5/20/2013 Portland, Oregon – Pop in your mints…
While the rally in equities continues relatively unchecked, the measure of the M1 monetary base has taken a marked dive of roughly 6.2% since last week, leaving it at a level not seen since April 15th (see the current M1 measure below).
For the uninitiated, the M1 money supply is what we call cash on the street, coins and bills. In other words, what most people consider spending money.
By nature and by the FED’s own admission, money supply data is highly volatile and subject to revision. Even so, our own observation has been that folks are short on cash. While this brief drop is not likely to signal a change in the trend, it has certainly caused some unexpected hiccups in dollar land.
Perhaps not coincidentally, precious metals have continued their near term price collapse. The price of silver, our preferred investment at The Mint, tanked to nearly $20 overnight Sunday. While the near term price is somewhat irrelevant, it may be indicative of a rush to meet short term debt obligations by holders of precious metals.
Most media reports read much into price movements, as if they mean something about the real economy. Unfortunately, the real economy is nothing more than a yo-yo at the end of a string of debt obligations. Until they wind up the yo-yo and let it be, real economic growth (or contraction of that matter), in terms of debt laden USD land, is nothing more than a myth one reads about in text books and in the main stream financial media.
Eventually, the avalanche of FED funds guaranteed as long as their latest QE pledge is in effect will begin to consistently run into real world asset and commodity prices. It will feel good, but participants are advised to keep their eye on the punch bowl. Once it is removed, it will be best to swim near the edge of the pool.
The vanilla crisis is hitting some chocolate patches, try to avoid them.
Stay tuned and Trust Jesus.
Key Indicators for May 20, 2013
Copper Price per Lb: $3.33
Oil Price per Barrel: $96.71
Corn Price per Bushel: $6.49
10 Yr US Treasury Bond: 1.97%
Mt Gox Bitcoin price in US: $119.75
FED Target Rate: 0.11% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,395 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.5%
Inflation Rate (CPI): -0.4%
Dow Jones Industrial Average: 15,335
M1 Monetary Base: $2,482,200,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base: $10,538,200,000,000