The Repo man goes Basel on funding markets

1/25/2013 Portland, Oregon – Pop in your mints…

We have been remiss in our regular correspondence to you, fellow taxpayer, and we pray you will forgive us.  We have completed and published the first two volumes in our series, called “Why what we use as Money Matters.”  It is our humble attempt to explain, well, why what we use as money matters.  The volumes are currently available on Amazon’s Kindle as wells as in various eBook formats on Smashwords and can be accessed at the following links:

What is Money? – Volume I – Free until February 7, 2013 at Smashwords

Of Money and Metals -Volume 2 – Free until January 31, 2013 at Smashwords

Our objective in writing the series is to convince humanity of two truths:

1.  That if the activities of the earth are to be in balance with the available resources, money must be something natural, in other words, not debt or a sort of promise or idea.

2.  That Anarchy is an ultimate given, and that Capitalism is the best response to this given.

The governments of the world, as we have known them, are disintegrating, but this will be addressed in our upcoming volumes in the series.

We would be honored if you would give them a read and keep watch for the upcoming volumes, for these ideas are exceedingly important.

Back to finance

While the Fiscal cliff and subsequent fallout have taken a toll on the average working American to the count of 2% right where it counts, there is a something altogether wonderful and dreadful knocking at the door:

Inflation

The wave of inflation that has been on the horizon ever since Federal Reserve monetary policy gave us new acronyms such as ZIRP and QE, appears to be breaking and will soon wash ashore.  Now that it is breaking, the only thing that stands between it and the average working American is some flavor of collective default by the nation’s banks.  Thanks to the programs which are represented by the above mentioned acronyms, this is highly unlikely.

At this point, then, the only entities whose default could cause such a chain reaction are the Federal Reserve, US Treasury, or possibly the ECB.  However, here at The Mint we believe that the tidal waves of cash that have been unleashed may even make the default of one of these institutions manageable.

The Federal Reserve has succeeded in the sense that they have flooded the system with so much cash and have repeatedly stated in no uncertain terms that they will backstop the Treasury and MBS market until the US Dollar’s last dying breath.  While for a time, maturing debt obligations were mopping up the liquidity that the FED was pumping in, most consumers have now moved to extend maturities via refinancing or, on the conservative end, have closed out both cash and debt positions by paying off mortgages with savings which had been “ZIRPed” into dormance as an income producing asset.  This collective action has put the economy in a sort of warped reset where the fiat currency debt monster can run amok for the foreseeable future, with the attendant fatal real world consequences.


Oddly enough, as the FED begins to claim victory over the financial crises which its own policies have made possible, the double whammy of the Basel accords and Dodd-Frank regulatory regimens may eventually eliminate many of the financial institutions which today are household names.

The Repo man cometh

In what is perhaps an unintended consequence, the afore mentioned regulations have given what is known as a REPO contract its walking papers.  In our oversimplified understanding of the matter, for simplicity is a virtue here at The Mint, the REPO arrangement, which is a glorified demand deposit, has allowed banks to hold their client’s funds on their balance sheet as Tier I capital.

In 2017, these arrangements will be forced to be properly classified as demand deposits, and many of the wiser financial institutions, who already have a long way to go to reach the Basel Tier I requirements, are already steering their clients away from these arrangements.

How much capital will this pull out of the banking system?  Nobody knows.  But what is for sure is that unwinding these REPO positions will leave some institutions exposed and unprepared.  They will probably become aware of their exposure via the classic individual financial panic mechanism:
The margin call.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for January 25 2013

Copper Price per Lb: $3.64
Oil Price per Barrel:  $95.88
Corn Price per Bushel:  $7.21
10 Yr US Treasury Bond:  1.95%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,659 THE GOLD RUSH IS ON!
MINT Perceived

Famed Apocalypse Consultant sees wealth squandered as too little, too late as 12-21-2012 approaches

12/13/2012 Portland, Oregon - Pop in your mints…

On a rainy Thursday morning in Southeast Portland’s Bipartisan Cafe, we sit, slowing sipping our coffee with REM’s “The end of the world as we know it” playing softly in the background.  The clouds and rain match the mood of our companion, Dr. Roger Doomsday, the world’s leading Apocalypse consultant.  Dr. Doomsday, who has not even touched his mug since it arrived 10 minutes ago, stares quietly out the window at the traffic passing on SE Stark and only wonders what might have been.

