nobody around here like that.

In fact, this is a dismal fact that was brought up by Larry Kudlow, on CNBC, where he asked some panel of morons for their explanation of where the money for real recovery is going to come from, now that the figures show that M3 money supply is falling, incomes are falling, the equity-extraction ("Your house is an ATM machine, ready to spew out money!") madness that swept the country is completely gone, the collateralized mortgage market has disappeared and it is, I summarize, bad (pause) news (pause) all (pause) around.

Nobody, of course, had an answer to where the money was going to come from, meaning that everybody assumed that the money would come from, I assume, the same magical fairy-land where everybody lives, we collectively assume, happily ever after, and nobody ever has to live next door to somebody like me.

Unless, of course, the magic will be in the rising prices of Gold Bullion, silver and oil, which makes investing so pleasantly easy that you involuntarily find yourself giggling aloud "Whee!"

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Back-to-Back US Deficits

Rude Mogambo Scorn (RMS) from the Mighty Mogambo Moron (MMM)...

TO SHOW YOU how things go around to get around, I got this from Ed Steer's Gold & Silver Daily, which linked to an essay by Adrian Ash at Bullionvault.com, posted over at Safehaven.com, and bearing the title "Gold Gets All Political", writes the Mogambo Guru from Tampa, Florida for The Daily Reckoning.

The thrust is, as Mr. Steer says, that "Adrian floats the disturbing possibility that governments, looking around for easy sources of revenue, may decide to tax the private ownership of gold."

Well, I am happy to be the "go-to guy" when it comes to questions like this, and I am happy that I can put Adrian's fears to rest. And he can rest assured that the government will indeed tax the private ownership of gold, and everything else too, highly reminiscent of the phrase in the Declaration of Independence that reads that the government "has erected a multitude of new offices, and send hither swarms of officers to harass our people, and eat out their substance" which, at this point in time since 1789, is 1 out of 5 workers who are paid from the collection of taxes, and a large system of government which spends more than half of all income, and spends up to two-thirds of all income if the cost of compliance with government regulations is included!

Everything will be taxed, since things are already bad, as easily seen in an essay by Mike "Mish" Shedlock of Global Economic Analysis, who writes that the when government got less tax revenue remitted, spending went up despite it. Thus the budget deficit is rising, the national debt is rising, and all in a pretty dramatic way, too.

"The excess of spending over revenue rose to $82.7 billion last month compared with a $20.9 billion gap in April 2009. It was the second April deficit since 1983."

In fact, says Mish, "April marked a record 19th straight monthly shortfall, highlighting the challenges facing the Obama administration," which shows that Mr. Shedlock is mellowing, as he knows, better than most of us, that we are Seriously, Seriously Screwed (SSS), and calling such an unstoppable horror a "challenge" seems like a joke, and it must be, because it made me smile!

Anyway, more evidence of a certain mellowing in Mr. Shedlock is found when he says, "Deterioration in the government's balance sheet in coming years raises the risk of higher interest rates even as an improving economy helps lift tax receipts," which doesn't even sound like him!

He says "raises the risk" when he knows exactly why interest rates would rise; inflation in prices! The buying power of the Dollar will be falling as a result of all that creation of more money, and the buyers of bonds want to be compensated for that loss, and they will demand higher interest rates to get it.

But he does not want to get into that "inflation-prediction" swamp with me, and instead said, "The government has reported budget surpluses in 43 of the past 56 Aprils," which is pretty remarkable, but not as remarkable as the fact that "The last time the US had back-to-back April deficits was 1963-1964."

1963-1964? Yow! I leap involuntarily to my feet, my Powerful Mogambo Brain (PMB) whirling in shock when I ominously notice that this is exactly when the long bear market in stocks of 1964-1982 began! Yikes!

"Anyway," you are perhaps thinking to yourself, "maybe it is not as bad as all that, and maybe with a little sense of proportion and dispassion, qualities completely alien to this Mighty Mogambo Moron (MMM), we could discern a small ray of sunshine, whereas he sees nothing but gloom and despair at every turn, like when he turns around and sees one of the kids looking at him while holding a butcher knife, and when he asks, 'What are you doing with that butcher knife?' and the kid says, 'Nothing. Yet.'"

