But we’re not…yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.

To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”

But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.

Yet that hasn’t quite happened.

Core inflation — which denotes consumer prices without food and energy costs — has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom and boom crowd wondering if they’re worried about nothing.

So what gives?

Well, there are four reasons we haven’t yet seen hyperinflation:

Click here to continue reading Mr. Fitzgerald’s article.

Since then, it has been known as “The Friedman Effect.”

It’s important to understand the Friedman Effect because it can have dramatic impact on your investment decisions and your portfolio…

Milton Friedman & The Friedman Effect

Basically, Milton Friedman found that if the Fed switched from tight money to easy money, or vice versa, it would take about six months before you would see any change in the direction of the economy or Wall Street.

The Friedman Effect worked like clockwork during the financial crisis of 2008. In late 2007 and early 2008, the Fed decided to squeeze the money supply and impose a credit crunch on the financial markets to slow down the real estate boom. The Fed got more than it bargained for. Its tight-money policy had a dramatic impact – the real estate market crashed and took the financial markets with it.

The Fed panicked and in September, 2008, Ben Bernanke & Co. reversed course and injected billions of dollars into the marketplace. The Fed’s balance sheet (see chart below) doubled in a few months as the Fed acted aggressively. Among other bold efforts, the Fed bought Treasuries and mortgage-backed securities directly in an effort to stem the tide of a deflationary collapse.

As you can see from the above chart, the Fed’s bank account (Adjusted Monetary Base) doubled in short order in 2008-09.

The Friedman Effect – Pinpointing The First Signs of Recovery

According to the Friedman Effect, that means the first signs of a recovery and stock market rally would occur six months later. Sure enough, in March, 2009, Wall Street bottomed out and roared ahead in one of the strongest rallies in Wall Street history. The S&P 500 Index has climbed an incredible 34% from its lows of March 8.

Moreover, we’ve seen sure signs of stabilization in the financial markets and the economy. The Libor rate – the interest rate banks charge each other to borrow short term – has fallen sharply, an indicator that the financial crisis is ending.

Many economic indicators have also turned positive. On Thursday, the Labor Department announced that the total number of people filing for unemployment insurance fell by 148,000 to nearly 6.7 million in the week ending June 6. That was the largest drop in more than seven years, and snapped a streak of 19 straight record-highs.

The best overall indicator of a possible recovery is the U.S. Index of Leading Indicators published monthly by the Conference Board, a private research group based in New York. The Ten Leading Indicators are designed to forecast the economy in the next three to six months. Most of the indicators are business related, such as new orders for capital goods, building permits and unemployment claims – and, I might add, the stock market and real money supply growth. The Conference Board also surveys the leading economic indicators for 10 other countries around the world.

The Board reported that the U.S. Leading Indicators fell sharply over the past year, and finally bottomed out – in March of this year! The leading indicators have now risen two months in a row. And on Thursday, the index rose 1.2%, the biggest gain since March 2004.

• In short, the good news is that the U.S. economy is slowly but surely on the road to recovery.
• The bad news is that the Fed has apparently decided to step on the brakes again, reversing course in its monetary policy. The days of quantitative easing are apparently over. As the graph above indicates, the Fed has stopped adding to its balance sheet – the adjusted monetary base has stopped growing.

The broader-based money supply (M2) was growing at double-digit rates until a few months ago. Now’s it’s growing at only 2% or less.

This tight money policy could spell trouble down the road if it continues. The stock market will probably continue to push higher for now, due to the lag time in the Friedman Effect. The Dow might even reach 10,000 by the end of this year. But if the Fed maintains this new tight money policy, we could be in for another rough period and a return of the bear market.

Source: The Friedman Effect: Is Another Bear Market Around the Corner?

Given that more than $800 billion of federal money has been earmarked for U.S. “stimulus” projects, one would actually expect that the frightening job losses of the past six months would quickly reverse, and that the U.S. economy would soon start creating the 3 million jobs that U.S. President Barack Obama has promised.

Unfortunately, that has not been the case.

That’s not to say that the outlook is for a Great Depression, an economic reversal in which a country’s output plummets by 25% or more from its peak level. While the current U.S. recession may well be the “worst since the Great Depression,” it’s becoming clear that the peak-to-trough output decline will be something like 5% – worse than the recessions of 1973-75 and 1980-82, both of which saw output declines of about 3.5%, but not all that much worse.

After all, the money supply has not been allowed to collapse as it did during the 1930s and there has been no repetition of the infamous Smoot-Hawley Tariff Act, though the “Buy America” provisions in the original stimulus outline and the corresponding “Buy China” provisions inChina’s corresponding package indicate that “Smoot-Hawleyism” still lurks just beneath the surface.

However, the following four factors make it almost certain that the U.S. economy will be slow:

• Record-low interest rates make it impossible for the U.S. central bank to use rate cuts to jump-start growth.
• The huge U.S. budget deficit will force the federal government to continue its heavy borrowing – potentially “crowding out” private-sector players seeking loans to finance their own growth.
• The growing size and influence of the U.S. public sector.
• And an over-growth of government regulation.

