Today marks the beginning of the Jewish high holiday Rosh Hashanah, a celebration of the new year, a celebration of the creation of the world.
We are convinced that the Messiah, Jesus, is returning. We are equally convinced that it has not been given to any man to know the exact time of his return.
What we do know is that we will know the season of his return. The interpretations which we have heard of Jesus’s declaration recorded in Matthew 24:36 generally center around the premise that some sort of series of great catastrophes will be unfolding and a series of signs will be in some stage of fulfillment, implying that these things will mark the season of Jesus’s return.
Here at The Mint, we subscribe to a much simpler and more profound understanding of this scripture, drawn from an understanding of the Jewish wedding ceremony. Jesus will arrive during the fall season in the Northern Hemisphere.
In fact, based on the timing of His death and resurrection, the Passover, we believe that His triumphant return will logically take place over Rosh Hashanah. The celebrated Feast of Trumpets.
Feast of trumpets by Aleksander Gierymski (1850–1901): Painting of Hasidic Jews performing tashlikh (ritual washing away of sins) on Rosh Hashanah, placed on the banks of the Vistula River in Warsaw.
Not necessarily this fall, mind you. For it is impossible to know for certain. If one were to attempt to pick a specific year, the logical choices would be one of the upcoming Jubilee years, 2018 (starting on Rosh Hashanah 2017 on the Gregorian calendar) or 2068, or the final year of the 6000 year Jewish Calendar, 2240.
Yet it could be tomorrow, or the next day, as Rosh Hashanah has the element of uncertainty as to precisely when the new moon occurs. This detail fits nicely with Jesus’s declaration that we would not know the day or time.
With all of the things that are happening in the world, many have begun to speculate that the end is nigh.
Clearly, the end is always nigh, and calamities such as the ones humanity is currently suffering have always taken place to some degree ever since mankind chose to disobey God and turn their back on their Creator.
Today, with billions of us on the planet, these calamities are multiplied to a staggering degree. The good news is that God’s grace and mercy are experienced in abundance as well, and this will overcome all suffering and calamity as He daily establishes His Kingdom within and amongst us.
As Rosh Hashanah begins, we hold fast to our faith, cleanse our minds and spirits, and resolve to love and forgive as God has loved and forgiven us. The Messiah is coming, the trumpet is about to sound!
As always, George Friedman, author of Strafor’s indispensable publication Geopolitical Weekly, provides clarity into what on the surface is a situation on the verge of erupting. A situation that, if poorly handled, has the potential to unleash chaos throughout the world.
In a world where Might makes right, striking a delicate balance between one’s rhetoric and actions is the statesman’s most important task. A task that would be rendered useless were we all to chose the better way.
Nonetheless, Friedman helps us to cut through the rhetoric to recognize both the motivations of and limitations on each of the actors in what has become a game of brinksmanship of epic proportions, and the stakes have never been higher.
We encourage you to review the full report which is reproduced below with the permission of Stratfor:
War and Bluff: Iran, Israel and the United States
By George Friedman
For the past several months, the Israelis have been threatening to attack Iranian nuclear sites as the United States has pursued a complex policy of avoiding complete opposition to such strikes while making clear it doesn’t feel such strikes are necessary. At the same time, the United States has carried out maneuvers meant to demonstrate its ability to prevent the Iranian counter to an attack — namely blocking the Strait of Hormuz. While these maneuvers were under way, U.S. Secretary of State Hillary Clinton said no “redline” exists that once crossed by Iran would compel an attack on Iran’s nuclear facilities. The Israeli government has long contended that Tehran eventually will reach the point where it will be too costly for outsiders to stop the Iranian nuclear program.
