An article on the emergence of new trading and commerce platforms in the Orient and middle east: http://www.silverdoctors.com/jim-willie-the-coming-isolation-of-usdollar/
Tag Archives: Gold
Should You Accumulate Gold Like China?
According to reports on Chinese imports of gold from Hong Kong, the People’s Republic is on track to import more gold bullion in 2012 than the entire official holdings of the ECB. What does it mean for us, fellow taxpayer? Our guest contributor Brad Evans, who is writing on behalf of BullionVault, explores this economic trend and possible implications for your portfolio in the following insightful editorial. Enjoy and stay fresh!
Should You Accumulate Gold Like China?
In recent years, much has been written and speculated about the idea of Chinese authorities buying up massive amounts of gold bullion. Indeed, the amount of gold going to China has increased notably over the course of the past few years, and it certainly seems as if the country is making a concerted effort to accumulate a great deal of the precious metal resource. Is this just a passing trend, representative of independent economic movements, or a greater strategy with implications for the worldwide economy? Ultimately that remains to be seen, but one result of China’s accumulation of gold bullion is clear.
With many of the world’s dominant economies located in the United States and the Euro zone, the U.S. and countries that use the Euro generally prefer to keep the cost of gold low, if possible, so as to avoid the strengthening of the resource against their respective currencies. As things stand now, and have for some time, the U.S. dollar and the Euro are generally seen as popular reserve currencies, meaning that people in other economic zones frequently turn to the U.S. dollar and the Euro as the ultimate safe haven. As long as the price of gold remains relatively low, the dollar and Euro remain strong as reserve currencies. Therefore, it is plain to see why China buying up massive amounts of gold bullion may lead to an unwanted shift in gold prices that could take the focus away from the reserve currency status that U.S. dollar and Euro enjoy.
Perhaps more important for many people is how this economic strategy of China’s could affect your finances. World economic trends will come and go, and economies will strengthen and weaken accordingly – but can you benefit from buying up gold bullion in your personal life, on a smaller scale, in the same way that China hopes to benefit in the long run internationally? While you certainly can’t hope to influence any worldwide economic trends on your own – accumulating gold bullion may not be a bad strategy to consider if you feel that the price of gold will be rising relative to other assets in the coming years.
Buying gold bullion is simple enough. You just need to head to a precious metal trading site such a s BullionVault, where you can buy and sell gold as you please according to constantly updated world prices. These sites also offer you various convenient and secure storage options, meaning that if you want to you can easily accumulate a great deal of gold bullion. However, before making this or any investment decision it is important to formulate a sound investment strategy. For example, if you are looking for short-term stability or gains, gold investment may be risky at the moment, as the dollar is strengthening and gold may be weakening. But for long-term gains, this may be a strategy worth considering.
This has been a guest post on behalf of BullionVault, written by freelancer Brad Evans.
Of Money and Metals, Part V – Free Money Refutes Gresham’s Law
1/31/2012 Portland, Oregon – Pop in your mints…
{Editor”s note: The following is the long awaited conclusion of the series “Of Money and Metals.” Please click here to view the Part I, Part II, Part III, and Part IV}
Free money also renders null and void any arguments as to what constitutes good or bad money, for this determination will be made on a daily basis by producers and consumers rather than a monetary authority who is acting on mere theory with severely limited data.
Absent the government declaration of what is money and how much said “money” is worth, there is no longer bad money driving out good money, as Gresham’s Law so perceptively observes. What remains, then, as the ultimate determinant of what is money and how much it is worth are the two parties to a transaction, who are generally in the best position to determine such matters.
“But this would destroy exchange as we know it!” comes the cry from apologists of legal tender laws. “No one will know what anything is worth, let alone how to pay for it!”
On the contrary, the free operation of the money supply would, by necessity, cause everyone engaging in exchange to be acutely aware of both what constitutes money and how much it is worth. It is legal tender laws which serve to pull the wool over everyone’s eyes as to the true value of money.
When seen through a different lens, that of the free operation of the money supply, the absurdity of legal tender laws becomes clear. Commodity (free) money is unhindered by the artificial restraint of existing debts and is constrained only by the productive will of society. Commodity (free) money is free to accurately reflect the price of goods and services in light of the perceived supply and productive capacity of both goods being exchanged, that being offered in exchange and that offered in payment as money.
Money, as most people instinctively understand it, is simply an ordinary good whose utility and value are greatly enhanced by its wide acceptance in trade. If one strives to remove the “cost” of producing money, as Adam Smith so nobly aspired to do, it is clear that the best way to do this is to allow the good which is acting as money to be produced in the most efficient way by the greatest number of artisans as are necessary to fulfill the present demand for money.
But how would all of these artisans, blindly creating all of this commodity money, know when to stop producing were it not for legal tender laws?
Here, there is no risk of oversimplifying the answer, for the answer is painfully simple. As persons competing in the free market who have chosen to produce money, they are likely to be the first to know when there is too much money in circulation, for their orders for new money will uncannily drop when the economy has enough money to function efficiently.
Further, any commodity that is only marginally used in the production of money will quickly and smoothly have its supply directed to other, more efficient uses as the incentive (realized margin) to use it as money is incrementally reduced as supply begins to overtake demand. Each producer is therefore free to choose his or her exit point.
Take the case of copper. If copper becomes monetized by the free will of the participants in the economy, it stands to reason that it could be demonetized by the same free market operation. Should economic activity slow to the point where the pace of saving and exchange no longer calls for copper to assume a role as money, as copper is demonetized those holding copper will find it more efficient to melt the copper that they have in monetary form and sell it as a consumer good.
The process of demonetization is simply a matter or free choice when something occurring in nature is used as money. It first moves to the fringes of use as money, as a Jeton or modern day casino chip is used in place of money. In time, the material will be demonetized completely.
Debt, when used as money, enjoys no such elasticity. By necessity, when debt is forced into a role as money, it causes an unnatural proliferation of credit, so that when the inverse of Gresham’s law begins to operate (good credits push bad credits out of circulation) the unnatural restriction on the money supply assures that even the best of credits will go bad, and the money supply along with them.
When debt is demonetized, usually by force, the result is more often than not a severe hyperinflation followed by war.
Legal tender laws, such as the modern laws which declare that debt is money, are futile at best and generally destructive. They do, however, permit a small group to reap the monetary margin that the artificial monopoly on money creation allows them for at time.
Accepting that an inanimate object is no longer worth what one thought it was can be disappointing, but at least one still has said inanimate object. In the case of debt, accepting that someone cannot deliver what they promised tends to create feelings of resentment and remorse which, depending upon the size of the failure, can lead to violence.
