Disturbing economic trends continue into 2012

1/9/2012 Portland, Oregon - Pop in your mints…

2012 has gotten off to a relatively uneventful start on all fronts.  Stock and Bond markets continue on autopilot and are completely underwritten by central banks at this point.  Commodity prices seem to be following the inflationary path that the central banks support of the stock and bond markets has set them on. 

Meanwhile, productivity, real output, appears stable and poised to climb, which should further fuel inflation as the money supply begins to overwhelm the supply of real goods and labor.

The assault on civil liberties continues.  The United States surrendered its status as a free country when it approved the NDAA, assuring that they government could detain anyone, anywhere, for as long as they want, without ever having to produce charges.

Finally, widespread corruption continues unabated.  Officials at MF Global are still loose after robbing $1.2 billion of client funds in a desperate attempt to stave off a margin call which brought down the firm as the CME washed its hands of the situation, leaving traders everywhere wondering if their univested brokerage funds are safe or even truly exist.

Now, from Switzerland, the bastion of financial morality, comes word that the wife of Philipp Hildebrand, the now former Chairman of its central bank, made a substantial purchase of US Dollars just weeks before her husband and his colleagues shocked the world by surrendering the Swiss franc to the same fate as the doomed Euro.  Coincidence?  It would appear not.


The Swiss National Bank Courtesy of Baikonur

In short, there is nothing in the data to disprove the hypothesis that the world’s financial system and by default the nations which are currently charged with it are collectively headed to hell in a hand basket. 

This, fellow taxpayers, should be cause for hope.  For only when it is acutely understood by all involved the incredible destruction which is being wrought every single day by the current, insane, “debt is money” financial system under which we live, can things finally begin to get better.

We hope and pray that the day of collective acute understanding is near, and that the transition to a new system passes peacefully.

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 January 9, 2012

Copper Price per Lb: $3.39
Oil Price per Barrel:  $101.40

Corn Price per Bushel:  $6.52  
10 Yr US Treasury Bond:  1.96%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,611 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.5%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  11,995  

M1 Monetary Base:  $2,290,800,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,718,900,000,000 YIKES UP $1 Trillion in one year!!!!!!!

John Corzine Testifies to a Congressional Panel on MF Global Collapse

12/7/2011 Portland, Oregon - Pop in your mints…

Today the world witnessed one of the most surreal spectacles that we can imagine.  John Corzine, former CEO of MF Global, the Primary Dealer which went bankrupt on October 31st and is now missing $1.2 billion of client funds, was called on to testify by a group of men in the US Congress who are trying to understand what went wrong and how they can prevent it from occuring again.

You can see the agonizing hearing in all of its glory by clicking the link below.  Our humble observations:

1.  Neither Mr. Corzine or Congress said anything that should give any measure of confidence to participants in the global financial markets.

2.  Mr. Corzine is sorry this happened.

3.  One of the members of the panel stated the obvious "we got to find that money."  Understatement of the year.

4.  Mr. Corzine is so confident that the client funds will be recovered that he mumbled, after being pressed by a member of the panel, that he and the other executives would personally reimburse clients in the event that it wasn't (NOT!)

5.  Questions about the Federal Reserve's ability to properly vet firms who are qualified to be Primary Dealers.

We didn't know whether to laugh or cry.  Mr. Corzine looked like a large elf from the camera angle and the members of congress, in most cases, sounded less than up to the task of understanding what happened, much less being able to craft legislation which would prevent a similar event in the future.

It was like watching political professional wrestling.  The entertainment value was fairly high, excitement filled the room, but it left you wondering if what you saw was real or simply scripted and well acted by all involved.

All in all, it was a synopsis of the level corruption and ignorance that grace the halls of power in America circa 2011.

See the entire sorry spectacle courtesy of C-Span:  http://www.c-span.org/Events/Fmr-Senator-Corzine-to-Testify-in-MF-Global-Investigation/10737426111-1/

Perhaps now the Farmer and the Cowman will befriend each other, grab their pitchforks, and storm capital hill until their $1.2 billion is returned.

