Tag Archives: Monetary Theory

What is Money? A quest to answer the question of the ages

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What is Money?  A quest to answer the question of the ages

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What is Money?  By David Mint

Dabbling in Eschatology: What to expect in the Monetary Realm as the world comes to an end – Part III of III – The Vision of Daniel

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.}

 

Albrecht Dürer, The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, Woodcut
The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, by Albrecht Dürer, Woodcut

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!

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for April 11, 2012

Copper Price per Lb: $3.68

Oil Price per Barrel:  $102.70

Corn Price per Bushel:  $6.36

10 Yr US Treasury Bond:  2.03%

FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,660

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.2%

Inflation Rate (CPI):  0.4%

Dow Jones Industrial Average: 12,805

M1 Monetary Base:  $2,299,000,000,000

M2 Monetary Base:  $9,823,900,000,000

Dabbling in Eschatology: What to expect in the Monetary Realm as the world comes to an end – Part II – The Vision of John

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.

Albrecht Dürer, The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, Woodcut
The Revelation of St John: The Four Riders of the Apocalypse, 1497-98, by Albrecht Dürer, Woodcut

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!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 10, 2012

Copper Price per Lb: $3.69

Oil Price per Barrel:  $100.90

Corn Price per Bushel:  $6.34

10 Yr US Treasury Bond:  1.99%

FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,660

MINT Perceived Target Rate*:  0.25% AWAY WE GO!

Unemployment Rate:  8.2%

Inflation Rate (CPI):  0.4%

Dow Jones Industrial Average: 12,716

M1 Monetary Base:  $2,299,000,000,000

M2 Monetary Base:  $9,823,900,000,000

The Bible Clearly Explains the Consequences of a Debt based Monetary System

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:

  1. It is the most widely read book in the history of the world to date
  2. In its labyrinth of narratives, poetry, song, and prophecy, it provides the only coherent framework within which humans, who have been given the gift of reasoning, can understand the world in which they inhabit and what they are to do with their time here.

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. 

A Bible Handwritten in Latin in Malmesbury Abbey, Wilshire, England. Transcribed in Belgium in the year 1407

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!

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for February 28, 2012

Copper Price per Lb: $3.86

Oil Price per Barrel:  $106.55

Corn Price per Bushel:  $6.53

10 Yr US Treasury Bond:  1.93%

FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,784

MINT Perceived Target Rate*:  1.00% AWAY WE GO!

Unemployment Rate:  8.3%

Inflation Rate (CPI):  0.2%

Dow Jones Industrial Average: 13,005

M1 Monetary Base:  $2,137,600,000,000

M2 Monetary Base:  $9,763,200,000,000

Of Money and Metals, Part V – Free Money Refutes Gresham’s Law

1/31/2012 Portland, Oregon – Pop in your mints…

 

{Editor”s note: The following is the long awaited conclusion of the series “Of Money and Metals.”  Please click here to view the Part IPart 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.

 

European Jeton from 1598 courtesy of Wikipedia.org

 

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!

 

David Mint

Email: davidminteconomics@gmail.com

 

Key Indicators for January 31, 2012

 

Copper Price per Lb: $3.79
Oil Price per Barrel:  $98.48

Corn Price per Bushel:  $6.39  
10 Yr US Treasury Bond:  1.80%

FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,737 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,633  

M1 Monetary Base:  $2,152,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,782,800,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Of Money and Metals – Part IV: The Operation of a Free Money Supply Explained

1/23/2012 Portland, Oregon – Pop in your mints…

{Editor”s note: The following is a continuation of the series “Of Money and Metals.”  Please click here to view the Part IPart II, and Part III

Natural law is always operating, always demanding a balance of accounts in the real world, not simply on an accountant’s ledger or numbers on a bank statement.

It is then foolishness for anyone to assume that a central authority, no matter how clairvoyant, can properly estimate the money supply necessary for human economic activity to continue at the optimal rate, balancing both the quantity of debt and money to provide for both the present and future using all of the information which is collectively available.

It is for this reason that it is imperative that people be free to declare both what will serve as money as well as its value in exchange.  History has shown that, if people chose gold or anything natural as money, economic activity and the resulting benefits to society will accumulate so rapidly that the supply of gold will quickly act as a constraint.  If gold is money by decree, this becomes a problem. 

However, if gold has simply been chosen for use as money by the majority, the same majority will quickly and tacitly gravitate to a secondary natural source of money with which to augment the primary natural money supply.  Historically, this secondary source of money has been silver. 

