Things are beginning to unravel!
8/18/2011 Portland, Oregon – Pop in your mints…
It is 66 degrees on a mid-August afternoon in Portland. As a banker friend of ours put it, “we hope you are enjoying the mild winter.” The truth is, were it not August, we would be quite enjoying the weather. Unfortunately people have certain expectations about the weather, hence the widespread belief that man can control and reverse trends like global warming or cooling. August in the Northern Hemisphere should be hot.
But its not.
If people are upset at the weather, then they must be seething at what is occurring in the financial markets. The relative calm in the financial markets has vanished like free beer at a NASCAR event. A 400+ drop in the Dow today and an even more significant drop in the price of oil and financial stocks, coupled with a rise in gold, silver, and Treasury Bills? (yes, you read it right) on the surface are evidence of a classic “flight to safety.”
But what is going on? Why such a massive flight to safety on what would otherwise be a calm August day, so fit for reflection and the pondering of life as one knows it? We don’t know exactly why all of this occurred today but suffice it to say, none of it should come as a surprise.
For instance, it should come as no surprise that banks are completely broke and at this point, worse than worthless, as they are destroying real wealth. The modern bank is built on the assumption that the currency regime and the demand for debt denominated in that currency will increase infinitely. Demand for debt in US Dollars began to wane about four years ago and as far as we can tell is not coming back anytime soon, at least not in the quantities (nor at the margins) necessary for the modern megabanks to exist on their current scale.
Hence, the banks are toast. Short them if you can after the next round of short covering passes.
The FED unwittingly made matters worse for the banks a couple of weeks ago when they announced that short rates would be near 0% for at least two years. The FED has given up, and they have done it in the worst possible way. Rather than standing ready to bail water out of the waterlogged currency ship, they have turned the spigot on full blast and walked away.
The FED will probably not be around in two years.
In yet another twisted irony that is a by-product of the current insane “debt is money” currency system, these low short rates, which in theory should be a boon to banks, will drown the banks with large deposits that they cannot lend except at razor thin margins to sub-prime borrowers such as the US Government.
Yes, society’s aversion to debt has fundamentally changed the banking business from one which primarily benefits from usury to one that must redefine itself as a trusted custodian of assets. This change seems to be happening overnight, and the banks are completely unprepared.
Case in point, it appears that Hugo Chavez, Venezuela’s democratically elected dictator has been moved to repatriate his country’s roughly 211 tons of gold held by foreign banks. He has already issued a demand to the Bank of England and rumor has it He will soon issue a demand to JP Morgan, which reportedly holds 10.6 tons of Venezuela’s gold.
The problem is, JP Morgan only has 10.6 tons of gold in custody on liabilities of roughly 100 times that amount. This would not be a huge problem except for the fact that thanks to the internet the entire world now knows this. Leave it to Chavez to strike at the heart of US imperialism. Things should begin to get interesting.
JP Morgan’s short position in physical Silver is even more frightening. If JP Morgan’s skills as a custodian is any indication, it appears that the modern banks are unable to provide this service. Protect your assets accordingly.
And speaking of frightening, almost as if on cue, violence in Palestine began to escalate again after attacks on Israeli civilians, the deadliest in two years, led Israel to retaliate by launching an airstrike against Gaza earlier today.
Our instinct tells us that a major event is unfolding in Palestine ahead of the UN’s statehood vote and it just may coincide with the collapse of the Western Currencies.
Coincidence? Most certainly. And a very sad coincidence indeed.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 18, 2011
Copper Price per Lb: $3.95
Oil Price per Barrel: $81.83
Corn Price per Bushel: $6.99
10 Yr US Treasury Bond: 2.08%
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,825 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.5%!!! UP 0.7% IN ONE MONTH, 8.4% ANNUALLY AT THIS PACE!!!
Dow Jones Industrial Average: 10,991 TO THE MOON!!!
M1 Monetary Base: $2,033,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,478,200,000,000 YIKES!!!!!!!
