Tag Archives: European Debt Crisis

Economics, The Mint

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!!!!!!!

Economics, Uncategorized

World Economy Collapse explained in 3 minutes – Mind Blowing!!!!!

For anyone wondering what is going on in Europe this weekend and what it means, this video should clear things up nicely.  Enjoy!

http://www.facebook.com/video/video.php?v=10150860012110261

Economics, The Mint

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

10/17/2011 Portland, Oregon – Pop in your mints…
For those of you who have missed or long since forgotten Part I, please take a moment to review it here:
Our tale continues:
As the Fixed income markets continue to crumble, all eyes in Finance are now on a summit of European leaders that will take place next Sunday, when many persons will be watching sporting events, enjoying the outdoors, protesting, or toiling to eke out a meager existence on this earth.
What happens in Europe next Sunday may be simply another act in the game of extend and pretend that until now has been the only strategy employed by Western governments and their Central Banks in response to the bankruptcy of the world’s largest banks and governments.
On the other hand, it may be a Pearl Harbor type of event for the Euro and other currencies.
Since we do not know what will befall mankind this coming Sunday, we must endeavor to understand how the Western world has arrived at this critical juncture in history.  We began last week, by exploring the often underestimated contribution of Luca Pacioli to the commonwealth of society:  The dissemination of Dual Entry Accounting methods used in Genoa, Florence, and Venice circa 1492.
Today, we will explore the great irony that Dual Entry Accounting – what we call man’s greatest innovation, has made possible what we are calling man’s greatest catastrophe, Modern Central Banking.
In order to do this, we begin with a brief history and explanation of the concept of Central Banking and its relationship to government.
The concept of Central Banking is rooted in man’s need for security as well as his recognition of his co-dependence on his fellow man to increase his well being through trade.  It takes time and energy to obtain and protect wealth.  It also takes time and energy to barter with counterparties while trading differing goods without a suitable means of exchange.
A bank, in its simplest form, provides a secure place to store wealth.  A natural extension of this activity is for the banker to extend credit and act as a clearing house for commerce by assuming a de facto role as an issuer of currency in the form of banknotes which represent a claim on wealth held at their bank.  The existence and circulation of these banknotes greatly facilitated trade.
As trade and consequently the wealth of mankind increased both in volume and geographical reach, there was increasingly a need for a larger banking interest to store the excess wealth of the individual banks and to honor the banknotes emitted by the individual banks.  This larger banking interest, formed by and for the benefit of the individual banks, is what we today call a Central Bank.
The complexity of maintaining banking accounts was greatly facilitated and made possible on a large scale by the use of dual entry accounting.  The ability for individual banks to maintain accounts on a larger scale made possible the existence of a Central Bank to act as a clearing house amongst banks.  Hence, our premise that Dual entry accounting enabled Central banking.

Now, on to the role of Government in relation to Central Banking.  If Central Banks arose because man needed someone to look after his wealth, governments arose because man needed someone to look after his life.  Governments were formed in response to the natural human need for a common defense.

It is not hard, then, to imagine that Governments, in whatever form, relied heavily upon and supported the formation of both individual banks and Central Banks.
Why would Governments need banks and Central banks?
Governments are generally given license by the members of society to use whatever means necessary to preserve their lives.  As such, they assume the role as the apparatus of compulsion and coercion in that society.
As the apparatus of compulsion and coercion, the government, by definition, cannot generate wealth.  At best, it can only create the conditions under which individuals may create wealth, but the activities of government as a provider of security never directly create wealth.  Because they cannot create wealth, they must either borrow from or tax the populace in order to fund their activities of compulsion and coercion.
The Central Bank, as the ultimate repository of wealth, offers a convenient source of both credit and, in a later wave of Central Banks of which the Federal Reserve is a prime example, tax collection services.
Storage of Wealth and Tax Collection Service provided with a smile
As you can see, a Central Bank is an indispensible institution both for individuals in terms of storing wealth and facilitating trade, as well as for Governments who have an insatiable need for tax revenues and credit.
The existence of a Central Bank, for all of the benefits that it may bestow, unwittingly makes the wealth of those it serves a natural target for those who are anxious to obtain that wealth through unjust means.
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.
Needless to say, the scale of modern Central Banking is beyond what would be advisable, and the potential for catastrophe is unprecedented.
How, when, and most importantly why will this catastrophe take place?  We can only answer the why, and we will tackle it tomorrow as we are spent.
Stay tuned and Trust Jesus.
Stay Fresh!
Key Indicators for October 17, 2011
Copper Price per Lb: $3.35
Oil Price per Barrel:  $86.24
Gold Price Per Ounce:  $1,671 PERMANENT UNCERTAINTY

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!!!!!!!

Economics, The Mint

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!!!!!!!

