Category Archives: Politics

8/2/2015 Portland, Oregon – Pop in your mints…

During the month of July we found ourselves south of the equator in our second home, Bolivia. It has been two long years since we have walked the earth there and much has changed. The following are some observations made on our journey.

First off, it is obvious that money is everywhere. From the construction of new apartment buildings to a new style of McMansions that are being erected by those who have benefited by the DEA’s absence in this country: The Cholet. The same increase in economic activity that we have noted in Portland is evident here in spades. Everywhere you look, there is a new store, restaurant, cafe, or industrial park, all with the comforts of modern architecture with inimitable South American flair.

The first part of our visit coincided with the visit of the extremely popular Pope Francisco, or “El papa Francisco” as he is known here. We arrived in Santa Cruz on July 6th, two days before the Holy See arrived. On the 8th, we listened, along with all of Bolivia, the radio call of his descent and landing at the airport in El Alto. The radio call resembled the call of a soccer game here, with the announcer screaming “Llegó” with the same passion that they yell “gol” when the home team scores.

As a follower of Jesus of Nazareth, we are ambiguous to the activities of the Pope, who to us is simply another follower of the same Jesus, with a slightly larger following. In other words, we do not recognize or attribute any special authority nor clairvoyance to the Catholic church that is not available to all believers.

That said, it is undeniable that papa Francisco is something special to the Catholic faithful, especially here in South America, as Francisco (or Francis, as he is known in the English speaking world), an Argentinian (though you would never know it as he does not seem to swear like a sailor) is the first Pope to hail from the continent.

Having listened to his discourses over two days, it was obvious that Francisco is well schooled in the populist platitudes that the likes of Che Guevara awakened and contemporary leaders Hugo Chavez and Evo Morales have resurrected.

True to the populist playbook, Pope Francisco derides economic inequality and envisions a society where all elements of the economy, the productive sector, distributors, and retailers, all carry out their daily chores in harmony with mother earth and one another. Where every child can enjoy a happy childhood, every worker enjoy a dignified position, and every elderly person enjoy a dignified retirement.

Evo Morales, the Bolivian President, welcomed Pope Francisco with a unique gift, a crucifix where in the place of the cross, Jesus of Nazareth is portrayed as being crucified on a hammer and scythe, a symbol synonymous with Socialism.

Was the Pope offended? Hardly, you see, the artistic origins of the gift lie with a popular Jesuit priest who made what to some is the obvious connection between the Gospel and Socialist doctrine. There is more to the story behind the gift, which you can read here:

http://www.ehagendaurbana.com.ar/2015/07/el-cristo-del-martillo-y-la-hoz.htm

We bring the whole matter up to state once and for all that the Gospel and Socialism have just one common thread: The Gospel, or the Good News, is that God forgives, and expects us to do likewise. Nothing more, and nothing less. It is the most important spiritual and natural event that has ever occurred, in our lives and the lives of countless others, for it is forgiveness and forgiveness alone that unleashes the supernatural and eternal presence of Yahweh in the here and now.

To the extent that Socialism demands that mankind treat one another as they would like to be treated, it is in harmony with the Gospel. However, any attempt to enforce what should be spontaneous acts of goodwill towards one another makes a mockery of the Gospel and subjects it to the rules of men. As we have explored in our economic treatise, Why What We use as Money Matters, rules made by men are incompatible with freedom, which is the reason for the Gospel in the first place.

This Freedom extends to the right to be Socialist, but it does not extend to the right to enforce this destructive doctrine on one’s unwilling fellow man or woman.

We admire the Pope, heck, he gave mass in La Paz with one lung and drew out millions of the faithful in South America. If he wants to use his enormous platform and the freedom afforded to him by the forgiveness of sins through Jesus of Nazareth to expound upon an idyllic worker’s paradise. more power to him.

The Pope speaks to the Socialist Movements in Santa Cruz de la Sierra, Bolivia:

The danger in the Socialist doctrine is not evident in meaningless platitudes spewed by its proponents, nor is it evident in postulations about goals that are as unattainable as they are unmeasurable, such as universal dignity in work and retirement. The danger of this poisonous doctrine is only evident in the blood spilled silently over the years in its name. For when authoritarian regimes are allowed to define and enforce such concepts on a large scale, the previously unimagined economic burdens of such a program fall upon everyone, and the end result is invariably a society that lives and treats each other in a quite undignified manner.

A side note, and certainly fodder for further debate here at The Mint, our Mother-in-law posed a very interesting hypothesis about what may be wrong with Bolivian society, which seems hell bent on self destruction despite the gifts Mother Nature has seen fit to surround it with: The poisonous union of the lie by two strata of society.

First the rich, or those who come into money, those whom we will call the upper strata of society. This strata of society learns to lie as a means to maintain or improve their status both within their social circle, which in turn feeds a continuous chorus of lies as a group to the populations which they enslave and exploit.

Second, there are the lies of the exploited populations themselves, who learn to lie as a powerful tool of survival in a society where, to paraphrase President Snow of the Hunger Games, the odds are never in their favor.

The union of the accumulated lies tend to make any society impossible to navigate with any form of moral or ideological compass. For to run the straight and narrow is to be stabbed in the back, and the lies create the sad and universally acknowledged truth that no one can be trusted.

Into such societies the seeds of Socialist ideology find fertile ground in which to grow and take root in the minds of the underprivileged. They begin to grow and, like GMO crop production, look good until one realizes that the crops are only viable with a disproportionate quantity of productive inputs, and that they leave the soil and its inhabitants desolate once the massive inputs stop flowing.

It is then that the inevitable bloodshed begins, and no amount of platitudes or lofty goals, whether spoken by the Pope or the President, can stop it.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for August 2, 2015

Copper Price per Lb: $2.37
Oil Price per Barrel: $46.77

Corn Price per Bushel: $3.68
10 Yr US Treasury Bond: 2.20%
Bitcoin price in US: $279.31
FED Target Rate: 0.14%
Gold Price Per Ounce: $1,095

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.3%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 17,690
M1 Monetary Base: $2,998,600,000,000

M2 Monetary Base: $11,991,900,000,000

Bitcoins, Politics

Greeks are about to learn the virtues of Bitcoin

June 29, 2015 David Mint

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

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

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

Climate Change, Economics, Politics

Obama comes to Portlandia

May 7, 2015 David Mint

5/7/2015 Portland, Oregon – Pop in your mints…

For those unaware, the Portland metro area is playing host to President Barack Obama. While we had no idea why he is here, we have been made keenly aware of the traffic perils that await us over the next 24 hours. Highways randomly shut in both directions, entire areas of the city impassable by car, rail, or bicycle (perish the thought). Such is the cost of playing host to the world’s most heavily guarded human being.

Obama Ponders the lubricant of free trade that the TPP will unleash

After some careful research (roughly 40 characters typed in a google search) we now know that he has come to promote something called the “Trans-Pacific Partnership,” which we have heard described as “NAFTA on steroids.” He has chosen the Nike campus, which is a mere 10 minute walk from where The Mint resides, to tout what would be his crowning achievement, a free trade agreement that exterminates what remains of US-based manufacturing once and for all.

His choice of Nike, who in a sense pioneered the practice of exploiting cheap overseas labor, has drawn reactions of shock and awe from socialists and unions alike.

First, the Daily Kos, where an author known as “davej” lays out the case against Nike by alluding to sweatshops and child labor, and feigns disgust at the irony that Obama would choose Nike to hold his rally there. For good measure, the article ends with instruction on where to meet at Nike to stage a protest as the President speaks.

The AFL-CIO produced a video enlisting not only American workers but also workers from other countries throughout the Pacific Rim to denounce TPP as a job killer and an enemy of organized labor. You can see it below:

Finally, Bernie Sanders, the Vermont Socialist and current 2016 Presidential candidate, bemoans the fact that a $320 pair of LeBron XII Elite iD shoes can be sold in America but not made in America. Comrade Sanders, we admire your zeal yet find your logic vexing.

We have no clue what the TPP will do, but generally speaking, free trade is good, and will ultimately benefit everyone. However, circa 2015, there is a fly in the ointment that makes Free Trade act as a lubricant on the once slow-moving machinery of global warming: Debt based currency.

Federal Reserve Notes: A License to Strip Mine the Earth

While it is fine and well the TPP will enable American consumers to consume at theoretically better prices that those that they already enjoy thanks to pioneers like Phil Knight and Sam Walton, all of this consumption comes at a steep price, both in terms of human suffering and the environmental impact of removing barriers to trade.

While we would love to appeal to a moral high ground, such as the author at the Daily Kos and the AFL-CIO do in their opposition to the TPP, we cannot. Instead, we appeal to our own at times infallible logic on the matter.

The TPP and the associated increase in trade along the Pacific Rim that it will enable will cause an unprecedented amount of debt based currency to come into being and begin to circulate. While most persons have been trained to think of debt based currency as money, we offer a new definition:

Debt based currency is a license to strip mine the earth, and entirely too many of them have been issued already.

Yes, when you circulate debt based currency (and on the planet today it is nearly impossible not to) by buying and selling in it, you are sending an erroneous economic signal to the rest of humanity. When you purchase the above mentioned Lebron James Michael Jordan wannabe shoes from Nike, you simply want the shoes to put on your feet. However, what you are saying to Phil Knight and his minions is, “design a shoe that I and 50 of my closest friends will drool over, then drill deep into the earth and extract petroleum with which to run the machines that will make the shoe, then hire labor as cheaply as possible to run the machines and assemble the shoe, kill some cows for leather, pull latex from plants or manmade processes, create dyes to color the shoe just so, and do whatever it takes to bring together the raw materials by which to bring my dream shoe into being.”

Now the production of the shoe and all of the related activities that it spawns would be fine and well were the shoes to be paid for with real money. However, consumers, no matter what country they are in, pay for things in debt based currency, meaning currency which comes into being on a whim, and derives its value by acting as a hot potato, causing any number of unnecessary or non-beneficial activities to be envisioned and carried out by mankind on a daily basis without a natural counterbalance to said activities.

In layman’s terms, when one is purchasing a product using debt based currency, they are by no means engaging in “fair trade,” despite what the label says, they are trading nothing for something, something that the earth and its inhabitants had to be strip-mined and enslaved to create. For the wants and needs of mankind are limitless, and, when enabled by a limitless supply of debt based currency, cause a chain reaction of 1) increased human activity which leads to 2) increased impact on the environment without a counterbalancing activity of resource replenishment, human or natural, elsewhere in the broad swath of economic activity on the planet.

Federal Reserve notes and their foreign counterparts are nothing more than a license to strip mine the earth and its inhabitants of resources well ahead of their ability to replenish them. Mother Nature is now in the second half of the Chessboard, will we turn in our license before it’s too late? Or will we drive nature and ourselves off of the proverbial cliff?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 7, 2015

Copper Price per Lb: $2.90
Oil Price per Barrel: $58.72

Corn Price per Bushel: $3.57
10 Yr US Treasury Bond: 2.18%
Bitcoin price in US: $236.53
FED Target Rate: 0.13%
Gold Price Per Ounce: $1,184

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.5%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 17,924
M1 Monetary Base: $3,100,000,000,000

M2 Monetary Base: $11,824,300,000,000

Politics

On Obama’s Immigration Gambit

November 25, 2014 David Mint

For those who missed it this past Thursday, the American President, Barack Obama, announced that he was taking action via an Executive order to fix the US Immigration system. Depending upon one’s feelings on the subject, Obama either an extremely bold step to do what the US Congress should have done years ago, or He made one of the most shameless power grabs by the Executive in recent history.

Whatever one’s feelings, it is reported that the action will allow some 5 million undocumented immigrants to now live and work legally in the United States.

In the following piece, Katie Couric frames up what has occurred:

For most thinking persons, the stated results should come as very good news, especially when one considers that it now gives the right for undocumented parents of children who do have legal status to stay with their family and to provide for them in a more dignified manner. However, the GOP appears to have taken to extreme rhetoric in opposition to the President’s humanitarian actions.

Even the writers at Saturday Night Live seemed inclined to highlight the power grab element of what presumably will be Executive Order 13683 once it is recorded.

While the GOP position, that America should do more to protect its borders in conjunction with allowing those who are here without documents to receive amnesty, appears logical, it is completely devoid of morality and human decency.

We are all immigrants. And failure to recognize this basic fact is cause for seemingly endless strife in many places on God’s green earth. The right to reside on a certain piece of geography via a piece of paper and a formal relationship with the tax farm is a construct of 20th Century Imperialism. The idea of carrying a passport for the common man or woman only came into being around the time of WWI.

People Immigrate because they are looking for a better life. It should flatter the current inhabitants of the United States of America that they believe that they can build that life here, as the ancestors of the current inhabitants, the immigrants of generations past, have been able to do. To put unreasonable measures which rip families apart and deny those who are ambitious and courageous enough to leave everything behind to pursue the modern-day American Dream is not only wrong, it is self-defeating to any nation that desires to remain on the cutting edge of progress.

Our Time as an Undocumented Immigrant

It may come as a surprise to our readers that we have spent time as an “undocumented” immigrant in both Spain and Bolivia. We did not sneak across the border into these lands, as one might imagine. We arrived via normal channels through airports, as many undocumented immigrants in America have come.

Our passport was stamped and away we went, in search of pursuing our dreams. There was one catch, the achievement of our dreams in these places was to take a good deal more than the 90 days supposedly allotted us on our visitor’s visa. As such, we went to the immigration authorities of the respective countries and began the long and expensive road to legitimizing our status through a process that can only be described as a colossal waste of time and effort for all involved.

In Spain, we waited all morning in a cue only to arrive at the window 6 hours later to submit our application. When we arrived, we were told to wait some more. Amazingly, they did not even give us the dignity of a lavatory and, after the seven hour ordeal, our bladder was in rough shape.

Once our school was done, we were fortunate enough to land a job with an American company, Sara Lee, and we thought our immigration troubles were over. However, after waiting in two similar cues over the course of seven months and still not being able to begin work as we waited on the Spanish bureaucracy to process our application, we’d had enough. The process was ludicrous, and we parted for Bolivia with our bride to be.

In Bolivia, the process did not involve as many cues, but it did involve some nervous periods of time when our passport was sequestered for weeks on end to be “translated.”

Perhaps the most blatant example of the sham of Immigration processes was their requirement that we obtain an “International Criminal Record” from an organization next door called “Interpol.” Once inside, the kind gentlemen at Interpol would give you two options. Option one, which carried a cost of 10 Bolivianos (roughly $1.50) would render a “Criminal check” in about a week. However, there was another, slightly more expensive option, running around 100 Bolivianos, which would render a “Criminal check” on the spot.

Naturally, the more expensive and necessarily less thorough 100 Boliviano International criminal check was the more popular choice.

The point of recounting our struggles with Immigration abroad is this: There are many people living within our borders who desperately want to do the right thing and legitimize their status. However, they do not have 5 to 10 years to put their life and ambitions on hold wait for their fate to be decided by some sort of visa lottery or bureaucratic process. All the while living peaceful, productive lives with the constant fear that it could all be taken away on a whim.

The Immigration system is not just, it is inhumane and a great impediment to the further progress of the United States of America or any Country that puts politics and nationalism ahead of people. If President Obama has taken steps to remedy this stain on America, then he has done a great service to 5 million human beings who can now live their lives without fear. If he had to sidestep a political process to do this, then the true problem lies in the political process, not in the actions of one who is acting with humane intent.

AFP 2014, Politics

A Conversation with Ben Bernanke

November 23, 2014 David Mint

11/23/2014 Portland, Oregon – Pop in your mints…

At the 2014 Association of Financial Professionals Annual Conference in Washington D.C. there were a number of incredibly insightful sessions. Perhaps the most interesting, at least on the playbill, was the opening general session, which featured Ben Bernanke, the former chairman of the Federal Reserve.

Bernanke is on tour selling his upcoming 2015 book, a memoir focused on his front row seat and actions during the Financial Crisis, for which he has received an advance of roughly $8 million.

He took the opportunity to speak to over 5,000 members of the AFP, ourselves included, on November 2, 2014 in Hall E of the Walter E. Washington Convention Center in Washington, DC.

Bernanke addressed the audience for approximately 30 minutes in what, for the most part, appeared to be an apologetic for the actions of the Federal Reserve and other major actors who found themselves in the middle of the Financial Crisis.

The final 60 minutes of the session were much more interesting as the presentation changed in format to that of an interview conducted by Bernanke’s friend and former Princeton and Federal Reserve Colleague, Alan S. Blinder. We will have more insights from Blinder later in this series of AFP sessions on The Mint.