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 www.davidmint.com

Key Indicators for December 8, 2011

Copper Price per Lb: $3.49
Oil Price per Barrel:  $98.57
Corn Price per Bushel:  $5.90   10 Yr US Treasury Bond:  1.97% FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,706 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  8.6%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  11,998  
M1 Monetary Base:  $2,255,500,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!M2 Monetary Base:  $9,623,700,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Reports of the FED as “Only” Lender of US Dollars, The Definition of a System Collapse

9/28/2011 Portland, Oregon - Pop in your mints…

We have taken a small breather here at The Mint.  What has occurred in the past week simply boggles the mind.  Precious metals have taken a beating and it is our guess that they will continue through tomorrow.  The most interesting reasoning for the drop in Gold and Silver that we have heard is that there will be an announcement on October 4^th limiting short positions on the COMEX.

Guess who has a huge short position in silver that needs to be covered this week?  JP Morgan, to the tune of 121 million ounces.  We can only guess at the machinations but needless to say, it would be very convenient for them to be able to cover their positions at a discount.  Hence the increase in margin requirements at the COMEX last Friday which has shaken out the weak long positions this week.

Across the board in commodities, current prices reflect a rush to cash, not changing fundamentals.

Some interesting reading on the current, sorry state of employment in the US from US News:

15 Stunning Statistics About the Job Market

It is much worse than most imagine.

Other than that, chaos is reigning as the dollar funding markets for banks in Europe are apparently non-existent.  As September 30, 2011 approaches, banks are holding on to cash in the absence of clear direction from the Eurozone as to how they intend to bail out their large institutions.

In the meantime, the FED has apparently opened up swap lines (read printing presses) to provide dollars to these banks.  According to a report that we saw from Bloomberg, the FED has gone from its role as the lender of last resort to a role as the lender of ONLY resort.

We take this to mean that nobody is willing to lend US Dollars at any price to the largest banking institutions in the world.

Does this indicate that, at long last, the US Dollar system has technically collapsed?

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 September 28, 2011

Copper Price per Lb: $3.21
Oil Price per Barrel:  $79.95

Corn Price per Bushel:  $6.30  
10 Yr US Treasury Bond:  2.00%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,610 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.4%!!!   UP UP UP!!!
Dow Jones Industrial Average:  11,011  

M1 Monetary Base:  $2,010,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,541,800,000,000 YIKES!!!!!!!

The Parable of the Zoo, A Crack-up Boom on the Horizon as Currency and Debt Markets Decouple

5/17/2011 Portland, Oregon – Pop in your mints…

Last week we raised the specter that the Job, Sovereign Debt, and Housing markets were essentially carcasses, mere shadows of an economy that was.   While the financial authorities all across the globe are spending their time and other people's money trying to revive the carcasses, a new economic model is springing up largely beyond their reach.

We offer you a brief recap of where we are, disguised as a zoo metaphor.

The financial authorizes first built the zoo to cage the capitalist beasts in North America back in 1913 when the creation of the Federal Reserve hijacked the money supply.  They took them down and dragged them to the zoo one by one as FDR signed the order to confiscate gold on April 3, 1933.  The beasts have been languishing in captivity for nearly 80 years.  Some of them have grown old and passed away in captivity.

By the time they died, the beasts had become so lethargic that all they did was sit around and eat all day.  The beasts had become so bloated that the zookeepers didn't even to bother to take them out for their daily exercise.  Why would they?  They had grown fat themselves charging the price of admission to see the beasts.

In their lethargic state, all the zookeepers could do was make their daily rounds to feed the beasts, not even bothering to see if they are alive or dead.

Such is the state of things today, circa 2011.  The FEDs shovel cheap money and credit into the cages and assume that the beasts eat and are satisfied.

The Health Care Industry wasting away in the Zoo

 What they don't know, due to their self delusions and inner laziness, is that the food the leave is no longer being consumed by the caged beasts, rather, beasts that are still in the wild enter the zoo unimpeded and snatch away the food.

Even if the zookeepers were aware, their own lethargic state (see the current US Debt ceiling standoff) leaves them helpless to put a stop to it.

And so we watch as the carcass of housing rolls over, and Sovereign Debt begins to rot.  Finance, the best fed of all the caged beasts, is going into cardiac arrest and Health Care is helpless to save it, hopelessly caged in and wheezing, while the auto industry struggles in its shackles.

