Category Archives: Monetary Theory

Greeks are about to learn the virtues of Bitcoin

6/28/2015 Portland, Oregon – Pop in your mints…

It appears that the Greek government is once again on the brink of an inevitable default on its Euro denominated debt.  This time, however, Greece’s Prime Minister Alexis Tsipras appears determined to take it over the edge, calling for a referendum on the whether or not the Greek people should continue to abide by its creditors’ bailout terms and extend their own misery or to give the proverbial middle finger to their oppressors in the north.

Monetary oppression

Greece, Where the Euro pays tourist prices
Greece, Where the Euro pays tourist prices

We use the term oppressors, for the current state of affairs has been held in place to ensure that Germany maintains a death grip on the Eurozone.  Greece stopped benefiting from being a member of the Eurozone the moment it accepted the yoke of a common currency.  Sure, it was a nice run for the entire Eurozone when times were good, but when times got tough circa 2008 the Euro handlers at the ECB cut rates too slowly, citing a tired “stable currency” bias, and generally struggled to maintain liquidity, which is pretty much “job 1” when one is running a currency regime.

Maybe the Treaty of Lisbon wasn’t such a good idea after all.

What happened next was a catastrophe that is only possible in a Central Banking/Tax Farm disconnect that the Eurozone’s half baked approach to unity has left as the norm.  You see, fellow taxpayer, in the United States of America, we have one Central Bank which runs the tax collection mechanism for the government.  This means that, with localized exceptions, the tax farm’s tactics and the Central Bank’s liquidity functions can work in an awkward harmony.  For those of us who pay Cesar annually via the IRS, this means that in a demented sense we share society’s burdens across 50 states.  To those of us in Oregon, it matters not that the State of California cannot pay its obligations (unless, of course, one is a creditor of the State of California).  It is taken as a given that the Federal Government will bail them out and the Federal Reserve will provide the cash (indirectly) to the Feds in order to do so.  Then, and this is where the magic happens, we all pay for California’s misdeeds via Federal taxes and inflation.

This same scenario was possible in Europe until January 1, 1999 (a day that lives in infamy) and had played out throughout much of modern history.

Not so today.  For today, in Europe, when the government of Greece hits hard times and cannot pay its bills, it has to beg its rich neighbors to the north for Euros, and accept whatever conditions they impose.  What is funny is that neither Greece nor its northern benefactors can actively emit currency in sufficient quantities to ensure their new contract can be paid.

What does it mean?

Which brings us back to the upcoming referendum.  While in our mind it is still even money that there will be a further modification of the Greek bailout and that the Eurozone will carry on as it has for 16 years now, there exists the strong possibility that Greece will “opt out” of the inconvenient currency part of the European Union.  What does it mean?  Beyond getting comfortable with Drachma exchange rates again, nobody knows, nobody has ever opted out of the currency after opting in (Denmark and the UK never got in).

The Greek people have decided that it means they are in big trouble, and they have been lining up at ATMs in order to get their hands on as many Euros as possible before the lights go out.  For Mr. Tsipras, this in turn means he must declare a banking holiday and capital controls, which is a time tested recipe for causing any remaining economic activity to screech to a halt as anyone with a brain and more than a few Euros to their name starts working 24/7 on ways to keep their assets off the government’s confiscation radar.

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

However, as in Cyprus, smart Greeks with a working data connection have a medium at their disposal that may ensure that their assets stay well away from their government: Bitcoin.

The mini-spike in Bitcoin indicates that the Cyprus scenario is playing out again.  If anyone recalls that event, it took the Bitcoin from relative obscurity to trading at around $1,100 before the mania wore off.  Will it happen again?

It is anybody’s guess, but here are some statistics that may help guide your own educated ponderings:

Population of Cyprus: 1.14M, pre banking holiday bitcoin price: $49 (March 2013), post banking holiday Bitcoin spike: $1,124 (October 2013)

Population of Greece: 10.82M, pre banking holiday bitcoin price: $249 (June 2015) , post banking holiday Bitcoin spike:  ???? (January 2016????)

We’ll let you do the math on the hypothetical situation we have planted, but the dynamics of what is occurring in Greece, from a monetary standpoint, are extremely similar to the Cyprus scenario.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 28, 2015

Copper Price per Lb: $2.61
Oil Price per Barrel:  $58.74

Corn Price per Bushel:  $3.85
10 Yr US Treasury Bond:  2.48%
Bitcoin price in US:  $249.46
FED Target Rate:  0.13%
Gold Price Per Ounce:  $1,174

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.5%
Inflation Rate (CPI):   0.4%
Dow Jones Industrial Average:  17,947
M1 Monetary Base:  $2,929,400,000,000

M2 Monetary Base:  $11,970,200,000,000

Bitcoin Panel Illuminates the World of Crypto-currencies for the Oregon AFP

Bitcoin2/21/2015 Portland, Oregon – Pop in your mints…

For those who were unable to join us on Wednesday, the Bitcoin panel discussion at the Oregon AFP was a great success.  With us were six of the finest minds in Crypto-currencies in the Portland area.  These minds, together with some of the finest financial practitioners in the city, worked to bridge the gap between the Bitcoin universe and mainstream commerce.

We were pleased to find that the two are really not that far apart.

While there were a number of keen insights shared at yesterday’s meeting at the Multnomah Athletic Club, three stood out in our minds:

1) Transactions volume in Bitcoin has soared over the past two years and the USD/Bitcoin price action has settled down as a result.  Further, Venture Capital is pouring into the Bitcoin industry, proving that crypto-currencies, once on the exciting confluence of technology and money, are now entering the relatively boring yet infinitely more profitable economic mainstream.

2) Bitcoin innovators have largely solved the problem that has thus far kept most bankers at bay:  KYC, Know Your Customer.

3) Concerns about Bitcoin’s wild fluctuations in value are addressed by services that instantly exchange Bitcoins accepted in trade into national currencies. This is especially important for those who transact day-to-day business in Bitcoin, as it is technically considered property for tax purposes and could otherwise create an accounting nightmare. It also allows for a clear delineation between Bitcoin speculation and Bitcoin circulation, two completely different activities before were often unwittingly commingled by virtue of one’s use of Bitcoin in trade.

Bitcoin has come a long way since we published our 48 hour crash analysis of the emergent monetary revolution back in 2013, and our panelists did a superb job of presenting a balanced discussion of the present state of crypto-currencies.

A special thanks once again to all of our panelists, Lawrence I Lerner, Ian Pulicano, Anna Guyton, Mike Fors, George Fogg, and Rhys Faler, who was planning on spectating and found himself on the panel in the midst of an incredibly rich, informative, and relevant discussion of the merits and challenges of Bitcoin.

Ian had the difficult task of breaking the ice of ignorance and/or skepticism that is often associated with presenting the concept of Bitcoin to someone for the first time, which is never an easy task.  Beyond explaining the technical side in a concise manner, the slide near the end which highlighted the exponential growth in transactions and VC funding over the past 3 years got everyone’s attention and set the stage nicely for the discussion that followed.  Anna did a great job of stepping up as moderator and added valuable insights throughout, Lawrence did an excellent job of bridging the knowledge gap between industry and Bitcoin through helpful analogies, Mike and Rhys provided the evidence that Bitcoin can and is being used in everyday transactions, and George added insight into the inherent challenges and opportunities of Bitcoin on the regulatory and securitization side of the house.

At the end of the hour, the audience was left with one inescapable conclusion: Crypto-currencies are here, are here to stay, and will be part of one’s economic experience in the not too distant future.

For the benefit of those who were unable to join us on Wednesday, we offer the following bootleg recording of the event:

We also offer the hope that these types of panels will be held in other venues where finance and technology intersect, and that mankind will be all the better off for it.

Stay Fresh!

