Monday, October 13, 2008

Reserving the right to destroy the dollar
By The Mogambo Guru

I woke up on the floor where I had collapsed in a dead faint, my heart having gone into spasms of fibrillation at finding out Total Fed Credit went up by another staggering $253.6 billion last week! A quarter of a trillion dollars in One Freaking Week (OFW)!

Stunned to incoherence, I was fortunate to have gold adviser Ed Bugos at Agora Financial take over for me, who says, "The news that should be driving gold prices to the moon is out! The Federal Reserve has just expanded its balance sheet more in one month than it has in almost all of its first 86 years of existence. This number is unprecedented. It is difficult to predict gold's short-term response to this shock, but the market cannot ignore the

fundamental effect of this crackup for long. With interventions like this, we should get a few more $100-up days soon enough."

This TFC, in case you were wondering, is the magical stuff from which credit in the banks instantly appears, at the literal push of a button at the literal whim of the Federal Reserve, as the Fed makes all the money that the government wants to spend.

And this credit in the banks is the miracle stuff from which money will be multiplied by the banks a hundred times over, a thousand times over, a million times over, all of it used to make new loans, all courtesy of the fraud known as fractional-reserve banking, which means that the Fed has, in the last two weeks alone, created over half a freaking trillion dollars' worth of new credit, which is turned into unknown Umpteen Freaking Gazillions (UFG) of dollars when the banks get finished multiplying it through insane degrees of fractional-reserve banking!

And it is not just American banks, either! The Federal Reserve, on behalf of the people of the United States, is giving hundreds of billions of dollars to foreign central banks to bail them out, too!

And then those selfsame foreign central banks used this money to buy $43 billion of US government and agency debt last week! Gaaaahhh! My head is spinning! This is insane!

The Federal Reserve, in case you did not realize it, is not federal, in that it is a private bank owned by shadowy, nasty, greedy people hiding behind corporate shells, and it has no real reserves, but can create money anytime it likes, like last week, as the Fed created some money and then used the money to buy government bonds for itself! Hahaha! The Fed's stash of government bonds rose last week by $8.27 billion!

To show you that the Federal Reserve should instead be called the Government Slush Fund (GSF), the government borrowed most of this new money, as we realize when we see that Treasury Gross Public Debt went up by an eye-popping $336 billion last week, reaching the staggering total of $10.124 trillion!

In fact, in the last 12 months, the national debt went up by $1.062 trillion! Gaah! We're freaking doomed! Not only is the federal budget a mind-blowing $3 trillion in the $14 trillion American economy, but Congress is now spending an average of $88 billion per month (every damned month!) more than the government's revenues, which is 30% more than what they budgeted! Insane, incompetent morons!

And all of this money created by the Federal Reserve - all those stupefying trillions and trillions of new dollars and credit - increases the money supply, which will increase prices in a persistent, grinding inflation, getting worse and worse, which will destroy America as it has destroyed every other idiotic country that tried such a stupid, stupid thing.

Sure enough, John Williams of writes, "In last night's (October 2) H.6 Money Stock Measures, seasonally-adjusted M2 - the currently official broad money measure - reportedly exploded in the week-ended September 22nd by $165.5 billion to $7,900.0 billion, an annualized growth rate of 200%. M1 rose at an annualized 800%, up $60.9 billion to $1,272.2 billion."

But there is no reason for crying, because soon enough we will be happily convening vengeful kangaroo courts in which to convict Alan Greenspan and the other hateful, low-IQ lowlife morons who caused all of this, and it is better, in the meantime, that we should make some Big Wonderful Money (BWM) on it.

And right now I gotta think that the Big Glorious Money (BGM) is going to be made in silver, mostly because Ted Butler, in the Market Update from, writes that "silver has never been a better investment at precisely the same time its price performance has never been more extreme", by which he concludes from the latest Commitment of Traders report that the commercial traders at the COMEX "have built up a record or near-record net long position in both gold and silver futures" and that they have also "established a record long position in call options for the first time in history."

Suddenly, being a really stupid guy, I was instantly lost, and I realized with horror that his seemingly cryptic remarks about futures and options meant that I was being asked to do some thinking to make any sense of it, and I was going to complain like the little crybaby that I am that I don't like to think, and that, like most people, I just want things handed to me.

Apparently, Mr Butler could see the sudden blank look of incomprehension and total befuddlement on my face, and, taking pity on me and fellow mental midgets everywhere, offers that he figures it means that these commercial traders are "positioned for an upside move in gold and silver" and "they are positioned for it to occur soon."

The real significance of this is that, as a result of long experience, he deems these commercial traders (other than the eight largest traders) as being "nearly-always-correct"! Whee!

And that means that I, being "nearly-always-incorrect" about everything, will soon be right for a change! How nice! Hey! This investing stuff is easy!

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 Daily Reckoning. Copyright 2008, The Daily Reckoning.

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