Greeks are about to learn the virtues of Bitcoin

6/28/2015 Portland, Oregon – Pop in your mints…

It appears that the Greek government is once again on the brink of an inevitable default on its Euro denominated debt.  This time, however, Greece’s Prime Minister Alexis Tsipras appears determined to take it over the edge, calling for a referendum on the whether or not the Greek people should continue to abide by its creditors’ bailout terms and extend their own misery or to give the proverbial middle finger to their oppressors in the north.

Monetary oppression

Greece, Where the Euro pays tourist prices
Greece, Where the Euro pays tourist prices

We use the term oppressors, for the current state of affairs has been held in place to ensure that Germany maintains a death grip on the Eurozone.  Greece stopped benefiting from being a member of the Eurozone the moment it accepted the yoke of a common currency.  Sure, it was a nice run for the entire Eurozone when times were good, but when times got tough circa 2008 the Euro handlers at the ECB cut rates too slowly, citing a tired “stable currency” bias, and generally struggled to maintain liquidity, which is pretty much “job 1” when one is running a currency regime.

Maybe the Treaty of Lisbon wasn’t such a good idea after all.

What happened next was a catastrophe that is only possible in a Central Banking/Tax Farm disconnect that the Eurozone’s half baked approach to unity has left as the norm.  You see, fellow taxpayer, in the United States of America, we have one Central Bank which runs the tax collection mechanism for the government.  This means that, with localized exceptions, the tax farm’s tactics and the Central Bank’s liquidity functions can work in an awkward harmony.  For those of us who pay Cesar annually via the IRS, this means that in a demented sense we share society’s burdens across 50 states.  To those of us in Oregon, it matters not that the State of California cannot pay its obligations (unless, of course, one is a creditor of the State of California).  It is taken as a given that the Federal Government will bail them out and the Federal Reserve will provide the cash (indirectly) to the Feds in order to do so.  Then, and this is where the magic happens, we all pay for California’s misdeeds via Federal taxes and inflation.

This same scenario was possible in Europe until January 1, 1999 (a day that lives in infamy) and had played out throughout much of modern history.

Not so today.  For today, in Europe, when the government of Greece hits hard times and cannot pay its bills, it has to beg its rich neighbors to the north for Euros, and accept whatever conditions they impose.  What is funny is that neither Greece nor its northern benefactors can actively emit currency in sufficient quantities to ensure their new contract can be paid.

What does it mean?

Which brings us back to the upcoming referendum.  While in our mind it is still even money that there will be a further modification of the Greek bailout and that the Eurozone will carry on as it has for 16 years now, there exists the strong possibility that Greece will “opt out” of the inconvenient currency part of the European Union.  What does it mean?  Beyond getting comfortable with Drachma exchange rates again, nobody knows, nobody has ever opted out of the currency after opting in (Denmark and the UK never got in).

The Greek people have decided that it means they are in big trouble, and they have been lining up at ATMs in order to get their hands on as many Euros as possible before the lights go out.  For Mr. Tsipras, this in turn means he must declare a banking holiday and capital controls, which is a time tested recipe for causing any remaining economic activity to screech to a halt as anyone with a brain and more than a few Euros to their name starts working 24/7 on ways to keep their assets off the government’s confiscation radar.

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

However, as in Cyprus, smart Greeks with a working data connection have a medium at their disposal that may ensure that their assets stay well away from their government: Bitcoin.

The mini-spike in Bitcoin indicates that the Cyprus scenario is playing out again.  If anyone recalls that event, it took the Bitcoin from relative obscurity to trading at around $1,100 before the mania wore off.  Will it happen again?

It is anybody’s guess, but here are some statistics that may help guide your own educated ponderings:

Population of Cyprus: 1.14M, pre banking holiday bitcoin price: $49 (March 2013), post banking holiday Bitcoin spike: $1,124 (October 2013)

Population of Greece: 10.82M, pre banking holiday bitcoin price: $249 (June 2015) , post banking holiday Bitcoin spike:  ???? (January 2016????)

