Tag Archives: Iran

Middle East Conflict Analysis: Will Hillary Clinton’s visit to Middle East will result in US engagement?

11/20/2012 Portland, Oregon – Pop in your mints…

Here at The Mint, we have been following with great interest the recent escalation in the conflict in the Middle East.  It is understood by many that the grievances between the Israelis and the Palestinians are seemingly irreconcilable.  Today, we will attempt to provide a bit of background, along with details we have gathered from various sources regarding the current dynamic, and engage in speculation as to potential outcomes.

Background

While the divisions in the region have deep historical roots, we have attempted to gain what understanding we can of the modern conflict.  Our reading on the matter has been limited to The Bible, The Haj, and The Source, as such, we recognize that our bias is Pro-Israeli.

From these sources, we have cobbled together the following understanding:  Beginning in the early 1900’s as Jewish settlers began to populate Palestine in an attempt to create a homeland where the Jewish people, who had suffered persecution in every other land on the planet, could relocate to escape said persecution.

The logical place to do this, from the Jewish point of view, was to purchase land in the area where the ancient Kingdom of Israel had been.  The Jews then worked to establish settlements and to encourage Jewish pilgrims and refugees to come home.  In 1947, after the ethnic cleansing that the Jews suffered during World War II, the Jewish settlers appealed to the United Nations for statehood and recognition by the International Community.

On November 29, 1947, with the UN divided on the matter (which required a 2/3 majority vote for passage), the Philippines relented to pressure from the United States and cast the deciding vote in favor, and Israel for all practical purposes was recognized by the UN.

{Editor’s Note:  We present the UN vote as an EPIC FAIL of large scale “democracy by proxy,” and again make the case for small scale democratic systems left to operate in a large scale anarchic environment, which would allow peace to prosper as the small scale systems tacitly work towards the stalemates presented in “The Strategy of Conflict“, which is a discussion for another day.}

On May 15, 1948, when the British Mandate in Palestine officially expired, the predominantly Arab countries surrounding Israel attacked her and were repelled.  It could be said that hostilities in the region have continued on and off ever since.  Naturally, the Arab States refuse to recognize Israel’s existence to this day, and the situation in Palestine may be the most marked example of how the simple drawing of border lines has caused ceaseless bloodshed and heartache for those involved, with the ultimate losers being the inhabitants of what is today understood to be Palestine, those lands in Palestine which are not part of the Jewish state.  These refugees were evacuated from their lands by the Arab states with the promise of inhabiting all of Palestine once the Jewish state was eliminated, and are now held hostage, in a sense, by both the Arab states and Israel.

We now fast forward from what undoubtedly is a biased History lesson to the present situation and, again more importantly, what is likely to occur.

The Present Dynamic

In the most recent escalation in hostilities, which began on November 15, 2012, both Hamas and Israel have continued their mutual assaults despite rumors that a cease fire is being negotiated by Egypt.  To summarize recent events, a number of short and medium range rockets, amongst them the Fajr-5, which has now been used to target both Tel Aviv and Jerusalem, have been launched from the Gaza strip at Israeli population centers.

In response, Israel has called up reserves and is preparing a force of roughly 100,000 for a ground assault into Gaza, with the goal of neutralizing the longer range threat that the Fajr-5 presents.

Even casual observers will note that 100,000 troops is quite a bit of manpower, in fact, it exceeds the number of troops that the US currently has deployed in Afghanistan.  Why would Israel, which should hold a clear technical advantage over its adversaries (leading many observers to sympathize with the Palestinians, a phenomenon known as “Underdogma” made famous by Michael Prell), call up so much firepower to deal with Gaza?  One response is the prospect of prolonged urban warfare in Gaza City, where a portion of the Hamas rocket cache may be located.

Speculation on possible outcomes

However, given the timing of the Israeli response, just weeks after the US Presidential elections, it is just as likely that Israel is using the current conflict as a launch pad towards a unilateral operation to destroy Iran’s nuclear program and eliminate what Israel sees as its most urgent existential threat.

Benjamin Netanyahu, the Israeli Prime Minister, more than alluded to this in his September speech at the United Nations as he all but called for an invasion of Iran.  With the re election of the Obama administration in the US, historically Israel’s closest ally, Netanyahu understands that the US is likely to stay on the sidelines in the near future and is taking the Iranian matter into his own hands.

