Why What We Use as Money Matters, Our Economic and Philosophical Treatise, is Now Available

Our long awaited Treatise on Economy and Philosophy, Why What We Use as Money Matters, is now available in various digital formats at Smashwords.com and on Kindle at Amazon.com.  With any luck, we will have a print version available before we leave for the Southern Hemisphere.

What kind of book is this?  It is largely up to the reader to decide.  For us, it is the fruit of two years of wrestling with some of life's deeper questions with regards to Economics, Politics, and Philosophy.  It has answered many of them and, in turn, has raised other issues, for in our exploration, as you will see, the current state of affairs is laid bare for all to examine, and our recommended courses of action may be unpalatable for many.

Nevertheless, there it is, altogether thick and challenging, yet refreshingly simple, the key to reversing the effects of climate change.

In a sense, it culminates the first phase of what we set out to do here at The Mint.  There will be more to come, but for the time being, we leave you to ponder the following brief excerpt:

"The natural world strives daily to achieve a perfect state of balance. Events and occurrences that, taken by themselves, appear chaotic and devoid of meaning are together part of a constant rebalancing of the earth's delicate state. Each event is a splash of color across an oppressive gray sky that hints at a rainbow that will soon appear. "

Jamie Dimon makes a courtesy appearance before the home team

Today, Jamie Dimon, CEO of JP Morgan, made his courtesy appearance before the home team, the Senate Banking, Housing, and Urban Affairs Committee earlier today.

It was, for the most part, a constructive exercise.  Mr. Dimon had been called to explain something alarming, a $2 billion loss due to hedges gone awry in what is essentially the banks internal treasury operations.  Alarming as it may be, the losses fell entirely on the backs for JPM’s shareholders.

It was a stark contrast to the lambasting that Jon Corzine, former bureaucrat and MF Global chief, recieved by committees from both the House and Senate after his firm “lost” $1.6 billion of client funds.  As JPMorgan was the counterparty to the transfer of a portion of those funds, it was only natural that a few questions with regards to the infamous event would find their way to Mr. Dimon today.

Generally, Mr. Dimon gave an impressive show in front of the home team crowd.  As the largest bank on the planet and a Treasury Primary Dealer, JPMorgan may be one of the largest direct and indirect purchasers of US Bond issues.  For the most part, the Senators were kind to their biggest customer.  You can see the entire testimony here.
Some observations from The Mint:

• Mr. Dimon knows what he is doing.
• There is a reason that JPM is the banker and/or key liquidity provider of many smaller banks and sovereign nations.
• It was brought up that loans are the riskiest investments that a bank makes, and JPM is no exception.
• The term “hedging” is widely misunderstood.  Most take it to mean a trade made to eliminate risk, when in practice hedging has the effect of diversifying a portfolio of investments, often using leverage to do so.
• Mr. Dimon’s brief response about the need for fewer regulations which are enforced rather thatn the myriad of regulators which lack expertise and authority was classic.
• The US fiscal cliff will not wait until December 31, 2012 to produce derogatory effects.  Individuals and businesses will begin to take actions to protect themselves long before the deadline approaches.
• One of the Senators observed that the US Treasury ran a “loss” of $4 billion per day, twice the amount that Mr. Dimon’s firm had lost on its renegade trades. 
• Most of the Senators, while well intentioned, are absolutely clueless about the inner workings of a modern banking entity.  Which begs the question, what qualifies them to regulate one?
• JPMorgan is not to big to fail, rather, it is too big to save were it to fail.
• One cannot apply the hedging and investment strategies of the world’s largest bank to the entire banking industry.
• JPMorgan is in a league of its own, and thus is required to take risks on the scale which is difficult to fathom.
• Mr. Dimon places little faith in models, which at best are a reflection of the immediate past and useless for future decision making.
• New regulation costs as a result of legislation inspired by the financial crisis for JPMorgan were estimated to be upwards of $1 billion.
• It is not below the Senate to play the “US Taxpayer is on the hook” card when speaking with a banker, incorrectly implying that the US Taxpayer somehow thought that TARP and everything after was necessary and stands ready to take similar actions should a bank get in trouble.

