Tag Archives: Dodd-Frank Act

The Mint

A US Default? Into the Great Unknown

6/29/2011 Portland, Oregon – Pop in your mints…

Much has happened in the financial markets in this past week, and much will happen in the coming weeks.  But perhaps what is most notable is what has not happened.

Namely, the US Congress has not raised its self imposed credit card limit.  For an entity that is already $14.3 Trillion in debt ($4 Trillion of which reportedly comes due in the next 12 months) with no realistic plan to pay for it, this is suicide.  What are they thinking?

The two parties are in agreement one count, they need to save $2 Trillion dollars over 10 years.  Why this sum has been identified as the cure for what ails the country’s finances is anybody’s guess.  Unfortunately, but not surprisingly, there is no agreement as to how to get there.

Where will they find $2 Trillion? Tax the rich, screams Obama, repeating the eternal populist sentiment.  Stop spending, say the Republicans, using the circumstances to make a push for “limited government.”

Editors Note:  There is no hope for limited government with the current two party system in place, therefore the Republican’s stance is entirely a façade.

The President has taken the extraordinary step of asking Congress not to recess over the Fourth of July, as is their custom, calling their lack of agreement akin to his daughters not completing their homework.  While the President makes a quaint metaphor, we believe that Obama’s daughter’s homework is probably more challenging than Congress’s task of balancing the budget.

Obama Admonishes the GOP to stay and do its "homework

Balancing a budget is simple.  It just takes courage.  It seems that courage is in short supply in Washington DC these days.

Without internal fortitude to press the Americans along, a little external pressure is beginning to be applied.  First, the Treasury’s latest 7 year bond auction did not go as well as planned as investors demanded 2.43% to hold US paper for a sabbath cycle.  Without the FED at the table, it is hard to imagine how it could have gone well.  Bond Market participants are beginning to wring their hands.

Then comes word that the IMF is beginning to apply pressure, eloquently reminding the Americans of what they should do and why they should do it.  It is worth noting that the IMF appears to be the last to know about such things so we will excuse their apparent surprise at the lack of inaction (they are most likely not informed MINT readers like yourself):

“…the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets,”

Yeah, tell us something we don’t know.  And then, true to their holier than thou, infallible status, they give the Americans advice on how to do it:

“We see early political agreement on a comprehensive medium-term consolidation plan based on realistic macroeconomic assumptions as a cornerstone of a credible and cyclically appropriate fiscal adjustment strategy,”

Great!  Thanks for the incomprehensible and totally impractical advice.  This type of drivel simply solidifies our opinion that the IMF is a worthless institution and could be categorically ignored if it were not so insistent upon meddling in financial matters on a global basis.

Meanwhile, we are getting to see first hand what happens to a country that gives up control over its currency and then listens to the IMF for advice and is forced to take a loan from them. Greece, is giving the world a glimpse at how popular austerity is with the masses.

The scene that was carried out in the Middle East in the Spring is set to take place in Europe and England over the summer months.

How long until it crosses the Atlantic?

Another event that may occur as interested parties begin to reduce exposure to US Treasury debt is a liquidity crunch that will start in early July.  Apart from the debt ceiling uncertainty, the Dodd-Frank financial reform rules are set to begin to do their damage to the financial system on July 15th.

If they do not forestall these rules as many banks are begging them to do, the US and global economy will take their first tender steps into the great unknown, a world without political or real capital to act a a backstop for failures.

It will be dangerous and exciting.  And, just like a fireworks show, will be best enjoyed from a safe distance.  Keep your money close at hand, meaning out of banks and preferably in precious metals or anything tangible, and enjoy the show!

Stay Fresh!

P.S.  If you enjoy or at least tolerate THE MINT, please share us with your friends and family!

Key Indicators for Wednesday, June 29, 2011

Copper Price per Lb: $4.20
Oil Price per Barrel:  $94.93 A FAILURE TO INFLATE, WILL TREND LOWER

*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.

