At the bottom of every Mint, we include a handy set of data which we consider so important that we have named the compilation ‘Key Indicators.” Taken apart, they are just numbers. They are neither good not bad, they are simply data points.
Taken together, they tell a story. The story of The Mint’s Key Indicators is one of what Nadeem Walayat, over at the Market Oracle, refers to as the “Inflation Mega-Trend.” The phenomenon, in other corners, has been referred to as the “Commodity Super Cycle,” and other superlatives.
The driving factor behind the narrative is that the monetary authorities across the globe are in the process of causing inflation, via direct electronic money printing and intervening in debt markets to create the illusion of low borrowing rates, on a scale once thought impossible.
What makes their inflationary actions all the more sinister is that they are continually trumpeted in the media as necessary due to fears of deflation.
The Inflation Mega Trend, if it indeed is intact, has serious implications for investment strategies. First and foremost, fixed income is dead. Most governmental and institutional debt instruments are issued today at negative real interest rates, meaning that those purchasing them are agreeing, up front, to a loss in purchasing power of the funds.
The classic way to invest in this environment, has been to purchase precious metals, other hard commodities, real estate, and, as one analyst put it, “plastic silverware, toilet paper, really anything real.” Equities have also been a good place to invest as long as the trend is intact, preferably those stocks which are components of the indices which are targeted to rise by the monetary authorities, such as the Dow Jones and S&P 500.
If one is following this investment strategy, the question that must be asked, day after day, year after year, is the following:
Is the Inflation Mega Trend still in place?
The Mint’s Key Indicators are presented to respond to this question. The following is a table which compares each Key Indicator to its level on the same day during the past two years, along with a one word interpretation as to what the annual change in the indicator is telling us:
The Mint’s Key Indicators on October 19
What is striking about this graphic is that, of the three indicators which do not indicate that inflation is continuing, two are, at this point, directly controlled by the Federal Reserve’s actions, the 10yr US Treasury Yield and the FED Target Rate.
Folks, despite deflationary propaganda to the contrary, the Inflation Mega Trend is alive and well. Don’t believe the hype and invest accordingly.
Today we came across one of the most insightful pieces on education that we have read in quite a while. Perhaps we are biased because it we written by a member of our comparatively small generation, or perhaps it is something more. Virginia Heffernan, the national correspondent for Yahoo! News posted an article today entitled:
With what appears to be the benefit of hindsight and a sober look at her own educational experience, she eloquently voices a viewpoint which, almost out of necessity, is quickly moving from the fringe to mainstream thought. A traditional college education, circa 2012, not only fails to offer a competitive advantage in the workforce to those who can set aside four to six otherwise productive years and the untold thousands spent during that time period, it places undue financial and social pressure on both parents and their children from the time of admission to graduation day.
The College Education: A ticket to a rewarding career or four years of indoctrination followed by a trip to debtors prison? There must be a better way. Photo of Harvard Yard in 2009 by chensiyuan
This undue stress is generally attributable to the fact that parents and students alike who find themselves in the middle of a financial commitment which equates to more than a few years worth of wages are collectively questioning the wisdom of throwing money at an investment whose return has turned unacceptably negative in recent years.
The reason for this, as most current economics students may struggle to tell you, is that the college education, like any other economic good, is succumbing to the workings of to the law of diminishing marginal returns. This law is one of the beautiful, immutable natural laws which states that economic activity, if carried on long enough, will reach a point where each additional dollar of capital invested will render a lower return on investment than the previous dollars invested.
This phenomenon is attributable to changes in the underlying supply and demand dynamics which take place as the natural tendency to chase outsized returns drives more people to engage in high margin activities, which increases the supply of that activity’s output. This supply, as it satiates demand, then serves to lower the price of the product until the producers with higher cost structures are driven out of business while producers with lower-cost structures continue producing profitably at lower price points.
The application of the Law of diminishing marginal returns when applied to College degrees in the US
For a period of time, beginning in the 1940’s in the US, it was relatively rare for an individual to obtain a four-year college degree. In economic parlance, there was a scarcity of college educated individuals relative to demand. Those individuals who did obtain a degree received a higher return on their investment in education in the form of higher wages for the rest of their working lives.
{Editor’s Note: We recognize that this analysis ignores the dynamics in the US economy during that time period leading to the demand for college educated individuals in the workforce. For purposes of this example, we submit it as a given to avoid further divergence from our theme.}
As time went on, more and more individuals saw the wisdom in investing in a college education, colleges and universities increased their capacity and course offerings to satisfy this demand. As the workforce continued to demand college educated individuals, this created a virtuous feedback loop in the higher education industry.
This virtuous feedback loop became so normal, as did rising stock prices in the 80’s and rising home values in the 00’s, that seeking to attend a four-year college has become the goal for a great majority of teens.
Circa 2009, the supply of college educated individuals began to overwhelm the demand for their services. At this point, the marginal return on investment for attending a four-year college for many has decreased to the point where it no longer has a positive net present value, the financial criteria most often used by rational individuals when determining whether or not to undertake an action.
Against this dismal backdrop for education entered a phenomenon which is poised to deliver the knockout blow, the widespread adoption of the internet.
While the net productivity gains realized by the advent of the Internet are seen in many spheres, the Internet is maturing to the point that it is now fundamentally changing the structure of education.
Our mother wisely told us, during those difficult years we spent at the University in the 90’s, that the only thing college will teach you is how to access the information you need when you need it.
The advice has served us well, as has Google.
Unlike Heffernan, we do not feel that our college degree is obsolete. In our epoch, it was necessary to attend a four-year school to learn the disciplines of accounting, finance, and treasury which support us today.
However, the internet has fundamentally changed not the disciplines, but the delivery methods of said education. Now, an individual desiring to learn a discipline such as accounting or economics no longer needs to pack their bags to party with others for four years while fitting in class between video games and other shenanigans.
That individual can peruse The Mint, for example, form the comfort of their living room. Then, after leaving the site. thoroughly confused (for which we wish to be held harmless, mind you), they can access any one of thousands of free online tutorials and videos created by capable individuals who will provide an education on a specific subject on demand in a fraction of the time that it takes to obtain a degree.
Gary North has written recently on the YouTube educational phenomenon as well. If one has something to teach the world, it is a small task to obtain a microphone, video camera (think webcam or smart phone), and a YouTube account. Simply teach the class once to a camera, post it, and your done, saving countless hours needlessly spent drooling on yourself as you sleep through class in a lecture hall. This is how a majority of education will be served over the next millennia.
The internet is fundamentally changing the education industry in the same way it has changed communication, and many of our alma maters will soon resemble the US Postal Service, which has struggled in vain to maintain its current state and sinecure structure as the world it grew up in has changed forever.
This analysis does not even address the fact that many four-year colleges have struggled to keep up with the ability to teach the skills demanded by the modern workforce. The net result of this change in delivery methods and competative disadvantage will be the loss of a number of sinecures in the hallowed halls of Liberal Arts colleges across the land.
While the liberal arts and art itself will always find ways to flourish, paying to be forced to read literature that one is not interested is quickly becoming a luxury that college students cannot afford.
