Category Archives: Mint Money Supply Digest

The Great Work of Janet Yellen

3/29/2014 Portland, Oregon – Pop in your mints…

“…Sanballat and Geshem sent to me, saying, ‘Come, let us meet together in the villages in the plain of Ono.’ But they intended to harm me.

            I sent messengers to them, saying, ‘I am doing a great work, so that I can’t come down.  Why should the work cease, while I leave it, and come down to you?’  They send to me four times like this; and I answered them the same way…”

– Nehemiah 6:3

Nearly 30 days and nights have passed since our last correspondence, fellow taxpayer, and we, like Nehemiah, have only one excuse:

We are doing a great work.

Nehemiah’s great work, referred to above, was to rebuild Jerusalem, the Holy City.  He found that, though he had been given authority to perform the work, on the ground, he often encountered hostility and detriments to the work that came from quarters where he had reason to expect help or, at a minimum, indifference.

Our great work at the moment, fellow taxpayer, is to concurrently rebuild a Fiscal department and restore an accounting record that has fallen into disrepair, all while undergoing an annual audit and responding to the day-to-day tasks and myriad of reporting requests which come with the territory of modern financial management.

{Editor’s Note:  While it is a subject for another day, we must comment on the tool of the trade that is being employed in the great work, the Yardi Voyager accounting software.  We last touched Yardi over 10 years ago and, while the software retains many of its origins, the current version is a beast in terms of cloud processing.  We reckon that, given the correct tactician at the helm (which we humbly consider ourselves to be), accounting records in Yardi can be administered by considerably fewer finance staff than many competitors.}

For the moment, we face no hostility and, generally speaking, the finance profession is free from mortal danger.  However, there is great interest in the work as there are ultimately a great number of interested parties, and we find that, like Nehemiah, we are often called to the ‘villages in the plain of Ono’ for other matters.

There are risks in undertaking any great work, and there is also great exhilaration in making progress and ultimately, after facing all of the difficulties and suffering through the doubts of naysayers, doing the impossible.

Janet Yellen’s Great Work

Janet Yellen came onto the job as the Federal Reserve’s first Chairwoman on February 3, 2014, just 10 days after we began our great work.  Unlike ourselves, Yellen has had the benefit of watching her predecessor hone his craft as Vice Chairman for four years and has enjoyed the benefits of the revolving door between government and academia since the early ’80s.

In other words, Yellen has no real world experience, which is a prerequisite to serve in any high-ranking office in America, circa 2014.

A Shameless plug on our volume dealing with the constant unity of Capitalism and Socialism
A Shameless plug on our volume dealing with the constant unity of Capitalism and Socialism, click to purchase

According to her dossier, it counts among her previous great works a study dealing with East Germany’s integration into the German economy upon the reunification of the country. {Editor’s Note:  For those to young or indifferent to recall such matters, the East German integration was a major windfall for West Germany at the time, who then (1990) was jockeying for position in what was to be the European Union.  The reunification caused 16 million more Germans to appear overnight, giving the unified Germany a considerable voice in the negotiations.}  Beyond this, Yellen is given credit for a form of clairvoyance regarding the financial crisis in 2007, apparently seeing something amiss from her post as the President of the San Francisco Fed (she must have seen Jim Cramer’s rant in July).

Janet Yellen now has a new great work to undertake as Chairwoman of the Federal Reserve.  While she was likely performing many of Bernanke’s tasks from at least October of last year when President Obama nominated her as Bernanke’s successor, one task that could not be delegated was that of the press conference.

As such, Yellen took the stage on March 19th, 2013 and dutifully attempted to explain the rationale for the decisions of the Federal Reserve’s FOMC regarding short-term interest rates and its Quantitative Easing programs.

The press conferences, which began under Ben Bernanke, were meant to clear up any confusion, which may have been read into the numbers and written statements provided by the FOMC which had until then served as the primary window for the outside world into the machinations of the committee which decides how much credit will be conjured out of thin air.

For some reason, perhaps the novelty, the press conferences have taken on a life of their own.  The reason for this is that, while the FOMC may have deliberated and arrived at a consensus regarding their curious task, the person who gives the press conference ultimately has the last word and, though the event is meant to be carefully scripted, it cannot help but introduce an element of uncertainty into a process (the conjuring of credit out of thin air) which already defies the laws of economics and indeed works in direct opposition to nature herself.

