The Dow Rises against a Wave of Bad News, The Inflation Mega-Trend Releases Caged Currency into the Wild

11/7/2011 Portland, Oregon - Pop in your mints…

The fairy tale of the world’s current financial system continued today.  Stocks crept higher in the face of what seems to be a deluge of bad news:

“Frustration mounts for MF Global clients” – Jon Corzine’s firm cannot account for $600 million in client funds.  Beyond the inability to deliver client funds on demand, MF Global clients began receiving margin calls as their collateral with the firm vanished.  The ripple effect was so severe that commodities exchanges relaxed their margin rules in order to to avoid wider damage.  The fall of MF Global was like an earthquake, now it is time to brace for the financial Tsunami.

“New Census data raise number of poor to 49 million” – The official poverty rate is 15.1%.  However, it hits 16% when you slide the income bar just a bit higher to $24,343 for a family of four.  In other words, one in six Americans is currently living below this slightly adjusted poverty measure.

“Italy bond yields soar; euro zone troubles deepen” – Lest we forget that the euro financial system is a complete disaster, Italian yields are climbing and the Italian bond market is beginning to resemble the leaning tower of Pisa.  Then came reports that Spain only had 20 billion Euros in reserves at the end of August (they must have spent their savings on vacation!) and as their banking system crumbles, they are largely helpless to intervene to save it.  Meanwhile France is now pushing austerity leaving Germany and the ECB as the only backstops in Europe.

Yet in spite of this disasterous news, the Dow is holding just above 12,000.  What does it mean? 

Far from signaling economic recovery, the action appears to be further evidence that what Nadeem Walayat at the Market Oracle calls the Inflation Mega-Trend (and consequent Stealth Bull Market in stocks) is firmly in place.

The Mega-Trend, as Mr. Walayat calls it, is the simultaneous debasement of the currency and spreading of deflationary propaganda intended to delay the public’s reaction to the inflation caused by said debasement. 

Think about it, while the FED, ECB, BoJ, and nearly every other Central Bank in the world pump money into their financial systems in order to “fight deflation” or “stimulate the export market,” the average person has watched gas, food, and the price of nearly everything else (besides their paycheck) steadily rise over the past decade.

The the public is told that these steady increases are “healthy inflation” which is currently “understood” to be roughly 2% a year.  This 2% in reality represents the indirect tax rate imposed on anyone who chooses to hold a currency as an asset or accept the currency as wages.  There is not time here to properly refute the fallacy that inflation is somehow necessary for GDP growth.  However, inflation is useful and absolutely necessary to keep an insane, “debt is money”, ponziesque, wealth destroying monetary system functioning.

As the Central Bank creates trillions of dollars out of thin air in a vain attempt to stabilize the global financial system, the public is told that it this new currency is "benign" because most of the money is being held on deposit at the Federal Reserve simply to buffer the banks against falling asset prices and keep the ATM machines spitting out cash.

Yet, with the stock market maintaining its optimism in the face of seeming insurmountable odds, can you be sure that the FED’s funny money is safely locked up in its electronic vaults, simply waiting to have foreclosed properties written off against it? 

Will all of this freshly printed money really be content to simply die a quiet death, never having run through an ATM or point of sale transaction in the real world?

Oh, fellow taxpayer, we have our doubts.  You should too. 
More tomorrow.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

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

 

Email: davidminteconomics@gmail.com

Key Indicators for November 7, 2011

Copper Price per Lb: $3.56
Oil Price per Barrel:  $95.63

Corn Price per Bushel:  $6.53  
10 Yr US Treasury Bond:  1.99%
FED Target Rate:  0.09%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,796 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  12,068  

M1 Monetary Base:  $2,122,700,000,000 RED ALERT!!! THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,507,600,000,000 YIKES UP $1 Trillion in one year!!!!!!!

The Three Ring Circus Begins

10/25/2011 Portland, Oregon - Pop in your mints…

What a difference a day makes.  Yesterday, it appeared that the authorities had most of the problems that ail the world’s economy resolved.  All they needed was a little more time, money and cooperation to implement their plans and the good times would be rolling once again!  Today, instead of coordinated, determined action, it appears that a three ring circus of sorts is beginning.