The compelling case for silver, beyond words:
8/17/2011 Portland, Oregon – Pop in your mints…
Almost nothing of consequence happened today in the markets. Just what one would expect on a quiet August day. Silver and other commodities are poised to go higher, but our guess is that it will wait a month to really hit its stride. At that point, inflation could really be a problem.
August is a time for reflection and relaxation. Casting off the cares of the past 11 months and charging the batteries for another run. At The Mint, we are pondering a great many things. Our dear German friend who has been with us here in Portland the past nine months left for Frankfurt today. She will be missed dearly by all. It seems that Oregon had a special impact upon her as well and she commented that this season has been one of the most pleasant of her life.
Yes, Oregon is a special place.
“There is so much nature here!” she commented upon returning from a trip to Montana. Apparently in Germany every square mile is spoken for, leaving wild animals little room to roam. One of her chief concerns on these excursions was the bears. Who can blame her, with the news coming out of Yellowstone at the time?
She is heading to Barcelona to start a ministry and we wish her well, for she is now one of the family. Hospitality blesses one in ways they cannot imagine.
August thoughts in the US are being rudely interrupted by the presidential campaigns that are warming up in Iowa and are heading to New Hampshire to continue the race in which the winner will declare themselves King of the Americans.
As Bloom County fans may recall, when the Meadow party nominated Bill the Cat and Opus for the job, they concluded that only a complete idiot would apply after careful consideration of the job description which in there estimation included “being blamed for every problem on the planet.”
The complete idiot label came to mind after we heard a comment in a video shared with us by a friend in which Bill Hybels, the Pastor of Willow Creek, a large church in Illinois, noted that the tendency in American dialogue today is to “throw stones first” and ask questions later. He explained that people grab onto comments and statements made by others and publicly villianize them without bothering to consider the context or verify the validity of said statements.
His remarks were made at the Willow Global Leadership Summit while addressing the interesting situation in which Howard Schultz, the CEO of Starbucks, backed out of his contract to appear at the summit after receiving threats of a boycott from a group who claimed that Willow Creek was anti-gay.
He went on to say that this phenomenon is making America “ungovernable.”
Mr. Hybels did not go into detail as to how this phenomenon would make the country ungovernable, but the idea got us thinking. What makes a country governable in the first place? Do people naturally need government in order to survive?
In the sense that people need to feel protected and able to care for themselves and their loved ones, people may need the concept of government. People, knowing their weak state on this planet, need to believe that someone is looking out for them. This need leads them to subject themselves to the idea of government.
Inevitably, those who are entrusted with embodying the idea of government find that they are given quite a bit of power over the lives of others and quickly learn to abuse it.
This leads the subjects to seek freedom from the government while at the same time looking for someone of something else to fulfill the basic needs of protection and material well-being. Seen this way, when a people become “ungovernable” they are rejecting the government under which they are because of a perceived or actual abuse.
It is important to note that, for people to reach this state, they must feel that they are out of options under the current government. Economic hardship has a lot to do with how people perceive their options. It should come as no surprise then that economic hardship is a result of policies which restrictive freedom.
Free men are infinitely more productive than slaves. A policy change in either direction will express itself in economic results. The results in America prove that we are a people becoming enslaved.
When things go well, no one cares who is governing. When things go badly, they become unnaturally preoccupied with the political process. America circa 2011 is moving towards this unnatural preoccupation.
Ironically, the more one concentrates on the government and its political processes, the more it becomes evident that the very existence of a government organized by men may be more a threat to than a protector of the basic needs of protection and material well-being.
We have stated before that in practice the governments of the world today operate like competing defense agencies. It may be, then, that Americans are tired of the current contractor and are searching for another one; one that is less intrusive and has fewer overhead costs to cover.
Will they find it before they are completely enslaved by the current one?
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 17, 2011
Copper Price per Lb: $4.03
Oil Price per Barrel: $87.43
Corn Price per Bushel: $7.11
10 Yr US Treasury Bond: 2.16%
FED Target Rate: 0.10% TIGHTENING? NOT!
Gold Price Per Ounce: $1,789 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,410 TO THE MOON!!!