Meanwhile, commodities, technology, and their offspring, which have either never been caged or managed to escape along the way, are now openly raiding the zoo and taking down the stores of food as quickly as the zookeeper sets it out.

Soon, the stores of food will be gone and the agile beasts will once again forage in the forest, remaining nimble, while the caged beasts and their keepers perish.

As we see in this parable, we are witnessing a dramatic decoupling of the currency and debt markets.  The food is currency and the debt markets are the bloated and dead carcasses.  Now that the debt markets are unable to absorb the flood of currency, bizarre manifestations of depression and hyperinflation (what Ludwig Von Mises referred to as a "Crack-up Boom") are beginning to rise to the surface, like a boiling cauldron.

Something new is forming outside of the Federal Reserve's US Dollar system and the agile industries are busy building it, using what is naturally available outside of the system (the entire world!) and sustaining itself on what is left of the food at the US Dollar zoo.

The visitors of the zoo are those seeking employment inside of the old system.

The logical conclusion?  One is better off taking their chances out in the wild.

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 Tuesday, May 17th, 2011

Copper Price per Lb: $4.02
Oil Price per Barrel:  $97.89

10 Yr US Treasury Bond:  3.12%
FED Target Rate:  0.10% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,519

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  12,479
M1 Monetary Base:  $1,986,500,000,000 THE CRACK-UP BOOM BEGINS!!!!
M2 Monetary Base:  $8,980,800,000,000 DESPERATION!!!!

*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.

The Inflation Train is Back on Track, Citi Shares Rise the Hard way, and the Carcass of Housing and Sovereign Debt issues

5/10/2011 Portland, Oregon – Pop in your mints…

A head fake.  That is the only way we can describe the action in the commodity markets last week.  Commodity markets differ from equity, bond, and money markets in that commodity markets are where real stuff changes hands, even if the owners never actually take delivery. 

When one buys a bond or equity, they own the vague or explicit promise of an income stream at some future date.  These streams generally come in the form of currency, which must pass through the money markets to get to their wallet.  From the time the bond or equity is purchased until the income hits their wallet, this income undergoes a hazing ritual in the form of taxes and regulatory fees which would cause any fraternity house to be banned from the college campus.  This hazing ritual reduces the income stream to a mere trickle.

It should come as no surprise, then, that speculation in stocks and bonds is much more profitable than any buy and hold strategy, especially when the FED is supplying free money at the casino!  Equities are easy to manipulate which makes them the preference of modern day money changers.

Take Citibank (C) for example, their share price was languishing around $4.50 per share (which is still way too much for their carcass of a balance sheet).  Most institutional investors (read those who invest workers' 401Ks), wouldn't touch it with a 10 foot pole, simply because the stock trades below $10 (which says something about the brain dead fund managers and their models but that is fodder for another Mint).  What to do?

Voila!  On Monday, Citibank opened with a share price around $44.  This was accomplished with a little mathematical operation called a "reverse split."  You see, Citibank, on a whim, made 10 of their shares suddenly equal to one share.  Problem solved!  Citi promptly fell more than 2%.

AIG, another carcass, pulled the same type of head fake in July of 2009.  After rising 87%, according to the Wall Street Journal, they are down 39% year to date in 2011.  Mathematical operations do not change fundamentals.

In contrast, when you buy a contract for wheat or any other commodity you have the right to take delivery of said commodity.  In the case of wheat, all you need is some yeast and an oven and you are on your way to a good meal.

Speculation in Commodity markets is their very essence and function.  The stakes are high.  These markets can literally affect the price of producer and consumer goods all over the planet.

If the income stream doesn't pan out for an equity or bond, the seller simply points the angry buyer to the prospectus where it tells them that the equity or bond may lose value for any number of reasons. 

In commodities, if the seller can't deliver the wheat they promised, people may starve.

Last week, the commodity markets went into a nosedive.  It appeared for a moment that they anticipated demand to plummet and called for worldwide production to slow.

This was merely a head fake.  Astute readers have picked up on the fact that we are comparing the commodity markets to a basketball player.  The prices of various contracts are the "head" of the basketball player and the fundamentals of the market (supply and demand) are the player's hips.

