Monthly Archives: December 2013

Politics, The Mint

On 2013, the year of the Crypto Currency, and Long term Unemployment Benefits Social Programs made Necessary by Debt based Currency

12/28/2013 Portland, Oregon – Pop in your mints…

As 2013 winds down, it must be acknowledged that in the financial and monetary world, the story of the year has been crypto currencies.  Our own awareness that Bitcoin may be something more than a passing fad, our monetary epiphany, if you will, came in March of this year, when we were contacted for assistance in forming a business plan for an exchange.  The episode, while it has yet to be fully capitalized on, caused us to look deeply into Bitcoin.

Our Bitcoin Guide Available at Smashwords and Amazon

What we found was astonishing.  You can read the details in our eBook on the subject but the jest is that it is digital gold.

As the crypto currency gained in price and popularity, many have been the detractors who have dismissed it on the grounds that it is “nothing”, or a “Ponzi scheme.”. What such detractors fail to realize is that it is they that do not comprehend the very nature of money.

Money, in any form, is nothing more than a concept.  All that Bitcoins do is capture this concept, that we refer to as the monetary premium, in its purest form.

JPMorgan Steps Into the Fray

The latest news on the crypto currency front is that JPMorgan is dusting off a patent it filed in 1999 in what is surely a heavy handed effort to exert its primacy in the crypto currency space.  Whether or not they will succeed remains to be seen, but one thing is clear, the digital currency space is divided into those who want to mainstream these currencies and being them under sovereign control, and those who do out.

These types of philosophical divisions are as old as time itself, that of the anarchist and the statist, and the schism will remain, though the thought of anarchists and statist sharing a blockchain is interesting indeed.

Dogecoin

Another development worth following is the rise of the Dogecoin, which is all at once a joke and a serious foray into the crypto currency space.  You see Dogecoin is one of many cryptos that we foresaw coming into existence back in April and is further proof that the fiat currencies of the world are wholly inadequate and act as a restraint on human trade rather than a facilitator of it, which is really their only redeeming quality.

It is a beautiful irony that a fellow Portlander had a hand in creating it.

Why Long Term Unemployment Benefits Must be Extended

Those who have suffered through The Mint for any amount of time are likely aware of our Libertarian and Anarchist philosophical sympathies.  As such, it may come as a surprise that we believe that most Social Safety nets should be maintained.  As such, we think that lawmakers are making a grave error in failing to extend the emergency extensions to the Federal unemployment programs that have recently expired.

It is not that we champion sloth or laziness, as our position may cause some to assume, (though we admit that at times, our own inner-laziness gets the best of us).

Our reasoning behind this position is that poverty, joblessness, the skyrocketing cost of living and the like are largely a result of the current, insane debt based monetary system in which the United States and much of the world have been forced to live for over a century now.

As one looks back on the origins of what has become known as the Social Contract, it must be noted that they occurred in the 1930s after the great depression had ravaged the country.  What the politicians realized was that they had a very big problem on their hands, the workforce was severely “dislocated,” to use today’s terminology.  What they did not realize that the cause of this was the currency act that had been signed back in 1913, when debt, in the form of Federal Reserve Notes, became money.

The mandate for the American populace to use this system amounted to a cosmic shift in everything the American workforce knew about money and how to make it.  The economic rules had been turned on their head, and it would take a very long time for an honest and hard working people to understand that in the new system, the only way to get rich was to severely indebt oneself.

Indeed, today many still do not get it.  However, the debt based currency system must keep growing in order for it to remain viable, meaning that contrary to the beliefs of some, the Federal Government will always run a deficit, or at least strive to, and the largest companies will be the ones who are able to indebt themselves faster than their rivals and convince others to do so.

Using debt as currency changed the entire societal paradigm, making Social Safety nets a necessary part of the landscape, not because people were better off or well cared for as a result of them, rather, because the debt based currency system requires every member of society to participate in order for it to perpetuate itself.  Even those who are unemployed must be given some currency to circulate so that they stay attached to the game.

Otherwise, if too many of them stayed out of the game for too long, as is the case now with youth in much of Europe and even here in America, they may just realize that there is much work to be done outside of the currency system, and that, in fact, the debt based currency system acts as a giant straight jacket on human potential.

