Category Archives: Economics

Economics, Mint Classics, The Mint

G7 Meet to Stop Yen’s Dramatic Rise and the BLS Calls BS on its Broad CPI Measure – A Mint Classic

Over the past year, the Bank of Japan has tried numerous times to Kamikaze its currency and has failed miserably.  As of the writing of this classic Mint, the USDJPY exchange stood at about 80:1.  Check today to see how the Bank of Japan has fared.
 
As for the other theme, if anyone still believes in the BLS’ headline inflation number, they probably work at the Federal Reserve and watch I-Pad prices for signs of inflation!

Enjoy!
 
3/18/2011 Portland, Oregon – Pop in your mints…
 
The G7 Central Bankers have called an emergency meeting to “do something” about the “skyrocketing Japanese Yen.”  This meeting is simply their latest attempt to combat reality.  The reality of the situation in Japan is that they are dealing with a catastrophe.  When one is dealing with a catastrophe, the next prudent step, after all of the immediate crises have been contained, is to take stock of the situation.  By taking stock, we mean that one takes note of what was lost and, more importantly, what one will need in order to restore things to an acceptable level of comfort.Comforts cost money.  In Japan, to replace these comforts the average person needs Yen.  They will either get this Yen by making a claim with their insurance company or selling assets to raise cash.  With damages of nearly $15 Trillion Yen (roughly 3% of Japan’s GDP) and counting you can imagine how the demand for Yen is, well, about to skyrocket.

 
The Japanese people are still dealing with the catastrophe.  Speculators in the currency markets are, as always, one step ahead of what must happen and are sapping liquidity, in terms of Yen, at a rapid pace.  This activity, taken at face value, will presumably wreak havoc for Japanese Government Bond prices, the prices of stocks traded on the Nikkei, and the US Dollar.
 
These three markets will crash if nature is allowed to take its course.  You see, in the tipsy turvy world of currencies, to buy a yen more often than not means that a US dollar, a JGB, or a stock listed on the Nikkei is sold on the other side of the trade.
 
The most sought after currency in the world, at least until the G7 meet tomorrow
 
The accelerated selling of dollars, as Jim Rogers points out, could cause the endgame scenario for the US currency to swiftly come upon the world.  Mr. Rogers goes so far as to call this a “Moment of Truth for the dollar.”
You can see the brief interview by clicking here.
 
Of course, as Mr. Rogers points out, it may be time to buy the dollar, if for some reason it is to survive as a top tier currency.  We have lived just long enough to know that anything is possible.
 
The G7 meeting today is VERY IMPORTANT.  It should not be, if only the world had not left the embrace of sound money 40 years ago, but unfortunately, it is.  For the G7 will essentially decide whether to keep the Dollar on life support or to pull the plug.
 
What will they do?
 
Meanwhile, the Bureau of Labor Statistics (BLS), the legion of bureaucrats who are charged with cranking out data in order to support FED policy, appears to be starting its own form of political protest against the loose dollar policies followed by the Federal Reserve.  After faithfully cranking out the core CPI, a key statistic here at The Mint, for years and watching it slowly become distorted into the puppet statistic that it now is, they came out with a data point in 2002 called the “Chained Consumer Price Index” which takes into account a rolling average of food and fuel costs, which the core CPI now blatantly ignores.
 
This index hit a record high in February, confirming what most average Americans already know:  It has never been more expensive to live in the Land of the Free.
 
Will we be Brave enough to return to sound money?  You, fellow taxpayer, can take a step in that direction with just a few simple keystrokes.  APMEX, our affiliate, is running a contest.  They are giving away one 1 oz gold eagle coin each month.  All you have to do to enter is register by clicking this link and filling in the blanks.  You can register to win once per month.  If you so desire, click here and Register at APMEX.com Today!
 
By definition, the black hole of debt will always grow at a more rapid pace than the worthless currency that is printed in an attempt to fill it.  If the black hole collapses (i.e. widespread default occurs), hyperinflation will occur quickly.  If currency becomes scarce, people will find another medium of exchange, likely gold and/or silver.
 
Either way, the world will be out of this mess before long, so hold on to your hats, it is bound to be a wild ride to the other side!
 
Stay Fresh!
 
 
 
P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
 
Key Indicators for Friday, March 18th, 2011
 
Economics, Mint Classics, Politics, The Mint

US Debt Ceiling Vote to Ignite Armageddon in Bond Markets? Key Indicators all Point to Inflation – A Mint Classic

Today we are taking a break en route to Bolivia.  Breathing in La Paz is hard enough, let alone attempting to dissect what is occurring in the World economy.  As such, we offer a look at things which we wrote about 14 short months ago which came to pass just 8 short months ago.  A much ignored number which is peculiar to America, the debt ceiling.
 
Today, the number is mostly ceremonial but it is important to remember that the US is likely to breach the $16.2 trillion symbolic limit in the near future.  Will we have  repeat of the events we described?  Enjoy!
 
1/18/2011 Portland, Oregon – Pop in your mints…
 
For some months now we have been wrestling with the notion that there will be a major collapse in the Bond Markets.  We have speculated as to the causes and possible effects in these chronicles, comparing the coming events to the battle of Armageddon, famously prophesied by John in the book of Revelation, Chapter 16.  Bondholders have been lured into a valley, and our guess is that they are about to get slaughtered.
 
When and how will this occur?  This is the subject of our speculation today.  Be forewarned, fellow Gambler, that we do not have any sort of inside information.  Rather, we rely on our own wild imagination and questionable powers of deduction.  Actual events may differ dramatically from what we imagine, and we pray that they will!
 
Our current speculation has its origin in digesting the reality of the upcoming Congressional vote as to whether or not to raise the debt ceiling.  In the past, this would barely have been news.  The government almost always, without fail, spends more money than it takes in. This is one of the few things that you can count on a democratically elected government to do.  To cover the deficit, the government must issue debt.  Since there is almost always a deficit and there is almost always interest to be paid on existing debt, the amount of debt owed by the government must always increase.  This is the basis of our current insane monetary system.
 
 But wait!  Along comes a group of Congressmen and women that either don’t understand the game or are unwilling to play along any longer.  They appear, at least from their rhetoric, to be set to vote AGAINST raising the debt ceiling (the total amount of debt that the US Government can officially borrow).  In theory, this would mean that Government expenditures would have to be immediately reduced by $1 Trillion, the projected deficit for current fiscal year, and further reduced to give them the ability to roll over the roughly $3 Trillion dollars worth of US Treasury debt that is set to mature in 2011, even assuming that it can be rolled over at 0% interest.  Both of these are plausible but highly unlikely scenarios.
 
 
As an aside, you can watch all of the dizzying US Debt statistics here.  We advise you to take some Dramamine beforehand.
 
However, a “NO” vote on raising the debt ceiling would make these highly unlikely scenarios not only likely but absolutely necessary.  A “NO” vote would likely trigger a sell-off not only in the US Treasury Debt Markets but also in every fixed income and equity market on the planet.  This sell-off would lead to an unprecedented amount of cash chasing around a finite number of real goods.  
 
In short, the end result of a “NO” vote would be a paralyzed Government and hyperinflation.
 
On the other hand, a “YES” vote is no picnic either.  Many of these Congressmen and women were around the last time they had to vote on a measure with such broad reaching financial implications.  Does the TARP Fiasco of 2008 ring a bell?
 
