Category Archives: Gold

Climate Change, Economics, Empire, Freedom, Gold, Monetary Theory, Silver, The Mint, True Capitalism

Free Banking – The Ultimate Solution

11/2/2012 Portland, Oregon – Pop in your mints…

In our recent open letter to Evo Morales, we brought up three principles which must operate together in a society for the greatest amount of material good to come to the greatest possible amount of people.  While most assume that the principles, Liberty, Private Property, and Equality before the law, can only operate via the apparatus of government, we argue that the exact opposite is the case.  By necessity, the operations of government, an ultimate sovereign, would necessarily hinder the operation of these essential principles.

The reasoning is this:  These principles are so important that they must be learned and respected by every member of society.  At the same time, they are so basic to human nature that they are most effectively learned by simply living amongst one’s fellow human beings.  As such, the more a person is exposed to the anarchic environment in which we all ultimately live, the more quickly they will master these essentials.

Free Banking - The key to Liberty
Free Banking – The key to Liberty

The apparatus of Government can only retard the most effective teacher:  Hands on experience.

The recognition of the vacuum of power called Anarchy, which all systems great and small operate under, is extremely important when trying to understand the world as we know it.  However, it is not the focus of today’s Mint.

Today’s Mint is focused on Free banking.  Within our three great principles, Free banking generally fits under the principle of Liberty.  However, as banking and currency circulation, circa 2012 is perhaps the least free area of enterprise, it deserves special consideration as we examine what true freedom consists of.

Important as it is, the concept of Free banking may seem foreign to you, fellow taxpayer, as it is to nearly every other person, great and small, on our beloved earth.

However, the concept of Free Banking is perhaps the most important thing that men today can dedicate themselves to, for it is the lack of Freedom when it comes to currency and credit which has lead to stripping of the earth’s resources and the resulting environmental problems which a number of developing nations suffer from in a disproportionate manner.

Specifically, the suppression of Free Banking has caused the activities of man to create what is an unsustainable imbalance with the demands of the earth’s natural systems.

So what is Free banking?  As the name may suggest to many in the developed world, it is not a lack of monthly charges on a bank account, rather, it is the freedom for banks to compete as issuers of credit and safe keepers of currency in any form.

The Free Lakota Bank - Free Banking in action
The Free Lakota Bank – Free Banking in action

The current slave banking system’s fatal flaw is that it is obligated to issue credit and accept deposits in currencies which are nothing more than debt issued by a Central Bank.  This constraint causes the currency created by the Central Bank to be the basis of all of man’s activities out of a necessity to pay a tax to the government in said currency.

To compound this fatal flaw, the issuing Central Banks actively manipulate the interest rates, which affect the price of the flawed currency and credit, making the value of both the credit and savings of everyone completely subject to the whims of the Central Bank.

If the currency which everyone was working for had been created legitimately by the labor of another man and its price, via the interest rate mechanism, allowed to respond to real supply and demand signals, a natural balance would be struck between credit and savings in society.  This balance would express itself as conservation and eventual increase of the earth’s resources.

However, the currency which everyone is working for is nothing more than a piece of data created by a computer and printed onto a piece of paper and, via the active suppression of the interest rate mechanism, is not allowed to be properly discounted.  As such, all of the labors of man are set towards destroying the earth, turning it into more pieces of paper, and depositing them into a bank in order to close out the credit account created by the computer.

We observed the zeal with which Evo Morales and other revolutionary leaders have implemented reforms by closing down a majority of the ministries of the government almost immediately upon gaining the power to do so.  It is a swift move in which they attempt to consolidate their power.  However, as one studies these cases, they will see that often there was one notable exception that was allowed to continue operating:  The Central Bank.

The Central Bank is often seen as a sacred cow, even by those who vehemently opposite it, on the grounds that the currency and interest rates are too important to day to day life to be to the incapable hands of the people, which is what the concept of Free banking is all about.

However, it is for this very reason, the indispensible role of currency and credit in society, that currency and interest rates CANNOT be left in the hands of any one entity, no matter how much clairvoyance is attributed to them.

No one would argue that grains and fuel are important to everyday life in nearly all the earth.  However, even hard core Marxists would be hard pressed to admit that all peoples would be better off were only one entity given the ability to produce and set the price for either.  As such, it has been proven over and over again that the expansion of the ability to produce such indispensible items not only provides them in sufficient quantities to satisfy demand, it will do so at a price that is more or less tolerable for all (this argument, of course, is null if the price is controlled by a single entity).

While free market proponents are quick to recognize the benefits of the freedom to produce grains, fuels, and healthcare, for example, they become hardcore Marxists when it comes to currency and credit.  What those who fall into this trap fail to realize is that all of the virtues of free markets are worthless if the most basic economic common denominators of currency and credit are not allowed to operate in as nature intended.

Free banking would allow free markets to solve all the problem of scarcity in currency and credit in the most efficient way possible.  Why, then, is Free banking seen as the ultimate boogeyman by those in authority?  It is for one reason and one reason only:

Control of currency and credit represents the ultimate authority in the material world.

While free market reforms can go a long way towards liberating the peoples of the world, the task and to close down the Central Bank and allow both the banks and the people to choose in what currency they will issue credit and maintain their savings.  Far from leading to anarchic chaos, the basic need for exchange and the issuance of credit amongst humans would cause all of society who wished to trade with one another to arrive at a tacit decision as to what is best suited to serve as currency.

While in most cases, this tacit decision has arrived on Gold and Silver, the British and American empires, the most recent examples of empire, grew so wealthy that lesser metals, such as copper, were thrust into use as currency.

As a practical matter, it must be admitted that closing down the Central Bank would be a shock.  For this reason, we look to solutions such as those seen in the actions of Canupa Gluha Mani, the Ithanchan of the Free Lakota Bank, as a path to free banking and the ultimate freedom of the peoples of the world.

The Lakota people declared their freedom from the sovereignty from the Government of the United States government in 2007.  As an important part of this process, they knew that it would be necessary to establish their own monetary system.  Further, they recognized that to simply choose another currency would again make them slaves to the creators of that currency.

To solve this problem, they opened the Free Lakota Bank and adopted what is known as the American Open Currency Standard, which is attempt to return to a balanced system of metallic weights and measures to use as currency which is recognized and traded internationally.

While this may seem now like an impossible step to take, the Peoples of the earth must enjoy free banking if they are to enjoy Liberty, Private Property, and Equality before the law in any meaningful way.  For the lack of options in currencies in favor of the Central Bank’s monopoly on the issue of credit will keep the Peoples of the earth and their governments in the bonds of financial slavery until the Freedom of Banking is restored.

Free banking, by its very nature, does not obligate a people to adopt a currency standard, as the native Lakota people have.  While the most likely outcome of the liberation of the currency and credit markets is for all involved to quickly settle on a new currency standard, it is necessary to guarantee that all Peoples the right to choose which currency they want to hold and to bank in.  This is the only way that man can live in harmony with one another and with the natural world.  This freedom is the spirit of the principle of Free Banking.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 2, 2012

Copper Price per Lb: $3.48
Oil Price per Barrel:  $84.86
Corn Price per Bushel:  $7.39
10 Yr US Treasury Bond:  1.73%
FED Target Rate:  0.17%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,677 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.9%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,093
M1 Monetary Base:  $2,394,100,000,000
M2 Monetary Base:  $10,168,900,000,000

Affiliates, Economics, Gold, Personal Finance

Should You Accumulate Gold Like China?

