Elsa Fornero breaks down a she announces Italy’s proposed austerity measures. Nobody in the government likes to see austerity, nobody.
Revolution Fire Continues to Rage, What’s wrong with Anarchy?
For your weekend enjoyment we offer another classic Mint in its original form. Enjoy and have a great weekend!
2/24/2011 Portland, Oregon – Pop in your mints…
Today we can hardly believe our eyes. What appeared to be a simple revolution in a remote land, Tunisia, has begun a chain of events that may touch every person on the planet before it is through. We will call it the “Fire” of revolution, at it seems to be catching everywhere. The grievances of a generation are beginning to be aired in public forums from Tripoli to Madison, Wisconsin. As you are aware, we are of the opinion that the spark for this fire began it what may appear to be a very far away place. Washington, D.C.
While many conspiracy theorists have their own, well, theories, we believe that this is collateral damage from the Federal Reserve’s misguided attempt to leave no debt unpaid by simply printing the money up to pay them. It is simple enough to do in their ivory towers, but the consequences in the real world, in the form of trade and production imbalances, which are sometimes referred to as “Malinvestments,” are absolutely and totally destructive to balance in society.
The consequences of printing money are generally felt in two forms.
The most obvious form is what is being seen in Greece and now Wisconsin. In these cases the government made promises to workers, retirees, and other constituents that they cannot honor. The governments appear to be doing the honest thing and are effectively defaulting on these promises. However, they are attempting to default at exactly the wrong moment, as the increased money supply begins to pinch workers in the developed world. In both cases, many public workers are simply being asked to give up privileges such as the ability to take a long holiday at the beach. In both cases, we are seeing sometimes violent evidence of just how hard it is for the government to default on its promises.
The less obvious and more damaging form of consequences are what we are seeing in Tunisia, Egypt, Yemen, Algeria, Bahrain and Libya. In these cases, the governments are not technically defaulting on promises, rather, they are seen as the scapegoats for rapidly rising food costs which threaten to drive many to the point of starvation. These rising food costs are the indirect result of the governments in the developed world attempting to give their public employees holidays at the beach. Naturally, with the stakes higher in the developing world, a sense of desperation has set in and the pace of and violence involved in the uprisings is markedly higher.
Today we will go one step further at the risk letting the FED off the hook for sparking these revolutions with their insane monetary policy. That step is to postulate that the cause of the flood of money and credit which has lead to higher food prices stems from people’s unwavering faith in their leaders and/or elected governments. This unwavering faith, which stems from people’s need to feel secure, generates an inertia towards demands for a nanny state, in which the government is expected to take care of every legitimate and some illegitimate needs presented to them by the people.
This arrangement appears to work very well as long as the government and/or leader appear to have the means to provide for these needs. This arrangement is also the very reason that the government and/or leader will never have the means to provide for these needs indefinitely. You see, this arrangement generally discourages productive activity and encourages unproductive activity (commonly known as freeloading and currently justified by vague appeals to any myriad of “rights”) which eventually leads to the shortages and imbalances that are at the root of the revolutionary fires that are currently raging.
Central Banks like the FED are simply the enablers of this dangerous “Social Contract” that is being defaulted upon globally before our very eyes. Their motivation for enabling is that the arrangement is extremely profitable for their member banks. When stripped of its veil of legitimacy, the arrangement more resembles a drug cartel than a productive banking system.
So if the desire for government is truly the root of the problem, as we have speculated, then would not anarchy be the solution? No! You say! Anarchy is chaos and destruction! But is it really? In the strict sense of the word, Anarchy simply means the absence of government. In the absence of government, people would quickly understand that they would need to protect and provide for themselves. This understanding would be quickly followed by the realization that in order to do this they will need to deepen their productive cooperation with their fellow man or woman.
When theft is no longer publicly sanctioned, suddenly the Golden Rule would become the law of the land, with its fruits of peace, freedom, and abundance following soon thereafter.
Until people realize that they need God more than they need a government, we will watch violent struggles to fill the vacuums of power currently being created. Struggles that often give us such esteemed leaders such as Moammar Gadhafi in Libya, whose loyal tribesmen chose to ditch multimillion dollar aircraft in the desert rather than follow his orders to bomb the opposition, and Scott Walker in Wisconsin, who apparently has not mastered the use of caller ID or plain old fashioned voice recognition.
Stay Fresh!
Email: davidminteconomics@gmail.com
P.S. If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
Key Indicators for Thursday, February 24th, 2011
If I Had a Trillion Dollars, A Ballad From Ben Bernanke to the Banks (With Apologies to the Bare Naked Ladies)
We send you into the first weekend of December with another Classic Mint. This was written when Quantitative Easing was still relatively new, and the Federal Reserve was on the verge of printing another slew of money. Enjoy and have a great weekend!
11/2/2010 Portland, Oregon – Pop in your mints…
Today and tomorrow the entire world, that is, the investment world, will be watching what the Federal Reserve and its poster boy, Ben Bernanke. What will he do? Most money managers and bond traders are operating under the assumption that he will proceed to create approximately $1 Trillion US dollars out of thin air through a process known as Quantitative Easing (QE), which is nothing more than indirectly confiscating at least $1 Trillion worth of goods and services from those who produce them in good faith and are compelled to accept US dollars in exchange for them.
You see, Mr. Bernanke and his cohorts are presented with an impossible dilemma. If they do nothing, bondholders get absolutely annihilated in short order and the dollar continues as a viable currency. If they proceed with the $1 Trillion QE game, the currency is the sacrificial lamb and the bondholders get a lifeline, but will get annihilated in the end anyway. Essentially it is the choice of when to feel the pain of massive default on dollar denominate paper.
But what must Mr. Bernanke be thinking at this very hour with so much at stake? The world presumably expects $1 Trillion dollars. Logic would follow that, at a minimum, what he must provide to avoid “disruption” in the markets. You see, the markets have long since baked in these $1 Trillion dollars and if they do not appear will adjust prices accordingly. Guessing which prices will change and when is what keeps things interesting.
Our guess here at The Mint is that Mr. Bernanke is not thinking at all. He has his orders; the markets will wait and see if he follows them. What he is likely doing is strumming his guitar and warming up his academic tenor voice with a song that goes something like this:
“If I Had a Trillion Dollars” a Ballad from Ben Bernanke to the Banks (with Apologies to the Bare Naked Ladies):
To the tune of “If I Had a Million Dollars“:
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy the US a house
(I would buy the US a house)
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy the US furniture for its house
(No interest or payments for a year)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy the US a Ford
(And get everyone’s clunker off the road)
If I had a trillion dollars I’d buy your bonds!