After what seems like an hour, the famed Apocalypse Consultant breaks the silence,

“They just don’t get it,” he laments.

Flash back to 1999.  Dr. Doomsday, who had previously helped groups such as the Branch Davidians, the Peoples Temple, and the Movement for the Restoration of the Ten Commandments of God prepare for the coming Apocalypse, was riding a wave of hope.

“I did a great disservice to my early clients,” Doomsday says, in the first of many understatements he would utter.  “Back then, my advice was too practical, I thought ‘hey, if you don’t want to go through this thing and have a better place to go to, why wait around for the Apocalypse?’”


Unfortunately for those of the Peoples Temple, Doomsday’s advice had horrific consequences which led to the greatest loss of civilian life in the US prior to 9/11.
After freeing himself from a slew of civil and criminal charges related to the matter, with the help of a then relatively unknown lawyer named Johnny Cochran, he began to reconsider his methods.

“I thought, rather than telling people to evacuate the planet before the inevitable occurs, why not try riding it out in style?”  He then lets out what we interpreted to be both a chuckle and a sob, “I guess Koresh took my advice a little too far.”

After the Branch Davidian fiasco, in which Doomsday claims his only error was “not counting on the FEDs showing up,” which was understatement number two of the morning, according to our count, the resilient Doctor, with the encouragement of his well paid legal counsel, again changed his approach.

“I began to wonder if counseling people to heavily arm themselves and live as gluttons in far away retreats was the right thing to do, so I dropped the firearms stockpiling from my standard Apocalypse preparedness program in favor of a greater allocation of funds towards revelry.”

Fast forward to Uganda in 1999.  Again, on the advice of Dr. Doomsday, the Movement for the Restoration of the Ten Commandments of God throws an epic party as what they deemed the end of the world as they knew it was approaching.
Unfortunately, a fire breaks out, enacting a heavy death toll on the revelers.  Again, another one of Doomsday’s clients leaves a trail of shattered lives as time nonchalantly marched forward.

“What happened in Uganda was lamentable,” Doomsday explains, “but I felt I was finally getting it right, and my official recommendation never involved open fires.”  Somehow, we felt that he was strangely giving a sales pitch and a disclaimer to us all in the same phrase, like the advertisements you hear on the radio.

With his approach strangely validated, albeit in his own mind, Dr. Doomsday moved from specializing in consulting obscure religious sects to taking his approach, which he called “Party like its 1999,” until The Artist, formerly known as The Artist Formerly known as Prince, formerly known as Prince, successfully sued Doomsday for copyright infringement, to both large corporations and governments.

“While the Apocalypse is always just around the corner, I had an incredible stroke of luck when the Mayan prediction began to be widely disseminated.  With the year 2000 in the past and the Jewish Messiah’s arrival famously unpredictable, I needed something for people to latch onto, an end date they could all embrace.”

For the Apocalypse Consultant, the Mayan’s 12-21-2012 cryptic codex interpretations came like manna from heaven.


“What do they mean? No one can tell, but I can tell you what those native stone carvings and the wild imagination of the archaeologists who encountered them meant to me, about $1 billion, yes, billion in net fees over the past twelve years!” exclaimed the Dr. with more incredulity than joy in his voice.

For the past twelve years, Doomsday has traveled the globe helping both corporations and governments to squander what he estimates to be “Eight centuries of accumulated wealth” in just over a decade.

“Everybody wanted a plan, Citibank, JPMorgan, all the big banks, Cargill, GE, Xerox,” recalled Doomsday, “the Department of Defense even had something called Homeland Security created as a vehicle for passing wealth straight to the sewers of history.  GW himself came up with the name, said it reminded him of home cooking, or something like that.”

