US Government on the Brink of Shut Down, a Large Scale Debacle in the Making

4/7/2011 Portland, Oregon – Pop in your mints…

Oh fellow taxpayer, we are getting our money's worth, so to speak.  As of this writing, President Obama, House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nevada, who have become the key figureheads in what is essentially an ideological battle over an extremely small portion of the Federal Budget, still have not come to an agreement as to what the Federal Government's budget should be for a year that is already more than halfway over.  

To say that this is ridiculous is an understatement, but not for the reasons that may immediately come to mind.

At The Mint, we do not marvel that representatives of such ideologically divided constituencies should fail to come to an agreement as to how to spend money.  This is normal.  What is abnormal and what make these circumstances a "Debacle in the Making," as we like to call it, is the fact that these representatives hold the purse strings to roughly $3.6 trillion dollars, or roughly 25% of the nation's GDP.

The mere thought of it fills us with awe.  Imagine, sending 25% of your gross income to a group of 535 people (or 0.000174% of the US population) and expect it to be distributed in a manner that maximizes the general welfare of 308 million persons.  Wait a minute, those of us who live and work on American soil do not have to imagine it, this is our reality!

The implication of our insane system, then, is that these 535 persons are extremely wise, clairvoyant, and devoid of personal ambition.  As Yakov Smirnoff would say, What a Country!

Naturally, if someone is paying 25% of his or her income for something, they are likely to be somewhat demanding as to what they are getting for their money.  Some expect a pension in the form of Social Security, health care, education, food, road maintenance, and defense against foreign invasion.  Still others expect to land a large contract to build new housing or infrastructure or to launch a spaceship. 

And the list goes on.  With 25% of the nation's income theoretically at their disposal (in practice nearly 45% of it is borrowed or created out of thin air, as is now the case), one can imagine that the demands made of these 535 persons are numerous and incessant.

Yet what puts this house of cards in jeopardy, apparently, are disagreements over whether or not to fund abortions, regulate the very air we breathe, and frivolous warfare in far off lands.

Yes, with all of the pork at the disposal of the group of 535 which could be cut from the Federal budget, one side cannot cede funding Planned Parenthood and the EPA, while the other side cannot cede funding the Military.  At stake is a mere $12 Billion, or 0.003% of the giant albatross that is the US Federal Budget and the activities that it represents.

And they are already more than 6 months late?  With this sort of leadership, we may be better off if the entire thing shut down.

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

P.S.  Please check out our latest 72 Hour Call at www.davidmint.com

Key Indicators for Thursday, April 7th, 2011

Copper Price per Lb: $4.38
Oil Price per Barrel:  $110.31 SKYROCKETING!!!!
10 Yr US Treasury Bond:  3.56%
FED Target Rate:  0.09% FED LOSING CONTROL OF TARGET RATE!!!!

Gold Price Per Ounce:  $1,458  SKYROCKETING!!!!

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,409
M1 Monetary Base:  $1,978,000,000,000 DESPERATION!!!!
M2 Monetary Base:  $8,961,500,000,000

*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.