10/3/2013 Portland, Oregon – Pop in your mints…

A mere 48 hours into the first shutdown of the Federal Government, life in the land of the free appears to be carrying on as normal for most non-Federal employees.  Even Federal employees, while technically not getting paid, at least have some measure of certainty that they will get their jobs back and will likely be paid for the time they missed, unlike many unemployed Americans.

Much of the MSM commentary to this point has centered on the current budget standoff being nothing more than a childish spat amongst Congressmen who possess an increasingly common blend of arrogance and ignorance that is almost a prerequisite for public office circa 2013.  For the MSM, anything other than business as usual is abnormal.  What this analysis fails to recognize is that what is truly abnormal is what passes as business as usual for the Federal Government.

The current shutdown of the Federal Government is revealing on a number of levels.  It is an exceptionally bold gambit being played by the faction of the Republican party that has brought the machinations of the Federal government to an unplanned halt.  Amongst the revelations that have surfaced are the following:

1. The Federal government has somewhere on the order of 800,000 “non-essential” employees.  The President is the one who decides which classes of employees are essential and non-essential.  The President’s choices provide an interesting insight into his priorities.  The distinction between essential and non-essential functions should also inform future discussions about austerity.
2. The President, in delaying the penalties for businesses with regards to the Affordable Care Act for a year, neglected to offer the same treatment for individuals.  While on the surface, this appeared to be an administrative move, the faction of Republicans who are blocking a clean continuing resolution have called the President out on this slight of the American Public.
3. The Affordable Care Act provides for the addition of 16,000 IRS agents and zero doctors via direct funding provisions, a statistic that seems to defy logic and highlight the core function of the government as tax collector.  Any increase in the availability and quality of care is left to market forces guided by government policy, a scenario that has failed in the sense that it produces sub-optimal results in every sphere where it has been applied.
4. Even if there was a clear administrative need to selectively apply the Affordable Care Act’s provisions, the act of selectively applying the laws provisions undermines the credibility of the law itself and in practice gives the President near dictatorial powers.  This is a matter of principle that is worth standing up for.  The fact that governance in America has degenerated this far and that it takes a budget or other fiscal crisis for it to rise to the surface is a national tragedy in and of itself.  Further, this matter of principle, equality before the law, may be the only appeal to reason that the Republican faction has for what is otherwise an indefensible position.  Either the Republicans themselves underestimate its importance or the MSM, in bickering about why certain satellites cannot be launched into space, has abandoned all appeals to reason in the discussion and this fine point of governance is lost on most observers.
5. The American Economy will eventually be much better off were the Government to remain shut down once it is allowed to adjust to the new realities.  If the Fiscal crisis facing the government is as dire as advertised, it should be a no brainer for the government to discontinue any non-essential activities until such time that the nation’s finances improve to a point that they can afford to perform them.
6. It is reported on a number of fronts that the shutdown will shrink GDP by x% (roughly 1.2% by one estimate) and that $60 billion per day is simply disappearing because the government is not spending it on the wages of non-essential employees.  This analysis falls into the classic fallacy of failing to see beyond what has disappeared to envision and recognize what will appear in its absence.  While a number of non-essential government tasks are not being performed, a window of opportunity exists for enterprising individuals to undertake tasks that society deems essential but were not possible because a heavily subsidized competitor, i.e. Uncle Sam, had claimed a monopoly on activity.  The reality is that the economy is likely to grow exponentially under current monetary policy, regardless of what the government does.

There are many more revelations that are bound to appear before the shutdown is resolved.  It will take cutting through the MSM’s shallow analysis to parse it out, but if one keeps their eyes open, they will see the underbelly of the amoeba laid bare, and it is not a pretty sight.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 3, 2013

Copper Price per Lb: $3.27
Oil Price per Barrel: $104.35
Corn Price per Bushel: $4.41
10 Yr US Treasury Bond: 2.63%
Mt Gox Bitcoin price in US: $125.68
FED Target Rate: 0.08%
Gold Price Per Ounce: $1,318
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.3%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 15,395
M1 Monetary Base: $2,470,500,000,000
M2 Monetary Base: $10,789,400,000,000