“Some took my recommendations too far, too soon,” continued Doomsday, “Enron, Tyco, and Bear Stearns got all excited and blew up early, that was always the danger, blowing through the resources before the Apocalypse arrived.”

“‘How much is enough?’ everyone wanted to know, so I said “you know your retirement calculator?  Just shift your life span to end on 12-21-2012,” he laughed, “worked like magic, and saved me a ton of accounting fees on the back-end!”

He now stares at the commuters passing down Stark on their way to work or school through the Bipartisan’s window as shakes his head.  ”I can only wonder what might have been,” he says, with a tone of regret.

While he believes much wealth has already been squandered, he can only wonder what might have been had the corporations fully implemented his recommendations.  However, corporations, who seemed to eagerly embrace his ideas early, have been too slow to act.

Dr. Doomsday’s standard recommendations, which he calls “no-brainers” if the world is about to end, involved a number of disincentives for employees to work.
“Categorically, I told employers to slash benefits and freeze wages, something that many waited until a couple of years ago to do.  Still, many employees saw the writing on the wall and retired, while others, notably union workers, clung to their jobs in the face of deep cuts…I didn’t see that coming!”

The idea was that, with such a disincentive to work, employees would do the math, retire, cash in their 401Ks and party or otherwise spend irrationally with 12-21-2012 in sight.  Simple on paper, but in practice, Dr. Doomsday underestimated the influence of one key factor:  The influence of the Apocal-skeptic.

It turns out, not everyone believed that the world would end on 12-21-2012.  Even when presented with the temptation to spend an estimate 800 years of accumulated savings in just 12, some people just couldn’t take the bait.

“The Apocal-skeptics didn’t believe it.  What was so clearly carved in stone by people smarter than ourselves some 3,000 years ago somehow didn’t register with them as credible evidence.  Only now is my phone blowing up with calls asking how to fast track recommendations which were laid out to debauch the earth over a minimum of 7 years to be executed in a week.  I threw my phone in the Willamette last night…I can’t take it, we had a golden chance and we wasted it, or didn’t, as it were.”

His sorrow is now evident, as a tear streams down his unshaven face.
“I mean, Citi just now laid off 11,000 workers?  They barely have time to blow their 401Ks on unbridled debauchery.  This isn’t how it was supposed to go down.”

Staring back at the window, he cries, “and these people look like they’re going to work!” as he slams his fist on the table, causing the half awake patronage to look in his general direction

“The only ones who truly got it are the Western Governments.  I mean, in sheer numerical terms, they have hit the ball out of the park when it comes to squandering wealth,”  He continues, ”the Governments were already squandering an impressive amount of capital, I just gave them a reason to go all the way.”

While Doomsday still thinks the Government overdid it on things like defense spending, education, and cleaning up the environment, activities he says have no place in an apocalyptic mindset, he can’t deny the numbers.

“While I would have preferred to see my program of night club and amusement park development fully implemented, on net, they (Western Governments) have been the most proactive in encouraging leisure, revelry, and the ‘eat drink and be merry, for tomorrow we die’ mindset that is they very core of my philosophy,” he pauses and shakes his head, “they’ve done their fair share, but the people have failed them.”

He blames the human tendency to plan for the future, a survival mechanism which, he admits, takes time to overcome, as well as the Fiscal Cliff, which he claims is a myth which is perpetuated by Apocal-skeptics in the US congress who have a vested interest in the status quo, for derailing many of his recommendations before they made it out of committee and into various spending packages.

“I admit,” continues Doomsday, “that parts of my program, such as converting ship yards to churn out cruise ships and one of my favorites, constructing fraternity and sorority houses, as well as subsidies for inflatable play structures, seemed a bit far-fetched even for those convinced that the Apocalypse was coming…but our differences were more about how to waste the money, not whether or not it should be wasted,” he sighs, helplessly, “now they are setting up rules for Obamacare!”

Obambacare is a sore subject for Dr. Doomsday.  It was the antithesis of what he deemed a proper Apocalyptic health care system.