(If I had a trillion dollars)
I’d buy the US a house
(I would buy the US a house)
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy the US furniture for its house
(No interest or payments for a year)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy the US a Ford
(And get everyone’s clunker off the road)
If I had a trillion dollars I’d buy your bonds!
If I had a trillion dollars
I’d buy some junk paper from your books
If I had trillion dollars
They could help, it’d be less you’d have to cook
If I had trillion dollars
Maybe we could put like a little collateral in there somewhere
You know, we could just act like everything’s cool
Like show off the CUSIPs and stuff
Then there would still be liquidity available to us
As if we never bought subprime CDOs and other things
I’d buy some junk paper from your books
If I had trillion dollars
They could help, it’d be less you’d have to cook
If I had trillion dollars
Maybe we could put like a little collateral in there somewhere
You know, we could just act like everything’s cool
Like show off the CUSIPs and stuff
Then there would still be liquidity available to us
As if we never bought subprime CDOs and other things
They have endless liquidity but they don’t have asset quality anymore
Thanks to me, of course,
Uh, yeah
Thanks to me, of course,
Uh, yeah
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy up asset backed securities
(But not with real money I’d be a fool!)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy up Synthetic CDOs
(Yep, like a Hybrid or non-performing SIV)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy up Lehman Brother’s remains
(Ooh, all them crazy Hudson Castle assets!)
And If I had a trillion dollars I’d buy your bonds!
If I had a trillion dollars
We wouldn’t have to tax the people more
If I had a trillion dollars
Now, we’d stick to the foreign creditors
If I had a trillion dollars
We wouldn’t have to eat our bad debts
But we would eat our bad debts
Of course we would, we’d just eat more
And pad our tier 1 ratios with new cash
That’s right, all the free cash… FED credit!
Mmmmmm, Mmmm-Hmmm
If I had a trillion dollars
(If I had a trillion dollars)
Well, I’d get us out of this mortgage mess
(But not the homeowners, I’m no fool!)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy financial reform
(Ala Dodd-Frank and Obama)
If I had a trillion dollars
(If I had a trillion dollars)
Well, I’d make you solvent
(Haven’t you always wanted to be solvent?)
If I had a trillion dollars
I’d buy your bonds!
I’d buy your bonds!
If I had a trillion dollars, If I had a trillion dollars
If I had a trillion dollars, If I had a trillion dollars
If I had a trillion dollars…
You’d be rich!
Seriously, to enjoy some real entertainment (and to get the tune in your head to sing along with Ben and the banks), check out the Bare Naked Ladies performing their 1996 hit “If I Had a Million Dollars” below. As for tomorrow’s FED announcement, rest easy and wait along with the rest of the investment world to see if Ben & Co. really have the $1 Trillion dollars expected of them. Of course they don’t really have it but at least it will be fun to see how they explain it this time, that is until those $1 trillion show up in commodity prices!
Stay Fresh!
Key Indicators for Tuesday, November 2, 2010Copper Price per Lb: $3.77
Oil Price per Barrel: $83.40
10 Yr US Treasury Bond: 2.63%
FED Target Rate : 0.19%
Gold Price per Oz: $1,356
Unemployment Rate: 9.6%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 11,125
M1 Monetary Base: $1,460,900,000,000
M2 Monetary Base: $7,960,300,000,000
Oil Price per Barrel: $83.40
10 Yr US Treasury Bond: 2.63%
FED Target Rate : 0.19%
Gold Price per Oz: $1,356
Unemployment Rate: 9.6%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 11,125
M1 Monetary Base: $1,460,900,000,000
M2 Monetary Base: $7,960,300,000,000
The First of December: A poem, a memory, and a lesson
12/1/2011 Portland, Oregon – Pop in your mints…
The first of December has come. Contrary to “political” belief, the first of December would have arrived even if the large European bank which caused all the global fake money shuffling amongst western Central Banks to occur yesterday had been allowed to fail.
Nature cares not whether a man or woman in New York or Frankfurt raise a finger to populate a spreadsheet with a number representing something that does not exist but as a figment of the popular imagination. The sun would have set and a great majority of the world would have been none the wiser, and likely better off.
Make no mistake, the actions taken by Central Banks are made for the benefit of very few to the detriment of a great many. For this reason, we have called it Man’s Greatest Catastrophe.
The first of December always brings with it a fond memory from our youth here at The Mint.
Some 20 years ago we were in the midst of our junior year of high school. Like many our age, we preferred hanging out with friends to completing our assigned homework. A winter’s evening of that year found us doing the former while ignoring the latter.
On that particular evening, however, we were concerned. We had to write a poem for a class in which we were struggling the next day. At the time, it seemed a monumental task, made all the more impossible by leaving the task to the last minute.
We shared the dilemma with our friends that evening as we were excusing ourselves early in order to work on the poem at home.
A dear friend of our spoke up: “What does the poem need to be about?”
“Nature,” we replied.
“Hang on a minute,” replied our friend as he gathered pencil and paper and began to write. Within five minutes, he handed me the draft of a poem and said, “There, now you can stick around a bit longer!”
We were stunned, not only at the unselfishness of our friend, but at the eloquent words which he came up with in such a brief time. Our teacher, failing to see the genius and beauty in the poem, gave a merely average grade and forced us to revise and extend it. The subsequent revision, as we recall, severely diluted the beauty of the original five stanzas and attempted to resolve something that was better left to the reader to resolve.
Like so many things in life, an abundance of solutions robs people of the opportunity to think for themselves. Between television, sermons, university lectures, and government policies, life is diminished for many by listening to the voices of men in place of the sacred dialogue between a man and his God.
Our friend’s poem allowed for this dialogue.
We hope to one day be able to locate the manuscript of his masterpiece to share it with you. It is appropriately titled “The First of December” and is a moving description of a wintry scene witnessed by a man who is soon caught up in the wonder of it all. He then abruptly realizes that all that he is witnessing is occurring and will continue to occur, without his intervention, long after he is gone.
The realization humbles him.
We leave you with the last stanza which is forever etched in our memory:
“Now I must go,
But I’ll always remember,
Life in the cold,
On the first of December”
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for December 1, 2011
Copper Price per Lb: $3.53
Oil Price per Barrel: $100.14
Corn Price per Bushel: $5.95
10 Yr US Treasury Bond: 2.12%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,744 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 12,020
M1 Monetary Base: $2,155,200,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,627,300,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Central Banks Coordinate USD Funding actions, the final act of currency homogenization is underway
11/30/2011 Portland, Oregon – Pop in your mints…
Living on the West Coast, there are two things which we take for granted here at The Mint. First, that viewing Twitter is the quickest way to take a pulse of what is going on in the financial world. Second, that we are, by virtue of our location, jumping into the financial news of the day when it is half over in New York and finished in Europe, allowing us not only to see the news but also the effect of the news on these markets.
With these two givens, we often pen our thoughts as a sort of digestion (or indigestion, as the case may be) of the events which are currently unfolding. Such is the case today.
The Final Act
We’d barely had time to collect our scattered thoughts as news came that the final act of the tragedy that is the world’s financial system circa 2011 appears to be underway. This morning, numerous tweets announcing that coordinated action amongst western central banks, specifically the Federal Reserve and its counterparts in Canada, Japan, Switzerland, and England, had been taken. The action was taken to rush a fresh supply of cheap US Dollars to the ECB in time for the ECB to prevent a major European bank from imploding today.
Our guess is that the yet unnamed bank is BNP Paribas and by extension its many counterparties. Any large French bank would be a candidate and we are just guessing that it would be the le grand chat.
- The USD got torpedoed in coordinated action
As further evidence of the final act being underway, we see that the Federal Reserve suspended its POMO (Permanent Open Market Operation) for today until December 2nd. Not coincidentally, this latest operation was to withdraw liquidity from the US dollar system on a day on which apparently the system was calling for more.
To simplify what has happened for our fellow taxpayers we offer the following executive summary: Today is the final day of a calendar month, a day when accounts must be settled. A large bank in the Euro zone did not have enough US Dollars with which to pay back its short term loans to other banks. It turned to the ECB, which did not have enough US Dollars to backstop the large bank. The ECB, then turned to the Federal Reserve, which quickly shifted gears from suck to blow and confirmed, once again, that it will print money any time there is a liquidity crunch, anywhere in the western world.
The FED will now wait until the dust settles on December 2nd to see how much liquidity it can withdraw from the system without imploding it. To them we say: good luck.
As longsuffering Mint readers are already aware, a debt based currency regime, which is erroneously referred to as a monetary system, relies on the infinite creation of debt along with its continued acceptance in place of money proper in order for the game to continue. Once either of those conditions ceases to exist, it indicates that a majority no longer have confidence in the currency regime. In other words, the currency regime has failed.
The western central banks appear to momentarily have their streams crossed, and in a pointless effort to homogenize interest (and by extension foreign exchange) rates, will increasingly take this sort of “coordinated action” until their currencies act and trade as one.
A JP Morgan note on this most recent coordinated action highlights the fact that the Federal Reserve not only will lend dollars to these Central Banks at a discount, the foreign Central Banks will in turn lend their respective currencies to the Federal Reserve at a discount on demand. This gives further credence to the fact that the system has already failed and is in retreat, with the Central Banks themselves left passing their currencies and credits amongst themselves and their member banks.
Once this is homogenization process is complete; a severe devaluation of the homogenized currency will take place which will leave any holder or the homogenized currency(s) as a savings device substantially poorer and the holders of real assets better off on a relative basis.
However, on balance, the world as a whole grows poorer every day that the centralized currency regime is allowed to continue its violently enforced monopoly on currency issuance.
Money proper was never meant to be centralized and controlled by a single entity, and the current system which engenders this centralization is exploding before our very eyes. Yet it will not go without a fight. Recent events in the Middle East and Iran indicate that yet another physical fight to expand this failed system may be at hand.
It is a further expression of the Might Makes Right ideology, and it is time to pray for the peace of Israel.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 30, 2011
Copper Price per Lb: $3.56
Oil Price per Barrel: $100.17
Corn Price per Bushel: $6.01
10 Yr US Treasury Bond: 2.07%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,747 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 12,046
M1 Monetary Base: $2,095,600,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,664,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Rockaway Beach, Jaca, and the illusion of Market Homeostasis
11/29/2011 Portland, Oregon – Pop in your mints…
We are back from a wonderful Thanksgiving holiday spent with family in lovely Rockaway Beach, Oregon. Rockaway Beach is a gem of a town on the Oregon coast which straddles Rock Creek as it descends from the Coastal Range and violently collides with the Pacific Ocean.
We were fortunate to awake each morning with a front row seat to this raging battle. At low tide, the creek appeared to make headway as it made its final run into the great unknown. The beach was immense and inviting, and seagulls roamed the sands to find what the sea had left behind as an appetizer.
At high tide, the sea was angry. The creek’s advances were violently thrust back again and again as the full weight of the Pacific came in against it. The beach and its inhabitants disappeared and we were glad to be looking down on the raging waves from the third floor of the townhouse.
We now understand why navigating the mouth of the Columbia River was a fool’s game for centuries.
The central Oregon coast is unique. It is never quite warm enough, no matter what time of year one visits, to be a suitable substitute for the tropics. Nor is it ever quite cool enough to be easily categorized as Nordic. It permanently exists in a state somewhere between these two extremes.
The State of Oregon declared the entire coast a state highway in 1913 and affirmed the beaches as public lands via passage of the Oregon Beach Bill in 1967. These two actions have kept the coast both accessible to the public and in generally pristine condition.
Essentially, these are no private beaches in Oregon For this, we are grateful, as the coast may be one of the most peaceful and photogenic places on the planet.
Our time in sleepy Rockaway Beach was pleasant. Apart from seven miles of coastline, the town has a park and a number of antique and craft dealers. On Friday evening we were treated to the annual town Christmas tree decorating and lighting ceremony along with an old fashioned sing-a-long led by the school choir.
Songbooks and cookies were passed around and the choir took requests from the crowd. The last time we experienced such an expression of civic merry making was in the mountain town of Jaca in Aragon. As we arrived in Jaca, it was dark and persons were flocking to the green in front of the Castle of San Pedro. They appeared to jump at our car as if from nowhere.
