Tag Archives: Central Banks

Pacioli’s Gift vs. Bernanke’s Curse

3/25/2013 Portland, Oregon – Pop in your mints…

As events in the Cyrus experiment continue to unfold.  here at The Mint we are watching from a distance, aghast at the implications.  The sacred rule of the Financial Crisis, the one that shielded most banking clients from taking direct losses as a result of holding their funds in a weak bank in a sovereign nation without the means or the control over its currency to bail them out, has been broken.

Anyone who was unfortunate enough to be holding over 100,000 Euros in a Cypriot bank at the close of business on March 15, 2013, now stands to take a 40% bath on all “uninsured funds.”

This is a warning shot, and if you are reading these words and do not yet understand, let us spell it out loud and clear.  Funds held in banks or financial institutions are sitting ducks for bankrupt governments to line their pockets with.  Any wealth that one wishes to maintain must be kept close at hand in something tangible and trade-able.  Bank accounts are no longer risk free assets.  They never were.

How has the world come to this place, where a government would directly confiscate assets and assume that there would not be severe repercussions?

Luca_Pacioli_Gemaelde by Jacopo de' Barbari circa 1496
Summa de Arithmetica, Geometrica, Proportioni et Proportionale – Pacioli’s great gift to Western Civilization

We have been editing our latest e-book, which will hit digital shelves later this week if all goes well.  It is volume V in our “Why what we use as Money Matters” series.  In it we explore how humanity came to this point in history, what is wrong, and most importantly, the solution.

As an appetizer, we present to you the introduction.  Enjoy!

Pacioli’s Gift vs. Bernanke’s Curse

An Introduction

In response to what has become known as the Financial Crisis of 2008, the Central Bankers of the world have employed nearly every form of monetary alchemy at their disposal in a desperate attempt to maintain the status quo.  The status quo, which in this case means that all commercial banks and sovereign governments remain both liquid and solvent, has become increasingly difficult to maintain as each attempt to stimulate economic growth via ultra low discount rates and quantitative easing has seen a diminishing marginal return in terms of economic growth.  The longer the Central Banks of the world engage in these and other forms of financial alchemy, which in the end serve as futile attempts to defy immutable natural laws, the greater the danger of a complete economic collapse becomes.

The unconventional measures employed by the World’s Central bankers in increasing measures over the past five years are not only failing to achieve their stated goals of increasing employment and economic growth, they are triggering what is quickly becoming an unmitigated disaster in the fixed income markets.  These markets, once the bedrock of global finance, have now been conditioned to do nothing more than attempt to front run the FED and other Central Banks up and down the yield curve.

The action in the financial markets is akin to a 300 pound man, who represents the Central Banks, chasing an 800 pound gorilla, who represents the financial markets, around on a queen sized water bed.  The action is becoming completely unpredictable and downright dangerous.  Throw in the chaotic interventions of a 10 pound chihuahua, who represents the sovereign governments’ meddling in the market financial market mechanisms via commercial banking regulation and tax policy, and the entire situation is a basement flood waiting to happen.

As the chaos on the water bed, which is a metaphor for the wealth of the real world, continues to unfold, it is important to examine and understand, to the extent possible, how humanity has arrived at this critical juncture in history, where a fat man chasing a gorilla while dancing around a chihuahua on a water bed can threaten to damage the wealth of nearly everyone on the planet.

It is the aim of this volume to explore two of the oft overlooked elements that have, each in their own way, given rise to the system which enables a relatively small group of persons to the ability to destroy the accumulated wealth of mankind’s 9,000 years of toil in just over 100.  Dual entry accounting, which we refer to as mankind’s greatest invention, and Central Banking, which we refer to as mankind’s greatest catastrophe.

In the end, we present what is known as “Free Banking” as the antidote for the curse of Central Banking, and the ultimate solution to the current and future financial crises that the world will suffer at the hands of well-meaning Central bankers who, it would appear, are oblivious to the destruction that their chosen profession inflicts on humanity.

Intrigued?  So are we.  Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 25, 2013

Copper Price per Lb: $3.44
Oil Price per Barrel:  $94.75
Corn Price per Bushel:  $7.33
10 Yr US Treasury Bond:  1.92%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,605 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,448
M1 Monetary Base:  $2,368,600,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,521,800,000,000

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!

David Mint

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!!!!!!!

