Category Archives: Economics

Economics, Gold, Silver, The Mint

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part V – Final Catastrophe and Hope for the Future

10/21/2011 Portland, Oregon – Pop in your mints…

As the western world braces for a full scale currency collapse, we have endeavored here at The Mint to offer an explanation as to why these events are taking place and, along the way, offering the obvious solution to the chief problem, mistaking credit for money.  

For those of you who have missed Part I, Part II, Part II, and/or Part IV, you may read them by clicking on the following links:

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part IV – The Catastrophe at Hand

If you require only a brief summary, Part IV above offers a relatively brief and comprehensive summary of the previous three.  Now where were we…

Ah yes, in the United States, circa 1968, a time not so unlike our own.  The Vietnam war was becoming increasingly unpopular and the social climate was ripe for protest.  The US had run up a large and increasing trade deficit with the rest of the world.  It was becoming clear that if foreign dollar holders were to redeem a significant amount of their Federal Reserve Notes, which we now understand to be banknotes and not money proper, for gold, which we now understand to be money proper, the Federal Reserve would not be able to deliver enough gold.

The solution, if it can be called that, was to gradually increase the amount of Federal Reserve Notes required to obtain an ounce of gold from $35 to $41 between 1968 and 1971.  Then, in 1971, with the US dollar collapsing in value and the Bretton Woods system falling apart at the seams, then President of the United States Richard Nixon announced that US dollars were no longer convertible into gold.  The event is now referred to as the Nixon Shock.

And a shock it was.  The US dollar, the benchmark of Central Bank currencies throughout the world, was now officially backed only by the faith that it would continue to be accepted in trade.  The Federal Reserve had defaulted.

Most of the world still lives by this faith today, and if anything, the delusion that a banknote issued by a Central Bank which has defaulted on its obligation to deliver real money on demand has only grown.

The reason that the large scale catastrophe of modern Central Banking lies before us is that over the last 40 years, the lack of gold and silver to back the banknotes in circulation has been replaced by the expectation that governments, and by extension their subjects (citizens), will produce enough goods and perform enough services to repay the obligations represented by the banknotes. As the unrestricted quantity of banknotes and obligations to deliver banknotes in existence will always tend to exceed the stock of available goods and services, these obligations are impossible to satisfy.

Human beings are fallible.  It is normal and should be expected that they will not be able to deliver on certain obligations.  The natural beauty of banknotes redeemable in gold and silver was that, if it was suspected or observed that a person or entity would be unable to pay their obligations, the creditor would move to seize the gold, silver, or other assets that the debtor had pledged as collateral.

The seizure of collateral or the threat of seizure was often enough to correct the failed human action or decisions that were leading to the net loss of wealth incurred by the activity which was undertaken.  In economic parlance, we would call this the correction of the malinvestment of resources.

Without gold and silver to act as a natural limitation on the supply of banknotes and other forms of credit, the bad decisions that lead to the malinvestment and the activities that lead to the destruction of wealth and resources can continue for a very long time.

The use of gold and silver as money had another, more important function that is often overlooked.  Gold and silver are inert, non-consumable objects.  Their hoarding and use as money will not generally cause starvation or want.  In fact, the hoarding of gold and silver as money would have the effect of lowering general prices as productivity increased, naturally creating an incentive to decrease production which in turn would raise prices, making the expenditure of more silver and gold necessary and in turn raise prices, creating a natural  incentive to produce.

Gold and silver allow the economy to naturally regulate itself and, by virtue of the difficulty in extracting them, cause the rest of the earth’s resources to be used in harmony with each other.

Finally, gold and silver are inanimate objects.  Their recognition and possible seizure as collateral does not threaten the liberty or life of a person.  However, because modern central banking has replaced money proper and placed credit in its place, it will become increasingly common to entire societies held as security for a debt that many of them had no direct hand in creating. This is the logical end of using credit as money.

It is the truth that will bring tragedy to the earth.

Without the natural counterbalance to trade and growth which gold and silver money had provided for over 9,000 years, man’s activities, whether productive or destructive, have continued nearly unchecked for the past 40 years.  It is staggering to think of the catastrophe that awaits if man is truly on the path to destruction.

Man, by nature, is always on the path of destruction, but the use of gold and silver as money served to correct him before he strayed too far down it.

Most people alive today have been trained to believe that using Gold and Silver as money is an unnecessary and environmentally harmful process.  Even Adam Smith believed that if the effort expended to mine metals to create money could be directed to other, more useful activities, that humanity would be better off.

What Smith did not realize was that man would not always direct its energies to useful activities.  Like modern Socialists, he underestimated the power of self interest inherent in all human action.  Today we are preparing to reap the consequences of 40 years of unrestricted and more often misguided human actions.

While it may be too late to avoid the catastrophe that Modern Central Banking may bring upon us, it is comforting to know that a return to the understanding and use of gold and silver as money offers hope for a future of truly infinite possibilities.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at www.davidmint.com

Key Indicators for October 21, 2011

Copper Price per Lb: $3.23
Oil Price per Barrel:  $87.40

Corn Price per Bushel:  $6.49
10 Yr US Treasury Bond:  2.20%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,642 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,809  

M1 Monetary Base:  $2,056,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,570,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Gold, Silver, The Mint

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part IV – The Catastrophe at Hand

10/20/2011 Portland, Oregon – Pop in your mints…

For those of you who have missed Part I, Part II, and/or Part III, you may read them by clicking on the following links:

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?

Again, for those of you who are too lazy to click the links, here we offer a brief summary to get you up to speed:

 

Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade.  A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.

 

The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life.  The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.

 

The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society.  As such, the Central Bank becomes the natural creditor of the Government.  Whether it lends funds directly to the Government or indirectly, the result is the same.  That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.

 

Having established the fact that some form of both a Government and a Central Bank will naturally, in some form, come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.

 

Today, that the scale of modern Central Banking is excessive and that the potential for catastrophe is unprecedented.

 

The reason for the unprecedented scope of Central Banking is that money, as it is widely understood today, does not really exist.  Rather, banknotes issued by Central Banks, which are by definition credit instruments, are misunderstood to be money proper by a majority of the people in the developed and semi-developed world.

 

This misunderstanding flies in the face of 9,000 years of human history, in which Gold and Silver in bar and coin form have been tacitly used as money proper.  It is this misunderstanding which has set the stage for the greatest catastrophe in history to occur.

Federal Reserve Notes Begin toReplace Gold and Silver as the concept of Money for a Generation
 

The misunderstanding of money and credit began, like many experiments, in Northern Europe with the establishment of the Bank of Amsterdam.  Established in 1609, the Bank of Amsterdam is widely recognized as at least a precursor to modern central banks.  For over 400 years since it was established, the use of banknotes issued by a Central Bank which are not directly convertible to coin has slowly but steadily increased.

 

Modern Central banks issuing banknotes were subsequently formed in Europe, England, and Japan.  As these Central banks and their successors began to slowly absorb the true money supply and issue banknotes in their place, man began to slowly transfer the concept of money proper from Gold and Silver and attribute the qualities of money to the banknotes issued by the Central Bank.

 

This process of wealth absorption greatly accelerated in 1913 when the United States of America granted a 100 year charter to its third Central Bank, the Federal Reserve.  The FED, as it is commonly known, was to act primarily as a reserve and to create “money” (read banknotes) as necessary.  At the advent of World War I, the FED stepped in and issued bonds to finance the war and after the war the FED was granted exclusive control of the money supply in the United States.

 

In 1933, in the midst of what was to be the great depression in the US, President Franklin D. Roosevelt signed Executive Order 6102 which required citizens to deliver all but a small amount of gold coin and bullion held by them to the FED in exchange for $20.67 worth of Federal Reserve notes (the banknotes issued by the FED) per ounce.