Once settled in to our accommodations, we joined them and were invited to a sing-a-long in the early autumn evening in the Spanish Pyrenees. But that is a story for another day. We are having a hard enough time returning from our vacation bliss. If we reminisce on our time in Spain we may be on permanent vacation.
Homeostasis?
We love the word homeostasis. It is a complicated way of saying that an organism, or in our case, an economic system, is in balance, in touch with its inner Chi. We think of a frog sitting on a log, slowly breathing. Perhaps it is an image burned into our minds by a biology text we once read. Whatever images the word conjures in your mind, fellow taxpayer, it is unlikely to trigger a flight or fight response.
We seem to have returned from the raging coastline to a market which appears to have achieved a sort of homeostasis. The rise and fall of equities, many times over 200 points a day as measured by the Dow, should evoke a fight of flight response from market participants. Yet now commentators and participants barely blink an eye at such moves.
After trillions of dollars of stimulus, dozens of government bailouts and guarantees, and collectively learning to think the unthinkable, the market must finally be achieving equilibrium, right?
Oh fellow taxpayer, if only it were true. Unfortunately, the very perception that the market may be at homeostasis may be the indication that we are at an intermission before the dramatic final act of the play in which we all find ourselves unwilling participants, gets underway.
In the final act, the sovereign debt debacle that first appeared in Greece and is now enveloping France and perhaps Germany finds its way across the ocean to the United States of America. At that point, the US will succeed where Europe, until now, has failed.
As the financial world trains its binoculars on the equity and bond market indicators, they will continue to declare that all is well, the homeostasis that the American authorities so desire will appear to have been achieved. US bond yields will remain steady and the equity indices will steadily rise. Even housing may begin to march forward after its long slumber.
No, the US will not default in the traditional way, as Europe is on the verge of doing. In fact, perceptive fellow taxpayers will quickly point out that the US has been in the process of defaulting for some time now via quantitative easing (QE).
In markets as in a biological system, all of the actors are always pursuing a state of homeostasis. Yet the rub of homeostasis is that it is impossible to achieve by unilateral force. It is something that must collectively be achieved. It is something that only Anarchy, the absence of the State, can bring about.
The final act of this play will be the ultimate display of unilateral force. In an increasingly desperate attempt to keep bond and equity indices steady, the Federal Reserve will lose control of the currency in what historians will call a hyperinflationary blow off.
Then modern Central Banking, Western Governments, the warfare/welfare state, and all of its grotesque machinations will take a bow and exit stage left…or they will jump off the stage and attack the crowd.
Come to think of it, we may just leave after this intermission.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 29, 2011
Copper Price per Lb: $3.38
Oil Price per Barrel: $99.34
Corn Price per Bushel: $5.98
10 Yr US Treasury Bond: 2.00%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,715 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 11,556
M1 Monetary Base: $2,095,600,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,664,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Happy Thanksgiving! The Mint’s Debut at the Moral Liberal
Happy Thanksgiving from The Mint!
We are pleased to let you know that we have contributed the first of what we hope will be many articles for publication at The Moral Liberal. The first of which you can see by clicking here:
The Tenets and Benefits of True Capitalism
We are grateful for Steve Farrell, who has given us a rare opportunity to contribute to a forum in which we find ourselves aligning ideologically on a great number of issues and are excited for the opportunity to share and further the ideas of freedom and liberty with a greater audience. Please take time to browse their site as it is full of interesting articles.
Observant readers will notice that our submission has been modified slightly from its original form to remove references to Anarchy, which the Moral Liberal is strictly against. It is a subtle difference in ideology which we are quite comfortable with. The general debate, as it has been amongst Libertarians for a good while now, is whether or not the Government must necessarily exist.
Our position here at The Mint is that Anarchy is man’s natural state apart from God. Government has jumped in to fill the void which naturally begs to be filled in the absence of structure. We agree with The Moral Liberal that Anarchy is not a desirable nor sustainable state of affairs, but we cannot ignore the fact that it is man’s natural state in the absence of structure. However, it is not not essential to advancing the cause of true freedom and we respect The Moral Liberal’s position with regards to Anarchy.
We are grateful to Mr. Farrell and everyone over at The Moral Liberal for the privilege of contributing to their site and hope that together we can continue to share ideas which will change the world.
Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system – Part II
11/23/2011 Portland, Oregon – Pop in your mints…
If you were not able to join us yesterday for Part I, please take a brief moment to review it by clicking here:
We will pick up where we left off…
The acts which are required to carry out an economic system doomed to failure inevitably insures that those who lead would be the worst amongst us in terms of adhering to any sort of moral code, for they have chosen to pursue the economic or political program above the obligations of morality, no matter what the cost. They possess the ability to mute their conscience and oversee acts that are increasingly despicable and outrageous in pursuit of the aims of the program.
Hayek goes on to argue that as the Totalitarian economic and social program inevitably begins to fail, the leader of said system would increasingly deem it necessary to employ a larger number of individuals to enforce the increasing sacrifices required to continue the program. He offers three reasons why this inevitable outcome further assures that the leader surrounds himself with and encourages the promotion of those who are capable of the worst forms of moral corruption:
“First, the higher the education and intelligence of individuals become, the more their tastes and views are differentiated. If we wish to find a high degree of uniformity in outlook, we have to descend to the regions of your moral and intellectual standards where the more primitive instincts prevail. This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards.
Second, since this group is not large enough to give sufficient weight to the leader’s endeavors, he will have to increase their numbers by converting more to the same simple creed. He must gain the support of the docile and gullible, who have no strong convictions of their own but are ready to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently. It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.
Third, to weld together a closely coherent body of supporters, the leader must appeal to a common human weakness. It seems to be easier for people to agree on a negative program — on the hatred of an enemy, on the envy of those better off – than on any positive task. The contrast between the “we” and the “they” is consequently always employed by those who seek the allegiance of huge masses. The enemy may be internal, like the “Jew” in Germany or the “kulak” in Russia, or he may be external. In any case, this technique has the great advantage of leaving the leader greater freedom of action than would almost any positive program.
Advancement within a totalitarian group or party depends largely on a willingness to do immoral things.”
The Might Makes Right ideology, then, far from being a viable alternative to True Capitalism, assures a slow march towards a society which openly ignores the rule of law and, as a consequence, quickly becomes devoid of morality.
