Tag Archives: Inflation Mega-Trend

Economics, The Mint

The Inflation Mega Trend/Commodity Super Cycle is alive and well

10/19/2012 Portland, Oregon – Pop in your mints…

At the bottom of every Mint, we include a handy set of data which we consider so important that we have named the compilation ‘Key Indicators.”  Taken apart, they are just numbers.  They are neither good not bad, they are simply data points.

Taken together, they tell a story.  The story of The Mint’s Key Indicators is one of what Nadeem Walayat, over at the Market Oracle, refers to as the “Inflation Mega-Trend.”  The phenomenon, in other corners, has been referred to as the “Commodity Super Cycle,” and other superlatives.

The driving factor behind the narrative is that the monetary authorities across the globe are in the process of causing inflation, via direct electronic money printing and intervening in debt markets to create the illusion of low borrowing rates, on a scale once thought impossible.

What makes their inflationary actions all the more sinister is that they are continually trumpeted in the media as necessary due to fears of deflation.

The Inflation Mega Trend, if it indeed is intact, has serious implications for investment strategies.  First and foremost, fixed income is dead.  Most governmental and institutional debt instruments are issued today at negative real interest rates, meaning that those purchasing them are agreeing, up front, to a loss in purchasing power of the funds.

The classic way to invest in this environment, has been to purchase precious metals, other hard commodities, real estate, and, as one analyst put it, “plastic silverware, toilet paper, really anything real.”  Equities have also been a good place to invest as long as the trend is intact, preferably those stocks which are components of the indices which are targeted to rise by the monetary authorities, such as the Dow Jones and S&P 500.

If one is following this investment strategy, the question that must be asked, day after day, year after year, is the following:

Is the Inflation Mega Trend still in place?

The Mint’s Key Indicators are presented to respond to this question.  The following is a table which compares each Key Indicator to its level on the same day during the past two years, along with a one word interpretation as to what the annual change in the indicator is telling us:

The Mint's Key Indicators on October 19
The Mint’s Key Indicators on October 19

What is striking about this graphic is that, of the three indicators which do not indicate that inflation is continuing, two are, at this point, directly controlled by the Federal Reserve’s actions, the 10yr US Treasury Yield and the FED Target Rate.

Folks, despite deflationary propaganda to the contrary, the Inflation Mega Trend is alive and well.  Don’t believe the hype and invest accordingly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 19, 2012

Copper Price per Lb: $3.71
Oil Price per Barrel:  $92.03
Corn Price per Bushel:  $7.60
10 Yr US Treasury Bond:  1.83%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,742 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.8%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,549
M1 Monetary Base:  $2,334,000,000,000
M2 Monetary Base:  $10,199,400,000,000

Economics, The Mint

The Dow Rises against a Wave of Bad News, The Inflation Mega-Trend Releases Caged Currency into the Wild

11/7/2011 Portland, Oregon – Pop in your mints…
The fairy tale of the world’s current financial system continued today.  Stocks crept higher in the face of what seems to be a deluge of bad news:

“Frustration mounts for MF Global clients” – Jon Corzine’s firm cannot account for $600 million in client funds.  Beyond the inability to deliver client funds on demand, MF Global clients began receiving margin calls as their collateral with the firm vanished.  The ripple effect was so severe that commodities exchanges relaxed their margin rules in order to to avoid wider damage.  The fall of MF Global was like an earthquake, now it is time to brace for the financial Tsunami.

“New Census data raise number of poor to 49 million” – The official poverty rate is 15.1%.  However, it hits 16% when you slide the income bar just a bit higher to $24,343 for a family of four.  In other words, one in six Americans is currently living below this slightly adjusted poverty measure.

“Italy bond yields soar; euro zone troubles deepen” – Lest we forget that the euro financial system is a complete disaster, Italian yields are climbing and the Italian bond market is beginning to resemble the leaning tower of Pisa.  Then came reports that Spain only had 20 billion Euros in reserves at the end of August (they must have spent their savings on vacation!) and as their banking system crumbles, they are largely helpless to intervene to save it.  Meanwhile France is now pushing austerity leaving Germany and the ECB as the only backstops in Europe.

Yet in spite of this disasterous news, the Dow is holding just above 12,000.  What does it mean?

Far from signaling economic recovery, the action appears to be further evidence that what Nadeem Walayat at the Market Oracle calls the Inflation Mega-Trend (and consequent Stealth Bull Market in stocks) is firmly in place.

The Mega-Trend, as Mr. Walayat calls it, is the simultaneous debasement of the currency and spreading of deflationary propaganda intended to delay the public’s reaction to the inflation caused by said debasement.

Think about it, while the FED, ECB, BoJ, and nearly every other Central Bank in the world pump money into their financial systems in order to “fight deflation” or “stimulate the export market,” the average person has watched gas, food, and the price of nearly everything else (besides their paycheck) steadily rise over the past decade.

The the public is told that these steady increases are “healthy inflation” which is currently “understood” to be roughly 2% a year.  This 2% in reality represents the indirect tax rate imposed on anyone who chooses to hold a currency as an asset or accept the currency as wages.  There is not time here to properly refute the fallacy that inflation is somehow necessary for GDP growth.  However, inflation is useful and absolutely necessary to keep an insane, “debt is money”, ponziesque, wealth destroying monetary system functioning.

As the Central Bank creates trillions of dollars out of thin air in a vain attempt to stabilize the global financial system, the public is told that it this new currency is “benign” because most of the money is being held on deposit at the Federal Reserve simply to buffer the banks against falling asset prices and keep the ATM machines spitting out cash.

Yet, with the stock market maintaining its optimism in the face of seeming insurmountable odds, can you be sure that the FED’s funny money is safely locked up in its electronic vaults, simply waiting to have foreclosed properties written off against it?

Will all of this freshly printed money really be content to simply die a quiet death, never having run through an ATM or point of sale transaction in the real world?

Oh, fellow taxpayer, we have our doubts.  You should too.  More tomorrow.

Stay tuned and Trust Jesus.

Stay Fresh!

Key Indicators for November 7, 2011

Gold Price Per Ounce:  $1,796 PERMANENT UNCERTAINTY

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!!!!!!!