The Mint

Copper Price per Lb: $2.43
Oil Price per Barrel: $44.79

Key Indicators for September 11, 2015

Corn Price per Bushel: $3.62
10 Yr US Treasury Bond: 2.19%
Bitcoin price in US: $240.28
FED Target Rate: 0.14%
Gold Price Per Ounce: $1,106

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.1%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 16,330
M1 Monetary Base: $3,132,300,000,000

M2 Monetary Base: $12,088,500,000,000

Audio Books, ebooks, Economics, The Mint

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

June 6, 2015 David Mint

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

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!

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

Key Indicators for June 6, 2015

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

Climate Change, Economics, Politics

Obama comes to Portlandia

May 7, 2015 David Mint

5/7/2015 Portland, Oregon – Pop in your mints…

For those unaware, the Portland metro area is playing host to President Barack Obama. While we had no idea why he is here, we have been made keenly aware of the traffic perils that await us over the next 24 hours. Highways randomly shut in both directions, entire areas of the city impassable by car, rail, or bicycle (perish the thought). Such is the cost of playing host to the world’s most heavily guarded human being.

Obama Ponders the lubricant of free trade that the TPP will unleash

After some careful research (roughly 40 characters typed in a google search) we now know that he has come to promote something called the “Trans-Pacific Partnership,” which we have heard described as “NAFTA on steroids.” He has chosen the Nike campus, which is a mere 10 minute walk from where The Mint resides, to tout what would be his crowning achievement, a free trade agreement that exterminates what remains of US-based manufacturing once and for all.

His choice of Nike, who in a sense pioneered the practice of exploiting cheap overseas labor, has drawn reactions of shock and awe from socialists and unions alike.

First, the Daily Kos, where an author known as “davej” lays out the case against Nike by alluding to sweatshops and child labor, and feigns disgust at the irony that Obama would choose Nike to hold his rally there. For good measure, the article ends with instruction on where to meet at Nike to stage a protest as the President speaks.

The AFL-CIO produced a video enlisting not only American workers but also workers from other countries throughout the Pacific Rim to denounce TPP as a job killer and an enemy of organized labor. You can see it below:

Finally, Bernie Sanders, the Vermont Socialist and current 2016 Presidential candidate, bemoans the fact that a $320 pair of LeBron XII Elite iD shoes can be sold in America but not made in America. Comrade Sanders, we admire your zeal yet find your logic vexing.

We have no clue what the TPP will do, but generally speaking, free trade is good, and will ultimately benefit everyone. However, circa 2015, there is a fly in the ointment that makes Free Trade act as a lubricant on the once slow-moving machinery of global warming: Debt based currency.

Federal Reserve Notes: A License to Strip Mine the Earth

While it is fine and well the TPP will enable American consumers to consume at theoretically better prices that those that they already enjoy thanks to pioneers like Phil Knight and Sam Walton, all of this consumption comes at a steep price, both in terms of human suffering and the environmental impact of removing barriers to trade.

While we would love to appeal to a moral high ground, such as the author at the Daily Kos and the AFL-CIO do in their opposition to the TPP, we cannot. Instead, we appeal to our own at times infallible logic on the matter.

The TPP and the associated increase in trade along the Pacific Rim that it will enable will cause an unprecedented amount of debt based currency to come into being and begin to circulate. While most persons have been trained to think of debt based currency as money, we offer a new definition:

Debt based currency is a license to strip mine the earth, and entirely too many of them have been issued already.

Yes, when you circulate debt based currency (and on the planet today it is nearly impossible not to) by buying and selling in it, you are sending an erroneous economic signal to the rest of humanity. When you purchase the above mentioned Lebron James Michael Jordan wannabe shoes from Nike, you simply want the shoes to put on your feet. However, what you are saying to Phil Knight and his minions is, “design a shoe that I and 50 of my closest friends will drool over, then drill deep into the earth and extract petroleum with which to run the machines that will make the shoe, then hire labor as cheaply as possible to run the machines and assemble the shoe, kill some cows for leather, pull latex from plants or manmade processes, create dyes to color the shoe just so, and do whatever it takes to bring together the raw materials by which to bring my dream shoe into being.”

Now the production of the shoe and all of the related activities that it spawns would be fine and well were the shoes to be paid for with real money. However, consumers, no matter what country they are in, pay for things in debt based currency, meaning currency which comes into being on a whim, and derives its value by acting as a hot potato, causing any number of unnecessary or non-beneficial activities to be envisioned and carried out by mankind on a daily basis without a natural counterbalance to said activities.

In layman’s terms, when one is purchasing a product using debt based currency, they are by no means engaging in “fair trade,” despite what the label says, they are trading nothing for something, something that the earth and its inhabitants had to be strip-mined and enslaved to create. For the wants and needs of mankind are limitless, and, when enabled by a limitless supply of debt based currency, cause a chain reaction of 1) increased human activity which leads to 2) increased impact on the environment without a counterbalancing activity of resource replenishment, human or natural, elsewhere in the broad swath of economic activity on the planet.

Federal Reserve notes and their foreign counterparts are nothing more than a license to strip mine the earth and its inhabitants of resources well ahead of their ability to replenish them. Mother Nature is now in the second half of the Chessboard, will we turn in our license before it’s too late? Or will we drive nature and ourselves off of the proverbial cliff?

Stay tuned and Trust Jesus.

Stay Fresh!

Copper Price per Lb: $2.90
Oil Price per Barrel: $58.72

Key Indicators for May 7, 2015

Corn Price per Bushel: $3.57
10 Yr US Treasury Bond: 2.18%
Bitcoin price in US: $236.53
FED Target Rate: 0.13%
Gold Price Per Ounce: $1,184

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.5%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 17,924
M1 Monetary Base: $3,100,000,000,000

M2 Monetary Base: $11,824,300,000,000

March 16, 2015 David Mint

The US Economy Turns Green in Time for St. Patrick’s Day

3/17/2015 Portland, Oregon – Pop in your mints…

1 oz .999 Fine Silver Round Irish Green Enamel Four-Leaf Clover With Display Box

A Happy early St. Patrick’s Day to our long-suffering readers of The Mint, who know we have an affinity for the color green, specifically the tone which can be found on the coin pictured to the left.

We have been buried deep in a classic accounting “busy season” of our own design, as, along with our regular duties, we have stumbled upon a vein persons ready to move their accounting systems into the cloud along with a cadre of brilliant entrepreneurs who need solid advice in terms of accounting and systems. This work has gone nicely with our goal of mastering the tax trade this winter and spring. We have also managed to produce our first audio version, What is Truth? On the Nature of Empire (check it out here).

Together, it has made little time for reflection. Alas, this is the life of a farmer. When the season to work comes over us, we work day and night, knowing a season of rest waits.

Due to our numbers related tarries, the last time we took a glance at the US economy for long enough to write about it was October 3rd of last year, according to our records.

At that time, when the stated Unemployment rate was 5.9%, we sensed back then that it did not matter as the FED was set on continuing its Zero Interest Rate Policy until its member banks were safely in the clear, and that the US Labor market was getting extremely tight.

In case you are wondering, ZIRP and tight labor markets, taken together, is a recipe for explosive economic growth. Five short months later, it appears that the feast is nearly ready, and the US economy is about to eat it.

First, let’s check in on Unemployment, which stands at 5.5%. According to the March 9th jobs report, US Job Creation has never been stronger:

And that momentum in the labor market is hotter than it was in 2005 – 2006:

And you have a labor market that has not been seen since the end of WWII.

