MOGAMBO GURU: Empires Do Not Always Die Gracefully

[Tace]

Richard Daughty, the angriest guy in economics
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-- I made a solemn vow to sober up, and this time I really mean it, when I read that Total Fed Credit did NOT, again, climb, it did NOT, again, remain constant, but last week it went down by $3.2 billion! Naturally, I assumed that my bloodshot eyes are deceiving me or that I have finally killed the few remaining neurons in my brain that still work. Can this slowdown in Fed credit be true, and I can get back to a life of drunken dissolution with a clear conscience? Time will tell.

And what is the significance of Fed Credit? Because this is the magical and fabled Money From Thin Air, which the Fed, by merely pushing a button, distributes to banks, which use it to make loans, and when the bank makes a loan, real money is thus created, not from thin air, but from the increase in their reserves, which came from the increase in Total Fed Credit, which you realize DID, if you have been paying attention, come from thin air. So, without all this new money from thin air, the money supply has, umm, stagnated.

Mark Lundeen, a guy who literally drips data, sent me a graph showing the growth of Fed Credit since 1938. Back then, even after that arch-communist FDR was installing the socialist state in America, it was about $10 billion or so, and it was gradually rising and rising, faster and faster. Somewhere in the middle 70's, it finally grew to $100 billion, but it kept on increasing, faster and faster. Then, coinciding with the horrid Alan Greenspan being appointed as the chairman of the Federal Reserve, it really got going. Now it is at $783 billion.

Sure enough, when we take a look at the money supply, as measured by the M's, we notice that they all fell, too, although for reasons completely different than why The Mogambo fell down, which was because I was going to unsteadily go over and finish off that bottle of tequila so that I would not be tempted to drink it. But the money supply probably fell because of a lot of reasons, mostly because more people were paying off their loans than were taking new on new ones. It was nothing to write home about, but it does merit the kind of attention that one pays to small clouds on the horizon, knowing that small clouds can grow to big clouds, and then suddenly you get pelted by wind and rain and your new portable radio gets all wet and is ruined, and nobody wants THAT! So it pays to keep an eye on these damn clouds.

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http://worldnewstrust.org/modules/AMS/article.php?storyid=736