"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 10 hours What Is Bitcoin Really Supposed To Be?
  • 11 hours The Surprising Media Giant Taking On Netflix
  • 12 hours Cybersecurity Stocks Are Red-Hot As Election Looms
  • 13 hours Americans Grow Weary Of U.S. Trade Policy
  • 14 hours What Putin Really Wants From Trump
  • 16 hours Europe’s EV Sales Growth Is Slowing
  • 18 hours The Looming "Hyper-War"
  • 1 day The Real Winners Of The Real Estate Business
  • 1 day 3 Reasons Small-Cap Stocks Are Booming
  • 2 days Chinese IPO Fervor Slows As Xiaomi Disappoints
  • 2 days How Corporate America Is Filling The Gaps In Public Education
  • 2 days Bezos’ Space Flight Gamble
  • 2 days Is This The Answer To High Gasoline Prices?
  • 2 days Netflix Shock Hits FAANG Stocks Hard
  • 2 days Foreign Investors Losing Interest In The U.S.
  • 2 days Chinese Police Bust $1.5B Crypto Gambling Scheme
  • 3 days Can Artificial Intelligence Compete With Real Doctors?
  • 3 days UK Stocks Bounce Back From Worst Selloff In Years
  • 3 days Geopolitical Uncertainty Weighs On Global Markets
  • 3 days Gold May Still Be On Its Way Down
The Surprising Media Giant Taking On Netflix

The Surprising Media Giant Taking On Netflix

Professional wrestling is not often…

Netflix Shock Hits FAANG Stocks Hard

Netflix Shock Hits FAANG Stocks Hard

Netflix released its surprising second…

3 Reasons Small-Cap Stocks Are Booming

3 Reasons Small-Cap Stocks Are Booming

As major market indexes waiver,…

The Mogambo Guru

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…

Contact Author

Gunning Down Money Creation

"So imagine my surprise to hear them yelling at each other 'Damn it! He almost shot me! What in the hell is that Stupid Lunatic Mogambo (SLM) doing now? He's going to kill us all with those stupid guns of his!'"

After the markets closed down in last week's surprising options-expiration-Friday climax, you can imagine the hubbub around here as Mogambo Emergency Plan Number One (MEPNO) was automatically put into effect. Everything was fine, proceeding according to plan while warning sirens and klaxons ("Ahhhh-oooo-gah! Ahhhh-oooo-gah!") were blaring in the Bunker Of The Frightened Mogambo (BOTFM), until we got to Step Tw "Test-fire weapons systems", which for some reason scared the stupid neighbors!

I had naively assumed that they had seen the news, or heard the sirens, or at least something, and that they had thus been adequately informed of the horror unfolding in the world economy, thereby prompting their stupid little Earthling pea-brains to have at least some dim, indistinct, shadowy feeling that things were seriously amiss.

Thus, they should have realized that I would soon be initiating the Mogambo Intruder Detection System (MIDS), because everybody knows that that is the kind of horrifying crap that scares the living hell out of me.

So imagine my surprise to hear them yelling at each other "Damn it! He almost shot me! What in the hell is that Stupid Lunatic Mogambo (SLM) doing now? He's going to kill us all with those stupid guns of his!"

I softly chuckled as I thought to myself, "Well, maybe it won't come to that!", and I smiled a sinister, secret smile as I adjusted the "Firepower: Rounds Per Minute" dial to "Vaporize".

Safely armed and armored, I was fully prepared to look at the latest report of Total Fed Credit and be prepared for any horror, because this is how the Federal Reserve magically creates credit in the banks, which the banks then use to make new loans (loan inflation), which expands the money supply (monetary inflation), which increases debt (debt inflation) and which will soon produce the horror of price inflation in some things, then most things, and then all things as the extra money diffuses through the economy, always more and more money diffusing through the economy, and pretty soon prices are so high that people are hungry and angry, and rioting all over the place because the price of things are so high.

Imagine my surprise, then, to note that TFC was not up! In fact, it was down, although down by a piddly $226 million.