If they dwelt upon the above clever metaphor, as you may find yourself doing now, fellow taxpayer, they might understand that Bitcoin, Dogecoin, and other crypto currencies are the latest attempt by humanity to break out of the straight jacket.

If efforts to hinder them, such as JPMorgan’s patent filing, ultimately fail, as we believe they will (at least in practice), the straight jacket of debt based currency will be off and the systems of the nation state which supported them will become relegated to the second class status they so richly deserve.

The very concept of Unemployment is made necessary by debt based currencies, as such, it is right that they should provide Safety nets to catch those who fall out of the workforce.  At this stage, it is inconceivable that the current Congress would cut these benefits, for to do so is to plant but one more nail in the coffin of the current debt based currency system, and to encourage a new and better understanding of money, one that will benefit both humankind and the creation itself.

Stay with us, there is much more to come.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 27, 2013

Copper Price per Lb: $3.35
Oil Price per Barrel:  $100.32

Corn Price per Bushel:  $4.28
10 Yr US Treasury Bond:  3.01%
Mt Gox Bitcoin price in US:  $779.89
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,214

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):   0.0%
Dow Jones Industrial Average:  16,478
M1 Monetary Base:  $2,620,500,000,000

M2 Monetary Base:  $11,050,600,000,000

GSM, Jesus, Poetry

It is Christmas, God created a Child

12/24/2013 Portland, Oregon – Pop in your mints…

It is Christmas, God Created a Child – A Christmas Poem inspired by a revelation given to Bettie Mitchell regarding why God saved humankind in the most unusual manner that we celebrate during Christmas.

 

It is Christmas, God Created a Child

It is Christmas,

a babe in a manger lay,

Why has He come?

The reason of the mystery revealed.

"Adoration of the Shepherds" by Gerard van Honthorst, 1622
“Adoration of the Shepherds” by Gerard van Honthorst, 1622

 

In the beginning,

God created them, man, then woman,

What would they do?

He walked with them in the garden.

 

 

 

Their betrayal,

broke His heart, and He sent them away,

with a gift of clothing,

the first sacrifice, but not the last.

 

 

God left them,

He pondered what went wrong,

and how to make it right again.

He watched them from afar, as a nervous parent.

 

 

 

He watched,

as they conceived and bore children,

outside of the garden,

the results were disastrous, murder, betrayal

 

 

 

He sent a flood,

to destroy them all, to wipe the earth clean,

for the earth was innocent,

He wrestled with the implications, and saw Noah.

 

 

 

He would allow them to live,

Abraham confirmed what he saw in Noah,

Humankind still loved Him,

Yet they were so evil, how could He come close?

 

 

 

Then it came to Him,

Like a muse from below, for in the beginning,

In the garden,

They were perfect, they were His, and they were adults.

 

 

 

He would create a child,

not cursed, as those outside of the garden,

but perfect,

As Adam and Eve were, in the beginning

 

 

 

He inhaled,

and breathed life into the darkness,

it was perfect,

They must see how to live, from cradle to grave, our perfect union

 

 

 

The perfect end,

The only way to blot out, the transgression in the garden,

for in the beginning,

it was good.

 

 

 

The baby arrived,

to teach us how to live, and take the punishment,

once and for all,

to perfect the creation and human hearts.

 

 

 

His will be done,

His Kingdom come, then, now, and forever more,

God created a child,

at Christmas, to make things right.

 

 

God created a child.

Merry Christmas!

Stay tuned and Trust Jesus.

Stay Fresh!

Economics, Monetary Theory

The Monetary Premium is the Fed Alternative

12/24/2013 Portland, Oregon – Pop in your mints…

Here at The Mint we are preparing for a record-breaking year in 2014.  As we look out upon the horizon, we see that the eternal tension between inflation and deflation that is the bane of the insane debt is money monetary system is beginning to subside.  While many at this point are standing on the beach watching the monetary tide recede to an unimaginable extreme, those who watch the weather know that this phenomenon is but the precursor to a tsunami.

Inflation will soon be here, and it is time to adjust revenue targets accordingly.

We make this forecast not out of any sort of clairvoyance, but largely as a hunch.  The Federal Reserve, which just passed its 100th anniversary and appears to be going strong, has no choice but to inflate, as it is their only tool and default bias.

