Why Creating Money Won't Shock the Economy Back to Life

Being a paranoid gold-bug conspiracy-theorist whack-job lunatic halfwit like I am, I am always monitoring the perimeter for new things, strange things, things that have never happened before, the theory being that if things that have never happened before keep happening, then one day everything will have happened, meaning, of course, that I will finally find real happiness, true love and a good frozen pizza.

Alas, there is nothing to report on the “happiness, love and pizza” front, but Bloomberg reported that “The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a US debt auction.”

Naturally, not being very bright, I am not sure that I could be talked into investing money into a debt instrument to get a negative yield, but it could be one of the idiosyncrasies of the TIPS security, or the tax ramifications thereof, or something else that I wouldn’t understand even if you explained it to me, even if I cared, which I don’t, except as regards a Loud Mogambo Outburst Of Indignant Outrage (LMOOIO) of, “What in the hell is going on here?” which I do because this kind of negative-yield crap Just Ain’t Right (JAR) in a normal world!

Well, the reason Bloomberg gave was that the people buying these TIPS bonds “bet the Federal Reserve [would] be successful in sparking inflation,” when suddenly it makes sense, since the TIPS has additional principal added according to how much commodities go up!

This is probably very clever, of course, but since I am too dull-witted to appreciate it, I will just stick to buying gold and silver when the Federal Reserve is creating so much money, as the metals are guaranteed to go up by dint of 4,500 years of history.

Instead, let us look for signs of inflation in the money supply, which will lead to inflation in prices, which will make gold and silver soar in price, as guaranteed by 4,500 years of history.

Fortunately for lazy people like me, if I am looking for signs of inflation, I don’t have far to look, as right in my email is Agora Financial’s 5-Minute Forecast reporting that “Goldman Sachs says the Federal Reserve may have to buy up to $4 trillion in Treasuries and other ‘assets’ to shock the US economy’s failing heart back to something approximating a normal pulse.”

At the mention of pulse, I instinctively check my own pulse, which I notice is racing at the mention of the Federal Reserve creating 4 trillion more dollars, a horror perhaps made more understandable when compared to the entire GDP of the whole country, which is only $14 trillion! This $4 trillion is 27% of everything good and service this country produces in an Entire Freaking Year (EFY)!

And, even more horrific, the Federal Reserve is creating this immense $4 trillion mountain of money so that the federal government can borrow it and spend it, thus “shocking” the economy with untold trillions of dollars pouring into the economy. Gaaahhh!

I understand that you have never seen me impersonate a doctor before, especially one that is screaming and screaming about the inflationary horror that is being created by the Federal Reserve creating so much money.

But my clever use of a physician’s white smock and stethoscope enables me to continue unchallenged with the “patient” analogy, which is that this Federal Reserve intervention will, I assume, supposedly, they hope, result in the grotesquely fat, bloated, misshapen, cancerous, mal-invested, overly-indebted monstrosity of a “patient” suddenly sitting up, springing out of bed, briskly walking home and living a long, normal life. Hahahaha!

The reason I am laughing is that it sure ain’t a-gonna happen, which I know for a Stone Cold Fact (SCF) because if there WAS something that could be done to stop the catastrophe that is unfolding because of a dirtbag government borrowing and spending itself into bankruptcy, it would have worked some other time in the last 4,500 years of the constant, sickening worldwide parade of corrupt dirtbag governments borrowing and spending themselves into bankruptcy, all of which proves the ultimate, utter uselessness of all their tragic, terrifying throes of desperation.

In short, nothing has ever, ever worked. Ever! Nothing!

And that – that! – is why it is so important that you NOT get into this kind of bankrupting mess to start with! This is why the Founding Fathers wrote into the Constitution that money “shall only” be of gold and silver, which automatically prevents big expansions of the money supply, which prevents all of this kind of mess.

Sadly, the reality is that inflation in prices will begin soaring soon, as Jan Hatzius, Goldman Sachs’ chief US economist, says that the Federal Reserve is going to create “$500 billion, or perhaps slightly more, over a period of about six months.”

As a snide way of referencing How Freaking Much (HFM) money this is, the federal government deficit-spent $1.7 trillion in the fiscal year which just ended, which is $850 billion over a period of about six months. $500 billion ain’t a-gonna do it.

And thus, things are going to get worse and worse, except for those lucky people who buy gold, silver and oil, for whom things will paradoxically get better and better, which makes it all so doubly nice because it is so easy! Just buy them!

Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning