Category Archives: Monetary Theory

Economics, Monetary Theory, The Mint

Why Cash Costs the U.S. Economy Real Money

10/2/2013 Portland, Oregon – Pop in your mints…

Why What We Use as Money Matters
Why What We Use as Money Matters

We recently came across an article by Diane Brady at Businessweek which touched on a theme that is near and dear to us here at The Mint:  The “cost” of money.

The reason that things like this interest us is that we believe the point of something acting as money (more accurately, the monetary premium) is that it has a cost.  Not only a cost, but a cost which, if allowed to be set by free market conditions, provides the perfect, tacit governance of the activities of humankind on this earth.

Brady’s article, as you can see, fell short of our high philosophical ideals and, instead of analyzing why cash has a cost, degenerated to the default position held by many that money should be free:

Why Cash Costs the US Economy Real Money 

Disappointing but not entirely unexpected from the Senior Editor of a financial publication.

The truest saying in all of economics is that there is no such thing as a free lunch.  There may be a lunch that costs you nothing but the time spent to approximate oneself to the plate and consume it, but rest assured that the cost of the ingredients and preparation of the lunch itself have been borne elsewhere.

The same dynamic is at work in the monetary realm.  Whether or not one needs to go to an ATM or simply swipe their credit card or tap their mobile phone is of consequence only to that person, but the cost of the production and exchange of money is being borne not by the economy, as Brady suggests, but by the earth itself, which is daily thrown further out of balance by the misguided actions of humankind.

This state of affairs will continue as long as we use debt as money.

Key Indicators for October 2, 2013

Copper Price per Lb: $3.24
Oil Price per Barrel: $101.55
Corn Price per Bushel: $4.39
10 Yr US Treasury Bond: 2.65%
Mt Gox Bitcoin price in US: $137.07
FED Target Rate: 0.06% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,288 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.3%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 15,192
M1 Monetary Base: $2,470,500,000,000 ANOTHER MARKED DROP
M2 Monetary Base: $10,789,400,000,000

 

 

Economics, Monetary Theory, The Mint

August and Everything After All Over Again

9/23/2013 Portland, Oregon – Pop in your mints…

Most persons in the financial industry, and likely beyond may recall that a mere five years ago, the Lehman Brother’s bankruptcy filing rocked the financial markets and served as the official notice that the blind 25 basis point hikes in the FED target rate that had passed as “monetary policy” during the go-go years of the early 2000’s were not exactly what the economy ordered.

In a matter of months, an entire industry that had been operating in a nearly infallible uptrend since the early 1970’s began to retool itself to cope with significant downside risk.

The Lehman event took place on September 15th and, while it did not exactly catch the US Treasury and the FED off guard, it did catch them without the resources or authority to do anything about it.  As Phillip Swagel details in this piece “Why Lehman Wasn’t Rescued,”:

“Lehman failed before TARP was passed or even proposed to the Congress. This meant that the Treasury Department had no legal authority to put government money into the firm or provide a guarantee for its obligations. This changed with the passage of the Emergency Economic Stabilization Bill on Oct. 3, 2008, which provided $700 billion in TARP financing to be used to purchase troubled assets (used in the end mostly to purchase preferred shares in banks).”

Swagel goes on to state that the cases of both Bear Stearns and AIG, whose subsequent bailouts caused Lehman stakeholders, amongst others, to cry foul, differed on one very significant count:

“To all eyes, the problem at Lehman was one of solvency while the issue in the other two cases was liquidity. The Fed’s actions on Bear and A.I.G. were thus appropriate in its role as a lender of last resort and the same with its caution at Lehman.”

And so began the cascade of minifailures which have become collectively known as the Financial Crisis of 2008, as liquidity was provided to the solvent while the insolvent went quickly into history’s dustbin.

At The Mint, we refer to this odd period of time as “August and Everything After,” with apologies to the Counting Crows.  It was a time when the industry threw in the towel, and the prevailing current became one of loss avoidance.

Today, just over 5 years later, we believe that we are at a similar inflection point with regards to tendencies in the financial markets, hence our tagline “August and Everything After All Over Again,” only this time, the tremendous risks in the financial system are not on the downside, where everyone is looking for them, they are on the upside, where few dare to tread.

The few who have tread confidently on the upside risks, despite the commonly held beliefs to the contrary, would have nearly tripled their money by doing something as mindless as going long the Dow circa March 2009, when it appeared the Dow companies themselves were to be swallowed up.

At this point in time, the upside risks are hidden from most.  While the stock market continues to churn out an impressive performance, a more significant trend has been playing out in plain sight:  Private investment activity is going through the roof.

While publicly traded equities get nearly all of the airtime, it is becoming clear that the advantages of being a publicly traded company are being outweighed by the regulatory burden and incredible scrutiny that public companies are under.  To sum up the plight of public companies circa 2013, they are easy targets.

The answer for many has been to “go private,” and go private they have, from Ford to Blackberry, companies that once basked in the public limelight have found that going private may be just what the doctor ordered.

To accentuate this trend, today is the day that a key provision of the JOBS act takes effect, allowing private companies and startups to solicit accredited investors publicly rather than needlessly lurking about in the shadows as they had done since the days of the Great Depression.

The Role of the Federal Reserve

The Federal Reserve, in direct violation of Natural Law
The Federal Reserve, in direct violation of Natural Law

FED observers watched in near disbelief last week as the US Central Bank declined to “Taper,” which means to scale back the amount of money that they simply print and hand to holders of US Treasuries and Mortgage Backed Securities, citing downside risks.

In observing the FED, we can confirm that the economy currently faces unimaginable upside risks, as they are paradoxically always the last to react to market realities which they have unwittiningly created.

The FED and their observers labor under a belief that is both accurate and woefully misguided all at once.  It is true that the Federal Reserve, in regulating short term interest rates and the base money supply, has nearly unchecked influence on the level of economic activity anywhere that dollars are used in exchange.  This is a simple reality of the insane “debt is money” monetary system that the world suffers under.  The primary issuer of the debt determines how much money there is.

They are wrong in thinking that the FED is clairvoyant in any sense of the word and can somehow time their interventions to achieve desired effects on the underlying economy.  In this sense, the FED is always the last to react as it has no idea what the true timing of the cause and effect of their policy decisions are.  While they have produced reams of academic work to prove their theories, in practice, it is nothing more than guesswork with the benefit of hindsight.

This is also why the FED will only “taper” when nobody cares whether or not they taper, i.e. when there is so much money flooding the system that the dangers are clearly on the side of hyperinflation.  Inflation, in their mind, is much easier to fight than the deflationary spiral the the Lehman event triggered five short years ago.

They are right in the sense that in a hyperinflationary environment, the monetary system simply needs less juice, where a deflationary environment threatens their stranglehold on the world’s monetary system.

To understand the depth of the incompetence of the FED and Central Bankers at large, one need only look to their latest hero, Michael Woodford.  Mr. Woodford wrote a book titled “Interest and Prices:  Foundations of a Theory of Monetary Policy” in which he deals with problems of zero bound rates and quantitative easing, ideas that were being toyed with back in 2003 when the book was published as mere theory.  Now, they are part of a Central Banker’s everyday life, and Woodford’s book is considered their bible.

The base of Woodford’s theory, which we have come to know as “foreword guidance,” is that when monetary policy is accommodating maximum liquidity and the system still lacks it, policy makers must resort to telling market participants what they will do, essentially tying their hands in the future, in order for liquidity to exceed its theoretical limits.  This is the only reason why Ben Bernanke now holds a press conference after FED policy meetings, so that this theory can be implemented.

Woodford’s theory of Foreword Guidance, like Quantitative easing, is further evidence that the current monetary system has failed.  It has failed in the sense that even unlimited amounts of debt masquerading as money cannot satiate the need for liquidity in global markets, which are so disconnected from actual physical conditions that it is impossible to tell which projects are a net benefit to humankind and which take humankind further down the path to fantasyland, where all play and no work promises a lot of pain and scarcity down the line.

