Inflation Soars as Federal Reserve Credit Sinks

Reddit

Total Fed Credit was down another US$1.7 billion last week, continuing on its trend that I rudely characterise as, “a worrying lack of growth in money and credit if you are going to keep inflation going up and up and up forever until we are all destroyed by such monetary idiocy!”

TFC, of course, is the source of magic that produces out-of-nowhere credit in the banks, which the banks lend, which increases the money supply, which increases the prices of whatever in the hell it was that was bought with the damned borrowed money, and after a few iterations of the system increases the prices of everything else, like food, as the money sloshes around hither and yon, and the next thing you know I am screaming at the stupid little cashier at the grocery store because she thinks I am freaking MADE out of money or something!

This week what set me off was, of course, inflation. And not just inflation in general, as in the joke used by Adrian Ash at BullionVault.com in his essay “USD R.I.P” that was told by comedian Max Kauffman in the ’50s; “Among the things that money can’t buy is everything it used to.” Hahaha! Very clever!

But even Mr. Ash sees the futility of attempting levity, as he notes, “But US consumers have since lost their sense of humor. The dollar has dropped another 86% of its purchasing power since then.”

No, the particular thing that set me off in a rage was that she said Barron’s rose in price from $4 an issue to $5! A 25% jump! Overnight! Naturally I assumed that the stupid cashier deliberately overcharged me, the little vicious brat, who is probably a willing participant in some FBI plot against me or another. Like for instance, the way government agents snuck into my kitchen sometime last week and sabotaged my blender! After 16 years of working perfectly, all of a sudden the blender just stops working? Just like that? For no reason? Ha! Government sabotage, I tells ya!

Naturally, the cashier allying with the FBI and trying to cheat me makes the famous Mogambo Reflexes Of Lightning (MROL) take over, and I drop into a defensive crouch behind the bagboy, using him as both a victim and human shield, and I snarl,

“Overcharge me by 25%, will you? Inflation is not so bad that I don’t suffer enough already, but now you want me to suffer even more by cheating me out of an extra dollar? As ye sow misery, so shall ye reap!” With that, I tighten my grip around the neck of that stupid bagboy to show him what suffering is, and suddenly the cashier is yelling, “No! Stop! You weren’t being cheated! That’s the new price! Look at the cover of the magazine! See? It says $5 right here at the top! See? The new price is $5! It is the new price they are charging!”

I am suddenly thinking to myself, “Oops!” I let go of the bagboy’s neck, which is good because I think he had an accident in his pants (the little wimp!) and I certainly did not want him bumping up against me.

So I look, and sure enough, she was right! The new price for Barron’s is $5 an issue! A 25% increase in price! As a long-time reader, I know that Barron’s has the official stance that refined and educated people like us do not sully ourselves by wallowing in such nastiness as grubby inflation in prices or the greasy, corruption of Federal Reserve policy, because the only thing that counts in life is that a) stocks are rising and b) bond prices are rising (which means interest rates are falling and bond owners are showing capital gains), which they always do, and if they don’t, then they soon will, because the Federal Reserve is always “on the case!”, and when the Fed slashes interest rates or convincingly tells another series of lies with doctored statistics (or both) that everybody swallows without a whimper (including Barron’s), everything will be perfect again!

And speaking of Barron’s, I was jarred to note that they report the Monetary Base as having contracted almost $9 billion last week, dropping to $820.5 billion from $829.4 billion! Wow! This is such a huge move that it looks like a typo!

Anyway, like I said, TFC was down $1.7 billion last week, which is not much, but which is still utterly, completely inconsistent with a Federal Reserve that history proves wants two things in life: Firstly, to never take my calls (“Let me speak to that butthead Bernanke!” and the receptionist sweetly says, “Let me put you on hold for the rest of your Nasty Mogambo Life (NML)! Thank you!”), and secondly, to keep creating more money and credit, to produce more inflation in prices, particularly asset prices like stocks, bonds and housing, and more inflation in consumer prices, which they will lie about, so it doesn’t count.

Incredibly, the action in the stock and bond markets shows that investors believe that incredible monetary inflation engineered by the Federal Reserve will, again, produce healthy inflation in the prices of stocks, inflation in the prices of bonds, inflation in the prices of houses and inflation in the size of government, and everybody is out buying lots of each, creating the very inflation that they saw coming!

I think that the original Latin expression is “Biggus stupiditus cerebrum fiat currency happy days are here again excelsior cogitum ad infinitum crapola”, which, of course, translates into English as, “Only a brain of big stupidity could possibly believe that excessive creation of fiat currency and credit would always produce wonderful benefits without unintended inflationary consequences, because to imagine such folly is a load of excrement.”

If you don’t believe me, then read, “It’s Different This Time, I Swear” by Charles Zentay of thinkinvestblogspot.com. He explains, “Ben Bernanke has a plan. Bernanke, a long-time student of the Great Depression, believes that the cause of the Depression was that the Fed first overlent and then underlent, whipsawing the economy into catastrophe. The solution to prevent a future crisis is to flood the banking system with liquidity during times of instability.”

My blood freezes in horror. And then people wonder why I am so paranoid and hateful, when it is so obvious “why” that they could just ask this Zentay guy, who doesn’t even know me!

The Mogambo Guru
The Daily Reckoning Australia

Mogambo Guru
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Reddit

Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au