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.
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.
Key Indicators for October 25, 2011
Gold Price Per Ounce: $1,705 PERMANENT UNCERTAINTY