Soon, the world will learn that using debt as money is a dangerous violation of the very laws of nature. As with any violation of natural law, the consequences may be withheld for a time, but they are never avoided. The longer they are artificially withheld, the more swiftly and severely the consequences will be meted out when they can no longer be repressed.
For no man, or group of men, regardless of their number, clairvoyance, or special powers they profess to have, can suspend or accelerate the operation of natural law. The Creator alone reserves that power for himself.
There is a perfect balance in God’s creation. Yin and yang, male and female, mercy and justice, heat cold, money and debt. Calling one extreme the by the name of other is futile and leads only to confusion and destruction.
It is only a matter of time.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for January 31, 2012
Copper Price per Lb: $3.79
Oil Price per Barrel: $98.48
Corn Price per Bushel: $6.39
10 Yr US Treasury Bond: 1.80%
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,737 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 1.50%
Unemployment Rate: 8.5%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 12,633
M1 Monetary Base: $2,152,800,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,782,800,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Of Money and Metals – Part IV: The Operation of a Free Money Supply Explained
1/23/2012 Portland, Oregon – Pop in your mints…
{Editor”s note: The following is a continuation of the series “Of Money and Metals.” Please click here to view the Part I, Part II, and Part III}
Natural law is always operating, always demanding a balance of accounts in the real world, not simply on an accountant’s ledger or numbers on a bank statement.
It is then foolishness for anyone to assume that a central authority, no matter how clairvoyant, can properly estimate the money supply necessary for human economic activity to continue at the optimal rate, balancing both the quantity of debt and money to provide for both the present and future using all of the information which is collectively available.
It is for this reason that it is imperative that people be free to declare both what will serve as money as well as its value in exchange. History has shown that, if people chose gold or anything natural as money, economic activity and the resulting benefits to society will accumulate so rapidly that the supply of gold will quickly act as a constraint. If gold is money by decree, this becomes a problem.
However, if gold has simply been chosen for use as money by the majority, the same majority will quickly and tacitly gravitate to a secondary natural source of money with which to augment the primary natural money supply. Historically, this secondary source of money has been silver.
Once economic activity further accelerates and the benefits continue to accrue to a larger portion of the population, the supply of silver will act as a restraint. Again, if left to their own devices, the majority will quickly and tacitly adopt another item occurring in nature to be used as money. Historically, this third source has been copper.
Yet even the supply of copper, abundant as it may be, will eventually serve as a restraint, and so on, and so forth. Eventually, in this example of what we like to call “Free Money,” gold will tend to operate as a form of savings and settlement only in the largest of transactions, with silver serving as money at an intermediate level while copper would be the most widely circulated currency for smaller transactions.
The beauty of free money is that, should the supply of copper become a constraint, steel, nickel, or some other more abundant natural resource will take the place of copper for use in smaller transactions, and so on, so that the money supply, in a general sense, will always be perfectly suited for the rate of economic activity which is occurring.
It is important to note that, while history has shown a preference for metals to be used as money, in the free money (and by extension, free banking) theory there is no requirement that what be adopted as money be metal. In fact, money can be anything that those participating in exchange bilaterally accept as payment for goods and settlement of debts. As you will recall, the only thing that money should not be, by definition, is debt.
- Yes, Mr. Cheney, Deficits do matter
While it is obvious that debt can be exchanged in the place of money for a time, as the past 100 years have shown us, common sense, logic, and natural law will demand that the debts which circulate be settled in real terms. The creation of debt as money severely distorts economic reality and the more debt that is created, the greater the demanded settlement in real terms will be, regardless of how many times one chants the Keynesian mantra recently made famous again by former Vice President of the US Dick Cheney “Deficits don’t matter.”
The superiority of free money is that the money supply is free to adapt to the rapidly economic activity, which is nothing more than an expression of the changing wants and needs of consumers. The money supply is not hindered by unnatural constraints which have nothing to do with economic reality and are imposed by what is at best an uninformed or disinterested and at worst a malicious monetary authority.
The current debt as money system, far from providing a perfectly elastic money supply, has created the economic equivalent of concrete, which is now hardening the economy instead of providing it with the much needed lubrication. If this insanity carries on much longer, society will be shattered as economic reality takes a jackhammer to it.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for January 23, 2012
Copper Price per Lb: $3.79
Oil Price per Barrel: $99.93
Corn Price per Bushel: $6.20
10 Yr US Treasury Bond: 2.07%
FED Target Rate: 0.10% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,677 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 1.50%
Unemployment Rate: 8.5%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 12,709
M1 Monetary Base: $2,167,800,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,805,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Of Money and Metals Part III – Debt: The Barbarous Relic
1/19/2012 Portland, Oregon – Pop in your mints…
{Editor”s note: The following is a continuation of the series “Of Money and Metals.” Please click here to view the Part I and Part II}
As the world descended further into depression which eventually led it into the Second World War (Editor’s Note: It should come as no surprise that the only two World Wars have come after the declaration that debt is money), The Keynesian adherents clamored for more debt as the only answer to the world’s economic ills.
What Keynes and his Harvard trained legions fail to comprehend is that the only permanent cure for an economic depression is to allow each individual to declare what he or she will use as money and allow market participants to coalesce around what at that time is best suited for the role of money. For balance sheet recessions, such as the one the world is currently experimenting, are merely symptoms of a rigid money supply which has failed to keep up with the demands of a dynamic economy.
Under current theory, the government sacrifices the dynamic economy in the name of preserving the “integrity” of the monetary system.
When it is quite obvious that it is the monetary system that has failed, the government’s response can only be seen as idiotic at best.
What makes the situation of the past 100 years even more untenable is that money, instead of operating as a lubricant for economic activity, is more like concrete. Such is the inherently destructive nature of debt as money.
For the only rule with regards to money which is imposed as a matter of natural law is that debt cannot ever be money. It is a concept so clear that it escapes most academics and government officials.
Now, the Keynesian indoctrinated readers of these words are no doubt dusting off the “silver bullet” of Keynesian theory: That gold, which is widely held as the logical alternative to the “debt is money” insanity, is a “barbarous relic.” In layman’s terms, Keynesian theory holds that any attempt to limit the money supply via natural means, the most popular being a gold standard (fixing the price of gold in terms of monetary units) will cause a deflationary spiral which will bankrupt the entire world.
Even Adam Smith argued that the mining of metals for use as currency was essentially a lamentable waste of resources.
