...the angriest guy in economics
The Mogambo Guru
Jun 14, 2006
-- Last Friday, after gobbling a handful of assorted tranquilizers
washed down with coffee, my wife tied me to a chair before looking
in the Wall Street Journal to see the report of new Total Reserve
Bank Credit on page C 12. Cinching the last of the knots, she
picks up the paper and reports "It says here that it's up
I breathe a sigh of some relief. Two and a half billion bucks
ain't too bad for one week. Even a little on the low side, maybe!
Suddenly she throws the newspaper at me and starts to walk out,
and I say "Hey! How about looking up U.S. Gov't Securities:
Bought Outright?" I hear only scorn in her voice as she
says "Look it up yourself, jerk!"
So I ask, "Well, how about untying me so that I CAN read
it myself?", but she was gone, although I could hear her
muttering to herself as she walked down the hall, "Hahaha!
Screw you, creep!"
After awhile I get tired of alternately begging for help and
screaming death threats at her, so I decide to try and find out
on my own. I finally manage to loosen one corner of the strip
of duct tape that she put over my eyes, and I could use my Amazing
Mogambo Super Vision (AMSV) to read "U.S. Gov't Securities:
Bought Outright" next to the number $1,423" which means
the evil Federal Reserve bought up $1.423 billion dollars in
government bonds last week, after first creating the money to
What a racket! This is the ultimate in fiscal fraud and they
all should all go to prison for it. And if the American government
was not filled with (being as nice as I can manage) stupid, ignorant,
untrustworthy, lying, corrupt, cheating bastards and whores,
that's where they would all go.
But if I dare to show up at the Federal Reserve to make a citizen's
arrest, dressed for the occasion in my best Rambo outfit, complete
with headband and .30 caliber, belt-fed, air-cooled machine gun
under my brawny, manly Mogambo arm (BMMA), the cops come roaring
up with sirens blaring, not help me round up the economic terrorists
that have taken over the Federal Reserve, but to arrest ME! Like
I'M the one guilty of something!
But those vainglorious days seem now over, and I am stuck here,
ignominiously tied to a chair, peeking out from under a blindfold.
Then I notice that Required Reserves in the banks dropped back
to the insignificant $42.459 billion.
What fraud! What audacity! What an embarrassment that the self-important
nitwits at the nation's universities see nothing wrong with not
only an out-of-control fractional-reserve banking system, but
one where there are literally no freaking reserves at all (NFRAA)!
Money is literally created out of thin air, with no backing from
deposits whatsoever! This level of risk and multiplication of
the money supply is insane! This is beyond insane! And yet, there
I also noticed that custody Foreign Holdings of government debt
rose $11.4 billion in the last week, too, and so I amused myself
with laughing at foreigners while I struggled at the ropes.
-- Chuck Butler of EverBank notes that the G-8 finance ministers
are meeting again and he reports that Brad Setser of Roubini
Global Economics said that the ministers are promising not only
more action, but "vigorous" action, regarding the global
economic imbalances. Yow!
"Vigorous" action ought to produce a lot of fireworks,
including a rise in the dollar price of a barrel of oil. And
if you have not been out shopping for oil-related stock lately,
then I strongly suggest that you chug down the rest of that morning
"eye-opener" can of beer and buy some. Pronto.
And this suggestion that you load up on oil is because the dollar
is going to go down in purchasing power, which is the whole point
of the G-8 promising "vigorous" action.
You will, theoretically, seemingly make a lot of money on this
oil trade, but that is just an example of "money illusion";
you THINK that you made money because you bought low and sold
high, but remember; it is still only a damned barrel of oil!
And now the "money" you think you "made"
only offsets the loss in buying power that your money has suffered.
And to make it worse, you are actually a loser, since you have
to pay taxes on your nominal "gain"!
And to make it worse yet, you have to pay higher prices for gasoline
when you gas up the car to go pick up the profits and mail the
check to the IRS! Hahahaha! Welcome to the world of inflation!
And it will get worse, as evidenced by Barclays Capital estimating
that global inflation is increasing at the "fastest pace
in a decade."
