Tag Archives: monetary policy

The currency war to end all currency wars

1/28/2013 Portland, Oregon – Pop in your mints…

With Japan’s recent aggressive devaluation of the Yen, the financial news has again taken up the phrase “currency war” to describe any lack of coordination in the steady devaluation of fiat currencies across the globe.

In a recent piece over at the Financial Times, Niall Ferguson identifies the Bank of England as the current winner in the stealth currency war that is currently being waged.  While the Bank of England may be the winner, the losers are not other nations, as the term war would suggest, but rather the savings of those who are unfortunate to count bank accounts or debt instruments denominated in national currencies among their assets.

Who, then, are the winners in what we have dubbed the currency war to end all currency wars?  In a simplified sense, those who hold the Dow Jones Industrial stock index (not the individual stocks, which are, in the final analysis, a crap shoot) and those who own gold.

In an attempt to illustrate this point while at the same time saving 1,000 words, should the old adage hold true, we have created the following graph, which plots a normalization (which brings the sheer magnitude of the numbers down to a workable scale) of the M1 and M2 monetary measures against both the Dow Jones Industrial Average and gold prices, all averaged on a monthly basis since April of 1968.

Graph of Normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures
Graph of normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures

Those with a keen eye will notice that the only data point that has been on a downward trend since the US Dollar was officially released from the shackles of the gold standard on August 15, 1971 has been the Federal Funds Rate, which in theory should have an inverse relationship with all of the other data points.

We will leave you with three observations from our graphic exercise:

1.  The most volatile of the two asset data sets has been that of the Dow Jones Industrial Average.  However, despite its volatility, its overall trend tends to follow that of the M2, or expanded, money supply measure.

2.  The more stable of the two asset data sets has been gold, which has generally lagged growth in the M1, or base money supply to which it was tied to pre 1971.  Beginning in the year 2000, gold again began to follow the M1 trend.

3.  The light blue line, which tracks the Federal Funds Rate, has been on a downtrend.  The upticks in the Federal Funds Rate, in theory, should have lead to downward ticks in the M1 and M2   As you can see from the graph, this is not the case.

The conclusion of this brief analysis is the following:  Holding Stock Indices such as the Dow Jones should give some measure of protection against inflation over the long term, perhaps even superior to gold.  However, since 2000, gold has held steady as an inflation hedge and generally will have less liquidity risk than stocks.

Finally, and perhaps most importantly, is that upwards changes in the Federal Funds rate, even those as dramatic as were experienced during the Volcker years, have little or no effect on the near term trajectory of the M1 and M2 monetary measures and have never caused these monetary measures to trend downwards, ever.  At most, these movements may serve to temporarily arrest the upwards slope of the growth of the M1 and M2 monetary measures.

What does it mean?  While the Federal Funds Rate may serve to weakly toggle the rise in the M1 and M2 measures, the Quantitative easing programs, which began in 2008 and are now a permanent piece of monetary policy, have had a much greater direct impact on both the monetary measures and the asset classes which have been included above.

Given the current state of affairs, the QE program must be watched closely as it will have an outsized immediate impact on asset prices.

In the long run, it is clear that the Federal Reserve has set monetary policy on autopilot and programmed a course straight through the stratosphere and into the far reaches of outer space.  There is no plan for the US Dollar to return to earth.  The M1 and M2 monetary measures will not come down, no matter what happens to QE and the Federal Funds Rate.

It is time to organize investments in the real world accordingly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 28 2013

Copper Price per Lb: $3.64
Oil Price per Barrel:  $96.52
Corn Price per Bushel:  $7.29
10 Yr US Treasury Bond:  1.97%
Gold Price Per Ounce:  $1,659 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.8%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  13,881
M1 Monetary Base:  $2,397,900,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,501,100,000,000

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%
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

G7 Meet to Stop Yen’s Dramatic Rise and the BLS Calls BS on its Broad CPI Measure – A Mint Classic

Over the past year, the Bank of Japan has tried numerous times to Kamikaze its currency and has failed miserably.  As of the writing of this classic Mint, the USDJPY exchange stood at about 80:1.  Check today to see how the Bank of Japan has fared.
As for the other theme, if anyone still believes in the BLS’ headline inflation number, they probably work at the Federal Reserve and watch I-Pad prices for signs of inflation!