Nadeem Walayat, the clairvoyant analyst at The Market Oracle, speculates that the ground campaign in Gaza is the first phase of a three phase operation.  In order to attack Iran with minimal civilian casualties, Israel must first remove the threat of short and medium range rocket attacks by Iranian proxies on its population centers as such attacks would immediately begin were Israel to immediately attack Iran.

According to Walayat, Israel would attack Gaza and then Hezbollah in Lebanon, hoping to seal up these theaters of conflict before launching what by any account would be a risky assault on Iran.  Either Iran is desperately close to developing a nuclear weapon, or Netanyahu is desperately seeking reelection.  Whatever the motive, it should be clear that Israel is intent on dismantling Iran’s nuclear capabilities and that they view the present circumstances in the region give them the best opportunity for success, meaning neutralizing Iran’s nuclear program with limited fallout in the region or beyond.

Another part of the regional dynamic which is may greatly aid or hurt the Israeli strategy, depending upon how it plays out, is the conflict in Syria.  The protracted conflict in Syria has caused Hezbollah to conserve rockets and other armaments which they would otherwise train on Israel in anticipation of a possible civil war breaking out in Lebanon.  The recent international recognition of the Syrian opposition has only increased this threat.

At this point, Hezbollah could just as easily be drawn into deeply into a conflict in Lebanon as it could be in Israel.  The current state of events in Syria favors the Israeli plan, if indeed Mr. Walayat is correct.  However, should Israel be drawn into a protracted operation in Gaza, Hezbollah could choose to strike the Israelis first and open up a second front, which would begin to stretch Israel’s armed forces and slow their strategy which, in order to be successful, must be carried out in a matter of months.

Another wildcard in a situation that is full of them is that the recent spillover from Syria into Turkey has the potential to draw German troops and NATO assets into the theater.

Against this backdrop, Washington DC is panicking (as a result of having no strategy in the Middle East) and has dispatched Secretary of State Hillary Clinton to bring the big brother (or sister, as it were) element into the mix.

Clinton, along with Egyptian officials, will attempt to broker a ceasefire between Israel, Hamas, and the Palestinian Islamic Jihad, which, according to Stratfor, is in control of at least some of the Fajr-5 rocket cache in Gaza.

The most recent report from Stratfor on the matter indicates that the Palestinian Islamic Jihad and Hamas will negotiate together.  The key demand of Israel is the grounding and confiscation of rockets in Gaza to neutralize the threat.  If this can be achieved via a Cease fire, which would likely mean Israeli or even US involvement overseeing the removal of the weapons and preventing further rockets from entering Gaza, Israel will have achieved its objective and a ground assault into Gaza would be unnecessary.

If this is the outcome, expect Israel to concentrate both diplomatic and military efforts on the Iranian threat and ignore Hezbollah, as they will perceive that the US has their back, both literally and figuratively.

If, on the other hand, the Egyptians insist on assuming the role of policing the rocket removal and preventing shipments, a condition that Israel is unlikely to agree to, we anticipate that Israel will proceed with their ground assault into Gaza.

Here at The Mint, half the world away, we hope for the best.  Perhaps the militants in Gaza will throw their rockets into the sea, and both Iran and Israel dismantle their respective nuclear programs.  Seeing this example, all of humanity will immediately lay down their weapons, dismantle their nukes, and sing kumbaya.  Anything is possible if those involved engage in IMMEDIATE FORGIVENESS and begin to live by the Golden Rule.

As this seems unlikely, we must all prepare for the worst, a middle east conflict launched in the name of self defense, which draws all of the world’s powers once again into armed conflict.

In the words of Jesse Ventura, “Nobody likes to see that…nobody.”

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for November 20, 2012

Copper Price per Lb: $3.49
Oil Price per Barrel:  $87.11
Corn Price per Bushel:  $7.43
10 Yr US Treasury Bond:  1.66%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,728 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.9%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  12,789
M1 Monetary Base:  $2,458,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,333,800,000,000

QQE – Quantum Physics meets Central Banking

10/4/2012 Portland, Oregon – Pop in your mints…

There is much confusion amongst economists regarding the effects of the various programs which are currently being run by the largest of the Western Central Banking cartels known as Quantitative easing, better known by its keystroke saving acronym, QE.

