Friday, March 18, 2011

G7 Meet to Stop Yen’s Dramatic Rise and the BLS Calls BS on its Broad CPI Measure

3/18/2011 Portland, Oregon – Pop in your mints…
The G7 Central Bankers have called an emergency meeting to "do something" about the "skyrocketing Japanese Yen."  This meeting is simply their latest attempt to combat reality.  The reality of the situation in Japan is that they are dealing with a catastrophe.  When one is dealing with a catastrophe, the next prudent step, after all of the immediate crises have been contained, is to take stock of the situation.  By taking stock, we mean that one takes note of what was lost and, more importantly, what one will need in order to restore things to an acceptable level of comfort.

Comforts cost money.  In Japan, to replace these comforts the average person needs Yen.  They will either get this Yen by making a claim with their insurance company or selling assets to raise cash.  With damages of nearly $15 Trillion Yen (roughly 3% of Japan's GDP) and counting you can imagine how the demand for Yen is, well, about to skyrocket.
The Japanese people are still dealing with the catastrophe.  Speculators in the currency markets are, as always, one step ahead of what must happen and are sapping liquidity, in terms of Yen, at a rapid pace.  This activity, taken at face value, will presumably wreak havoc for Japanese Government Bond prices, the prices of stocks traded on the Nikkei, and the US Dollar.  These three markets will crash if nature is allowed to take its course.  You see, in the tipsy turvy world of currencies, to buy a yen more often than not means that a US dollar, a JGB, or a stock listed on the Nikkei is sold on the other side of the trade.
The most sought after currency in the world, at least until the G7 meet tomorrow
The accelerated selling of dollars, as Jim Rogers points out, could cause the endgame scenario for the US currency to swiftly come upon the world.  Mr. Rogers goes so far as to call this a "Moment of Truth for the dollar."
You can see the brief interview by clicking here.
Of course, as Mr. Rogers points out, it may be time to buy the dollar, if for some reason it is to survive as a top tier currency.  We have lived just long enough to know that anything is possible.
The G7 meeting today is VERY IMPORTANT.  It should not be, if only the world had not left the embrace of sound money 40 years ago, but unfortunately, it is.  For the G7 will essentially decide whether to keep the Dollar on life support or to pull the plug.
What will they do?
Meanwhile, the Bureau of Labor Statistics (BLS), the legion of bureaucrats who are charged with cranking out data in order to support FED policy, appears to be starting its own form of political protest against the loose dollar policies followed by the Federal Reserve.  After faithfully cranking out the core CPI, a key statistic here at The Mint, for years and watching it slowly become distorted into the puppet statistic that it now is, they came out with a data point in 2002 called the "Chained Consumer Price Index" which takes into account a rolling average of food and fuel costs, which the core CPI now blatantly ignores.
This index hit a record high in February, confirming what most average Americans already know:  It has never been more expensive to live in the Land of the Free.
Will we be Brave enough to return to sound money?  You, fellow taxpayer, can take a step in that direction with just a few simple keystrokes.  APMEX, our affiliate, is running a contest.  They are giving away one 1 oz gold eagle coin each month.  All you have to do to enter is register by clicking this link and filling in the blanks.  You can register to win once per month.  If you so desire, click here and Register at APMEX.com Today!
By definition, the black hole of debt will always grow at a more rapid pace than the worthless currency that is printed in an attempt to fill it.  If the black hole collapses (i.e. widespread default occurs), hyperinflation will occur quickly.  If currency becomes scarce, people will find another medium of exchange, likely gold and/or silver.
Either way, the world will be out of this mess before long, so hold on to your hats, it is bound to be a wild ride to the other side!
Stay Fresh!
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Key Indicators for Friday, March 18th, 2011


*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.