“For goodness sake, all you needed were some ERs to mend the thrill seekers.  Primary and preventative care?  Vaccinations?  Treating people with pre-existing conditions?  What are we trying to do, make people think they’ll live forever?!?!?!?!”

He shakes his head in resignation that a once in a lifetime opportunity was lost.
“I did my part, I told people how to properly waste money, gave them an endless bucket list, and the framework for the common man and woman to live out their numbered days in pure, shameless debauchery.  I even led by example.”

{Editors note:  In his last statement, Doomsday is referring to his lifestyle which, up until his personal fortune was exhausted last week, made Hugh Hefner and most gangster rappers blush}.

As the rain falls, we take a look at our iPhone, suddenly, as the digital display ticks another minute towards 12-21-2012, we realized that Dr. Doomsday, like the famous Gambler who spoke with Kenny Rogers, had given us an ace that we could keep.

We quickly thanked Dr. Doomsday, though he doesn’t respond as he stares blankly out  onto Stark street, and bolt out the door, right past the thought of paying the tab.  We didn’t even bother to take his pulse as our internal clock turned up the volume as the seconds began to tick away with an eerie clarity in our mind.
We dialed our 401k provider as we run out the door of the cafe, barely noticed by those half awake on this dreary Portland morning.

“Yes, I need my account liquidated and the funds delivered to me in cash as soon as possible…I know there are fees associated…just do it, I will be by to pick it up within the hour.”

As we begin to dial airlines, the voice of reason screams out, barely audible above the ticking in our head, something along the lines of, “Stop!”

That would be the last we heard from him, as we call our family and friends and invite them to an all expenses paid party in paradise.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 13 2012

Copper Price per Lb: $3.63
Oil Price per Barrel:  $86.33
Corn Price per Bushel:  $7.12
10 Yr US Treasury Bond:  1.73%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,697 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  13,171
M1 Monetary Base:  $2,527,700,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,375,100,000,000

Federal Reserve Effectively Forgives US National Debt

12/11/2012 Portland, Oregon – Pop in your mints…
Last week, we made a vague promise to provide data to back a claim that the US Debt at the FED had already been largely cancelled via the various quantitative easing (QE) operations that have been realized over the past several years.  This fact makes any talk of solving the moronic “Fiscal Cliff” via extreme methods such as minting platinum coins with $1 Trillion face value unnecessary.

In an attempt to illustrate what amounts to an effective forgiveness of a portion of the US National Debt by the Federal Reserve, we offer the following graph, which plots the both the official US National debt as well as the official US National debt net of the Federal Reserve’s holdings as a percentage of GDP.


As you can see, the real US National debt to GDP is closer to 94% rather than the projected 105% which the official US National debt figures would suggest.  The Federal Reserve, at last count, holds roughly $1.6 Trillion of US Treasury debt.  While this debt is still theoretically on the books, it can essentially be removed from consideration when arguing about the need to solve the debt problem, vis-a-vis the moronic Fiscal Cliff debacle that is playing out in Washington.

 94% is an alarming level, but according to our projections, the current US Government current account deficit cycle is about to end as the waves of new currency released into the global economy by the Federal Reserve and other central banks begins to run through the coffers of the US Government.

Despite the desperate proclamations by Congress that it will be difficult to solve their (yes, this is their problem) impasse, indicators such as an EFT that tracks the Defense industry, XAR, which would theoretically be the hardest hit were the US to fail to address portions of the Fiscal cliff such as suspending the sequestered spending cuts agreed upon as a result of the infamous Debt ceiling debacle, are not showing any signs of trouble.

In other words, the financial markets are assuming that the US Congress and Executive, when push comes to shove, will wind up and kick the can a mile down the road, as they did when the debt ceiling was bearing down on them.

According to our projections, there is no debate, the Fiscal Cliff does not even exist, rather, it is a figment of the collective imagination.

We do not believe in money, at least not in the form of money that is currently used in America today, and it appears that the US Congress is beginning to come around to our point of view.  If the Federal Reserve will simply finance deficits ad infinitum, why even bother with the Fiscal Cliff charade?  We are still working to answer that question, and leave it for you, fellow taxpayer, to ponder along with us.