What is changing in 2014 are the Federal Reserve’s tactics.  The FED will spend much of 2014 and beyond fighting inflation as a matter of policy.  Each coming policy, such as the recent $5 Billion/month token (or courtesy) taper that was recently announced, in theory will serve to reduce the monetary base.  What many do not realize is that the monetary base will not shrink as a result for at least three and a half years.

At this point our long-suffering readers are welcome to point out that The Mint was wrong.  We had predicted that the Fed would increase the target rate before tapering, as the target rate was more of a random subsidy while the taper recipients have come to expect it as a form of state banking welfare.  We humbly admit that, given the latest announcement, we were technically wrong.

What the taper reduction is accomplishing, in practice, is a form of marginal stimulus.  The Fed is herding the banks and other lenders out of Treasuries, as holding too many Treasuries in a taper environment is categorically inadvisable.  Some reports have the Fed representing 80-90% of the market for treasuries.  As they scale their participation rate back via the taper, Treasuries will be forced to find a market price, and if what happened to the 7 year after the announcement (a roughly 264 bp drop) is any indication, the market has an opinion of Treasuries that is quite different from those held by the Fed.

The point is that, as the banks have the spigot open at .09%, this money will, at long last, find its way into the hands of credit hungry consumers and businesses.

The giant of the US Economy is waking up.  Part of the activity can be attributed to the Christmas season, however, in early 2014, much of the initial uncertainty surrounding Obamacare will begin to sort itself out, and both businesses and consumers will find themselves both willing and, for the most part, able to do what they do best:  spend.

The Fed has worked tirelessly to shore up the monetary base for five years, and, despite what one may think of Yellen’s dovish bias, she is likely smart enough to realize that the best shot the Fed has now to stimulate the economy is to appear to head to the closet to pick up the liquidity mop.

The Importance of Tribute, and the Fed Alternative

After 100 years, the Federal Reserve has done much.  Their most amazing exploit, one that is lost on most, is that they made the US and much of the world believe that debt was money, and indeed, a great deal of the monetary premium has gravitated to Federal Reserve notes.

Clairvoyant Political Cartoon circa 2012 by Adam Crozier
Clairvoyant Political Cartoon circa 2012 by Adam Crozier

{Editor’s Note:  Click here to see more clairvoyant political cartoons circa 1912, just before the Fed was granted its monopoly on the US money supply}

In the end, what is a Federal Reserve note?  It is a Central Bank liability, which is an irredeemable hot potato that at best represents an indirect claim on wealth but in the end maintains its allure on the part of those forced to transact in it because the US Empire requires that all taxes be reported and paid in them.

Think about it, the hammerlock that any currency has on a citizenry, no matter how putrid its fundamentals may be (and they don’t get much worse than the paradox of debt based money), is that the sovereign requires tribute to be rendered in said currency.

The logical proof is this, were the US Government to require payroll and income tax remittances in Euros or corn bushels, how long is the Federal Reserve Note likely to retain its value and usefulness in trade?

The requirement to use a monetary unit or currency in rendering tribute is a important component of what we call the “monetary premium,” which is loosely defined as the portion of aggregate value that something carries related to its relative function of a transmitter of value.  It is embedded in the supply and demand dynamic of all quasi-monetary instruments, such as gold, silver, and most recently, Bitcoin and other crypto currencies.

While most fix their eyes on credit markets to determine the value of currency in trade, they would do better to observe the Monetary Premium, for it represents the collective hopes and dreams of humankind in the material world, and where it goes, relative riches follow.

For this reason, the Federal Reserve and other Central banks of the world will fight to the last (insert your preferred noun) to retain a share of the monetary premium, for it is their only value proposition in what is a terminally defective, if not purposefully fraudulent, product mix.

In 2014, the Fed will lose its iron grip on the Monetary Premium and take its place amongst currencies relegated to tax remittance and nothing more.

Bitcoin’s resilience is but one item in a long list of evidence that the monetary premium attributed to central bank notes is attaching itself to other indirect claims on wealth and items representing unencumbered claims on wealth.