The Israeli and American positions are intimately connected, but the precise nature of the connection is less clear. Israel publicly casts itself as eager to strike Iran but restrained by the United States, though unable to guarantee it will respect American wishes if Israel sees an existential threat emanating from Iran. The United States publicly decries Iran as a threat to Israel and to other countries in the region, particularly Saudi Arabia, but expresses reservations about military action out of fears that Iran would respond to a strike by destabilizing the region and because it does not believe the Iranian nuclear program is as advanced as the Israelis say it is.
The Israelis and the Americans publicly hold the same view of Iran. But their public views on how to proceed diverge. The Israelis have less tolerance for risk than the Americans, who have less tolerance for the global consequences of an attack. Their disagreement on the issue pivots around the status of the Iranian nuclear program. All of this lies on the surface; let us now examine the deeper structure of the issue.
Behind the Rhetoric
From the Iranian point of view, a nuclear program has been extremely valuable. Having one has brought Iran prestige in the Islamic world and has given it a level of useful global political credibility. As with North Korea, having a nuclear program has allowed Iran to sit as an equal with the five permanent members of the U.N. Security Council plus Germany, creating a psychological atmosphere in which Iran’s willingness merely to talk to the Americans, British, French, Russians, Chinese and Germans represented a concession. Though it has positioned the Iranians extremely well politically, the nuclear program also has triggered sanctions that have caused Iran substantial pain. But Iran has prepared for sanctions for years, building a range of corporate, banking and security mechanisms to evade their most devastating impact. Having countries like Russia and China unwilling to see Iran crushed has helped. Iran can survive sanctions.
Visit our Iran page for related analysis, videos, situation reports and maps.
While a nuclear program has given Iran political leverage, actually acquiring nuclear weapons would increase the risk of military action against Iran. A failed military action would benefit Iran, proving its power. By contrast, a successful attack that dramatically delayed or destroyed Iran’s nuclear capability would be a serious reversal. The Stuxnet episode, assuming it was an Israeli or U.S. attempt to undermine Iran’s program using cyberwarfare, is instructive in this regard. Although the United States hailed Stuxnet as a major success, it hardly stopped the Iranian program, if the Israelis are to be believed. In that sense, it was a failure.
Using nuclear weapons against Israel would be catastrophic to Iran. The principle of mutual assured destruction, which stabilized the U.S.-Soviet balance in the Cold War, would govern Iran’s use of nuclear weapons. If Iran struck Israel, the damage would be massive, forcing the Iranians to assume that the Israelis and their allies (specifically, the United States) would launch a massive counterattack on Iran, annihilating large parts of Iran’s population.
It is here that we get to the heart of the issue. While from a rational perspective the Iranians would be fools to launch such an attack, the Israeli position is that the Iranians are not rational actors and that their religious fanaticism makes any attempt to predict their actions pointless. Thus, the Iranians might well accept the annihilation of their country in order to destroy Israel in a sort of megasuicide bombing. The Israelis point to the Iranians’ rhetoric as evidence of their fanaticism. Yet, as we know, political rhetoric is not always politically predictive. In addition, rhetoric aside, Iran has pursued a cautious foreign policy, pursuing its ends with covert rather than overt means. It has rarely taken reckless action, engaging instead in reckless rhetoric.
If the Israelis believe the Iranians are not deterred by the prospect of mutually assured destruction, then allowing them to develop nuclear weapons would be irrational. If they do see the Iranians as rational actors, then shaping the psychological environment in which Iran acquires nuclear weapons is a critical element of mutually assured destruction. Herein lies the root of the great Israeli debate that pits the Netanyahu government, which appears to regard Iran as irrational, against significant segments of the Israeli military and intelligence communities, which regard Iran as rational.
Avoiding Attaining a Weapon
Assuming the Iranians are rational actors, their optimal strategy lies not in acquiring nuclear weapons and certainly not in using them, but instead in having a credible weapons development program that permits them to be seen as significant international actors. Developing weapons without ever producing them gives Iran international political significance, albeit at the cost of sanctions of debatable impact. At the same time, it does not force anyone to act against them, thereby permitting outsiders to avoid incurring the uncertainties and risks of such action.
