In case you were wondering, this Fed Credit is the stuff that the Federal Reserve magically makes appear, literally at the push of a button on a computer, on the balance sheets of the nation’s banks, where it sits until someone wants to borrow some money from the bank, whereupon the banks can loan out Huge Freaking Multiples (HFM) of the amount of the original credit by virtue of the scam known as “fractional-reserve banking.”

And when this new Fed-created credit is lent by the banks, at that point it becomes “money”, and it adds to the money supply, which expands. And since the money is used to buy something (or else why else borrow it?), it bids up prices, which is the inflation in prices that you get from an increase in the money supply! A horror!

And you don’t have to take my word for it, as Mike Hewitt and Krassimer Petrov wrote the essay “Money Supply and Purchasing Power” at Dollardaze.org. They looked at the money supply since 1971 to 2008, which is “the post-Bretton-Woods period. Bretton Woods is the period that characterizes the international monetary regime between WWII and 1971. After the Second World War, only the U.S. Dollar remained convertible to gold at a rate of US$35 per troy ounce. During that period all other currencies were linked to the dollar at a fixed exchange rate. On August 15, 1971, President Nixon unilaterally closed the ‘gold window’ to prevent foreigners from exchanging their U.S. Dollars for gold.”

What they found was a “near-perfect inverse relationship between the amount of money in circulation and its purchasing power. It reflects the simple relationship that prices increase approximately proportionately to money supply. Stated differently, it reflects the basic tenet of monetarism that in the long-run, price inflation is a direct consequence of increase to monetary inflation.”

I know what you are thinking, because I am thinking it, too. We want to know, “What about the actual data? We ask because we have been listening to Ben Bernanke and all the rest of those neo-Keynesian, government lackey morons summarizing their data, and they say everything is going along just fine, and that everything is wonderful, so now we are paranoid and suspicious now that we know that we are being lied to at Every Freaking Turn (EFT).”

Perhaps anticipating our question, they write, “Looking at the data, from January 1971 to December 2008, the U.S. money supply increased 16.8 times; this was accompanied by an 81.1% drop in purchasing power of the dollar, as implied by the governmentally-reported CPI.”

And how did this affect gold? I’m glad you asked, because I have been pounding the table like a demented village idiot for years that you should be buying gold, and so people want to know “Is the opinion of The Ridiculous Mogambo (TRM) as stupid as he sounds about this money inflation thing?’

My answer is, “No, not in the case of gold, but yes for most everything else I say” while their answer is, “For the same period and using the same CPI statistics, the purchasing power of gold has actually increased four times. The price of gold is up from about $38 to about $822, which corresponds to an increase in its price of almost 22 times, while the CPI is up from about 40 to 210, or about 5 times. Thus, for the period, the price of gold has increased about 22 times, while the price level has increased about five times, resulting in an increase in the purchasing power of gold of about four times; the exact increase is 310%, which corresponds to purchasing power of a little over four times” at the same exact time as “the purchasing power of major currencies is down 5-10 times.” Wow!

Naturally, I am halfway out the door to buy more gold, because with the Federal Reserve, with their laughable equations based on the socialist madness of John Maynard Keynes to give them a mathematical excuse to create vastly excessive amounts of money and credit like proverbial profligate idiots, to a degree even more horrifying than during the tenure of Alan Greenspan (the moron who single-handedly got the world into this mess), gold will go up explosively, just like it already has and just like it has Every Freaking Time (EFT) in all of history – In all of history!!!! – when a stupid government continually spent more money by going farther into un-payable debt!

The sharp-eyed among you no doubt noticed the 4 exclamation points in the paragraph above, which I cleverly used to indicate extreme emphasis, as one should have gathered from the phrase “in all of history” but probably didn’t, thus the punctuation was chosen for your benefit, at no extra charge. You are welcome.

So, what can we conclude from this whole analysis? I say, “Many things!”

Firstly, I conclude, “We’re freaking doomed!”

Secondly, I conclude that I gotta get more gold, and from that I thirdly conclude that I gotta get rid of one or more of the kids because I can’t afford both, and I can’t think of a legal way, and it’s a hell of a problem for me right now.