At minute 20, which we have clipped below, Jon Hilsenrath of Wall Street Journal calls out the fact that there is an upward drift in a dot plot reflecting expectations for short-term interest rates of the individuals on the committee, and how one should reconcile that with the guidance given in the FOMC statement.

Yellen deflects Hilsenrath from the dot plots and then goes on to target the end of 2016 as the time when rates will likely rise.  She also calls out 6.5% as the target for the unemployment rate, and reiterates the eternal 2% target for inflation as triggers for tightening.  As you can see below, unemployment clocked in at 6.7%, meaning tightening could be around the corner.

This degree of upside uncertainty, which Yellen interjected as part of her great work at the press conference, managed to spook markets, as, while 2016 may be a long ways off in Yellen’s mind, as it would be when one is waiting to obtain their driver’s license, for those who are writing bonds today based on the Fed’s guidance, 2016 is in many cases a thing of the past, and Yellen’s utterances shattered a countless number of assumptions that the bond market had begun to hold dear.

Conjuring credit out of thin air is risky business as it is, and when those who are primarily responsible for it attempt to explain their actions, things can become incoherent in a hurry.

In the near future, we may hear Yellen uttering Nehemiah’s refrain the next time she is called to the press conference,

“I am doing a great work, so that I can’t come down.  Why should the work cease, while I leave it, and come down to you?”

For the last time Yellen came down, fixed income nearly imploded.  The risky business of conjuring credit out of thin air is best performed in the dark, if at all.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 29, 2014

Copper Price per Lb: $3.02
Oil Price per Barrel:  $101.07
Corn Price per Bushel:  $4.92
10 Yr US Treasury Bond:  2.71%
Bitcoin price in US:  $501.24
FED Target Rate:  0.08%
Gold Price Per Ounce:  $1,295
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  6.7%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  16,323
M1 Monetary Base:  $2,694,800,000,000
M2 Monetary Base:  $11,229,900,000,000

The Mint Money Supply Digest – July 15, 2013

7/15/2013 Portland, Oregon – Pop in your mints…

Now that summer is in full swing there are few surprises on the horizon and the world, it would appear, is resigned to reluctantly following the current credit cycle on its dramatic upward trajectory. While we do not believe that the centrally managed credit cycles of today are beneficial (indeed, they are quite the opposite) nor do we believe in money in its present form (as long-suffering readers well know), the centrally managed credit cycle is quite predictable and in this sense appeals to our inner laziness.

Some five years ago, the Federal Reserve began doing everything in their power to stimulate credit, as the swoon of 2008, induced by a series of blind 25 basis point hikes in the Fed’s rate target, threatened to choke off the lifeblood of the debt based monetary system.  At the time, we postulated that it would be roughly 39 months before the average man on the street began to feel stimulated the way the Fed’s architects imagined he would.

Now, 60 months on, consumer credit is finally picking up, on net, and everywhere you look the debt soaked economy is on a high.  The money is so hot one risks a scorched retina by merely looking upon it as it flashes through the bond, equity, and commodity charts.

Unfortunately, beyond the glare, the debt based money supply has left some major sinkholes in the economy that either fiscal or monetary policy can patch.  The trick to safely navigating through the coming phase of the most recent edition of credit madness sponsored by central banks across the globe will be to avoid being engulfed by the sinkholes, for at this point there exists not the means nor political will to do so.

Where are the sinkholes?  Alas, if we knew for certain, we would long since have laid our pen to rest in favor of a life of leisure.  However, if we were pressed to guess, we would watch for them to appear under any patch of economic mass holding large sums of cash or long term debt instruments.

Given that criteria, the central banks themselves come to mind.  It is they that will remain trapped in concrete as human progress speeds ahead.

Stay tuned and Trust Jesus!

Stay Fresh!

Key Indicators for July 15, 2013 

The Mint Money Supply Digest – June 27, 2013

6/27/2013 Portland, Oregon – Pop in your mints…

With the last trading day in June in sight, the US equity markets are staging a comeback from their recent collapse.  Nearly everything is along or the ride except for currency alternatives such as Bitcoin and Gold.

While we think the stock markets will continue to post nominal highs, it is painfully apparent that the action over the past few days is smells more of window dressing than any serious near term move higher.  After all, most working Americans are due a statement of their retirement account on June 30, and their asset managers want to make sure they have a number appear that will ensure their employment for another quarter.