According to reports on Chinese imports of gold from Hong Kong, the People’s Republic is on track to import more gold bullion in 2012 than the entire official holdings of the ECB.  What does it mean for us, fellow taxpayer?  Our guest contributor Brad Evans, who is writing on behalf of BullionVault, explores this economic trend and possible implications for your portfolio in the following insightful editorial.  Enjoy and stay fresh!

Should You Accumulate Gold Like China?

In recent years, much has been written and speculated about the idea of Chinese authorities buying up massive amounts of gold bullion.  Indeed, the amount of gold going to China has increased notably over the course of the past few years, and it certainly seems as if the country is making a concerted effort to accumulate a great deal of the precious metal resource.  Is this just a passing trend, representative of independent economic movements, or a greater strategy with implications for the worldwide economy?  Ultimately that remains to be seen, but one result of China’s accumulation of gold bullion is clear.

With many of the world’s dominant economies located in the United States and the Euro zone, the U.S. and countries that use the Euro generally prefer to keep the cost of gold low, if possible, so as to avoid the strengthening of the resource against their respective currencies.  As things stand now, and have for some time, the U.S. dollar and the Euro are generally seen as popular reserve currencies, meaning that people in other economic zones frequently turn to the U.S. dollar and the Euro as the ultimate safe haven.  As long as the price of gold remains relatively low, the dollar and Euro remain strong as reserve currencies.  Therefore, it is plain to see why China buying up massive amounts of gold bullion may lead to an unwanted shift in gold prices that could take the focus away from the reserve currency status that U.S. dollar and Euro enjoy.

Perhaps more important for many people is how this economic strategy of China’s could affect your finances.  World economic trends will come and go, and economies will strengthen and weaken accordingly – but can you benefit from buying up gold bullion in your personal life, on a smaller scale, in the same way that China hopes to benefit in the long run internationally?  While you certainly can’t hope to influence any worldwide economic trends on your own – accumulating gold bullion may not be a bad strategy to consider if you feel that the price of gold will be rising relative to other assets in the coming years.

Buying gold bullion is simple enough.  You just need to head to a precious metal trading site such a s BullionVault, where you can buy and sell gold as you please according to constantly updated world prices.  These sites also offer you various convenient and secure storage options, meaning that if you want to you can easily accumulate a great deal of gold bullion.  However, before making this or any investment decision it is important to formulate a sound investment strategy.  For example, if you are looking for short-term stability or gains, gold investment may be risky at the moment, as the dollar is strengthening and gold may be weakening.  But for long-term gains, this may be a strategy worth considering.

This has been a guest post on behalf of BullionVault, written by freelancer Brad Evans.

Freedom, Gold, Silver

Canupa Gluha Mani – Ithanchan of the Free Lakota Bank on monetary sovereignty


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5/16/2012 Portland, Oregon – Pop in your mints…

We first heard about the Free Lakota Bank back in 2008.  From what we understood at the time, it was a bank in the free sense, in that they coined, circulated, and accepted precious metals for deposits.  At the time, it was hard to imagine the importance of the Free Lakota Bank, both from a monetary standpoint and, as we will explore today at The Mint, the standpoint of sovereignty.

We had heard nothing more of the Free Lakota Bank until we received an update yesterday from the Ithanchan (Director) of the Bank, Canupa Gluha Mani.  It gave us some valuable insight into the origins of the Bank and the broader struggle for sovereignty which is occurring in the background as the financial debacle which passes for an economy in the West circa 2012 continues to erode the sovereignty of the nation state.

Before we share the Ithanchan’s words with you, we wish to interject our own analysis of the current state of national sovereignty.  The nation state, as many have come to know it over the past several hundred years, is disintegrating. 

Rather than work to change or hasten the destruction of the failed nation state system, which are the tactics of choice for the majority, we at The Mint advocate that the best course of action is to simply get the heck out of the way.

It is easy enough to recognize that one should leave a burning building when the alarm sounds, and that one should run clear of large structures when the earth begins to shake.  However, when an economy and financial system are simultaneously burning and collapsing, a different course of action is called for.  The action involves declaring your individual and family sovereignty and then seeking to align with other sovereign individuals and family units which hold a similar set of values.

Doug Casey, the famed investor, believes that the world is in the process of aligning itself in “phyles,” which is a Greek word which roughly translates into clans.

Given this hypothesis, events such as the one described by the Ithanchan may become more commonplace as events such as the Greek Euro exit and the MF Global and JPMorgan billion dollar mistakes become the norm.

Now, the communication from the Ithanchan:

“May 15th, 2012

An Important Update from Director Canupa Gluha Mani:

Hoka hey!

My name is Canupa Gluha Mani, and I am the Ithanchan of the Free Lakota Bank, whip-man of the Black Hills Treaty Council, warrior of the Strong Heart Society and a proud member of the Lakota Oyate.

In 2007, my colleagues and I traveled from the Pine Ridge reservation to Washington DC, declaring our sovereignty and independence from the tyranny of your government and more than a century of abuse and ignoring the treaty of Fort Laramie.

Since then, we have undertaken many tasks to gain the support and recognition of the international community. We sent ambassadors across the globe, established our own monetary system, our own bank, we began issuing our own travel documents and most importantly, started generating our very own profit. The Lakota people are no longer slaves to your government.

In 2008 the Lakota people launched the Free Lakota Bank, in accordance with the demands of the treaty council, in partnership with the American Open Currency Standard and with protection from the Strong Heart Warrior Society. The bank quickly became an international sensation. Support poured in from across the globe, and our project was instantly overwhelmed. It has taken more than three years to catch up on the backlog of interest in our groundbreaking financial institution. Though we still have a long way to go, our founding depositors have helped us accomplish amazing results since inception.

Though we are still in the development stage, we can no longer operate quietly. As your governments march steadily toward their own destruction, they cannibalize the citizenry through taxation and regulation.

For example, those of you paying attention may have noticed that, through the work of your government’s Financial Crimes Enforcement Network, private banking is now effectively dead. In the past, US authorities required foreign banks to report directly, and most international banking centers simply ignored the requests. Now, all banks that wish to participate in the Federal Reserve banking system must report account data to their own governments, and with a few remote exceptions, governments simply swap data with each other. Moreover, popular US peer-to-peer payment systems now issue 1099’s for payments received, creating a tax liability for those who wish to transact online. As the government fails, look for the squeeze to continue.

We known how it feels to be treated like this. The basic rights of indigenous people across our lands have been trampled on for years. We were stolen from, forced into colonialism, massacred, cheated and abused in just about every form imaginable. I know first-hand what it’s like to stand up to the federal government. I was there at wounded knee in 1973, firing shots in defense of my people. I wish the people of this country never have to personally witness such an atrocity, but I believe that day may come for you too to draw your line in the sand.

We do not intend to do nothing while your government implodes. In fact, there is great profit to be made providing tools and access for people like you to live a sovereign life. There are many components to sovereignty, but one that I believe to be most important is economic independence. You must have the ability to earn your own profit in an objective form of value, like silver or gold. You must have the ability to easily do business with others that demand payment in the same form. You must have the ability to use objective forms of value to satisfy the needs and desires of your life. The Free Lakota Bank is working diligently to create the network for access to the new economy, built of the mutual exchange of value. 

Over the years, many have asked why Lakota elders chose to start the Free Lakota Bank. The Lakota people are warriors. Warriors can achieve victory. Like Crazy Horse, Sitting Bull, Rain in Your Face and other warriors before them, my elders wish to leave a legacy, a positive impact on turtle island, which you call North America, and the people that inhabit Her.  The Lakota legacy will be to emancipate the people of this land from financial slavery.

