I notice that the price ratios between the time spans of differing gold lease rates have been remarkably well behaved lately, almost as if they were locked together in precise bands. I think that this is interesting as hell, although I have no idea what it means, if indeed it means anything, which it probably doesn’t, although I will say that those guys setting up spreads (to take advantage of volatility) in gold have gotten financially killed, which I figure in turn benefited the guys who are short all that gold, as that is who I figure is on the other side of the trade when you and I are trying to make a quick buck with some fancy day-trading of options and futures and, of course, the spreads, and they manage to clean us out pretty regularly, the lying, cheating, thieving bastards.

But being naturally suspicious and cynical, I obviously regard that this is just part of the plan on the part of 1.) The guys who are short gold, whose total short position is in the range of billions and trillions and quadrillions and zillions and gajillions of dollars for all I know, and the 2.) Central banks who foolishly lent out the nation’s gold, at diddly interest rates, as their part of the scheme, and now the Fed has essentially sold (although they call it “leased”) half of all our nation’s gold, which I seem to recall is the estimate of the Gold Anti-Trust Action committee, who are probably best qualified to know (other than the government or Fed, who know for sure, but both of which refuse to even talk about it!).

In fact, Bill Murphy of GATA says, “The Gold Cartel is running out of available central bank gold to meet surging demand for physical gold. It is the opinion of the GATA camp that the central banks only have half the gold they say they have in their vaults – not the commonly bandied about 30,000 tonne number, but less than 15,000 tonnes.”

He notes that there were many powerful people with many powerful friends who had many powerful reasons to keep the price of gold down, such as how “the gold price suppression scheme was the cornerstone of Secretary Treasury Robert Rubin’s ’strong dollar’ policy”, and “Treasury Secretary Paulson, a key member of the President’s Working Group on Financial Markets (popularly known as the Plunge Protection Team)” who chillingly said, “The United States will do what it takes to calm markets”, which they think will be demonstrated by the price of gold not rising, because ordinarily it would be shooting to the freaking moon in response to economic conditions like today, and people would be alarmed, and perhaps singing the latest hit song by the Rocking Mogambo Quintet (RMQ) that has the famous line, “Look at gold shoot to the moon! The Mogambo was right! We’re freaking doomed!”

Now, if you are like me, then you already suspect that all of these people are crooks and back-stabbing, traitorous thieves anyway, and all I want is just to make a lot of money so that I can move into a nice house in a gated community that has armed guards, a nice golf course and completely surrounded by sleazy strip clubs and pizza parlors where you can get any kind of pizza you ever heard of at discount prices.

Fortunately, everything except the cheaper prices is entirely possible as a result of all of this government meddling in the gold market (as they are advised to do so by former Fed chairman Paul Volcker, who had to eliminate the 15% inflation of the ’70s and who thinks that gold soaring to $850 an ounce “looked bad” and undermined his efforts to stop runaway inflation), and Mr. Murphy thinks that this means that “Fortunes have been made and there are more fortunes to come”, and that may people think that gold prices “will go up 3 to 5 times again from present levels.”

And as to the notion that the Fed has sold half of our nation’s gold, I think that is being generous as hell, as I see no reason why the Fed would stop at only half, sort of like when I am starving and I sit down with a whole delicious pizza in front of me, and my wife thinks I am just going to eat half and leave the other half for her, and then she acts all surprised when I see no reason to stop at half, either!

So, assuming they still have some gold to sell into the market to keep the price down, you may have an opportunity to buy more gold cheaply for a while longer yet! Whee!

And don’t get me started on how you can still buy silver so cheaply, as it will elicit another, yet bigger, squeal of glee from me along the lines of “Wheeeee!”, wherein you notice that I used a few extra letters to indicate much higher amounts of glee, which only proves how deadly serious I am!

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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.

As for the questions of punctuation, the answer is no, as multiple question marks indicate the appropriate level of complete freaking befuddlement at such a bizarre statistic; leasing gold at less than zero percent interest!

This is oddly in line with a clever satire at epi.org, sent to me by JMR Mikael, titled “Fed lowers benchmark interest rate by 50 points (a satire…)” in which Jared Bernstein proposes the same thing as regards the Federal Reserve! His humorous fiction starts out, “In a surprise move aimed at stimulating moribund financial markets and the larger economy, the Federal Reserve surprised markets with an unprecedented 50 point rate cut, taking their target rate down to -47%.” Hahaha! An interest rate of a negative 47 percent! Hahahaha!