The risk in the “After August” period is to the upside, and central bank notes will become irrelevant as the global economy goes into overdrive and a new monetary system will be tacitly agreed upon by all participants.

When the Central Bankers of the world look up from Woodford’s textbook, they may catch a glimpse as the Tsunami of liquidity washes their currencies away.

The FED has nearly doubled the base money since 2008, are re you ready for it to multiply?

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 23, 2013

Copper Price per Lb: $3.27
Oil Price per Barrel:  $103.40
Corn Price per Bushel:  $4.53
10 Yr US Treasury Bond:  2.71%
Mt Gox Bitcoin price in US:  $133.43
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,322
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.3%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  15,401
M1 Monetary Base:  $2,469,100,000,000
M2 Monetary Base:  $10,783,000,000,000

ebooks, Economics, Empire, Freedom, Jesus, Monetary Theory, Peaceful Resistance, True Capitalism

Why What We Use as Money Matters, Our Economic and Philosophical Treatise, is Now Available

Our long awaited Treatise on Economy and Philosophy, Why What We Use as Money Matters, is now available in various digital formats at Smashwords.com and on Kindle at Amazon.com.  With any luck, we will have a print version available before we leave for the Southern Hemisphere.

Why What We Use as Money MattersWhat kind of book is this?  It is largely up to the reader to decide.  For us, it is the fruit of two years of wrestling with some of life’s deeper questions with regards to Economics, Politics, and Philosophy.  It has answered many of them and, in turn, has raised other issues, for in our exploration, as you will see, the current state of affairs is laid bare for all to examine, and our recommended courses of action may be unpalatable for many.

Nevertheless, there it is, altogether thick and challenging, yet refreshingly simple, the key to reversing the effects of climate change.Why What We Use as Money Matters

In a sense, it culminates the first phase of what we set out to do here at The Mint.  There will be more to come, but for the time being, we leave you to ponder the following brief excerpt:

“The natural world strives daily to achieve a perfect state of balance. Events and occurrences that, taken by themselves, appear chaotic and devoid of meaning are together part of a constant rebalancing of the earth’s delicate state. Each event is a splash of color across an oppressive gray sky that hints at a rainbow that will soon appear. “

 

Economics, Monetary Theory, The Mint

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

Ben Bernanke Testimony
Pondering the folly of Short-term interest rate management

7/1/2013 Portland, Oregon – Pop in your mints…

There are days when things are muddled and days when things are so painfully apparent it disturbs us that we did not happen upon it sooner.  Today is one of the latter.

We have been pondering the failure of centralized planning.  While the evidence is clear that centralized planning is a failure, pointing to the reasons why can prove elusive.  The same holds for our working theory that in order for the activities of mankind to be in balance with the natural world, the monetary premium, a concept that is commonly referred to as money, must be affixed to the natural realm.

Today, a revelation regarding the problem with fixing short-term interest rates (or any interest rate for that matter) came upon us which we will share with you now.  We believe that the revelation deals with both the problem of short-term interest rate fixing as well as the larger issue of the placement of the monetary premium, for the two are linked.

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.  The amount of capital available in system can be determined on whim, such is the power of centralized discount rate management.

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, the size of the loan, and 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, what we call the 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 with then bank’s balance sheet, becomes impossible to fund.

In both cases, both the borrower and the 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 genetically 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.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for July 1, 2013

Copper Price per Lb: $3.14
Oil Price per Barrel:  $97.99
Corn Price per Bushel:  $6.55
10 Yr US Treasury Bond:  2.48%
Mt Gox Bitcoin price in US:  $89.74
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,253
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  14,975
M1 Monetary Base:  $2,452,200,000,000
M2 Monetary Base:  $10,628,800,000,000

Climate Change, ebooks, Economics, Monetary Theory

An Intro to Why What We use as Money Matters – The Calling

Gallery

6/21/2013 Portland, Oregon – Pop in your mints…

A quick peek at the financial markets over the last two days may lead one to think the world is ending.  From what we can tell, investors are attempting to front run what they perceive to be an earlier than anticipated FED exit from its unprecedented support of the Bond market to let it fend for itself.

Lest us be clear, the Federal Reserve will not exit when anyone expects it.  The mere prospect of it, which began to transmit itself through the markets on Wednesday, caused Treasuries to collapse towards normal and overnight lending in China to seize up while leaving equities and commodities as collateral damage.  M1 even managed to collapse again to $2.4 trillion.  These are hardly long-term (or short-term, for that matter) Fed goals.

If Fed history is any guide, it shows that the Fed knows absolutely nothing.  For example, can you predict what GDP or unemployment will be in one, two, or three years?  Neither can the Federal Reserve governors, who are tasked with controlling such matters.  The only difference between the man on the street and a Federal Reserve governor with regard to such matters is that the wild guess of the man on the street is more likely to be accurate than that of the Fed governor, but that is a tale better wound by those more qualified to explain such matters, such as Lee Adler at the Wall Street Examiner.

We are gearing up to publish our Treatise on political economy, Why What We use as Money Matters, before we head out on holiday this year.  It is more than a treatise, it is our calling (more below).

The current plan is to copy-edit and self publish this important work unless we are successful in landing an interested publisher in the interim.  It is urgent that mankind examine what is in their wallet, for it is currently an invisible hand steering mankind towards a myriad of disasters that are either unfolding or about to unfold.  These man-made disasters can be undone, if only a few can grasp what we have to share.

Stay tuned for the release and enjoy the brief introduction below!

Introduction:  The Calling

Owen Meany had a calling.  The hero in John Irving’s 1989 New York Times bestseller A Prayer for Owen Meany which was later loosely adapted to the feature-length film Simon Birch, believed himself to be God’s instrument in an unswerving and often shocking manner.  Owen Meany’s calling was as clear to him as it was confusing, for while he could see the end result, he could not foresee nor fully understand the varied circumstances which guided him to his encounter with destiny.

We believe that, like the fictional Owen Meany, every human being that is alive or has ever lived has a calling, something specific that is to be done in this world that only they and they alone can accomplish.  The task may be ignored, but it cannot be delegated.  It may require the collaboration of many to accomplish, but the burden and drive to complete the task rests with one individual.

If the task does not get done, it does not get done, and the world will be all the worse off for it.  On the other hand, if it is accomplished, all the host of heaven will applaud, for every calling that is recognized and pursued is not simply another task to be completed, it is an indispensable stitch in the fabric of what may be if only all of humanity would accept the call to a higher purpose that, far from being reserved for the exceptional, is the birthright of every human.

The following nine volumes are our calling.  Taken individually, they are a winding exploration of philosophy, monetary theory, economics, dual entry accounting, climate change, and eschatology.  Taken together, they are a treatise on political economy of such gravity and importance that, if fully understood by even one person among a million, will bring the activities of mankind into a perfect balance with nature.

Will that person be you?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 21, 2013

Copper Price per Lb: $3.10
Oil Price per Barrel:  $93.92
Corn Price per Bushel:  $6.68
10 Yr US Treasury Bond:  2.17%
Mt Gox Bitcoin price in US:  $115.00
FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,299 THE GOLD RUSH IS ON HOLD FOR THE SUMMER!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  14,799
M1 Monetary Base:  $2,432,200,000,000
M2 Monetary Base:  $10,621,100,000,000

Climate Change, ebooks, Monetary Theory, To Build up the Land

To Build up the Land, Thoughts on Mankind’s uneasy intercourse with Nature

To Build up the Land
To Build up the Land

Our latest ebook offering here at The Mint, To Build up the Land, Thoughts on Mankind’s uneasy intercourse with Nature, is now available on Smashwords and Amazon’s Kindle.

It is a thought provoking look at the root cause of climate change and the origins of mankind’s interaction with the land.

