Iranian Oil Bourse To Be Launched In May

Friday, April 28, 2006

According to a report at Iranian News the establishment of the Iranian Oil Bourse is in its final stages and will be launched in early May, oil minister Vaziri Hamaneh said last Wednesday.
From the report:
Oil Minister Kazem Vaziri Hamaneh said on Wednesday that the establishment of Oil Stock Exchange is in its final stage and the bourse will be launched in Iran in the next week.
He told reporters, upon arrival from Qatar where he attended the 10th General Assembly of International Energy Agency and consultations with OPEC member states, that registration of the Oil Stock Exchange is underway and the entity will operate after being approved by by Council of Stock Exchange.
He rejected a statement attributed to him saying that Oil Stock Exchange will bring to the ground the US economy and said, "I don't know who has speculated that I've not talked about US economy." Asked about conference on energy in Doha, he said that more than 60 countries and 30 oil companies and consultants took part in the conference.
Vaziri Hamaneh said that serious discussions were held including security of supply and demand, security of investment in energy and environment issues.
"The best method for security of demand in the oil sector is that consumers should be given opportunity to enter into partnership with the suppliers in investment in oil industry."
He said that the conference called for diversifying energy resources and cooperation of the developed states with the countries possessing oil and gas resources.
Asked about the oil price rise, Vaziri-Hamaneh said that oil price is being influenced by political situation, whereas it should be freed from political impacts and economic and technical fundamentals should determine the oil prices.
"As long as political impacts dominate the oil market, price hikes will continue," he concluded.

Crude oil has established itself above the $70 mark recently.

The Mogambo Guru Expects More Chinese Gold Purchases

Thursday, April 20, 2006

Sorry for my laziness, posting the Mogambo Guru's justified rantings a day late. But I hope you will understand that my pleasure trip to Helsinki, capital city of Finland, has priority. I am confident you will understand that guessing the eye-color of the next gorgeous tall blonde - gray, green, blue or a mix of it all - is certainly a better pastime than watching silver being squashed in excess of 10% in a single day while crude passed the $74 mark.
As the Mogambo Guru does not discuss silver this time - but has 3 MORE reasons to own gold, let me just add my thoughts:
On Tuesday confidential sources informed me that the Fed categorized the recent advances in silver as a "bubble."
On Wednesday margin requirements for silver were raised on all US futures exchanges.
On Thursday silver corrects almost $2.
If you still believe in market forces only please tell me where Santa Claus lives.