We could not agree with them more. The limited amounts of gold in the world make it wholly unfit for everyday exchange. Gold, rather, is generally agreed upon to be the most perfect savings vehicle that the world has yet discovered.
So Keynes, despite promoting a theory which sacrifices the yang (savings) and glorifies the yin (debt) is right after all? Not quite…
Using the same logic with which the Keynesian so adeptly slays the gold standard, it quickly becomes obvious that by declaring that debt is money is not only a violation of natural law, it makes debt, rather than gold, the new barbarous relic.
Debt has a distinct disadvantage to gold in that it can be quickly and completely destroyed. Once it is assumed by the majority that a certain debtor will not be able to make good on their debts, the debts owed by the debtor, and any money in circulation which is either directly or indirectly related to the existence of these debts, is destroyed. For debt, at its base level, is a figment of the imagination until it is settled in real terms by the delivery of money in settlement of the debt.
It would hold, then, that debt, the new “barbarous relic,” is exponentially more dangerous than gold when used as money. The reasoning is the following, while the quantity of debt in the world can be suddenly and permanently reduced, the quantity of gold, which is admittedly difficult to increase, is at the same time extremely difficult to decrease.
Yet even given the strong advantage of gold over debt as money, it is obvious that both the Keynesians and the gold bugs are sadly mistaken in formulating their ultimate solution to the eternal problem of the money supply.
When it comes to determining the proper money supply, Adam Smith’s invisible hand of the market can be seen slapping both Keynesians and gold bugs silly!
For the problem with declaring anything, be it gold, debt, or white elephants as money, has nothing to do with the fitness of gold, debt, or white elephants for use as money, rather, it lies in the act of the minority attempting to dictate what will be used as money by the majority.
Money, in a general sense, is a good of the highest order. There is nothing in nature which states that gold, silver, seashells, or anything else must be used as money. The historical association of gold and silver as money is the result of their superior fitness for the role of money. It is simply a product of the collective wisdom of mankind, gleaned from experience as free exchange and the division of labor began to bring order to man’s chaotic surroundings.
However, just because gold and silver were superior in their role as money in the past does not necessarily mean that they enjoy some sort of divine designation as money.
Gold and Silver, like all things occurring in nature, are in limited supply. The fact that they occur in nature gives them a distinct advantage over debt (which is simply a promise to pay in the future) in that debt, which is theoretically in infinite supply, quickly loses value against scarce real goods due to the fact that debt, in theory, enjoys an infinite supply.
Anyone can make promises to pay in the future, it is the function of debt markets to determine what those promises are worth today. Ironically, the value of debt today is perilously tied to speculations about the money supply, which is in turn dependent upon the issuance of debt. Thus, declaring debt as money provides the economy with yet another hindrance in that the debt markets are increasingly disconnected from their noble origins; the debtor’s perceived productive capacity.
It is clear that mankind is in a perilous predicament. Will we take hold of the simple answer, which lies in free banking and free determination of what will serve as money?
More to come…
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for January 19, 2012
Copper Price per Lb: $3.80
Oil Price per Barrel: $100.41
Corn Price per Bushel: $6.06
10 Yr US Treasury Bond: 1.97%
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,657 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 1.50%
Unemployment Rate: 8.5%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 12,625
M1 Monetary Base: $2,167,800,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,805,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Of Money and Metals, Part I – Balance
1/17/2012 Portland, Oregon – Pop in your mints…
It is turning out to be an unusually dry winter here in Portland. It is a refreshing break from the usual incessant pounding of rain which blesses this part of the world between November and May each year. Perhaps we are just now getting back the lost months of June and July of 2011, as nature has a way of evening things out over time.
We have observed that there is a perfect balance in God’s creation. Some call it a yin and yang, male and female, mercy and justice, freedom and slavery, heat and cold. For every extreme, there is a force which, given enough time, will work to counteract the excesses wrought by the seemingly uninhibited operation of its polar opposite.
It should come as no surprise, then, that in the economic sphere, debt and money fall into the same category of opposing natural forces.
Yes, debt and money are two completely different forces. One takes from the future to provide for the present, the other takes from the past towards the same end.
Simple, right? Male, female, Yin, Yang, case closed.
Yet circa 2012, for some odd reason, there seems to be an abundance of debt and a dearth of money in the world. The world as we know it is perilously out of balance.
How can this be? Why are things so far out of balance? In the interest of time, we will sum up what is otherwise a long and painful explanation in the following way. Roughly 100 years ago, by decree of the financial authorities, debt was declared to be money.
Ever since then, man has lived in a state of economic confusion. On one hand, He has seen an unprecedented level of technological advances and a resulting rise in his standard of living. On the other hand, on net, he, or someone acting in his name, has borrowed an unprecedented amount of money from the future in order to achieve these advances and consequent rise in his living standards.
How is this possible? Didn’t simply declaring debt is money relieve man of having to save? After all, if everyone simply assents to accepting promises to pay in the future for goods or services delivered or performed today, haven’t we trumped the need for savings, the Yang, as it were?
More to the point, have the laws of nature with regards to money been permanently altered?
If only it were so. Unfortunately, the longer man labors under the false assumption that debt is money, the greater the pain which will be incurred by mankind as nature unilaterally brings the earth into balance.
More to come…
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for January 17, 2012
Copper Price per Lb: $3.72
Oil Price per Barrel: $100.75
Corn Price per Bushel: $6.04
10 Yr US Treasury Bond: 1.85%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,653 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 1.50%
Unemployment Rate: 8.5%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 12,485
M1 Monetary Base: $2,380,300,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,829,100,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system – Part I
11/22/2011 Portland, Oregon – Pop in your mints…
After a brief break in our faithful correspondence, we are compelled to pick up the proverbial pen to complete an incomplete thought in a vain attempt to eat Thanksgiving dinner in peace. If you are a new reader of The Mint, we will simply relate that the Mint is the product of a deep felt agitation by its author. It is what could be referred to as therapy. The thoughts, once on paper, leave us in peace. Until then, they stir, deep in our spirit, waiting to escape via these words.
How very fortunate and long suffering you are, fellow taxpayer.
Before we continue our mantra of Anarchy, True Capitalism, Natural Law, and Might Makes Right, we will share a few important observations.
First, the MF Global implosion is now reported to have left a $1.7 Billion hole in the capital base of a highly leveraged commodity and derivatives market. MF Global was a primary dealer, one that had the unconditional trust of the exchange and other secondary commodity dealers. It was a silent pillar of these markets. The aftermath of their implosion, both in loss of capital and confidence, has only begun to unfold. Commodity markets are no longer “safe” by normal standards. This situation is best watched by your money at a distance.
