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What is Money? A quest to answer the question of the ages
It is the first in our ‘Why what we use as Money Matters” series and is available now at smashwords.com, coupon code: PG74U
4/11/2012 Portland, Oregon – Pop in your mints…
If you missed parts I or II of this series, please click below and give them a brief read before continuing:
Part I – Give to Caesar what is Caesar’s and Part II – The Vision of John
In our brief but necessary excursion into the wild world of Eschatology here at The Mint, we have endeavored to bring to your attention, fellow taxpayer, what one can expect in the Monetary Realm as the world comes to an end.
To be clear, we are not predicting when the world will come to an end, for only God alone can determine this, rather, we are sharing our interpretation of what will take place regarding man’s relationship to his money and possessions as the inevitable trials and tribulations which will take place begin to unfold.
First, a brief review of parts I and II of the series:
Part I – Give to Caesar what is Caesar’s: Around 2000 years ago, Jesus reiterated the importance of a mark in determining monetary ownership, stating that since the mark of Caesar is on the coin used to pay the tax to Caesar, it is proper to “give to Caesar what is Caesar’s, and to God what is God’s.”
With this simple statement, Jesus reaffirmed both the complete Sovereignty of God as well as the validity of private property held by men in God’s view.
The obvious yet staggering implication is that money and coinage given by an Emperor may at some point be demanded back by that Emperor, therefore it is foolish to accumulate money and coinage issued by an Emperor as a store of one’s wealth.
Not surprisingly, the same is true today.
Part II – The Vision of John: Roughly 60 years after Jesus’ declaration, the Apostle John was given a vision of the events that would transpire before Jesus returned to the earth to reign triumphantly.
{Editor’s Note: This is not unprecedented; in addition to the vision of Daniel which we will discuss today, a vision of Jesus’ first coming was given to Isaiah some 700 years prior to the event.}
John’s vision, recorded in the book of Revelation, covers a great deal of topics and is perhaps the most widely studied book when it comes to Eschatology. In this series, we are specifically concerned with only the portion of the vision which is commonly referred to as the “Mark of the Beast.”
In our review, we stated that the “beast (satan)” will at some point in the future demand the worship of all men. Specifically, he will ban all worship of the One True God and cause a statue to be set up, which God refers to as the “abomination which causes desolation,” and demand that everyone on the earth render worship to the statue.
One tactic that will be used to coerce mankind into worshiping the statue instead of the One True God will be to require mankind to accept a “mark” on their physical body in order to be able to buy and sell.
The choice to accept or deny this mark will be the watershed moment for the inhabitants of the earth at that time. They will be forced to choose to either throw their lot in with satan, whose kingdom is being destroyed forever, or the One True Living God, whose Kingdom is established for eternity.
On paper, the choice is obvious. However, given the deception which satan employs in an attempt to manipulate mankind, much perseverance will be required.
The prospect of losing title to all of their possessions and not being able to buy or sell may be too much for even self professed Christians to bear, and many, faced with the choice to continue their way of life within the system or to presumably wander the earth as Cain was, may be tricked into capitulating to satan’s tactic and accepting the mark.
We wrote yesterday that the Rapture will occur before any of the tribulations, including the dreaded choice of whether or not to accept the “mark of the beast,” takes place. Therefore, if the end times which John writes of seem like too much to bear (as it is for us,) we implore you to begin trusting Jesus today.
If you have just made or have already made a decision to trust Jesus, you may stop reading and begin a life of praise and service to God.
However, for those who are unfortunate enough to be living on the earth during the perilous days to come, the third and final passage which we will consider is intended to give them a measure of hope, as well as the timeframe which one must be prepared to endure.
Fortunately, God has given us, circa 2012, a guide to the end times. For the vision of Daniel regarding the end times, related in the book of Daniel, Chapter 12, taken together with the vision of John in Revelation gives us the specific time frames that the “Mark of the Beast” will be required to be used for buying and selling within the earth’s system.
It is clear from John’s vision that the imposition of the mark will coincide with the erection of the statue which God calls the “abomination which causes desolation.” Therefore, according to Daniel 12:11-12, the time frame from the beginning of the tribulations until the time that the decision to accept or reject the mark is presented to all of those on the earth at that time, will be 1,290 days, or approximately 3 years and 6 months.
If one finds him or herself on the earth at this time, we advise you to use those 1,290 days to prepare at least 45 days of rations.
