7/15/2013 Portland, Oregon – Pop in your mints…
Now that summer is in full swing there are few surprises on the horizon and the world, it would appear, is resigned to reluctantly following the current credit cycle on its dramatic upward trajectory. While we do not believe that the centrally managed credit cycles of today are beneficial (indeed, they are quite the opposite) nor do we believe in money in its present form (as long-suffering readers well know), the centrally managed credit cycle is quite predictable and in this sense appeals to our inner laziness.
Some five years ago, the Federal Reserve began doing everything in their power to stimulate credit, as the swoon of 2008, induced by a series of blind 25 basis point hikes in the Fed’s rate target, threatened to choke off the lifeblood of the debt based monetary system. At the time, we postulated that it would be roughly 39 months before the average man on the street began to feel stimulated the way the Fed’s architects imagined he would.
Now, 60 months on, consumer credit is finally picking up, on net, and everywhere you look the debt soaked economy is on a high. The money is so hot one risks a scorched retina by merely looking upon it as it flashes through the bond, equity, and commodity charts.
Unfortunately, beyond the glare, the debt based money supply has left some major sinkholes in the economy that either fiscal or monetary policy can patch. The trick to safely navigating through the coming phase of the most recent edition of credit madness sponsored by central banks across the globe will be to avoid being engulfed by the sinkholes, for at this point there exists not the means nor political will to do so.
Where are the sinkholes? Alas, if we knew for certain, we would long since have laid our pen to rest in favor of a life of leisure. However, if we were pressed to guess, we would watch for them to appear under any patch of economic mass holding large sums of cash or long term debt instruments.
Given that criteria, the central banks themselves come to mind. It is they that will remain trapped in concrete as human progress speeds ahead.
Stay tuned and Trust Jesus!
Key Indicators for July 15, 2013
Oil Price per Barrel: $105.72
Corn Price per Bushel: $5.38
10 Yr US Treasury Bond: 2.56%