Tag Archives: BoE

The Disguise, Greece plays roulette with the Eurocrats, How inflation will express itself in USD Prices

9/12/2011 Portland, Oregon – Pop in your mints…

The moment of truth is approaching for Greece.  Today the headlines flashed that the markets were pricing in a 98% chance of the Greeks defaulting on their sovereign debt.  A great lesson is about to be learned.  Is anyone paying attention?

The great lesson is the following:  Reliance on governmental and/or central bank action to stave off a default is not a sound strategy.  You may get lucky once, twice, even three times.  If one is particularly unfortunate, the strategy may even work many times in succession.

The government reliance strategy is like idly watching spins a roulette wheel with all your chips on red.  With enough spins, the ball will eventually drop on a black.  Think of it as the governmental version of a black swan.

Gambling on Government intervention


In the case of Greece, who abandoned its 2,000 year old currency to join the Euro club, there seems to be a lack of political will to ink the rubber stamp which approves the Greek’s next ration of Euros.  The taskmasters of the Eurozone are starting to realize that each time the stamp is inked, the sewage of Greek finances leaks a little further into their well. 

The populace is starting to get sick to their stomach, as are large banks on both sides of the Atlantic.  The French banking giants are queasy because much of the Greek debt is on their books.  In the New World, where about half of Greek debt is insured, the banking giants are getting nauseas.  It is the nausea of a drunk man realizing he will be stuck with the bar tab after his buddies sneak out of the tavern.

Meanwhile, as the politicians and central banks continue to bungle their way through this information, the market has already priced it in.

“Priced in?”  Astute, shocked, and astounded readers are surely thinking, “Then where is the crash in stocks and bonds?” 

Astute readers, of course, are right.  There is a crash occurring right now in stocks and bonds.  However, bond yields are down and the stock market is up because the crash is occurring against the backdrop of rapidly depreciating currencies and as such, the debauched currencies are disguising the crash.

The Disguise

Astute readers now have a collective light bulb in their head illuminating as they clearly see that inflation in consumer prices is set to accelerate in the near future.  Naturally, this obvious inflation would not be tolerable and as such must be masked in order for the general public to peacefully accept it.

For this acceptance to peacefully take place, the inflation must come in disguise.  Here is what is likely to occur once the loosened up monetary policies of the FED, ECB, BoJ, and BoE are in sync (with apologies to the 1990’s boy band):

A new dollar will be introduced with a convertibility ratio from old dollars of 10:1.  In other words, each current dollar will be the equivalent of a new dime.

Voila!  No inflation here.  The new and improved dollar now buys more than ever! 

The Debauched Dollar in disguise

Why choose a 10:1 ratio?  There are two compelling reasons for the US Currency to go through a reverse 10:1 split.  First and foremost, it is simple.  Since a majority of the world’s commerce is conducted in dollars, the disguise must be mathematically simple.  What could be simpler than moving a decimal place?

The second reason is less obvious but perhaps more compelling from the point of view of the monetary authorities.  The disguise would immediately eliminate the need for pennies and nickels and increase the demand for dollar coins.

At this stage in the game, it costs the US Mint more to create pennies and nickels than they are worth.  While we are not certain of the exact numbers as of today, some estimates have the value of the metals needed to create a nickel valued at $0.07 while the metals needed to create a penny are valued at $0.012.  This is before considering the energy and equipment necessary to strike the coins and distribute them.

At current metal prices, which are unlikely to drop in the near future, the US Mint is producing nickels and pennies at a loss.

This embarrassing detail makes the purchase of nickels and pennies a better risk free investment than US Treasury Bonds, the world’s current safe haven of choice.  The metal premium for Platinum, Gold, and Silver coins is widely known.  At some point, nickels and pennies will disappear from circulation and their metal premium will take precedence over their face value. 

Still, one may ask, “What difference does it make?  This 10:1 switch sounds like a great idea.  I’m sick of pennies!”

Oh, if only the switch were price neutral, it would make no difference at all.  How, then, do the stock, bond, and almost every other market continue to rally in the face of questionable macroeconomic fundamentals?