Why 45 days? Because 45 days is the period of time which one will have to refrain from buying or selling if you still desire to accept Jesus and reject the mark of the beast. As it is related in Daniel 12:12: “Blessed is the one who waits for and reaches the end of 1,335 days.”
Again, 45 lonely days is all one will have to refrain from buying or selling as a consequence of wisely rejecting the mark of the beast. During this extremely short period of time, the beast will appear to have complete control over the monetary realm.
Then, the fraudulent monetary and religious system that the beast has attempted to impose on the earth will collapse, and all of the earth will fall into a deeper tribulation as a result. However, it is clear from Daniel’s vision that those who refused to accept the mark of the beast will be blessed.
We are aware that this is but one of many interpretations of the events surrounding the end times. It is our prayer that you will find both comfort and a call to action in our interpretation of what is to come.
45 days may seem like a long time, but with the proper preparations, all of the peoples of the world who remain during the coming tribulation may eagerly await the coming of Jesus without fear and full of hope.
God is faithful and will quickly answer honest and earnest prayer. We encourage everyone to study the Bible and to seek God in order to develop their own understanding of what is to happen and what they are to do.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for April 11, 2012
FED Target Rate: 0.15% ON AUTOPILOT, THE FED IS DEAD!
MINT Perceived Target Rate*: 0.25% AWAY WE GO!
Dow Jones Industrial Average: 12,805
4/10/2012 Portland, Oregon – Pop in your mints…
If you missed Part I of this series, please click below and give it a brief read before continuing:
Part I – Give to Caesar what is Caesar’s
It is clear from Jesus’ answer to the spies’ question that He ascribed little importance and value to the coinage of Caesar. This flew in the face of what to most people believe about money on a subconscious level.
As we have explored in this space before, the current monetary system, where money is debt, creates an unnatural link between human beings, a sort of mutual slave/master relationship in which each and every person within the system finds themselves ensnared.
How does Caesar ensnare people in this system? By simply placing his mark on the coinage, the coin becomes Imperial property. The next step is to pass a series of laws, commonly known as legal tender laws, which obligate people to use the coinage in trade and commerce.
“Give to Caesar what is Caesar’s,” therefore, may be seen as a call out of the system of Imperial coinage and tribute. If one remains in the system by accepting and using the coinage in exchange for goods and labor, they remain a slave to the empire and all of the money bearing his mark which they have accumulated belongs to Caesar.
Today, some 2000 years after Jesus’ words, most of the western world lives in a system where not only does the modern day Caesar lay claim to their money via a mark, but also their future output by means of debts which are incurred as a necessity in the face of the declining real world value of the Imperial coinage in trade.
And yet it is only money, nothing more. Jesus stresses both private property rights and God’s divine sovereignty over all when He continues, “and to God what is God’s.” implying that everything is God’s while recognizing the right for Caesar to lay claim to all Imperial coinage via the mark.
This brings us to the second passage which we will examine as we continue our eschatological dabbling into what to expect in the monetary realm as the world comes to an end.
The second passage relates to us a portion of the vision given to the Apostle John as he was exiled on the Isle of Patmos in the Aegean Sea circa 95 AD.
The passage, Revelation 13:14-18, is a source of widespread discontent amongst Christians who are paying attention as it warns of a time when all people on the earth will be forced to make a permanent choice between accepting the “mark of the beast” and “buying and selling.”
The discontent stems from the perception that one will be forced to accept the mark, and as a consequence presumably be forever estranged from Jesus, to be able to put bread on the table for themselves and their families. On the surface, this discontent is completely understandable.
Yet in light of the coming rapture of the Church, it is also completely unfounded for the true believer. Allow us to explain.
At the Mint, we are of the opinion that Jesus will rapture us (those who have accepted Jesus as their savior) before the inhabitants of the earth are faced with this fateful decision. This opinion is based on the parallels between the rapture and Jewish wedding traditions, where the bride (the Church of Christ) is swept away for seven days.
The parallel is that Jesus will come to sweep us away and hide us in his house (heaven) for the seven years of the tribulation which were revealed to John in his vision. This interpretation is supported by everything else that Jesus said about the end of the world.
While nobody knows exactly when Jesus will come, it is reasonable to expect that He will return around the time of Rosh Hashanah, the Jewish New Year. The first coming of the Messiah, Jesus, was the culmination of the Jewish Passover which occurs in the springtime. It could logically follow that the second coming of Jesus would occur during the harvest time around the Feast of Trumpets. Though we do not know the time of Jesus’ return, we will know the season.
