Monday, November 8, 2010

Unemployment “Steady” and Has the Lone Ranger Arrived? Ron Paul vs. the FED

11/8/2010 Portland, Oregon – Pop in your mints…
Perusing the news we see that China and Germany, economies that actually produce more than they consume, are openly mocking US economic and monetary policy ahead of the next G20 meeting.  It is a wonder the G20 even bother to meet.  At least it gives protesters of all stripes a world stage in which to air their grievances, which is nice.  To us here at The Mint, the G20 resembles an uncomfortable high school reunion where the participants do their best to update each other on their progress and make feeble attempts to "get together and do something" before the next reunion.  Little if any meaningful real world action actually occurs or comes as a result of what happens at these meetings.  Which is probably a good thing.
Looking further, we see that the stated unemployment rate, one of our key indicators, remained unchanged at 9.6%.  We will elaborate later on the importance of what the unemployment rate as stated by the Bureau of Labor Statistics  means to dollar holders and the bond markets.  What is important is that, this stated unemployment rate (which is the product of many "adjustments" by the government statisticians) gives us the signal as to what the FED will do with regard to monetary policy.  High unemployment = loosening of monetary policy (more inflation) on the horizon. Lower unemployment = tightening of monetary policy (less inflation) on the horizon.  This current unemployment number, concerns about its accuracy aside, simply gives the FED the cover it needs to continue to needlessly inflate the currency at the expense of savers and bondholders.

In other news, from Fox we get word that Ron Paul, the only congressman with a firm grasp of monetary theory (not policy, but theory) is slated to be the next Chairman of the House Monetary Policy Subcommittee.  The wonderful, sweet irony for us here at The Mint is that the Monetary Policy Subcommittee is in charge of overseeing the FED, and Ron Paul, being a hard money proponent, would love to abolish the FED!  For those of you who doubt the existence or intentions of GOD, we submit this as evidence of nothing less than a miracle.
Of course this is all speculation, this business of abolishing the FED, but speculating is what we do here so we will indulge ourselves.  What would the market do if it had to contemplate that the FED would cease to exist?  Imagine the gyrations!  Currently, the market places a premium on things that are close to the money spigot of FED cash and credit, what would happen if those premiums evaporated?  Stocks, Bonds, and housing would collapse, so would items dependent upon military expenditure, the growth of export driven economies (China comes to mind), Social Security and entitlements would likely evaporate, it boggles the mind.  It would literally turn the world as we know it upside down.  That assumes that the world we currently live in is right side up which, upon further review of exactly what the Federal Reserve is, you may determine that the FED itself is the one who is turning the world upside down, and its being abolished would be a step in the direction of justice. 
But we are just speculating, of course, so we continue with our questions.  Would a world without the FED, or Central banking generally be a bad thing?  For most of us, we would lose our way of understanding money and markets and would remain lost unless we had a more solid base by which to judge relative values, such as Gold and/or Silver ratios to goods and services.  However, what society would stand to gain is INFINITELY valuable for future prosperity and, dare we say, peace.  First, we would gain a truer picture of relative values and second, it would regain a moral basis for the economy and society.
So, again we ask, would a world without Central Banking be a better place?  While it admittedly requires much imagination (there are few, if any, modern examples of this), our humble position here at The Mint is that it most definitely would be a different place.  And it would certainly be a better place for anyone prepared to produce, serve, cooperate, and live in a more Just and peaceful world.  More to come.
Stay Fresh!