In the real world, where window dressing in not an issue, there is a serious problem occurring.  On one hand, there is an unprecedented amount of liquid funds available for deployment.  On the other, there is a world on edge, reluctant to take the bait.

If history is any guide, the recent rise in interest rates will kick start the exchange of money (for we are loathe to call it economic activity) and the central bankers of the world will have all the velocity they can handle to go along with their unprecedented creation of currency.

It will be quite a ride, and when it is finished, we will either have a large increase in overall price levels and a severely disjointed and dysfunctional economy, or we will have a full scale currency collapse and a severely disjointed and dysfunctional economy.

Either way, dollar holders lose.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 27, 2013

Copper Price per Lb: $3.02
Oil Price per Barrel:  $96.82
Corn Price per Bushel:  $6.67
10 Yr US Treasury Bond:  2.48%
Mt Gox Bitcoin price in US:  $102.59
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,201
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  15,024
M1 Monetary Base:  $2,452,200,000,000
M2 Monetary Base:  $10,628,800,000,000

The Mint Money Supply Digest – June 24, 2013

6/24/2013 Portland, Oregon – Pop in your mints…

And then there were two.

The liquidity drain initiated by the People’s Bank of China has caused a fire sale on financial assets across the globe as Chinese banks scramble to make various margin calls in the face of double-digit overnight rates.  Lee Adler, over at the Wall Street Examiner, offers some insight into the big squeeze currently underway:

US and Japan Pump It, Chinese Dam It and Suck, And Europe Sullenly Suffers Shrinkage

For the uninitiated, we beg of you to take a step back and to leave, just for a moment, any thought of “efficient market” hypotheses and market fundamentals behind and see the financial world for what it is:  A bunch of corporations with large credit card bills to pay and margin calls to meet.

Like anyone who has a large credit card bill to pay or margin call to meet, the ability to meet the obligation is more often than not determined by the willingness of other large corporations in similar situations to lend them money.  If they can, great, the credit rolls over.  If not, assets must be liquidated so that the debt can be paid.

The flaw in efficient market theory, with regards to financial markets, is that it implies stability when, in fact, most debtors, especially big ones, only liquidate assets as a final option.  As such, this type of liquidation often occurs suddenly and with little warning, hence the feeling of panic and cascading financial markets.

At their core, equity markets represent decisions at the margin. They often reflect this type of liquidation in an exaggerated manner.  In an odd way, this sort of whiplash seems to be the only way to spur Central bankers into action.

The actions of the PBoC suggest that they have had enough of the easy money policy that has dominated Central Bank actions for the past five years.  They have pulled the plug.  Does it have anything to do with Mr. Snowden?  Who knows, but it is what it is.

As it stands now, the Federal Reserve and Bank of Japan now stand alone on the mountain of insane monetary policy, watching the smoke plumes rise.

Anyone who has perused The Mint no doubt has noticed that we keep a relatively small collection of coins online.  This serves a dual purpose.  First, it allows us to quickly grab marketing copy should we have a particular coin in stock.  Second, it allows us to savor the coin as we attempt to put its dual faces into words.  Normally, this can be a tedious and relatively dull process.

1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981
1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981

Today was different, as we came across a relatively rare 1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round, minted in 1981.  For those who are unfamiliar with Harry R. Truman, we offer our marketing copy as a brief descriptor:

On one side of this coin is a bust of Harry R. Truman, the caretaker of the Mount St. Helens Lodge at Spirit Lake who stubbornly refused to leave his home even as the historic eruption was imminent. Truman was 84 when the Mount St. Helens erupted and is presumed to have died along with his 16 cats and 56 others that fateful day on May 18th, 1980. Truman’s bust is surrounded by the inscriptions “Courage,” “Spirit,” “Determination” above and his name, “Harry R. Truman” and the years he was born and died, “1896 – 1980″ below. The letters “KU” appear to the right, their meaning is unknown.

On the other side of this reeded coin is a depiction of Mount St. Helens erupting flanked by the inscriptions “One Troy Ounce” and “.999 Fine Silver,” to indicate its weight and silver content. The top of the coin, just above the smoke plume, is adorned with the inscription “First Anniversary.” Below the mountain are inscribed “1980 – 1981,” and the words “Mount St. Helens.” These beautiful coins are a great way to inspire your friends, loved ones, and co-workers by recalling the finer qualities of a man who became a hero for sticking by his desire to ride out a violent act of nature, come what may.