But what about Wage Growth? It is tame, a 0.2% drop, in fact, if the BLS is to be believed. However, the NFIB Compensation Plans Indicator and the Employment cost Index are on the rise, meaning American workers are enjoying a rare (long overdue, we might add) post 1971 gain in real wages before the CPI, which clocked in at 0.7% (still well under the FED’s target), overtakes them.

Wage growth and Inflation go hand in hand

And this chart seems to indicate that the tightening rental market may be the match that starts the Wage/Price spiral in motion:

We’re not sure about other metro areas, but rental and housing markets in Portland are ‘en fuego,’ with apologies to Dan Patrick.

What does it all mean? No one can be certain, but here are a couple of guesses:

1) The US Economy will once again become the envy of the world, despite itself. Yes, even with Obama care and other political and economic landmines strewn around it, the US economy is on pace to surpass the growth rates of developing nations, soon to be known as last decade’s darlings:

2) US Workers are likely to get healthy wages from healthy companies. Unhealthy companies will be gutted in this brain drain and fail.

3) Paradoxically, corporate profit margins will continue to increase as productivity gains continue.

4) Housing premiums, in terms of rent and home sales, are about to soar.

5) Interest rates will not go up until the markets yank them up by their shirt collar and hold them up against the wall, the FED will keep short-term rates low and allow the banks to recapitalize on the backs of the US economic miracle:

6) There will be no “Grexit” to spoil things. Despite European claims to clairvoyance, it was the US who established the Euro zone (and its predecessor treaties) as the vital space for a revitalized German industrial base in the wake of WWII (more on this in our upcoming review of “The Global Minotaur” which was ironically written by a Greek economist). Circa 2014, the Euro currency zone exists for the sole benefit of Germany and to an extent France. The rest of Europe would be better off without it, which is why Germany and the pan euro banks will hold it together with an iron fist, not matter how futile the effort, or how far they have to bend the rules.

7) The Chicago River will turn green, and a record amount of beer will be sold tomorrow in honor of St. Patrick

Be safe out there as the Luck of the Irish and the ignorance of the FED paints the US Economy green for the foreseeable future!

Stay tuned and Trust Jesus.

Stay Fresh!

Dow Jones Industrial Average: 17,977
M1 Monetary Base: $3,069,400,000,000

Key Indicators for March 16, 2015

Copper Price per Lb: $2.65
Oil Price per Barrel: $43.68

Corn Price per Bushel: $3.79
10 Yr US Treasury Bond: 2.10%
Bitcoin price in US: $289.87
FED Target Rate: 0.11%
Gold Price Per Ounce: $1,154

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.5%
Inflation Rate (CPI): 0.7%

M2 Monetary Base: $11,883,100,000,000

Economics, Silver

Digital Silver

January 11, 2015 David Mint

1/11/2015 Portland, Oregon – Pop in your mints…

A belated happy new year to our fellow taxpayers. While the pages of The Mint have been quiet, The Mint himself has been pressing forward on a number of initiatives. Perhaps the most notable being our renewed interest in Tax Planning and preparation, which is a natural complement to our virtual CFO and associated services. More to come on that.

Long-suffering readers of The Mint are well aware of our views on monetary theory. Throughout the ages, true money has generally taken the form of gold and/or silver. However, for roughly 44 years now, mankind has been on an extremely dangerous experiment in which debt has come to take the place of money in everyday transactions. While it may seem a completely normal manner of transacting business today, it is lost on most that money and debt are actually polar opposites. They are meant to cancel each other out in trade and, in doing so, maintain the quantity of one another and by extension all of world trade and economic activity, in balance.

However, when money becomes debt, then debt can only be cancelled by the issuance of more debt, which means that the primary impulse of all economic activity is not a well thought out response to the laws of supply and demand, but a response to whether or not the supply of debt instruments in the world is increasing or decreasing.

The period between 2008 and 2013 has been marked by a relative stagnation in what was until then a steady wave of increasing credit post 1971. This stagnation was almost fatal to the debt based monetary system that, by definition, counts on an infinite expansion in the quantity of debt for its very existence.

The current expansion, which began in 2014 and is set to accelerate through 2015 and beyond, is already causing cosmic shifts in the economy. Old, established companies and brands are being supplanted by a phenomenon that is best exemplified by social media platforms: Hyper focused content delivery and a wholesale fragmentation of what were, just five years ago, long-established norms around consumer behavior. Large brands are losing the edge as consumers can increasingly tailor the content that passes by their eyeballs on social media and, further, consume almost any type of media on demand.

This shift is once again propelling a large wave of growth, which means that soon, consumers will begin to demand increasing amounts of credit so that they can underwrite their various individual activities necessitated by this shift.

What place does Silver have in this brave new world? At $16.57 an ounce, physical silver is taking a short breather as the world’s best investment. However, a new form of Silver is rising to take its place.

Silver Money Service is a simple mobile app that filters hundreds of credit card offers to help you find unsecured credit that suits your needs. While at first this may seem an elementary concept, the utility of the Silver app, which is currently available for Android and iPhone, cannot be overstated.

As much as we are loath to admit it, most consumers will need to increase their credit footprint over the coming year in order to keep pace with inflation. What the Silver app does is simply save consumers tens if not hundreds of hours sifting through credit card offers in the mail and on the internet. By asking a few simple questions, Silver guides the user to the current credit card offerings that are best suited to their needs.

How does it work? As we mentioned above, the app asks the user a simple, multiple-choice question:

Which type of card are you looking for?
- Rewards
- Cash back
- Low Interest
- Bad Credit

From there, it asks the user a second, again multiple choice question based on their response to the first in order to tailor its results to the user’s unique credit needs. The app then presents a list of the relevant credit card offers alongside buttons that allow the user to contact the credit card provider directly via telephone, email, or directly at their website.

Silver’s refreshingly simple and intuitive approach to assisting consumers in expanding their credit footprint. You can download this handy app that the Google Play store and the iPhone App Store today and get a head start on your peers.

While physical silver will always be a safe harbor, the Silver app may prove more useful over the coming years as a way to fund the next wave of credit expansion. Even if you are a gold or silver bug, you can use the Silver app to get a credit card to get ahead of the curve by ordering your next tube of rounds or silver bars from your favorite bullion dealer.

For in the blow off phase, it won’t matter how much unsecured debt one has to pay back, but what real assets one has on hand to confront the gradual disintegration of the real economy.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for January 11, 2015

Copper Price per Lb: $2.79
Oil Price per Barrel (WTI): $47.58

Corn Price per Bushel: $4.00
10 Yr US Treasury Bond: 1.97%
Bitcoin price in US: $276.80
FED Target Rate: 0.12%
Gold Price Per Ounce: $1,225

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.6%
Inflation Rate (CPI): -0.3%
Dow Jones Industrial Average: 17,737
M1 Monetary Base: $3,157,800,000,000

M2 Monetary Base: $11,769,400,000,000

Economics, Events

The Bank of Russia Dwarfed in Oil Price War

December 3, 2014 David Mint

12/3/2014 Portland, Oregon – Pop in your mints…

In case you haven’t been following our key indicators lately, the price of oil has taken a nosedive over the past three months, falling nearly 30% from late September. If you drive an SUV or run an airline, this is great news. If you are Russian or in some way invested in or employed by US based shale oil operations or work extracting oil from the Alberta Tar Sands, this is bad news.