Economics, The Mint

Sumo Wrestling in Europe, Can America afford to be Frugal? Not as long as Debt = Money

10/5/2011 Portland, Oregon – Pop in your mints…

In Europe, the sumo wrestlers have resumed their battle royal on the edge of the cliff.  In this metaphor, the wrestlers conveniently represent the various banks, semi-sovereign governments, central banks, and other unproductive, parasitic organizations with the words “Monetary Fund” in their name.

Up until now, with the exception of some jeering from the spectators, the battle royal has been good natured fun.  Each time one of the wrestlers has tumbled towards the cliff, several of his benevolent fellow competitors have come to his rescue.

First Greece, then Ireland, Northern Rock, Anglo-Irish, and The Bank of Ireland.  Now Alpha, Spain, Caja del Sol, Portugal, Italy, and Dexia.

Each time, they get up, dust each other off, and go back at it.

But the competitors are getting weary, as are the spectators.  With each new stumble towards the cliff, more competitors and even some spectators are required to jump in to avert certain disaster.  If this continues, when one of the weary wrestlers finally tumbles over the cliff, it is increasingly likely that he will take the rest of his competitors and a decent number of well meaning spectators over the edge with him.

Now things are starting to get interesting as BNP Paribas, SocGen, and France herself began to stumble towards the edge.  Who will save them?  Certainly not the Swiss National Bank, which last month stumbled to the edge of the ring and ironically may be the first to fall off.

Any sober observer will quickly point out that this is an insane pastime.  Why would a group of sweaty fat men repeatedly try to push each other from a ring along the edge of a cliff?

We can only venture a guess, and our guess is along the lines of “they somehow believe that they must.”

Why ask Why? Just stay away from the edge!

It doesn’t make sense, neither do a great number of things that occur in the current, insane, “debt is money” currency system in which we live. 

People and institutions are trained to make decisions regarding money based on the assumption that money in and of itself has value.  This assumption, under which the world currently toils, was debased along with the US Dollar back in 1971.  Money today has very little in common with the money our fathers grew up with.  Peter Schiff, the outspoken CEO of Euro Pacific Capital, has gone as far as to call modern currencies the “hidden portfolio risk.”

Our father’s money was based on the assumption that men were dishonest, and what they used as money (gold and silver) served to keep them honest.  Today, money is widely assumed to be honest, a fact which has served to make a great number of men dishonest.

Debt is not money, the proof

The only way that the illusion that debt is money can be perpetuated is when debt, and therefore the perceived money supply, is increasing.  First of all, who has ever been known to turn down free money?  When the exponential increase in the perceived money supply is occurring, it creates the welcome illusion of wealth.

Second, people quickly learn that the easiest way to make money is to position oneself as close as possible to the creation of new debt.  This is essentially the business model of Goldman Sachs and every other consumer and investment bank on the planet.

The money is so easy that no one stops to consider what would happen if aggregate debt were to begin to decrease, in turn decreasing the money supply by the same multiples with which it was created.

It will never happen, right?  People will never turn down free or almost free money.

Yet they are.  It turns out that people have a propensity for austerity when they have no choice.  If money were based on something real, austerity would be extremely healthy for the economy which would be accumulating a capital base from which to make the next series of technological advances.

In the current, insane, debt is money currency regime austerity (the reduction of aggregate debt) removes the life blood from the monetary system and causes the underlying economy to die a slow, then sudden and altogether painful, death.

The mirage of the debt fueled economy quickly vaporizes and the debtors and creditors in the system find themselves in the middle of an economic desert with a long road ahead of them.

There will be much struggle along the way, and their only hope is to walk together.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 5, 2011

Copper Price per Lb: $3.13
Oil Price per Barrel:  $79.51

Corn Price per Bushel:  $6.05  
10 Yr US Treasury Bond:  1.91%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,640 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  10,940  

M1 Monetary Base:  $2,052,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,511,300,000,000 YIKES!!!!!!!

Economics, Gold, Silver, The Mint

Reports of the FED as “Only” Lender of US Dollars, The Definition of a System Collapse

9/28/2011 Portland, Oregon – Pop in your mints…

We have taken a small breather here at The Mint.  What has occurred in the past week simply boggles the mind.  Precious metals have taken a beating and it is our guess that they will continue through tomorrow.  The most interesting reasoning for the drop in Gold and Silver that we have heard is that there will be an announcement on October 4th limiting short positions on the COMEX.

Guess who has a huge short position in silver that needs to be covered this week?  JP Morgan, to the tune of 121 million ounces.  We can only guess at the machinations but needless to say, it would be very convenient for them to be able to cover their positions at a discount.  Hence the increase in margin requirements at the COMEX last Friday which has shaken out the weak long positions this week.

Across the board in commodities, current prices reflect a rush to cash, not changing fundamentals.

Some interesting reading on the current, sorry state of employment in the US from US News:

15 Stunning Statistics About the Job Market

It is much worse than most imagine.