Mr. Truman, may he rest in peace, in many ways represents the Fed and BoJ today.  The other Central Bankers of the world have stepped cautiously back, away from the dreadful inflation for which the eruption of Mount St. Helens will serve as a handy metaphor of today.

1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981
1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981

Not Mr. Bernanke and his Japanese counterparts.  Both the US Dollar and Yen have been on the mountain longer than many of their counterparts, and their current caretakers are convinced that the bubbling inflation that their policies are stoking will simply blow over as they has in the past.

Are they right?  Or is it time to move away a safe distance from the mountain?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 24, 2013

Copper Price per Lb: $3.03
Oil Price per Barrel:  $94.85
Corn Price per Bushel:  $6.53
10 Yr US Treasury Bond:  2.55%
Mt Gox Bitcoin price in US:  $122.89
FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,283
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  14,660
M1 Monetary Base:  $2,432,200,000,000
M2 Monetary Base:  $10,621,100,000,000

The Mint Money Supply Digest for June 17, 2013

6/17/2013 Portland, Oregon – Pop in your mints…

Over the past week the M1 money supply has come roaring back from its relative collapse over the prior two weeks.  Today, the measure sits at $2.6 trillion.

For the uninitiated, the M1 and M2 Money supply measures, published on a weekly basis by the Federal Reserve, are defined as the following:

M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler’s checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler’s checks, demand deposits, and OCDs, each seasonally adjusted separately.

M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

In layman’s terms, the M1 Money supply is what we refer to as “Money on the street,” or cold hard cash.  It is the part of the money supply that is otherwise unencumbered or loaned out on float.

The M2 Money supply is perhaps best defined as the Money on the street (M1) plus all of the money that customers think is held at banks but is really loaned out.

In the past, the Federal Reserve also published the M3 (Broad) Money supply measure, which was essentially all of the money that customers had, thought they had, and/or thought that they could receive (via the inclusion of money market funds and repo instruments).  It was perhaps the truest measure of the money circulating in an economy  in aggregate.  In addition to base money, demand deposits, and time deposits, M3 included what the largest treasuries were holding in quasi money instruments . The Federal Reserve stopped publishing the measure on  March 23, 2006 as it began to launch into the stratosphere.

While the Broad money supply (M3) may have crossed the line into credit instruments {Editor’s Note:  Here at The Mint we recognize all Central Bank notes as credit instruments by definition}, it was an excellent proxy for inflation, for it gave demonstrated the sum total of how many players were participating in the game of monetary musical chairs that the banks and large treasuries play every evening when they settle up.

The M2/M1 Ratio

Today, we submit for your perusal, a graphic of the M2 Money supply divided by the M1 Money supply (the M2/M1 Ratio) by month for the data sets since January 1, 1959, the first year that the data is easily retrievable, through the first week of June.

Historical Ratio of M2 / M1 Money Supply Measures
Historical Ratio of M2 / M1 Money Supply Measures

For purposes of interpretation, the chart shows the degree to which the M1 Money supply is “leveraged” by commercial banks to create what is reported in the M2 figures.  Bear in mind this ratio is a function of both bank reserve requirements and consumer behavior.  Generally speaking, the M1 and M2 Money supply measures have been increasing over the span of the chart.

The ratio between them, however, has been on a general increase as well, meaning that the M1 measure has been leveraged.  This leverage appears to have peaked around 5.4 during the meltdown of late 2008 and early 2009.  Ever since then, it has been on a steady decline and currently stands at 4, just a shade above the straight average of 3.7 for the entire data set.

At a glance, it would appear that the economy, in terms of the M2/M1 ratio, is returning to a healthy balance.  In practice, this means that the game of musical chairs that occurs at the Fed settlement each night is a bit less stressful for the participants.

Unfortunately, this ratio appears to be historical with little predictive value save that perhaps a ratio of 5/1 being an indication that the monetary base is overextended.