You can hear a large portion of the conversation between Bernanke and Blinder by listening to the audio file below:

On AIG: At minute 11:30 – Bernanke observes that the only “True Bailout” performed by the government during the Financial crisis was that of AIG. He observed that AIG was like an unregulated hedge fund. They doubled down by taking the cash they received from insuring the CDO’s against the risk of default and purchasing those same CDOs, essentially leaving them with double exposure to the CDO market. There was a sense that they were either not doing proper risk management or that their actions were cynical. Bernanke was most irritated by the AIG bailout of all of the actions that were taken to stave off the Financial Crisis.

On His scariest moment during the crisis: The Tuesday that they went to Congress to propose TARP when some of the largest firms under pressure. Not unsurprisingly, Bernanke maintains that TARP was good policy under the circumstances, and it gave the Fed the legal authority to take many of the actions that, in Bernanke’s opinion, staved off the total collapse of the financial system.

On Lehman Brothers: There was no legal way to save Lehman Brothers. At 7:00 he addresses this. There was not buyer for Lehman Brothers, and at the time, everybody was pulling away from Lehman, and the firm would have collapsed with a week anyway.

On Quantitative Easing: At minute 16, Blinder brings up the fact that Bernanke lobbied for a time for the series of programs which were known as “Quantitative easing” to be called “Credit easing” in order to distinguish it from the actions previously taken by the Bank of Japan. The key difference being that while the Bank of Japan pumped funds directly into the banks as reserves, the Fed was creating liquidity to the system as a direct actor in the credit markets.

{Editor’s Note: Those interested in satire can see our 2010 rendition of the Bare Naked Ladies hit If I had a Million Dollars as sung by Ben Bernanke, inspired by the early rounds of QE here}

On the stock vs. flow theory: Around minute 21, Blinder and Bernanke move into a conversation about the “stock” versus the “flow” view of the Fed’s balance sheet. The key difference being that those holding the stock (meaning money stock) view look at the Fed’s balance sheet as it actually is to infer the effects that the Fed is having on monetary policy, while those that hold to the “flow” view, namely almost everyone on Wall Street, look at the Fed’s buying and selling of assets to infer the effects.

Bernanke is a strict adherent to the stock view, and wonders what will happen if and when the Fed looks to unwind its Balance sheet at a future date.

For those who followed the Financial Crisis closely, Bernanke offers his own, less guarded take of the events in the interview, which we assume will be a precursor for the contents of his upcoming memoir.

One of the stark takeaways that we are compelled to pass on to our readers is the following: Bernanke’s assertions that the Fed did not have the legal authority to save the financial system until TARP was passed. TARP was essentially railroaded through Congress on the advice of then Treasury Secretary Henry Paulson. While it may have been the expedient thing to do at the time, it is unclear whether it was a good idea to give the Federal Reserve and the Treasury (for they work in tangent with one another) the authority to backstop the financial system.

It is a question that is still waiting to be answered today, on the eve of yet another great inflation event.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for November 23, 2014

Copper Price per Lb: $3.07
Oil Price per Barrel (WTI): $76.45

Corn Price per Bushel: $3.72
10 Yr US Treasury Bond: 2.32%
Bitcoin price in US: $367.00
FED Target Rate: 0.10%
Gold Price Per Ounce: $1,282

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.8%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 17,810
M1 Monetary Base: $2,758,900,000,000

M2 Monetary Base: $11,585,100,000,000

Catala, Freedom, Oregon Politics, Politics, Spain

Catalunya Employs Classic Democracy as Oregon Taxes Weed

November 9, 2014 David Mint

11/9/2014 Portland, Oregon – Pop in your mints…

For those among our readership who do not follow Spanish Politics, Catalunya, the region of Spain most easily recognized by its leading city, Barcelona, held a vote on two matters of the utmost importance to the Catalans. The questions were posed in the following manner:

1) Do you want Catalunya to be a State?

2) Do you want that State be Independent?

The vote today in Catalunya, of which 80.72% voted “yea” on both questions, was not sanctioned or recognized by the Spanish government in Madrid, other than to say it was nothing more than propaganda.

According to The Guardian, roughly 2 million of the 5.4 million persons who were eligible to vote cast a ballot today, a roughly 37% turnout, which means that today, roughly 32.3% of those living in Catalunya took the time to submit a symbolic ballot in favor of their Independence from Spain. For a quick comparison of this figure, 68.9% of eligible voters cast a ballot in Spain’s last General Election in November of 2011.

While voter turnout today in Catalunya may not seem impressive on the surface, it takes on more meaning when one considers that, as it was unsanctioned by the Spanish Government, over 40,000 volunteers took it upon themselves to receive and count the ballots.

The Catalans have employed what we call Classic, or Grass-roots, Democracy in an effort to allow their citizens to determine in a civilized manner the most basic of questions with regards to self governance: Shall we, as a region, be Independent?

Admittedly, Catalunya is in a unique position to do so. Most regions, for which Independence is more a romantic idea than a practical one (the most recent example being Scotland’s referendum to break ties with the UK), have much to lose and little to gain by declaring Independence. Catalunya, on the other hand, is essentially self-sufficient and for them, remaining part of Spain has little upside.

For a time, the argument could be made that Spain provided Catalunya access to markets that it otherwise could not have sold into. Today, this is a non-issue, as the EU trade agreements would continue to cover an Independent Catalan State.

The Spanish Government has a big problem. While Spanish officials are swiftly and publicly denouncing the Catalans for holding what, in their mind, had already been declared an “illegal” vote, the Catalans have cleverly and very publicly made a mockery of what passes today as “Democracy” in the Sovereign States of the world who embrace this model of governance.

For what is Democracy if not the people’s right to self determination? Yet modern democracy for most boils down to questions of which hand picked candidate will occupy an embedded power structures, and whether or not to increase the existing tax and regulatory burdens imposed by this power structure.

With today’s actions, the Catalans struck at the heart of the existing system. Our guess is that one day, they and many other regions in similar situations will enjoy sovereign status as peers to their former oppressors in the EU.

Throwing off the EU’s chains, however, would be a matter settled by arms, as the French, American, and every other successful revolution against the clutches of Empire have shown. It is not the nature of Empire to negotiate or put to vote matters of self-determination.

Oregon Taxes Weed

In our local elections, our fellow Oregonians chose to decriminalize marijuana. Joining them were the people of Washington, DC, making a total of four jurisdictions in the US that have changed the innocuous plant from a huge drain on tax revenue to a potential source of revenue with the stroke of a pen.

Weed: It got your parents kicked out of school, now it can pay for yours.

Which way did The Mint vote on the issue? We didn’t. You can read our reasons for abstaining from voting on State and Federal Matters in the links below:

Ballot Burning, Our Breaking Point, and Why the Next Gold Rush Just Began (notice the reference to Catalunya’s Independence preparations)

Three Reasons Why We’ve Stopped Voting, The Trail of Tears

The Silent Majority, Why No One Will Win the 2012 Presidential Election

As the Catalans have seen in the case of the Spanish, government, once it exceeds a certain size, ceases to serve the people who created it and becomes at best parasitic and at worst, antagonistic and violent as it increasingly resorts to the use of force in an effort to advance a failed system.

Can Catalunya peacefully remove the yoke?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for November 9, 2014

Copper Price per Lb: $3.07
Oil Price per Barrel (WTI): $79.02

Corn Price per Bushel: $3.67
10 Yr US Treasury Bond: 2.31%
Bitcoin price in US: $361.80
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,179

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.8%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 17,574
M1 Monetary Base: $2,939,700,000,000

M2 Monetary Base: $11,485,000,000,000

Economics, Politics, The Mint

What created the Bolivian Economic Miracle?

October 27, 2014 David Mint

10/27/2014 Portland, Oregon – Pop in your mints…

For those who do not follow Bolivian Politics, Evo Morales has one a third term as President of the South American nation we are happy to call our second home.

Evo Morales - President of Bolivia in Brazil 2007 — Evo Morales – President of Bolivia, photo taken December 17, 2007 in Brazil by Marcello Casal Jr. of Agencia Brasil http://www.agenciabrasil.gov.br/media/imagens/2007/12/17/1840MC44.jpg

As Morales is seen as a Socialist hero, his reelection coincided with a deluge of praise for his hand in the Bolivian Economic miracle that has unfolded over the past 10 years from the left. It seemed to start with an article from the New York Times back in February, which highlights Morales’ success and the paradox that it presents. On one hand, he is a, well, a proclaimed Socialist. On the other, he runs a balanced budget and has largely rejected the advice of the IMF and other financial overlords of the world:

Turnabout in Bolivia as Economy Rises from Instability

Then, a widely read article in the Guardian, where the author makes the bold claim that “socialism doesn’t damage economies,” which sparked a swift reaction from the neo-con/neo-lib right.