If you think that, then I laugh in Rude Mogambo Scorn (RMS) at you, because for one thing, none of my kids is stupid enough to use a knife to attack an angry, paranoid guy who is, as they say, "packing heat," and for another thing, I am laughing in RMS so hard that I cannot even find the breath to begin to tell you why I make such sport of you! Hahahaha!

For that, I turn again to Mr. Shedlock, who says the particulars are that, compared to the same month last year, "Revenue and other income fell 7.9 percent," which is a huge drop, although we are still looking at a cumulative $245.3 billion in revenue since October.

For reasons that I can only guess are, at the root, a result of the Federal Reserve creating so much money and buying up so much debt and assets from corporations of one sort or another that "Corporate tax receipts totaled $77.1 billion for the year to date, an increase of 8.9 percent," which seems fairly remarkable in a kind of "lying, thieving scumbag" kind of way.

The bad news is about us workaday sweat-hogs out here in the real world, doing our stupid jobs while also performing most of the duties of all of the people who were laid off in management's continually desperate "cost-cutting" strategies, including the only people who knew what they were doing, and now things are hopelessly screwed up, and we are getting whacked, as evidenced by the fact that "Individual income tax collections were down 11.6 percent so far this fiscal year to $500.8 billion." See what I mean? Our incomes are down by almost 12%! Wow! Whacked!

All in all, I don't know what, but Something Very Bad (SVB) is going to happen before long, which is about how long it will be before gold and silver shoot up in price! Whee! This investing stuff is easy, right?

Ready to Buy Gold...?

$14 Trillion Gone Forever

The money lost during the global financial crisis ain't ever coming back...

SO HENRY C.K. LIU, writing at atimes.com, has – unlike the Securities and Exchange Commission, apparently not been spending his days downloading pornography on his computer, and instead has looked at the sheer amount of money that was lost worldwide since October 31, 2007, reports the Mogambo Guru, writing from Tampa, Florida for The Daily Reckoning.

Back then, "the total market value of publicly traded companies around the world reached a high of $63 trillion. A year and four months later, by early March 2009, the value had dropped more than half to $28.6 trillion."

To add a little perspective, "The lost $34.4 trillion in wealth is more than the 2008 annual gross domestic product (GDP) of the US, the European Union and Japan combined." But the upshot is that this money ain't never comin' back...

"This wealth deficit effect would take at least a decade to replenish, even if these advanced economies were to grow at mid-single digit rates after inflation and only if no double-dip materialized in the markets."

Liu goes on that "At an optimistic compounded annual growth rate of 5%, it would take more than 10 years to replenish the lost wealth in the US economy", which, I assume, is an inflation-adjusted 5% growth, although since John Williams at shadowstats.com has calculated that actual inflation in prices is a terrifying 9.5%, this means that we "advanced" economies must grow at 13.5% for more than a decade for the losers to break even!

Hahahaha!

As for just us Americans, "US households lost almost $8 trillion of wealth in the stock market on top of the $6 trillion loss in the market value of their homes," which is so much money that "The total wealth loss of $14 trillion by US households in 2009 was equal to the entire 2008 US GDP."

And worse, I remember that money comes into existence by borrowing money (to buy stuff), and so all that money is still owed, but it won't be repaid, because it can't be repaid, because it is just So Freaking Much Money (SFMM).

This means that a lot of guys are going to take a lot of losses, which means a drop in capital gains taxes paid, and so a lot of capital gains tax revenue will not be coming into the IRS for the next (looking at my watch for the correct time) a hundred years or so.

And since the maximum loss tax write-off is $3,000 per year, and neither will the government get the income tax on the $3,000 of deductions! And none of this mentions the economy-killing general grumpiness that losses and bankruptcy and unemployment create.

In response, the morons in the Federal Reserve think that if they can keep creating more and more money, and using some of it to meddle in the markets by actually buying stocks and bonds, then people will be happy, and profits will still be made because prices of everything will be going up! Hahaha!