From GMOs to CAFOs and back through to the elusive Garden of Eden, To Build up the Land explores how the modern day urban centric worldview has given rise to both the myth of overpopulation as well as the all too real phenomenon of climate change.

However, rather than searching out the usual suspects of increased carbon footprints, fossil fuels, and over development, we masterfully pinpoint the root cause of climate change.  It is a cause that is seldom recognized or addressed, yet it lies at the heart of the myriad of crises which increasingly besiege our planet.

As a special offer to our loyal readers, you can pick up a free copy here at The Mint until June 11th.  Just click here and follow the check out process.

Visit Smashwords.com, Amazon’s Kindle Store, or pick up your very own Mint edition today!

Gold, Mint Money Supply Digest, Monetary Theory, Strategic Planning

The Debut of The Mint Money Supply Digest

Gallery

5/3/2013 Portland, Oregon – Pop in your mints…

Today at The Mint we are launching The Mint Money Supply Digest.  Longsuffering readers of The Mint will recall that we launched a now defunct service known as the “72 Hour Call” which was an attempt to predict the future direction of a specific trade three days out.  After roughly 63 attempts, of which we were batting .524 (correct 52.4% of the time) we decided that the short term call was a fool’s game best left to high frequency traders and those with insider information.

However, the 72 Hour Call exercise was not in vain, rather, what it revealed was that while our Key Indicators (listed below), when taken together, revealed no reliable and/or actionable data with regards to short term trades.  Over time, however, the Key Indicators have proven extremely helpful in projecting longer term trends which tend to underpin the S&P 500 in particular and US equity indices in general.

Before we go further, we must give credit to both Lee Adler at the Wall Street Examiner and Greg Guenther of the Daily Reckoning’s Rude Awakening for their brilliant coverage of the frequent gyrations in the financial markets.  If you need information which is actionable on a shorter time horizon, we highly recommend following their insights.

The intent of The Mint Money Supply Digest is to provide insight via the observation of changes in the trend of our Key Indicators as to the direction of one simple yet critically important trend.

The simple trend is that of the money supply in terms of US dollars.  The goal of the monetary stimulus every central bank on the planet has undertaken to some degree or another over the past three to four years has been to simply increase the money supply and hope for the best.

Graph of Normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures
Graph of normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures

The strategy is a recipe for disaster, as we have explored in depth both here at The Mint and in our eBook series “Why what we use as Money Matters.”  The goal of The Mint Money Supply Digest is to keep our readers informed as to the trend of the Money Supply in terms of US dollars in an effort to keep you ahead of the curve when the disasters (for there will be a series of them) occur.

The disasters will come in one of two flavors.  The first flavor, which we will call vanilla for the moment, takes the form of the increases in the money supply begin to take hold to the point where inflationary expectations by a majority of the actors in the world economy who use dollars or dollar proxies (currencies and debt instruments which are pegged, directly or indirectly, to the US dollar) in trade become embedded to the point where inflation in consumer prices sparks a level of demand in consumer goods which quickly outstrips supplies of such goods.  The vanilla disaster is a mouthful, and it is where the trend is gently heading today.

The second flavor, the disaster which is unlikely in the short term save the appearance of black swan type events, we will call the chocolate variety.  The chocolate variety of disaster is simple, it takes the form of an unmitigated collapse in the money supply similar to what the world experienced in 2007 (which most people realized was occurring in 2008).  Were this to occur, it is time to get all chips off of the table.  Fortunately, our Key Indicators should give us roughly three to four years of advance warning of a full blow chocolate disaster taking place (barring the unpredictable, or black swan event, as it were).

As you can see, while the chocolate disaster is to be feared above all, it will be easier to prepare for given the lead time in the data.  The vanilla disaster, which is currently underway to some extent, will be somewhat more difficult to pinpoint in terms of timing but will likely have a lead time of roughly two to three months in which to take action.

Our bias, then, at the outset of The Mint Money Supply Digest, is to be on the lookout for the vanilla disaster while gauging, via the trends in our Key Indicators, just how much chocolate is mixed into the swirl which is the combined disaster that is slowly unfolding in US dollar land.

As a logical offshoot of our analysis, we keep an eye on something we call the “Monetary Premium,” which is our term for what most people simply refer to as money.  In our worldview, money does not exist in the tangible way that most people assume it does.  Rather, the concept of money comes into being when people begin to attach the attributes of money to something which gives that something (usually one of our Key Indicators) a premium above and beyond what normal market conditions and that special “something’s” physical or ethereal composition might otherwise dictate.

This increase in relative value of that special “something” is what we refer to as the Monetary Premium, and it is important, for a big part of making money is accurately identifying not where the monetary premium is, such as the US dollar, but in where it is gravitating towards, such as gold, Bitcoins, or sea shells.

With the preamble out of the way, we hope to keep the Digests as simple and sweet as a cone on a hot summer’s day.

The Mint Money Supply Digest for May 3, 2013

Today the swirl of disasters continues to tend towards the vanilla variety.  Jobless claims continued their positive trend and the unemployment rate reported by the BLS came down a notch to 7.5%.  This is good news and bad news.  Good news in that more people have jobs, and bad news in that every tick down in Unemployment moves the world closer to the day where the Federal Reserve is likely to turn the switch on their monetary Mega maid, their Quantitative easing programs, from suck to blow.  That day is still far off, however.

Today’s jobs report, coupled with the ECB’s dovish meeting announcements yesterday (they are throwing in the towel, albeit in slow motion, on austerity) and the BOJ’s Turbo Kids monetary strategy for an aging population are all buoying the money supply to counteract the unmitigated, innavigable disaster that is the world economy.  An economy that is desperately trying to reset itself without the benefit of knowing who is really solvent.

The vanilla disaster is still winning.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 3, 2013

Copper Price per Lb: $3.28
Oil Price per Barrel:  $95.68
Corn Price per Bushel:  $6.99
10 Yr US Treasury Bond:  1.73%
Mt Gox Bitcoin price in US:  $91.78
FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,468 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  14,987
M1 Monetary Base:  $2,565,500,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,571,400,000,000

Climate Change, ebooks, Monetary Theory, The Mint

Nature’s desperate struggle for balance in spite of men

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4/19/2013 Portland, Oregon – Pop in your mints…

We leave you this Friday with some  foor for thoughts on Nature’s struggle from our upcoming eBook.  Enjoy!

The natural world strives daily to achieve a perfect state of balance.  Events and occurrences that, taken by themselves, appear chaotic and devoid of meaning are part of a grand rebalancing of the earth’s delicate state.  These events are the splash of color across an oppressive gray sky that hints at the rainbow that will soon appear.

The natural world exists in a constant state of subtle agitation and violent quakes, yet each ebb and flow in the natural world is the physical expression of a desire to achieve a state that by definition will never be perfected:

Homeostasis.

Homeostasis, the tendency toward a relatively stable equilibrium between interdependent elements, is all at once a state of being that already exists and one that will never exist, for the natural world’s constant striving towards this state ensures that a perfect balance will never be achieved.

Yet despite the constant struggles in the natural world, the clashes between immovable objects and irresistible forces, the interplay between predator and prey, and the aggregation of slow processes which unite to cause large scale natural spectacles and events, are living proof of the laws that they are governed by, a set of rules that we hold out as natural law.

Mankind, for all of its virtues, has tacitly adopted a large scale delusion with regards to the natural world.  The delusion is this, that all of nature’s struggles, interplays, and slow processes can be tamed or manipulated to bring about a constant state of balance in which he can plan, build, and operate with a high degree of certainty.

The widespread belief in this delusion, while seemingly noble and painstakingly practical, has flourished and proliferated under the current monetary system, in which the monetary premium, which is the highest expression of value that can be attributed to a good, has been completely removed from the natural world and is largely attributed to debt instruments, which ultimately rest on nothing more than the well intended promises of men.

