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.

G7 Fails to Stem Yen’s Rise, The Futility of Market Intervention, Portuguese Government Next to Collapse

3/22/2011 Portland, Oregon – Pop in your mints…

We left off Friday with the G7 Central Bankers reaching deep into their pockets and dumping all of the Yen they had, and then some that they didn't have, in an effort to stem the rise of the Japanese currency.  At first, it appeared to work.  On the surface they were able to avoid a catastrophe in the JGB (Japanese Bond), Nikkei, and US Dollar markets.  But what do you know?  On Monday, the Yen continued to rise as if nothing had happened before finding a trading range near the levels at which the G7 had intervened.

Is this seemingly unrelated crisis in Japan the Waterloo for the US Dollar in the currency wars?  That is our current speculation here at The Mint.

In a world not riddled with government debt and baseless currencies with which to pay them, a disaster of this magnitude in Japan would cause the value of currency on the Isle of Japan to rise and the value of debt obligations to fall.  This is simple logic.  When a disaster strikes, you need things now, not promises of things 3 months to 30 years in the future.  The word currency cleverly captures this idea of having something "currently" and not later.  It is no mystery that it should become dearer as anxiety increases.

In a world that is awash in debt and baseless currency, as our world is, anything can happen.  Anything, as long as it is limited to setting the current price of government debt holdings and competing baseless currencies against one another.  The current flavor of "anything happening" is that, defying all logic, the Japanese Yen seems to have gradually fallen from the speculative buying that bid it to record levels in the aftermath of the threefold disasters which befell northeastern Japan.

Upon further review, "gradually fallen" may not be an accurate description of the price action in the Yen:

Japanese and G7 Central Bankers try to Push the Yen off a Cliff!

As you can see in the above chart, it looks more and more like the Japanese and G7 Central Bankers threw the Yen off of a cliff.  Unfortunately for them, it appears that the Yen has wings and that even the combined efforts of the mightiest Central Banks on the planet cannot stop this rally.

Bad news for the dollar.

Market intervention is, in the long run, futile.  In the short term, however, it can be very profitable.  Just ask Goldman Sachs!

Here is a tip, if you see a market that is being massively intervened in, bet against the intervention.  Following this logic, one could now buy the Yen (but not JGBs, mind you!) without fear.  Free people and the free markets which represent them will always overcome any attempt by a minority of governments and Central Bankers to work against them.  Supply and Demand always prevail in economics.  The only thing that intervention does is to slow the process.

If you understand the supply and demand dynamics of a market and see that demand is overwhelming supply, go for it.  Look at the interventionists as your allies as they continue to hit the pause button so that you can increase your positions.  All they (the interventionists) do is send false signals which end up further restricting supply, which simply makes the reasons for going long all that more compelling.  Just don't go into debt to do it!  Market intervention is futile, and it is a shame that so much of it is taxpayer sponsored.

Before we sign off we cast our weary eyes across the pond and see that the Portuguese are offering the world another example of fiscal democracy at work.  In a scene being played out in democratically elected chambers all over the world, the majority is refusing to give up the government subsidies, entitlements, and boondoggles that they have slowly voted into existence over the years, even in the face of national bankruptcy. 

Voting things into existence and actually working for them are two very different things.  Voting is easy, working is not.  This is the great tragedy of democracy in fiscal matters.

There is an escape hatch from all of this madness, and, in the US, it is surprisingly easy to find and  open.  Hold wealth in silver or gold (click here and Register at APMEX.com Today!), pop some popcorn, and sit back and watch the political theater unfold.  Knowing that your wealth is safe, you may even get a chuckle or two as the wheels come off the bus of fiscal and monetary policy as we know it!

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 22nd, 2011

Copper Price per Lb: $4.30
Oil Price per Barrel:  $102.23
10 Yr US Treasury Bond:  3.32%
FED Target Rate:  0.14%

Gold Price Per Ounce:  $1,427

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  12,037
M1 Monetary Base:  $1,843,500,000,000
M2 Monetary Base:  $8,974,000,000,000

*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.

G7 Meet to Stop Yen’s Dramatic Rise and the BLS Calls BS on its Broad CPI Measure

3/18/2011 Portland, Oregon – Pop in your mints…

The G7 Central Bankers have called an emergency meeting to "do something" about the "skyrocketing Japanese Yen."  This meeting is simply their latest attempt to combat reality.  The reality of the situation in Japan is that they are dealing with a catastrophe.  When one is dealing with a catastrophe, the next prudent step, after all of the immediate crises have been contained, is to take stock of the situation.  By taking stock, we mean that one takes note of what was lost and, more importantly, what one will need in order to restore things to an acceptable level of comfort.

Comforts cost money.  In Japan, to replace these comforts the average person needs Yen.  They will either get this Yen by making a claim with their insurance company or selling assets to raise cash.  With damages of nearly $15 Trillion Yen (roughly 3% of Japan's GDP) and counting you can imagine how the demand for Yen is, well, about to skyrocket.

