Mwana Africa - A New beginning

For those of you who still don't hold at least SOME Gold, may you heed THIS warning...


UNDER GOLD’S SPELL
by The Mogambo Guru

Rick Ackerman of Rick's Picks recently wrote, "Ben
Bernanke considers himself to be an expert on the Great
Depression and the 1929 Crash, and he evidently has Wall
Street convinced that under his watch the Fed will not
repeat the monetary mistakes that supposedly triggered
the deflationary collapse of the 1930s.

"[But] I would argue that merely by harbouring the
belief that the Fed will be able to manage a global debt
bubble amounting to hundreds of trillions of dollars,
Bernanke has disqualified himself for the job."

Hahaha! My feelings exactly - good one!

But hundreds of trillions? I interrupt to say: "An
impressive number, Mr Ackerman!" Hearing me, I can see a
vein pop out on Mr Ackerman's neck. But instead of
having a couple of his goons throw me out like he
threatened to do if I opened my big fat yap one more
time when he was speaking, he explains:

"The total value of the world’s goods and services
economy amounts to no more than $40 trillion. However,
the financial economy has a notional value more than six
times that size, resting as it does on leveraged
financial instruments with a face value estimated by the
BIS at $250 trillion."

I have also read of a $350 trillion estimate, for the
record, but if you believe the memory of The Mogambo
(MOTM) you are a fool.

Getting back to the subject, the total notional size of
existing financial instruments is six times the size of
all the actual buying and selling of goods and service
in the whole freaking world? Yow yow yow! But even THAT
is insignificant, as Ackerman argues that "Again, the
focus is wrongly on the relatively puny goods-and-
services economy. But it is the $250 trillion financial
economy that we should be concerned about, since it
rests entirely on collateral that has been artificially
inflated via credit stimulus."

All I can do is stare off into space, my mouth hanging
open in stunned stupefaction at the enormity of it all.
$250 trillion! Trance-like, in my mind's eye I see gold.
Glittering, shining gold, all yellow and golden, saying,
"I will save you, Mogambo! And even better, you will be
rich for having accumulated gold and silver at these
bargain prices, and you can easily finance the long-
awaited Mogambo Reign of Terror against all your
enemies, both real AND imagined, which is, by this time,
probably damned near everybody alive or dead."

Seeing that I am going off on another tangent of
rhapsodising about delicious revenge, Martin Weiss of
the Safe Money Report tries to calm me down, saying,
"2008 will see gold at over $1,000 an ounce."

Well, I admit that his clever ploy worked. As a guy who
has both 1) a wife with a gold crown on her tooth and 2)
a pair of pliers in the garage, I LOVE hearing about how
gold is going to $1,000 an ounce! I sit down,
enthralled...

Jason Hommel of SilverStockReport.com sees how easy it
is to get me to shut the hell up, and says that he
predicts $40,000 an ounce! I scoot over towards Mr
Hommel and away from that piker Weiss and his lousy
$1,000. With me fawning at his feet, I am entranced when
Hommel says: "And yet, this prediction of $40,000/oz
gold is conservative. It is important to note that these
are not really true growth rates. They are actually
decay rates. They show the dollar decaying. Gold's value
cannot grow to infinity, but a dollar's value can decay
away to nothing. So, I'm not saying that gold will have
infinite value. I'm saying dollars will become
worthless."

Well, I didn't once date a maths scholar in college for
nothing, and I am telling you that dividing gold by the
zero worth of the dollar is, indeed, infinity on the old
dollars-per-ounce scale. Or damned close to it!

And for this week's instalment of "Don't forget about
silver!" Hommel says, "Silver will rise to about
$8000/oz. You should start investing as early as
possible, and you should not really care whether silver
is $7/oz, or $9/oz or even $25/oz."

So who is buying all this gold? It ain't me, since I
have no money and have no prospects of getting any
because I am lazy and hate working, and I have a wife
who won't take a second job and gets real testy when I
bring it up all the time. But it turns out that lots of
people are not like me, and they are buying with
enthusiasm, as Martin Weiss says:

"The buyers are more aggressive right now because they
know that the world is on an inflationary path. They
also know that most central banks will do everything in
their power to keep their economies tilted toward
inflation. The alternative - deflation - is a nightmare
to all governments."