For the moment, with the downward trend in the ratio intact, it appears that the monetary base that the Federal Reserve has gone to great pains to pad via its QE programs, is intact and ready to support an increase in economic activity.  Howver, one must keep in the back of their mind that the money supply itself is fragile, and if confidence in the Fed were to evaporate, all bets are off.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 17, 2013

Copper Price per Lb: $3.19
Oil Price per Barrel:  $97.78
Corn Price per Bushel:  $6.68
10 Yr US Treasury Bond:  2.17%
Mt Gox Bitcoin price in US:  $106.99
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,385 THE GOLD RUSH IS ON HOLD FOR THE SUMMER!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  15,180
M1 Monetary Base:  $2,634,300,000,000
M2 Monetary Base:  $10,586,200,000,000

The Mint Money Supply Digest for June 11, 2013

6/11/2013 Portland, Oregon – Pop in your mints…

Here at The Mint we have been invited to take part in a summer ritual dating back to 1887, one which we have abstained from participating in for one reason or another for twelve years:  Softball.

We began what was a reintroduction to the ritual last night in a double header.  There was much familiar and generally a good time was had by all.  What was unfamiliar was the unexpected mind/body dynamic that took place as we laced up the cleats, grabbed our glove, and pulled our hat down.

As we trotted out to center field, a position chosen entirely at random as time constraints forced our team to tacitly choose positions on the fly, our mind took a trip back some 20 years to our high school baseball days.  Unfortunately, our body, which must deal with reality, did not make the trip.

The Georgia Peach in a 1910 photo Courtesy of the George Grantham Bain Collection (Library of Congress)
The Georgia Peach in a 1910 photo Courtesy of the George Grantham Bain Collection (Library of Congress)

What followed was a series of misguided exertions and poorly judged balls that passed for softball only by virtue of our dress and physical location.  While we avoided striking out, the results were far from optimal.  With every successive exertion, our already limited range in the position made famous by Ty Cobb, Mickey Mantle, and Willie Mays, became even more limited while the range perceived by our 17 year old mind grew to that exercised by the Georgia Peach himself.

Towards the end, we found ourselves playing just a shade off the infield and found ourselves in a number awkward instances where we were unnecessarily obligating ourselves to replicate Mays’ famous Catch with quite different results.

However, today is another day and brings another double header with it.  How will it turn out?  Fortunately, our body is only beginning to seize up and we should avoid the full physical consequences of last nights folly until at least tomorrow.

The M1 money supply is racing upwards once again after a dramatic drop over the past two weeks.  Equities, Fixed Income, and Gold are beginning to exhale, which means an inordinate amount of dough is set to run through a supermarket near you.

To make matters worse, or better, depending upon your preference for more Quantitative Easing on the part of the FED, the BLS (sans L) Unemployment rate ticked up to 7.6%, virtually ensuring that the program will remain in place.  Despite recent speculation of a taper, QE is the only thing standing between the big banks and insolvency.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 11, 2013

Copper Price per Lb: $3.19
Oil Price per Barrel:  $95.25
Corn Price per Bushel:  $6.59
10 Yr US Treasury Bond:  2.19%
Mt Gox Bitcoin price in US:  $106.99
FED Target Rate:  0.11%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,378 THE GOLD RUSH IS ON HOLD FOR THE SUMMER!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  15,171
M1 Monetary Base:  $2,585,400,000,000
M2 Monetary Base:  $10,489,300,000,000

 

The Mint Money Supply Digest for May 28, 2013

5/28/2013 Portland, Oregon – Pop in your mints…

Jimmy Buffet hit the jackpot when he penned a three chord melody back in 1977:

Margaritaville:  Welcome to ‘Margaritaville,’ the most lucrative song ever.

While it is difficult to comprehend the moral implications of the fact that Margaritaville currently holds the throne as the most lucrative song ever, what is not difficult to comprehend is its allure, a laid back, carefree lifestyle tinged with a hint of regret and melancholy made tolerable by the beach and the “frozen concoction that helps me hold on.”

It is a lifestyle whose allure quickly fades to the harshness of its demands.  Beyond the headaches and marked lack of depth in human relations, alcohol sans moderation will inevitably hasten one’s march to the grave.  Indeed, despite the headlines received by the AIDS epidemic, warfare, and famine, it is often an addiction to cheap alcohol and that contributes to shortened lifespans in developing nations.

There is no way around it, alcohol is hard on one’s system.

As alcohol is hard on the human system, cheap money is hard on the real economy, and will eventually be purged.  At the moment, the M1 money supply is collapsing as the increasing doses of cheap credit have an ever decreasing effect on the real world hangover that awaits at the end of this binge.

