7/13/2011 Portland, Oregon - Pop in your mints…
Today Bernanke went before the US Congress and gently laid down the gauntlet. If Congress fails to raise the debt ceiling soon (by August 2nd, we are told), it could have catastrophic effects on the economy.
Given that nearly the entire banking system on the planet depends upon the US Treasury being Grade A debt, Mr. Bernanke may again be credited with the understatement of the year!
We pity Mr. Bernanke. He is like a pilot flying an Airbus aircraft that is stalling at extremely high altitute. We don’t know much about aircraft but we understand that Airbus aircraft, with their European design slant, do not give a pilot much freedom to override the plane’s automated systems. It assumes that all of the necessary corrective actions can be pre-programmed and, if the plane begins to stall, the computers take over to attempt to correct the problem.
Actual Airbus pilots are free to dispute the merits of our oversimplification. We just needed a metaphor.
Back to Bernanke, with the autopilot mechanism failing, the pilot does not know what to do. If the US Congress had dutifully raised the debt ceiling as it had 94 times in the past, as the Airbus autopilot manual said it would, Bernanke’s reaction to the most recent US jobs report would have been to simply propose a third round of quantitative easing (read: money printing or counterfeiting of currency).
On the Airbus, he would get on the intercom and say “please fasten your seatbelts until we pass through this patch of rough air.”
However, the failure of the US Congress to reach a deal to raise the debt ceiling has thrown a wrench in his plans. What is his plan now? Think helicopters, Zimbabwe, Gideon Gono.
Mr. Bernanke is going on a safari!
Yes, fellow taxpayer, with each day that passes, it is becoming clearer to the majority that Mr. Bernanke is unwittingly following in the footsteps of none other than Gideon Gono. Some may recall that Mr. Gono, the Governor of the Reserve Bank of Zimbabwe, was forced to “do extraordinary things that aren’t in the textbooks,” meaning that he oversaw the printing of large amounts of his country’s currency which produced an amazing modern example of hyperinflation.
In an interview with Newsweek in early 2009, Gono offered an explanation for his actions and predicted that the US would do the same, as it has:
“I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”
The hyperinflation in Zimbabwe led to shortages of real goods and destroyed the economy. Why would Mr. Bernanke’s experiment end any differently?
Meanwhile, over in the Eurozone, the Airbus is in rapid descent and everybody on the plane is offering ideas as to what went wrong and how to fix it. Its auto-pilot has not been programmed to deal with the failures the plane is experiencing and as the pilots and passengers engage in a heated debate, none are able to grab the controls much less safely land the aircraft.
it will not be long before impact and the smarter passengers are starting to grab for the parachutes made of Gold and Silver. Gold closed up almost 1% to a record of $1,583 and Silver gained nearly 6% on the day.
Back in the US, whether or not Congress passes legislation to raise the debt ceiling is irrelevant. The US Treasury will borrow and the FED will print even without Congressional approval. That is what makes modern Government fun, if you don’t like a rule, just ignore it and claim that you were exercising “Leadership.”
All of the countries in the Eurozone will soon surrender their sovereignty to Germany and the IMF in exchange for the “privilege” of using Euro as currency. The ideological divide that is being exposed in the US may eventually lead to civil war.
But these events may be small compared to what is occurring in the Middle East. Iran opened its own international Crude Oil exchange today which is akin to declaring war on the western governments and banking interests.
And keep your eyes on Palestine. The UN vote on Palestinian statehood in September is eerily similar to the vote 62 years ago when the UN accepted Israel as an independent state. Our guess is that this vote will spark events there that will capture the attention of the whole world.
Stay tuned and Trust Jesus.
Stay Fresh!
David Mint
Email: davidminteconomics@gmail.com
P.S. If you enjoy or at least tolerate The Mint, please share us using the buttons at the top of this post. If you feel that you can’t go another day and risk missing The Mint, please register by clicking here. Thank you!