The economic activity that this tacitly coordinated shift out of Federal Reserve notes will cause in 2014 and beyond will be breathtaking.  They will call it inflation, and it will be the Fed’s death knell.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 24, 2013

Copper Price per Lb: $3.31
Oil Price per Barrel:  $99.21

Corn Price per Bushel:  $4.35
10 Yr US Treasury Bond:  2.98%
Mt Gox Bitcoin price in US:  $698.87
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,205

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):   0.0%
Dow Jones Industrial Average:  16,358
M1 Monetary Base:  $2,583,700,000,000

M2 Monetary Base:  $11,024,400,000,000

Bitcoins, Jesus

What is Bitcoin?

12/11/2013 Portland, Oregon – Pop in your mints…

We are settling in for a long, productive winter here at The Mint.  While there is a whirlwind of activity outside, the key to maintaining one’s sanity is to maintain an internal balance, no matter what happens.

The best way we have found to do this is to maintain a state of constant rest, the eternal Sabbath, if you will, together with the creator in the very core of our being.  Rather than experiencing God in one’s mind or even heart, true peace is found when you experience Him in the abdominal region, often referred to as the soul.

It was in the midst of this rest today that we had a profound revelation.  While the revelation was centered on the present Bitcoin phenomenon, it has implications far beyond the Bitcoin, and, for those of us who are paying attention, may reveal something of the nature of the divine as well as that of humankind.

Longsuffering readers of The Mint know that our musings on Monetary Theory often lead us to dabble in Eschatology, the study of what are commonly called the end times in world religions that hold apocalyptic worldviews.  Today’s revelation, as you will see, is a further dabble into this inherently speculative subject.

Before we dive into today’s revelation, we must provide a bit of context with regards to Bitcoin.

Bitcoin, an Unregulated Ponzi Scheme

We have watched the rise of the Bitcoin/USD ratio, which now stands near $909, ever since April.  In this short time frame, we have observed that every time there is a surge in the Bitcoin price, it attracts an increasing amount of attention, both positive and negative.  As it is with most things in life, the negative opinions are played at a higher volume.  In the case of Bitcoin, those who hold it in disdain throw around two flavors of arguments:

1.  It is a Ponzi scheme and, 2.  There is no regulation of it.

The detractors are correct on both counts, however, what they fail to recognize is that the same is true for fiat currencies, equities, and all other indirect claims on wealth.

“But what about the FED, SEC, the Government, etc.?  Don’t they regulate currencies and equities?” come the shrill voices from the public.

Again, this rebuttal is correct if one takes the narrow view of both of the unregulated Ponzi schemes in question.  The Federal Reserve does attempt to regulate its Ponzi scheme within the framework of the IRS and Banking system, and the SEC attempts to regulate various Ponzi schemes within its purview on various stock exchanges.

However, the unregulated universe in both equities and currencies is much larger than most realize, and Bitcoin’s apparent lack of regulation stems from the fact that it is a mere four years in existence.  Given time, sovereign governments and Bitcoin exchanges will begin to erect a regulatory framework for the Bitcoins that pass amongst their citizens or participants.  Indeed, these efforts are already underway.

The narrow analysis of Bitcoin that its critics lean on is that Bitcoin is either an equity or a currency.  In this faulty analysis, they point to the fact that as an equity or currency, there is nothing immediately recognizable within its framework that would lend it valuable.  Therefore, they state smugly, Bitcoin is a Ponzi scheme to be avoided and derided, case closed.

Yet supposedly educated, computer literate persons are willing to pay $900 USD per Bitcoin despite the risks.  What gives?  What the failed analyses of Bitcoin do not recognize is that Bitcoin is neither a currency or an equity, but rather the purest reflection to date of something that is pursued by nearly every person on the planet the world over on a daily basis in some form or another.

It may come as a shock to you, fellow taxpayer, and indeed much of humankind, that a great majority of humanity pursues what Bitcoin represents without even knowing how to articulate what they are pursuing.

While a portion of Bitcoin’s value stems from its functionality as an open source international money transfer channel, we believe that most of Bitcoin’s value stems from the fact that it is the purest reflection of what we call the Monetary Premium.  In an academic sense, the Monetary Premium is the relative increased value attached to an item that is attributable to a specific, ephemeral part of the item’s value that is related to its function, no matter how minimal it may be, as money.