There is much confusion amongst economists regarding the effects of the various programs which are currently being run by the largest of the Western Central Banking cartels known as Quantitative easing, better known by its keystroke saving acronym, QE.
For the uninitiated, QE involves the Central Bank issuing currency in exchange for government debt and all other manner of otherwise worthless financial assets provided to it by the banking class. In the best of cases, it provides liquidity for what would be a temporary hiccup in an otherwise healthy economy. In the worst of cases, which most who have taken a sober look at the financial industry would agree we are in, it serves as a backstop for financial asset prices, placing an artificial floor under the price of what passes as collateral in the financial system.
In any case, the Central Bank agrees to swap the wine of its currency for the sewage on bank balance sheets. As anyone who has put this theory to the test will tell you, if you add a teaspoon of wine to barrel full of sewage, you get sewage, while if you add a teaspoon of sewage to a barrel full of wine, you get…sewage.
QE – Sewage in disguise
Following this analogy, the existence of QE means that the currency of all of the Western world is now sewage.
While the pure, hard money Austrian school analyst sees it as a prelude to a hyperinflationary event, the Keynesian sees it as a necessary evil. At this point, there is no real argument that QE, by definition, is inflationary. However, the perverted feedback loop between the Central banks’ issuance of currency, the Governments’ issuance of debt, and the banking sector serving as an increasingly weak middleman, has managed to keep a large portion of the freshly created currency parked in either the Treasury or at the Central Bank in the form of excess bank reserves.
As the logic of the Central Bank goes, once the storm blows over, the stars will align and all of the sewage will turn back into wine. The currency created as a part of QE will simply disappear, as it never really left the FED anyway.
Simple logic, right? You can almost cut the naivety with a knife. The fact is that the freshly minted currency is here to stay. As long as the Governments, Central banks, and banking cartel exist in their present form, none of them can afford for even a cent of the sewage they have created to disappear. It is there for the long haul. All the average man or woman can hope for is that the sewage doesn’t spill off of their balance sheets or work its way to the water supply of the real economy.
All of this is old hat to fiat currency hounds and bond vigilantes. The dangerous new twist which is just now in its infancy is the application of quantum theory to the mix.
Here, we must turn to the razor sharp intellect of Mr. Walayat, whose analysis over at The Market Oracle is on the cutting edge and generally spot on.
Walayat, along with Lee Adler of the Wall Street Examiner, are amongst the handful of analysts with a true understanding of the banking system and the motives and logical consequences of the actions of the Central banking cartel.
As the currency event in Iran unfolds, those of us in the “secure” West would do well to read up on what awaits as the Western Central banks throw their inflationary machines into overdrive, what Walayat refers to as “The Quantum of Quantitative Easing, or the keystroke saver: QQE.”
The operation of QQE is simple and predictable, yet unnecessarily mind-boggling.
As in a standard QE operation, it begins with the Government issuing debt which is purchased by members of the banking cartel in exchange for currency, which it then spends on any number of pet projects. The Central Bank then buys the Government debt from the banks and receives the interest which is paid by the Government. The Banks park the currency they have received from the Central Bank at the Central Bank and earn interest on it.
QQE ensues when the Central Bank then returns to the Government the difference between the interest paid by the Government on its own debt and the interest paid out to the Banks to keep them afloat. As the Central Bank will never take a nominal loss on their debt holdings, and the Government will never default as long as QE remains in place, The Government is not borrowing at the implied interest rate that it auctions its debt at, rather, it is effectively borrowing at the rate that the banks earn on their reserves deposited at the Central bank, less the cost of the Central Bank’s operations!
Is your head spinning yet? Stay with us, it gets better. The longer that the policy of QE continues (and it will continue until the currencies of the world blow up, as the Iranian Rial is in the process of doing,) the Government is effectively swapping out its old debt, issued 30 years ago at anywhere between 11 and 14%, for new debt at an effective rate of 0.25%! Those interest savings on the rollover are the rocket fuel of QQE. They are what will allow the Governments to both ramp up spending and reduce the relative size of their balance sheet.
By the way, those “savings” come at the expense of every person and organization which holds the currency as a savings vehicle.
In order to gain a fuller understanding of just what is going on, read the articles linked in the above paragraphs at your leisure. They will help to make sense of what is occurring as we begin to see the paradox of increased government spending and reduced or stable levels of national debt.
Oh yes, and double digit real inflation rates, despite the irrelevant claims of the BLS propaganda machine. Plan accordingly, this is not a drill.
The global smart phone industry is still reeling from the implications of the ruling in favor of Apple in a high stakes legal battle with rival Samsung in the mobile technology space.
To be clear, Apple has every right to make use of the remedies available to them under international patent law. As the law is written, there can be no mistake that the pioneering iPhone and iOS operating system has been shamelessly mimicked in a desperate attempt to replicate its success and help satiate the insatiable human need for easy to use technology at an affordable price on a platform friendly to developers.
Yes, the villains at Samsung are being punished for listening to the market and copying and improving upon Apple’s design, making it faster, bigger, more affordable, and accessible to developers.
For this their punishment should be all the more severe.
So should the punishment for every organic farmer who dares to “copy” a seed which has been “patented” by Monsanto, or anyone who puts their hands to work to cultivate or, dare we say, improve upon something that has been made before them.
The point is that patent law, while serving the important function of protecting innovations as they come to market, is counterproductive on a societal level when they are enforced to keep copy cat products, which meet a need that the original product does not. In the example of the iPhone, offering a similar product at a more accessible price with an easier to use interface.
In fact, we see that in nearly every example of a company or individual invoking patent protections to protect its products, the law ends up causing a greater loss to society as they are forced to choose between what is now seen as an inferior or prohibitively expensive product or go without until the patent holder sees fit, from the crystal cage of their legal monopoly, to grant the populace an upgrade or a price break.
Apple, in this sense, has admitted defeat in the mobile realm, as the iPhone 5 proves once again that, after establishing the baseline for mobile technology through sheer genius, they are forced to lean on patent laws to maintain what should have been a clear competitive advantage.
In the case against Samsung, we see that the authorities are more interested in product pride than allowing free actors in the market to supply a consumer need that the iPhone does not, par for the course in a system where Crony Capitalism daily stifles what may be life-changing innovations.
Thank goodness the human genome wasn’t patented! Where would we apply for the right to reproduce?
Full disclosure: We own devices with both android and iOS operating systems. For those who have never tried a droid, let’s just say that it makes operating in the iOS and the Apple ecosystem feel like being shackled with a pair of handcuffs. For those who have never tried the iOS, let’s just say it makes the droid feel clunky and unstable. Were it possible to mesh the iOS with the freedom of the android ecosystem, mobile nirvana would be achieved. Thanks to patent law enforcement, it never will be.