M1 Monetary Base: $2,140,300,000,000 RED ALERT!!!
M2 Monetary Base: $9,404,000,000,000 YIKES!!!!!!!
The markets seem to be enjoying a relative calm after the record setting volatility they experienced last week. It turns out that one would have hit a home run by buying the VIX as the debt ceiling debate was dragging on. We’ll keep that recommendation tucked away for a later date as the conditions which created last week’s tremors still exist and continue to intensify.
A headline caught our eye today, from Bloomberg: German, French leaders propose European ‘economic government’
In practice, the monetary authority becomes the sovereign.
We have further speculated that the current sovereign debt crisis in Europe would serve to erode the sovereignty of the governments being bailed out. It now appears that even wise users of the Euro, such as Germany and the Netherlands, will have to give up the illusion of budgetary authority to save the currency. Think of it as guilt by association.
The leaders in the Eurozone are dealing with a problem that has no solution. What is unfortunate is that they are taking a considerable amount of time and other people’s money in a vain attempt to solve it.
The problem is simple enough. A fiat currency, such as the Euro, is a faith based currency. One needs faith that the currency will maintain its value and continue to be accepted in trade. The bedrock of this currency faith is that credits must be created which are repayable in the currency. This gives people, who naturally want to improve their circumstances by attending to the most urgently felt need, the incentive to productively trade in the currency.
If the currency is something tangible and can be produced in sufficient quantities, this is all that is required for something to be accepted as currency in society. Production and circulation of the currency would occur organically as the needs of the economy dictated.
On the other hand, if the currency is a fiat, faith based currency, such as the Euro, much heinous effort is required for it to be accepted as currency. The first requirement is a decree that all taxes must be remitted in the fiat currency. This is what Jesus referred to when he told the spies of the Chief Priests to “give to Caesar what is Caesar’s and give to the Lord what is the Lord.”
Once it is decreed that taxes will be remitted in the fiat currency, the fiat currency must be produced in sufficient quantities without the guidance of the free market signals (known today as monetary policy). Finally, the system of taxation and redistribution of the tax revenue (known today as fiscal policy) must be perceived as either inconsequential or fair in order for those subjected to the fiat currency regime to continue to assent to using the currency.
The Eurozone’s incurable ailment is that its single monetary policy cannot respond to the multitude of fiscal policies that are operating in the currency zone. If the currency were tangible, production in the economy would properly adjust and fiscal policy would be less pervasive and dictated by reality. But because the Euro is simply a faith based currency, fiscal and monetary policy have no chance of harmonizing themselves.
The Euro is doomed and its handlers must at least suspect it by now. Their only hope is to quickly form a unified fiscal government in the Eurozone which is what in theory they are doing. In practice this may be nearly impossible.
The US Dollar faces a similar problem which has been slower to manifest itself because its problem is on a global scale.
As Jesus said, the fiat authority only owns the coins, scraps of paper, or electronic bits that consist of money. True ownership of real things, and especially people, ultimately is the Lord’s.
How important this simple teaching will be in the years to come.
Stay tuned, Trust Jesus, and Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 16, 2011
Copper Price per Lb: $3.99
Oil Price per Barrel: $87.14
Corn Price per Bushel: $7.14
10 Yr US Treasury Bond: 2.21%
FED Target Rate: 0.10% TIGHTENING? NOT!
Gold Price Per Ounce: $1,787 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,406 TO THE MOON!!!
M1 Monetary Base: $2,140,300,000,000 RED ALERT!!!
M2 Monetary Base: $9,404,000,000,000 YIKES!!!!!!!
An amazing concept worth exploring. A DVD with the building blocks for modern civilization?
Some humor, Groundhog Day, spanish version, a disgruntled Bill Murray predicts a cold gray winter that will last, well, you’ll see…
This is just plain scary:
8/11/2011 Portland, Oregon – Pop in your mints…
Fresh injections of electronically printed cash from the US and Euro FEDs appear to have tranquilized a market in free fall. That, along with a ban on short selling in Europe seems to be sufficient to continue the illusion that the financial system is operating normally.