Mankind’s day to day activities, which are the result of the choices that each man or woman individually take, often unconsciously, are largely dedicated to obtaining an increased portion of the monetary premium.  With this given, it holds that the activities of mankind, to the extent that they succeed in their pursuit of the monetary premium, serve to throw the natural world ever further out of its delicate balance, which in turn gives rise to nature’s need to rebalance itself in order to comply with the immutable natural laws under which it must operate.

This volume, which is the most important and forms the basis for the previous five and all subsequent volumes in the Why what we use as Money Matters series, deals with natural law and mankind’s most suitable response to its many and varied demands, the capitalistic system.

It does so by presenting the ideologic basis of the true capitalistic system, a system rooted in the principles of freedom and private property.  It further examines the specific demands of natural law and mankind’s failed response to it, which is the large scale socialist system which is violently forced upon mankind through the mechanism of large scale government.  The concept of the large scale socialist system is referred to throughout this volume as a product of the “might makes right,” mentality.

While mankind is a mere forty years into the present monetary experiment in which the monetary premium has been increasingly associated with debt instruments, the effects of the removal of the monetary premium from the natural world are already evident. The consequences are staggering, and are currently manifesting themselves in the natural world through a phenomenon that has been labeled climate change.

The label is woefully misleading, as the climate is not simply changing, rather, the natural world is becoming increasingly unstable as it desperately seeks to balance as the activities of men, which previously worked in relative harmony with nature, with the immutable demands of natural law.

The current debt based monetary system and its tendency towards centralized planning and decision making has not only caused significant imbalances in trade and resource allocation, it is increasingly causing the earth itself to react more and more violently as it alone strives to comply with the demands of natural law.

For mankind, once the earth’s unwitting yet faithful custodian, has become its well meaning adversary.  The root of this growing antagonism between man and nature is money, and the only remedy is to return the monetary premium to its rightful place in the natural realm.

For so long as it rests solely on the hopes and dreams of mankind, the power of the monetary premium is in the employ of the most destructive force on the planet.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 19, 2013

Copper Price per Lb: $3.15
Oil Price per Barrel:  $88.01
Corn Price per Bushel:  $6.52
10 Yr US Treasury Bond:  1.70%
Mt Gox Bitcoin price in US:  $119.50
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,407 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  14,548
M1 Monetary Base:  $2,437,900,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,645,600,000,000

Gold, Monetary Theory, Silver, The Mint

On Rumors that Zimbabwe will officially adopt the Bitcoin

Gallery

4/16/2013 Portland, Oregon – Pop in your mints…

Much has occurred since our last correspondence.  First, tragically, another act of terrorism has rocked the land of the free.  Our thoughts and prayers go out to all affected.  Once again, we are reminded of Robert Kennedy’s speech on the menace of violence.  For those who have never heard it, it is well worth a listen.

Source IMF via the Money Game.
Source IMF via the MoneyGame

Well before the twin blasts interrupted a peaceful Boston afternoon, two of our key indicators and our investment of choice here at The Mint, silver, took an unprecedented bath.

No, the data below on both the Bitcoin and Gold price are not typos.  As a Goldman Report put it:  “There are weeks when decades happen” or something to that effect, with regards to the action in the gold markets.

Essentially, 500 tonnes of gold were sold in the most recent selloff.  Where it will come from or whether or not it will actually be delivered, nobody knows.  It is certainly fodder for those who claim these markets are manipulated.  Even so, there is no divine law as to what the price of things in US dollars should be.  As such, those involved in the trade must accept their random fate, no matter how unjust it feels.

The Bitcoin somehow found its footing around $65 USD after crashing down to the canvas from $260.

However, the amazing, or perhaps not so amazing, if you have read our most recent eBook, part of the story is that it is still trading around $65 USD.  This is an amazing commentary on the state of national currencies.  How long can the central bank issued national currencies compete when a lifeless logarithm is doing their job better than they ever could?

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

We, along with the rest of the Bitcoin community, have been developing some innovative ideas about how to make Bitcoins more accessible to the general public.  If you have $150,000 and care to help us launch the initiative more quickly (as an investor, naturally, this is not a charitable endeavor, at least, that is not the intention!) please email us for more information.  You could significantly reduce our launch time in what will soon be a highly lucrative and competitive market:  Building the Bitcoin infrastructure.

Perhaps our seed capital will come from none other than Zimbabwe.  Those who have followed currency matters will recall that just five years ago Zimbabwe gave the world a rare glimpse of hyperinflation and one trillion dollar bill.  In the now infamous words of Gideon Gono, Governor of the Reserve Bank of Zimbabwe:

“I’ve been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren’t in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”

In a page that has since been removed from CNN’s ireport {SEE UPDATE BELOW}, we saw a rumor that Zimbabwe was poised to adopt the Bitcoin as its official currency.  Perhaps Mr. Gono got a hold of our book?

{UPDATE 4/17/2013: The page has been updated and can be seen here.  It now appears that Zimbabwe rumor is now official, though unverified by CNN.}

Meanwhile, as Bitcoin, Gold, Silver, and Oil crash, the monetary measures continue to spiral out of control.  There are some big naked shorts out there, and Mr. Bernanke may, for a finale as Fed Chairman, borrow a page from Mr. Gono’s playbook circa 2009 in an attempt to cover them.  Given the IMF’s global growth forecast, we deem it a virtual certainty.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 16, 2013

Copper Price per Lb: $3.44
Oil Price per Barrel:  $88.97
Corn Price per Bushel:  $6.63
10 Yr US Treasury Bond:  1.72%
Mt Gox Bitcoin price in US:  $68.00
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,374 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  14,757
M1 Monetary Base:  $2,655,000,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,636,100,000,000

ebooks, Economics, Monetary Theory, The Mint

The Difficulty of Bitcoin Denominated Debt

4/8/2013 Portland, Oregon – Pop in your mints…

The following is an excerpt of our brief, hastily compiled yet infinitely useful practical guide to the evolving world of Bitcoins.  It is an encouragement to dive into Bitcoin acceptance, a monetary analysis of the Bitcion, a high level how to guide, and a word of caution all with a lesson in character embedded within its pages.

With any luck, it will hit digital shelves before the Bitcoin hits $200 USD, which will be tomorrow.  Enjoy!

The Difficulty of Bitcoin Denominated Debt

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

Another rare but often unrecognized barrier to Bitcoin acceptance is the inability for the widespread formation of debt markets denominated in terms of Bitcoins.  The reason that debt contracts will not be created in terms of Bitcoins has to do with the very thing that makes Bitcoins valuable in the first place:  The mathematical limit on their issuance.

As of this writing, slightly over half of the 21 million Bitcoins scheduled to be created are in circulation.  The rest will be emitted in decreasing increments over the next twenty years.  The trajectory of the Bitcoin logarithm against the national currencies is negative, which is causing the inverse relationship in their prices.

Again, in layman’s terms, it would be a fools bet to take promise to pay a debt in Bitcoins, as they will, by definition, become increasingly difficult to obtain.  If anything, one would need to factor in a Bitcoin appreciation to the debt instrument, meaning that it would have in implied negative interest rate.  While we can foresee the emergence of such instruments, we also foresee that they will be too complex to be understood by most.  As such, an important medium of currency acceptance, the existence of deep and liquid debt markets, will be lacking in the case of Bitcoin.  While this is not a bad thing, it must be recognized by anyone who deals in Bitcoins.

The book will hit digital shelves near you shortly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 8, 2013

Copper Price per Lb: $3.38
Oil Price per Barrel:  $93.40
Corn Price per Bushel:  $6.33
10 Yr US Treasury Bond:  1.73%
Mt Gox Bitcoin price in US:  $186.90
FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,571 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,613
M1 Monetary Base:  $2,534,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,501,300,000,000

Economics, Gold, Monetary Theory, Silver

Jobs, Gold, and Bitcoins

Gallery

4/5/2013 Portland, Oregon – Pop in your mints…

Today’s BLS jobs report was seen as an unmitigated disaster.  This should give the Federal Reserve the cover they need to turn Japanese with regards to their QE program (the BOJ came out with a QE program that is roughly 30%! of GDP over a year, by way of comparison, the FED has pumped out 15% of GDP in 5 years).