I encourage you to join our economic system. Bank with us or other commodity banks and be a part of our success while you create your own. The Free Lakota Bank is the first bank in the world to offer deposits and investment opportunities exclusively in silver, and even pays interest on contract deposits in ounces of metal.

Over the next few months, stay tuned for several important announcements from the Free Lakota Bank. Thank you for your continued support and remember, as the great warrior Crazy Horse said, Hoka Hey! Today is a good day to die!

Canupa Gluha Mani

Free Lakota Bank

While we may never hunt and use every part of the bison, we at The Mint do share the vision of free banking as the key to sovereignty and congratulate the Lakota on the steps they have taken to reclaim their sovereignty.

This also reminds us that we must write a letter to Evo Morales, Bolivia’s President, regarding free banking and its link to sovereignty.  Perhaps holding the Lakota out as an example to him will finally get his attention.

Stay tuned for further sections and Trust Jesus.

Stay Fresh and Hoka Hey!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 16, 2012

Copper Price per Lb: $3.48

Oil Price per Barrel:  $92.83

Corn Price per Bushel:  $6.20

10 Yr US Treasury Bond:  1.77%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,540

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.1%

Inflation Rate (CPI):  0.0%

Dow Jones Industrial Average: 12,599

M1 Monetary Base:  $2,335,600,000,000

M2 Monetary Base:  $9,783,500,000,000

Economics, Gold, Monetary Theory, The Mint

Are Bitcoins Money? The concept of digital currency and the desperate need for a Free Money supply

5/9/2012 Portland, Oregon – Pop in your mints…

We would be remiss here at The Mint if we did not enquire and make an honest attempt to understand the phenomenon of bitcoins.  Bitcoins, according to wikipedia, are units of a peer-to-peer digital currency.  They are a purely digital attempt to solve the eternal problem of what to use as money.  Are they to be trusted?  Lets take a look.

First, we must look at them from a purely conceptual standpoint.  Are they money?  Yes, bitcoins, as we understand their operation, meet our pure definition of money in the sense that they are not debt.

However, they have a rather severe limitation in that universal or even regional recognition as money in exchange and convertibility to other forms of money could prove elusive.  This is a psychological barrier that theoretically could be overcome, however, it is difficult to assume that a majority of persons would, in time, learn what a bitcoin is and then take the time to sign up for and monitor a bitcoin account.

The market penetration for bitcoins could be as large as the number of internet and mobile phone users in the world but would more likely be similar to that of banking customers who use online and mobile banking services.  In other words, those who are comfortable storing a portion of their wealth in a digital media.

Given the barriers to recognition and acceptance, at this point, bitcoins are probably best thought of as a share of stock in an amorphous payment clearing mechanism whose business model consists of the free exchange of its own shares of stock between account holders and the constant validation of transactions and subsequent logging of ownership of said shares.

These shares, then, would need to be converted into a local currency to be of use outside of the realm of bitcoin account holders.

The validation of the exchange and the logging of ownership of the bitcoins must be done by someone for the bitcoins to maintain their integrity and therefore any value which others may attach to them apart from a fickle monetary premium which is, at present, compromised by the barriers of recognition and convertibility refered to above. 

This validation is currently undertaken voluntarily by the bitcoin account owners themselves and is accomplished by the users offering their resources, in the form of computer processing power and the use of computer hardware and electricity which makes the processing possible, to the greater bitcoin network for this purpose.

In return for the computer processing power and use of hardware and electricity which they dedicate to these processes, the bitcoin account owner receives a quantity of newly created bitcoins in exchange for the completion of a set quantity of computing (read bookkeeping and auditing functions) completed.  These newly issued bitcoins serve to dilute the overall stock of the existing bitcoins. 

The process of bitcoin creation realized through computer processing is refered to as “mining,” a name which is a fairly accurate description of the way in which bitcoins come into creation, even though the process more resembles accounting than strip mining.

As of this writing, we understand that mining bitcoins on a small scale is not profitable, which in layman’s terms means that the cost of the electricity needed to perform the computer processing involved in mining is greater than the amount of bitcoins which would come into existence as a result of the computer processing performed. 

This calculation is naturally expressed in dollars as we are not yet aware of a utility company which accepts bitcoins as payment for electric bills.

It would then follow that bitcoin creation would slow as long as this price relationship exists.  We will ignore, for the sake of simplicity, the fact that a great deal of bitcoin “mining” is done via bots which use the electricity and computer processing capacity of unwitting hosts, which makes mining profitable for some at the expense of others, and simply state that bitcoin creation, on net, is currently a losing proposition.

The fact that the mining of bitcoins is not profitable should make the existing bitcoins more valuable in the future as the stock of bitcoins will either cease to be diluted will be diluted at a lower rate.  This would theoretically cause the value of bitcoins to increase until it again became profitable to “mine” them, which in turn would lead to an increased rate of dilution of the bitcoin stock and lower relative value in exchange, etc.

In this sense, the economics of bitcoins is similar to that of mining precious metals.  Another similarity that the bitcoin has to precious metals is that theoretically there is a logarithm which ultimately will place an absolute limit on the number of bitcoins in existence.  The logarithm places a mathematical limit to the stock of bitcoins in the same way that nature places a theoretical limit on the extractable amounts of precious metals which can be used as money.

However, bitcoins have a distinct disadvantage to precious metals owed to the fact that bitcoins require constant bookkeeping and auditing to maintain the integrity and therefore value of the bitcoin as money.  Precious metals, on the other hand, do not rely upon administrative functions to maintain their value and rely entirely upon their relative value in trade.

Further, we must assume that the bookkeeping and auditing needed to maintain the integrity of the bitcoin will increase exponentially as bitcoin production approaches its logarithmically imposed limit, just as the incentive to perform these functions (mining, as it were) continues to diminish.

Given this inevitable dynamic, it is unclear if the integrity of the system can be maintained once the incentive to maintain the integrity of the system, which is currently supplied by the ability to “mine” bitcoins, is removed. 

Having said all of that, it is now time to point out the obvious flaw in the bitcoin model, the flaw which lands bitcoins squarely in the realm of equity and makes them unfit for long-term use as money:  The threat of competing digital currencies which would surely come into existence if the bitcoin were to gain widespread popularity and acceptance.

Even with the digital checks and balances on production which are mathematically built into the bitcoin model, the bitcoin, like gold, silver, seashells, and fiat currency, fails to completely solve the happy problem which has no solution:

That the infinite increases in trade due to the increased division of labor in the world will require money and debt markets with the flexibility and dynamism that only a completely free money supply can offer.

Gold and silver may hit physical limits, bitcoins may be limited by logarithms, and debt based fiat currencies tend to collapse upon themselves.  This is proof that none of them, by virtue of physical and psychological limitations, completely fulfill the role of money for man.  They were never meant to.  

The determination of what will serve as money must be left in the hands of the people who are involved in trade.  Left to their own devices, we would be amazed at the speed and efficiency with which the problem of what is money can be solved.

In other words, let those engaged in trade decide what is most suited as money at a given time and allow them to trade with it without hindrance.

For it is not the costs associated in the production of a monetary unit which remove value from the economy, rather, the administrative burdens, unnecessary conversion costs, and the rigidity of an imposed monetary unit which deals mortal blows to trade and consequently the ability of all humans to flourish to the greatest of their abilities. 