 

Naturally, most citizens with large quantities of gold at the time had it transferred to Switzerland.

 

Then, by decree, the Government raised the price of redeeming gold from the FED to $35 per ounce.  Redemption could only be made by Foreign parties as, naturally, it was now illegal for US Citizens to own gold.

 

Federal Reserve notes were now the only form of “money” that an entire generation of Americans were likely to handle.  However, foreigners could still redeem the Federal Reserve notes for gold, though they rarely did, at $35 per ounce.

 

After World War II, the US emerged as the most powerful nation on earth.  It was only natural that the western governments would peg their currencies at a fixed exchange rate to the US dollar (Federal Reserve Note) which was redeemable in gold at $35 per ounce.  This is commonly known as the Bretton Woods system.

 

The system held together for around 20 years, accepting that $35 US Dollars were as good as gold until 1968, when things began to get dangerous…

 

Stay tuned and  Trust Jesus.

 

Stay Fresh!

 

David Mint
 

Email: davidminteconomics@gmail.com

Key Indicators for October 20, 2011

Gold Price Per Ounce:  $1,622 PERMANENT UNCERTAINTY
M1 Monetary Base:  $2,056,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,570,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Economics, Gold, Silver, The Mint

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?

10/19/2011 Portland, Oregon – Pop in your mints…

For those of you who have missed Part I and/or Part II, you may read them by clicking on the following links:

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

For those of you who are too lazy to click the links, we do not blame you.  Below we offer a brief summary to get you up to speed:

Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade.  A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.

The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life.  The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.

The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society.  As such, the Central Bank becomes the natural creditor of the Government.  Whether it lends funds directly to the Government or indirectly, the result is the same.  That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.

Having established the fact that some form of both a Government and a Central Bank will come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.

Central Banking, like alcohol and socialism, may be a good idea when used in moderation.  However, each one of these also represents a catastrophe waiting to happen.  For if the circumstances under which they are created or used take an unfavorable turn, the wealth and lives of many may be lost in a very short period of time.

How, when, and most importantly why will this catastrophe take place?  As mere mortals, we can only answer the why and speculate as to the how and when.

Why, then, will the current system of Central Banking come to an end which will cause wealth destruction on a scale which will make the weapons of war seem like child’s play in comparison?

The answer, fellow taxpayer, is that money as it is widely understood today does not really exist.

You read correctly.  What a majority of the developed and semi-developed world uses as a store of wealth, unit of account, and medium of exchange, is a figment of the collective imagination.

Allow us to explain.  It is generally understood today that the value of money is not necessarily in money proper, rather the value of money is found in the ability of the bearer to exchange said money for goods and services.  What is often overlooked in this observation is that, for money to be exchanged for something of value between willing participants of a transaction, what is used as money in the transaction must be universally perceived to have value that is easily transferable between parties.

Following this logic, what society uses as money is, by definition, simply another good which is widely recognizable as useful in exchange and therefore carries a price premium (we will call it the monetary  premium) of a certain amount usually far above what some economists would incorrectly* call the good’s “intrinsic” value.

* We say incorrectly because value judgments, while often influenced by what are known as “market” or “intrinsic” values, are by definition made by the individuals who willingly enter into a transaction, not disinterested observers.  It is for this reason that it is more accurate to appraise value by observing price points of transactions on “the margin” (i.e. transactions that are actually taking place) as opposed to appraising value based on past transactions or transactions imagined to take place in the future.  Many are the hypothetical gains and losses of those who refuse to enter into transactions because they are waiting for and offer at “market prices” or the “intrinsic value” of an item.

Regardless of the monetary premium that a good may carry, whatever is used as money, by definition, must be a tangible good.  Otherwise, we are dealing with credit, which is a promise to pay in money at a future date. Credit may be given in exchange in the place of money and is often traded at a discount to money delivered immediately. 

The distinction between money and credit is common knowledge to but it is important to make a clear distinction in order to properly understand what happens next.

 

Examples of Money Proper - Courtesy of Mark Herpel - www.dgcmagazine.com

 

In roughly 9.000 years of human history, it has been tacitly agreed upon that silver and gold, usually in coin or bar form, are the highest and most widely recognized goods used as money and that the accumulation of silver and gold represent wealth. 

As you recall, the concept of a Central Banking arose in response to the need for man to protect his wealth.  You will further recall that in order to both protect wealth and facilitate trade, a Central Bank creates banknotes which represent a claim on the wealth being protected by the Central Bank. 

These banknotes which the Central Bank creates are, by definition, credit and not money.  They are generally the highest, least discounted, form of credit which is traded, but this does not change the fact that the banknotes are credit and thus carry an implied risk of default.  This risk of default places the ultimate limit on the circulation and acceptance of the banknotes in trade.

From time to time, when a Central Bank’s ability to protect the wealth entrusted to it came into question, banknotes would be presented to the Central Bank to be redeemed for the amount of silver and gold which they represented.  If the Central Bank could not produce the amount of silver and gold that was being redeemed, the Central Bank was considered to be in default and, as word of the default spread, the banknotes in circulation would trade at an ever increasing discount to real goods.

This logic further supports the fact that banknotes are credit, subject to default risk, and not money proper.

Can you now smell the impending catastrophe?  Or, to put the question more directly:

What’s in your wallet?  More tomorrow,

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 19, 2011

Copper Price per Lb: $3.25
Oil Price per Barrel:  $86.11

Corn Price per Bushel:  $6.38  
10 Yr US Treasury Bond:  2.16%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,671 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,505  

M1 Monetary Base:  $2,201,800,000,000 RED ALERT!!!
M2 Monetary Base:  $9,554,000,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, The Mint

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

10/17/2011 Portland, Oregon – Pop in your mints…
For those of you who have missed or long since forgotten Part I, please take a moment to review it here:
Our tale continues:
As the Fixed income markets continue to crumble, all eyes in Finance are now on a summit of European leaders that will take place next Sunday, when many persons will be watching sporting events, enjoying the outdoors, protesting, or toiling to eke out a meager existence on this earth.
What happens in Europe next Sunday may be simply another act in the game of extend and pretend that until now has been the only strategy employed by Western governments and their Central Banks in response to the bankruptcy of the world’s largest banks and governments.
On the other hand, it may be a Pearl Harbor type of event for the Euro and other currencies.
Since we do not know what will befall mankind this coming Sunday, we must endeavor to understand how the Western world has arrived at this critical juncture in history.  We began last week, by exploring the often underestimated contribution of Luca Pacioli to the commonwealth of society:  The dissemination of Dual Entry Accounting methods used in Genoa, Florence, and Venice circa 1492.
Today, we will explore the great irony that Dual Entry Accounting – what we call man’s greatest innovation, has made possible what we are calling man’s greatest catastrophe, Modern Central Banking.
In order to do this, we begin with a brief history and explanation of the concept of Central Banking and its relationship to government.
The concept of Central Banking is rooted in man’s need for security as well as his recognition of his co-dependence on his fellow man to increase his well being through trade.  It takes time and energy to obtain and protect wealth.  It also takes time and energy to barter with counterparties while trading differing goods without a suitable means of exchange.
A bank, in its simplest form, provides a secure place to store wealth.  A natural extension of this activity is for the banker to extend credit and act as a clearing house for commerce by assuming a de facto role as an issuer of currency in the form of banknotes which represent a claim on wealth held at their bank.  The existence and circulation of these banknotes greatly facilitated trade.
As trade and consequently the wealth of mankind increased both in volume and geographical reach, there was increasingly a need for a larger banking interest to store the excess wealth of the individual banks and to honor the banknotes emitted by the individual banks.  This larger banking interest, formed by and for the benefit of the individual banks, is what we today call a Central Bank.
The complexity of maintaining banking accounts was greatly facilitated and made possible on a large scale by the use of dual entry accounting.  The ability for individual banks to maintain accounts on a larger scale made possible the existence of a Central Bank to act as a clearing house amongst banks.  Hence, our premise that Dual entry accounting enabled Central banking.