I looked up from my laughter to see that Junior Mogambo Ranger (JMR) Terry L. sent an essay by Randall Hoven, where we learn the news that "The CBO reports that total (federal government) revenues in 2009 and 2010 were $4.28 trillion. But outlays were $7.042 trillion", which seems odd since this is only April of 2010.

Immediately, figuring that I had merely gone through a normal space-time continuum and was in the future, I reached for my calculator to determine the government's shortfall, which looked like a deceptively easy subtraction problem, which was not the case, what with all those zeroes everywhere, and I was soon lost, but it looks somewhere in the neighborhood of $2.8 trillion. In Two Freaking Years (TFY)!

Whatever the exact result, Mr. Hoven figures that "Revenues are paying only 61% of our bills; the rest is borrowed. On the other hand, entitlements plus interest on the debt accounted for 65% of spending in 2009 and 61% in 2010. In short, every bit, and then some, of current revenues is totally used up by entitlements and interest. Every Dollar spent on national defense, highways, courts, veterans, energy, education, etc., etc. is 100% borrowed."

And when looking at such exponentially-rising money creation by the Federal Reserve with which to finance such massive, exponentially-rising borrowing by the federal government, one's mind immediately goes into Mogambo Panic Mode (MPM) at the stark terror of such massive inflation in prices, resulting in a frenzy to buy more gold, silver and oil.

At least mine does, anyway! And yours should, too, if you know what is good for you.

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The Strong Hand of Silver & Gold

"The only way to lose money in a secular bull market is by trading..."

SO TOBY CONNOR has an essay posted at Goldseek.com with a title that I find very intriguing, writes the Mogambo Guru in The Daily Reckoning.

Namely, it's called "The Strong Hand Theory" – which sounds like it could be all sorts of terrific things, ranging from a new Sherlock Holmes mystery to "How to destroy brick buildings with a karate chop with your bare hand and impress girls!"

Unfortunately, Mr. Connor does not offer any help in impressing girls by demolishing random commercial property, nor does he entertain us with a story of the famous detective noticing the strength of a man's handshake...and going on brilliantly from there to cleverly solve a murder using mere wisps of clues. Unlike the Securities and Exchange Commission, which can't even recognize blatant frauds when they are repeatedly pointed out and the evidence is dumped on their desks.

It reminds me of how that little snot Arnold, from the accounting department, keeps showing my boss his stupid charts and stupid printouts that prove, so he says, that I am the worst employee the company has ever had, and my stupid boss wants to know if I can explain any of that, and I say, "Of course I can explain it! Arnold hates me, and he is a lying piece of crap that likes to hang around playgrounds and talk to cute little boys about joining the Nazi Party!" and of course Arnold, all flustered and upset, says, "That's not true! None of it!"

Naturally, my back is against the wall, and I'm afraid to go home to face my wife and tell her that I have been fired from yet another job. So I press the attack by replying, "That's just what you filthy Nazi pedophile bastards always say! Fire him! Castrate him! Kill him!" which must have been a better retort than I thought, because he never brought it up again when I was in the room!

Anyway, this is not about Arnold, but about you should be Buying Gold, silver and oil in response to the governments of the world, especially that of the USA, deficit-spending double-digit percentages of GDP, all financed by the central banks of the world creating huge expansions in money, and how inflation in prices will soar in response to all of this new money, making gold, silver and oil go up in a huge, multi-decade hell of roaring inflation, starvation and murderous social discord, worse and worse, misery upon misery, until a Strong Hand arises to seize control of the world, and all people fall to their knees to worship The Mighty Mogambo (TMM)!

Okay, Mr. Connor did not say that, but since I am sure that Buying Gold, silver and oil will be worth whole multiples of their current prices, he's bang on when he says that "The only way to lose money in a secular bull market is by trading" which is – as funny as it seems – pretty much exactly right!

And if you want to know the one investing strategy that always comes out best over the long-term when investing with a secular trend, it is Dollar Cost Averaging, a mindless system where you invest the same number of dollars each month, regardless of price. And that is only part of the reason why I extol the virtues of the Mogambo Can't Miss Portfolio (MCMP), loaded to the gunwales with gold, Silver and oil, and, bristling with all the firepower that the Second Amendment allows, gives one the courage to say, "Whee! This investing stuff is easy!"