Gold Will Become The Chinese Hedge
by The Mogambo Guru
Nothing much noteworthy happened last week, especially as pertains to the Federal Reserve, especially in comparison to something so dramatic that it tells me, beyond any lingering, vestigial shadow of a doubt, that the price of gold is, to coin a phrase, a-fixing to go a-booming and a-fixing to go a-zooming and we'll all be rich, rich, rich, cha cha cha. The reason for my frivolity is that on Fin24.co.za we read the headline "Chinese Eye Solid Gold." Of course, we immediately think, "Duh! Big deal! Who doesn't? Why are you wasting my time? Are you trying to start something with me by wasting my precious time, punk? Is that what you want? You want a piece of The Mogambo? Huh, punk? Is that what you want? Huh?"
Bank of China Will Launch Equivalent Of A Gold ETF
But methinks that maybe we are a little too hasty, as right off the bat we learn "Chinese banks are expanding the options they offer rich depositors in the face of greater competition from foreign banks." And what is this new option for the Chinese rich? "Next month," the article reveals, "the Bank of China plans to launch its newest product, dollar-denominated certificates linked to the price of gold."
Hmmm! Suddenly, my brain is going every which way! This is very, very interesting! On the one hand, this seems to prove that rich Chinese people are no more sophisticated than the rest of us clodhopper bozos out here who mess with dollars. I mean, these rich Chinese people are supposed to be so dull that they will line up to buy a certificate, denominated in dollars, a currency that is due to fall in purchasing power due to massive over-creation by the Federal Reserve over decades, that is also linked to gold? Huh? Why? Isn't this merely a bet on gold, which these foreign people will naturally price in their own currency anyway, which will ALSO trade up and down against the dollar in the currency exchange markets, negating the gain made in dollars using these certificates? What's the point?
Or, much more excitingly, perhaps this is actually the Chinese equivalent of a new gold Exchange-Traded Fund! If so, wow! The impact of gold ETFs on the price of gold has been, so they say, significant in producing the stellar performance of gold. And if it is, and here is another one, a potentially enormous one, to add to the impact!
Naturally, I am wondering "Are these Chinese gold certificates, paid for with dollars, going to be backed by physical gold, newly bought with the investor's dollars?" If so, like I said, wow! A Chinese gold ETF! Animated by glee, with the lithe, sinuous grace of a panther I dance the Forbidden Mogambo Dance of Love (FMDOL) in celebration that my bullish stance on gold is apparently vindicated!
Government Scam?
But if the certificates are NOT going to be backed up with physical gold bullion, then who is so incompetent, or insane, that they would take the other side of that trade, in essence going naked short? Or is there a derivative hedge that can be laid on? Is this some kind of government scam? I scream out in my frustration "What the hell is happening here?"
And if NOT that, then I fall to my knees, pleading, pleading, pleading with that pathetic look in my eyes, my lower lip trembling, hands clenched together as I beg you to please, please, please tell me what in the hell is the attraction of these certificates, linked to gold, denominated in dollars, to rich Chinese people?
Gold As A Hedge For China
As I crumble, blubbering at your feet in what is probably my greatest dramatic performance ever, I suddenly think to myself "Wait a minute! Maybe it has something to do with how Nick Godt, writing about gold at TheStreet.com, reports 'With all the uncertainty surrounding the dollar, gold bugs believe that the precious metal will increasingly act as a hedge for countries, such as China, which seek to invest a surplus of savings in financial assets.' "
So, energized, I leap to my feet, my bright Mogambo eyes (BME) shining with excitement, because the way I figure it, the plan is that if Chinese businessmen will accept gold for their accumulating dollars (thanks to the trade deficit and their financing of our budget deficit) instead of asking for them to be converted into yuan, then the government does not have to print so many yuan to keep the dollar/yuan exchange rate from changing! And thus, too, their overheated economy is somewhat cooled by reducing the expansion of the money supply! And China also winds up, believe it or not, with the gold of the United States at a huge discount! My head is spinning!
ESTFTWOTAES
On the other hand, this germinates into my new idea for a great Tom Clancy novel, starring the larger-than-life hero Mogambo, the popular and handsome head of the Economic Stupidity Task Force To Wipe Out The Aforesaid Economic Stupidity (ESTFTWOTAES), bravely tangling with the dark forces of fiat-money evil, like Congress, the Federal Reserve and the Supreme Court. The plot is that perhaps there is a lot more going on here than meets the eye! Economic Warfare kinds of stuff!
The camera pans in to the office of The Mogambo just as the phone rings. A voice calls out from offstage, "If that's my wife, tell her I'm not here! And if it is the police, tell them that I have been here all morning, and you are willing to testify to it!" But the phone keeps on ringing and ringing, until finally The Mogambo enters the room. He reads the note left under the phone, and he recognizes the handwriting of his own secretary as she scrawled "Dear Creepy Pervert, I quit! I hate you! Expect a lawsuit! Yours truly, Yolanda."
Cheap Gold Thanks To The Fed
Again the phone rings. Distractedly, The Mogambo picks up the receiver. Immediately, a voice comes over the phone line saying "Mr. Mogambo, your mission, should you decide to accept it, is to check this out; perhaps these sneaky Chinese dudes (SCDs) have realized that the idea is not to make money (as in 'wealth measured in dollars'), but in painlessly and effortlessly obtaining astonishing amounts of US dollars! See, as the purchasing power of the dollar falls and falls and falls, thanks to the Federal Reserve creating so many of them, then the price of gold goes up, and as those dollars wind up in China, thanks to the trade deficit, then pretty soon any Chinese dude or dudette with a handful of gold could own whole swaths of everything in America! Welcome to the future, dudes! Hahaha!"
I slam the phone down, and springing to stage front, I tear off my disguise (mild-mannered reporter for the Daily Mogambo Planet newspaper) and begin to sing my first aria as the orchestra begins playing and the stage fills with beautiful dancing girls. My voice belies my breaking Mogambo heart (BMH) as I croon "You thought that the debasement of the dollar by the over-creation of them was going to be so painless (chorus sings 'Painless! Painless!') that you laughed (chorus: 'Ha ha ha!') and scorned (chorus: 'Ho ho ho!') the Founding Fathers because they deliberately made it a Constitutional requirement that money would be only - ONLY! - of silver and gold precisely so the damned government COULDN'T do that? Hahaha! Morons!" And the chorus melodically echoes "Morons! Morons!"
Morons, Morons
And if the audience thought they were going to get off with that one short aria, they were wrong! I silence the orchestra with a wave of my hand, and the operatic patrons were deathly silent in rapt attention as I went on to say, darkly, like the voice of doom booming from hell, "You thought the promise of an 'elastic currency', the very antithesis of gold, was going to be so terrific that you let them create the Federal Reserve? And then you let FDR and a cowardly, traitorous Supreme Court rule that the Constitution was wrong, and that money did NOT have to be gold? Hahaha! Morons!" And the chorus replied "Morons! Morons!"
The sound of my crazed laugher echoing down the hall, I majestically went on to bellow the tragedy of "You thought Jefferson was crazy when he warned that the use of a fiat currency/debt based economy would cause us to wake up as slaves in the very country that their fathers gave to them? Hahaha! Morons!" And the chorus again returned "Morons! Morons!"
Drawing myself to my full height and repeatedly adjusting my oversized codpiece so that everybody gets the point, I gravely intone "I scorn you all!" The curtain falls, and another lovely evening of grand musical theater comes to a close.
3 More Good Reasons To Own Gold
And regardless of the audience booing and angrily demanding their money back, in that one power-packed operatic scene alone are three MORE very good reasons to own gold, to add to the thousands of other perfectly good reasons to own gold right now.
The AP newswire reports that the government is spending like crazy, and that "Spending during this six-month period totals $1.34 trillion, up 8.7 percent from the same period in 2005." 8.7% Police reports and video evidence (all of it fabricated by lying fascist police-state goons, vengeful family members and hateful, nosy neighbors) indicate that this is where I really started losing it, if by "losing it" you mean running down the street dressed in combat boots and an adult disposable diaper (it's going to be a long day, and experience has shown that once you are in a restroom answering "nature's call", they have you cornered) yelling "Wake up and kiss it all goodbye, you gullible morons! You believed them when they said it was okay to ignore the Constitutional requirement that money be made of silver and gold to keep the government from printing up too much of it! Now money is not an intrinsic store of value, but our money is paper and promises! Hahaha! The hyperinflation has begun! Hahaha! Heil, Weimar America!"
Hyperinflation Has Already Begun
The video evidence from later in the day is pretty interesting, too, as you can see that that the diaper is apparently soaking wet and getting pretty full by this time, and you can tell by looking at the faces of the police that they are uncharacteristically very reluctant to tackle me and wrestle me to the ground, kicking and punching and biting and going "zzzt!" with those damned Tazers like they usually do, the little cowards! My plan is working perfectly!
But this is not about how The Mogambo thought he had beaten them at their own game, or how this government goon squad decided to escalate to the tranquilizer-gun and throw-a-net-over-that-idiot stage, which I had not anticipated! No, this is instead about the government spending 8.7% more money than last year! And borrowing the money to spend!
Price Inflation Will Follow Monetary Inflation
And now some banks, somewhere, are going to create that money, so that someone can borrow it and lend it to the government, and (to make a long, sad story short, but still sad, only shorter), price inflation will follow monetary inflation. With a wail of hopeless despair, I fall to my knees, and I weep for America.
But before I could even refresh my makeup ("Fuller, pouting lips!" I demand with a flourish) or adjust the Mogambo propeller beanie to a rakish angle in preparation for my big boffo finish of this terrific scene about the horrors of inflation, here comes Tom Dyson of DailyWealth.com, interrupting and upstaging me by breathlessly quoting a recent article in the New York Times, which he calls "a landmark piece of news."
Chinese Wages Indicate Inflation Too
The article talks about "Persistent labor shortages at hundreds of Chinese factories. Wage levels throughout China's manufacturing ranks are rising." This IS bad news! And not only ARE Chinese wages rising, but they HAVE been rising, as Mr. Dyson goes on to note that, in China, "Minimum wages have climbed about 25 percent over the past three years in big cities. Wages at larger factories operated on behalf of multinationals are also on the rise."
What makes this a "landmark" is revealed when he goes on to say "The bottom line is this: If wages rise in China, then prices rise in China." Yikes! Or, as is written in the Ancient Mogambo Scrolls (AMS) "Mo mo yikes a bigga bigga freaking priceum up bigga badda mojo dude!", which translates more poetically as "Price inflation is the demonic, devouring dragon of economic death that springs to life under crushing piles of debt that created more excess paper money." But Mr. Dyson has never been to the Metropolitan Mogambo Museum Of Mogambo-Related Crap (MMMOMRC), and so is probably unaware of the contents of these sacred scrolls, and so he sticks more to the facts, and merely adds that we are talking about rising price inflation, as "The rising price of Chinese goods is bad news for CPI indices around the world." Everybody suffering inflation? Yow! Yow! Yow!