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part IV – The Catastrophe at Hand

10/20/2011 Portland, Oregon – Pop in your mints…

For those of you who have missed Part I, Part II, and/or Part III, you may read them by clicking on the following links:

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?

Again, for those of you who are too lazy to click the links, here we offer a brief summary to get you up to speed:

 

Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade.  A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.

 

The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life.  The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.

 

The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society.  As such, the Central Bank becomes the natural creditor of the Government.  Whether it lends funds directly to the Government or indirectly, the result is the same.  That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.

 

Having established the fact that some form of both a Government and a Central Bank will naturally, in some form, come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.

 

Today, that the scale of modern Central Banking is excessive and that the potential for catastrophe is unprecedented.

 

The reason for the unprecedented scope of Central Banking is that money, as it is widely understood today, does not really exist.  Rather, banknotes issued by Central Banks, which are by definition credit instruments, are misunderstood to be money proper by a majority of the people in the developed and semi-developed world.

 

This misunderstanding flies in the face of 9,000 years of human history, in which Gold and Silver in bar and coin form have been tacitly used as money proper.  It is this misunderstanding which has set the stage for the greatest catastrophe in history to occur.

Federal Reserve Notes Begin toReplace Gold and Silver as the concept of Money for a Generation
 

The misunderstanding of money and credit began, like many experiments, in Northern Europe with the establishment of the Bank of Amsterdam.  Established in 1609, the Bank of Amsterdam is widely recognized as at least a precursor to modern central banks.  For over 400 years since it was established, the use of banknotes issued by a Central Bank which are not directly convertible to coin has slowly but steadily increased.

 

Modern Central banks issuing banknotes were subsequently formed in Europe, England, and Japan.  As these Central banks and their successors began to slowly absorb the true money supply and issue banknotes in their place, man began to slowly transfer the concept of money proper from Gold and Silver and attribute the qualities of money to the banknotes issued by the Central Bank.

 

This process of wealth absorption greatly accelerated in 1913 when the United States of America granted a 100 year charter to its third Central Bank, the Federal Reserve.  The FED, as it is commonly known, was to act primarily as a reserve and to create “money” (read banknotes) as necessary.  At the advent of World War I, the FED stepped in and issued bonds to finance the war and after the war the FED was granted exclusive control of the money supply in the United States.

 

In 1933, in the midst of what was to be the great depression in the US, President Franklin D. Roosevelt signed Executive Order 6102 which required citizens to deliver all but a small amount of gold coin and bullion held by them to the FED in exchange for $20.67 worth of Federal Reserve notes (the banknotes issued by the FED) per ounce.

 

Naturally, most citizens with large quantities of gold at the time had it transferred to Switzerland.

 

Then, by decree, the Government raised the price of redeeming gold from the FED to $35 per ounce.  Redemption could only be made by Foreign parties as, naturally, it was now illegal for US Citizens to own gold.

 

Federal Reserve notes were now the only form of “money” that an entire generation of Americans were likely to handle.  However, foreigners could still redeem the Federal Reserve notes for gold, though they rarely did, at $35 per ounce.

 

After World War II, the US emerged as the most powerful nation on earth.  It was only natural that the western governments would peg their currencies at a fixed exchange rate to the US dollar (Federal Reserve Note) which was redeemable in gold at $35 per ounce.  This is commonly known as the Bretton Woods system.

 

The system held together for around 20 years, accepting that $35 US Dollars were as good as gold until 1968, when things began to get dangerous…

 

Stay tuned and  Trust Jesus.

 

Stay Fresh!

 

David Mint
 

Email: davidminteconomics@gmail.com

Key Indicators for October 20, 2011

Gold Price Per Ounce:  $1,622 PERMANENT UNCERTAINTY
M1 Monetary Base:  $2,056,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,570,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?

10/19/2011 Portland, Oregon – Pop in your mints…

For those of you who have missed Part I and/or Part II, you may read them by clicking on the following links:

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part I

Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part II – Irony

For those of you who are too lazy to click the links, we do not blame you.  Below we offer a brief summary to get you up to speed:

Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade.  A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.

The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life.  The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.

The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society.  As such, the Central Bank becomes the natural creditor of the Government.  Whether it lends funds directly to the Government or indirectly, the result is the same.  That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.

Having established the fact that some form of both a Government and a Central Bank will come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.