Other than that, chaos is reigning as the dollar funding markets for banks in Europe are apparently non-existent.  As September 30, 2011 approaches, banks are holding on to cash in the absence of clear direction from the Eurozone as to how they intend to bail out their large institutions.

In the meantime, the FED has apparently opened up swap lines (read printing presses) to provide dollars to these banks.  According to a report that we saw from Bloomberg, the FED has gone from its role as the lender of last resort to a role as the lender of ONLY resort.

We take this to mean that nobody is willing to lend US Dollars at any price to the largest banking institutions in the world.

Does this indicate that, at long last, the US Dollar system has technically collapsed?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 28, 2011

Copper Price per Lb: $3.21
Oil Price per Barrel:  $79.95

Corn Price per Bushel:  $6.30  
10 Yr US Treasury Bond:  2.00%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,610 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,011  

M1 Monetary Base:  $2,010,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,541,800,000,000 YIKES!!!!!!!

Economics, Events, The Mint

A run on BNP, Europe’s Financial Collapse begins in earnest

9/22/2011 Portland, Oregon – Pop in your mints…

While it was a rough day for equity markets everywhere, in light of what is occurring, they (the markets) were amazingly resilient.  A testimony to how fast the monetary spigots at the Central Banks are running.

There are two events that appear to be on a collision course with destiny today (No, neither of them is the NASA space junk hurtling towards the earth).  It feels as if the world is reaching a sort of inflection point in modern history.  Perhaps a great awakening is about to occur.  Will people’s faith in Central Banking finally be broken?

The colliding events are the Palestinian bid for official recognition by the United Nations, scheduled for tomorrow, and the emerging institutional bank run on BNP Paribas.

The Palestinian situation needs no further discussion.  It is clear to most that it is an explosive topic to which the bid for recognition threatens to detonate, much in the way the Israeli Declaration of Independence ignited war in Palestine in 1948.

The Institutional run on BNP Paribas is an event that is occurring as we write and it is unclear how it will play out.  Reggie Middleton at the BoomBustBlog, is chronicling this event in real time.  If you are interested, we highly recommend following the event there.

Real Money Fleeing the Continent!

We have read reports of Lloyds of London, the famous Insurance Marketplace, pulling a great deal of its deposits out of banks on the continent.  We have also read reports of Siemens pulling deposits and parking them directly at the ECB.

Then there was the report of the ECB making an emergency loan of $500 million US Dollars to an unidentified bank (read BNP) with similar loans to other institutions in the cue.  It is clear that the banking crisis in France is dwarfing the ability for the French government to deal with it.

There is no use pointing out the many lessons that society will learn from this, for only one is expedient at the moment.  That lesson is that digital bits on a computer screen or numbers on a bank statement are worthless if the counterparty cannot make good on their commitments.

The run on BNP will intensify the focus on Western Central Banks, which have balance sheets that make BNP, BAC, and all of the other large sinking banks look good by comparison.  This is important because a good part of the world is to some extent a counterparty to the Central Banks.

Need proof?  Open your wallet.  If you have US Dollars or Euros, you are a counterparty to (owed money by) the Federal Reserve or the ECB, whose management is currently buying every worthless paper asset on the planet with leverage that is unimaginable for mere mortals.

Dollar and Euros are about to become extremely hot potatoes, which makes trading them for potatoes, spuds, or anything real, a real good idea.

Let us pray for the peace of Jerusalem, and that tomorrow passes uneventfully on all fronts.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 22, 2011

Copper Price per Lb: $3.45
Oil Price per Barrel:  $80.41

Corn Price per Bushel:  $6.50  
10 Yr US Treasury Bond:  1.72%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,736 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  10,734  

M1 Monetary Base:  $2,010,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,541,800,000,000 YIKES!!!!!!!

The Mint

A taste of Autumn, Greece remains on the hot seat, the US budgets to end wars?