Can you now see why the ideological battle between True Capitalism and Might Makes Right is much more than a simple choice of economic systems, rather, it determines the moral basis upon which a majority of the society’s members will act.
Unfortunately, we have a shining example of the phenomenon of the worst rising to the top in Jon Corzine, former governor of New Jersey and CEO of the now infamous investment bank, MF Global. Mr. Corzine is a career investment banker and politician. In other words, he has been firmly indoctrinated and skillfully trained in two of the most destructive trades known to mankind.
Mr. Corzine allegedly saw nothing wrong with raiding the cash accounts of MF Global’s clients in a vain attempt to stave off the firm’s bankruptcy which was declared on October 31, 2011. There is no way to sugar coat what happened in the days leading up to MF Global’s demise. MF Global allegedly robbed its clients’ accounts to meet its own obligations. The fact that the commodity exchanges have been allowed to operate without immediately making the defrauded clients whole has caused an unprecedented breach of the trust which underpins the smooth operation of these exchanges.
Perhaps Mr. Corzine thought he was still a politician. In Government, it has become a common and acceptable practice to rob a legally established trust fund and replace it with the government’s IOUs.
Mr. Corzine is but the most recent example of the level of hubris and moral corruption required to occupy a high level post in the government and financial sectors circa 2011.
The MF Global bankruptcy and subsequent actions taken by the regulators have called into question whether or not the rule of law will prove supreme in such a situation. As a society increasingly leans towards a Might Makes Right ideology, the excuses for ignoring the rule of law proliferate. Hayek observed the inextricable link between the rule of law and Freedom when he wrote the following:
“NOTHING distinguishes more clearly a free country from a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand.”
The most famous modern excuses for ignoring the rule of law during the war on terror and the financial crises are: “These actions are taken in order to protect the American people,” and “These actions have been taken to ensure the stability of the Financial System.”
Fellow taxpayer, do you personally feel safer than 10 years ago? Do you believe that the financial system is more stable than five years ago?
These are important questions, for the answer may reveal which side of the ideological battle one identifies with. True Capitalism or Might Makes Right, for there is no ideological middle ground.
The governments of the world are busy tirelessly advancing a failed program. It should come as no surprise, then, that nearly every action that the governments have taken to fight the war on terror and the financial crisis only seem to have made the original problem worse.
It is clear that as long as the Might Makes Right ideology is embraced by institutions and governments, those who are best able to ignore basic morality and the rule of law are most likely to populate their halls of power.
It should come as no surprise, then, that man’s only hope for justice is to reject Might Makes Right and embrace True Capitalism. Only then will lasting peace and prosperity be attainable.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 23, 2011
Copper Price per Lb: $3.34
Oil Price per Barrel: $98.01
Corn Price per Bushel: $5.98
10 Yr US Treasury Bond: 1.95%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,700 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 12,096
M1 Monetary Base: $2,121,700,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system – Part I
11/22/2011 Portland, Oregon – Pop in your mints…
After a brief break in our faithful correspondence, we are compelled to pick up the proverbial pen to complete an incomplete thought in a vain attempt to eat Thanksgiving dinner in peace. If you are a new reader of The Mint, we will simply relate that the Mint is the product of a deep felt agitation by its author. It is what could be referred to as therapy. The thoughts, once on paper, leave us in peace. Until then, they stir, deep in our spirit, waiting to escape via these words.
How very fortunate and long suffering you are, fellow taxpayer.
Before we continue our mantra of Anarchy, True Capitalism, Natural Law, and Might Makes Right, we will share a few important observations.
First, the MF Global implosion is now reported to have left a $1.7 Billion hole in the capital base of a highly leveraged commodity and derivatives market. MF Global was a primary dealer, one that had the unconditional trust of the exchange and other secondary commodity dealers. It was a silent pillar of these markets. The aftermath of their implosion, both in loss of capital and confidence, has only begun to unfold. Commodity markets are no longer “safe” by normal standards. This situation is best watched by your money at a distance.
Second, while Europe implodes, the US has been spending most of its time firming its position in Asia. There has been speculation that the US is moving to aggressively devalue the dollar vis-à-vis the Yuan. Will it be the 10:1 reverse split that we have speculated about here? No one knows, but it would appear that the US Dollar will not serve as a reliable store of wealth in the short term. Silver and Gold come to mind as viable substitutes as this drama plays out.
Finally, It appears that the Occupy protesters are now wising up and using tactics which we call the Bolivian tactic, that of blocking major thoroughfares. It is much more effective, not to mention exciting, than urban camping. As a practical matter, if your livelihood in any way relies on a major thoroughfare being open in an area where the protests are growing, we suggest that short term contingency plans be considered.
These events and any pain they cause should be short term, maybe three to four months of adjustments, if they are allowed to simply run their course. If the Government continues to intervene, they will plague us indefinitely. We pray for the former and prepare for the later.
With that off our chest, we continue pondering life as we know it. Our question today is: Why does it seem that the worst morals seem to come out on top? First, a glance at Isaiah:
“ And I will make boys their princes, and infants shall rule over them. And the people will oppress one another, every one his fellow and every one his neighbor; the youth will be insolent to the elder, and the despised to the honorable,” Isaiah 3:4-5
Have you ever complained about a politician? The government? How about your boss? The current state of society? If you haven’t, you are indeed a rarity in this day in age, for there is much complaining, and seemingly much to complain about.
How did we arrive at this, fellow taxpayer? If democracy is supposed to deliver the cream of the crop in terms of leadership in the government, why does it seem that most politicians are the epitome of immoral liars?
This question was thrust upon us as we were reading the “Is there no shame” rant at zerohedge.com and came across the words “Hayek’s theory that the worst always rise to the top.” We then perused Hayek’s theory in an excerpt from the “Road to Serfdom.”
In the section entitled “Why the Worst Get to the Top,” Hayek states that:
“There are strong reasons for believing that the worst features of the totalitarian systems are phenomena which totalitarianism is certain sooner or later to produce.
Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from the essentially individualist Western civilization.”
Suddenly, it all makes sense. As man has generally chosen to pursue the Totalitarian, or what we call the Might Makes Right ideology, it would follow that those thrust into power should be among the most immoral, unscrupulous, human beings on the planet.
In summary, the Might Makes Right ideology unwittingly promotes the worst individuals to positions of power, as they are best suited to carry out the immoral and contradictory demands which are invariably made of the persons occupying positions of power in such a system.
