Portland, Oregon, United States
David Mint has a Bachelors degree in Business Administration from Colorado State University and an MBA from the Universitat de Barcelona, Spain. He has over 15 years of experience in Accounting, Finance, Treasury, and Information Systems Consulting positions both in the United States and Spain.
A familiar sight in Portland on a Saturday afternoon. Students, friends, families, empty nesters, foreigners, the among the things that many of them have in common are the need for a good cup of coffee, companionship, ambiance, and maybe even a little peace and quiet. As winter gives way to spring, they will grab their cups and populate the cafe patios and occupy the parks to soak in the short season of natural vitamin D, otherwise known as sunshine, here in our fine city.
Coffee drinking is called by some a cheap luxury. Even with the increasing threat of higher coffee bean prices being passed on to coffee house patrons, it is still a relatively cheap way to pass the time. If you are truly concerned about rising coffee prices, you can effectively hedge against the rising cost of your caffeine addiction by placing a portion of your portfolio in an Exchange Traded Fund like the iPath Dow Jones-UBS Coffee ETN, whose stick ticker symbol JO must have been cleverly devised by some brilliant marketing mind.
Fortunate Patrons at a Portland Cafe
A familiar sight in Portland on a Saturday afternoon. Students, friends, families, empty nesters, foreigners, the among the things that many of them have in common are the need for a good cup of coffee, companionship, ambiance, and maybe even a little peace and quiet. As winter gives way to spring, they will grab their cups and populate the cafe patios and occupy the parks to soak in the short season of natural vitamin D, otherwise known as sunshine, here in our fine city.
Coffee drinking is called by some a cheap luxury. Even with the increasing threat of higher coffee bean prices being passed on to coffee house patrons, it is still a relatively cheap way to pass the time. If you are truly concerned about rising coffee prices, you can effectively hedge against the rising cost of your caffeine addiction by placing a portion of your portfolio in an Exchange Traded Fund like the iPath Dow Jones-UBS Coffee ETN, whose stick ticker symbol JO must have been cleverly devised by some brilliant marketing mind.
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For years, it had been accepted that Starbucks’ wild success had cemented Seattle’s place as the coffee capital of the world. If the average coffee drinker were to partake of his or her 3.1 cups per day in Seattle, they were considered privileged.
As Starbucks, which now pours 1 out of every 100 cups of coffee served on the planet each day, struggles to find a place to expand in the northwest that is not within five blocks of one of their existing locations, coffee connoisseurs are quietly speaking of Portland as the new Mecca of coffee culture. As Starbucks continues to go global, local Portland roasters like Stumptown continue to develop what just may be the best coffee in the world.
So wrap your hands around a cup of locally brewed coffee and know that not only will you make it through another seemingly endless winter, you are one of the privileged 500,000 to live in what will soon be recognized as the coffee capital of the world. After athletic shoes and coffee, could the movie and tech industries be next to defect to Portlandia?
The 511 Federal Building located at 511 NW Broadway is eerily one of the more impressive examples of turn of the Century Architecture that we have in Portland. It is also an example of how far the Federal Government feels that it must go to protect itself after the attacks of September 11th.
The building is currently home to the U.S. Citizenship and Immigration Services Offices. This one time Post Office is located at what may be considered the gateway between the upscale Pearl District and the less attractive Old Town Chinatown neighborhood. It stands as a testament to the dichotomy of its surroundings, altogether grisly and glorious.
Built during World War I, as many of the older Federal Buildings in Portland were, its adornments of Eagles, buttressed columns, and men and women dressed to compete in the ancient Greek version of the Olympics are examples of an architectural style called Neo-Classical or Classical Revival. The 511 Federal Building was deservedly placed on the National Register of Historic Places in 1979.
The 511 Federal Building located at 511 NW Broadway is eerily one of the more impressive examples of turn of the Century Architecture that we have in Portland. It is also an example of how far the Federal Government feels that it must go to protect itself after the attacks of September 11th.
The building is currently home to the U.S. Citizenship and Immigration Services Offices. This one time Post Office is located at what may be considered the gateway between the upscale Pearl District and the less attractive Old Town Chinatown neighborhood. It stands as a testament to the dichotomy of its surroundings, altogether grisly and glorious.