Elsewhere, we see that margin requirement for Gold contracts were increased by the Chicago Mercantile Exchange in an attempt to arrest Gold’s parabolic rise over the past several days. This must have been what Obama and Bernanke talked about last night at the White House. They probably made a few revisions to the jobs numbers that were printed today while they were at it.
The ban of short selling in Europe is eerily similar to the ban placed on short selling large bank stocks in the US not so long ago. The increase in the Gold margin requirement is eerily similar to the increase in Silver margin requirements by the CME last spring.
What is going on? Nothing good, fellow taxpayers. A tip, if you see the Government actively trying to stop something, it is good idea to be on the other side of the government’s trade. In this case, sell European bank shares and buy gold. Think of it as an indirect governmental subsidy to little old you.
The markets are desperately trying to correct nearly 40 years of errors that have been created since the US Dollar was officially de-pegged from gold. The FED’s, who see currency that can be created on a whim without the inconvenience of having to either mine it from the earth or earn it in honest, fair trade as extremely convenient , are desperately trying to fight the correction.
If the numbers just look normal, they think, people will continue to pacifically labor under the illusion that the Government has everything under control.
Nothing could be farther from the truth.
It occurred to us that we may need to clarify what the money problem is and why it, and not fossil fuels, are the cause of economic imbalance and may lead to what is popularly referred to as climate change.
Many deride the use of gold and silver as money because it must be mined from the ground, refined, minted, carried around, kept secure, etc. It is inconvenient. They see money created out of thin air as a simple net gain to society.
Presto, you have, with a stroke of the pen, saved the miners from years of hard labor underground. You have saved who knows how many trees, fossil fuels, and other elements required for the refining process. And you have saved Jack and Jill consumer and shopkeeper from the inconvenience of carting around loads of heavy coins.
So what is the matter with instant money? The problem, if you have not identified it, is precisely in the fact that it is easy to create. When you remove the effort required to create money for trade, you free that effort to be spent in a lot of other ways. That is great, except for the fact that no one considers that instant money would give people the time to scorch the earth in a thousand other ways which are much more harmful than mining.
By making money “free”, you throw the economy completely out of balance and perpetuate bad decisions for a much longer time than if the wrong speculations were limited by the need to back them with real money, acquired by difficult toil both under and above the earth.
The problem with “free” money is that it has no value, and it serves to devalue the production and lives of all who are forced to circulate it. The longer it circulates, the more damage it does.
Worst of all, it concentrates power in the hands of those who create it out of thin air and enjoy it first.
The world has gone 40 years down this insane path. How much more can it take?
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 11, 2011
Copper Price per Lb: $4.03
Oil Price per Barrel: $85.42
Corn Price per Bushel: $7.02
10 Yr US Treasury Bond: 2.34%
FED Target Rate: 0.10% TIGHTENING? NOT!
Gold Price Per Ounce: $1,768 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,143 TO THE MOON!!!
M1 Monetary Base: $2,140,300,000,000 RED ALERT!!!
M2 Monetary Base: $9,404,000,000,000 YIKES!!!!!!!
8/10/2011 Portland, Oregon – Pop in your mints…
Gold hit $1,800 today. That should tell you all you need to know about what is happening.
We are trying not to look at the markets today. It gives us the morbid feeling that one gets as they are about to witness a train wreck or other catastrophe. Our curiosity begs us to look but our morality forbids it.
What we are hesitant to watch as it gets underway is some form of global banking collapse. From CNBC:
“Rochdale banking analyst Richard Bove said there is little chance of a French bank default.
“If a bank in Europe went under, it would cause huge counterparty risk. It wouldn’t be that bad for 99 percent of the banks in the country. It would be bad for the biggest banks…Why are all the banks falling in price? The deeper issue is what the Federal Reserve did yesterday,” said Bove.
The Fed, in an unusual move Tuesday, revealed that its “extended period” to hold rates at zero runs until the middle of 2013. The Fed also downgraded its view of the economy to a picture of slow growth.
