No Blood, No Life - The Lifeblood of The Currency Regime Running Dry

4/1/2011 Portland, Oregon – Pop in your mints…

"The life of every creature is in its blood..."

Leviticus 17:14

There is so much happening! maybe it is just April fool's day, maybe something more.  We left off on Tuesday attempting to explain why debt (i.e. slavery) is essential to the survival of a currency regime.  The expansion of debt has been the sole goal of the Western Governments and their Central Banks ever since the Central Banks got their foot in the door on currency matters.  Given what we know about government efforts and the inherent laziness bred by the money lending profession, it should come as no surprise that they are failing to attain this sole aim.

Until autumn of 2007, they were succeeding.  People saw credit as a boon, a way to bring future consumption into the present, which is exactly what it is.  In this sense, credit is like time travel.  Then, out of nowhere, the people decided that they had enough debt and decided to begin paying it down.  It turns out you can have too much of a good thing, even consumption.

Take this exhaustion of consumption together with Mankind's awakened desire to be free and the debt peddlers don't stand a chance with the people.  Seeing that the game with the public was up, the Central Banks turned to the "People's Government" to further enslave them.  This is where we are today.

Unfortunately, the Western Governments are insolvent, so the Central Banks are now printing money (popularly known as quantitative easing or QE) in order to keep the system of debt on life support.  What the world is coming to realize is that the existence of QE = the failure of a Central Bank's currency regime. 

The Central Banks are now fighting a losing battle against a predominant bias to deleverage (pay down debt).  Their game was easy when they were riding the trend.  They will now go bankrupt, in shockingly rapid fashion, trying to fight it.

Justice Preparing to Mete itself out

 But a Central Bank does not go bankrupt the way a normal institution goes bankrupt.  They do not come out and announce insolvency, send notices to creditors, and wait for the judge to divide what is left of their assets.  Oh no, fellow taxpayer, it is much more entertaining than that!

The Central Bank's only judge is merciless and quick to execute both judgment and sentencing.  That Judge is called "public opinion," and you can read his verdict against the currency regime in the commodity markets over the next two months.

Will war in the Middle East be enough of a distraction?

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

P.S.  Check out our new 72 hour call at www.davidmint.com!

Key Indicators for Friday, April 1st, 2011

Copper Price per Lb: $4.26
Oil Price per Barrel:  $107.94 SKYROCKETING!!!!
10 Yr US Treasury Bond:  3.45%
FED Target Rate:  0.10% DESPERATION!!!!

Gold Price Per Ounce:  $1,429

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,377
M1 Monetary Base:  $1,911,900,000,000 DESPERATION!!!!
M2 Monetary Base:  $8,980,000,000,000

*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.

A Bear Market for Confidence in Governments, the Life Blood of a Currency Regime Explained

3/29/2011 Portland, Oregon – Pop in your mints…

As events in the Middle East continue to deteriorate into violence and the world powers stand around and scratch their heads as the mess at the Fukushima Daiichi nuclear plant in northern Japan continues to spread, some things are starting to come into focus.

First, whatever confidence that people had in Governments across the globe is beginning to wane.  This is partly because many governments are either asking too much of their citizens and giving to little or asking too little of their citizens and giving too much.  Both situations have their respective breaking points and in many parts of the world that point is rapidly being approached.  The former situation is reaching its breaking point in the Middle East and the latter in Japan, the US, and Western Europe.

At The Mint we see the Governmental institutions as a mere mask for the currency regimes that run them.  Once a country hands over the right to mint its coinage (sometimes known as seigniorage), it has taken the first and irrevocable step towards surrendering sovereignty.  In Europe, governments seem to be falling peacefully (resigning) by the week.  Even Canada got in on the act with a recent "No Confidence" Vote, which is worded as if to make our point for us.

In the face of near weekly governmental capitulation, you would think that the Euro rulers would spend their time and ink drafting plans to fill the leadership void being left by the government's departure, right?  Not quite.

Instead, the time and ink is being spent formulating a plan to make sure that the respective governments do not default on their debt.  In fact, ever since the current "Financial Crisis" began, a majority of the measures taken by the governments and Central Banks have been bent on achieving two goals:

1. Assuring that no government, investment bank (save Lehman Brothers), insurance company, or household defaults on its debt.
2. Encouraging these same governments, investment banks, insurance companies, and households to take on an even greater debt load.

Does this seem insane?  On the surface, of course it does.  And it is!  If an entity is bankrupt, it is bankrupt.  The world generally would be better off liquidating the assets of these insolvent entities and getting them into productive hands.  Nearly everyone in the world, that is, except for the currency regimes.

The currency regime (such as the US Dollar, the Euro, or the Yen) has but one incredibly simplistic goal, to proliferate debt.  A currency regime creates demand for their product (a concept that they call currency) by enticing governments, companies, and households to create debt instruments which can only be settled in the regime's currency.

This is the only logical explanation for the response of Governments and Central Banks alike to the financial crisis.  THE CURRENCY REGIME'S VERY EXISTENCE IS DEPENDENT UPON THE EXISTENCE OF DEBT PAYABLE IN THE REGIME'S CURRENCY.  Decreasing debt = Decreasing demand for currency with which to pay it.  This is why there is an active effort to make it more difficult to declare bankruptcy.  It is in the interest of the regime to have a debt "restructured" rather than extinguished.  To lighten the slave's burden, rather than set them free.

Without the need to settle debts in the currency, the currency holders would no longer be subject to the most compelling argument to actively seek to earn the currency in question, to pay a debt.  Without this obvious utility to the holder, he or she would begin to look for reasons to hold the currency in question.  At this point, they would be hard pressed to find one.

