Tag Archives: EFSF

The Three Ring Circus Begins

10/25/2011 Portland, Oregon – Pop in your mints…

What a difference a day makes.  Yesterday, it appeared that the authorities had most of the problems that ail the world’s economy resolved.  All they needed was a little more time, money and cooperation to implement their plans and the good times would be rolling once again!  Today, instead of coordinated, determined action, it appears that a three ring circus of sorts is beginning.

In Ring 1, we have the European Clown Car:  Yesterday, Europe looked ready to announce a plan to simultaneously solve the sovereign debt, banking, and resultant currency crises in one fell swoop.  Today, it appears that Italy is balking at implementing a growth plan on moment’s notice and Germany and France will need a miracle to announce a credible Pan-European rescue package by tomorrow, their self imposed deadline.  What a difference a day makes!

It should be clear by now to most sober persons that regardless of what is announced tomorrow, the Euro as a currency in its present form is not viable.  It should also be clear that the countries who have adopted the Euro will give away what is left of their sovereignty in a vain attempt to preserve it.

Step Right Up! The Three Ring Economic Circus Begins

In Ring 2, we have the American Elephants:  The US is quietly completing three Bond auctions that will cause the national debt higher than the national GDP.  The official total should eclipse GDP by the end of October.  100% of GDP is when the debt of a mere mortal nation (Greece, for example) has traditionally harkened national bankruptcy.

The only exception to this rule is in Ring 3, the Japanese Tight Rope Walker: Japan, where national debt is north of 200% of GDP.  How do they avoid bankruptcy?  Simple, they print money to pay the debt.  As if to prove our point, today, the Bank of Japan decided that they have seen enough Yen appreciation and announced another five trillion Yen currency printing campaign.

When money doesn’t exist, the sky is the limit, which is why commodities and certain equities are set to explode to the upside.  Bonds, while they may not fall in nominal value, will fall in relative value as they are repaid in severely depreciated currencies.

As if on cue, commodities took off today.  How high and far they will fly this time is anyone’s guess.

As the circus gets underway, the sober amongst us are beginning to wonder, sometimes aloud, “if the Governments, banks, and monetary authorities cannot solve these problems, then who can?”

The answer, fellow taxpayer, is right under our fingertips.  We, the People of the earth can solve it.  The tool we have been given is our own wit and ingenuity.  The only requirement is that we embrace True Capitalism, for better or for worse, for richer or poorer, until death do us part.

What is True Capitalism?  It may be summed up as a deep, radical respect for life, liberty, and private property.  It is an understanding that mutual cooperation is more often than not in our rightly understood interests (to use a Mises term).  It is not simply a choice, it is the only choice.  More to come.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 25, 2011

Copper Price per Lb: $3.41
Oil Price per Barrel:  $93.17

Corn Price per Bushel:  $6.51  
10 Yr US Treasury Bond:  2.13%

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

Gold Price Per Ounce:  $1,705 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,707  

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!!!!!!!

European Semi-Solution Extends the False Calm and indirect moratorium on Eurozone Investment

10/24/2011 Portland, Oregon – Pop in your mints…
Today after the western stock markets closed, the German lawmakers announced yet another plan in an attempt to stem the Eurozone’s tandem sovereign debt and banking crisis, which is rapidly accelerating.  The plan, according to AP, would boost the European Financial Stabilization Fund from its current 440 billion Euros approximately one trillion Euros.
The one trillion Euro figure is an estimate due to the nature of the plan which involves enticing capital to invest in the Sovereign debt issues from Euro member states by creating an insurance fund to partially back sovereign debt issues that would otherwise attract little investor interest.
Think of it as a partial Fannie Mae guaranty for European Governments.
There is a reason that foreign capital is hesitant to invest in Euro sovereign debt, and it is not for lack of enticement.  Greek, Spanish, Portuguese, and Italian bonds all offer fixed income investors a decent premium over other sovereigns for their perceived risk.  The problem from the point of view of the investors is that the premiums are not high enough if considered against the likely event that they will not get their principal returned.  The problem from the perspective of the Euro sovereign issuers is that they cannot realistically pay even these reduced premiums.
Once it is generally perceived that a nation state will default on its obligations, it is very difficult to attract capital, whether it be the purchase of sovereign bonds or investments in businesses located in the troubled country.
Default, while the most practical solution for any normal debtor, is apparently unacceptable for modern western nations.  For this reason, the Eurozone leadership is moving in slow, measured steps to appear to do just enough to preserve the credibility of the debt issued by the weaker, peripheral states such as Greece, Spain, and Portugal.
Will this latest Eurocrat concoction be enough?
For the moment, it may be.  The German Parliament must vote on their new obligations on Wednesday, just hours before the broader Eurozone working group is set to formally announce the plan, leaving no room for dissent, ala Slovenia earlier this month.  Once the political drama in Germany passes, it will be smooth sailing for the Euro and its sovereign debt markets…for about a week.
The illusion of viability and solvency

At that point, it will again become clear that the banks and sovereigns will require additional funds (currently the estimate is north of 2 trillion Euros) in order to continue the illusion solvency.