Ready to Buy Silverand gold today...?

Buying Gold: Not for Morons

If you don't understand, then just wait around a little while. You will...!

JUNIOR MOGAMBO RANGER (JMR) Jim L. sent me a link to a story at Yahoo.com entitled "Bernanke Wants to Eliminate Reserve Requirements Completely", gasps the Mogambo Guru in The Daily Reckoning.

First, starting with the explanation, we learn that "Up until now, the United States has operated under a 'fractional reserve' banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest."

What they don't mention is that the money keeps eventually coming back to the bank, deposited into savings accounts and checking accounts, which the banks again gather up, putting aside a few bucks, and loaning out the rest again, whereupon the money eventually makes its way back to savings accounts and checking accounts at the banks, over and over and over, so that a single Dollar deposited in one bank can be multiplied ten-fold, a hundred-fold, a thousand-fold – or more, unto infinity! – which is how the money supply gets so grossly swollen, which is what causes booms and busts and the catastrophic, ruinous, terrifying inflation in prices.

The funny part is when the article goes on:

"But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says 'impose costs and distortions on the banking system'..."

Hahahahahaork!

That "Hahahahahaork!" appending the previous paragraph is my feeble attempt at describing the sound of "laughing and puking in fear", a remarkable feat that I was sure would win me some kind of theatrical award. And it would, too, if only award committees would send someone to witness my performance, or even answer my calls and letters, and then maybe a Hollywood producer would see me and star me in a few films, and then I would be rich and famous and I could get out of this little jerkwater town and away from its stupid inhabitants who don't Buy Gold, silver and oil when I tell them to, even after I specifically track them down, grab them by the front of their shirts, drag them up close to me and then, spitting while I talk so that they can feel little droplets of Pure Mogambo Spittle (PMS) hitting their stupid faces while I am screaming at them, tell them to Buy Gold, silver and oil! But they still don't!

Instead, they file charges...and so I try to file a counter-charge of my own, and I tell the policemen that I was arresting this moron for acting stupidly, and the stupid cop tells me that it is not against the law to act stupidly! I mean, what kind of country is this, anyway?

But letting imbeciles walk around making stupid decisions – such as not Buying Gold – is not the point I was making, but that this Bernanke moron, the head of the Federal Reserve, doesn't know that total reserves in the banks is a piddly $64 billion and which is so miniscule that it is not even worth talking about? Hahaha!

Banking reserves against losses in assets and liabilities are, at $64 billion, up from a decade of $42 billion, but still ridiculously laughably insignificant, as in "rounding error" when compared to the $20 trillion or so in bank assets and liabilities, probably not to mention all the off-book assets and liabilities they are sitting upon.

And yet this Bernanke buffoon thinks that reserves comprised of such chump change "impose costs and distortions on the banking system"? Hahahaha!

This is the same guy – the same guy! – who sees no distortions when he and his inept Federal Reserve cronies create the money to fund the government's $1.6 trillion budget deficit or almost $13 trillion in national debt, but finds accounting for a handful of chump change distorting instead? Hahahaha! Surreal! I can't believe he said that! Hahahaha!

And then, when you add it to the complete failure of the Federal Reserve to achieve its original mission to maintain the value of the Dollar, which has shrunk to about 3 cents of 1913 buying power, as Bugs Bunny would say, "What a maroon!"

And with this extremely low-caliber type of people running the economic show, I am sure that you can instantly, intuitively understand, deep down in your gut where you sense impending doom (like when Thelma and Louise saw all those cop cars chasing them through an open desert in broad daylight), why I am screaming, "We're freaking doomed!" why I am armed to the teeth, why I am up to my ears in gold, silver and oil, and why I am so insistent that you do the same.

And if you don't understand, then just wait around a little while. You will!

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Buying Gold: Not for Morons

If you don't understand, then just wait around a little while. You will...!