The Japanese people are still dealing with the catastrophe.  Speculators in the currency markets are, as always, one step ahead of what must happen and are sapping liquidity, in terms of Yen, at a rapid pace.  This activity, taken at face value, will presumably wreak havoc for Japanese Government Bond prices, the prices of stocks traded on the Nikkei, and the US Dollar.  These three markets will crash if nature is allowed to take its course.  You see, in the tipsy turvy world of currencies, to buy a yen more often than not means that a US dollar, a JGB, or a stock listed on the Nikkei is sold on the other side of the trade.

The most sought after currency in the world, at least until the G7 meet tomorrow

The accelerated selling of dollars, as Jim Rogers points out, could cause the endgame scenario for the US currency to swiftly come upon the world.  Mr. Rogers goes so far as to call this a "Moment of Truth for the dollar."

You can see the brief interview by clicking here.

Of course, as Mr. Rogers points out, it may be time to buy the dollar, if for some reason it is to survive as a top tier currency.  We have lived just long enough to know that anything is possible.

The G7 meeting today is VERY IMPORTANT.  It should not be, if only the world had not left the embrace of sound money 40 years ago, but unfortunately, it is.  For the G7 will essentially decide whether to keep the Dollar on life support or to pull the plug.

What will they do?

Meanwhile, the Bureau of Labor Statistics (BLS), the legion of bureaucrats who are charged with cranking out data in order to support FED policy, appears to be starting its own form of political protest against the loose dollar policies followed by the Federal Reserve.  After faithfully cranking out the core CPI, a key statistic here at The Mint, for years and watching it slowly become distorted into the puppet statistic that it now is, they came out with a data point in 2002 called the "Chained Consumer Price Index" which takes into account a rolling average of food and fuel costs, which the core CPI now blatantly ignores.

This index hit a record high in February, confirming what most average Americans already know:  It has never been more expensive to live in the Land of the Free.

Will we be Brave enough to return to sound money?  You, fellow taxpayer, can take a step in that direction with just a few simple keystrokes.  APMEX, our affiliate, is running a contest.  They are giving away one 1 oz gold eagle coin each month.  All you have to do to enter is register by clicking this link and filling in the blanks.  You can register to win once per month.  If you so desire, click here and Register at APMEX.com Today!

By definition, the black hole of debt will always grow at a more rapid pace than the worthless currency that is printed in an attempt to fill it.  If the black hole collapses (i.e. widespread default occurs), hyperinflation will occur quickly.  If currency becomes scarce, people will find another medium of exchange, likely gold and/or silver.

Either way, the world will be out of this mess before long, so hold on to your hats, it is bound to be a wild ride to the other side!

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 Friday, March 18th, 2011

Copper Price per Lb: $4.32
Oil Price per Barrel:  $103.11
10 Yr US Treasury Bond:  3.25%
FED Target Rate:  0.14%

Gold Price Per Ounce:  $1,404

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.5%
Dow Jones Industrial Average:  11,775
M1 Monetary Base:  $1,843,500,000,000
M2 Monetary Base:  $8,974,000,000,000

*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.

Japanese, Euro and US FEDs Go Green for St. Patrick's Day, Quadruple Witching Ends Tomorrow

3/17/2011 Portland, Oregon – Pop in your mints…

Quadruple Witching is upon the markets.  For those of you who are wondering, Quadruple witching is a market term for the third Friday in the months of March, June, September, and December when stock market index futures, stock market index options, stock futures, and stock options all expire on the same day.  In other words, everyone must either take their medicine or look for an escape hatch from undesirable market positions.

If quadruple witching does not phase you, our affiliate TradeKing will let you trade all of these options at rock bottom prices.  You can open an account by clicking their banner to the right or if you find computers cumbersome and now trade from your smart phone, check out the New TradeKing iPhone app.


This quadruple witching phenomenon is set to occur tomorrow which may be one reason that the US and Euro FEDs are printing money like there is no tomorrow.  The only refuge from this monetary disaster are to hold wealth in silver and/or gold coins and possibly real estate.  

Avoid getting pinched!  Get a start on putting your wealth into gold and silver this St. Patrick's day, click here and Register at APMEX.com Today!  There is no obligation and you can register each month for a chance to win a 1oz gold eagle, worth $1,402 at today's prices.

Meanwhile, events continue to spiral out of control in northeastern Japan.  Things are spiraling out of control in the Middle East as well, but what normally would be front page news simply pales in comparison to the havoc that nature has wrought on the Land of the Rising Sun.  While tens of thousands wait anxiously in freezing temperatures as water and heating fuel run low, the world sits on edge waiting for confirmation that there has been a meltdown at the Daiichi nuclear plant.