Key Indicators for July 13, 2011
Copper Price per Lb: $4.35
Oil Price per Barrel: $97.83
Corn Price per Bushel: $7.26
10 Yr US Treasury Bond: 2.89%
FED Target Rate: 0.07% JAPAN HERE WE COME!
Gold Price Per Ounce: $1,582 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 12,492 TO THE MOON!!!
M1 Monetary Base: $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,112,300,000,000 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.
Wednesday, July 13, 2011
Monday, July 11, 2011
Italians to join Europe’s needy, the parable of the Chiropractor
7/11/2011 Portland, Oregon - Pop in your mints…
Investors woke up today and wasted little time in marking down Italian sovereign debt, along with Spanish and Portuguese debt issues. Why? The story of the Italians is eerily similar to that of the Greeks, the Portuguese, and the Spanish. Their government spends more than it takes in.
At this point, all readers of The Mint know that it is impossible for any Government to produce value. Yet somehow, in our upside down, insane monetary system, it has become acceptable for the western governments to run a reasonable deficit to help pay for their role as the Robin Hood in the current welfare state model. The European Union even went so far as to attempt to define what constitutes a reasonable deficit as 3% of a nation’s GDP per year.
Now if the government takes in 25% of national income in the form of taxes, which is not an unheard of (if anything it is a low estimate) and then borrows an additional 3% (which has proved an elusive target), then 28% of the welfare state’s economy is devoted to income “redistribution.”
While the term “income redistribution” does not fly well with most voters, the Government’s "investment" decisions are cleverly disguised as Social Security, Health Care, Defense, and Education. Most will recognize that these are important investments, which leads us to the logical question:
Why leave these investment decisions up to the Government?
This question is rarely asked, and most seem content to let the Government continue in their collective role as Robin Hood. It should come as no surprise, then, that a great deal of time and what would otherwise be productive energy goes into influencing Robin Hood’s decisions as to whom the poor are at the moment. Bill Bonner at The Daily Reckoning calls this outsized effect of Government in the economy a “Zombie Takeover.”
With the Zombies creatively destroying a minimum of 28% of GDP in a modern welfare state, perhaps it is a testament to the resilience and productivity of the citizenry that any real progress can be made under such circumstances.
Fortunately (or unfortunately for those in the zombie class) the insanity is coming to an end. As the government’s destruction of wealth accelerates, even elected officials will have to admit that the bad decisions that all of this accumulated debt represents do not go away just because one denies that they exist.
In fact, attempts to solve the problem of too much debt by creating more currency are futile, as each unit of currency creates a unit of debt which must be dealt with at a later date. This is the glory of modern monetary theory. It binds the world together in slavery. It is also its Achilles heel, which is now exposed, waiting to be stricken.
How and when will this finally occur? It will be like the man with back pain who finally goes to visit the chiropractor. The gradual spinal realignment that he had hoped to achieve by doing simple stretching exercises (austerity) is not taking place, in fact, his back problems have gotten worse. Once in the exam room, he will be laid down swiftly on the chiropractor’s table.
Then chiropractor will move into place, interest rates will rise, and a series of pops will go off in the patient’s spine. Naturally, the popping sounds are the troubled EU nations defaulting on their sovereign debt in unison, which is what is about to occur.
Will the patient then get up and go on his way, sore but better off for the treatment? Or perhaps the better question is; do zombies even use chiropractors?
Meanwhile in the US, the political theater that is the debt ceiling negotiations may be the catalyst that sends the US Treasury market into a much deserved tailspin. We have speculated about this almost incessantly and still cannot believe that it may happen.
But while the EU goes to the chiropractor, the US may prefer to rely on the prescription drugs of fiscal and monetary stimulus for as long as they appear to work in a futile attempt to reassure the zombies that all is well.
The US will simply destroy the value of the currency, completely and irreversibly. Why else would they pick a fight with Iran at this point?
That makes each dollar that one holds like holding an M80 firecracker with a lit fuse.
How long will you hang on?
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 11, 2011
Copper Price per Lb: $4.32
Oil Price per Barrel: $94.99
Corn Price per Bushel: $6.81
10 Yr US Treasury Bond: 2.92%
FED Target Rate: 0.07% JAPAN HERE WE COME!