On the bright side, a “NO” vote would bring an abrupt end to the insanity of the present world monetary system.  A system that is based on debt, not real money, which causes the productive forces of mankind to cannibalize themselves.  After the initial shock, a “NO” vote would be a great thing for mankind.  Do today’s politicians have the backbone to do this?  Only time will tell, but here at The Mint, we believe that at this point a “NO” vote or a stall tactic (which is practically the same thing) may in fact be likely to occur this spring.  We are not alone in this boat, as back in November former Treasury Secretary Robert Rubin alluded to this vote as a possible “trigger“ for a “rout in the Treasury Market.”
 
While all signs in the Bond Markets point to an implosion, either this spring or at some unspecified date in the future, all of our Key Indicators here at The Mint are continuing to point to Inflation.  It is for this very reason that we observe them daily, to ensure that our hypothesis is correct.  These are the “cards” the we hold as gamblers.  Each one merits in depth study as to its economic significance but we will spare our fellow gamblers this depth for now and jump directly to the practical application. 
 
At the end of every Mint, we present the Key Indicators.  We encourage you to compare them with the Key Indicators from previous Mints.  If the Key Indicators are generally higher (with three exceptions) than they have been in the past, we expect inflation, maybe a lot of it.  If they are lower, we would expect deflation.  The magnitude of the inflation or deflation depends upon the magnitude of the changes in the numbers.
The three exceptions, of course, are the “FED Target Rate”, the “MINT Perceived Target Rate”, and the “Inflation Rate (CPI).”  In the case of these three indicators, if the number is lower than it has been in the past, we can expect inflation.  If they are higher, we would expect deflation.   
 
You may also click on each data point below for a link to its source to better perform trend analysis.
The timing of what is to come is a mystery.  Based on recent data, inflation is walking up the drive but still a ways from the door.  If we had to guess, we would expect inflation in full force by January 2012.  If Congress pulls the trigger with a “NO” vote this spring, it could arrive quite a bit sooner.
 
As Kenny Rogers wisely said, “Know when to walk away and know when to run!”
 
Stay Fresh!
 
 
 
 
P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
 
Key Indicators for Tuesday, January 18th, 2011
 
MINT Perceived Target Rate*:  4.5%
Unemployment Rate:  9.4%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  11,787
M1 Monetary Base:  $1,954,500,000,000
M2 Monetary Base:  $8,881,000,000,000 (this numbers stands roughly $2 trillion higher today, about the same amount that the debt ceiling was ceremoniously increased back in August.  Coincidence?  we think not!)
Economics, Freedom, Politics, True Capitalism

You Might be a Socialist if…

3/5/2012 Portland, Oregon – Pop in your mints…

Nearly 20 years ago, Jeff Foxworthy topped the comedy charts when he released his now famous album “You Might be a Redneck if…”  While we have no illusions that today’s musings will attain the fame that Mr. Foxworthy’s have, today’s Mint is an entirely accidental homage to Mr. Foxworthy in which we present a series of one-liners which we hope will provide an invaluable service to the American public.

Namely, we aim to provide the public with comical assistance in helping one properly identify whether or not they are a Socialist.  It is a handy, self convicting exercise which is meant to help all of us to identify and perhaps deal with our latent Socialist tendencies.

In other words, you may laugh heartily, knowing that the laughter, like the accumulated loss of capital in a Socialist society, is at the expense of the proletariat.  Enjoy:

You might be a Socialist if… (with apologies to Mr. Foxworthy):

You default to the government when asked who should solve a social problem

You get a measure of self righteous gratification when passing through a body scanner

You believe in economic equality

You have attempted to define economic equality

You make special exceptions for yourself when defining your concept of economic equality

You still believe in economic equality after attempting to define it

You are a member of a labor union

You wish you were a member of a labor union

You wish you were an unemployed member of a labor union

You believe that tariffs save jobs

You believe that limitations on immigration save jobs

You believe that taxes create jobs

You believe that regulations create jobs

You vote for tax increases

You vote for a representative government which asserts authority over those who are not permitted to vote

You are entirely comfortable living in a world where the “end justifies the means”

You regularly give unsolicited advice to strangers

You get angry when such advice is ignored

You use a central bank issued currency as a savings instrument

You have attempted to describe the economic benefit of homogenized interest rates

You prefer a higher national GDP to a higher personal income

You believe that certain projects are so big that only the government is qualified to do them

You can say “government efficiency” with a straight face

You have ever defended TARP on the grounds that a nebulous “greater disaster” was averted

You’ve referred to “Cash for Clunkers” as good for the environment

You’ve referred to “Cash for Clunkers” as good for the economy

You’ve referred to war as good for the economy

You’ve referred to a natural disaster as good for the economy

You believe that there is a universally fair price for certain goods or services

You believe that said universally fair price should be a dictated by the government

You would feel guilty paying less than said universally fair price

You think you are saving money because an expense is tax deductible

You have uttered the words “necessary evil” as an explanation for a moral contradiction

You have uttered the words “the lesser of two evils” to explain an unpopular decision

You use the words “quality” and “equality” interchangeably

And finally, the last one we can think of for today, which, as you can see, if far from qualifying as a punch line:

Your list of inalienable rights extends beyond or excludes life, liberty, and property

If you have said “that’s me” to one or more of the above, you might be a socialist.  If you find that you truly are a Socialist, take comfort in the fact that you form part of a large and vocal majority.  The most logical response, if this is the case, is to fully embrace one’s socialist identity and to leave behind the inherent contradictions of calling oneself a “liberal” or “conservative.”

There is absolutely no shame in identifying as a Socialist.  As Polonius urged his son so we urge you, fellow taxpayer, “To thine own self be true.”

However, if it disturbs you to have identified with any of the above statements, please continue to peruse The Mint, as all of us can aspire towards embracing True Capitalism, and move towards creating a future full of the blessings of real freedom for our children.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for March 5, 2012

Copper Price per Lb: $3.84

Oil Price per Barrel:  $106.97

Corn Price per Bushel:  $6.66

10 Yr US Treasury Bond:  2.01%

FED Target Rate:  0.11%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,705

MINT Perceived Target Rate*:  1.00% AWAY WE GO!

Unemployment Rate:  8.3%

Inflation Rate (CPI):  0.2%

Dow Jones Industrial Average: 12,964

M1 Monetary Base:  $2,199,000,000,000

M2 Monetary Base:  $9,759,800,000,000

Bible Teaching, Economics, Jesus, Monetary Theory, Of Money and Metals

The Bible Clearly Explains the Consequences of a Debt based Monetary System

2/28/2012 Portland, Oregon – Pop in your mints…

Yesterday we took our fellow taxpayers for a detour which is leading us into what, for some, may be uncharted waters.  These waters are commonly known as the Bible, or the Word of God.  While seemingly unrelated to the discipline of economics and specifically monetary theory, it is important to gain an understanding of the Bible for two reasons:

  1. It is the most widely read book in the history of the world to date
  2. In its labyrinth of narratives, poetry, song, and prophecy, it provides the only coherent framework within which humans, who have been given the gift of reasoning, can understand the world in which they inhabit and what they are to do with their time here.

If only for these reasons alone, it is of the utmost importance that the Bible be understood if we are to gain any meaningful understanding of what is called the “economy” and our specific area of interest, monetary theory, as these disciplines make absolutely no sense without an understanding of the framework in which they operate.