Bitcoins, gold, and silver jumped.  The management of what the world calls currencies is heading for the exits, and from the looks of things, so are many Dollar, Yen, and Euro holders.

Don’t bother to turn off the light or lock the doors, just get the heck out.  A four alarm fire coupled with an earthquake is on the verge of breaking out in the currency markets.  The monetary premium is looking for something to affix itself to, and it will trample many an asset class in search of it.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 5, 2013

Copper Price per Lb: $3.38
Oil Price per Barrel:  $92.70
Corn Price per Bushel:  $6.29
10 Yr US Treasury Bond:  1.69%
Mt Gox Bitcoin price in US:  $142.88
FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,582 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,565
M1 Monetary Base:  $2,534,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,501,300,000,000

 

Bible Teaching, ebooks, Jesus, Monetary Theory

The Bitcoin crazy train, the great green wall, and are you a soldier, an athlete, or a farmer?

4/3/2013 Portland, Oregon – Pop in your mints…

In the Bitcoin/USD market, the world is getting a rare glimpse of the power of the monetary premium.  Today those who watched witnessed the Bitcoin briefly race up to $147 USD before retreating to around $115, where it stood yesterday.

Over the past few days, we have been participating in a discussion of the merits of the Bitcoin over on Google+ with the Austrian Economics group.  It has been interesting to see how we wrestle with the concept of what is money.  Trying to pin it down to one thing in the physical world.  For if money were just one thing and one thing only, one of the world’s great mysteries would be put to rest, and the rest of the mysteries may even become less mysterious.

However, the concept of money remains elusive.  It will remain elusive, and it is good.  Here is why.

For the many things that it purports to be, the Bitcoin may be best described as a decentralized digital currency.  As such, the only value that can rationally be attributed to it consists entirely of what we call a monetary premium.  In our worldview, money is a concept.  As such, there is no physical thing or concept that can claim a divine right to being money.  Not gold, silver, nor national currencies.

What fools man into clinging to these things and insisting on calling them money is the notion of a monetary premium, which we define as a set of characteristics when make something a chosen store of wealth, medium of trade, and unit of account.  For more on this, please read our eBook “What is Money?  A quest to answer the question of the ages.”

What is Money? By David MintWe return from this shameless plug to the Bitcoin.  The Bitcoin is not a physical good.  If anything, it boils down to an arbitrary string of the zeros and ones that form the basis of all computing.  However, this non-thing is beginning to absorb a portion of the monetary premium.

This partial absorption of the monetary premium by a string of digital numbers serves a proof that money is a construct of man, and for all of man’s efforts to capture it, measure it, and make it his, the concept of money, or what is better understood as the monetary premium, is a fickle and fleeting thing.

For this reason, Jesus warned us,

“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”

Matthew 6:24

Neither YHWH or the monetary premium can be seen, but man must choose to serve one or the other.  One is fickle and fleeting, the other faithful and constant.  One’s answer as to which is which will reveal whom they serve.

Choose wisely.

Yet the Bitcoin and the fickle and fleeting monetary premium that it is interacting with gives those of us who are paying attention a chance to examine our character.  For our reaction to the fluctuations in the Bitcoin / USD ratio may help to reveal  hat kind of man or woman we are.

Whether one finds themselves serving the monetary premium or YHWH, they are likely to find themselves identifying with one of three basic examples of behavior and motivations.

These examples were first presented to us in the summer of 2004 at a Kings Kids European summit in Tarragona.  Far from the lush EU summits which are the hallmark of today’s famous Troika mismanagement, the Kings Kids operate on a wing and, most literally, a prayer.

With our Castilian Spanish skills still lacking, we spent a mid summer’s week in tents on a high school campus (naturally, school was out) with minimal bath and shower facilities with hundreds of adolescents, young adults, and not so young adults from across Europe and the UK (indeed, we were acquainted with a long lost cousin from Wales at the event).  It is in these settings where YHWH moves and provides his most profound lessons and training.

It was in this setting, then, that the examples were presented by our Pastor Curtis Clewett of La Iglesia El Lokal in Barcelona.  Each time we recount the impact of this teaching to him, he recalls it as something that he threw together at the last minute.

So it was, on a warm summers eve on the Mediterranean coast in a place which more or less resembled a gypsy camp, we gathered to hear el Reverendo impart the three examples of what we will call spiritual maturity.  Read them carefully and please, take no offense at the blanket statements that the descriptions imply.  We understand there are many shades of the following professions, and it will quickly become clear that it is the description that matters more than the professional title:

The Soldier:  The soldier is in training.  He is fit, well equipped, and he is at the ready.  However, the soldier does not represent the ultimate in spiritual maturity, for he is lacking two things:  Initiative and autonomy.

The soldier is trained to take orders.  He does not dare act on his own for fear of retribution or failure.  He is limited by not only the rules and regulations of his trade, but also in his physical movements and the ability to act independently of the orders given by his commanders.  As such, he cannot act on his own initiative and, if he does, it is in a very small sphere of operations which is dependent upon others following similar orders.

Being a soldier is not a bad thing, indeed, it is admirable, but the path to spiritual maturity demands that he move past this necessary first jaunt down the neverending path towards spiritual maturity.

The Athlete:  Unlike the soldier, the athlete is, by definition, acting on his or her own initiative.  They may depend upon a coach for guidance and encouragement, but their motivation to obey the coach comes from a desire to improve, not fear, as was the case from time to time with the soldier.

The athlete desires to excel at a certain sport or event, and relies on set intervals of competitions or time trials by which to receive feedback and praise for his or her efforts.

Again, being an athlete is not a bad thing, and the emergence of personal initiative and the desire to train, as well as an increased degree of autonomy represent a further journey down the path to spiritual maturity, however, even if the athlete reach the pinnacle of their chosen field, they are still lacking in one very important aspect, an aspect that is fully embraced by the farmer.

The Farmer:  The farmer does not have a drill sergeant yelling at him in the morning, nor is he told what to do and when to do it.  The farmer is not restricted in his movements or daily activities.

The farmer does not train on a daily basis and is not accountable to a coach.  Indeed, the farmer takes on responsibility not only for his own training regimen, but for understanding when and where to compete.

The farmer knows exactly what to do and waits for signals from his natural surroundings to tell him when to do it.  He constantly looks after his surroundings and understands that both the land and the animals within his care have been entrusted to him.  Indeed, so have his family and his neighbors.  Even those whom he will never meet indirectly may rely upon the success of his efforts to be able to put food on their table.

The farmer’s efforts may appear volatile, oscillating between sloth and frenzies of chaotic activity.  When there is nothing to be done, the farmer drives to the café to drink coffee and play cards all day.  When there is work to be done, he awakens early and does not rest until his equipment or the lack of daylight put an end to the day’s efforts.

The farmer not only understands what needs to be done, he understands that all efforts, to be effective, must be put forth in their season.  He can prepare, and often does, but he understands that the time to exert himself will become known in its due time, but it will not happen on a schedule which he can set.

Still, he accepts the responsibility of his post, both the long days and the stinging boredom, with joy, knowing that ultimately he is doing the work of a master, and is providing for many who live well beyond the county line who he may never personally meet.  He may never be thanked by them, or recognized formally for his work, yet in the work itself, he finds life’s greatest contentment.

As you can see from the above examples, to understand one’s own character, it is as important to understand who we are serving as it is to understand how we are serving, for the key to contentment lies in choosing well on both accounts.

The monetary premium currently attributed to the Bitcoin will take wings.  If one is a soldier or an athlete, they are likely to get burned by the sudden movements.  However, the farmer, in a sloth like manner, will pick his spot and wait patiently for an opportunity to present itself.

