Tuesday, November 9, 2010

Is The World Waking up to Gold?

11/9/2010 Portland, Oregon – Pop in your mints…
The cold, rain, and accompanying haze began to move into Portland.  The weekend was a constant battle as the sun tried to shine on as the clouds regrouped and doubled their gloomy offensive.  In between the action we could see geese following their collective biological GPS south for the winter.  In the war for seasonal climate domination, autumn has begun the week firmly in control.
Does this surprise anyone?  Of course not!  The weather in the Northern Hemisphere has followed this pattern for as long as anyone can remember.  It is interesting to see what the weather will bring each day as the seasons change but if the current season is known, there is no question as to where the weather is headed.  In Portland, it is clear that we are going to get slowly and thoroughly soaked at various temperatures that can generally be called "cold or colder" over the next several months.  It is referred to in these parts as winter.  
One of our unstated goals here at The Mint is to gain an understanding of 1) where we are located and 2) what season we are in as far as money and investing is concerned.  It is not as hard as you may think (or your author's inner laziness would have dissuaded him from the task long ago).  However, it requires paying attention and, generally, turning off the TV.  Anyone watching weather reports can attest to their day to day accuracy, why would market commentary be any different?  As for commentary on weather, rain is a curse to the person planning a barbecue but a blessing to the person who has many acres of crops to care for.  The news is relative and must be applied to one's situation to be anything more than entertainment.
With this understanding, we look out the window this morning and see that the fiat geese are flying over head in the battle between the world's faith based fiat currencies and Gold (or Silver, depending upon your location) for control of the position of money in people's minds.  A couple of headlines caught our attention.  Years ago, this would have been unheard of but that was back when they were still pretending that the dollar was a feasible money alternative.  Since August of this year, they are not even pretending anymore:
China, Brazil, and Germany continue to mock the US.  From the AP:  China knocks US plan to pump money into system 
Even consumers smell a rat and are throwing the big bank's rhetoric in their face.  From the The Huffington Post:  Consumers Should Be "Too Big to Fail"
You see, this touches on what is known as "moral hazard."  A fiat currency, like anything else, only has value if you limit (or at least pretend to limit) its supply.  It used to be that only the FED's closest friends knew that it could print money infinitely.  Now that bailouts of the banks and every other "Too Big to Fail" industry are common knowledge, why should printing money and giving it to the average Joe or Jane be a problem?  They did it for the banks and it didn't work, why not give it straight to the consumers?  If this were the way to solve economic problems, wouldn't printing more money for consumers be a logical solution?  Oh if it were only that easy! 
The Future of Pocket Change?
It has been a long and glorious summer for Western Central Banks and their Member Banks, Western Governments, and the US Empire.  All summer long there have been barbecues, sporting events, large scale remodeling projects (i.e. stimulus), days at the pool, and all types of leisure activities.  After a brief cold snap in 2008, the Indian summer has stretched this period on longer than anyone imagined.  A lot of money and power has flowed into unproductive hands at the expense of productive ones.  But now fall has come, and what does the leisurely class have to harvest?  With public opinion beginning to flow against fiat currencies, they may be reaping nothing but soggy paper promises.  At a minimum, it will take a lot more of those paper promises to get what the productive hands are producing!
Autumn and winter are on the way.  We encourage you to mute the weather man and step outside wherever you are to see what is on the horizon.
Stay Fresh!