David Mint

Key Indicators for February 21, 2015

Copper Price per Lb: $2.58
Oil Price per Barrel:  $50.81

Corn Price per Bushel:  $3.85
10 Yr US Treasury Bond:  2.13%
Bitcoin price in US: $246.31
FED Target Rate:  0.09%
Gold Price Per Ounce:  $1,204

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.7%
Inflation Rate (CPI):  -0.3%

Dow Jones Industrial Average:  18,140
M1 Monetary Base:  $2,884,400,000,000

M2 Monetary Base:  $11,771,600,000,000

Happy Halloween from The Mint!

As all hallows eve approaches, we are glad to inform you that we will be in attendance at the AFP annual conference in Washington, DC along with Dr. Ben Bernanke, Thomas Friedman, and 6,500 other Financial ghouls and goblins over the early part of next week.  If any of our readers will be there, feel free to drop us a line, we would love to connect with you, it will be a welcome respite from the deluge of mainstream economic/finance/banking information that has already started to bombard us in the mail!

We leave you today with what may just be the world’s first “Bit o Latern”:

The World's First Bit o Lantern?
The World's First Bit o Lantern?

The World’s First  Bit o Lantern?

We wish you all a safe and fun Halloween here at The Mint!

 

Positive Money UK is on the right track

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

For some time we have followed a group known as Positive Money UK on Twitter.  They seem to be among the few people/groups that have a decent comprehension of the flaws in what we call the insane debt based monetary system in which the inhabitants of the earth are either coerced or compelled to live by.  They describe themselves as “a movement to democratise money and banking so it works for society and not against it.”

We were reminded of this by one of their tweets today:

Positive Money Tweet

The alien meme sums up what we have been driving at for some time now here at The Mint.  We tend to focus on the acceleration of the damage that humankind causes to nature as the nasty side effect of using debt as money, but it is well noted in other corners that indeed, many of the distortions in relationships between persons and nations have the concept of extinguishing debt as their root.

The video which is linked to in the above Tweet from Positive Money UK is presented as a public service below, it does a nice job of showing how the only way to create money in our insane, debt based monetary system, is to go deeper into debt or have someone else go into debt.

While the video is spot on in terms of money creation, they present only half of the solution (which we find is common in many monetary reform circles, namely Bitcoin).  The second half that is too often ignored is that 1) money, as a concept, necessarily will take on many forms in the world and 2) whatever is used as money by a majority will necessarily require an associated debt market to successfully operate for any length of time (the lack of a viable debt market is killing Bitcoin).  This is the great supposed advantage of using debt in the form of Central Bank notes as money, infinite debt markets = infinite liquidity, meaning there is always money available.  It is this advantage that any viable monetary reform must include, or else it is doomed from the start.

On their website, Positive Money UK points out that “Only 1 in 10 MPs understand that 97% of money is created by banks.”  As the English are generally cleverer than Americans, we would imagine the ratio in the governing bodies on the US side of the pond to be even lower.  If you need proof of this, just watch the next Senate Banking Committee session on C-Span.

Nobody seems to get that today, circa 2014, money and debt are the SAME THING.  What passes as money today are nothing more than liabilities of Central Banks.  This is a worldwide phenomenon, and the effects are profound.

Money is a concept that attaches itself to certain real world things in various forms.  Credit is another concept which attaches itself to various agreements.  They are the antithesis of each other.  Most people generally understand this and spend a good deal of their time working or causing others to work in order to attain a reasonable balance between the two on their ledgers, regardless of the size.

However, as the above video partially illustrates, most people are wrong, the only way to “make money” is to “make debt.”  This is causing SEVERE imbalances in the natural world as the activities of mankind continue with an unconscious disregard for the effects of the real world.

The effects on the real world are this:  There is an inordinate amount of fallow land left unattended while an increasing share of mankind passes time in urban settings, with their own productive capacity squarely aligned, day in, day out, in conflict with the needs of the natural world.

The irony is that many have taken note of the dire state of affairs of nature (read Climate Change, etc.) and then misdiagnose the cause.  They clamor for more “money” to solve problems that have come about as an indirect result of the creation of more “money.”

Humankind was never meant to live under that shadow of such an overabundance of credit.  The removal of limits on credit creation has effectively removed the natural governor of the activities of man, the need to create real, free market money, making certain that debts are settled in terms of real goods which are demanded by a free market economy.  The return to this natural governor on human activity is indispensable if humankind is to even begin to address climate change and world peace.

The return to this natural governor will be painful, but it is inevitable, and the more one can prepare now to operate in a world where money and credit operate in their appropriate the capacities and take their appropriate places in a balanced economy, the better.

The world is headed, kicking and screaming, towards a forced monetary reset, and things will be much different than they are now.

We applaud the efforts of Positive Money UK, for they are on the right track.  You too can follow them on Twitter or YouTube and learn more about this fascinating and important subject that, by our own reckoning, only one in a million comprehend.  Will that one be you?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for October 10, 2014

Copper Price per Lb: $3.04
Oil Price per Barrel (WTI):  $85.82

Corn Price per Bushel:  $3.34
10 Yr US Treasury Bond:  2.31%
Bitcoin price in US:  $360.13
FED Target Rate:  0.08%
Gold Price Per Ounce:  $1,223

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.9%
Inflation Rate (CPI):   -0.2%
Dow Jones Industrial Average:  16,544
M1 Monetary Base:  $2,969,100,000,000

M2 Monetary Base:  $11,407,100,000,000

The ECB negative rate announcement is a cannibalistic non-event

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

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

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

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

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

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

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

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

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 22, 2014

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

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

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

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

A Discussion of the Merits of Short Term Interest Rate Management, Part I

4/28/2014 Portland, Oregon – Pop in your mints…

One of our working hypotheses here at The Mint is that short-term interest rate management, the primary tool employed by the Central Banks of the world to implement monetary policy, is necessarily harmful to the economy by providing incentives for achieving what otherwise would be suboptimal economic outcomes.  By extension, we believe that these suboptimal outcomes are not simply a lost opportunity or a generator of wasted efforts and resources, but a primary contributor to the imbalances in the environment which today bears the label “climate change.”

Recently, we were invited to present our hypothesis at a Global Macro Roundtable for discussion.  Today and over the next several days, we will present a slightly redacted transcript of the roundtable for the consideration of our fellow taxpayers.  Names (with the obvious exception of our own) have been changed to protect both the innocent and guilty.

As you will see, the discussion (which we have color coded in order to help follow the cast through the maze of discussion) takes many twists and turns, and in a way reveals how far-reaching the influence of short-term interest rates has become, as well as the broad misunderstanding of the concept of money that persists to this day.

Enjoy!

A Discussion of the Merits of Short Term Interest Rate Management

The hypothesis:

Why Short-Term Interest Rate Management is Harmful to the Economy: The Unseen Funding Dynamic 

While the evidence is clear that centralized planning is a failure, pointing to the reasons why can prove elusive. Recently, a revelation regarding the problem with centralized management of short-term interest rates came upon us. The revelation is the following: Imagine you are a banker who needs to fund a loan. In order to fund this loan, you would presumably need to have the money available with which to fund it. This is simple logic, however, in the real world of banking, the decision of whether or not to fund a loan is completely disconnected from the availability of funds, which is primarily determined by the overnight funding markets which, in turn, are completely reliant upon short-term interest rates.

In a world that followed the rules of financial physics, the short-term interest rates would be completely dependent upon the availability of funds in the system. However, the centralized management of interest rates makes this critical data point, which would otherwise provide a snapshot of the amount of capital in an economic system which is held in liquid form and available for deployment, irrelevant, as the amount of capital available in today’s centrally managed system can be determined on whim.

As such, the ability of the banker to fund the loan is not dependent upon an availability of funds that represents the amount of capital available in the real world, rather, his ability to fund the loan is completely dependent upon the borrower’s ability to pay and the size of the loan in relation to the structure of the bank’s balance sheet.

The three criteria above are important, as any underwriter will tell you, but the invisible fourth criteria, the true availability of the funds for the loan, or funding dynamic, is completely ignored in the following fashion:

When the short-term interest is managed to be low, as is the case currently, any borrower who has the capacity to pay and has a lending need that fits well with a certain bank’s loan mix is extremely likely to get funded, regardless of whether or not the economics system as a whole has the capital available to fund his or her loan. When the short-term interest rate is managed to be high, as it was in the early 1980’s in the US, funding any loan, regardless of the ability to pay and fit within bank’s balance sheet, becomes impossible to fund.