But without money being created in the banks, no wonder the markets fell! If no new money is being created, then there is no new money to keep buying things (like stocks and bonds) at higher prices without selling something else first, which makes those markets go down, negating the whole "everybody gets richer" effect that the Fed was looking for!

In reality, real money can only be created by a bank making a loan, or a government printing some actual dollar bills on a press. I boldly say this without fear of contradiction, as I can prove by simply noting that if it was possible to create money outside of the government/banking system, everyone would do it.

And if not literally "everyone" doing it because some people are just too stupid to understand the concept of "free money", then at least SOME people would be doing it, and certainly I would be doing it, and without a doubt I would be forcing the kids to be doing it, working the little tykes overtime doing it, seven days a week doing it, until they either a.) make me rich with all their ceaseless creation of money, or b.) drop from sheer exhaustion, whereupon I'll trade them for some new kids that CAN do the work, dammit!

But this is all academic, as the fact is that nobody does it, which would seem to prove that you can't create money outside of the banking system. And believe me when I say that I have looked at many, many, many systems designed to produce plenty piles of powerful profits for me, but they all had many flaws, mostly in that they involved "work", which they never tell you about in the brochure, and that they are inherently stupid and wrong, which is also not in the brochure, regardless of what "J.W. in New York" or "A.P. in California" say ("I tripled my money in ten seconds!").

Now, notice the way I twirl my mustache in that unmistakable, slimy, evil, Simon Legree way. This is my clever theatrical way of calling your attention to the fact that you can, however, create the promise of money, and if some idiot pension fund manager can be gotten so drunk as to be talked into buying your promises of money, treating it like it was an asset, then- bingo! -you have it made!

In that regard, I am currently working on a "get rich quick" plan which would allow people to stave off bankruptcy, hopefully avoiding the inevitable shame of discovery (Judge, incredulously: "That stinking Mogambo loser (TSML) spent the money on WHAT?"). The deal is this same "my promise is the same as a money asset" scam, which is apparently easy as hell, given that so much of this obvious fraud is festering in our retirement funds already.

But even this lack of new Fed Credit was not going to keep the trashy, grubby banks from extending more credit, and Doug Noland in his Credit Bubble Bulletin at PrudentBear.com reports that "Bank Credit ballooned an additional $32.1bn for the week (10/10) surpassing $9.0 TN for the first time." Yow! The banks have now created $9 trillion in credit, just in the banking system!

In fact, it is worse than that, as he goes on "In the meantime, there is today apparently no alternative than massive banking system inflation. In just 12 weeks, bank Credit has ballooned $360bn." Yow! A $380 billion addition to the money supply, and to debt loads, in less than 3 months? Suddenly, I am nervously and furiously pounding at a calculator, disbelieving my own eyes as each time it indicates that bank credit is expanding at over $1.4 trillion dollars a freaking year! The country has a lousy $12 trillion GDP, but yet money/debt is expanding at $1.4 trillion! And growing!

Pardon my suddenly losing my mind and starting to yip like a snippy little dog, "Yikes yikes yikes yikes yikes yikes yikes yikes!"

And yet people still stupidly ask my wife "Why is he screaming in such fear, like he has seen the opened gates of hell and is staring into the abyss of unbearable suffering and economic damnation?" Isn't it obvious, you morons? Jeez!

And don't get me started about the banks' shadowy repo market, where heavy hitters go for short-term, overnight, a few-days-at-most loans, which positively exploded by about $36 freaking billion last Thursday alone! In one day! $36 billion! IN ONE FREAKING DAY!

I guess thing are getting so desperate that have to do everything they can think of, as even the banks admit that they boosted their reserves! Look for yourselves: Total Reserves in the banks suddenly shot up to $46 billion, which ain't squat, I realize, but symbolically more that the piddly little $43 billion or so that they have been averaging for the last few damned years! Suddenly, 10% more!

And foreigners are still pouring money into their accounts at the Federal Reserve, and these Foreign Holdings U.S. Debt exploded by $14.3 billion last week! Wow! In one week! It may be our currency, as they say, but it is their problem, as they also say, but they are wrong. My panic and fear is everyone's problem.

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.


Back to homepage

Leave a comment

Leave a comment