11/30/10 Tampa, Florida – I thought I knew everything about the foul Federal Reserve in that I knew they cause inflation in prices by deliberately creating too much money, which is the One Big Thing (OBT) that you do not want because of the social upheaval of people starving to death and rioting in the streets.
And I thought I knew that the Federal Reserve was originally charged with preserving the value of the dollar, but apparently that is not so. Ergo, the Federal Reserve was not prevented, or warned, or even suggested to refrain from actually being evil, in that we have had continuous inflation in prices since the inception of the Federal Reserve in 1913 because of the vast increase in the money supply since 1913, and only a vast and expensive expansion of the welfare state has kept starvation and rioting under control… So far.
So I was happy to learn a few things from The Wall Street Journal, like how only since 1978 has the Fed been given a so-called “dual mandate” to achieve both price stability and full employment, where “in the original Federal Reserve Act of 1913 Congress asked the central bank to supervise banks. It did not mention explicit economic goals. Even in the Keynesian heyday of the Employment Act of 1946, Congress did not ask the Fed to manage the economy.”
Of course, there are those who ask, “Why quibble about whether the Federal Reserve is a failure in both its ‘mandates’ of maintaining stable prices and high employment now that the horrible Federal Reserve is actually beginning their promised creation of another $600 billion in the next six months, and by extension another $1.2 trillion in the next year, and in fact will be buying a total load of almost $2 trillion in Treasury debt in the next twelve months, when you should be working and not standing around discussing this stupid stuff on company time?”
As I was slumping back to my desk, I was muttering under my breath, “The reason is because of inflation in prices from all of this inflation in the money supply and how it is going to destroy us, you moron!”
I’ll bet that if I was in China, my stupid Chinese boss wouldn’t be asking me such a stupid question, as David Stevenson in the Money Morning newsletter notes that “the official figures showed China’s cost of living climbing by 4.4% year-on-year.” Yikes!
And all of this inflation in prices is because, “In the last seven years, China’s M2 money supply measure – how much cash is sloshing around the system – has increased more than threefold. In other words, there’s been a massive credit bubble” that has not only produced alarming inflation in prices, but “rapid economic growth – China is growing at around 10% a year just now,” which means more demand and higher prices still! Yikes!
And as bad as that is, Mr. Stevenson goes on that “a member of the Chinese Academy of Social Sciences, one of the government’s top think tanks, said that by its own calculations the country’s consumer price index had been understated by more than 7% over the past five years,” which means that the terrifying 4.4% inflation is grossly understated, and has been estimated by others to be as high as 10%!
This probably comes from the fact that “Food prices are already rising at 10% year-on-year. The Xinhua news agency reported that a basket of 18 staple vegetables cost 62% more during the first ten days of November than in the same period last year.”
They did not mention anything about pepperoni prices, sausage, bacon, cheese or any other ingredients of pizza, so I imagine that’s why food riots have not broken out, plus the fact that the Chinese are said to be buyers of gold, protecting themselves against the debasement of their money by their banks and government.
And since the same strategy of buying gold, silver and oil when so much money is being created works everywhere, I imagine that in Chinese they say something that sounds like “Ah-so! Oy chow wan go!” while we here in America say, “Whee! This investing stuff is easy!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
It isn’t just the Chinese buying gold for protection.
From telegraph.co.uk under the story
‘EU rescue costs start to threaten Germany itself’
We get this memorable quote-
“You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings.”
It seems The Germans and The Chinese are trying to protect themselves by buying gold while most Americans still sneer at precious metals.
How does he know that if he were in China his Chinese boss would be stupid?
“Stupid” is being used figuratively (and repeatedly).
In any case, MoGu bets that if he were in China his boss WOULDN’T be asking stupid questions.
And in his real life office, I think MoGu IS the boss, or one of them, at least.
I have a bit more to add, in my best Mogambo impersonation: “And the stupid masses are still buying too much stuff at the shops, stuffing their stupid trolleys with useless imported crap, all with glazed over eyes rushing around screaming “but its Christmas, but its Christmas and we must buy more “stuff” for everyone we know, as everyone we know will be buying us “stuff” too so we have to buy them stuff too. Never mind that none of us can afford more stuff and that nobody needs more stuff, the tv said we should buy stuff and so we shall” And so it will go on until they all collapse at the shops in one big uselss(OBU) pile of crap with shopping scattered everywhere and arms and legs sticking out of the pile of crap that is mixed with shopping and stuff, and then they will all say “oh man we really should have listened to Mogambo when he told us to buy gold, silver and oil” But it will be too late by then, they should have listened earlier, to which the Mogambo will reply “I told you so you bloody idiots”
the mighty and xtreeemely powerful mogambo
has hereby documented “bankster creep”!!!
i shall award him an honorary Doctorate of Banster Bunkoism, from amherst, which he can display in his BadBoyBadAssBunker…