Now, on to the role of Government in relation to Central Banking.  If Central Banks arose because man needed someone to look after his wealth, governments arose because man needed someone to look after his life.  Governments were formed in response to the natural human need for a common defense.

It is not hard, then, to imagine that Governments, in whatever form, relied heavily upon and supported the formation of both individual banks and Central Banks.
Why would Governments need banks and Central banks?
Governments are generally given license by the members of society to use whatever means necessary to preserve their lives.  As such, they assume the role as the apparatus of compulsion and coercion in that society.
As the apparatus of compulsion and coercion, the government, by definition, cannot generate wealth.  At best, it can only create the conditions under which individuals may create wealth, but the activities of government as a provider of security never directly create wealth.  Because they cannot create wealth, they must either borrow from or tax the populace in order to fund their activities of compulsion and coercion.
The Central Bank, as the ultimate repository of wealth, offers a convenient source of both credit and, in a later wave of Central Banks of which the Federal Reserve is a prime example, tax collection services.
Storage of Wealth and Tax Collection Service provided with a smile
As you can see, a Central Bank is an indispensible institution both for individuals in terms of storing wealth and facilitating trade, as well as for Governments who have an insatiable need for tax revenues and credit.
The existence of a Central Bank, for all of the benefits that it may bestow, unwittingly makes the wealth of those it serves a natural target for those who are anxious to obtain that wealth through unjust means.
Central Banking, like alcohol and socialism, may be a good idea when used in moderation.  However, each one of these also represents a catastrophe waiting to happen.  For if the circumstances under which they are created or used take an unfavorable turn, the wealth and lives of many may be lost in a very short period of time.
Needless to say, the scale of modern Central Banking is beyond what would be advisable, and the potential for catastrophe is unprecedented.
How, when, and most importantly why will this catastrophe take place?  We can only answer the why, and we will tackle it tomorrow as we are spent.
Stay tuned and Trust Jesus.
Stay Fresh!
Key Indicators for October 17, 2011
Copper Price per Lb: $3.35
Oil Price per Barrel:  $86.24
Gold Price Per Ounce:  $1,671 PERMANENT UNCERTAINTY

M1 Monetary Base:  $2,201,800,000,000 RED ALERT!!!
M2 Monetary Base:  $9,554,000,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, The Mint

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

10/13/2011 Portland, Oregon – Pop in your mints…

As we alluded to yesterday, the Federal Reserve’s latest attempt to goose the economy, “Operation Twist,” is not only failing to achieve its stated goals, it is also triggering an unmitigated disaster in the fixed income markets.  These markets, once the bedrock of global finance, have now been conditioned to do nothing more than attempt to front run the FED and other Central Banks up and down the yield curve.

To continue our waterbed analogy, it is akin to a 300 pound Ben Bernanke (Central Banks) chasing an 800 pound gorilla (the market) around on a queen sized waterbed.  The action is becoming completely unpredictable and downright dangerous.

Today, as the chaos continues to unfold, we want to take a moment to examine how humanity has arrived at this critical juncture in history, where a fat man chasing a gorilla on a waterbed can threaten to damage the wealth of nearly everyone on the planet.

In order to understand this, we must travel back to the year 1492.  Venice is the center of the western world and Christopher Columbus has set sail to find a new trade route to India.  A Franciscan monk by the name of Luca Pacioli sits in his room and creates the outline for:  Summa de Arithmetica, Geometrica, Proportioni et Proportionale.

Summa de Arithmetica, Geometrica, Proportioni et Proportionale - Pacioli's great gift to Western Civilization

As part of what would have otherwise been simply another boring textbook on Mathematics, Pacioli sees fit to include a section on “Details of Accounting and Recording” in which he described the accounting practices used in Venice at the time.  When Summa was published in 1494, it contained what is recognized as the first complete description of dual entry accounting.

To be clear, accounting in some way, shape, or form has always been practiced.  What Pacioli accomplished, perhaps unwittingly, was to disseminate throughout Europe the accounting method which had made the merchants in Genoa, Florence, and Venice the most successful in the Western World.

What makes dual entry accounting so special?  Dual entry accounting, in a nutshell, is the formal recognition that every trade has a net affect on the income statement and balance sheet of an individual or enterprise.

More to the point, it enabled merchants and producers to understand which activities created wealth and therefore make informed decisions regarding which activities to undertake with their limited time and resources.

While this now seems intuitive, it is hard to overstate the benefits that the dissemination and use of dual entry accounting has bestowed on Western Civilization by enabling a greater number of persons to engage in activities which increase the capital stock and allowing them to more quickly abandon activities which deplete the capital stock (accumulated wealth) of society.

This facilitation of wealth generating activities is why dual entry accounting may be considered man’s greatest innovation.

Yet, in perhaps the greatest irony since God sending His Son, Jesus, to die in our place, dual entry accounting enabled the existence of what we are calling man’s greatest catastrophe, Modern Central Banking.

We’ll explain this great irony tomorrow in Part II.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 13, 2011

Copper Price per Lb: $3.31
Oil Price per Barrel:  $84.61

Corn Price per Bushel:  $6.38  
10 Yr US Treasury Bond:  2.17%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,667 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,478  

M1 Monetary Base:  $2,201,800,000,000 RED ALERT!!!
M2 Monetary Base:  $9,554,000,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, The Mint

The Bond Market Waterbed, Operation Twist causes the first of many weak US Treasury Auctions

10/12/2011 Portland, Oregon – Pop in your mints…

At this point, most FED watchers have heard of the FED’s latest move to appear to stimulate the economy while at the same time appear to control inflation, Operation Twist.  In theory, the FED is simply reshuffling its bloated portfolio of worthless paper, exchanging the pieces of paper that have dates that are in the near future for pieces of the paper with dates farther off in the future.

Sounds simple enough, the FED is not directly increasing the money supply; rather, it is stepping from one end of the bond market waterbed to the other in an attempt to shake things up.

Now anyone who has ever jumped on or skipped along a waterbed knows it is a dangerous exercise.

The FED prepares to Leap to the Long end. Where will the water go?

Why is it dangerous?  Because the FED, whose balance sheet is leveraged 55:1 as of October 5th, is telegraphing its trades in bold letters everywhere it can and is bound to be front run and take some losses.  Any mortal bank, bound by the restriction of marking its assets to market, would need to raise capital in the open market, beg the Government for a bailout, or increase its clients’ fees to cover these predictable losses.

Not the FED, they have the luxury of keeping their assets on the books at face value, running a negative capital balance, and printing the money necessary to absorb the losses.  All of these strategies have the ultimate effect of robbing their depositors (anyone holding US Dollars) of purchasing power. 

In the end, the Federal Reserve will become technically and later functionally insolvent.

They true tragedy in this gross, final expression of monetary madness by the FED is that they have no hope of achieving their stated goals.  Ostensibly they are selling on the short end of the yield curve in an attempt to raise rates and somehow spur lending, yet at last check, rates on the short end are as low as they have ever been.

Meanwhile, long yields, the ones the FED is theoretically partnering with the “free” market in order to lower rates so that everyone can refinance their underwater variable rate mortgages, are rising.

Inconceivable!  Yet true.

If today’s US Treasury auction was any indication of things to come (and there is no reason to think that it will not be), then the weakened demand for Treasuries that expressed itself today could overwhelm any attempt for the FED to lower rates and the logical end game is that the FED will be the ONLY entity bidding on long dated Treasuries.