Most of the world who bothers to keep up with monetary matters, as we at The Mint are tasked with doing, have now digested and “evacuated” (to use the medical terminology) the jest of the FED’s last communication to the world. Amongst other things, the FED’s public image, Ben Bernanke, indicated
Bernanke’s Put will leave a painful mark on household budgets
that the all knowing Federal Reserve Bank, protector of the US currency and guarantor of full employment for all, will take the following actions:
1. The FED will keep the FED funds rate target zero bound through 2015. Since the FED funds rate has been zero bound for over three years now, the FED has taken to increasing the year at the end of this statement, in this case 2015, since they are reluctant to target a negative interest rate. Think of the year as just another decimal point in this absurd equation.
2. They will take Quantitative Easing (QE) to a whole new level. Starting with $40 Billion in free funds to holders of mortgage notes and other rehypothecated asset backed (the astute will note the oxymoron) trash each month, for the rest of their existence.
This is not a drill.
The FED has tipped their hand so far that even most bankers (save Morgan Stanley) and government officials now understand what is going on. We are witnessing what will come to be known as the Bernanke Put, or Ka-Put, as we now refer to it.
As Ira Epstein eloquently put it in his most recent Gold Report: “Basically, the Fed threw the kitchen sink at the market.”
The Bernanke Ka-Put, taken together with the recent comments by Mario Draghi of the ECB and the ruling of the German High Court, which further sealed the Euro currency’s inflationary demise, leave no room for doubt as to what the MO of the world’s Central Banks is.
What does it mean? The FED will print money to prop up the system no matter what happens. Rampant price inflation and intermittent panics (due to the malinvestment which is occurring as a result of the FED’s money printing) must now be assumed in any financial model and household budget.
Additionally, contingency planning, with the assumptions of the disruption of services and supply lines, must now take place. Malinvestment means that things will begin to “not work” (an understatement, to be sure) in the real world as a result of the financial engineering being practiced by the FED and every other Central Bank and banking cartel on the planet.
Today we turn our focus to an event which, like a sequel of a bad movie, has been widely ignored. The dreaded Fiscal Cliff. For those who do not recall, the Fiscal Cliff is the moronic sequel of the 2011 flop “The Debt Ceiling Debacle.” You can read our review of the first film here:
Most of the actors in the first film, Obama, Boehner, Reid, and Bernanke, are returning for the sequel, although there are rumors that Obama may be replaced by Mitt Romney if Romney is chosen over Obama in a fan poll scheduled in November. Tim Geithner, who did a poor job acting as the voice of reason in the original film, is expected back as well, albeit in a severely diminished role. His appearance in the film is largely contingent upon Obama winning the fan poll.
The sequel picks up the story where the original left off with Bernanke, Reid, and Boehner accelerating their vehicle towards a cliff, presumably to plunge into the canyon a la Thelma and Louise. The sequel begins with a cloud of dust, which eventually settles to reveal that the trio has abruptly stopped the car just before taking the plunge. After a collective sigh of relief, they hold a meeting and decide the following:
1. Instead of plunging off of this cliff, they will look for a larger cliff to plunge off of somewhere down the road,
2. Bernanke will pay for the gas with the money he stole from US Dollar holders and,
3. Rather than taking the plunge themselves, they will force Obama and Geithner, or Romney and Geithner’s replacement, to drive off the cliff.
The fan poll in November should serve to make this moronic sequel somewhat interesting, but either way, the winner will be handcuffed to the wheel with the accelerator at full throttle.
Our advice? Don’t bother watching this moronic redux. Like the Expendables 2, it is a desperate attempt by the actors to cash in on past glories. Unlike the Expendables 2, anyone living in the US will need to purchase an advance ticket to NOT see the Fiscal Cliff. Tickets can be found at your local coin shop. Simply trade you US dollars and bonds for gold and silver and you can ignore this catastrophe.
Hurry, there is precious little time before the Fiscal Cliff’s December 31 debut.
According to reports on Chinese imports of gold from Hong Kong, the People’s Republic is on track to import more gold bullion in 2012 than the entire official holdings of the ECB. What does it mean for us, fellow taxpayer? Our guest contributor Brad Evans, who is writing on behalf of BullionVault, explores this economic trend and possible implications for your portfolio in the following insightful editorial. Enjoy and stay fresh!
Should You Accumulate Gold Like China?
In recent years, much has been written and speculated about the idea of Chinese authorities buying up massive amounts of gold bullion. Indeed, the amount of gold going to China has increased notably over the course of the past few years, and it certainly seems as if the country is making a concerted effort to accumulate a great deal of the precious metal resource. Is this just a passing trend, representative of independent economic movements, or a greater strategy with implications for the worldwide economy? Ultimately that remains to be seen, but one result of China’s accumulation of gold bullion is clear.
With many of the world’s dominant economies located in the United States and the Euro zone, the U.S. and countries that use the Euro generally prefer to keep the cost of gold low, if possible, so as to avoid the strengthening of the resource against their respective currencies. As things stand now, and have for some time, the U.S. dollar and the Euro are generally seen as popular reserve currencies, meaning that people in other economic zones frequently turn to the U.S. dollar and the Euro as the ultimate safe haven. As long as the price of gold remains relatively low, the dollar and Euro remain strong as reserve currencies. Therefore, it is plain to see why China buying up massive amounts of gold bullion may lead to an unwanted shift in gold prices that could take the focus away from the reserve currency status that U.S. dollar and Euro enjoy.
Perhaps more important for many people is how this economic strategy of China’s could affect your finances. World economic trends will come and go, and economies will strengthen and weaken accordingly – but can you benefit from buying up gold bullion in your personal life, on a smaller scale, in the same way that China hopes to benefit in the long run internationally? While you certainly can’t hope to influence any worldwide economic trends on your own – accumulating gold bullion may not be a bad strategy to consider if you feel that the price of gold will be rising relative to other assets in the coming years.
Buying gold bullion is simple enough. You just need to head to a precious metal trading site such a s BullionVault, where you can buy and sell gold as you please according to constantly updated world prices. These sites also offer you various convenient and secure storage options, meaning that if you want to you can easily accumulate a great deal of gold bullion. However, before making this or any investment decision it is important to formulate a sound investment strategy. For example, if you are looking for short-term stability or gains, gold investment may be risky at the moment, as the dollar is strengthening and gold may be weakening. But for long-term gains, this may be a strategy worth considering.
This has been a guest post on behalf of BullionVault, written by freelancer Brad Evans.
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.
We recently subscribed to Gary North’s latest project, a site called “The Tea Party Economist.” To be clear, we have no political interest nor affiliation. It is our feeling that government, in its current state, is best ignored and avoided rather than confronted. It will go away on its own.
To draw on a well known analogy, the Tea Party, like the Republican and Democratic parties, are all fighting for control of the steering wheel of the Titanic after it hit the iceberg. Rather than fight it out on the control deck, we at The Mint realize that the only ones who survived the Titanic were those who found a lifeboat or other means to stay afloat.
Despite our distaste for all things political, we respect Mr. North and have greatly enjoyed and benefited from what he shares. We suspect that the use of “Tea Party” is more of an attempt to attract his target audience than any endorsement of the Tea Party.
Today, Mr. North shared an article at Forbes which made us gasp. It was written by Jerry Bowyer and as we read through it, one thought passed through our mind: Has our manner of thinking really gone mainstream?