As the common person’s view of money is generally limited to fiat currencies, it is understandable that most would not know what makes a fiat currency act as money.  It then follows that Bitcoin, which is the purest form of the Monetary Premium, would be widely misunderstood by most of humankind.

Bitcoin, The Monetary Premium, and Eschatology: The Revelation

With the lengthy but essential matter of defining what Bitcoin is out of the way, the revelation that follows should now be clear.

The revelation is best presented in the following bullet points:

1.  Bitcoin may be the purest reflection of the Monetary Premium known to humankind.

2.  The Monetary Premium is manmade and cannot be seen.

3.  Pursuit of the Monetary Premium in some shape or form is what a majority of humans dedicate a large portion of their daily activities towards through the acts of producing, consuming, and investing.

4.  When God warns of the choice between God and money, as He does in Matthew 6:24:

24  “No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can’t serve both God and Mammon.”

The Mammon (money) being referred to is not an inanimate object, but rather the Monetary Premium.

5.  The Ultimate choice between full, dedicated worship to the invisible God and continuing to pursue the invisible manmade Monetary Premium will be presented to those who are still present on earth with the ultimatum presented to mankind described in Revelation chapter 13:16-18 (for those who are familiar with eschatology, this last statement makes it clear that we hold a pre tribulation rapture view):

16 He causes all, the small and the great, the rich and the poor, and the free and the slave, to be given marks on their right hands, or on their foreheads; 17 and that no one would be able to buy or to sell, unless he has that mark, the name of the beast or the number of his name. 18 Here is wisdom. He who has understanding, let him calculate the number of the beast, for it is the number of a man. His number is six hundred sixty-six.

Click the image above to read more on Eschatology and Money
Click the image above to read more on Eschatology and Money

What does it all mean?

The Bitcoin is not the Mark of the Beast or any such thing.  However, Bitcoin’s unique reflection of the Monetary Premium is illustrative for purposes of understanding money in Biblical contexts where the worship of money is juxtaposed with the worship of God, as it is in Matthew 6:24, and the implications for such an understanding within the context of eschatological studies, specifically when pondering the events described in Revelation chapter 13.

Beyond the monetary realm, Trusting Jesus today is the single most important step that one can take in the search for inner peace.  For chasing the fickle monetary premium around will never allow for rest, peace with God can be found in Jesus.  He is closer than you think, waiting to commune with every one of us in the eternal Sabbath.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 11, 2013

Copper Price per Lb: $3.28
Oil Price per Barrel:  $97.37

Corn Price per Bushel:  $4.31
10 Yr US Treasury Bond:  2.84%
Mt Gox Bitcoin price in US:  $900.50
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,252

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  15,844
M1 Monetary Base:  $2,658,600,000,000

M2 Monetary Base:  $10,900,400,000,000

Bitcoins

Bitcoins storm China as the Last Bear Standing throws in the towel

12/3/2013 Portland, Oregon – Pop in your mints…

As the most recent arctic air blast rushes across the Northwest, the economies of the world appear to be at a crossroads.  The coming three months are critical in determining humanity’s path forward.  Will we cower with fear or step bolding forward with faith and courage into the unknown?

The past five years have taken a toll on the psyche of the financial markets and those who participate in them.  On one hand, the cards have been stacked for raging inflation to take hold and decimate the debt based currencies the world has come to rely on, on the other, this obvious outcome has been stayed because 1) it is obvious, meaning bets are disproportionately placed on the side of inflation and 2) in a debt based currency system, new currency creation by definition means new debt creation, as debt obligations have rolled over into lower interest obligations over the past five years, a heavy undercurrent of deflation has been running against the inflationary pressures.

It is becoming clear that the ACA is having a more dramatic impact on the US landscape than anticipated.  The good news is that after a few months, most consumers fates will have been sealed, for better or worse, and many will be able to carry on.  By extension, many companies will be ready to deploy the capital that they have accumulated over the past several years through cost cutting and debt restructuring (for lack of a better term).  Again, the table is set for inflation, will the scenario play out?