-- If you are panicking about the swoon in gold lately, then
I pity you, because I know that you have not achieved True Mogambo
Enlightenment (TME), and thus I further I know that you will
be, to your dismay, repeating my again course next year. And
while I may be seeing your happy little face again next term,
we will obviously not be seeing Jim Otis, aka The Optimist, who
demonstrates flawless TME when he addresses the "near certainty
that inflation and world tensions will continue to get worse,
so an opportunity to buy silver and gold at temporarily reduced
prices is truly wonderful and positive news."
And the reason that he has the apt moniker "The Optimist"
is that he hedges his bet about inflation with the phrase "near
certainty" about price inflation, hoping for, I suppose,
a chance that a miracle of some kind will occur.
Tired of being referred to in the press as "local obnoxious
halfwit", I seize this opportunity to re-invent myself to
become (insert trumpet fanfare "taa-daa!") "The
Pessimist", because I am 100% sure that we are going to
get price inflation. Lots of it. I am so sure, so very sure,
so very, very sure that price inflation is coming because it
has always, always, always followed monetary inflation.
As proof of monetary inflation, David Tice of the Prudent Bear
Funds, in his semi-annual report, notes that "Across the
world, domestic credit systems are firing on all cylinders. Double-digit
credit growth now blankets the economies and asset markets of
the U.S., the Eurozone, the United Kingdom, Scandinavia, China,
Russia, India, Australia, throughout non-Japan Asia, and elsewhere.
To be sure, global monetary conditions have never been so loose."
And when you have, like we do right freaking now, lots and lots
and lots of growth in the global monetary base, especially after
whole decades of it, you eventually run out of bubbles in the
stock market, bubbles in the bond market, bubbles in the size,
scope and cost of government, and bubbles in the housing market.
That's when you finally get around to bubbles in commodities.
Gold is a commodity, AND it is a store of wealth.
And if you believe that there are such things as "lessons
of history", then as price inflation heats up and up, as
the value of the dollar goes down and down, gold will go up and
up, just like it has all the other times in history when somebody's
stupid government caused too much money to be created. And especially
those times when the "too much money" created is not
just by literally printing up cash with paper and ink, but creating
the money from debt! Hahaha! But now, this one time in history,
you think gold is going to go down as a result? Hahahaha!
-- The losses suffered in markets around the world, raging from
5% to over 50%, have given me a reason to moan. Stocks. Houses.
Bonds. Precious metals. Everything. In stocks alone, Bloomberg
reports $1.85 trillion in market value has been lost, worldwide,
It makes me wonder about the so-called "wealth effect",
which is the phenomenon that you spend more money (giving GDP
a boost) when you feel rich. Dr. Kurt Richebächer notes
that "It has been calculated that the 'wealth effects' on
consumption have raised real GDP growth by 1.5 percentage points
a year for the past five years. With nothing in sight to replace
this monstrous asset and credit bubble, a sharp downturn of the
U.S. economy is the most obvious conclusion."
Now add in that $1.85 trillion of "wealth" lost this
month and then tell me your new updated GDP estimate!
-- But Americans are as optimistic as they are ignorant and greedy,
and to prove it, the Federal Reserve reported that consumer borrowing
rose by $10.6 billion in April, which works out to an annual
rate of increase of 5.9%. Total consumer credit is now a record
My wife was behind a woman in line at the grocery store, and
she was saying as how "We owe $12,000 on our credit card
and we don't know how we are going to meet the minimum payment"!
And how did she pay for the groceries? With a credit card! Hahahaha!
It was from these humble, humble beginnings that the new Fabulous
Mogambo Editorial Cartoon (FMEC) was born, and it is not only
sure to go down as an Historical Mogambo Milestone (HMM) of some
kind, but hopefully also win some kind of prize or award or something
that I can turn into some cash, and pronto.
Anyway, the new Mogambo cartoon is a delightful series of similar
vignettes, starting with a woman at the grocery store checkout
counter paying with a credit card, and then, in successive panels,
to City Hall paying with a credit card, to the county paying
with a credit card, to the state paying with a credit card, and
finally to Congress paying with a credit card, all saying the
same thing: "Goodness me! I don't know how we are going
to make the minimum payment on the credit card this month!"
-- The Labor Department said that the U.S. April trade deficit
widened 2.5% to $63.4 billion. The prices of imported goods was
up 1.6 percent for the month. The month!
