Tag Archives: Federal Reserve

Economics, Events

September 11th, and why Money does not Exist

9/11/2015 Portland, Oregon – Pop in your mints…

September 11th has become a day of remembrance in what was formerly the land of the free.  The horrific spectacle of the events that unfolded in New York and Washington that infamous day will be forever etched in the memory of our generation.  While we did not realize it at the time, it was the day that the United States lost a great deal of freedoms.

The external restrictions that have been imposed on society post 9/11 are well documented.  The passage of the Patriot Act has given the government carte blanche when it comes to surveillance and disregard for due process.  While these practices have always been employed to some degree, the Patriot Act in a sense legitimized them.

Perhaps more devastating, however, has been the mental shift that 9/11 caused in the thought of US Citizens.  Pre 9/11/2001, the US was a place where truly anything was possible, it was the Land of the Free, the sky was the limit.  Humankind had just “survived” the Y2K non-catastrophic event and credit flowed freely.

More importantly, though, our minds were free.

Naturally, we can only speak of our own experience, but we would be willing to bet that many who lived these events would agree.  Pre 9/11, the United States was a completely different country.

Ironically, 9/11/2001 was the day after we had been laid off from our first job.  We had cornered ourselves in Internal Audit, which for the uninitiated, is the first department to get the axe when cost cutting measures are employed.  Really, who wants to pay people to tell them what they are doing wrong all day unless they can justify the expense?

We received the memo and our final check on the 10th.  On the 11th, we woke up to the first day of freedom that we could recall, turned on Good Morning America, and watched the events unfold.  At that point they were speculating that the first tower was some sort of small aircraft accident.  A caller from New Jersey was on and said, with a grave seriousness in his voice, that it was not a small aircraft, but a commercial airliner.   Then, on live television, the second airplane hit the second tower.  We are embedding a YouTube video of this moment for those who did not see it.  Please be advised that it is indeed disturbing and skip it if you do not want to be shocked:

It was at that point that we knew something bigger than ourselves was occurring, and God had set us there to PAY ATTENTION TO WHAT WAS GOING ON!  We were new to Christianity, true Christianity, and had begun to truly commune with God over the past several months.  To those who have not had similar conversations with the creator, this will sound strange, but God does speak quite clearly to those who are paying attention.

Anyway, God said, “It’s time.”

This has set our life on a completely different course, one that you, fellow taxpayer, are now a part of.

Ah yes, we were going to explain why money does not exist, at least not in the sense that most understand it.

The Federal Reserve is set to meet in September.  There is an expectation that they will raise interest rates.  However, there is also a sense that the economy is somehow still in a funk.  What is the Fed to do?

We postulated earlier this year that the Fed would sooner raise interest rates than end its QE money printing programs.  We were wrong, QE ended before rates increased.  However, we hold out the spectre that, eventually, perhaps this month, the Fed will need to increase its target rate.  When it does, it will cause big problems for large banks.   Banks will need a buyer for the masses of Treasuries they have to hold as a result of Dodd-Frank.  The Fed will buy them at cost (not market, as their market value will be dropping), effectively reinstating their QE program.

They will raise rates on the short end and work to maintain lower than natural long rates.  Anything else would spell disaster for the economy.

Why can the Fed employ QE (electronic money printing) in the first place?  Because money does not exist.  What we use as money is really credit.  Credit and Money are opposite elements in the realm of economics.  They should cancel each other out.

Now that Money is credit, the productive activities of humankind are aligning themselves in direct conflict with the needs of the natural world.  And the chasing of non-existent money is causing humankind to strip mine the earth.

Will we learn in time?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 11, 2015

Copper Price per Lb: $2.43
Oil Price per Barrel:  $44.79

Corn Price per Bushel:  $3.62
10 Yr US Treasury Bond:  2.19%
Bitcoin price in US:  $240.28
FED Target Rate:  0.14% 
Gold Price Per Ounce:  $1,106

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  5.1%
Inflation Rate (CPI):   0.1%
Dow Jones Industrial Average:  16,330
M1 Monetary Base:  $3,132,300,000,000

M2 Monetary Base:  $12,088,500,000,000

Economics, Monetary Theory

The Monetary Premium is the Fed Alternative

12/24/2013 Portland, Oregon – Pop in your mints…

Here at The Mint we are preparing for a record-breaking year in 2014.  As we look out upon the horizon, we see that the eternal tension between inflation and deflation that is the bane of the insane debt is money monetary system is beginning to subside.  While many at this point are standing on the beach watching the monetary tide recede to an unimaginable extreme, those who watch the weather know that this phenomenon is but the precursor to a tsunami.

Inflation will soon be here, and it is time to adjust revenue targets accordingly.

We make this forecast not out of any sort of clairvoyance, but largely as a hunch.  The Federal Reserve, which just passed its 100th anniversary and appears to be going strong, has no choice but to inflate, as it is their only tool and default bias.

What is changing in 2014 are the Federal Reserve’s tactics.  The FED will spend much of 2014 and beyond fighting inflation as a matter of policy.  Each coming policy, such as the recent $5 Billion/month token (or courtesy) taper that was recently announced, in theory will serve to reduce the monetary base.  What many do not realize is that the monetary base will not shrink as a result for at least three and a half years.

At this point our long-suffering readers are welcome to point out that The Mint was wrong.  We had predicted that the Fed would increase the target rate before tapering, as the target rate was more of a random subsidy while the taper recipients have come to expect it as a form of state banking welfare.  We humbly admit that, given the latest announcement, we were technically wrong.

What the taper reduction is accomplishing, in practice, is a form of marginal stimulus.  The Fed is herding the banks and other lenders out of Treasuries, as holding too many Treasuries in a taper environment is categorically inadvisable.  Some reports have the Fed representing 80-90% of the market for treasuries.  As they scale their participation rate back via the taper, Treasuries will be forced to find a market price, and if what happened to the 7 year after the announcement (a roughly 264 bp drop) is any indication, the market has an opinion of Treasuries that is quite different from those held by the Fed.

The point is that, as the banks have the spigot open at .09%, this money will, at long last, find its way into the hands of credit hungry consumers and businesses.

The giant of the US Economy is waking up.  Part of the activity can be attributed to the Christmas season, however, in early 2014, much of the initial uncertainty surrounding Obamacare will begin to sort itself out, and both businesses and consumers will find themselves both willing and, for the most part, able to do what they do best:  spend.

The Fed has worked tirelessly to shore up the monetary base for five years, and, despite what one may think of Yellen’s dovish bias, she is likely smart enough to realize that the best shot the Fed has now to stimulate the economy is to appear to head to the closet to pick up the liquidity mop.

The Importance of Tribute, and the Fed Alternative

After 100 years, the Federal Reserve has done much.  Their most amazing exploit, one that is lost on most, is that they made the US and much of the world believe that debt was money, and indeed, a great deal of the monetary premium has gravitated to Federal Reserve notes.

Clairvoyant Political Cartoon circa 2012 by Adam Crozier
Clairvoyant Political Cartoon circa 2012 by Adam Crozier

{Editor’s Note:  Click here to see more clairvoyant political cartoons circa 1912, just before the Fed was granted its monopoly on the US money supply}

In the end, what is a Federal Reserve note?  It is a Central Bank liability, which is an irredeemable hot potato that at best represents an indirect claim on wealth but in the end maintains its allure on the part of those forced to transact in it because the US Empire requires that all taxes be reported and paid in them.

Think about it, the hammerlock that any currency has on a citizenry, no matter how putrid its fundamentals may be (and they don’t get much worse than the paradox of debt based money), is that the sovereign requires tribute to be rendered in said currency.

The logical proof is this, were the US Government to require payroll and income tax remittances in Euros or corn bushels, how long is the Federal Reserve Note likely to retain its value and usefulness in trade?

The requirement to use a monetary unit or currency in rendering tribute is a important component of what we call the “monetary premium,” which is loosely defined as the portion of aggregate value that something carries related to its relative function of a transmitter of value.  It is embedded in the supply and demand dynamic of all quasi-monetary instruments, such as gold, silver, and most recently, Bitcoin and other crypto currencies.

While most fix their eyes on credit markets to determine the value of currency in trade, they would do better to observe the Monetary Premium, for it represents the collective hopes and dreams of humankind in the material world, and where it goes, relative riches follow.

For this reason, the Federal Reserve and other Central banks of the world will fight to the last (insert your preferred noun) to retain a share of the monetary premium, for it is their only value proposition in what is a terminally defective, if not purposefully fraudulent, product mix.

In 2014, the Fed will lose its iron grip on the Monetary Premium and take its place amongst currencies relegated to tax remittance and nothing more.