In both cases, both borrower and banker are left completely in the dark as to whether or not there exists the necessary capital stock or productive capacity in the economy for the funds to be deployed in the manner that the borrower envisions, for the short-term interest rate signal has been genetically modified to send a common signal to all participants.

Unfortunately, it is a signal that blinds everyone to the facts of the situation. For many are the hopes, dreams, and ideas of mankind, but it is the funding dynamic which keeps these hopes, dreams, and ideas in harmony with the natural world upon which we all depend.

Right now, we are floating in the clouds, completely disconnected from reality. The landing caused by the next round of high rates, via a natural rebalancing of accounts or further genetic modification of the short-term rates, will be very hard indeed.

The funding dynamic is so delicate that mankind cannot hope to optimize it via genetic modification, for when left alone, it is optimized by definition. Again, by definition, every attempt to modify will bring about sub-optimal results.

As with all complex economic and political systems, dissent is information, and serves to manage the system’s outputs while at the same time increasing the resiliency of the system, making it less susceptible to shocks.

Centralized short-term interest rate management must be abandoned before it is too late, for it is leading the activities of mankind towards a dangerous showdown with the limitations of the natural world.

Discussion

Contributor A:  This brings to mind the Pareto curve reaching a knee limit and catastrophe theory when there is a Quantum state change in the system being considered (the twig will snap, the water will boil as energy (money) is added, etc.). We are expanding the money supply and disregarding that eventually an infinite amount will be needed.

One other point is the Multiplier effect at the Bank who gets $ 1 Million from the fed and uses a low Reserve to make loans greatly exceeding that because the Loans are an asset on their books ; and, as repayments come in multipliers on those. Where does it stop? When the twig snaps and then raging inflation must kick in at an Exponential level with time. Then SNAP!

Contributor B:  I have no disagreement with the conclusion, however, the facts leading there need to be adjusted/considered. For example, in the early 80’s, liquidity was not nearly the issue as it was raised in the statement. Not only did my clients acquire funding as required in that period, but I [stupidly] agreed to a mortgage in that period with an interest rate that still gives me nightmares. For the last few years interest rates have been suppressed, but at the same time my middle market clients have complained of there being insufficient liquidity to fund their business loans, meaning that new business ventures were not realised. This has relaxed in the past year or two slightly, but you need to remember one of the issues regarding the vast amount of dollars being held in banks.

When the FED began shipping huge quantities of dollars to friendly banks after the 2008 crash in order to stabilise some very shaky balance sheets, the FED promised to pay interest to the banks on those funds kept in storage with one absolutely unbreakable codicil: under no circumstances could the banks use those funds as part of their asset base in making loans. In other words, none, zero, zip, nada, NONE of those FED funds could be used for loans. Clearly, this move suppressed what would have been an immediately inflationary environment in the US, a highly destructive inflationary environment. But it also left these banks which were otherwise strapped for funds floundering for any money to loan out to their best small business customers. The banks may have stabililsed in the past few years of lean flow of funds, but it is not that much better in the commercial market for small and mid-sized customers.

The Mint:  As Contributor A highlights, the entire modern monetary system is extremely fragile and, given its debt base, could quickly disintegrate were a crisis of confidence to emerge or a widespread failure of technology make it inaccessible.

Contributor B (to whom I will defer on funding experiences of the early 80’s) brings up an important point in the form of the “unbreakable codicil” of the FED with regards to funding intended to shore up the Federal Reserve system. While this move made the banks and system technically solvent, the Fed has ignored the fact that the US economy has outgrown the Federal Reserve system, as the economy is starved for money at a time when the Fed’s measurements indicate that quite the opposite is true.

In the 2008 panic, the Federal Reserve deviated significantly from its traditional funding mechanisms to save its system and has altered the normal monetary transmission protocol. I believe that this has created a feedback loop which will result in the Federal Reserve system receding and other mediums of exchange posturing to take its place.

Contributor B:  I thoroughly agree that it will be reset, David. However, while you may see market forces and evolved consumer needs driving this reset, I tend to pay attention to the political aggression of states not at all amicable to the interests of the FED and believe the geopolitical transformation we will witness may be the lynchpin upon which the existence of the FED depends. In the long run it will not really matter to the FED whether it is driven by the economic needs of the consumer or the geopolitical ambitions of another nation, but it will matter to the ordinary participants, I suspect. The withering of FED control worn away by alternative exchange mechanisms will provide a much different life at ground level than the sudden repudiation of the USD as the world reserve currency as anticipated (and desired it seems) by the Chinese military (along with a few others who are tired of US economic hegemony). The former is a transformative change more gradual in nature while the latter can be far more sudden in keeping with the rapid shifts in the global market; the former providing the opportunity to adjust more peacefully while the latter is expected to lead to widespread disruptions in service, food, and support delivery at the ground level. Food riots, water riots, just plain riots, and toilet paper riots… sorry, basic staples of urban and 21st century life will be in short supply. I think I’ll find farmland in another country far away. 😉

For ease of transition, I’d vote for alternative exchange mechanisms. Curiously, I saw an article a few weeks ago that noted extreme activity increases in southeast Asia on Bitcoin and the development of alternatives… either opportunity or another front in the attack on the USD. It can be both.

Now, to envision a world without central banks. That takes us back a while in history…

Then again, perhaps this graph {Editor’s Note:  Regarding the Longevity of currency reserve status over the past 600 years} tells it all:

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/01/20120103_JPM_reserve.png

… and speaking of market competitors, Googlecoin? it is being touted already.

Contributor C:  

“Centralized short-term interest rate management must be abandoned before it is too late, for it is leading the activities of mankind towards a dangerous showdown with the limitations of the natural world.”

I like above statement. 

This game of interest rate putting up and down could create a crisis if somebody implemented at the wrong time. I consider interest rate as a weapon of mass of destruction if we manage it recklessly. Interest rate volatility creates problems for investors, homeowners and other savers. What about instruments linked to interest rates? What will happen if we don’t carefully manage  or misuse those instruments? Why do we see higher interest rates in some periods and lower interest rates in some periods? Can’t we find solution to fix interest rates without creating volatility?”

The discussion, which is about to take many an unforeseen turn, continues tomorrow…things are about to get lively (at least lively as far as short-term interest rates discussions go) indeed!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 28, 2014

Copper Price per Lb: $3.07
Oil Price per Barrel:  $100.93

Corn Price per Bushel:  $5.07
10 Yr US Treasury Bond:  2.68%
Bitcoin price in US:  $431.71
FED Target Rate:  0.10%
Gold Price Per Ounce:  $1,303

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  6.7%
Inflation Rate (CPI):   0.2%
Dow Jones Industrial Average:  16,361
M1 Monetary Base:  $2,721,500,000,000

M2 Monetary Base:  $11,353,000,000,000

Mt Gox, we hardly knew ye

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

While the digital currency Bitcoin continues to rise in value relative to the US Dollar, one of the mainstays of the Bitcoin universe, Mt Gox, appears to have exited the industry after a series of digital heists in the form of hacks into the exchange’s hot wallet (the exchange’s interface with the broader Bitcoin market) left what was once the world’s most important Bitcoin exchange insolvent.

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

When Mt Gox imploded on February 25th, it took with it one of the largest bridges between the Bitcoin universe and the national currencies of the world.  It also took with it one of the largest pools of liquidity in the digital currency realm.  As a result, the digital currency traded below $300 for the first time since November 2013.

While the events which unfolded on that fateful February day last week have caused many a Bitcoin naysayer to blurt out, “I told you so,” evidence of the actual demise of Bitcoin and other digital currencies has been lacking.  After all, it wasn’t as if the Bitcoin blockchain itself that imploded.  On the contrary, the demise of Mt Gox may have been the best thing to happen to the Bitcoin industry.

