Sunday, June 1, 2014

It is Junuary in the Land of Giants

6/1/2014 Portland, Oregon – Pop in your mints…

It is Junuary. For readers who have not had the pleasure of living in the Land of Giants, Junuary is the time of year when one looks at their calendar to find it clearly indicates the month of June, yet a look outside at the rain and colder temperatures seems to confirm one’s instinct that it is indeed January.
Fortunately, one way or another, Junuary yields to July, and the summer inevitably arrives in full force in the Pacific Northwest.

The US economy appears to be enjoying a Junuary of its own. In terms of monetary policy, it is January. On one hand, as GDP clocked in at a negative 1% for the first quarter of 2014, which in hindsight is quite natural when an economy that runs on a credit based currency created by fiat absorbs a loss of $40 Billion of anticipated new money flows with more reductions to come.

Yet at the same time, it is June. Our key indicators here at The Mint reflect a situation in which the effects of monetary policy are quite the same as they have been for some time now, from the standpoint of the real economy, Q1 was business as usual in this recovery. {Editor’s Note: Bitcoin, for all its detractors, has weathered the Mt. Gox bankruptcy just fine, and now sits at an astonishing $646 USD per coin. Yet for all its price resilience, economists continue to call for regulation. The point of Bitcoin is that it cannot be regulated, and the position that it can be regulated stems from a wrong understanding of the role of money in general and Bitcoin’s role in the monetary strata on the part of the regulators.}

Further, the FED’s favorite indicators such as Unemployment, which now sits at 6.3%, average hourly earnings, up 1.9% year over year, and headline CPI is up 1.6% with core CPI up 1.4%. Similarly, housing prices continue their meteoric rise and consumer confidence continues to improve.

Consumer Confidence Chart

So what is it? January or June? If you are a financial commentator, it looks like January, with financial disaster just around the corner despite the improved data.

However, if you look beyond the numbers to what is actually occurring, it is June, with a substantial risk of a financial forest fire. The tinder on the ground has been there for nearly 5 years now; the Federal Reserve’s relentless money creation has left fuel in every corner of the forest. The only reason the landscape has not gone up in flames as a result is that consumer have not dared start a fire of their own.

Now, consumers are beginning to start their fires, and the trifecta of lower unemployment, wage inflation, and CPI is about to catch the FED completely off guard. Their monetary medicine has a serious side effect, it creates what we refer to as a scorched earth economy, and the dose required to keep the failed system afloat during this last round may take the forest down altogether.

Junuary is here, and July is just around the corner. Inflation is about to become an important part of the economic landscape for the foreseeable future. At first, we may enjoy the pleasant kind, where housing prices and stock rise abnormally with pay bump. However, it will be followed by the unpleasant kind, where coffee and groceries take an outsized bite out of one’s paycheck. The summer will be very interesting indeed.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Key Indicators for June 1, 2014

Copper Price per Lb: $3.14
Oil Price per Barrel: $102.71
Corn Price per Bushel: $4.65
10 Yr US Treasury Bond: 2.48%
Bitcoin price in US: $646.01
FED Target Rate: 0.09%
Gold Price Per Ounce: $1,251
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 6.3%
Inflation Rate (CPI): 0.3%
Dow Jones Industrial Average: 16,717
M1 Monetary Base: $2,740,100,000,000
M2 Monetary Base: $11,218,600,000,000