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.

US Government Fails to Reach Budget Deal, Bernanke Mumbles Rate Increase to Avert Widespread Dollar Dumping

US Government Fails to Reach Budget Deal, Bernanke Mumbles Rate Increase to Avert Widespread Dollar Dumping

4/6/2011 Portland, Oregon – Pop in your mints…

The past two days have been surprisingly calm on the currency front given what we are witnessing.  We have no illusions that reality will express itself in the currency markets anytime soon.  The currency market manipulation is the largest ongoing market intervention in the world.  Daily flows there dwarf the precious metals and US Treasury debt markets.  With so much riding on the currency markets (namely, the illusion of controlling the world), it should come as no surprise that this market, which moves $4 Trillion in daily volume, around 37% of it through London, is the most closely "managed" market on the planet.

What exactly are we witnessing?  At The Mint, we have our eyes trained on two events that, taken at face value, would cause generalized panic selling of the US Dollar.  This panic selling would first express itself in the FOREX, US Treasury, and Precious metals markets.  At this point, only the precious metals are sending a danger signal to the world.

On to the events.

The first event is the failure of Congress to take action on raising the US debt ceiling at this late stage.  Despite repeated calls from Ben Bernanke and Timothy Geithner that financial Armageddon will occur if this seemingly painless step is not taken.  This US Government's debt ceiling must be raised for the charade that is FED funded Government spending, via Quantitative Easing (money printing), to maintain the illusion of legitimacy.  Otherwise, the veil comes off and the Wizard of Oz is forced to leave the Emerald Palace.

What do you mean I've got to go?

The second is the failure to pass a budget more than halfway through the fiscal year.  Under normal circumstances, this would not be that big of a deal.  Strange as it sounds, the $3.6 Trillion dollar Federal budget has run on autopilot for longer periods of time in the past.  What is significant about this particular budget process is the dire straits in which the US Treasury finds itself.  Again, to keep the charade going, the government must make meaningful reductions in expenditures.  As if to underscore the point, Chuck Butler at the Daily Pfenning brought to our attention a glimpse of the fiscal insanity that passes as modern Government finances:

(CNSNews.com) – The US Treasury has released a final statement for the month of March that demonstrates that financial madness has gripped the federal government.

During the month, according to the Treasury, the federal government grossed $194 billion in tax revenue and paid out $65.898 billion in tax refunds (including $62.011 to individuals and $3.887 to businesses) thus netting $128.179 billion in tax revenue for March.

At the same, the Treasury paid out a total of $1.1187 trillion. When the $65.898 billion in tax refunds is deducted from that, the Treasury paid a net of $1.0528 trillion in federal expenses for March.

That $1.0528 trillion in spending for March equaled 8.2 times the $128.179 in net federal tax revenue for the month.

As you can see, the situation is extremely serious.  Yet the US Dollar remains the reserve currency for most of the planet, and the US Dollar index seems to be bouncing around on the floor.  The fact that this floor exists is a testament to the far ranging power of the Central Banks to control the FOREX markets.

But even the power of a Central Bank with the ability to print the world's reserve currency is not inexhaustible.  In a nod to inflationary pressures, Fed officials "raised the specter" of higher interest rates late Monday.

The Fed faces a grim choice, to sacrifice the US Dollar and most likely itself, by leaving interest rates low, or to sacrifice its Member banks, the US Government, and the US Economy (you and I, fellow taxpayer) by raising interest rates and saving the US Dollar to fight another day.

What will they do?  We do not pretend to know but that doesn't keep us from guessing!

Our 72 hour call at www.davidmint.com yesterday was for the US Dollar Index, which is completely a product of what occurs in the FOREX markets, to fall.  Check back on April 7 to see how we did.  We are currently 0 for 1, not counting our initial gimme, so currently it appears that one would do well to read The Mint's call and promptly bet against it.  In any event, we are glad to be of service, even if it involves frequently swallowing our pride.  Please share it with your friends.

If we continue on our current pace, the words "bet against The Mint" may become the akin to such sage advice as "don't bet against the Fed!"  Stay tuned at www.davidmint.com.

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, April 6th, 2011

Copper Price per Lb: $4.23
Oil Price per Barrel:  $108.34 SKYROCKETING!!!!
10 Yr US Treasury Bond:  3.48%
FED Target Rate:  0.09% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,457  SKYROCKETING!!!!

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,394
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.

US Government Borrowing Nominally Breaches Debt Ceiling as Congress “Argues Over a Bar Tab on the Titanic”, One step closer to an International conflict in Libya

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

The Western Governments and their respective Central Banks, (save Germany and Ireland), are in denial.  They are bankrupt.  You can only hide bankruptcy so long before economic law begins to reign.  Not even the world's most powerful monetary authority nor its most powerful military can stop it.  The laws of economics are as immutable as the God who put them in place.  

Our current speculation at The Mint is that the Western Governments are about to play what they believe to be their trump card, a large scale conflict otherwise known as a world war.  Why else would the US be "reluctantly" tangled up in a military operation in North Africa?  Now there is talk of an Obama Doctrine which, like the Monroe Doctrine, will give credence to further military intervention in far off lands.  This is a sad state of affairs, but as our wife gently reminds us if we begin to fret, "es lo que nos toca vivir (it is what we have been chosen to experience)."

Meanwhile, back at home, the US Congress continues to neglect its duties.  Former U.S. Comptroller General David Walker equated the current budget debate on Capitol Hill to "…arguing about the bar tab on the Titanic."  We love the analogy but shudder at what it implies.

As the bickering continues at the Federal level, the problems with US State and Local government finances are beginning to come home to roost.  Jamie Dimon, Chairman and CEO of JPMorgan Chase, thinks that 100 municipalities will not make it.

And out of nowhere, the latest US Treasury auctions sent the total outstanding US Debt over the debt ceiling.  OOOOOOOOPPPSSS!  According to zerohedge.com:

"the most recently disclosed total debt was 14,211,567,662,931.23 as of March 28. This excludes the settlement of all of this week's auctions which amount to $35 + $35 + $29 billion (including today) or $99 billion. Adding the two amounts to $14,310,567,662,931.23. As a reminder the debt ceiling is $14,294,000,000,000.00. In other words, the total US debt just passed the debt limit - break out the Champagne! Granted there is a buffer of $52.2 billion between the total debt and the debt actually subject to the ceiling, meaning that America is not in default, yet."

As we have speculated here at The Mint, Armageddon is upon the bond markets.  Perhaps not coincidentally, on Friday the EU gave approval to undertake military operations on the ground in Libya to support the humanitarian mission, which up until now has involved dropping bombs from jets. 

The world is about to undergo what historians will call a "fundamental" shift.  At least they will have the benefit of know what happened.

For those of us who are here now, "es lo que nos toca vivir."  We will sit glued to our seats watching the end of the world as we know it!

And I feel fine!  If you trust Jesus, you probably do as well.

Stay Fresh!

David Mint

Email:  davidminteconomics@gmail.com

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

Key Indicators for Monday, April 4th, 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.