We Are Freaking Doomed!
I am screaming "We're freaking doomed!" while frantically trying to get the child-proof cap off of a bottle of powerful tranquilizers at this horrible news as he breezily continues "When this news hits the headlines, investors will find bonds a lot less attractive." And notice that he did NOT say that investors would merely "find them less attractive," but instead he is careful to say that investors will find them a LOT less attractive! So, if you want a clearly unstoppable trend to start speculating in, start shorting bonds!
Buy Bonds, Lose Money
Perhaps this explains why bonds, in a rare bit of sanity, are sporting rising yields. In fact, the U.S. 10-year T-Note has finally climbed back to over 5%, which is actually higher than it has been in four years! This means that all the morons who bought bonds in the last four years have lost money on them! Hahaha! Lost money! Everybody in four years! See what happens to you when you act stupid? Hahaha!
But notice how my insane laughter, likened by some to "the sound of a diseased weasel gagging up a dead rat," changes to laughter of stark raving fear, which is also (strangely enough) likened by some as "the sound of a diseased weasel gagging up a dead rat", probably indicating some weird new kind of social trend or something. Anyway, all that money (thanks to derivatives and insane levels of lending by the banks) has been leveraged and multiplied, so that the teensy, tiny gains would have been multiplied into a nice piece of change if things had worked out.
How Much Are Banks Under Water?
But, guess what? They didn't! Work out, that is! Hahaha! "They tossed the heavenly dice with Fate, and they came up craps!" Hahaha! And now they are underwater by some huge multiple of how much they had invested in the first place, thanks to the insane leveraging by borrowing heaps and heaps of money! And with the wild swings in things, the sheer tonnage of it, world-wide, must be shaking the world's economic foundations to the roots! So with gold and silver reacting like they should (blasting to the moon), and housing going down, why aren't the stock and bond markets tanking and people jumping out of the windows in fear, and the survivors cursing themselves and saying "Oh, why didn't I listen to the wise and wonderful Mogambo (WAWM) and get the hell out of common stocks and into gold?"
The Plunge Protection Team Must Be Quite Busy These Days
The answer is simplicity itself! Because (cue the blare of trumpets) the Plunge Protection Team and their counterparts around the world are bravely on the job! So, rest assured that everybody in any government, and everybody amenable to coercion by any government, are all on the job, busily using YOUR money to convey to the present owners of assets (mostly the rich, making them richer) to cover up the unfolding monumental mess of monstrous monetary mistakes made by the central banks in general and our loathsome Federal Reserve in particular. And not just innocent little mistakes, either, but the biggest and baddest mistake of them all (BABMOTA); pure economic insanity (PEI).
Pure Economic Insanity
And, if there is any comfort in "misery loves company," then perhaps we should feel better that it is not just us Americans. Tony Cherniawski at ThePracticalInvestor sent a link to the "Statement by Toshihiko Fukui, Governor of the Bank of Japan, concerning the Bank's Semiannual Report on Currency and Monetary Control III. Purchases of Stocks Held by Commercial Banks," which is a title so dreary that it makes me sleepy just to read it.
Bank of Japan Buys Stocks
Normally, I would say "Bah!" and take a nap. But fortunately, for some unexplained reason, I decided instead to waste some time by skimming through the article, mostly to see if there were any photos of scandalously underdressed beautiful young ladies or maybe hotrods or really boss choppers (there weren't), when my eyes accidentally read that the damned central bank of Japan, in the ultimate corruption, has been buying stocks! A virtual arm of the government is buying stocks, thus owning the companies! Note the exclamation point!
National Stock Purchases Are SOCIALISM Coming Through The Backdoor
In case it has been a long time since you took Social Studies in junior high (but you figured you already knew all the Social Studies you needed to know, namely that the world is divided into you versus them), the buying of equities by the government is (horror of horrors!) the very textbook definition of socialism; the government owns the means of production!
I knew you would not believe me since you know what a liar and idiot I am, so I am including the actual quote: "The Bank started to purchase stocks held by commercial banks from November 2002 to reduce the risk that stock price fluctuations might impact negatively upon the business management of individual financial institutions, potentially resulting in instability of the financial system as a whole." Hahahaha! Stock price fluctuations might "impact negatively" if, I assume, prices go down? Hahaha! How blatant! They even admit "The total amount of stocks purchased by the Bank as of May 31, 2004 was 1,979.9 billion yen," which I admit ain't a whole lot. But still!
Their conclusion was equally as chilling, as this is, apparently, just the opening salvo of the weird economic crap they have planned: "To ensure that this recovery will become sustainable and to overcome deflation, the Bank considers it essential that a wide range of economic entities continue to make efforts to revitalize the economy." Yow!
Bet Free Money On Guaranteed Winners
In short, the message is that every Tom, Dick and Hari Kari can buy Japanese equities with confidence that they will go up in price, because the government is going to be buying them relentlessly, too, and together they will swamp supply! And not only that, but you can also borrow the money from the banks with which to buy them, because the banks are continuing their zero-interest rate policy! So it's free money to bet on a guaranteed winner in a manipulated market! Hahahaha! How corrupt can a government get?
Japan's Wet Dream: Sizeable Inflation
Well, to tell the truth, they don't actually say that in so many words, but they do say that the money will be made instantly available because "The Bank is determined to firmly support Japan's economy by continuing with monetary easing even as the economy continues to recover, in order to realize sustainable growth and overcome deflation."
Japan's Reality: Financial Suicide
And how do you overcome deflation? With inflation! Hahahaha! Suicide!
And The Fed Happily Follows The Bad Example
But this is the same slimy, corrupt thing that is almost certainly happening here in America, too, as we already have the Plunge Protection Team, by virtue of Presidential Executive Order 12631, which creates a secretive, omnipotent group made up of the chairman of the Federal Reserve, plus other assorted riffraff like the Secretaries of the Treasury and the SEC and the honchos of the Commodity Futures Trading Commission. They have the power, literally conferred on them by the President, to literally intervene in the markets!
Let's Intervene
In his own words, at a Jan. 14, 1997 speech in Leuven, Belgium, Greenspan said: "We have the responsibility to prevent major financial market disruptions through development and enforcement of prudent regulatory standards and, if necessary in rare circumstance, through direct intervention in market events."
Notice, with horror in your heart and your blood freezing in your veins, that he says that not only do they have the power, but they also have the "responsibility" to use it! They are compelled, they think, to intervene, and thus corrupt the free markets and the whole pricing structure!
Trade Figures Mask The Disaster
George Ure at UrbanSurvival took a look at the "good news" that the trade deficit fell in February as compared to January's deficit of $68.6 billion, which was $2.2129 billion per day. And where did this big monthly improvement in the trade balance come from? Instead of me telling you the punch line and screwing it up ("That was no lady; that was a duck under my arm!") let's have him tell you. He says "There were also only 28 days" in the month! Hahahaha! I'm busting a gut here! Hahaha! Only 28 days! What a card! They say that the secret of humor is in the delivery!
Wiping the tears of laughter from my eyes, as the straight man in the piece I point to January's daily trade deficit of $2.2129 billion per day as he goes on to say that in February "the daily plunder was $2.3464 billion per day. My simple conclusion: Trade Worsened." Hahaha!
The obvious solution to the monthly trade deficit is thus: Declare that, from now on, every year will contain more months than the year before, and each month will have decreasingly fewer days in them. Thus, since we have more months in the year, and every month would be progressively shorter, we would, magically, produce a smaller "monthly" trade deficit, although the actual daily deficit could continue to go up and up and up! That way, we would have a fall in the trade deficit every month, and everything would seem to be fine!
Expect More Government Intervention
The world is, judging by the sheer amount of press it got, agog that Massachusetts, the same weird little state that perpetually sends overt communists like Ted Kennedy and John Kerry to the United States Senate, has, somehow, solved the healthcare crisis and saved the world. Mirthlessly I laugh hahaha!
I laugh (as I said) mirthlessly because nothing has changed the basic problem, which is that the government has still required that the healthcare industry or government pay for everything for everybody, from real life-or-death emergency care to everything you can name, all the way to acupuncture, chiropractic, and (for all I know) healing crystals, magic amulets and voodoo spells.
Somebody Will Have To Pay For It All
But regardless of the actual efficacy of any or all of these medical treatments, the fact is that somebody has to pay for it all. It's as simple as that. That's the ugly, ugly side of stark reality, and all the good intentions, sheer compassion and endless hours of debate and compromise will never, ever change that fact in the least. In fact, government interventions always make EVERYTHING cost more and get worse.
And so, with virtually unlimited rising demand for an ever-increasing menu of treatment options paid for by requiring insurance companies and providers to pay for them, then, by virtue of the very basic, "What You Learned On Day One" rudiments of basic finance AND economics, the price must rise right along with it! Popular uprisings ensure, as a horde of morons, many of them from Massachusetts, scream that "something must be done" about the rising cost of healthcare and health insurance!
And sure enough, I note that the new Massachusetts plan merely makes more people pay more money, and more businesses pay more money, and everyone collectively paying more money. How special.
I get a real kick of out people saying things like how they are concerned that central banks may "over-react" to signs of inflation by raising interest rates to the point where they kill off growth. To paraphrase the great David Bowie tune, I loudly sing "Major Mogambo to Ground Control! Major Mogambo to ground control! Killing off growth is how you stop inflation, you imbeciles! Look it up!"
And sure enough, rising interest rates may be killing off growth in the housing bubble! Robert Prechter of Elliott Wave reports that "February was another bad month for the housing industry, as sales of new homes plunged 10.5%, the biggest drop in nearly nine years, while prices fell and the number of homes on the market hit a record high." Nine years! Yikes! We are truly doomed! Ugh.
****Mogambo sez: It sure looks like history is repeating itself, as gold always zooms when government economic stupidities get to this end-stage. And if history DOES actually repeat, like it always has for thousands and thousands of years, then the startling rises in the price of gold and silver today are only the beginning. Whoopee!