Mt Gox grew from its humble beginnings as an online exchange for Magic: The Gathering cards to dominate the Bitcoin trade, which it entered into in 2011.  On June 11th, not long after it entered the Bitcoin game, it suffered the first of what would be several security breaches.  After all, in the Bitcoin Universe, all Mt Gox had was just another wallet.  The fact that it was seen as one of the largest wallets made it a natural target.

In April of 2013, when Mt Gox was in its heyday, processing roughly 70% of all Bitcoin trades, it suffered another well publicized hack.

Through all of its setbacks, Mt Gox was able to soldier on and execute trades, despite being short, as revealed over the past week, roughly 750,000 Bitcoins.  It is our suspicion that Mt Gox was able to cover shortfalls in the past by mining Bitcoins to cover those that had been stolen.  Over the course of the past year, with Bitcoin touching roughly $1,200 USD at certain points in time, mining again became lucrative as the rate of Bitcoin generation began to plateau, leaving any player who was short Bitcoin in an extremely difficult situation.

While those of us who, until recently, looked to Mt Gox for the Bitcoin market price as a silver trader looks to the Comex, it will take some minor adjustments, but life in Bitcoin land will move on and, from the looks of things, be more stable and vibrant.

For those who stored a great deal of Bitcoin denominated wealth directly on Bitcoin’s wallet, the outcome, it would appear, is much more tragic.

Does Mt Gox’s demise signal the demise of Bitcoin?  On the contrary, it may have ushered in Bitcoin’s golden age as the standard by which all subsequent digital currency offerings are measured.

The case for Bitcoin remains extremely compelling once one grasps what Bitcoin represents.  Bitcoin is operating as an indirect claim on assets, nothing more, nothing less.  In this sense, it is similar to equities and central bank currencies.  Once this is properly understood, a quick look at Bitcoin’s fundamentals will reveal why the Bitcoin/USD ratio is on a roller coaster ride tilted upwards until the rails come off the track.

Enjoy the ride, but keep an eye on the exit, you may need a parachute!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 3, 2014

Copper Price per Lb: $3.20
Oil Price per Barrel:  $104.73

Corn Price per Bushel:  $4.70
10 Yr US Treasury Bond:  2.75%
Bitcoin price in US:  $672.00
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,350

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  6.6%
Inflation Rate (CPI):   0.1%
Dow Jones Industrial Average:  16,168
M1 Monetary Base:  $2,658,300,000,000

M2 Monetary Base:  $11,121,500,000,000

The Division of Labor Gives Rise to the Monetary Premium

2/8/2014 Portland, Oregon – Pop in your mints…

Today we find ourselves, along with the rest of the inhabitants of the Willamette Valley, enjoying what has been dubbed “Snowpocalypse 2014.”  The valley’s residents are now three days into this rare event and, while much in the way of normal transit has been disrupted (truly, it does not take much snow to paralyze Portland).  We do not have a solid measure of just how much snow has fallen and whether or not the event lives up to its name, what is unmistakable is that the snow is beautiful and is has revealed many a great sledding hill in our midst.

Some of our faithful readers will recall that back in December, we began exploring the Monetary Premium, the portion of an item’s relative value owed to the utility of an item as money (those new to The Mint can glance back at these essays for a thorough exploration of the definition of money).  In that essay, we presented the portion of the Monetary premium that arises as a result of an Imperial authority demanding tribute in said currency.  Logically, it may also be said that laws declaring what is legal tender or any law which dictates the monetary unit in which debts are to be cancelled in an economic zone will also give rise to the monetary premium.

Of Money and Metals by David MIntGiven the above example, it may appear that the primary drivers for an economic good to carry the monetary premium are related to imperial or government action.  However, this is decidedly not the case, for the ultimate origin of and primary factor contributing to the monetary premium of any economic good has nothing to do with the government or what is used as money, rather, the Monetary premium comes into being as a result of an increase in the division of labor.

For those not familiar with the term, the division of labor is what makes urban society possible.  While perhaps the most easily understood metaphor is that of the assembly line, where each individual worker dedicates him or herself to completing one facet of the production process, relying on their counterparts on either side of them to ensure that the chain of production, of which they form part of, remains unbroken.

Economic systems are, in a sense, a collection of interconnected assembly lines both large and small, with each member of the system dedicating themselves to a set of tasks; the more time and energy that each individual is allowed to dedicate to their task, the more efficient each individual generally becomes.  The fact that each individual dedicates an increased amount of time and energy to a specific task gives rise for other members of society to pitch in and specialize in tasks that others cannot do for themselves given the specific scope of their labors.

The division of labor, if allowed to rise and sort itself out on its own, is generally good for economic output, as increased efficiencies translate into increased outputs.  However, as individuals increasingly specialize in certain tasks, they increasingly rely upon other members of society to fulfill their need.  As logic would follow that the increased division of labor does not allow much time for barter transactions, an increase in the division of labor always gives rise to the need for a monetary premium to both emerge and expand, attaching itself not only to traditional transmitters but giving rise to new ones as well.

Once the monetary premium expands, it gives rise to an increase in the division of labor, and in this way the dynamic between the two drives real economic growth.

Limitations on the Division of Labor and Monetary Premium

After reading the above, it should be clear that both the division of labor and the monetary premium are generally good for humankind, and that both factors driving real economic growth, if left to operate unhindered would eventually run up against and adapt to the limitations of the natural environment.

However, today, circa 2014, both the division of labor and monetary premium are hindered not by natural limitations, but by limitations placed upon them by well meaning legislators.  While all legislation tends to have either a direct or indirect effect on economic activity, there are two kinds that are particularly harmful to economic growth as they cut off the lifeblood of economic expansion:  The dual expansion of the division of labor and the monetary premium.

The first are laws dealing with minimum wages.  While minimum wages laws strive to guarantee a living wage for all members of society, they never achieve this goal and, in the process, serve to directly hinder the expansion of the division of labor when actual wage rates for certain activities are below the minimum wage rate, and serve no purpose when wage rates are above it.

The second set of laws are those referenced above; legal tender laws.  While Legal tender laws strive to codify what serves as money in a society, they invariably serve to direct an inordinate amount of the monetary premium into instruments that are not worthy of serving as money on a grand scale.  In the process, they serve as a severe limitation on what can carry the monetary premium and, by extension, the expansion of the monetary premium and the division of labor.

We all suffer to some degree due to manmade hindrances to the expansion of either the monetary premium or the division of labor; however, it is those farthest from monetary spigots, as defined by legal tender laws, who suffer the most.  In order for peace and prosperity to accrue to the greatest possible number of persons, it is critical that we grasp the importance of encouraging the division of labor to operate unhindered.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for February 8, 2014

Copper Price per Lb: $3.26
Oil Price per Barrel:  $99.88

Corn Price per Bushel:  $4.44
10 Yr US Treasury Bond:  2.68%
Mt Gox Bitcoin price in US:  $680.00
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,267

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  6.6%
Inflation Rate (CPI):   0.3%
Dow Jones Industrial Average:  15,794
M1 Monetary Base:  $2,752,800,000,000

M2 Monetary Base:  $10,968,700,000,000

Why What We Use as Money Matters Trailer released

Today we present the fresh release of the trailer for our recent book, Why What We Use as Money Matters, a reflection on current systems of finance and governance and how they may be throwing the earth wildly out of balance.

Could it be that it is not how, but what we use as money matters when searching for the root cause of Climate Change and other Global Problems?  These nine volumes are a thought provoking exploration of modern financial and political systems and their effects on both people and the land.

WWWUAMM BannerPick up your copy today and stay fresh!

 

How Money is Made

1/13/2014 Portland, Oregon – Pop in your mints…

We were fortunate to have the video below brought to our attention recently.  As you can see, this brilliant video presentation of what is wrong with the current monetary system does in 30 minutes something that we have taken lengthy stabs at expressing via the written word over the past three years, and it does so with some nice animation to boot!