3/18/2011 Portland, Oregon – Pop in your mints…
The G7 Central Bankers have called an emergency meeting to “do something” about the “skyrocketing Japanese Yen.”  This meeting is simply their latest attempt to combat reality.  The reality of the situation in Japan is that they are dealing with a catastrophe.  When one is dealing with a catastrophe, the next prudent step, after all of the immediate crises have been contained, is to take stock of the situation.  By taking stock, we mean that one takes note of what was lost and, more importantly, what one will need in order to restore things to an acceptable level of comfort.Comforts cost money.  In Japan, to replace these comforts the average person needs Yen.  They will either get this Yen by making a claim with their insurance company or selling assets to raise cash.  With damages of nearly $15 Trillion Yen (roughly 3% of Japan’s GDP) and counting you can imagine how the demand for Yen is, well, about to skyrocket.

The Japanese people are still dealing with the catastrophe.  Speculators in the currency markets are, as always, one step ahead of what must happen and are sapping liquidity, in terms of Yen, at a rapid pace.  This activity, taken at face value, will presumably wreak havoc for Japanese Government Bond prices, the prices of stocks traded on the Nikkei, and the US Dollar.
These three markets will crash if nature is allowed to take its course.  You see, in the tipsy turvy world of currencies, to buy a yen more often than not means that a US dollar, a JGB, or a stock listed on the Nikkei is sold on the other side of the trade.
The most sought after currency in the world, at least until the G7 meet tomorrow
The accelerated selling of dollars, as Jim Rogers points out, could cause the endgame scenario for the US currency to swiftly come upon the world.  Mr. Rogers goes so far as to call this a “Moment of Truth for the dollar.”
You can see the brief interview by clicking here.
Of course, as Mr. Rogers points out, it may be time to buy the dollar, if for some reason it is to survive as a top tier currency.  We have lived just long enough to know that anything is possible.
The G7 meeting today is VERY IMPORTANT.  It should not be, if only the world had not left the embrace of sound money 40 years ago, but unfortunately, it is.  For the G7 will essentially decide whether to keep the Dollar on life support or to pull the plug.
What will they do?
Meanwhile, the Bureau of Labor Statistics (BLS), the legion of bureaucrats who are charged with cranking out data in order to support FED policy, appears to be starting its own form of political protest against the loose dollar policies followed by the Federal Reserve.  After faithfully cranking out the core CPI, a key statistic here at The Mint, for years and watching it slowly become distorted into the puppet statistic that it now is, they came out with a data point in 2002 called the “Chained Consumer Price Index” which takes into account a rolling average of food and fuel costs, which the core CPI now blatantly ignores.
This index hit a record high in February, confirming what most average Americans already know:  It has never been more expensive to live in the Land of the Free.
Will we be Brave enough to return to sound money?  You, fellow taxpayer, can take a step in that direction with just a few simple keystrokes.  APMEX, our affiliate, is running a contest.  They are giving away one 1 oz gold eagle coin each month.  All you have to do to enter is register by clicking this link and filling in the blanks.  You can register to win once per month.  If you so desire, click here and Register at APMEX.com Today!
By definition, the black hole of debt will always grow at a more rapid pace than the worthless currency that is printed in an attempt to fill it.  If the black hole collapses (i.e. widespread default occurs), hyperinflation will occur quickly.  If currency becomes scarce, people will find another medium of exchange, likely gold and/or silver.
Either way, the world will be out of this mess before long, so hold on to your hats, it is bound to be a wild ride to the other side!
Stay Fresh!
P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
Key Indicators for Friday, March 18th, 2011

Revolution Fire Continues to Rage, What’s wrong with Anarchy?

For your weekend enjoyment we offer another classic Mint in its original form.  Enjoy and have a great weekend!

