Wednesday, December 7, 2011

Losing even blind faith in the Euro and USD, remembering Pearl Harbor

12/7/2011 Portland, Oregon - Pop in your mints…
Today we continue to watch the relative calm in both the stock and bond markets with our jaw hanging just inches from the floor.  In our estimation, the calm, or homeostasis, is perhaps the only thing that is completely inexplicable under the current state of affairs.

Just what is that state of affairs, you ask?  A few off the top of our head:

-          Downgrades or the threat of downgrades to nearly every sovereign bond on the planet
-          A resulting dearth of quality assets to be used as collateral in the financial system
-          A debt based economy collectively attempting to live within its means
-          The resulting collapse of the debt based economy
-          An imminent war in Persia

But these are simply large events that are leading to a great number of small decisions which are in turn causing more unforeseen large scale events, etc.  The result being that, much to the chagrin of the financial authorities, a majority of the world is embracing frugality.

A quick recap for those are joining us for the first time, the powers that be, the current currency regime, rely on an ever expanding amount of debt in order to continue to function.  It is a system that is based on trust and blind faith, for it offers nothing of lasting value.

In the short term, the system, if functioning properly, allows a great deal of power to be centralized.  It also encourages, albeit indirectly, nearly every sort of vice and shuns virtue.  The system tends to reward bad behavior and to promote into leadership those who are least likely to possess a moral compass.

The system is no longer functioning as designed.  The reach of the currency regime is shrinking and will continue to shrink until the only ones who maintain faith in it are the most morally decrepit individuals and institutions on the planet.  They will continue to trade their increasingly worthless paper until they realize that they are simply shuffling paper amongst themselves, long after they have completely lost any semblance of control that they had on the situation.

Much of this paper shuffling is running through the stock and bond markets, and seemingly these markets are calm.  However, the illusion of stability is being maintained at the cost of trillions of new dollars and Euros being created which are rapidly losing value against anything tangible.

In the United States, the dollar will begin to significantly deteriorate sometime in March, according to our crude calculations.  The Euro, whose handlers have been late to start the game of shameless currency debasement, is more likely to implode with the European banking system as they gag on the sewage of assets that are on their balance sheets.

The great irony of the current currency regime is that a currency which has attempted to maintain its value will become extinct, shunned for one whose value is plummeting.

The Euro and US Dollar are showing the world the two paths that a currency regime can follow to destruction.  It will be interesting to see which car ceases to operate first, the motor that runs out of gas or the one that has its gas tank overflow and goes up in flames.

Either way the economy, which is the motor of the vehicle in the metaphor we have just jumped to, is currently being retooled to run on another type of combustible, one that will last much longer than the current blend of currency gasoline which is nothing more than flammable vapors.  If the currency, and the assets which back it have real value, the economic motor will be allowed to run at a more even pace.

Gold and Silver, ready or not, here we come.  Until then, the economy is sputtering and running on fumes.

Pearl Harbor

We cannot let today pass without a few brief words about Pearl Harbor.  Like 9/11, Pearl Harbor served as a national wake-up call.  Both served as the justifications for the largest military actions and suppressions of freedom (which seem to go hand in hand) that America has known. 

The explosion of the USS Shaw during the attack on Pearl Harbor, courtesy of the US National Archives

As this day that lives in infamy passes, we pause to honor those who perished in these events and the subsequent military actions which occurred as a result of these events.  May they rest in peace, and may mankind learn to avoid the suffering and sacrifices they had to endure at all costs.

War is not necessary and must be undertaken only after every other attempt to engage and deter an aggressor has been exhausted.  It is an act of desperation, not a form of economic stimulus, and it troubles us that the widespread loss of life and property has been referred to as the force which lifted the US out of the great depression.

Those who hold to such a theory are not only following an indefensible logic, they are hurling the ultimate insult to men and women who have fought to defend Freedom throughout history.  For any “stimulus” which has been observed is not the result of the decision of a politician to go to war, rather, it is a result their tireless efforts and indomitable spirits which lifted this and many other countries from the ashes of war.

We pray that more of these heroic efforts and indomitable spirits will not be squandered in Persia.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at http://www.davidmint.com/

Key Indicators for December 7, 2011

Gold Price Per Ounce:  $1,742 PERMANENT UNCERTAINTY
M1 Monetary Base:  $2,155,200,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,627,300,000,000 YIKES UP $1 Trillion in one year!!!!!!!