If you, too, would like to share this joyful fate, we encourage you to choose today to trust Jesus. At this point, you may stop reading and begin a life of praise and service to God.
In the unfortunate event that one chooses to decline God’s loving invitation and finds themselves on the earth when humanity is faced with the ultimatum to either accept the mark of the beast or to be denied access to a perceived economic necessity, namely, “buying and selling,” please read on, for there will still be time to choose eternal life with God, but it will involve a seemingly difficult decision.
There is no shortage of speculation as to what form this “mark of the beast” will take, ranging from barcode tattoos, implanted microchips, and even the choice to worship on Sunday. Here we do not wish to add to the speculation.
Rather than focus on the substance which the mark will take, it is more important to focus on what it will mean, for at the time of the ultimatum, the choice they are being asked to make will be subtle and at the same time, crystal clear for all of mankind.
God’s enemy, satan, desires to occupy the place of God in people’s lives and the obligation to worship an image and accept a mark will be his final, desperate attempt to obtain all human worship for himself through a final deception.
It is clear that this desperate attempt will fail, yet that even some of those who are following Jesus may be led astray. For this reason, it is important for all to be aware of the choice which is being presented.
The acceptance or denial of the mark will be a choice that all those on earth will be forced to make and it appears to be the final watershed event in human history. The choice for those living at that time will be clear to them and the consequences eternal.
The choice is the following: Will you accept the mark and throw your lot in with the world which you can see or will you deny the mark and throw your lot in with the unseen God, and as a consequence subject yourself and your family to being ostracized from the world system to face hunger, persecution, and torture?
Denying the mark will likely be similar to losing title to all of one’s assets and loss of access to the banking system.
In other words, it would mean being shut out of the system.
The choice that each person makes at that time will then be clear for all to see. It will symbolize either entitlement to goods, services, and protection in the world system or being cast out of it to wander the earth as Cain did.
Those who desire to throw their lot in with God at that time are then presented with the some very important questions here and now: How long can you and your family survive without access to your assets or the banking system? Is it worth it to resist the mark and live as wanderers? Won’t God understand if I take the mark and forgive even this transgression?
To the first two questions, only you can provide the answers. The Bible is clear as to the answer to the third question, and from what we read in Revelation 14:9-12, it appears that the answer is no.
So, then, the true believer is left to prepare to live outside of the system until Jesus comes for them, to keep their lamp lit until the groom comes, as it were.
But for how long? That, fellow taxpayer, is the exciting part, and it will have to wait until tomorrow.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for April 10, 2012
FED Target Rate: 0.16% ON AUTOPILOT, THE FED IS DEAD!
MINT Perceived Target Rate*: 0.25% AWAY WE GO!
Dow Jones Industrial Average: 12,716
2/28/2012 Portland, Oregon – Pop in your mints…
Yesterday we took our fellow taxpayers for a detour which is leading us into what, for some, may be uncharted waters. These waters are commonly known as the Bible, or the Word of God. While seemingly unrelated to the discipline of economics and specifically monetary theory, it is important to gain an understanding of the Bible for two reasons:
If only for these reasons alone, it is of the utmost importance that the Bible be understood if we are to gain any meaningful understanding of what is called the “economy” and our specific area of interest, monetary theory, as these disciplines make absolutely no sense without an understanding of the framework in which they operate.
Regardless of one’s preconceived judgments about the Bible’s ability to provide this framework, it is important to understand that a number of one’s fellow humans believe that the Bible provides this framework. With this given, it can be inferred that this belief is, in whole or in part, is driving their choice of actions.
However, if you remain unconvinced or simply do not have time or motivation to undertake a careful study of the Bible, we will relate what we understand, it is in no way a substitute for one’s personal and corporate study of the Bible, but we appreciate your confidence.
The lessons of the Bible are important and we reiterate, without an understanding of the framework of the Bible, nothing that is going to take place in the future will make sense but will appear to simply occur at random:
Truly we tell you, the events to come have been foretold. The Kingdom of God is advancing.
What does it have to do with money? Why is a proper understanding of what we use as money important?
We are glad you asked, allow us to explain:
The current monetary system which most of the Western world uses to each day is built on debt. Debt, at its essence, is built a faith that persons will perform certain actions in the future. Performance of these actions from the debtor’s perspective is homogenized as being able to order delivery of the debts of others to the creditor in order to satisfy the debt.