Let’s consider each one.

First and foremost, the U.S. Federal Reserve has loosened money supply inordinately over the last year, with short-term interest rates at 0.00% and money supply growth at 15% per annum. Thus, there is no Fed loosening available to spur employment.

Interest-rate-sensitive sectors – especially housing and construction – are likely to remain depressed for years. These sectors are major employers of low-skilled and semi-skilled labor, which will not be picking up their normal slack.

A second adverse factor is the exceptionally large federal budget deficit - expected to reach $1.85 trillion, or 13% of the U.S. economy, in this year alone, according to the nonpartisan Congressional Budget Office(CBO). That deficit will stretch several years into the future, thanks to the stimulus package and various bailouts initiatives.

In the short term, these rescue-oriented provisions have helped U.S. employment, not the least by allowing federal and state governments to do some hiring. But in the longer term, the federal borrowing they have caused will restrict the private sector’s access to the capital markets. That will hinder small businesses in particular. Indeed, the private sector will find it difficult to fund capital expansion, and again the result is likely to be a dearth of hiring.

A third adverse factor is the expansion of the public sector itself. To some extent, it does not matter how budget deficits are financed; the important consideration is the transfer of resources from the private sector – allocated by the automatic optimization of the so-called “price mechanism” – into the public sector, where no such considerations apply.

It’s not just a question of government itself; it’s now clear, for example, that Chrysler LLC and General Motors Corp. (OTC: GMGMQ) are to be controlled by the government – with subsidies – at our expense.

When General Motors announces, as the company did Wednesday, that it will build automobiles on the basis of an assumed oil price of $100-$120 per barrel, one sees at once a politically motivated strategy; GM will cease making the large cars that in the past have been its principal source of profit. If oil prices average $50 or less, as is perfectly possible in a long period of sluggish global growth, General Motors will be a mess – and will need to be bailed out by us again.

The late William F. Buckley Jr. once claimed that 500 names chosen at random from the Boston telephone book could do a better job of running the country than Congress; I wouldn’t mind betting that such a random selection would also make a better job of running General Motors than the government.

Related to the growth in government is the growth in regulation. For example, President Obama’s “cap-and-trade” plan to address global warming will impose a new tranche of costs on the U.S. economy, without any great offsetting spurs to employment. In areas such as energy production and heavy industry, employment will be depressed by the additional cost burdens those areas bring, as well as by the simple difficulty of complying with the new regulations.

To see where a larger state sector and more regulation can lead, one need only look at the European Union (EU). Whereas U.S. unemployment was below 5% for much of the last decade, the lowest rate reached since 2000 was 8.8% in the EU. What’s more is that certain areas of the EU have much worse records than this.

In Spain, for example, unemployment was close to 20% for much of the 1980s and 1990s, and has now soared once again to no less than 18.2%.  The EU is not ensconced in a Great Depression and Spain remains a relatively wealthy country; nevertheless, the rigidities in the European system are such that unemployment remains persistently high, with adverse social effect, such as the rioting in the Paris banlieus.

The European Commission (EC) recognized this problem as early as the 1980s, and has been gradually pushing Europe towards the more open U.S. labor market, with only moderate success.

Because of over-loose money, excessive budget deficits, growing government and impending regulation, it is thus unlikely that the U.S. economy and its job market will bounce back as quickly as it has in the past.

The investment “takeaway” from this is obvious, I fear: A substantial part of one’s money should be invested in the free-market economies of East Asia, where regulation and taxation are lower, so even though a recession has also hit, recovery is likely to be much more robust.

Source:  The Four Key Reasons the U.S. Economy is Facing a ‘Jobless Recovery’

The thing that bothers us most is the supposed solution to the problem – more easy money – is also the intrinsic cause. Governments around the world want to “reinflate” the economy. But we know there’s a fine line between “reinflation” and “inflation.” Hence our uneasy sleep.

Will’s father, Bill, has made a quick tally of the funny money entering the system. “The US Federal Reserve,” he writes in The Daily Reckoning, “has been authorized to “print” $1.75 trillion worth of new money in order to buy Treasury bonds. The Bank of England has its own program – worth £75 billion, so far. Even Switzerland has been printing money – so much that its money supply, as measured by M2, is growing at 30% per year. And two weeks ago, the European Central Bank announced that it too would begin creating money in order to buy corporate bonds.”

The question, of course, is where does this money go after it is born? And what effect does it have on the economy?

We like to call all this newly printed money “Abracadabra money.” Bill is more direct. He calls it “counterfeit money.” But whatever you call it, determining where it will end up and what kind of trouble it will cause is never straightforward. It seems like Bill is having nightmares too.