First, let’s take a look at the effects on Russia, which have dominated the headlines. The Russian economy is heavily reliant on oil and has one of the largest petroleum industries in the world. It has the world’s eighth largest oil reserves and is the largest exporter of oil in the world in absolute numbers. Since the chart below, which highlights the rise of Russia’s productive capacity and post cold war era export capacity, was produced in by Plazak back in 2013, Russian production has continued its study rise through 2014, posting a post-Soviet record of 10.61 million barrels per day in September.

Russian Oil Production Chart By Plazak (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Further, Russia produces approximately 73 barrels of oil per day per 1,000 inhabitants, compared with approximately 37 barrels of oil per day produced in the US per 1,000 people.

Oh yes, and it has been reported that the 2015-2017 budget forecast of the Russian Government was based on the assumption of oil being priced at $100 per barrel (they are now revising it to around $85, $20 some dollars ago in the real world). Unlike the most of us in the US, that is a revenue assumption for them.

Financial markets are watching this and licking their chops, Russia is a short no matter how you slice it. Their oil industry and economy live in a world that ceased to exist about the time the price of oil spiked and drove the world’s largest consumers, the US, to search for alternatives.

The Russian Central Bank has spent at least $82 Billion in its foreign exchange reserves through October of 2014 in what has proven a feeble effort to prop up the Ruble. It spent $700 million on Monday alone, and it is not working. Were the heads of the Russian Central Bank thinking a bit more clearly, they may have been wise to carefully intervene in the oil markets before their currency got lashed. Alas, the Central Bankers of the World are seldom blessed with the gift of clairvoyance.

The Bank of Russia should have bought oil

But what about the US? As the world’s largest oil producer at nearly 12 million barrels a day, won’t the United States economy fall victim to the latest drop in oil prices as well? That is the premise of Michael Snyder, writing over at The Economic Collapse blog:

Guess What Happened The Last Time The Price of Oil Crashed Like This?…

While Snyder does make some compelling points about the 1.7 million jobs that the fracking boom has produced, the US is nowhere near Russia in terms of oil price dependency for its economic health.

We have three concrete reasons that we place forward for your inspection, fellow taxpayer, as to why the impact on the US will be minimal or even positive:

1) While the US produces 12 million barrels per day, it consumes 18.8 million barrels. As such, the higher price of oil still works as a quasi tax on the US as opposed to a concrete revenue source.

2) The US economy is the most dynamic on the planet. As long as credit is available, it will create jobs.

3) The Fed is still in a mode of underpinning the economy and has maintained its unconditional guarantee of the post financial crisis stock and bond markets. They would quickly contain the oil based junk bond issue that Snyder brings up.

The US economy is eternally susceptible to one thing and one thing only, a sustained decrease in consumer credit and government debt, neither of which is likely in the near term. While the Fed has hinted at raising rates, the current crisis in Russia, if anything, gives them sway to keep their various stimuli in place or on the ready as the crisis is feeding dollar strength, so the Fed doesn’t have to.

It will not always be so, as the Fed itself will one day implode on its own merits (or lack thereof). For the moment, it is the Bank of Russia playing the jester in this play.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for December 3, 2014

Copper Price per Lb: $2.92
Oil Price per Barrel (WTI): $67.10

Corn Price per Bushel: $3.68
10 Yr US Treasury Bond: 2.29%
Bitcoin price in US: $377.28
FED Target Rate: 0.13%
Gold Price Per Ounce: $1,205

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.8%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 17,880
M1 Monetary Base: $2,765,000,000,000

M2 Monetary Base: $11,607,000,000,000

Economics, Politics, The Mint

What created the Bolivian Economic Miracle?

October 27, 2014 David Mint

10/27/2014 Portland, Oregon – Pop in your mints…

For those who do not follow Bolivian Politics, Evo Morales has one a third term as President of the South American nation we are happy to call our second home.

Evo Morales - President of Bolivia in Brazil 2007 — Evo Morales – President of Bolivia, photo taken December 17, 2007 in Brazil by Marcello Casal Jr. of Agencia Brasil http://www.agenciabrasil.gov.br/media/imagens/2007/12/17/1840MC44.jpg

As Morales is seen as a Socialist hero, his reelection coincided with a deluge of praise for his hand in the Bolivian Economic miracle that has unfolded over the past 10 years from the left. It seemed to start with an article from the New York Times back in February, which highlights Morales’ success and the paradox that it presents. On one hand, he is a, well, a proclaimed Socialist. On the other, he runs a balanced budget and has largely rejected the advice of the IMF and other financial overlords of the world:

Turnabout in Bolivia as Economy Rises from Instability

Then, a widely read article in the Guardian, where the author makes the bold claim that “socialism doesn’t damage economies,” which sparked a swift reaction from the neo-con/neo-lib right.

Evo Morales has proved (sic) that socialism doesn’t damage economies

It is true that the Bolivian economy has grown at a mighty pace over the past 10 years, however, to simplify this miracle to solitary policy changes such as the legalization of coca farming, a deeply personal matter for Morales, or other various social policies noted by the authors is to miss the point completely.

As a public service, we present to you today the short list of reasons why Bolivia is experiencing an economic miracle in the eyes of many Westerners:

Benford’s Law, which would account for Bolivia’s rapid relative growth. As a country, it was near the bottom of many world measures in terms of economic statistics. As such, things tend to go up from a low level quickly on a relative basis.
Currency policy: The Boliviano trades tightly with the USD similar to the Yuan. This is due to the fact that much of the country’s savings are held in dollars. Currency stability = real growth
Legalize it: While the legalization of coca is controversial, the removal of regulations has opened up a wild west of trade and attendant economic activity.
Anarchy reigns: Ever since Simon Bolivar freed it from Spanish rule in 1825, Bolivia has had 81 Presidents and been ruled by various “Juntas” or forms of military rule 9 times. By contrast, the US has been around for 50 years longer and had just 44 Presidents. If our theory that Anarchy produces stability holds, it would follow that the Bolivian economy is one of the most resilient on the planet, one that cannot help but grow from a solid base.
Evo’s Charisma: While Evo Morales is often chided, he is simple and lovable at heart, an anomaly in the cesspool of modern politics. He has drawn a great deal of positive attention to Bolivia as the first indigenous President in the nation’s history. This has given Bolivia international exposure not before seen.
The Open Letter: While it is a longshot, perhaps Evo has read our open letter to him and is secretly implementing our policy proposals.
While Bolivia was extremely poor in the eyes of the world, yet rich in so many ways.

We love Bolivia, it is one of the most precious, pristine, and complicated places on the planet and we are honored to call it our second home. While speculation as to what has caused the current economic miracle there will continue, we know one thing to be true:

It is Bolivia’s time.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for October 27, 2014

Copper Price per Lb: $3.08
Oil Price per Barrel (WTI): $80.66

Corn Price per Bushel: $3.63
10 Yr US Treasury Bond: 2.26%
Bitcoin price in US: $350.95
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,225

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.9%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 16,818
M1 Monetary Base: $2,747,700,000,000

M2 Monetary Base: $11,514,900,000,000

October 16, 2014 David Mint

BofA FX Strategist breaks down the state of G10 Currencies

10/16/2014 Portland, Oregon – Pop in your mints…

Yesterday we had the pleasure of hearing a presentation by John Shin, the G10 FX Strategist at Bank of America. Mr. Shin is highly intelligent and a deft presenter, as one would expect from someone of his caliber (Harvard PhD in Econ, etc.) He also managed to make the material, essentially a rehash of Central Bank rate policy over the past several years through today, somewhat entertaining and relevant.