For the uninitiated, QE involves the Central Bank issuing currency in exchange for government debt and all other manner of otherwise worthless financial assets provided to it by the banking class.  In the best of cases, it provides liquidity for what would be a temporary hiccup in an otherwise healthy economy.  In the worst of cases, which most who have taken a sober look at the financial industry would agree we are in, it serves as a backstop for financial asset prices, placing an artificial floor under the price of what passes as collateral in the financial system.

In any case, the Central Bank agrees to swap the wine of its currency for the sewage on bank balance sheets.  As anyone who has put this theory to the test will tell you, if you add a teaspoon of wine to barrel full of sewage, you get sewage, while if you add a teaspoon of sewage to a barrel full of wine, you get…sewage.

Wine barrels
QE – Sewage in disguise

Following this analogy, the existence of QE means that the currency of all of the Western world is now sewage.

While the pure, hard money Austrian school analyst sees it as a prelude to a hyperinflationary event, the Keynesian sees it as a necessary evil.  At this point, there is no real argument that QE, by definition, is inflationary.  However, the perverted feedback loop between the Central banks’ issuance of currency, the Governments’ issuance of debt, and the banking sector serving as an increasingly weak middleman, has managed to keep a large portion of the freshly created currency parked in either the Treasury or at the Central Bank in the form of excess bank reserves.

As the logic of the Central Bank goes, once the storm blows over, the stars will align and all of the sewage will turn back into wine.  The currency created as a part of QE will simply disappear, as it never really left the FED anyway.

Simple logic, right?  You can almost cut the naivety with a knife.  The fact is that the freshly minted currency is here to stay.  As long as the Governments, Central banks, and banking cartel exist in their present form, none of them can afford for even a cent of the sewage they have created to disappear.  It is there for the long haul.  All the average man or woman can hope for is that the sewage doesn’t spill off of their balance sheets or work its way to the water supply of the real economy.

All of this is old hat to fiat currency hounds and bond vigilantes.  The dangerous new twist which is just now in its infancy is the application of quantum theory to the mix.

Here, we must turn to the razor sharp intellect of Mr. Walayat, whose analysis over at The Market Oracle is on the cutting edge and generally spot on.

Walayat, along with Lee Adler of the Wall Street Examiner, are amongst the handful of analysts with a true understanding of the banking system and the motives and logical consequences of the actions of the Central banking cartel.

As the currency event in Iran unfolds, those of us in the “secure” West would do well to read up on what awaits as the Western Central banks throw their inflationary machines into overdrive, what Walayat refers to as “The Quantum of Quantitative Easing, or the keystroke saver: QQE.”

The operation of QQE is simple and predictable, yet unnecessarily mind-boggling.

As in a standard QE operation, it begins with the Government issuing debt which is purchased by members of the banking cartel in exchange for currency, which it then spends on any number of pet projects.  The Central Bank then buys the Government debt from the banks and receives the interest which is paid by the Government.  The Banks park the currency they have received from the Central Bank at the Central Bank and earn interest on it.

QQE ensues when the Central Bank then returns to the Government the difference between the interest paid by the Government on its own debt and the interest paid out to the Banks to keep them afloat.  As the Central Bank will never take a nominal loss on their debt holdings, and the Government will never default as long as QE remains in place, The Government is not borrowing at the implied interest rate that it auctions its debt at, rather, it is effectively borrowing at the rate that the banks earn on their reserves deposited at the Central bank, less the cost of the Central Bank’s operations!

Is your head spinning yet?  Stay with us, it gets better.  The longer that the policy of QE continues (and it will continue until the currencies of the world blow up, as the Iranian Rial is in the process of doing,) the Government is effectively swapping out its old debt, issued 30 years ago at anywhere between 11 and 14%, for new debt at an effective rate of 0.25%!  Those interest savings on the rollover are the rocket fuel of QQE.  They are what will allow the Governments to both ramp up spending and reduce the relative size of their balance sheet.

By the way, those “savings” come at the expense of every person and organization which holds the currency as a savings vehicle.

In order to gain a fuller understanding of just what is going on, read the articles linked in the above paragraphs at your leisure.  They will help to make sense of what is occurring as we begin to see the paradox of increased government spending and reduced or stable levels of national debt.