Enjoy this presentation of “How Currency is Made, How Debt is Created, and How you are Impoverished,” the fourth video in a series on the monetary system courtesy of Liveleak.com:

We are especially fond of the scene where the workers shovel the currency into the piggy bank, only to have a large bird swoop down, pick it up, and fly it to the offices of the tax authority.  It is truly something that nearly all of our fellow taxpayers can related to, and this depiction drives the point home.

For better or worse, this is the monetary and taxing regime in which we live.  Getting out of it is as simple as changing your mind with regards to such matters.  The difficult part is changing the minds of others so that meaningful advances towards monetary freedom can be made.  For if you act alone, you are merely a prepper, but if you act in concert with all of those in your community and circle of trade, you are a history maker.

One way or another, we will all find ourselves in the latter camp, but, like campsites on the fourth of July weekend, the best spots will go to those who get there early.  Will you be one of them?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

The Monetary Premium is the Fed Alternative

12/24/2013 Portland, Oregon – Pop in your mints…

Here at The Mint we are preparing for a record-breaking year in 2014.  As we look out upon the horizon, we see that the eternal tension between inflation and deflation that is the bane of the insane debt is money monetary system is beginning to subside.  While many at this point are standing on the beach watching the monetary tide recede to an unimaginable extreme, those who watch the weather know that this phenomenon is but the precursor to a tsunami.

Inflation will soon be here, and it is time to adjust revenue targets accordingly.

We make this forecast not out of any sort of clairvoyance, but largely as a hunch.  The Federal Reserve, which just passed its 100th anniversary and appears to be going strong, has no choice but to inflate, as it is their only tool and default bias.

What is changing in 2014 are the Federal Reserve’s tactics.  The FED will spend much of 2014 and beyond fighting inflation as a matter of policy.  Each coming policy, such as the recent $5 Billion/month token (or courtesy) taper that was recently announced, in theory will serve to reduce the monetary base.  What many do not realize is that the monetary base will not shrink as a result for at least three and a half years.

At this point our long-suffering readers are welcome to point out that The Mint was wrong.  We had predicted that the Fed would increase the target rate before tapering, as the target rate was more of a random subsidy while the taper recipients have come to expect it as a form of state banking welfare.  We humbly admit that, given the latest announcement, we were technically wrong.

What the taper reduction is accomplishing, in practice, is a form of marginal stimulus.  The Fed is herding the banks and other lenders out of Treasuries, as holding too many Treasuries in a taper environment is categorically inadvisable.  Some reports have the Fed representing 80-90% of the market for treasuries.  As they scale their participation rate back via the taper, Treasuries will be forced to find a market price, and if what happened to the 7 year after the announcement (a roughly 264 bp drop) is any indication, the market has an opinion of Treasuries that is quite different from those held by the Fed.

The point is that, as the banks have the spigot open at .09%, this money will, at long last, find its way into the hands of credit hungry consumers and businesses.

The giant of the US Economy is waking up.  Part of the activity can be attributed to the Christmas season, however, in early 2014, much of the initial uncertainty surrounding Obamacare will begin to sort itself out, and both businesses and consumers will find themselves both willing and, for the most part, able to do what they do best:  spend.

The Fed has worked tirelessly to shore up the monetary base for five years, and, despite what one may think of Yellen’s dovish bias, she is likely smart enough to realize that the best shot the Fed has now to stimulate the economy is to appear to head to the closet to pick up the liquidity mop.

The Importance of Tribute, and the Fed Alternative

After 100 years, the Federal Reserve has done much.  Their most amazing exploit, one that is lost on most, is that they made the US and much of the world believe that debt was money, and indeed, a great deal of the monetary premium has gravitated to Federal Reserve notes.

Clairvoyant Political Cartoon circa 2012 by Adam Crozier
Clairvoyant Political Cartoon circa 2012 by Adam Crozier

{Editor’s Note:  Click here to see more clairvoyant political cartoons circa 1912, just before the Fed was granted its monopoly on the US money supply}

In the end, what is a Federal Reserve note?  It is a Central Bank liability, which is an irredeemable hot potato that at best represents an indirect claim on wealth but in the end maintains its allure on the part of those forced to transact in it because the US Empire requires that all taxes be reported and paid in them.

Think about it, the hammerlock that any currency has on a citizenry, no matter how putrid its fundamentals may be (and they don’t get much worse than the paradox of debt based money), is that the sovereign requires tribute to be rendered in said currency.

The logical proof is this, were the US Government to require payroll and income tax remittances in Euros or corn bushels, how long is the Federal Reserve Note likely to retain its value and usefulness in trade?

The requirement to use a monetary unit or currency in rendering tribute is a important component of what we call the “monetary premium,” which is loosely defined as the portion of aggregate value that something carries related to its relative function of a transmitter of value.  It is embedded in the supply and demand dynamic of all quasi-monetary instruments, such as gold, silver, and most recently, Bitcoin and other crypto currencies.

While most fix their eyes on credit markets to determine the value of currency in trade, they would do better to observe the Monetary Premium, for it represents the collective hopes and dreams of humankind in the material world, and where it goes, relative riches follow.

For this reason, the Federal Reserve and other Central banks of the world will fight to the last (insert your preferred noun) to retain a share of the monetary premium, for it is their only value proposition in what is a terminally defective, if not purposefully fraudulent, product mix.

In 2014, the Fed will lose its iron grip on the Monetary Premium and take its place amongst currencies relegated to tax remittance and nothing more.

Bitcoin’s resilience is but one item in a long list of evidence that the monetary premium attributed to central bank notes is attaching itself to other indirect claims on wealth and items representing unencumbered claims on wealth.

The economic activity that this tacitly coordinated shift out of Federal Reserve notes will cause in 2014 and beyond will be breathtaking.  They will call it inflation, and it will be the Fed’s death knell.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 24, 2013

Copper Price per Lb: $3.31
Oil Price per Barrel:  $99.21

Corn Price per Bushel:  $4.35
10 Yr US Treasury Bond:  2.98%
Mt Gox Bitcoin price in US:  $698.87
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,205

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):   0.0%
Dow Jones Industrial Average:  16,358
M1 Monetary Base:  $2,583,700,000,000

M2 Monetary Base:  $11,024,400,000,000

What is Bitcoin?

12/11/2013 Portland, Oregon – Pop in your mints…

We are settling in for a long, productive winter here at The Mint.  While there is a whirlwind of activity outside, the key to maintaining one’s sanity is to maintain an internal balance, no matter what happens.

The best way we have found to do this is to maintain a state of constant rest, the eternal Sabbath, if you will, together with the creator in the very core of our being.  Rather than experiencing God in one’s mind or even heart, true peace is found when you experience Him in the abdominal region, often referred to as the soul.

It was in the midst of this rest today that we had a profound revelation.  While the revelation was centered on the present Bitcoin phenomenon, it has implications far beyond the Bitcoin, and, for those of us who are paying attention, may reveal something of the nature of the divine as well as that of humankind.

Longsuffering readers of The Mint know that our musings on Monetary Theory often lead us to dabble in Eschatology, the study of what are commonly called the end times in world religions that hold apocalyptic worldviews.  Today’s revelation, as you will see, is a further dabble into this inherently speculative subject.

Before we dive into today’s revelation, we must provide a bit of context with regards to Bitcoin.

Bitcoin, an Unregulated Ponzi Scheme

We have watched the rise of the Bitcoin/USD ratio, which now stands near $909, ever since April.  In this short time frame, we have observed that every time there is a surge in the Bitcoin price, it attracts an increasing amount of attention, both positive and negative.  As it is with most things in life, the negative opinions are played at a higher volume.  In the case of Bitcoin, those who hold it in disdain throw around two flavors of arguments:

1.  It is a Ponzi scheme and, 2.  There is no regulation of it.

The detractors are correct on both counts, however, what they fail to recognize is that the same is true for fiat currencies, equities, and all other indirect claims on wealth.

“But what about the FED, SEC, the Government, etc.?  Don’t they regulate currencies and equities?” come the shrill voices from the public.

Again, this rebuttal is correct if one takes the narrow view of both of the unregulated Ponzi schemes in question.  The Federal Reserve does attempt to regulate its Ponzi scheme within the framework of the IRS and Banking system, and the SEC attempts to regulate various Ponzi schemes within its purview on various stock exchanges.

