12/27/10 Tampa, Florida – There are increasingly those who predict hyperinflation, which is popularly defined as rapidly-rising prices that soon reach un-payable levels, and which is always caused by the true definition of inflation, which is (according to the Mogambo Big Book Of Economic Stuff (MBBOES), “A gigantic growth in the money supply, which is caused by banks deliberately acting like greedy, lying, filthy pigs who deserve to be thrown in jail.”
I am, as you probably guessed, one of those people, although I seem to be the only one who is literally screaming his guts out in fear about the inflation in prices caused by the Federal Reserve creating so much money, and who is, again literally, puking his guts out in fear that the Federal Reserve is in the beginning stage of a long period of massive growth in the money supply, starting with the $1.2 trillion that will be created by quantitative easing 2 this year. This year! In One Freaking Year (OFY)!
$1.2 trillion of new money in One Freaking Year (OFY)! It boggles the mind!
Well, this barfing thing has elicited two responses, one of which is my wife saying, “I’m not cleaning that up!” followed by her saying, “Clean that up!” followed by, “This is the last time I am telling you to clean that up or there will be no fried foods in this house for an entire month!” followed by her saying, “Thanks for cleaning that up, moron!”
The other response is that I am happy to report that cleaning up Mogambo Vomit Of Fear (MVOF) has a decidedly calming effect on people who are screaming in outrage and fear at the slimy treachery of the Federal Reserve creating so much money, and which is indeed fortunate for me, as it allowed me to calmly read Victor Sperandeo writing in this week’s Barron’s, that “in periods of hyperinflations, gold tends to appreciate by 2,000% to 50,000% against a hyperinflated currency.” Wow!
As for a hyperinflated currency, the monetary base jumped a mighty $53 billion last week to $2.03 trillion, which is a hefty 2.7% jump in One Freaking Week (OFW)! And much more to come!
And so, if I read my Sperandeo correctly, gold at $1,400 an ounce will “tend” to go up in price by 20 times to 500 times, taking gold to somewhere between $28,000 an ounce and $700,000 an ounce? Whee!
Maybe this increase in the money supply, which always leads to inflation in prices, is why bonds are dropping in price, too. And how much bond investment money has been “lost”?
According to the WSJ a week or so ago, the 10-year notes have dropped 5.5%, and “the price of the 30-year bond, which is more sensitive to changes in yield because of its longer duration, has fallen by more than 7%,” which was bad enough then, and is worse now.
So, with $14 trillion in national debt, an average decline in value of only 6% would mean a paper loss of $840 billion? Wow!
When you imagine these kinds of losses appearing on tax returns, you understand the frantic desperation of the government and the Federal Reserve to keep things up until the end of the tax/calendar year!
Peter Schiff of Euro Pacific Capital does not want to comment on taxes, the motives of the government, any of my paranoid conspiracy theories, the way my darling blue eyes twinkle with a light of their own, or even the horrific losses accruing to those stupid enough to own bonds at such ridiculously overvalued prices.
Rather, he implies that it’s going to get A Lot Worse From Here (ALWFH), because, “If bond prices failed to rise given such a Herculean effort to lift them up, there can be only one direction for them to go: down.”
And rightfully so, too! Inflation in prices is everywhere! And the rate of inflation in prices swamps the puny yields from overpriced bonds! For instance, the CRB index is up 13.1% year-to-date, and the Goldman Sachs Commodities Index (GSCI) is up 16.5%, too!
And The Economist magazine shows the commodity-price dollar index for “all items” to be a whopping 30.6% year-over-year change! Food, for crying out loud, is up 24.9% in the selfsame last year!
You can probably tell by the way I am in Mogambo Panic Mode (MPM) that these are nightmarish levels of inflation, and they are going to get worse, as in “more nightmarish,” because Agora Financials’ 5- Minute Forecast writes that because the price of oil is rising, and I assume will continue to rise with the presumed fall in the purchasing power of the dollar due to the foul Federal Reserve creating so many of them, “It’s been said that every $1 added to the price of a barrel of oil is $100 billion subtracted from GDP.”
This dismal fact is borne out by FedEx just announcing that it will cost 3.9% more to ship something via FedEx, probably as the result of its profits calling by “18% in the third quarter” and that its “fuel costs were 26% higher than Q3 2009.”
United Parcel Service is raising its rates 4.9%, too.
And there is more than the faint scent (sniff, sniff) of inflation in how The 5 went on, “Wholesale prices jumped 0.8% during November, according to the Labor Department. That’s the fifth straight monthly rise. The increases were concentrated in energy (up 2.1% for the month) and food (up 1%).”