Tune in tomorrow.

 Trust Jesus and Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at www.davidmint.com

Key Indicators for September 12, 2011

Copper Price per Lb: $3.97
Oil Price per Barrel:  $88.19

Corn Price per Bushel:  $7.34  
10 Yr US Treasury Bond:  1.93%


Gold Price Per Ounce:  $1,814 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:  11,061  TO THE MOON!!!

M1 Monetary Base:  $2,181,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,456,000,000,000 YIKES!!!!!!!

Forgiveness, the FED, Bank of England, Bank of Japan, and ECB to coordinate actions, will they formally peg exchange rates?

9/9/2011 Portland, Oregon – Pop in your mints…

Much ink is being spilled today in anticipation of what may or may not happen as the 10th anniversary of the events that occurred on September 11, 2001.  Here at The Mint, we take the somewhat radical view of the Amish in response to tragic loss.  We must forgive.  An important part of forgiveness is to avoid making or observing a memorial to the offense.  Memorializing an event is to keep it present before us.

As the US Empire is now conducting at least three extremely expensive military adventures which have their origins in the events that occurred that fateful day, forgiveness is probably not on many people’s minds this weekend.  Meanwhile, millions of dollars are being spent to memorialize it.

We must forgive.  It is our opportunity to choose the tree of life over the tree of the knowledge of good and evil.  To repair the fateful error made in Eden.

Under the cover of this memorial, we sense that an extraordinary event will occur which will impact the fortunes of many in the US, England, Japan, and Europe and others outside their borders with exposure to their respective currencies.


The Event which we refer to is the coordinated debauchery of their currencies. 

For the past four years, the FED, BoE, BoJ, and ECB have been engaged in a desperate attempt to debauch (devalue) their currencies.  They have had the predictably mediocre to poor results that one would expect from efforts made by this rare hybrid of an agency which combines the laziness of the banking class with the incompetence of the governing class.

The goal seems simple enough.  Print money to pay existing debts and encourage people to spend and to take on new debt.  So simple, that each of these Central Banks is currently running at their own pace down this calamitous path with little regard to how the outside world is reacting.

Guess what?  The outside world is not reacting as expected.

What they did not take into account, at least until now, was that there is quite a bit of money to be made from the fact that they are all running at different paces down the same path.  The nature of international finance is such that one Central Bank’s unbridled effort to debauch its currency leads to an opportunity to profit by borrowing in that nation’s currency and purchasing one of the other three currencies, which undermines the debauchery of the currency that is being purchased. 

Stark, as most thinking persons, cannot stomach the debauchery in his midst

This is commonly known as the carry trade, and these large Central Banks have taken all of the guess work out of it for the past four years.

We suspect that these four Central Banks see the immediate need to eliminate interest rate spreads amongst their currencies which will force those who ply the carry trade to purchase currencies outside of this group.

In effect, this ultimate coordination of interest rate policies will cause these four currencies to “peg” to each other, which should assure that the debauchery of their respective currencies will continue unchecked and likely accelerate.

According to Bloomberg, there is speculation that this type of coordination, a de facto currency peg to the dollar, could begin this weekend at the G-7 Meeting.

Will another stealth disaster befall the US this weekend?  If these Central Banks somehow coordinate their collective debauchery of the currency, the economic devastation of millions will march on.

Perhaps this is why Juergen Stark has suddenly stepped down from the ECB.  It will be more than any caring Bundesbank official can stomach.

Stay tuned and Trust Jesus.

Stay Fresh!


David Mint


Email: davidminteconomics@gmail.com


Key Indicators for September 9, 2011


Copper Price per Lb: $4.00
Oil Price per Barrel:  $87.20


Corn Price per Bushel:  $7.26  
10 Yr US Treasury Bond:  1.92%



Gold Price Per Ounce:  $1,856 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:  10,992  TO THE MOON!!!


M1 Monetary Base:  $2,181,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,456,000,000,000YIKES!!!!!!!