FINANCIAL EARTHQUAKES
by The Mogambo Guru
To tell you the truth, I disagree with the idea that only the rich can
buy
gold. When I see the enormous amounts of money the middleclass and the
poor spend on pure trash every year, I say, "And you want me to believe
that out of all that money, they can't manage to buy a stinking
half-ounce
of gold a year? Or some silver? Hahaha! Don't hand me that crap!"
I think that the important point is that gold is a "rich man's escape",
which, by definition, means that rich people will be buying gold to
effect
their escape! And given the staggeringly huge amounts of money now in
the
world (mostly owned by the rich!), versus the pitifully small amount of
gold in the world, this could be Really Big Time Stuff (RBTS) indeed,
because 1.) History has shown that rich people always take their money
and
rush to the safety of gold at the inflationary ends of booms (like this
one), 2.) Gold is essentially (like all markets) an auction market, and
3.) Rich people bidding against other rich people for a finite supply
of
gold, with unimaginable amounts of money, is the stuff of which auction
history, and newspaper headlines, is made!
And the good news, the better news, the best possible news, is that
gold
is still selling at only about $660 a lousy ounce! What a screaming
bargain when viewed against what is surely coming, just like it has
always
come! Unbelievable! But, "Whee!"
To a suspicious little creep like me, I naturally connect Mr. Embry's
point that there may not be enough central-bank gold to satisfy demand,
to
Bill Murphy of Le Metropole Café citing a Dow Jones report that "The
International Monetary Fund has proposed to increase transparency in
the
gold market by publishing statistics that reveal the amount of gold
loaned
and swapped into the market by central banks."
What? This surprises the hell out of me! Then I remember (and make some
rude, disparaging noises) that the IMF has mismanaged itself, which
comes
mostly from the fact that no country needs to borrow any money from the
IMF these days, as the entire world has long since gone completely
freaking insane with creating all this excess money and credit in which
the world is currently sloshing greedily around.
Now, with the slowdown in the
"bail-out-and-meddle-in-your-sovereign-affairs" business, the IMF
desperately needs more money with which to overpay themselves and
maintain
their expensive little lifestyles, empires and power, to which end they
recently actually proposed to sell the gold (their capital) that the
United States loaned them to fund the damned IMF in the first place!
What
thieving arrogance!
Rebuffed, I guess, this proposed new disclosure rule by the IMF to
reveal
the actual gold holdings of central banks is, I figure, just the usual
slimy blackmail. "Give us more money, or we will tell what you did!"
(Which is sort of how I ended up getting married, but that's another
ugly
story, which I don't want to get into because I will cry like a baby
and
get all embarrassed. And then angry. Very angry. And nobody wants
that!)
Exactly what the central banks did (but not how much) is hinted at by
the
news that "Although they provide regular reports of their gold
purchases
and sales, central banks don't currently reveal how much gold is loaned
and swapped."
But there are just too many tremors, and tremors in central bankers
everywhere, not to think about predicting earthquakes in the gold
market,
and getting long gold.
And speaking of central bankers, from Bloomberg we read, "Federal
Reserve
Chairman Ben S. Bernanke said monetary policy is still aimed at
combating
inflation even though risks to economic growth are multiplying. 'Our
policy is still oriented towards control of inflation, which we
consider
to be at this time to be the greater risk,' he told the Joint Economic
Committee of Congress in Washington."
Bernanke is reported to have said, with no hint of embarrassment,
"uncertainties have risen, and therefore a little more flexibility
might
be desirable." The Mogambo is also reported to have said "Hahaha!" in
snarling disdain, and if you didn't read or hear about it, it obviously
means that this highly-illuminating Mogambo Editorial Comment (MEC) was
censored by government goons, which that proves they're all out to get
me.
And it also proves that snooping government agents and spies are
prowling
around in my bushes, probably right now, and thus I am fully justified
in
ruthlessly hosing down the shrubbery with withering machinegun fire
until
I feel safe again (or until I run out of bullets, whichever comes
first).
Okay, well, maybe it doesn't actually mean all that, but it DOES mean
that
the Fed wants to ignore inflation, although preventing inflation and
attendant boom/bust cycles is the reason that power over America's
money
was given to the Fed in the first damned place! They obviously haven't
done their damned jobs - I mean, look at the record! They've failed
miserably! And now, they still don't want to do their damned job; they
want "more flexibility" to give us more of the same! This is insane!
And
yet Congress does nothing! Nothing! I am incensed!
But wait! I may be too hasty! With a sudden, powerful insight, I
realize
that I could use this unusual stalling technique to my own advantage:
Since my Annual Employee Evaluation is coming up soon, I evilly twirl
my
mustache as I scheme to myself, "This 'more flexibility' thing could
come
in very, very handy indeed!"
Goals not met? I cry out "I need more flexibility!" Losses mounting? I
wail, "I need more flexibility!" Employees and customers in open revolt
at
my arrogance and incompetence? With a tone of voice that speaks volumes
about what I am going to do to my boss's car if this Evaluation thing
doesn't work out for me the way I want, I say, through clenched teeth,
"I
need more flexibility!"
Another way of looking at it was provided by Bloomberg: "Bernanke said
the
central bank last week dropped its stated tilt toward higher borrowing
costs because policy makers wanted more room to maneuver." Thanks! Now
I
realize I need more room to maneuver, too! I need room to maneuver! For
God's sake, give me room to maneuver!
The message is clear; my boss now hates and fears me more than ever,
and
the Fed is clearly signaling that lots of inflation is in our future,
as
it is the price we must pay to bail out the blinding, incandescent
incompetence of the Federal Reserve under Alan Greenspan, who created
the
housing bubble, which was created to bail out the busted stock market
bubble, and the bond market bubble, and the size-of-government bubble
that
he also created. Grrrr!
Until next week,
The Mogambo Guru
for The Daily Reckoning
**** Mogambo sez: If GATA is right, and the gold market is being
manipulated with the collusion of the central banks (and I have
absolutely
no doubt that it is, and would be stunned, absolutely stunned, to learn
that it wasn't), I again think of John Embry and his phrase, "the gold
price is going to go ballistic" when central banks can't meet demand.
My Mogambo Profit-Sensing Gland (MPSG) recognizes the screamingly
obvious
profit that will come when this kind of manipulation ends (as it must),
and it squirts a jolt of "greed hormone" into my bloodstream. In
response,
I look at my pitiful stash of gold and silver, and I compare that to
how
freaking much wealth I want to have when the inevitable explosion in
gold
finally happens, and I wonder "Do I have enough?" which is Polite And
Genteel Mogambo-Speak (PAGMS) for "Has my embarrassing, gluttonous
greed
and unspeakable depths of avarice been satisfied with this pathetic
little
pile of gold and silver?" Upon reflection, I find the answer is, of
course, "no".
Then I wonder, "Should I get a job, to earn some money with which to
buy
more gold and silver?" Again, upon reflection, the answer is, of
course,
"no".
Then I wonder, "Should I make the wife and kids drop out of school, get
second jobs so that they can buy their own food and clothes (saving me
a
bundle!), and maybe pay a little room and board around here (the little
worthless, parasite freeloaders!), and then use the money to buy more
gold
and silver?" At last, I arrive at a solution I can live with. Even
optimal, in its own way!
So while I don't know how it works out for you, and you'll do what you
do,
but whatever you do, you'll find that you are usually better off if you
do
what you know you should do, as this gold and silver thing is "do it or
it's doo-doo!"
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.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning
and
other fine publications. If you're inclined to read more, you'll find
the
whole Mogambo here:
Tasty Morsels of Deficit Spending
dailyreckoning.com
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