Much of the testimony was peppered with the common theme from the Senators “how should we regulate you?”

While Mr. Dimon took the opportunity to point out that the so called Volcker rule was a bad, which is what has dominated headlines about today’s hearing, He did point out that JP Morgan’s survival was not dependant upon TARP and other bailouts, as has been suggested.

The message?  Don’t regulate us and don’t save us.

In the end, isn’t that what True Capitalism is all about?

Spain, Inc., the latest proof of Anarchy in action, an impromptu Manifesto

6/11/2012 Portland, Oregon - Pop in your mints…

When we attended graduate school in Spain, we were the first North American student in our course.  It was late 2003 and the Eurozone was full of optimism.  This optimism lead some of the professors to use a portion of their class time taunt the US model as failed and the European model as the obvious way forward.

As proof of European supremacy, our Finance professor often made a point of mentioning to us that the yields on the Spanish 10yr bond were almost the equivalent to the yields on the US 10yr bond.

What a difference nine years and 500 basis points make.

Circa 2012, Spain dominates the financial headlines as the latest casualty of the European debt crisis.  Apparently Spain now is in need of a bailout.  The bailout strategy which will be employed by Spain, Inc. is a hybrid of the prior bailouts accepted by their counterparts, Greece, Inc. and Ireland, Inc.

Greece, Inc. required a bailout because its government was broke.  Ireland, Inc. was slightly more ingenious in that it made a good faith effort to backstop its banks, only to find that it was now the entity which required a backstop.  Spain, Inc, theoretically learning from both experiences, forced its banks to accept the backstop directly so that the Spanish government could save face and be spared the humiliation of the Irish scenario.

Unfortunately, the markets have seen through the charade and are now putting pressure on all bonds, bank or sovereign, which hail from the Iberian Peninsula.

What a difference nine years and 500 basis points make!

Spain's strategy has failed before it was even implemented for lack of collateral and credibility, both of which are in desperately short supply amongst the EU leadership.

How did once proud Europe end up in this situation?  They decided to force a debt based currency integration by integrating only the currency part of the equation and leaving the debt and fiscal matters to chance.

As if choosing to use a debt based currency weren't bad enough, choosing only to implement the currency is like handing the nations foolish enough to engage in such a gamble the revolver in a game of Russian roulette where the revolver is fully loaded.

Now, the revolver is being passed and it is Spain's turn.  Once Spain slumps to the floor, it is Italy's turn, the Belgium, France, etc. until the European Currency Union, doomed from its outset, breathes its last.

At some point in the process, possibly as Spain pulls the trigger, USA, Inc. will be forced to step in with the "ultimate" backstop, the final hope of the failed, insane "debt is money" currency regime.  As the US throws its sovereign credit rating in front of the runaway freight train of Europe's soveriegns, it will quickly find itself in the very situation that it is trying to save the European Sovereigns from.

For in this debt crisis, the unwritten rule of quality holds.  When one adds wine to sewage, one gets sewage.  When one adds sewage to wine, one gets sewage.  The sovereign vats have long since been polluted.  It might make sense to check one's portfolio and remove as much sewage as possible.

Beyond that, we will present two unsolicited yet practical bits of advice.  First, US Bonds will ultimately slide as USA, Inc. wades across the pond to aid Europe.  The Euro currency will rally as the run on European banks by the citizens and the wholesale dumping of any bond denominated in the currency begins.  Quite simply, demand for the Euro will exceed supply in the short term.

Plan accordingly.

We submit to you that the Spain, Inc. debacle is further evidence of one of The Mint's central themes, that Anarchy is man’s reality, it is an ultimate given, it simply is, and all understanding of the current political and social structures is greatly facilitated by one’s acceptance of this fact.