This increase came on the heels of a 2.1% surge in April. MarketWatch.com
took a look at the report and noted that excluding all fuels,
import prices rose 0.7% last month. Non-agricultural exports
rose 0.6%. Export prices were up 3.4% in the past year. Prices
for imported food rose 1.3% in May. Anywhere you look, inflation
-- Richard T. Williams reports that "Of the mortgages written
in the last year, approximately worth $3 trillion, upwards of
29% have no equity in their homes. For almost a third of recent
mortgages to be underwater suggests that potentially well over
$1 trillion worth of homes could come to market as homeowners
turn in the keys to banks and walk away from their failed investments."
This must not come as big news to the DailyReckoning.com folks,
as they report "the housing bubble is over. Mortgage activity
is at a four-year low. Nationwide, foreclosures rose 75% during
the first quarter, over a year ago."
Miko reports from Florida's south central west coast that one
big builder has had sales drop 97% from the same period a year
ago, and another has had "A 100% decrease in sales."
-- If you want another reason to be bullish about silver, then
Ted Butler's essay at Investment Rarities.com is what you should
read. He first starts of with the snide remark, "CFTC doesn't
even bother to analyze the data it monitors and publishes",
and then seamlessly goes on to say "According to the COT,
for positions as of May 30, 2006, the 4 or less large traders
in COMEX silver have a net short position that is more concentrated
than at any time in history." I can sense that you are salivating
at the potent of a short squeeze. Me, too! I make a note to myself
on my saliva-soaked notebook, "Buy more silver!"
Mr. Butler is obviously repelled at all this salivating, what
with dribbling down my chin and all. So he quickly goes on "It
is far more lopsided in concentrated shorts compared to concentrated
longs than any other major market. This short position is not
only 3.5 times greater than the concentrated net position of
the 4 or less largest long traders, it is also more concentrated
and larger than any position held by the Hunt Brothers in the
great silver manipulation of 1980. In the silver market, the
concentrated short position towers over the concentrated long
position to an extent not found anywhere."
"An extent not found anywhere." Oops! More salivating!
I wipe my chin with my sleeve and underline my "Buy more
silver!" note as Mr. Butler goes on to say "The actual
numbers state that the 4 or less largest traders are net short
the equivalent of 181,584,000 ounces, while the 4 or less largest
traders are net long 52,506,000 ounces. To put this short amount
into perspective, it is more than is produced annually on the
largest silver producing continent, North America (Mexico, US
and Canada). It's larger than the combined total holdings in
the COMEX warehouses and the silver ETF (SLV)."
How to sum up? He does it easily when he says "The concentrated
net short position is staggering in size."
And speaking of silver, alert reader CBIP sent the news that
"The 2006 Silver Survey claims that at the end of 2005 worldwide
silver bullion stocks (government, COMEX, European traders, etc.)
were approximately 600 million ounces. The CFTC data indicates
that the largest four (or less) traders currently have a net
short position of 187 million ounces, equal to more than 30%
of all the silver bullion that exists in the entire world!!"
Note the use of the rare double exclamation point!
He writes "Four (or less) traders short an amount equal
to nearly 1/3 of the bullion that exists in the entire world,
possibly a naked short, and the CFTC has let this situation develop
under their very noses. Spooky, eh?" he asks.
-- From Bloomberg we learn "Corn prices may gain for a third
week and soybeans may reach a six-month high on speculation that
hot, dry Midwest weather will damage the two biggest U.S. crops.
Fields from southern Texas to Iowa got about half the normal
precipitation over the last six months, creating soil conditions
ranging from abnormally dry to extreme drought."
It seems like it was just a few months ago that I reported that
in the warm El Nino/La Nina region of water off the Pacific coast
was not only (if memory serves) larger and warmer than at any
time in the last, oh, zillion years or so, but it has appeared
earlier in the year than it ever has before, too. The lesson
was that the rain patterns were going to be disrupted to the
extent that it will rain where it normally does not rain, and
it will not rain where it normally rains. And, if I understand
it correctly, most farmers plant their crops where it normally
Perhaps all this has something to do with Jeff Wilson, writing
at Bloomberg.com, reporting that the government said "The
U.S. winter-wheat crop will be 4.5 percent smaller than forecast
in May as unusually hot, dry weather last month from Texas to
South Dakota damaged the crop."