One of the big takeaways from the presentation was that the ECB has not been performing well in its role when compared to the FED, Bank of England, and Bank of Japan, against which it is often compared. Mr. Shin acknowledged that in many cases their hands are tied as, while they have the experience, they seem to struggle with their mandate, to maintain a stable currency, as they are vilified in a world where other Central Banks have taken stimulus to extremes once thought unimaginable.

The Euro is a very important currency. The Euro and the ECB as its managing institution are also very young relative to their counterparts. Making their job even more difficult is the fact that they are managing the currency for the Eurozone, whose internal fiscal and market dynamics at time defy analysis if not logic. Here at The Mint, we recognize that the ECB is simply making the best of what’s around as they constantly mend the currency union that holds what is at times a tense economic union together.

Mr. Shin also spoke at length about the Unemployment rate in the US and the associated workforce participation rate (roughly 64%) which has rapidly declined due to, according to Shin, a roughly 50/50 mix of demographic and economic factors. He also put the workforce participation rate in perspective, as it is still above where it was in the 1960’s, roughly 59.5%.

Generally, he was bullish on the US Economy and the US Dollar, and had pegged his expectations for FED rate increases to mid-next year. It will be interesting to see if his call plays out.

After the presentation was finished, we asked him for a nugget of advice in terms of what his one Key Indicator was to keep a pulse on economic activity. He said that, while they track many indicators, as one would expect, there is none that speaks more to the contemporaneous state of the US economy than the monthly jobs numbers. Concretely, when they top 200,000, the economy is in good shape, anything below that is a bad thing in his view. He said no other data point correlates so well with other economic growth indicators.

So there you have it, the dollar will remain strong and as long as the economy adds 200,000 jobs or more per month, all is well from the perspective of one of B of A’s best and brightest.

Mr. Shin is in charge of the “World at a Glance,” which is their flagship publication which highlights the bank’s key forecasts in FX, rates, and commodities. An extremely interesting read put together by some of the best in the business.

Will his forecasts on FED rate increases come to pass in mid-2015? If today’s market action is any indication, low rates could be with us for a long time to come.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for October 16, 2014

Copper Price per Lb: $2.98
Oil Price per Barrel (WTI): $83.02

Corn Price per Bushel: $3.52
10 Yr US Treasury Bond: 2.15%
Bitcoin price in US: $391.63
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,239

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.9%
Inflation Rate (CPI): -0.2%
Dow Jones Industrial Average: 16,117
M1 Monetary Base: $2,815,400,000,000

M2 Monetary Base: $11,513,000,000,000

October 3, 2014 David Mint

5.9% and why it doesn’t matter

10/3/2014 Portland, Oregon – Pop in your mints…

Today the BLS reported that payrolls grew in September and that the stated unemployment rate dropped to 5.9%. They also published the labor force participation at 62.7%. The handy chart below from the folks at Business Insider shows how steeply labor force participation has dropped over the past five years.

Labor Market Participation aside, the 5.9% unemployment is exciting for banks. On one hand, it can be seen as a sign that more people are working and theoretically becoming creditworthy. This is big because consumers with deposits are cherished in the Basel III framework that they are painfully working their investment ladders into.

On the other hand, it is seen as just high enough that the Federal Reserve will not raise short term interest rates for fear of “derailing the recovery” or whatever phrase Janet Yellen chooses to employ in her latest effort to mask the brutal fact that they are continuing to provide money free of charge to a painfully inept banking cartel.

While much will be written about today’s “Goldilocks” job report, it matters not in terms of Fed policy. The Fed will continue to offer money free to banks until they are certain that Basel policy reforms will not inadvertantly cause (rather than prevent, as they are designed to do) the financial crisis. Meanwhile, in the real world, the cost of labor, meaning the cost of hiring someone who can actually perform a specific task, is about to skyrocket.

The reason for this is that there remain severe imbalances in the labor market caused by recent advances in technology, namely cloud based administrative services and logistics, which are now colliding with a relative decline in the recent productivity gain that said technology was providing. While large productivity gains having been the norm, there is soon to be a lack of persons who have the requisite skills to run such systems efficiently, which means that those productivity gains will at a minimum not continue and may even be lost.

There is also another labor undercurrent that the BLS data does not capture. This is the large scale disruption of entire industries that the cloud and logistics revolution is enabling.

Indeed, there is much more to the labor market than a tidy percentage point can express, as nearly five years of ZIRP is pushing the division of labor to new extremes. Employers, Employees, and the BLS may soon become archaic terms, as American Society moves towards outsourcing on steroids.

Today’s 5.9% is little more than bad information, unless of course, you are a banker, in which case it means that the Goldilocks days are here again, and the Fed’s subsidy, a license to strip mine the earth that is provided on the backs of its inhabitants and nature herself, will continue until further notice.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for October 3, 2014

Copper Price per Lb: $3.04
Oil Price per Barrel (WTI): $89.68

Corn Price per Bushel: $3.23
10 Yr US Treasury Bond: 2.45%
Bitcoin price in US: $377.60
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,192

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.9%
Inflation Rate (CPI): -0.2%
Dow Jones Industrial Average: 17,015
M1 Monetary Base: $2,833,300,000,000

M2 Monetary Base: $11,418,000,000,000

Economics, Politics

The New Labor Market – Scotland’s Lesson to Labor

September 19, 2014 David Mint

9/19/2014 Portland, Oregon – Pop in your mints…

The results of the Scottish referendum on independence are in, and in the maneuvering leading up to the vote as well as the results themselves, the Scottish question has brought to light a new dynamic that many economists, including yours truly, have been late to properly identify: The astronomical rise in the cost of labor that is on the horizon.

What do Scottish/English politics and the labor market have in common? Nothing, really, save the dynamic between an overlord (England/Employer) and underling (Scotland/Employee), and the rapidly changing status quo.

First, a brief overview of the Scottish referendum from an economic standpoint. Astute readers will note that we have an extremely basic understanding this. That said, the little we do understand serves our metaphor. As such, we dare not risk deepening our understanding at this point.

Our aforementioned understanding is the following: As part of the United Kingdom, Scotland enjoys a £32 Billion per year block grant, for which it cedes approximately £7 Billion per year in North Sea oil tax revenues, and approximately £16 Billion in other taxes rendered to England, bringing England’s net subsidy to Scotland to roughly £9 Billion per year. You can read more about the economics of Scottish Independence at the ever Clairvoyant Market Oracle.

Scottish Independence YES Vote Panic

As you can see at the end of the above video, the chances of Scotland actually voting “Yea” for the referendum were extremely far-fetched and rightfully cause for panic. Furthermore, we observe that the reaction of the English, predictably, was to cave to Scottish demands for autonomy and, ultimately, an increase in the net subsidy in exchange for remaining part of the UK.

As the Scottish economy represents roughly £160 billion annually, it is clear that the £9 billion hit in terms of the subsidy loss would be devastating. Devastating as it may have been for the Scottish people, the loss was at least calculable and to some extent containable.

On the other hand, while England appears to have forfeited a good deal of autonomy, not to mention being out a net £9 billion on the Scottish subsidy, their zeal to keep Scotland in the UK is explained by one simple fact:

Scotland is irreplaceable, and for England to forfeit its allegiance now is not only to turn its back on a union forged over the course of 300 years, it is to look forward to a future of Balkanization and an incalculable demise in its political and economic power as the sun finally sets on an Empire that at one time could rightfully claim that the sun never set upon it.