Regardless of one’s preconceived judgments about the Bible’s ability to provide this framework, it is important to understand that a number of one’s fellow humans believe that the Bible provides this framework.  With this given, it can be inferred that this belief is, in whole or in part, is driving their choice of actions. 

A Bible Handwritten in Latin in Malmesbury Abbey, Wilshire, England. Transcribed in Belgium in the year 1407

However, if you remain unconvinced or simply do not have time or motivation to undertake a careful study of the Bible, we will relate what we understand, it is in no way a substitute for one’s personal and corporate study of the Bible, but we appreciate your confidence.

The lessons of the Bible are important and we reiterate, without an understanding of the framework of the Bible, nothing that is going to take place in the future will make sense but will appear to simply occur at random:

Truly we tell you, the events to come have been foretold.  The Kingdom of God is advancing.

What does it have to do with money?  Why is a proper understanding of what we use as money important?

We are glad you asked, allow us to explain:

The current monetary system which most of the Western world uses to each day is built on debt.  Debt, at its essence, is built a faith that persons will perform certain actions in the future.  Performance of these actions from the debtor’s perspective is homogenized as being able to order delivery of the debts of others to the creditor in order to satisfy the debt.

This activity and its consequences are conveniently summed up in Bible as the parable of the Unforgiving Debtor, which can be found in the Bible in the book of Matthew, Chapter  18, verses 21-35.

Wrapped up in a narrative which will take under two minutes to read, the final consequences of using debt as money have never been more clearly stated.  Please give it a read, it is important.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for February 28, 2012

Copper Price per Lb: $3.86

Oil Price per Barrel:  $106.55

Corn Price per Bushel:  $6.53

10 Yr US Treasury Bond:  1.93%

FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,784

MINT Perceived Target Rate*:  1.00% AWAY WE GO!

Unemployment Rate:  8.3%

Inflation Rate (CPI):  0.2%

Dow Jones Industrial Average: 13,005

M1 Monetary Base:  $2,137,600,000,000

M2 Monetary Base:  $9,763,200,000,000

Economics, The Mint

No Love for Greece, The latest casualty of central planning

2/15/2012 Portland, Oregon – Pop in your mints…

The fruits of Central Planning, via the socialized monetary and credit system which is currently managed by the World’s Central Banks, are beginning to ripen, and the whole world is witnessing the latest social harvest of this doomed philosophy in Greece.

From the Associated Press:

“Tensions between Athens and other European capitals have hit new highs this week. While the European Union is officially still warning of the far-reaching dangers of a disorderly default by Greece, some politicians have in recent weeks downplayed the effects of such an event.

… While the Parliament in Athens faced down violent protests over the weekend to approve a far-reaching new austerity package, the cabinet of ministers remained locked in talks Tuesday evening over how to save an extra euro325 million demanded last week by the eurozone.”

It seems that the Greeks are having trouble accepting the well intended budgetary advice which their credit “counselors” (read overlords) in the north are so generously imposing upon them.  Now that the Greeks appear to be balking at their inevitable slide towards a vassal state, the folks in the north are getting restless as their banking syndicates have quite a bit riding on the events unfolding on the shores of the Aegean Sea.

Will the Hellenic Republic submit?

On the other side of the Atlantic, it appears that the similarly indebted US government will escape the fate of externally imposed austerity which Greece is now suffering.  The Federal Reserve has made it clear that it will print money to monetize the deficits of the US Government for as long as necessary, and the Republican budget hawks have had their wings clipped with their latest capitulation on the extension of the Payroll tax holiday.

These two events, taken together, indicate that the US intends to go for broke and fully embrace the Keynesian dream of printing its way to full employment.

The obvious solution, then, would be for the Greeks to reject the Euro in favor of not the Drachma, but the infinitely flexible US Dollar.

Unfortunately for the US, and the Greeks, should they choose to join them, the Keynesian dream is quickly becoming a nightmare as the folly of central economic planning begins to express itself in the form of runaway inflation.  The policy tools used in the past have succeeded only in stripping the earth and its people of the ability to make productive economic decisions.  What now awaits the world is the inevitable adjustment which is likely to lead to a lower standard of living.

At this prospect, Athns burned on Sunday night, and it appears that the last bastions of austerity in the US capital threw in the towel and, for the moment, Washington is not burning.

The tragedy unfolding in Europe is a painful reminder that the power to mint money was never meant to be given, by edict, to an elect few. 

Will the rest of the world learn this valuable lesson before it is too late?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com 

Key Indicators for February 15, 2012

Copper Price per Lb: $3.80
Oil Price per Barrel:  $101.93

Corn Price per Bushel:  $6.27 
10 Yr US Treasury Bond:  1.93%
FED Target Rate:  0.12%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,721

MINT Perceived Target Rate*:  1.00% AWAY WE GO!
Unemployment Rate:  8.3%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average: 12,781

M1 Monetary Base:  $2,274,500,000,000
M2 Monetary Base:  $9,653,000,000,000

Economics

Nigel Farage calling out the EU on their Handling of Greece

Nigel Farage, again telling it like it is.  Below he calls out the members of the EU for systematically destroying Greece by forcing them to stay in the Euro.  With a puppet government and ceaseless demands for austerity, Greece’s economy has contracted for 5 straight years and is currently falling off a cliff.

It is refreshing to hear Farage call out the EU, and it is painfully obvious that his pleas fall on deaf ears as his Eurocrat colleagues simply mill about.  The EU Commission would be a funny joke if their idiocy didn’t cause such widespread suffering.  From zerohedge.com:

Economics, Freedom, Gold, Monetary Theory, Of Money and Metals, Silver, The Mint

Of Money and Metals, Part V – Free Money Refutes Gresham’s Law

1/31/2012 Portland, Oregon – Pop in your mints…

 

{Editor”s note: The following is the long awaited conclusion of the series “Of Money and Metals.”  Please click here to view the Part I,  Part II, Part III, and Part IV} 

 

Free money also renders null and void any arguments as to what constitutes good or bad money, for this determination will be made on a daily basis by producers and consumers rather than a monetary authority who is acting on mere theory with severely limited data.

 

Absent the government declaration of what is money and how much said “money” is worth, there is no longer bad money driving out good money, as Gresham’s Law so perceptively observes.  What remains, then, as the ultimate determinant of what is money and how much it is worth are the two parties to a transaction, who are generally in the best position to determine such matters.

 

“But this would destroy exchange as we know it!” comes the cry from apologists of legal tender laws.  “No one will know what anything is worth, let alone how to pay for it!”

 

On the contrary, the free operation of the money supply would, by necessity, cause everyone engaging in exchange to be acutely aware of both what constitutes money and how much it is worth.  It is legal tender laws which serve to pull the wool over everyone’s eyes as to the true value of money.

 

When seen through a different lens, that of the free operation of the money supply, the absurdity of legal tender laws becomes clear.  Commodity (free) money is unhindered by the artificial restraint of existing debts and is constrained only by the productive will of society.  Commodity (free) money is free to accurately reflect the price of goods and services in light of the perceived supply and productive capacity of both goods being exchanged, that being offered in exchange and that offered in payment as money.