Now that we understand the basic interest of the currency regime, it follows logically that the regime will only create ENOUGH CURRENCY TO PAY DEBTS AT A PACE WHICH IS SLOWER THAN THE PROLIFERATION OF THE AGGREGATE AMOUNT OF DEBT INSTRUMENTS OUTSTANDING.  This is what the FED failed to do and precisely why it finds itself resorting to extreme measures such as QE to keep the charade going.

Why would they do that?  In layman's terms, it is to keep the carrot out in front of the horse so that the horse keeps running forward.  In order to continue participating in the system, one needs the illusion of being able to one day extinguish the debt with which they are saddled.

QE Proves that Currency Regime is Irreparably Broken

Guess what?  It is not working.  If it was, there would be no need for QE.  The very existence of QE is evidence that the currency regime is irreparably broken, just like the Fukushima Daiichi nuclear plant.

On paper, the Central Bankers are able to measure in exact terms the right amount of currency to satisfy the outstanding debt at a rate that keeps everyone in "the game" and the horses running at a sustainable pace.

In the real world, the horses run after the carrot and often die before catching up to it.  Before the Central Bank can find another horse to saddle, the wolves come and eat the carrot up.  The bankers string up yet another carrot in an effort to continue the game.

The growing imbalances in the currency and debt markets are about to showcase what happens when the horses and wolves no longer want to play this sordid game.

Trust us, you won't want to be on the field.

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 Tuesday, March 29th, 2011

Copper Price per Lb: $4.33
Oil Price per Barrel:  $103.41
10 Yr US Treasury Bond:  3.45%
FED Target Rate:  0.13%

Gold Price Per Ounce:  $1,421

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,198
M1 Monetary Base:  $1,843,700,000,000
M2 Monetary Base:  $8,984,700,000,000

*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.

NATO Take Over in Libya? Déjà Vu in Syria, the FED to lose an Inflation Hawk in October – Will the Dollar still exist?

3/28/2011 Portland, Oregon – Pop in your mints…

Something big is definitely afoot.  There is just too much chaos erupting at once for there to be a logical explanation.  Maybe the Mayans where right to stop their calendar at 2012, if the current pace of change continues, the world we grew up in will be no more, and that may not be such a bad thing.

Change is good, it is healthy, but it is rarely pleasant.  Just ask Mubarak, Ghadaffi, and now al-Assad.  Yes, like a broken record, it appears that Syria is about to join the list of Middle Eastern  "Nations" (we use the imperialist term loosely) to experience a regime change.  Apparently the protestors want something known as "Democracy," which we loosely define here at The Mint as the ability to vote entitlements for oneself at the expense of others.  Somebody should warn the Syrians to keep the receipt along with their change.

Whether they want Democracy or not, the mere mention should be enough reason for the US to entangle itself militarily at some point.  Now that the President of the Americans can unilaterally decide to engage the nation in open ended warfare (let's call the US role in Libya what it really is), we should probably expect more of it.

But doesn't the President of the US need authorization from the People to engage in such nonsense?  Four short years ago, two congressmen with aspirations of occupying the nation's Executive role seemed to think so:

How things change once one is in power!

President Obama seemed to forget that He is not in Illinois, and the US Military is not the Chicago Police Department.  To launch a military strike, there is a certain protocol to be followed.  He, um, didn't follow it. 

The situation in Libya gets more complex by the day.  Perhaps realizing that He "forgot" to ask for permission to launch military exercises against a country that does not pose a direct threat to anyone but themselves, the President was all to eager to pass off the hot potato to NATO.  Once NATO is in command, the US is simply "assisting its allies."  Problem solved, right?  Not so fast.  Turkey is a member of NATO, and they are not exactly on board with the mission.  Ditto for Germany, who called back two of their naval vessels from a NATO exercise in the Mediterranean.

So the potato is now stuck being passed from the US, to France, to Britain, and so on until they can get the other members to play along.  Will Obama's oversight be the end of NATO?  With so much changing, anything is possible.

Against this backdrop, Thomas Hoenig, one of the few FED Heads who seemed genuinely concerned about inflation and protecting the value of the dollar, will be retiring in October.  Apparently the man has hit the FED's mandatory retirement age.  Who will replace him?  It will probably be another stuffy academic like William Dudley, who was deservedly heckled at a recent speech in Queens for citing the price of the IPad2 as proof that there was no inflation.

With another defender of the dollar out of the picture, one has to wonder if the dollar as we know it will even exist in October.  Like a man wearing his bathrobe to work on a Casual Friday*, the FED has lost all restraint.  As we have said in this space before, the FED has no choice but to mercilessly devalue the dollar and hope for the best.  In our Casual Friday metaphor, the dollar is moments away from being fired as the world's reserve currency.  If there was ever a time or a reason to sell dollars and buy, well, anything tangible, it is upon us.

As if to underscore our point, Silver, one of our favorite tangible things, is up 12.5% in the past month alone.

March Madness, Indeed!

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!

*(for non-Americans, this is a term which refers to a company relaxing its normal dress code on Fridays so that employees can wear more comfortable attire, i.e. not three piece suits.)

Key Indicators for Friday, March 28th, 2011

Copper Price per Lb: $4.36
Oil Price per Barrel:  $105.14
10 Yr US Treasury Bond:  3.33%
FED Target Rate:  0.13%

Gold Price Per Ounce:  $1,430

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,221
M1 Monetary Base:  $1,843,700,000,000
M2 Monetary Base:  $8,984,700,000,000

*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.