JUNIOR MOGAMBO RANGER (JMR) Jim L. sent me a link to a story at Yahoo.com entitled "Bernanke Wants to Eliminate Reserve Requirements Completely", gasps the Mogambo Guru in The Daily Reckoning.

First, starting with the explanation, we learn that "Up until now, the United States has operated under a 'fractional reserve' banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest."

What they don't mention is that the money keeps eventually coming back to the bank, deposited into savings accounts and checking accounts, which the banks again gather up, putting aside a few bucks, and loaning out the rest again, whereupon the money eventually makes its way back to savings accounts and checking accounts at the banks, over and over and over, so that a single Dollar deposited in one bank can be multiplied ten-fold, a hundred-fold, a thousand-fold – or more, unto infinity! – which is how the money supply gets so grossly swollen, which is what causes booms and busts and the catastrophic, ruinous, terrifying inflation in prices.

The funny part is when the article goes on:

"But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says 'impose costs and distortions on the banking system'..."

Hahahahahaork!

That "Hahahahahaork!" appending the previous paragraph is my feeble attempt at describing the sound of "laughing and puking in fear", a remarkable feat that I was sure would win me some kind of theatrical award. And it would, too, if only award committees would send someone to witness my performance, or even answer my calls and letters, and then maybe a Hollywood producer would see me and star me in a few films, and then I would be rich and famous and I could get out of this little jerkwater town and away from its stupid inhabitants who don't Buy Gold, silver and oil when I tell them to, even after I specifically track them down, grab them by the front of their shirts, drag them up close to me and then, spitting while I talk so that they can feel little droplets of Pure Mogambo Spittle (PMS) hitting their stupid faces while I am screaming at them, tell them to Buy Gold, silver and oil! But they still don't!

Instead, they file charges...and so I try to file a counter-charge of my own, and I tell the policemen that I was arresting this moron for acting stupidly, and the stupid cop tells me that it is not against the law to act stupidly! I mean, what kind of country is this, anyway?

But letting imbeciles walk around making stupid decisions – such as not Buying Gold – is not the point I was making, but that this Bernanke moron, the head of the Federal Reserve, doesn't know that total reserves in the banks is a piddly $64 billion and which is so miniscule that it is not even worth talking about? Hahaha!

Banking reserves against losses in assets and liabilities are, at $64 billion, up from a decade of $42 billion, but still ridiculously laughably insignificant, as in "rounding error" when compared to the $20 trillion or so in bank assets and liabilities, probably not to mention all the off-book assets and liabilities they are sitting upon.

And yet this Bernanke buffoon thinks that reserves comprised of such chump change "impose costs and distortions on the banking system"? Hahahaha!

This is the same guy – the same guy! – who sees no distortions when he and his inept Federal Reserve cronies create the money to fund the government's $1.6 trillion budget deficit or almost $13 trillion in national debt, but finds accounting for a handful of chump change distorting instead? Hahahaha! Surreal! I can't believe he said that! Hahahaha!

And then, when you add it to the complete failure of the Federal Reserve to achieve its original mission to maintain the value of the Dollar, which has shrunk to about 3 cents of 1913 buying power, as Bugs Bunny would say, "What a maroon!"

And with this extremely low-caliber type of people running the economic show, I am sure that you can instantly, intuitively understand, deep down in your gut where you sense impending doom (like when Thelma and Louise saw all those cop cars chasing them through an open desert in broad daylight), why I am screaming, "We're freaking doomed!" why I am armed to the teeth, why I am up to my ears in gold, silver and oil, and why I am so insistent that you do the same.

And if you don't understand, then just wait around a little while. You will!

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All You Need is Money

Why more money actually makes poor people poorer...

I AM HAPPY TO note that the Tea Party, which appeals to me personally, is gaining traction and power, which adds more political overtones to my life and gets me, a shameful Republican, away from the loathsome Republicans (except Ron Paul), who have acted almost as despicably as the Democrats, writes the Mogambo Guru from his Tampa Bay hide-out for the Daily Reckoning.