Bitcoin’s resilience is but one item in a long list of evidence that the monetary premium attributed to central bank notes is attaching itself to other indirect claims on wealth and items representing unencumbered claims on wealth.

The economic activity that this tacitly coordinated shift out of Federal Reserve notes will cause in 2014 and beyond will be breathtaking.  They will call it inflation, and it will be the Fed’s death knell.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 24, 2013

Copper Price per Lb: $3.31
Oil Price per Barrel:  $99.21

Corn Price per Bushel:  $4.35
10 Yr US Treasury Bond:  2.98%
Mt Gox Bitcoin price in US:  $698.87
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,205

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.0%
Inflation Rate (CPI):   0.0%
Dow Jones Industrial Average:  16,358
M1 Monetary Base:  $2,583,700,000,000

M2 Monetary Base:  $11,024,400,000,000

Politics, The Mint

Why the FED will Increase the Target Rate Before Tapering and the DC Budget/Debt Ceiling Paralysis Matters Not

9/27/2013 Portland, Oregon – Pop in your mints…

Autumn is upon us here in the Northwest.  As in most places, it is a refreshing return to the dance of life that we will live together over the next nine months under the requisite cover of rain and cloud.

If occurrences in nature can be trusted as future economic guidance, we are setting up for a phenomenal year in terms of production.  Salmon runs up the Columbia basin, which were once nearly extinguished altogether, are crushing all previous records this year, and word is that the Tuna catches in terms of quantity are staggering.  Corn yields further east in Minnesota are on pace to increase even on a decrease in acreage planted.

Even the Mushroom pickers are reporting a bumper crop.

Mushroom picking; illustration to III tome "Pan Tadeusz" circa 1860 by Franciszek Kostrzewski
Mushroom picking; illustration to III tome “Pan Tadeusz” circa 1860 by Franciszek Kostrzewski

Nature is doing its part to provide for us on any number of fronts, despite what Malthusian apologists and central planners may say, the only thing holding humankind back are the restrictions that it places upon itself.

Chief among these restrictions is the unnatural monopoly that exists with regards to the production of money and credit, which paradoxically are one in the same in the current “debt is money” scheme under which the entire financial world operates.  For the uninitiated, the monopoly that we speak of is that of the Central Banking institutions, which have been given unchecked authority to manipulate (notice our choice of terminology in place of the more quaint verb “setting” which is normally propagated) short (and now long term) interest rates as well as to determine what serves as legal tender.

Add to these monopolistic practices the ultimate authority to collect taxes and the extent of the monopoly which Central Banks have been granted becomes clear.

Given the existence of this monopoly, it is little wonder that those who make their living by working closely with money and debt, as we do, or those who hold a large amount of money and debt instruments examine the actions of the Central Banks with a great deal of anticipation and scrutiny.

The Central Banks are not to be watched because they have anything special or relevant to offer in the form of clairvoyance or enlightenment, rather, they are to be watched in the same way a pack of dogs must be watched when boarding an airplane, for their movements, while unproductive, tend to bother and in the worst of cases, cause harm to the rest of the passengers.

Against this backdrop, the captive watchers of the Federal Reserve were somewhat surprised this past Thursday that the Central Bank decided to delay their much anticipated “tapering” operation.  The decision to leave the current amount of money printing (Quantitative easing, that is) at current levels, which amount to roughly $115 Billion per month, was welcomed with a certain degree of shock by those who were certain that the program would be discontinued in light of the recent strength in the US economic data reports.

Entitlement: Why the FED will Raise the Target Rate Before Tapering

The decision did not surprise us, however, for the following reason.  The Quantitative easing program has essentially become an entitlement in the sense that it guarantees the credit system a buyer of last resort for the current level of mortgage backed and other securities which the FED purchases from their holders.  Were this program to be dialed back, it is clear which entities would be hurt by the action.  Entitlements of this sort are nearly impossible to take away once they are in place.

On the other hand, the other tool that the FED would theoretically use to signal it was responding to strong economic data by working to tighten credit (something that will not occur within the next three to five years, no matter what the FED does), is by manipulating short term interest rates via the SOMA and POMO.  They are more likely to test the waters by letting rates drift higher as this is an action that does not necessarily have direct consequences for certain market actors.  While some of the consequences are predictable, they are in the end indirect consequences, which give them less the feel of an entitlement, which is what the QE program has become.

In any event, by espousing a policy of giving “Forward Guidance,” which theoretically gives juice to existing policy actions by providing certainty to market participants as to how long certain policies will be in place, the FED is now, monthly, placed in the impossible position of showing the world how much its “word” is worth, as Forward Guidance only works if that guidance is actually reliable.

You see, contrary to what academics such as Michael Woodford, who is credited with originating the Forward Guidance principle, might say, the word of an organization and/or individual, like a debt instrument, can also be discounted based on the prevailing belief as to the extent to which the promises of the individual and/or organization can be trusted.

While the actions of the Federal Reserve, whatever they may be, are for some reason seen as immediately effective is beyond us.  In our models it is clear that any action taken by the FED with regards to interest rates does not significantly impact price and wage levels outside of the financial sphere for three to five years.  Nevertheless, the Federal Reserve actions are observed by algorithms which “think” differently than we do, and it is these algorithms which drive large scale equity trading circa 2013.

Fiscal Policy vs Price Levels:  Why the DC Budget/Debt Ceiling Paralysis Matter Not

Perhaps even more ineffective and innocuous to the economy in the short term than Federal Reserve action are the actions that are taken (or not taken) by the Federal Government.

The news is currently ablaze with the current scenario in Congress which has managed to entangle the Federal Budget, the Debt Ceiling, and Obamacare in the same line of debate.  This type of stalemate in terms of budget matters is absolutely normal and to be expected of technically bankrupt entities.

The past three years, which have seen at least two other debates around the debt ceiling as well as various sequesters, furloughs, disastrous tax and fiscal policy, and arguably a complete failure of any inkling of “Forward Guidance” out of the Federal Government, have taught the economic community one very important lesson:

Despite members of each party assuring the public that the outcome of these debates and any failure to act will destroy the economy, whether these debates are resolved or not is of little consequence.  The reason that they are inconsequential is that the major actors in the US economy, which are and always will be at least one step ahead of both politicians and central bankers, have already discounted the true impact and likelihood of government action by tacitly adjusting their activities to adapt to the inherent uncertainty.

So relax, the no matter what the FED or Congress do or fail to do, the risks remain firmly on the upside for at least three to five more years or the day that the current “debt is money” system fails, whatever comes first.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 27, 2013

Copper Price per Lb: $3.29
Oil Price per Barrel:  $102.77
Corn Price per Bushel:  $4.54
10 Yr US Treasury Bond:  2.62%
Mt Gox Bitcoin price in US:  $140.00
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,337
MINT Perceived Target Rate*:  0.25%

Economics, The Mint

Was Removing the DEA the Catalyst for Bolivia and Latin America’s Economic Miracle?

9/11/2013 Portland, Oregon – Pop in your mints…

We recently returned from Bolivia, which, for the geographically challenged, is a relatively large country located in the heart of South America.  Our better half hails from this land that extends from the peaks of the Andes to the Amazon basin, and we have more than a passing interest in the goings on there.

What we observed in Bolivia this past trip can only be described as an economic boom.  While the economy has been on the uptick for a number of years, what we saw this year was well beyond an uptick.  During previous visits, we witnessed the construction of major roads along with an insane number of apartment complexes being constructed.  On this trip it was evident that the parks are now being maintained and the number of western style shopping malls and other spaces had greatly increased.

The homogenization of Bolivia, as we are fond of calling the phenomenon of globalization, is well underway.

Indeed, as one toggles the GDP of Bolivia on the embedded chart below, courtesy of tradingeconomics.com, the warp curve of economic growth that we have observed in our travels there, which began in 2005, just before Evo Morales (whose policies can only be described as Neo-Socialist) was elected, is confirmed by GDP figures.


Source: tradingeconomics.com

As we descended into Viru Viru, the interestingly named airport in Santa Cruz, we struck up a conversation with a young man who was working as a commercial diver in Oman.  In the course of the conversation, we remarked that Bolivia appeared to be in the midst of an economic boom.

When we asked our fellow weary traveller his opinion as to why the Bolivian economy had entered into its most recent growth spurt, he simply replied, “se fue la DEA.” Which means, the DEA is gone.