Unnatural restrictions on the money supply, which solutions like bitcoin attempt to solve, are devastating to trade.  The destruction wrought by monetary hegemony should surpass hunger, poverty, and climate change as global concerns, for allowing a free money supply to operate would serve to eradicate all of these problems and their symptoms, namely social unrest, terrorism, and health care crises.

Imagine.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 9, 2012

Copper Price per Lb: $3.70

Oil Price per Barrel:  $96.42

Corn Price per Bushel:  $6.41

10 Yr US Treasury Bond:  1.84%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,589

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.1%

Inflation Rate (CPI):  0.3%

Dow Jones Industrial Average: 12,835

M1 Monetary Base:  $2,275,100,000,000

M2 Monetary Base:  $9,832,700,000,000

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

Is Fiduciary money really money or cleverly disguised debt?

4/30/2012 Portland, Oregon – Pop in your mints…

As money managers are frantically rebalancing their portfolios in a vain effort to get out of the way of Apple’s 20 point decline and Spain’s central bank, whose reason for existing we cannot conjure at the moment, consults experts in toxic assets because it apparently cannot figure out how to perform the most basic of banking functions:  Writing down bad assets, we are waxing philosophical here at The Mint.

We will give the Spaniards the benefit of the doubt and assume that they know what should be done with the toxic assets, they just do not want to appear to have admitted that the vile sludge on the balance sheets of nearly all spanish banking institutions are worse than worthless without getting an expert opinion. 

The defunct Spanish Central Bank looking for unsophisticated Investors to clean their banking system's septic tank

These are smart people, no doubt, the money managers and central bankers involved in the debacle that is the western financial system, circa 2012.  It is for this reason that there should be great cause for concern when they appear completely uncapable of functioning when things do not go the way they planned.

For example, a properly functioning banking system would have no problem figuring out what to do with non-performing loans (the common name for the toxic assets that the central bankers so dread).  In fact, a properly functioning banking system, where real and not limitless fiduciary money was at stake, would have created an adequate quality control system to ensure that very few financial assets of the toxic variety live to see the light of day.  Those that did see the light of day would have beem properly discounted them to a point where all of their toxic side effects could be properly cleaned up should they spill over.

We must assume, then, that there is something dreadfully wrong with the banking system.  But what is it?

We began to ponder this question last week when we saw a post by an Ivy League trained economist.  The assertion that fiduciary money is money bothered us to the point where we were compelled to jump in to correct this unintentional error.

The Ivy league trained economist indulged us for a time and then, for reasons unknown, disabled commenting on the post.  We interpret this action as a concession of the point we are trying to make, either that or they just wanted to get rid of us, which, given our obvious charm, we can only assume is not the case.

What is important is that the post brought up a fallacy which we see it as part of our mission here at The Mint to debunk.

The fallacy, which is widely accepted as fact by money managers and Spanish central bankers alike, is that fiduciary money operates like money when in reality it is nothing more than a debt instrument in disguise. 

So which is it?  Is The Mint off its rocker or is there something to the error of this “debt is money” point of view, as in, it is causing otherwise intelligent people to act in more and more absurd ways as the inevitable consequences of using debt as money rear their ugly head?

Simply stated, is fiduciary money really money, as the name implies, or is it technically debt?  It is a fine point that, to be honest, does not matter to most people on the planet, for what is commonly known as fiduciary money tends to operate as money in a way that is imperceptable to the members of society…until it doesn’t.

The true essence of fiduciary money is not money at all, but debt.  Granted, it may be a highly liquid and highly transferable form of debt, but that does not change the fact that when it is created at the bank, be it a local or central bank, it represents a debt of that bank, regardless of the ability of said bank to redeem the fiduciary money for specie money, which is what we hold out as worthy of the term money for purposes of analysis.

As you can see from our presentation of the interaction below, we attempted, in good faith, to convince the Ivy League trained economist that Federal Reserve notes, as their name implies, are debt and not money.

I have redacted the amicable interaction to highlight the applicable text of our interaction as it pertains to the case in point, is fiduciary money really money?

Please read on and decide for yourself.

{Editor’s note:  Out of respect for the Ivy League trained economist, we have removed all references to their identity, for it is not our intent to shame, discredit, or launch any form of personal attack on them, but rather, the fallacy surrounding mainstream economics’ treatment of fiduciary money in its analysis}.

The Mint (in response to the intial post):

I would like to point out that fiduciary money is not money, but rather debt which carries in its value a monetary premium which the market has chosen to assign it.

Ivy League trained economist:

“Perhaps this helps you David Mint. I wrote this back on March 8th.

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

The Mint:

Thanks again, however, I still cannot concede your assertions that Federal Reserve notes are money, rather, they are a debt instrument, which is often referred to as fiduciary money.

The proof of this lies in that Federal Reserve notes pay interest and trade at an implied discount rate, whereas money simply trades against other goods in a varying relationship determined by the relative scarcity of resources.

Both circulate as currency in a normal economy, but the rigidity of debt makes it unsuitable for obligatory legal tender.

It is a fine point that is categorically overlooked, but the more one forces debt into the role of money, the greater the disconnect between the activities of men and the resources available to support those activities.

I would love to hear a convincing argument that debt is money if you have one in your archives.

Thanks again and all the best!

Ivy League trained economist:

“Decidedly David Mint, Federal Reserve notes do not pay interest. There isn’t anyone on earth paying interest to anyone else who is holding a $5 bill in his wallet.

Here, David, disabuse yourself. See my many shares on what money is:

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

You ought to spend good time reading this one:

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

The Mint

Quickly, on the fallacy of the $5 bill which is held, the implied interest and discount rate on Federal Reserve notes traded amongst commercial and central banks still affect the value of the bill as it is held up until the moment it is given in exchange for trade.  The coupon rate is 0%, but the normal operations of debt instruments hold true for them.

From what admittedly little I have read of your work, I agree with 99% of what you present.  It is this fine point, that Federal Reserve notes behave as debt, even when they are part of the M1 money supply, that I believe is the error which is spread throughout mainstream economics.  Of this, I have yet to be disabused by what you have presented.

Debt includes all fiduciary money.  The point is important because using debt as money works until it doesn’t, meaning the issuer of the debt defaults or is widely perceived to have defaulted, and their debts become worthless in trade.

Ivy League trained economist:

“That’s all fine, except Federal Reserve bank notes are not debt.  Decidedly, Federal Reserve bank notes are money owning to bearer negotiability and ability to extinguish contracts.

Yet, Federal Reserve notes are not credits, and thus are not debt.  Federal Reserve notes are not even evidences of ownership of contracts.

At most anyone can say is that Federal Reserve notes represent a call on future products to be made by anonymous, as yet, identified others who likely shall take them in exchange.”

The Mint

As a matter of accounting necessity, the Federal Reserve must book a liability when it issues a Federal Reserve Note which makes their notes debt by definition.  If this were not the case, why would they list it as a liability on their balance sheet?

http://www.federalreserve.gov/releases/h41/current/

On the contrary, the most that anyone can say about Federal Reserve notes is that they are the highest and most liquid form of debt which is traded in the US economy.  However, this does not change the fact that the essence of the Federal Reserve note is debt.

The Ivy League trained economist unexpectedly exits stage left.

Who cares?  Why is this important?  It is important because if what we believe about fiduciary money is true, most of the Western world, including the mysteriously influential Paul Krugman (who is not, by the way, the anonymous Ivy League trained economist above), somehow believes that fiduciary money is money that can be produced at will, and that the world will be better off if we simply produced more of it.