9/19/2011 Portland, Oregon – Pop in your mints…
We’ve had our first taste of autumn here in the Pacific Northwest.  We found ourselves strangely welcoming the overcast sky and constant humidity.  It is the type of weather that is pleasant for a month or two.  Unfortunately, we get about 8 months of it here which requires some sort of escape to the sun, either Hawaii or California, for it to remain tolerable.
But still, the first taste was sweet and provided a warm feeling that all was well with the world, despite constant reports to the contrary.  Fortunately for us, the sun looks as though it will return this week.
On the whitewashed shores of Greece, where the sun seems to perpetually shine, there is now intense pressure from which there seems to be no escape.  The Prime Minister was called back from a trip to the US after receiving an emergency call from the Finance Minister as he stopped over in London.  The poor chap had to be on a conference call with creditors and the troika and didn’t want to take the lashing alone.
As if to give the world a taste of things to come, the Greek Government passed an emergency property tax which is to be collected via the citizens’ electricity bill to help ensure compliance.  Apparently the folks at the electric company are not happy about adding tax collection to their duties and are pushing back on the order.
The Greeks never have been good at collecting taxes, either that or their citizens are especially adept at avoiding paying them.  Either way, the combination makes for low tax revenues which makes servicing public debt, well, difficult.
We offer a suggestion to the Greeks, privatize the electric company and then enact an enormous tax on consumption.  At least then the riots would be staged at the electric company and not at parliament.
Meanwhile, before departing for New York in perhaps the least understood yet most important peace-keeping mission the US will ever embark upon, President Obama gave yet another clinic on teleprompter reading during his speech on, what else, government finances.  His proposal was to save $1.5 Trillion over the next 10 years by in large part by ending the wars in Iraq and Afghanistan.
Will Palestine Become a UN Member?
We do not have any statistics, but we are willing to bet that this is not the first time that ending these wars has been proposed as a deficit reduction measure.  What is truly astonishing to almost every thinking person is that these two military adventures have continued for so long and have become such a drain on the public treasury  that ending them now would save $1 Trillion.
Less war, more money, what a novel idea!  It is as straightforward as it is unlikely to happen.
We sense that both this speech and bath time for Greek creditors will be interrupted by the Palestinian bid for statehood at the UN this week.  The Middle East has not seen a moment like this since Israel vied for statehood in 1949.  Let us pray that this moment passes in a peaceful manner.
Stay tuned and Trust Jesus.
Stay Fresh!
Key Indicators for September 19, 2011
Gold Price Per Ounce:  $1,779 PERMANENT UNCERTAINTY

M1 Monetary Base:  $2,101,100,000,000 RED ALERT!!!
M2 Monetary Base:  $9,540,500,000,000 YIKES!!!!!!!

Economics, The Mint

A pending Eurozone implosion and How Inflation appears in disguise: The Euro/Peseta price of Spanish Coffee

9/14/2011 Portland, Oregon – Pop in your mints…

What a week it has been, and we are only halfway through it!  Societe Generale, BNP Paribas, and many other European banks are bracing for the impact of a pending Greek default which would likely be followed in short order by an Irish, Spanish, Portuguese, and possibly Italian default as club med prepares to give the collective finger to their German, ECB, and IMF taskmasters.

There were rumors that BNP could not borrow dollars yesterday and today we saw why.  The large French banks, of which BNP at $2 Trillion in assets is the largest, collectively hold assets of $8 Billion, which is four times France’s annual GDP.  This, in theory, makes nationalization of these banks impossible and the meager, strings attached handouts offered by China are of little comfort.

Zerohedge.com posted an excerpt of a report by Jeffries which spelled out a probable endgame scenario in Europe which involves sloppy nationalizations of the financial sector and a repudiation of the Euro by the defaulting countries in order to print the drachmas, pesetas, liras, etc. necessary to make good on the newly nationalized banks’ liabilities.

The PIGS have nothing to lose at this point and it will be EUROUGLY for those who cling to the Euro. 

We are all preparing to learn a great lesson about faith in paper currencies and it looks like for the Europeans, class is in session.

Yesterday, we were attempting to explain the concept of inflation coming in disguise.  We speculated that the disguise would come in the form of a “10:1 reverse split” being declared for the current USD.  In other words, a new US Dollar would be introduced which would be worth 10 old US dollars.  We left off with a question, “What’s the big deal?  Why does this matter?”

At this point, our rational readers are thinking to themselves, ”Big deal, so we get rid of the penny and nickel production cost problem, learn to move the decimal place in our thinking, and happily move along with life, right?”

This, of course, is what most monetary and governmental representatives think as well.  It makes the move almost a no-brainer.

We must beware of the money changers!  They seem innocent, yet are wolves in sheep’s clothing.

Yes, fellow taxpayer, under the reverse split scenario, dollar holders will be robbed.  Quietly, and, if not for the following humble explanation, completely unaware.   It is as Keynes famously said:

“The best way to destroy the capitalist system is to debauch the currency.  By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens”

(Editor’s note: today inflation is accepted as “sound” economic policy thanks to meddlers such as Mr. Keynes.)  

How, then, will dollar holders have their wealth confiscated?  A change like this initially robs those who can least afford to be robbed, the poor.  And the thievery is made all the more sinister because the thieves employ unwitting merchants and tax collectors with which to fleece them.

The following is a practical example of how the theft will take place: 

One would be hard pressed to find a more suitable and pleasant example if instant price inflation than that of the Spanish cup of coffee, pleasantly sipped at mid-morning with friends and colleagues.

Inflation explained in the new Euro price of Cafe con Leche

This cup of coffee, a constitutional right of Spaniards for generations, could be enjoyed for a mere 100 pesetas circa 1995, in the era before the peseta was to be pegged and converted into the then conceptual Euro currency.