This activity and its consequences are conveniently summed up in Bible as the parable of the Unforgiving Debtor, which can be found in the Bible in the book of Matthew, Chapter 18, verses 21-35.
Wrapped up in a narrative which will take under two minutes to read, the final consequences of using debt as money have never been more clearly stated. Please give it a read, it is important.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for February 28, 2012
FED Target Rate: 0.10% ON AUTOPILOT, THE FED IS DEAD!
MINT Perceived Target Rate*: 1.00% AWAY WE GO!
Dow Jones Industrial Average: 13,005
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!!!!!!!
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.
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!!!!!!!
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!!!!!!!
1/18/2012 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}
In 1913 the US Congress passed the now infamous Federal Reserve act. Not unlike the recent passage of the 2012 NDAA, it happened during the winter holiday when the populace was largely distracted by the festivities.
While the Federal Reserve act has wrought many injustices on the earth, undoubtedly the greatest injustice which continues to cause the greatest amount of damage to mankind was the subtle replacement of money proper with Federal Reserve notes. This action effectively declared that debt is money, in direct violation of natural law.
While this fact may have seemed like a minor detail with regards to custodianship at the time, the declaration was, in essence, handing Frodo’s One Ring to the financial and governmental authorities of the earth. For it gave them largely unfettered access to the accumulated savings of the entire earth and, in the case that the savings ran dry, the unhindered ability to incur debts against the future production of the entire earth as well.
The only thing that they needed was to compel the entire earth to accept debts as money in everyday exchange. In the west, they have largely succeeded. In the east, the acceptance of debt as money has been violently forced upon the populace through a series of wars.
Yet as we stated yesterday, debt and money are polar opposites. To declare that debt is money was not only insane, it was a direct violation of natural law. This violation of natural law began to reap its terrible harvest in 1933 with the onset of the great depression. Yet instead of admitting defeat and leaving the quantities of debt and money in the hands of the people, where it naturally belongs, the authorities presented an academic apologist to confirm for them that debt was indeed now money and that all that was required was more of it.
Enter John Maynard Keynes, best known as the father of the Keynesian school of economic thought. Mr. Keynes developed a thesis which “correctly” diagnosed that the economic problem facing the earth was a lack of money. What Keynes and those who subscribed to his theories have failed to realize is that the Federal Reserve, in declaring that debt was money, had placed a significant impediment to the creation of money, the remedy which the earth desperately needed.
Instead, Keynes and his colleagues skipped over the only viable solution, namely, allowing the free market to determine what constitutes debt and money and in what quantities each was needed, and offered the world a solution which has been the equivalent of injecting poison directly into the veins of the ailing economy. The poison of which we speak was injected as a result of the testing erroneous hypothesis:
“The problem is that there is not enough money. Because debt is now money, it follows that more debt must be incurred to create the money necessary to spur production, employment, and all the things that people now associate with a healthy economy. Further, there is not enough money precisely because the people are not sufficiently indebting themselves. Since the people are not inclined to further indebt themselves (Editor’s note: the people are naturally reacting to natural law, which naturally calls for less debt and more saving), it is the duty of the government to increase overall indebtedness, and therefore the money supply, on behalf of the people. It must force the people to do what they cannot (or more accurately, will not) do for themselves.”
As insane as this line of thought sounds, it is today generally accepted as natural law by nearly every Harvard trained economist, and therefore government and central bank official, on the planet. The only difference between the 1930’s and today is that today, circa 2012, this disastrous line of thought is practiced on a much grander scale.
Stay tuned for tomorrow’s installment: The Barbarous Relic and Trust Jesus!
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for January 18, 2012
Copper Price per Lb: $3.73
Oil Price per Barrel: $100.77
Corn Price per Bushel: $5.93
10 Yr US Treasury Bond: 1.90%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,660 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 1.50%
Unemployment Rate: 8.5%
Inflation Rate (CPI): 0.0%
Dow Jones Industrial Average: 12,562
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!!!!!!!
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!!!!!!!
10/21/2011 Portland, Oregon – Pop in your mints…
As the western world braces for a full scale currency collapse, we have endeavored here at The Mint to offer an explanation as to why these events are taking place and, along the way, offering the obvious solution to the chief problem, mistaking credit for money.