Evo Morales has proved (sic) that socialism doesn’t damage economies

It is true that the Bolivian economy has grown at a mighty pace over the past 10 years, however, to simplify this miracle to solitary policy changes such as the legalization of coca farming, a deeply personal matter for Morales, or other various social policies noted by the authors is to miss the point completely.

As a public service, we present to you today the short list of reasons why Bolivia is experiencing an economic miracle in the eyes of many Westerners:

Benford’s Law, which would account for Bolivia’s rapid relative growth. As a country, it was near the bottom of many world measures in terms of economic statistics. As such, things tend to go up from a low level quickly on a relative basis.
Currency policy: The Boliviano trades tightly with the USD similar to the Yuan. This is due to the fact that much of the country’s savings are held in dollars. Currency stability = real growth
Legalize it: While the legalization of coca is controversial, the removal of regulations has opened up a wild west of trade and attendant economic activity.
Anarchy reigns: Ever since Simon Bolivar freed it from Spanish rule in 1825, Bolivia has had 81 Presidents and been ruled by various “Juntas” or forms of military rule 9 times. By contrast, the US has been around for 50 years longer and had just 44 Presidents. If our theory that Anarchy produces stability holds, it would follow that the Bolivian economy is one of the most resilient on the planet, one that cannot help but grow from a solid base.
Evo’s Charisma: While Evo Morales is often chided, he is simple and lovable at heart, an anomaly in the cesspool of modern politics. He has drawn a great deal of positive attention to Bolivia as the first indigenous President in the nation’s history. This has given Bolivia international exposure not before seen.
The Open Letter: While it is a longshot, perhaps Evo has read our open letter to him and is secretly implementing our policy proposals.
While Bolivia was extremely poor in the eyes of the world, yet rich in so many ways.

We love Bolivia, it is one of the most precious, pristine, and complicated places on the planet and we are honored to call it our second home. While speculation as to what has caused the current economic miracle there will continue, we know one thing to be true:

It is Bolivia’s time.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for October 27, 2014

Copper Price per Lb: $3.08
Oil Price per Barrel (WTI): $80.66

Corn Price per Bushel: $3.63
10 Yr US Treasury Bond: 2.26%
Bitcoin price in US: $350.95
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,225

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 5.9%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 16,818
M1 Monetary Base: $2,747,700,000,000

M2 Monetary Base: $11,514,900,000,000

Economics, Politics

The New Labor Market – Scotland’s Lesson to Labor

September 19, 2014 David Mint

9/19/2014 Portland, Oregon – Pop in your mints…

The results of the Scottish referendum on independence are in, and in the maneuvering leading up to the vote as well as the results themselves, the Scottish question has brought to light a new dynamic that many economists, including yours truly, have been late to properly identify: The astronomical rise in the cost of labor that is on the horizon.

What do Scottish/English politics and the labor market have in common? Nothing, really, save the dynamic between an overlord (England/Employer) and underling (Scotland/Employee), and the rapidly changing status quo.

First, a brief overview of the Scottish referendum from an economic standpoint. Astute readers will note that we have an extremely basic understanding this. That said, the little we do understand serves our metaphor. As such, we dare not risk deepening our understanding at this point.

Our aforementioned understanding is the following: As part of the United Kingdom, Scotland enjoys a £32 Billion per year block grant, for which it cedes approximately £7 Billion per year in North Sea oil tax revenues, and approximately £16 Billion in other taxes rendered to England, bringing England’s net subsidy to Scotland to roughly £9 Billion per year. You can read more about the economics of Scottish Independence at the ever Clairvoyant Market Oracle.

Scottish Independence YES Vote Panic

As you can see at the end of the above video, the chances of Scotland actually voting “Yea” for the referendum were extremely far-fetched and rightfully cause for panic. Furthermore, we observe that the reaction of the English, predictably, was to cave to Scottish demands for autonomy and, ultimately, an increase in the net subsidy in exchange for remaining part of the UK.

As the Scottish economy represents roughly £160 billion annually, it is clear that the £9 billion hit in terms of the subsidy loss would be devastating. Devastating as it may have been for the Scottish people, the loss was at least calculable and to some extent containable.

On the other hand, while England appears to have forfeited a good deal of autonomy, not to mention being out a net £9 billion on the Scottish subsidy, their zeal to keep Scotland in the UK is explained by one simple fact:

Scotland is irreplaceable, and for England to forfeit its allegiance now is not only to turn its back on a union forged over the course of 300 years, it is to look forward to a future of Balkanization and an incalculable demise in its political and economic power as the sun finally sets on an Empire that at one time could rightfully claim that the sun never set upon it.

Do you now see how the metaphor applies to the labor market fellow taxpayer? In simple terms, Employee (Scotland) threatens to leave Employer. Employer reacts by giving employee more autonomy and pay.

This scenario is playing out across certain cross sections of the US Labor market and is about to have a tremendously disruptive effect on what many have come to understand to be the status quo in terms of Corporate employment.

While it may be true that, unlike Scotland, most employees are replaceable, it is also true that with each employee that walks out the door, an incalculable amount of synergies and institutional knowledge leaves with them. Couple this loss of intangibles with the fact that the employee that will be hired to replace them is likely to be 1) More expensive, 2) Less productive, and 3) Less loyal than the one that just walked out the door.

Like Scotland, many employees are finding that, while they have something to lose by leaving their employer, the loss is calculable and often more than compensated for by the potential gains awaiting them as the current game of musical chairs disrupts the low cost of labor, a hidden subsidy that many corporations have come to rely on.

While it may appear that employees, like Scotland, have much to lose and little to gain by declaring their independence and seeking new alliances, in reality it is the corporate status quo, such as England, that stand to lose the most in this latest game of musical chairs.

In the end, England will pay dearly for maintaining its alliance with Scotland. Will your employer pay dearly for you? You may be surprised by the answer.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for September 19, 2014

Copper Price per Lb: $3.13
Oil Price per Barrel (WTI): $92.41

Corn Price per Bushel: $3.31
10 Yr US Treasury Bond: 2.58%
Bitcoin price in US: $396.09
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,216

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 17,279
M1 Monetary Base: $2,747,800,000,000

M2 Monetary Base: $11,479,800,000,000

Events, Politics

On Racism – What Many White People do not understand

September 2, 2014 David Mint

9/2/2014 Portland, Oregon – Pop in your mints…

“Life in this country is inherently different for white people and black people”

The words of John Stewart of the Daily Show as he skillfully ripped apart biased portions of Fox’s coverage of the Michael Brown homicide ring true as a reminder that the mar of racism is still visible on the fabric of modern North American culture.

The events on August 9, 2014 in Ferguson Missouri will forever change how Americans of all races view the police and each other. In terms of one’s view of the police, Michael Brown’s death has served as a wakeup call that it is not ok for public servants to use deadly force on unarmed assailants. While we believe the right of civilians to self-defense must be held sacred, the police, who are paid by the public to serve the public, must be held to a higher standard. The job they are asked to do is an extremely difficult one, but they are well-trained and have any number of alternatives to deadly force available to them. For all members of society, deadly force must be used as an absolute last resort, not as the deterrent of choice as it would appear to have been for the policeman on the night Mr. Brown lost his life.

On Racism

Beyond the ever-present tension between the police and the public, the incident on August 9th has given pause for Americans to reflect on an issue that has been for the most part swept under the rug, racism.

While much has been said on the subject, we wish to interject an idea that we hope will impact you, not matter what color your skin may be, as much as it has impacted us: The concept of Equity

Equity

What is Equity and why is it important for understanding and removing the mar of racism from the Land of the Free? When it comes to dealing with racism, the definition of Equity is two-fold. Most white people in America understand and, in their better moments, are comfortable with the first:

1) Fairness of justice in the way people are treated

In many respects, the elevation and nearly universal recognition of this facet of the concept of Equity is the great achievement attributed to Martin Luther King, Jr. and the movement that he came to embody. It was enshrined into law in the Civil Rights Act of 1964, and impacts nearly every aspect of public life in America. For most white people, passing and observing this law was enough to rectify the problem of racism.