This 100 peseta price held more or less firm until the Euro coins began to circulate in 2002.  The Euro/Peseta conversion rate had been pegged at 166.386:1 in 1995.  In 2002, the same cup of coffee was now 1 Euro, an overnight 66% increase.

The numbers may not be exact but you get the point.  Currency changes offer a grand opportunity for price adjustments at the lower end.  While on the surface, it appears that a cup of coffee that costs 1 monetary unit compared to one that costs 100 monetary units is an improvement.  In fact, considering that many wages remained stagnant, it represented a considerable deterioration of overall purchasing power.

To this day, many Spaniards think of prices for larger items such as cars and houses in terms of pesetas.  It is one thing to be duped on the value of a cup of coffee, quite another to be duped on the value of a car or house. 

For a time, asset prices there did indeed rise as an indirect result of people fleeing the inflation caused by the change to the Euro.  However, the devil of inflation is in the details.  An overnight 66% increase in a cup of coffee can eat into a laborer’s stagnant wages quickly. 

Once the transitory asset price increases have been burned through at the café, one is left with a nation that is collectively poorer and unable to make economic decisions because of these types of stealth price shifts.

Returning to the probable US Dollar reverse split, we can see that a 10:1 change from old to new dollars would likely result in a cup of coffee going for a nice round quarter (or 25 new cents).  Which sounds like a trip back to the 70’s until you consider that we are talking about $2.50 of the old dollars for a plain cup of coffee which could be had for $1.50 before the switch.

One can rest assured, employers will be mindful to move the decimal point and nothing more on wage calculations.  Voila!  Overnight poverty, all with the stroke of a pen. 

While one may hold out hope that any change in the monetary unit will be price neutral, the Spanish example shows us that lipstick on a pig does not make it any prettier, and coffee at 1 Euro is no tastier than it was at 100 pesetas, just more expensive.

We pray that you will prepare yourself by saving in gold and silver coins, which will retain and perhaps increase their relative value under such a scenario.  Under current conditions (and probably more so after the G-7 begin to their coordinated action) anything that cannot be created by government decree, to paraphrase Michael Pento, will be preferable as a savings vehicle to the US Dollar.

Stay tuned and Trust Jesus.

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 14, 2011

Copper Price per Lb: $3.90
Oil Price per Barrel:  $88.94

Corn Price per Bushel:  $7.24  
10 Yr US Treasury Bond:  2.01%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,815 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:  $9,456,000,000,000 YIKES!!!!!!!

Economics, The Mint

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%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

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!!!!!!!

Economics, The Mint

Crash! The Mother of all Calls illustrated by Dave Kingman

8/4/2011 Portland, Oregon – Pop in your mints…

Today the Dow fell some 500 points.  Looking further, everything seemed to fall today.  We hope you have a good umbrella,  fellow taxpayer, it could be quite a storm.

Three noteworthy things seemed to have taken place in no particular order and for no apparent reason other than to unite to tank financial asset prices all over the globe, which is no small feat.  We will take them one by one.

First, overnight, the Japanese Central Bank intervened to prop up the dollar (or weaken the Yen, however you prefer to look at it).

Second, the world gave a collective thumbs down to the Eurozone’s “effort” to stabilize its bond markets.  The Euro Feds appear over matched in their currency union’s first true fidelity test.

This uncoordinated action led to the third event which we will call the “mother of all calls” on the US Dollar.  With short and long interest rates skipping around a zero as far as the eye can see, speculators have taken swings at the dollar like Dave Kingman at the 2-0 fastball.  The dollar is already sold short on an almost unimaginable scale.

Today, those speculators, ala Dave Kingman, whiffed and nearly fell over.  The only way this “mother of all calls” could be satisfied was for those short the dollar to quickly and injudiciously exit other positions.

This exiting injudiciously of  other positions is colloquially called a crash.

This crash, along with the foul smelling economic datacoming out of the US will give the Fed and Congress all the ammunition they need to launch both QE3 and any and every fiscal stimulus program they can dream up.

QE3 and fiscal stimulus on steroids will soon prove those speculators short the dollar right and the final, sordid chapter of the US Dollar’s history is about to begin!

Dave Kingman may have whiffed at the 2-0 fastball, but he has two more swings…

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for August 4, 2011

Copper Price per Lb: $4.19
Oil Price per Barrel:  $85.60

Corn Price per Bushel:  $6.93
10 Yr US Treasury Bond:  2.46%
FED Target Rate:  0.12%  TIGHTENING?  NOT!

Gold Price Per Ounce:  $1,649 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  11,384  TO THE MOON!!!
M1 Monetary Base:  $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base:  $9,226,100,000,000 YIKES!!!!!!!