 

Money, as most people instinctively understand it, is simply an ordinary good whose utility and value are greatly enhanced by its wide acceptance in trade.  If one strives to remove the “cost” of producing money, as Adam Smith so nobly aspired to do, it is clear that the best way to do this is to allow the good which is acting as money to be produced in the most efficient way by the greatest number of artisans as are necessary to fulfill the present demand for money.

 

But how would all of these artisans, blindly creating all of this commodity money, know when to stop producing were it not for legal tender laws?

 

Here, there is no risk of oversimplifying the answer, for the answer is painfully simple.  As persons competing in the free market who have chosen to produce money, they are likely to be the first to know when there is too much money in circulation, for their orders for new money will uncannily drop when the economy has enough money to function efficiently.

 

Further, any commodity that is only marginally used in the production of money will quickly and smoothly have its supply directed to other, more efficient uses as the incentive (realized margin) to use it as money is incrementally reduced as supply begins to overtake demand.  Each producer is therefore free to choose his or her exit point.

 

Take the case of copper.  If copper becomes monetized by the free will of the participants in the economy, it stands to reason that it could be demonetized by the same free market operation.  Should economic activity slow to the point where the pace of saving and exchange no longer calls for copper to assume a role as money, as copper is demonetized those holding copper will find it more efficient to melt the copper that they have in monetary form and sell it as a consumer good.

 

European Jeton from 1598 courtesy of Wikipedia.org

 

The process of demonetization is simply a matter or free choice when something occurring in nature is used as money.  It first moves to the fringes of use as money, as a Jeton or modern day casino chip is used in place of money.  In time, the material will be demonetized completely.

 

Debt, when used as money, enjoys no such elasticity.  By necessity, when debt is forced into a role as money, it causes an unnatural proliferation of credit, so that when the inverse of Gresham’s law begins to operate (good credits push bad credits out of circulation) the unnatural restriction on the money supply assures that even the best of credits will go bad, and the money supply along with them.

 

When debt is demonetized, usually by force, the result is more often than not a severe hyperinflation followed by war.

 

Legal tender laws, such as the modern laws which declare that debt is money, are futile at best and generally destructive.  They do, however, permit a small group to reap the monetary margin that the artificial monopoly on money creation allows them for at time.

 

Accepting that an inanimate object is no longer worth what one thought it was can be disappointing, but at least one still has said inanimate object.  In the case of debt, accepting that someone cannot deliver what they promised tends to create feelings of resentment and remorse which, depending upon the size of the failure, can lead to violence.

 

Soon, the world will learn that using debt as money is a dangerous violation of the very laws of nature.  As with any violation of natural law, the consequences may be withheld for a time, but they are never avoided.  The longer they are artificially withheld, the more swiftly and severely the consequences will be meted out when they can no longer be repressed.

 

For no man, or group of men, regardless of their number, clairvoyance, or special powers they profess to have, can suspend or accelerate the operation of natural law.  The Creator alone reserves that power for himself.

 

There is a perfect balance in God’s creation.  Yin and yang, male and female, mercy and justice, heat cold, money and debt.  Calling one extreme the by the name of other is futile and leads only to confusion and destruction.

 

It is only a matter of time.

 

Stay tuned and Trust Jesus.

 

Stay Fresh!

 

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for January 31, 2012

 

Copper Price per Lb: $3.79
Oil Price per Barrel:  $98.48

Corn Price per Bushel:  $6.39  
10 Yr US Treasury Bond:  1.80%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,737 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,633  

M1 Monetary Base:  $2,152,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,782,800,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, The Mint

Euro funding doesn’t pencil out

Rumors today that Greece would default on its sovereign debt were received with relative calm by the bond markets.  Now that Greece’s public debt is approaching 150% of GDP and is forecast to increase by at least 10%, even the most optimistic analysts, namely S&P, are coming to one inescapable conclusion:

Greece is in technical default.

This is news to no one in the world of finance.  The numbers in Greece haven’t penciled out for at least three years and have shown absolutely no sign of improvement.  Anyone with significant exposure to Greece has either sold it or obtained some sort of guarantee from the ECB and/or IMF that they will be made whole on their exposure.

Hence, the lack of panic in the markets.

For financial market participants, the guarantee of the ECB works as a hallucinogen.  Traditional analysis no longer applies once an infinitely solvent guarantor signs on to back the debt of a weak partner.  The weak partner is no longer seen as insolvent, but rather, devoid of credit risk.

However, 2012 is shaping up to be a tough year for the ECB itself.  With every cent of spare Euro liquidity fleeing to American shores, the ECB is now the lone ranger as its lending activity increasingly dominates the Euro money markets.

Assuming that it must fund a large majority of the Eurozone’s debt rollovers in in 2012, how many Euros will the ECB need to conjure up?  The rough tally is 740 billion euros worth of European sovereign debt.

Additionally, it is almost a bygone conclusion that the ECB will need to step in and buy the debt of European banks whose country’s sovereigns are under pressure.  This includes:

  • 25% of Irish banks outstanding debt
  • 20% of Spanish banks outstanding debt
  • 15% of Italian banks outstanding debt; and
  • 15% of Italian banks outstanding debt

To borrow an old but relevant metaphor, 2012 will be the year that the ECB’s wine, the Euro, turns to sewage.  Thanks to their unlimited swap line at the Federal Reserve, the US currency is likely to begin to smell funny as well.

Could this be why the FED funds rate has creeped up from its flatline the past few days?

No matter how you look at it, the 2012 Euro funding picture does not pencil out.  The sooner that Greece and the other insolvent sovereigns and banks declare the default that the markets have long since priced in, the sooner growth and hope will return to the Eurozone.

On the other hand, the longer the sewage is allowed to backup at the ECB, the greater the risk of a Euro currency collapse.  Nobody wants to see that, especially the FED.

Economics, Gold, Monetary Theory, Of Money and Metals, Silver, The Mint

Of Money and Metals – Part IV: The Operation of a Free Money Supply Explained

1/23/2012 Portland, Oregon – Pop in your mints…

{Editor”s note: The following is a continuation of the series “Of Money and Metals.”  Please click here to view the Part I,  Part II, and Part III} 

Natural law is always operating, always demanding a balance of accounts in the real world, not simply on an accountant’s ledger or numbers on a bank statement.

It is then foolishness for anyone to assume that a central authority, no matter how clairvoyant, can properly estimate the money supply necessary for human economic activity to continue at the optimal rate, balancing both the quantity of debt and money to provide for both the present and future using all of the information which is collectively available.

It is for this reason that it is imperative that people be free to declare both what will serve as money as well as its value in exchange.  History has shown that, if people chose gold or anything natural as money, economic activity and the resulting benefits to society will accumulate so rapidly that the supply of gold will quickly act as a constraint.  If gold is money by decree, this becomes a problem. 

However, if gold has simply been chosen for use as money by the majority, the same majority will quickly and tacitly gravitate to a secondary natural source of money with which to augment the primary natural money supply.  Historically, this secondary source of money has been silver. 

Once economic activity further accelerates and the benefits continue to accrue to a larger portion of the population, the supply of silver will act as a restraint.  Again, if left to their own devices, the majority will quickly and tacitly adopt another item occurring in nature to be used as money.  Historically, this third source has been copper.

Yet even the supply of copper, abundant as it may be, will eventually serve as a restraint, and so on, and so forth.  Eventually, in this example of what we like to call “Free Money,” gold will tend to operate as a form of savings and settlement only in the largest of transactions, with silver serving as money at an intermediate level while copper would be the most widely circulated currency for smaller transactions.