For those of you who have missed Part I, Part II, Part II, and/or Part IV, you may read them by clicking on the following links:
If you require only a brief summary, Part IV above offers a relatively brief and comprehensive summary of the previous three. Now where were we…
Ah yes, in the United States, circa 1968, a time not so unlike our own. The Vietnam war was becoming increasingly unpopular and the social climate was ripe for protest. The US had run up a large and increasing trade deficit with the rest of the world. It was becoming clear that if foreign dollar holders were to redeem a significant amount of their Federal Reserve Notes, which we now understand to be banknotes and not money proper, for gold, which we now understand to be money proper, the Federal Reserve would not be able to deliver enough gold.
The solution, if it can be called that, was to gradually increase the amount of Federal Reserve Notes required to obtain an ounce of gold from $35 to $41 between 1968 and 1971. Then, in 1971, with the US dollar collapsing in value and the Bretton Woods system falling apart at the seams, then President of the United States Richard Nixon announced that US dollars were no longer convertible into gold. The event is now referred to as the Nixon Shock.
And a shock it was. The US dollar, the benchmark of Central Bank currencies throughout the world, was now officially backed only by the faith that it would continue to be accepted in trade. The Federal Reserve had defaulted.
Most of the world still lives by this faith today, and if anything, the delusion that a banknote issued by a Central Bank which has defaulted on its obligation to deliver real money on demand has only grown.
The reason that the large scale catastrophe of modern Central Banking lies before us is that over the last 40 years, the lack of gold and silver to back the banknotes in circulation has been replaced by the expectation that governments, and by extension their subjects (citizens), will produce enough goods and perform enough services to repay the obligations represented by the banknotes. As the unrestricted quantity of banknotes and obligations to deliver banknotes in existence will always tend to exceed the stock of available goods and services, these obligations are impossible to satisfy.
Human beings are fallible. It is normal and should be expected that they will not be able to deliver on certain obligations. The natural beauty of banknotes redeemable in gold and silver was that, if it was suspected or observed that a person or entity would be unable to pay their obligations, the creditor would move to seize the gold, silver, or other assets that the debtor had pledged as collateral.
The seizure of collateral or the threat of seizure was often enough to correct the failed human action or decisions that were leading to the net loss of wealth incurred by the activity which was undertaken. In economic parlance, we would call this the correction of the malinvestment of resources.
Without gold and silver to act as a natural limitation on the supply of banknotes and other forms of credit, the bad decisions that lead to the malinvestment and the activities that lead to the destruction of wealth and resources can continue for a very long time.
The use of gold and silver as money had another, more important function that is often overlooked. Gold and silver are inert, non-consumable objects. Their hoarding and use as money will not generally cause starvation or want. In fact, the hoarding of gold and silver as money would have the effect of lowering general prices as productivity increased, naturally creating an incentive to decrease production which in turn would raise prices, making the expenditure of more silver and gold necessary and in turn raise prices, creating a natural incentive to produce.
Gold and silver allow the economy to naturally regulate itself and, by virtue of the difficulty in extracting them, cause the rest of the earth’s resources to be used in harmony with each other.
Finally, gold and silver are inanimate objects. Their recognition and possible seizure as collateral does not threaten the liberty or life of a person. However, because modern central banking has replaced money proper and placed credit in its place, it will become increasingly common to entire societies held as security for a debt that many of them had no direct hand in creating. This is the logical end of using credit as money.
It is the truth that will bring tragedy to the earth.
Without the natural counterbalance to trade and growth which gold and silver money had provided for over 9,000 years, man’s activities, whether productive or destructive, have continued nearly unchecked for the past 40 years. It is staggering to think of the catastrophe that awaits if man is truly on the path to destruction.
Man, by nature, is always on the path of destruction, but the use of gold and silver as money served to correct him before he strayed too far down it.
Most people alive today have been trained to believe that using Gold and Silver as money is an unnecessary and environmentally harmful process. Even Adam Smith believed that if the effort expended to mine metals to create money could be directed to other, more useful activities, that humanity would be better off.
What Smith did not realize was that man would not always direct its energies to useful activities. Like modern Socialists, he underestimated the power of self interest inherent in all human action. Today we are preparing to reap the consequences of 40 years of unrestricted and more often misguided human actions.
While it may be too late to avoid the catastrophe that Modern Central Banking may bring upon us, it is comforting to know that a return to the understanding and use of gold and silver as money offers hope for a future of truly infinite possibilities.