Gold Price Per Ounce: $1,554 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 12,506 TO THE MOON!!!
M1 Monetary Base: $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,112,300,000,000 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.
Investors woke up today and wasted little time in marking down Italian sovereign debt, along with Spanish and Portuguese debt issues. Why? The story of the Italians is eerily similar to that of the Greeks, the Portuguese, and the Spanish. Their government spends more than it takes in.
At this point, all readers of The Mint know that it is impossible for any Government to produce value. Yet somehow, in our upside down, insane monetary system, it has become acceptable for the western governments to run a reasonable deficit to help pay for their role as the Robin Hood in the current welfare state model. The European Union even went so far as to attempt to define what constitutes a reasonable deficit as 3% of a nation’s GDP per year.
Now if the government takes in 25% of national income in the form of taxes, which is not an unheard of (if anything it is a low estimate) and then borrows an additional 3% (which has proved an elusive target), then 28% of the welfare state’s economy is devoted to income “redistribution.”
While the term “income redistribution” does not fly well with most voters, the Government’s "investment" decisions are cleverly disguised as Social Security, Health Care, Defense, and Education. Most will recognize that these are important investments, which leads us to the logical question:
Why leave these investment decisions up to the Government?
This question is rarely asked, and most seem content to let the Government continue in their collective role as Robin Hood. It should come as no surprise, then, that a great deal of time and what would otherwise be productive energy goes into influencing Robin Hood’s decisions as to whom the poor are at the moment. Bill Bonner at The Daily Reckoning calls this outsized effect of Government in the economy a “Zombie Takeover.”
With the Zombies creatively destroying a minimum of 28% of GDP in a modern welfare state, perhaps it is a testament to the resilience and productivity of the citizenry that any real progress can be made under such circumstances.
Fortunately (or unfortunately for those in the zombie class) the insanity is coming to an end. As the government’s destruction of wealth accelerates, even elected officials will have to admit that the bad decisions that all of this accumulated debt represents do not go away just because one denies that they exist.
In fact, attempts to solve the problem of too much debt by creating more currency are futile, as each unit of currency creates a unit of debt which must be dealt with at a later date. This is the glory of modern monetary theory. It binds the world together in slavery. It is also its Achilles heel, which is now exposed, waiting to be stricken.
How and when will this finally occur? It will be like the man with back pain who finally goes to visit the chiropractor. The gradual spinal realignment that he had hoped to achieve by doing simple stretching exercises (austerity) is not taking place, in fact, his back problems have gotten worse. Once in the exam room, he will be laid down swiftly on the chiropractor’s table.
Then chiropractor will move into place, interest rates will rise, and a series of pops will go off in the patient’s spine. Naturally, the popping sounds are the troubled EU nations defaulting on their sovereign debt in unison, which is what is about to occur.
Will the patient then get up and go on his way, sore but better off for the treatment? Or perhaps the better question is; do zombies even use chiropractors?
Meanwhile in the US, the political theater that is the debt ceiling negotiations may be the catalyst that sends the US Treasury market into a much deserved tailspin. We have speculated about this almost incessantly and still cannot believe that it may happen.
But while the EU goes to the chiropractor, the US may prefer to rely on the prescription drugs of fiscal and monetary stimulus for as long as they appear to work in a futile attempt to reassure the zombies that all is well.
The US will simply destroy the value of the currency, completely and irreversibly. Why else would they pick a fight with Iran at this point?
That makes each dollar that one holds like holding an M80 firecracker with a lit fuse.
How long will you hang on?
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 11, 2011
Copper Price per Lb: $4.32
Oil Price per Barrel: $94.99
Corn Price per Bushel: $6.81
10 Yr US Treasury Bond: 2.92%
FED Target Rate: 0.07% JAPAN HERE WE COME!
Gold Price Per Ounce: $1,554 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 12,506 TO THE MOON!!!
M1 Monetary Base: $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,112,300,000,000 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.
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