If the Krugman’s of the world get their way, labor and accumulated capital will be so poorly allocated that it could take three generations for humanity to adequately organize itself to make good use of the earth’s inexhaustible reasources.  Do you have that kind of time?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 30, 2012

Copper Price per Lb: $3.86

Oil Price per Barrel:  $104.88

Corn Price per Bushel:  $6.60

10 Yr US Treasury Bond:  1.92%

FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,664

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

Unemployment Rate:  8.3%

Inflation Rate (CPI):  0.3%

Dow Jones Industrial Average: 13,214

M1 Monetary Base:  $2,210,700,000,000

M2 Monetary Base:  $9,970,100,000,000

Gold, Jesus, Monetary Theory, What to expect in the Monetary Realm as the world comes to an end

Dabbling in Eschatology: What to expect in the Monetary Realm as the world comes to an end – Part I – Give to Caesar what is Caesar’s

4/9/2012 Portland, Oregon – Pop in your mints…

We must preface this series with a simple disclosure:  There is no human who knows the exact time that the world will end.  Further, there is no human who knows exactly how the world will end in a general sense, for experiencing the end of the world will be both a deeply personal experience as well as a universally polarizing event which will determine the eternal fate of people and communities.

{Read the entire e book on Smashwords}

That said, our limited studies of eschatology and monetary theory have lead us to some inescapable conclusions that we are compelled to share with you starting today, following one of the biggest festivals of the Christian calendar, Easter, which is celebrated three days after the Jewish Passover celebration and marks the resurrection of Jesus Christ from the dead some 2000 years ago.

Our studies accept as fact that the earth was created some 5,772 years ago as of this writing, in agreement with the Jewish calendar, as well as the fact that Jesus Christ, who was crucified, dead, and raised from the dead some 2000 years ago, is the Messiah.

Consequently, we accept the Bible as both an accurate historical narrative and a reliable guide as to what is to come.

Today, we will focus on the first of three passages which, taken together, give us reliable information as to what will transpire as the time of Jesus’ triumphant return approaches.

Albrecht Dürer, The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, Woodcut
The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, by Albrecht Dürer, Woodcut

 

It is our prayer that you will find both comfort and a call to action in our interpretation of what is to come.  With the proper preparations, all of the peoples of the world may eagerly await the coming of their Lord without fear and full of hope.

The first passage is related in Matthew 22:15-22, Mark 12:14-17, and Luke 20:21-25.  It is focused on what appears to have been a brief verbal exchange between Jesus and a group of spies sent to ask a question of him by the religious authorities.

Interestingly enough, it seems that people 2000 years ago were as eager to avoid paying taxes as they are today.  In an attempt to catch Jesus advocating for tax avoidance, the religious leaders, who wanted to get rid of Jesus, send spies to trap him in his words.

In response, Jesus not only foils their attempt at trapping him, He delivers a simple monetary concept with wide ranging consequences.  He challenges them not on whether it is right to pay taxes, but rather on what they are using as money.

When asked whether or not it was right to pay the Roman Imperial tax.  In response to their question, Jesus stated the obvious.  Namely, that since the coin used to pay the tax belonged to Caesar (the Roman Emperor) to begin with it should be no problem to simply give it back to him when he asks for it.

Jesus’ response cut to the heart of monetary theory, what they were using as money.  The people’s choice to use the Emperor’s money in those days had enslaved them to the Emperor in a way that no army or jail master could, and they were eager for a way out.

In those days, Emperors had made a habit of declaring themselves gods and demanding allegiance.  The Jews were peculiar in that they refused to recognize these imposters and instead worshiped the Living God.  However, the Jews also had become accustomed to conceding certain aspects of their allegiance to the Emperor in an effort to survive.

Jesus, with a simple statement, challenged people to get off the fence, for the fence would one day be burned down and people would have to make a concrete choice, put their money where their mouth is, as it were, between ultimate allegiance to the Emperors of this world or the One True Living God, who alone is worthy of glory and honor and praise forever and ever.

Today, it is customary for most people exchange their labor for paper or digital currency issued by the Emperor.  2000 years ago, Jesus warned against this.

Why?  The answer, which we will explore tomorrow, had already been partially revealed to Daniel some 600 years before, and was going to be completely revealed to John on the Isle of Patmos some 70 years later.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for April 9, 2012

Copper Price per Lb: $3.79

Oil Price per Barrel:  $102.28

Corn Price per Bushel:  $6.49

10 Yr US Treasury Bond:  2.04%

FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,641

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.2%

Inflation Rate (CPI):  0.4%

Dow Jones Industrial Average: 12,929

M1 Monetary Base:  $2,299,000,000,000

M2 Monetary Base:  $9,823,900,000,000

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, 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!!!!!!!

Gold, Silver, The Mint

COMEX: The March to Irrelevance

A very thorough explanation of the emerging irrelevance of the COMEX due to the permanent beach of trust highlighted in the MF Global fiasco.

Essentially the claim is that JP Morgan, in its rush to seize collateral, stole the precious metals held in COMEX vaults which rightfully belong to MF Global clients.

This is what is generally referred to as theft.  However, the banking elites, who reserve the right to steal for themselves, prefer to call it “rehypothetication,” which simply means that something is pledged as collateral a second time.  In this case, MF Global pledged the same collateral to their clients and JP Morgan.

When push came to shove, guess who MF Global and the CME Group (the owner of the soon to be defunct COMEX) threw under the bus?

It is becoming painfully obvious that the degree of fraud and theft required to keep the bankrupt financial system running is reaching a crescendo. What will December 31 bring?

Readers are advised to convert their paper assets to something tangible before their account becomes the victim of another bankrupt Wall Street firm’s margin call.

Click the link below to see the gory details rehashed at goldseek.com:

http://news.goldseek.com/GoldenJackass/1324501200.php

Gold, Silver

Precious Metals, Bitter MF Global Investors – Barrons.com

This was bound to happen. MF Global is the first of what will be many CME metals warehouse defaults.  The MF Global clients will take a 28% haircut placing their faith in the CME’s oversight mechanisms, according to Barrons:

http://online.barrons.com/article/SB50001424052748703856804577098740322633760.html?mod=googlenews_wsj?mod=googlenews_barrons

Barrons also reiterates that the CME still has not committed to back stopping the lost MF Global funds. Why any honest and informed person would continue to trade and store precious metals with the CME is beyond our limited comprehension.

Whether the missing MF Global client monies are eventually located, placed by the CME, replaced by Corzine and his accomplices, or not all, irreperable damage has been done to investor confidence as far as commodities go.

Equities won’t be far behind.

Economics, Events, Gold, Politics, Silver, The Mint

Losing even blind faith in the Euro and USD, remembering Pearl Harbor

12/7/2011 Portland, Oregon – Pop in your mints…

Today we continue to watch the relative calm in both the stock and bond markets with our jaw hanging just inches from the floor.  In our estimation, the calm, or homeostasis, is perhaps the only thing that is completely inexplicable under the current state of affairs.

Just what is that state of affairs, you ask?  A few off the top of our head:

–          Downgrades or the threat of downgrades to nearly every sovereign bond on the planet

–          A resulting dearth of quality assets to be used as collateral in the financial system

–          A debt based economy collectively attempting to live within its means

–          The resulting collapse of the debt based economy

–          An imminent war in Persia

But these are simply large events that are leading to a great number of small decisions which are in turn causing more unforeseen large scale events, etc.  The result being that, much to the chagrin of the financial authorities, a majority of the world is embracing frugality.

