Tag Archives: World Politics

Mint Classics, Politics

Revolution Fire Continues to Rage, What’s wrong with Anarchy?

For your weekend enjoyment we offer another classic Mint in its original form.  Enjoy and have a great weekend!

2/24/2011 Portland, Oregon – Pop in your mints…

Today we can hardly believe our eyes.  What appeared to be a simple revolution in a remote land, Tunisia, has begun a chain of events that may touch every person on the planet before it is through.  We will call it the “Fire” of revolution, at it seems to be catching everywhere.  The grievances of a generation are beginning to be aired in public forums from Tripoli to Madison, Wisconsin.  As you are aware, we are of the opinion that the spark for this fire began it what may appear to be a very far away place.  Washington, D.C.  
 
While many conspiracy theorists have their own, well, theories, we believe that this is collateral damage from the Federal Reserve’s misguided attempt to leave no debt unpaid by simply printing the money up to pay them.  It is simple enough to do in their ivory towers, but the consequences in the real world, in the form of trade and production imbalances, which are sometimes referred to as “Malinvestments,” are absolutely and totally destructive to balance in society.
 
The consequences of printing money are generally felt in two forms.
 
The most obvious form is what is being seen in Greece and now Wisconsin.  In these cases the government made promises to workers, retirees, and other constituents that they cannot honor.  The governments appear to be doing the honest thing and are effectively defaulting on these promises.  However, they are attempting to default at exactly the wrong moment, as the increased money supply begins to pinch workers in the developed world.  In both cases, many public workers are simply being asked to give up privileges such as the ability to take a long holiday at the beach.  In both cases, we are seeing sometimes violent evidence of just how hard it is for the government to default on its promises.
 
The less obvious and more damaging form of consequences are what we are seeing in Tunisia, Egypt, Yemen, Algeria, Bahrain and Libya.  In these cases, the governments are not technically defaulting on promises, rather, they are seen as the scapegoats for rapidly rising food costs which threaten to drive many to the point of starvation.  These rising food costs are the indirect result of the governments in the developed world attempting to give their public employees holidays at the beach.  Naturally, with the stakes higher in the developing world, a sense of desperation has set in and the pace of and violence involved in the uprisings is markedly higher.
 
Today we will go one step further at the risk letting the FED off the hook for sparking these revolutions with their insane monetary policy.  That step is to postulate that the cause of the flood of money and credit which has lead to higher food prices stems from people’s unwavering faith in their leaders and/or elected governments.  This unwavering faith, which stems from people’s need to feel secure, generates an inertia towards demands for a nanny state, in which the government is expected to take care of every legitimate and some illegitimate needs presented to them by the people. 
 
This arrangement appears to work very well as long as the government and/or leader appear to have the means to provide for these needs.  This arrangement is also the very reason that the government and/or leader will never have the means to provide for these needs indefinitely.  You see, this arrangement generally discourages productive activity and encourages unproductive activity (commonly known as freeloading and currently justified by vague appeals to any myriad of “rights”) which eventually leads to the shortages and imbalances that are at the root of the revolutionary fires that are currently raging.
 
Is Anarchy the Answer?
Central Banks like the FED are simply the enablers of this dangerous “Social Contract” that is being defaulted upon globally before our very eyes.  Their motivation for enabling is that the arrangement is extremely profitable for their member banks.  When stripped of its veil of legitimacy, the arrangement more resembles a drug cartel than a productive banking system.
 
So if the desire for government is truly the root of the problem, as we have speculated, then would not anarchy be the solution?  No!  You say!  Anarchy is chaos and destruction!  But is it really?  In the strict sense of the word, Anarchy simply means the absence of government.  In the absence of government, people would quickly understand that they would need to protect and provide for themselves.  This understanding would be quickly followed by the realization that in order to do this they will need to deepen their productive cooperation with their fellow man or woman.
 
When theft is no longer publicly sanctioned, suddenly the Golden Rule would become the law of the land, with its fruits of peace, freedom, and abundance following soon thereafter.
 