Built during World War I, as many of the older Federal Buildings in Portland were, its adornments of Eagles, buttressed columns, and men and women dressed to compete in the ancient Greek version of the Olympics are examples of an architectural style called Neo-Classical or Classical Revival. The 511 Federal Building was deservedly placed on the National Register of Historic Places in 1979.
The 511 Federal Building in Portland, Oregon
This scene outside of the 511 stands in stark contrast to the open arms of Bud Clark Commons which is currently being constructed across Broadway. The building’s once proud architecture is obscured by additional adornments of security cameras, chain link fences, and mirrored windows. These security enhancements apparently keep the Federal Employees safe from the outside world and to keep the world safe from any unfortunate immigrants who may be awaiting deportation inside one of the building’s three holding cells.
What was once a symbol of a rising Empire, the 511 Federal Building circa 2011 appears now as a symbol of an Empire in decline. More precisely, it looks like a prison. This image was further confirmed on Tuesday with the presence of two Geo Transport buses. Geo Transport is in the business of prisoner transportation and these buses are often used to transport immigrants who do not have legal status to the Federal Immigration and Customs Enforcement Center in Tacoma, Washington.
Fortunately, this once proud building will get a new lease on life. While the City of Portland begins to squabble about where to move the U.S. Citizenship and Immigration Service Offices, waiting in the wings to occupy the 511 is the Pacific Northwest College of Art. The College of Art will enter the 511 like a warm breeze on a cool day, and the presence of hundreds of art students alone will go a long way towards restoring this treasure to its previous glory.
Nearly 20 years ago, Jeff Foxworthy topped the comedy charts when he released his now famous album “You Might be a Redneck if…” While we have no illusions that today’s musings will attain the fame that Mr. Foxworthy’s have, today’s Mint is an entirely accidental homage to Mr. Foxworthy in which we present a series of one-liners which we hope will provide an invaluable service to the American public.
Namely, we aim to provide the public with comical assistance in helping one properly identify whether or not they are a Socialist. It is a handy, self convicting exercise which is meant to help all of us to identify and perhaps deal with our latent Socialist tendencies.
In other words, you may laugh heartily, knowing that the laughter, like the accumulated loss of capital in a Socialist society, is at the expense of the proletariat. Enjoy:
You might be a Socialist if… (with apologies to Mr. Foxworthy):
You default to the government when asked who should solve a social problem
You get a measure of self righteous gratification when passing through a body scanner
You believe in economic equality
You have attempted to define economic equality
You make special exceptions for yourself when defining your concept of economic equality
You still believe in economic equality after attempting to define it
You are a member of a labor union
You wish you were a member of a labor union
You wish you were an unemployed member of a labor union
You believe that tariffs save jobs
You believe that limitations on immigration save jobs
You believe that taxes create jobs
You believe that regulations create jobs
You vote for tax increases
You vote for a representative government which asserts authority over those who are not permitted to vote
You are entirely comfortable living in a world where the “end justifies the means”
You regularly give unsolicited advice to strangers
You get angry when such advice is ignored
You use a central bank issued currency as a savings instrument
You have attempted to describe the economic benefit of homogenized interest rates
You prefer a higher national GDP to a higher personal income
You believe that certain projects are so big that only the government is qualified to do them
You can say “government efficiency” with a straight face
You have ever defended TARP on the grounds that a nebulous “greater disaster” was averted
You’ve referred to “Cash for Clunkers” as good for the environment
You’ve referred to “Cash for Clunkers” as good for the economy
You’ve referred to war as good for the economy
You’ve referred to a natural disaster as good for the economy
You believe that there is a universally fair price for certain goods or services
You believe that said universally fair price should be a dictated by the government
You would feel guilty paying less than said universally fair price
You think you are saving money because an expense is tax deductible
You have uttered the words “necessary evil” as an explanation for a moral contradiction
You have uttered the words “the lesser of two evils” to explain an unpopular decision
You use the words “quality” and “equality” interchangeably
And finally, the last one we can think of for today, which, as you can see, if far from qualifying as a punch line:
Your list of inalienable rights extends beyond or excludes life, liberty, and property
If you have said “that’s me” to one or more of the above, you might be a socialist. If you find that you truly are a Socialist, take comfort in the fact that you form part of a large and vocal majority. The most logical response, if this is the case, is to fully embrace one’s socialist identity and to leave behind the inherent contradictions of calling oneself a “liberal” or “conservative.”