Up to this point, the Iranians have not even fielded a device for testing, let alone a deliverable weapon. For all their activity, either their technical limitations or a political decision has kept them from actually crossing the obvious redlines and left Israel trying to define some developmental redline.
Iran’s approach has created a slowly unfolding crisis, reinforced by Israel’s slowly rolling response. For its part, all of Israel’s rhetoric — and periodic threats of imminent attack — has been going on for several years, but the Israelis have done little beyond some covert and cyberattacks to block the Iranian nuclear program. Just as the gap between Iranian rhetoric and action has been telling, so, too, has the gap between Israeli rhetoric and reality. Both want to appear more fearsome than either is actually willing to act.
The Iranian strategy has been to maintain ambiguity on the status of its program, while making it appear that the program is capable of sudden success — without ever achieving that success. The Israeli strategy has been to appear constantly on the verge of attack without ever attacking and to use the United States as its reason for withholding attacks, along with the studied ambiguity of the Iranian program. The United States, for its part, has been content playing the role of holding Israel back from an attack that Israel doesn’t seem to want to launch. The United States sees the crumbling of Iran’s position in Syria as a major Iranian reversal and is content to see this play out alongside sanctions.
Underlying Israel’s hesitancy about whether it will attack has been the question of whether it can pull off an attack. This is not a political question, but a military and technical one. Iran, after all, has been preparing for an attack on its nuclear facilities since their inception. Some scoff at Iranian preparations for attack. These are the same people who are most alarmed by supposed Iranian acumen in developing nuclear weapons. If a country can develop nuclear weapons, there is no reason it can’t develop hardened and dispersed sites and create enough ambiguity to deprive Israeli and U.S. intelligence of confidence in their ability to determine what is where. I am reminded of the raid on Son Tay during the Vietnam War. The United States mounted an effort to rescue U.S. prisoners of war in North Vietnam only to discover that its intelligence on where the POWs were located was completely wrong. Any politician deciding whether to attack Iran would have Son Tay and a hundred other intelligence failures chasing around their brains, especially since a failed attack on Iran would be far worse than no attack.
Dispersed sites reduce Israel’s ability to strike hard at a target and to acquire a battle damage assessment that would tell Israel three things: first, whether the target had been destroyed when it was buried under rock and concrete; second, whether the target contained what Israel thought it contained; and third, whether the strike had missed a backup site that replicated the one it destroyed. Assuming the Israelis figured out that another attack was needed, could their air force mount a second air campaign lasting days or weeks? They have a small air force and the distances involved are great.
Meanwhile, deploying special operations forces to so many targets so close to Tehran and so far from Iran’s borders would be risky, to say the least. Some sort of exotic attack, for example one using nuclear weapons to generate electromagnetic pulses to paralyze the region, is conceivable — but given the size of the Tel Aviv-Jerusalem-Haifa triangle, it is hard to imagine Israel wanting to set such a precedent. If the Israelis have managed to develop a new weapons technology unknown to anyone, all conventional analyses are off. But if the Israelis had an ultrasecret miracle weapon, postponing its use might compromise its secrecy. I suspect that if they had such a weapon, they would have used it by now.
The battlefield challenges posed by the Iranians are daunting, and a strike becomes even less appealing considering that the Iranians have not yet detonated a device and are far from a weapon. The Americans emphasize these points, but they are happy to use the Israeli threats to build pressure on the Iranians. The United States wants to undermine Iranian credibility in the region by making Iran seem vulnerable. The twin forces of Israeli rhetoric and sanctions help make Iran look embattled. The reversal in Syria enhances this sense. Naval maneuvers in the Strait of Hormuz add to the sense that the United States is prepared to neutralize Iranian counters to an Israeli airstrike, making the threat Israel poses and the weakness of Iran appear larger.