Central Banking, like alcohol and socialism, may be a good idea when used in moderation.  However, each one of these also represents a catastrophe waiting to happen.  For if the circumstances under which they are created or used take an unfavorable turn, the wealth and lives of many may be lost in a very short period of time.

How, when, and most importantly why will this catastrophe take place?  As mere mortals, we can only answer the why and speculate as to the how and when.

Why, then, will the current system of Central Banking come to an end which will cause wealth destruction on a scale which will make the weapons of war seem like child’s play in comparison?

The answer, fellow taxpayer, is that money as it is widely understood today does not really exist.

You read correctly.  What a majority of the developed and semi-developed world uses as a store of wealth, unit of account, and medium of exchange, is a figment of the collective imagination.

Allow us to explain.  It is generally understood today that the value of money is not necessarily in money proper, rather the value of money is found in the ability of the bearer to exchange said money for goods and services.  What is often overlooked in this observation is that, for money to be exchanged for something of value between willing participants of a transaction, what is used as money in the transaction must be universally perceived to have value that is easily transferable between parties.

Following this logic, what society uses as money is, by definition, simply another good which is widely recognizable as useful in exchange and therefore carries a price premium (we will call it the monetary  premium) of a certain amount usually far above what some economists would incorrectly* call the good’s “intrinsic” value.

* We say incorrectly because value judgments, while often influenced by what are known as “market” or “intrinsic” values, are by definition made by the individuals who willingly enter into a transaction, not disinterested observers.  It is for this reason that it is more accurate to appraise value by observing price points of transactions on “the margin” (i.e. transactions that are actually taking place) as opposed to appraising value based on past transactions or transactions imagined to take place in the future.  Many are the hypothetical gains and losses of those who refuse to enter into transactions because they are waiting for and offer at “market prices” or the “intrinsic value” of an item.

Regardless of the monetary premium that a good may carry, whatever is used as money, by definition, must be a tangible good.  Otherwise, we are dealing with credit, which is a promise to pay in money at a future date. Credit may be given in exchange in the place of money and is often traded at a discount to money delivered immediately. 

The distinction between money and credit is common knowledge to but it is important to make a clear distinction in order to properly understand what happens next.

 

Examples of Money Proper - Courtesy of Mark Herpel - www.dgcmagazine.com

 

In roughly 9.000 years of human history, it has been tacitly agreed upon that silver and gold, usually in coin or bar form, are the highest and most widely recognized goods used as money and that the accumulation of silver and gold represent wealth. 

As you recall, the concept of a Central Banking arose in response to the need for man to protect his wealth.  You will further recall that in order to both protect wealth and facilitate trade, a Central Bank creates banknotes which represent a claim on the wealth being protected by the Central Bank. 

These banknotes which the Central Bank creates are, by definition, credit and not money.  They are generally the highest, least discounted, form of credit which is traded, but this does not change the fact that the banknotes are credit and thus carry an implied risk of default.  This risk of default places the ultimate limit on the circulation and acceptance of the banknotes in trade.

From time to time, when a Central Bank’s ability to protect the wealth entrusted to it came into question, banknotes would be presented to the Central Bank to be redeemed for the amount of silver and gold which they represented.  If the Central Bank could not produce the amount of silver and gold that was being redeemed, the Central Bank was considered to be in default and, as word of the default spread, the banknotes in circulation would trade at an ever increasing discount to real goods.

This logic further supports the fact that banknotes are credit, subject to default risk, and not money proper.

Can you now smell the impending catastrophe?  Or, to put the question more directly:

What’s in your wallet?  More tomorrow,

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 19, 2011

Copper Price per Lb: $3.25
Oil Price per Barrel:  $86.11

Corn Price per Bushel:  $6.38  
10 Yr US Treasury Bond:  2.16%

FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,671 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,505  

M1 Monetary Base:  $2,201,800,000,000 RED ALERT!!!
M2 Monetary Base:  $9,554,000,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Oh My, The Giant Snowball is now Rolling Down Hill, can the Central Banks Stop it?

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.

"AAA" Government dominates the market and it is beginning to smell funny!

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!

David Mint

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!!!!!!!

Greece to exit Euro and Palestine to take Center Stage

5/25/2011 Portland, Oregon – Pop in your mints…

If the events of the past week have not convinced you that there has been a permanent, fundamental change in the financial markets, perhaps nothing will.  As much as the numbers seem to stay the same, one has the sense that something is very, irreparably, wrong.

Trust that sense.