Oh yes, and double digit real inflation rates, despite the irrelevant claims of the BLS propaganda machine.  Plan accordingly, this is not a drill.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 4, 2012

Copper Price per Lb: $3.77
Oil Price per Barrel:  $91.45
Corn Price per Bushel:  $7.57
10 Yr US Treasury Bond:  1.67%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,790 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  8.1%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,575  
M1 Monetary Base:  $2,355,800,000,000
M2 Monetary Base:  $10,070,300,000,000

War and Bluff: Iran, Israel and the United States

As always, George Friedman, author of Strafor’s indispensable publication Geopolitical Weekly, provides clarity into what on the surface is a situation on the verge of erupting.  A situation that, if poorly handled, has the potential to unleash chaos throughout the world.

In a world where Might makes right, striking a delicate balance between one’s rhetoric and actions is the statesman’s most important task.  A task that would be rendered useless were we all to chose the better way.

Nonetheless, Friedman helps us to cut through the rhetoric to recognize both the motivations of and limitations on each of the actors in what has become a game of brinksmanship of epic proportions, and the stakes have never been higher.

We encourage you to review the full report which is reproduced below with the permission of Stratfor:

War and Bluff: Iran, Israel and the United States

Flag of IsraelFlag of the United States of America

Flag of IranBy George Friedman

For the past several months, the Israelis have been threatening to attack Iranian nuclear sites as the United States has pursued a complex policy of avoiding complete opposition to such strikes while making clear it doesn’t feel such strikes are necessary. At the same time, the United States has carried out maneuvers meant to demonstrate its ability to prevent the Iranian counter to an attack — namely blocking the Strait of Hormuz. While these maneuvers were under way, U.S. Secretary of State Hillary Clinton said no “redline” exists that once crossed by Iran would compel an attack on Iran’s nuclear facilities. The Israeli government has long contended that Tehran eventually will reach the point where it will be too costly for outsiders to stop the Iranian nuclear program.

The Israeli and American positions are intimately connected, but the precise nature of the connection is less clear. Israel publicly casts itself as eager to strike Iran but restrained by the United States, though unable to guarantee it will respect American wishes if Israel sees an existential threat emanating from Iran. The United States publicly decries Iran as a threat to Israel and to other countries in the region, particularly Saudi Arabia, but expresses reservations about military action out of fears that Iran would respond to a strike by destabilizing the region and because it does not believe the Iranian nuclear program is as advanced as the Israelis say it is.

The Israelis and the Americans publicly hold the same view of Iran. But their public views on how to proceed diverge. The Israelis have less tolerance for risk than the Americans, who have less tolerance for the global consequences of an attack. Their disagreement on the issue pivots around the status of the Iranian nuclear program. All of this lies on the surface; let us now examine the deeper structure of the issue.

Behind the Rhetoric

From the Iranian point of view, a nuclear program has been extremely valuable. Having one has brought Iran prestige in the Islamic world and has given it a level of useful global political credibility. As with North Korea, having a nuclear program has allowed Iran to sit as an equal with the five permanent members of the U.N. Security Council plus Germany, creating a psychological atmosphere in which Iran’s willingness merely to talk to the Americans, British, French, Russians, Chinese and Germans represented a concession. Though it has positioned the Iranians extremely well politically, the nuclear program also has triggered sanctions that have caused Iran substantial pain. But Iran has prepared for sanctions for years, building a range of corporate, banking and security mechanisms to evade their most devastating impact. Having countries like Russia and China unwilling to see Iran crushed has helped. Iran can survive sanctions.

Visit our Iran page for related analysis, videos, situation reports and maps.

While a nuclear program has given Iran political leverage, actually acquiring nuclear weapons would increase the risk of military action against Iran. A failed military action would benefit Iran, proving its power. By contrast, a successful attack that dramatically delayed or destroyed Iran’s nuclear capability would be a serious reversal. The Stuxnet episode, assuming it was an Israeli or U.S. attempt to undermine Iran’s program using cyberwarfare, is instructive in this regard. Although the United States hailed Stuxnet as a major success, it hardly stopped the Iranian program, if the Israelis are to be believed. In that sense, it was a failure.

Using nuclear weapons against Israel would be catastrophic to Iran. The principle of mutual assured destruction, which stabilized the U.S.-Soviet balance in the Cold War, would govern Iran’s use of nuclear weapons. If Iran struck Israel, the damage would be massive, forcing the Iranians to assume that the Israelis and their allies (specifically, the United States) would launch a massive counterattack on Iran, annihilating large parts of Iran’s population.