There is absolutely no shame in identifying as a Socialist. As Polonius urged his son so we urge you, fellow taxpayer, “To thine own self be true.”
However, if it disturbs you to have identified with any of the above statements, please continue to peruse The Mint, as all of us can aspire towards embracing True Capitalism, and move towards creating a future full of the blessings of real freedom for our children.
This past weekend our Pastor, Fred Cason of True Life Fellowship in Beaverton, delivered a profound message. As are many great metaphors in the modern west, it was came disguised as a vehicle metaphor.
What’s up with all the guard rails?
As each of us careen down the highways and canyons in life, from time to time we will observe to our left or right, a man made construction which, at a glance, appears to have little practical purpose.
In fact, it seems like a hindrance, an unnecessary distraction or limitation on an otherwise scenic drive. If one dwells on it too long, its very existence may become quite bothersome indeed.
Yet guard rails serve an extremely important purpose. For, if well placed, they can save a life. They have the power to turn what would have been a deadly accident into a mere fender bender. Fender benders are unpleasant, but they are much easier to repair and recover from than a fatality.
In some cases, guard rails are erected by those who have planned and built the road. In other cases, they have been erected only after those whom have traveled down the road numerous times came to a tacit or explicit agreement as to where they are necessary. While there may have been discussion as to exactly where to place them, their necessity was, at one point, obvious to all.
Regardless of how they got there, guardrails are set at places where the yellow painted lines were simply not enough to keep people from running off the road.
How are the guard rails in your life?
For guard rails which are carefully thought out are placed locations along the road where, were the driver to suffer a brief lapse in judgment or some sort of mechanical failure, the consequences for running off the road are the gravest. Conversely, at places in the road where no such danger exists, it would be foolish to erect guard rails for the sake of erecting them.
A curiosity about guard rails, especially along the most scenic and well-traveled roads, is that they are often placed where the view is the best, which can make their existence extremely frustrating.
Yet they are there precisely because the very places where the view is spectacular are often where there is an extreme correlation between the level of distraction of the driver and the catastrophic consequences of running off the road into an abyss.
Do you see where this is going?
It is probably clear to most that a peculiar set of rules, commonly known as religion, determines the placement of the guard rails (the rules themselves in this metaphor) in one’s life.
The road is one’s life, their chosen path, the road where they have either intentionally traveled or via some obligatory detour, find themselves on.
Some roads are more dangerous than others, and require a careful placement of rules along the way in order to avoid hurtling one’s life towards disaster. In this lies the benefit of religion.
Yet no one, save perhaps the guard rail contractor, chooses their road based solely on the guard rails placed along the way.
So, then, it is clear that the guard rail is not an end in and of itself. In fact, when one is in control, focused on the road, and their vehicle is in good operating condition, they may not even notice the guard rails in their midst.
Guard rails will never provide one with focus or control of their vehicle, as rules will never provide one with focus or control of their life. Only the Living God can provide this.
Ironically, the guardrail serves absolutely no purpose for the coherent, sober, focused driver. It is the driver who, from time to time, gets distracted or willing takes their hands off the wheel (read, everyone on the planet) which to benefit the most from the guard rails’ (rules’) existence.
A final note, if you happen to find yourself on a road without any guard rails, it may be time to look for a different road.
Yesterday we took our fellow taxpayers for a detour which is leading us into what, for some, may be uncharted waters. These waters are commonly known as the Bible, or the Word of God. While seemingly unrelated to the discipline of economics and specifically monetary theory, it is important to gain an understanding of the Bible for two reasons:
It is the most widely read book in the history of the world to date
In its labyrinth of narratives, poetry, song, and prophecy, it provides the only coherent framework within which humans, who have been given the gift of reasoning, can understand the world in which they inhabit and what they are to do with their time here.