A quick recap for those are joining us for the first time, the powers that be, the current currency regime, rely on an ever expanding amount of debt in order to continue to function.  It is a system that is based on trust and blind faith, for it offers nothing of lasting value.

In the short term, the system, if functioning properly, allows a great deal of power to be centralized.  It also encourages, albeit indirectly, nearly every sort of vice and shuns virtue.  The system tends to reward bad behavior and to promote into leadership those who are least likely to possess a moral compass.

The system is no longer functioning as designed.  The reach of the currency regime is shrinking and will continue to shrink until the only ones who maintain faith in it are the most morally decrepit individuals and institutions on the planet.  They will continue to trade their increasingly worthless paper until they realize that they are simply shuffling paper amongst themselves, long after they have completely lost any semblance of control that they had on the situation.

Much of this paper shuffling is running through the stock and bond markets, and seemingly these markets are calm.  However, the illusion of stability is being maintained at the cost of trillions of new dollars and Euros being created which are rapidly losing value against anything tangible.

In the United States, the dollar will begin to significantly deteriorate sometime in March, according to our crude calculations.  The Euro, whose handlers have been late to start the game of shameless currency debasement, is more likely to implode with the European banking system as they gag on the sewage of assets that are on their balance sheets.

The great irony of the current currency regime is that a currency which has attempted to maintain its value will become extinct, shunned for one whose value is plummeting.

The Euro and US Dollar are showing the world the two paths that a currency regime can follow to destruction.  It will be interesting to see which car ceases to operate first, the motor that runs out of gas or the one that has its gas tank overflow and goes up in flames.

Either way the economy, which is the motor of the vehicle in the metaphor we have just jumped to, is currently being retooled to run on another type of combustible, one that will last much longer than the current blend of currency gasoline which is nothing more than flammable vapors.  If the currency, and the assets which back it have real value, the economic motor will be allowed to run at a more even pace.

Gold and Silver, ready or not, here we come.  Until then, the economy is sputtering and running on fumes.

Pearl Harbor

We cannot let today pass without a few brief words about Pearl Harbor.  Like 9/11, Pearl Harbor served as a national wake-up call.  Both served as the justifications for the largest military actions and suppressions of freedom (which seem to go hand in hand) that America has known. 

The explosion of the USS Shaw during the attack on Pearl Harbor, courtesy of the US National Archives

As this day that lives in infamy passes, we pause to honor those who perished in these events and the subsequent military actions which occurred as a result of these events.  May they rest in peace, and may mankind learn to avoid the suffering and sacrifices they had to endure at all costs.

War is not necessary and must be undertaken only after every other attempt to engage and deter an aggressor has been exhausted.  It is an act of desperation, not a form of economic stimulus, and it troubles us that the widespread loss of life and property has been referred to as the force which lifted the US out of the great depression.

Those who hold to such a theory are not only following an indefensible logic, they are hurling the ultimate insult to men and women who have fought to defend Freedom throughout history.  For any “stimulus” which has been observed is not the result of the decision of a politician to go to war, rather, it is a result their tireless efforts and indomitable spirits which lifted this and many other countries from the ashes of war.

We pray that more of these heroic efforts and indomitable spirits will not be squandered in Persia.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 7, 2011

Copper Price per Lb: $3.53
Oil Price per Barrel:  $100.51

Corn Price per Bushel:  $5.82  
10 Yr US Treasury Bond:  2.12%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,742PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  12,020  

M1 Monetary Base:  $2,155,200,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,627,300,000,000YIKES UP $1 Trillion in one year!!!!

Economics, Gold, Politics, Silver, The Mint, True Capitalism

Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system – Part I

11/22/2011 Portland, Oregon – Pop in your mints…

After a brief break in our faithful correspondence, we are compelled to pick up the proverbial pen to complete an incomplete thought in a vain attempt to eat Thanksgiving dinner in peace.  If you are a new reader of The Mint, we will simply relate that the Mint is the product of a deep felt agitation by its author.  It is what could be referred to as therapy.  The thoughts, once on paper, leave us in peace.  Until then, they stir, deep in our spirit, waiting to escape via these words.

How very fortunate and long suffering you are, fellow taxpayer.

Before we continue our mantra of Anarchy, True Capitalism, Natural Law, and Might Makes Right, we will share a few important observations.

First, the MF Global implosion is now reported to have left a $1.7 Billion hole in the capital base of a highly leveraged commodity and derivatives market.  MF Global was a primary dealer, one that had the unconditional trust of the exchange and other secondary commodity dealers.  It was a silent pillar of these markets.  The aftermath of their implosion, both in loss of capital and confidence, has only begun to unfold.  Commodity markets are no longer “safe” by normal standards.  This situation is best watched by your money at a distance.

Second, while Europe implodes, the US has been spending most of its time firming its position in Asia.  There has been speculation that the US is moving to aggressively devalue the dollar vis-à-vis the Yuan.  Will it be the 10:1 reverse split that we have speculated about here?  No one knows, but it would appear that the US Dollar will not serve as a reliable store of wealth in the short term.  Silver and Gold come to mind as viable substitutes as this drama plays out.

Occupiers take note of a Bolivian tactic of blocking major thoroughfares

Finally, It appears that the Occupy protesters are now wising up and using tactics which we call the Bolivian tactic, that of blocking major thoroughfares.  It is much more effective, not to mention exciting, than urban camping.  As a practical matter, if your livelihood in any way relies on a major thoroughfare being open in an area where the protests are growing, we suggest that short term contingency plans be considered.

These events and any pain they cause should be short term, maybe three to four months of adjustments, if they are allowed to simply run their course.  If the Government continues to intervene, they will plague us indefinitely.  We pray for the former and prepare for the later.

With that off our chest, we continue pondering life as we know it.  Our question today is:  Why does it seem that the worst morals seem to come out on top?  First, a glance at Isaiah:

“ And I will make boys their princes, and infants shall rule over them.  And the people will oppress one another, every one his fellow and every one his neighbor; the youth will be insolent to the elder, and the despised to the honorable,”  Isaiah 3:4-5

Have you ever complained about a politician?  The government?  How about your boss?  The current state of society?  If you haven’t, you are indeed a rarity in this day in age, for there is much complaining, and seemingly much to complain about.

How did we arrive at this, fellow taxpayer?  If democracy is supposed to deliver the cream of the crop in terms of leadership in the government, why does it seem that most politicians are the epitome of immoral liars?

This question was thrust upon us as we were reading the “Is there no shame” rant at zerohedge.com and came across the words “Hayek’s theory that the worst always rise to the top.”  We then perused Hayek’s theory in an excerpt from the “Road to Serfdom.”

In the section entitled “Why the Worst Get to the Top,” Hayek states that:

“There are strong reasons for believing that the worst features of the totalitarian systems are phenomena which totalitarianism is certain sooner or later to produce.

Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from the essentially individualist Western civilization.”

Suddenly, it all makes sense.  As man has generally chosen to pursue the Totalitarian, or what we call the Might Makes Right ideology, it would follow that those thrust into power should be among the most immoral, unscrupulous, human beings on the planet.

In summary, the Might Makes Right ideology unwittingly promotes the worst individuals to positions of power, as they are best suited to carry out the immoral and contradictory demands which are invariably made of the persons occupying positions of power in such a system.

