New Bans on Short selling in Europe, Margin Requirements for Gold, Money’s role in Climate Change

8/11/2011 Portland, Oregon - Pop in your mints…

Fresh injections of electronically printed cash from the US and Euro FEDs appear to have tranquilized a market in free fall.  That, along with a ban on short selling in Europe seems to be sufficient to continue the illusion that the financial system is operating normally.

Elsewhere, we see that margin requirement for Gold contracts were increased by the Chicago Mercantile Exchange in an attempt to arrest Gold’s parabolic rise over the past several days.  This must have been what Obama and Bernanke talked about last night at the White House.  They probably made a few revisions to the jobs numbers that were printed today while they were at it.

The ban of short selling in Europe is eerily similar to the ban placed on short selling large bank stocks in the US not so long ago.  The increase in the Gold margin requirement is eerily similar to the increase in Silver margin requirements by the CME last spring.

What is going on?  Nothing good, fellow taxpayers.  A tip, if you see the Government actively trying to stop something, it is good idea to be on the other side of the government’s trade.  In this case, sell European bank shares and buy gold.  Think of it as an indirect governmental subsidy to little old you.

The markets are desperately trying to correct nearly 40 years of errors that have been created since the US Dollar was officially de-pegged from gold.  The FED’s, who see currency that can be created on a whim without the inconvenience of having to either mine it from the earth or earn it in honest, fair trade as extremely convenient , are desperately trying to fight the correction. 

If the numbers just look normal, they think, people will continue to pacifically labor under the illusion that the Government has everything under control.

Nothing could be farther from the truth.

It occurred to us that we may need to clarify what the money problem is and why it, and not fossil fuels, are the cause of economic imbalance and may lead to what is popularly referred to as climate change.

Many deride the use of gold and silver as money because it must be mined from the ground, refined, minted, carried around, kept secure, etc.  It is inconvenient.  They see money created out of thin air as a simple net gain to society.

 Presto, you have, with a stroke of the pen, saved the miners from years of hard labor underground.  You have saved who knows how many trees, fossil fuels, and other elements required for the refining process.  And you have saved Jack and Jill consumer and shopkeeper from the inconvenience of carting around loads of heavy coins.

So what is the matter with instant money?  The problem, if you have not identified it, is precisely in the fact that it is easy to create.  When you remove the effort required to create money for trade, you free that effort to be spent in a lot of other ways.  That is great, except for the fact that no one considers that instant money would give people the time to scorch the earth in a thousand other ways which are much more harmful than mining.

By making money “free”, you throw the economy completely out of balance and perpetuate bad decisions for a much longer time than if the wrong speculations were limited by the need to back them with real money, acquired by difficult toil both under and above the earth.

The problem with “free” money is that it has no value, and it serves to devalue the production and lives of all who are forced to circulate it.  The longer it circulates, the more damage it does.

Worst of all, it concentrates power in the hands of those who create it out of thin air and enjoy it first.

The world has gone 40 years down this insane path.  How much more can it take?

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for August 11, 2011

Copper Price per Lb: $4.03
Oil Price per Barrel:  $85.42

Corn Price per Bushel:  $7.02  
10 Yr US Treasury Bond:  2.34%
FED Target Rate:  0.10%  TIGHTENING?  NOT!

Gold Price Per Ounce:  $1,768 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  11,143  TO THE MOON!!!

M1 Monetary Base:  $2,140,300,000,000 RED ALERT!!!
M2 Monetary Base:  $9,404,000,000,000 YIKES!!!!!!!

Global Banking Collapse, Global Cooling, Opinions on Climate Change

8/10/2011 Portland, Oregon - Pop in your mints…

Gold hit $1,800 today.  That should tell you all you need to know about what is happening.

We are trying not to look at the markets today.  It gives us the morbid feeling that one gets as they are about to witness a train wreck or other catastrophe.  Our curiosity begs us to look but our morality forbids it.

What we are hesitant to watch as it gets underway is some form of global banking collapse.  From CNBC:

“Rochdale banking analyst Richard Bove said there is little chance of a French bank default.

"If a bank in Europe went under, it would cause huge counterparty risk. It wouldn't be that bad for 99 percent of the banks in the country. It would be bad for the biggest banks...Why are all the banks falling in price? The deeper issue is what the Federal Reserve did yesterday," said Bove.

The Fed, in an unusual move Tuesday, revealed that its "extended period" to hold rates at zero runs until the middle of 2013. The Fed also downgraded its view of the economy to a picture of slow growth.

"The Federal Reserve told me, number one, that the economy is weakening and my loan losses just went up," Bove said. "The ability to make new loans is hampered by the weaker economy, and on top of that, the Federal Reserve said they were going to keep margins on my product down," he said, explaining banks need higher rates to make profits on lending and deposits.”

With the FED injured and out of the game, the world’s largest banks are readying to show the world that there really is no entity on the planet which is “too big to fail,” starting with themselves.  There is no doubt that the ECB will pull out all the stops to save the large French banks, as Mr. Bove suggests above.