If only for these reasons alone, it is of the utmost importance that the Bible be understood if we are to gain any meaningful understanding of what is called the “economy” and our specific area of interest, monetary theory, as these disciplines make absolutely no sense without an understanding of the framework in which they operate.
Regardless of one’s preconceived judgments about the Bible’s ability to provide this framework, it is important to understand that a number of one’s fellow humans believe that the Bible provides this framework. With this given, it can be inferred that this belief is, in whole or in part, is driving their choice of actions.
A Bible Handwritten in Latin in Malmesbury Abbey, Wilshire, England. Transcribed in Belgium in the year 1407
However, if you remain unconvinced or simply do not have time or motivation to undertake a careful study of the Bible, we will relate what we understand, it is in no way a substitute for one’s personal and corporate study of the Bible, but we appreciate your confidence.
The lessons of the Bible are important and we reiterate, without an understanding of the framework of the Bible, nothing that is going to take place in the future will make sense but will appear to simply occur at random:
Truly we tell you, the events to come have been foretold. The Kingdom of God is advancing.
What does it have to do with money? Why is a proper understanding of what we use as money important?
We are glad you asked, allow us to explain:
The current monetary system which most of the Western world uses to each day is built on debt. Debt, at its essence, is built a faith that persons will perform certain actions in the future. Performance of these actions from the debtor’s perspective is homogenized as being able to order delivery of the debts of others to the creditor in order to satisfy the debt.
Wrapped up in a narrative which will take under two minutes to read, the final consequences of using debt as money have never been more clearly stated. Please give it a read, it is important.
We have been busy here at The Mint publishing our first of what we hope will be many E-books. To the surprise of many, it has nothing to do with Monetary Theory. For Monetary Theory to have any coherence, a proper understanding of the world must first be established. This E-Book is a humble attempt to begin this process for our dear fellow taxpayers.
Regardless of whether you believe that the Words of the Bible are true or if you are of the opinion that the Bible has nothing of relevance to say to the modern world, it is extremely urgent that you examine the Bible soon for it will provide the only coherent explanation for the events which are unfolding.
This particular E book deals with teaching the Bible, specifically the book of the prophet Hosea. Fellow taxpayers who have an interest in the Bible are encouraged to take a peek at it here. The book presents a method which is entirely different than any other teaching method which we have encountered, for it permits the Word of God to speak for itself, free of man’s distorted and too often self interested interpretations.
A book which teaches one to study the Bible may not be what one would expect from The Mint. On the other hand, given that the Bible is our only hope of grasping a coherent, consistent truth from which all other events can be understood and put into perspective, there could perhaps be no more urgent or noble undertaking to which we must dedicate our lives
In the Bible, God did 10 amazing things:
He gave us a concrete understanding of our origins in a way so simple that a child can understand it.
He gave us a historical narrative that can be archeologically corroborated should we have doubts that the events actually took place.
He gave us 10 rules to live by which, if observed, would eradicate every social and many physical and mental ailments.
He provided a number of other tips and suggestions which would further improve the general welfare.
He gave us a brief summary so that we would not have to memorize the rules, tips, and suggestions in order to observe them.
He gave us the choice whether to live by the rules and suggestions or not.
He sent His Son to accept all of the natural consequences for failing to observe the rules and suggestions and in the process He vanquished the inevitability of death.
He gave examples of every problem imaginable with regards to family and other human relationships, and then some.
He laid down the division between good and evil which had nothing to do with observed behavior and everything to do with intent.
He gave us a promise the He would physically return to dwell with us.
It should come as no surprise, then, that a correct understanding of the present state of the economy and of cause and effect can only be achieved by first understanding the essence of life, the world in which we live, and most importantly, who is ultimately in charge.
There is a need for understanding that can only be found in the Bible. While reading the Bible is a good way to start, listening to the spoken word of the Bible in the presence of others is a much better way to gain the aforementioned understanding of life itself.