We thought the Bubble Epoch was the peak in claptrap and illusions. But we were only in the foothills. The feds now pretend to bail out the economy by giving money to companies that pretend to be concerned, run by people who pretend to know what they are doing. And when they run short of money, they create more of it, pretend it is real… and pretend they can tell it what to do.

What is likely is that money will have a mind of its own. First, the markets will react…and the authorities will not. They will remember their own critiques of Japanese and Roosevelt-era monetary policy. In both cases, they believe central banks removed the punch bowl too early – before the party really got rolling. In both cases, the recovery was cut off.

Then, while they are hesitating, money will turn on them. Inflation rates will rise further. The velocity of money will pick up. And investors – including foreign governments – will become eager sellers of government debt. Suddenly, it will be too late. In order to remove the monetary inflation they previously added, central banks will have to sell bonds, instead of buying them, trying to reabsorb money from the economy. The extra cash will then disappear back into the central banks. But in order to bring inflation under control, the biggest bond buyers in the world must turn into the world’s biggest sellers. Bond prices, already falling as investors fear the worst, will collapse immediately. An avalanche of dollars will fall upon the world markets – as dollar holders all over the world become desperate to get rid of them.

We don’t know what day it will happen. But we have a good idea as to what time of day central bankers will realize that they are doomed. About 4am is our guess. That is the moment when Ben Bernanke and other central bankers begin to feel like members of the Donner Party.

If I had been writing it, I would have titled it “Not All Of The People In The World Are Stupid!” with the subhead, “There are lots of smart people who are buying gold to capitalize on the sheer stupidity of governments abusing fiat currencies so that inflation in prices will soar as inflation in the money supply soars, until gold-owning people, giddy with greedy glee, will say, ‘The Mogambo was right! Whee! This investing stuff is easy!’”

But I am not here to show off how good I am at coming up with boffo headlines with the subtle undertones so that they offer me a job, at a fabulous salary, to write headline gems like this one; this is about how “On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000+ contracts, representing about 15% of the April COMEX gold futures contracts remained open” indicating that, as holders of those long gold contracts, they “demanded” delivery of the physical gold “by holding futures contracts past the expiration date.”

The big problem belongs to the short-sellers of gold, who are finding, suddenly, that “long buyers were demanding in droves” – demanding physical gold bars, when, apparently, there were not enough.

Since I am confused as to what all of this means, Mr. Goodman correctly interprets the blank look on my face as puzzlement – if not outright befuddlement – and patiently explains that to keep things in perspective, history has shown that people investing in COMEX futures don’t necessarily want physical gold, and that they are merely speculators, as, “In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper” which is the basis of the alleged gold and silver scams, as GATA.org and Ted Butler have long exposed, which gets us talking about how corrupt regulators are these days, as everything is else corrupted these days, which is, of course, just what you would expect at the end of long monetary booms, which doesn’t make it any more palatable.

But back to our story of the almost-default at COMEX… Fortunately, at the last minute, Deutsche Bank delivered “a massive 850,000 ounces, or 8500 contracts worth of the yellow metal.”

This is where I kind of lost interest, as this kind of thing is like blood in the water to sharks, who will soon be looking at the low price of gold and the complete lack of supply of bullion, and they will be hatching plots to squeeze this disparity and make a lot of money, and I was soon fantasizing about how my tiny little stash of gold will soar and everybody else who doesn’t own gold will be busted out, now that the scam has been busted, and there will be people, like cute college coeds, who will be so desperate that they will say they are willing to do anything for money, and I will say, “Anything?” and then they will quickly affirm, “Anything!”, and so I again ask, but with a rakishly raised eyebrow and licking my lips in a lascivious manner, “Anything?” and they gulp and say, but without their former enthusiasm, “Anything”… So you can see how I was distracted.

And anyway, somewhere along the line he admits that it is “circumstantial evidence” that Deutsche Bank was a major holder of short positions, or that “the gold used by Deutsche Bank to deliver and fulfill its COMEX obligations, came directly or indirectly, from the ECB”, which gets back to the headline “Did the ECB Save COMEX from Gold Default?” that we were discussing previously.

All of this, of course, is fraudulently criminal in many, many ways, breaks a lot of regulations in those and other ways, and he calls for investigations and indictments and all of that stuff, which won’t happen because the amount of corruption at the end of long monetary booms is so pandemic that it won’t be allowed.

Now, before I go off ranting and raving about how another bunch of scumbags perpetrated another scam with compliance from government scumbags, let’s concentrate on the important fact that not only are a bunch of guys buying gold and demanding delivery of the actual metal, but now increasing demand has swamped supply! Amazing!

In conclusion, let me say that if people don’t buy gold, in spite of the overwhelming historical evidence to do so when the money supply is set to double (and then double again and again!), in spite of gold’s gains for the last decade, in spite of the sight of people suddenly taking delivery of physical gold in unprecedented amounts, and in spite of me telling them right to their faces to buy gold, then there is something very, very wrong with them, which ought to give them something to think about as they are idly scratching around in the dirt looking for bugs to eat, because this economic mess caused by a Congress constantly deficit-spending and a Federal Reserve constantly creating the money for them to do so is going to get Really, Really Nasty (RRN), and I am scared for me and for them.