When we step back and view the picture as a whole, we see Iran using its nuclear program for political reasons but being meticulous not to make itself appear unambiguously close to success. We see the Israelis talking as if they were threatened but acting as if they were in no rush to address the supposed threat. And we see the Americans acting as if they are restraining Israel, paradoxically appearing to be Iran’s protector even though they are using the Israeli threat to increase Iranian insecurity. For their part, the Russians initially supported Iran in a bid to bog down the United States in another Middle East crisis. But given Iran’s reversal in Syria, the Russians are clearly reconsidering their Middle East strategy and even whether they actually have a strategy in the first place. Meanwhile, the Chinese want to continue buying Iranian oil unnoticed.
It is the U.S.-Israeli byplay that is most fascinating. On the surface, Israel is driving U.S. policy. On closer examination, the reverse is true. Israel has bluffed an attack for years and never acted. Perhaps now it will act, but the risks of failure are substantial. If Israel really wants to act, this is not obvious. Speeches by politicians do not constitute clear guidelines. If the Israelis want to get the United States to participate in the attack, rhetoric won’t work. Washington wants to proceed by increasing pressure to isolate Iran. Simply getting rid of a nuclear program not clearly intended to produce a device is not U.S. policy. Containing Iran without being drawn into a war is. To this end, Israeli rhetoric is useful.
Rather than seeing Netanyahu as trying to force the United States into an attack, it is more useful to see Netanyahu’s rhetoric as valuable to U.S. strategy. Israel and the United States remain geopolitically aligned. Israel’s bellicosity is not meant to signal an imminent attack, but to support the U.S. agenda of isolating and maintaining pressure on Iran. That would indicate more speeches from Netanyahu and greater fear of war. But speeches and emotions aside, intensifying psychological pressure on Iran is more likely than war.
With the recent shooting at the Empire State building, the focus is back on workplace violence. While it is extremely important to maintain vigilence in the workplace, it is equally important to understand that:
1. Despite the high profile media attention that acts of workplace violence generate, these types of incendents are extremely rare and,
2. As with terrorist attacks, they rarely occur without the perpatrator exhibiting suspicious behavior, which is easily observed by the untrained eye, well in advance of the attack. If this behavior is reported and the intelligence acted upon, most incidents can be difused before an attack takes place.
Stratfor’s Scott Stewart details a number of ways in which employees can through their own vigilence, take ownership of their own safety at their place of work to help ensure that a similar tragedy never occurs at their place of work.
You can read his report (report name) via Stratfor:
While the report focuses on the voilence between coworkers, it is interesting to note that the nine bystanders that were wounded in the Empire State Building shooting were injured by NYPD police gunfire as they tried to aprehend the assailent. Sadly, it is simply another of many examples of how one senseless act of violence leads to another, a fact of life when society subscribes to the “Might makes right” doctrine as its guiding light.
Another great piece by George Friedman explaining what is going on in Europe. Will the new economic ties trump not so ancient rivalries? Only time will tell, but European leaders will do everything within their power, including a trashing of the Euro’s value, to ensure they do. Via Stratfor:
Stratfor’s Robert Kaplan analyzes the Arab Spring and the complexities it presents to both the US and the remaining autocratic regimes in the region. Mr. Kaplan’s report can be seen here via Stratfor:
George Friedman delivers another excellent analysis in his Geopolitical Weekly report on the limits, both explicit and implicit, of the power of the US Presidency.
He further analyzes how the choice to intervene or not in foreign conflicts is seen as simply a choice between maintaining the balance of power in the world via a series of minor conflicts or via a large scale conflict ala WWI and WWII.
Like the large black locust tree in our yard which fell over the weekend, you choose to either trim it along the way or wait for it to come crashing down.
In the end, the US President is subject to forces well beyond their control, just like the rest of us. While ascribing omnipotence to the office may help those who cannot accept the reality of anarchy to sleep at night, it does little to change the relative impotence of the one that holds it.