Mr. Bowyer points out a number of examples of a general decline in voluntary compliance with things the government increasingly uses its superior force to mandate, such as taxes and environmental laws. The irony is that as a government’s power grab via rules and regulations accelerates, voluntary compliance, from which all forms of government derive their power, declines.
If Mr. Bowyer is correct, then it would appear that Americans are taking the idea of Atheism with regards to government to heart.
It is clear, yet seldom acknowledged, that the absence of voluntary compliance is the most effective type of revolution which can be waged.
Mr. Bowyer also makes an important distinction. The lack of voluntary compliance is not a form of civil disobedience or act of aggression towards a government. Rather, it is the conscious choice to stop believing in the government and live one’s life as if it does not exist as anything more than a lethal nuisance to be avoided. Mr. Bowyer eloquently describes this phenomenon via an amoeba metaphor:
Amoeba Ordinatio
“It’s not civil disobedience that I’m talking about. It’s the opposite: Civil disobedience is meant to be noticed. It is a price paid in the hope of creating social change. What I’m talking about is not based on hope; in fact, it has given up much hope on social change. It thinks the government is a colossal amoeba twitching mindlessly in response to tiny pinpricks of pain from an endless army of micro-brained interest groups. The point is not to teach the amoeba nor to guide it, but simply to stay away from the lethal stupidity of its pseudopods.”
“The amoeba does not get smarter but it does get hungrier and bigger. On the other hand, we get smarter. More and more of our life takes place outside of the amoeba’s reach: in the privacy of our own homes, or in capital accounts in other nations, or in the fastest growing amoeba avoidance zone ever created, cyberspace. We revolt decision by decision, transaction by transaction, because we believe deep down that most of what government tells us to do is at bottom illegitimate.”
You can read the entire article here at Forbes.com:
Everyday, more and more people are recognizing the insanity of attempting to comply with the onslaught of rules and regulations which allegedly protect them against others. They are realizing that the Rules are building a prison in which they themselves are incarcerated.
We conclude today’s Mint with a quote from Ayn Rand which seems appropriate when considering an amoeba like government:
“When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.”
While we may have no confidence in government, we make up for it in an abundance of faith in God and our fellow men and women. Are you ready to come out of Babylon?
We are emotionally drained here after Spain’s victory over neighboring Portugal in the Euro 2012 semifinal which took place in the Ukraine. From what we could tell, soveriegn credit quality was not mentioned nor did it have an impact on the match. As such, the correlation between a country’s sovereign credit quality and Euro cup performance is still being tested.
Spain downs Portugal! Euro 2012 prediction intact
If Germany downs Italy tomorrow, the hypothesis will hold, at least as far as the semifinals are concerned. We are predicting that Spain will disprove the hypothesis in the final and take the cup home.
Yet the Euro 2012, as are the Olympic games, which commence in just one tender month, are large scale distractions from the disease that ails the world and is threatening to rip it apart. Yes, fellow taxpayer, the insane “debt is currency” monetary experiment of the past 40 to 100 years is beginning to disintegrate.
Someday the historians will write about our times and lament: “They used debt as money, and corn as fuel,” or something to that effect.
While modern life is full of such contradictions, there are few with the potential to wreak such havok as the one where debt is forced into the role as money, which is akin to water being forced into service as oil.
But what is so bad about debt based currency? Doesn’t the ability to create money at will buffer everyone from suffering another depression?
On the contrary, the fickle nature of electronically created debts masquerading as money is economic suicide. This demands an explanation that we will not unduely withhold, for it about to burst out of us.
Capitalism is man’s only productive reaction to his Anarchic surroundings. It is inevitable that man would choose an increasingly free and capitalistic society as he gains a deeper understanding of natural law and his rightly understood self interests.
The expansion of the capitalistic system relies upon the division of labor in which men (we include women as we use the term “men” to define all of mankind) increasingly abandon self reliance and begin to trust their fellow men to provide them with life’s essentials.
This process is good, for it inspires and encourages widespread effeciencies in all spheres as man’s natural tendency to economize is rewarded as his actions align with what we refer to as the demands of anarchy and the natural economic law of supply and demand.
While this process is good, it is dependant upon capitalistic principles to operate in all spheres without exception. Any part of the system which succombs to hegemony (what we refer to as ‘Might makes right“) by one party causes all of those who mistakenly rely upon that part of the system to become vulnerable to its collapse.
The hegemonic parts of the system are prone to collapse because their existence is no longer owed to willing participation, but the use of force.
At the risk of oversimplifying a complicated issue, the more an organization encourages willing participation, the more it must adapt to the wants and needs of its clients. The process of adaptation makes the organization extremely strong and stable. It becomes a rock.
A hegemonic system, where organizations rely upon force to maintain thier positions, has already failed, for the organizations cease to adapt in a vain attempt to force others to adapt to them. The organizations in turn become weak and prone to collapse.
The largest hegemonic system operating today is the world’s monetary system, and it is on the verge of collapse. This debt based monetary system is especially dangerous because it has the effect of stimulating economic interdependence in much the same way that a healthy capitalistic system would while at the same time rendering useless or destroying the capital upon which a healthy capitalistic system relies upon to operate.
While the more perceptive members of society see it coming, the inevitable collapse causes the interdepence on which all rely to suddenly cease to operate. The result is chaos and suffering for the unprepared.
While there are many ways to prepare for this, there is only one way to start. It requires large amounts of humility, faith, and courage.
For now is the time to walk humbly with God and others. It is time to step, on the right with faith, which is provided by God, and the left with courage, which comes from within.
Faith…courage…faith…courage…faith…courage as we work together to pick up the pieces of the failed experiment to build something new, something reliable, something that will last.
For walking humbly in faith and courage is to live in the Kingdom of God.
After defeating Greece in the quarterfinals, Germany will now face Italy in the Euro semifinals and, if they are victorious in there, either Spain or Portugal in the finals. If the 2012 Euro plays out according to the most recent soveriegn credit ratings, according to Moody’s, we should expect the following outcomes from the aforementioned teams:
Germany (Aaa) defeats Greece (Ca), which already occurred on Friday. Spain (A3) would defeat Portugal (Ba3) on Wednesday, and Germany (Aaa) would come out a hair ahead of Italy (A3).
The Germany would then come out victorious after handling Spain on July 1.
However, as Italy showed England yesterday, poor credit ratings can be overcome on the pitch. Therefore, we are speculating that Spain will defy Moody’s and take the cup.
Spain to defy Moody’s on the pitch
Ironically, a similar scenario is set to play out at the latest emergency EU summit (we have lost track but believe that there have been at least 14 prior to this one) where the Germans are set to capitulate on not only austerity measures but also restraint on monetary policy.
As unemployment in Europe’s club med regions rises, Germans and Europe in general will be keen to avoid a repeat of the rise of the Third Reich in their neighbors to the south.
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:
When we attended graduate school in Spain, we were the first North American student in our course. It was late 2003 and the Eurozone was full of optimism. This optimism lead some of the professors to use a portion of their class time taunt the US model as failed and the European model as the obvious way forward.