But I am not as scared when I have gold, so at least I have that going for me! Whee!

Source: Golden Shorts in an Economic Winter

… which is what you get when you read Mr. Noland reporting that “The M2 (narrow) ‘money’ supply surged $39.8bn to a record $8.343 TN (week of 3/9)” which means, “Narrow ‘money’ has now inflated at an 18% rate over the past 25 weeks and $766bn over the past year, or 10.1%”! Yikes!

The “yikes!” comment at the end is chosen specifically to indicate that the preceding section is “Bad, but I’ve seen worse, and we will see a lot worse over time as the treacherous Federal Reserve will continue to be required to create more and more money so that the moronic, desperate Congress can borrow it so that they, their parasitic entitlement friends and more and more desperate people can merely survive at this point, and who are all more and more destitute from the huge inflation in the money supply, that produced the higher prices, that produced the bubbles in stocks, bubbles in bonds, bubbles in houses, bubbles in derivatives and bubbles in size of government, that has now produced the bursting of the aforementioned bubbles that were caused by the foul Alan Greenspan, insane chairman of the despicable Federal Reserve from 1987 to 2006, creating all the mountains of excess money and credit that made it all so, so horribly possible.”

Actually, this $766 billion increase in the M2 money supply, normally staggering and enough to send me dialing “9-1-1” on the phone while gobbling nitroglycerine pills so that when the police dispatcher answers “Nine one one, what is your emergency?” I say “Hebba ah uh mmmba!” – now seems quite mundane compared to the loathsome Obama administration and the despicable Congress plumbing the depths of stupidity born of desperation with their new $1.9 trillion budget deficit for next year!!!

Not surprisingly, then, the Economist magazine shows that our federal governmental budget balance, as a percentage of 2009 GDP, is already a NEGATIVE 13.7%, which can be interpreted to say that just the borrowing to finance the stunning deficit-spending by the federal government for the next year constitutes almost 1/7th of the total value of every good and service (GDP= $14 trillion) that this whole freaking country produces in a Whole Freaking Year (WFY)!

And this humongous 13.7% of GDP is just the BORROWED part of one year’s federal government spending!!! Astounding!

What can one say except “We’re freaking doomed to death by inflation, and that means that anyone not buying gold Right Freaking Now (RFN) either has something very, very wrong with them, or they are more victims of the Mealy-Mouth Mainstream Media (MMMM), who are not “reporters” or “investigative reporters” anymore, whose original purpose was to expose corrupt government and pursue justice, but they are now all girly “journalists” who wish to discover the painful emotional traumas suffered by tragic “victims” of various kinds, yet turning it into a heroic story of hope, renewal and redemption.

So, even more embarrassing, America used to strut around the world, scolding countries that got into this deficit-spending-gone-kaput mess, sanctimoniously preventing them from increasing their government deficit-spending as a condition of getting bailout loans from the U.S., the International Monetary Fund, the World Bank, miscellaneous secret government slush funds and terrorist goon-squads, and instead we insisted that they increase taxes and cut government spending! Hahaha!

Now, in a spate of irony, the tables are turned, and we smug Americans are doing what we tried to prevent other countries from doing when their economies fell apart after their stupid governments overspent, over-borrowed, over-leveraged, over-estimated and over-enacted a lot of overly-stupid legislation that forever changed the economy for the worse.

And not only are we doing what we wouldn’t let anyone else do, but we now have a much larger negative budget-deficit as a percentage of GDP than all the others in the list of top-30 major countries, by size, of the world! We’re the absolute worst! Hahaha!

And although I can hear you whining and complaining about how this is sure to make me launch a Screaming Mogambo Bellow Of Outrage (SMBOO), I am still going to make it all worse by noting, during the SMBOO, that industrial production around the world is getting hammered, too, being down 11% in the USA, down 11% in Britain, down 9% in Germany, down 4% in France, a terrifying 24% in Spain, (in the whole euro area, industrial production is down a hefty 12%), down a scary 31% in Japan, and down a terrifying 43% in Taiwan! Yikes!

It’s a good thing that we have gold, silver and oil to protect ourselves! Whee! This investing stuff is easy!

Source: U.S. Government Buys Hypocrisy With Fiat Currency

So I was taken aback when Addison Wiggin of Agora Financial wrote, “$7.2 trillion is a lot of money. That’s what D.C. has poured into ‘our’ bailout so far.” Wow!

Trying to keep from peeing my pants in horror, I think to myself, “Hell yeah, that’s a lot of money… Because it is roughly half of everything this country makes in a year! Half of American GDP!” which, unfortunately, ended in “P”, which sounds like “pee”, which was just enough of a subliminal suggestion that… Well, never mind.