“The Federal Reserve told me, number one, that the economy is weakening and my loan losses just went up,” Bove said. “The ability to make new loans is hampered by the weaker economy, and on top of that, the Federal Reserve said they were going to keep margins on my product down,” he said, explaining banks need higher rates to make profits on lending and deposits.”
As we alluded to yesterday, the Federal Reserve essentially ended its storied career yesterday. In an all out attempt to goose the markets it spent its last bit of credibility. It is currently being carted off the field to cheer its losing team from the sidelines. It may come back, but, like Brett Farve, it may find its former glory elusive.
With the FED injured and out of the game, the world’s largest banks are readying to show the world that there really is no entity on the planet which is “too big to fail,” starting with themselves. There is no doubt that the ECB will pull out all the stops to save the large French banks, as Mr. Bove suggests above.
They will be carted off behind the FED. But enough of the markets, it is just too ugly to gaze upon.
Let’s talk about the weather!
It is an unusually cold “summer” day here in Portland. We loosely use the term summer because it now seems that summer has taken its own vacation and left the inhabitants of the Northwest with a straight shot from Spring to Fall. Not so bad, provided we get the best of both seasons.
Still, the lack of sunshine at this time of year seems to be taking its toll on people. When the sun comes out here, you suddenly become aware that the city has about triple the number of inhabitants than you once thought. People literally hibernate here and when the sun brings them out it can be startling if you are not expecting it.
Logic would follow that, with the recent weather data taking a turn for the cooler, the global warming crowd would declare victory and let the planet move on to bigger and better things. Now that the myth of global warming is apparently being disproved by nature herself, scientists are clinging onto the term “climate change” to justify the right to determine who needs how much energy. The right to energy in recent times was determined by wars so perhaps this is an improvement.
Many will quickly note that we have certain facts wrong about global warming/climate change and will want to correct us in our error. To them we say, please do not waste your time. We do not pretend to be an expert at anything here at The Mint, we are merely opinionated. The most normal thing is for us to be wrong, it helps keep us humble.
That said, we base our “the globe is now cooling” opinion on two anecdotes that we heard while in Nebraska recently. First, Lake McConaughy, which just five years ago was nearly bone dry is now full to overflowing. The “experts” said that it would take 50 years to reach normal levels.
Second, we spoke with a guy from northern Wyoming who said they are seeing new GLACIATION taking place right before their eyes. In a valley where last season there was merely a stream coming down from the mountains now stands a new glacier over 50 feet high. Not just snowpack, a glacier. He could not recall this ever happening there before. Let alone so quickly.
Then there are the bears. Rumor has it that they are moving to lower altitudes in the Northwestern US because snowpack in the mountains is not receding as it normally did and this is driving the bears closer to populated areas in search of a feast to fill their bellies for the winter.
And finally, everyone is aware of the flooding taking place along the Missouri and Mississippi rivers this season.
To us, here in the Northern Hemisphere, it appears that the globe is now cooling at an alarming rate. Is the solution now to burn more fossil fuels?
Our point is that the weather is something that no man, no matter how many terms he has spent in Congress, can control. Those who believe that mankind can somehow master the weather (the logical implication and end of most policies invoked in the name of stopping “climate change”) are innocently deluded at best and in the worst case may be power hungry control freaks.
As for allowing Wall Street first dibs at selling us the air we breathe (cleverly disguised as “carbon credits”), any thinking person should quickly identify this notion as just plain insanity.
On the other hand, we have great respect for people who are deeply committed to taking care of the environment. We wish them well and whole heartedly support their dream of bringing peace to the earth and balance to what occurs on it.
Our disagreement with most mainstream climate policy is a question of methods. While most see a problem with what mankind currently uses to create energy, we see as a problem with what mankind has chosen to use as money.
Once the monetary system is fixed (which may be occurring shortly), we suspect that the earth will be cleaner and greener than even the most ambitious environmentalist has ever imagined.
Best of all, the change will be a product of mankind’s collective free will, not of the hollow decrees of a governmental edict.