This E Book is an attempt to open the Word of God to be understood by many. There is a deep need for people to take the hard assignments that are given to them as they gain this aforementioned understanding for themselves.
Patrick Young, an investment advisor, gives a sobering account of the current state of the Greek economy and the future of the EU. In short, Greece will default within 8 weeks and it will be chaotic.
We are not sure what is more shocking, Mr Young’s assessment or the footage of the riots in Athens running in the background. About 5 minutes and well worth a view:
The fruits of Central Planning, via the socialized monetary and credit system which is currently managed by the World’s Central Banks, are beginning to ripen, and the whole world is witnessing the latest social harvest of this doomed philosophy in Greece.
“Tensions between Athens and other European capitals have hit new highs this week. While the European Union is officially still warning of the far-reaching dangers of a disorderly default by Greece, some politicians have in recent weeks downplayed the effects of such an event.
… While the Parliament in Athens faced down violent protests over the weekend to approve a far-reaching new austerity package, the cabinet of ministers remained locked in talks Tuesday evening over how to save an extra euro325 million demanded last week by the eurozone.”
It seems that the Greeks are having trouble accepting the well intended budgetary advice which their credit “counselors” (read overlords) in the north are so generously imposing upon them. Now that the Greeks appear to be balking at their inevitable slide towards a vassal state, the folks in the north are getting restless as their banking syndicates have quite a bit riding on the events unfolding on the shores of the Aegean Sea.
Will the Hellenic Republic submit?
On the other side of the Atlantic, it appears that the similarly indebted US government will escape the fate of externally imposed austerity which Greece is now suffering. The Federal Reserve has made it clear that it will print money to monetize the deficits of the US Government for as long as necessary, and the Republican budget hawks have had their wings clipped with their latest capitulation on the extension of the Payroll tax holiday.
These two events, taken together, indicate that the US intends to go for broke and fully embrace the Keynesian dream of printing its way to full employment.
The obvious solution, then, would be for the Greeks to reject the Euro in favor of not the Drachma, but the infinitely flexible US Dollar.
Unfortunately for the US, and the Greeks, should they choose to join them, the Keynesian dream is quickly becoming a nightmare as the folly of central economic planning begins to express itself in the form of runaway inflation. The policy tools used in the past have succeeded only in stripping the earth and its people of the ability to make productive economic decisions. What now awaits the world is the inevitable adjustment which is likely to lead to a lower standard of living.
At this prospect, Athns burned on Sunday night, and it appears that the last bastions of austerity in the US capital threw in the towel and, for the moment, Washington is not burning.
The tragedy unfolding in Europe is a painful reminder that the power to mint money was never meant to be given, by edict, to an elect few.
Will the rest of the world learn this valuable lesson before it is too late?
Nigel Farage, again telling it like it is. Below he calls out the members of the EU for systematically destroying Greece by forcing them to stay in the Euro. With a puppet government and ceaseless demands for austerity, Greece’s economy has contracted for 5 straight years and is currently falling off a cliff.
It is refreshing to hear Farage call out the EU, and it is painfully obvious that his pleas fall on deaf ears as his Eurocrat colleagues simply mill about. The EU Commission would be a funny joke if their idiocy didn’t cause such widespread suffering. From zerohedge.com:
An interesting piece on Zerohedge.com which confirms what many have long suspected: LIBOR is not exactly an objective measure of inter bank lending rates.
It’s like finding out professional wrestling isn’t real, does it really matter?
The answer, of course, is that it does not matter…until it does.
Check out this great goal from Erlan Mealla, striker for Nacional Potosí:
Nacional beat The Strongest 1-0 thanks to Mealla’s “scorpion kick.” The kick was almost as good as the traditional music which can be heard in the background!
More on the missing MF GLOBAL client funds, why justice will never be served, and why our current monetary system is at best an illusion and, more accurately, a fraud.
The same, crystal clear money trails which are used to incriminate alleged terrorists, identity thieves, tax evaders, and drug runners are somehow blurred when members of the political and financial elite are involved in the theft.
It is also clear that numbers on a bank or brokerage statement are subject to “vaporization” without cause, justice, or recourse.