Until people realize that they need God more than they need a government, we will watch violent struggles to fill the vacuums of power currently being created.  Struggles that often give us such esteemed leaders such as Moammar Gadhafi in Libya, whose loyal tribesmen chose to ditch multimillion dollar aircraft in the desert rather than follow his orders to bomb the opposition, and Scott Walker in Wisconsin, who apparently has not mastered the use of caller ID or plain old fashioned voice recognition.
 
Stay Fresh!
 
 
 
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Key Indicators for Thursday, February 24th, 2011
 
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Italians to join Europe’s needy, the parable of the Chiropractor

7/11/2011 Portland, Oregon – Pop in your mints…

Investors woke up today and wasted little time in marking down Italian sovereign debt, along with Spanish and Portuguese debt issues.  Why?  The story of the Italians is eerily similar to that of the Greeks, the Portuguese, and the Spanish.  Their government spends more than it takes in.

At this point, all readers of The Mint know that it is impossible for any Government to produce value.  Yet somehow, in our upside down, insane monetary system, it has become acceptable for the western governments to run a reasonable deficit to help pay for their role as the Robin Hood in the current welfare state model.  The European Union even went so far as to attempt to define what constitutes a reasonable deficit as 3% of a nation’s GDP per year.

Now if the government takes in 25% of national income in the form of taxes, which is not an unheard of (if anything it is a low estimate) and then borrows an additional 3% (which has proved an elusive target), then 28% of the welfare state’s economy is devoted to income “redistribution.”

While the term “income redistribution” does not fly well with most voters, the Government’s “investment” decisions are cleverly disguised as Social Security, Health Care, Defense, and Education.  Most will recognize that these are important investments, which leads us to the logical question:

Why leave these investment decisions up to the Government?

This question is rarely asked, and most seem content to let the Government continue in their collective role as Robin Hood.  It should come as no surprise, then, that a great deal of time and what would otherwise be productive energy goes into influencing Robin Hood’s decisions as to whom the poor are at the moment.  Bill Bonner at The Daily Reckoning calls this outsized effect of Government in the economy a “Zombie Takeover.”

With the Zombies creatively destroying a minimum of 28% of GDP in a modern welfare state, perhaps it is a testament to the resilience and productivity of the citizenry that any real progress can be made under such circumstances.

Fortunately (or unfortunately for those in the zombie class) the insanity is coming to an end.  As the government’s destruction of wealth accelerates, even elected officials will have to admit that the bad decisions that all of this accumulated debt represents do not go away just because one denies that they exist.

In fact, attempts to solve the problem of too much debt by creating more currency are futile, as each unit of currency creates a unit of debt which must be dealt with at a later date.  This is the glory of modern monetary theory.  It binds the world together in slavery.  It is also its Achilles heel, which is now exposed, waiting to be stricken.

How and when will this finally occur?  It will be like the man with back pain who finally goes to visit the chiropractor.  The gradual spinal realignment that he had hoped to achieve by doing simple stretching exercises (austerity) is not taking place, in fact, his back problems have gotten worse.  Once in the exam room, he will be laid down swiftly on the chiropractor’s table.

Then chiropractor will move into place, interest rates will rise, and a series of pops will go off in the patient’s spine.  Naturally, the popping sounds are the troubled EU nations defaulting on their sovereign debt in unison, which is what is about to occur.

Will the patient then get up and go on his way, sore but better off for the treatment?  Or perhaps the better question is; do zombies even use chiropractors?

Meanwhile in the US, the political theater that is the debt ceiling negotiations may be the catalyst that sends the US Treasury market into a much deserved tailspin.  We have speculated about this almost incessantly and still cannot believe that it may happen.

But while the EU goes to the chiropractor, the US may prefer to rely on the prescription drugs of fiscal and monetary stimulus for as long as they appear to work in a futile attempt to reassure the zombies that all is well.

The US will simply destroy the value of the currency, completely and irreversibly.  Why else would they pick a fight with Iran at this point?

That makes each dollar that one holds like holding an M80 firecracker with a lit fuse.

How long will you hang on?

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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Key Indicators for July 11, 2011

Copper Price per Lb: $4.32
Oil Price per Barrel:  $94.99

Corn Price per Bushel:  $6.81
10 Yr US Treasury Bond:  2.92%
FED Target Rate:  0.07% JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,554 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,506 TO THE MOON!!!
M1 Monetary Base:  $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,112,300,000,000 YIKES!!!!!!!