Imagine.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 10, 2011
Copper Price per Lb: $3.91
Oil Price per Barrel: $82.89
Corn Price per Bushel: $6.78
10 Yr US Treasury Bond: 2.13%
FED Target Rate: 0.10% TIGHTENING? NOT!
Gold Price Per Ounce: $1,795 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 10,719 TO THE MOON!!!
M1 Monetary Base: $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base: $9,226,100,000,000 YIKES!!!!!!!
8/9/2011 Portland, Oregon – Pop in your mints…
Something extraordinary happened today. The FED, one day after the worst stock market crash in the series of stock market crashes to which we are doomed until the problem of too much debt is dealt with, came out and announced that it would hold overnight rates under 0.25% for at least two more years.
This is the ultimate stimulus measure, money will continue to be free, let the final stage of the mad scramble for resources begin. With this statement, the FED has confirmed that the currency will be destroyed. Plan accordingly!
We saw a chart at the Wall Street Journal site today which was entitled “Downward Dow.” The name hearkens to the canine/yoga position better seen that described:
The FED sees what is going on and is taking a long, running, Charlie Brown style kick at the Downward Dow before it. Unfortunately for us all, like Charlie Brown, Ben and the gang are going to whiff on the Dow, which is more likely to lie down than resume its forward gait, and pull a hamstring in the process.
In other words, the FED, with today’s statement, has severely injured itself and will do nothing more now than sit on the sidelines and hand out free money. With Congress paralyzed, the helicopters (the FED member banks) will be in charge of dropping the money on the populace.
Helicopter Phase is here!
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 9, 2011
Copper Price per Lb: $3.97
Oil Price per Barrel: $79.75
Corn Price per Bushel: $6.78
10 Yr US Treasury Bond: 2.33%
FED Target Rate: 0.08% TIGHTENING? NOT!
Gold Price Per Ounce: $1,750 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 10,826 TO THE MOON!!!
M1 Monetary Base: $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base: $9,226,100,000,000 YIKES!!!!!!!
8/8/2011 Portland, Oregon – Pop in your mints…
Oh my. Two words, four meager characters, made famous by Jesse “The Body” Ventura during his ringside blow by blow commentary in the glory days of the WWF (circa 1986). These words, which so eloquently summed up the effects of a pile driver, seem strangely appropriate to describe what is occurring in equity markets around the globe during their first chance to “react” to the S&P downgrade of the US Government’s sovereign debt rating.
As we write, the Dow is down 5%, ditto for Oil. Gold is up over 4% and the downgraded bonds of the US Government of the 10 year variety are up (in other words, yields have fallen) approximately 4%.
What is going on? We will give you a clue, Bank of America (BAC) is down almost 20% on massive volume.
Still guessing? We won’t keep you in suspense. This downgrade, whether deserved or not, early or late, is wreaking havoc with mutual fund investment policies which call for excess funds to be held in AAA rated debt. There are not enough German bunds or UK gilts in circulation to pick up the excess funds gushing out of Treasuries.
The obvious implication is that USD bank deposits should rise.
More deposits that it can’t lend at a profit would tank behemoths like B of A, and Uncle Sam may have trouble saving it. That, and B of A is being sued for fraud, again.
Enough of B of A, back to the money flying out of US Government obligations by investment policy edict. Where will this money go? That is what is currently being sorted out in the markets. And at the moment it is UGLY for equities on a global scale. Don’t worry, by late next week, so much money will be pumped into the system that equities will have no choice but to rise.
We can’t help but think back to this chart (BELOW) showing the proliferation of AAA debt in the world. It seemed as if it was everywhere, like pine trees in a forest. Now, with one simple action, those who trust S&P’s judgment (which history has show is at one’s own peril) find themselves with at least $14 Trillion less AAA issues to choose from. More, if you count the implied downgrades of government agency and other government guaranteed debt.
Stepping away from the technicalities of investment policies and looking at the downgrade in a philosophical sense, it is like a minor earthquake that triggers a tsunami that the financial world is now helplessly watching roll ashore, or like a giant snowball has been pushed downhill and threatens to start an avalanche.