This reminds me of the last episode of the old TV show Barney Miller when the precinct was being closed down. The rumor was that the old police station was going to be torn down and replaced by “low-income luxury housing”, which was a really funny line at the time, but in subsequent years “low-income luxury housing” actually came to pass in some places, and so maybe a negative 47% interest rate is not as absurd as it seems, either!

Anyway, the next paragraph of the satire was, “The statement accompanying the surprise cut was also unusual, employing bolder language than is typically the case. For example, the phrase ‘the committee judges inflationary and growth risks to be roughly balanced’ was changed to read, ‘Screw it! We’re going nuts over here! You got a financial problem? Need some fast cash? We’ll pay you – that’s right, you heard us – to borrow money from our bank.”

But this biting satire and raw sarcasm has given me the idea for a new television game show of my own. Thus, I proudly announce the latest television hit show, Mogambo’s Let’s Make A Deal (MLMAD). The essence of the 30-minute show is that I say to a randomly-picked audience member who is dressed in some ridiculous garb, “If you think that a negative lease rate for gold is weird, and if you think that the banks reporting total reserves of $44 billion while at the same time non-borrowed reserves are an astonishing negative $61 billion is weird, and if you think that banks’ ‘free reserves’ are a sudden, staggering negative $75 billion is weird, or if you think that borrowed reserves in the banks are a sudden, terrifying $80 billion is weird, and if you think that private-sector investment banks borrowing from the Federal Reserve itself for the first time in history is weird, then you are not only 100% correct, but you win! You are a winner! You have won the chance to choose between the two Mogambo Doors Of Mystery (MDOM) and claim the fabulous prize that is waiting there for you!”

The camera pans down to two mysterious doors on stage as I say, “Step right up and pick which door you wish to open, and discover the surprise behind that door! And why don’t you tell us what is behind the two doors, Bob?” at which point Bob the Announcer says, “Right you are, Mogambo! Behind one door is a government that will grant you seven wishes, making all your dreams come true! Behind the other door is the economic death from the government making someone else’s seven wishes come true.”

Waiting for the applause from the audience at the prospect of being granted seven wishes to die down, I say, “And there you have it! Which door will it be?”

The audience chants rhythmically, “Which door? Which door? Which door?” louder and louder and louder, like some demonic jungle voodoo rhythm, until the contestant finally, and excitedly, chooses a door!

If he guesses right, he gets seven wishes and he goes off to enjoy them. If he chooses wrong and chooses the door behind which waits “economic death from making someone else’s seven wishes come true”, then thugs rush out to strip the surprised contestant naked before dragging them out to throw them into the cold, filthy gutter while our audience watches in air-conditioned comfort as our lawyers loot the contestant’s house, their bank accounts, retirement plans, brokerage accounts, their safe-deposit box at the bank and then burn their house to the ground. All gone!

Well, all the network people, all of the money people and everybody who heard of my new show said it was the worst idea they had ever heard, which I cleverly counter by saying, “The moronic population of this country loves this game already, even though nobody has ever had to pick the wrong door until now! Where in the hell did you think all this government spending was going?”

And if you think, like everybody else seems to think, that this is an ugly, vicious and stupid idea, then get used to it, because you are going to see all kinds of weird things from now on, as the governments – not just American but everybody’s – are now realizing, too late and to their horror, that we are all freaking doomed by the vast expansions of fiat currencies and indebting taxpayers to fund massive amounts of government growth and government spending, and now they are going to do every slimy monetary, fiscal and legal trick that they can think of.

And with the awesome, unlimited power of a fiat currency that can be increased in volume literally at will, all fiscal and monetary plans are, suddenly, possible! Negative interest rates, tax rebates, tax cuts and increased government spending all at the same time! It’s literally possible, and without end! Ask Zimbabwe!

But it is, alas, impossible that they will succeed in alleviating the problems. As Clyde C. Harrison at Brookshire Raw Materials correctly said, “Governments and central banks are completely incapable of keeping tomorrow from coming”, which is too bad, which in turn reminds me of the funny line, “Tomorrow is the greatest labor-saving device today”, which seems oddly and chillingly apropos, considering what the government and the Fed are doing is merely fighting for another day of economic reprieve!

Until next week,

The Mogambo Guru
for The Daily Reckoning