Second, while Europe implodes, the US has been spending most of its time firming its position in Asia. There has been speculation that the US is moving to aggressively devalue the dollar vis-à-vis the Yuan. Will it be the 10:1 reverse split that we have speculated about here? No one knows, but it would appear that the US Dollar will not serve as a reliable store of wealth in the short term. Silver and Gold come to mind as viable substitutes as this drama plays out.
Finally, It appears that the Occupy protesters are now wising up and using tactics which we call the Bolivian tactic, that of blocking major thoroughfares. It is much more effective, not to mention exciting, than urban camping. As a practical matter, if your livelihood in any way relies on a major thoroughfare being open in an area where the protests are growing, we suggest that short term contingency plans be considered.
These events and any pain they cause should be short term, maybe three to four months of adjustments, if they are allowed to simply run their course. If the Government continues to intervene, they will plague us indefinitely. We pray for the former and prepare for the later.
With that off our chest, we continue pondering life as we know it. Our question today is: Why does it seem that the worst morals seem to come out on top? First, a glance at Isaiah:
“ And I will make boys their princes, and infants shall rule over them. And the people will oppress one another, every one his fellow and every one his neighbor; the youth will be insolent to the elder, and the despised to the honorable,” Isaiah 3:4-5
Have you ever complained about a politician? The government? How about your boss? The current state of society? If you haven’t, you are indeed a rarity in this day in age, for there is much complaining, and seemingly much to complain about.
How did we arrive at this, fellow taxpayer? If democracy is supposed to deliver the cream of the crop in terms of leadership in the government, why does it seem that most politicians are the epitome of immoral liars?
This question was thrust upon us as we were reading the “Is there no shame” rant at zerohedge.com and came across the words “Hayek’s theory that the worst always rise to the top.” We then perused Hayek’s theory in an excerpt from the “Road to Serfdom.”
In the section entitled “Why the Worst Get to the Top,” Hayek states that:
“There are strong reasons for believing that the worst features of the totalitarian systems are phenomena which totalitarianism is certain sooner or later to produce.
Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from the essentially individualist Western civilization.”
Suddenly, it all makes sense. As man has generally chosen to pursue the Totalitarian, or what we call the Might Makes Right ideology, it would follow that those thrust into power should be among the most immoral, unscrupulous, human beings on the planet.
In summary, the Might Makes Right ideology unwittingly promotes the worst individuals to positions of power, as they are best suited to carry out the immoral and contradictory demands which are invariably made of the persons occupying positions of power in such a system.
Depressed? Don’t be. It doesn’t have to be this way. More tomorrow.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 22, 2011
Copper Price per Lb: $3.34
Oil Price per Barrel: $98.01
Corn Price per Bushel: $5.98
10 Yr US Treasury Bond: 1.95%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,700 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): -0.1%
Dow Jones Industrial Average: 12,096
M1 Monetary Base: $2,121,700,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Natural Law: The Golden Rule
11/15/2011 Portland, Oregon – Pop in your mints…
We continue today with our brief examination of the foundations of society here at The Mint. We are finding that while society appears complex on the surface, the further that its elements are reduced, the foundation is extremely, perhaps painfully simple. Any complexity that we experience is not a product of an inherent complexity in natural laws, rather, it is a product of the human relationships and actions that are a result of man’s choice of response to the demands of natural law.
For those of you joining us for the first time, let us get you up to speed with a synopsis:
Anarchy, the lack of government, is man’s natural state. It is an ultimate given. It simply is. A clear understanding of the current state of affairs depends upon grasping this inescapable fact.
In response to Anarchy, man has two choices. He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property, or He can choose to take his fellow man’s life and property through the use of force. We have called the path of mutual cooperation “True Capitalism” and the path of forceful coercion “Might Makes Right.”
Ideologically, there is no middle ground between these two paths. In practice, men live at various points on the spectrum between these two ideological extremes.
We argue that True Capitalism is the response which creates the greatest benefits for the greatest number of people. The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law. Like Anarchy, Natural Law is immutable. It does not change, for its statutes are etched in the foundations of the earth itself.
Last Thursday we presented the Natural Law of supply and demand, a law that deals with what is concrete and tangible. Today we will deal with second law which primarily governs human relationships and works in conjunction with the law of supply and demand.
It is popularly called the Golden Rule.
The Golden Rule is articulated and exalted as an ideal in some form in nearly every society and religion on the planet. The Bible famously articulates the Golden Rule in the following way:
“Love your neighbor as you love yourself” (Deuteronomy 6:5)
It is important to note that the Golden Rule is a positive declaration. It is a call to action. In many societies and religions the Golden Rule is stated in a negative declaration, a command to abstain from action. An example of this can be found in Hinduism:
“One should never do that to another which one regards as injurious to one’s own self.” (Anusasana Parva, Section CXIII, Verse 8 )
The negative declaration is sometimes called the Silver Rule. It is important to understand that only the Golden Rule, the positive call to action, is Natural Law. Observance of the Silver Rule, while highly advisable, does not rise to the level of Natural law. However, it is a logical corollary to the Golden Rule.
Compliance with the Golden Rule, as with all natural law, is indispensible. It is ignored at one’s peril, for it operates regardless of one’s acceptance of its validity or not. The Truly Capitalistic society greatly facilitates and encourages compliance with the Golden Rule. Conversely, compliance is hindered in a society that has embraced Might Makes Right as its ideological response to Anarchy.
“Wait a minute,” some of you are saying, “I’ll give you that the Golden Rule is a great ideal but Natural Law? No one requires it of me, right?”
Remember, the essence of Natural law is that it is universally true and applicable to all. The law of Supply and Demand, for example, can be ignored for a time, but every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached. The result of the failure to comply with the law of supply and demand is material scarcity and ultimately death.
The same is true of the Golden Rule. Every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached. In the case of the Golden Rule, the result of the failure to comply is by definition a failure to properly comply with the law of supply and demand as well, with the end result, as mentioned above, being material scarcity and ultimately death.
Compliance with the Golden Rule is a necessary prerequisite to compliance with the law of supply and demand, for the Golden Rule governs relationships in the purest sense. This is evident to most who have taken the time to ponder it. So broad are the implications of the Golden Rule that the origins of both the rule of law and more recently the concept of human rights can be traced to it.