Do you now see how the metaphor applies to the labor market fellow taxpayer? In simple terms, Employee (Scotland) threatens to leave Employer. Employer reacts by giving employee more autonomy and pay.

This scenario is playing out across certain cross sections of the US Labor market and is about to have a tremendously disruptive effect on what many have come to understand to be the status quo in terms of Corporate employment.

While it may be true that, unlike Scotland, most employees are replaceable, it is also true that with each employee that walks out the door, an incalculable amount of synergies and institutional knowledge leaves with them. Couple this loss of intangibles with the fact that the employee that will be hired to replace them is likely to be 1) More expensive, 2) Less productive, and 3) Less loyal than the one that just walked out the door.

Like Scotland, many employees are finding that, while they have something to lose by leaving their employer, the loss is calculable and often more than compensated for by the potential gains awaiting them as the current game of musical chairs disrupts the low cost of labor, a hidden subsidy that many corporations have come to rely on.

While it may appear that employees, like Scotland, have much to lose and little to gain by declaring their independence and seeking new alliances, in reality it is the corporate status quo, such as England, that stand to lose the most in this latest game of musical chairs.

In the end, England will pay dearly for maintaining its alliance with Scotland. Will your employer pay dearly for you? You may be surprised by the answer.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for September 19, 2014

Copper Price per Lb: $3.13
Oil Price per Barrel (WTI): $92.41

Corn Price per Bushel: $3.31
10 Yr US Treasury Bond: 2.58%
Bitcoin price in US: $396.09
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,216

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 17,279
M1 Monetary Base: $2,747,800,000,000

M2 Monetary Base: $11,479,800,000,000

August 29, 2014 David Mint

The US Economy is Already Going Gangbusters

8/29/2014 Portland, Oregon – Pop in your mints…

Amid what has become a nearly constant stream of alarming news from the Middle East and the escalation in the Ukraine conflict, the US Economic growth has quietly been amassing the fuel for what is shaping up to be an impressive period of extended growth.

Readers of The Mint are aware that we follow a baker’s dozen of key indicators, which are presented at the end of each edition, in order to gauge the actual state of the economy via money supply growth and some of the key inputs and outputs as to what expectations are as to the future state of the money supply. Setting aside the fact that what we use as money is not really money at all, but not so cleverly disguised debt, the state of the money supply gives us a sense as to what will happen in terms of employment and asset prices, the fodder which ultimately impacts GDP. Overall, our key indicators have been steadily signaling growth ever since 2009.

While the fuel has been amassing for approximately 5 years now, it is now poised to be coupled with the proverbial spark necessary to spur growth rates reminiscent of the late ’90s – 2007: Improving sentiment.

You won’t see improving sentiment on TV, hear it on the radio nor read about it in the news. You see, improving sentiment doesn’t draw people to read the news, doom and gloom does.

Improving sentiment can be seen in a very conspicuous place in American cities: Increased traffic, be it car, pedestrian, freight, or public transit. When people are out and about, they are generally doing something. The fact that more people are out tends to beget additional economic activity. It is largely a chicken and egg question but in the cities, when you see traffic increase, it is a good bet you are witnessing economic growth first hand.

Have you seen traffic on the rise where you are? In Portland, it has been staggering.

Confirmations that the US Economy is already going gangbusters and may be poised to go into hyper drive for at least the next 5 years are beginning to pop up in the mainstream media:

You might ask what will drive this expansion? While there is truly no catalyst or new age industrial revolution on the horizon, there is an avalanche, tsunami, (insert your favorite metaphor) of money itching to get out of government bonds and into something, anything that will paradoxically give it increased yields and security.

As in the past, this money will find its way into real estate, the much scourged asset class that is now surprisingly affordable on a relative basis. Once that happens, we know the script, and the expansion expected by the market in the first chart above seems probable, indeed, inevitable.

Here at The Mint, we have been beating the drum of recovery for some time now by virtue of following our “MINT Perceived Target Rate” which lags the more famous Federal Reserve Target rate by 39 months, the estimated amount of time it takes for Fed policy to hit main street. Through this lens, we see at least 39 months of accelerating growth in the future. Once sentiment kicks in, the game will really be on, and the time to position oneself is now.

Is it time to jump back into real estate? Back in early 2013, Nadeem Walayat, at the Market Oracle gave this prognosis for the US Housing Market, which today is holding true to form, as most of Mr. Walayat’s analysis does.

One would do well to mind his final word of caution, do not make the mistake of leveraging oneself too far. If you do, you must time the exit perfectly, and who needs that kind of pressure? The inflationary mega trend to which he refers and our Key Indicators confirm will be with us a very long time, which means real assets trump money in the back any day of the week. The key is to stay liquid.

Stay tuned and Trust Jesus.

Stay Fresh!

M2 Monetary Base: $11,406,000,000,000

Key Indicators for August 29, 2014

Copper Price per Lb: $3.19
Oil Price per Barrel: $95.08

Corn Price per Bushel: $3.62
10 Yr US Treasury Bond: 2.35%
Bitcoin price in US: $508.89
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,287

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 17,103
M1 Monetary Base: $2,732,600,000,000

Book Reviews, Economics, Education

Finance Smurf – A Post-2008 look at a Classic Graphic Novel

August 22, 2014 David Mint

8/22/2014 Portland, Oregon – Pop in your mints…

In November of 1992 Pierre Culliford, a renowned author and illustrator published a graphic novel of tremendous gravity and startling economic insight. The novel would be his last, as on December 24, 1992, Culliford suffered a heart attack at his home in Brussels and passed away the same day.

Culliford is known by his nickname, Peyo, and he was the creator of the Schtroumpfs, who are better known by their English name, the Smurfs.

Peyo’s final novel, Finance Smurf, at long last has an English translation which became available on July 1, 2014.
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Seen through the lens of post 2008 skepticism with regards to the financial system that continues to hold the world in shackles, the novel seems especially timely, and the marketing copy on the back cover, which reads:

“99% of the Smurfs have left the Smurfs Village! No one but the Finance Smurf wants to occupy the Smurfs Village!”

appears to be nothing more than an attempt to carry on the rallying cry of the Occupy Wall Street movement of 2011. However, as one opens the cover and peers into the world of Peyo’s Smurfs, it is clear that the author intended to call into question everything the reader thought they understood about money, and in large part, he succeeded.

Occupy Wall Street Poster — “Wall-Street-1” by http://26.media.tumblr.com/tumblr_lsd8ucoCX91qbrgmdo1_500.jpg. Licensed under Fair use of copyrighted material in the context of Occupy Wall Street via Wikipedia – http://en.wikipedia.org/wiki/File:Wall-Street-1.jpg#mediaviewer/File:Wall-Street-1.jpg

While the Smurfs are, well, the Smurfs, and as such will invariably be forever adorable and highly entertaining in the eyes of most of humanity, here at The Mint we will look past the novel’s obvious merits of providing page after page of blue colored cuteness and highlight our observations of the merits of the economic arguments and questions that it raises as well as the metaphors employed via the roles played by long-standing characters in the following review. Enjoy!