Hugh Hendry seems to think so, ceding the obvious case that inflation in asset prices is to be a part of the investment landscape for the foreseeable future.  In his December 2013 Eclectica investment letter, which can be read over at Zero Hedge via the link below, he appears to be throwing in the towel on the bear case.  In doing so, he makes a revealing statement on the current state of equity markets:

“…I have had to put aside qualitative analysis and be in this trending market.” as “…Playing it safe may be the greatest risk of all.”

Read the entire letter here via Zero Hedge: Hugh Hendry Throws In The Bearish Towel: His Full Must-Read Letter

Ultimately, the case for inflation or deflation rests with the consumers of the world.  Will they cower in fear or step out boldly in faith and courage?  We believe the next three months will yield the answer to that question, and that they will step out boldly.

What’s with the Bitcoin Roller Coaster?

Bitcoins, which continue to garner attention on numerous planes, as a novelty, a speculative vehicle, and the answer to creating a worldwide currency and payment system, has seen its price swing from $550 to $1,200 and land around $760 at this writing.

The price swings are normal for such a small, relatively illiquid market.  Any large scale adoption event, which in the final analysis, is the driver of Bitcoins’ price at this stage, triggers a sell-off by those who have learned to speculate in the crypto currency.

The latest large scale adoption event in question this past week has been the increased interest in the currency by the Chinese.

In a recent interview, Bobby Lee outlined the reasons he believes that Bitcoin has garnered considerable interest in China over the last several weeks.  Lee has a front row seat to this phenomena from his post at BTC China and cites two main reasons that the Chinese have taken a keen interest in the crypto currency.

First, the Chinese are, on whole, extremely gifted in math and sciences, which makes the concept of a digital currency fit into the cultural nomenclature more readily.  As simply understanding what Bitcoin is may be the biggest hurdle to adopting and using it, the Chinese have a cultural leg up on many other cultures.

Second, and perhaps more importantly, is that the Chinese are net savers.  As such, they are constantly seeking out investments and places to park their savings for a rainy day.  Bitcoins appear to offer a strange form of asset protection, despite the breathtaking volatility in their price, as they are limited in the number that will be created by an algorithm.

Finally, one must remember that China does still impose capital controls on its citizens.  Bitcoin, while not its chief aim, gives the Chinese investor a handy tool by which to move his or her capital out of the country with their mobile phone or PC.  Something that simply cannot be accomplished with a bank account.

The Chinese, like the Cypriots and Argentines, are finding their culturally specific use for the world’s most popular crypto currency, and the price action, which has ranged from $1,200 USD to $700 during the past 72 hours, reflects just how volatile a freely traded, finite global currency can be.

Bitcoins are a rough equivalent to gold in the digital realm, and, as Lee notes, volatility is not going away any time soon.  Yet if one can see past the price movements to understand the value in what is essentially the world’s largest collective math problem, one will see that Bitcoins at any price serve a very important purpose:  They capture the monetary premium in action.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 7, 2013

Copper Price per Lb: $3.21
Oil Price per Barrel: $97.65
Corn Price per Bushel: $4.24
10 Yr US Treasury Bond: 2.88%
Mt Gox Bitcoin price in US: $765.00
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,231
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 16,020
M1 Monetary Base: $2,618,600,000,000
M2 Monetary Base: $10,934,500,000,000

Bitcoins, Economics, Monetary Theory, Of Money and Metals

It is Winter, do you know what and where your Bitcoins are?

12/3/2013 Portland, Oregon – Pop in your mints…

“It is winter, a time to pause, the driveway is half shoveled out, but I lay down the shovel, and I pause to enjoy this moment, after all, this is my first heart attack.”

A Poem recited by Red Green during The Winter of our Discount Tent show segment

For those who were fortunate enough to see Red Green in his prime, circa 1991, the words “it is winter” immediately bring a sense of comic anticipation to mind.  Really, the mere sound of the man’s voice will bring a smile to your face if not cause one to break out in laughter.

Red Green, a Canadian, brought a unique brand of humor to the late night airwaves.  While there is really nothing to compare it to, if one were to imagine a cross between Al Bundy (Married with Children) and Crocodile Dundee in Canada doing a variety show against the backdrop of an ongoing storyline in his men’s lodge, you would be in the ballpark.

Yet as the poem above hints at, you never quite knew what would come out of Red’s mouth, but his dry delivery and lighthearted machismo made nearly anything the man said pass for hilarious. (see the poem read live by Red below and see for yourself).