It is here that we get to the heart of the issue. While from a rational perspective the Iranians would be fools to launch such an attack, the Israeli position is that the Iranians are not rational actors and that their religious fanaticism makes any attempt to predict their actions pointless. Thus, the Iranians might well accept the annihilation of their country in order to destroy Israel in a sort of megasuicide bombing. The Israelis point to the Iranians’ rhetoric as evidence of their fanaticism. Yet, as we know, political rhetoric is not always politically predictive. In addition, rhetoric aside, Iran has pursued a cautious foreign policy, pursuing its ends with covert rather than overt means. It has rarely taken reckless action, engaging instead in reckless rhetoric.

If the Israelis believe the Iranians are not deterred by the prospect of mutually assured destruction, then allowing them to develop nuclear weapons would be irrational. If they do see the Iranians as rational actors, then shaping the psychological environment in which Iran acquires nuclear weapons is a critical element of mutually assured destruction. Herein lies the root of the great Israeli debate that pits the Netanyahu government, which appears to regard Iran as irrational, against significant segments of the Israeli military and intelligence communities, which regard Iran as rational.

Avoiding Attaining a Weapon

Assuming the Iranians are rational actors, their optimal strategy lies not in acquiring nuclear weapons and certainly not in using them, but instead in having a credible weapons development program that permits them to be seen as significant international actors. Developing weapons without ever producing them gives Iran international political significance, albeit at the cost of sanctions of debatable impact. At the same time, it does not force anyone to act against them, thereby permitting outsiders to avoid incurring the uncertainties and risks of such action.

Up to this point, the Iranians have not even fielded a device for testing, let alone a deliverable weapon. For all their activity, either their technical limitations or a political decision has kept them from actually crossing the obvious redlines and left Israel trying to define some developmental redline.

Iran’s approach has created a slowly unfolding crisis, reinforced by Israel’s slowly rolling response. For its part, all of Israel’s rhetoric — and periodic threats of imminent attack — has been going on for several years, but the Israelis have done little beyond some covert and cyberattacks to block the Iranian nuclear program. Just as the gap between Iranian rhetoric and action has been telling, so, too, has the gap between Israeli rhetoric and reality. Both want to appear more fearsome than either is actually willing to act.

The Iranian strategy has been to maintain ambiguity on the status of its program, while making it appear that the program is capable of sudden success — without ever achieving that success. The Israeli strategy has been to appear constantly on the verge of attack without ever attacking and to use the United States as its reason for withholding attacks, along with the studied ambiguity of the Iranian program. The United States, for its part, has been content playing the role of holding Israel back from an attack that Israel doesn’t seem to want to launch. The United States sees the crumbling of Iran’s position in Syria as a major Iranian reversal and is content to see this play out alongside sanctions.

Underlying Israel’s hesitancy about whether it will attack has been the question of whether it can pull off an attack. This is not a political question, but a military and technical one. Iran, after all, has been preparing for an attack on its nuclear facilities since their inception. Some scoff at Iranian preparations for attack. These are the same people who are most alarmed by supposed Iranian acumen in developing nuclear weapons. If a country can develop nuclear weapons, there is no reason it can’t develop hardened and dispersed sites and create enough ambiguity to deprive Israeli and U.S. intelligence of confidence in their ability to determine what is where. I am reminded of the raid on Son Tay during the Vietnam War. The United States mounted an effort to rescue U.S. prisoners of war in North Vietnam only to discover that its intelligence on where the POWs were located was completely wrong. Any politician deciding whether to attack Iran would have Son Tay and a hundred other intelligence failures chasing around their brains, especially since a failed attack on Iran would be far worse than no attack.

Dispersed sites reduce Israel’s ability to strike hard at a target and to acquire a battle damage assessment that would tell Israel three things: first, whether the target had been destroyed when it was buried under rock and concrete; second, whether the target contained what Israel thought it contained; and third, whether the strike had missed a backup site that replicated the one it destroyed. Assuming the Israelis figured out that another attack was needed, could their air force mount a second air campaign lasting days or weeks? They have a small air force and the distances involved are great.

Meanwhile, deploying special operations forces to so many targets so close to Tehran and so far from Iran’s borders would be risky, to say the least. Some sort of exotic attack, for example one using nuclear weapons to generate electromagnetic pulses to paralyze the region, is conceivable — but given the size of the Tel Aviv-Jerusalem-Haifa triangle, it is hard to imagine Israel wanting to set such a precedent. If the Israelis have managed to develop a new weapons technology unknown to anyone, all conventional analyses are off. But if the Israelis had an ultrasecret miracle weapon, postponing its use might compromise its secrecy. I suspect that if they had such a weapon, they would have used it by now.