A head fake is where a player leads one way with his or her head and then darts the other way with the ball towards the goal.  As a defender (or investor in commodities) one MUST keep their eye on the opposing player's hips.

The fundamentals in the commodities markets take many years to change.  This week the fundamentals are driving commodity prices higher and signaling a looming hyperinflation after throwing a deflationary head fake at investors last week.

Nothing has changed to stop the "inflation megatrend", as Nadeem Wayalat of the Market Oracle calls it.  See for yourself in our Key Statistics below.  Even if the FED were to change course now and raise its short term interest rate target, it would take around three years for this to trickle down to consumer prices.

But how can this be?  Isn't there slack in employment, ever increasing sovereign debt issues, and an overhang of housing inventory in the US as far as the eye can see?

Again, this deflationary propaganda is a mere head fake.  They are describing the carcass of the old economic model that governments worldwide are fighting to prop up.  This carcass will continue to decay.

Behold, a new economy is arising far from the reaches of the carcass and its handlers.  Most of the FED's money will end up not propping up the carcass but rushing into the new model. 

Skyrocketing commodity prices, which still have a long way to rise, are announcing this fact loud and clear to those who will listen.

He who has ears, let him hear!

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 Tuesday, May 10th, 2011

Copper Price per Lb: $4.02 Oil Price per Barrel:  $103.72

10 Yr US Treasury Bond:  3.19%
FED Target Rate:  0.09% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,519

MINT Perceived Target Rate*:  3.25%Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,767
M1 Monetary Base:  $1,960,200,000,000 DESPERATION!!!!M2 Monetary Base:  $8,995,300,000,000 DESPERATION!!!!

*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.

The Parable of the Cupcake Addict, Absent QE3 Commodities go into Hibernation, and the Markets attach their Bungee Cord and Plunge Headlong off a Cliff!

5/5/2011 Portland, Oregon – Pop in your mints…

We are back from a breather at The Mint to find that the numbers we follow are beginning to reach a strange sort of plateau.  Like a man who has taken to eating nothing but cupcakes for breakfast, the Feds got what they wanted in the short term with their monetary alchemy.  

Anyone who has done this knows that cupcakes taste great and wake you right up.  Unfortunately for the man, after three long years of this indulgent behavior the long term effects are starting to show up.  

The man faces a dilemma.

A raging headache is beginning to come over him.  He knows that another cupcake would give him a much needed sugar rush.  A glance down at his sagging belly, however, gives him pause.  "I will feel better for a time," he ponders to himself, "but eventually I'll need new clothing and risk diabetes and heart disease if I continue this strange habit."  

In this state of mind, the man stands frozen before the tray full of cupcakes, unable to react as his headache worsens.

In the meantime, across town, the bakery prepares to send the man a courtesy notice that he can no longer supply the amount of cupcakes at the current price.  The man will soon have to choose either pay more or accept fewer cupcakes.

The Markets take a dive, will they Hit Bottom?

In our parable, the man is the US Government and economy at large.  The cupcakes are money substitutes created by the Federal Reserve.  The Federal Reserve is the bakery.  The headache represents high unemployment and the man's belly represents increased debt obligations.

What will the man do?  The markets, from stocks, to bonds, to precious metals and other commodities, are betting that the man will call the bakery, cancel his orders, and go on a diet.

Want Proof?  A quick peek over the last 5 days in the engineered markets:

The Dow?  Down 2%

S&P 500?  Down 2.5%

Bond Yields?  Down 4%

The real evidence of this opinion, however, is in the commodity markets which operate in a relatively organic fashion:

Oil?  Down 12%

Gold?  Down 6.5%

And our favorite commodity, Silver is down a whopping 26% over the past 5 days!

What is going on?  We recently discussed the immutability of the seasonality in all aspects of life.  The advent of spring and summer tends to trigger a feeling of abundance and there is a tendency to stop hoarding and begin using stores of certain items.  This is beginning to affect commodities market in the usual way. 

Another factor that is directly affecting silver and may explain its outsized drop in price is that the Chicago Mercantile Exchange has raised the margin limits on silver contracts three times in the past week which severely impacts liquidity in this market.  The end result of this action will be further shortages of physical silver which only makes it that much more appealing as an investment.