2/24/2011 Portland, Oregon – Pop in your mints…

Today we can hardly believe our eyes.  What appeared to be a simple revolution in a remote land, Tunisia, has begun a chain of events that may touch every person on the planet before it is through.  We will call it the “Fire” of revolution, at it seems to be catching everywhere.  The grievances of a generation are beginning to be aired in public forums from Tripoli to Madison, Wisconsin.  As you are aware, we are of the opinion that the spark for this fire began it what may appear to be a very far away place.  Washington, D.C.  
While many conspiracy theorists have their own, well, theories, we believe that this is collateral damage from the Federal Reserve’s misguided attempt to leave no debt unpaid by simply printing the money up to pay them.  It is simple enough to do in their ivory towers, but the consequences in the real world, in the form of trade and production imbalances, which are sometimes referred to as “Malinvestments,” are absolutely and totally destructive to balance in society.
The consequences of printing money are generally felt in two forms.
The most obvious form is what is being seen in Greece and now Wisconsin.  In these cases the government made promises to workers, retirees, and other constituents that they cannot honor.  The governments appear to be doing the honest thing and are effectively defaulting on these promises.  However, they are attempting to default at exactly the wrong moment, as the increased money supply begins to pinch workers in the developed world.  In both cases, many public workers are simply being asked to give up privileges such as the ability to take a long holiday at the beach.  In both cases, we are seeing sometimes violent evidence of just how hard it is for the government to default on its promises.
The less obvious and more damaging form of consequences are what we are seeing in Tunisia, Egypt, Yemen, Algeria, Bahrain and Libya.  In these cases, the governments are not technically defaulting on promises, rather, they are seen as the scapegoats for rapidly rising food costs which threaten to drive many to the point of starvation.  These rising food costs are the indirect result of the governments in the developed world attempting to give their public employees holidays at the beach.  Naturally, with the stakes higher in the developing world, a sense of desperation has set in and the pace of and violence involved in the uprisings is markedly higher.
Today we will go one step further at the risk letting the FED off the hook for sparking these revolutions with their insane monetary policy.  That step is to postulate that the cause of the flood of money and credit which has lead to higher food prices stems from people’s unwavering faith in their leaders and/or elected governments.  This unwavering faith, which stems from people’s need to feel secure, generates an inertia towards demands for a nanny state, in which the government is expected to take care of every legitimate and some illegitimate needs presented to them by the people. 
This arrangement appears to work very well as long as the government and/or leader appear to have the means to provide for these needs.  This arrangement is also the very reason that the government and/or leader will never have the means to provide for these needs indefinitely.  You see, this arrangement generally discourages productive activity and encourages unproductive activity (commonly known as freeloading and currently justified by vague appeals to any myriad of “rights”) which eventually leads to the shortages and imbalances that are at the root of the revolutionary fires that are currently raging.
Is Anarchy the Answer?
Central Banks like the FED are simply the enablers of this dangerous “Social Contract” that is being defaulted upon globally before our very eyes.  Their motivation for enabling is that the arrangement is extremely profitable for their member banks.  When stripped of its veil of legitimacy, the arrangement more resembles a drug cartel than a productive banking system.
So if the desire for government is truly the root of the problem, as we have speculated, then would not anarchy be the solution?  No!  You say!  Anarchy is chaos and destruction!  But is it really?  In the strict sense of the word, Anarchy simply means the absence of government.  In the absence of government, people would quickly understand that they would need to protect and provide for themselves.  This understanding would be quickly followed by the realization that in order to do this they will need to deepen their productive cooperation with their fellow man or woman.
When theft is no longer publicly sanctioned, suddenly the Golden Rule would become the law of the land, with its fruits of peace, freedom, and abundance following soon thereafter.
Until people realize that they need God more than they need a government, we will watch violent struggles to fill the vacuums of power currently being created.  Struggles that often give us such esteemed leaders such as Moammar Gadhafi in Libya, whose loyal tribesmen chose to ditch multimillion dollar aircraft in the desert rather than follow his orders to bomb the opposition, and Scott Walker in Wisconsin, who apparently has not mastered the use of caller ID or plain old fashioned voice recognition.
Stay Fresh!
P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
Key Indicators for Thursday, February 24th, 2011