Depressed?  Don’t be.  It doesn’t have to be this way.  More tomorrow.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 22, 2011

Copper Price per Lb: $3.34
Oil Price per Barrel:  $98.01

Corn Price per Bushel:  $5.98  
10 Yr US Treasury Bond:  1.95%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,700 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  12,096  

M1 Monetary Base:  $2,121,700,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Gold, The Mint, True Capitalism

Natural Law: The Golden Rule

11/15/2011 Portland, Oregon – Pop in your mints…

We continue today with our brief examination of the foundations of society here at The Mint.  We are finding that while society appears complex on the surface, the further that its elements are reduced, the foundation is extremely, perhaps painfully simple.  Any complexity that we experience is not a product of an inherent complexity in natural laws, rather, it is a product of the human relationships and actions that are a result of man’s choice of response to the demands of natural law.

For those of you joining us for the first time, let us get you up to speed with a synopsis:

Anarchy, the lack of government, is man’s natural state.  It is an ultimate given.  It simply is.  A clear understanding of the current state of affairs depends upon grasping this inescapable fact.

In response to Anarchy, man has two choices.  He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property, or He can choose to take his fellow man’s life and property through the use of force.  We have called the path of mutual cooperation “True Capitalism” and the path of forceful coercion “Might Makes Right.”

Ideologically, there is no middle ground between these two paths.  In practice, men live at various points on the spectrum between these two ideological extremes.

We argue that True Capitalism is the response which creates the greatest benefits for the greatest number of people.  The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law.  Like Anarchy, Natural Law is immutable.  It does not change, for its statutes are etched in the foundations of the earth itself.

Last Thursday we presented the Natural Law of supply and demand, a law that deals with what is concrete and tangible.  Today we will deal with second law which primarily governs human relationships and works in conjunction with the law of supply and demand.

It is popularly called the Golden Rule.

The Golden Rule is articulated and exalted as an ideal in some form in nearly every society and religion on the planet.  The Bible famously articulates the Golden Rule in the following way:

“Love your neighbor as you love yourself” (Deuteronomy 6:5)

It is important to note that the Golden Rule is a positive declaration.  It is a call to action.  In many societies and religions the Golden Rule is stated in a negative declaration, a command to abstain from action.  An example of this can be found in Hinduism:

“One should never do that to another which one regards as injurious to one’s own self.”  (Anusasana Parva, Section CXIII, Verse 8 )

The negative declaration is sometimes called the Silver Rule.  It is important to understand that only the Golden Rule, the positive call to action, is Natural Law.  Observance of the Silver Rule, while highly advisable, does not rise to the level of Natural law.  However, it is a logical corollary to the Golden Rule.

Compliance with the Golden Rule, as with all natural law, is indispensible.  It is ignored at one’s peril, for it operates regardless of one’s acceptance of its validity or not.  The Truly Capitalistic society greatly facilitates and encourages compliance with the Golden Rule.  Conversely, compliance is hindered in a society that has embraced Might Makes Right as its ideological response to Anarchy.

“Wait a minute,” some of you are saying, “I’ll give you that the Golden Rule is a great ideal but Natural Law?  No one requires it of me, right?”

Remember, the essence of Natural law is that it is universally true and applicable to all.  The law of Supply and Demand, for example, can be ignored for a time, but every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached.  The result of the failure to comply with the law of supply and demand is material scarcity and ultimately death.

The same is true of the Golden Rule.  Every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached.  In the case of the Golden Rule, the result of the failure to comply is by definition a failure to properly comply with the law of supply and demand as well, with the end result, as mentioned above, being material scarcity and ultimately death.

Compliance with the Golden Rule is a necessary prerequisite to compliance with the law of supply and demand, for the Golden Rule governs relationships in the purest sense.  This is evident to most who have taken the time to ponder it.  So broad are the implications of the Golden Rule that the origins of both the rule of law and more recently the concept of human rights can be traced to it.

What thrusts the Golden Rule out of the realm of being simply a good idea and into the realm of Natural Law is this:  All attempts to comply with the Golden Rule serve to coordinate the actions of men in such a way that the greatest number of human needs are met in the most efficient way.  Any deviance from the Golden Rule, by definition, is a failure to meet human needs in the most efficient way.  Again, by definition, failure to meet human needs in the most efficient way means that a greater number of human needs are simply not being met.

Far from being simply a moral standard, the Golden Rule is elemental in the determination of supply and demand.  As the equilibrium price serves as the beacon of production for the law of supply and demand, the actions taken by men, governed by the Golden Rule, initially determine the supply and demand factors which, when combined, produce the equilibrium price.  In this sense, the Golden Rule serves as the beacon for both supply and demand which enable the creation of an initial equilibrium price.

How can the Golden Rule run ahead of the Law of Supply and Demand?  This is one of the beauties of Natural Law.  Natural Law always compliments and never contradicts itself.

An Example of the operation of the Golden Rule

Each human being has needs and wants which are sources of uneasiness.  Human Action, to paraphrase Von Mises, consists of men acting to dispel their most intensely felt uneasiness.  If a man is hungry, he will direct his actions towards getting something to eat.  Other tasks will be put on hold until this intensely felt uneasiness is relieved.

The operation of the Golden Rule, in the example of mans the need to alleviate hunger, operates in the following way.  A man feels hunger.  He has two options before him with which to fulfill this need.  First, he can forage, hunt, fish, or perform any series of actions with the end of fulfilling this need.  Second, he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for something to eat.

As the second way is the most expedient, it is likely that a majority of people will elect this option.  Now reflect upon the Golden Rule:  “Love your neighbor as you love yourself.”  The person who chooses to comply with the Golden Rule will quickly understand that if he has the need to be fed, it is likely that his neighbor (in this sense, neighbor would mean anyone in the geographical realm in which he is equipped to serve, up to every person on the planet if it is possible for him to serve them) is likely to have the same need to some degree.  With this revelation, he unwittingly is on his way to discovering demand.

As he seeks to voluntarily fulfill this demand, he will need to either produce the supply of food himself or he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for a supply of food with which to provide his neighbor with something to eat.  The information that his adherence to the Golden Rule provides him with regarding the needs of his fellow man will serve to guide his speculation as to where to best employ his limited time and capital.

It is a simple example, yet its simplicity serves to highlight the operation of the Golden Rule and can apply to any situation regardless of the complexity.  The Golden Rule, in modern business school lingo, is the origin of market research; it is the impulse for entrepreneurial activity and is the basis for subsequent human actions.

The Question of Charity

What about charity?  Wouldn’t adhering to the Golden Rule quickly lead to widespread scarcity and bankruptcy as catering to everyone’s preference to receive something for free would quickly deplete all available supplies and production?

The answer lies in the Golden Rule itself:  “Love your neighbor as you love yourself.”  Would you like to provide something for someone and not receive compensation?  Our guess is only if you are in a position to give something away and are willing to do it.  If all members of society are complying with the Golden Rule, the norms of charity will fall under the governance of the law of supply and demand.

The beauty, the perfection, of the Golden Rule is that above all it demands balance in human relationships and by extension, balance in the supply and demand of material goods.

True Capitalism Enable Compliance with the Golden Rule

True Capitalist ideology completely subjects itself completely to the Golden Rule and, in return, most accurately directs human actions towards fulfilling the most urgently felt needs of the greatest number of people. 

Inefficiency is naturally wrung from the system at its source as errors are quickly corrected and information is quickly disseminated via equilibrium prices.  The proper identification of demand by default leads to the most efficient allocation of scarce resources possible.  The liberty of life and property which is ensured in the Truly Capitalistic system allows men to supply this demand by employing their limited time and resources without unnecessary hindrance.