But in a bigger sense, the longer the man stands motionless before the tray of cupcakes, the Markets, a new character in our parable who represents the clothiers, doctors, etc. who were counting on the man to continue his insane habit of consuming his cupcakes in the morning.

Now that the man appears ready to kick his habit, the markets have attached their bungee cords and have just taken a head first plunge off of a high cliff. 

Unless the bakery intervenes, they are likely to hit the bottom!

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, May 5th, 2011

Copper Price per Lb: $3.99  PLUNGING!!!!Oil Price per Barrel:  $98.31 PLUNGING!!!!10 Yr US Treasury Bond:  3.17%
FED Target Rate:  0.09% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,465  PLUNGING!!!!

MINT Perceived Target Rate*:  3.25%Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,546
M1 Monetary Base:  $1,895,300,000,000 DESPERATION!!!!M2 Monetary Base:  $9,071,900,000,000 DESPERATION!!!!

*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.

Deflation has been Defeated, Woe to us All!

4/19/2011 Portland, Oregon – Pop in your mints…

It is hard to imagine that the amount of negative news has ever been more abundant.  Reasons to worry abound.  At The Mint, we have speculated that bad news and the worry it causes is, to some extent, a seasonal phenomenon.  Not that the events that cause the news only occur during certain seasons, rather that mankind is more apt to worry about the news during the Spring and Fall in either hemisphere than during other times of the year.  It is a time when preparations for the upcoming summer or wintertime are being made and it is natural to worry as to whether or not one's preparations are adequate.

However, even discounting seasonal worry, the combination of troublesome events that are being reported at present is staggering.  Under normal circumstances, any of the catastrophic events and wars that have occurred recently on its own would be reason for a stock market collapse.  Taken together, it is a wonder that stocks even have a pulse.

Yet in what can only be described as the eighth wonder of the world (ninth, if you count Andre the Giant), the stock, bond, and commodity markets are all racing higher at various speeds.

Can the Economic Recovery rival Andre the Giant

 as the 8th wonder of the world?

What to make of it?  Here at The Mint, we look at the data and believe that there is only one reasonable conclusion:

The Central Bankers have won:  Deflation has been Defeated.

Mint.com for Android – Keep Your Money in Your Pocket

As you may recall, three and one half years ago, give or take, the Financial authorities realized that there was a four alarm fire occurring in the financial markets.  Soon, every major Central Bank and Government were on the scene and proceeded to pump liquidity into the system to avoid a deflationary collapse that, as we were told, would bring an end to the world as we know it.

Now, much like George W. Bush in Iraq, we survey the landscape in the financial markets and, with equal confidence declare "Mission Accomplished."

Just like the US Military in Iraq, the financial authorities are announcing plans for an "orderly handover of power" from the public sector to the private sector.  

Just like the US Military in Iraq, the financial authorities are finding the handover of power to be much easier in word than deed.

Now that the financial authorities have defeated deflation (or Saddam Hussein if you are still following the Iraqi war parallel), they are finding that instead of the smooth transition of power that they apparently had hoped for there exists a cadre of violent elements in the economy which are jousting to fill the vacuum that the financial authorities and governments of the world will leave as they begin to pull liquidity out of the markets.

Instead of supply and demand being in balance, even more grotesque ratios of debt to equity and skyrocketing commodity prices are emerging as the rule of the day and equity, bond and commodity markets are walking time bombs.  Essentially, the later condition of the markets is worse than the former.

Didn't Jesus say something about this in Luke 11:24-26?  More than a clean heart, Man needs to have his sinful nature cleansed from him.  In the same way, more than liquidity, the financial system needs to have its bad debts written off, no matter how painful it may be.

Free money (or liquidity) is not the ultimate answer to the imbalances in the financial markets just as democracy does not appear to be the ultimate solution to a peaceful and prosperous Iraq.  It may even be breaking down in the United States if the recent partisan wrangles over the budget and debt ceiling are any indication. 

No, we are just now beginning to see the "unforeseen" (yet strangely logical) consequences of flooding the world with liquidity.  The war against deflation has been won, but the pent up demand and distorted production patterns that the war has left in its wake are now threatening to unleash inflation on a scale not seen for nearly a century.