Depressed? Don’t be. It doesn’t have to be this way. More tomorrow.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 22, 2011
Copper Price per Lb: $3.34
Oil Price per Barrel: $98.01
Corn Price per Bushel: $5.98
10 Yr US Treasury Bond: 1.95%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,700 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 12,096
M1 Monetary Base: $2,121,700,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Barnhardt.biz – Commodity Brokerage shuts down citing lack of confidence in wake of MF Global collapse
Ann Barnhardt, on how MF Global really effectively took the system down. Her parting message is on November 17th. Time to exit and watch the madness from the sidelines:
Watch “Farage: What gives you the right to dictate to the Greek and Italian people?” on YouTube
Nigel Farage of Ireland, calling the loss of sovereignty in Europe for what it is. Will Spain be the next country to have a puppet government thrust upon it?
Credit Unions: Join the people’s banking system
As public disgust with the commercial banking industry continues to grow, many consumers who were simply content to grumble about the Federal tax dollars that are being committed to bailing out the banks for their bad decisions are now being driven to the unspeakable action of renouncing commercial banks altogether.
What is it that has driven these otherwise reasonable people to take such a drastic step?
In a word: Fees. In addition to increasing the fees which consumers pay for overdrawn checks and various other “services”, some banks have taken the additional step of charging fees for debit cards, checking accounts, ATMs, and a host of other services which many Americans have come to expect free of charge.
Such has been the public outcry at this unthinkable insult that even Congress couldn’t help but notice. Senator Dick Durbin, (D-Ill) had this to say: “Bank of America customers, vote with your feet, get the heck out of that bank, find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”
While it is a mystery why Durbin singled out Bank of America, as the fee cancer has spread throughout the commercial banking system, what is clear is that many Americans are already voting with their feet and are ditching fee mongering commercial banks in search of alternatives.
In Portland, the search will lead them to a number of local credit unions that offer superior service, unbeatable interest rates, and low or no fee alternatives to services provided by commercial banks.
How can credit unions afford to do this? The simple answer is that credit unions are banking coops. By definition and by statute, they are locally owned and operated. Credit unions are non-profit organizations whose only “shareholders” are its members. Therefore, credit unions exist exclusively for the benefit of its customers and the community which it serves.
To become a member of a credit union, one must be a member of a group that is served by a specific credit union’s charter. A person is typically eligible to become a member of a credit union based on where they live, work, or worship. In some cases, becoming a member can be as easy as simply applying for a loan at the credit union.
Once a person is deemed to be eligible for the credit union’s field of membership, all they would need to do to become a member is to complete an application and make a one-time deposit (typically $5) into their savings account. From there, the member is not only on their way to investing in their community, they are on their way to receiving better interest rates on both deposits and loans, superior customer service, and having the right to vote on important decisions affecting the credit union.
Few changes stand to make such a profound impact on both the individual and the community than the decision to bank at a local credit union instead of a commercial bank. The individual and their community are both empowered by this seemingly simple choice.
There are a number of great credit unions in the Portland area. A great place to start is by locating a credit union near you. Websites such as findacreditunion.com and creditunionaccess.com can help you to locate a credit union in your area.
If you need any additional encouragement or have doubts about leaving your bank behind, a peek at this brief article at moneyistheroot.com on the advantages of credit unions should quickly put those doubts to rest.
In Portland, it is easy to cast your vote against the commercial banking regime and put your money to work building our community. Start banking locally today at your local credit union.
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Natural Law: The Golden Rule
11/15/2011 Portland, Oregon – Pop in your mints…
We continue today with our brief examination of the foundations of society here at The Mint. We are finding that while society appears complex on the surface, the further that its elements are reduced, the foundation is extremely, perhaps painfully simple. Any complexity that we experience is not a product of an inherent complexity in natural laws, rather, it is a product of the human relationships and actions that are a result of man’s choice of response to the demands of natural law.
For those of you joining us for the first time, let us get you up to speed with a synopsis:
Anarchy, the lack of government, is man’s natural state. It is an ultimate given. It simply is. A clear understanding of the current state of affairs depends upon grasping this inescapable fact.
In response to Anarchy, man has two choices. He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property, or He can choose to take his fellow man’s life and property through the use of force. We have called the path of mutual cooperation “True Capitalism” and the path of forceful coercion “Might Makes Right.”
Ideologically, there is no middle ground between these two paths. In practice, men live at various points on the spectrum between these two ideological extremes.
We argue that True Capitalism is the response which creates the greatest benefits for the greatest number of people. The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law. Like Anarchy, Natural Law is immutable. It does not change, for its statutes are etched in the foundations of the earth itself.
Last Thursday we presented the Natural Law of supply and demand, a law that deals with what is concrete and tangible. Today we will deal with second law which primarily governs human relationships and works in conjunction with the law of supply and demand.
It is popularly called the Golden Rule.
The Golden Rule is articulated and exalted as an ideal in some form in nearly every society and religion on the planet. The Bible famously articulates the Golden Rule in the following way:
“Love your neighbor as you love yourself” (Deuteronomy 6:5)
It is important to note that the Golden Rule is a positive declaration. It is a call to action. In many societies and religions the Golden Rule is stated in a negative declaration, a command to abstain from action. An example of this can be found in Hinduism:
“One should never do that to another which one regards as injurious to one’s own self.” (Anusasana Parva, Section CXIII, Verse 8 )
The negative declaration is sometimes called the Silver Rule. It is important to understand that only the Golden Rule, the positive call to action, is Natural Law. Observance of the Silver Rule, while highly advisable, does not rise to the level of Natural law. However, it is a logical corollary to the Golden Rule.
Compliance with the Golden Rule, as with all natural law, is indispensible. It is ignored at one’s peril, for it operates regardless of one’s acceptance of its validity or not. The Truly Capitalistic society greatly facilitates and encourages compliance with the Golden Rule. Conversely, compliance is hindered in a society that has embraced Might Makes Right as its ideological response to Anarchy.
“Wait a minute,” some of you are saying, “I’ll give you that the Golden Rule is a great ideal but Natural Law? No one requires it of me, right?”
Remember, the essence of Natural law is that it is universally true and applicable to all. The law of Supply and Demand, for example, can be ignored for a time, but every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached. The result of the failure to comply with the law of supply and demand is material scarcity and ultimately death.