Picture the waterbed.  A 300 pound Ben Bernanke jumps from one end to the other, where does the water go?  Follow the water, then race to get off the bed.  As long is Ben Is jumping on the bed, the bed (i.e. the Government controlled bond market that it represents) won’t hold water much longer.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 12, 2011

Copper Price per Lb: $3.38
Oil Price per Barrel:  $84.90

Corn Price per Bushel:  $6.41  
10 Yr US Treasury Bond:  2.23%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,676 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,519  

M1 Monetary Base:  $2,144,500,000,000 RED ALERT!!!
M2 Monetary Base:  $9,473,100,000,000 YIKES!!!!!!!

Economics, The Mint

Dexia Nationalized, Occupy Wall Street Appears to misinterpret the Monetary Roots of Widespread Discontent

10/11/2011 Portland, Oregon – Pop in your mints…

The big news over the weekend was the partial nationalization of the Belian Bank, Dexia.  What?  You’ve never heard of Dexia?  Most people this side of the pond hadn’t up until a few weeks ago.  This tiny $707 Billion hedge fund disguised as a bank, which just months ago passed the European bank stress tests with flying colors, has become the first official victim of the dearth of interbank funding in the Eurozone.

In a world full of potential butterfly effects, Dexia’s staggering juggernaut could have a knock-off effect for the US Municipal bond market.

Following a familiar script into unfamiliar territory, the Governments of France, Belgium, and Luxembourg jumped in and provided guaranties (ala Fannie Mae and Freddie Mac, which ironically are currently regurgitating their guaranties back onto US Banks) to the tune of $122 Billion until things settle down.

Unfortunately for France, Belgium, and Luxembourg, things will not settle down in time for their governments to remain solvent.  Chalk another set of Eurozone governments up to the “effective loss of sovereignty club.”  Surrendering sovereignty to international banking interests seems to be working out well for Greece, Ireland, Portugal, and Italy, so why not join the fun?

Slovakia appears to be the only nation willing to stand up against the wave of bailouts and subsequent loss of sovereignty as the bailouts costs crush already strained government balance sheets.  It appears that they may hold out a couple more days, enough time to find a compliant government (the current one was voted out in a confidence vote tied to the EFSF earlier today).

The situation in Europe is giving the world a frightening message:  When push comes to shove, the governments can be counted on to work in the interests of the banks.  How long this untenable situation can last is anybody’s guess, but if the Occupy Wall Street movement continues to gain traction, it is clear that the situation, if properly understood, could change very quickly.

The Euro Prepares to Claim More Sovereignty

Observant fellow taxpayers will note that we have qualified our previous statement with the words “if properly understood” because, at the moment, the Occupy Wall Street movement appears to misunderstand the roots of their many and varied forms of discontent.

Protesters apparently see nothing wrong with the government selectively fleecing the productive class as long as they receive their “fair share.”  If we have correctly identified the Socialist tendencies of these protests (as last check they had not adopted a manifesto), then the logical outcome is simply the ouster of one form of parasite, the banking interests, for another.

The problem, of course, lies in what we use as money.  Placing the power to create money in the hands of a Central Bank and then turning a blind eye as they shamelessly debauch the currency, giving an inordinate amount of purchasing power to those closest to the money printing operation (banks and government) and placing an inordinate amount of regulatory and tax burden to those farther away from the money printing operation (that would be you and I, fellow taxpayer), is perhaps the surest way to destroy man’s faith in the capitalistic system, and in the process lay the blame for every evil unleashed by the debauching of the currency on the capitalistic system.

Rothchild, Marx, and Keynes understood this.  They also understood that only one man in a million would be able to understand how debauching the currency serves to concentrate power in the hands of few at the expense of many.

Are you one of them?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 11, 2011

Copper Price per Lb: $3.30
Oil Price per Barrel:  $85.81

Corn Price per Bushel:  $6.45  
10 Yr US Treasury Bond:  2.16%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,663 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,416  

M1 Monetary Base:  $2,144,500,000,000 RED ALERT!!!
M2 Monetary Base:  $9,473,100,000,000 YIKES!!!!!!!

Economics, The Mint

Sumo Wrestling in Europe, Can America afford to be Frugal? Not as long as Debt = Money

10/5/2011 Portland, Oregon – Pop in your mints…

In Europe, the sumo wrestlers have resumed their battle royal on the edge of the cliff.  In this metaphor, the wrestlers conveniently represent the various banks, semi-sovereign governments, central banks, and other unproductive, parasitic organizations with the words “Monetary Fund” in their name.

Up until now, with the exception of some jeering from the spectators, the battle royal has been good natured fun.  Each time one of the wrestlers has tumbled towards the cliff, several of his benevolent fellow competitors have come to his rescue.

First Greece, then Ireland, Northern Rock, Anglo-Irish, and The Bank of Ireland.  Now Alpha, Spain, Caja del Sol, Portugal, Italy, and Dexia.

Each time, they get up, dust each other off, and go back at it.

But the competitors are getting weary, as are the spectators.  With each new stumble towards the cliff, more competitors and even some spectators are required to jump in to avert certain disaster.  If this continues, when one of the weary wrestlers finally tumbles over the cliff, it is increasingly likely that he will take the rest of his competitors and a decent number of well meaning spectators over the edge with him.

Now things are starting to get interesting as BNP Paribas, SocGen, and France herself began to stumble towards the edge.  Who will save them?  Certainly not the Swiss National Bank, which last month stumbled to the edge of the ring and ironically may be the first to fall off.

Any sober observer will quickly point out that this is an insane pastime.  Why would a group of sweaty fat men repeatedly try to push each other from a ring along the edge of a cliff?

We can only venture a guess, and our guess is along the lines of “they somehow believe that they must.”

Why ask Why? Just stay away from the edge!

It doesn’t make sense, neither do a great number of things that occur in the current, insane, “debt is money” currency system in which we live. 

People and institutions are trained to make decisions regarding money based on the assumption that money in and of itself has value.  This assumption, under which the world currently toils, was debased along with the US Dollar back in 1971.  Money today has very little in common with the money our fathers grew up with.  Peter Schiff, the outspoken CEO of Euro Pacific Capital, has gone as far as to call modern currencies the “hidden portfolio risk.”

Our father’s money was based on the assumption that men were dishonest, and what they used as money (gold and silver) served to keep them honest.  Today, money is widely assumed to be honest, a fact which has served to make a great number of men dishonest.

Debt is not money, the proof

The only way that the illusion that debt is money can be perpetuated is when debt, and therefore the perceived money supply, is increasing.  First of all, who has ever been known to turn down free money?  When the exponential increase in the perceived money supply is occurring, it creates the welcome illusion of wealth.

Second, people quickly learn that the easiest way to make money is to position oneself as close as possible to the creation of new debt.  This is essentially the business model of Goldman Sachs and every other consumer and investment bank on the planet.

The money is so easy that no one stops to consider what would happen if aggregate debt were to begin to decrease, in turn decreasing the money supply by the same multiples with which it was created.

It will never happen, right?  People will never turn down free or almost free money.

Yet they are.  It turns out that people have a propensity for austerity when they have no choice.  If money were based on something real, austerity would be extremely healthy for the economy which would be accumulating a capital base from which to make the next series of technological advances.

In the current, insane, debt is money currency regime austerity (the reduction of aggregate debt) removes the life blood from the monetary system and causes the underlying economy to die a slow, then sudden and altogether painful, death.

The mirage of the debt fueled economy quickly vaporizes and the debtors and creditors in the system find themselves in the middle of an economic desert with a long road ahead of them.

There will be much struggle along the way, and their only hope is to walk together.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 5, 2011

Copper Price per Lb: $3.13
Oil Price per Barrel:  $79.51

Corn Price per Bushel:  $6.05  
10 Yr US Treasury Bond:  1.91%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,640 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  10,940  

M1 Monetary Base:  $2,052,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,511,300,000,000 YIKES!!!!!!!