*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

Italians to join Europe’s needy, the parable of the Chiropractor

7/11/2011 Portland, Oregon – Pop in your mints…

Investors woke up today and wasted little time in marking down Italian sovereign debt, along with Spanish and Portuguese debt issues.  Why?  The story of the Italians is eerily similar to that of the Greeks, the Portuguese, and the Spanish.  Their government spends more than it takes in.

At this point, all readers of The Mint know that it is impossible for any Government to produce value.  Yet somehow, in our upside down, insane monetary system, it has become acceptable for the western governments to run a reasonable deficit to help pay for their role as the Robin Hood in the current welfare state model.  The European Union even went so far as to attempt to define what constitutes a reasonable deficit as 3% of a nation’s GDP per year.

Now if the government takes in 25% of national income in the form of taxes, which is not an unheard of (if anything it is a low estimate) and then borrows an additional 3% (which has proved an elusive target), then 28% of the welfare state’s economy is devoted to income “redistribution.”

While the term “income redistribution” does not fly well with most voters, the Government’s “investment” decisions are cleverly disguised as Social Security, Health Care, Defense, and Education.  Most will recognize that these are important investments, which leads us to the logical question:

Why leave these investment decisions up to the Government?

This question is rarely asked, and most seem content to let the Government continue in their collective role as Robin Hood.  It should come as no surprise, then, that a great deal of time and what would otherwise be productive energy goes into influencing Robin Hood’s decisions as to whom the poor are at the moment.  Bill Bonner at The Daily Reckoning calls this outsized effect of Government in the economy a “Zombie Takeover.”

With the Zombies creatively destroying a minimum of 28% of GDP in a modern welfare state, perhaps it is a testament to the resilience and productivity of the citizenry that any real progress can be made under such circumstances.

Fortunately (or unfortunately for those in the zombie class) the insanity is coming to an end.  As the government’s destruction of wealth accelerates, even elected officials will have to admit that the bad decisions that all of this accumulated debt represents do not go away just because one denies that they exist.

In fact, attempts to solve the problem of too much debt by creating more currency are futile, as each unit of currency creates a unit of debt which must be dealt with at a later date.  This is the glory of modern monetary theory.  It binds the world together in slavery.  It is also its Achilles heel, which is now exposed, waiting to be stricken.

How and when will this finally occur?  It will be like the man with back pain who finally goes to visit the chiropractor.  The gradual spinal realignment that he had hoped to achieve by doing simple stretching exercises (austerity) is not taking place, in fact, his back problems have gotten worse.  Once in the exam room, he will be laid down swiftly on the chiropractor’s table.

Then chiropractor will move into place, interest rates will rise, and a series of pops will go off in the patient’s spine.  Naturally, the popping sounds are the troubled EU nations defaulting on their sovereign debt in unison, which is what is about to occur.

Will the patient then get up and go on his way, sore but better off for the treatment?  Or perhaps the better question is; do zombies even use chiropractors?

Meanwhile in the US, the political theater that is the debt ceiling negotiations may be the catalyst that sends the US Treasury market into a much deserved tailspin.  We have speculated about this almost incessantly and still cannot believe that it may happen.

But while the EU goes to the chiropractor, the US may prefer to rely on the prescription drugs of fiscal and monetary stimulus for as long as they appear to work in a futile attempt to reassure the zombies that all is well.

The US will simply destroy the value of the currency, completely and irreversibly.  Why else would they pick a fight with Iran at this point?

That makes each dollar that one holds like holding an M80 firecracker with a lit fuse.

How long will you hang on?

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  If you enjoy or at least tolerate The Mint, please share us using the buttons at the bottom of this post.  If you feel that you can’t go another day and risk missing The Mint, please register by clicking here.  Thank you!

Key Indicators for July 11, 2011

Copper Price per Lb: $4.32
Oil Price per Barrel:  $94.99

Corn Price per Bushel:  $6.81
10 Yr US Treasury Bond:  2.92%
FED Target Rate:  0.07% JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,554 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,506 TO THE MOON!!!
M1 Monetary Base:  $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,112,300,000,000 YIKES!!!!!!!

*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.

Economics, The Mint

What is so Complex about a Default? The Greek Bailout Highlights The Shortcomings of Debt as Money

7/5/2011 Portland, Oregon – Pop in your mints…

Another day, another Euro.  It appears that it is still all systems go for the Greek bailout.  Athens will get another shot of hot money in mid July and the charade will keep going on.

In the old communist days, the joke went “we pretend to work and they pretend to pay us.”  In the current socialized monetary system, the joke goes “we pretend to cut back and they pretend we will pay them back.”

As our astute fellow taxpayers are already aware, the Greeks have no intention of changing their ways.  Parliamentary promises and austerity measures are of little value when 90% of the population is against them.  It is doubtful that the money lenders in Germany and France will step out of their high rises to come repossess the Parthenon.

No, they will leave that to foreign militaries as they march on Palestine.