But if creating that much money is not enough to scare the piss out of you, too, then consider it just a Mogambo Warm-Up Test (MWUT) to see if your heart is strong enough to take the news behind the New York Post headline “The Fed’s Futile Move” – an article by Dick Morris and Eileen McGann, who report, “the money supply has already expanded by 271 percent in the past five months”! Gaaahhhh! That comes out to a money supply expanding by 650% in a year!

I immediately see that I made a mistake in worrying about YOUR heart, when I just noticed that my own has taken the news very badly, and as I am laying here on the floor, wondering if the newspaper reporter will report whether I am “laying” or “lying” on the floor where I have been killed by the news of the complete suicidal stupidity of Congress and the Federal Reserve, when it occurs to me as I was either laying or lying on the floor that the thing that makes it all so surreal, and which proves that everyone involved in this whole Federal Reserve/Congressional irresponsibility is both insane AND stupid, is that the whole ridiculous idea behind all of this “stimulus” money is the laughable belief that all of this excessive new money and insane amounts of deficit-spending can be removed once the economy “recovers”! Hahaha!

After nervously laughing at such idiocy to hopefully forestall puking up blood in terror, or at least screaming in sheer outrage, my lips curl into a snarling sneer, and with a voice dripping with venomous contempt, I ask, “Recover from what, morons? Hell, the wildly distorted economy has been a walking zombie for decades, animated only by the constant infusions of new money and credit from the Federal Reserve to finance more and more deficit-spending of government, so that the entire economy gradually evolved into a cancerous, warped, mal-invested, misshapen, bloated, disgusting socialist/collectivist monstrosity, built upon the insane economic pillars of government spending for constantly-increasing entitlements, trading financial assets to each other, providing health services to each other, and building huge houses and lots of Starbucks coffee shops! Hahaha!”

In case anybody asked (which they didn’t) I would have ended with, “Everything else that we used, we imported! We stuck ourselves with a trade deficit that regularly exceeded $800 billion a year” which means that $800 billion a year left this country and became the wealth of somebody in some foreign country, who appears to not be very happy to get those $800 billion dollars because he is saying disparaging things about them, which sounds like, “Wong cho wo hubba bubba go down crapper?” which means, “What in the hell am I supposed to do with all these American dollars that get more worthless every damned day because the stupid American Federal Reserve is creating insanely more of them every damned day and the stupid American government is insanely deficit-spending more of them every day, too?”

I admit that eavesdropping on foreigners whining about the dollar is pretty far from my original complaint, which was that all of this stimulus money will never, ever be withdrawn from the economy because that would mean that the money supply would go down, which is the definition of deflation, and this deflation is what has the Fed and the Congress in such a frightened panic that they are deliberately creating inflation and risking hyperinflation with their unbelievably massive explosions of new fiat money and government spending, which are guaranteed to destroy us a dozen times over, just to make sure that deflation, and the attendant drop in inflated asset prices, doesn’t happen! Hahaha! We’re freaking doomed!

And yet (notice the way my eyes comically roll around in my head) I am supposed to believe that maybe one day, perhaps after a decade of the government deficit-spending another $40 trillion or so, they will allow deflation to happen and let all the prices of assets collapse then? Hahaha!

No, no, my darling Junior Mogambo Rangers (JMRs); all that money, and yet still more money from other countries and other sources, will be with us for the rest of our lives, and the inflation in the money supply will show up as higher and higher inflation in consumer prices, which is what will cause rioting when the people realize that they are bankrupted and starving to death because they did not buy gold, silver and oil when their own stupid government started acting irresponsibly, which is, I am sure you will agree, bad news.

The good news is two-fold in that that 1). I will be a shining exemplar of the fat, piggish, conceited, self-absorbed, obnoxiously gluttonous rich guy whose gold, silver and oil have obviously served him well enough to indulge every gutter-level salacious appetite, no matter how revolting, and 2). It will be a lesson everyone else will, hopefully, not forget the next time their government acts like a moron.

Whee! This investing stuff is easy!

Source: Zombie Economy Feeds on New Money and Credit

…since it is concerned primarily with providing information and news about stocks and bonds so that you will be motivated to constantly buy and sell stocks and bonds.

So I was surprised to read where it starts out with, “Large investors, including some who anticipated deep troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments world-wide to shovel money at problem areas could cripple leading currencies.”

This is exactly true! That is exactly why I am buying gold, and why smart people are buying gold and why large investors are buying gold!

Well, since the WSJ is traditionally concerned with stocks and bonds and so is historically unconcerned and disdainful of gold, I figure that Mr. Zuckerman will follow that “gold bug” news with some disparaging remark like “which only proves how stupid large investors are, since everyone knows that gold is for morons and raving lunatics like, for instance, The Mogambo, who is forever wailing about how you should be buying gold, silver and oil with your very waking breath because the Federal Reserve, which caused all of the world’s problems by their decades-old regimen of constantly over-creating money and credit which produced massive inflations in the prices of stocks, bonds, houses and size of government, is now going to make the money supply go Freaking Super-Nova (FSN) with even MORE excess creation of money and credit to accommodate the panicky, unbelievable, desperate deficit-spending plans measured in the multi-trillions of dollars by the incompetent, brain-damaged Congress and the ridiculous Obama administration comprising, as it does, the worst of the worst, and that means consumer prices are going to explode one day – say people like The Mogambo, within a year or so, and for a long, long time afterward, too.”

