Tag Archives: US Debt

Federal Reserve Effectively Forgives US National Debt

12/11/2012 Portland, Oregon – Pop in your mints…

Last week, we made a vague promise to provide data to back a claim that the US Debt at the FED had already been largely cancelled via the various quantitative easing (QE) operations that have been realized over the past several years.  This fact makes any talk of solving the moronic “Fiscal Cliff” via extreme methods such as minting platinum coins with $1 Trillion face value unnecessary.

In an attempt to illustrate what amounts to an effective forgiveness of a portion of the US National Debt by the Federal Reserve, we offer the following graph, which plots the both the official US National debt as well as the official US National debt net of the Federal Reserve’s holdings as a percentage of GDP.

US Debt GDP QE Graph

 

As you can see, the real US National debt to GDP is closer to 94% rather than the projected 105% which the official US National debt figures would suggest.  The Federal Reserve, at last count, holds roughly $1.6 Trillion of US Treasury debt.  While this debt is still theoretically on the books, it can essentially be removed from consideration when arguing about the need to solve the debt problem, vis-a-vis the moronic Fiscal Cliff debacle that is playing out in Washington.

94% is an alarming level, but according to our projections, the current US Government current account deficit cycle is about to end as the waves of new currency released into the global economy by the Federal Reserve and other central banks begins to run through the coffers of the US Government.

Despite the desperate proclamations by Congress that it will be difficult to solve their (yes, this is their problem) impasse, indicators such as an EFT that tracks the Defense industry, XAR, which would theoretically be the hardest hit were the US to fail to address portions of the Fiscal cliff such as suspending the sequestered spending cuts agreed upon as a result of the infamous Debt ceiling debacle, are not showing any signs of trouble.

In other words, the financial markets are assuming that the US Congress and Executive, when push comes to shove, will wind up and kick the can a mile down the road, as they did when the debt ceiling was bearing down on them.

According to our projections, there is no debate, the Fiscal Cliff does not even exist, rather, it is a figment of the collective imagination.

We do not believe in money, at least not in the form of money that is currently used in America today, and it appears that the US Congress is beginning to come around to our point of view.  If the Federal Reserve will simply finance deficits ad infinitum, why even bother with the Fiscal Cliff charade?  We are still working to answer that question, and leave it for you, fellow taxpayer, to ponder along with us.

The real question, the one which we wrestle with every day here at The Mint, is when will the faith in the Federal Reserve be destroyed?  With the advent of the various QEs beginning in 2008, the Federal Reserve system effectively collapsed.  The creation of credit was no longer self sustaining in the economy.  The FED has been living on borrowed time.

As December 21 approaches and those who have misinterpreted the Mayan calendar wonder if December 22nd will come, we look forward to the 22nd of December, when the Federal Reserve’s charter is rumored to expire, and YouTube’s “Man of Truth” famously prophesied that the Federal Reserve would go bankrupt. Technically, he said “December 2012”, but, after 99 years, why split hairs?

Chances are that the world will wake up on December 22nd and carry on.  However, if you see the words “Force Majeure” in the financial headlines, get ready to calculate prices in a new currency for 2013.  For the US may swerve to avoid the Fiscal Cliff, but sooner or later it will drop off the currency cliff.

That is when things will get very interesting indeed.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 11 2012

Copper Price per Lb: $3.65
Oil Price per Barrel:  $85.84
Corn Price per Bushel:  $7.24
10 Yr US Treasury Bond:  1.65%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,710 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  13,284
M1 Monetary Base:  $2,457,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,275,200,000,000

The Fiscal Cliff, the moronic Redux of the 2011 Debt Ceiling debacle

9/18/2012 Portland, Oregon – Pop in your mints…

Today we turn our focus to an event which, like a sequel of a bad movie, has been widely ignored.  The dreaded Fiscal Cliff.  For those who do not recall, the Fiscal Cliff is the moronic sequel of the 2011 flop “The Debt Ceiling Debacle.”  You can read our review of the first film here:

US Debt Ceiling Vote to Ignite Armageddon in Bond Markets?

Most of the actors in the first film, Obama, Boehner, Reid, and Bernanke, are returning for the sequel, although there are rumors that Obama may be replaced by Mitt Romney if Romney is chosen over Obama in a fan poll scheduled in November.  Tim Geithner, who did a poor job acting as the voice of reason in the original film, is expected back as well, albeit in a severely diminished role.  His appearance in the film is largely contingent upon Obama winning the fan poll.

The sequel picks up the story where the original left off with Bernanke, Reid, and Boehner accelerating their vehicle towards a cliff, presumably to plunge into the canyon a la Thelma and Louise.  The sequel begins with a cloud of dust, which eventually settles to reveal that the trio has abruptly stopped the car just before taking the plunge.  After a collective sigh of relief, they hold a meeting and decide the following:

1.  Instead of plunging off of this cliff, they will look for a larger cliff to plunge off of somewhere down the road,

2.  Bernanke will pay for the gas with the money he stole from US Dollar holders and,

3.  Rather than taking the plunge themselves, they will force Obama and Geithner, or Romney and Geithner’s replacement, to drive off the cliff.

The fan poll in November should serve to make this moronic sequel somewhat interesting, but either way, the winner will be handcuffed to the wheel with the accelerator at full throttle.

Our advice?  Don’t bother watching this moronic redux.  Like the Expendables 2, it is a desperate attempt by the actors to cash in on past glories.  Unlike the Expendables 2,  anyone living in the US will need to purchase an advance ticket to NOT see the Fiscal Cliff.  Tickets can be found at your local coin shop.  Simply trade you US dollars and bonds for gold and silver and you can ignore this catastrophe.

Hurry, there is precious little time before the Fiscal Cliff’s December 31 debut.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 18, 2012

Copper Price per Lb: $3.78
Oil Price per Barrel:  $95.22
Corn Price per Bushel:  $7.39
10 Yr US Treasury Bond:  1.68%

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

Gold Price Per Ounce:  $1,769 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  8.1%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,552  
M1 Monetary Base:  $2,470,800,000,000
M2 Monetary Base:  $10,103,400,000,000

72 Hour Call for June 8, 2011

Today’s Call: Yield on 10yr US Treasury bond to fall (price to rise).  Currently 2.962%.
Rationale: China warned today that a US default would be very harmful to many nations of the world, most of all China.  While we believe that the US will eventually default, in the short term this type of news should be traded against.  Short term safe haven buying will overwhelm any selling on this news.
Result of Call for June 3, 2011: Caterpillar (CAT) to fall.  Was $101.10, Currently $97.91.  Good Call.
Calls to Date: Good Calls: 27, Bad Calls: 18, Batting .600

Key Indicators for Wednesday, June 8, 2011

FED Target Rate:  0.09% FED IN DESPERATION MODE!!!!
MINT Perceived Target Rate*:  2.25% INFLATION HERE WE COME!!!!

*See FED Perceived Economic Effect Rate Chart at bottom of blog.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.