Finance Smurf

The novel Finance Smurf is set in Smurfs Village. It begins with the incapacitation of Papa Smurf, the Smurf who keeps Smurf Village safe and orderly, who is laid up by a laboratory accident. In this sense, Papa Smurf may be seen as a metaphor for a benevolent dictator or embodiment of a divine being for the Smurfs. This is important, as it is the absence of the ongoing intervention of Papa Smurf in daily life that gives room for the mischief in the novel to occur (Smurf fans will quickly recognize this plot device employed by Peyo).

It then falls to Finance Smurf to seek an antidote, which takes him to the world of humans. It is there that he learns the concept of money and becomes fascinated by it. It is interesting that he does not appear to immediately recognize the creation of money as a means to enrich himself.

Indeed a hallmark of the Smurfs is the communist (or socialist) structure of their life in the Village. Here at The Mint, we do not find this odd, as we have explored in-depth here at The Mint the fact that socialism is the norm in self-supporting economic systems the size of Smurfs’ Village who have a Papa Smurf, so to speak, as a universally respected authority figure. What drives people to Capitalism is the need to tacitly make economic decisions in the absence of a universally respected authority figure, hence Peyo’s need to sideline Papa Smurf at the outset for the narrative to play out.

Finance Smurf returns to Smurfs’ Village with the antidote, as well as a burning desire to introduce money and the human system of trade to the Smurfs. First, he reasons that he needs gold coins with Papa Smurfs likeness on them to use as monetary units. He goes to Painter Smurf for the artistic rendering, Sculptor Smurf for the mold for the coins, Miner Smurf for the gold (Miner Smurf, ironically, has a pile of gold sitting there which he has no use for, as he is diligently extracting flint with his pick axe). Handy Smurf then melts the gold and makes the coins using the mold.

Here we interject another observation. The day-to-day activities of the Smurfs are dependent upon their profession (or lack thereof). In the absence of money the Smurfs simply do what they do. There are rarely specific value judgments made with regards to what the Smurfs do, though all of their actions appear to be motivated by the needs of their fellow Smurfs and throwing the occasional party. This system, while idyllic, assumes that everyone wants to maintain the status quo. The maintenance of the status quo is at once the pillar of strength and the Achilles heel of Socialism.

It is clear that for Painter Smurf, Sculptor Smurf, and Handy Smurf, the requests of Finance Smurf are outside of the status quo. However, being good Smurfs, they go along with it and hope for the best.

With the coins made, Finance Smurf calls a meeting of all Smurfs, introduces the concept of money, and hands out an equal share of the coins to each Smurf. The Smurfs initially do not know how to operate in the new system, so Finance Smurf helps them by doing some back of the napkin costing analysis of their activities. It is worth noting here that this activity is also the hallmark of Socialist systems, the central planning of prices.

As the Smurfs begin to trade, the predictable begins to happen. The productive elements of society, Farmer Smurf, Handy Smurf, Baker Smurf, and so on, soon have more coins than they know what to do with. They take them to Finance Smurf, who is now acting as the bank, to be invested. On the other side, artists such as Harmony Smurf and Poet Smurf find themselves short of money and then mortgage their houses to Finance Smurf. Lazy Smurf is hardest hit.

If it was not obvious to readers to this point, Finance Smurf begins to embody Central Banks and Wall Street. At one point, Baker Smurf calls out Finance Smurf for lending at 10% but only giving him a 6% return. In a nod to the foreclosure crisis, Finance Smurf becomes owner of all of the real estate in Smurfs’ Village. There is a reference to privatization of public works, as when the bridge goes out, the Smurfs look to Finance Smurf to pay for the replacement, which he does in exchange for the right to collect a toll. Even corruption is broached as there is some price-fixing for lumber on the bridge project orchestrated by Finance Smurf.

In short, Finance Smurf comes to embody everything that everybody hates about today’s financial system. The rest of the Smurfs, fed up with the swift disaster that the Money system introduced by Finance Smurf has brought upon them, leave to build another village. In this action, they take the only logical step in the face of monetary tyranny. It is a wonder that more of us do not venture out and do the same today.

In terms of economic lessons to be taken from Finance Smurfs, there is little more to be gleaned.

The remaining Social/Political lessons are taught via the intervention of Gargamel, the Smurfs’ arch nemesis. Gargamel counterfeits coins, echoing a form of economic sabotage employed by nations at war, and lures the Smurfs to them, relying on their newfound greed to be their downfall. Fortunately, Papa Smurf returns and wisely guides the Smurfs away from the trap.

In another odd twist, Papa Smurf, once he becomes aware of the new Money system that has been introduced during his time of incapacitation, does not act to stop it, instead, he bumbles along with it as many a powerful emeritus would do, until the Smurfs ultimately leave to build another village, safely away from the scourge of money.

Conclusions

As an adult reading Finance Smurf in the post 2008 socio-economic landscape, one gets an eerie sense that Peyo was on to something back in 1992, and cleverly communicated it to the world. While the ongoing economic analogies presented in the novel are quite clear, Peyo proves stunningly accurate in his depiction of Finance Smurf inventing money and introducing it to the populace, along with a monopoly on usury, for in this way Central Banks unwittingly enslave the world by promulgating the debt based money supply.

The Peyo’s final triumph is his clairvoyant depiction of the Smurfs’ unanimous decision to simply leave the village that was their happy home before it became the illegitimate property of Finance Smurf, and build another village just a stone’s throw away, yet with one marked difference; the absence of money and its creator.

True to form, the Smurfs reconcile with Finance Smurf who repents of his ways. For Smurfdom, and indeed our world, was never meant to live under the tyranny of perpetual debts. The Smurfs in Smurfs’ Village, who had a small-scale debt problem which quickly got out of hand, simply left and went elsewhere. Jewish law called for a Jubilee, recognizing both the necessity of money and finance for large-scale commerce and the necessity of liberation from the snares that they created amongst what would otherwise be a brotherhood of man. What, then, is the solution for an entire world living under the scourge of a 100-year-old debt based monetary system?

Following the Smurfs may not be a bad idea after all.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for August 22, 2014

Copper Price per Lb: $3.20
Oil Price per Barrel (WTI): $93.50

Corn Price per Bushel: $3.65
10 Yr US Treasury Bond: 2.40%
Bitcoin price in US: $518.00
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,280

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 17,001
M1 Monetary Base: $2,694,800,000,000

M2 Monetary Base: $11,393,400,000,000

Economics

Wall Street smells the wage price spiral

August 1, 2014 David Mint

8/1/2014 Portland, Oregon – Pop in your mints…

Yesterday, the US stock market finally experienced mild selloff. Finally, we say, because it had continued to rise even as the most recent series of crises in the Middle East flared up in conjunction with the downing of Malaysia Air flight 17 in the Ukraine conflict, which has become a flashpoint for deteriorating relations between Russia and the West.

Did investors just wake up to these crises and begin to fly to safety?

Don’t kid yourself, fellow taxpayer, the events above were actually bullish for the market. In the altered universe that the use of debt as money for the past 43 years has created, destruction and war = GDP growth + a population submitted by fear, afraid to ask for too much while others experience sacrifice.

When debt is money and destruction is growth, war is the ultimate boondoggle.

What truly has investors spooked at the moment, albeit mildly (despite what the headlines imply) is the continued march of evidence that the proletariat is now stepping up and demanding wage increases at an alarming rate.

Take the Employment Cost Indicator above and add it to the number of unemployed workers per job opening below and you come to one inescapable conclusion: The Wage price spiral is upon us.