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 October 21, 2011
Copper Price per Lb: $3.23
Oil Price per Barrel: $87.40
Corn Price per Bushel: $6.49
10 Yr US Treasury Bond: 2.20%
FED Target Rate: 0.07% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,642 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 11,809
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!!!!!!!
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!!!!!!!
10/5/2011 Portland, Oregon – Pop in your mints…
In Europe, the sumo wrestlers have resumed their battle royal on the edge of the cliff. In this metaphor, the wrestlers conveniently represent the various banks, semi-sovereign governments, central banks, and other unproductive, parasitic organizations with the words “Monetary Fund” in their name.
Up until now, with the exception of some jeering from the spectators, the battle royal has been good natured fun. Each time one of the wrestlers has tumbled towards the cliff, several of his benevolent fellow competitors have come to his rescue.
First Greece, then Ireland, Northern Rock, Anglo-Irish, and The Bank of Ireland. Now Alpha, Spain, Caja del Sol, Portugal, Italy, and Dexia.
Each time, they get up, dust each other off, and go back at it.
But the competitors are getting weary, as are the spectators. With each new stumble towards the cliff, more competitors and even some spectators are required to jump in to avert certain disaster. If this continues, when one of the weary wrestlers finally tumbles over the cliff, it is increasingly likely that he will take the rest of his competitors and a decent number of well meaning spectators over the edge with him.
Now things are starting to get interesting as BNP Paribas, SocGen, and France herself began to stumble towards the edge. Who will save them? Certainly not the Swiss National Bank, which last month stumbled to the edge of the ring and ironically may be the first to fall off.
Any sober observer will quickly point out that this is an insane pastime. Why would a group of sweaty fat men repeatedly try to push each other from a ring along the edge of a cliff?
We can only venture a guess, and our guess is along the lines of “they somehow believe that they must.”
It doesn’t make sense, neither do a great number of things that occur in the current, insane, “debt is money” currency system in which we live.
People and institutions are trained to make decisions regarding money based on the assumption that money in and of itself has value. This assumption, under which the world currently toils, was debased along with the US Dollar back in 1971. Money today has very little in common with the money our fathers grew up with. Peter Schiff, the outspoken CEO of Euro Pacific Capital, has gone as far as to call modern currencies the “hidden portfolio risk.”
Our father’s money was based on the assumption that men were dishonest, and what they used as money (gold and silver) served to keep them honest. Today, money is widely assumed to be honest, a fact which has served to make a great number of men dishonest.
Debt is not money, the proof
The only way that the illusion that debt is money can be perpetuated is when debt, and therefore the perceived money supply, is increasing. First of all, who has ever been known to turn down free money? When the exponential increase in the perceived money supply is occurring, it creates the welcome illusion of wealth.
Second, people quickly learn that the easiest way to make money is to position oneself as close as possible to the creation of new debt. This is essentially the business model of Goldman Sachs and every other consumer and investment bank on the planet.
The money is so easy that no one stops to consider what would happen if aggregate debt were to begin to decrease, in turn decreasing the money supply by the same multiples with which it was created.
It will never happen, right? People will never turn down free or almost free money.
Yet they are. It turns out that people have a propensity for austerity when they have no choice. If money were based on something real, austerity would be extremely healthy for the economy which would be accumulating a capital base from which to make the next series of technological advances.
In the current, insane, debt is money currency regime austerity (the reduction of aggregate debt) removes the life blood from the monetary system and causes the underlying economy to die a slow, then sudden and altogether painful, death.
The mirage of the debt fueled economy quickly vaporizes and the debtors and creditors in the system find themselves in the middle of an economic desert with a long road ahead of them.
There will be much struggle along the way, and their only hope is to walk together.
Stay tuned and Trust Jesus.
Stay Fresh!
Email: davidminteconomics@gmail.com
Key Indicators for October 5, 2011
Copper Price per Lb: $3.13
Oil Price per Barrel: $79.51
Corn Price per Bushel: $6.05
10 Yr US Treasury Bond: 1.91%
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,640 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.1%
Inflation Rate (CPI): 0.4%!!! UP UP UP!!!
Dow Jones Industrial Average: 10,940
M1 Monetary Base: $2,052,100,000,000 RED ALERT!!!
M2 Monetary Base: $9,511,300,000,000 YIKES!!!!!!!
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!!!!!!!
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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