It is winter, and while any number of narratives continue to fill the financial landscape, they all have one thing in common:  Inflation is here to stay and the Federal Reserve and it cohorts around the world are not about to do anything stupid, like raise rates or end bond buying programs, at this stage of the game.  From their standpoint, risks are on the side of deflation, no matter what your grocery bill is.

In the context of this stance by the caretakers of the world’s currencies, a developer known as Satoshi Nakamoto launched the Bitcoin Genesis block back in 2009, like a self replicating message in a bottle to the world that reads “try using this as money.”

Today, as we near the end of 2013, it is becoming clear that the message is reaching quite a few individuals, and that they are taking action.  The message came to us in March of 2012, when the Bitcoin/USD ratio hovered around $5-$16, and it took us until March of 2013, when the ratio was near $150 to act upon it.  The ratio now sits at around $1,100 and has garnered so much attention that a US Senate committee called a hearing in a feeble attempt to understand what it is and why it is valuable.

As anyone who has followed such hearings can attest, they rarely, if ever, shed light on the subject being discussed, and it was clear in watching that the Senators who attended as well as their expert witnesses have no idea what Bitcoins truly are.

Misinformation regarding Bitcoins abounds, indeed, a discussion we have been following in one of our Treasury groups has drug on for weeks with the participants vacillating from the stance that Bitcoins are a good idea and viable fiat alternative to them being a Ponzi scheme.  Our take is that those who are obviously confused are not hindered in their understanding of what Bitcoins are as much as they are hindered by their failure to understand what money is in the first place {Editor’s Note:  If you count yourself among the confused, stay with us for a spell or pick up a copy of one of the following publications:  What is Money, Of Money and Metals, or Bitcoins: What they are and how to use them}

Our take here at The Mint is twofold.  First, Bitcoins are clearly a Ponzi scheme, however, they are a self-limiting Ponzi scheme with no clear beneficiary, and in these respects are superior to other widely accepted Ponzi schemes such as equities and fiat currencies, which share similar characteristics to that of Bitcoin in terms of representing and indirect claim on wealth.

Second, and more importantly at the moment, Bitcoins are the gold standard with regards to digital currencies by virtue of being the first and most widely accepted.  All other digital currencies to come are practically forced to use the Bitcoin market as a point of reference in the same way the gold market looks to comex prices.

During the past few days, a Welshman named James Howells has been in the news because he tossed out a hard drive containing approximately 7,500 Bitcoins.  The same article mentions a man named Stefan Thomas who allegedly lost 7,000 Bitcoins according to Der Spiegel.  Indeed, we have a friend who told us he had wiped “thousands” of Bitcoins off of his hard drive.

While these types of stories may seem to offer a reason not to dabble in Bitcoins, we see them as yet another reason that the Bitcoin/USD ratio will continue to go vertical for the foreseeable future, as there will only be 21 million Bitcoins ever created, and, if the system is as tight as it appears to be, neither Mr. Howells’, Mr. Thomas’, nor our friend’s lost Bitcoins will ever be circulated again, making the remaining Bitcoins that are tradable all the more scarce and, at the moment, valuable.

A bit of free advice from The Mint.  While it seems counterintuitive, we encourage you to store your wallet online at a service such as blockchain.info to avoid the fate of the above mentioned individuals.  This goes without saying, but choose an extremely complex password.

Finally, if you are convinced that Bitcoins are a Ponzi scheme, remember that so are equities and fiat currencies, the only difference is that Bitcoins are still in an extremely early stage.  Think of it as buying Apple or Microsoft in the 80s, only better, as Bitcoins represent a confluence of technology and commerce that has just begun the search for its value.

It is winter, do you know where your Bitcoins are?

Until next time, keep your stick on the ice!

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 3, 2013

Copper Price per Lb: $3.16
Oil Price per Barrel:  $97.19
Corn Price per Bushel:  $4.22
10 Yr US Treasury Bond:  2.78%
Mt Gox Bitcoin price in US:  $1,158
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,224
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  15,915
M1 Monetary Base:  $2,563,700,000,000
M2 Monetary Base:  $10,942,300,000,000