The DEA (US Drug Enforcement Administration, for those unfamiliar with the show Miami Vice) had occupied the rich agricultural land of the Chapare, which, while not ideal for growing coca leaves, enjoys a humid climate in which nearly anything will grow quickly, for nearly 33 years when Morales ordered them to leave during a diplomatic spat with the US in November of 2008.   It was a long-standing grudge that Morales, a coca farmer himself, had against the agency which he saw as an imperial force which harassed the simple farmers in the region that was his adopted home.

A quick glance at the GDP graph above seems to indicate that the DEA’s departure, which was completed in early February of 2009, appears to have been the catalyst that sent the Bolivian economy into overdrive.

Not only that, but when one overlays the Latin American GDP in the graph above, it is clear that not only Bolivia, but all of Latin America has experienced a similar GDP warp curve and attendant development in their infrastructure and consumer amenities.

While it may appear that a simple injection of drug money, which now flows somewhat unhindered into the country in search of the now abundant coca leaf (the raw material for cocaine and other illicit drugs) would account for this unprecedented growth, the phenomenon has coincided with another US policy that has paralleled the time frame in which Bolivia has been “DEA free*.”

Ben Bernanke’s printing press, which kicked into hyperdrive circa 2008 and has not stopped since.

While places like Hong Kong and China receive a great deal of attention for their respective currency pegs to the US Dollar, the Boliviano (the Bolivian national currency) is also pegged to the US Dollar in a similar 7:1 fashion.  As such, the Bolivian economy, which until recently has had a relatively low-level of consumer debt, has taken the dollars that Bernanke had intended to stimulate the US economy, and put them to work rather than throwing them down the black hole of their banking institutions.

So what is the ultimate catalyst for the explosive Bolivian and Latin American GDP growth over the past five years, the DEA leaving Bolivia or US Monetary policy?  Either way, it is clear that despite the Socialist bent of many Latin American countries, there is a flashing green light to invest in them as long as these two conditions persist, for they are like rocket fuel for these largely cash based economies with dollar pegs fixed to their national currencies.

“Viva mi Patria Bolivia…como la quiero yo!”

*Morales has deployed his own military to fulfill the role of the DEA in their absence, however it is evident that they are not as zealous in their persecution of the coca leaf as their American counterparts.

Key Indicators for September 11, 2013

Mint Money Supply Digest

The Mint Money Supply Digest – July 15, 2013

7/15/2013 Portland, Oregon – Pop in your mints…

Now that summer is in full swing there are few surprises on the horizon and the world, it would appear, is resigned to reluctantly following the current credit cycle on its dramatic upward trajectory. While we do not believe that the centrally managed credit cycles of today are beneficial (indeed, they are quite the opposite) nor do we believe in money in its present form (as long-suffering readers well know), the centrally managed credit cycle is quite predictable and in this sense appeals to our inner laziness.

Some five years ago, the Federal Reserve began doing everything in their power to stimulate credit, as the swoon of 2008, induced by a series of blind 25 basis point hikes in the Fed’s rate target, threatened to choke off the lifeblood of the debt based monetary system.  At the time, we postulated that it would be roughly 39 months before the average man on the street began to feel stimulated the way the Fed’s architects imagined he would.

Now, 60 months on, consumer credit is finally picking up, on net, and everywhere you look the debt soaked economy is on a high.  The money is so hot one risks a scorched retina by merely looking upon it as it flashes through the bond, equity, and commodity charts.

Unfortunately, beyond the glare, the debt based money supply has left some major sinkholes in the economy that either fiscal or monetary policy can patch.  The trick to safely navigating through the coming phase of the most recent edition of credit madness sponsored by central banks across the globe will be to avoid being engulfed by the sinkholes, for at this point there exists not the means nor political will to do so.

Where are the sinkholes?  Alas, if we knew for certain, we would long since have laid our pen to rest in favor of a life of leisure.  However, if we were pressed to guess, we would watch for them to appear under any patch of economic mass holding large sums of cash or long term debt instruments.

Given that criteria, the central banks themselves come to mind.  It is they that will remain trapped in concrete as human progress speeds ahead.

Stay tuned and Trust Jesus!

Stay Fresh!

Key Indicators for July 15, 2013 

Mint Money Supply Digest, Silver

The Mint Money Supply Digest – June 24, 2013

Gallery

6/24/2013 Portland, Oregon – Pop in your mints…

And then there were two.

The liquidity drain initiated by the People’s Bank of China has caused a fire sale on financial assets across the globe as Chinese banks scramble to make various margin calls in the face of double-digit overnight rates.  Lee Adler, over at the Wall Street Examiner, offers some insight into the big squeeze currently underway:

US and Japan Pump It, Chinese Dam It and Suck, And Europe Sullenly Suffers Shrinkage

For the uninitiated, we beg of you to take a step back and to leave, just for a moment, any thought of “efficient market” hypotheses and market fundamentals behind and see the financial world for what it is:  A bunch of corporations with large credit card bills to pay and margin calls to meet.

Like anyone who has a large credit card bill to pay or margin call to meet, the ability to meet the obligation is more often than not determined by the willingness of other large corporations in similar situations to lend them money.  If they can, great, the credit rolls over.  If not, assets must be liquidated so that the debt can be paid.

The flaw in efficient market theory, with regards to financial markets, is that it implies stability when, in fact, most debtors, especially big ones, only liquidate assets as a final option.  As such, this type of liquidation often occurs suddenly and with little warning, hence the feeling of panic and cascading financial markets.

At their core, equity markets represent decisions at the margin. They often reflect this type of liquidation in an exaggerated manner.  In an odd way, this sort of whiplash seems to be the only way to spur Central bankers into action.

The actions of the PBoC suggest that they have had enough of the easy money policy that has dominated Central Bank actions for the past five years.  They have pulled the plug.  Does it have anything to do with Mr. Snowden?  Who knows, but it is what it is.

As it stands now, the Federal Reserve and Bank of Japan now stand alone on the mountain of insane monetary policy, watching the smoke plumes rise.

Anyone who has perused The Mint no doubt has noticed that we keep a relatively small collection of coins online.  This serves a dual purpose.  First, it allows us to quickly grab marketing copy should we have a particular coin in stock.  Second, it allows us to savor the coin as we attempt to put its dual faces into words.  Normally, this can be a tedious and relatively dull process.

1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981
1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981

Today was different, as we came across a relatively rare 1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round, minted in 1981.  For those who are unfamiliar with Harry R. Truman, we offer our marketing copy as a brief descriptor:

On one side of this coin is a bust of Harry R. Truman, the caretaker of the Mount St. Helens Lodge at Spirit Lake who stubbornly refused to leave his home even as the historic eruption was imminent. Truman was 84 when the Mount St. Helens erupted and is presumed to have died along with his 16 cats and 56 others that fateful day on May 18th, 1980. Truman’s bust is surrounded by the inscriptions “Courage,” “Spirit,” “Determination” above and his name, “Harry R. Truman” and the years he was born and died, “1896 – 1980″ below. The letters “KU” appear to the right, their meaning is unknown.

On the other side of this reeded coin is a depiction of Mount St. Helens erupting flanked by the inscriptions “One Troy Ounce” and “.999 Fine Silver,” to indicate its weight and silver content. The top of the coin, just above the smoke plume, is adorned with the inscription “First Anniversary.” Below the mountain are inscribed “1980 – 1981,” and the words “Mount St. Helens.” These beautiful coins are a great way to inspire your friends, loved ones, and co-workers by recalling the finer qualities of a man who became a hero for sticking by his desire to ride out a violent act of nature, come what may.

Mr. Truman, may he rest in peace, in many ways represents the Fed and BoJ today.  The other Central Bankers of the world have stepped cautiously back, away from the dreadful inflation for which the eruption of Mount St. Helens will serve as a handy metaphor of today.

1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981
1 OZ .999 Fine Silver First Anniversary Mount St. Helens Harry Truman Commemorative Round – 1981

Not Mr. Bernanke and his Japanese counterparts.  Both the US Dollar and Yen have been on the mountain longer than many of their counterparts, and their current caretakers are convinced that the bubbling inflation that their policies are stoking will simply blow over as they has in the past.

Are they right?  Or is it time to move away a safe distance from the mountain?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 24, 2013

Copper Price per Lb: $3.03
Oil Price per Barrel:  $94.85
Corn Price per Bushel:  $6.53
10 Yr US Treasury Bond:  2.55%
Mt Gox Bitcoin price in US:  $122.89
FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,283
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  14,660
M1 Monetary Base:  $2,432,200,000,000
M2 Monetary Base:  $10,621,100,000,000

Economics, Events, Financial Advice, Politics, The Mint

Cyprus – The Waterloo of Eurocratic management or the ultimate catalyst for Euro zone growth?