What thrusts the Golden Rule out of the realm of being simply a good idea and into the realm of Natural Law is this: All attempts to comply with the Golden Rule serve to coordinate the actions of men in such a way that the greatest number of human needs are met in the most efficient way. Any deviance from the Golden Rule, by definition, is a failure to meet human needs in the most efficient way. Again, by definition, failure to meet human needs in the most efficient way means that a greater number of human needs are simply not being met.
Far from being simply a moral standard, the Golden Rule is elemental in the determination of supply and demand. As the equilibrium price serves as the beacon of production for the law of supply and demand, the actions taken by men, governed by the Golden Rule, initially determine the supply and demand factors which, when combined, produce the equilibrium price. In this sense, the Golden Rule serves as the beacon for both supply and demand which enable the creation of an initial equilibrium price.
How can the Golden Rule run ahead of the Law of Supply and Demand? This is one of the beauties of Natural Law. Natural Law always compliments and never contradicts itself.
An Example of the operation of the Golden Rule
Each human being has needs and wants which are sources of uneasiness. Human Action, to paraphrase Von Mises, consists of men acting to dispel their most intensely felt uneasiness. If a man is hungry, he will direct his actions towards getting something to eat. Other tasks will be put on hold until this intensely felt uneasiness is relieved.
The operation of the Golden Rule, in the example of mans the need to alleviate hunger, operates in the following way. A man feels hunger. He has two options before him with which to fulfill this need. First, he can forage, hunt, fish, or perform any series of actions with the end of fulfilling this need. Second, he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for something to eat.
As the second way is the most expedient, it is likely that a majority of people will elect this option. Now reflect upon the Golden Rule: “Love your neighbor as you love yourself.” The person who chooses to comply with the Golden Rule will quickly understand that if he has the need to be fed, it is likely that his neighbor (in this sense, neighbor would mean anyone in the geographical realm in which he is equipped to serve, up to every person on the planet if it is possible for him to serve them) is likely to have the same need to some degree. With this revelation, he unwittingly is on his way to discovering demand.
As he seeks to voluntarily fulfill this demand, he will need to either produce the supply of food himself or he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for a supply of food with which to provide his neighbor with something to eat. The information that his adherence to the Golden Rule provides him with regarding the needs of his fellow man will serve to guide his speculation as to where to best employ his limited time and capital.
It is a simple example, yet its simplicity serves to highlight the operation of the Golden Rule and can apply to any situation regardless of the complexity. The Golden Rule, in modern business school lingo, is the origin of market research; it is the impulse for entrepreneurial activity and is the basis for subsequent human actions.
The Question of Charity
What about charity? Wouldn’t adhering to the Golden Rule quickly lead to widespread scarcity and bankruptcy as catering to everyone’s preference to receive something for free would quickly deplete all available supplies and production?
The answer lies in the Golden Rule itself: “Love your neighbor as you love yourself.” Would you like to provide something for someone and not receive compensation? Our guess is only if you are in a position to give something away and are willing to do it. If all members of society are complying with the Golden Rule, the norms of charity will fall under the governance of the law of supply and demand.
The beauty, the perfection, of the Golden Rule is that above all it demands balance in human relationships and by extension, balance in the supply and demand of material goods.
True Capitalism Enable Compliance with the Golden Rule
True Capitalist ideology completely subjects itself completely to the Golden Rule and, in return, most accurately directs human actions towards fulfilling the most urgently felt needs of the greatest number of people.
Inefficiency is naturally wrung from the system at its source as errors are quickly corrected and information is quickly disseminated via equilibrium prices. The proper identification of demand by default leads to the most efficient allocation of scarce resources possible. The liberty of life and property which is ensured in the Truly Capitalistic system allows men to supply this demand by employing their limited time and resources without unnecessary hindrance.
The Golden Rule may not provide everyone with what they expect or what they think they desire, but complete submission to it not only creates the most efficient allocation of resources, it gives humans the best information to base their attempts to mutually cooperate to fulfill the myriad of human desires. It has the added social benefit of creating the greatest amount of harmony and goodwill possible in human relations.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 15, 2011
Copper Price per Lb: $3.49
Oil Price per Barrel: $99.39
Corn Price per Bushel: $6.45
10 Yr US Treasury Bond: 2.06%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,781 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.0%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 12,096
M1 Monetary Base: $2,215,000,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,532,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Natural Law: the transcendental importance of Supply, Demand, and Equilibrium Prices
11/10/2011 Portland, Oregon – Pop in your mints…
As Europe continues to unravel, we have been exploring, perhaps by accident, the foundations of society here at The Mint. In case you have missed it, here is a brief recap:
Anarchy, the lack of government, is man’s natural state. It is an ultimate given. It simply is. A clear understanding of the current state of affairs depends upon grasping this inescapable fact.
In response to Anarchy, man has two choices. He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property or He can choose to take his fellow man’s life and property through the use of force.
In other words, man may choose the path of True Capitalism or Might Makes Right. Ideologically, there is no middle ground. In practice, men live at various points on the spectrum between these two extremes.
We have argued that True Capitalism is the response which creates the greatest benefits to society in terms of peace, security, capital accumulation and material prosperity while the ideology of Might Makes Right by definition is the antithesis of the Truly Capitalistic ideology and consequently would create the greatest detriment to society.
Ironically, all of the Nation States in existence derive their power from the adoption of the Might Makes Right ideology by a majority of the people. How, then, can we be so certain that True Capitalism is the proper response to Anarchy if the majority has embraced Might Makes Right?
The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law. Like Anarchy, Natural Law is immutable. It simply is. Man is bound to it whether he chooses to recognize it or not. It does not change, for Its statutes are etched in the foundations of the earth itself.
It is as Ayn Rand stated: “You can ignore reality, but you can’t ignore the consequences of ignoring reality.”
In our example, we take the reality that Rand refers to as Natural Law. Natural Law may be ignored, but ignorance always comes at a price.
The first of these Natural Laws is that of supply and demand. The Law of supply and demand, simply stated, holds that supply of and demand for a good or service will tend to find a point of equilibrium at a certain price expressed in terms of money (the equilibrium price). On a graph the relationship looks like this:
In simple terms, it is a way of expressing what most people intuitively know. When an item is increasing in price, one of two things is happening. Either people are demanding more of the good or service or the supply of the item at the previous equilibrium price point is diminishing.
Naturally, the opposite is also true. When an item is decreasing in price, one of two things is happening. Either people are demanding less of the good or service or the supply of the item at the previous equilibrium price point is increasing.
In either case, the change in the price of the item in monetary terms is providing crucial information to all of those either producing or consuming the good or service in question, for it guides their inherent speculations.