Woe to dollar holders everywhere, for this inflation is now taking on a life of its own.

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 Tuesday, April 19th, 2011

Copper Price per Lb: $4.26
Oil Price per Barrel:  $108.40 SKYROCKETING!!!!
10 Yr US Treasury Bond:  3.36%
FED Target Rate:  0.10% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,495  SKYROCKETING!!!!

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,267
M1 Monetary Base:  $1,954,200,000,000 DESPERATION!!!!
M2 Monetary Base:  $9,045,900,000,000 DESPERATION!!!!

*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.

Is it Seasonal or is the US Dollar Losing Reserve Status more quickly than we think?

4/14/2011 Portland, Oregon – Pop in your mints…

This week we have witnessed a relentless increase across the board in the price of most commodities.  Some of this action is attributable to seasonal factors.  Spring is the time to plant in the Northern Hemisphere and the time to Harvest in the Southern.  These events create a flurry of activity in commodities because at this point there are many unknowns. 

In the North, they are trying to decide what to plant which creates a sort of statistical vacuum for speculators to fill with the assumption that there will be scarcity.  In the South, they are beginning to tally what the combination of the earth along with their toil has afforded them as sustenance for the winter.  Naturally, as when the votes of a big election are being tallied, there is a lot of speculation.  Speculators jump on this informational vacuum and the feeling of scarcity causes them to, you guessed it, bid up commodities.

The whole flurry of activity itself involves lots of John Deere tractors and combines, fertilizer, water and manpower and, you guessed it, oil.  All of which involves increased demand for various commodities and helps to create a general anxiety which sweeps the planet.

It should come as no surprise that God chose to ordain the two great feasts during these times.  The Passover in the spring of the North and the Feast of Trumpets in the autumn.

Some of this seasonality in commodity prices is new phenomena, some of this has been around since man first was called into being on the sixth day.  Whatever the underlying reason, the confluence of these events tends to cause prices to rise in money terms in the autumn and spring in both hemispheres.  Modern transport methods and global trade have helped to smooth this out but natural forces have always trump man's efforts.  Even the advent of the internet has not changed this fact.

But what to make of the recent run up in the prices of just about everything except paper money?  There is something more to these increases than the regular seasonal trends.  Yes, fellow taxpayer, it appears that the inflation that the FEDS of every nation on the planet have been baking in over the past three years is beginning to set up.   

George Soros, a famous investor who made a great deal of his fortune and reputation by shorting the British Pound in the early 1990's held an April 8^th conference that some are hailing as "Bretton Woods III", an homage to the past two conferences which reformed currencies and in turn created the present world order that we now live in, appears to have called for an end to the dollar as the world's reserve currency.  This is from an interview with Mr. Soros by the Financial Times in November of 2009:

You can read more about the speculation on Mr. Soros' intentions here.

Please follow this link for a long and interesting Q & A at the conference with Mr. Soros and Paul Volcker fielding questions.

The fact that this conference is being held, taken along with the fact that China has been amassing large amounts of gold and silver, is giving credence to the speculation that the Chinese currency may be in a position to take the baton of reserve currency status from the dollar.  If this is true, we cannot overstate what this means for currency and bond markets and more importantly the cost of everyday items for those attempting to pay for them in dollars.

To state what may be obvious, the US dollar will be worth much less in trade than it is today.

While the European and Chinese Central Banks have recently raised rates, the US FED still has the printing press on full throttle.  If our speculation here at The Mint is correct, the FED, like the driver of a semi-truck that is careening down a steep mountain road, may not be able to apply the brakes and save the remaining value of the US dollar.

Then again, maybe they don't want to.

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 14th, 2011

Copper Price per Lb: $4.26
Oil Price per Barrel:  $109.41 SKYROCKETING!!!!
10 Yr US Treasury Bond:  3.485%
FED Target Rate:  0.08% FED IN DESPERATION MODE!!!!

Gold Price Per Ounce:  $1,462  SKYROCKETING!!!!

MINT Perceived Target Rate*:  3.25%
Unemployment Rate:  8.8%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,285
M1 Monetary Base:  $1,954,200,000,000 DESPERATION!!!!
M2 Monetary Base:  $9,045,900,000,000 DESPERATION!!!!

*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.