3/18/2013 Portland, Oregon – Pop in your mints…

While the management of the ongoing banking crises on this side of the Atlantic has been dishonest, the management on the other side of the pond, or in today’s case, sea, has been an unmitigated disaster.  Or so it would seem.

We are talking about Cyprus.  For those who have yet to hear about Cyprus, it is an island nation located in the far eastern Mediterranean Sea, just below Turkey.  It is currently inhabited by a fiery mix of Greeks and Turks, who have lived in an uneasy peace with each other for some 40 years after the events that took place during the summer of 1974.

Like many island nations, Cyprus has been able to find common ground with those who have been unable to find common ground on the mainland.  It has found that it can leverage its sovereignty and willingness to bend the rules to offer banking services without the nagging regulations which increasingly plague banks and their clients in the Western nations on the mainland.

Now that the government of Cyprus is bankrupt and in need of a bailout, showing that even a tax and banking paradise can be poisoned by a bad currency, they have gone hat in hand to Belgium, a strange country in the north with absolutely nothing in common with Cyprus, save the currency in question.

The Eurocratic apparatus in Belgium, either on its own or at the behest of the global banking giants in Cyprus, has decided that the terms of the bailout, or “bail in”, which is the Euro friendly way to say “Corralito,” {Editor’s Note:  Corralito is the Argentinean term for when the Government decides to unilaterally make use of the funds in its country’s banks to fund the government because there is literally no one willing to lend them currency on any terms}, would be the direct confiscation of funds from depositors bank accounts in the form of a tax, in this case between 3 and 9.9% (because 10% just looks bad in print) to ultimately pay back the countries who have been generous enough to provide the funds, which, despite the technicalities involved, for most Europeans means Germany.

Predictably, the people of Cyprus, who caught wind of the confirmation of the rumors on Friday and awoke Monday to find that their government had declared what is, at this writing, an indefinite banking holiday (meaning banks and ATMs are closed) to prevent anyone who did not want to participate in the bail in from withdrawing their funds from the country’s banks, are channeling their anger at the German Embassy, quite naturally:

Henry Blodget has written a decent analysis on the details of the Cyprus bail in over at the Daily Ticker.  Blodget does a good job of analyzing the events up until the point where He presumes:

“…the moment depositors think that there is risk to their savings, they rush to banks to yank their money out.

That’s called a run on the bank.

And since no bank anywhere has enough cash on hand to pay off all its depositors at once, runs on the bank cause banks to go bust.

That’s what happened to hundreds of banks in the Great Depression.

And it’s what happened to Bear Stearns, Lehman Brothers, and other huge banks during the financial crisis (though, with Bear and Lehman, the folks who yanked their money out weren’t mom and pop depositors but other big financial institutions). It’s what threatened to bring the entire U.S. financial system to its knees. And it’s why the U.S. and European governments have been frantically bailing out banks ever since.

But now, thanks to the eurozone’s bizarre decision in Cyprus, the illusion that depositors don’t need to yank their money out of threatened banks because they’ll be protected has been shattered.”

What Blodget presumes is that a bank run is bad for the bank.  Here at The Mint, we postulate that this tax on depositors is taken precisely for the benefit of the Cypriot banks.  Further, it has been taken not only for the benefit of the banks in Cypriot, but to serve as the catalyst for the Euro zone to return to growth, or the activities which pass as economic growth circa 2013.

How can this be?  To understand this will take a basic understanding of the banking revenue model.

Ever since 2008, the Federal Reserve and the ECB have been underwriting the banking sector by providing cheap cash to banks and, indirectly, the governments and people’s of their respective countries.  This is where Blodget’s parallel of today’s bank runs and those that occurred during the Great Depression falls apart.  For all of the mistakes that Ben Bernanke has made, the unconditional guarantee of liquidity in the banking system is the one that he will never relinquish, despite appeals to reason, for he mysteriously sees it as his life’s calling.

However, in an effort to stem the fall in asset prices, which is largely a product of the insane “jack the rate 25 basis points every month or so” policy that the Greenspan and Bernanke Fed followed from June 2004 until June 2006, the policy that caused markets to seize up like a car engine losing oil as they accelerated to record speeds, the Feds and the ECB have largely ignited an increase not in economic growth, but in bank deposits.

Bank deposits, far from being a boon to the receiving bank, are a huge problem when market conditions force them to reinvest (read lend out) those funds for rates that are unconscionably low (3.75% to consumers for 30 years, in a fiat currency system, are you out of your mind?).  Making matters worse, the consumers have been slow to take the bait, resulting in a big time squeeze on the traditional banking revenue model.

Enter Cyprus, an island that holds a disproportionate amount of bank deposits.  As a thinking Eurocrat, of which we suspect there are few, save Nile Farage, who is hunting for a way to both ensure that the banking revenue model continues to function, the government of Cyprus retains legitimacy, and that economic activity in the Euro zone will increase, the pile of Euros in Cypriot banks looks like a great target not to loot, as most analysis of the situation will paint this move as, but to force billions of Euros out of the digital vaults of the banking system to wash from the shores of Cyprus outwards into the other Euro zone countries in search of real goods, not simply another cash warehouse.

One sees the Eurocratic genius in the move at the moment one (again, that is you and I, fellow taxpayer) understands that the mere threat of a unilateral tax on deposits as a condition for a Euro zone bailout is causing lines to form at ATMs from Andalu to Cataluña, across the border into Torino and down to the lonely parts of Sicily.

Cyprus Flag
Will the Cyprus Misadventure by the catalyst for elusive economic growth in the Euro zone?

Within a matter of days, billions of Euros which were locked up in the accounts of villainous savers and otherwise useless to the European economy will be running around the Spanish and Italian streets in a desperate attempt to purchase anything real in which to hold said savings.

With what appears to have been a typically boneheaded Eurocratic move, the Eurocrats may have managed to do what Ben Bernanke and all of the helicopters in the world could not have done to the club Med economies:  Shower them with foolishly spent cash while at the same time bailing out both the banks and the governments as a grotesque side effect.

To be sure, it is a short term fix and will leave the Euro zone further down the scorched earth economy path in a matter of years.  Even so, you have to give the Eurocrats some credit for pulling out all the stops, even if they did stumble upon their ultimate stimulus, which relies upon their own stupidity to function, completely by accident.

Meanwhile in Cyprus, the latest is that the government wants to “think over” the terms of the bailout.  The formal vote has been postponed until Friday, and we presume that the banking holiday will remain in effect until after the vote is taken and any taxes are skimmed.

It is a hard assignment, and we do not envy them nor blame them for thinking it over.  The decision before Cyprus’ government officials is simple.  Should they accept the bailout, they face being blamed by their countrymen for sacrificing their parched island on the Eurocratic altar as well as spending the rest of their lives dodging the hit men of any oligarch’s who did not have sufficient forewarning of the move.

Should they reject the bailout, their government may even find a few contributions from said oligarchs to keep operating, and the only cost will be a few less German tourists on their shores, which, given the alternative, seems a small price to pay.

In the end, if our hunch is correct, the mere threat of corallito should be enough to stimulate the Euro zone.

Were we in their shoes, and we are glad we are not, we would reject the bailout.  Either way, it is a strong argument for exiting the formal banking system or becoming a large net creditor.  It is much easier for “crats” of any stripe to confiscate assets with a few keystrokes than for them to lift a finger to grab something in the real world.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for March 18, 2013 (PM)

Copper Price per Lb: $3.43
Oil Price per Barrel:  $93.79
Corn Price per Bushel:  $7.20
10 Yr US Treasury Bond:  1.96%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,606 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:  14,452
M1 Monetary Base:  $2,466,100,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,499,300,000,000

Gold, Politics, The Mint

On Debt Jubilees and the Fed’s Inflationary Crazy Train

2/21/2013 Portland, Oregon – Pop in your mints…

It has been an exciting couple of days in the financial markets.  We almost can’t bear to watch.  From what little we can tell, the out-sized effects of short-term funds, which are jittery in nature, are determined to drive anyone who is taking a long view on the market mad.

Most of what passes as equity investing today is done with short-term funding provided by the Federal Reserve.  No matter how much propaganda the Fed puts out promising to maintain their QE programs in full force or keep the pedal to the metal on ZIRP, it is an inescapable fact that funds at many of the Primary Dealers are short-term and can be pulled by the Fed on a whim.

Lately, between the sequester threat and the Federal Reserve meeting notes which can only be described as anti-inflationary propaganda, the short-term funds have been taking flight.  How long this will last is anyone’s guess, but it is and always has been the Fed’s prerogative.  Whatever market participants anticipate that they will do with the regards to the money supply flashes through the equity markets, as equities are essentially on the margin of visible economic activity.

