Category Archives: Politics

The New Labor Market – Scotland’s Lesson to Labor

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

On Racism – What Many White People do not understand

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

Yellen and the Senate Banking Committee describe a winter economy

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.

Janet Yellen becomes the first woman to chair the Federal Reserve

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.

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

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

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

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

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

Enjoy!

A Discussion of the Merits of Short Term Interest Rate Management

The hypothesis:

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

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

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

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

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

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

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

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

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

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

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

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

Discussion

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

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

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

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

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

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

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

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

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

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

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

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

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

Contributor C:  

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

I like above statement. 

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

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

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 28, 2014

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

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

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

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

Robert D. Kaplan’s Clairvoyance on Emerging Anarchy

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.

Anarchy as an Ultimate GivenKaplan’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.

Read more: Why So Much Anarchy? | Stratfor

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

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

Observations on the Government Shutdown

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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