If I Had a Trillion Dollars, A Ballad From Ben Bernanke to the Banks (With Apologies to the Bare Naked Ladies)

We send you into the first weekend of December with another Classic Mint.  This was written when Quantitative Easing was still relatively new, and the Federal Reserve was on the verge of printing another slew of money.  Enjoy and have a great weekend!
11/2/2010 Portland, Oregon – Pop in your mints…

Today and tomorrow the entire world, that is, the investment world, will be watching what the Federal Reserve and its poster boy, Ben Bernanke.  What will he do?  Most money managers and bond traders are operating under the assumption that he will proceed to create approximately $1 Trillion US dollars out of thin air through a process known as Quantitative Easing (QE), which is nothing more than indirectly confiscating at least $1 Trillion worth of goods and services from those who produce them in good faith and are compelled to accept US dollars in exchange for them.

You see, Mr. Bernanke and his cohorts are presented with an impossible dilemma.  If they do nothing, bondholders get absolutely annihilated in short order and the dollar continues as a viable currency.  If they proceed with the $1 Trillion QE game, the currency is the sacrificial lamb and the bondholders get a lifeline, but will get annihilated in the end anyway.  Essentially it is the choice of when to feel the pain of massive default on dollar denominate paper.

But what must Mr. Bernanke be thinking at this very hour with so much at stake?  The world presumably expects $1 Trillion dollars.  Logic would follow that, at a minimum, what he must provide to avoid “disruption” in the markets.  You see, the markets have long since baked in these $1 Trillion dollars and if they do not appear will adjust prices accordingly.  Guessing which prices will change and when is what keeps things interesting.
Our guess here at The Mint is that Mr. Bernanke is not thinking at all.  He has his orders; the markets will wait and see if he follows them.  What he is likely doing is strumming his guitar and warming up his academic tenor voice with a song that goes something like this:
“If I Had a Trillion Dollars”  a Ballad from Ben Bernanke to the Banks (with Apologies to the Bare Naked Ladies):
To the tune of “If I Had a Million Dollars“:
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy the US a house
(I would buy the US a house)
If I had a trillion dollars
(If I had a trillion dollars)
I’d buy the US furniture for its house
(No interest or payments for a year)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy the US a Ford
(And get everyone’s clunker off the road)
If I had a trillion dollars I’d buy your bonds!
If I had a trillion dollars
I’d buy some junk paper from your books
If I had trillion dollars
They could help, it’d be less you’d have to cook
If I had trillion dollars
Maybe we could put like a little collateral in there somewhere
You know, we could just act like everything’s cool
Like show off the CUSIPs and stuff
Then there would still be liquidity available to us
As if we never bought subprime CDOs and other things
They have endless liquidity but they don’t have asset quality anymore
Thanks to me, of course,
Uh, yeah

If I had a trillion dollars
(If I had a trillion dollars)
I’d buy up asset backed securities
(But not with real money I’d be a fool!)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy up Synthetic CDOs
(Yep, like a Hybrid or non-performing SIV)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy up Lehman Brother’s remains
(Ooh, all them crazy Hudson Castle assets!)
And If I had a trillion dollars I’d buy your bonds!

If I had a trillion dollars
We wouldn’t have to tax the people more
If I had a trillion dollars
Now, we’d stick to the foreign creditors
If I had a trillion dollars

We wouldn’t have to eat our bad debts
But we would eat our bad debts
Of course we would, we’d just eat more
And pad our tier 1 ratios with new cash
That’s right, all the free cash… FED credit!
Mmmmmm, Mmmm-Hmmm

If I had a trillion dollars
(If I had a trillion dollars)

Well, I’d get us out of this mortgage mess
(But not the homeowners, I’m no fool!)
And if I had a trillion dollars
(If I had a trillion dollars)
Well, I’d buy financial reform
(Ala  Dodd-Frank and Obama)

If I had a trillion dollars
(If I had a trillion dollars)
Well, I’d make you solvent
(Haven’t you always wanted to be solvent?)

