Richard Daughty, the angriest guy in economics
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[email protected]Last Friday is now known, around here anyway, as The Day The Mogambo Finally Lost It Completely. That was the day I found out about the latest horrific happenings at the Federal Reserve. I don't remember much about it, but I do remember that my eyes felt like they exploded from their sockets, as if in an Itchy and Scratchy cartoon, when I read that Total Fed Credit went up by an astonishing $6.2 billion last week. This is literally the "money and credit from thin air" of fabled story and song, and I am sure that as good little Mogambo Scouts (MS) you have joyfully sung many, many of the campfire tunes from the Official Mogambo Scout Songbook (OMSS), such as the popular "Give control of our money to the Fed and pretty soon it's dead, cha cha cha," or that old favorite "The Fed killed my money and now it’s killing me," which is, of course, sung as a dirge. In fact, ALL the songs in the OMSS are dirges. And the reason for that is that the consequences of creating so much credit, which becomes both a new debt and new money, is that prices will rise as all that money, that luscious, luscious money -- money that I'll never have because I am lazy and stupid and have a family that tries to fill a void in their pathetic, miserable lives caused by having a distant and hateful husband or father (that they blame for everything) by buying stuff -- will all seep into the prices of things, as there is (as my voice rises to a fever pitch) nothing else that can be done with money except increase demand for something by spending it on buying something!
That is why I nervously laugh the laugh of The Mogambo in full panic mode (LOTMIFPM) to glom a headline in Friday's Wall Street Journal that read, "Nikkei, Gold Hit Milestones; Dow Nears One." At first glance, it seems like such pleasant news. You think to yourself, "Ahh! People have more money! How nice for the economy!" But suddenly your blood turns cold when you read the sub-head: "Japan's strengthening economy and market overhauls propel stock Index to close above 15,000." What? Hey! Bonehead! I just told you in the previous paragraph, and so it should be still fresh in your young grasshopper mind, that all this money that the Fed is creating, and all the money that foreign banks are creating in response and emulation, has to be spent by the government on something! If not, then why in the hell is someone borrowing the damned money in the first place? And it has to, eventually, percolate through the economy and wind up in someone's pocket, and they have to put lots of it into stocks and bonds because there is just so damned much of it!
But this is not about how mysterious strangers are borrowing so much money, or how mysterious strangers are tapping my phone or lurking outside my house, but let me merely go out there with an AK-47 assault rifle and "hose down" a clump of suspicious bushes, and they will twist it all around so it is ME that gets in trouble for it! But the point is, instead, that the Japanese stock market went up for the same reason that the U.S. market is going up, and that is because the governments are borrowing and spending enormous amounts of cash, and the Federal Reserve is creating enormous amounts of cash to buy the enormous amounts of new government debt being created. And then this money eventually seeps into pockets, and then what do you do with it? Well, what other market is so big, so huge, so complicated, so diffuse, so liquid, so secretive, so willingly compliant, that can absorb so freaking much money EXCEPT the stock market and the bond market?
And speaking of humongous mountains of money, the national debt exploded again, jumping $11 billion IN ONE FREAKING DAY on Dec. 2. In one day! And then people want to know why I am so freaked out that I cannot eat, and I cannot sleep, and I keep screaming and shooting that damned pistol of mine at anything that moves all night long, and one of these days someone is going to get hurt and blah blah blah.
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http://worldnewstrust.org/modules/AMS/article.php?storyid=1799
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