The financial world is looking at these twin disasters and now realizes that the only thing standing between them and the demise of the current financial and currency systems is, are you ready for this?
The Central Banks of the World!!! Not exactly knights in shining armor, if you ask us. We might be more comfortable if Pee-wee Herman were on the case. At least he could provide entertainment as the demise unfolds!
The downgrade is another chink in the armor of the world’s largest knight in shining armor, the United States of America. Every day, more people are coming to grips with the fact that the US of A cannot provide security and social benefits at such low rates. Bill Bonner of the Daily Reckoning regularly explores this decline of the American Empire.
As we touched on the other day, what man calls nations today are, for purposes of analysis, simply competing security agencies which have a man-made geographical monopoly. The problem, as any businessman will tell you, is that nowadays the agency’s customers can’t take the price hikes. Neither can they easily choose to move their business to a competitor. Expatriating is not cheap and involves a host of logistical problems.
The book of Isaiah, chapter 40, God refers to the nations as a “drop in the bucket” and “dust on the scales.” The obvious implication is that nations do not last, and in extreme cases, dealing with a government may feel like one is dealing with the Mafia. The need to preserve a geographical monopoly can make an analysis of the actions of a government or a mafia eerily similar.
Seen through this lens, S&P is like the snitch who broke Omerta and tells everyone that the Mafia boss can’t pay on his contracts. Now the boss will likely face an increase in the vig on what he owes the loanshark.
How long before the rat gets whacked?
Don’t forget to keep your eye on events in the Middle East, especially Palestine. Something bigger than we image is brewing there and our guess is that the eyes of the world will soon be focused there.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 8, 2011
Copper Price per Lb: $3.97
Oil Price per Barrel: $83.36
Corn Price per Bushel: $6.78
10 Yr US Treasury Bond: 2.37%
FED Target Rate: 0.09% TIGHTENING? NOT!
Gold Price Per Ounce: $1,718 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 10,899 TO THE MOON!!!
M1 Monetary Base: $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base: $9,226,100,000,000 YIKES!!!!!!!
Stay tuned and Trust Jesus.
8/4/2011 Portland, Oregon – Pop in your mints…
Today the Dow fell some 500 points. Looking further, everything seemed to fall today. We hope you have a good umbrella, fellow taxpayer, it could be quite a storm.
Three noteworthy things seemed to have taken place in no particular order and for no apparent reason other than to unite to tank financial asset prices all over the globe, which is no small feat. We will take them one by one.
First, overnight, the Japanese Central Bank intervened to prop up the dollar (or weaken the Yen, however you prefer to look at it).
Second, the world gave a collective thumbs down to the Eurozone’s “effort” to stabilize its bond markets. The Euro Feds appear over matched in their currency union’s first true fidelity test.
This uncoordinated action led to the third event which we will call the “mother of all calls” on the US Dollar. With short and long interest rates skipping around a zero as far as the eye can see, speculators have taken swings at the dollar like Dave Kingman at the 2-0 fastball. The dollar is already sold short on an almost unimaginable scale.
Today, those speculators, ala Dave Kingman, whiffed and nearly fell over. The only way this “mother of all calls” could be satisfied was for those short the dollar to quickly and injudiciously exit other positions.
This exiting injudiciously of other positions is colloquially called a crash.
This crash, along with the foul smelling economic datacoming out of the US will give the Fed and Congress all the ammunition they need to launch both QE3 and any and every fiscal stimulus program they can dream up.
QE3 and fiscal stimulus on steroids will soon prove those speculators short the dollar right and the final, sordid chapter of the US Dollar’s history is about to begin!
Dave Kingman may have whiffed at the 2-0 fastball, but he has two more swings…
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 4, 2011
Copper Price per Lb: $4.19
Oil Price per Barrel: $85.60
Corn Price per Bushel: $6.93
10 Yr US Treasury Bond: 2.46%
FED Target Rate: 0.12% TIGHTENING? NOT!
Gold Price Per Ounce: $1,649 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,384 TO THE MOON!!!
M1 Monetary Base: $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base: $9,226,100,000,000 YIKES!!!!!!!
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
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