Expect the Federal Reserve and the Central Banks of the world to fire up the blenders and roll out the kegs, for a drunk economy is the only one they know.

You can watch Buffet perform his three chord pot of gold here: 

How long will the frozen concoction help them hang on?  Probably not too much longer.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 28, 2013

Copper Price per Lb: $3.30
Oil Price per Barrel:  $95.01
Corn Price per Bushel:  $6.66
10 Yr US Treasury Bond:  2.13%
Mt Gox Bitcoin price in US:  $128.50
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,381 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  15,409
M1 Monetary Base:  $2,429,700,000,000 ANOTHER MARKED DROP
M2 Monetary Base:  $10,544,600,000,000

The Mint Money Supply Digest for May 24, 2013

5/24/2013 Portland, Oregon – Pop in your mints…

We were honored yesterday to be mentioned alongside a host of names with more weight and prestige than our own by a writer whom we greatly admire, Jason Hommel, on a list he has compiled of Christian Libertarian resources.  We have often referred to Mr. Hommel’s vast trove of research into both the silver market and eschatology (specifically the scriptural and empirical support for a pre-tribulation rapture), which he has published at both the Silver Stock Report and bibleprophesy.org respectively, in our own investigation of these matters.  Indeed, Mr. Hommel has performed the world a great service through much of what he shares.

While we do not know him personally, we appear to share similar interests and applaud his bold search for truth and, perhaps more importantly, the tenacity with which he defends it once discovered.  Most who have tried find that truth is not often welcomed this side of heaven, at best it is ignored and then attacked as others come to know it.  Well done Jason, we cheer you on from our corner of the world and wish you all the best!

The matter gave us pause to think about what it means to be a Christian Libertarian.  Indeed, some who may be reading this site on Mr. Hommel’s may wonder where we stand on certain matters.

There two things that we we know.  One, that the God of the Bible is the one true God, and that He is our friend.  He revealed himself to us and, we believe to all of humanity, through the Messiah, commonly known as Jesus in our experience.  In this revelation, he made it clear that we are to Forgive as He has forgiven us, it is his one simple requirement.  Sacrifices are meaningless, what He desires is to be close to us.  We know that we will live with Him for eternity, no matter what happens here and now.

If this makes us a Christian, so be it.

We also recognize that God has given all of us a free will, which is a logical precondition for His relationship with us.  Some use this free will to liberate others, some use it to enslave them.

Yet it is clear that the whole mass of humanity is obligated to respond to the demands of an inherently anarchic world of our own devising because of our willful ignorance and defiance of God.  For both those of us who know and love God and those who are either ignorant of or defiant towards Him, our only hope of survival lies in our willingness to peacefully cooperate with one another.  This cooperation works best when it is done voluntarily without compulsion.

If this makes us a Libertarian, so be it.

Naturally, there is much more to say on both subjects, and we do pray that you will tune in from time to time.  We have attempted to collect our stream of consciousness, for lack of a better term, in a series of ebooks.  We are currently working on the last volume of what will be our mini treatise, “To Build up the Land,” which we hope to have on digital shelves by the end of May.

Shifting gears to the Money Supply, the M1 measurement clocked another steep week over week decline, this time on the order of 2.12%.  Again, while the week to week shifts in base money are volatile by nature, this now constitutes an 8% + drop.

This is bad news on a number of levels, and the Central Bankers of the world are now moving into overdrive with respect to money creation.  Will the succeed in holding off the coming depression?

Thanks again for reading and a special thanks to Mr. Hommel, we consider mention on your site to be a great honor.  Be encouraged in your work, for it is extremely important.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 24, 2013

Copper Price per Lb: $3.29
Oil Price per Barrel:  $94.20
Corn Price per Bushel:  $6.57
10 Yr US Treasury Bond:  2.01%
Mt Gox Bitcoin price in US:  $133.55
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,383 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  15,296
M1 Monetary Base:  $2,429,700,000,000 ANOTHER MARKED DROP
M2 Monetary Base:  $10,544,600,000,000

The Mint Money Supply Digest for May 20, 2013

5/20/2013 Portland, Oregon – Pop in your mints…

While the rally in equities continues relatively unchecked, the measure of the M1 monetary base has taken a marked dive of roughly 6.2% since last week, leaving it at a level not seen since April 15th (see the current M1 measure below).

For the uninitiated, the M1 money supply is what we call cash on the street, coins and bills.  In other words, what most people consider spending money.

