Monday, March 7, 2011

US Jobless Rate Prints Lower, Prepare for a FED Target Rate Hike!

3/7/2011 Portland, Oregon – Pop in your mints…
On Friday the world rejoiced as the US Unemployment rate dropped from 9% to 8.9%.  Amazing, right?  Look out, the recovery on main street is underway!  So amazing that the Dow dropped 150 points and Gold rose $12.  Even Treasuries rose mildly, defying all logic.  What does it mean?  Why is this good news immediately followed by action that, in market parlance, is a predominant flight to safety?
For the most part, what happens daily in global markets is rubbish.  It is the product of an insane combination of Investment Banks robbing their clients by front-running their trades, hot money flashing in and out without warning, panicked responses to margin calls, window dressing of mutual fund investment results, and plain old fashioned gamesmanship.  All of this action literally dwarfs the honest investor who is simply trying to "buy and hold" what they think is a good investment.  For an interesting narrative of these phenomena, please check out this link from zerohedge.com:  A Deep Walkthru for Silver Manipulation – Redux.
So we must look beyond the daily grind and grasp at good old common sense to understand what is going on.  Before we begin our rambling explanation, we must let you in on a secret:
We don't know what is going on.  But we take courage, if not comfort, in the fact that neither do Bernanke, Geithner, Obama, Greenspan, Trichet, Merkel, or any of the other people who are paid by the public to know.  Our bumbling ignorance, on the other hand, is done on our own nickel.
Now that the secret is out, we will tell you what we think is going on.
The FED is going to increase their Target Rate.  Ben Bernanke doesn't want it to, for reasons documented here at The Mint.  Neither do the FED's member banks.  To Bernanke, it means that he won't get to test his academic theory that the only reason the Great Depression got the "Great" adjective was that monetary and fiscal stimulus was shut off too soon.
For the member banks it is much more serious, they will need either TARP 2 or a miracle to survive any increase in short term rates.  Given the popularity of TARP, a miracle seems more likely.
Despite their objections, the markets are beginning to trump even the most powerful monetary authority on the planet and his evil legions of member banks.  The trump card?  Skyrocketing gold and silver prices.  People are beginning to understand the scam that is the global financial and banking system and to put their money into hard assets like gold and silver before the monetary authorities can sell the next version of their monetary scam to the public. 
When people get their money out of the banking system and into hard assets, they are no longer fleeced at will by the monetary regime.  They are free!
An economically free people is the last thing that the monetary authorities want, and they are willing to sacrifice the weak among their member banks to assure that the people remain enslaved.
The FED Funds Rate Categorically Moves Inversely To the Unemployment Rate - Courtesy of Calculatedriskblog.com
The decrease in the unemployment rate, as small as it is, gives Bernanke a theoretical basis to raise the FED short term rate.  The increase, or the threat of an increase, is enough to bring the Dow down as money floods out of equities as banks increase cash holdings in anticipation.
More importantly to the monetary regime, the increase will bring down the gold and silver price, making staying in the banking system look like a better option.
Don't take the bait, fellow taxpayer!  Rather, when the price drop comes, our guess is it will arrive in May or June, see it as a buying opportunity for the metals.  If you need proof that precious metals serve as a better form of money and savings than bank deposits, you can investigate the past 5,000 years or so of human history to see which paper currency has maintained its value better than gold or silver over that time period. 
Or, you can save some time if you just take The Mint's word for it!
Stay Fresh!
P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!
Key Indicators for Monday, March 7th, 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.