However, this facet of the concept of Equity is merely a first step, as it is the second definition of Equity that must be addressed by America, for indeed if we do not, there is not another nation on earth that will pay more than lip service to it. It is this second definition that most White people do not understand, and when they do, tend to become extremely uncomfortable (image the Fox anchors in Stewart’s clip dealing with this one):

2) Justice according to natural law or right, specifically, freedom from bias or favoritism

You see, once racism has been acknowledged, it demands a just response. It is not enough to simply ensure that a spirit of fairness with regards to race is carried out from this point in time forward. To leave the issue there is to wash one’s hands of all of the past injustices that have been carried out in the name of racism.

If the mar of racism is to be cleansed from the American fabric once and for all, a concerted effort must be made, at least where public policy is concerned, to make amends, to the extent possible, for past injustices that have occurred. To many, it will appear to be favoritism, and indeed it is, but as a form of favoritism has been exercised for a great deal of time already, it is only logical that it would take years of reverse favoritism to even begin to rectify the past injustices.

Followed to its logical end, this facet of the concept of equity means that people of color should be disproportionately represented in the halls of power at all levels, they should be awarded government contracts in disproportionate fashion, and should be accorded the right to provide any other favors they may see expedient at the public’s expense in the same way that white people have done for as long as forms of government in the United States have existed.

Sound absurd? It may be, but it is just. Under this second facet, it would not be out of the question for certain white people to be enslaved for two generations or more just to even the score with the descendants of those whom their ancestors systematically denied the blessings of life, liberty, and happiness.

While it is difficult to imagine these “eye for an eye” types of reparations taking place in 2014, this has been the harsh reality for people of color for most of our nation’s history. Given the history, what, then, is the appropriate method of administering Justice with regards to racism?

The full concept of Equity, and the truth that it brings to light, is what most White people do not understand.

Conclusion

Here at The Mint, we understand that the government can do no good, as its very nature is to raise the most corrupt elements of society to the top and to steal and misappropriate resources, for by definition, it can do nothing more.

However, within the broken apparatus of public administration lies the means to achieve the full concept of Equity with regards to racism, and as long as it is in place, it has a duty to tip the scales of justice the way of those who have been disenfranchised because of the color of their skin.

While most persons in America would nod and agree with the first facet of the concept of equity, the second and more troubling facet is what most white people fail to understand. Like most things that actually cost something, many find it difficult to embrace once they do fully understand it.

We only happened upon it by chance, and it has forever changed the way we see the renewed discussion of race in this country. For it is the only way that America will be able to say, once and for all, that its fabric is truly free of the mar of racism. America is the only place that can hope to achieve Equity in a civilized and productive manner, and come out all the stronger for having fully embraced it.

Will we?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for September 2, 2014

Copper Price per Lb: $3.17
Oil Price per Barrel: $95.82

Corn Price per Bushel: $3.59
10 Yr US Treasury Bond: 2.34%
Bitcoin price in US: $479.44
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,286

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.2%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 17,098
M1 Monetary Base: $2,732,600,000,000

M2 Monetary Base: $11,406,000,000,000

Economics, Politics

Yellen and the Senate Banking Committee describe a winter economy

May 9, 2014 David Mint

The Honorable Dr. Janet Yellen, Chair of the Federal Reserve, testified before the Senate Banking Committee yesterday in a ceremony that her predecessor, Dr. Bernanke, must have come to dread towards the end of his tenure.

Of course, towards the end, Dr. Bernanke’s tenure had been marked by the largest economic downturn in memory for most and he found himself shouldering much of the blame. Bodies such as the Senate Banking Committee often took the opportunity to grill Bernanke on the latest financial headlines or the direct complaints from their constituents stemming from various financial debacles that had unfolded during his tenure. Be it Lehman Brothers, MF Global, or the troubled housing market, Bernanke could count on questions ranging from the dangerous to the ridiculous from committee members who were, in many cases, further removed from reality than Dr. Bernanke himself.

So it was that Yellen took the hot seat that her predecessor had dreaded yesterday before a new set of faces in order to explain what she sees in her economic crystal ball.

From what could be gathered from the mostly scripted exchange between the parties, there seems to be a range of lingering worries in the minds of policy holders as to the health of the US economy, which recently clocked in at an underwhelming 0.1% annual growth rate in Q1 of 2014. The worries, which are no doubt rooted in recent history, range from the continued drop in labor force participation rates and what many see as a stalled out recovery in the housing market.

The US Q1 GDP number can be summed up in a phrase that Red Green was fond of, “It is winter.” Housing markets invariably slow down over the winter months, which are generally a drag on GDP as households recover from the Q4 holiday spending binge.

Labor market participation, which surfaced as a primary concern during yesterday’s hearing, is a much more complex problem, for deep down it validates the fears of nearly every thinking economist, that the US is following in the footsteps of Japan’s demographic and economic precedent.

The real problem with the US economy was not addressed directly at this hearing, nor is it likely to ever be addressed in such a forum: The extraordinary measures employed by the Fed back in 2008 in an effort to prop up the international banking system have forever altered the mode of transmitting credit into the economy. This has caused a broad based reset of the banking food chain at a time when the US economy could least afford for such a change to occur.

These extraordinary measures will be with us until the US Dollar hits its breaking point, and the inevitable currency reset begins to pick up steam. When this occurs, Dr. Yellen and the Senate Banking Committee are likely to be the last to know.

Bitcoins, Economics, Monetary Theory, Politics

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

April 28, 2014 David Mint

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

Anarchy: Athiesm with Regards to Government, Empire, Politics, Strategy

Robert D. Kaplan’s Clairvoyance on Emerging Anarchy

February 6, 2014 David Mint

2/6/2014 Portland, Oregon – Pop in your mints…

Robert D. Kaplan, Stratfor’s Chief Geopolitical Analyst, published in interesting report yesterday recounting his clairvoyance in predicting the rise of anarchic rule in certain African states (predictions that came to pass) and the general erosion of state governance throughout the world.

Kaplan’s observations are of particular interest to us, as we hold the belief that Anarchy is an Ultimate Given, meaning that groups of people tend to search for a coordinated approach to their inherently anarchic surroundings, the most recent of which has been the democratic nation state.

While Kaplan’s analysis appears to paint a picture of chaos and lawlessness, which indeed are the hallmarks of regime change, we see democratic nation states and their attendant monetary regimes as things that the world is currently shedding for its ultimate betterment, as they now serve to restrict trade instead of facilitating it as once was their chief contribution to the livelihood of the governed.

The continued adoption of communication via the internet is moving toward a state of maturity from which the natural progression towards internet facilitated trade amongst parties is causing the world to eschew the label of their respective nation state and replace it with one of religion or other shared affinities which are readily accessible given the pace of mobile communication expansion.

Kaplan also makes a clear distinction between the need for strong governance of urban societies whereas rural/agrarian societies tend to govern themselves, a point that is lost on most observers, not the least of which are the political classes in the current nation state, which tend to focus on national borders as the only limitations to their sphere of influence.

While Kaplan’s analysis is interesting and serves to explain what is likely to continue to occur for the next 5 to 20 years in terms of the erosion of central governments, he appears unable to speculate as to what form the governing body of a large geographical area would take.

As such, we will speculate for him. The world is in the process of segregating itself into phyles, or groups of people aligned in terms of ideologies, be they religious or otherwise, independent of geographic location. These phyles will tend to unite, geographically where possible, but primarily through trade relationships. Once these trade relationships are established, the increased division of labor will resume within the phyles, giving rise to a true increase in the Monetary premium of items that up until now have not been identified as money.

Bitcoin is one example of what is essentially a pure monetary premium transmitter. As the nation states continue to crumble, the foundations for new societies united by ideology and/or trade relations are already being laid, and we hope and pray for a peaceful transition onto them for all, as the failed model of the democratic nation state based on mere borders must be laid to rest peacefully for humankind to truly prosper.

Without further ado, Robert D. Kaplan…

Why So Much Anarchy?