The battlefield challenges posed by the Iranians are daunting, and a strike becomes even less appealing considering that the Iranians have not yet detonated a device and are far from a weapon. The Americans emphasize these points, but they are happy to use the Israeli threats to build pressure on the Iranians. The United States wants to undermine Iranian credibility in the region by making Iran seem vulnerable. The twin forces of Israeli rhetoric and sanctions help make Iran look embattled. The reversal in Syria enhances this sense. Naval maneuvers in the Strait of Hormuz add to the sense that the United States is prepared to neutralize Iranian counters to an Israeli airstrike, making the threat Israel poses and the weakness of Iran appear larger.

When we step back and view the picture as a whole, we see Iran using its nuclear program for political reasons but being meticulous not to make itself appear unambiguously close to success. We see the Israelis talking as if they were threatened but acting as if they were in no rush to address the supposed threat. And we see the Americans acting as if they are restraining Israel, paradoxically appearing to be Iran’s protector even though they are using the Israeli threat to increase Iranian insecurity. For their part, the Russians initially supported Iran in a bid to bog down the United States in another Middle East crisis. But given Iran’s reversal in Syria, the Russians are clearly reconsidering their Middle East strategy and even whether they actually have a strategy in the first place. Meanwhile, the Chinese want to continue buying Iranian oil unnoticed.

It is the U.S.-Israeli byplay that is most fascinating. On the surface, Israel is driving U.S. policy. On closer examination, the reverse is true. Israel has bluffed an attack for years and never acted. Perhaps now it will act, but the risks of failure are substantial. If Israel really wants to act, this is not obvious. Speeches by politicians do not constitute clear guidelines. If the Israelis want to get the United States to participate in the attack, rhetoric won’t work. Washington wants to proceed by increasing pressure to isolate Iran. Simply getting rid of a nuclear program not clearly intended to produce a device is not U.S. policy. Containing Iran without being drawn into a war is. To this end, Israeli rhetoric is useful.

Rather than seeing Netanyahu as trying to force the United States into an attack, it is more useful to see Netanyahu’s rhetoric as valuable to U.S. strategy. Israel and the United States remain geopolitically aligned. Israel’s bellicosity is not meant to signal an imminent attack, but to support the U.S. agenda of isolating and maintaining pressure on Iran. That would indicate more speeches from Netanyahu and greater fear of war. But speeches and emotions aside, intensifying psychological pressure on Iran is more likely than war.

War and Bluff: Iran, Israel and the United States is republished with permission of Stratfor.

Watch “Prime Minister of Israel Binyamin Netanyahu at AIPAC 2012” on YouTube

A decent speech from Mr. Netanyahu at the AIPAC 2012, and unfortunately there is much prophecy that would be fulfilled were Israel to strike Iran, or vice versa.  It is a difficult situation, and Mr. Netanyahu may be admired for not skirting around the issue, as the Western nations have done until now, for it is gravely serious.

Yet for all of his wonderful discourse, the most moving of which starts at minute 22:30 of the below video, Mr Netanyahu, like most of us, misses the point. 

Jesus came so that the world would be forgiven, and to overcome death and live abundantly.  Resorting to the “Might Makes Right,” “Strike them before they strike us mentality,” to which Mr. Netanyahu appeals in this address, is what leads all nations to espouse war and violence as a response to their fragile surroundings.  Followed to its logical end, mankind would exterminate itself in a very short period of time. 

While a preemptive strike against a country which is going to annihate your nation may seem like the best response, or the least amongst evils, what is even more necessary is a need for understanding and ultimately the abandonment of the nation state, especially the religious nation state, so that people can deal with each other without the unnecessary prejudices which the mask of the nation state paints on its adversaries. 

With that in mind, enjoy the speech and, as you ponder its obvious consequences, pray for the peace of Jerusalem, Tehran, and your own city.

Bernanke fires up the Helicopters and Precious Metals Blast off!

7/13/2011 Portland, Oregon – Pop in your mints…

Today Bernanke went before the US Congress and gently laid down the gauntlet.  If Congress fails to raise the debt ceiling soon (by August 2nd, we are told), it could have catastrophic effects on the economy

Given that nearly the entire banking system on the planet depends upon the US Treasury being Grade A debt, Mr. Bernanke may again be credited with the understatement of the year!