As proof of European supremacy, our Finance professor often made a point of mentioning to us that the yields on the Spanish 10yr bond were almost the equivalent to the yields on the US 10yr bond.
What a difference nine years and 500 basis points make.
Circa 2012, Spain dominates the financial headlines as the latest casualty of the European debt crisis. Apparently Spain now is in need of a bailout. The bailout strategy which will be employed by Spain, Inc. is a hybrid of the prior bailouts accepted by their counterparts, Greece, Inc. and Ireland, Inc.
Greece, Inc. required a bailout because its government was broke. Ireland, Inc. was slightly more ingenious in that it made a good faith effort to backstop its banks, only to find that it was now the entity which required a backstop. Spain, Inc, theoretically learning from both experiences, forced its banks to accept the backstop directly so that the Spanish government could save face and be spared the humiliation of the Irish scenario.
Unfortunately, the markets have seen through the charade and are now putting pressure on all bonds, bank or sovereign, which hail from the Iberian Peninsula.
What a difference nine years and 500 basis points make!
Spain’s strategy has failed before it was even implemented for lack of collateral and credibility, both of which are in desperately short supply amongst the EU leadership.
How did once proud Europe end up in this situation? They decided to force a debt based currency integration by integrating only the currency part of the equation and leaving the debt and fiscal matters to chance.
As if choosing to use a debt based currency weren’t bad enough, choosing only to implement the currency is like handing the nations foolish enough to engage in such a gamble the revolver in a game of Russian roulette where the revolver is fully loaded.
Now, the revolver is being passed and it is Spain’s turn. Once Spain slumps to the floor, it is Italy’s turn, the Belgium, France, etc. until the European Currency Union, doomed from its outset, breathes its last.
At some point in the process, possibly as Spain pulls the trigger, USA, Inc. will be forced to step in with the “ultimate” backstop, the final hope of the failed, insane “debt is money” currency regime. As the US throws its sovereign credit rating in front of the runaway freight train of Europe’s soveriegns, it will quickly find itself in the very situation that it is trying to save the European Sovereigns from.
For in this debt crisis, the unwritten rule of quality holds. When one adds wine to sewage, one gets sewage. When one adds sewage to wine, one gets sewage. The sovereign vats have long since been polluted. It might make sense to check one’s portfolio and remove as much sewage as possible.
Beyond that, we will present two unsolicited yet practical bits of advice. First, US Bonds will ultimately slide as USA, Inc. wades across the pond to aid Europe. The Euro currency will rally as the run on European banks by the citizens and the wholesale dumping of any bond denominated in the currency begins. Quite simply, demand for the Euro will exceed supply in the short term.
Plan accordingly.
We submit to you that the Spain, Inc. debacle is further evidence of one of The Mint’s central themes, that Anarchy is man’s reality, it is an ultimate given, it simply is, and all understanding of the current political and social structures is greatly facilitated by one’s acceptance of this fact.
In fact, one’s ability to act and react to the unfolding changes in the current political and social structures depends upon accepting and embracing Anarchy as the basis for reality and learning to operate in the Truly Capitalistic system which organically emerges as men learn anew that mutual trust and cooperation are in their rightly understood self interests, and that he who is to lead must truly become the servant of all.
To truly embrace this fact, we must understand the nature of mankind. Man, left to his own devices, is completely devoid of the ability to do the right thing. He doesn’t have it in him. He is lazy, self-serving, and completely evil. He needs God and his fellow man to be able to do anything productive, altruistic, or what may be considered remotely good. A full defense of this statement is a subject for another day (although the evidence is all around us), we mention it here only to underscore the necessity of a framework which presupposes this fact within which mankind can use this weakness to avoid both self and mutual destruction.
The only reliable framework which has emerged out of natural Anarchy which not only addresses the problem of human nature, but also turn man’s weaknesses into strengths is what we call True Capitalism. Ironically, by allowing market forces to work with as little hindrance as possible, mankind can insulate itself from descending into chaos and catastrophe.
In fact, to fight the workings of True Capitalism is, by default, to submit oneself to chaos and misery. Yet every nation on the planet is devoted to some degree in the fight against True capitalism. Why? Because the nation state sells itself as the most perfect expression of man’s good intentions, which we presuppose do not exist. In other words, the dream of the nation state is built on a false pretense that is usually attributed to socialism: That man is inherently good and wants to do good to others.
Given their presuppositions, is it clear that the nation state and a truly capitalistic society are, in fact, the antithesis of one another. Where a nation state regulates by edict, truly capitalistic society regulates by example. Where a nation state is rigid, where truly capitalistic society is pliable. Hence, where truly capitalistic society will bend but not break, the nation state is repeatedly smashed to pieces when faced with change.
For the more a nation state tries to force men to do good, the more mankind’s character flaws will overtake these good intentions until the nation state becomes an expression of mankind’s evil nature.
The truly capitalistic society allows each mans evil nature to be corrected by allowing him to experience the consequences of his inherently poor behavior, paradoxically and naturally improving the behavior and norms of all.
Moving to a less philosophical level, how can we be sure that Anarchy is the basis of man’s current existence? The evidence can be found in that the institutions which supposedly offer the best option to Anarchy, the nation states if the world, are beginning to succumb to the punishments they have built up in their losing fight against natural law.
Greece, Ireland, Portugal, Italy, and now Spain, Inc. are now succumbing to the inevitable. The member of club med which turns from the failure of the Euro currency to go it alone and embrace the much feared “Anarchy,” as it were, paradoxically stands to be richly rewarded by the flocks of tourists who can suddenly afford a European vacation without the Euro.
We conclude with a brief manifesto for your perusal and enjoyment. What does the future hold?
Out of Anarchy, a Truly Capitalistic System will ORGANICALLY emerge, and with it a new dawn for humanity, built on mutual interest and almost endless capital formation which will engender a spontaneous and dynamic social order, a society without borders that would enjoy freedom and prosperity that we cannot even imagine under current conditions.
A colleague from our grad school days in Barcelona recently contacted us from Madrid with an exciting project he and a partner are developing. As such, we are unwittingly trying our hand at the emergent Natural Cosmetics Market.
While Spain and Europe in general appear to be falling apart at the seams, his company is experiencing a boom. As with most smaller enterprises, all it lacks is some well guided investment to transform this mini-boom into a supersonic boom. “El Empujon”, we call it. The big push to get them over the hump, to open new markets, scale production, and create countless jobs in the value chain.
It is just this sort of thing that Governments in the West espouse in word but make nearly impossible in deed.
While the products are all natural, they may be subject to FDA approvals. Then, once the governmental hurdles are cleared, we face a fiercely competitive market where access to the final consumer is tightly controlled by what amounts to a monopoly or at best, an oligarchy, in the cosmetics world. Then there are patents, customs, and any number of mines in the field which must be avoided or diffused to successfully bring the products to market.
How shall The Mint attack this Goliath? We are working on a strategy, which we call, the “Heart of the Beast.” The details of which, for obvious reasons, we shall keep a well guarded secret for the moment.
