The Irish Take the Hatchet, Scalpel, and Plunger to The National Budget, JP Morgan to corner the Copper Market?

12/8/2010 Portland, Oregon – Pop in your mints…

Yesterday we awoke to some wonderful news regarding the US economy for which we are still pinching ourselves for fear of waking up.  We will explore this more in the coming days but it appears that Obama and the GOP have finally got stimulus right!

In other news we see that JP Morgan has been extremely busy accumulating Copper for its clients.  What does it see on the horizon?  Is it simply trying to offset its ever-increasing Silver liabilities?  One can only imagine.  But we do know one thing for sure, that so much of one commodity controlled by one entity, albeit in trust, is a very bad thing.  Keep your eye on the price of Copper, one of our Key Indicators here at The Mint.

Today we are feeling greener than usual, not environmentally conscious but rather, physically ill.  It appears the Irish and, by extension, other heavily indebted Euro-zone governments think that they can appease their creditors by hacking and slashing their operating budgets to the bone and increasing taxes on their populace.  This creates a viscous cycle and one that, through the latest tax deal, we appear to be averting here in the US.  Not that government belt tightening is a bad thing, it is, on the contrary, a wonderful thing for the general population.  On that note we are reminded of a hilarious Saturday Night Live skit aired during the last presidential campaign in which Obama and McCain debate as to whether they would take a Hatchet or Scalpel to the US Budget deficit.  You can enjoy it here
at around minute 3:30:

Less government activity is generally a good thing for everybody, including the government.  What makes us want to lose our lunch over the Irish / Euro situation is how eager the countries are to bail out their banks and then turn around and saddle the general population with these bailout costs, not matter how exorbitant.  Famed Investor Jim Rogers put it well in a recent interview:

"You need to let Ireland go bankrupt. They are bankrupt, why should innocent Germans, Poles or anybody pay for mistakes made by Irish politicians,"

At the heart of the matter is accountability.  In spiritual matters, we all need to be bailed out of original sin by the blood of Jesus.  In material and economic matters, there is little if any benefit to large scale bailouts.  Anyone with children will understand that as long as the bailouts continue, there is little incentive for the misuse of funds to be corrected. 

The situation with regards to accountability, or lack thereof, at a national government level is extremely serious.  THESE BANKS, AND ANY GOVERNMENT WHO INSISTS ON BAILING THEM OUT, MUST BE ALLOWED TO FAIL FOR HUMAN PROGRESS TO CONTINUE.  There is no making good on the debts that have been incurred.  It must be liquidated, written off, and forgotten about in order for progress to resume.  Bad investments must be liquidated!  This is what the Irish and other heavily indebted Euro-zone nations need to understand.  Their choice is clear.  They are choosing a currency over sovereignty.  No matter how you analyze it, that is the inescapable conclusion.

In retrospect, these governments relinquished their sovereignty when they agreed to join the Euro.

Continued bailouts are quickly moving from being considered necessary to questionable.  Soon, any politician that proposes them will be recognized as insane.

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

P.S.  If you enjoy or at least tolerate The Mint please share us with your friends, family, and associates!

Key Indicators for Wednesday, December 8th, 2010

Copper Price per Lb: $4.00
Oil Price per Barrel:  $87.71
10 Yr US Treasury Bond:  3.17%
FED Target Rate:  0.18%

Gold Price Per Ounce:  $1,401

MINT Perceived Target Rate*:  5.25%
Unemployment Rate:  9.8%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  11,359
M1 Monetary Base:  $1,763,900,000,000
M2 Monetary Base:  $8,707,500,000,000

*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.