Mr Friedman’s complete report can be seen here via Stratfor:
The price of corn and soy have been exploding in recent weeks:
Is it just seasonal factors, or is Dr. Bernanke’s inflationary storm hitting main street? One thing’s for sure, the price of beef will drop will drop in the short term. See the full article at the Business Insider.
For the few who missed it, Spain handily defeated Italy yesterday, proving Moody’s wrong once again and making us 1-0 on Euro cup calls here at The Mint. The Spanish national team, which has won each Euro and World Cup since 2008, will now go down as one of the greatest national teams of all time.
Spain downs Italy as The Mint goes 1-0 on its Euro 2012 prediction
The continent will now turn its weary eyes to the Olympic games, while those who can afford it prepare for their constitutionally guaranteed summer vacation (no kidding, the EU high court has held it as such).
Unfortunately for footballers and vacationers alike, Europe is operating in a perpetual crisis mode, and it is possible that vacationers will return to a Europe that is quite different than the one they left just 30 days before. One in which their options are limited and their ATM card doesn’t work.
Yes, what started as a minor Hellenic financial problem has predictibly mushroomed into a political crisis at the highest level of the EU. Voters, fed up with the bailout/austerity approach to banker welfare, increasingly exercise what is left of their sovereign right to vote out relative conservatives and/or moderates and vote in technocrats and/or populists as their fearless leaders.
Here is another prediction, for what its worth, the populists take Germany in the fall of 2013, Europe’s version of Mega Maid will have turned all the way from suck to blow. The path of austerity that they are currently on will be but a faint memory as the ECB and policy makers move from bailing out the bankers to bailing out any and every political ally.
{Editor’s note: A populist, for our purposes, is a socialist who no longer masquerades as a conservative or moderate, they are out of the closet, as it were.}
Yet for all the drama and human suffering that is unfolding, we can’t help but think that this is all simply a high priced publicity stunt to get the doomed Euro currency some air time.
For many of the European peoples, the Euro currency has served as nothing more than an unwanted crash course in math and an agent of larceny on the grandest of scales. The average Jacque, Giorgos, Jorge, or Giovanni would have been better off in the long run had the Euro never been dreamed up.
Rising Populism in Europe to test the ECB’s commitment to elasticity
However, the continued use of the Euro is an extremely high priority to for a select few with addreses on Wall Street, in The City, and anywhere in Germany. As such, the current tack for the doomed Euroship is for it to be spoken of in the same context as climate change or terrorism, which invariably involves an increasingly illogical and alarmist rhetoric.
The question of whether or not something should be done is glossed over in favor of handing supreme power to a body who demands that something be done. The only rhetoric that is allowed beyond fear mongering is a discussion of what the supreme power should do.
And so it is with the Euro.
There will be a number of elections over the coming months in the Eurozone, and not one of them will matter. The tone in Europe is turning decidedly populist, as George Friedman eloquently describes in his recent Geopolitcal Weekly report via Stratfor:
As a treasury professional, we have more than a passing interest in money laundering schemes. For the unitiated, money laundering schemes are generally designed to make money earned through illegal activities, such as trafficking illegal drugs, appear as if it were earned legitimately, allowing it to freely navigate the financial system.
A great deal of the bureaucracy inherent in the banking system is an attempt to thwart would be money launderers. In the process, they make nearly everyone with a bank account a suspect.
One of the bureaucratic tools employed to nab money launderers is the SAS, or Suspicious Activity Report. This is why your banker wants to see your identification when you withdraw or deposit a large sum of cash, even though they have known you for years. The technical threshold for filing such reports is $10,000, but the bankers are further instructed to file an SAS whenever a deposit or withdrawl deviates from a client’s regular modus operandi.
This brings us to Smurfing. the term came to us via yet another informative report generously provided by Stratfor. Smurfing is the act of depositing a large amount of cash in amounts under $10,000 overseveral days and/or across several financial institutions for the purpose of avoiding an SAS. It is ineffective, for sure, yet it is technically a viable money laundering tactic.