In fact, one’s ability to act and react to the unfolding changes in the current political and social structures depends upon accepting and embracing Anarchy as the basis for reality and learning to operate in the Truly Capitalistic system which organically emerges as men learn anew that mutual trust and cooperation are in their rightly understood self interests, and that he who is to lead must truly become the servant of all.

To truly embrace this fact, we must understand the nature of mankind.  Man, left to his own devices, is completely devoid of the ability to do the right thing.  He doesn’t have it in him.  He is lazy, self-serving, and completely evil.  He needs God and his fellow man to be able to do anything productive, altruistic, or what may be considered remotely good.  A full defense of this statement is a subject for another day (although the evidence is all around us), we mention it here only to underscore the necessity of a framework which presupposes this fact within which mankind can use this weakness to avoid both self and mutual destruction.

The only reliable framework which has emerged out of natural Anarchy which not only addresses the problem of human nature, but also turn man’s weaknesses into strengths is what we call True Capitalism.  Ironically, by allowing market forces to work with as little hindrance as possible, mankind can insulate itself from descending into chaos and catastrophe.

In fact, to fight the workings of True Capitalism is, by default, to submit oneself to chaos and misery.  Yet every nation on the planet is devoted to some degree in the fight against True capitalism.  Why?  Because the nation state sells itself as the most perfect expression of man’s good intentions, which we presuppose do not exist.  In other words, the dream of the nation state is built on a false pretense that is usually attributed to socialism: That man is inherently good and wants to do good to others.

Given their presuppositions, is it clear that the nation state and a truly capitalistic society are, in fact, the antithesis of one another.  Where a nation state regulates by edict,  truly capitalistic society regulates by example.  Where a nation state is rigid, where  truly capitalistic society is pliable.  Hence, where  truly capitalistic society will bend but not break, the nation state is repeatedly smashed to pieces when faced with change.

For the more a nation state tries to force men to do good, the more mankind's character flaws will overtake these good intentions until the nation state becomes an expression of mankind's evil nature.

The truly capitalistic society allows each mans evil nature to be corrected by allowing him to experience the consequences of his inherently poor behavior, paradoxically and naturally improving the behavior and norms of all.

Moving to a less philosophical level, how can we be sure that Anarchy is the basis of man’s current existence?  The evidence can be found in that the institutions which supposedly offer the best option to Anarchy, the nation states if the world, are beginning to succumb to the punishments they have built up in their losing fight against natural law.

Greece, Ireland, Portugal, Italy, and now Spain, Inc. are now succumbing to the inevitable.  The member of club med which turns from the failure of the Euro currency to go it alone and embrace the much feared "Anarchy," as it were, paradoxically stands to be richly rewarded by the flocks of tourists who can suddenly afford a European vacation without the Euro.

We conclude with a brief manifesto for your perusal and enjoyment.  What does the future hold?

Out of Anarchy, a Truly Capitalistic System will ORGANICALLY emerge, and with it a new dawn for humanity, built on mutual interest and almost endless capital formation which will engender a spontaneous and dynamic social order, a society without borders that would enjoy freedom and prosperity that we cannot even imagine under current conditions.

Believe.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for June 11, 2012

Copper Price per Lb: $3.35
Oil Price per Barrel:  $81.49

Corn Price per Bushel:  $5.92
10 Yr US Treasury Bond:  1.60%
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,596 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  8.2%
Inflation Rate (CPI):  0.0%
Dow Jones Industrial Average:  12,411

M1 Monetary Base:  $2,306,000,000,000
M2 Monetary Base:  $9,790,100,000,000

Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system - Part II

Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system

11/23/2011 Portland, Oregon - Pop in your mints…

If you were not able to join us yesterday for Part I, please take a brief moment to review it by clicking here:

Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system – Part I

We will pick up where we left off…

The acts which are required to carry out an economic system doomed to failure inevitably insures that those who lead would be the worst amongst us in terms of adhering to any sort of moral code, for they have chosen to pursue the economic or political program above the obligations of morality, no matter what the cost.  They possess the ability to mute their conscience and oversee acts that are increasingly despicable and outrageous in pursuit of the aims of the program.