Although Mr, Zuckerman does not mention me directly, he says, “For years, big gold fans were fast-moving traders and so-called gold bugs, a crowd of bears ever-convinced that the underpinnings of global economies and markets were set to crumble” which not only describes me to a freaking T, but is exactly what happened!

He also describes me pretty well, too, when he says, “Gold has disappointed some investors because it hasn’t been a home-run investment despite continuing financial ills” which is also the fault of the Federal Reserve, which is on record as saying that “the Fed stands ready” to dump as much gold onto the market as is needed to keep its price from rising.

And the reason they are openly manipulating the price of gold, which is the advice of former Fed chairman Paul Volcker, is because they are concerned about the price of gold rising, which is a clear signal that inflation is raging because the Fed is a bunch of money-maddened morons and the economy is in Big Freaking Inflationary Trouble (BFIT) because of them and their mismanagement of monetary policy with their ridiculous neo-Keynesian econometric stupidities! Hahahaha!

And it is going to get worse, as Junior Mogambo Ranger (JMR) Wayne T. sent a clip from ft.com that announced that “Barack Obama’s top economic adviser has urged world leaders to pump more public money into the economy in a coordinated effort to boost demand and lift the world out of recession.”

And how are we going to do this amazing feat? By engineering a “global demand-led recovery” where everybody starts buying! Buying! Buying!

And in fact, Laughable Larry Summers thinks, “There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.”

I cannot believe what I am reading! Perhaps in a feeble attempt to make me shut up my screaming in outrage at the inflation in prices that such irresponsible economic stupidity will cause, he does allow that, as ft.com terms it, “While the US and other western nations should return to living within their means in the medium term, everyone should raise spending sharply now.” Hahaha! Unbelievable!

And why in the hell would anyone in their right mind say such a bizarre thing that is directly contraindicated by the entire stinking corpus of world economic history for the last 4,500 years which proves that, 100% percent of the time, increasing the money supply of a fiat currency with government deficit-spending has been what we in the economics biz officially call a Big, Big, Bad, Bad, Bankrupting Bust (BBBBBB).

Well, don’t look at me for an answer as to why someone would say such a ridiculous thing and make us laugh with scorn and contempt, but, “In an interview with the Financial Times, Lawrence Summers said the urgent need for a short-term increase in spending by governments temporarily overrode the longer-term goal of tackling the global imbalances many economists believe caused the financial crisis.” Hahahaha!

“Temporarily overrode”! Hahaha! This is the economics of Larry Summers? Hahahaha! No wonder he wound up in the Obama administration! Hahaha! No wonder we are so freaking doomed!

I am struggling to contain my laughter, as I want to make sure that I write this down because people in the future are not going to be satisfied with me merely recalling the moment and laughing and guffawing all over again, but probably drooling more than I do now.

So I officially make note that Larry Summers, “Barack Obama’s top economic adviser” thinks that things will be better by having the government spend more money! Hahahaha!

This is after, I assume, getting it from the Federal Reserve, which can merely push a button to create all the money and credit one can even imagine, at perpetually low interest rates, so that untold trillions of dollars of new money can be borrowed from banks so that untold trillions of dollars in new Treasury bonds can be bought, worsening horrific imbalances that are already so staggering that they could only have been produced during rampant government corruption and/or pandemic stupidity! Hahaha!

I knew I could not get into the interview itself, and, as usual, am stopped long before I can even get near, although sometimes I can break free of the grasp of security guards long enough so that you can barely hear me in the background yelling, “We’re freaking doomed, you morons! The damned increase in the money supply by government deficit-spending will increase prices and produce Really, Really Weird (RRW) economic distortions!”

Well, this is not one of those times, and I couldn’t hear a thing they were saying, and thus they could not hear me, and I had to read in the Financial Times article that Mr. Summers says, in another of those things that must be written down because nobody is going to believe it, that “The US administration had no choice but to take strong public action to ‘save the market system from its own excesses.’” Hahahaha!

“Save the system from its own excesses” with more excesses! Hahahaha!

But this is not about how much disrespect I have for Mr. Summers’ opinion (because, as Milton Berle said, “Never trust the opinion of a man in trouble” as to the necessity of more governmental deficit-spending to correct the bankrupting imbalances of previous governmental deficit-spending until fully half – half! – of the economy is now composed of local, state and federal government spending, which is not even to mention all the borrowing by the local and state governments floating bonds to pay for sewers and fire houses and playgrounds where most of the “children” are probably drug-addled adolescent criminals and brain-damaged mutants, judging by the way they look, dress and act.