Then, in a sudden, measured frenzy, he will then labor day and night until the work is finished.

Pastor Clewett is still in Barcelona.  In the true spirit of the farmer, he continues to pastor in addition to his duties at Planting Together, where he is on the Executive team.  Planting Together is an organization which organizes tree planting and pruning excursions, where they partner with the government of Senegal and many others to help build up the Great Green Wall, a wall of trees and foliage which is successfully fighting back the encroachment of the Sahara in northwestern Africa.

Thank you, Curtis!  Many blessings on your head.  May we all learn to sow and reap as you have.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 3, 2013

Copper Price per Lb: $3.34
Oil Price per Barrel:  $94.45
Corn Price per Bushel:  $6.41
10 Yr US Treasury Bond:  1.81%
Mt Gox Bitcoin price in US:  $115.20
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,558 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,550
M1 Monetary Base:  $2,425,000,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,547,600,000,000

Freedom, Monetary Theory

Bitcoin takes off and earns a place in our Key Indicators

4/2/2013 Portland, Oregon – Pop in your mints…

If you haven’t paid attention, there is nothing short of a seismic event occurring in the world’s monetary base.  It started with the threat of government confiscation of savings accounts in Cyprus and is transmitting itself not through the ordinary channels of the financial and commodity markets, but into what is one of the least recognized developing markets on the globe:

Decentralized digital currency.

Welcome to digital money's wild ride
Welcome to digital money’s wild ride

For those in Cyprus with an internet connection and a reasonable amount of technical savvy, the Bitcoin represents an escape hatch from the government’s currency grab.

Again, while we personally have reservations about keeping too many eggs in any form of digital currency, be it bank accounts, fiat currency, or Bitcoins, the utility of Bitcoins as a temporary store of value cannot be overlooked.

While we do not classify anything as money, rather, we recognize various things or concepts tend to carry a monetary premium, it is quickly becoming clear that Bitcoins and similar digital currencies which will no doubt emerge must be considered by any serious monetary theorist, amongst which we count ourselves and few others.

As such, the price of Bitcoins as it appears on Mt. Gox, the most established exchange of the digital medium, will be listed amongst our Key Indicators.

It will be quite a ride, for we suspect many senators and those in government whom the public suppose are caring for monetary matters are just now getting briefed on what it is, and why it threatens their hammer lock on the money supply.

At some point, the Central Banks of the world will intervene in the market the way they do with the rest of the markets in our Key Indicators, either directly or indirectly.

Until then, it will be quite a ride, and mostly upward sloping, as the two elements of the Bitcoin/USD ratio are on nearly opposite trajectories.  Should confidence in the Bitcoin go mainstream, the action could get downright silly.  Not just in the Bitcoin price, but on main street, where banking as we know it will be publicly executed by a lifeless logarithm.

It is a form of poetic justice that Mark Twain would have loved.  We invite you to join us in enjoying it for him.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 2, 2013

Copper Price per Lb: $3.38
Oil Price per Barrel:  $96.89
Corn Price per Bushel:  $6.40
10 Yr US Treasury Bond:  1.86%
Mt Gox Bitcoin price in US:  $115.29
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,576 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,662
M1 Monetary Base:  $2,425,000,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,547,600,000,000

Climate Change, Economics, Monetary Theory, The Mint, To Build up the Land

Why the monetary premium must be attributed to a tangible good – To Build up the Land – Part IV

4/1/2013 Portland, Oregon – Pop in your mints…

On this April fool’s day we will attempt to lay out yet another premise.  It is the underlying premise and our ultimate contribution to man’s understanding of monetary theory.

Our choice to present the premise today may mean one of three things:

1.  If it is so absurd as not to be accepted by any thinking human being, we may attribute it to a cruel April fool’s joke.

2.  It may be received as such a revelation that mankind will take what they have assumed to be money for a cruel April fool’s joke.

3.  It just happens to be April 1st as we are writing.

We can assure you of that the third reason is absolutely true, as for which of the first two may be valid, we leave the decision up to you, fellow taxpayer.

The premise is the following:  The monetary premium, which is the increase in the value of an object owed to its usefulness as a store of value, medium of exchange, and/or unit of account, must be primarily attached to a tangible good for the activities which mankind carries out to be in balance with the resources that exist in natural world.

The world has operated on a system of fiat currency, or currency by decree, on and off for as long as there has been an Empire capable of dictating what its subjects must use as money in settlement of debts.  Fiat currency is not harmful in and of itself.  In fact, given enough time, any fiat currency which is not flexible enough to change with the needs of the economic activity which it is intended to aid will either self destruct on its own, owed to it being eschewed in favor of a more suitable currency, or, if its use is rigidly enforced, cause the underlying economic activity to self destruct or cease, causing another form of fiat collapse.

To control what is used as money and the monetary premium represents the ultimate power in the material world.  As such, such control can never be gained by force.  Rather, it must be created by a great many deceptions which cause otherwise rational persons to hand over control over this most important of decisions.

For over 40 years now, much of the world has not only subjugated itself to accepting a form of fiat, it has come to accept as money the worst form of fiat, a fiat currency that comes into being as a debt instrument.  As a result, mankind has attached this precious monetary premium to credit, which is not dependant upon the production of goods in the real world, nor on existing property, rather, it is primarily dependent upon the character of a man.

Today we read a list of quotations compiled by Frederick Sheehan which came to us via Credit Writedowns.  Two of the quotes speak directly to the nature of credit, which will help to underscore our premise:

“Credit is not money.  Credit is trust. Trust can vanish in an instant.” – Frederick J. Sheehan, March 25, 2013

In response to questioning by Samuel Untermeyer during the Pujo Committee hearings, J.P. Morgan famously made the following observations on money and credit:  {Editor’s note: You may read the Pujo Committee, formally known as the Money Trust Investigation, testimonies here via the St. Louis Fed.

“Untermyer: ‘The basis of banking is credit, is it not?”

Morgan:  “Not always. That is evidence of banking, but it is not the money itself.  Money is gold, and nothing else.”

Then, during the same lime of testimony:

“Untermyer: “Is not commercial credit based primarily on money or property?

Morgan: “No sir, the first thing is character.

Untermyer: “Before money or property?

Morgan: “Before money or property or anything else.  Money cannot buy it”

Both Sheehan and Morgan’s observations on credit are sufficient to gain an understanding of what credit really is.  Most persons are conditioned to assume that credit is backed by collateral.  However, were credit backed by collateral, it would cease to be credit.

The essence of credit is trust.  Trust, by definition, is created by the belief in an inherently uncertain future outcome.  Again, by definition, trust may not always be well placed.  The plans upon which the credit and underlying trust are built may just as well not turn out as planned.

Money cannot be destroyed, it can only change hands.  Credit and trust, however, can be destroyed in an instant, for they are subject to the fickle decisions and imperfect plans of men.

When money is based on trust, the world moves to a very dangerous place with regards to the planning of daily activities.  This is where the world is today, circa 2013, after 40 years of what we refer to as the insane debt is money financial system.

Trust is good and necessary to a point, however, it can vanish in an instant.  When there is an excess amount of trust, or promises to pay, circulating in relationship to a finite number of money, goods, and capital in the real world, there are bound to be a few broken promises.

If kept to a minimum, the economic systems which are organically created by man to trade and deal with scarcity, a state of being that we call True Capitalism, will correct the errors that result from misplaced trust which manifests itself by credits which are defaulted on.  The activities of men will then return to balance with the underlying natural resources which the earth affords him.

Forest Clearing in Cameroon, and example of man's imbalance with nature? Photo credits: © Greenpeace / Alex Yallop
Forest Clearing in Cameroon, and example of man’s imbalance with nature?
Photo credits: © Greenpeace / Alex Yallop

However, if misplaced trust in the form of bad credits are allowed to perpetuate themselves, men will have no incentive to investigate whom amongst them is worthily of the trust that credit represents.  This state of being will, and indeed does, cause much of the earth’s natural resources to fall into unproductive hands where it will ultimately be squandered.