Economics

A Chilling Coincidence in the S&P Chart

This chart came to our attention via the Business Insider Chart of the day.  Apparently it was produced by an analyst a Citi and is turning a lot of heads.  Three years on, the S&P closed yesterday at exactly the same level it did on October 3, 2008. After that, well, bad things happened.  Coincidence?

Economics, The Mint

If the FED is the only Lender of US Dollars, the System has Collapsed

10/4/2011 Portland, Oregon – Pop in your mints…

The dust is beginning to settle after what must have been a tense weekend for bank execs on both sides of the Atlantic.  We can only imagine that banks pulled out all the stops to somehow make their numbers for the third quarter end.  In a practical sense this meant putting the stranglehold on equity and commodity positions and hanging on to dollars with all their might.

The vacuum action in the dollar funding markets was so extreme that at one point it was rumored that US dollar funding for banks in Europe was apparently non-existent.  We speculated that banks were holding on to cash in the absence of clear direction from the Eurozone as to how they intend to bail out their large institutions and governments.

The action looks like a sumo wrestling battle royal on the edge of a cliff.

The FED came to the rescue and re- opened its swap lines with European banks to provide dollars and avoid widespread panic.  According to a report that we saw from Bloomberg, the FED had gone from its role as the lender of last resort to a role as the lender of ONLY resort.

We left off with a question which we will consider today:

Does the fact that the FED is the only institution willing to lend dollars indicate that the US Dollar system has technically collapsed?

On the surface, it would appear that the evidence points to just the opposite.  The US Dollar index has gone through the roof which would indicate a preference for dollars, making them more valuable.  Doesn’t this prove that the US Dollar is alive and well?

Bernanke Readies his Helicopters

Were the Dollar backed by something real, the above would be true.  However, in the current, insane, “Debt is Money” currency regime, it tells us quite the opposite.  The fact that the Federal Reserve, the creator of the current version of the US Dollar, is the only institution willing to lend said Dollars is in fact evidence that the system has failed.

It has failed because it is no longer self sustaining.  The willingness to take on new debt, which is the life blood of a debt based currency regime, is non-existent.  The usurers need fresh blood in order to sustain themselves and finding no new victims, are beginning to feed on each other.

Financial Institutions are attempting to hoard dollars on a net basis.  Instead of lending them to productive enterprises, they are paying down their dollar denominated liabilities.  In other words, the productive classes have begun to shun the dollar on a net basis and the ultra leveraged financial sector is beginning to vaporize as the productive debts are cancelled.

Financial institutions see this vaporization taking place at their counterparties and are unwilling to extend them credit on any terms.  The financial institutions which cannot meet their day to day funding requirements then turn to the Federal Reserve to lend them the Dollars necessary to meet their commitments.

The inter day funding action has, in effect, become a high stakes game of musical chairs.

While musical chairs is fun to watch, it is not evidence in and of itself of the collapse.  The evidence of the collapse emerges as we fix our gaze on the logical end of this vicious feedback loop.  The logical end is this:  The Federal Reserve ends up holding every worthless paper asset on the planet on its balance sheet which theoretically backs the dollars which it is emitting in exchange.  The banks, which are left with the dollars as their own “paper asset” and the Federal Reserve are left with staggering liabilities which they pass back and forth as investors, businesses, and consumers increasingly shun their paper.

For the moment, the world may have reached a peak in monetization, and the FED’s money machine is now backing up as the sewage of every bad loan on the planet begins to flood their balance sheet.

It is getting ugly.  How ugly?  So ugly that Bank of America’s website has been down for three straight days, presumably for technical reasons but avoiding an online bank run and forcing customers to pay $8 to bank at the branches come to mind as compelling technical reasons for a website failure.

Meanwhile, Europe is having their own “TARP moment” as Slovakian resistance is sure to be swiftly dealt with.  We know where that will lead.

Yes, the end of the insane system is approaching.  It won’t be long now until the authorities pull out their ultimate trump card, a wholesale change of the currency.  With nearly every government and bank on the planet heading to the poorhouse, it is the only trick that the currency regime has left.

Don’t fall for it, fellow taxpayer, for it too shall fail.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 4, 2011

Copper Price per Lb: $3.05
Oil Price per Barrel:  $78.31

Corn Price per Bushel:  $5.88  
10 Yr US Treasury Bond:  1.78%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,624 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,011  

M1 Monetary Base:  $2,052,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,511,300,000,000 YIKES!!!!!!!

Economics, Gold, Silver, The Mint

Reports of the FED as “Only” Lender of US Dollars, The Definition of a System Collapse

9/28/2011 Portland, Oregon – Pop in your mints…

We have taken a small breather here at The Mint.  What has occurred in the past week simply boggles the mind.  Precious metals have taken a beating and it is our guess that they will continue through tomorrow.  The most interesting reasoning for the drop in Gold and Silver that we have heard is that there will be an announcement on October 4th limiting short positions on the COMEX.

Guess who has a huge short position in silver that needs to be covered this week?  JP Morgan, to the tune of 121 million ounces.  We can only guess at the machinations but needless to say, it would be very convenient for them to be able to cover their positions at a discount.  Hence the increase in margin requirements at the COMEX last Friday which has shaken out the weak long positions this week.

Across the board in commodities, current prices reflect a rush to cash, not changing fundamentals.

Some interesting reading on the current, sorry state of employment in the US from US News:

15 Stunning Statistics About the Job Market

It is much worse than most imagine.

Other than that, chaos is reigning as the dollar funding markets for banks in Europe are apparently non-existent.  As September 30, 2011 approaches, banks are holding on to cash in the absence of clear direction from the Eurozone as to how they intend to bail out their large institutions.

In the meantime, the FED has apparently opened up swap lines (read printing presses) to provide dollars to these banks.  According to a report that we saw from Bloomberg, the FED has gone from its role as the lender of last resort to a role as the lender of ONLY resort.

We take this to mean that nobody is willing to lend US Dollars at any price to the largest banking institutions in the world.

Does this indicate that, at long last, the US Dollar system has technically collapsed?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 28, 2011

Copper Price per Lb: $3.21
Oil Price per Barrel:  $79.95

Corn Price per Bushel:  $6.30  
10 Yr US Treasury Bond:  2.00%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,610 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,011  

M1 Monetary Base:  $2,010,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,541,800,000,000 YIKES!!!!!!!

Economics

The Law of Diminishing Marginal Returns

Editor’s Note: Please welcome our guest contributor here at The Mint, Mr. Jason Holmes.  Mr. Holmes is a regular contributer at Debt Consolidaton Care and various other financial websites and has authored several e-books.  Without further adeiu, Mr. Holmes:

One of the popular laws in the theory of economics is the law of diminishing marginal returns. This law states that as the application of one factor of production is increased continuously, marginal product of that factor increases up to a certain point until it reaches a maximum and thereafter it begins to fall and eventually the marginal product of each additional factor of production becomes negative.  When the marginal product reaches zero level, total production can be said to have reached the maximum level.  When the marginal product of that factor is negative, total product starts falling.  This particular theory, as with many economic theories, is framed under the assumption that all of the other factors of production are kept constant.

One of the classic examples of the law of diminishing marginal returns is the use of fertilizers in agriculture. Increased application of fertilizers augments agricultural production, but only up to a certain extent. Once that point is reached, increased application of fertilizers no longer increases agricultural output, rather agricultural output starts declining.  Once the maximum amount of production is reached, the law of diminishing marginal returns starts operating and marginal increases in agricultural output begins to decline.  In the case of fertilizers, this occurs because with increased application of fertilizers, the fertility of the soil increases up to a certain extent.  However, as the application of fertilizer to the soil increases, the fertility of soil no longer improves, rather it starts degrading.  As a result, the agricultural production of the soil starts to decline. 