By Robert D. Kaplan

Twenty years ago, in February 1994, I published a lengthy cover story in The Atlantic Monthly, “The Coming Anarchy: How Scarcity, Crime, Overpopulation, Tribalism, and Disease are Rapidly Destroying the Social Fabric of Our Planet.” I argued that the combination of resource depletion (like water), demographic youth bulges and the proliferation of shanty towns throughout the developing world would enflame ethnic and sectarian divides, creating the conditions for domestic political breakdown and the transformation of war into increasingly irregular forms — making it often indistinguishable from terrorism. I wrote about the erosion of national borders and the rise of the environment as the principal security issues of the 21st century. I accurately predicted the collapse of certain African states in the late 1990s and the rise of political Islam in Turkey and other places. Islam, I wrote, was a religion ideally suited for the badly urbanized poor who were willing to fight. I also got things wrong, such as the probable intensification of racial divisions in the United States; in fact, such divisions have been impressively ameliorated.

However, what is not in dispute is that significant portions of the earth, rather than follow the dictates of Progress and Rationalism, are simply harder and harder to govern, even as there is insufficient evidence of an emerging and widespread civil society. Civil society in significant swaths of the earth is still the province of a relatively elite few in capital cities — the very people Western journalists feel most comfortable befriending and interviewing, so that the size and influence of such a class is exaggerated by the media.

The anarchy unleashed in the Arab world, in particular, has other roots, though — roots not adequately dealt with in my original article:

The End of Imperialism. That’s right. Imperialism provided much of Africa, Asia and Latin America with security and administrative order. The Europeans divided the planet into a gridwork of entities — both artificial and not — and governed. It may not have been fair, and it may not have been altogether civil, but it provided order. Imperialism, the mainstay of stability for human populations for thousands of years, is now gone.

The End of Post-Colonial Strongmen. Colonialism did not end completely with the departure of European colonialists. It continued for decades in the guise of strong dictators, who had inherited state systems from the colonialists. Because these strongmen often saw themselves as anti-Western freedom fighters, they believed that they now had the moral justification to govern as they pleased. The Europeans had not been democratic in the Middle East, and neither was this new class of rulers. Hafez al Assad, Saddam Hussein, Ali Abdullah Saleh, Moammar Gadhafi and the Nasserite pharaohs in Egypt right up through Hosni Mubarak all belonged to this category, which, like that of the imperialists, has been quickly retreating from the scene (despite a comeback in Egypt).

No Institutions. Here we come to the key element. The post-colonial Arab dictators ran moukhabarat states: states whose order depended on the secret police and the other, related security services. But beyond that, institutional and bureaucratic development was weak and unresponsive to the needs of the population — a population that, because it was increasingly urbanized, required social services and complex infrastructure. (Alas, urban societies are more demanding on central governments than agricultural ones, and the world is rapidly urbanizing.) It is institutions that fill the gap between the ruler at the top and the extended family or tribe at the bottom. Thus, with insufficient institutional development, the chances for either dictatorship or anarchy proliferate. Civil society occupies the middle ground between those extremes, but it cannot prosper without the requisite institutions and bureaucracies.

Feeble Identities. With feeble institutions, such post-colonial states have feeble identities. If the state only means oppression, then its population consists of subjects, not citizens. Subjects of despotisms know only fear, not loyalty. If the state has only fear to offer, then, if the pillars of the dictatorship crumble or are brought low, it is non-state identities that fill the subsequent void. And in a state configured by long-standing legal borders, however artificially drawn they may have been, the triumph of non-state identities can mean anarchy.

Doctrinal Battles. Religion occupies a place in daily life in the Islamic world that the West has not known since the days — a millennium ago — when the West was called “Christendom.” Thus, non-state identity in the 21st-century Middle East generally means religious identity. And because there are variations of belief even within a great world religion like Islam, the rise of religious identity and the consequent decline of state identity means the inflammation of doctrinal disputes, which can take on an irregular, military form. In the early medieval era, the Byzantine Empire — whose whole identity was infused with Christianity — had violent, doctrinal disputes between iconoclasts (those opposed to graven images like icons) and iconodules (those who venerated them). As the Roman Empire collapsed and Christianity rose as a replacement identity, the upshot was not tranquility but violent, doctrinal disputes between Donatists, Monotheletes and other Christian sects and heresies. So, too, in the Muslim world today, as state identities weaken and sectarian and other differences within Islam come to the fore, often violently.

Information Technology. Various forms of electronic communication, often transmitted by smartphones, can empower the crowd against a hated regime, as protesters who do not know each other personally can find each other through Facebook, Twitter, and other social media. But while such technology can help topple governments, it cannot provide a coherent and organized replacement pole of bureaucratic power to maintain political stability afterwards. This is how technology encourages anarchy. The Industrial Age was about bigness: big tanks, aircraft carriers, railway networks and so forth, which magnified the power of big centralized states. But the post-industrial age is about smallness, which can empower small and oppressed groups, allowing them to challenge the state — with anarchy sometimes the result.

Because we are talking here about long-term processes rather than specific events, anarchy in one form or another will be with us for some time, until new political formations arise that provide for the requisite order. And these new political formations need not be necessarily democratic.

When the Soviet Union collapsed, societies in Central and Eastern Europe that had sizable middle classes and reasonable bureaucratic traditions prior to World War II were able to transform themselves into relatively stable democracies. But the Middle East and much of Africa lack such bourgeoisie traditions, and so the fall of strongmen has left a void. West African countries that fell into anarchy in the late 1990s — a few years after my article was published — like Sierra Leone, Liberia and Ivory Coast, still have not really recovered, but are wards of the international community through foreign peacekeeping forces or advisers, even as they struggle to develop a middle class and a manufacturing base. For, the development of efficient and responsive bureaucracies requires literate functionaries, which, in turn, requires a middle class.

The real question marks are Russia and China. The possible weakening of authoritarian rule in those sprawling states may usher in less democracy than chronic instability and ethnic separatism that would dwarf in scale the current instability in the Middle East. Indeed, what follows Vladimir Putin could be worse, not better. The same holds true for a weakening of autocracy in China.

The future of world politics will be about which societies can develop responsive institutions to govern vast geographical space and which cannot. That is the question toward which the present season of anarchy leads.

Why So Much Anarchy? is republished with permission of Stratfor.

Follow Stratfor: @stratfor on Twitter | Stratfor on Facebook

Politics, The Mint

On 2013, the year of the Crypto Currency, and Long term Unemployment Benefits Social Programs made Necessary by Debt based Currency

December 28, 2013 David Mint

12/28/2013 Portland, Oregon – Pop in your mints…

As 2013 winds down, it must be acknowledged that in the financial and monetary world, the story of the year has been crypto currencies. Our own awareness that Bitcoin may be something more than a passing fad, our monetary epiphany, if you will, came in March of this year, when we were contacted for assistance in forming a business plan for an exchange. The episode, while it has yet to be fully capitalized on, caused us to look deeply into Bitcoin.

Our Bitcoin Guide Available at Smashwords and Amazon

What we found was astonishing. You can read the details in our eBook on the subject but the jest is that it is digital gold.

As the crypto currency gained in price and popularity, many have been the detractors who have dismissed it on the grounds that it is “nothing”, or a “Ponzi scheme.”. What such detractors fail to realize is that it is they that do not comprehend the very nature of money.

Money, in any form, is nothing more than a concept. All that Bitcoins do is capture this concept, that we refer to as the monetary premium, in its purest form.

JPMorgan Steps Into the Fray

The latest news on the crypto currency front is that JPMorgan is dusting off a patent it filed in 1999 in what is surely a heavy handed effort to exert its primacy in the crypto currency space. Whether or not they will succeed remains to be seen, but one thing is clear, the digital currency space is divided into those who want to mainstream these currencies and being them under sovereign control, and those who do out.

These types of philosophical divisions are as old as time itself, that of the anarchist and the statist, and the schism will remain, though the thought of anarchists and statist sharing a blockchain is interesting indeed.

Dogecoin

Another development worth following is the rise of the Dogecoin, which is all at once a joke and a serious foray into the crypto currency space. You see Dogecoin is one of many cryptos that we foresaw coming into existence back in April and is further proof that the fiat currencies of the world are wholly inadequate and act as a restraint on human trade rather than a facilitator of it, which is really their only redeeming quality.

It is a beautiful irony that a fellow Portlander had a hand in creating it.

Why Long Term Unemployment Benefits Must be Extended

Those who have suffered through The Mint for any amount of time are likely aware of our Libertarian and Anarchist philosophical sympathies. As such, it may come as a surprise that we believe that most Social Safety nets should be maintained. As such, we think that lawmakers are making a grave error in failing to extend the emergency extensions to the Federal unemployment programs that have recently expired.