The beauty of free money is that, should the supply of copper become a constraint, steel, nickel, or some other more abundant natural resource will take the place of copper for use in smaller transactions, and so on, so that the money supply, in a general sense, will always be perfectly suited for the rate of economic activity which is occurring.

It is important to note that, while history has shown a preference for metals to be used as money, in the free money (and by extension, free banking) theory there is no requirement that what be adopted as money be metal.  In fact, money can be anything that those participating in exchange bilaterally accept as payment for goods and settlement of debts.  As you will recall, the only thing that money should not be, by definition, is debt.

Yes, Mr. Cheney, Deficits do matter

 

While it is obvious that debt can be exchanged in the place of money for a time, as the past 100 years have shown us, common sense, logic, and natural law will demand that the debts which circulate be settled in real terms.  The creation of debt as money severely distorts economic reality and the more debt that is created, the greater the demanded settlement in real terms will be, regardless of how many times one chants the Keynesian mantra recently made famous again by former Vice President of the US Dick Cheney “Deficits don’t matter.”

The superiority of free money is that the money supply is free to adapt to the rapidly economic activity, which is nothing more than an expression of the changing wants and needs of consumers.  The money supply is not hindered by unnatural constraints which have nothing to do with economic reality and are imposed by what is at best an uninformed or disinterested and at worst a malicious monetary authority.

The current debt as money system, far from providing a perfectly elastic money supply, has created the economic equivalent of concrete, which is now hardening the economy instead of providing it with the much needed lubrication.  If this insanity carries on much longer, society will be shattered as economic reality takes a jackhammer to it.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 23, 2012

Copper Price per Lb: $3.79
Oil Price per Barrel:  $99.93

Corn Price per Bushel:  $6.20  
10 Yr US Treasury Bond:  2.07%
FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,677 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,709  

M1 Monetary Base:  $2,167,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,805,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Gold, Monetary Theory, Of Money and Metals, Silver, The Mint

Of Money and Metals Part III – Debt: The Barbarous Relic

1/19/2012 Portland, Oregon – Pop in your mints…

{Editor”s note: The following is a continuation of the series “Of Money and Metals.”  Please click here to view the Part I and Part II} 

As the world descended further into depression which eventually led it into the Second World War (Editor’s Note:  It should come as no surprise that the only two World Wars have come after the declaration that debt is money), The Keynesian adherents clamored for more debt as the only answer to the world’s economic ills.

What Keynes and his Harvard trained legions fail to comprehend is that the only permanent cure for an economic depression is to allow each individual to declare what he or she will use as money and allow market participants to coalesce around what at that time is best suited for the role of money.  For balance sheet recessions, such as the one the world is currently experimenting, are merely symptoms of a rigid money supply which has failed to keep up with the demands of a dynamic economy.

Under current theory, the government sacrifices the dynamic economy in the name of preserving the “integrity” of the monetary system.

When it is quite obvious that it is the monetary system that has failed, the government’s response can only be seen as idiotic at best.

What makes the situation of the past 100 years even more untenable is that money, instead of operating as a lubricant for economic activity, is more like concrete.  Such is the inherently destructive nature of debt as money. 

For the only rule with regards to money which is imposed as a matter of natural law is that debt cannot ever be money.  It is a concept so clear that it escapes most academics and government officials.

Now, the Keynesian indoctrinated readers of these words are no doubt dusting off the “silver bullet” of Keynesian theory:  That gold, which is widely held as the logical alternative to the “debt is money” insanity, is a “barbarous relic.”  In layman’s terms, Keynesian theory holds that any attempt to limit the money supply via natural means, the most popular being a gold standard (fixing the price of gold in terms of monetary units) will cause a deflationary spiral which will bankrupt the entire world.

The former "Barbarous Relic" - photo by Toi Mine courtesy of Wikimedia Commons

Even Adam Smith argued that the mining of metals for use as currency was essentially a lamentable waste of resources.

We could not agree with them more.  The limited amounts of gold in the world make it wholly unfit for everyday exchange.  Gold, rather, is generally agreed upon to be the most perfect savings vehicle that the world has yet discovered.

So Keynes, despite promoting a theory which sacrifices the yang (savings) and glorifies the yin (debt) is right after all?  Not quite…

Using the same logic with which the Keynesian so adeptly slays the gold standard, it quickly becomes obvious that by declaring that debt is money is not only a violation of natural law, it makes debt, rather than gold, the new barbarous relic.

Debt has a distinct disadvantage to gold in that it can be quickly and completely destroyed.  Once it is assumed by the majority that a certain debtor will not be able to make good on their debts, the debts owed by the debtor, and any money in circulation which is either directly or indirectly related to the existence of these debts, is destroyed.  For debt, at its base level, is a figment of the imagination until it is settled in real terms by the delivery of money in settlement of the debt.

It would hold, then, that debt, the new “barbarous relic,” is exponentially more dangerous than gold when used as money.  The reasoning is the following, while the quantity of debt in the world can be suddenly and permanently reduced, the quantity of gold, which is admittedly difficult to increase, is at the same time extremely difficult to decrease.

Yet even given the strong advantage of gold over debt as money, it is obvious that both the Keynesians and the gold bugs are sadly mistaken in formulating their ultimate solution to the eternal problem of the money supply.

When it comes to determining the proper money supply, Adam Smith’s invisible hand of the market can be seen slapping both Keynesians and gold bugs silly!

For the problem with declaring anything, be it gold, debt, or white elephants as money, has nothing to do with the fitness of gold, debt, or white elephants for use as money, rather, it lies in the act of the minority attempting to dictate what will be used as money by the majority.

Money, in a general sense, is a good of the highest order.  There is nothing in nature which states that gold, silver, seashells, or anything else must be used as money.  The historical association of gold and silver as money is the result of their superior fitness for the role of money.  It is simply a product of the collective wisdom of mankind, gleaned from experience as free exchange and the division of labor began to bring order to man’s chaotic surroundings.

However, just because gold and silver were superior in their role as money in the past does not necessarily mean that they enjoy some sort of divine designation as money.

Gold and Silver, like all things occurring in nature, are in limited supply.  The fact that they occur in nature gives them a distinct advantage over debt (which is simply a promise to pay in the future) in that debt, which is theoretically in infinite supply, quickly loses value against scarce real goods due to the fact that debt, in theory, enjoys an infinite supply.

Anyone can make promises to pay in the future, it is the function of debt markets to determine what those promises are worth today.  Ironically, the value of debt today is perilously tied to speculations about the money supply, which is in turn dependent upon the issuance of debt.  Thus, declaring debt as money provides the economy with yet another hindrance in that the debt markets are increasingly disconnected from their noble origins; the debtor’s perceived productive capacity.

It is clear that mankind is in a perilous predicament.  Will we take hold of the simple answer, which lies in free banking and free determination of what will serve as money?