Another oft-cited example of the law of diminishing marginal returns is the addition of more workers on a car assembly line.  Up to a certain point, the addition of more workers results in the production of more cars. However, after that point, the addition of more workers no longer leads to the production of more cars. In fact, quite the opposite may happen.  Some workers may find others in their way making it difficult to perform their respective tasks while other workers may now have to wait to get access to a certain part, etc.  In this chaotic situation, the production of cars may actually start falling relative to the additional inputs of labor.

Many large scale examples of this law can be observed today.  In an attempt to expand or develop at any cost, the countries of the world have engaged in a widepsread unmindful use of resources. The time is approaching where we may soon see the complete depletion of valuable natural resources. The tremendous proliferation of the usage of petroleum products and natural gas threatens the environment.  Emissions of CO2, greenhouse gases and unchecked deforestation of timberlands have added to the danger of disruptive climate change.  Meteoric increases in the usage of cars and electronic gadgets have created some negative side effects as well.  As an indirect result, human civilization may be more vulnerable to various types of diseases and natural catastrophes.

These examples all point to the operation of the law of diminishing marginal returns. The law can also be applied to personal finance. If one takes on more and more credit card debt in order to pay off other existing debts, the consequences can indeed be grave and ultimately the individual may have to file for bankruptcy.  One  needs to be more disciplined and restrainted in their personal financial matters or they may also opt for credit consolidation to relieve the burden.  Discipline and restraint are advisable in all fields of life.  Otherwise, human civilization will  continue to be threatened as the day of reckoning approaches.

Jason Holmes is a regular writer with http://www.debtconsolidationcare.com/ and is also a contributor at other financial sites.  His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, ‘Take Creditors and Collection Agencies to Small Claims Court’ and, ‘My Story- From Depression To a Smile’.

Economics, Events, The Mint

A run on BNP, Europe’s Financial Collapse begins in earnest

9/22/2011 Portland, Oregon – Pop in your mints…

While it was a rough day for equity markets everywhere, in light of what is occurring, they (the markets) were amazingly resilient.  A testimony to how fast the monetary spigots at the Central Banks are running.

There are two events that appear to be on a collision course with destiny today (No, neither of them is the NASA space junk hurtling towards the earth).  It feels as if the world is reaching a sort of inflection point in modern history.  Perhaps a great awakening is about to occur.  Will people’s faith in Central Banking finally be broken?

The colliding events are the Palestinian bid for official recognition by the United Nations, scheduled for tomorrow, and the emerging institutional bank run on BNP Paribas.

The Palestinian situation needs no further discussion.  It is clear to most that it is an explosive topic to which the bid for recognition threatens to detonate, much in the way the Israeli Declaration of Independence ignited war in Palestine in 1948.

The Institutional run on BNP Paribas is an event that is occurring as we write and it is unclear how it will play out.  Reggie Middleton at the BoomBustBlog, is chronicling this event in real time.  If you are interested, we highly recommend following the event there.

Real Money Fleeing the Continent!

We have read reports of Lloyds of London, the famous Insurance Marketplace, pulling a great deal of its deposits out of banks on the continent.  We have also read reports of Siemens pulling deposits and parking them directly at the ECB.

Then there was the report of the ECB making an emergency loan of $500 million US Dollars to an unidentified bank (read BNP) with similar loans to other institutions in the cue.  It is clear that the banking crisis in France is dwarfing the ability for the French government to deal with it.

There is no use pointing out the many lessons that society will learn from this, for only one is expedient at the moment.  That lesson is that digital bits on a computer screen or numbers on a bank statement are worthless if the counterparty cannot make good on their commitments.

The run on BNP will intensify the focus on Western Central Banks, which have balance sheets that make BNP, BAC, and all of the other large sinking banks look good by comparison.  This is important because a good part of the world is to some extent a counterparty to the Central Banks.

Need proof?  Open your wallet.  If you have US Dollars or Euros, you are a counterparty to (owed money by) the Federal Reserve or the ECB, whose management is currently buying every worthless paper asset on the planet with leverage that is unimaginable for mere mortals.

Dollar and Euros are about to become extremely hot potatoes, which makes trading them for potatoes, spuds, or anything real, a real good idea.

Let us pray for the peace of Jerusalem, and that tomorrow passes uneventfully on all fronts.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 22, 2011

Copper Price per Lb: $3.45
Oil Price per Barrel:  $80.41

Corn Price per Bushel:  $6.50  
10 Yr US Treasury Bond:  1.72%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,736 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  10,734  

M1 Monetary Base:  $2,010,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,541,800,000,000 YIKES!!!!!!!

Economics, Politics, The Mint

Markets go up, Slovenia goes down, Dissing the State, Embracing Anarchy

9/20/2011 Portland, Oregon – Pop in your mints…

The Stock market is absolutely resilient in the face of news ranging from bad to UGLY.  Presumably, the slow motion debt market collapse occurring in Europe is priced in, and it may be this very collapse that is driving money into US equities.  In the insane “debt is money” system, the money can only go so many places, and there is currently so much money sloshing around that it is a wonder everything isn’t going up in price.

Oh, wait, it is!  The CPI came in at 0.4% for August.  Nothing to write home about but at this pace the annual CPI could hit 5%, well above the FED’s 2% target.

And we haven’t seen anything yet.  Tomorrow, the Federal Reserve will meet and be expected to “do something.”  Lately, “do something” has meant that the FED offers to throw perfectly good Federal Reserve notes at various forms of bad paper issued by companies and governments who never intend to make good on them.

At this stage in the game, it is now a given that if perfectly willing market participants won’t buy the paper, surely the FED must do it.  “So what?” say you, “Let the FED waste its own money!”  If only it were that simple, fellow taxpayer.

Unfortunately, the FED’s money, by decree, is everybody’s money.  Every bad decision by the FED reduces the purchasing power of every dollar holder on the planet, making nearly all of us involuntary shareholders of this worthless enterprise, and management at the FED has been making some very bad decisions with very large sums for about four years now.

As a concerned involuntary shareholder of the FED we are compelled to offer the following unsolicited advice:  Why not just wait until January, when the 0% FED funds “trickle” their way down to Main Street?  Then things will really be interesting.  That is when the US Dollar in its present form will go the way of every other paper currency in the history of mankind. 

Fellow taxpayer, prudence demands that one make immediate plans to replace anything that depends upon the value of the US Dollar with something real.  By the time the FED gets around to doing it for you, by introducing a New Dollar, current inaction will have caused anyone with faith in the dollar to suffer horrendously tremendous losses in relative purchasing power.

Back in the rotting old world, to quote Nabokov, the Euro debacle just became more complicated as the Slovenian government failed a confidence vote.  The President is now left trying to cobble together a government and the rest of the Eurozone will presumably have to wait at least 30 days to get Slovenia’s approval for the next round of good money to be thrown at Greece.

It is useless to point out that the Eurozone governments, like their American counterparts, are simply throwing good money after bad.  As we have observed here before, throwing money at failing enterprises is their only solution.  Besides, they have banking interests to protect.  Soon they will be spreading propaganda that ATMs won’t spit out Euros and the world will end if the Greeks are not supported.

That may be true, but these unpleasant outcomes will eventually come to pass no matter what the Euro FEDs do.

This is how the State, which by definition can do nothing but destroy wealth, operates.  Western societies, and dare we say, the entire world are now beginning to suffocate under the weight of the current form of welfare/warfare state which exists to make promises on behalf of its productive citizens to its unproductive citizens.

Then, after enslaving the productive citizens, the State then makes promises to support the banking and military interests in order to ensure that the productive citizens remain enslaved.

Is Anarchy the Answer?