BusinessWeek.com reports that the Agriculture Department revised
its Kansas winter wheat estimate to 291.4 million bushels, 23%
less than last year, and that about 50% of the state's wheat
is in poor condition, 30% in "fair" condition. 18%
was "good' and 2% was "excellent" shape.
As a nation, the Agriculture Department revised their winter
wheat estimate to be 1.26 billion bushels, a whopping 16% less
than last year.
George Kleinman, the Editor of Commodities Trends, writes "Due
to bone-dry growing conditions in the Great Plains this spring,
the hard winter wheat crop was a disaster--the second-smallest
yield in 30 years. Texas and Oklahoma combined will produce their
smallest wheat crop in 50 years. And wheat production on a global
basis is slated to fall sharply in the coming 12 months."
And with China and India, a third of the world's population,
getting bigger, and whose middle classes are getting bigger,
and whose economies are getting bigger, and who will all want
to consume commodities, do you still wonder why I am bullish
And it is not just me, either! The famous Jim Rogers says "Most
commodities now are somewhere between 80% and 90% below their
all-time high, especially adjusted for inflation."
-- Many people wrote to say that last week the stupid MoGu contained
a figure for the weight/volume (mass) of silver that used 16
ounces to the pound, and not the 12 troy ounces. My point was
that it was about mass (weight and volume). So 16 to the pound
or 12 to the pound, it is still a pound.
But that was not good enough for the pickier Mogambo larva (PML)
among you. To address these concerns, I use the note sent to
me from Alert reader Mike A, as his was one of the few whose
email did not address me as "moron" or "defendant."
He writes "Just wanted to give a quick correction with regards
to troy vs avoirdupois measurements. A troy pound is 5760 grains
(about 373.24 g), while an avoirdupois pound is 7000 grains (about
453.59 g), so one troy oz = 31.103477 grams. With the density
of silver being 10.49 g/cm^3, this means a cubic foot of silver
would be 297045.5 g which when divided by 31.103477g = 9550.23
troy ounces. At 13 bucks a shot, that's 124,153 bucks a block."
-- If you have any doubts that idiots infest the world of investments,
then a headline from Bloomberg ought to dispel them. "Treasuries
Rise as Investors Seek Haven While Rates Increase" it read.
Hahahaha! Bond prices go down when rates increase, and yet these
morons are going to buy Treasuries as a "haven"? Hahaha!
-- One of the peculiar things about anti-psychotic drugs is called
Metabolic Syndrome. What happens is that there are a couple of
long-term ugly side effects, the first of which is steadily-increasing
obesity, which leads to diabetes and obesity-related problems,
and the other side effect is steadily-increasing elevated triglycerides
and cholesterol, which leads to cardiac disease, high blood pressure,
and the tripling of the risk of strokes and coronary heart disease.
So the tradeoff is to choose between taming schizophrenia, or
having a heart attack while you are on your way to have the last
bit of your legs amputated. Interesting choice!
Anyway, this whole unpleasant business is a Mogambo Medical Metaphor
(MMM) for the actions of the Federal Reserve, which is always
administering "medicine" to the warped, bizarre monetary
schizophrenic idiocy of Americans.
Sure, with the constant administration of the "medicine"
of lower interest rates, new debt and new money, the Fed "cures"
a slow economy temporarily. But the Metabolic Syndrome of it
is that you get a bloated, fat-clogged, diabetic basket-case
that needs constant injections of more monetary medicine, and
an early death.
-- Bill Bonner of DailyReckoning.com conjures up the excesses
of the French Revolution when he writes "When the lumps
figure out what has happened to them, they are likely to have
revenge on their minds...and a rope in their hands." And
truer words were never spoken, as history is completely devoid
of any example of bankrupted, destitute, desperate people NOT
taking violent action against somebody or something.
-- Remember how Bernanke was saying that inflation in "non-market"
costs were not included in inflation? Well, I was at a little
shop here recently, and I noticed a sign that read "We no
longer accept credit cards or debit cards." I was kind of
surprised, and asked the owner about it. "Does this mean
you will take only cash or checks?" I casually remarked,
and he said "Yes."