In Ring 1, we have the European Clown Car:  Yesterday, Europe looked ready to announce a plan to simultaneously solve the sovereign debt, banking, and resultant currency crises in one fell swoop.  Today, it appears that Italy is balking at implementing a growth plan on moment’s notice and Germany and France will need a miracle to announce a credible Pan-European rescue package by tomorrow, their self imposed deadline.  What a difference a day makes!

It should be clear by now to most sober persons that regardless of what is announced tomorrow, the Euro as a currency in its present form is not viable.  It should also be clear that the countries who have adopted the Euro will give away what is left of their sovereignty in a vain attempt to preserve it.

Step Right up!  The Economic 3 Ring Circus Begins

In Ring 2, we have the American Elephants:  The US is quietly completing three Bond auctions that will cause the national debt higher than the national GDP.  The official total should eclipse GDP by the end of October.  100% of GDP is when the debt of a mere mortal nation (Greece, for example) has traditionally harkened national bankruptcy.

The only exception to this rule is in Ring 3, the Japanese Tight Rope Walker: Japan, where national debt is north of 200% of GDP.  How do they avoid bankruptcy?  Simple, they print money to pay the debt.  As if to prove our point, today, the Bank of Japan decided that they have seen enough Yen appreciation and announced another five trillion Yen currency printing campaign.

When money doesn’t exist, the sky is the limit, which is why commodities and certain equities are set to explode to the upside.  Bonds, while they may not fall in nominal value, will fall in relative value as they are repaid in severely depreciated currencies.

As if on cue, commodities took off today.  How high and far they will fly this time is anyone’s guess.

As the circus gets underway, the sober amongst us are beginning to wonder, sometimes aloud, “if the Governments, banks, and monetary authorities cannot solve these problems, then who can?”

The answer, fellow taxpayer, is right under our fingertips.  We, the People of the earth can solve it.  The tool we have been given is our own wit and ingenuity.  The only requirement is that we embrace True Capitalism, for better or for worse, for richer or poorer, until death do us part.

What is True Capitalism?  It may be summed up as a deep, radical respect for life, liberty, and private property.  It is an understanding that mutual cooperation is more often than not in our rightly understood interests (to use a Mises term).  It is not simply a choice, it is the only choice.  More to come.

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 October 25, 2011

Copper Price per Lb: $3.41
Oil Price per Barrel:  $93.17

Corn Price per Bushel:  $6.51  
10 Yr US Treasury Bond:  2.13%
FED Target Rate:  0.07%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,705 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,707  

M1 Monetary Base:  $2,056,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,570,500,000,000 YIKES UP $1 Trillion in one year!!!!!!!

The Euro zone cobbles together a 2 trillion Euro rescue package – Is this the ultimate panacea?

Editor’s Note: Please welcome our guest contributor here at The Mint, Mr. Jason Holmes.  Mr. Holmes is a regular contributer at Debt Consolidaton Care and various other financial websites and has authored several e-books.  Without further adeiu, Mr. Holmes:

Euro zone cobbles together a 2 trillion Euro rescue package – Is this the ultimate panacea?

As international pressure swells on Europe to forestall the Greek debt crisis from undermining the banks and economies around the world, the European leaders are busy cobbling together a rescue package that would quickly hit the economy with 2 trillion Euros of firepower.  According to the International Monetary Fund (IMF), the plans for an ambitious rescue package are coming together in order to enable banks to write-off a large potion (probably 50%) of Greek bonds. The latest talks about the launch of this particular package calmed down the European markets on September 26^th, but there are still substantial doubts as to when this plan will be approved and in what form.

There is already doubt about the plan as without the support of the European Central Bank and the German parliament, which has already been hesitant in expanding its involvement, there is meager chance of the plans gaining approval. The larger bailout package has already run into opposition as the new President of the German central bank has suddenly emerged as a powerful critic of the entire rescue package. He has spoken against the expansion of the rescue mission by the ECB by purchasing the sovereign bonds of Greece, Italy and the remaining countries with spiraling sovereign debt crises.

Markets seize due to the Euro zone rescue package – Does this hold true?

As the rumors spread that the European leaders are planning a mammoth rescue package to avert the Euro zone debt crisis from wreaking havoc on the global economy, the US and the European markets have risen overnight.  The particular fund that is being provided for as part of the rescue package would be utilized when problem economies like Italy and Spain are in trouble. Though the European governments will take at least 5-6 weeks to put this entire plan in place, investors have collectively pinned their hopes on this impending rescue plan’s eventual passage.