Hayek goes on to argue that as the Totalitarian economic and social program inevitably begins to fail, the leader of said system would increasingly deem it necessary to employ a larger number of individuals to enforce the increasing sacrifices required to continue the program.  He offers three reasons why this inevitable outcome further assures that the leader surrounds himself with and encourages the promotion of those who are capable of the worst forms of moral corruption:

“First, the higher the education and intelligence of individuals become, the more their tastes and views are differentiated. If we wish to find a high degree of uniformity in outlook, we have to descend to the regions of your moral and intellectual standards where the more primitive instincts prevail. This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards.

Second, since this group is not large enough to give sufficient weight to the leader's endeavors, he will have to increase their numbers by converting more to the same simple creed. He must gain the support of the docile and gullible, who have no strong convictions of their own but are ready to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently. It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.

Third, to weld together a closely coherent body of supporters, the leader must appeal to a common human weakness. It seems to be easier for people to agree on a negative program — on the hatred of an enemy, on the envy of those better off - than on any positive task. The contrast between the "we" and the "they" is consequently always employed by those who seek the allegiance of huge masses. The enemy may be internal, like the "Jew" in Germany or the "kulak" in Russia, or he may be external. In any case, this technique has the great advantage of leaving the leader greater freedom of action than would almost any positive program.

Advancement within a totalitarian group or party depends largely on a willingness to do immoral things.”

The Might Makes Right ideology, then, far from being a viable alternative to True Capitalism, assures a slow march towards a society which openly ignores the rule of law and, as a consequence, quickly becomes devoid of morality.

Can you now see why the ideological battle between True Capitalism and Might Makes Right is much more than a simple choice of economic systems, rather, it determines the moral basis upon which a majority of the society’s members will act?

Jon Corzine - A Shining example of leadership in the Might Makes Right System

Unfortunately, we have a shining example of the phenomenon of the worst rising to the top in Jon Corzine, former governor of New Jersey and CEO of the now infamous investment bank, MF Global.  Mr. Corzine is a career investment banker and politician.  In other words, he has been firmly indoctrinated and skillfully trained in two of the most destructive trades known to mankind.

Mr. Corzine allegedly saw nothing wrong with raiding the cash accounts of MF Global’s clients in a vain attempt to stave off the firm’s bankruptcy which was declared on October 31, 2011.  There is no way to sugar coat what happened in the days leading up to MF Global’s demise.  MF Global allegedly robbed its clients’ accounts to meet its own obligations.  The fact that the commodity exchanges have been allowed to operate without immediately making the defrauded clients whole has caused an unprecedented breach of the trust which underpins the smooth operation of these exchanges.

Perhaps Mr. Corzine thought he was still a politician.  In Government, it has become a common and acceptable practice to rob a legally established trust fund and replace it with the government’s IOUs.
Mr. Corzine is but the most recent example of the level of hubris and moral corruption required to occupy a high level post the government and financial sectors circa 2011.

The MF Global bankruptcy and subsequent actions taken by the regulators have called into question whether or not the rule of law will prove supreme in such a situation.  As a society increasingly leans towards a Might Makes Right ideology, the excuses for ignoring the rule of law proliferate.  Hayek observed the inextricable link between the rule of law and Freedom when he wrote the following:

“NOTHING distinguishes more clearly a free country from a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand.”

Fellow taxpayer, do you personally feel safer than 10 years ago?  Do you believe that the financial system is more stable than five years ago?

These are important questions, for the answer may reveal which side of the ideological battle one identifies with.  True Capitalism or Might Makes Right, for there is no ideological middle ground.
The governments of the world are busy tirelessly advancing a failed program.  It should come as no surprise, then, that nearly every action that the governments have taken to fight the war on terror and the financial crisis only seem to have made the original problem worse.