The other money laundering technique described in the report (which can be read by clicking the link below) is much more interesting. It involves money being transferred to China from the US in exchange for appliances which and other goods which are shipped to Mexico and then sold.
The War on Drugs has made drug trafficking so profitable that even it is working as a bizarre sort of stimulus!
The point of the Stratfor report is to highlight the fact that there is an increased incidence of both drug trafficking and money laundering activity now that the US Feds have cracked down on the manufacture of methanphetamines in the 50 states. This report discusses the results of the law enforcement operation “Dark Angel.”
However, as the author points out, the lessons learned from Dark Angel may reveal more about money laundering techniques than they do about meth trafficking.
If this is what Stratfor provides for free email subscribers, we can only imagine the insights that a paid subscription would provide. Their analysis is insgihtful and borders on brilliant.
With Greece predominantly in the headlines for its fiscal woes, this insightful report by Robert Kaplan explores the historical roots of Greece’s economic problems as well as its unique strategic advantage owed to its geographic location.
Is Greece European?
It can be a long road from political extremism and nepotism to a moderate political center, and this past weekend’s elections have shown that it is a road which Greece may not continue down, no matter how much prodding it gets from the increasingly desperate EU.
Greece, Inc. is now for sale. Its new management is preparing a list of demands for its current creditors, the Troika. If those demands are not met, Greece, Inc., which enjoys a prime geographical location, will prod its shareholders to accept an offer from the highest bidder, likely to be either Russia and/or China.
From Olympic sized overspending to the aftermath of the recent world wars, Kaplan does a fine job of presenting Greece’s history as a framework for understanding its current situation.
The report can be seen in its entirety via Stratfor:
This year, it is our privilege to get to know John, the author of a good portion of what is now the New Testament.
There is much to learn. Today, we had two revelations as we began our journey:
Revelation one has to do with what we willthe mechanics of rebirth. It is written in John 1:12-13 that those who believe in Jesus, the Messiah, are given the right to become children of God. How does this miracle occur?
It was revealed to us as the spirit of God penetrating the believer. It is a miracle, yet we will attempt to describe it as clearly as possible. The Spirit of God descends as a mere drop of oil on the head, which then enters the body, as if flesh were not a barrier.
Russian Orthodox icon of the Apostle and Evangelist John the Theologian, 18th century (Iconostasis of Transfiguration Church, Kizhi Monastery, Karelia, Russia)
This drop grows larger until it fills the entire physical presence of the believer, for it is the essence of the Lord permeating the flesh of the believer.
This was confirmed as we read the next line, John 1:14: The Word BECAME FLESH and dwelt amongst us. This vision and John’s choice of descriptive language reveal the deep understanding and intimacy that John has with the Father.
It is no mistake that in Chapter 3, the third witness of this truth appears as John recounts Jesus’ shock in John 3:10 that Nicodemus, a teacher of Israel, would be ignorant of the mechanics of spiritual rebirth. Nicodemus’ ignorance is striking because He was a Pharisee, one who believed in life after death and the coming of the Messiah.
The second revelation is that John was one of two disciples of John the Baptist, whom upon witnessing the baptism of Jesus, immediately followed Jesus and asked where He was staying. The other was Andrew. Both of these first disciples told their brothers that they had found the Messiah. The brother of Andrew was Peter, and the brother of John was James.
John, like Isaiah before Him, was eagerly awaiting the Jewish Messiah. While He was a fisherman by day, his spiritual thirst attracted Him to John the Baptist. His perceptiveness drew Him to Jesus.
The spirit of Isaiah was upon John, and the Spirit of the Living God is upon all of us.
The EU’s direct Spanish bank bailout, while ostensibly averting the latest in a string of events which threaten to blow the Euro to smithereens, has now raised the question of moral hazard for German politicians.