Rumors today that Greece would default on its sovereign debt were received with relative calm by the bond markets. Now that Greece’s public debt is approaching 150% of GDP and is forecast to increase by at least 10%, even the most optimistic analysts, namely S&P, are coming to one inescapable conclusion:
Greece is in technical default.
This is news to no one in the world of finance. The numbers in Greece haven’t penciled out for at least three years and have shown absolutely no sign of improvement. Anyone with significant exposure to Greece has either sold it or obtained some sort of guarantee from the ECB and/or IMF that they will be made whole on their exposure.
Hence, the lack of panic in the markets.
For financial market participants, the guarantee of the ECB works as a hallucinogen. Traditional analysis no longer applies once an infinitely solvent guarantor signs on to back the debt of a weak partner. The weak partner is no longer seen as insolvent, but rather, devoid of credit risk.
However, 2012 is shaping up to be a tough year for the ECB itself. With every cent of spare Euro liquidity fleeing to American shores, the ECB is now the lone ranger as its lending activity increasingly dominates the Euro money markets.
Assuming that it must fund a large majority of the Eurozone’s debt rollovers in in 2012, how many Euros will the ECB need to conjure up? The rough tally is 740 billion euros worth of European sovereign debt.
Additionally, it is almost a bygone conclusion that the ECB will need to step in and buy the debt of European banks whose country’s sovereigns are under pressure. This includes:
25% of Irish banks outstanding debt
20% of Spanish banks outstanding debt
15% of Italian banks outstanding debt; and
15% of Italian banks outstanding debt
To borrow an old but relevant metaphor, 2012 will be the year that the ECB’s wine, the Euro, turns to sewage. Thanks to their unlimited swap line at the Federal Reserve, the US currency is likely to begin to smell funny as well.
Could this be why the FED funds rate has creeped up from its flatline the past few days?
No matter how you look at it, the 2012 Euro funding picture does not pencil out. The sooner that Greece and the other insolvent sovereigns and banks declare the default that the markets have long since priced in, the sooner growth and hope will return to the Eurozone.
On the other hand, the longer the sewage is allowed to backup at the ECB, the greater the risk of a Euro currency collapse. Nobody wants to see that, especially the FED.
Natural law is always operating, always demanding a balance of accounts in the real world, not simply on an accountant’s ledger or numbers on a bank statement.
It is then foolishness for anyone to assume that a central authority, no matter how clairvoyant, can properly estimate the money supply necessary for human economic activity to continue at the optimal rate, balancing both the quantity of debt and money to provide for both the present and future using all of the information which is collectively available.
It is for this reason that it is imperative that people be free to declare both what will serve as money as well as its value in exchange. History has shown that, if people chose gold or anything natural as money, economic activity and the resulting benefits to society will accumulate so rapidly that the supply of gold will quickly act as a constraint. If gold is money by decree, this becomes a problem.
However, if gold has simply been chosen for use as money by the majority, the same majority will quickly and tacitly gravitate to a secondary natural source of money with which to augment the primary natural money supply. Historically, this secondary source of money has been silver.
Once economic activity further accelerates and the benefits continue to accrue to a larger portion of the population, the supply of silver will act as a restraint. Again, if left to their own devices, the majority will quickly and tacitly adopt another item occurring in nature to be used as money. Historically, this third source has been copper.
Yet even the supply of copper, abundant as it may be, will eventually serve as a restraint, and so on, and so forth. Eventually, in this example of what we like to call “Free Money,” gold will tend to operate as a form of savings and settlement only in the largest of transactions, with silver serving as money at an intermediate level while copper would be the most widely circulated currency for smaller transactions.
The beauty of free money is that, should the supply of copper become a constraint, steel, nickel, or some other more abundant natural resource will take the place of copper for use in smaller transactions, and so on, so that the money supply, in a general sense, will always be perfectly suited for the rate of economic activity which is occurring.
It is important to note that, while history has shown a preference for metals to be used as money, in the free money (and by extension, free banking) theory there is no requirement that what be adopted as money be metal. In fact, money can be anything that those participating in exchange bilaterally accept as payment for goods and settlement of debts. As you will recall, the only thing that money should not be, by definition, is debt.
