Mogambo - interest rates to da moon!
321gold.com
This is oddly in keeping with Puru Saxena, of the Money Matters newsletter, who writes "In 1971, the non-gold reserves of all countries were worth US$100 billion and today these have grown to roughly $4.3 trillion - an alarming 43-fold increase in 35 years! Rampant monetary inflation fuelled by the growth of credit turned the capital markets into one giant casino as punters worldwide (often loaded with credit) searched for the next opportunity to make a fortune."
And I notice with a grim Mogambo frown (GMF) on my stupid face that Required Reserves in the banks actually went down to the bottom of its range for the last zillion years or so. Hell, picking a date in random, say, in May 1995, which was eleven long years ago, total deposits in the banks ("savings") were only around $110 billion, and total Loans and Leases on the books of the banks logged in at only $204 billion. And against that, the banks were saddled with $57 billion in Required Reserves.
Now, I notice how my blood has run chilly, and how everything is dark and gloomy. Gaunt buzzards have gathered in the trees to sit and lick their chops as they glare into the deep, dark, dangerous depths of my soul. I realize, in a sudden cold sweat, that the dollar and the banks (as we professional Mogambo economists (PME) say) "are freaking doomed!"
The scene is now perfectly set to reveal the ugly fact that Total Deposits at the banks are up to $5.2 trillion, which is 47 times bigger than it was in 1995. That's a growth rate of 42% a year, compounded! And total Loans and Leases is now $5.7 trillion, which is 27 times bigger than in 1995, which works out to an annual growth rate of 35% a year! Big, BIG increases!
Yet against that monstrous, cancerous rise in both assets and liabilities, the Required Reserves went DOWN from $57 billion in 1995 to only $42 billion today in 2006! Hahahaha! Surprise! Down! Required Reserves went DOWN! Hahahaha! To keep the same 0.518 ratio of Required Reserves against total deposits in the banking system in 1995, the banks would have to have, right now, in Required Reserves, $2.693 trillion! Instead, they have only $42 billion, 1.6% as much! Hahahaha!
In short, more than ALL of the money and credit created in the banking system since 1995 have been literally created without any underlying cash deposits of any kind! None! Zero money! This is an infinite multiplication of deposits! Fractional-reserve banking at its insane, suicidal extreme!
But the latest stupid shenanigans of us Americans and our precious little Federal Reserve are getting to be almost insignificant. Bloomberg.com reports that China's Shanghai Securities News revealed that, for May, "the Chinese M2 money supply growth rose 19.5% higher than the level last year."
Anyway, Foreign Holdings in custody of the Fed went up by a hefty $6.8 billion last week, which is, I guess, how foreigners are trying to help us "manage" the planned decline in the dollar.
And you wonder why it is that I am always screaming that you buy gold and silver? Hahaha! Wonder no more!
...From Dr. Steve Sjuggerud at DailyWealth.com, we find him taking a page from Marc Faber's book Tomorrow's Gold, which he calls his "cheat sheet for the next ten years." From the book he lists the things that gained the most in the 1974-1980 period, which is highly reminiscent of today.
Back then, oil topped the list, rising 1,866% in price in that period of time. The next biggest winner was gold, up 1,458% in price, followed by U.S coins (1,053%), silver (739%), Chinese ceramics (607%), diamonds, farm land, art, followed by housing (164%), stocks (81%), bonds (89%), all of which sounds pretty good until you note that Mr. Sjuggerud includes the fact that inflation (as measured by the CPI) was up 110% in those six years.
Brian Hunt, also at DailyWealth.com, has an interesting technical indicator. He reports that all three times in the last 110 years that the stock market went three years without a correction, "it always precedes a plunge in the S&P 500." This seemingly-infallible indicator has now ominously again occurred on March 15, 2006.
....He goes on to quote an "unattributed article on Unknown Country's web site entitled "Dollar on the Edge" which notes that "A 'run' on the dollar, caused by panicking foreign holders attempting to sell into non-existent buying, could cause the dollar to collapse very suddenly, even over a matter of days."
To prevent that and to prove that we Americans are now as corrupt as any other dirtbag nation on the earth, the article continues "There is evidence that the US is attempting to manage the decline by purchasing its own debt. As Asian purchasing of US paper declined last month, the slack was taken up by Caribbean and UK banks that would not normally have the liquidity to make such purchases. Therefore, they are acting for a third party, and the only party that would buy dollars when a loss in value is inevitable is the US Treasury."
Why are we so intent on proving that we have no morals or ethics? "By doing this," the article concludes, "the US is hoping to prevent a sudden collapse of the dollar and the subsequent unwinding of the US and world economies in a fiscal disaster so profound that it will eclipse the Great Depression."
Mr. Steele's summation was "In other words, boys and girls, the dollar is doomed."
.....Martin Weiss of the Safe Money Report takes a trip down memory lane when he recalls that his dad said, in 1970, "In past cycles, for each $100 billion in new debts added to the economy, the level of short-term interest rates went up by one full percentage point before the cycle was over."
Instantly my ears pricked up! $100 billion in new debt equals one percentage point higher interest rates? Wow! Hell, the federal government alone amasses that much new debt every two months!
Mr. Weiss goes on to say that in 1970 his dad said, "Now, after adjusting for inflation, $1 trillion in net new debts has been added. So, if the ratio holds up in the next cycle, the short-term T-bill rate will have to leap from about 7% where it is today to as high as 17% where I think it will eventually peak."
The result of this prediction? "Precisely ten years later, in 1980, that's exactly where the 3-month T-bill rate peaked: At 17%. Meanwhile, the price of crude oil rose by over tenfold."
Then he fast forwards to today. "Even adjusting for inflation, today's numbers make America's 1970 debt pyramid look like an anthill by comparison."
So how high will interest rates go if this rule of thumb (one percentage point higher rates for every $100 billion in new debt)? Search me. How do you measure debt? Do you include derivatives? I dunno. But comparing the end-state 17% interest rate of 1980 as an "anthill" to today's insane levels of debt, I must conclude that 17% will look "anthill-like", too!
-- If you wanted more proof that the economics profession has been taken over by grubby idiots (beyond the proof offered by the fact that the Federal Reserve was chaired by Alan Greenspan, and now by Ben Bernanke!), then get a load of the Wall Street Journal editorial Tuesday that showcased a letter by "500 prominent economists, including five Nobel laureates" who signed a letter to President Bush saying that "immigration has been a net gain for American citizens." Hahaha!
Their analysis is that they work cheap, see, which helps keep prices down. This is the "net gain" for America. In short, ruthless exploitation of the tragically poor is a "net gain", while, somehow, the $80,000 in taxpayer money spent per illegal immigrant per year is NOT supposed to be part of this "net gain" for America. And this all comes at the same time the Democrats are working feverishly to increase the minimum wage by 40% over the next two years because wages are so low? Idiots! All of them! Idiots! Hahaha! |