The Golden Rule may not provide everyone with what they expect or what they think they desire, but complete submission to it not only creates the most efficient allocation of resources, it gives humans the best information to base their attempts to mutually cooperate to fulfill the myriad of human desires.  It has the added social benefit of creating the greatest amount of harmony and goodwill possible in human relations.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 15, 2011

Copper Price per Lb: $3.49
Oil Price per Barrel:  $99.39

Corn Price per Bushel:  $6.45
10 Yr US Treasury Bond:  2.06%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,781 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  12,096  

M1 Monetary Base:  $2,215,000,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,532,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Gold, Silver, The Mint

Natural Law: the transcendental importance of Supply, Demand, and Equilibrium Prices

2 Comments

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

As Europe continues to unravel, we have been exploring, perhaps by accident, the foundations of society here at The Mint.  In case you have missed it, here is a brief recap:

Anarchy, the lack of government, is man’s natural state.  It is an ultimate given.  It simply is.  A clear understanding of the current state of affairs depends upon grasping this inescapable fact.

In response to Anarchy, man has two choices.  He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property or He can choose to take his fellow man’s life and property through the use of force.

In other words, man may choose the path of True Capitalism or Might Makes Right.  Ideologically, there is no middle ground.  In practice, men live at various points on the spectrum between these two extremes.

We have argued that True Capitalism is the response which creates the greatest benefits to society in terms of peace, security, capital accumulation and material prosperity while the ideology of Might Makes Right by definition is the antithesis of the Truly Capitalistic ideology and consequently would create the greatest detriment to society.

Ironically, all of the Nation States in existence derive their power from the adoption of the Might Makes Right ideology by a majority of the people.  How, then, can we be so certain that True Capitalism is the proper response to Anarchy if the majority has embraced Might Makes Right?

The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law.  Like Anarchy, Natural Law is immutable.  It simply is.  Man is bound to it whether he chooses to recognize it or not.  It does not change, for Its statutes are etched in the foundations of the earth itself.

It is as Ayn Rand stated:  “You can ignore reality, but you can’t ignore the consequences of ignoring reality.”

In our example, we take the reality that Rand refers to as Natural Law.  Natural Law may be ignored, but ignorance always comes at a price. 

The first of these Natural Laws is that of supply and demand.  The Law of supply and demand, simply stated, holds that supply of and demand for a good or service will tend to find a point of equilibrium at a certain price expressed in terms of money (the equilibrium price).  On a graph the relationship looks like this:

A Graphical Representation of Supply, Demand, and Equilibrium Price

In simple terms, it is a way of expressing what most people intuitively know.  When an item is increasing in price, one of two things is happening.  Either people are demanding more of the good or service or the supply of the item at the previous equilibrium price point is diminishing.

Naturally, the opposite is also true.  When an item is decreasing in price, one of two things is happening.  Either people are demanding less of the good or service or the supply of the item at the previous equilibrium price point is increasing.

In either case, the change in the price of the item in monetary terms is providing crucial information to all of those either producing or consuming the good or service in question, for it guides their inherent speculations.

(Editors Note:  Speculation, far from being an illegal or immoral activity, is essential to everyday survival and without it, there is no hope of achieving equilibrium prices and therefore both production and consumption tend to cease.  It is important to clarify that the illegal or immoral speculation that is villianized today is generally the act of investing the money of other parties in types of speculations without the knowledge or consent of the other party to do so.)

As a producer, if one sees the price of the good or service that one provides increase, the producer will strive (speculate, as it were) to either increase production to take advantage of the opportunity to profit and/or others will strive to produce the good or offer the service for which the price is increasing.

As a consumer, if one if one sees the price of the good or service that one consumes increase, the consumer will strive to either decrease consumption to mitigate the effects of the higher prices or others will strive to find a less expensive substitute for the good or service  to offer in the place of the good or service for which the price is increasing.

Stay focused, here comes the important part.  The increase in production will increase supply which, as the Natural Law of supply and demand dictates, will eventually lower the equilibrium price as the increase in demand is satisfied.  Likewise the decrease in demand will have the effect of increasing the available supply. 

In either case, the individual decisions (again, speculations, as it were) of the producers and consumers serve to increase the available supply.  The process occurs tacitly, and is an example of what Adam Smith famously called the Invisible hand of the market.

To further sum it up in what may seem at first a paradox, the best cure for higher prices is higher prices.

There are no exemptions from the natural law of supply and demand, however, there are numerous examples of Nation States, guided by the principal that Might Makes Right, manipulating the pure message that price is intended to send to producers and consumers.

This manipulation may be achieved in overt ways, such as price controls (the setting the price of an item by decree).  However, most people understand that price controls are bad, so today’s Nation States commonly resort to other tactics.  Amongst these tactics are taxes, subsidies, and the granting exclusive privileges to either buy or sell the good or service in question via regulating the purchase of or granting monopolies to produce it.

Regardless of the tactic employed, the result is to always a manipulation of the equilibrium price for a good or service and consequently distort the signal which guides the speculations and ultimately the actions of all producers and consumers.  The result of society as a whole is always and in every case achieving suboptimum results to those that would be achieved if the price signal were as pure as possible.

In the case of Central Banking and centralized currency control, the Nation State, in addition to the tinkering mentioned above, adds the complication of manipulating the currency that the equilibrium prices are expressed in.  This further distorts the sacred price signal that is universally relied upon to direct the actions of producers and consumers.

You can imagine the confusion occurring all around us, every day.

The True Capitalist ideology, on the other hand, completely subjects itself completely to the law of supply and demand and, in return, provides producers and consumers with best opportunity to obtain and act on the most accurate price information possible.

A Truly Capitalist society quickly settles on Gold and/or Silver as currency and does not recognize the right of anyone to tax, regulate, or grant monopolies. The Truly Capitalist Society continually works to bring supply and demand into balance in the simplest, most efficient way possible:  By relinquishing all control to the market participants and by extension, natural law.

Inefficiency is naturally wrung from the system as firms that depend upon the false price signals or special protections or subsidies provided under the Might Makes Right ideology quickly go out of business.

True Capitalism not only quickly eliminates economic waste, it quickly directs the surplus capital into its most urgently needed employ, and it is accomplished by simply obeying and embracing the natural law of supply and demand.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 10, 2011

Copper Price per Lb: $3.39
Oil Price per Barrel:  $98.04

Corn Price per Bushel:  $6.49
10 Yr US Treasury Bond:  2.07%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,749 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,861  

M1 Monetary Base:  $2,122,700,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,507,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Economics, Gold

Nickels: The perfect inflation hedge

We came across this graphic at www.zerohedge.com which underscores the current US Dollar debasement perhaps better than any words can.  It shows the value of the oft despised penny and nickel in terms of their raw metal weights.  This is the reason that we have speculated that pennies and nickels will soon be a thing of the past as the US Dollar undergoes a 10:1 reverse split.

This is also a reason why Unlce Sam and your bank hate cash and love cards.  You still have to do some work to create coins and bills.

Observe:

Nickels: the perfect inflation hedge?

 

In other words, you can currently buy nickels at roughly a 10% discount to thier current metal value.  Even if the metal values plunge, you come out even in dollar terms, guaranteed as long as the Federal Reserve runs the currency.

If the FED continues to destroy the currency, as has been their MO since inception, you have unlimited upside.  The fundamentals of the Nickel (the metal, not the coin) are nothing to sneeze at, either.  We don’t have statistics but we have a feeling that it is in relatively short supply.

Nickels and perhaps pennies may be the perfect inflation hedge.

If you can get your hands on them.