More on this to come.
In our last correspondence, we presented a hypothesis for dealing with government. Now, we must move the hypothesis down a level. How, then would one test the hypothesis by embracing anarchy, or atheism with regards to government, in a place like Oregon?
Oregon is a State which places a relatively large amount of faith in its political system and, by extension, the power of the government to solve social problems.
The approach seems to work for most. The territory is home to an abundance of natural resources and a great number of people who are willing to go along with the government’s program. In these conditions, the idea and mechanisms of government are tolerated and to an extent championed, for it is possible to live in Oregon and enjoy a relatively high standard of living despite the waste inherent in governmental activities.
Disarming the State is as simple as changing and then using one's mind
However, one can only wonder as to what may be possible here in the great Northwest were the government not to hyper regulate every industry or confiscate 9% of the wages earned by those who labor in its borders (on top of the roughly 21% that the Federal government lays claim to).
Is the average citizen better off living on 70% of his wages? Or, put another way, does the average citizen derive enough benefit from being “governed” that he or she would value it at roughly one third of his or her income?
There are burning questions, fellow taxpayer, that every citizen would do well to ask themselves from time to time. If the mechanism of government were to go away, or be reduced to the spheres where it paradoxically does add value to the economy (note that, were this the case, it would technically cease to be government and become yet another capitalistic enterprise operating in the anarchic surroundings), would it not hold that everyone, including those who work in the unproductive areas of government, would be better off on a relative basis?
The answer, of course, is yes, unless one finds themselves in a position which relies upon the government being able to confiscate a certain amount of resources or the privileges which the mechanism of government may grant them.
However, even this minority would be better off once they adjusted to the reality of life without the idea of government.
What about the Disaster aid, Police and Fire Departments? Aren’t they at least necessary?
Of course they are! And for that very reason, private organizations would quickly spring up to fill these vital roles. In fact, they already exist. They are commonly known as Security and Insurance companies. In Anarcho-Capitalist theory, the array of companies which would arise are called “Private Defense Agencies.” Anyone skeptical about what would arise in a purely anarchic system to replace functions currently delegated to the Nation State is encouraged to study this theory.
For in some ways, the Nation State is simply an over diversified and poorly run Private Defense Agency.
As with any failing capitalistic entity, when a Nation State has gone from being a servant of the people to active enslavement, its lack of popularity invariably shows up in its deteriorating financial condition. This fact alone is proof that Anarchy is the context in which the Nation States of the world today act and operate. On this basis alone it is proper to constantly question the relevancy of the State with regards to its utility against viable alternatives.
Yet despite the failure and bankruptcy of nearly all of the Nation States that have existed and the presence of well developed theories which offer alternatives to these failures, the mechanism of the Nation State remains in place and retains for itself a monopolistic power over defense, welfare, as well as the right to generally meddle in all of the affairs of its subjects at whim.
When living within geographical boundaries of a failing Nation State, it is wise to be prepared to live as if it did not exist, which means that functions vital for one’s existence must be secured by the individual or a cooperative independant of the failing Nation State, for it has been observed throughout history that the authorities of a failing Nation State have a tendency to pillag…we mean, relieve their subjec…we mean, citizens, of their means of sustenance by the most expedient means available.
What is the most expedient means possible? If the Nation State controls the money supply, they simply print money and acquire resources, which is more the rule than the exception circa 2012.
Once a Nation State has begun to relieve their citizens of their wealth in this way, it is possible that those who understand what is going on will convince all to resist by way of armed conflict. However, this is rarely effective, for it tends to replace one form of tyranny with another. These methods rely upon might to make right, which most thinking persons are keenly aware is a losing proposition.
Persons and Nation States, especially those that are desperate and have resorted to robbery, rarely give up their arms willingly or peacefully, so it is up to the individual to peacefully disarm it. This is best done by using a tactic that is not coincidentally very effective against the school yard bully.
Avoidance.
How can one do this? For practical purposes, we have compiled a brief list of steps which one could take to avoid and thereby peacefully resist a Nation State which has failed:
1.Money, trade what you want to: Conduct trade in a currency other than the one used to pay the tax. For it is proper to give to Caesar what is Caesar’s. While it may be inconvenient at first to trade using alternative currencies, one may find that it is often not obligatory to use Caesar’s money.
2.Rely on Common sense: Ignore laws and excessive regulations and respect the free will of those you work with. If someone is willing to work for you for less than minimum wage, allow them to work, do not deprive them of a job to comply with an arbitrary wage set by a bureaucrat. Make no conscious distinction between contract workers and employees, for both are freely performing work.
3.An important caveat to this is to not brag about flouting unreasonable laws and regulations. Assume that if you are breaking a legitimate labor law, for example, both you and the employee will know of it and have dealt with it long before the government will deal with it. It is the false hope that government is regulating untenable working conditions that gives rise to untenable working conditions in the first place.
4.Come out of Babylon: If you live in a place where the microscope of government regulation is unavoidable, move until you can freely live a safe distance from it.
5.Cross borders: If language is not a barrier and your trade or profession is not location specific, there should be no resistance from either government to crossing national borders in search of better opportunities, for all stand to benefit from this.
6.Sell what consumers want, not what the government allows you to sell. The greatest test of a product (food included) is public opinion. Government approval of products, like labor laws tend to give the population a false sense of security.
As we have stated above, if the Nation State’s intentions are pure and in harmony with Natural Law, there should be no resistance from them to an individual who chooses to take these steps.
If, on the other hand, the bankrupt Nation State begins to pass and enforce laws against these actions, restricting freedom and by default, trade, in a vain effort to pillage its subjects to pay the politicians’ debts, it then shows itself to be predatory.
Anyone who has attempted to take any the steps above has likely encountered some sort of resistance to taking these actions. What may come as a surprise is that the resistance may not have come directly from the government itself, for the government of a failing Nation State, or any Nation State for that matter, does not have the resources to enforce all of the rules that they put on the books.
Rather, resistance, more often than not, comes from well meaning but misguided fellow citizens who are unwittingly trained by the government’s education system to deter these brave souls on the questionable moral basis of simply obeying the rules, no matter how unreasonable they may be.
“I am an atheist with regards to the world’s government, for I have chosen to live in the Kingdom of God”
Yesterday at The Mint, we took quite a ride through Portland’s plastic bag ban, bisacksuality, the virtues of non-violent protest, anarchy, atheism, and the imaginary construct of government.
If you missed it, we encourage you to give it a read as it will aid greatly in understanding today’s installment. Of course, if your prefer to jump cold turkey into today’s Mint, by all means, carry on.
And onward we must toil, for this is exceedingly important.
Yesterday we offered that the best way to test the legitimacy of government, that is, its right to govern, would be to simply live as if the government did not exist and see where resistance came from.
If resistance were to come from a solid majority, then that would lend credence to the necessity of government. If resistance were to appear in the form of a minority relying on an imaginary framework to create and enforce a series of rules, imposed by one group on other groups in order to gain or maintain an unearned privilege, the legitimacy of the government should be questioned.