Yes, Mr. Cheney, Deficits do matter
While it is obvious that debt can be exchanged in the place of money for a time, as the past 100 years have shown us, common sense, logic, and natural law will demand that the debts which circulate be settled in real terms. The creation of debt as money severely distorts economic reality and the more debt that is created, the greater the demanded settlement in real terms will be, regardless of how many times one chants the Keynesian mantra recently made famous again by former Vice President of the US Dick Cheney “Deficits don’t matter.”
The superiority of free money is that the money supply is free to adapt to the rapidly economic activity, which is nothing more than an expression of the changing wants and needs of consumers. The money supply is not hindered by unnatural constraints which have nothing to do with economic reality and are imposed by what is at best an uninformed or disinterested and at worst a malicious monetary authority.
The current debt as money system, far from providing a perfectly elastic money supply, has created the economic equivalent of concrete, which is now hardening the economy instead of providing it with the much needed lubrication. If this insanity carries on much longer, society will be shattered as economic reality takes a jackhammer to it.
Jeffrey Tucker, the executive editor of Laissez-Faire Books has written a great article which highlights, among other things, the correlation of the free sharing of information and innovation which can be found at the Daily Reckoning.
Mr. Tucker is a gifted writer and it is always a treat to read his work. This timely essay is no exception.
We highly encourage you to read his valuable insights at the link below:
As the world descended further into depression which eventually led it into the Second World War (Editor’s Note: It should come as no surprise that the only two World Wars have come after the declaration that debt is money), The Keynesian adherents clamored for more debt as the only answer to the world’s economic ills.
What Keynes and his Harvard trained legions fail to comprehend is that the only permanent cure for an economic depression is to allow each individual to declare what he or she will use as money and allow market participants to coalesce around what at that time is best suited for the role of money. For balance sheet recessions, such as the one the world is currently experimenting, are merely symptoms of a rigid money supply which has failed to keep up with the demands of a dynamic economy.
Under current theory, the government sacrifices the dynamic economy in the name of preserving the “integrity” of the monetary system.
When it is quite obvious that it is the monetary system that has failed, the government’s response can only be seen as idiotic at best.
What makes the situation of the past 100 years even more untenable is that money, instead of operating as a lubricant for economic activity, is more like concrete. Such is the inherently destructive nature of debt as money.
For the only rule with regards to money which is imposed as a matter of natural law is that debt cannot ever be money. It is a concept so clear that it escapes most academics and government officials.
Now, the Keynesian indoctrinated readers of these words are no doubt dusting off the “silver bullet” of Keynesian theory: That gold, which is widely held as the logical alternative to the “debt is money” insanity, is a “barbarous relic.” In layman’s terms, Keynesian theory holds that any attempt to limit the money supply via natural means, the most popular being a gold standard (fixing the price of gold in terms of monetary units) will cause a deflationary spiral which will bankrupt the entire world.
The former "Barbarous Relic" - photo by Toi Mine courtesy of Wikimedia Commons
Even Adam Smith argued that the mining of metals for use as currency was essentially a lamentable waste of resources.
We could not agree with them more. The limited amounts of gold in the world make it wholly unfit for everyday exchange. Gold, rather, is generally agreed upon to be the most perfect savings vehicle that the world has yet discovered.
So Keynes, despite promoting a theory which sacrifices the yang (savings) and glorifies the yin (debt) is right after all? Not quite…
Using the same logic with which the Keynesian so adeptly slays the gold standard, it quickly becomes obvious that by declaring that debt is money is not only a violation of natural law, it makes debt, rather than gold, the new barbarous relic.
Debt has a distinct disadvantage to gold in that it can be quickly and completely destroyed. Once it is assumed by the majority that a certain debtor will not be able to make good on their debts, the debts owed by the debtor, and any money in circulation which is either directly or indirectly related to the existence of these debts, is destroyed. For debt, at its base level, is a figment of the imagination until it is settled in real terms by the delivery of money in settlement of the debt.