I cheerfully denounce them all with a snotty, disrespectful tone in my voice and a condescending sneer on my lips – also an indicator of disrespect – because I am a guy who has spent a lifetime reading about what happens when governments try this "increasing the money supply" crapola that, since the 1960s, the Democrats made into a political mainstay and the Republicans went "grudgingly" along with it, and I am, in a word, horrified and disgusted.

The truth is that I am now continuing to write, as after writing that last horrific sentence about "increase the money supply", I took the rest of the morning off to think about it, hopefully to calm my shattered nerves. Now I am back at work after discovering that I am more, much more than horrified, and instead am in a Raging Mogambo Snit (RMS) because, according to Fox News, "Sen. Max Baucus, D-Mont., chairman of the influential Finance Committee" said that the "overhaul" of the healthcare system was "an 'income shift' to help the poor", which is not what I am angry about because it's exactly true, else why do it?

So you can't fault him for saying what is true! Hahaha!

However, I can fault Senator Baucus for just being a typical laughable-yet-loathsome modern Democrat, entirely emblematic as he is of the egotistical big-hearted people who love, and live to love, and love to live to love, and who think that the Beatles were right when they sang "All you need is love", and use their arrogant "more-compassionate-than-thou" conceit as a bloody bludgeon to beat into submission common sense, economics, the entire history of fiat currencies, and the eternal problem of what to do with the poor people, the crippled people, and the old people.

The part that really makes me despise Democrats slightly more than I despise Republicans is that Democrats ridiculously try to "help" the poor by tearing down the only system that has been shown to actually help the poor; namely, supplying them with jobs and keeping consumer prices from rising. Indeed – and wonderfully! – prices gently come down under this system, so that the poor have a rising standard of living because their money buys more.

"And what could such a wonderful system be?" you ask, unable to believe your ears. I reply, "It's what you automatically get from a system of free enterprise powered by a stable money supply. It works like magic! It always has! It always will!"

Yet instead, the Federal Reserve will be forced to create so Monstrously Much Money (MMM) to finance a cancerously enlarging government to drown us in total debt, and thus continuously, massively enlarge the monetary base, which must make prices rise and rise continuously, prices which the poor can't afford to pay and which makes them poorer, which makes Congress borrow and spend more money, which makes the money supply rise and rise, with prices always rising and rising as the monetary base gets larger and larger, round and around, whirling and twirling, spinning, spinning, spinning until you fall to the ground, crying out, dramatically:

"Noooooo! More money only creates, paradoxically, more poor working people to add to the huge existing population of poor people because wage increases always lag price increases!"

Senator Baucus does not acknowledge my scorn or compliment me on my fine acting performance, and I hope everyone noticed how he would not meet my gaze, either, and instead lamely talks about "income mal-distribution" by saying that "Wages have not kept up with increased income of the highest income in America", like this is some kind of news to him or something.

To this I say, "Hahahaboohoohoohahahaboohoohaboohaboohaha!" which shows that I am laughing and crying, and then laughing, and then crying, and then laughing, and then crying while laughing at the sheer idiocy of it, which proves that it must be idiotic for me to be laughing that way, QED.

Then, to show that he is a true Democrat, he says, "This legislation will have the effect of addressing the mal-distribution of income in America", although he did not elaborate by saying, "by taking it away from somebody richer and giving it to someone poorer" and he did not say, "it will be paid for with fiat money created by the Federal Reserve so that Congress can borrow and spend it" and he did not say, "this unprecedented avalanche of new money will monstrously drive up prices paid by the poor, making them much, much poorer and angrier" but he could have and he should have.

Apparently, though, Senator Baucus is kind of stupid, as he does not understand that when a government deficit-spends, it does so by borrowing the money, but since the poor don't have any money to loan to the government, the rich end up borrowing the money to loan to the government, whereupon the rich, over time, get all their money back, plus interest, making them richer, while, unfortunately, the poor get poorer because prices have risen.

All of these things he could have said, and he might as well have said, as it is all there in black and white at Mises.org, or it should be, and might well be!

And while neither he nor Mises.org said to Buy Gold, silver and oil as protection against this sheer economic idiocy and insanity, they might as well have, and while I cannot imagine either of them saying, "Whee! This investing stuff is easy" I certainly will!

Whee!

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