The problem of Euro solvency is no secret.  This is why both banks and sovereign governments are having a great deal of difficulty getting credit from anyone other than other broke European governments, banks, the ECB, and the Federal Reserve.  This latter list of entities have two things in common.  First and foremost, they all have a vested interest in perpetuating the charade that the Euro is a viable currency.  Second, these entities, by virtue of their activities, can only destroy wealth and therefore must coerce the productive class into lending its resources.
To make matters worse, no one in their right mind can invest real capital in the Eurozone under these conditions.  With sovereign governments pushing austerity measures and increasing the confiscation of private assets via increased taxation, any further investment in the Eurozone must be properly seen as an act of charity.
Such is the paradox of solving debt problems by incurring more debt.  Once one believes that the debt cannot be repaid, this belief becomes a self fulfilling prophecy.  The Eurozone is becoming the world’s latest example of this inescapable truth.
Meanwhile, commodity prices, which reflect the fruits of productive activities, are on the verge of exploding to the upside, signaling a growing distaste for fiat currencies.   Will this be the final, violent blow off in commodities?
Stay tuned and Trust Jesus.
Stay Fresh!
 
 
Key Indicators for October 24, 2011
 
Copper Price per Lb: $3.46
Oil Price per Barrel:  $91.60
Gold Price Per Ounce:  $1,653 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!!!!!!!

Dexia Nationalized, Occupy Wall Street Appears to misinterpret the Monetary Roots of Widespread Discontent

10/11/2011 Portland, Oregon – Pop in your mints…

The big news over the weekend was the partial nationalization of the Belian Bank, Dexia.  What?  You’ve never heard of Dexia?  Most people this side of the pond hadn’t up until a few weeks ago.  This tiny $707 Billion hedge fund disguised as a bank, which just months ago passed the European bank stress tests with flying colors, has become the first official victim of the dearth of interbank funding in the Eurozone.

In a world full of potential butterfly effects, Dexia’s staggering juggernaut could have a knock-off effect for the US Municipal bond market.

Following a familiar script into unfamiliar territory, the Governments of France, Belgium, and Luxembourg jumped in and provided guaranties (ala Fannie Mae and Freddie Mac, which ironically are currently regurgitating their guaranties back onto US Banks) to the tune of $122 Billion until things settle down.

Unfortunately for France, Belgium, and Luxembourg, things will not settle down in time for their governments to remain solvent.  Chalk another set of Eurozone governments up to the “effective loss of sovereignty club.”  Surrendering sovereignty to international banking interests seems to be working out well for Greece, Ireland, Portugal, and Italy, so why not join the fun?

Slovakia appears to be the only nation willing to stand up against the wave of bailouts and subsequent loss of sovereignty as the bailouts costs crush already strained government balance sheets.  It appears that they may hold out a couple more days, enough time to find a compliant government (the current one was voted out in a confidence vote tied to the EFSF earlier today).

The situation in Europe is giving the world a frightening message:  When push comes to shove, the governments can be counted on to work in the interests of the banks.  How long this untenable situation can last is anybody’s guess, but if the Occupy Wall Street movement continues to gain traction, it is clear that the situation, if properly understood, could change very quickly.

The Euro Prepares to Claim More Sovereignty

Observant fellow taxpayers will note that we have qualified our previous statement with the words “if properly understood” because, at the moment, the Occupy Wall Street movement appears to misunderstand the roots of their many and varied forms of discontent.

Protesters apparently see nothing wrong with the government selectively fleecing the productive class as long as they receive their “fair share.”  If we have correctly identified the Socialist tendencies of these protests (as last check they had not adopted a manifesto), then the logical outcome is simply the ouster of one form of parasite, the banking interests, for another.

The problem, of course, lies in what we use as money.  Placing the power to create money in the hands of a Central Bank and then turning a blind eye as they shamelessly debauch the currency, giving an inordinate amount of purchasing power to those closest to the money printing operation (banks and government) and placing an inordinate amount of regulatory and tax burden to those farther away from the money printing operation (that would be you and I, fellow taxpayer), is perhaps the surest way to destroy man’s faith in the capitalistic system, and in the process lay the blame for every evil unleashed by the debauching of the currency on the capitalistic system.

Rothchild, Marx, and Keynes understood this.  They also understood that only one man in a million would be able to understand how debauching the currency serves to concentrate power in the hands of few at the expense of many.

Are you one of them?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 11, 2011

Copper Price per Lb: $3.30
Oil Price per Barrel:  $85.81

Corn Price per Bushel:  $6.45  
10 Yr US Treasury Bond:  2.16%

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

Gold Price Per Ounce:  $1,663 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,416  

M1 Monetary Base:  $2,144,500,000,000 RED ALERT!!!
M2 Monetary Base:  $9,473,100,000,000 YIKES!!!!!!!