(Editors Note: Speculation, far from being an illegal or immoral activity, is essential to everyday survival and without it, there is no hope of achieving equilibrium prices and therefore both production and consumption tend to cease. It is important to clarify that the illegal or immoral speculation that is villianized today is generally the act of investing the money of other parties in types of speculations without the knowledge or consent of the other party to do so.)
As a producer, if one sees the price of the good or service that one provides increase, the producer will strive (speculate, as it were) to either increase production to take advantage of the opportunity to profit and/or others will strive to produce the good or offer the service for which the price is increasing.
As a consumer, if one if one sees the price of the good or service that one consumes increase, the consumer will strive to either decrease consumption to mitigate the effects of the higher prices or others will strive to find a less expensive substitute for the good or service to offer in the place of the good or service for which the price is increasing.
Stay focused, here comes the important part. The increase in production will increase supply which, as the Natural Law of supply and demand dictates, will eventually lower the equilibrium price as the increase in demand is satisfied. Likewise the decrease in demand will have the effect of increasing the available supply.
In either case, the individual decisions (again, speculations, as it were) of the producers and consumers serve to increase the available supply. The process occurs tacitly, and is an example of what Adam Smith famously called the Invisible hand of the market.
To further sum it up in what may seem at first a paradox, the best cure for higher prices is higher prices.
There are no exemptions from the natural law of supply and demand, however, there are numerous examples of Nation States, guided by the principal that Might Makes Right, manipulating the pure message that price is intended to send to producers and consumers.
This manipulation may be achieved in overt ways, such as price controls (the setting the price of an item by decree). However, most people understand that price controls are bad, so today’s Nation States commonly resort to other tactics. Amongst these tactics are taxes, subsidies, and the granting exclusive privileges to either buy or sell the good or service in question via regulating the purchase of or granting monopolies to produce it.
Regardless of the tactic employed, the result is to always a manipulation of the equilibrium price for a good or service and consequently distort the signal which guides the speculations and ultimately the actions of all producers and consumers. The result of society as a whole is always and in every case achieving suboptimum results to those that would be achieved if the price signal were as pure as possible.
In the case of Central Banking and centralized currency control, the Nation State, in addition to the tinkering mentioned above, adds the complication of manipulating the currency that the equilibrium prices are expressed in. This further distorts the sacred price signal that is universally relied upon to direct the actions of producers and consumers.
You can imagine the confusion occurring all around us, every day.
The True Capitalist ideology, on the other hand, completely subjects itself completely to the law of supply and demand and, in return, provides producers and consumers with best opportunity to obtain and act on the most accurate price information possible.
A Truly Capitalist society quickly settles on Gold and/or Silver as currency and does not recognize the right of anyone to tax, regulate, or grant monopolies. The Truly Capitalist Society continually works to bring supply and demand into balance in the simplest, most efficient way possible: By relinquishing all control to the market participants and by extension, natural law.
Inefficiency is naturally wrung from the system as firms that depend upon the false price signals or special protections or subsidies provided under the Might Makes Right ideology quickly go out of business.
True Capitalism not only quickly eliminates economic waste, it quickly directs the surplus capital into its most urgently needed employ, and it is accomplished by simply obeying and embracing the natural law of supply and demand.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for November 10, 2011
Copper Price per Lb: $3.39
Oil Price per Barrel: $98.04
Corn Price per Bushel: $6.49
10 Yr US Treasury Bond: 2.07%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,749 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 11,861
M1 Monetary Base: $2,122,700,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base: $9,507,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part IV – The Catastrophe at Hand
10/20/2011 Portland, Oregon – Pop in your mints…
For those of you who have missed Part I, Part II, and/or Part III, you may read them by clicking on the following links:
Again, for those of you who are too lazy to click the links, here we offer a brief summary to get you up to speed:
Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade. A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.
The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life. The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.
The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society. As such, the Central Bank becomes the natural creditor of the Government. Whether it lends funds directly to the Government or indirectly, the result is the same. That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.
Having established the fact that some form of both a Government and a Central Bank will naturally, in some form, come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.
Today, that the scale of modern Central Banking is excessive and that the potential for catastrophe is unprecedented.
The reason for the unprecedented scope of Central Banking is that money, as it is widely understood today, does not really exist. Rather, banknotes issued by Central Banks, which are by definition credit instruments, are misunderstood to be money proper by a majority of the people in the developed and semi-developed world.
This misunderstanding flies in the face of 9,000 years of human history, in which Gold and Silver in bar and coin form have been tacitly used as money proper. It is this misunderstanding which has set the stage for the greatest catastrophe in history to occur.
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The misunderstanding of money and credit began, like many experiments, in Northern Europe with the establishment of the Bank of Amsterdam. Established in 1609, the Bank of Amsterdam is widely recognized as at least a precursor to modern central banks. For over 400 years since it was established, the use of banknotes issued by a Central Bank which are not directly convertible to coin has slowly but steadily increased.
Modern Central banks issuing banknotes were subsequently formed in Europe, England, and Japan. As these Central banks and their successors began to slowly absorb the true money supply and issue banknotes in their place, man began to slowly transfer the concept of money proper from Gold and Silver and attribute the qualities of money to the banknotes issued by the Central Bank.
This process of wealth absorption greatly accelerated in 1913 when the United States of America granted a 100 year charter to its third Central Bank, the Federal Reserve. The FED, as it is commonly known, was to act primarily as a reserve and to create “money” (read banknotes) as necessary. At the advent of World War I, the FED stepped in and issued bonds to finance the war and after the war the FED was granted exclusive control of the money supply in the United States.
In 1933, in the midst of what was to be the great depression in the US, President Franklin D. Roosevelt signed Executive Order 6102 which required citizens to deliver all but a small amount of gold coin and bullion held by them to the FED in exchange for $20.67 worth of Federal Reserve notes (the banknotes issued by the FED) per ounce.
Naturally, most citizens with large quantities of gold at the time had it transferred to Switzerland.
Then, by decree, the Government raised the price of redeeming gold from the FED to $35 per ounce. Redemption could only be made by Foreign parties as, naturally, it was now illegal for US Citizens to own gold.
Federal Reserve notes were now the only form of “money” that an entire generation of Americans were likely to handle. However, foreigners could still redeem the Federal Reserve notes for gold, though they rarely did, at $35 per ounce.
After World War II, the US emerged as the most powerful nation on earth. It was only natural that the western governments would peg their currencies at a fixed exchange rate to the US dollar (Federal Reserve Note) which was redeemable in gold at $35 per ounce. This is commonly known as the Bretton Woods system.