The same is true of the Golden Rule. Every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached. In the case of the Golden Rule, the result of the failure to comply is by definition a failure to properly comply with the law of supply and demand as well, with the end result, as mentioned above, being material scarcity and ultimately death.
Compliance with the Golden Rule is a necessary prerequisite to compliance with the law of supply and demand, for the Golden Rule governs relationships in the purest sense. This is evident to most who have taken the time to ponder it. So broad are the implications of the Golden Rule that the origins of both the rule of law and more recently the concept of human rights can be traced to it.
What thrusts the Golden Rule out of the realm of being simply a good idea and into the realm of Natural Law is this: All attempts to comply with the Golden Rule serve to coordinate the actions of men in such a way that the greatest number of human needs are met in the most efficient way. Any deviance from the Golden Rule, by definition, is a failure to meet human needs in the most efficient way. Again, by definition, failure to meet human needs in the most efficient way means that a greater number of human needs are simply not being met.
Far from being simply a moral standard, the Golden Rule is elemental in the determination of supply and demand. As the equilibrium price serves as the beacon of production for the law of supply and demand, the actions taken by men, governed by the Golden Rule, initially determine the supply and demand factors which, when combined, produce the equilibrium price. In this sense, the Golden Rule serves as the beacon for both supply and demand which enable the creation of an initial equilibrium price.
How can the Golden Rule run ahead of the Law of Supply and Demand? This is one of the beauties of Natural Law. Natural Law always compliments and never contradicts itself.
An Example of the operation of the Golden Rule
Each human being has needs and wants which are sources of uneasiness. Human Action, to paraphrase Von Mises, consists of men acting to dispel their most intensely felt uneasiness. If a man is hungry, he will direct his actions towards getting something to eat. Other tasks will be put on hold until this intensely felt uneasiness is relieved.
The operation of the Golden Rule, in the example of mans the need to alleviate hunger, operates in the following way. A man feels hunger. He has two options before him with which to fulfill this need. First, he can forage, hunt, fish, or perform any series of actions with the end of fulfilling this need. Second, he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for something to eat.
As the second way is the most expedient, it is likely that a majority of people will elect this option. Now reflect upon the Golden Rule: “Love your neighbor as you love yourself.” The person who chooses to comply with the Golden Rule will quickly understand that if he has the need to be fed, it is likely that his neighbor (in this sense, neighbor would mean anyone in the geographical realm in which he is equipped to serve, up to every person on the planet if it is possible for him to serve them) is likely to have the same need to some degree. With this revelation, he unwittingly is on his way to discovering demand.
As he seeks to voluntarily fulfill this demand, he will need to either produce the supply of food himself or he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for a supply of food with which to provide his neighbor with something to eat. The information that his adherence to the Golden Rule provides him with regarding the needs of his fellow man will serve to guide his speculation as to where to best employ his limited time and capital.
It is a simple example, yet its simplicity serves to highlight the operation of the Golden Rule and can apply to any situation regardless of the complexity. The Golden Rule, in modern business school lingo, is the origin of market research; it is the impulse for entrepreneurial activity and is the basis for subsequent human actions.
The Question of Charity
What about charity? Wouldn’t adhering to the Golden Rule quickly lead to widespread scarcity and bankruptcy as catering to everyone’s preference to receive something for free would quickly deplete all available supplies and production?
The answer lies in the Golden Rule itself: “Love your neighbor as you love yourself.” Would you like to provide something for someone and not receive compensation? Our guess is only if you are in a position to give something away and are willing to do it. If all members of society are complying with the Golden Rule, the norms of charity will fall under the governance of the law of supply and demand.
The beauty, the perfection, of the Golden Rule is that above all it demands balance in human relationships and by extension, balance in the supply and demand of material goods.
True Capitalism Enable Compliance with the Golden Rule
True Capitalist ideology completely subjects itself completely to the Golden Rule and, in return, most accurately directs human actions towards fulfilling the most urgently felt needs of the greatest number of people.
Inefficiency is naturally wrung from the system at its source as errors are quickly corrected and information is quickly disseminated via equilibrium prices. The proper identification of demand by default leads to the most efficient allocation of scarce resources possible. The liberty of life and property which is ensured in the Truly Capitalistic system allows men to supply this demand by employing their limited time and resources without unnecessary hindrance.
The Golden Rule may not provide everyone with what they expect or what they think they desire, but complete submission to it not only creates the most efficient allocation of resources, it gives humans the best information to base their attempts to mutually cooperate to fulfill the myriad of human desires. It has the added social benefit of creating the greatest amount of harmony and goodwill possible in human relations.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 15, 2011
Copper Price per Lb: $3.49
Oil Price per Barrel: $99.39
Corn Price per Bushel: $6.45
10 Yr US Treasury Bond: 2.06%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,781 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 12,096
M1 Monetary Base: $2,215,000,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,532,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Occupy Portland and Mayor Adams take the high road
The Occupy Portland movement, which has been the focus of much discourse and debate since it was launched on October 6th, faces its first possible confrontation tonight. Mayor Sam Adams has issued an eviction order to those camping in Chapman and Lownsdale squares effective at midnight tonight.
Mayor Adams issued the order after a Molotov cocktail had been thrown at the World Trade Center by someone allegedly from the camp. The Mayor has cited generally rising crime and reports of drug overdoses in and around the camp as additional reasons for ordering that the camp be disbanded.
“I cannot wait for someone to use the camp as camouflage to inflict bodily harm on others,” said Adams in his November 10th statement.
The Mayor has taken what anyone outside of Portland would have considered an unusual step of giving the protesters three days to dismantle the camp. The protestors, in turn, have complained that three days is too little time.
It is admirable how both sides, the Mayor and police as well as the protesters, have strived to maintain the dignity of and respect for what the protestors are striving to accomplish.
By placing the focus of the action on public safety, Adams appears to be accomplishing what few mayors in the country have been able to do: Order a peaceful transition of the Occupy Portland movement from the outside.
In a gesture that speaks to the maturity of the Occupy Portland movement, it appears that a majority of those taking part in the protest camps are heeding Mayor Adam’s eviction notice.
By choosing to embrace and cooperate with the Occupy movement, the City of Portland has a chance to not only peacefully dismantle the camps, which threaten to become a public safety hazard, but to give those drawn to the Occupy movement a model of truly peaceful and powerful resistance in place of the confrontation which has marred gatherings in other cities.