No, this is about how you should buy gold; but perhaps the best reason to buy gold is provided by Mr. Zuckerman himself, who says, “Since 1971, the dollar has been backed not by gold but by faith in the U.S. government”! Hahaha! Faith in the U.S. government! Hahahaha!

If anybody has any faith whatsoever in the U.S. government, then they have not been paying attention and deserve to lose their money, as the price of freedom, they say, is eternal vigilance, but that is not exactly true. It looks like the saying should be “The price of freedom is either eternal vigilance or all your money.”

The good news is that the real, lazy man’s secret is that gold is “eternal vigilance” in a handy, compact yellow metal, and sometimes, like now, you will actually get richer in terms of fiat money due to the depreciation of the over-produced fiat money!

Whee! This investing stuff is easy!

Source: There’s No Place Like Gold

…at which point I was getting my hopes up that he would mention me saying something, you know, memorable, such as, “I seem to remember that The Mogambo said something that was so deliciously, delightfully clever, and although I do not remember which it was among his voluminous bon mots, I do recall how his flashing eyes twinkled when he spoke of How Freaking Rich (HFR) he was going to be when the prices of gold and silver exploded as a result of such Federal Reserve malfeasance, including their manipulating the prices of silver and gold down to levels that are officially classified as ‘laughably cheap’ which made such riches possible by being able to ‘buy low’ now and ‘sell high’ very soon, and how we laughed – ‘Hahaha!’ – when he kept saying how we were all freaking doomed because of the constantly increasing price inflation from the constant increases in the money supply by the Federal Reserve creating so much money and credit to accommodate constant expansion of government spending!”

Alas, it turns out he did not mention me at all, but said that an interesting way to look at the economy was that “The great boom that the world is enjoying is, in effect, an enormous shorting of cash and going long on debt” which is indeed an interesting perspective, although it does not say that that bastard Alan Greenspan is directly responsible when he had the Federal Reserve keep increasing money and credit, at lower and lower rates, for so long that a constant simmering inflation resulted as people “went long on debt” by borrowing, borrowing, borrowing, including the federal government borrowing, borrowing, borrowing trillions of dollars to expand a huge, monstrous entitlement-generating government that is now So Freaking Big (SFB) that total federal, state and local governments comprise half of all spending in the USA! Half! Gaaahhh!

I am so outraged at this that I say we ought to rise up in outrage and rush to our telephones, where operators are standing by to take your order for “Mogambo Brand” Mob Supplies (MBMS), including not only the popular Mogambo Flaming Torch (MFT) and Mogambo Long-Tine Pitchfork (MLTP), but now featuring a new line of filthy rags in which to dress with which to give the whole thing a kind of surreal, repellent horror, as all politicians know that there is no more dangerous a person than a hungry, bankrupted peasant in filthy clothing brandishing a Mogambo Flaming Torch (MFT) and/or a Mogambo Long-Tine Pitchfork (MLTP)!

Mr. Price is apparently not prepared to advocate buying one of my shoddy, overpriced products or mob rule, but he might as well have, as the result of going short cash and long on debt is that “Eventually, there will be a short squeeze on cash which will have to be covered by going long on cash and shorting debt” which ought to make your spine curl up into a tight little knot when you remember that money now comes from debt, and this debt going down in price means money going up in smoke with bond prices falling, meaning interest rates are moving up (since bond prices move inversely to interest rates), which means that rolling over debt means losing more and more money while owing more and more! Hahaha!

Again, Mr. Price is not interested in my interruption or my stupid observations, and says that “Bringing all the massive liabilities of the banking system onto the Treasury’s indebtedness – while the corresponding assets are worth far, far less than these liabilities – will solve nothing” to which he adds, by logical extension of solving nothing, that “Debt must be reduced by defaults and bankruptcies. There is no other solution!” where the astute reader will notice that Mr. Price has appropriately included an exclamation point at the end to indicate special emphasis, which seems appropriate considering the sorrowful effects of “defaults and bankruptcies”!

But there is also a plethora of exclamation points for when one considers the effects of inflation in prices and the resultant civil unrest as prices rise faster than incomes rise for the people who have incomes, and the screaming outrage of people who don’t have incomes that can rise!!!!

For those of you surprised at the “plethora of exclamation points” at the end of that last sentence, you cannot say you were not warned about them in the first part of the sentence, or that you were not warned of the disastrous effects of inflation in prices, which everybody has known about for centuries and which drove the Founding Fathers to write into the Constitution that money “shall only be of silver and gold” just to make sure that it would not happen in America by the simple remedy of making money out of something that the government, nor anyone else, cannot create at its whim.

All of this brings me, as you knew it would, to gold. It’s a valuable thing that nobody can create at a whim, and that is why, as everyone has learned for the last 4,500 years, you gotta have gold or you got nothin’ when governments are acting this, ugh, way.