The Mogambu Guru's straightforward writings are made possible by The Daily Reckoning.
Richard Daughty aka The Mogambo Guru is general partner and COO of the Smith Consultant Group and can be emailed at RichardSmithGroup@verizon.net.

FOMC Minutes Talk Of Strong Growth To Weaken Later This Year

Tuesday, April 18, 2006

The Federal Reserve may come closer to a pause in its interest rate policy, giving the economy time to digest the past 15 subsequent rate hikes that have propelled the Fed Funds rate to a current level of 4.75% with market participants anticipating another hike at the next FOMC meeting on May 10, the latest FOMC minutes show.
Most impotantly, the minutes softened the wording of the latest FOMC statement that had led markets to the conclusion that the FOMC will initiate at least another two rate hikes this year, pushing the Fed Funds rate to my lower target of 5.25%. But the Fed avoided a complete retreat from its inflationary fears.
"Some members expressed concern that retention of the phrase "some further policy firming may be needed to keep the risks...roughly in balance" could be misconstrued as suggesting that the Committee thought that several further tightening steps were likely to be necessary."
But I would not share into happy mood of the WSJ where Greg Ip prays for an end of the current rate cycle that has kept rates still well below long-term averages. It looks as there is a growing number of FOMC members that worry more about inflation than a cooling of the housing market, the following quote indicates.
"Some participants held that core inflation and inflation expectations were already toward the upper end of the range that they viewed as consistent with price stability, making them particularly vigilant about upside risks to inflation, especially given how costly it might be to bring inflation expectations back down if they were to rise."
Noting a "brisk" and broad based economic expansion despite signs of a cooling housing market in Q1 2006 the FOMC expects economic activity to decline to a slower pace in the next quarters, continuing a trend of suprisingly weak GDP growth in Q4 2005.
"Meeting participants saw both upside and downside risks to their outlook for expansion around the rate of growth of the economy's potential. In the housing market, for instance, some downshift from the rapid price increases and strong activity of recent years seemed to be underway, but the magnitude of the adjustment and its effects on household spending were hard to predict."
The Fed continues to stress the point that inflation expectations remain well anchored but equally stresses the fact that high oil and energy prices may seep through into core inflation.
"In their discussion of prices, participants indicated that data over the intermeeting period, including measures of inflation expectations, suggested that underlying inflation was not in the process of moving higher. Crude oil prices, though volatile, had not risen appreciably in recent months on balance, and a flattening in energy prices was beginning to damp headline inflation. In addition, core consumer inflation was flat or even a bit lower by some measures. Some meeting participants expressed surprise at how little of the previous rise in energy prices appeared to have passed through into core inflation measures. However, with energy prices remaining high, and prices of some other commodities continuing to rise, the risk of at least a temporary impact on core inflation remained a concern."
Ladies and Gentlemen, place your bets. Mine still lie with Fed Funds between 5.25% and 5.75% by yearend as record energy and industrial resources prices will keep inflation elevated. $3 gasoline will act like an additional tax on consumers, further endangering private consumption. Higher mortage and credit card rates will add to the cost burden of Joe Average too.
Economic growth may still remain on a nominally good-looking path. But I guess everyone of us could create an artificial upturn by feeding taxpayer's money into the defense sector and balloning the number of government employees while financing it all the time with money borrowed from foreigners and the Fed which holds just below 10% of total federal debt, effectively monetizing it.
Investing in the US markets has become a fly-by-night adventure anyway since the Fed ceased publication of M3 a month ago. We have no way to check the speed of the money printing press anymore. Having watched the James Bond movie "Goldfinger" before it was interesting that the head of the Bank of England taught Sean Connery "that gold is the determinant of the value of the pound and the dollar." That was in 1964. In my opinion nothing has changed since.

Will The USA Nuke Its Way Out Of Recession?