By nature and by the FED’s own admission, money supply data is highly volatile and subject to revision.  Even so, our own observation has been that folks are short on cash.  While this brief drop is not likely to signal a change in the trend, it has certainly caused some unexpected hiccups in dollar land.

Perhaps not coincidentally, precious metals have continued their near term price collapse.  The price of silver, our preferred investment at The Mint, tanked to nearly $20 overnight Sunday.  While the near term price is somewhat irrelevant, it may be indicative of a rush to meet short term debt obligations by holders of precious metals.

Most media reports read much into price movements, as if they mean something about the real economy.  Unfortunately, the real economy is nothing more than a yo-yo at the end of a string of debt obligations.  Until they wind up the yo-yo and let it be, real economic growth (or contraction of that matter), in terms of debt laden USD land, is nothing more than a myth one reads about in text books and in the main stream financial media.

Eventually, the avalanche of FED funds guaranteed as long as their latest QE pledge is in effect will begin to consistently run into real world asset and commodity prices.  It will feel good, but participants are advised to keep their eye on the punch bowl.  Once it is removed, it will be best to swim near the edge of the pool.

The vanilla crisis is hitting some chocolate patches, try to avoid them.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 20, 2013

Copper Price per Lb: $3.33
Oil Price per Barrel:  $96.71
Corn Price per Bushel:  $6.49
10 Yr US Treasury Bond:  1.97%
Mt Gox Bitcoin price in US:  $119.75
FED Target Rate:  0.11%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,395 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.4%
Dow Jones Industrial Average:  15,335
M1 Monetary Base:  $2,482,200,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,538,200,000,000

The Mint Money Supply Digest for May 14, 2013

5/14/2013 Portland, Oregon – Pop in your mints…

Today finds US equity markets up, in fact, they are eclipsing new nominal records.  The US economy must see a screaming recovery on the horizon, right?

While the economic recovery, which began in the dark days of 2009 continues to plod along at a predictable pace, there are two factors that are contributing significantly to the determined rise of the equity markets.

First and foremost, strange as it may seem, the US Government is actually paying down debt.  A combination of sequester savings, the fiscal cliff with its notable 2% payroll tax increase, and a slew of paybacks on public “investments” made during the financial crisis has the US Treasury somewhat awash in cash, which in turn has caused the supply of US Treasuries on the market to shrink.

In the meantime, the Federal Reserve still has the monetary spigots on full blast and the Primary dealers, who have had their spigots trained on Treasuries, are now directing the overflow into equities, which has caused stocks to rise despite a rise in the US Dollar index (which just passed 83) and the fact that roughly 50% of individual investors are completely out of the stock market.  Once Ben Bernanke has his way with the USD and the individual investors get off the fence, this rally will run quite a ways.

The second, and more important factor that is propelling the US Stock indices to record highs, is that it is Tuesday, the day when most people’s 401K contributions and auto investment plans find their way into equities.  Zerohedge has provided some interesting analysis as to the effect of Tuesdays on stock indices returns which can be ready here:

This is your S&P; This Is Your S&P Without Tuesdays

The vanilla crisis is moving ahead full throttle.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 14, 2013

Copper Price per Lb: $3.27
Oil Price per Barrel:  $94.07
Corn Price per Bushel:  $6.52
10 Yr US Treasury Bond:  1.94%
Mt Gox Bitcoin price in US:  $119.00
FED Target Rate:  0.12%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,427 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  15,176
M1 Monetary Base:  $2,645,900,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,475,500,000,000

The Mint Money Supply Digest for May 10, 2013

5/10/2013 Portland, Oregon – Pop in your mints…

This week’s M2 Monetary base shrunk by roughly $100 billion while the M1 Base grew by $80 billion.  Generally, this means that more Fed cash has left the hypothetical realm and is out in the world, causing mischief in the form of bidding up prices of everyday goods.

Treasury yields have increased since we last checked in to the tune of 14 basis points.  Given that Treasury supply has shrunk over the past month (yes, the US Government actually ran a temporary cash surplus) this decline in yield is not insignificant and may reflect a fundamental change in the dynamic between the Fed and the economy.

Over the past several years, the markets have become accustomed to Quantitative easing taking the form of the Fed printing dollars, lending them to banks at roughly 0.12%, who then soaked up the Treasury supply.  The fundamental change that is taking place is that the QE spigot is no longer being soaked up by the Treasury supply, rather, it is flooding the basements of equity markets around the world.