The wage price spiral, that scourge of corporate profit margins which has been accelerating since March of this year (according to our unscientific calculations here at The Mint), has finally caught the attention of Investors, who in turn are selling on the off chance that the Federal Reserve will;

1) Take notice and,

2) Take action by increasing interest rates

To those who have been spooked by the selloff we offer a word of comfort: The likelihood that the Federal Reserve takes action to raise rates in a meaningful way is slim. Assuming they were to raise rates, any action at this point would take at least 39 months to matter, crucify fixed income in the short term, and trigger large scale bankruptcies the likes of which they have spent the past 5 years trying to mop up.

However, even if the Fed had the desire to raise rates they would be unable to do so. They have lost any meaningful control of the traditional rate mechanisms through an incomprehensible mix of monetary policy (think Quantitative Easing) and regulatory action (chiefly Dodd-Frank) some time ago. All they have left us rhetoric, which is increasingly falling on deaf ears.

Reality is far removed from Washington DC and Wall Street. There are very large piles of money that are on the fence between seeking safety and return, and that pile is growing faster by the minute. The bigger it grows, the greater the likelihood that it will be deployed at a lower risk adjusted return. The decrease in returns = increased wages to the proletariat as the pendulum swings the other way in world’s socialist monetary system.

The wage price spiral is here, and it is about to make a hot mess of markets everywhere. Ask for a substantial raise or find another job, especially if you are in an industry with ultra-tight demand for labor. You are likely to be pleasantly surprised.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for August 1, 2014

Copper Price per Lb: $3.22
Oil Price per Barrel: $97.39

Corn Price per Bushel: $3.55
10 Yr US Treasury Bond: 2.52%
Bitcoin price in US: $598.00
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,293

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.3%Dow Jones Industrial Average: 16,498
M1 Monetary Base: $2,825,900,000,000

M2 Monetary Base: $11,348,900,000,000

Economics

Negative rates and the no bid Repo: It’s not your father’s overnight funding market

July 14, 2014 David Mint

7/14/2014 Portland, Oregon – Pop in your mints…

A great deal has occurred since our last correspondence, most of it bad news for what passes today as monetary policy.

Fellow taxpayers have no doubt noticed that our once faithful correspondence has been less than faithful over the past several months. While explanations amongst chums the likes of which we have become are unnecessary, we offer a brief glimpse as to how The Mint has been spending his precious time as of late.

For starters, we have been frantically reconstructing 2013 and making various systems upgrades on our most recent assignment. Now that the work has been done and passed audit, we are moving through regular compliance reports and are about to begin the second part, (our personal favorite) of our not quite patented one/two accounting and treasury systems overhaul: The treasury overhaul part of the program.

Here we digress into what we consider our unique philosophy on data processing with regards to accounting information systems. If you could care less about such matters, please scroll to the next bolded heading to return to

A mere 11 years ago, we considered ourselves an accountant. We acted like an accountant, worked like an accountant, even smelled like an accountant (if indeed accountants can be said to have a smell about them.

Then we went to Spain, and had nothing short of an epiphany, which is as follows: Real business people could care less about proper accounting, they simply want the accounts collected and the bills paid, a steady stream of cash in the bank, and they want to get real-time financial metrics which will let them both know how their past decisions have fared and, more importantly, allow them to make better decisions about the future.

With this epiphany fresh in our mind, we realized that most accounting systems, while built by programmers to serve the business person, had been hijacked by accountants when they were set up, in most cases rendering the information the business person was to receive subject to seemingly infinite torture by the accountants before it could be presented, at which time the information was neither timely or useful to the business person.

With this realization, we developed our two-step approach to assisting business people in reclaiming their accounting data. The first step involves ensuring that the accounting system they are using is both adequate (it may come as a shock that many companies pay too much for systems that are no longer a good fit for them) and set up to capture and report the business’s financial data in a way that facilitates high level decision-making.

The second step involves addressing the issue of the timeliness of the data. We realized that in a great majority of transactions, the bank received the data before the accounting department did, and much valuable time and effort was wasted by waiting for the accounting department to input data into the accounting system, much of which was provided by the bank rather than internal sources, and then reconciling the system to the bank statement. The entire process was backwards, so we decided to perform data processing directly in the banks’ treasury management systems, where the transactions are initiated, approved, and executed, and have the bank data be easily uploaded into the accounting system, where it can be matched with vendor and client data and properly classified.

There you have it, it is much easier said than done, but once our program is complete, most companies we engage can get by with half of the accounting/fiscal personnel they had before, get their data in a timely and coherent manner, and usually end up saving money on their systems to boot.

In any event, between earning our daily bread in the above manner, watching the World Cup, and editing a taxonomic paper on Central American land crabs (which can be seen here: http://biodiversitydatajournal.com/articles.php?id=1161), we have been following the disintegration of the debt based currency system from a comfortable distance. Our observations on the most recent ruptures follow:

The No bid Repo: It’s not your father’s overnight funding market

In the late 1980’s, the Federal Reserve had just begun what would be a series of automatic bailouts to the larger financial system. After Black Tuesday in 1987, it became clear to most sober observers that the Fed would do everything in its power, which at the time was limited to rigging short-term interest rates, to ensure that financial markets remained liquid at all costs.

Perhaps not coincidentally, in the late 1980’s, Oldsmobile ran a series of commercials with the tagline, “it’s not your father’s Oldsmobile,” which seemed to be a vain attempt to minimize the “Old” and emphasize the “mobile” part of its name. In case you don’t remember how exhilarating it was, videoarcheology.com brings it to life for us once again:

What did the strategy of the Fed and the strategy of Oldsmobile have in common? They both assumed that demand for their product, no matter how unappealing it was, would be infinite. Oldsmobile gave up the ghost in 2004, maybe people did want their father’s Oldsmobile after all.

The Fed is still hard at work, but their product, the debt-based currency used by most financial institutions in the United States and indeed throughout the world, is going the way of the Oldsmobile.

The Federal Reserve got by for nearly 95 years by monopolizing the ability to provide something for nothing, something that appealed to governments, companies, and consumers alike. They substituted debt for money, and in the process opened up a world of possibilities never before fathomed.

The plan went well, people began to circulate the debt in place of money, with those closest to the Fed paying the least and those furthest way paying more, and people toiled day in and day out to move further up the food chain.

Sure, using debt as money left the occasional sinkhole in the economy, on those rare occasions when more debts were being cancelled than issued, but the Fed simply lowered interest rates to provide adequate incentive for people to demand more debt, lowering the perceived price of getting something for nothing.

Now, circa 2014, the Fed has lowered interest rates to zero and has taken the extra step of creating even more debt of its own to circulate. While things should be going gangbusters at the Fed factory, we open the pages of the financial news to find that:

a) The Fed can no longer control the interest rate mechanism as it did before and;

b) The Repo market, which funds $1.6 trillion in short-term loans every business day, is going no bid on an increasingly regular basis thanks to the 2010 Dodd-Frank Act, which was supposed to fix these sort of problems.

{Editor’s Note: For a primer on the Repo Market, read this paper by the NY Fed: Key Mechanics of the U.S. Tri-Party Repo Market, we dare you}

The Federal Reserve’s debt based monetary system has reached its theoretical limit. While the ECB has toyed with the idea of negative interest rates, the US market, specifically US Treasuries which are sucked into the Repo Market nightly, is rendering negative rates on its own, and the Fed is powerless to stop it.