But deflation might be terrific for you! How does a nice
waterfront home in Florida for $12,000 suit you? How
about a ten-cent cheeseburger? It suits you fine, I'll
bet!

But we are not talking about Florida real estate or
luscious cheeseburgers, but about gold. Weiss goes on to
say, "Historically, when you hear about central banks
selling gold, also keep the following in mind: In the
late 1970s, the US Treasury sold tons of gold. Traders
and savvy investors bought every ounce at every auction,
and more. So despite the Treasury sales, gold prices
went up, up, and away!"

And keep in mind, too, that in the '30s, during the
Great Depression, Homestake Mining supposedly went up
500% while everything else went, like my dreams and
ambitions today, into the crapper.

Weiss also reports that a milestone was set recently, so
that the "Chinese are now consuming more natural
resources than any other civilisation in history." The
upshot of this news is "that’s putting huge upside
pressure on prices, which, in turn, is raising general
inflation levels around the world."

And on top of that we have central banks creating more
money and credit, which ALSO puts upward pressure on
prices! And what is the one thing, the one sure bet, the
only thing that will protect you against the debasing of
your currency/rising prices?

Gold!

Perhaps he is sick of hearing me whine about inflation
this and inflation that, but Rick Ackerman says that I
should "think of deflation in precisely the way it will
come knocking on your door: ie, as an increase in the
real burden of debt. Which is to say, having to pay real
rates of 9 or 10 percent to service a mortgage on a home
worth less than you paid for it. Or having the rate on
your $15,000 of credit card debt boosted from 4% to 12%
overnight."

But we are both on the same page when he asks the
timeless question, "Can anyone still believe Keynesian
quackery works, or that the key to reviving prosperity
is to get consumers to spend yet more borrowed money?"

Well, the US Congress does, and the Federal Reserve
does, and from SafeHaven.com we learn there may be more
than meets the eye to this decision by the Federal
Reserve to no longer report M3, the most inclusive
estimate of the US money supply. They write:

"The date when M3 will start being hidden also happens
to be the exact month that Iran will declare economic
war against the US Dollar by trading its oil in Petro-
Euros on its new bourse."

Hmmmm! But before I can take the time to think about
this, SafeHaven says "but there is more...

"The Federal Reserve currently has three vacancies
within the 19 top Regional Bank and Board of Governor
spots. Why? Part of ongoing wholesale resignations. Over
the past few years no less than six Federal Reserve
Regional Bank Presidents have resigned. This is highly
unusual. Two positions for the Board of Governors -
there are 7 - have been open for quite a while. Plus,
six of the 12 Regional Head spots have turned over
during the past few years."

Notice that SafeHaven is such a classy outfit not once
did it use the phrase "rats deserting a sinking ship."
But The Mogambo is not nearly so constrained by civility
and breeding, and I say that they, and the whole rest of
the Federal Reserve System, are a bunch of filthy,
stinking, lying, stupid rats that have made a diseased,
pus-filled canker sore of the economy of the United
States.

What is even more interesting is that "the recent rise
in gold catalogued 74 points over about a month, a 16
percent rally from precisely the day the Fed announced
it would hide M3 from [US] taxpayers and citizens of
this great nation. That is no coincidence. Gold sees
hyperinflation, monetisation of debt, and intervention
into free markets. Gold is telling us it expects Ben
Bernanke to be an inflationist."

All of this over M3? So how big is the M3 money supply?
For this we turn to Doug Noland, who says "Broad money
supply (M3) surged $27.3 billion (week of December 12)
to a record $10.148 Trillion. Over the past 30 weeks, M3
has inflated $523 billion, or 9.4% annualized. Year-to-
date, M3 has expanded at a 7.3% rate, with M3-less Money
Funds expanding at an 8.2% pace."

And we can rely on Doug Noland not only for pertinent
data, but to give his unbiased opinion about Ben
Bernanke, too, when he says "We have a full-fledged
monetary quack about to take the helm at the Federal
Reserve."


Until next week,

The Mogambo Guru
for The Daily Reckoning


Until next time...

W.S.