Not the legitimacy of those who are governing at the time, mind you, rather, the legitimacy of the apparatus which allows such rule by the minority at the expense of the majority.
For if a majority would be materially better off by simply shedding the illusion of government, why does the idea of government persist?
Let’s face it, it is nice to sleep at night with the idea that someone is watching over us and our assets. Even more comfort may be found in the idea that, were something to happen to ourselves or our assets, we would probably still be taken care of.
Yet these same promises are also the promises of the Almighty God! Why, then, if one were to believe in the God of the Bible, would it make sense to attribute the power of God to a government which is by definition an assembly of fallible men?
The answer, most would say, is that God is unseen, while men, while they may be fallible, can be observed to be acting. This logic is clear. Some may even take it a step further and claim that the government is God’s agent to provide protection and provision to His people. There is certainly support for this idea in scripture. However, it is important to watch how the men act before blindly ascribing supernatural powers to them.
In the case of government, the confiscation of n
The irony is this: To be an Atheist is to be an Anarchist, and to be an Anarchist is to live in the Kingdom of God
early 30% of a person’s income, which is what the average American may expect to pay in the form of Federal, State, and Local taxes, does not exactly fit with most peoples idea of the preservation of assets, nor does the idea of restricting the ability of one to own a weapon fit with the preservation of one’s life.
Yet it is clearly stated in the Bible that he who trusts in God shall be both protected and provided for.
How can this paradox be reconciled? For it is one thing to deny the existence of the unseen God.It is quite another to deny the existence of God on one hand, and on the other assign the attributes of the non existent God to an entity which consistently operates in a manner contrary to the self interest and freedom of the individual, which presumably would be the reason that an individual would deny the existence of God in the first place.
For the sake of consistency, then, the professing atheist must be a professing anarchist as well. If not, one would be at a minimum inconsistent and possbily insane to assent to most if not all of the actions of the government, for the sacrifices required by most governments on the earth far exceed those requested of humanity by the Living God.
Those who know God, on the other hand, would be inconsistent were they to declare that God is their provider and protector and then eschew what God asks of them in favor of fulfilling a requirement imposed upon them by the government when the two come into conflict with each other.
So what gives? Is it possible to be an atheist with regards to the world’s governments without living in defiance of nor toiling against them? Is it possible to simply deal with the inconveniences which appear as a result of a large part of the world’s population acting upon the belief that the government really exists?
In other words, is it possible to live in the world but not be of the world, as the apostle Paul alluded to? For to do so is to choose to live in the Kingdom of God.
The only way to know for sure is for both the atheist and the believer to peacefully and actively test the hypothesis of a government’s legitimacy by living their lives as if the government did not exist, and then patiently wait and see where any resistence to their chosen way of life came from.
Aslong as they are not stealing from of hurting anyone, they should be just fine, right?
There are certain questions which one encounters in everyday life which demand a shocking answer.
For example, the everyday grocery bagging inquiry “Would you like paper or plastic?” can be responded to with the customary preference. This is the routine response and requires no creativity whatsoever.
A prepared, slightly creative individual may think outside of the box and have their response prepared. “I don’t need a bag, I’ve brought my own,” which is interpreted to mean “I am saving the earth and thereby reject your greedy corporate attempt to deliberately pollute it by rudely offering me an already manufactured bag for my own convenience.”
Then there is the creative genius, the one who rises above the imaginary philosophical bickering and takes what is given to them while at the same time disarming the mythical compulsion which the slightly creative person above felt threatened by. What is their shocking response to this common question?
“I’ll take either one, I’m bisacksual.”
In the same way, when approached with the somewhat common question posed by an eager petitioner “are you registered to vote?” One can give the standard yes or no answer which the question requires.
The slightly creative person may turn the question into an opportunity to share their point of view. “That depends, what is the issue?” Depending upon the issue, they may either wholeheartedly lend their support and sign the petition or engage in a lengthy debate about the error in supporting the proposed legislation.
Enter the creative genius, as in the grocery check-out line, they rise above the imaginary philosophical bickering about what the government should or shouldn’t require everyone to do and at the same time disarm the mythical compulsion which caused the slightly creative person to enter into a lengthy and meaningless debate. What, then, is their shocking response to this common question?
“I’m an atheist with regards to government.”
This is dedicated to the creative geniuses.
At the moment, we are residing in Oregon, where plastic bags are frowned upon to the point that the City of Portland passed an ordinance intended to reduce the use of them. The result is that large retailers in Portland are now one sack outlets, which not only clashes with Portland’s tendency towards plurality in any number of spheres, it has noticeably diminished the quality of the paper sacks available.
The great irony in the ban on bisacksuality is that the same people seen at City Hall protesting the “forced” use of plastic bags are likely to be the same ones who will chain themselves to a tree when the increased demand for paper sacks resulting from this action (the butterfly effect, if you will) leads to the acceleration in the destruction of rainforests in the Amazon.
On the bright side, the plastic bag ban and resulting plea to save the rainforests should combine to help Oregon’s ailing lumber industry in the short term.
Yet all of this nonsense about plastic bags, the rejection of bisacksual Portlanders, and backdoor stimulation of the Oregon lumber industry serves to illustrate the effects that government actions have on the population and industry.
As Henry Hazlitt astutely observed in his classic “Economics in one lesson,” actions taken by governments have the exact opposite long term effect on reality as that which was intended. For this reason alone, all government mandates must be met with suspicion.
Yet none of these government actions and the resulting imbalances would be possible without an unwavering faith in the government on the part of the people, which is why the only hope for the world to escape the crazy cycles inherent in placing faith in the government is for the populace to become not militant, but agnostic towards the actions of their government as they would a well intentioned but clumsy sidekick.
Take the example of Portland’s plastic bag ban. Were the disenfranchised bisacksual population of Portland to violently oppose the plastic bag police (which, most certainly, do not exist), they would be wasting their time and resources only to perpetuate a system which promises nothing more but endless power struggles and the short lived thrill of victory or agony of defeat.
Even if bisackuality were to be legalized, no sooner would the ink be dry on the new ordinance than would a band of sacktivist warriors covered in plastic armor be organizing to take back their right to a paper only Portland. The bisacksuals would then organize and revolt, etc.
To be clear, we have no strong feelings one way or the other on the sack issue, we have merely chosen to shamelessly embellish upon the theme in order to make a larger point.
The point is that militancy breeds militancy, and violence breeds violence. Ghandi, and more recently Martin Luther King, understood that long term, permanent change could never come about by force of arms. Rather, they understood that the only way to test whether or not an idea was true or simply temporary public opinion was to live in peaceful defiance of the idea and tolerate whatever opposition they met with.
In the case of King, the good reverend was thrust into the civil rights battle in the Southern US. For those who may be unfamiliar with this piece of history, we will oversimplify it by saying that there were rules in the South which demanded that African Americans sit in the back of the bus.
Rosa Parks and thousands of other African Americans began to put this rule to the test, not by petitioning the powers that be for permission to sit in front of the bus, but rather, by sitting in front of the bus as if the rule did not exist.
