Tag Archives: SNB

Sumo Wrestling in Europe, Can America afford to be Frugal? Not as long as Debt = Money

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.”

Why ask Why? Just stay away from the edge!

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!

David Mint

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%


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!!!!!!!

The Swiss throw in the towel, Decide to Enter the Fiat Currency Battle Royal

9/6/2011 Portland, Oregon – Pop in your mints…

We spent the weekend attacking sections of our yard that had, until now, remained a wilderness reserve due to our inner laziness.  Trees, shrubs, ivy that had been allowed to grow unchecked all fell victim to our saw and lopper (which must be the best tool ever invented).  The yard now appears more barren, if not civilized, than before.

Like everything, it came at a price.  Our back may never be the same and working in such close company with the pines seems to have triggered a latent allergy which nearly floored us for the balance of the weekend.

Fighting nature is not a long term strategy, but it has provided a strange sort of satisfaction in the near term.

This is the same sort of satisfaction that the Swiss National Bank must be feeling after they arbitrarily decided to cap the Franc:Euro exchange rate at 1.2:1, effectively throwing their lot in with the doomed Euro.  From the Wall Street Journal:

“The SNB said Tuesday that it would “no longer tolerate” the euro falling below the minimum rate. In a statement, it said it will enforce the limit with “the utmost determination and is prepared to buy foreign currency in unlimited quantities.”

While this type of action should come as no surprise to our readers, it is significant because the Swiss have traditionally been a sort of neutral safe haven on a number of fronts, not the least of which being money and banking.

Their abstention from joining the Euro in the first place was a testament to this.  Their capitulation today simply gives more credence to the extraordinary pressures that the competitive devaluation of all fiat currencies is placing on those Central Banks which for one reason or another have chosen not to compete.

The Swiss currency has been under siege ever since its neighbors embarked on the Euro currency experiment.  Being the ingenious people that they are, the Swiss, with their mountain bunker airbases and underground buildings, were able to hold out for a long time.

What finally sent them over the edge?  We are not certain but we can only imagine that, as the Franc soared unwittingly towards parity with the Euro, the intelligent Swiss flocked across the border to purchase whatever they could from their unwitting neighbors who are all unequally yoked to the Euro’s fate.

In other words, why shop in Geneva when your Francs go further in France?

Having seen enough, the SNB is has now crossed the ropes and is entering the Battle Royal of fiat currency devaluation.  Who will be standing at the end?

Fiat Currencies Battle for Devaluation

This is a trick question, as our equally intelligent fellow tax-payers will quickly point out. There are no winners when something with no value is widely recognized as such.  Only mayhem, yelling, pile drivers, body slams, blood, and drama.

Most investors are now waking up and realizing that it is time to hold currency reserves (household savings) in Gold, Silver, Pork loins, anything but fiat currencies.

Get out of the arena and avoid the ensuing traffic jam.  This sort of mayhem is better enjoyed from the comfort of one’s home and the quicker one gets there the better!

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 6, 2011

Copper Price per Lb: $4.06
Oil Price per Barrel:  $86.49

Corn Price per Bushel:  $7.47  
10 Yr US Treasury Bond:  1.98%


Gold Price Per Ounce:  $1,880 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:  11,139  TO THE MOON!!!

M1 Monetary Base:  $2,108,800,000,000 RED ALERT!!!
M2 Monetary Base:  $9,473,600,000,000 YIKES!!!!!!!