In layman’s terms, the game has flipped on the Fed, and now people and companies are essentially saying “lend me $100 today, and I’ll pay you back $97 in a year and we are square.” Crazy as it may sound, this is the reality on the fringe of the credit markets, and it is the price of continuing to deal in a debt-based currency that is passed its prime.

Let’s face it, Oldsmobile wasn’t cool in 1988. They had tinkered with it to such a degree that it would never again be your father’s Oldsmobile, and that was not a good thing. In the same way, between QE, Operation Twist, and near zero short-term rate targeting, Ben Bernanke has so severely mangled the Fed’s balance sheet with his tinkering that maintaining the integrity of the US dollar and US Treasuries as any sort of measure of reliable benchmark is all but impossible.

Now, the engine of the Fed’s debt based currency is beginning to lose speed via negative nominal rates, and Janet Yellen is looking into the toolbox, only to realize that Ben left most of the tools rigged in the engine of the Fed’s Balance sheet, and that moving any one of them will cause a catastrophic failure of the currency. Not to mention that long-awaited, highly inflationary wage – price spiral is about to kick in.

Academic economists will one day struggle to explain what is happening now, while inflation rises, interest rates continue to dip further, going negative at the top of the financial food chain, and the Fed is left with nothing but rhetoric with which to attempt to execute monetary policy. This is likely to get ugly and, if possible, defy the laws of finance and perhaps even mathematics before the game is up.

Stay tuned and Trust Jesus.

Stay Fresh!

M2 Monetary Base: $11,284,500,000,000

Key Indicators for July 14, 2014

Copper Price per Lb: $3.25
Oil Price per Barrel: $100.51

Corn Price per Bushel: $3.78
10 Yr US Treasury Bond: 2.52%
Bitcoin price in US: $618.00
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,339

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.1%
Inflation Rate (CPI): 0.4%
Dow Jones Industrial Average: 16,944
M1 Monetary Base: $2,961,000,000,000

Economics, Monetary Theory, The Mint

The ECB negative rate announcement is a cannibalistic non-event

June 22, 2014 David Mint

6/22/2014 Portland, Oregon – Pop in your mints…

On June 5th, the European Central Bank made modern Central Banking history by providing the world with its first announcement of what they call a negative interest rate. For those who may be scratching their heads at the concept of a negative interest rate, we offer the following layman’s definition:

It is a commission that is charged every month for holding too many Euros in the wrong place.

In the mind of the clever central banker, a negative interest rate provides a simple disincentive to hoard Euros. In his or her mind, the way to invigorate the European economy is to force Euros into circulation by turning them into a sort of hot potato, though at -0.10% the analogy is more akin to a potato emanating scarcely enough heat to melt a pat of butter.

Following the infallible logic of the central banker, the banks will take the money and lend it, as putting 100% of deposits at risk via a loan in a terribly disjointed economic zone is clearly a better alternative that loosing a guaranteed 0.10% annually by parking it overnight at the ECB.

This would be a brilliant solution were the simple hoarding of Euros the only thing ailing the Euro system. Unfortunately for the ECB and indeed, Euro holders in general, the problem with the Euro is that it is dying a strange death at the hands of deflation and strangulating the European economy in the process. Following this set of facts, it would hold that the safer bet for those who find themselves holding excess Euros would be to pay down higher rate liabilities in lieu of holding Euros overnight at the cannibalistic ECB, whose actions, while for the moment are foreseen to be a non-event, will ultimately lead to an implosion of the 15 year-old Euro currency.

What is lost on the European central bank is that they are managing a debt-based currency that looks like money but smells something much different. While charging a commission on bank deposits in hopes of getting currency flowing again may seem a good idea, the dynamics of the debt-based currency make this strategy akin to economic suicide. Fabian for Liberty appears to take a slightly different slant on the subject and arrives at the same conclusion:

Debt is the lifeblood of modern currency, and a large part of what gives debt based currency its allure is the illusion of getting something for nothing in the form of usury. On June 5th, the ECB pierced the veil on interest rates and the illusion of getting something for nothing along with it. This has never been attempted by a modern monetary authority, and once again the ECB has shown that if there are errors to be made in the management of debt based currency, they are willing to make it.

Stay tuned and Trust Jesus.

Stay Fresh!

M2 Monetary Base: $11,306,300,000,000

Key Indicators for June 22, 2014

Copper Price per Lb: $3.10
Oil Price per Barrel: $106.83

Corn Price per Bushel: $4.53
10 Yr US Treasury Bond: 2.62%
Bitcoin price in US: $599.07
FED Target Rate: 0.10%
Gold Price Per Ounce: $1,315

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.3%
Inflation Rate (CPI): 0.4%
Dow Jones Industrial Average: 16,947
M1 Monetary Base: $2,728,900,000,000

Economics, Personal Finance

It is Junuary in the Land of Giants

June 1, 2014 David Mint

6/1/2014 Portland, Oregon – Pop in your mints…

It is Junuary. For readers who have not had the pleasure of living in the Land of Giants, Junuary is the time of year when one looks at their calendar to find it clearly indicates the month of June, yet a look outside at the rain and colder temperatures seems to confirm one’s instinct that it is indeed January.

Fortunately, one way or another, Junuary yields to July, and the summer inevitably arrives in full force in the Pacific Northwest.

The US economy appears to be enjoying a Junuary of its own. In terms of monetary policy, it is January. On one hand, as GDP clocked in at a negative 1% for the first quarter of 2014, which in hindsight is quite natural when an economy that runs on a credit based currency created by fiat absorbs a loss of $40 Billion of anticipated new money flows with more reductions to come.

Yet at the same time, it is June. Our key indicators here at The Mint reflect a situation in which the effects of monetary policy are quite the same as they have been for some time now, from the standpoint of the real economy, Q1 was business as usual in this recovery. {Editor’s Note: Bitcoin, for all its detractors, has weathered the Mt. Gox bankruptcy just fine, and now sits at an astonishing $646 USD per coin. Yet for all its price resilience, economists continue to call for regulation. The point of Bitcoin is that it cannot be regulated, and the position that it can be regulated stems from a wrong understanding of the role of money in general and Bitcoin’s role in the monetary strata on the part of the regulators.}

Further, the FED’s favorite indicators such as Unemployment, which now sits at 6.3%, average hourly earnings, up 1.9% year over year, and headline CPI is up 1.6% with core CPI up 1.4%. Similarly, housing prices continue their meteoric rise and consumer confidence continues to improve.

So what is it? January or June? If you are a financial commentator, it looks like January, with financial disaster just around the corner despite the improved data.

However, if you look beyond the numbers to what is actually occurring, it is June, with a substantial risk of a financial forest fire. The tinder on the ground has been there for nearly 5 years now; the Federal Reserve’s relentless money creation has left fuel in every corner of the forest. The only reason the landscape has not gone up in flames as a result is that consumer have not dared start a fire of their own.

Now, consumers are beginning to start their fires, and the trifecta of lower unemployment, wage inflation, and CPI is about to catch the FED completely off guard. Their monetary medicine has a serious side effect, it creates what we refer to as a scorched earth economy, and the dose required to keep the failed system afloat during this last round may take the forest down altogether.

Junuary is here, and July is just around the corner. Inflation is about to become an important part of the economic landscape for the foreseeable future. At first, we may enjoy the pleasant kind, where housing prices and stock rise abnormally with pay bump. However, it will be followed by the unpleasant kind, where coffee and groceries take an outsized bite out of one’s paycheck. The summer will be very interesting indeed.

Stay tuned and Trust Jesus.

Stay Fresh!