We’ll let you do the math on the hypothetical situation we have planted, but the dynamics of what is occurring in Greece, from a monetary standpoint, are extremely similar to the Cyprus scenario.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 28, 2015

Copper Price per Lb: $2.61
Oil Price per Barrel:  $58.74

Corn Price per Bushel:  $3.85
10 Yr US Treasury Bond:  2.48%
Bitcoin price in US:  $249.46
FED Target Rate:  0.13%
Gold Price Per Ounce:  $1,174

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.5%
Inflation Rate (CPI):   0.4%
Dow Jones Industrial Average:  17,947
M1 Monetary Base:  $2,929,400,000,000

M2 Monetary Base:  $11,970,200,000,000

Our Latest Audio Book and Why the Fed will take Baby Steps

6/6/2015 Portland, Oregon – Pop in your mints…

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

Recently we have been working with some wonderful producers to make many of our volumes here at The Mint available in audio format.  The experience has been great as those with talent in the voice department, such as Robert Fox, who brought our newest audio offering, Bitcoins:  What they are and how to use them, to life.

We imagine the producers get a good chuckle as they read our prose, to which Long-suffering readers of The Mint are accustomed.  We know we do!

Why the Fed will take Baby Steps when it comes to raising rates

The US Economy added 280,000 jobs in May of 2015, which was positive no matter how you slice it.  To our readers, this should come as no surprise, every one of our key indicators indicates an economy that is roaring ahead.  Take the price of oil, which continues to hover near the $60 per barrel mark.  While to some, a lower oil price may signal weakness in demand due to a slowdown in underlying activity, we see it as incredibly positive for US consumers, as oil, which translates into gasoline prices, acts as a quasi tax for many consumers whose demand is relatively inelastic.

We also see the steady prices of copper, around $2.70 per ounce, and corn, clocking in at $3.60 per bushel, as signs that the United States economy is on extremely solid footing looking ahead.  These prices tend to tank when bad omens are on the horizon.

The only negative (depending upon who you are), as reflected in the Jobs report, is that wages have not risen at a healthy pace.  This is great for employers and the Fed, who can maintain their margins on the backs of the working class, but not so good for those employed.

We sense this will change, as the productivity gains of the past several years are not likely to replicate themselves over the next several.  The economy is transitioning to the second half of the chessboard (as Thomas Friedman would say) and it will take a ton of work to get it there.  Once it is there, we will see hyperactivity in the economy, it will be a whirlwind that people will either embrace or run direct the other way from.  To an extent, humankind will benefit, but mother nature will suffer perhaps a fatal blow.

If proletariat wages remain low, then why has the stock market reacted negatively to what would otherwise be considered most excellent news?  We can only guess that equity traders, who at times are clairvoyant to their own detriment, look around at the plethora of good news and smell a Fed rate hike on the horizon.

They are correct, of course.  However, we believe that the Fed learned its lesson back in 2008.  The blind 0.25 per month basis hikes that were implemented to cool off the sizzling post 9/11 economy were blunt and oversized for the sheer breadth of the Fed’s economic sphere of influence.  It is doubtful we will see such blunt and misguided policy from the current Fed.

Instead, we see baby steps, increases of 0.01 basis points emitted over time so that the economy can absorb the shocks in a manageable way, rather than taking them square on the kisser as it did in 2008.

Will it work?  Only time will tell, but for the moment the US economy looks like it’s running full speed ahead, and nobody at the Fed is interested in being the next Ben Bernanke.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 6, 2015

Copper Price per Lb: $2.69
Oil Price per Barrel:  $59.13

Corn Price per Bushel:  $3.60
10 Yr US Treasury Bond:  2.40%
Bitcoin price in US:  $227.55
FED Target Rate:  0.13%
Gold Price Per Ounce:  $1,172

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.5%
Inflation Rate (CPI):   0.1%
Dow Jones Industrial Average:  17,849
M1 Monetary Base:  $3,029,600,000,000

M2 Monetary Base:  $11,853,900,000,000