It is not that we champion sloth or laziness, as our position may cause some to assume, (though we admit that at times, our own inner-laziness gets the best of us).

Our reasoning behind this position is that poverty, joblessness, the skyrocketing cost of living and the like are largely a result of the current, insane debt based monetary system in which the United States and much of the world have been forced to live for over a century now.

As one looks back on the origins of what has become known as the Social Contract, it must be noted that they occurred in the 1930s after the great depression had ravaged the country. What the politicians realized was that they had a very big problem on their hands, the workforce was severely “dislocated,” to use today’s terminology. What they did not realize that the cause of this was the currency act that had been signed back in 1913, when debt, in the form of Federal Reserve Notes, became money.

The mandate for the American populace to use this system amounted to a cosmic shift in everything the American workforce knew about money and how to make it. The economic rules had been turned on their head, and it would take a very long time for an honest and hard working people to understand that in the new system, the only way to get rich was to severely indebt oneself.

Indeed, today many still do not get it. However, the debt based currency system must keep growing in order for it to remain viable, meaning that contrary to the beliefs of some, the Federal Government will always run a deficit, or at least strive to, and the largest companies will be the ones who are able to indebt themselves faster than their rivals and convince others to do so.

Using debt as currency changed the entire societal paradigm, making Social Safety nets a necessary part of the landscape, not because people were better off or well cared for as a result of them, rather, because the debt based currency system requires every member of society to participate in order for it to perpetuate itself. Even those who are unemployed must be given some currency to circulate so that they stay attached to the game.

Otherwise, if too many of them stayed out of the game for too long, as is the case now with youth in much of Europe and even here in America, they may just realize that there is much work to be done outside of the currency system, and that, in fact, the debt based currency system acts as a giant straight jacket on human potential.

If they dwelt upon the above clever metaphor, as you may find yourself doing now, fellow taxpayer, they might understand that Bitcoin, Dogecoin, and other crypto currencies are the latest attempt by humanity to break out of the straight jacket.

If efforts to hinder them, such as JPMorgan’s patent filing, ultimately fail, as we believe they will (at least in practice), the straight jacket of debt based currency will be off and the systems of the nation state which supported them will become relegated to the second class status they so richly deserve.

The very concept of Unemployment is made necessary by debt based currencies, as such, it is right that they should provide Safety nets to catch those who fall out of the workforce. At this stage, it is inconceivable that the current Congress would cut these benefits, for to do so is to plant but one more nail in the coffin of the current debt based currency system, and to encourage a new and better understanding of money, one that will benefit both humankind and the creation itself.

Stay with us, there is much more to come.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 27, 2013

Copper Price per Lb: $3.35
Oil Price per Barrel: $100.32

Corn Price per Bushel: $4.28
10 Yr US Treasury Bond: 3.01%
Mt Gox Bitcoin price in US: $779.89
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,214

MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.0%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 16,478
M1 Monetary Base: $2,620,500,000,000

M2 Monetary Base: $11,050,600,000,000

Empire, Politics

Observations on the Government Shutdown

October 3, 2013 David Mint

10/3/2013 Portland, Oregon – Pop in your mints…

A mere 48 hours into the first shutdown of the Federal Government, life in the land of the free appears to be carrying on as normal for most non-Federal employees. Even Federal employees, while technically not getting paid, at least have some measure of certainty that they will get their jobs back and will likely be paid for the time they missed, unlike many unemployed Americans.

Much of the MSM commentary to this point has centered on the current budget standoff being nothing more than a childish spat amongst Congressmen who possess an increasingly common blend of arrogance and ignorance that is almost a prerequisite for public office circa 2013. For the MSM, anything other than business as usual is abnormal. What this analysis fails to recognize is that what is truly abnormal is what passes as business as usual for the Federal Government.

The current shutdown of the Federal Government is revealing on a number of levels. It is an exceptionally bold gambit being played by the faction of the Republican party that has brought the machinations of the Federal government to an unplanned halt. Amongst the revelations that have surfaced are the following:

The Federal government has somewhere on the order of 800,000 “non-essential” employees. The President is the one who decides which classes of employees are essential and non-essential. The President’s choices provide an interesting insight into his priorities. The distinction between essential and non-essential functions should also inform future discussions about austerity.
The President, in delaying the penalties for businesses with regards to the Affordable Care Act for a year, neglected to offer the same treatment for individuals. While on the surface, this appeared to be an administrative move, the faction of Republicans who are blocking a clean continuing resolution have called the President out on this slight of the American Public.
The Affordable Care Act provides for the addition of 16,000 IRS agents and zero doctors via direct funding provisions, a statistic that seems to defy logic and highlight the core function of the government as tax collector. Any increase in the availability and quality of care is left to market forces guided by government policy, a scenario that has failed in the sense that it produces sub-optimal results in every sphere where it has been applied.
Even if there was a clear administrative need to selectively apply the Affordable Care Act’s provisions, the act of selectively applying the laws provisions undermines the credibility of the law itself and in practice gives the President near dictatorial powers. This is a matter of principle that is worth standing up for. The fact that governance in America has degenerated this far and that it takes a budget or other fiscal crisis for it to rise to the surface is a national tragedy in and of itself. Further, this matter of principle, equality before the law, may be the only appeal to reason that the Republican faction has for what is otherwise an indefensible position. Either the Republicans themselves underestimate its importance or the MSM, in bickering about why certain satellites cannot be launched into space, has abandoned all appeals to reason in the discussion and this fine point of governance is lost on most observers.
The American Economy will eventually be much better off were the Government to remain shut down once it is allowed to adjust to the new realities. If the Fiscal crisis facing the government is as dire as advertised, it should be a no brainer for the government to discontinue any non-essential activities until such time that the nation’s finances improve to a point that they can afford to perform them.
It is reported on a number of fronts that the shutdown will shrink GDP by x% (roughly 1.2% by one estimate) and that $60 billion per day is simply disappearing because the government is not spending it on the wages of non-essential employees. This analysis falls into the classic fallacy of failing to see beyond what has disappeared to envision and recognize what will appear in its absence. While a number of non-essential government tasks are not being performed, a window of opportunity exists for enterprising individuals to undertake tasks that society deems essential but were not possible because a heavily subsidized competitor, i.e. Uncle Sam, had claimed a monopoly on activity. The reality is that the economy is likely to grow exponentially under current monetary policy, regardless of what the government does.

There are many more revelations that are bound to appear before the shutdown is resolved. It will take cutting through the MSM’s shallow analysis to parse it out, but if one keeps their eyes open, they will see the underbelly of the amoeba laid bare, and it is not a pretty sight.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 3, 2013

Copper Price per Lb: $3.27
Oil Price per Barrel: $104.35
Corn Price per Bushel: $4.41
10 Yr US Treasury Bond: 2.63%
Mt Gox Bitcoin price in US: $125.68
FED Target Rate: 0.08%
Gold Price Per Ounce: $1,318
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.3%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 15,395
M1 Monetary Base: $2,470,500,000,000
M2 Monetary Base: $10,789,400,000,000

Personal Finance, Politics

Obamacare Calculator and Deadline to Avoid Tax Penalties Approaching

September 30, 2013 David Mint

As the threat of a Government shutdown looms, another important deadline, one with more individual implications, is looming.

While we do not pretend to understand the workings of the Affordable Care Act, we do understand that it will have a dramatic impact on both the health care industry and individual budgets, an impact that is difficult to calculate.

As a public service here at The Mint, we are embedding a calculator created by the Kaiser Family Foundation which will give individuals and families a general idea of how Obamacare will affect their premiums:

In any event, it is important to understand that, barring Congressional action to the contrary, anyone who does not have coverage in place before January 1, 2014, will pay a penalty on their tax return equal to $95 or 1% of their 2013 income, whichever is greater. If you do not have coverage, this government website can help guide you:

https://www.healthcare.gov/index.html

But you must act fast as, according to Gary North, whom we must thank for providing this information, the above link will no longer be available after midnight tonight as the government run health insurance exchanges will go live.

Again, you must have a health plan in place before January 1, 2014 to avoid paying a penalty on your 2013 taxes.

Stay healthy and fresh!

Politics, The Mint

Why the FED will Increase the Target Rate Before Tapering and the DC Budget/Debt Ceiling Paralysis Matters Not

September 27, 2013 David Mint

9/27/2013 Portland, Oregon – Pop in your mints…

Autumn is upon us here in the Northwest. As in most places, it is a refreshing return to the dance of life that we will live together over the next nine months under the requisite cover of rain and cloud.