But we are getting ahead of ourselves.  Our topic of the day is why the Euro/IMF and now, reluctantly, the private sector are “thrashing” (which must be somewhat harsher than mere hashing) out an aid plan for Greece tomorrow in France.  From Reuters:

International banks and insurers will meet on Wednesday to thrash out a plan for the private sector to contribute to Greece’s bailout effort as fears grow that the proposal will be derailed.

The Institute of International Finance (IIF) lobby group said it will chair the meeting of private-sector creditors.

It needs to resolve how a deal can get past credit rating agencies without it being termed a default, and how accountants will deal with it.

A lot of work remains to be done and Wednesday’s meeting will not be decisive, several sources said.

“It’s a process. The new French finance minister said today it will take weeks, over the summer. It’s complex. It can’t be settled overnight,” a French private sector source involved in the talks said.

He said there was unlikely to be a single “one-size-fits-all solution” but rather several options, given the number of different bondholders and stakeholders involved.

“The issue is so complex that we need more time,” a German banking industry source added.

Of course, the issue is not complex.  The Greeks have promised more than they can deliver.  Anyone can do this for a time but if too much time passes, actions (overspending) speak louder than words (austerity measures).

Besides, for a socialist tax collecting entity such as the Greek government, austerity measures starve its customer base of revenue, lowering its own tax revenues, which in turn demand’s more austerity, etc.

For a generally unproductive country that has made the mistake of outsourcing its money printing operations like Greece, austerity is collective suicide.  Even credit ratings agencies and accountants can no longer ignore this dubious state of affairs.

Greece, Where the Euro pays tourist prices

Yet paradoxically, the international bankers seem intent on forcing the Greeks, against their collective will, to starve themselves.  Why?  Even in the parallel universe of our current monetary system this course of action makes absolutely no sense.

And that is precisely why it must be done.  Somehow, the banking cartel must put on the charade of solvency.  Most people, accountants and ratings agencies amongst them, have a vague understanding that saving money is equal to solvency.

How right they would be, if silver and gold were still money.  In the current insane “debt is money” socialist monetary system, savings remove the lifeblood of the currency regime.

Don’t be deceived by the Euro and IMF’s words, Greece is a lost cause.  It has problems that not even Christine Lagarde and her $550K pay package cannot solve.

But that won’t stop them from trying!  As the explanations become more and more ludicrous across the Atlantic and Mediterranean, keep your eye on The Mint’s Key Indicators, which are still pointing at raging inflation with no end in sight in dollar land.

The only protection for savings is anything real that is not a dollar (or a promise to pay a dollar in the future, such as dollar denominated bonds).  How is that for investing made simple?  So many options!

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 July 5, 2011

Copper Price per Lb: $4.30
Oil Price per Barrel:  $96.83 A FAILURE TO INFLATE, WILL TREND LOWER

Corn Price per Bushel:  $6.80 MONETARY POLICY IS NOT WORKING
10 Yr US Treasury Bond:  3.14% WITH THE FED OUT, THE SKY’S THE LIMIT
FED Target Rate:  0.07% JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,516 BENEFITING FROM PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,570 WINDOW DRESSING FOR 401K PORTFOLIOS
M1 Monetary Base:  $1,954,300,000,000 RED ALERT!!!
M2 Monetary Base:  $9,098,400,000,000 YIKES!!!

*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.

72 Hour Call

72 Hour Call for June 22, 2011

Today’s Call:  Yield on 10 US Treasury to fall, price to rise.  Currently 2.99%.

Rationale:  The combination of the FED downgrading the economic assessment and announcing no further stimulus along with no clear progress on the debt ceiling will cause, paradoxically, talk of a fiscal stimulus package so that authorities can claim to be “doing something.”  Problems in Greece will cause most funds to repurchase US Treasuries by default to stay away from the Euro.

Result of Call for June 17, 2011:  Dow Jones Industrial Average to rise.  Was 12,004, Currently 12,163.  Good Call.

Calls to Date:  Good Calls: 30, Bad Calls: 25, Batting .545

Key Indicators for Wednesday, June 22, 2011

Copper Price per Lb: $4.10
Oil Price per Barrel:  $95.06 A FAILURE TO INFLATE

Corn Price per Bushel:  $6.07   MONETARY POLICY IS NOT WORKING
10 Yr US Treasury Bond:  2.99%
FED Target Rate:  0.09%  FED IN PERMANENT DESPERATION MODE

Gold Price Per Ounce:  $1,549 BENEFITING FROM PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.25%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,163
M1 Monetary Base:  $1,921,900,000,000 RED ALERT!!!
M2 Monetary Base:  $9,084,400,000,000 YIKES!!!

 *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.