Today we wish to bring two things to the attention of our fellow taxpayers, unfortunately both of them are somewhat ominous.  They are nothing new, mind you, but as the warning signals of the next crisis and its probable outcome begin to appear on the horizon, we thought it best to keep interested readers informed.

First, Lee Adler over at the Wall Street Examiner, who performs a great service to the economic world by slicing through the economic propaganda to analyze the true data, shared this piece which is worthy of reading.  It explains how the mountains of customer deposits are piling up at Commercial banks.  If, and more probably when these deposits begin to be deployed in the real world, asset bubbles and inflation will begin to pop up in the US economy like lava flowing down the side of a volcano.

His article can be read here:

Bloomberg Reports Biggest Story of All Backwards As Fed Blows Dangerous Deposit Bubble

If Mr. Adler is correct, the Fed’s inflationary crazy train may be about to leave the station.

We are compelled to warn you that the next quote, from a piece by Jeff Neilson at www.gold-eagle.com, may be enough to make your blood boil if you are not one of the privileged classes (in other words, most of us) that he believes will likely benefit from the upcoming “Debt Jubilee,”

So what will our 21st century Debt Jubilee look like? With History’s most-corrupt governments, expect the most-corrupt “solution.” The debts of our governments, the Big Banks, and the wealthiest Oligarchs will be totally erased. We will be told they are doing this to “save us” from drowning in their (reckless/fraudulent) debts.

However, the Little People will face a somewhat different future. Their debts will be maintained at 100-cents-on-the-dollar. The bankers, politicians and Oligarchs (via their Corporate Media) will tell us that this is necessary to “protect the integrity of the System” (their System).

Think this level of perversity/injustice is impossible? We already have precedent. After the Wall Street banks had caused (created?) the Crash of ’08 (with their reckless fraud/gambling); and after they took their $15+ trillion from the U.S. government in assorted hand-outs, 0% loans, tax-breaks, and “loss guarantees” (i.e. more hand-outs); the Wall Street banksters kept their massive bonuses.

We were told this was because of “the sanctity of contracts.”

Then after this massive give-away; various U.S. governments began unilaterally hacking-and-slashing the wages, pensions, and benefits of their own workers – which had been freely/fairly negotiated in their own contracts. The reason? After giving $trillions to the bankers; the workers were told the government “couldn’t afford” to honor their contracts.

The sanctity of contracts is important, as all that men and women ultimately have in this world is their word.  Unfortunately for most of us, we may soon find out just how much the government’s word is worth.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for February 21, 2013

Copper Price per Lb: $3.55
Oil Price per Barrel:  $93.03
Corn Price per Bushel:  $6.90
10 Yr US Treasury Bond:  1.98%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,577 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.9%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  13,881
M1 Monetary Base:  $2,384,300,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,419,300,000,000

Economics, The Mint

The GDP and Unemployment Red Herrings

2/1/2013 Portland, Oregon – Pop in your mints…

As we begin the month of February, it would appear that the US Economy has suffered from a couple of data shocks, which, taken at face value, would call into question the validity of the current rally in nearly every asset class (save bonds) and give rise to fears of the US slipping into another Recession or worse.

First, the Gross Domestic Product read came in at a negative 0.1% for the fourth quarter.  The GDP is mostly a bogus data point in an economy with a debt based currency.  At this point, the negative data, like most data that will appear this year, will give the Federal Reserve the statistical cover they need to continue QE and decimate the dollar.

The Unemployment rate, which inched up slightly, falls into the same category.  Given the paradigm shift that the US workforce is undergoing as the internet makes geography a non issue for anyone who works from a computer, and the demographic shift as the Baby Boomers ease into retirement make it hard to say what would constitute an appropriate amount of Unemployment at this time.

Full employment has always been a slippery concept, and at this point, the BLS statistics can be counted on to err on the side of covering the inflationary consequences of QE as well.

What has not changed is that people, when given the chance, will tend to spend more money than they have.  This tendency is again being allowed to manifest itself as credit restrictions are easing in the US and soon, even your cat will begin to receive credit card offers as they did in the good old days of 2005.

The Federal Reserve and every Central Bank on the planet have stuffed every orifice of the financial system with cash, so much so that they must lend gobs of it out to remain solvent.  The consumers are taking the bait, and the wave of inflation is now rolling through stocks and commodities.  It will not stop until QE stops.

And given the propaganda that passed as economic data prints this past week, QE will be with us for quite some time.  Plan and invest accordingly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for February 1, 2013

Copper Price per Lb: $3.75
Oil Price per Barrel:  $97.77
Corn Price per Bushel:  $7.36
10 Yr US Treasury Bond:  2.01%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,667 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.9%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  14,010
M1 Monetary Base:  $2,455,100,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,412,500,000,000

ebooks, Economics, Education, Gold, Monetary Theory, Of Money and Metals, Silver, Teaching

Of Money and Metals: The Operation of a Free Money Supply Explained

We’ve been at it again!  Be the first to download our newest e-book,  now available on Smashwords and Amazon’s Kindle:

Of Money and Metals: The Operation of a Free Money Supply Explained

Of Money and Metals: The Operation of a Free Money Supply Explained is Volume II in the “Why what we use as Money Matters” series. Of Money and Metals presents the fallacies of the current day practice of circulating debt in the place of money and explains the urgent need for and the operation of a free money supply. This volume also explores the phenomenon of Bitcoins and digital currencies.

It is available to our dear readers for free until January 31, 2013 at smashwords.com, just enter coupon code: MA65L

Thank you for your support!

Of Money and Metals by David MInt

 

Economics, Politics, The Mint

Federal Reserve Effectively Forgives US National Debt

12/11/2012 Portland, Oregon – Pop in your mints…

Last week, we made a vague promise to provide data to back a claim that the US Debt at the FED had already been largely cancelled via the various quantitative easing (QE) operations that have been realized over the past several years.  This fact makes any talk of solving the moronic “Fiscal Cliff” via extreme methods such as minting platinum coins with $1 Trillion face value unnecessary.

In an attempt to illustrate what amounts to an effective forgiveness of a portion of the US National Debt by the Federal Reserve, we offer the following graph, which plots the both the official US National debt as well as the official US National debt net of the Federal Reserve’s holdings as a percentage of GDP.

US Debt GDP QE Graph

 

As you can see, the real US National debt to GDP is closer to 94% rather than the projected 105% which the official US National debt figures would suggest.  The Federal Reserve, at last count, holds roughly $1.6 Trillion of US Treasury debt.  While this debt is still theoretically on the books, it can essentially be removed from consideration when arguing about the need to solve the debt problem, vis-a-vis the moronic Fiscal Cliff debacle that is playing out in Washington.

94% is an alarming level, but according to our projections, the current US Government current account deficit cycle is about to end as the waves of new currency released into the global economy by the Federal Reserve and other central banks begins to run through the coffers of the US Government.

Despite the desperate proclamations by Congress that it will be difficult to solve their (yes, this is their problem) impasse, indicators such as an EFT that tracks the Defense industry, XAR, which would theoretically be the hardest hit were the US to fail to address portions of the Fiscal cliff such as suspending the sequestered spending cuts agreed upon as a result of the infamous Debt ceiling debacle, are not showing any signs of trouble.

In other words, the financial markets are assuming that the US Congress and Executive, when push comes to shove, will wind up and kick the can a mile down the road, as they did when the debt ceiling was bearing down on them.

According to our projections, there is no debate, the Fiscal Cliff does not even exist, rather, it is a figment of the collective imagination.

We do not believe in money, at least not in the form of money that is currently used in America today, and it appears that the US Congress is beginning to come around to our point of view.  If the Federal Reserve will simply finance deficits ad infinitum, why even bother with the Fiscal Cliff charade?  We are still working to answer that question, and leave it for you, fellow taxpayer, to ponder along with us.

The real question, the one which we wrestle with every day here at The Mint, is when will the faith in the Federal Reserve be destroyed?  With the advent of the various QEs beginning in 2008, the Federal Reserve system effectively collapsed.  The creation of credit was no longer self sustaining in the economy.  The FED has been living on borrowed time.

As December 21 approaches and those who have misinterpreted the Mayan calendar wonder if December 22nd will come, we look forward to the 22nd of December, when the Federal Reserve’s charter is rumored to expire, and YouTube’s “Man of Truth” famously prophesied that the Federal Reserve would go bankrupt. Technically, he said “December 2012”, but, after 99 years, why split hairs?