Perhaps this is why TheGoldForescaster.com reports, “The joint holdings of the two leading Exchange Traded Funds have grown larger than the gold holdings of Switzerland, rising to 1,272.26 tonnes up another 43.21 tonnes.”

Whee! This investing stuff is easy!

Source: Attack of the Debt Mobs

It no doubt reflects a fault in my makeup that I found it not entirely convincing – but then I’m a math major and a former banker.

The speech – which took the place of the State of the Union address since it’s Obama’s first year in office – concentrated almost entirely on economics, and in particular on the financial and economic crisis currently facing the United States. President Obama’s comments were least convincing when they focused on the financial aspects of the crisis.

President Obama’s first mistake was in blaming the entire current situation on Wall Street. That’s attractive, populist rhetoric, but where was the acknowledgement of the U.S. Federal Reserve’s role in the debacle, inflating the money supply 70% faster than gross domestic product (GDP) for more than 13 years, so that asset bubble after asset bubble caused the incentive structures on Wall Street to go haywire?

Where, too, was the (admittedly subsidiary, maybe No. 3 after the feckless Fed and the greedy bankers)  role that Congress played over decades, messing up the housing market by creating unregulated irresponsible government guarantee monopolies in Fannie Mae (FNM) and Freddie Mac (FRE), an extra excrescence that no other advanced economy has found necessary to finance housing?

Bashing bankers is good rollicking stuff for a campaign speech, but it is less appropriate here, when the problems must actually be fixed. This rhetoric actually obscures the reality of the current problem, and diverts attention from the still-dangerous presence of U.S. Federal Reserve Chairman Ben S. Bernanke, whose role in creating the disaster is in danger of being exceeded by his role in perpetuating it. If Bernanke’s current rapid expansion of the money supply leads to violent inflation, as is likely, the crisis will indeed be prolonged for a decade, as Obama claimed was possible without government action.

President Obama’s second inaccuracy on the financial side in last night’s speech was in diagnosis. Lending in the U.S. economy has not seized up. It did seize up for about two months after the September crisis, but even by the end of the year loan growth had resumed, as figures from the major banks show. The commercial paper market has reopened and the investment-quality bond market has run at high volumes since the beginning of January.

Only one major source of “easy money” in past lending markets has disappeared – the securitization business: Almost nobody will now invest in securitization structures, and with good reason. However, as my investigative analysis of the nation’s Top 12 banks last week demonstrated, most of the major U.S. banks are in better shape than we believe, and are actually making money.

Their profitability has been greatly increased by the disappearance of competition from securitization – loan margins at the healthy US Bancorp (USB), for example, increased from 3.7% to 3.9% in the fourth quarter of 2008, and will have increased still further now.

Other than a few huge “zombies,” most banks are now making good money the old-fashioned way, through the interest margin between borrowing and lending rates. They will continue to do so, provided the government doesn’t (as President Obama and U.S. Treasury Secretary Timothy F. Geithner are currently readying to) introduce artificial competition, by inventing new taxpayer-funded vehicles to make consumer loans and drive margins down.

Yes, loans need to remain available for houses, automobiles and other purchases, but there’s no reason why they should not be somewhat more expensive – to rebalance the U.S. economy, the U.S. consumer needs to save more, not borrow more.

As well as being shaky in his knowledge of banking, President Obama is coming to make me question his math. Reducing the budget deficit from 10% of GDP, its level in 2009, to $500 billion, about 3% of GDP by 2013, is a hell of a task. That 7% swing in the budget balance is almost double the largest four-year swing ever achieved since the end of World War II: 3.8% in 1996-2000. Even during the 1990s economic cycle as a whole – a period of exceptional economic good fortune and budget thriftiness – the swing in the eight years from 1992 to 2000 was only 7.1% of GDP.

The problem with trying to tighten fiscal policy so rapidly is the negative “stimulus” effect it would cause. If the U.S. economy does anything in mid-2010 but zoom like a Saturn V rocket roaring off the launch pad, sucking 7% of GDP out of government demand over so short a period is likely to abort the recovery and push the economy back into a depression. Furthermore, Obama intends to do this without raising the taxes by one penny on anybody earning less than $250,000, and while increasing the size of the armed forces, their pensions, and spending more on energy, healthcare and education.

Maybe I’m a grouchy old skeptic, but it doesn’t look to me as if the math adds up.

Look, President Obama is a wonderful speaker, he really is, and he gave quite a performance in his address to Congress last night. As a gnarled old Republican, I’m prepared to admit he’s as good as former President Ronald Reagan, I may even nurse a faint suspicion that he’s better than Ronald Reagan.

But to be a great president, Obama will need to pursue policies that are sufficiently middle of the road so as not to destroy the superb private sector that’s the backbone of the U.S. economy, and that are also cleverly designed to work properly. It’s the math, the economics and the finance, not the language, the arts and the humanities, where there are still doubts.

Source: Despite Great Speech, President Obama Presents Risky Plan