And so, curious, I asked the next obvious question, "What
are you, some kind of idiot or something?" He answered "No,
you rude, creepy bastard. Most of my sales are for small amounts
of cash anyway." Eager to ask him another question and noting
his British accent, I queried "Then why don't you accept
credit cards, you stupid Limey trash?"
He reached under the counter, took out his latest statement from
the people who process his credit card and debit card transactions,
and shoved it into my face, saying "Because the fees are
so high I lose money with every sale, you despicable American
bit of stinking dog crap."
Taking the statement in hand, I see that since he stopped taking
credit and debit cards he has accrued $162.51 in credit/debit
sales, and for that he paid a total $42.94 in fees and charges.
There were a total of six mysterious fees, which are batch closure
fee, authorization fee, settlement statement fee, credit batch
settlement fee, customer service fee, a mc/visa minimum fee,
plus a 2.2% "service charge" on the total amount of
each sale! This works out to 26.4% of gross sales!
But his gross profit on each sale only ranges from 6-20%! So
if he sells an item where his gross markup is only 6%, then if
he accepts a credit card in payment, he will lose 20.4% on each
sale! His best-case scenario is if he sells, on credit, an item
with a 20% markup, because he only loses 6.4% for each one of
those he sells!
This prompts the Mogambo Essay Question Of The Day (MEQOTD):
"How long do you stay in business if you lose money every
time you make a sale?" You will get extra credit if you
can possibly work "Make it up on volume" into your
answer and somehow make it funny again.
And you want to hear something else? You know those credit cards
where they give you, the card holder, "up to 5% cash back"
for each time you use the credit card? Well, guess what? They
charge the 5% cash back to the retailer!
And, in the real world, just to keep from going bankrupt the
retailer has to start charging higher prices, which we common,
scumbag, hateful little Mogambo-type people (CSHLM-TP) immediately
recognize as price inflation. The thing that has always destroyed
currencies, people, economies and countries.
Suddenly, I throw back my head and laugh demonically, startling
everyone in the store, my loud, obnoxious voice eerily echoing
as if resounding from the depths of hell. "Welcome to the
ugliness of price inflation, you stupid earthlings! Price inflation!
Hahahaha! The inevitable consequence of monetary inflation by
the Federal Reserve! And what inevitably follows price inflation
is a horror that only befits a country so foolish, so insane,
so deliberately stupid, so typically American as to disregard
its own Constitutional requirement that money be only of silver
and gold! Hahahaha!"
And as I walked out, he was screaming at me "And next time,
I want to see a green card!"
Tony Straka on his PrudentInvestor.blogspot.com site has juxtaposed
two quotes. "EXCERPT FROM THE US CONSTITUTION, Article I,
section 10: No State shall ... coin Money; emit Bills of Credit;
make any Thing but gold and silver Coin a Tender in Payment of
And the other contrasting quote posted right under it was "FROM
THE US TREASURY WEBSITE: 'Federal Reserve notes are not redeemable
in gold, silver or any other commodity, and receive no backing
by anything. The notes have no value for themselves, but for
what they will buy.' "
***Mogambo sez: To all of those whose selling made the
price of gold and silver fall, I send a Hearty Mogambo Thank
You (HMTY)! Now those whose education is more extensive, and
can thus see the folly in selling, can buy those metals at bargain
Jun 13, 2006
Provided as a courtesy of Agora Publishing and The
is general partner and C.O.O. for Smith Consultant Group, serving
the financial and medical communities, and the writer/publisher
of the Mogambo Guru economic newsletter, an avocational exercise
the better to heap disrespect on those who desperately deserve
it. The Mogambo Guru is quoted frequently in Barron's, The
and other fine publications.
|Recent Gold/Silver/$$$ essays at 321gold:
Oct 19 The Novo Riche Get More Data Bob Moriarty 321gold
Oct 18 Nothing Lasts Forever Nell Sloane 321gold pdf
Oct 17 Amazing Energy Produces from 70,000 Acres in the Permian Bob Moriarty 321gold
Oct 17 Gold: Textbook Pullback In Play Stewart Thomson 321gold
Oct 13 Gold Bulls Have Slight Technical Edge Morris Hubbartt 321gold
Oct 13 Gold Miners' Q'17 Preview Adam Hamilton 321gold