Chances are that the world will wake up on December 22nd and carry on.  However, if you see the words “Force Majeure” in the financial headlines, get ready to calculate prices in a new currency for 2013.  For the US may swerve to avoid the Fiscal Cliff, but sooner or later it will drop off the currency cliff.

That is when things will get very interesting indeed.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 11 2012

Copper Price per Lb: $3.65
Oil Price per Barrel:  $85.84
Corn Price per Bushel:  $7.24
10 Yr US Treasury Bond:  1.65%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,710 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  13,284
M1 Monetary Base:  $2,457,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,275,200,000,000

Gold, Monetary Theory, Of Money and Metals, Silver, The Mint

Perpetuation of the Trillion dollar coin solution to US Debt

As our site name implies, we have more than a passing interest in monetary theory.  As such, ideas for new types of coin and currency are of special interest.  When the value of the coins proposed contains an insane amount of seigniorage, we are compelled to call it out.

 

The Fiscal Cliff melodrama playing out in the halls of US Federal Government’s Capital has given rise to the above mentioned monetary insanity.

As the so called, moronic “Fiscal Cliff” false alarm approaches, it becomes more common for those of a Socialist/Statist leaning philosophy to search for easy solutions to what amounts to enabling catastrophic policy failures, out of control spending, and unsustainable debt pacts.

This is not surprising, as Socialism and economics are incompatible philosophies. Anyone who claims otherwise either mistakenly applies small system theory to large scale systems or is a shill. From one of these insane theorists comes the idea of the US Treasury coining a trillion dollar platinum coin to deposit at the FED, who would then cancel the Treasury’s debts.

This will not happen, first and foremost, because the insane monetary system relies on debt as its lifeblood, as such, any debt cancellation by the underlying foundation of US Treasury debt is out of the question.

Second, it must be recognized that coining a trillion dollar coin, theoretically equal to 1/60 of global GDP, that anyone other than the FED would accept at face value, is impossible, it simply flies in the face of reason.  The FED has been paying 100 cents on the dollar for the MBS toilet paper that banks have sold to them for years now, as such, any concept of value left the halls of the Federal Reserve years ago.

The third reason is that the US debt at the FED has already been largely canceled via the FED’s various QE operations over the past several years. For the reasoning as to why the official US Debt held by the FED hasn’t been lowered to better reflect its true drag on GDP, we refer fellow taxpayers back to reason one.

We will present more data to back this claim in the coming week. In the meantime, if someone offers you a trillion dollar coin, be sure to check the spot price of platinum before making a more reasonable counter-offer. In any event, you are better off holding the platinum, as someday it will be worth are least a trillion Federal Reserve notes, the shills at the FED and Treasury have assured it.

Anarchy: Athiesm with Regards to Government, Catala, Events, Financial Advice, Gold, Politics, Silver, Spain, The Mint

Ballot burning, our breaking point, and why the next Gold Rush just began

11/9/2012 Portland, Oregon – Pop in your mints…

The 2012 US Presidential election is over, and the only thing that remains to be seen is whether or not the No vote will maintain its absolute majority.  At last count it was 50.2% and will go down to the wire.

For our part, we finally got around to burning our mail-in ballot last night.  For those who will lament that we did not perform our civic duty, we report that we did give it a cursory check to make sure there were not City or County measures which required our input.

If you are joining us late in the game, we presented our personal reasons for not voting a few weeks ago.  To be fair, we have never been much for voting, mostly attributable to our inner laziness.  However, this time was different.  We made a conscious decision not to participate.  We decided not to to meddle in the affairs of others.  We took the position that the largest sphere of influence which we could, in good conscious, cast our vote over others was at the County level.

Our County generally fulfills its commitments and is solvent.  As such, it meets our criteria for an operating Socialist system.  The State and Federal level do not.  We did not reach this conclusion through logical contemplation, rather, we had a minor breaking point with regards to the political systems at the higher levels as we read to our son about the Trail of Tears, which moved us to tears and, as a consequence, this form of peaceful resistance.

The rest, including what you, fellow taxpayer, are reading, is a slow digestion and reflection upon our weeping over the Trail of Tears.

For the record, we do not buy into conspiracy theories (although trading on them can be very profitable) nor are we cynical enough to say, along with Emma Goldman, “If voting changed anything, it would be illegal.”  What we do know is that we can no longer endorse the killing and robbing of people with whom we have no quarrel and who pose us no existential threat.

In a sense, we are peacefully surrendering our “right” to participate.  Were the government to suddenly stop taxing our wages, income, gasoline purchases, telecommunications, and capital gains, we may go as far as to relinquish the “right” to Social security, roads, and such.  On this point, however, we will not hold our breath.  Nor will we actively avoid taxes or reject monetary benefits which come to us.  This is a broader question which we will not delve deeper into today.

Speaking of taxes, the election seems to have ignited what may be the blow off phase in the precious metals markets.  Please read on…

The new Gold Rush, The triple Fiscal Cliff, and logical consequences

The market selloff continues today, as the logical consequence of the expectation of higher taxes manifests itself.  While we believed that higher taxes were coming, no matter who was elected, it is nonetheless fascinating to watch what is unfolding in the equity markets.

For a bit of background, the Federal Reserve, ECB, Bank of Japan, England, and all entities in the Central Banking industry are putting the throttle down and printing money at a breathtaking pace.  This has been enough to keep equity prices “afloat” with relatively minor nominal price drops.

However, the drop in value, commonly known as purchasing power, has truly been staggering over the past several years.  If you track such things, look at your grocery or utility bills for proof.  You are probably either paying more, getting less, or some combination of these double whammies.

The election results appear to have triggered a decoupling of the commodity and equity markets for the foreseeable future.  Meanwhile, while bonds are rallying as those who hold large unrecognized gains in equity positions choose to recognize them before December 31, when the clock strikes midnight and any gains left on the table will be taxed out of existence {Editor’s note: this is figurative language and speculation, of course}.

This is the logical consequence of the fiscal cliff.  When the election was called for Obama and control of the Senate and House looked to remain the same, equity holders saw the writing on the wall.  The stalemate at the Federal level will remain in place and the probability of the US plummeting off of the dreaded Fiscal Cliff (which, we remind you, is purely a government construction) greatly increased.

While some window dressing will no doubt be presented as the solution, those holding large equity positions will be seen as “new meat for the grinder” and likely will be the next lamb sacrificed on the alter of fiscal irresponsibility.

But it is not just the US looking over a fiscal cliff.  The anticipation of the US Presidential outcome distracted attention from the dire situation in Greece, where in 8 short days, the government will be out of funds and the once vaunted “Troika” now stands by, unwilling to throw more money at them.

Then there are the Spaniards.  Having lived three years in Barcelona, we have a special affinity for the Spanish in general and specifically for the Catalans.  While the Greeks may be coerced into having more conditions shoved down their throat, the Spanish situation is a bit more complex.

The Spaniards are smart, and the Catalans are even smarter.  Catalunya knows that they are indispensible to Spain.  They have also spent the past 30+ years building systems to ensure that they can operate perfectly well without the Spanish Feds in Madrid.

Those in Madrid know this, and are holding the threat of Catalan secession as their Ace in the hole which, at this point, has allowed them to extract concessions from the ECB, all the while avoiding surrendering what is left of their Sovereignty to Brussels as the Greeks, Irish, Portuguese, and Italians have.

Will the can which has been kicked down the road in Europe finally get kicked off the Euro Cliff?  Even if it doesn’t, the Spanish firecracker inside of the can will go off at some point and blow up the proverbial can, at which point all bets are off.

With the two largest, debt based financial currencies in the world facing unprecedented uncertainty and the prospect of higher taxes on the horizon, one has to question the wisdom of holding anything but physical gold and silver in place of financial assets.

This, along with the ongoing tension in the Middle East and that crazy Mayan prophecy, is why we believe that the final blow off in the gold and silver markets is at hand.  There is still time to get in and these quasi currencies have plenty of room to run.  While the physical production fundamentals are less compelling than they were 10 years ago (a 440% rise in price will tend to encourage production), the financial backdrop has never been more favourable, and its about to get even better.