For the month! These are inflationary increases for the month!
At this point I caution you to calm down instead of completely freaking out and going to Washington, DC, vowing to throw out the inflationary idiots in Congress and burn the inflationary Federal Reserve to the ground.
Instead, it is much easier to just buy gold, silver and oil to capitalize on the inflation in prices that all this new money from the Fed will cause.
And trust me; there will be plenty of people ahead of you in wreaking revenge against the government, the Federal Reserve, and the scumbags who encouraged them when they realize, as H. L. Mencken once famously said, that we got “the government we deserve, good and hard.”
And while these rioting mobs angrily “take out the trash,” you will be busy calculating how rich you are after buying gold, silver and oil at these low, low prices, and happily muttering to yourself, “Whee! That investing stuff was 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.
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“And so, if I read my Sperandeo correctly, gold at $1,400 an ounce will “tend” to go up in price by 20 times to 500 times, taking gold to somewhere between $28,000 an ounce and $700,000 an ounce? Whee!”
In hyperinflation no one wants the currency anymore, so its value is moot. “How many dollars per ounce of gold?” “How many angels can dance on the head of a pin?”
Wikipeida reports on the angel/needle question as, “a metaphor for wasting time debating topics of no practical value.” Thus, when it takes five or six figures worth of dollars to get gold, then those dollars might only be of interest to those angels on that pinhead.
There’s always the Good, the Bad and the Ugly.
The Good – In a few years an increase in the money supply of only 1.7 trillion dollars will be an improvement
The Bad – Exchanging your ounce of gold for $28k-$700k will leave you with paper of little real value. Agreement with AGD&D.
The Ugly – The Great Mogambo is right, this breakdown in currency value will lead to extreme civil strife.
Happy New Year!
True the dollar of the future may be worthless and it may take many of them to buy an ounce of gold. But my mortgage is valued in dollars. So if I time it right, I can pay of my whole mortgage by selling some gold that I buy now for the cost of only a few monthly payments. So if I make it though the rough times ahead by eating stored up and/or homegrown food food I can come out on the other side with no mortgage. I would rather do that than spend the next 30 years slaving away to make the bankers and the government richer. There are two sides to every coin be they solid gold or cheap fiat crap
Long term planning takes pains, efforts and a sea of troubles.
The prevailing wind is adhoc planning that will pleased every electorate.
For the time being, I think QE series is the only viable schedule. If not, why not try out Quantity Hardening. Like QE series, you too are entitled to QH 1 to QH 1000….. Then, let’s observe the mob’s characteristic changes and their behavioral inclinations.
Quantitative hardening is what you get when your nation’s central bank does not control the printing presses, and your nation’s elitist central planners make that fateful decision to make the vile banksters whole at the expense of the general population. And while the value of gold in dollars may be moot when it’s all said and done, there will always, as there has been for the last four and-a-half millenia, be someone willing to give you a chicken (or a pizza, if you prefer) for a piece gold or silver…
At least the Mogambo Plan is one that the general population can use as part of self-preservation portfolio, if you will…. bear in mind, however, that both gold and silver will show up on a neighborhood body scanner strategically located for national security reasons…
Well. What ever it is, whether, Quantitative easing(QE), consolidating(QC), controlling(QCon), hardening(QH), softening(QS), or imploding(QI) … all are tip-top technology. For the shake of the world biggest and most powerful democracy, let’s hope that these will sail through the test and will be in the nation’s first and foremost voting agenda.
Remember Mogambo is only for entertainment purposes. Everything is fine! Relax go watch the game on that big new flat screen TV. All of that extra money is going to be used for …….. new infrastructure. Everything is fine.
I love you Mogambo, you are always so funny and so right!
Remember that every financial crisis is actually a transfer of wealth. In inflation, the transfer is from creditors to debtors. Who’s the world’s biggest debtor? To ask the question is to give the reason for inflation. To prosper in such conditions, it’s necessary to be on the side the wealth is transferred to–the debtor side. The inflation game is also known as “stiff your lender”.
If you wish its sound pleasant to the ears, then use the term ‘transfer of wealth. Conversely, if your ears can tolerate rocking tone, then make use the metaphor ‘con-man job or confidence man philosophy’.
Though, Mr BB is not a philosopher, but, when he murmured, he accidentally hit the centre dot of the target – that is, when he said, “when a man die, his body decays but his soul is immortal. I am absolutely convinced.
Civil strife. Now we are talking.