It is clear that as long as Might Makes Right ideology is embraced by institutions and governments, those who are best able to ignore basic morality and the rule of law are likely to populate their halls of power.
It should come as no surprise, then, that man’s only hope for justice is to reject Might Makes Right and embrace True Capitalism.  Only then will lasting peace and prosperity be attainable.
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 November 23, 2011

Copper Price per Lb: $3.34
Oil Price per Barrel:  $98.01

Corn Price per Bushel:  $5.98  
10 Yr US Treasury Bond:  1.95%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,700 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  12,096  

M1 Monetary Base:  $2,121,700,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!

The most famous modern excuses for ignoring the rule of law during the war on terror and the financial crises are: “These actions are taken in order to protect the American people,” and “These actions have been taken to ensure the stability of the Financial System.”

Why the morally corrupt are assured of promotion in and leadership of the Might Makes Right ideological system - Part I

11/22/2011 Portland, Oregon - Pop in your mints…

After a brief break in our faithful correspondence, we are compelled to pick up the proverbial pen to complete an incomplete thought in a vain attempt to eat Thanksgiving dinner in peace.  If you are a new reader of The Mint, we will simply relate that the Mint is the product of a deep felt agitation by its author.  It is what could be referred to as therapy.  The thoughts, once on paper, leave us in peace.  Until then, they stir, deep in our spirit, waiting to escape via these words.

How very fortunate and long suffering you are, fellow taxpayer.

Before we continue our mantra of Anarchy, True Capitalism, Natural Law, and Might Makes Right, we will share a few important observations.

First, the MF Global implosion is now reported to have left a $1.7 Billion hole in the capital base of a highly leveraged commodity and derivatives market.  MF Global was a primary dealer, one that had the unconditional trust of the exchange and other secondary commodity dealers.  It was a silent pillar of these markets.  The aftermath of their implosion, both in loss of capital and confidence, has only begun to unfold.  Commodity markets are no longer “safe” by normal standards.  This situation is best watched by your money at a distance.

Second, while Europe implodes, the US has been spending most of its time firming its position in Asia.  There has been speculation that the US is moving to aggressively devalue the dollar vis-à-vis the Yuan.  Will it be the 10:1 reverse split that we have speculated about here?  No one knows, but it would appear that the US Dollar will not serve as a reliable store of wealth in the short term.  Silver and Gold come to mind as viable substitutes as this drama plays out.

Occupiers take note of a Bolivian tactic of blocking major thoroughfares

Finally, It appears that the Occupy protesters are now wising up and using tactics which we call the Bolivian tactic, that of blocking major thoroughfares.  It is much more effective, not to mention exciting, than urban camping.  As a practical matter, if your livelihood in any way relies on a major thoroughfare being open in an area where the protests are growing, we suggest that short term contingency plans be considered.

These events and any pain they cause should be short term, maybe three to four months of adjustments, if they are allowed to simply run their course.  If the Government continues to intervene, they will plague us indefinitely.  We pray for the former and prepare for the later.

With that off our chest, we continue pondering life as we know it.  Our question today is:  Why does it seem that the worst morals seem to come out on top?  First, a glance at Isaiah:

“ And I will make boys their princes, and infants shall rule over them.  And the people will oppress one another, every one his fellow and every one his neighbor; the youth will be insolent to the elder, and the despised to the honorable,”  Isaiah 3:4-5

Have you ever complained about a politician?  The government?  How about your boss?  The current state of society?  If you haven’t, you are indeed a rarity in this day in age, for there is much complaining, and seemingly much to complain about.

How did we arrive at this, fellow taxpayer?  If democracy is supposed to deliver the cream of the crop in terms of leadership in the government, why does it seem that most politicians are the epitome of immoral liars?

This question was thrust upon us as we were reading the “Is there no shame” rant at zerohedge.com and came across the words “Hayek’s theory that the worst always rise to the top.”  We then perused Hayek’s theory in an excerpt from the “Road to Serfdom.”