Just remember, buy and hold the physical metals, as ETFs and futures will likely not catch all of the upside of this monumental move.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 9, 2012

Copper Price per Lb: $3.46

Oil Price per Barrel:  $85.14

Corn Price per Bushel:  $7.45

10 Yr US Treasury Bond:  1.63%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,730 THE GOLD RUSH IS ON!

MINT Perceived Target Rate*:  0.25%

Unemployment Rate:  7.9%

Inflation Rate (CPI):  0.6%

Dow Jones Industrial Average:  12,862

M1 Monetary Base:  $2,394,100,000,000

M2 Monetary Base:  $10,168,900,000,000

Economics, Personal Finance, The Mint

The Bernanke Ka-Put

9/19/2012 Portland, Oregon – Pop in your mints…

Most of the world who bothers to keep up with monetary matters, as we at The Mint are tasked with doing, have now digested and “evacuated” (to use the medical terminology) the jest of the FED’s last communication to the world.  Amongst other things, the FED’s public image, Ben Bernanke, indicated

Ben Bernanke Testimony
Bernanke’s Put will leave a painful mark on household budgets

that the all knowing Federal Reserve Bank, protector of the US currency and guarantor of full employment for all, will take the following actions:

1.  The FED will keep the FED funds rate target zero bound through 2015.  Since the FED funds rate has been zero bound for over three years now, the FED has taken to increasing the year at the end of this statement, in this case 2015, since they are reluctant to target a negative interest rate.  Think of the year as just another decimal point in this absurd equation.

2.  They will take Quantitative Easing (QE) to a whole new level.  Starting with $40 Billion in free funds to holders of mortgage notes and other rehypothecated asset backed (the astute will note the oxymoron) trash each month, for the rest of their existence.

This is not a drill.

The FED has tipped their hand so far that even most bankers (save Morgan Stanley) and government officials now understand what is going on.  We are witnessing what will come to be known as the Bernanke Put, or Ka-Put, as we now refer to it.

As Ira Epstein eloquently put it in his most recent Gold Report:  “Basically, the Fed threw the kitchen sink at the market.”

The Bernanke Ka-Put, taken together with the recent comments by Mario Draghi of the ECB and the ruling of the German High Court, which further sealed the Euro currency’s inflationary demise, leave no room for doubt as to what the MO of the world’s Central Banks is.

What does it mean?  The FED will print money to prop up the system no matter what happens.  Rampant price inflation and intermittent panics (due to the malinvestment which is occurring as a result of the FED’s money printing) must now be assumed in any financial model and household budget.

Additionally, contingency planning, with the assumptions of the disruption of services and supply lines, must now take place.  Malinvestment means that things will begin to “not work” (an understatement, to be sure) in the real world as a result of the financial engineering being practiced by the FED and every other Central Bank and banking cartel on the planet.

Again, This is not a drill.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 19, 2012

Copper Price per Lb: $3.77
Oil Price per Barrel:  $94.57
Corn Price per Bushel:  $7.40
10 Yr US Treasury Bond:  1.77%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,771 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  8.1%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,609
M1 Monetary Base:  $2,470,800,000,000
M2 Monetary Base:  $10,103,400,000,000

The Mint

Exiting the work force, stage left

5/4/2012 Portland, Oregon – Pop in your mints…

Today, a couple of things occured which, on the surface, seem to contradict each other.  First, the official unemployment rate ticked down slightly from 8.2% to 8.1%.  While nothing to write home about, this generally would be seen as good news.  However, in the parallel universe of government statistics, the number itself is decieving.

Why?  Quite simply, labor participation, which, for better or worse, is the denomenator of the Unemployment rate equation, dropped to a level not seen in the US for 30 years, as in, circa 1982.

In other words, people are leaving the labor force for good or are returning to school, effectively leaving the government’s unemployment dole and joining the government’s student loan program, or what we like to think of as “ultra extended unemployment.”

In other words, the productive economy is continuing to shrink. 

While a lower unemployment rate will give both the Obama campaign something to tout and the hacks at the FED academic ammunition to speak of raising short term rates, very few people outside of the ivory halls of Washington can count this jobs report as good news.

It should come as little surprise, then, that there was a widespread drop in most markets today, save US Treasury yields, which inversly correlate with broad market drops.

The M1 money supply is expanding rapidly.  Ben’s helicopters have arrived.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 4, 2012

Copper Price per Lb: $3.75

Oil Price per Barrel:  $98.49

Corn Price per Bushel:  $6.62

10 Yr US Treasury Bond:  1.88%

FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,642

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.1%

Inflation Rate (CPI):  0.3%

Dow Jones Industrial Average: 13,038

M1 Monetary Base:  $2,275,100,000,000

M2 Monetary Base:  $9,832,700,000,000

However, this news came against the backdrop of

Gold, Monetary Theory, Of Money and Metals, Silver, The Mint

Is Fiduciary money really money or cleverly disguised debt?

4/30/2012 Portland, Oregon – Pop in your mints…

As money managers are frantically rebalancing their portfolios in a vain effort to get out of the way of Apple’s 20 point decline and Spain’s central bank, whose reason for existing we cannot conjure at the moment, consults experts in toxic assets because it apparently cannot figure out how to perform the most basic of banking functions:  Writing down bad assets, we are waxing philosophical here at The Mint.

We will give the Spaniards the benefit of the doubt and assume that they know what should be done with the toxic assets, they just do not want to appear to have admitted that the vile sludge on the balance sheets of nearly all spanish banking institutions are worse than worthless without getting an expert opinion. 

The defunct Spanish Central Bank looking for unsophisticated Investors to clean their banking system's septic tank

These are smart people, no doubt, the money managers and central bankers involved in the debacle that is the western financial system, circa 2012.  It is for this reason that there should be great cause for concern when they appear completely uncapable of functioning when things do not go the way they planned.

For example, a properly functioning banking system would have no problem figuring out what to do with non-performing loans (the common name for the toxic assets that the central bankers so dread).  In fact, a properly functioning banking system, where real and not limitless fiduciary money was at stake, would have created an adequate quality control system to ensure that very few financial assets of the toxic variety live to see the light of day.  Those that did see the light of day would have beem properly discounted them to a point where all of their toxic side effects could be properly cleaned up should they spill over.

We must assume, then, that there is something dreadfully wrong with the banking system.  But what is it?

We began to ponder this question last week when we saw a post by an Ivy League trained economist.  The assertion that fiduciary money is money bothered us to the point where we were compelled to jump in to correct this unintentional error.

The Ivy league trained economist indulged us for a time and then, for reasons unknown, disabled commenting on the post.  We interpret this action as a concession of the point we are trying to make, either that or they just wanted to get rid of us, which, given our obvious charm, we can only assume is not the case.

What is important is that the post brought up a fallacy which we see it as part of our mission here at The Mint to debunk.

The fallacy, which is widely accepted as fact by money managers and Spanish central bankers alike, is that fiduciary money operates like money when in reality it is nothing more than a debt instrument in disguise. 

So which is it?  Is The Mint off its rocker or is there something to the error of this “debt is money” point of view, as in, it is causing otherwise intelligent people to act in more and more absurd ways as the inevitable consequences of using debt as money rear their ugly head?

Simply stated, is fiduciary money really money, as the name implies, or is it technically debt?  It is a fine point that, to be honest, does not matter to most people on the planet, for what is commonly known as fiduciary money tends to operate as money in a way that is imperceptable to the members of society…until it doesn’t.

The true essence of fiduciary money is not money at all, but debt.  Granted, it may be a highly liquid and highly transferable form of debt, but that does not change the fact that when it is created at the bank, be it a local or central bank, it represents a debt of that bank, regardless of the ability of said bank to redeem the fiduciary money for specie money, which is what we hold out as worthy of the term money for purposes of analysis.

As you can see from our presentation of the interaction below, we attempted, in good faith, to convince the Ivy League trained economist that Federal Reserve notes, as their name implies, are debt and not money.

I have redacted the amicable interaction to highlight the applicable text of our interaction as it pertains to the case in point, is fiduciary money really money?

Please read on and decide for yourself.

{Editor’s note:  Out of respect for the Ivy League trained economist, we have removed all references to their identity, for it is not our intent to shame, discredit, or launch any form of personal attack on them, but rather, the fallacy surrounding mainstream economics’ treatment of fiduciary money in its analysis}.

The Mint (in response to the intial post):

I would like to point out that fiduciary money is not money, but rather debt which carries in its value a monetary premium which the market has chosen to assign it.

Ivy League trained economist:

“Perhaps this helps you David Mint. I wrote this back on March 8th.

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

The Mint:

Thanks again, however, I still cannot concede your assertions that Federal Reserve notes are money, rather, they are a debt instrument, which is often referred to as fiduciary money.

The proof of this lies in that Federal Reserve notes pay interest and trade at an implied discount rate, whereas money simply trades against other goods in a varying relationship determined by the relative scarcity of resources.

Both circulate as currency in a normal economy, but the rigidity of debt makes it unsuitable for obligatory legal tender.

It is a fine point that is categorically overlooked, but the more one forces debt into the role of money, the greater the disconnect between the activities of men and the resources available to support those activities.