They will be carted off behind the FED.  But enough of the markets, it is just too ugly to gaze upon.

Let’s talk about the weather!

It is an unusually cold “summer” day here in Portland.  We loosely use the term summer because it now seems that summer has taken its own vacation and left the inhabitants of the Northwest with a straight shot from Spring to Fall.  Not so bad, provided we get the best of both seasons.

Still, the lack of sunshine at this time of year seems to be taking its toll on people.  When the sun comes out here, you suddenly become aware that the city has about triple the number of inhabitants than you once thought.  People literally hibernate here and when the sun brings them out it can be startling if you are not expecting it.

Logic would follow that, with the recent weather data taking a turn for the cooler, the global warming crowd would declare victory and let the planet move on to bigger and better things.   Now that the myth of global warming is apparently being disproved by nature herself, scientists are clinging onto the term “climate change” to justify the right to determine who needs how much energy.  The right to energy in recent times was determined by wars so perhaps this is an improvement. 

Many will quickly note that we have certain facts wrong about global warming/climate change and will want to correct us in our error.  To them we say, please do not waste your time.  We do not pretend to be an expert at anything here at The Mint, we are merely opinionated.  The most normal thing is for us to be wrong, it helps keep us humble.

That said, we base our “the globe is now cooling” opinion on two anecdotes that we heard while in Nebraska recently.  First, Lake McConaughy, which just five years ago was nearly bone dry is now full to overflowing.  The “experts” said that it would take 50 years to reach normal levels.



Flooding on the Missouri River near Omaha - July 2011



Second, we spoke with a guy from northern Wyoming who said they are seeing new GLACIATION taking place right before their eyes.  In a valley where last season there was merely a stream coming down from the mountains now stands a new glacier over 50 feet high.  Not just snowpack, a glacier.  He could not recall this ever happening there before.  Let alone so quickly.

Then there are the bears.  Rumor has it that they are moving to lower altitudes in the Northwestern US because snowpack in the mountains is not receding as it normally did and this is driving the bears closer to populated areas in search of a feast to fill their bellies for the winter.

And finally, everyone is aware of the flooding taking place along the Missouri and Mississippi rivers this season.

Flooding near airport on Missouri River in Omaha - July 2011

To us, here in the Northern Hemisphere, it appears that the globe is now cooling at an alarming rate.  Is the solution now to burn more fossil fuels?

Our point is that the weather is something that no man, no matter how many terms he has spent in Congress, can control.  Those who believe that mankind can somehow master the weather (the logical implication and end of most policies invoked in the name of stopping “climate change”) are innocently deluded at best and in the worst case may be power hungry control freaks.

As for allowing Wall Street first dibs at selling us the air we breathe (cleverly disguised as “carbon credits”), any thinking person should quickly identify this notion as just plain insanity.

On the other hand, we have great respect for people who are deeply committed to taking care of the environment.  We wish them well and whole heartedly support their dream of bringing peace to the earth and balance to what occurs on it.

Our disagreement with most mainstream climate policy is a question of methods.  While most see a problem with what mankind currently uses to create energy, we see as a problem with what mankind has chosen to use as money.

Once the monetary system is fixed (which may be occurring shortly), we suspect that the earth will be cleaner and greener than even the most ambitious environmentalist has ever imagined.

Best of all, the change will be a product of mankind’s collective free will, not of the hollow decrees of a governmental edict.

Imagine.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for August 10, 2011

Copper Price per Lb: $3.91
Oil Price per Barrel:  $82.89

Corn Price per Bushel:  $6.78  
10 Yr US Treasury Bond:  2.13%
FED Target Rate:  0.10%  TIGHTENING?  NOT!

Gold Price Per Ounce:  $1,795 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  10,719  TO THE MOON!!!

M1 Monetary Base:  $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base:  $9,226,100,000,000 YIKES!!!!!!!

The FED Kicks the Downward Dow, and Whiffs!

8/9/2011 Portland, Oregon - Pop in your mints…

something extraordinary happened today.  The FED, one day after the worst stock market crash in the series of stock market crashes to which we are doomed until the problem of too much debt is dealt with, came out and announced that it would hold overnight rates under 0.25% for at least two more years.

This is the ultimate stimulus measure, money will continue to be free, let the final stage of the mad scramble for resources begin.  With this statement, the FED has confirmed that the currency will be destroyed.  Plan accordingly!

We saw a chart at the Wall Street Journal site today which was entitled “Downward Dow.”  The name hearkens to the canine/yoga position better seen that described:



A Canine demonstrates the Dow chart for the coming two years

The FED sees what is going on and is taking a long, running, Charlie Brown style kick at the Downward Dow before it.  Unfortunately for us all, like Charlie Brown, Ben and the gang are going to whiff on the Dow, which is more likely to lie down than resume its forward gait, and pull a hamstring in the process.