The Mint

The US House of Representatives, Unable to Function, Waffles on Derivatives Rules and Libya Resolution

The US House or Representatives, Unable to Function, Waffles on Derivatives Rules and Libya Resolution

6/1/2011 Portland, Oregon – Pop in your mints…

The leadership of the United States finds itself publicly handcuffed to the interests of the banks and defense contractors and at this point appears effortless to free itself.  Two glaring and pertinent examples have appeared in this week in what can only be described as an utter and complete failure to act on behalf of the people.  This inability to govern, as a QE program is evidence of the failure of a currency regime, is evidence of the very failure of a government.

Both examples are from the US House of Representatives:

Exhibit A of House Dysfunction: House Financial Services Committee Votes to Delay Derivatives Rules

For the uninitiated we offer a humble and intentionally oversimplified explanation of what this means.

You may recall that In 2008, The United States gave a $700 Billion blank check to the financial services industry (commonly known as TARP) with few, if any, questions asked.  When the inevitable, albeit insincere political backlash from the masses began to surface, the taxpayer was pacified with a piece of legislation called the Dodd-Frank Act.

The Dodd-Frank Act is a fictional attempt to regulate the financial markets.  Its passage was meant to put to rest any doubts that the US Government knew what it was doing when it immediately and blindly ceded over 5% of GDP to the sharks of the financial industry.

Senators Chris Dodd and Barney Frank were going to make sure that the financial markets never put the US Government in the uncomfortable position of having to bail them out again.

The main culprit was identified as the OTC derivatives market, presented to the people as a clandestine exchange where financial companies freely traded promises that they couldn’t keep for money that their counter parties didn’t have.  The whole thing was a fraud to begin with.

Unfortunately, passage of the Dodd-Frank Act has simply legitimized and encouraged this fraud.  Now, nearly two years later, Congress is having trouble implementing rules with teeth to apply the fairy tale derivatives market which is now reportedly worth $600 Trillion dollars, or roughly 10 TIMES GLOBAL GDP.

The failure to write rules for this worthless piece of legislation simply underscores how far the money lenders have infiltrated the US Government.

Meanwhile, large cap companies continue to raise large amounts of cash in preparation for a complete breakdown of traditional credit markets which could occur later this summer, no matter what the authorities do.

A New Sign Soon to grace the US Capitol Building?

Exhibit B of House Dysfunction: House puts off Vote on Libya Resolution

In what is perhaps an even more shocking example of how far the defense contractors have infiltrated the US Government, we have this report of a House resolution being pulled for fear that it will pass.  From the Associated Press:

“The GOP leadership had scheduled a vote Wednesday on the resolution by Rep. Dennis Kucinich, D-Ohio, that “directs the president to remove United States Armed Forces from Libya … not later than 15 days after the adoption” of the measure. The vote was delayed as the leadership and Obama administration realized frustrated lawmakers likely would support it.”

If this is to be believed, there is widespread support in congress for the US to immediately cease and desist all military activity in Libya.  At The Mint, we had speculated that the US had no business intervening in Libya.  It appears that the House of Representatives agrees.

But as appears to be the case with the Dodd-Frank Act, a mysterious force seems to be impeding the US Government from following the simple guidelines laid out for it in its own founding document, the long since forgotten Constitution of the United States of America.

With the government quickly running out of money and virtually impotent to do anything, let alone carry out its basic functions of protecting the life and property and its citizens, a time of “adjustment” (chaos in the financial markets) appears to be rapidly approaching on the horizon.

Are you prepared?

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

P.S.  Please check out our latest 72 Hour Call at www.davidmint.com

Key Indicators for Wednesday, June 1st, 2011

Copper Price per Lb: $4.09
Oil Price per Barrel:  $99.82

10 Yr US Treasury Bond:  2.97%
FED Target Rate:  0.10% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,539

MINT Perceived Target Rate*:  2.25% INFLATION HERE WE COME!!!!
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  12,290
M1 Monetary Base:  $1,892,800,000,000 THE CRACK-UP BOOM BEGINS!!!!
M2 Monetary Base:  $9,036,600,000,000 MORE FUEL FOR THE CRACK-UP BOOM!!!!

*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.