Meanwhile, those who are capable will not be able to coordinate their efforts with their fellow men in any meaningful way.  Indeed, the capable ones will simply learn how to take advantage of the over abundance of trust which is being created in the world.

This proliferation and misallocation, if we can call it that, of trust has two real world consequences:

1.  Natural resources are wasted at an alarming rate.  For this reason we believe that the placement of the monetary premium on credits has lead to the crisis that most people have come to call “Climate Change.”  It was previously known as “Global warming.”  This represents a myriad of symptoms whose root cause is that man’s activities are severely out of balance.  The cause of this imbalance in the current situation is that man’s activities, both those worth of trust that have succeeded and those that have failed miserably, have been greatly accelerated by the dangerous mix of credit and the monetary premium that circulates as currency.

Man is in a desperate race to meet a timetable that the earth’s resources cannot provide for.  The result is the severe imbalances which we are now observing.  It is this, and not the industrial revolution, fossil fuels, or any of the other symptoms that is the root cause of climate change.

2.  While there are a great deal of men who are busy scorching the earth with their activities, the wise have learned to concentrate their efforts not on the productive activities to which they would otherwise dedicate themselves, but to profiting from the explosion of trust and credit, from the misjudgments and miscalculations or their fellow men.

The land is either laying fallow or being scorched by the misguided activities of men, rather than being built up, as Old Jules encouraged.

However, it is not man himself or any of his inventions which constitute the root cause of the problem.  Rather, it is the simple misplacement of the monetary premium on credit instruments which emits the false signals that we all either follow or are forced to follow in the planning and execution of our daily activities.

This is our premise.  If one man in a million will grasp it, we can change the world.  Will it be you?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 1, 2013

Copper Price per Lb: $3.40
Oil Price per Barrel:  $97.07
Corn Price per Bushel:  $6.42
10 Yr US Treasury Bond:  1.84%
FED Target Rate:  0.13%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,599 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,573
M1 Monetary Base:  $2,425,000,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,547,600,000,000

ebooks, Monetary Theory, Silver, Teaching, The Mint

The 800 Pound Gorilla and Pacioli’s Gift

3/27/2013 Portland, Oregon – Pop in your mints…

Today, we present to you the “postre” of our most recent eBook offering, which we have entitled, after much deliberation,

Pacioli’s Gift or Bernanke’s Curse?

It is slated to arrive on digital shelves this evening.  What started as a book about the irony of dual-entry accounting enabling central banking, therefore making man’s greatest wealth producing innovation the agent of his greatest wealth destroying menace.

While it accomplishes this, it naturally spreads its tentacles into sound money, economic thought, and monetary history.

Enjoy desert, the main course will be available shortly.

Conclusion

While free markets and Free Banking represent mankind’s best hope for averting disaster, many people look at the scene on the water bed and side with the 300 pound man, who represents the central bankers of the world.  After all, isn’t he the only one taking action to capture and sedate the 800 pound gorilla, whom in our metaphor represents the world’s financial markets?

Luca_Pacioli_Gemaelde by Jacopo de' Barbari circa 1496
Summa de Arithmetica, Geometrica, Proportioni et Proportionale – Pacioli’s great gift to Western Civilization

What this analysis fails to recognize is that the best course of action when dealing with an 800 pound gorilla is to observe it from a distance.  Once the gorilla feels like it has an understanding of its surroundings, it will become docile and predictable unless it gets hungry or senses danger.  If the gorilla gets hungry, one should let it find something to eat.  If it senses danger, one’s reaction should not be to calm the gorilla, rather, to focus on the source of the gorilla’s agitation and act accordingly.

The 800 pound gorilla is not the problem.  In fact, it can often be counted on to recognize threats and, even though its reactions may seem unpredictable, gyrations in financial markets serve as early warning signs to potential economic problems on the horizon.  Once recognized, economic imbalances can be recognized and remedied.

To silence the gorilla, or the gyrations in the financial markets, is to rob mankind of an important early warning system.  Circa 2013, as the efforts of the world’s central bankers to sedate the gorilla by force escalate, many a Chihuahua (our metaphor’s personification of the government) is getting trampled and the water bed of world economic activity is on the verge of springing any number of leaks.

This is an outcome that Luca Pacioli could not have envisioned, for he lived in an age and in a place where Free Banking and free markets were more or less givens.  It was an age where capital formation was accelerating and the capital base from which we still operate today was being formed.  All thanks to Pacioli’s unwitting effort to disseminate the methods of dual-entry accounting throughout western civilization from his humble Franciscan abode.

While it is a great irony that a Franciscan Monk, sworn to poverty, would refine and articulate the greatest wealth generating innovation known to mankind, it is an even greater irony that this innovation would enable the large-scale employment of man’s greatest threat to this wealth, modern central banking.

The unconventional measures employed by the world’s central bankers in increasing measures over the past 100 and are not only failing to achieve their stated goals of increasing employment and economic growth, they are triggering what is quickly becoming an unmitigated disaster in the fixed income markets.  These markets, once the bedrock of global finance, have now been conditioned to do nothing more than attempt to front run the central banks’ interest rate cues up and down the yield curve.

Fortunately, the choice of whether to use Pacioli’s gift for good or for evil is always at hand.  Even as the world suffers under the grip of modern central banking, the ultimate solution of Free Banking, the banking that Pacioli and the Venetian merchants had assumed would always exist, is waiting in the wings to save mankind from its own penchant for error.  In fact, Free Banking is not something that requires a great deal of compromise and administrative rule writing as most modern legislation does.

Free Banking operates under the rules of natural law, and it can be implemented via a simple political decision to get off of the water bed and leave the gorilla alone.

Unfortunately, it is a political decision that modern governments, whose fate and existence depends upon the modern central banking model, will never take on their own.  In the absence of political action, it will take the wholesale collapse of the central bank itself to rid the world of its menace.

It is the catastrophe to come, and it will leave the fortunes of many laid waste as it indiscriminately dismantles the erroneous divisions of labor and implied daily activities that it has caused mankind to organize itself under.

It is not a question of if, but when.  For modern central banking will eventually give way to Free Banking out of necessity.  When it happens, mankind will be allowed to continue its self-correcting path toward civility and peace.

And Luca Pacioli, if not Christopher Columbus, will be vindicated.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 27, 2013

Copper Price per Lb: $3.45
Oil Price per Barrel:  $96.69
Corn Price per Bushel:  $7.35
10 Yr US Treasury Bond:  1.85%
FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,605 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,526
M1 Monetary Base:  $2,368,600,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,521,800,000,000

ebooks, Economics, Gold, Monetary Theory, Silver, Teaching, The Mint

The Presumption of a Monetary Constant

3/26/2013 Portland, Oregon – Pop in your mints…

Today, we offer a second course on the menu of our upcoming eBook release, Pacioli’s Gift vs. Bernanke’s Curse, it is a chapter on the importance of a monetary constant when employing the methods of dual entry accounting.  Enjoy!

The Presumption of a Monetary Constant

Luca Pacioli was first and foremost a mathematician.  He understood that mathematics relies upon certain constants to remain, well, constant in order for the calculations that depended upon them to be meaningful.  Whether or not Pacioli was conscious of the fact, implicit in his presentation of the methods of dual entry accounting is the assumption that the money in which he was directing merchants to keep their accounts on the basis of was sound money.  The use of the monetary unit as a unit of account implies that he understood that money was to the economic world what constants were to mathematical calculations.

Also implicit in his assumption was that the monetary units which were to be used as units of account on the accounting ledger contained a constant weight of silver or gold which existed in the natural world.  Silver and gold that had been hewn out of the ground and struck into coinage of a set weight and metallic alloy by the men at the old Zecca, the Mint of Venice in the Rialto district which preceded its famous successor was completed in 1545.  This was an important assumption, as dual entry accounting only works when the accounts balance.  By design, it implies that physical goods are in existence or are reasonably expected to come into existence and become available for exchange.