If I had a trillion dollars
I’d buy your bonds!

If I had a trillion dollars, If I had a trillion dollars
If I had a trillion dollars, If I had a trillion dollars
If I had a trillion dollars…

You’d be rich!

Seriously, to enjoy some real entertainment (and to get the tune in your head to sing along with Ben and the banks), check out the Bare Naked Ladies performing their 1996 hit “If I Had a Million Dollars” below.  As for tomorrow’s FED announcement, rest easy and wait along with the rest of the investment world to see if Ben & Co. really have the $1 Trillion dollars expected of them.  Of course they don’t really have it but at least it will be fun to see how they explain it this time, that is until those $1 trillion show up in commodity prices!

Stay Fresh!

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!!!!!!!

Forgiveness, the FED, Bank of England, Bank of Japan, and ECB to coordinate actions, will they formally peg exchange rates?

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

Much ink is being spilled today in anticipation of what may or may not happen as the 10th anniversary of the events that occurred on September 11, 2001.  Here at The Mint, we take the somewhat radical view of the Amish in response to tragic loss.  We must forgive.  An important part of forgiveness is to avoid making or observing a memorial to the offense.  Memorializing an event is to keep it present before us.

As the US Empire is now conducting at least three extremely expensive military adventures which have their origins in the events that occurred that fateful day, forgiveness is probably not on many people’s minds this weekend.  Meanwhile, millions of dollars are being spent to memorialize it.

We must forgive.  It is our opportunity to choose the tree of life over the tree of the knowledge of good and evil.  To repair the fateful error made in Eden.

Under the cover of this memorial, we sense that an extraordinary event will occur which will impact the fortunes of many in the US, England, Japan, and Europe and others outside their borders with exposure to their respective currencies.


The Event which we refer to is the coordinated debauchery of their currencies. 

For the past four years, the FED, BoE, BoJ, and ECB have been engaged in a desperate attempt to debauch (devalue) their currencies.  They have had the predictably mediocre to poor results that one would expect from efforts made by this rare hybrid of an agency which combines the laziness of the banking class with the incompetence of the governing class.

The goal seems simple enough.  Print money to pay existing debts and encourage people to spend and to take on new debt.  So simple, that each of these Central Banks is currently running at their own pace down this calamitous path with little regard to how the outside world is reacting.

Guess what?  The outside world is not reacting as expected.

What they did not take into account, at least until now, was that there is quite a bit of money to be made from the fact that they are all running at different paces down the same path.  The nature of international finance is such that one Central Bank’s unbridled effort to debauch its currency leads to an opportunity to profit by borrowing in that nation’s currency and purchasing one of the other three currencies, which undermines the debauchery of the currency that is being purchased. 

Stark, as most thinking persons, cannot stomach the debauchery in his midst

This is commonly known as the carry trade, and these large Central Banks have taken all of the guess work out of it for the past four years.

We suspect that these four Central Banks see the immediate need to eliminate interest rate spreads amongst their currencies which will force those who ply the carry trade to purchase currencies outside of this group.

In effect, this ultimate coordination of interest rate policies will cause these four currencies to “peg” to each other, which should assure that the debauchery of their respective currencies will continue unchecked and likely accelerate.

According to Bloomberg, there is speculation that this type of coordination, a de facto currency peg to the dollar, could begin this weekend at the G-7 Meeting.

Will another stealth disaster befall the US this weekend?  If these Central Banks somehow coordinate their collective debauchery of the currency, the economic devastation of millions will march on.

Perhaps this is why Juergen Stark has suddenly stepped down from the ECB.  It will be more than any caring Bundesbank official can stomach.

Stay tuned and Trust Jesus.

Stay Fresh!


David Mint


Email: davidminteconomics@gmail.com


Key Indicators for September 9, 2011


Copper Price per Lb: $4.00
Oil Price per Barrel:  $87.20


Corn Price per Bushel:  $7.26  
10 Yr US Treasury Bond:  1.92%



Gold Price Per Ounce:  $1,856 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:  $9,456,000,000,000YIKES!!!!!!!