At some point, each citizen decides that they are either better off becoming an unproductive citizen, working for the State taskmaster as a banker or provider of “security”, or fleeing beyond the State’s ability to enslave them.  Western society is quickly approaching the tipping point where a majority of its productive citizens will be forced to make this choice.

Faced with such facts, an intelligent fellow taxpayer such as yourself is surely asking (or should be asking, if we may prompt you), “Isn’t there a better way?”

In other words, is the State really necessary?  Today we read a brilliant essay on this very subject by Stefan Molyneux.  We encourage you to peruse it at your leisure.  You can see it by clicking on the link below:

The Stateless Society – An Examination of Alternatives

If you are limited on time, it is enough to say that Molyneux lays out compelling, logical arguments about how the free market would more effectively take care of the tasks which are currently relegated to the State.  Specifically, he examines three activities which pro-State apologists claim that the free market will not solve on its own, making the State’s existence a necessity:  Dispute Resolution, Collective Services, and Pollution.

After reading Molyneux’s arguments, it seems that now more than ever that embracing Anarchy is the answer to what ails society.

Much more than simply the answer, it is clear that the true chaos in not created by the Stateless Anarchist model, rather the present chaos is a product of entrusting the State with too much power.

How else can one explain how every present effort the Government uses to ”improve” its citizen’s lives serves to collectively impoverish them?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 20, 2011

Copper Price per Lb: $3.76
Oil Price per Barrel:  $86.43

Corn Price per Bushel:  $6.90  
10 Yr US Treasury Bond:  1.94%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,805 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,409  

M1 Monetary Base:  $2,101,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,540,500,000,000 YIKES!!!!!!!

Economics, The Mint

A pending Eurozone implosion and How Inflation appears in disguise: The Euro/Peseta price of Spanish Coffee

9/14/2011 Portland, Oregon – Pop in your mints…

What a week it has been, and we are only halfway through it!  Societe Generale, BNP Paribas, and many other European banks are bracing for the impact of a pending Greek default which would likely be followed in short order by an Irish, Spanish, Portuguese, and possibly Italian default as club med prepares to give the collective finger to their German, ECB, and IMF taskmasters.

There were rumors that BNP could not borrow dollars yesterday and today we saw why.  The large French banks, of which BNP at $2 Trillion in assets is the largest, collectively hold assets of $8 Billion, which is four times France’s annual GDP.  This, in theory, makes nationalization of these banks impossible and the meager, strings attached handouts offered by China are of little comfort.

Zerohedge.com posted an excerpt of a report by Jeffries which spelled out a probable endgame scenario in Europe which involves sloppy nationalizations of the financial sector and a repudiation of the Euro by the defaulting countries in order to print the drachmas, pesetas, liras, etc. necessary to make good on the newly nationalized banks’ liabilities.

The PIGS have nothing to lose at this point and it will be EUROUGLY for those who cling to the Euro. 

We are all preparing to learn a great lesson about faith in paper currencies and it looks like for the Europeans, class is in session.

Yesterday, we were attempting to explain the concept of inflation coming in disguise.  We speculated that the disguise would come in the form of a “10:1 reverse split” being declared for the current USD.  In other words, a new US Dollar would be introduced which would be worth 10 old US dollars.  We left off with a question, “What’s the big deal?  Why does this matter?”

At this point, our rational readers are thinking to themselves, ”Big deal, so we get rid of the penny and nickel production cost problem, learn to move the decimal place in our thinking, and happily move along with life, right?”

This, of course, is what most monetary and governmental representatives think as well.  It makes the move almost a no-brainer.

We must beware of the money changers!  They seem innocent, yet are wolves in sheep’s clothing.

Yes, fellow taxpayer, under the reverse split scenario, dollar holders will be robbed.  Quietly, and, if not for the following humble explanation, completely unaware.   It is as Keynes famously said:

“The best way to destroy the capitalist system is to debauch the currency.  By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens”

(Editor’s note: today inflation is accepted as “sound” economic policy thanks to meddlers such as Mr. Keynes.)  

How, then, will dollar holders have their wealth confiscated?  A change like this initially robs those who can least afford to be robbed, the poor.  And the thievery is made all the more sinister because the thieves employ unwitting merchants and tax collectors with which to fleece them.

The following is a practical example of how the theft will take place: 

One would be hard pressed to find a more suitable and pleasant example if instant price inflation than that of the Spanish cup of coffee, pleasantly sipped at mid-morning with friends and colleagues.

Inflation explained in the new Euro price of Cafe con Leche

This cup of coffee, a constitutional right of Spaniards for generations, could be enjoyed for a mere 100 pesetas circa 1995, in the era before the peseta was to be pegged and converted into the then conceptual Euro currency.

This 100 peseta price held more or less firm until the Euro coins began to circulate in 2002.  The Euro/Peseta conversion rate had been pegged at 166.386:1 in 1995.  In 2002, the same cup of coffee was now 1 Euro, an overnight 66% increase.

The numbers may not be exact but you get the point.  Currency changes offer a grand opportunity for price adjustments at the lower end.  While on the surface, it appears that a cup of coffee that costs 1 monetary unit compared to one that costs 100 monetary units is an improvement.  In fact, considering that many wages remained stagnant, it represented a considerable deterioration of overall purchasing power.

To this day, many Spaniards think of prices for larger items such as cars and houses in terms of pesetas.  It is one thing to be duped on the value of a cup of coffee, quite another to be duped on the value of a car or house. 

For a time, asset prices there did indeed rise as an indirect result of people fleeing the inflation caused by the change to the Euro.  However, the devil of inflation is in the details.  An overnight 66% increase in a cup of coffee can eat into a laborer’s stagnant wages quickly. 

Once the transitory asset price increases have been burned through at the café, one is left with a nation that is collectively poorer and unable to make economic decisions because of these types of stealth price shifts.

Returning to the probable US Dollar reverse split, we can see that a 10:1 change from old to new dollars would likely result in a cup of coffee going for a nice round quarter (or 25 new cents).  Which sounds like a trip back to the 70’s until you consider that we are talking about $2.50 of the old dollars for a plain cup of coffee which could be had for $1.50 before the switch.

One can rest assured, employers will be mindful to move the decimal point and nothing more on wage calculations.  Voila!  Overnight poverty, all with the stroke of a pen. 

While one may hold out hope that any change in the monetary unit will be price neutral, the Spanish example shows us that lipstick on a pig does not make it any prettier, and coffee at 1 Euro is no tastier than it was at 100 pesetas, just more expensive.

We pray that you will prepare yourself by saving in gold and silver coins, which will retain and perhaps increase their relative value under such a scenario.  Under current conditions (and probably more so after the G-7 begin to their coordinated action) anything that cannot be created by government decree, to paraphrase Michael Pento, will be preferable as a savings vehicle to the US Dollar.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at www.davidmint.com

Key Indicators for September 14, 2011

Copper Price per Lb: $3.90
Oil Price per Barrel:  $88.94

Corn Price per Bushel:  $7.24  
10 Yr US Treasury Bond:  2.01%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,815 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.5%!!!   UP 0.7% IN ONE MONTH, 8.4% ANNUALLY AT THIS PACE!!!
Dow Jones Industrial Average:  10,992  TO THE MOON!!!

M1 Monetary Base:  $2,181,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,456,000,000,000 YIKES!!!!!!!

Economics, The Mint

The Disguise, Greece plays roulette with the Eurocrats, How inflation will express itself in USD Prices

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

The moment of truth is approaching for Greece.  Today the headlines flashed that the markets were pricing in a 98% chance of the Greeks defaulting on their sovereign debt.  A great lesson is about to be learned.  Is anyone paying attention?