The system held together for around 20 years, accepting that $35 US Dollars were as good as gold until 1968, when things began to get dangerous…
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for October 20, 2011
Corn Price per Bushel: $6.50
10 Yr US Treasury Bond: 2.18%
FED Target Rate: 0.07% ON AUTOPILOT, THE FED IS DEAD!
10 Yr US Treasury Bond: 2.18%
FED Target Rate: 0.07% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,622 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 11,542
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 11,542
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!!!!!!!
M2 Monetary Base: $9,570,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!
Dual Entry Accounting – Man’s Greatest Innovation, Modern Central Banking – Man’s Greatest Catastrophe – Part III – Money or Credit?
10/19/2011 Portland, Oregon – Pop in your mints…
For those of you who have missed Part I and/or Part II, you may read them by clicking on the following links:
For those of you who are too lazy to click the links, we do not blame you. Below we offer a brief summary to get you up to speed:
Central Banking is the physical expression of Man’s need to safeguard his wealth and to increase trade. A Central Bank’s usefulness and scope were greatly increased when dual entry accounting could be employed to manage a Central Bank’s accounts.
The Central Bank’s role as a storehouse of wealth has generally attracted the attention of the Government, which is the physical expression of Man’s need to protect his life. The Government, in this capacity, does not generate wealth and must maintain itself either by taxing its subjects or borrowing funds.
The Central Bank, as the repository of wealth and facilitator of trade, by default creates a majority of the banknotes which circulate in a society. As such, the Central Bank becomes the natural creditor of the Government. Whether it lends funds directly to the Government or indirectly, the result is the same. That result is that the use of its subject’s wealth by the Government is greatly facilitated by the existence of a Central Bank.
Having established the fact that some form of both a Government and a Central Bank will come into existence and become increasingly interdependent, the only question is one of the size and scope of such entities.
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.
How, when, and most importantly why will this catastrophe take place? As mere mortals, we can only answer the why and speculate as to the how and when.
Why, then, will the current system of Central Banking come to an end which will cause wealth destruction on a scale which will make the weapons of war seem like child’s play in comparison?
The answer, fellow taxpayer, is that money as it is widely understood today does not really exist.
You read correctly. What a majority of the developed and semi-developed world uses as a store of wealth, unit of account, and medium of exchange, is a figment of the collective imagination.
Allow us to explain. It is generally understood today that the value of money is not necessarily in money proper, rather the value of money is found in the ability of the bearer to exchange said money for goods and services. What is often overlooked in this observation is that, for money to be exchanged for something of value between willing participants of a transaction, what is used as money in the transaction must be universally perceived to have value that is easily transferable between parties.
Following this logic, what society uses as money is, by definition, simply another good which is widely recognizable as useful in exchange and therefore carries a price premium (we will call it the monetary premium) of a certain amount usually far above what some economists would incorrectly* call the good’s “intrinsic” value.
* We say incorrectly because value judgments, while often influenced by what are known as “market” or “intrinsic” values, are by definition made by the individuals who willingly enter into a transaction, not disinterested observers. It is for this reason that it is more accurate to appraise value by observing price points of transactions on “the margin” (i.e. transactions that are actually taking place) as opposed to appraising value based on past transactions or transactions imagined to take place in the future. Many are the hypothetical gains and losses of those who refuse to enter into transactions because they are waiting for and offer at “market prices” or the “intrinsic value” of an item.
Regardless of the monetary premium that a good may carry, whatever is used as money, by definition, must be a tangible good. Otherwise, we are dealing with credit, which is a promise to pay in money at a future date. Credit may be given in exchange in the place of money and is often traded at a discount to money delivered immediately.
The distinction between money and credit is common knowledge to but it is important to make a clear distinction in order to properly understand what happens next.
In roughly 9.000 years of human history, it has been tacitly agreed upon that silver and gold, usually in coin or bar form, are the highest and most widely recognized goods used as money and that the accumulation of silver and gold represent wealth.
As you recall, the concept of a Central Banking arose in response to the need for man to protect his wealth. You will further recall that in order to both protect wealth and facilitate trade, a Central Bank creates banknotes which represent a claim on the wealth being protected by the Central Bank.
These banknotes which the Central Bank creates are, by definition, credit and not money. They are generally the highest, least discounted, form of credit which is traded, but this does not change the fact that the banknotes are credit and thus carry an implied risk of default. This risk of default places the ultimate limit on the circulation and acceptance of the banknotes in trade.
From time to time, when a Central Bank’s ability to protect the wealth entrusted to it came into question, banknotes would be presented to the Central Bank to be redeemed for the amount of silver and gold which they represented. If the Central Bank could not produce the amount of silver and gold that was being redeemed, the Central Bank was considered to be in default and, as word of the default spread, the banknotes in circulation would trade at an ever increasing discount to real goods.
This logic further supports the fact that banknotes are credit, subject to default risk, and not money proper.
Can you now smell the impending catastrophe? Or, to put the question more directly:
What’s in your wallet? More tomorrow,
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for October 19, 2011
Copper Price per Lb: $3.25
Oil Price per Barrel: $86.11
Corn Price per Bushel: $6.38
10 Yr US Treasury Bond: 2.16%
FED Target Rate: 0.07% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,671 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 11,505
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!!!!!!!
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!
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!!!!!!!
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.
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!
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!!!!!!!
Gold still crushing Equities
Fear is overwhelming optimism. Gold is crushing equities which only look good relative to a collapsing dollar. Check out the chart courtesy of The Money Game…
We’d like our gold now, Chavez Calling JP Morgan’s bluff? Bank Stocks Tanking, as Palestine flares up on cue
8/18/2011 Portland, Oregon – Pop in your mints…
It is 66 degrees on a mid-August afternoon in Portland. As a banker friend of ours put it, “we hope you are enjoying the mild winter.” The truth is, were it not August, we would be quite enjoying the weather. Unfortunately people have certain expectations about the weather, hence the widespread belief that man can control and reverse trends like global warming or cooling. August in the Northern Hemisphere should be hot.
But its not.
If people are upset at the weather, then they must be seething at what is occurring in the financial markets. The relative calm in the financial markets has vanished like free beer at a NASCAR event. A 400+ drop in the Dow today and an even more significant drop in the price of oil and financial stocks, coupled with a rise in gold, silver, and Treasury Bills? (yes, you read it right) on the surface are evidence of a classic “flight to safety.”