It would hold, then, that debt, the new “barbarous relic,” is exponentially more dangerous than gold when used as money. The reasoning is the following, while the quantity of debt in the world can be suddenly and permanently reduced, the quantity of gold, which is admittedly difficult to increase, is at the same time extremely difficult to decrease.
Yet even given the strong advantage of gold over debt as money, it is obvious that both the Keynesians and the gold bugs are sadly mistaken in formulating their ultimate solution to the eternal problem of the money supply.
When it comes to determining the proper money supply, Adam Smith’s invisible hand of the market can be seen slapping both Keynesians and gold bugs silly!
For the problem with declaring anything, be it gold, debt, or white elephants as money, has nothing to do with the fitness of gold, debt, or white elephants for use as money, rather, it lies in the act of the minority attempting to dictate what will be used as money by the majority.
Money, in a general sense, is a good of the highest order. There is nothing in nature which states that gold, silver, seashells, or anything else must be used as money. The historical association of gold and silver as money is the result of their superior fitness for the role of money. It is simply a product of the collective wisdom of mankind, gleaned from experience as free exchange and the division of labor began to bring order to man’s chaotic surroundings.
However, just because gold and silver were superior in their role as money in the past does not necessarily mean that they enjoy some sort of divine designation as money.
Gold and Silver, like all things occurring in nature, are in limited supply. The fact that they occur in nature gives them a distinct advantage over debt (which is simply a promise to pay in the future) in that debt, which is theoretically in infinite supply, quickly loses value against scarce real goods due to the fact that debt, in theory, enjoys an infinite supply.
Anyone can make promises to pay in the future, it is the function of debt markets to determine what those promises are worth today. Ironically, the value of debt today is perilously tied to speculations about the money supply, which is in turn dependent upon the issuance of debt. Thus, declaring debt as money provides the economy with yet another hindrance in that the debt markets are increasingly disconnected from their noble origins; the debtor’s perceived productive capacity.
It is clear that mankind is in a perilous predicament. Will we take hold of the simple answer, which lies in free banking and free determination of what will serve as money?
The following is a brief narrative loosely based on the “Ascension of Isaiah”, an early Christian text:
“You are around a campfire on a mountain after fleeing Bethlehem, which you had fled to after you’d fled Jerusalem. You are with Isaiah and other prophets who have come under persecution by Manasseh, and you are overjoyed. Not because of your current circumstances, but by what the Lord has spoken to you and your brethren who are sitting around the fire with you this cold night.
Isaiah has just told you and your brethren about his ascension to the seventh heaven, where he was permitted to see the Son of Man descend, undetected, through the heavens and down to earth to come to his own as a babe in a manger. He then tells how he saw the Son of Man nailed to a tree and then descending into Sheol, only to return victoriously to the seventh heaven in unimaginable glory to sit at the right hand of the Eternal One.
Indeed, it is a terrible and wonderful time.
As you are rejoicing with your brethren over the promised Messiah and the Lord’s final victory over death, you see torches and hear shouts coming from the valley below, you and your brethren quickly extinguish the flames and run to hide wherever you can. As you crouch behind a rock, out of the corner of your eye you watch Isaiah slip into a hollowed out tree.
The men in torches appear and begin to search the area around the smoldering campfire. You see that they are led by none other than Manasseh, the king of Judah. You then recall that Isaiah had prophesied that indeed he would die by Manasseh’s hand. As you are piecing this together in your mind, one of Manasseh’s men passes the by the rock which is your cover and strides up next to the tree in which Isaiah is hiding. As he searches the branches above, he notices a light emanating from within the trunk of the tree.
It is Isaiah.
You fix upon Isaiah’s face and watch as a holy calm and radiance comes over him. A radiance that would later be recognized on the face of Stephen, the first Jew to be martyred for giving testimony to the messiah that Isaiah foresaw some 700 years earlier.
Then the unthinkable happens…
{Editor’s Note: For those unfamiliar with the story, it is widely believed that Isaiah was sawn in two by Manasseh’s men while hiding in the tree. This is testified to in the Jerusalem Talmud, the Babylonian Talmud, and the early Christian psuedepigrapha “The Ascension of Isaiah,”}
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