In other words, the FED, with today’s statement, has severely injured itself and will do nothing more now than sit on the sidelines and hand out free money.  With Congress paralyzed, the helicopters (the FED member banks) will be in charge of dropping the money on the populace.

Helicopter Phase is here.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for August 9, 2011

Copper Price per Lb: $3.97
Oil Price per Barrel:  $79.75

Corn Price per Bushel:  $6.78  
10 Yr US Treasury Bond:  2.33%
FED Target Rate:  0.08%  TIGHTENING?  NOT!

Gold Price Per Ounce:  $1,750 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  10,826  TO THE MOON!!!

M1 Monetary Base:  $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base:  $9,226,100,000,000 YIKES!!!!!!!

Oh My, The Giant Snowball is now Rolling Down Hill, can the Central Banks Stop it?

8/8/2011 Portland, Oregon - Pop in your mints…

Oh my.  Two words, four meager characters, made famous by Jesse “The Body” Ventura during his ringside blow by blow commentary in the glory days of the WWF (circa 1986).  These words, which so eloquently summed up the effects of a pile driver, seem strangely appropriate to describe what is occurring in equity markets around the globe during their first chance to “react” to the S&P downgrade of the US Government’s sovereign debt rating.

As we write, the Dow is down 5%, ditto for Oil.  Gold is up over 4% and the downgraded bonds of the US Government of the 10 year variety are up (in other words, yields have fallen) approximately 4%.

What is going on?  We will give you a clue, Bank of America (BAC) is down almost 20% on massive volume.

Still guessing?  We won’t keep you in suspense.  This downgrade, whether deserved or not, early or late, is wreaking havoc with mutual fund investment policies which call for excess funds to be held in AAA rated debt.  There are not enough German bunds or UK gilts in circulation to pick up the excess funds gushing out of Treasuries.

The obvious implication is that USD bank deposits should rise.

More deposits that it can’t lend at a profit would tank behemoths like B of A, and Uncle Sam may have trouble saving it.  That, and B of A is being sued for fraud, again.

Enough of B of A, back to the money flying out of US Government obligations by investment policy edict.  Where will this money go?  That is what is currently being sorted out in the markets.  And at the moment it is UGLY for equities on a global scale.  Don’t worry, by late next week, so much money will be pumped into the system that equities will have no choice but to rise.

We can’t help but think back to this chart (BELOW) showing the proliferation of AAA debt in the world.  It seemed as if it was everywhere, like pine trees in a forest.  Now, with one simple action, those who trust S&P’s judgment (which history has show is at one’s own peril) find themselves with at least $14 Trillion less AAA issues to choose from.  More, if you count the implied downgrades of government agency and other government guaranteed debt.

An abundance of AAA Debt!

Stepping away from the technicalities of investment policies and looking at the downgrade in a philosophical sense, it is like a minor earthquake that triggers a tsunami that the financial world is now helplessly watching roll ashore, or like a giant snowball has been pushed downhill and threatens to start an avalanche.

The financial world is looking at these twin disasters and now realizes that the only thing standing between them and the demise of the current financial and currency systems is, are you ready for this?

The Central Banks of the World!!!  Not exactly knights in shining armor, if you ask us.  We might be more comfortable if Pee-wee Herman were on the case.  At least he could provide entertainment as the demise unfolds!

The downgrade is another chink in the armor of the world’s largest knight in shining armor, the United States of America.  Every day, more people are coming to grips with the fact that the US of A cannot provide security and social benefits at such low rates.   Bill Bonner of the Daily Reckoning regularly explores this decline of the American Empire. 

As we touched on the other day, what man calls nations today are, for purposes of analysis, simply competing security agencies which have a man-made geographical monopoly.  The problem, as any businessman will tell you, is that nowadays the agency’s customers can’t take the price hikes.  Neither can they easily choose to move their business to a competitor.  Expatriating is not cheap and involves a host of logistical problems.

The book of Isaiah, chapter 40, God refers to the nations as a “drop in the bucket” and “dust on the scales.”  The obvious implication is that nations do not last, and in extreme cases, dealing with a government may feel like one is dealing with the Mafia.  The need to preserve a geographical monopoly can make an analysis of the actions of a government or a mafia eerily similar.

Seem through this lens, S&P is like the snitch who broke Omerta and tells everyone that the Mafia boss can’t pay on his contracts.  Now the boss will likely face an increase in the vig on what he owes the loanshark. 

How long before the rat gets whacked?

Don’t forget to keep your eye on events in the Middle East, especially Palestine.  Something bigger than we image is brewing there and our guess is that the eyes of the world will soon be focused there.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

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

Key Indicators for August 8, 2011

Copper Price per Lb: $3.97
Oil Price per Barrel:  $83.36

Corn Price per Bushel:  $6.78  
10 Yr US Treasury Bond:  2.37%
FED Target Rate:  0.09%  TIGHTENING?  NOT!

Gold Price Per Ounce:  $1,718 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  10,899  TO THE MOON!!!

M1 Monetary Base:  $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base:  $9,226,100,000,000 YIKES!!!!!!!