Tuesday, April 11, 2006

Increased saber-rattling and growing rumours that the USA may even plan a nuclear strike - inevitably killing civilians - against Iran have left their mark on commodity prices again. Oil scratching at the $70 mark and gold and silver at quarter-century highs express the world's fears of another armed conflict in the area with the biggest fossile energy reserves worldwide.
Looking back into history offers a very uncomfortable perspective. Since the 1930s war has always helped to pull the USA out of recessions.
  • The Great Depression ended with world war II.
  • The slump in the 1950s ended with the Korea war.
  • In the 1960s Vietnam helped grease the military industrial complex.
  • The recession in the early 1980s preceded the Nicaragua conflict.
  • Interference in the Kosovo in the 1990s stood at the beginning of irrational exuberance in the 1990s.
  • In the new millennium the biggest defense (?) budgets and the invasion of Iraq helped pull the USA out of the rubble after the dot.com bubble until now.
Taking into account increasing pressure on the property market from higher interest rates, worsening demographics with their associated higher medical costs and the biggest debt bubble, private and public, all signs are pointing towards a recession.
To lift the eonomy out of the doldrums by way of war the USA would only follow a concept that has worked well in the past.
Although I hate to be caught using the phrase "this time it is different" it may well apply in the case of an Iran war which it will have to fight with an outworn army that has not exactly "won" the "liberation" of Iraq.
While the material drain can effectively turn into a blessing for companies in the defense sector and help drag along the nominal picture of the American econonmy it will be harder to replenish the ranks of those willing to fight a war with doubtful purposes. People are not lining up for redeployment in another oil-rich country.
Trying to defeat Iran in a remote high-tech war and exercising the nuclear option would lead the world into a dark chapter of history.
For the first time a nation would use nuclear bombs in a war of aggression. Decades of trying to make the world a more peaceful place after the horrible experiences in Hiroshima and Nagasaki showed that the nuclear option has an inhumane strike price and is therefore rightfully outlawed by those nations calling themselves civilized.
A country willingly weighing the devastating forces of atomic bombs in order to secure its oil supplies will lose all its moral authority which was once a role model for the democratically minded majority in the world.
Investmentwise there is nothing to add to the old advice: Buy gold, buy silver, buy platinum and buy energy.
UPDATE: The Power and Interest News Report has a timely analysis on the lingering conflict. I recommend this site in general for good geopolitical analysis that can be received by email subscription (UNPAID advertisement.)

WSJ Names Mishkin As Possible Fed Vice Chairman

Monday, April 10, 2006


President George Bush still has to fill a vacancy at the Federal Reserve Board (FRB) after the abrupt resignation of vice chairman Roger Ferguson. The Wall Street Journal today names Frederic Mishkin, a former senior Fed New York staffer and currently professor at New York's Columbia University, as a possible candidate for the job.
Interestingly, Mishkin's most downloaded research paper is titled "The yield curve as a predictor of US recessions" and according to the abstract
"the yield curve, specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill, is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead."
While the FRB is currently engulfed in a discussion whether to adopt an inflation target in its monetary policy, Mishkin's nomination could obviously lead to still more policy discussions. We remember that former chairman Alan Greenspan said last year that an inverted yield curve does not have to mean what it meant in the past. All past recessions were preceded by an inverted yield curve.
According to his bio (pdf) Mishkin's academic work has largely focused on monetary policy and its impact on financial markets and the aggregate economy. He is the author of "The Economics of Money, Banking and Financial Markets," the number one selling textbook in its field. In addition he is the author of more than ten other books, including "Inflation Targeting: Lessons from the International Experience" and "Money, Interest Rates, and Inflation."
Mishkin nas never served the US government in an official function. He is believed to be one of the top candidates for the post of vice chairman.
The WSJ also wrote that the Fed Philadelphia may look into hiring a Wall Street economist after the resignation of president Anthony Santomero.

Euro CB's stay put

Thursday, April 06, 2006

Both the ECB and the Bank of England (BoE) decided today to leave leading interest rates unchanged at 2.5% and 4.5% respectively. Statements by ECB president Jean-Claude Trichet at a press conference were understood by markets that way that the ECB will probably sit on its hands again at the next council meeting in May; defying price risks from crude oil which seems to trade a solid path towards $70 per barrel. In the United Kingdom property agents could wipe away the sweat on their foreheads after the BoE announced its message about inaction.
Currencies saw sharp swings after the announcements. The Euro weakened to $1.2220 after reaching at new 2006 high at $1.2330 and Sterling firmed against both the dollar and the Euro. Gold moved to a 25-year high at $596 and silver broke the $12 barrier.
Europe's rising money supply is increasingly feeding a housing bubble by now (yes, European stocks are rallying too.) Trichet said in his comparably brief introductory statement that latest developments
"confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the high trend rate of monetary expansion. Moreover, the annual growth rate of credit to the private sector has continued to increase over recent months, with borrowing by households - especially loans for house purchase - and non-financial corporations rising rapidly. Overall, strong monetary and credit growth in an environment of ample liquidity in the euro area continues to point to upside risks to price stability over the medium to longer term."
I was not able to follow the press conference but the following statements from Trichet do not exactly sound dovish.
"To sum up, annual inflation rates are projected to remain elevated in 2006 and 2007, and the economic analysis indicates that the risks to price stability remain on the upside. Given the strength of monetary growth and the ample liquidity situation in a context of improving economic activity, cross-checking the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability over the medium to long term prevail. It is essential that medium-term inflation expectations remain firmly anchored at levels consistent with price stability. Accordingly, the Governing Council will continue to monitor very closely all developments to ensure that risks to price stability do not materialise..."
Political reality in the EU may lead to the point where inflation fighting becomes a lip service because deficit-expansive politicians are horrified by a higher rate outlook. Both inflation and money supply hover above the target rates set by the ECB at 2% for inflation and 4% for money supply and the ECB still does not move aggressively to stem these dangerous developments that can be derived from exploding producer prices.
SPOTTED IN BLOGOSPHERE: Macroblog dug out old US anti-inflation propaganda. Best comedy I've seen in years. Evil German whispers trying to hook Americans to inflation...
I wonder when it will be discovered by politicians that high oil prices are inflation initiated by Muslims.

First Interesting ECB Meeting In Years

For the first time in more than two and a half years today's ECB council meeting will become truly interesting. Contrary to the past there has been no clear indication of the intended action of the ECB governors.
Walking the tightrope between the necessity to hike rates to finally curb sprawling money supply and the problem that higher rates might further diminish Europe's chances for a return to the path of solid growth it is open what the ECB will do. In my opinion the ECB would be well advised to ratchet up rates quicker although this could put the dollar - the currency currently seen worldwide as "too big to fail" - under severe stress now that China openly favours a reduction of dollar debt papers. So it remains to be seen how strict the ECB will follow its single mandate of price stability.
Monetary indicators point towards another 25 basis point tightening to 2.75%.
M3 growth accelerated to 8% (7.6%) in February and inflation is at 2.2% (2.3%) above the target rate of 2%.
A look at producer prices promises more inflation to come: The PPI rose 0.5% (0.4%) in February month-on-month (MOM) and the annual rate is now 5.4%.
Economic news prove my impression of a problematic situation. Retail sales declined 0.2% in the Eurozone month-on-month and rose a paltry 1.0% YOY. Industrial orders were down even more in the Eurozone: They fell 5.9% MOM in January but were still up 9.7% YOY, confirming an upturn in the machinery sector.
Reading the markets it looks like the ECB will hike the leading overnight rate by 25 basis points: The US dollar fell to 1.23 Euros in late Wednesday trading. Gold showed that geopolitical/economic worries continue to dominate investors minds. June gold futures rallied to a new high above $594, making the yellow metal again the best performing major currency.