Once economic activity further accelerates and the benefits continue to accrue to a larger portion of the population, the supply of silver will act as a restraint.  Again, if left to their own devices, the majority will quickly and tacitly adopt another item occurring in nature to be used as money.  Historically, this third source has been copper.

Yet even the supply of copper, abundant as it may be, will eventually serve as a restraint, and so on, and so forth.  Eventually, in this example of what we like to call “Free Money,” gold will tend to operate as a form of savings and settlement only in the largest of transactions, with silver serving as money at an intermediate level while copper would be the most widely circulated currency for smaller transactions.

The beauty of free money is that, should the supply of copper become a constraint, steel, nickel, or some other more abundant natural resource will take the place of copper for use in smaller transactions, and so on, so that the money supply, in a general sense, will always be perfectly suited for the rate of economic activity which is occurring.

It is important to note that, while history has shown a preference for metals to be used as money, in the free money (and by extension, free banking) theory there is no requirement that what be adopted as money be metal.  In fact, money can be anything that those participating in exchange bilaterally accept as payment for goods and settlement of debts.  As you will recall, the only thing that money should not be, by definition, is debt.

Yes, Mr. Cheney, Deficits do matter

 

While it is obvious that debt can be exchanged in the place of money for a time, as the past 100 years have shown us, common sense, logic, and natural law will demand that the debts which circulate be settled in real terms.  The creation of debt as money severely distorts economic reality and the more debt that is created, the greater the demanded settlement in real terms will be, regardless of how many times one chants the Keynesian mantra recently made famous again by former Vice President of the US Dick Cheney “Deficits don’t matter.”

The superiority of free money is that the money supply is free to adapt to the rapidly economic activity, which is nothing more than an expression of the changing wants and needs of consumers.  The money supply is not hindered by unnatural constraints which have nothing to do with economic reality and are imposed by what is at best an uninformed or disinterested and at worst a malicious monetary authority.

The current debt as money system, far from providing a perfectly elastic money supply, has created the economic equivalent of concrete, which is now hardening the economy instead of providing it with the much needed lubrication.  If this insanity carries on much longer, society will be shattered as economic reality takes a jackhammer to it.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 23, 2012

Copper Price per Lb: $3.79
Oil Price per Barrel:  $99.93

Corn Price per Bushel:  $6.20  
10 Yr US Treasury Bond:  2.07%
FED Target Rate:  0.10%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,677 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  1.50%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,709  

M1 Monetary Base:  $2,167,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,805,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Of Money and Metals Part III – Debt: The Barbarous Relic

1/19/2012 Portland, Oregon – Pop in your mints…

{Editor”s note: The following is a continuation of the series “Of Money and Metals.”  Please click here to view the Part I and Part II

As the world descended further into depression which eventually led it into the Second World War (Editor’s Note:  It should come as no surprise that the only two World Wars have come after the declaration that debt is money), The Keynesian adherents clamored for more debt as the only answer to the world’s economic ills.

What Keynes and his Harvard trained legions fail to comprehend is that the only permanent cure for an economic depression is to allow each individual to declare what he or she will use as money and allow market participants to coalesce around what at that time is best suited for the role of money.  For balance sheet recessions, such as the one the world is currently experimenting, are merely symptoms of a rigid money supply which has failed to keep up with the demands of a dynamic economy.

Under current theory, the government sacrifices the dynamic economy in the name of preserving the “integrity” of the monetary system.

When it is quite obvious that it is the monetary system that has failed, the government’s response can only be seen as idiotic at best.

What makes the situation of the past 100 years even more untenable is that money, instead of operating as a lubricant for economic activity, is more like concrete.  Such is the inherently destructive nature of debt as money. 

For the only rule with regards to money which is imposed as a matter of natural law is that debt cannot ever be money.  It is a concept so clear that it escapes most academics and government officials.

Now, the Keynesian indoctrinated readers of these words are no doubt dusting off the “silver bullet” of Keynesian theory:  That gold, which is widely held as the logical alternative to the “debt is money” insanity, is a “barbarous relic.”  In layman’s terms, Keynesian theory holds that any attempt to limit the money supply via natural means, the most popular being a gold standard (fixing the price of gold in terms of monetary units) will cause a deflationary spiral which will bankrupt the entire world.

The former "Barbarous Relic" - photo by Toi Mine courtesy of Wikimedia Commons

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!

David Mint

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!!!!!!!