However, the unregulated universe in both equities and currencies is much larger than most realize, and Bitcoin’s apparent lack of regulation stems from the fact that it is a mere four years in existence.  Given time, sovereign governments and Bitcoin exchanges will begin to erect a regulatory framework for the Bitcoins that pass amongst their citizens or participants.  Indeed, these efforts are already underway.

The narrow analysis of Bitcoin that its critics lean on is that Bitcoin is either an equity or a currency.  In this faulty analysis, they point to the fact that as an equity or currency, there is nothing immediately recognizable within its framework that would lend it valuable.  Therefore, they state smugly, Bitcoin is a Ponzi scheme to be avoided and derided, case closed.

Yet supposedly educated, computer literate persons are willing to pay $900 USD per Bitcoin despite the risks.  What gives?  What the failed analyses of Bitcoin do not recognize is that Bitcoin is neither a currency or an equity, but rather the purest reflection to date of something that is pursued by nearly every person on the planet the world over on a daily basis in some form or another.

It may come as a shock to you, fellow taxpayer, and indeed much of humankind, that a great majority of humanity pursues what Bitcoin represents without even knowing how to articulate what they are pursuing.

While a portion of Bitcoin’s value stems from its functionality as an open source international money transfer channel, we believe that most of Bitcoin’s value stems from the fact that it is the purest reflection of what we call the Monetary Premium.  In an academic sense, the Monetary Premium is the relative increased value attached to an item that is attributable to a specific, ephemeral part of the item’s value that is related to its function, no matter how minimal it may be, as money.

As the common person’s view of money is generally limited to fiat currencies, it is understandable that most would not know what makes a fiat currency act as money.  It then follows that Bitcoin, which is the purest form of the Monetary Premium, would be widely misunderstood by most of humankind.

Bitcoin, The Monetary Premium, and Eschatology: The Revelation

With the lengthy but essential matter of defining what Bitcoin is out of the way, the revelation that follows should now be clear.

The revelation is best presented in the following bullet points:

1.  Bitcoin may be the purest reflection of the Monetary Premium known to humankind.

2.  The Monetary Premium is manmade and cannot be seen.

3.  Pursuit of the Monetary Premium in some shape or form is what a majority of humans dedicate a large portion of their daily activities towards through the acts of producing, consuming, and investing.

4.  When God warns of the choice between God and money, as He does in Matthew 6:24:

24  “No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can’t serve both God and Mammon.”

The Mammon (money) being referred to is not an inanimate object, but rather the Monetary Premium.

5.  The Ultimate choice between full, dedicated worship to the invisible God and continuing to pursue the invisible manmade Monetary Premium will be presented to those who are still present on earth with the ultimatum presented to mankind described in Revelation chapter 13:16-18 (for those who are familiar with eschatology, this last statement makes it clear that we hold a pre tribulation rapture view):

16 He causes all, the small and the great, the rich and the poor, and the free and the slave, to be given marks on their right hands, or on their foreheads; 17 and that no one would be able to buy or to sell, unless he has that mark, the name of the beast or the number of his name. 18 Here is wisdom. He who has understanding, let him calculate the number of the beast, for it is the number of a man. His number is six hundred sixty-six.

Click the image above to read more on Eschatology and Money
Click the image above to read more on Eschatology and Money

What does it all mean?

The Bitcoin is not the Mark of the Beast or any such thing.  However, Bitcoin’s unique reflection of the Monetary Premium is illustrative for purposes of understanding money in Biblical contexts where the worship of money is juxtaposed with the worship of God, as it is in Matthew 6:24, and the implications for such an understanding within the context of eschatological studies, specifically when pondering the events described in Revelation chapter 13.

Beyond the monetary realm, Trusting Jesus today is the single most important step that one can take in the search for inner peace.  For chasing the fickle monetary premium around will never allow for rest, peace with God can be found in Jesus.  He is closer than you think, waiting to commune with every one of us in the eternal Sabbath.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 11, 2013

Copper Price per Lb: $3.28
Oil Price per Barrel:  $97.37

Corn Price per Bushel:  $4.31
10 Yr US Treasury Bond:  2.84%
Mt Gox Bitcoin price in US:  $900.50
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,252

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  15,844
M1 Monetary Base:  $2,658,600,000,000

M2 Monetary Base:  $10,900,400,000,000

Bitcoins storm China as the Last Bear Standing throws in the towel

12/3/2013 Portland, Oregon – Pop in your mints…

As the most recent arctic air blast rushes across the Northwest, the economies of the world appear to be at a crossroads.  The coming three months are critical in determining humanity’s path forward.  Will we cower with fear or step bolding forward with faith and courage into the unknown?

The past five years have taken a toll on the psyche of the financial markets and those who participate in them.  On one hand, the cards have been stacked for raging inflation to take hold and decimate the debt based currencies the world has come to rely on, on the other, this obvious outcome has been stayed because 1) it is obvious, meaning bets are disproportionately placed on the side of inflation and 2) in a debt based currency system, new currency creation by definition means new debt creation, as debt obligations have rolled over into lower interest obligations over the past five years, a heavy undercurrent of deflation has been running against the inflationary pressures.

It is becoming clear that the ACA is having a more dramatic impact on the US landscape than anticipated.  The good news is that after a few months, most consumers fates will have been sealed, for better or worse, and many will be able to carry on.  By extension, many companies will be ready to deploy the capital that they have accumulated over the past several years through cost cutting and debt restructuring (for lack of a better term).  Again, the table is set for inflation, will the scenario play out?

Hugh Hendry seems to think so, ceding the obvious case that inflation in asset prices is to be a part of the investment landscape for the foreseeable future.  In his December 2013 Eclectica investment letter, which can be read over at Zero Hedge via the link below, he appears to be throwing in the towel on the bear case.  In doing so, he makes a revealing statement on the current state of equity markets:

“…I have had to put aside qualitative analysis and be in this trending market.” as “…Playing it safe may be the greatest risk of all.”

Read the entire letter here via Zero Hedge: Hugh Hendry Throws In The Bearish Towel: His Full Must-Read Letter

Ultimately, the case for inflation or deflation rests with the consumers of the world.  Will they cower in fear or step out boldly in faith and courage?  We believe the next three months will yield the answer to that question, and that they will step out boldly.

What’s with the Bitcoin Roller Coaster?

Bitcoins, which continue to garner attention on numerous planes, as a novelty, a speculative vehicle, and the answer to creating a worldwide currency and payment system, has seen its price swing from $550 to $1,200 and land around $760 at this writing.

The price swings are normal for such a small, relatively illiquid market.  Any large scale adoption event, which in the final analysis, is the driver of Bitcoins’ price at this stage, triggers a sell-off by those who have learned to speculate in the crypto currency.

The latest large scale adoption event in question this past week has been the increased interest in the currency by the Chinese.

In a recent interview, Bobby Lee outlined the reasons he believes that Bitcoin has garnered considerable interest in China over the last several weeks.  Lee has a front row seat to this phenomena from his post at BTC China and cites two main reasons that the Chinese have taken a keen interest in the crypto currency.

First, the Chinese are, on whole, extremely gifted in math and sciences, which makes the concept of a digital currency fit into the cultural nomenclature more readily.  As simply understanding what Bitcoin is may be the biggest hurdle to adopting and using it, the Chinese have a cultural leg up on many other cultures.

Second, and perhaps more importantly, is that the Chinese are net savers.  As such, they are constantly seeking out investments and places to park their savings for a rainy day.  Bitcoins appear to offer a strange form of asset protection, despite the breathtaking volatility in their price, as they are limited in the number that will be created by an algorithm.

Finally, one must remember that China does still impose capital controls on its citizens.  Bitcoin, while not its chief aim, gives the Chinese investor a handy tool by which to move his or her capital out of the country with their mobile phone or PC.  Something that simply cannot be accomplished with a bank account.