The great lesson is the following:  Reliance on governmental and/or central bank action to stave off a default is not a sound strategy.  You may get lucky once, twice, even three times.  If one is particularly unfortunate, the strategy may even work many times in succession.

The government reliance strategy is like idly watching spins a roulette wheel with all your chips on red.  With enough spins, the ball will eventually drop on a black.  Think of it as the governmental version of a black swan.

Gambling on Government intervention

 

In the case of Greece, who abandoned its 2,000 year old currency to join the Euro club, there seems to be a lack of political will to ink the rubber stamp which approves the Greek’s next ration of Euros.  The taskmasters of the Eurozone are starting to realize that each time the stamp is inked, the sewage of Greek finances leaks a little further into their well. 

The populace is starting to get sick to their stomach, as are large banks on both sides of the Atlantic.  The French banking giants are queasy because much of the Greek debt is on their books.  In the New World, where about half of Greek debt is insured, the banking giants are getting nauseas.  It is the nausea of a drunk man realizing he will be stuck with the bar tab after his buddies sneak out of the tavern.

Meanwhile, as the politicians and central banks continue to bungle their way through this information, the market has already priced it in.

“Priced in?”  Astute, shocked, and astounded readers are surely thinking, “Then where is the crash in stocks and bonds?” 

Astute readers, of course, are right.  There is a crash occurring right now in stocks and bonds.  However, bond yields are down and the stock market is up because the crash is occurring against the backdrop of rapidly depreciating currencies and as such, the debauched currencies are disguising the crash.

The Disguise

Astute readers now have a collective light bulb in their head illuminating as they clearly see that inflation in consumer prices is set to accelerate in the near future.  Naturally, this obvious inflation would not be tolerable and as such must be masked in order for the general public to peacefully accept it.

For this acceptance to peacefully take place, the inflation must come in disguise.  Here is what is likely to occur once the loosened up monetary policies of the FED, ECB, BoJ, and BoE are in sync (with apologies to the 1990’s boy band):

A new dollar will be introduced with a convertibility ratio from old dollars of 10:1.  In other words, each current dollar will be the equivalent of a new dime.

Voila!  No inflation here.  The new and improved dollar now buys more than ever! 

The Debauched Dollar in disguise

Why choose a 10:1 ratio?  There are two compelling reasons for the US Currency to go through a reverse 10:1 split.  First and foremost, it is simple.  Since a majority of the world’s commerce is conducted in dollars, the disguise must be mathematically simple.  What could be simpler than moving a decimal place?

The second reason is less obvious but perhaps more compelling from the point of view of the monetary authorities.  The disguise would immediately eliminate the need for pennies and nickels and increase the demand for dollar coins.

At this stage in the game, it costs the US Mint more to create pennies and nickels than they are worth.  While we are not certain of the exact numbers as of today, some estimates have the value of the metals needed to create a nickel valued at $0.07 while the metals needed to create a penny are valued at $0.012.  This is before considering the energy and equipment necessary to strike the coins and distribute them.

At current metal prices, which are unlikely to drop in the near future, the US Mint is producing nickels and pennies at a loss.

This embarrassing detail makes the purchase of nickels and pennies a better risk free investment than US Treasury Bonds, the world’s current safe haven of choice.  The metal premium for Platinum, Gold, and Silver coins is widely known.  At some point, nickels and pennies will disappear from circulation and their metal premium will take precedence over their face value. 

Still, one may ask, “What difference does it make?  This 10:1 switch sounds like a great idea.  I’m sick of pennies!”

Oh, if only the switch were price neutral, it would make no difference at all.  How, then, do the stock, bond, and almost every other market continue to rally in the face of questionable macroeconomic fundamentals?

Tune in tomorrow.

 Trust Jesus and Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at www.davidmint.com

Key Indicators for September 12, 2011

Copper Price per Lb: $3.97
Oil Price per Barrel:  $88.19

Corn Price per Bushel:  $7.34  
10 Yr US Treasury Bond:  1.93%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,814 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.5%!!!   UP 0.7% IN ONE MONTH, 8.4% ANNUALLY AT THIS PACE!!!
Dow Jones Industrial Average:  11,061  TO THE MOON!!!

M1 Monetary Base:  $2,181,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,456,000,000,000 YIKES!!!!!!!

Economics, Jesus, The Mint

Forgiveness, the FED, Bank of England, Bank of Japan, and ECB to coordinate actions, will they formally peg exchange rates?

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

Much ink is being spilled today in anticipation of what may or may not happen as the 10th anniversary of the events that occurred on September 11, 2001.  Here at The Mint, we take the somewhat radical view of the Amish in response to tragic loss.  We must forgive.  An important part of forgiveness is to avoid making or observing a memorial to the offense.  Memorializing an event is to keep it present before us.

As the US Empire is now conducting at least three extremely expensive military adventures which have their origins in the events that occurred that fateful day, forgiveness is probably not on many people’s minds this weekend.  Meanwhile, millions of dollars are being spent to memorialize it.

We must forgive.  It is our opportunity to choose the tree of life over the tree of the knowledge of good and evil.  To repair the fateful error made in Eden.

Under the cover of this memorial, we sense that an extraordinary event will occur which will impact the fortunes of many in the US, England, Japan, and Europe and others outside their borders with exposure to their respective currencies.

Debauchery

The Event which we refer to is the coordinated debauchery of their currencies. 

For the past four years, the FED, BoE, BoJ, and ECB have been engaged in a desperate attempt to debauch (devalue) their currencies.  They have had the predictably mediocre to poor results that one would expect from efforts made by this rare hybrid of an agency which combines the laziness of the banking class with the incompetence of the governing class.

The goal seems simple enough.  Print money to pay existing debts and encourage people to spend and to take on new debt.  So simple, that each of these Central Banks is currently running at their own pace down this calamitous path with little regard to how the outside world is reacting.

Guess what?  The outside world is not reacting as expected.

What they did not take into account, at least until now, was that there is quite a bit of money to be made from the fact that they are all running at different paces down the same path.  The nature of international finance is such that one Central Bank’s unbridled effort to debauch its currency leads to an opportunity to profit by borrowing in that nation’s currency and purchasing one of the other three currencies, which undermines the debauchery of the currency that is being purchased. 

Stark, as most thinking persons, cannot stomach the debauchery in his midst

This is commonly known as the carry trade, and these large Central Banks have taken all of the guess work out of it for the past four years.

We suspect that these four Central Banks see the immediate need to eliminate interest rate spreads amongst their currencies which will force those who ply the carry trade to purchase currencies outside of this group.

In effect, this ultimate coordination of interest rate policies will cause these four currencies to “peg” to each other, which should assure that the debauchery of their respective currencies will continue unchecked and likely accelerate.

According to Bloomberg, there is speculation that this type of coordination, a de facto currency peg to the dollar, could begin this weekend at the G-7 Meeting.

Will another stealth disaster befall the US this weekend?  If these Central Banks somehow coordinate their collective debauchery of the currency, the economic devastation of millions will march on.

Perhaps this is why Juergen Stark has suddenly stepped down from the ECB.  It will be more than any caring Bundesbank official can stomach.

Stay tuned and Trust Jesus.

Stay Fresh!

 

David Mint

 

Email: davidminteconomics@gmail.com

 

Key Indicators for September 9, 2011

 

Copper Price per Lb: $4.00
Oil Price per Barrel:  $87.20

 

Corn Price per Bushel:  $7.26  
10 Yr US Treasury Bond:  1.92%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

 

Gold Price Per Ounce:  $1,856 PERMANENT UNCERTAINTY

 

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.5%!!!   UP 0.7% IN ONE MONTH, 8.4% ANNUALLY AT THIS PACE!!!
Dow Jones Industrial Average:  10,992  TO THE MOON!!!

 

M1 Monetary Base:  $2,181,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,456,000,000,000YIKES!!!!!!!