More to come…

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 19, 2012

Copper Price per Lb: $3.80
Oil Price per Barrel:  $100.41

Corn Price per Bushel:  $6.06  
10 Yr US Treasury Bond:  1.97%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,657 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,625  

M1 Monetary Base:  $2,167,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,805,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Monetary Theory, Of Money and Metals

Of Money and Metals, Part II – The Keynesian Nightmare

1/18/2012 Portland, Oregon – Pop in your mints…

{Editor”s note: The following is a continuation of the series “Of Money and Metals.”  Please click here to view the Part I} 

In 1913 the US Congress passed the now infamous Federal Reserve act.  Not unlike the recent passage of the 2012 NDAA, it happened during the winter holiday when the populace was largely distracted by the festivities.

While the Federal Reserve act has wrought many injustices on the earth, undoubtedly the greatest injustice which continues to cause the greatest amount of damage to mankind was the subtle replacement of money proper with Federal Reserve notes.  This action effectively declared that debt is money, in direct violation of natural law.

The Federal Reserve, in direct violation of Natural Law

 

While this fact may have seemed like a minor detail with regards to custodianship at the time, the declaration was, in essence, handing Frodo’s One Ring to the financial and governmental authorities of the earth.  For it gave them largely unfettered access to the accumulated savings of the entire earth and, in the case that the savings ran dry, the unhindered ability to incur debts against the future production of the entire earth as well.

The only thing that they needed was to compel the entire earth to accept debts as money in everyday exchange.  In the west, they have largely succeeded.  In the east, the acceptance of debt as money has been violently forced upon the populace through a series of wars.

Yet as we stated yesterday, debt and money are polar opposites.  To declare that debt is money was not only insane, it was a direct violation of natural law.  This violation of natural law began to reap its terrible harvest in 1933 with the onset of the great depression.  Yet instead of admitting defeat and leaving the quantities of debt and money in the hands of the people, where it naturally belongs, the authorities presented an academic apologist to confirm for them that debt was indeed now money and that all that was required was more of it.

Enter John Maynard Keynes, best known as the father of the Keynesian school of economic thought.  Mr. Keynes developed a thesis which “correctly” diagnosed that the economic problem facing the earth was a lack of money.  What Keynes and those who subscribed to his theories have failed to realize is that the Federal Reserve, in declaring that debt was money, had placed a significant impediment to the creation of money, the remedy which the earth desperately needed.

Instead, Keynes and his colleagues skipped over the only viable solution, namely, allowing the free market to determine what constitutes debt and money and in what quantities each was needed, and offered the world a solution which has been the equivalent of injecting poison directly into the veins of the ailing economy.  The poison of which we speak was injected as a result of the testing erroneous hypothesis:

 “The problem is that there is not enough money.  Because debt is now money, it follows that more debt must be incurred to create the money necessary to spur production, employment, and all the things that people now associate with a healthy economy.  Further, there is not enough money precisely because the people are not sufficiently indebting themselves.  Since the people are not inclined to further indebt themselves (Editor’s note:  the people are naturally reacting to natural law, which naturally calls for less debt and more saving), it is the duty of the government to increase overall indebtedness, and therefore the money supply, on behalf of the people.  It must force the people to do what they cannot (or more accurately, will not) do for themselves.”

As insane as this line of thought sounds, it is today generally accepted as natural law by nearly every Harvard trained economist, and therefore government and central bank official, on the planet.  The only difference between the 1930’s and today is that today, circa 2012, this disastrous line of thought is practiced on a much grander scale.

Stay tuned for tomorrow’s installment:  The Barbarous Relic and Trust Jesus!

Stay Fresh!

 

David Mint

 

Email: davidminteconomics@gmail.com

 

Key Indicators for January 18, 2012

 

Copper Price per Lb: $3.73
Oil Price per Barrel:  $100.77

 

Corn Price per Bushel:  $5.93  
10 Yr US Treasury Bond:  1.90%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

 

Gold Price Per Ounce:  $1,660 PERMANENT UNCERTAINTY

 

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,562  

 

M1 Monetary Base:  $2,380,300,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,829,100,000,000 YIKES UP $1 Trillion in one year!!!!!!!

 

Economics, Monetary Theory, Of Money and Metals, The Mint

Of Money and Metals, Part I – Balance

Yin Yang - A picture of balance

1/17/2012 Portland, Oregon – Pop in your mints…

It is turning out to be an unusually dry winter here in Portland.  It is a refreshing break from the usual incessant pounding of rain which blesses this part of the world between November and May each year.  Perhaps we are just now getting back the lost months of June and July of 2011, as nature has a way of evening things out over time. 

We have observed that there is a perfect balance in God’s creation.  Some call it a yin and yang, male and female, mercy and justice, freedom and slavery, heat and cold.  For every extreme, there is a force which, given enough time, will work to counteract the excesses wrought by the seemingly uninhibited operation of its polar opposite.

It should come as no surprise, then, that in the economic sphere, debt and money fall into the same category of opposing natural forces.

Yes, debt and money are two completely different forces.  One takes from the future to provide for the present, the other takes from the past towards the same end. 

Simple, right?  Male, female, Yin, Yang, case closed.

Yet circa 2012, for some odd reason, there seems to be an abundance of debt and a dearth of money in the world.  The world as we know it is perilously out of balance.

How can this be?  Why are things so far out of balance?  In the interest of time, we will sum up what is otherwise a long and painful explanation in the following way.  Roughly 100 years ago, by decree of the financial authorities, debt was declared to be money.

Ever since then, man has lived in a state of economic confusion.  On one hand, He has seen an unprecedented level of technological advances and a resulting rise in his standard of living.  On the other hand, on net, he, or someone acting in his name, has borrowed an unprecedented amount of money from the future in order to achieve these advances and consequent rise in his living standards.

How is this possible?  Didn’t simply declaring debt is money relieve man of having to save?  After all, if everyone simply assents to accepting promises to pay in the future for goods or services delivered or performed today, haven’t we trumped the need for savings, the Yang, as it were?

More to the point, have the laws of nature with regards to money been permanently altered?

If only it were so.  Unfortunately, the longer man labors under the false assumption that debt is money, the greater the pain which will be incurred by mankind as nature unilaterally brings the earth into balance.

More to come…

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 17, 2012

Copper Price per Lb: $3.72
Oil Price per Barrel:  $100.75

Corn Price per Bushel:  $6.04  
10 Yr US Treasury Bond:  1.85%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,653 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,485  

M1 Monetary Base:  $2,380,300,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,829,100,000,000 YIKES UP $1 Trillion in one year!!!!!!!

 

Economics, Freedom, Politics, The Mint

Disturbing economic trends continue into 2012

1/9/2012 Portland, Oregon – Pop in your mints…

2012 has gotten off to a relatively uneventful start on all fronts.  Stock and Bond markets continue on autopilot and are completely underwritten by central banks at this point.  Commodity prices seem to be following the inflationary path that the central banks support of the stock and bond markets has set them on.  Meanwhile, productivity, real output, appears stable and poised to climb, which should further fuel inflation as the money supply begins to overwhelm the supply of real goods and labor.

The assault on civil liberties continues.  The United States surrendered its status as a free country when it approved the NDAA, assuring that they government could detain anyone, anywhere, for as long as they want, without ever having to produce charges.

 

 

 

Finally, widespread corruption continues unabated.  Officials at MF Global are still loose after robbing $1.2 billion of client funds in a desperate attempt to stave off a margin call which brought down the firm as the CME washed its hands of the situation, leaving traders everywhere wondering if their univested brokerage funds are safe or even truly exist.