True lasting change can only come about through the superiority of ideas, not arms or the willingness to engage in violence. This is something that Portlanders, whether they occupy a tent in Chapman Square or a house on NE Glisan, can all agree on.
Mega Maid! Collapsing Bond Market to Suck Air Out of Stocks!
Another Mint Classic which unfortunately (or fortunately if you are short the major indices) is current again. Enjoy:
12/1/2010 Portland, Oregon – Pop in your mints…
Writing is such sweet sorrow. Sweet because there is no lack of things to write about. Sorrow because the financial authorities have made such a mess of things that there is no lack of things to write about, grand errors to expose again and again until we get it. The economy has been on adrenaline for almost 100 years and increasingly dangerous doses for the past 40. The crash will be grand and we must understand what is going on. If nothing else so that future generations can learn from the mistakes.
Back from the big picture to the problems of the moment. When will it end? We know more or less how, so we must look daily for the time to approach. Is it on the horizon? Your guess is as good as ours so we will consider what we know. Just when you thought it was clear sailing ahead for stocks and bonds, another wrench is thrown into the works. We have been focusing here at The Mint on the upcoming fireworks in the Bond Markets. Not that we know exactly how or when the market will collapse, we only know that its collapse, in some way, shape, or form, is imminent. Two of a myriad of reasons came into focus for us today which we will now attempt to pass along. Continue reading Mega Maid! Collapsing Bond Market to Suck Air Out of Stocks!
Organic Vs Engineered Economies, Benford’s Law, and Lower GDP Growth Rates in the West Explained
The following is a Mint classic in its original form. Can the simplicity of Benford’s law, a statistical proof of the law of diminishing marginal returns, explain lower relative growth rates in developed economies? Judge for yourself:
2/4/2011 Portland, Oregon – Pop in your mints…
For anyone who read yesterday’s Mint, you will be happy to know that we do not recall any of our dreams from last night. We did, however, send inquiries to members of the Arkansas legislature to see if they could help us interpret our dream about them. We do not anticipate any response but you never know. If anyone can help to explain it we figure it would be them. Please do not ask why we dreamt about the Arkansas Legislature, for we have no answer.
What we can do, however, is to continue to develop our current hypothesis. As you may recall from yesterday‘s Mint, it is:
“As a predominantly Engineered (Socialist) economy becomes less Engineered and more Organic (Capitalist), it experiences exponentially increasing rates of economic growth. Conversely as a predominantly Organic economy becomes more Engineered, it experiences exponentially decreasing rates of economic growth.”
We will define economic growth as an increase in capital goods within an economy. For lack of a better measure, we have looked at year over year GDP growth in the East and the West. We say for lack of a better measure because in the current insane monetary system where debt is money and money is debt, it is arguable that what is measured as GDP growth is actually the rate at which the economy is cannibalizing itself. But that is a subject for a different day.
For the sake of simplicity, we further postulate that the Eastern economies (China, Japan, etc.) more closely resemble “Engineered” or state controlled economies and that Western Economies (US, France, etc.) more closely resemble “Organic” or Capitalist economies. These may not be perfect definitions on a country by country basis but the general distinction between East and West will give us a good starting point in trying to confirm or deny our hypothesis on a country by country basis. Naturally, the US and China, the world’s largest trade relationship, should be our first case study.
What complicates matters is that there does not exist, to our knowledge, a perfectly Organic nor a perfectly Engineered economy on the planet that would be available for study. Rather, we will encounter a jumbled mix of qualities within a country that will make it seem at once Organic and Engineered. What we are looking for, then, is evidence that and economy is becoming generally more Organic or generally less Engineered and vice versa.
If our hypothesis is correct, we would expect to see an Eastern economy, which is moving from a state of being Engineered to a state of being allowed to grow Organically, grow its GDP at a faster rate year over year than an economy that is moving from a state of Organic growth to a state of being Engineered. We expect that Organic growth not only creates wealth faster but does a better job of maintaining the capital that has been previously accumulated. On the other hand, any attempt to Engineer an economy has the consequence of destroying capital and reducing wealth on a net basis.
We must say up front that part of this growth has to do with an interesting statistical nuance that is known as “Benford’s Law.” In summary, Benford’s Law states that:
“in lists of numbers from many (but not all) real-life sources of data, the leading digit is distributed in a specific, non-uniform way.”
Benford’s Law appears to flay in the face of logic. Why don’t the leading digits (1-9) simply occur 10% of the time, as logic may suggest? The reason is that, as something grows exponentially, as the GDP of an Organic Economy may, the data sets produced such as GDP measured in terms of dollars tend to take longer to double from 1 to 2, or from 1,000,000 to 2,000,000, than they do to double from say 2,000,000 to 4,000,0000, etc. The tendency is so strong and widespread that it even applies to the measurement of natural phenomenon such as earthquakes, infectious diseases, and even pulsars! Should it come as any surprise that it applies to a country’s GDP measurement as well?
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| Can Bedford’s Law Explain Higher GDP Growth Rates for Developing Countrie |
What does this have to do with our hypothesis? We are still wondering ourselves, but we think it has something to do with how the GDP growth percentage increase is measured. For a rapidly increasing GDP number, as we would expect to see in a developing economy moving from an Engineered state to an Organic state, the percentage increases would appear greater for data points between 1,000,000 and 2,000,000, for example. Since Bedford’s Law says that roughly 30% of the readings will start with one, as a smaller economy doubles in size, its rates of GDP growth expressed as a percentage will be higher than those of an economy moving from, say, 2,000,000 to 3,000,000. This rate of exponential growth would decrease and perhaps turn negative in an economy moving from an Organic state to an Engineered state.
To sum it up, the higher GDP growth percentage of an economy becoming less Engineered is because the Engineered economy is starting the GDP growth race from a very low GDP number. Logic and Benford’s Law dictate that it will outpace growth rates of the already high GDP Organic economies.
As an economy, once you’ve gone Organic, there is no turning back. The longer you stay Organic, the more dangerous becomes any attempt to Engineer it. The Dodd-Frank Financial Reform and Health Care Reform are large scale attempts to further Engineer the US’s Organic economy. Is it any wonder, then, that its growth rates should lag those of the East?
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Email: davidminteconomics@gmail.com
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