The Mogambo Guru Sees The Dollar Going Out Of Style

Wednesday, April 05, 2006

I am busier this week than expected but I hope the latest fears of the Mogambo Guru will offer a welcome relief from the silence at this blog. This time the Mogmabo Guru focuses, amidst so many other interesting snippets of information, on the inevitable decline of the greenback, not leats for the reason that Washington DC is littered with incapable economists who blissfully ignore historic and present facts as well as that part of John Maynard Keynes' theory that deals with the repayment of debts.

The Dollar Will Go Out Of Style
by The Mogambo Guru
I was stunned to see that Total Fed Credit actually went down by $6.7 billion last week. Either there is a sudden drop in demand for new money, or the Federal Reserve (reversing their explicit policy of the last two decades) is not letting the banks create insane amounts of new money to accommodate the usual ravenous demand for money.
Either way, for a debt-soaked economy so twisted, so misshapen, so malignant and so absurd as ours (and, by extension, the world's), this is bad news in spades (BNIS). Which, connecting the dots, is why I am securely ensconced in the Infamous Mogambo Bulletproof Bunker Of Iron And Steel (IMBBOIAS), safe and sound, and scared out of my Mogambo freaking mind (MFM).
There was also a flurry of excitement last week when there was a rumor that the Federal Reserve had printed up, suddenly, $2 trillion in cash. My initial reaction was, of course, "Hahahaha!" and my reasoning is thus: why would they go through the hassle? They can make electronic money with the wave of a finger, so why go through the messy rigamarole of dealing with ink and paper and all the problems of transporting it and counting it and storing it and blah blah blah?
Does The Fed
Print Like Mad?