Now, from Switzerland, the bastion of financial morality, comes word that the wife of Philipp Hildebrand, now former Chairman of its central bank, made a substantial purchase of US Dollars just weeks before her husband and his colleagues shocked the world by surrendering the Swiss franc to the same fate as the doomed Euro.  Coincidence?  It would appear not.

 

The Swiss National Bank Courtesy of Baikonur

 

In short, there is nothing in the data to disprove the hypothesis that the world’s financial system and by default the nations which are currently charged with it are headed to hell in a hand basket. 

This, fellow taxpayers, should be cause for hope.  For only when it is acutely understood by all involved the incredible destruction which is being wrought every single day by the current, insane, “debt is money” financial system under which we live, can things finally begin to get better.

 

We hope and pray that the day of collective acute understanding is near, and that the transition to a new system passes peacefully.

 

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 9, 2012

Copper Price per Lb: $3.39
Oil Price per Barrel:  $101.40

Corn Price per Bushel:  $6.52  
10 Yr US Treasury Bond:  1.96%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,611 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  11,995  

M1 Monetary Base:  $2,290,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,718,900,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Events, Politics, The Mint

MF Global Hearings move to the Senate: Bombs dropping left and right amongst the deaf

12/13/2011 Portland, Oregon – Pop in your mints…

Today the Agricultural committee of the US Senate played host to what has become the political and financial spectacle of the year:  The Hearings on the MF Global collapse.  We have equated these hearings to professional wrestling.  While high in entertainment value, the spectators are left to wonder how much of it is real and how much of the action is staged.

 

Today, Jon Corzine, MF Global’s former CEO, the ultimate insider who has become the poster boy for the corporate and political corruption that seems to rule the day, was joined by Bradley Abelow, former President and COO of MF Global and Henri Steenkamp, who is still acting as the firm’s CFO.

 You can watch the sad spectacle on C-SPAN at the following link: http://www.c-span.org/Events/Senate-Looks-into-MF-Global-Bankruptcy/10737426222/

 

Jon Corzine takes a quick thumb to the eye at MF Global’s Wrestlmania

It appears that the addition of two more members of MF Global’s senior management team was intended to give the illusion that there may be more information forthcoming at this hearing than at the earlier hearing held by the House Agricultural Committee.  That illusion was quickly dispelled as soon as each of them opened their mouths.

 In summary, they are very, very sorry.  They are aware that this situation has undermined confidence in the markets.  They do not know where the $1.2 billion of missing client funds are.  They are pretty sure that the funds went missing from their treasury group, where the funds are held.

 Strangely, the Patriot Act of 2001, in addition to steamrolling the US Constitution, included provisions which required every banking institution in the US to “know their customer,” which in practice means that no transfer from US accounts could have taken place without the authorities being able to quickly track who the money went to.  This provision, which on its face would make theft and money laundering in US Financial institutions impossible, makes “not knowing” who the money went to an untenable defense.

Nonetheless, Corzine and his cohorts stated again and again that they have no idea where it went.

The only revelation, apart from the names of a few MF Global employees who were offered as sacrificial lambs before the inquisition style questioning, was that the CFO of North American division was apparently on vacation when the funds went missing. 

 

They never mentioned whether or not this individual had returned.

 

Corzine went as far to say that nothing he said, such as “I don’t care where you get the money, we have to make this margin call,” for example, “should have been construed” as permission to transfer client funds into MF Global operating accounts and then out to counterparties.  He is obviously slipping towards a plea and hoping to do time with his Goldman buddies at a posh jail in Manhattan.

 

By the end of the morning, nothing that was said, either by a member of the Senate or former MF Global executive, served to instill any measure of confidence.

 

The afternoon, however, looked promising.  The regulators who were on the case and had their noses close to the ground were set to testify.  CME Group Executive Chairman Terrence Duffy, MF Global Trustee James Giddens and CFTC Commissioner Jill Sommers sat down before the committee and took the obligatory oath.

 

Mr. Giddens lead off, restating the obvious.  He is in charge of ensuring that MF Global assets are liquidated and that the proceeds distributed to the creditors based on the criteria laid out in the US Bankruptcy code.  He would later state that efforts to recover assets abroad had been blocked by sovereign governments (those across the Atlantic), who are likely protecting their banks from what would be a devastating clawback of funds.

 

Then, just as we thought that the afternoon would be a snoozefest, Mr. Duffy of the CME Group dropped a bombshell.  In his opening remarks, he stated that he was “in the room” when a CME employee was on the phone with an MF Global employee who stated that Mr. Corzine had direct knowledge that client funds were missing (or in industry parlance, “loaned out”) well before the weekend of October 31st.

 

This directly contradicted Mr. Corzine’s testimony under oath in which he stated that he had “no knowledge” of the missing client funds until that fateful weekend.

 

Et tu, Brute?

 

The diversion only lasted for a moment.  The committee then proceeded to flagellate Mr. Duffy and the CME Group for defending the idea that their exchanges can properly self regulate themselves.

 

Mrs. Sommers of the CFTC was then flagellated by the committee for the failure of the government agency to regulate entities such as the CME Group and MF Global which are supposed to, if we understand correctly, self regulate themselves.

 

As today’s chapter of the spectacle came to a close, there were more questions than answers.  Like the old WWF, no scores were permanently settled and we will have to tune in Friday to see how the next stage in this drama unfolds.  It promises to be exciting, as the committee includes none other than Ron Paul (R-TX), the one man in Congress who may actually understand what happened.

 

The Witness list for Friday can be found here.

 

For those who have not been following, the MF Global situation is extremely important because a number of things that investors have been able to count on have been called into question.  A brief list of these now invalid assumptions:

 

–          Client funds are properly segregated from a brokerage company’s operating funds.

–          Exchanges such as the CME Group will backstop (make whole) clients in the event that one of their approved brokerage firms goes bankrupt.

–          Exchanges will halt trading in the event of a bankruptcy until any missing client funds can be accounted for and that trades from customers of the bankrupt brokerage can be executed.

–          Once a brokerage firm declares bankruptcy, all assets must be handed immediately over to a trustee who from that moment on has a fiduciary duty to sell the bankrupt firms assets to the highest bidder to satisfy as many creditors as possible.

–          Regulatory agencies such as the CFTC have controls and monitoring in place which will prevent clients from suffering losses if a brokerage firm misappropriates their funds.

–          Sarbanes Oxley has effectively eliminated corporate fraud.

–          The commodity exchanges, such as the CME Group, can effectively self regulate.

–          Theft is illegal.

 

Every day which passes in which there is not a full recovery of the client funds held by MF Global adds to the list of questions.  And every day that passes serves to call further into question the ability of all brokerage houses, exchanges, and government regulators to make good on their promises.

 

The MF Global situation is not simply about the bankruptcy of a large brokerage, it is about whether or not the rule of law can be trusted to operate in the financial markets of the United States of America.

 

For all of the bankruptcies and bank seizures that have occurred in the wake of the 2008 financial crisis, in most cases there has been confidence that the framework of the markets could be trusted, and that the myriad of regulatory entities which are supposed to make Capitalism safe for all have everyting under control.

 

After MF Global, one has to question whether any asset, paper or physical, entrusted to a financial institution is safe.

 

In related news, Mr. Giddens (the MF Global Trustee above) announced today that JP Morgan would be probed in the MF Global investigation.

 

This can only serve to further disrupt futures markets.  Is the end of the current system nigh?