The Chinese, like the Cypriots and Argentines, are finding their culturally specific use for the world’s most popular crypto currency, and the price action, which has ranged from $1,200 USD to $700 during the past 72 hours, reflects just how volatile a freely traded, finite global currency can be.

Bitcoins are a rough equivalent to gold in the digital realm, and, as Lee notes, volatility is not going away any time soon.  Yet if one can see past the price movements to understand the value in what is essentially the world’s largest collective math problem, one will see that Bitcoins at any price serve a very important purpose:  They capture the monetary premium in action.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 7, 2013

Copper Price per Lb: $3.21
Oil Price per Barrel: $97.65
Corn Price per Bushel: $4.24
10 Yr US Treasury Bond: 2.88%
Mt Gox Bitcoin price in US: $765.00
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,231
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 16,020
M1 Monetary Base: $2,618,600,000,000
M2 Monetary Base: $10,934,500,000,000

It is Winter, do you know what and where your Bitcoins are?

12/3/2013 Portland, Oregon – Pop in your mints…

“It is winter, a time to pause, the driveway is half shoveled out, but I lay down the shovel, and I pause to enjoy this moment, after all, this is my first heart attack.”

A Poem recited by Red Green during The Winter of our Discount Tent show segment

For those who were fortunate enough to see Red Green in his prime, circa 1991, the words “it is winter” immediately bring a sense of comic anticipation to mind.  Really, the mere sound of the man’s voice will bring a smile to your face if not cause one to break out in laughter.

Red Green, a Canadian, brought a unique brand of humor to the late night airwaves.  While there is really nothing to compare it to, if one were to imagine a cross between Al Bundy (Married with Children) and Crocodile Dundee in Canada doing a variety show against the backdrop of an ongoing storyline in his men’s lodge, you would be in the ballpark.

Yet as the poem above hints at, you never quite knew what would come out of Red’s mouth, but his dry delivery and lighthearted machismo made nearly anything the man said pass for hilarious. (see the poem read live by Red below and see for yourself).

It is winter, and while any number of narratives continue to fill the financial landscape, they all have one thing in common:  Inflation is here to stay and the Federal Reserve and it cohorts around the world are not about to do anything stupid, like raise rates or end bond buying programs, at this stage of the game.  From their standpoint, risks are on the side of deflation, no matter what your grocery bill is.

In the context of this stance by the caretakers of the world’s currencies, a developer known as Satoshi Nakamoto launched the Bitcoin Genesis block back in 2009, like a self replicating message in a bottle to the world that reads “try using this as money.”

Today, as we near the end of 2013, it is becoming clear that the message is reaching quite a few individuals, and that they are taking action.  The message came to us in March of 2012, when the Bitcoin/USD ratio hovered around $5-$16, and it took us until March of 2013, when the ratio was near $150 to act upon it.  The ratio now sits at around $1,100 and has garnered so much attention that a US Senate committee called a hearing in a feeble attempt to understand what it is and why it is valuable.

As anyone who has followed such hearings can attest, they rarely, if ever, shed light on the subject being discussed, and it was clear in watching that the Senators who attended as well as their expert witnesses have no idea what Bitcoins truly are.

Misinformation regarding Bitcoins abounds, indeed, a discussion we have been following in one of our Treasury groups has drug on for weeks with the participants vacillating from the stance that Bitcoins are a good idea and viable fiat alternative to them being a Ponzi scheme.  Our take is that those who are obviously confused are not hindered in their understanding of what Bitcoins are as much as they are hindered by their failure to understand what money is in the first place {Editor’s Note:  If you count yourself among the confused, stay with us for a spell or pick up a copy of one of the following publications:  What is Money, Of Money and Metals, or Bitcoins: What they are and how to use them}

Our take here at The Mint is twofold.  First, Bitcoins are clearly a Ponzi scheme, however, they are a self-limiting Ponzi scheme with no clear beneficiary, and in these respects are superior to other widely accepted Ponzi schemes such as equities and fiat currencies, which share similar characteristics to that of Bitcoin in terms of representing and indirect claim on wealth.

Second, and more importantly at the moment, Bitcoins are the gold standard with regards to digital currencies by virtue of being the first and most widely accepted.  All other digital currencies to come are practically forced to use the Bitcoin market as a point of reference in the same way the gold market looks to comex prices.

During the past few days, a Welshman named James Howells has been in the news because he tossed out a hard drive containing approximately 7,500 Bitcoins.  The same article mentions a man named Stefan Thomas who allegedly lost 7,000 Bitcoins according to Der Spiegel.  Indeed, we have a friend who told us he had wiped “thousands” of Bitcoins off of his hard drive.

While these types of stories may seem to offer a reason not to dabble in Bitcoins, we see them as yet another reason that the Bitcoin/USD ratio will continue to go vertical for the foreseeable future, as there will only be 21 million Bitcoins ever created, and, if the system is as tight as it appears to be, neither Mr. Howells’, Mr. Thomas’, nor our friend’s lost Bitcoins will ever be circulated again, making the remaining Bitcoins that are tradable all the more scarce and, at the moment, valuable.

A bit of free advice from The Mint.  While it seems counterintuitive, we encourage you to store your wallet online at a service such as blockchain.info to avoid the fate of the above mentioned individuals.  This goes without saying, but choose an extremely complex password.

Finally, if you are convinced that Bitcoins are a Ponzi scheme, remember that so are equities and fiat currencies, the only difference is that Bitcoins are still in an extremely early stage.  Think of it as buying Apple or Microsoft in the 80s, only better, as Bitcoins represent a confluence of technology and commerce that has just begun the search for its value.

It is winter, do you know where your Bitcoins are?

Until next time, keep your stick on the ice!

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 3, 2013

Copper Price per Lb: $3.16
Oil Price per Barrel:  $97.19
Corn Price per Bushel:  $4.22
10 Yr US Treasury Bond:  2.78%
Mt Gox Bitcoin price in US:  $1,158
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,224
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  15,915
M1 Monetary Base:  $2,563,700,000,000
M2 Monetary Base:  $10,942,300,000,000

Bitcoin Stars in a Senate Hearing

11/19/2013 Portland, Oregon – Pop in your mints…

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

The virtual currency known as the Bitcoin has achieved what has become a badge of honor in the finance industry, it has become the subject of a Senate hearing.

Senate hearings have, in the past, starred noble characters such as MF Global and its lead actor, John Corzine, who still roams free after punting roughly $1.6 Billion USD to another Wall Street leading man, Jamie Dimon, who remains the head of JP Morgan, who added a $13 Billion fine to its list of greatest hits related to its dealings with other entities during what has become known as the Financial Crisis of 2008.

And who can forget the Gorilla, Lehman’s Richard Fuld, who starred in one of the earliest versions of such hearings and gave us the phrase, echoed by insolvent bankers throughout the world, “why us?”

As the Bitcoin has no central authority to speak of, the Senate Committee on Homeland Security and Government Affairs called Jennifer Calvary, head of the Financial Crimes Enforcement Network, Edward Lowery of the Secret Service, and Mythili Raman of the Justice Department to testify on its behalf.

As may be expected by three persons who are cast in the role of antagonist to anything offering anonymity to private citizens, a privilege that the government refuses to recognizes, they expressed concern about “what could happen” and “who may be using” virtual currencies such as Bitcoin.

However, the antagonists did show a measure of empathy for their crypto-foe, the same way viewers feel empathy for characters like John Q or Walter White.  While taking the government line that what people may do with Bitcoins may be bad, the Bitcoins themselves are generally harmless and, in fact, may provide a great benefit to society.

As pageantry that generally accompanies a finance related Senate hearing unfolded, the Bitcoin market went ballistic, touching $900USD before the elevator moves inherent in the Bitcoin/USD (or any other debt based currency) market took hold and thrust it back to $600, it is now climbing past $700 as we write.

While it is interesting for Senators to listen to how various branches of government propose to regulate Bitcoins, it is clear that, while they may have a glimmer of a chance of understanding the technological framework of Bitcoins, they have no clue what it means in the monetary realm, for they do not understand money.