Until now, the commodity markets have remained surprisingly tame in the face of the monetary tsunami that is rushing over the planet.  We suspect that the moment may be short lived, and that the time to own anything but dollars is once again at hand.

Yes, fellow taxpayers, the world’s first world wide crackup boom is coming to an economy near you.  Batten down the hatches!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 10, 2013

Copper Price per Lb: $3.35
Oil Price per Barrel:  $94.57
Corn Price per Bushel:  $6.75
10 Yr US Treasury Bond:  1.90%
Mt Gox Bitcoin price in US:  $117.78
FED Target Rate:  0.12%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,437 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  15,066
M1 Monetary Base:  $2,645,900,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,475,500,000,000

The Mint Money Supply Digest for May 7, 2013

5/7/2013 Portland, Oregon – Pop in your mints…

The Dow has briefly touched the 15,000 mark once again and frankly, from a money supply standpoint, it may just be getting started.  Ditto for the S&P 500, which is cruising past 1,600 and shows few signs of looking back.

The stock market is front running something.  Conventional wisdom, that of seven years ago, would say that it is front running the economy, that a brighter future is on the horizon.

Here at The Mint, we see the stock market as an indicator of the bloat in the money supply and the default primary beneficiary of those who are unloading the monetary premium embedded in the US dollar.

From the dawn of time, up until 1994, the M2 money supply ran ahead of the stock market.  Logically, money needed to be created before it could be invested.  Then, in 1995, the Glass-Steagall act, which had created a chasm between the commercial and investment flavors of banks since 1933, was effectively repealed as Citicorp and Travelers merged, forcing (or anticipating) the effective repeal of 28 firewalls that Glass-Steagal had set up between the banking sectors.

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

This repeal allowed commercial banks to fund purchases of “Section 20” affiliates, effectively unleashing the credit of the Commercial banking sector into the stock market, and stock indices have front run the M2 money supply ever since (with one notable exception at the height of the 2008 crisis right before the FED threw caution to the wind regarding monetary policy).

The FED will not make the same mistake again.  They have embedded expectations that they are willing and able to print money in quantities necessary to avoid another wholesale collapse in the nominal price of financial assets, what we call the chocolate disaster.

However, the FED cannot avoid a collapse in the relative value of financial assets, which is currently underway.  While the Dow may be headed to 17,000 before its next scheduled breakdown, the wise among us (that’s you and I, fellow taxpayer), must move our gaze to the diminishing relative value of those 17,000 Dow points.

Take the example of gold.  Despite its recent collapse in price, gold, which may have yet another leg down, has shown itself to be incredibly resilient in the face of insurmountable odds, for the same credit mechanism that is used to shamelessly juice the stock market is also used to shamelessly short precious metals.

What is surprising, then, should not be that gold has collapsed some $350 in recent months, but that it has bounced back at all against a financial enemy with an unlimited supply of ammunition.

The physical supply of gold is another story.  As anyone who has attempted to source gold or silver at these rock bottom prices can attest, it has been difficult to say the least, and it will be mid summer before supplies recover from the recent price shock.

Another non productive asset that is gaining on the Dow in relative terms is the Bitcoin.  While the digital currency continues to be too volatile to trade, it is still attractive anywhere under $80.  While not the panacea that many believe it to be, the Bitcoin fulfills a human need that will not soon go away.

Finally, corn, which took a similar early April bath along with a number of commodities, is raging back as well.

It will be an interesting summer indeed as the vanilla disaster continues to pile up.  Soon, owning real assets will be not simply a luxury, but a necessity, as gains in the stock indices are dwarfed by real inflationary pressures.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 7, 2013

Copper Price per Lb: $3.26
Oil Price per Barrel: $95.80
Corn Price per Bushel: $6.79
10 Yr US Treasury Bond: 1.79%
Mt Gox Bitcoin price in US: $105.20
FED Target Rate: 0.15% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,449 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.5%
Inflation Rate (CPI): -0.2%
Dow Jones Industrial Average: 15,012
M1 Monetary Base: $2,565,500,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base: $10,571,400,000,000

The Debut of The Mint Money Supply Digest

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Mint Money Supply Digest for May 3, 2013

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

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

The vanilla disaster is still winning.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 3, 2013

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