*See the MINT Perceived target Rate Chart.  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.

The Mint

A US Default? Into the Great Unknown

6/29/2011 Portland, Oregon – Pop in your mints…

Much has happened in the financial markets in this past week, and much will happen in the coming weeks.  But perhaps what is most notable is what has not happened.

Namely, the US Congress has not raised its self imposed credit card limit.  For an entity that is already $14.3 Trillion in debt ($4 Trillion of which reportedly comes due in the next 12 months) with no realistic plan to pay for it, this is suicide.  What are they thinking?

The two parties are in agreement one count, they need to save $2 Trillion dollars over 10 years.  Why this sum has been identified as the cure for what ails the country’s finances is anybody’s guess.  Unfortunately, but not surprisingly, there is no agreement as to how to get there.

Where will they find $2 Trillion? Tax the rich, screams Obama, repeating the eternal populist sentiment.  Stop spending, say the Republicans, using the circumstances to make a push for “limited government.”

Editors Note:  There is no hope for limited government with the current two party system in place, therefore the Republican’s stance is entirely a façade.

The President has taken the extraordinary step of asking Congress not to recess over the Fourth of July, as is their custom, calling their lack of agreement akin to his daughters not completing their homework.  While the President makes a quaint metaphor, we believe that Obama’s daughter’s homework is probably more challenging than Congress’s task of balancing the budget.

Obama Admonishes the GOP to stay and do its "homework

Balancing a budget is simple.  It just takes courage.  It seems that courage is in short supply in Washington DC these days.

Without internal fortitude to press the Americans along, a little external pressure is beginning to be applied.  First, the Treasury’s latest 7 year bond auction did not go as well as planned as investors demanded 2.43% to hold US paper for a sabbath cycle.  Without the FED at the table, it is hard to imagine how it could have gone well.  Bond Market participants are beginning to wring their hands.

Then comes word that the IMF is beginning to apply pressure, eloquently reminding the Americans of what they should do and why they should do it.  It is worth noting that the IMF appears to be the last to know about such things so we will excuse their apparent surprise at the lack of inaction (they are most likely not informed MINT readers like yourself):

“…the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets,”

Yeah, tell us something we don’t know.  And then, true to their holier than thou, infallible status, they give the Americans advice on how to do it:

“We see early political agreement on a comprehensive medium-term consolidation plan based on realistic macroeconomic assumptions as a cornerstone of a credible and cyclically appropriate fiscal adjustment strategy,”

Great!  Thanks for the incomprehensible and totally impractical advice.  This type of drivel simply solidifies our opinion that the IMF is a worthless institution and could be categorically ignored if it were not so insistent upon meddling in financial matters on a global basis.

Meanwhile, we are getting to see first hand what happens to a country that gives up control over its currency and then listens to the IMF for advice and is forced to take a loan from them. Greece, is giving the world a glimpse at how popular austerity is with the masses.

The scene that was carried out in the Middle East in the Spring is set to take place in Europe and England over the summer months.

How long until it crosses the Atlantic?

Another event that may occur as interested parties begin to reduce exposure to US Treasury debt is a liquidity crunch that will start in early July.  Apart from the debt ceiling uncertainty, the Dodd-Frank financial reform rules are set to begin to do their damage to the financial system on July 15th.

If they do not forestall these rules as many banks are begging them to do, the US and global economy will take their first tender steps into the great unknown, a world without political or real capital to act a a backstop for failures.

It will be dangerous and exciting.  And, just like a fireworks show, will be best enjoyed from a safe distance.  Keep your money close at hand, meaning out of banks and preferably in precious metals or anything tangible, and enjoy the show!

Stay Fresh!

P.S.  If you enjoy or at least tolerate THE MINT, please share us with your friends and family!

Key Indicators for Wednesday, June 29, 2011

Copper Price per Lb: $4.20
Oil Price per Barrel:  $94.93 A FAILURE TO INFLATE, WILL TREND LOWER

*See the MINT Perceived target Rate Chart.  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.