MOGAMBO GURU: Pure Economic Insanity

[Tace]

Richard Daughty, the angriest guy in economics -- World News Trust

Nothing much noteworthy happened last week, especially as pertains to the Federal Reserve, especially in comparison to something so dramatic that it tells me, beyond any lingering, vestigial shadow of a doubt, that the price of gold is, to coin a phrase, a-fixing to go a-booming and a-fixing to go a-zooming and we'll all be rich, rich, rich, cha cha cha. The reason for my frivolity is that on Fin24.co.za we read the headline "Chinese Eye Solid Gold." Of course, we immediately think, "Duh! Big deal! Who doesn't? Why are you wasting my time? Are you trying to start something with me by wasting my precious time, punk? Is that what you want? You want a piece of The Mogambo? Huh, punk? Is that what you want? Huh?"

But methinks that maybe we are a little too hasty, as right off the bat we learn, "Chinese banks are expanding the options they offer rich depositors in the face of greater competition from foreign banks." And what is this new option for the Chinese rich? "Next month," the article reveals, "the Bank of China plans to launch its newest product, dollar-denominated certificates linked to the price of gold."

Hmmm! Suddenly, my brain is going every which way! This is very, very interesting! On the one hand, this seems to prove that rich Chinese people are no more sophisticated than the rest of us clodhopper bozos out here who mess with dollars. I mean, these rich Chinese people are supposed to be so dull that they will line up to buy a certificate, denominated in dollars, a currency that is due to fall in purchasing power due to massive over-creation by the Federal Reserve over decades, that is also linked to gold? Huh? Why? Isn't this merely a bet on gold, which these foreign people will naturally price in their own currency anyway, which will ALSO trade up and down against the dollar in the currency exchange markets, negating the gain made in dollars using these certificates? What's the point? Or, much more excitingly, perhaps this is actually the Chinese equivalent of a new gold Exchange-Traded Fund! If so, wow! The impact of gold ETFs on the price of gold has been, so they say, significant in producing the stellar performance of gold. And if it is, and here is another one, a potentially enormous one, to add to the impact!

Naturally, I am wondering, "Are these Chinese gold certificates, paid for with dollars, going to be backed by physical gold, newly bought with the investor's dollars?" If so, like I said, wow! A Chinese gold ETF! Animated by glee, with the lithe, sinuous grace of a panther I dance the Forbidden Mogambo Dance of Love (FMDOL) in celebration that my bullish stance on gold is apparently vindicated!

more

http://worldnewstrust.org/modules/AMS/article.php?storyid=3172

[Demeter]

1. That Would Be A Fine Kettle of Fish

Paging Wm. Jenning Bryan!