Messrs Hewitt and Petrov think that “The overall conclusion is that gold is a significantly better store of value than paper currencies” which pretty much says it all!

Whee! This investing stuff is easy!

Source: Go Ahead, Make My Money

I woke up in the famous Mogambo Fortress Of Paralyzing Fear (MFOPF) just before dawn, bathed in sweat after another restless night of nightmares about inflation. The nightmares come in two varieties, in case you were wondering. The first variety is that my wife, children, family members and creditors are all demanding that I give them more and more money, while social workers and judges are standing behind them, urging them on, and I am running and running, but I can’t seem to get away. Over my shoulder I yell “You’ll never take me alive!” and they all yell back, “That suits us fine, you Stinking Mogambo Tightwad (SMT)! We just want your money!” and I scream and scream and scream at the prospect.

The other variety of nightmare is that little microbes that look just like Alan Greenspan (former chairman of the Federal Reserve whose insane monetary policies have destroyed the dollar and the American economy and have condemned us, for One Big, BIG Thing (OBBT), to death by inflation in consumer prices, and God knows what all else, too, because there will be lots of “elses”, all of them bad) are literally eating my internal organs, which causes an intense pain in my wallet, and I am running from doctor to doctor looking for a cure, but all the doctors look like Hillary Clinton shrilly demanding everything I own (probably because her bright idea is to come up with more and more unfunded mandates to force more and more healthcare providers to provide more and more healthcare to anyone who asks for it, whether they can pay or not, which they can’t, or they don’t, which is why they all turn to me to pay for everything, which is probably why I am having this nightmare all the damned time).

But now awake, I brushed the sleep and tears from my swollen eyes and yelled into the intercom for somebody to please bring daddy a cup of coffee (”Or else!”), when I noticed that it was quiet. Too quiet. And anybody who has ever seen an old movie on TV knows that when things are quiet, too quiet, it means danger, mostly in the form of bullets or arrows suddenly flying your way, at which point you turn to your own bullets and arrows, and it’s a hell of a tussle from then on.

Sure enough, no sooner had I decided that I did not have enough bullets and arrows in prepared response to this sudden quietude than I discover the reason for the quiet; Total Fed Credit at the Federal Reserve was down by $4 billion last week! And the total amount in this fount of miraculous credit is seemingly stuck at $864 billion, which is not only down for the freaking week, but is also down since last freaking YEAR at this time!

My hands shook so much at this news that I dropped some bullets and arrows, which is usually a bad thing to happen. The reason for my being so startled was that this Total Fed Credit is the magical stuff from which loan-able funds magically appear on the books of the banks, which is turned into money when somebody borrows it from the bank.

That’s how the money supply grows these days, which means that money literally comes from debt, as unwholesome and bizarre as that sounds, and as unwholesome and bizarre as that actually is. But this is not leading to one of my Predictable, Loud And Tiresome Mogambo Editorials (PLATME) about the absolute stupidity of the fake, fiat money that we use as currency, or the sheer preposterousness of allowing the banks to act so stupidly in creating so much money and debt, or about sheer insanity of disregarding the requirement, per the Constitution, that money be only of silver and gold so that money would not lose buying power due to over-issuance of money, mostly because that boat has sailed and now we are freaking doomed.

Instead, this is about the terrifying ramifications of not doing it anymore, as seems to be the case, which is where we find out exactly what is meant by the word “doomed”.

In short, once you get started with an idiotic economic system like this, debt must never stop growing because everyone owes both the money AND interest, and that means that money must never stop growing, even if you are just paying the interest that is due this money that was borrowed!

Therefore, your blood should run cold when you see that Total Fed Credit, the actual source of new dollar debt, it is not growing. As I was contemplating how my blood got suddenly colder, I was taking a long pull from a bottle of really cheap tequila to try and calm my ragged nerves about this lack of additional TFC thing.

It didn’t work. I just got sloppy drunk. And I dropped the bullets and arrows again, which, fortunately, stopped it from being quiet, too quiet. But I am still, obviously, nervous and drunk, and for good damned reasons, too. I think I’m going to puke, and for a lot of reasons, too.

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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.