We pity Mr. Bernanke.  He is like a pilot flying an Airbus aircraft that is stalling at extremely high altitute.  We don’t know much about aircraft but we understand that Airbus aircraft, with their European design slant, do not give a pilot much freedom to override the plane’s automated systems.  It assumes that all of the necessary corrective actions can be pre-programmed and, if the plane begins to stall, the computers take over to attempt to correct the problem.

Actual Airbus pilots are free to dispute the merits of our oversimplification.  We just needed a metaphor.

Back to Bernanke, with the autopilot mechanism failing, the pilot does not know what to do.  If the US Congress had dutifully raised the debt ceiling as it had 94 times in the past, as the Airbus autopilot manual said it would, Bernanke’s reaction to the most recent US jobs report would have been to simply propose a third round of quantitative easing (read: money printing or counterfeiting of currency).

On the Airbus, he would get on the intercom and say “please fasten your seatbelts until we pass through this patch of rough air.”

However, the failure of the US Congress to reach a deal to raise the debt ceiling has thrown a wrench in his plans.  What is his plan now?  Think helicopters, Zimbabwe, Gideon Gono.

Mr. Bernanke is going on a safari!

Yes, fellow taxpayer, with each day that passes, it is becoming clearer to the majority that Mr. Bernanke is unwittingly following in the footsteps of none other than Gideon Gono.  Some may recall that Mr. Gono, the Governor of the Reserve Bank of Zimbabwe, was forced to “do extraordinary things that aren’t in the textbooks,” meaning that he oversaw the printing of large amounts of his country’s currency which produced an amazing modern example of hyperinflation.  

In an interview with Newsweek in early 2009, Gono offered an explanation for his actions and predicted that the US would do the same, as it has:

“I’ve been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren’t in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”

The hyperinflation in Zimbabwe led to shortages of real goods and destroyed the economy.  Why would Mr. Bernanke’s experiment end any differently?

Meanwhile, over in the Eurozone, the Airbus is in rapid descent and everybody on the plane is offering ideas as to what went wrong and how to fix it.  Its auto-pilot has not been programmed to deal with the failures the plane is experiencing and as the pilots and passengers engage in a heated debate, none are able to grab the controls much less safely land the aircraft.

 it will not be long before impact and the smarter passengers are starting to grab for the parachutes made of Gold and Silver.  Gold closed up almost 1% to a record of $1,583 and Silver gained nearly 6% on the day.

Back in the US, whether or not Congress passes legislation to raise the debt ceiling is irrelevant.  The US Treasury will borrow and the FED will print even without Congressional approval.  That is what makes modern Government fun, if you don’t like a rule, just ignore it and claim that you were exercising “Leadership.”

All of the countries in the Eurozone will soon surrender their sovereignty to Germany and the IMF in exchange for the “privilege” of using Euro as currency.  The ideological divide that is being exposed in the US may eventually lead to civil war.

But these events may be small compared to what is occurring in the Middle East.  Iran opened its own international Crude Oil exchange today which is akin to declaring war on the western governments and banking interests.

And keep your eyes on Palestine.  The UN vote on Palestinian statehood in September is eerily similar to the vote 62 years ago when the UN accepted Israel as an independent state.  Our guess is that this vote will spark events there that will capture the attention of the whole world.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S. 

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Key Indicators for July 13, 2011

Copper Price per Lb: $4.35
Oil Price per Barrel:  $97.83

Corn Price per Bushel:  $7.26  
10 Yr US Treasury Bond:  2.89%
FED Target Rate:  0.07%  JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,582 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,492  TO THE MOON!!!
M1 Monetary Base:  $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,112,300,000,000 YIKES!!!!!!!

*See the MINT Perceived target Rate Chart.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.

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

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

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

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

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

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

Why leave these investment decisions up to the Government?

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

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

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

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

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

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

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

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

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

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

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

How long will you hang on?

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for July 11, 2011

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

Corn Price per Bushel:  $6.81
10 Yr US Treasury Bond:  2.92%

FED Target Rate:  0.07% JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,554 PERMANENT UNCERTAINTY

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

*See the MINT Perceived target Rate Chart.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.

Gaddafi a victim of the currency regime? Will Iran or China be next?