But I have some extra time on my hands, now that I had a jolly time using a .50 caliber machinegun to put a "shot across the bow" of some stupid neighborhood kids who thought that their youth and desire to retrieve an errant Frisbee negated laws against trespassing, and am using this "found time" to productively to think, and by thinking think that that maybe, just maybe, this whole "two trillion in cash" scenario has some, umm, merit, especially if you are thinking that foreigners dumping American securities (in revenge for us acting like such murderous buttheads) would instantly be reflected in instantaneous losses in bonds and meteoric rises in interest rates and the entire global economic machine would melt down. Bummer.
So maybe this could explain the "two trill in cash" plan: With this amount of cash, see, the American government can pretty much buy all the government securities that any foreigners want to sell, but the inflationary effects of creating so much money won't be felt in prices for awhile! Hahaha! They think this is clever!
And, besides, thousands of jobs will be created just to make, handle, account for, transport and store all this new money! Hahaha! And maybe the new currency could have those RFID tags to depreciate the value of idle cash, forcing everyone to spend all their money as soon as they get it! Surprised? Don't be, because is JUST the kind of financial and economic insanity that you see at the end of long booms fueled by excess money and credit, as the amount of corruption is, as they say, "off the freaking charts!"
End Of M3 Brings End Of Fear Index
And with corruption comes fear, and now here we have John Rubino on GoldSeek talking about the “Fear Index" that was created by Gold Money's James Turk back in the 1980s. The reason I am bringing this up is that Mr. Rubino says that as a market-timing device, Mr. Turk's Fear Index has, and I quote, "been nearly flawless." Now, when it comes to market-timing techniques, the Holy Grail of techniques is one that is "flawless", and so I scoot my chair up a little closer to make sure I don't miss a single word. He goes on "The Fear Index measures the relative importance of gold within the U.S. monetary system, and is calculated by multiplying the U.S. gold reserve (i.e., the weight of gold reportedly under the Treasury's 'control') by gold's exchange rate to get its total market value, and dividing this result by M3, the broadest measure of money supply."
Gold Close To $5,000
All of this sounds like a lot of math to me, and so, as a guy who has had his share of the shame of Remedial Math and people saying to me "This is a five! Can you say five?", I am quickly getting pretty damned bored. I mean, all I'm trying to do these days is to make some money, hopefully a LOT of money, with little or no work, by investing the few lousy pennies I can sneak out of my wife's purse. So, naturally, with all this math flying around, I figure I am in the wrong classroom, and am starting to gather up my books and get the hell away from Mister Math Wizard here, when he continues, "assuming M3 grows at 8% a year over the next three years, and the Fear Index rises to 10%, implying that we're worried as in the 1970s, the Fear Index yields a target gold price of $4,961 per ounce."
I stop leaving in mid-stride. Abruptly I sit back down. My brain is doing flip flops! While my face is a study in drooling blankness, mentally I am living it up and having a wonderful time! Why? Well, check this out: Over the next three years, this "nearly flawless" predictor says that gold will go to $4,961 per ounce. In three years! At a uniform rate of gain, this means that gold will more than double in price every freaking year! For three years running! Wow! Hahaha!
In case you were wondering, Mr. Turk's Fear Index is now 1.23, which is still a very, very low number, although it has been climbing over the past few years. But who cares? We now know all we mindless, greedy Mogambo money-sucking machines (MGMMSMs) need to know, namely that a flawless predictor has spoken! And if you are like me, you really, really REALLY like the sound of the word "flawless" when it comes to predictors, especially financial predictors, and so you rush home and call up all your friends and family again, and beg them for the zillionth time that they have GOT to, please, please, please, finally get up off of their stupid, fat butts and get some gold, and get their IRAs and 401(k)s into gold, too! But do they? No! Instead, they say hurtful, cruel things, like "Who the hell are you?" and "I want my chainsaw back, you thieving bastard!"
But Fear Indexes mean nothing to these people! Perhaps because fear indexes are not new, and even the little community I live in, Pinellas Park, has maintained its own "Mogambo Fear Index" since 1997, which is easily calculated from police logs. Simply take the number of complaints about The Mogambo screaming that the dollar is being killed by the Federal Reserve (indicating raw fear and panic), and divide that by the number of complaints from pretty women who are disgusted by my accosting them with crude, slavering invitations to "Mambo down with The Mogambo!" (indicating laughable optimism). And, since you are keeping score, right now the Mogambo Fear Index is zooming without precedent, indicating something, (being as understated as I can manage), very ugly.
Monetizing The Debt Never Worked
But the Treasury is still selling bonds like money is going out of style, which it actually is! Hahaha! Well, perhaps this is not the most clever Mogambo bon mot (CMBM) in history, but it is nonetheless apropos because the entire REST of history has shown that currencies that are depreciating from over-issue are seldom "in style", and sometimes (after a government/central bank creates waayyy too much money and credit, like now) they go so far OUT of style that they are never heard from again! I bring this up partly because this is, sadly, the ultimate fate of the US dollar, as this is always the fate of the currency of any country, world or planetary system that is so ignorant, or so stupid, or so impossibly corrupt that it would try, and try, and try, to buy national prosperity by creating a wildly-inflating fiat money and credit to buy it with! Hahaha! And, I sheepishly admit, I also bring it up partly because that is just the kind of hateful, gloomy and miserable little twerp I am, always seeing the dark side of sheer economic stupidity.
Not In My Wildest Dreams
I mean, if this COULD work, if this could POSSIBLY work, if thus could even conceivably, in anyone's wildest DREAM, work, then it would be truly fabulous! Not only would poverty and universal wealth be painlessly achieved, but (even better!) the Mogambo Logical Next Step (MLNS) would be that it IS possible for me to buy my youth back! I can literally be young again! Gloriously, wonderfully young, young, young! And I can achieve this miracle by merely dating young girls, which is the whole point of being young! And now, thanks to the Federal Reserve proving it, we know that all we need is more money!
So the NEXT damned time they catch me hanging around the junior college, acting (as they allege in court documents) "suspiciously and furtively, rat-like in nature", I can proudly say "Hey! Take these handcuffs off of me, you fascist pig cops! I'm just buying my youth back, just like the Federal Reserve is trying to buy prosperity by creating money and credit, you stupid Gestapo goons!" and they will have to say, politely, "Oh! Of course! Well, okay then! Why didn't you say so earlier? Sorry to have bothered you, sir!"
Buy Bonds, Lose Money
But not everyone is as gullible as campus police, and the yields on bonds are rising, which means that, lately, people are buying bonds and immediately losing money on them! But they keep on doing it! Buy bonds, lose money. Buy more bonds, lose more money! Hahaha! It is so ludicrous that I state, with that rare Mogambo Degree Of Absolute Certitude (MDOAC) that this is a trend that will not last very long! Hahaha!
And when people stop buying bonds, then the traditional textbook response is that the price of bonds will drop (making the yield rise) until they become attractive again. That's the way markets are supposed to work.
Scoring Big Time With The Chicks
And if you are raising your hand to ask "When bonds will become attractive?", let me tell you a little story that ties all of this together. Once upon a time, there was a rich, but ugly, troll who scored big-time with the chicks. But the troll got that way only by living more luxuriantly than he could afford, and when the debts finally got too high, he lost all his money, and then he lost all the chicks, too. Then he wondered "When will I be attractive again?" and he thought he would come over to my house and borrow some money to tide him over while he, patiently, waited to be attractive again.
But there was an unfortunate "accident" with an Uzi machinegun and the police didn't even come over to look at the dead ugly troll, and it lay out there for almost a week until one of the neighbor's dogs grabbed it and took it back home with him, and a little while later I could faintly hear Mrs. Kravitz screaming "Oh, my God! What in the hell is THAT?" Moral of the story: Nobody loves you when you are down and out.
Now substitute "dollar" for "troll" and "everybody else, especially foreign investors" for "Mrs. Kravitz" and write a fifty-word essay on the topic "Why we should capture and sterilize people who are so stupid that they hear that particular Timeless Mogambo Economic Parable (TMEP) and yet they do not run out to start dumping dollars and start buying silver and gold and oil with both hands."
Walking Off The Pier
And speaking of indicators, Paul Kasriel of the Northern Trust Company writes that the flat-to-inverted yield curve (the strange occurrence of long-term interest rates being lower than short-term rates) of late is not the only weird thing in the economic firmament. He says "I have plotted the spread between the 10-year Treasury security yield and the fed funds rate - one of my, though not Bernanke's, favorite leading indicators." The spread has narrowed, as you would expect.
So what does this mean about the future? Well, Mr. Kasriel can't help showing off because he is a respected big shot in the world of finance and economics, while I am just a horrible little man, stinking of beer and cheap pizza, who is always screaming about doomsday monetary policy. Effortlessly. Mr. Kasriel waxes both witty and, at the same time, profoundly horrific. The exact quote is "The spread narrows well ahead of the onset of recessions while consumers are blissfully confident about their current situation until just before they lose their jobs." Hahaha! Happily looking at the blue sky while they walk off the end of a pier! Hahaha! Splash! I told you it was funny!
Money Illusion
Ned W. Schmidt, publisher of The Value View Gold Report, reminds us that "Money illusion is when the amount of money one has rises, but the real value of that money is declining. The value of money is not the accounting concept of how many dollars, pesos, or roubles one possesses. The value of money is an economic concept, or what that pile of money will buy."
Since I have already taken and flunked this economics course three times already, I don't need another lecture about "money illusion". But before I can sit down and let out a big sigh to show him how bored I am with him and his stupid "money illusion" lecture (I mean, what's he gonna do? Flunk me? Hahaha!), he cleverly expands on it by saying "Perhaps one of the greatest monetary illusions of all times is in the recent era. That being that the value of housing, particularly in the U.S., has risen. In simplest terms, the monetary value of one house will buy just one house."