Economics, Spain, The Mint

Grants for Democracy? It’s Getting Ugly in Spain, US Housing Capitulates, Greek Government to Default on Austerity and then Simply Default

5/27/2011 Portland, Oregon – Pop in your mints…

We’ve said it before, things are beginning to happen at a rapid pace and the authorities are absolutely and completely helpless to do anything about it.  Not for lack of money, have you, for they are second in line behind the banks to pick at the money tree.  No, the authorities lack the one thing that is indispensable to getting things done.  Credibility.

Have things improved for you, fellow taxpayer?  Unless you are a banker, lobbyist, are a contractor who works for a banker or lobbyist, the answer is probably no.

And we haven’t even begun to talk “austerity” on US shores.

But first, we are obligated to take a peek at what the G-8 is doing.  We suspect we know but it is important to confirm ones suspicions.

From the Associated Press:

DEAUVILLE, France (AP) — Rich countries and international lenders are aiming to provide $40 billion in funding for Arab nations trying to establish true democracies, officials said at a Group of Eight summit Friday.

Officials didn’t fully detail the sources of the money, or how it would be used, but the thrust was clearly to underpin democracy in Egypt and Tunisia — where huge public uprisings ousted autocratic regimes this year — and put pressure on repressive rulers in Syria and Libya.

We suspected more aid to someone but this appears even more misguided than we thought.  The first line of the second paragraph is especially laughable but you can see where this is going.  We speculated Wednesday about the events in Palestine getting ready to take center stage, largely as a distraction to the “utter and complete collapse” of the world’s current financial system.

The G-8 is now throwing what is left of their credibility into extending their influence in the Middle East.  They have Iraq, Afghanistan, and now Egypt and Tunisia as footholds.  Will they be strong enough to hang on to this newfound influence?  Only time will tell if the new regimes can be bribed as easily as the old ones.

The credibility of the Western Governments and their worn out welfare state economic models is nearly spent.  In Greece, the IMF / Eurozone bailout participants are finding out that the Greek politicians don’t have the collective stomach to play the repo man on their countrymen’s future.

It appears that the government is refusing more austerity measures and is rethinking whether or not this whole Euro adventure is such a good idea.  Failure to agree now places the spotlight on the IMF / Eurozone plunge protection team.  Will they have the stomach to let Greece default?

The gauntlet has been thrown down, and what happens to Greece will set the tone for how the inevitable sovereign defaults of the Western Governments are likely to play out.  Are the Greeks the Lehman Brothers of Sovereigns?

On the other side of the world, Japan’s sovereign debt was officially downgraded as if to underscore the fact that the world monetary system is hurtling towards a catastrophic failure.

Back in Europe, a sequel to the Greek experience is now playing itself out across the Mediterranean Sea on the Iberian Peninsula.  The youth in Spain are finally arising as they clearly see that the politicians have shamelessly “handed their future” to the nation’s banks.

With protests in nearly every major city, their resolve grows with every passing day.  In Barcelona, one day before Barça plays for the Champions Cup against Manchester, the authorities attempted to clear Plaça Catalunya to clean it in anticipation of the celebrations that would surely take place there when Barça, led by the great Liionel Messi, wins the cup.

With over 100 persons injured between protestors and police officers, they will now have to clean up blood in the square.  The Spanish authorities, not unlike their western peers, just don’t get it.  The old way of doing things is over, fini.  The youth are taking matters into their own hands.  With 45% of the Spanish youth unemployed, their sheer numbers, if they stay at it, will simply overwhelm the authorities.

All the same, we are pulling for Barça tomorrow.

A final piece of news to share with you here at The Mint, the US Housing Market has finally capitulated. In other words, it is now safe to buy a house.  The hope that the US Government and Central Bank could somehow revive this market has left town on the same train as the US Government’s credibility.

The US Government lost its credibility most recently as it continues to bicker over meaningless spending cuts as the nation thunders towards an imminent default on its sovereign debt and by affirming the Unconstitutional Patriot Act, which essentially gave legislative authority for the US to become the wards of an international police state.

The brave souls who gave their lives to create and protect a free America must be rolling over in their graves this Memorial Day.

Will there be a generation brave enough to reclaim it?

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 Friday, May 27th, 2011

Copper Price per Lb: $4.16
Oil Price per Barrel:  $100.74

10 Yr US Treasury Bond:  3.06%
FED Target Rate:  0.09% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,537

MINT Perceived Target Rate*:  2.25% INFLATION HERE WE COME!!!!
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  12,441
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.

72 Hour Call

72 Hour Call for May 24, 2011

Today’s Call:  Copper price to Fall.  Currently $4.00 / lb

Rationale – Copper is currently in a large oversupply and with news of a European Debt Crisis and a further slowing economy copper will continue a slow trend downwards.

Result of Call for May 19, 2011:  Linkedin Corporation to Fall.  Was $104.25. Currently $94.45.  Good Call

Calls to Date:  Good Calls: 21, Bad Calls: 14, Batting .600