In the face of such an obvious humanitarian crisis, one that will mark a turning point for Japan and possibly the world, the Japanese, American, and Euro FEDs are unleashing a virtual Tsunami of cash into the world wide financial system.  This system is broken beyond repair.  It has been broken by the same FEDs who purport to save it from certain catastrophe.  

Like the devil who has been unleashed to roam the earth before he is thrown into the lake of fire for eternity, the FEDs are no longer making use of deception in their counterfeiting operation.  The US Government is broke, half of the European Governments are broke, and the Japanese Government's balance sheet is not to be believed.  They can no longer "bail each other out" as has been the case ever since WWII.

At this point all of the money shoveled into the self destructing financial system is being vaporized almost immediately by the black hole of debt that the FEDs are trying to fill.  This game was innocent enough while it was only the banks and financial companies getting shellacked.  Now that this funny money is baking its way into food and energy prices, it is literally a problem for everybody on the planet.

The good news is that the economy appears to be picking up.  As long as people have needs, there will be people working to fulfill those needs.  The people with the needs will work to fulfill others needs to be able to pay for the fulfillment of their own needs.  This is how a natural, organic, healthy economy works.  Once the Government and Banking cartel begin to interfere, you can see how things could quickly go wrong.  Yet for some amazing reason, the Government and Banking cartel are believed to be essential to the healthy working of the economy.

They are not, and the sooner the world wakes up to this fact, the better.

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 Thursday, March 17th, 2011

Copper Price per Lb: $4.18
Oil Price per Barrel:  $98.26
10 Yr US Treasury Bond:  3.21%
FED Target Rate:  0.14%

Gold Price Per Ounce:  $1,402

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  11,613
M1 Monetary Base:  $1,932,200,000,000
M2 Monetary Base:  $8,888,200,000,000

*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.

Japan Experiencing the Unimaginable, making all other matters trivial

3/15/2011 Portland, Oregon – Pop in your mints…

As nearly everyone with a television, radio, computer or smart phone is aware, within 72 hours the main island of Japan suffered a major earthquake, a major tsunami, and a nuclear disaster which has evoked comparisons to Chernobyl.  All of these events continue in a drama that is unfolding as the aftershocks, tsunamis, and associated consequences for the nuclear power plants continue.

We respectfully ask our readers to observe a minute of silence in honor of those perished and those who continue to be affected.

Silence is powerful.

We have a second cousin who lives in Japan and is sending regular updates.  He and his family are safe and He appears to generally be amazed at how the media there initially was minimizing what had happened.  He is now marveling at the indestructible Japanese spirit.

Perhaps it has something to do with Japanese culture and/or national pride.  Japan is one of the most modern societies, in terms of technological advances embraced as part of everyday life, in the world.  Their society appears to run flawlessly on a scale and at a pace that is unparalleled.  On Friday, this society was blindsided by the twin natural disasters.

For us personally, the unfolding nuclear disaster immediately brought to mind the song "Red Rain" by Peter Gabriel.  For those who are unfamiliar, "Red Rain" was inspired by a recurring dream that Gabriel had in which he was swimming in a sea of red water.  While Gabriel himself does not appear to have linked the dream to a nuclear holocaust, others have and the imagery has stuck for us here at The Mint.

Imagery aided by the great Japanese Film maker Akira Kurosawa's depiction in "Dreams" of "Mount Fuji in Red":

These events serve as powerful reminders of the humility with which each of us must live.  No matter how powerful a person or company may be or how many disaster preparedness plans a government may have in place, they are no match for the natural forces which we are all subject to.

The Bank of Japan injected $15 Trillion yen, the equivalent of roughly $184 Billion dollars, in a vain attempt to prop up the various money markets that capitulated on the news.  While this, along with what will surely be a coordinated effort by G8 Central Banks to "provide liquidity" (read "get major insurers out of their debt and equity positions so that they can make good on their policy claims") may stave off the inevitable rout on global markets, it will not get things back to normal any time soon.

Will the Central Banks bankrupt themselves in the process?

While an investor would be wise to steer clear of Japanese and most G8 stock markets as the giant insurance companies are forced to become net sellers to meet policy claims, we would not be surprised to see that the Japanese stock market, and the Japanese in general, quietly leading the way in terms of economic growth for the next decade.

We suspect that this event has shaken the national psyche of the Japanese people and that things in the land of the rising sun will never be the same.  We also suspect that the people of Japan will rise from the ashes of these disasters like a phoenix.

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 15th, 2011

Copper Price per Lb: $4.10
Oil Price per Barrel:  $98.99
10 Yr US Treasury Bond:  3.35%
FED Target Rate:  0.14%

Gold Price Per Ounce:  $1,429

MINT Perceived Target Rate*:  4.25%
Unemployment Rate:  8.9%
Inflation Rate (CPI):  0.4%
Dow Jones Industrial Average:  11,993
M1 Monetary Base:  $1,932,200,000,000
M2 Monetary Base:  $8,888,200,000,000

*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.