Will the Euro zone rescue operation boost the FTSE?

The blue-chip shares of Britain were sharply higher across the board on Tuesday, 27th September and experts have also tracked gains on the Wall Street and in Asia. This was a result of the hope of the European leaders to take a purposeful action to assuage the debt problems within the region. While there were good recovery signs in commodity prices, energy stocks and miners spearheaded the entire rally. Though there was an alarm about the entire state of the global economy, this counteracted with the optimism of the euro zone debt situation. The US markets even felt a positive effect with the Standard & Poor’s 500 Index and the Dow Jones Industrial average ending at more than 2% higher on the 26th of September.

The effect of the EFSF – Is it going to fade out?

Though the officials in Brussels agreed to shore up the EFSF (European Financial Stability Facility) and provide Greece with some new and lucrative financing options, there are still too many questions that still remain unanswered. Will the rescue package, seen as a huge leap for the European politicians, be to small for the markets?  The Euro Stoxx 50 index, a yardstick of blue chips in almost 17 countries that share the Euro has been on a winning streak since the 18th of July, but it slipped to 0.11% on Tuesday. Both the Italian and the Spanish Treasury are paying more for funds and their debt auctions are meeting with weakened demand.

The Chairman of the Federal Reserve, Ben S. Bernanke is of the opinion that the Euro region’s $2 trillion rescue package is not the ultimate panacea as the measures are all “temporary”. According to Bernanke, without fundamental, long term changes in the economies of Greece, Spain, and Italy, it is unlikely that they will emerge from their grave financial situation.

Jason Holmes is a regular writer with http://www.debtconsolidationcare.com/debt-relief.html and is also a contributor to other financial sites. His expertise is woven around various aspects of the debt industry and through his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like 'Credit Score The Quintessential Therapy for a Happy Pocket', ‘Take Creditors and Collection Agencies to Small Claims Court' and, ‘My Story- From Depression To a Smile'.

Waiting on Armageddon in the Bond Markets, A Freaky Chart form the BIS

7/18/2011 Portland, Oregon – Pop in your mints…

We are taking the week off here at The Mint. As the world observes the pitched battle between default and inflation, we will be roaming the cornfields of Northeastern Nebraska waiting to attend a cousin's wedding.

To default or not to default, that is the question. The financial world is on the edge of its seats waiting for the answer. What will congress do?

Regular Mint readers know that once QE started, the US essentially defaulted. Everything that is happening now is a mere attempt to avoid openly admitting it.

There has been a startling graph from Bank of International Settlements that has been circling the internet and is worth a look. You may want to ask the children to leave the room, it is downright scary.

"AAA" Government dominates the market and it is beginning to smell funny!"

Do you now understand why what happens in Greece, Ireland, Portugal, Spain, Italy and the US in the coming weeks is of the utmost importance for the bond markets? In a very short period of time, sovereign debt issues have become predominant. The scary part of the chart is that any sane person can tell you that there simply ain't that much AAA rated paper out there, no matter who issues it or who rates is.

With what is sure to be an action packed week as the financial world braces for the next of its many brushes with Armageddon. Not matter what happens, the only clear winner promises to be the volatility index (which you can conveniently trade as VIX). If there truly is the threat of a default, try TBT, the Ultrashort US Treasuries EFT.

Better yet, head down to your local coin shop, load up on physical Gold and Silver, and come roam the cornfields with us, worry free!

Stay Fresh,

David Mint

Email: davidminteconomics@gmail.com

P.S. If you enjoy or at least tolerate The Mint, please share us using the buttons at the top of this post. If you feel that you can’t go another day and risk missing The Mint, please register by clicking here. Thank you!

Key Indicators for July 18, 2011

Copper Price per Lb: $4.39
Oil Price per Barrel: $97.12
Corn Price per Bushel: $7.01
10 Yr US Treasury Bond: 2.91%
FED Target Rate: 0.06% JAPAN HERE WE COME!
Gold Price Per Ounce: $1,594 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 12,479 TO THE MOON!!!
M1 Monetary Base: $2,027,500,000,000 RED ALERT!!!
M2 Monetary Base: $9,265,600,000,000 YIKES!!!!!!!

*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.