The real question, the one which we wrestle with every day here at The Mint, is when will the faith in the Federal Reserve be destroyed?  With the advent of the various QEs beginning in 2008, the Federal Reserve system effectively collapsed.  The creation of credit was no longer self sustaining in the economy.  The FED has been living on borrowed time.

As December 21 approaches and those who have misinterpreted the Mayan calendar wonder if December 22nd will come, we look forward to the 22nd of December, when the Federal Reserve’s charter is rumored to expire, and YouTube’s “Man of Truth” famously prophesied that the Federal Reserve would go bankrupt. Technically, he said “December 2012″, but, after 99 years, why split hairs?

Chances are that the world will wake up on December 22nd and carry on.  However, if you see the words “Force Majeure” in the financial headlines, get ready to calculate prices in a new currency for 2013.  For the US may swerve to avoid the Fiscal Cliff, but sooner or later it will drop off the currency cliff.

That is when things will get very interesting indeed.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for December 11 2012

Copper Price per Lb: $3.65
Oil Price per Barrel:  $85.84
Corn Price per Bushel:  $7.24
10 Yr US Treasury Bond:  1.65%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,710 THE GOLD RUSH IS ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.1%
Dow Jones Industrial Average:  13,284
M1 Monetary Base:  $2,457,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,275,200,000,000

The Fiscal Cliff, the moronic Redux of the 2011 Debt Ceiling debacle

9/18/2012 Portland, Oregon – Pop in your mints…

Today we turn our focus to an event which, like a sequel of a bad movie, has been widely ignored.  The dreaded Fiscal Cliff.  For those who do not recall, the Fiscal Cliff is the moronic sequel of the 2011 flop “The Debt Ceiling Debacle.”  You can read our review of the first film here:

US Debt Ceiling Vote to Ignite Armageddon in Bond Markets?

Most of the actors in the first film, Obama, Boehner, Reid, and Bernanke, are returning for the sequel, although there are rumors that Obama may be replaced by Mitt Romney if Romney is chosen over Obama in a fan poll scheduled in November.  Tim Geithner, who did a poor job acting as the voice of reason in the original film, is expected back as well, albeit in a severely diminished role.  His appearance in the film is largely contingent upon Obama winning the fan poll.

The sequel picks up the story where the original left off with Bernanke, Reid, and Boehner accelerating their vehicle towards a cliff, presumably to plunge into the canyon a la Thelma and Louise.  The sequel begins with a cloud of dust, which eventually settles to reveal that the trio has abruptly stopped the car just before taking the plunge.  After a collective sigh of relief, they hold a meeting and decide the following:

1.  Instead of plunging off of this cliff, they will look for a larger cliff to plunge off of somewhere down the road,

2.  Bernanke will pay for the gas with the money he stole from US Dollar holders and,

3.  Rather than taking the plunge themselves, they will force Obama and Geithner, or Romney and Geithner’s replacement, to drive off the cliff.

The fan poll in November should serve to make this moronic sequel somewhat interesting, but either way, the winner will be handcuffed to the wheel with the accelerator at full throttle.

Our advice?  Don’t bother watching this moronic redux.  Like the Expendables 2, it is a desperate attempt by the actors to cash in on past glories.  Unlike the Expendables 2,  anyone living in the US will need to purchase an advance ticket to NOT see the Fiscal Cliff.  Tickets can be found at your local coin shop.  Simply trade you US dollars and bonds for gold and silver and you can ignore this catastrophe.

Hurry, there is precious little time before the Fiscal Cliff’s December 31 debut.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for September 18, 2012

Copper Price per Lb: $3.78
Oil Price per Barrel:  $95.22
Corn Price per Bushel:  $7.39
10 Yr US Treasury Bond:  1.68%
FED Target Rate:  0.15%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,769 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  8.1%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,552  
M1 Monetary Base:  $2,470,800,000,000
M2 Monetary Base:  $10,103,400,000,000