 

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 13, 2011

Copper Price per Lb: $3.43
Oil Price per Barrel:  $100.02

Corn Price per Bushel:  $5.88  
10 Yr US Treasury Bond:  1.96%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,632 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  11,995  

M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Politics, The Mint, True Capitalism

The benefits of Decentralized power, Rumblings of QE3, the clock is ticking on the currency regime

12/12/2011 Portland, Oregon – Pop in your mints…
There is something strangely satisfying about sitting around a large indoor fire just feet away from the Christmas tree with family.  In those moments, one can partake of all that is right with the world.  It occurred to us that we all strive for these moments yet at times they can seem elusive.  Eternity is placed in our hearts, and time on earth seems to be in short supply.
As such, we must use it wisely.
We have been extolling the benefits of what we have been calling True Capitalism.  True Capitalism is what we here at The Mint humbly offer as the solution to what currently ails the world.  There is one byproduct of True Capitalism, a radical respect of life and property, which is often overlooked and is perhaps “central” to the advantage that it has over every other conceivable construct of society:
True Capitalism works to decentralize power.
In other words, it naturally evens the playing field by removing unfair advantages realized by some at the expense of others.
But isn’t that what Government is supposed to do?  Of course it is!  However, governments circa 2011 are in the middle of an unprecedented power grab.  This centralization of power, they say, is necessary in order to homogenize life as we know it and to help everything run smoothly.
Even if this were possible, there is a fundamental problem created by the centralization of power which is without resolution.  In layman’s terms, it makes for an easy target.
When we see the word target, your mind may conjure up images of vulnerability of a military attack.  However, what we have in mind is much more dangerous.  An army of lobbyists.
Herein lies the weakness of centralized power.  However good its intentions, it will constantly be under attack and subsequent influence of groups who desire this centralized power for their own benefit.  Repelling these attacks is expensive.  Succumbing to them, as is more often the case, will bankrupt a nation.
Governing is not cheap, and there are no economies of scale in it.  Rather, the larger it is, the less efficient it becomes.  Does this sound familiar?  This is what we have now thanks to the Might Makes Right ideology by which we are ruled.
Enter True Capitalism.
In a Truly Capitalistic system, the cost of the nation state drops to zero, for the nation state as we know it would cease to exist.  Does this mean that there will be not be a need for governance?  No, on the contrary, the roles which we now attribute to government will be carried out by any number of organizations.  Governance, in general, would increase, yet it would cost less!
How is this possible?  Voluntary governmental bodies are generally more responsive and efficient, in large part because the cost of governance falls directly to those individuals who desire to pay for it.
Governance has value, and its value can and is be properly set on an open market.  The phenomenon of corporations and persons choosing to reside in low tax venues represents a conscious choice of where and by whom one prefers to be governed by those individuals.
In the west, the value of the brand of government provided in the US and Europe is dropping along with its bond prices.  The fact that nations issue bonds is proof of two things:  That their service oriented businesses are failing and that they will be increasingly reliant upon their ability to forcefully relieve their citizens of their assets (commonly known as taxation) to continue operations.
In other words, they will rely on their Might, the use of force, to justify their “right” to govern.
This untenable “Might Makes Right” system that can only operate as long as people believe that the aggressor has absolute power over them.  This is why countries have flags and dictatorships have the image of the dictator plastered everywhere.  This is why people are being forced into the current banking system, taught to rely upon it, and subsequently shut out of it.
This is a reason why Modern Central Banking and the Corporations that have sprung up around the Central Banks are man’s greatest disaster.
Once the currency and banking systems of Europe and America are completely broken down, people’s blind faith in the currency and its issuer will be destroyed.  The currency regime will then quickly disintegrate
The Federal Reserve will likely allude to QE3 to the tune of $1 trillion dollars today in a desperate attempt to keep the currency regime afloat.
The clock is ticking on these failed monetary experiments.
Do you know where your money is?
Stay tuned and Trust Jesus.
Stay Fresh!

Key Indicators for December 12, 2011
Gold Price Per Ounce:  $1,665 PERMANENT UNCERTAINTY

M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Events, Politics, The Mint

EU Treaty Exposes English and French Differences

12/9/2011 Portland, Oregon – Pop in your mints…

As many are aware, the EU ramrod “save the currency” treaty was quickly accepted by the countries who are all in on the Euro, while those who saw that drinking the Euro koolaid was likely to kill them, namely England, rejected the treaty.

For us, this exposed the fundamental differences in the English and those on the continent.

One of these differences being that the French tend to think of children as innocents who become corrupted as they age (which is why they are more apt to tolerate the immoral shenanigans of their governing class more than the Brits or Americans do), the English understand that children, as much as adults, are capable of both good and evil at any age.  They hope for the best and, at their best, prepare for the worst.

This is why the French could not believe the premise of the Lord of the Flies.  Why were these children portrayed as being aggressive to eachother?

While this observation is neither here nor there, we leave you with the French and English leaders as they interacted at the EU summit.

 

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 9, 2011

Copper Price per Lb: $3.57
Oil Price per Barrel:  $99.41

Corn Price per Bushel:  $5.85
10 Yr US Treasury Bond:  2.05%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,711 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  12,184

M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Events, Politics, The Mint, Uncategorized

John Corzine Testifies to a Congressional Panel on MF Global Collapse

12/8/2011 Portland, Oregon – Pop in your mints…

Today the world witnessed one of the most surreal spectacles that we can imagine.  John Corzine, former CEO of MF Global, the Primary Dealer which went bankrupt on October 31st and is now missing $1.2 billion of client funds, was called on to testify by a group of men in the US Congress who are trying to understand what went wrong and how they can prevent it from occuring again.

You can see the agonizing hearing in all of its glory by clicking the link below.  Our humble observations:

1.  Neither Mr. Corzine or Congress said anything that should give any measure of confidence to participants in the global financial markets.

2.  Mr. Corzine is sorry this happened.

3.  One of the members of the panel stated the obvious “we got to find that money.”  Understatement of the year.

4.  Mr. Corzine is so confident that the client funds will be recovered that he mumbled, after being pressed by a member of the panel, that he and the other executives would personally reimburse clients in the event that it wasn’t (NOT!)

5.  Questions about the Federal Reserve’s ability to properly vet firms who are qualified to be Primary Dealers.

We didn’t know whether to laugh or cry.  Mr. Corzine looked like a large elf from the camera angle and the members of congress, in most cases, sounded less than up to the task of understanding what happened, much less being able to craft legislation which would prevent a similar event in the future.

It was like watching political professional wrestling.  The entertainment value was fairly high, excitement filled the room, but it left you wondering if what you saw was real or simply scripted and well acted by all involved.

All in all, it was a synopsis of the level corruption and ignorance that grace the halls of power in America circa 2011.

See the entire sorry spectacle courtesy of C-Span:  http://www.c-span.org/Events/Fmr-Senator-Corzine-to-Testify-in-MF-Global-Investigation/10737426111-1/

Perhaps now the Farmer and the Cowman will befriend each other, grab their pitchforks, and storm capital hill until their $1.2 billion is returned.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 8, 2011

Copper Price per Lb: $3.49
Oil Price per Barrel:  $98.57

Corn Price per Bushel:  $5.90  
10 Yr US Treasury Bond:  1.97%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,706 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  11,998  

M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!