Huddled Masses of European Capital Fly to US Shores

7/6/2011 Portland, Oregon - Pop in your mints…

The crisis in the Eurozone is getting too big to ignore.  The gig is up, the Greek Government is in default, and Portugal and a host of private lenders, amongst them the ECB itself, are on their way there as well.  So certain is this fact that Moody’s even went on record and took the small step of downgrading Portugal’s debt. 

Naturally, the Europeans  can’t believe it.  Don’t they pay good money for these ratings?

Whatever Moody's reasons for stating the obvious, the news is having the effect of sending money fleeing across the Atlantic to US Markets any which way it can.  Commodities, Stocks, Bonds, even Real Estate are being bid up today as the European Bond Market collectively exhales capital.

For the moment, inflation on this side of the pond is only moderately accelerating as much of the cash is trapped on the Ellis Island of the US Banking system at the FED member banks.

Send me your tired, wadded up Euro capital looking for a home!

But as any banker knows, if you can’t lend the money then excess cash begins to crush your balance sheet.  This is why it is probable that the US will participate in a Eurozone bailout.  Even the threat of US intervention should get this newly immigrated capital looking for a new home shortly after arriving.

The trillion dollar question is now begging to be answered, will the US avoid default and keep the mushroom shaped debt sponge intact or will the current stalemate in Congress finally put the squeeze on the debt sponge and unleash the 500 year inflationary flood onto American shores from which there is but on escape (buy gold, silver, or anything real)?

We may know the answer sooner than we think!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for July 6, 2011

Copper Price per Lb: $4.30
Oil Price per Barrel:  $97.21

Corn Price per Bushel:  $6.47  
10 Yr US Treasury Bond:  3.10%
FED Target Rate:  0.08%  JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,529 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,626  TO THE MOON!!!
M1 Monetary Base:  $1,954,300,000,000 RED ALERT!!!
M2 Monetary Base:  $9,098,400,000,000 YIKES!!!

*See the MINT Perceived target Rate Chart.  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.