If you are trying to put your finger on what is causing the uneasiness you are feeling, allow us to offer our humble opinion.  The world is coming to the realization that all of the financial rescue programs that have been floated as the “cure” to the financial crisis by various Central Banks and Governments have done nothing useful. 

To put it harshly, they have not only failed, they have made things worse.

What they have done is to buy time for the banks to sell out of their losing positions and be made whole at the taxpayers’ expense.  Now, the jig is up.

The taxpayers see that the fix is in and are calling for the heads of their elected officials.  For the most part, the heads have been handed over peacefully via democratic elections.  Those that still have their heads are quickly backpedaling and distancing themselves from any Government sponsored bailouts.

With the resolve of the Governments of the west to continue “bailing out” the financial sector clearly in doubt, the heavy lifting is left to the ultimate and most deserving scapegoats, the central banks.

But what can they do?  Their only solution involves further exposing themselves for the fraud they are.  “If the central bank can simply print the money to pay debts, why should I work?” is the cry from the Proletariat.

That cry is being heard steadily in Greece and now Spain.

Austerity Protests in Athens today courtesy of occupiedlondon.org

It has taken a different tone in the Arab world, where revolution has increasingly been the rule ever since the Gregorian calendar turned to 2011.  The media explains what is happening in the Middle East as a “cry for democracy,” as if all of these people would be appeased if they could simply have the pleasure of voting for their dictator, as we do in the west.

No, the Middle East is burning due to the confluence of 1,300 years of festering hatred which for the past 90 years has had the Israeli / Palestinian conflict as its flashpoint and rapidly rising prices for basic necessities, which have always been dear in the desert regions.

These rising prices, of course, are the direct result of the debauchery of the currencies by western central banks.

From our vantage point, it is clear that the central banks have no more room to maneuver and that they will soon throw in the towel as well.  Central banking as we know it is expiring.

So who will bail out the western governments and central banks?  The taxpayers who have grown to loathe them?  Don’t count on it.  The simple answer is that no one will.  What logically follows is that the world is about to embark upon an amazing journey called “price discovery.”  A journey that has been delayed for three long years by the meddling of the authorities will now begin without further delay.

One of the first discoveries will be to find out what are Greek Bonds are worth.  Nobody really knows, but unofficially the 10 year note is trading at 51 cents on the dollar.  And now the barbarians from the north are storming down demanding that the Greeks make good on their austerity measures or else lose their support which would mean an almost immediate default by the Greeks.

But with riots becoming a way of life, the Greeks are beginning to wonder aloud whether or not the pain is worth it.  Our guess is that the barbarians will relent in an attempt to save the Euro.  You see, the Greeks still hold the ultimate trump card, as do we all, of defaulting on their debt and doing business in another currency.  For the Greeks, it would mean a return to the drachma.

Will they play it?

With the utter and complete failure of the world financial system at hand, those who soberly decided not to heed Harold Camping’s rapture warning and are looking forward to a world that will exist post October 21.  We believe that the world will increasingly turn their collective attention to Palestine.

We recently read The Haj in an attempt to beef up our understanding of the conflict.  You can read our review of this book at https://davidmint.com/?p=361.

The summary is that Palestine needs a miracle for there to be peace between the Israelis and the Palestinians.  This conflict will move to center stage as a distraction to the aforementioned utter and complete failure of the world financial system.

What has become crystal clear to us over the past two months is that if there is not peace in Jerusalem, there cannot be peace in the world.  Those of us who believe in Jesus (if you do not, please accept this as an invitation to believe) will not be raptured until there is peace in Jerusalem.   We do not know exactly why, we simply know that this is true.

For if there is peace in Jerusalem, there will be peace in our hearts.

Once we are raptured, the tribulation will begin, which is why we urge you to accept Jesus now.  You have nothing to lose and eternity to gain.

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

P.S.  Please check out our Affiliates!

Key Indicators for Wednesday, May 25th, 2011

Copper Price per Lb: $4.10
Oil Price per Barrel:  $101.47

10 Yr US Treasury Bond:  3.13%
FED Target Rate:  0.10% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,526

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  12,395
M1 Monetary Base:  $1,880,400,000,000 THE CRACK-UP BOOM BEGINS!!!!
M2 Monetary Base:  $9,011,900,000,000 DESPERATION!!!!

 *See FED Perceived Economic Effect Rate Chart at bottom of blog.  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.