The path forward, as we have discussed in this space before, leads to the elimination of national sovereignty for the countries unfortunate enough to have adopted the Euro.
George Friedman discusses the scenarios which may unfold as the Eurozone inches closer to implementing their ultimate solution to the continent’s debt crisis: The Eurobond
This particular report focuses on the failure of the United States’ recent nation building strategy which has relied on counterinsurgency operations. It also explores what viable defense strategy may take its place, namely, the broader use of specialized, highly mobile and scalable units to defend key geographical areas which are vulnerable to highly motivated and increasingly well equipped non-state actors.
It is a fascinating look at the logical evolution of US defense strategy as it retools itself to better and more effectively meet increasingly global security demands. Via Stratfor:
As Vladimir Putin takes the reigns once again (in truth, he never really gave them up) as Russia’s President, he faces a new European landscape, one in which He will navigate without the benefit of the personal alliances which were the core of his European strategy during his first two terms. Read more in this fascinating analysis by Stratfor:
As money managers are frantically rebalancing their portfolios in a vain effort to get out of the way of Apple’s 20 point decline and Spain’s central bank, whose reason for existing we cannot conjure at the moment, consults experts in toxic assets because it apparently cannot figure out how to perform the most basic of banking functions: Writing down bad assets, we are waxing philosophical here at The Mint.
We will give the Spaniards the benefit of the doubt and assume that they know what should be done with the toxic assets, they just do not want to appear to have admitted that the vile sludge on the balance sheets of nearly all spanish banking institutions are worse than worthless without getting an expert opinion.
The defunct Spanish Central Bank looking for unsophisticated Investors to clean their banking system's septic tank
These are smart people, no doubt, the money managers and central bankers involved in the debacle that is the western financial system, circa 2012. It is for this reason that there should be great cause for concern when they appear completely uncapable of functioning when things do not go the way they planned.
For example, a properly functioning banking system would have no problem figuring out what to do with non-performing loans (the common name for the toxic assets that the central bankers so dread). In fact, a properly functioning banking system, where real and not limitless fiduciary money was at stake, would have created an adequate quality control system to ensure that very few financial assets of the toxic variety live to see the light of day. Those that did see the light of day would have beem properly discounted them to a point where all of their toxic side effects could be properly cleaned up should they spill over.
We must assume, then, that there is something dreadfully wrong with the banking system. But what is it?
We began to ponder this question last week when we saw a post by an Ivy League trained economist. The assertion that fiduciary money is money bothered us to the point where we were compelled to jump in to correct this unintentional error.
The Ivy league trained economist indulged us for a time and then, for reasons unknown, disabled commenting on the post. We interpret this action as a concession of the point we are trying to make, either that or they just wanted to get rid of us, which, given our obvious charm, we can only assume is not the case.
What is important is that the post brought up a fallacy which we see it as part of our mission here at The Mint to debunk.
The fallacy, which is widely accepted as fact by money managers and Spanish central bankers alike, is that fiduciary money operates like money when in reality it is nothing more than a debt instrument in disguise.
So which is it? Is The Mint off its rocker or is there something to the error of this “debt is money” point of view, as in, it is causing otherwise intelligent people to act in more and more absurd ways as the inevitable consequences of using debt as money rear their ugly head?
Simply stated, is fiduciary money really money, as the name implies, or is it technically debt? It is a fine point that, to be honest, does not matter to most people on the planet, for what is commonly known as fiduciary money tends to operate as money in a way that is imperceptable to the members of society…until it doesn’t.
The true essence of fiduciary money is not money at all, but debt. Granted, it may be a highly liquid and highly transferable form of debt, but that does not change the fact that when it is created at the bank, be it a local or central bank, it represents a debt of that bank, regardless of the ability of said bank to redeem the fiduciary money for specie money, which is what we hold out as worthy of the term money for purposes of analysis.
As you can see from our presentation of the interaction below, we attempted, in good faith, to convince the Ivy League trained economist that Federal Reserve notes, as their name implies, are debt and not money.
