The government genie flips a
coin By The Mogambo Guru
Junior Mogambo Ranger (JMR) Gary S sent me
the chart of "30-Day Gold Lease Rates" from
Kitco.com, which definitely shows that the
one-month gold lease rate was less than zero. He
asks, "The lease rates on 30-day gold and silver
are negative?!?! What does that mean? Are banks
paying other banks to lease gold? Are banks so
desperate to raise cash that they are giving away
gold??? Am I using too many question marks?"
As for the questions of punctuation, the
answer is no, as multiple question marks indicate
the appropriate level of complete freaking
befuddlement at such a bizarre statistic; leasing
gold at less than zero percent interest!
This is oddly in line with a clever satire
at epi.org, sent to me by JMR Mikael, titled "Fed
lowers benchmark interest rate by
50
points (a satire ... )" in which
Jared Bernstein proposes the same thing as regards
the Federal Reserve! His humorous fiction starts
out, "In a surprise move aimed at stimulating
moribund financial markets and the larger economy,
the Federal Reserve surprised markets with an
unprecedented 50 point rate cut, taking their
target rate down to -47%." Hahaha! An interest
rate of a negative 47%! Hahahaha!
This
reminds me of the last episode of the old TV show
Barney Miller when the precinct was being closed
down. The rumor was that the old police station
was going to be torn down and replaced by
"low-income luxury housing", which was a really
funny line at the time, but in subsequent years
"low-income luxury housing" actually came to pass
in some places, and so maybe a negative 47%
interest rate is not as absurd as it seems,
either!
Anyway, the next paragraph of the
satire was, "The statement accompanying the
surprise cut was also unusual, employing bolder
language than is typically the case. For example,
the phrase 'the committee judges inflationary and
growth risks to be roughly balanced' was changed
to read, 'Screw it! We're going nuts over here!
You got a financial problem? Need some fast cash?
We'll pay you - that's right, you heard us - to
borrow money from our bank."
But this
biting satire and raw sarcasm has given me the
idea for a new television game show of my own.
Thus, I proudly announce the latest television hit
show, Mogambo's Let's Make A Deal (MLMAD). The
essence of the 30-minute show is that I say to a
randomly-picked audience member who is dressed in
some ridiculous garb, "If you think that a
negative lease rate for gold is weird, and if you
think that the banks reporting total reserves of
US$44 billion while at the same time non-borrowed
reserves are an astonishing negative $61 billion
is weird, and if you think that banks' 'free
reserves' are a sudden, staggering negative $75
billion is weird, or if you think that borrowed
reserves in the banks are a sudden, terrifying $80
billion is weird, and if you think that
private-sector investment banks borrowing from the
Federal Reserve itself for the first time in
history is weird, then you are not only 100%
correct, but you win! You are a winner! You have
won the chance to choose between the two Mogambo
Doors Of Mystery (MDOM) and claim the fabulous
prize that is waiting there for you!"
The
camera pans down to two mysterious doors on stage
as I say, "Step right up and pick which door you
wish to open, and discover the surprise behind
that door! And why don't you tell us what is
behind the two doors, Bob?" at which point Bob the
Announcer says, "Right you are, Mogambo! Behind
one door is a government that will grant you seven
wishes, making all your dreams come true! Behind
the other door is the economic death from the
government making someone else's seven wishes come
true."
Waiting for the applause from the
audience at the prospect of being granted seven
wishes to die down, I say, "And there you have it!
Which door will it be?"
The audience
chants rhythmically, "Which door? Which door?
Which door?" louder and louder and louder, like
some demonic jungle voodoo rhythm, until the
contestant finally, and excitedly, chooses a door!
If he guesses right, he gets seven wishes
and he goes off to enjoy them. If he chooses wrong
and chooses the door behind which waits "economic
death from making someone else's seven wishes come
true", then thugs rush out to strip the surprised
contestant naked before dragging them out to throw
them into the cold, filthy gutter while our
audience watches in air-conditioned comfort as our
lawyers loot the contestant's house, their bank
accounts, retirement plans, brokerage accounts,
their safe-deposit box at the bank and then burn
their house to the ground. All gone!
Well,
all the network people, all of the money people
and everybody who heard of my new show said it was
the worst idea they had ever heard, which I
cleverly counter by saying, "The moronic
population of this country loves this game
already, even though nobody has ever had to pick
the wrong door until now! Where in the hell did
you think all this government spending was going?"
And if you think, like everybody else
seems to think, that this is an ugly, vicious and
stupid idea, then get used to it, because you are
going to see all kinds of weird things from now
on, as the governments - not just American but
everybody's - are now realizing, too late and to
their horror, that we are all freaking doomed by
the vast expansions of fiat currencies and
indebting taxpayers to fund massive amounts of
government growth and government spending, and now
they are going to do every slimy monetary, fiscal
and legal trick that they can think of.
And with the awesome, unlimited power of a
fiat currency that can be increased in volume
literally at will, all fiscal and monetary plans
are, suddenly, possible! Negative interest rates,
tax rebates, tax cuts and increased government
spending all at the same time! It's literally
possible, and without end! Ask Zimbabwe!
But it is, alas, impossible that they will
succeed in alleviating the problems. As Clyde C
Harrison at Brookshire Raw Materials correctly
said, "Governments and central banks are
completely incapable of keeping tomorrow from
coming," which is too bad, which in turn reminds
me of the funny line, "Tomorrow is the greatest
labor-saving device today," which seems oddly and
chillingly apropos, considering what the
government and the Fed are doing is merely
fighting for another day of economic reprieve!
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.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily
Reckoning.)
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