When Pacioli penned Summa, the Venetian Zecca was one of the largest and most reputable mints in the world.  This reputation was born in no small part of a scandal at the Zecca which consummated with the Doges, who ruled Venice at the time issuing a decree on the 11th of November, 1457 against then noted variations in the weight and purity of the gold and silver coins that the Mint at Venice.  As a result of this renewed commitment to monetary purity, the coins which circulated in Pacioli’s time and locale, the Silver Ducat, Soldo, Lira Sequin, and Gold Ducat, served as the standard of trade in the world known to Pacioli.

Given that the Venetian merchants could count on this sound monetary standard on which to base their accounts and, by extension, their choice of activities, their use of dual entry accounting not only benefited their own interests, but had the side effect of benefiting all who circulated and traded the Venetian coinage, whether or not they had mastered the art of dual entry accounting.

Luca_Pacioli_Gemaelde by Jacopo de' Barbari circa 1496
Summa de Arithmetica, Geometrica, Proportioni et Proportionale – Pacioli’s great gift to Western Civilization

For those who had mastered the art of dual entry accounting in this environment, the ability to properly recognize and record their transactions and to make sense of the results gave them a sort of super power.  This super power, the ability to recognize the value of transactions over longer time horizons and therefore direct investments over longer time horizons, was further refined by Pacioli, who employed the use of Arabic numerals and proposed a system of mercantile accounting that could apply uniformly to all trades and nations.

However, dual entry accounting, as mankind is now coming to understand, is a two-edged sword.  For dual entry accounting to work in favor of those who practice and/or rely upon it, the unit of account must hold a stable value.  The assumption of the relatively stable value of the monetary unit in relationship to the natural world is essential for interpreting the primary output of dual entry accounting, the profit or loss signal.  The stable unit of account is also essential when evaluating the worth and employment of items that are represented by entries to the balance sheet, upon which the profit or loss signal ultimately depends.

In short, the stability of the monetary unit of account was essential if dual entry was to be relied upon for sound decision-making.

For the Venetians, this requirement was met by virtue of their relatively stable monetary unit.  As such, the Venetian Mercantile class rose to dominate the Western world.  Indeed, with few notable exceptions, dual entry accounting has rendered an invaluable service to mankind and has allowed human progress to follow a generally upward trajectory in terms of material well-being ever since Pacioli made his bequeath to mankind.

As a stable currency enables the super powers of dual entry accounting to operate, an unstable currency, of which there are numerous examples in the largest economies in the world today, circa 2013, is its kryptonite.  A currency that does not have a relatively stable value over long time horizons, specifically the time horizons required for large-scale investments of capital to be planned with the precision required for them to be successful, serves to render the gift of Pacioli powerless.

In doing so, an unstable currency threatens to take mankind from the comfort of their large screen televisions, sofas, and smart phones, and throw them back into the dark ages, from which the world that Pacioli lived in had recently emerged.

In the irony of ironies, mankind has unwittingly made use of Pacioli’s gift to create the largest system of unstable currency that the world has ever known, the one that has operated for the past 100 years.  This disastrous invention is known as central banking, and it has quickly turned the world’s economy into an unmitigated catastrophe waiting to happen.

Stay tuned for the release and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 26, 2013

Copper Price per Lb: $3.45
Oil Price per Barrel:  $96.17
Corn Price per Bushel:  $7.30
10 Yr US Treasury Bond:  1.91%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,600 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,560
M1 Monetary Base:  $2,368,600,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,521,800,000,000

Economics, Monetary Theory, Teaching, The Mint

Pacioli’s Gift vs. Bernanke’s Curse

3/25/2013 Portland, Oregon – Pop in your mints…

As events in the Cyrus experiment continue to unfold.  here at The Mint we are watching from a distance, aghast at the implications.  The sacred rule of the Financial Crisis, the one that shielded most banking clients from taking direct losses as a result of holding their funds in a weak bank in a sovereign nation without the means or the control over its currency to bail them out, has been broken.

Anyone who was unfortunate enough to be holding over 100,000 Euros in a Cypriot bank at the close of business on March 15, 2013, now stands to take a 40% bath on all “uninsured funds.”

This is a warning shot, and if you are reading these words and do not yet understand, let us spell it out loud and clear.  Funds held in banks or financial institutions are sitting ducks for bankrupt governments to line their pockets with.  Any wealth that one wishes to maintain must be kept close at hand in something tangible and trade-able.  Bank accounts are no longer risk free assets.  They never were.

How has the world come to this place, where a government would directly confiscate assets and assume that there would not be severe repercussions?

Luca_Pacioli_Gemaelde by Jacopo de' Barbari circa 1496
Summa de Arithmetica, Geometrica, Proportioni et Proportionale – Pacioli’s great gift to Western Civilization

We have been editing our latest e-book, which will hit digital shelves later this week if all goes well.  It is volume V in our “Why what we use as Money Matters” series.  In it we explore how humanity came to this point in history, what is wrong, and most importantly, the solution.

As an appetizer, we present to you the introduction.  Enjoy!

Pacioli’s Gift vs. Bernanke’s Curse

An Introduction

In response to what has become known as the Financial Crisis of 2008, the Central Bankers of the world have employed nearly every form of monetary alchemy at their disposal in a desperate attempt to maintain the status quo.  The status quo, which in this case means that all commercial banks and sovereign governments remain both liquid and solvent, has become increasingly difficult to maintain as each attempt to stimulate economic growth via ultra low discount rates and quantitative easing has seen a diminishing marginal return in terms of economic growth.  The longer the Central Banks of the world engage in these and other forms of financial alchemy, which in the end serve as futile attempts to defy immutable natural laws, the greater the danger of a complete economic collapse becomes.

The unconventional measures employed by the World’s Central bankers in increasing measures over the past five years are not only failing to achieve their stated goals of increasing employment and economic growth, they are triggering what is quickly becoming an unmitigated disaster in the fixed income markets.  These markets, once the bedrock of global finance, have now been conditioned to do nothing more than attempt to front run the FED and other Central Banks up and down the yield curve.

The action in the financial markets is akin to a 300 pound man, who represents the Central Banks, chasing an 800 pound gorilla, who represents the financial markets, around on a queen sized water bed.  The action is becoming completely unpredictable and downright dangerous.  Throw in the chaotic interventions of a 10 pound chihuahua, who represents the sovereign governments’ meddling in the market financial market mechanisms via commercial banking regulation and tax policy, and the entire situation is a basement flood waiting to happen.

As the chaos on the water bed, which is a metaphor for the wealth of the real world, continues to unfold, it is important to examine and understand, to the extent possible, how humanity has arrived at this critical juncture in history, where a fat man chasing a gorilla while dancing around a chihuahua on a water bed can threaten to damage the wealth of nearly everyone on the planet.

It is the aim of this volume to explore two of the oft overlooked elements that have, each in their own way, given rise to the system which enables a relatively small group of persons to the ability to destroy the accumulated wealth of mankind’s 9,000 years of toil in just over 100.  Dual entry accounting, which we refer to as mankind’s greatest invention, and Central Banking, which we refer to as mankind’s greatest catastrophe.

In the end, we present what is known as “Free Banking” as the antidote for the curse of Central Banking, and the ultimate solution to the current and future financial crises that the world will suffer at the hands of well-meaning Central bankers who, it would appear, are oblivious to the destruction that their chosen profession inflicts on humanity.

Intrigued?  So are we.  Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 25, 2013

Copper Price per Lb: $3.44
Oil Price per Barrel:  $94.75
Corn Price per Bushel:  $7.33
10 Yr US Treasury Bond:  1.92%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,605 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,448
M1 Monetary Base:  $2,368,600,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,521,800,000,000