I would love to hear a convincing argument that debt is money if you have one in your archives.

Thanks again and all the best!

Ivy League trained economist:

“Decidedly David Mint, Federal Reserve notes do not pay interest. There isn’t anyone on earth paying interest to anyone else who is holding a $5 bill in his wallet.

Here, David, disabuse yourself. See my many shares on what money is:

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

You ought to spend good time reading this one:

{Link to content further asserting that fiduciary money is money, removed to protect economist’s identity}

The Mint

Quickly, on the fallacy of the $5 bill which is held, the implied interest and discount rate on Federal Reserve notes traded amongst commercial and central banks still affect the value of the bill as it is held up until the moment it is given in exchange for trade.  The coupon rate is 0%, but the normal operations of debt instruments hold true for them.

From what admittedly little I have read of your work, I agree with 99% of what you present.  It is this fine point, that Federal Reserve notes behave as debt, even when they are part of the M1 money supply, that I believe is the error which is spread throughout mainstream economics.  Of this, I have yet to be disabused by what you have presented.

Debt includes all fiduciary money.  The point is important because using debt as money works until it doesn’t, meaning the issuer of the debt defaults or is widely perceived to have defaulted, and their debts become worthless in trade.

Ivy League trained economist:

“That’s all fine, except Federal Reserve bank notes are not debt.  Decidedly, Federal Reserve bank notes are money owning to bearer negotiability and ability to extinguish contracts.

Yet, Federal Reserve notes are not credits, and thus are not debt.  Federal Reserve notes are not even evidences of ownership of contracts.

At most anyone can say is that Federal Reserve notes represent a call on future products to be made by anonymous, as yet, identified others who likely shall take them in exchange.”

The Mint

As a matter of accounting necessity, the Federal Reserve must book a liability when it issues a Federal Reserve Note which makes their notes debt by definition.  If this were not the case, why would they list it as a liability on their balance sheet?

http://www.federalreserve.gov/releases/h41/current/

On the contrary, the most that anyone can say about Federal Reserve notes is that they are the highest and most liquid form of debt which is traded in the US economy.  However, this does not change the fact that the essence of the Federal Reserve note is debt.

The Ivy League trained economist unexpectedly exits stage left.

Who cares?  Why is this important?  It is important because if what we believe about fiduciary money is true, most of the Western world, including the mysteriously influential Paul Krugman (who is not, by the way, the anonymous Ivy League trained economist above), somehow believes that fiduciary money is money that can be produced at will, and that the world will be better off if we simply produced more of it.

If the Krugman’s of the world get their way, labor and accumulated capital will be so poorly allocated that it could take three generations for humanity to adequately organize itself to make good use of the earth’s inexhaustible reasources.  Do you have that kind of time?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 30, 2012

Copper Price per Lb: $3.86

Oil Price per Barrel:  $104.88

Corn Price per Bushel:  $6.60

10 Yr US Treasury Bond:  1.92%

FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,664

MINT Perceived Target Rate*:  1.00% AWAY WE GO!

Unemployment Rate:  8.3%

Inflation Rate (CPI):  0.3%

Dow Jones Industrial Average: 13,214

M1 Monetary Base:  $2,210,700,000,000

M2 Monetary Base:  $9,970,100,000,000

Monetary Theory, The Mint

Bernanke Sends the US Dollar on a Suicide Mission

2/7/2012 Portland, Oregon – Pop in your mints…

We have been cooking up a project here at The Mint and have been remiss in our faithful correspondence to you, fellow taxpayer.  For this, we offer you our humble apologies. 

With our mission partially accomplished, we are back in the saddle and riding the monetary range.  The days have been uncharacteristically sunny here in the Northwest, and it should come as no surprise that the outlook has cleared up, along with the skies.  While Europe remains in the dual grip of debt and cold, the US is once again tying its shoes and heading out to dance.

Official unemployment is down and inflation is nowhere to be seen according to the government.

Yes, fellow taxpayer, all signs indicate that a Keynesian socialized monetary system has saved the day.

Yet no matter what the official statistics say, there is something much more important occurring as we write, something that will adversely affect every person who is long the current US Dollar via holding the currency directly or indirectly via some vague promise to have the currency delivered in the future (Read:  Bonds, MBS, and any derivative of such).

The fateful occurrence is this:  The US Dollar is about to carry out its suicide mission.

Suicide mission?  Wouldn’t the Government inform us of something as important as the severe devaluation of the currency?

Yes and no.

Allow us to explain.  First and foremost, the Government, who, behind the banks in the Federal Reserve system, gain the most from a weak dollar, have a tremendous incentive to devalue the dollar as well as a tremendous incentive to hide this fact.

However, the truth can easily be deduced by simply observing what the stated Federal funds rate is at any given time and waiting approximately three years for the effects of that rate to hit main street.

39 months, to be exact, but here at The Mint there are no extra points given for accuracy.

Where were we, something about a suicide mission, ah yes…

Join us, fellow taxpayer, on a journey back to the lazy days of August and September of 2007.  The world could not have been brighter.  Everything seemed to be turning up roses, which in retrospect should have been the first sign of trouble.

 

"Benky" sends the US Dollar on its final quest

 

In early September, Ben Bernanke, the Chairman of the Federal Reserve, has just parked his avatar, “Benky” and logged off of World of Warcraft after completing a quest during his third day of “work” after a much undeserved vacation when the phone in his office rang.

“It’s time,” said the voice on the other end, and Bernanke slowly hung up the phone.  Nothing more needed to be said.

The Federal Reserve was finished; it was only a matter of time.  100 years of subtle confiscation was about to go into the history books, and it was time to execute the plans which had been laid for its chief agent, the US Dollar, to go out in spectacular fashion. 

Mr. Bernanke and his colleagues held a cursory open market meeting to say a tearful goodbye to the currency which they had been sworn to defend.  They then set in motion a series of rate cuts which to this day have not been reversed.

The US Dollar was off on its suicide mission.

It had been on many similar missions before, all with overwhelming success in what were increasingly high risk operations against multiple targets, and it had always returned to its home shores with the spoils of war in its train, stronger and more arrogant for the experience.

But this mission was unheard of.  Delving into short term interest rate depths never before attempted by a currency its size.  Infiltrating foreign bases and confiscating wealth on an unimaginable scale.  Only this time, it was not foreseen that it would return.  A bigger, stronger, and more efficient model was waiting in the wings to swoop in and bring the spoils, which the US Dollar was to so painstakingly confiscate, home.

The mission, as in the past, was to take three years.  Beginning at the FED, it would make a slow and steady descent through the short term funding markets and then plunge, in the span of 15 months, to the unexplored bottom.  There it would lurk, setting mines and nets for the next 39 months which would confiscate the wealth of not just individuals and corporations, but of nations and multinationals as well.

It would be a grand climax to an illustrious career.

For their part, Bernanke and his colleagues at the FED would provide all of the cover fire they could muster in order to give the US Dollar as much time as possible to carry out its terrible work.  In the end, however, there was little doubt that the currency would be found, tried, and executed during this tour of duty.

So certain was this fact, that neither provision nor measure was to be taken by anyone at the FED to rescue the US Dollar.  No further resources would be used in its rescue, save the empty words of Bernanke and his colleagues. 

The US Dollar’s orders were clear:  To remain at the ultimate depths of short term funding markets, laying as many traps as possible, until it expired in this effort.

It is a grim mission, to be sure, with a grim outcome for those who are long the US Dollar and, ultimately, for the dollar itself.

Circa February 7, 2011, it appears to the greater world that the US Dollar has descended to the 1% level, the exact level it had been perceived to be at on that fateful day in late summer of 2007 when Mr. Bernanke got the call.  For most people, it feels that all has returned to normal after four years of what can only be described as an economic nightmare.

Nothing could be further from the truth.

For in one short month, it will be clear that the US Dollar, rather than returning to base at the FED, as it has for nearly 100 years, has gone deeper and further into the pockets of the world than any currency has ever dared go before.

And it is about to pick each and every one of them.

If there was ever a time to own real assets instead of US Dollars, it is now.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for February 7, 2012

Copper Price per Lb: $3.85
Oil Price per Barrel:  $98.55

Corn Price per Bushel:  $6.42
10 Yr US Treasury Bond:  1.99%
FED Target Rate:  0.11%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,742 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.00% DROPPING LIKE A ROCK INTO MARCH!!!
Unemployment Rate:  8.3%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,881

M1 Monetary Base:  $2,198,400,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,686,800,000,000 YIKES UP $1 Trillion in one year!!!!!!!