I have redacted the amicable interaction to highlight the applicable text of our interaction as it pertains to the case in point, is fiduciary money really money?
Please read on and decide for yourself.
{Editor’s note: Out of respect for the Ivy League trained economist, we have removed all references to their identity, for it is not our intent to shame, discredit, or launch any form of personal attack on them, but rather, the fallacy surrounding mainstream economics’ treatment of fiduciary money in its analysis}.
The Mint (in response to the intial post):
I would like to point out that fiduciary money is not money, but rather debt which carries in its value a monetary premium which the market has chosen to assign it.
Ivy League trained economist:
“Perhaps this helps you David Mint. I wrote this back on March 8th.
{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}
The Mint:
Thanks again, however, I still cannot concede your assertions that Federal Reserve notes are money, rather, they are a debt instrument, which is often referred to as fiduciary money.
The proof of this lies in that Federal Reserve notes pay interest and trade at an implied discount rate, whereas money simply trades against other goods in a varying relationship determined by the relative scarcity of resources.
Both circulate as currency in a normal economy, but the rigidity of debt makes it unsuitable for obligatory legal tender.
It is a fine point that is categorically overlooked, but the more one forces debt into the role of money, the greater the disconnect between the activities of men and the resources available to support those activities.
I would love to hear a convincing argument that debt is money if you have one in your archives.
Thanks again and all the best!
Ivy League trained economist:
“Decidedly David Mint, Federal Reserve notes do not pay interest. There isn’t anyone on earth paying interest to anyone else who is holding a $5 bill in his wallet.
Here, David, disabuse yourself. See my many shares on what money is:
{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}
You ought to spend good time reading this one:
{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}
The Mint
Quickly, on the fallacy of the $5 bill which is held, the implied interest and discount rate on Federal Reserve notes traded amongst commercial and central banks still affect the value of the bill as it is held up until the moment it is given in exchange for trade. The coupon rate is 0%, but the normal operations of debt instruments hold true for them.
From what admittedly little I have read of your work, I agree with 99% of what you present. It is this fine point, that Federal Reserve notes behave as debt, even when they are part of the M1 money supply, that I believe is the error which is spread throughout mainstream economics. Of this, I have yet to be disabused by what you have presented.
Debt includes all fiduciary money. The point is important because using debt as money works until it doesn’t, meaning the issuer of the debt defaults or is widely perceived to have defaulted, and their debts become worthless in trade.
Ivy League trained economist:
“That’s all fine, except Federal Reserve bank notes are not debt. Decidedly, Federal Reserve bank notes are money owning to bearer negotiability and ability to extinguish contracts.
Yet, Federal Reserve notes are not credits, and thus are not debt. Federal Reserve notes are not even evidences of ownership of contracts.
At most anyone can say is that Federal Reserve notes represent a call on future products to be made by anonymous, as yet, identified others who likely shall take them in exchange.”
The Mint
As a matter of accounting necessity, the Federal Reserve must book a liability when it issues a Federal Reserve Note which makes their notes debt by definition. If this were not the case, why would they list it as a liability on their balance sheet?
On the contrary, the most that anyone can say about Federal Reserve notes is that they are the highest and most liquid form of debt which is traded in the US economy. However, this does not change the fact that the essence of the Federal Reserve note is debt.
The Ivy League trained economist unexpectedly exits stage left.
Who cares? Why is this important? It is important because if what we believe about fiduciary money is true, most of the Western world, including the mysteriously influential Paul Krugman (who is not, by the way, the anonymous Ivy League trained economist above), somehow believes that fiduciary money is money that can be produced at will, and that the world will be better off if we simply produced more of it.
If the Krugman’s of the world get their way, labor and accumulated capital will be so poorly allocated that it could take three generations for humanity to adequately organize itself to make good use of the earth’s inexhaustible reasources. Do you have that kind of time?
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