Alas, much of humanity is in the dark as to monetary theory.  It is for this reason that we started The Mint, to explore this deep “mystery” that lies in the wallet of each and every one of us.

Along the way, we have found gems for those who would pause and listen, such as the key to reversing the effects of climate change, and why Bitcoins are the gold standard of digital currencies.

To be sure, Bitcoins have an Achilles heel, but it is not what many people think, want to know what it is and when to get out of Bitcoins?  Someday we will give them away, for now, it will cost you $0.99 USD, or 0.00141 BTC to find out.  Please pick up our hastily written guide to Bitcoins, which, to our knowledge, is the only one that has examined Bitcoins through the lens of monetary theory with clarity and coherence.

Bitcoins:  What they are and how to use them

All we can say for the moment is that Bitcoin is a buy, you can sort out the details later.

As for the government’s concerns regarding Bitcoin’s inherent anonymity in the monetary realm, we propose the following Quid pro quo.  Rather than the public being obligated to respond to the straw man argument of “If you have nothing to hide, what are you worried about?” what if the public’s retort to the government became a universal, “if you have nothing to fear, what are you worried about?”

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 19, 2013

Copper Price per Lb: $3.16
Oil Price per Barrel:  $93.43

Corn Price per Bushel:  $4.17
10 Yr US Treasury Bond:  2.71%
Mt Gox Bitcoin price in US:  $772.00
FED Target Rate:  0.09%
Gold Price Per Ounce:  $1,274

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  15,967
M1 Monetary Base:  $2,515,000,000,000

M2 Monetary Base:  $10,867,000,000,000

 

Bitcoin going Viral as The Mint Receives the Gift of Time

11/9/2013 Portland, Oregon – Pop in your mints…

For those who have not yet taken notice, the USD/Bitcoin ratio now sits at $322, after touching a high of $395 today.  For those who are unfamiliar with what a Bitcoin is, we strongly encourage you to read our brief primer on Bitcoins entitled “Bitcoins:  What they are and how to use them.”

Bitcoins: What they are and how to use them
Bitcoins: What they are and how to use them

While the title itself is cryptic by design, the book is a straightforward analysis of not only what Bitcoins are, but also what their design and function as money means.  Now that we have a bit more time on our hands (more on that below), we hope to return to edit and update this volume.  While the Bitcoin itself is unlikely to change, there are now many more applications for it than there were when we penned it back in April of this year.

The combination of they monetary premium and technology has made the Bitcoin industry run on jet fuel, and it won’t slow down anytime soon.   The simple reason is that Bitcoins are a bizarre yet perfect form of equity that, like Twitter, is more of a public service.

In the case of Twitter, the need to randomly comment or blow off steam at someone else’s running digital commentary may only be marginally, if at all, profitable, but the value of it as a tool that people will rarely pay to use is priceless.

In the case of Bitcoin, the need for a means of exchange which can both hold a large portion of the monetary premium and be completely portable and ethereal is self evident and, while the Bitcoin itself generates no revenues, its value as a tool that people will use but not necessarily pay for is priceless.

Contrary to most of financial theory, discounted cash flows cannot capture the concept of value, as much of what people value in this world cannot be neatly summed up in financial models.  The Bitcoin falls squarely into this lofty realm where finance fails and dreamers soar.

{Editor’s Note:  If you would like assistance investing in Bitcoins or Bitcoin related ventures, please write us an email with the word BITCOIN in the subject.  There is much to be done and, consequently, much money to be made in this nascent industry that is moving like a wave across the earth}

Time on our hands

We have recently been notified that we are soon to be relieved of the burden of what is best described as our day job.  Over the last year, we set out to work ourselves out of a job through a series of process improvements in the Treasury Department.  Shockingly, it worked.

While on one hand the prospect of quickly ramping up our other activities (The Mint being one of many) is daunting, it is also exhilarating as we are of the peculiar breed that lie awake at night and early in the morn and watch a light show of ideas cross our mind.  Some we are able to capture and quickly act on.  Others we take note of and treasure them in our heart as we await the time that they come around again in and present themselves ever more brilliantly to our mind’s eye.

As we have one other time in our life, on September 10th, 2001, we are faced with the choice to either carry on in the 9 to 5 world or to pause and chase these ideas to their conclusion, watching where they lead and enjoying the ride as we chase them there.

These types of choices, frankly, are too much for us to bear, which is why we leave them in God’s hands.  It is He who opens and shuts doors.  Our job is to pursue the ones that are open until He shouts “enough!”

What we do have on the horizon, along with a number of projects that are providently moving towards fruition, are the preparation of a class on Deuteronomy, a 20 page biology article to edit, and any number of tasks that, while each one on its own would appear to be from different fields, when taken together make up the colorful tapestry of our life, as we blindly chase through the open doors with only one clear mandate:

Help people.

If you care to join us on this adventure, feel free to drop us a line.  You never know what we might accomplish together!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 9, 2013

Copper Price per Lb: $3.25
Oil Price per Barrel:  $94.60
Corn Price per Bushel:  $4.27
10 Yr US Treasury Bond:  1.75%
Mt Gox Bitcoin price in US:  $322.90
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,289

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  15,761
M1 Monetary Base:  $2,515,000,000,000

M2 Monetary Base:  $10,867,000,000,000

Why What We Use as Money Matters

10/29/2013 Portland, Oregon – Pop in your mints…

Could it be that it is not how, but what we use as money that matters when contemplating the root causes of Climate Change and other global problems?  This is the question that is at the root of our Economic and Philosophical Treatise which bears the cryptic name:

Why What We Use as Money Matters:  Unpacking the Key to Reversing the Effects of Climate Change is an Economic and Philosophical Treatise

Why What We Use as Money Matters
Why What We Use as Money Matters now in print!

Our Monetary Magnum Opus is now available in print at the following embedded links on Amazon.com and Createspace.com.

While there seems to be an endless debate as to what humankind should do in order to reduce our impact on the environment, ironically most of this and indeed countless other political debates result in more action being taken, either to cease and desist an activity or mobilize to clean up and reduce future environmental impacts of certain actions.

However, every action brings about some sort of reaction, often in the form of an “unintended consequence” which serves to negate any good that the carrying out of the well intended initial mandate had managed to accomplish.

Despite Al Gore’s call to action, realistic and manageable solutions to Climate Change remain elusive.  As such, where Gore and other Climate crusaders have failed, we have been compelled to step in.  You see, there is really a quite simple, certain, and palatable solution to Climate Change that could be implemented today.

The solution lies not in well-known solutions such as recycling, Cap and Trade schemes, development restrictions, technological advances, or taxes and other social engineering methods.  In fact, it has absolutely nothing to do with what people do or what they or their governments spend their money on.

It lies in What we use as money circa 2013.

What the world uses as money is not really money, but a highly liquid debt instrument.  While the difference is imperceptible to most, the accumulation of mistaken incentives and resulting actions on behalf of humankind which are inherent in the insane debt as currency model are beginning to manifest themselves in nature, and nature itself is beginning to bring itself into balance unilaterally.

Where humankind and the land once lived in a peaceful, mutually beneficial balance with one another, the relationship has become antagonistic and will remain so until the defects in the money supply are remedied.

How, then, can these defects be remedied?  Ah, fellow taxpayer, it is for this reason that the above mentioned book contains 400 pages, for while the answer is simple, it will require that humankind let go of some deeply ingrained ideas which a vast majority of us do not even know we hold fast to.

Start letting go by ordering your copy today!

Print editions are currently available at Amazon.com and Createspace.com and Electronic editions are available on Amazon’s Kindle, Barnes & Noble, Google’s Play Store, and a variety of formats via Smashwords.

Thank you for joining us in this quest.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 29, 2013

Copper Price per Lb: $3.26
Oil Price per Barrel:  $97.83
Corn Price per Bushel:  $4.32
10 Yr US Treasury Bond:  2.51%
Mt Gox Bitcoin price in US:  $212.51
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,344
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.2%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  15,680
M1 Monetary Base:  $2,515,000,000,000
M2 Monetary Base:  $10,867,000,000,000