Value Of One House: One House
I slap my forehead in delight, and say "He's right! I never thought of it that way before! The value of one house is one house! Hahaha! How clever!" And then everyone starts yammering, "How come the stupid Mogambo can't be clever?"
So while everyone is laughing and having a great time at my expense, we almost didn't notice that he has segued to the ugly side of inflation, such as how the price of a house, measured in ounces of gold, has been declining. "A year ago," Mr. Schmidt says, "about 440 ounces of Gold bought the typical house that traded. In the latest month, only about 380 ounces of Gold were required. Since July, the Gold price of a single family U.S. home has collapsed by about 25%!"
And not only that, but "For speculators, the unrealized losses are compounding. Suppose a speculator bought the median priced condominium in February of last year and sold last month. This speculator put down 5%, borrowing the rest. For a year the speculator has been making loan, association, utility, property tax, and insurance payments. Rent for the period was zero, as qualified renters have been rare. The seller pays a standard agent fee on the sale. The cash return, before any and all tax ramifications, on the cash investment is approximately NEGATIVE 200%."
Hahaha! Brilliant investing, Mister and Missus Real Estate Investor! And how brilliant of the brilliant Federal Reserve to make all that money available, so as to make it possible for this brilliant, brilliant, brilliant scheme to have "lost $2 for every $1 invested in the past year." Hahaha! Brilliant!
House Prices To Drop Up To 75%
I notice that I am the only one laughing, and with a disapproving look in my direction, Mr. Schmidt dryly goes on to say, "At the end of this natural and often repeated progression, housing prices in the U.S. will be 50-75% below current levels, or the government will own the housing stock. That loss in value will be split between those that own the loans and those that borrowed the money."
And, to make matters worse, when their houses go down in value, so does yours, even if you own your house outright and have no debt against it!
Others Have More Style
Do you ever sit around the pub getting really drunk and start talking about how you are getting pretty disgusted by the distracting way I spit when I talk? Or because of the way I mindlessly scratch my butt and groin a lot? Or how my constant burping and farting is a real turn-off for you? Well, then, your prayers have been answered! I proudly present Puru Saxena, of the Money Matters newsletter, who beautifully and perfectly captures the entire horror of inflation when he writes, "The ultimate truth about inflation is that it always benefits the rich who are able to ride the inflationary wave by investing in assets, whereas the poor become even more impoverished as things continue to become more expensive."
And he speaks for us both when he goes on to say "At a human level, inflation is a tragedy and totally immoral." And why is that? Because there is no social force more destructive and horrific in the world than a lot of very poor people getting poorer and poorer. If you don't believe me, pick up a history book sometime and read a few pages. Or better yet, pick up a copy of the Bonner and Wiggin book "Empire of Debt."
New Names For Old Problems
Thus prepared, perhaps one day in the future, when you are old, some hot shot reporter from the local newspaper will want to interview you for their stupid little story about how things have changed in all the years, and they want to know how it was possible for America be so stupid about economics all at once. If the reporter is some cute little thing in a short skirt, then you can launch into your epic version of events about the persistent evils of fiat currency and fractional-reserve banking since, oh, say, the time of the Etruscans.
But if the little reporter is just some pencil-neck jerk with bad breath who won't even inflate your hemorrhoid cushion, even though you said "please", then you can save yourself a lot of time by just quoting Jim Willie, CB, of the GoldenJackass newsletter, who says, in his essay entitled "The High Cost of Inflation" posted at GoldSeek, "Numerous personal conversations with economics degree holders over the years have revealed to me an absolutely shocking display of ignorance regarding risk from debt in commerce, risk from debt in currency, lost control from foreign debt ownership, wreckage from pursuit of low-cost foreign solutions, insane reliance upon consumption instead of investment, acceptance of the entire lexicon of FedSpeak, and benign dismay of economic statistics. These people have been co-workers in industry, colleagues of friends, and acquaintances socially. One sure path to acceptance of chronic bad policy is to have it blessed by badly educated economics counselors. In fact, a full generation of badly educated economics professionals litters the Washington, D.C. and academic landscape. In a sense, the United States has 're-invented' economic theory. The movement coincides with the advent and growth of financial engineering, which is just a nice glib catch phrase for inflation & leverage."
Even Keynes Dictated Repayment Of Debts
It's even more corrupt than that, Mr. Willie! Even Keynes himself, their god of economics who, in the 30's, invented a believable but incomprehensible math-based economic rationale for deficit-spending, was careful to say that you HAD to pay back the debt out of the boom that the debt created! But nobody has EVER paid back a dime! Ever! But our "economists" in general and Ben Bernanke in particular (and don't get me started on that arch-villain, the greasy Alan Greenspan) don't even admit to having ever even READ such a thing as having to pay back debt! Hahaha!
If that seems a little wordy to you, or if you just want something more condensed, consider this excerpt from the essay "Central Banks, Weimar Germany and Gold" by Richard J. Green of Thunder Capital Management. He says "The neglect of savings and investment that is crucial to a solid foundation for economic growth has been replaced by central planning of the economy by economic illiterates."
And if you want the ultimate in brevity so you can politely get rid of the kid whom you have grown to really, really hate in the last thirty seconds, then merely quote alert reader Jan A., who calls them "Fediots". Hahaha! Fediots!
Credit Suisse Touts Silver
Reuters reports that "Credit Suisse this week said silver could climb further in the medium-term, to $15 an ounce, hoisted by greater demand due to the ETF." And when Credit Suisse says "the" ETF, they, of course, mean the proposed new Barclays silver EFT. Well, I got some hot news for Reuters and Credit Suisse, and if you one day soon find yourself talking to either of them, you could casually mention "By the way, The Mogambo that there are a hell of a lot of people in this world who have a hell of a lot of money, and they don't need no stinking ETF to get a lot of silver and store it in the basement, and there are also a hell of a lot of other people and other countries of this world who are looking at this silver thing and saying to themselves, 'Hey! This is so simple that even The Mogambo could do it! Let's start an ETF of our own!' "
In short, the Story of Silver is just getting started, and is probably destined to replace the Story of The Mogambo, which chronicles how I was born in a manger on a planet far, far away and my family's flying saucer crashed in Roswell, New Mexico in 1947 and, and, well, you know the rest.
Toxic Corpses In The Basement
From the pile of stuff on my desk labeled "Very good reasons why more and more people hate America, and will for a long, long time", we have this item from AmericaHeraldSun.news.com, which reports "Vietnam War veterans and activists from six countries urged the US government today to compensate millions of people they say are victims of toxins in the military defoliant Agent Orange. Three decades after the war ended, Washington has yet to admit that the lethal chemical dioxin had harmed Vietnamese villagers and foreign soldiers through illness and birth defects."
They then trotted out a guy named Professor Nguyen Trong Nhan, of the Vietnam Dioxin/Agent Orange Victims Association, who said "This toxic chemical has destroyed the environment... and the lives of millions of Vietnamese people. From 1961 to 1971, US 'Operation Ranch Hand' dropped more than 80 million litres of defoliants, half of it Agent Orange, on southern Vietnam, exposing between 2.1 million to 4.8 million people to harm."
Well, I say "boo hoo hoo!" And I say that not because I dismiss the horror of what has happened to them, but because you ain't seen nothing yet! Even as we speak, the United States military is having a field day of horror (FDOH) in Iraq and Afghanistan, expending lots and lots of depleted-uranium rounds. When these rounds burst, they explode into a huge spray of radioactive particles, contaminating everything. And we are using tons and tons, thousands and thousands, of these things! So while Agent Orange is old history, now completely dissolved into whatever biodegradable hell these things devolve to and washed out to sea, the half-life of this radioactive contamination is 11,000 years!
And if you want to see real horror and an angry population, wait until our Iraq and Afghanistan veterans start dying from the teensiest, weensiest little speck of that radioactive "depleted uranium" crap that got into their lungs, and in their guts, and into their clothes, and burned its way permanently into their tissues.
And it is not just them, either! According to Karl W. B. Schwarz, Rense.com, co-author of the Aldermaston Report released in February, "The effects of those bombing attacks were registered as far away as the UK." Hahaha! Congratulations, war-criminal Pentagon buttheads! Having fun blowing up stuff with depleted-uranium munitions is contaminating millions of people and the entire continent, permanently!
And what does this have to do with Agent Orange? Well, not much. It has to do with money, and just as the Agent Orange victims are moving toward litigation, Mr. Schwarz envisions a huge class-action lawsuit as a result of this demonic depleted-uranium thing. "It would sort of be," he says, "The Citizens of the United States, Active Duty and Veterans of the US Armed Services v. The United States Government, certain Defense Contractors, Certain Individuals. My guess is the true price tag for their criminal negligence could easily top $1 trillion in damages the Plaintiffs should be entitled to."
And now think about the coming generations, for the next tens of thousands of years, as whole populations of people want to be compensated because of the radioactive contamination that resulted from the irresponsible, despicable way the America military acted today! Hahaha! And yet you want another reason why I am recommending gold? Ugh.
****Mogambo sez: I particularly like the way that the quarter ended, with the Lipper Mutual Fund Performance Indexes showing that gold funds came out in first place (gold got the "gold medal!" Get it? Gold wins a gold medal? Hahaha!) for the first quarter of 2006, up 22.5%! Whew! And gold-oriented funds also garnered a nice first place finish for the last twelve months, too, up 68%! Hahaha! This investing stuff is easy!
And the best news is that it gets better and better from here!

The Mogambu Guru's straightforward writings are made possible by The Daily Reckoning.
Richard Daughty aka The Mogambo Guru is general partner and COO of the Smith Consultant Group and can be emailed at RichardSmithGroup@verizon.net.

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