But what is going on? Why such a massive flight to safety on what would otherwise be a calm August day, so fit for reflection and the pondering of life as one knows it? We don’t know exactly why all of this occurred today but suffice it to say, none of it should come as a surprise.
For instance, it should come as no surprise that banks are completely broke and at this point, worse than worthless, as they are destroying real wealth. The modern bank is built on the assumption that the currency regime and the demand for debt denominated in that currency will increase infinitely. Demand for debt in US Dollars began to wane about four years ago and as far as we can tell is not coming back anytime soon, at least not in the quantities (nor at the margins) necessary for the modern megabanks to exist on their current scale.
Hence, the banks are toast. Short them if you can after the next round of short covering passes.
The FED unwittingly made matters worse for the banks a couple of weeks ago when they announced that short rates would be near 0% for at least two years. The FED has given up, and they have done it in the worst possible way. Rather than standing ready to bail water out of the waterlogged currency ship, they have turned the spigot on full blast and walked away.
The FED will probably not be around in two years.
In yet another twisted irony that is a by-product of the current insane “debt is money” currency system, these low short rates, which in theory should be a boon to banks, will drown the banks with large deposits that they cannot lend except at razor thin margins to sub-prime borrowers such as the US Government.
Yes, society’s aversion to debt has fundamentally changed the banking business from one which primarily benefits from usury to one that must redefine itself as a trusted custodian of assets. This change seems to be happening overnight, and the banks are completely unprepared.
Case in point, it appears that Hugo Chavez, Venezuela’s democratically elected dictator has been moved to repatriate his country’s roughly 211 tons of gold held by foreign banks. He has already issued a demand to the Bank of England and rumor has it He will soon issue a demand to JP Morgan, which reportedly holds 10.6 tons of Venezuela’s gold.
The problem is, JP Morgan only has 10.6 tons of gold in custody on liabilities of roughly 100 times that amount. This would not be a huge problem except for the fact that thanks to the internet the entire world now knows this. Leave it to Chavez to strike at the heart of US imperialism. Things should begin to get interesting.
JP Morgan’s short position in physical Silver is even more frightening. If JP Morgan’s skills as a custodian is any indication, it appears that the modern banks are unable to provide this service. Protect your assets accordingly.
And speaking of frightening, almost as if on cue, violence in Palestine began to escalate again after attacks on Israeli civilians, the deadliest in two years, led Israel to retaliate by launching an airstrike against Gaza earlier today.
Our instinct tells us that a major event is unfolding in Palestine ahead of the UN’s statehood vote and it just may coincide with the collapse of the Western Currencies.
Coincidence? Most certainly. And a very sad coincidence indeed.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 18, 2011
Copper Price per Lb: $3.95
Oil Price per Barrel: $81.83
Corn Price per Bushel: $6.99
10 Yr US Treasury Bond: 2.08%
FED Target Rate: 0.09% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,825 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: 10,991 TO THE MOON!!!
M1 Monetary Base: $2,033,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,478,200,000,000 YIKES!!!!!!!
Watch “Silver Shortage This Decade, Silver Will Be Worth More Than Gold” on YouTube
The compelling case for silver, beyond words:
New Bans on Short selling in Europe, Margin Requirements for Gold, Money’s role in Climate Change
8/11/2011 Portland, Oregon – Pop in your mints…
Fresh injections of electronically printed cash from the US and Euro FEDs appear to have tranquilized a market in free fall. That, along with a ban on short selling in Europe seems to be sufficient to continue the illusion that the financial system is operating normally.
Elsewhere, we see that margin requirement for Gold contracts were increased by the Chicago Mercantile Exchange in an attempt to arrest Gold’s parabolic rise over the past several days. This must have been what Obama and Bernanke talked about last night at the White House. They probably made a few revisions to the jobs numbers that were printed today while they were at it.
The ban of short selling in Europe is eerily similar to the ban placed on short selling large bank stocks in the US not so long ago. The increase in the Gold margin requirement is eerily similar to the increase in Silver margin requirements by the CME last spring.
What is going on? Nothing good, fellow taxpayers. A tip, if you see the Government actively trying to stop something, it is good idea to be on the other side of the government’s trade. In this case, sell European bank shares and buy gold. Think of it as an indirect governmental subsidy to little old you.
The markets are desperately trying to correct nearly 40 years of errors that have been created since the US Dollar was officially de-pegged from gold. The FED’s, who see currency that can be created on a whim without the inconvenience of having to either mine it from the earth or earn it in honest, fair trade as extremely convenient , are desperately trying to fight the correction.
If the numbers just look normal, they think, people will continue to pacifically labor under the illusion that the Government has everything under control.
Nothing could be farther from the truth.
It occurred to us that we may need to clarify what the money problem is and why it, and not fossil fuels, are the cause of economic imbalance and may lead to what is popularly referred to as climate change.
Many deride the use of gold and silver as money because it must be mined from the ground, refined, minted, carried around, kept secure, etc. It is inconvenient. They see money created out of thin air as a simple net gain to society.
Presto, you have, with a stroke of the pen, saved the miners from years of hard labor underground. You have saved who knows how many trees, fossil fuels, and other elements required for the refining process. And you have saved Jack and Jill consumer and shopkeeper from the inconvenience of carting around loads of heavy coins.
So what is the matter with instant money? The problem, if you have not identified it, is precisely in the fact that it is easy to create. When you remove the effort required to create money for trade, you free that effort to be spent in a lot of other ways. That is great, except for the fact that no one considers that instant money would give people the time to scorch the earth in a thousand other ways which are much more harmful than mining.
By making money “free”, you throw the economy completely out of balance and perpetuate bad decisions for a much longer time than if the wrong speculations were limited by the need to back them with real money, acquired by difficult toil both under and above the earth.
The problem with “free” money is that it has no value, and it serves to devalue the production and lives of all who are forced to circulate it. The longer it circulates, the more damage it does.
Worst of all, it concentrates power in the hands of those who create it out of thin air and enjoy it first.
The world has gone 40 years down this insane path. How much more can it take?
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for August 11, 2011
Copper Price per Lb: $4.03
Oil Price per Barrel: $85.42
Corn Price per Bushel: $7.02
10 Yr US Treasury Bond: 2.34%
FED Target Rate: 0.10% TIGHTENING? NOT!
Gold Price Per Ounce: $1,768 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,143 TO THE MOON!!!
M1 Monetary Base: $2,140,300,000,000 RED ALERT!!!
M2 Monetary Base: $9,404,000,000,000 YIKES!!!!!!!
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