Would some supernatural force come and move her to the back? Or would those who used the rule to gain privilege for themselves be the ones who would force her to the back of the bus or even deny her entry onto the bus in the first place?
The creative geniuses amongst us already know the answer.
The deeper question which must be addressed, then, is not whether or not each individual rule is necessary, but rather, is a government which imposes rules and forces those effected to put them the test, a necessity? Or is it merely an imaginary framework to erect a series of rules which are imposed by one group on other groups in order to gain or maintain an unearned privilege?
The only valid way to test this theory would be for one was to live their life as if the government did not really exist. What if one were to test this theory not by withdrawing from the government or fighting to change it, for both courses of action would be to acknowledge its existence, but by simply deciding not to believe in it?
In other words, what if one decided to stop attributing power to the government by simply changing their own mind about its existence and acting accordingly? What if the simplest path to freedom were to become a peaceful Anarchist? An atheist with regards to government, as it were?
These questions must burn until another day. Please share your thoughts below, as we are intrigued.
We would be remiss here at The Mint if we did not enquire and make an honest attempt to understand the phenomenon of bitcoins. Bitcoins, according to wikipedia, are units of a peer-to-peer digital currency. They are a purely digital attempt to solve the eternal problem of what to use as money. Are they to be trusted? Lets take a look.
First, we must look at them from a purely conceptual standpoint. Are they money? Yes, bitcoins, as we understand their operation, meet our pure definition of money in the sense that they are not debt.
However, they have a rather severe limitation in that universal or even regional recognition as money in exchange and convertibility to other forms of money could prove elusive. This is a psychological barrier that theoretically could be overcome, however, it is difficult to assume that a majority of persons would, in time, learn what a bitcoin is and then take the time to sign up for and monitor a bitcoin account.
The market penetration for bitcoins could be as large as the number of internet and mobile phone users in the world but would more likely be similar to that of banking customers who use online and mobile banking services. In other words, those who are comfortable storing a portion of their wealth in a digital media.
Given the barriers to recognition and acceptance, at this point, bitcoins are probably best thought of as a share of stock in an amorphous payment clearing mechanism whose business model consists of the free exchange of its own shares of stock between account holders and the constant validation of transactions and subsequent logging of ownership of said shares.
These shares, then, would need to be converted into a local currency to be of use outside of the realm of bitcoin account holders.
The validation of the exchange and the logging of ownership of the bitcoins must be done by someone for the bitcoins to maintain their integrity and therefore any value which others may attach to them apart from a fickle monetary premium which is, at present, compromised by the barriers of recognition and convertibility refered to above.
This validation is currently undertaken voluntarily by the bitcoin account owners themselves and is accomplished by the users offering their resources, in the form of computer processing power and the use of computer hardware and electricity which makes the processing possible, to the greater bitcoin network for this purpose.
In return for the computer processing power and use of hardware and electricity which they dedicate to these processes, the bitcoin account owner receives a quantity of newly created bitcoins in exchange for the completion of a set quantity of computing (read bookkeeping and auditing functions) completed. These newly issued bitcoins serve to dilute the overall stock of the existing bitcoins.
The process of bitcoin creation realized through computer processing is refered to as “mining,” a name which is a fairly accurate description of the way in which bitcoins come into creation, even though the process more resembles accounting than strip mining.
As of this writing, we understand that mining bitcoins on a small scale is not profitable, which in layman’s terms means that the cost of the electricity needed to perform the computer processing involved in mining is greater than the amount of bitcoins which would come into existence as a result of the computer processing performed.
This calculation is naturally expressed in dollars as we are not yet aware of a utility company which accepts bitcoins as payment for electric bills.
It would then follow that bitcoin creation would slow as long as this price relationship exists. We will ignore, for the sake of simplicity, the fact that a great deal of bitcoin “mining” is done via bots which use the electricity and computer processing capacity of unwitting hosts, which makes mining profitable for some at the expense of others, and simply state that bitcoin creation, on net, is currently a losing proposition.
The fact that the mining of bitcoins is not profitable should make the existing bitcoins more valuable in the future as the stock of bitcoins will either cease to be diluted will be diluted at a lower rate. This would theoretically cause the value of bitcoins to increase until it again became profitable to “mine” them, which in turn would lead to an increased rate of dilution of the bitcoin stock and lower relative value in exchange, etc.
In this sense, the economics of bitcoins is similar to that of mining precious metals. Another similarity that the bitcoin has to precious metals is that theoretically there is a logarithm which ultimately will place an absolute limit on the number of bitcoins in existence. The logarithm places a mathematical limit to the stock of bitcoins in the same way that nature places a theoretical limit on the extractable amounts of precious metals which can be used as money.
However, bitcoins have a distinct disadvantage to precious metals owed to the fact that bitcoins require constant bookkeeping and auditing to maintain the integrity and therefore value of the bitcoin as money. Precious metals, on the other hand, do not rely upon administrative functions to maintain their value and rely entirely upon their relative value in trade.
Further, we must assume that the bookkeeping and auditing needed to maintain the integrity of the bitcoin will increase exponentially as bitcoin production approaches its logarithmically imposed limit, just as the incentive to perform these functions (mining, as it were) continues to diminish.
Given this inevitable dynamic, it is unclear if the integrity of the system can be maintained once the incentive to maintain the integrity of the system, which is currently supplied by the ability to “mine” bitcoins, is removed.
Having said all of that, it is now time to point out the obvious flaw in the bitcoin model, the flaw which lands bitcoins squarely in the realm of equity and makes them unfit for long-term use as money: The threat of competing digital currencies which would surely come into existence if the bitcoin were to gain widespread popularity and acceptance.
Even with the digital checks and balances on production which are mathematically built into the bitcoin model, the bitcoin, like gold, silver, seashells, and fiat currency, fails to completely solve the happy problem which has no solution:
That the infinite increases in trade due to the increased division of labor in the world will require money and debt markets with the flexibility and dynamism that only a completely free money supply can offer.
Gold and silver may hit physical limits, bitcoins may be limited by logarithms, and debt based fiat currencies tend to collapse upon themselves. This is proof that none of them, by virtue of physical and psychological limitations, completely fulfill the role of money for man. They were never meant to.
The determination of what will serve as money must be left in the hands of the people who are involved in trade. Left to their own devices, we would be amazed at the speed and efficiency with which the problem of what is money can be solved.
In other words, let those engaged in trade decide what is most suited as money at a given time and allow them to trade with it without hindrance.
For it is not the costs associated in the production of a monetary unit which remove value from the economy, rather, the administrative burdens, unnecessary conversion costs, and the rigidity of an imposed monetary unit which deals mortal blows to trade and consequently the ability of all humans to flourish to the greatest of their abilities.
Unnatural restrictions on the money supply, which solutions like bitcoin attempt to solve, are devastating to trade. The destruction wrought by monetary hegemony should surpass hunger, poverty, and climate change as global concerns, for allowing a free money supply to operate would serve to eradicate all of these problems and their symptoms, namely social unrest, terrorism, and health care crises.
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