If occurrences in nature can be trusted as future economic guidance, we are setting up for a phenomenal year in terms of production. Salmon runs up the Columbia basin, which were once nearly extinguished altogether, are crushing all previous records this year, and word is that the Tuna catches in terms of quantity are staggering. Corn yields further east in Minnesota are on pace to increase even on a decrease in acreage planted.

Even the Mushroom pickers are reporting a bumper crop.

Mushroom picking; illustration to III tome "Pan Tadeusz" circa 1860 by Franciszek Kostrzewski — Mushroom picking; illustration to III tome “Pan Tadeusz” circa 1860 by Franciszek Kostrzewski

Nature is doing its part to provide for us on any number of fronts, despite what Malthusian apologists and central planners may say, the only thing holding humankind back are the restrictions that it places upon itself.

Chief among these restrictions is the unnatural monopoly that exists with regards to the production of money and credit, which paradoxically are one in the same in the current “debt is money” scheme under which the entire financial world operates. For the uninitiated, the monopoly that we speak of is that of the Central Banking institutions, which have been given unchecked authority to manipulate (notice our choice of terminology in place of the more quaint verb “setting” which is normally propagated) short (and now long term) interest rates as well as to determine what serves as legal tender.

Add to these monopolistic practices the ultimate authority to collect taxes and the extent of the monopoly which Central Banks have been granted becomes clear.

Given the existence of this monopoly, it is little wonder that those who make their living by working closely with money and debt, as we do, or those who hold a large amount of money and debt instruments examine the actions of the Central Banks with a great deal of anticipation and scrutiny.

The Central Banks are not to be watched because they have anything special or relevant to offer in the form of clairvoyance or enlightenment, rather, they are to be watched in the same way a pack of dogs must be watched when boarding an airplane, for their movements, while unproductive, tend to bother and in the worst of cases, cause harm to the rest of the passengers.

Against this backdrop, the captive watchers of the Federal Reserve were somewhat surprised this past Thursday that the Central Bank decided to delay their much anticipated “tapering” operation. The decision to leave the current amount of money printing (Quantitative easing, that is) at current levels, which amount to roughly $115 Billion per month, was welcomed with a certain degree of shock by those who were certain that the program would be discontinued in light of the recent strength in the US economic data reports.

Entitlement: Why the FED will Raise the Target Rate Before Tapering

The decision did not surprise us, however, for the following reason. The Quantitative easing program has essentially become an entitlement in the sense that it guarantees the credit system a buyer of last resort for the current level of mortgage backed and other securities which the FED purchases from their holders. Were this program to be dialed back, it is clear which entities would be hurt by the action. Entitlements of this sort are nearly impossible to take away once they are in place.

On the other hand, the other tool that the FED would theoretically use to signal it was responding to strong economic data by working to tighten credit (something that will not occur within the next three to five years, no matter what the FED does), is by manipulating short term interest rates via the SOMA and POMO. They are more likely to test the waters by letting rates drift higher as this is an action that does not necessarily have direct consequences for certain market actors. While some of the consequences are predictable, they are in the end indirect consequences, which give them less the feel of an entitlement, which is what the QE program has become.

In any event, by espousing a policy of giving “Forward Guidance,” which theoretically gives juice to existing policy actions by providing certainty to market participants as to how long certain policies will be in place, the FED is now, monthly, placed in the impossible position of showing the world how much its “word” is worth, as Forward Guidance only works if that guidance is actually reliable.

You see, contrary to what academics such as Michael Woodford, who is credited with originating the Forward Guidance principle, might say, the word of an organization and/or individual, like a debt instrument, can also be discounted based on the prevailing belief as to the extent to which the promises of the individual and/or organization can be trusted.

While the actions of the Federal Reserve, whatever they may be, are for some reason seen as immediately effective is beyond us. In our models it is clear that any action taken by the FED with regards to interest rates does not significantly impact price and wage levels outside of the financial sphere for three to five years. Nevertheless, the Federal Reserve actions are observed by algorithms which “think” differently than we do, and it is these algorithms which drive large scale equity trading circa 2013.

Fiscal Policy vs Price Levels: Why the DC Budget/Debt Ceiling Paralysis Matter Not

Perhaps even more ineffective and innocuous to the economy in the short term than Federal Reserve action are the actions that are taken (or not taken) by the Federal Government.

The news is currently ablaze with the current scenario in Congress which has managed to entangle the Federal Budget, the Debt Ceiling, and Obamacare in the same line of debate. This type of stalemate in terms of budget matters is absolutely normal and to be expected of technically bankrupt entities.

The past three years, which have seen at least two other debates around the debt ceiling as well as various sequesters, furloughs, disastrous tax and fiscal policy, and arguably a complete failure of any inkling of “Forward Guidance” out of the Federal Government, have taught the economic community one very important lesson:

Despite members of each party assuring the public that the outcome of these debates and any failure to act will destroy the economy, whether these debates are resolved or not is of little consequence. The reason that they are inconsequential is that the major actors in the US economy, which are and always will be at least one step ahead of both politicians and central bankers, have already discounted the true impact and likelihood of government action by tacitly adjusting their activities to adapt to the inherent uncertainty.

So relax, the no matter what the FED or Congress do or fail to do, the risks remain firmly on the upside for at least three to five more years or the day that the current “debt is money” system fails, whatever comes first.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 27, 2013

Copper Price per Lb: $3.29
Oil Price per Barrel: $102.77
Corn Price per Bushel: $4.54
10 Yr US Treasury Bond: 2.62%
Mt Gox Bitcoin price in US: $140.00
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,337
MINT Perceived Target Rate*: 0.25%

Events, Politics

Obama Punts Syria to Congress, will Congress Vote to Stimulate the Stock Market?

September 3, 2013 David Mint

As we stated before, what is currently occurring in Syria has serious implications for all of humanity, and with the weight of the world on his shoulders. Obama has chosen to do what any self-respecting statesman, circa 2013, would do. Mr. Obama has punted the question as to whether or not the United States should intervene via military action to the US Congress, who, it would appear, have been pulled away from their leisurely summer pursuits in an effort to inform themselves on the situation before they cast a vote on the matter.

What will they decide? The world is holding its breath in anticipation of the outcome of this latest political charade. For most thinking people, the answer is clear, the US should avoid a conflict that will not only trigger a series of inevitable side shows which are sure to include standoffs with China, Russia, and Iran, complete with Israeli sabre rattling in the background, but will most surely further bankrupt a government which has operated in the red without a budget, let alone a clear foreign policy, for five years running.

Fortunately for investors and unfortunately for the Syrian public and the world at large, the US Congress is not renowned for its thoughtfulness in such matters. While the British MPs took the high road and have prohibited their fearless leader from committing to military intervention, we would expect the US Congress to reluctantly authorize the use of force holding up an ambiguous “moral obligation” as the ultimate reason they have chosen to reluctantly order a military intervention.

Moral arguments aside, war, like zero bound interest rates and quantitative easing, is good for stocks and moneylenders and bad for everybody else involved. Should the US Congress authorize military intervention in Syria in their upcoming vote on the matter, we anticipate a short-term dip in equities, perhaps only a few days, which will present a tremendous buying opportunity.

The situation in Syria is lamentable and a blight on the basic humanity of us all. It is also a powder keg that threatens to further destabilize, were it possible, the fragile Middle East. Should the powder keg go off, equity values are likely to rise dramatically in the medium term against the backdrop of a widespread military conflict.

Unfortunately, price levels for everyday goods will rise even faster. While we hope for a no vote, it would be wise to anticipate a yes vote and plan accordingly.

Key Indicators for September 2, 2013

Copper Price per Lb: $3.27
Oil Price per Barrel: $107.03
Corn Price per Bushel: $4.95
10 Yr US Treasury Bond: 2.75%

Mt Gox Bitcoin price in US: $144.00

FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,396
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.4%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 14,810
M1 Monetary Base: $2,497,600,000,000
M2 Monetary Base: $10,693,300,000,00

The Mint

Category Archives: Politics

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Fresh ideas on Economics, Monetary Theory, Politics, and Less Pressing but Equally Entertaining Matters for the English and Spanish speaking worlds

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Fresh ideas on Economics, Monetary Theory, Politics, and Less Pressing but Equally Entertaining Matters for the English and Spanish speaking worlds