In the section entitled “Why the Worst Get to the Top,” Hayek states that:

“There are strong reasons for believing that the worst features of the totalitarian systems are phenomena which totalitarianism is certain sooner or later to produce.

Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from the essentially individualist Western civilization.”

Suddenly, it all makes sense.  As man has generally chosen to pursue the Totalitarian, or what we call the Might Makes Right ideology, it would follow that those thrust into power should be among the most immoral, unscrupulous, human beings on the planet.

In summary, the Might Makes Right ideology unwittingly promotes the worst individuals to positions of power, as they are best suited to carry out the immoral and contradictory demands which are invariably made of the persons occupying positions of power in such a system.

Depressed?  Don't be, for it does not have to be this way.  More tomorrow.

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 November 22, 2011

Copper Price per Lb: $3.34
Oil Price per Barrel:  $98.01

Corn Price per Bushel:  $5.98  
10 Yr US Treasury Bond:  1.95%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,700 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  -0.1%
Dow Jones Industrial Average:  12,096  

M1 Monetary Base:  $2,121,700,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,644,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Natural Law: The Golden Rule

11/15/2011 Portland, Oregon - Pop in your mints…

We continue today with our brief examination of the foundations of society here at The Mint.  We are finding that while society appears complex on the surface, the further that its elements are reduced, the foundation is extremely, perhaps painfully simple.  Any complexity that we experience is not a product of an inherent complexity in natural laws, rather, it is a product of the human relationships and actions that are a result of man’s choice of response to the demands of natural law.

For those of you joining us for the first time, let us get you up to speed with a synopsis:

Anarchy, the lack of government, is man’s natural state.  It is an ultimate given.  It simply is.  A clear understanding of the current state of affairs depends upon grasping this inescapable fact.

In response to Anarchy, man has two choices.  He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property, or He can choose to take his fellow man’s life and property through the use of force.  We have called the path of mutual cooperation “True Capitalism” and the path of forceful coercion “Might Makes Right.”

Ideologically, there is no middle ground between these two paths.  In practice, men live at various points on the spectrum between these two ideological extremes.

We argue that True Capitalism is the response which creates the greatest benefits for the greatest number of people.  The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law.  Like Anarchy, Natural Law is immutable.  It does not change, for its statutes are etched in the foundations of the earth itself.

Last Thursday we presented the Natural Law of supply and demand, a law that deals with what is concrete and tangible.  Today we will deal with second law which primarily governs human relationships and works in conjunction with the law of supply and demand.

It is popularly called the Golden Rule.

The Golden Rule is articulated and exalted as an ideal in some form in nearly every society and religion on the planet.  The Bible famously articulates the Golden Rule in the following way:

“Love your neighbor as you love yourself” (Deuteronomy 6:5)

It is important to note that the Golden Rule is a positive declaration.  It is a call to action.  In many societies and religions the Golden Rule is stated in a negative declaration, a command to abstain from action.  An example of this can be found in Hinduism:

“One should never do that to another which one regards as injurious to one’s own self.”  (Anusasana Parva, Section CXIII, Verse 8)

The negative declaration is sometimes called the Silver Rule.  It is important to understand that only the Golden Rule, the positive call to action, is Natural Law.  Observance of the Silver Rule, while highly advisable, does not rise to the level of Natural law.  However, it is a logical corollary to the Golden Rule.

Compliance with the Golden Rule, as with all natural law, is indispensible.  It is ignored at one’s peril, for it operates regardless of one’s acceptance of its validity or not.  The Truly Capitalistic society greatly facilitates and encourages compliance with the Golden Rule.  Conversely, compliance is hindered in a society that has embraced Might Makes Right as its ideological response to Anarchy.

“Wait a minute,” some of you are saying, “I’ll give you that the Golden Rule is a great ideal but Natural Law?  No one requires it of me, right?”

Remember, the essence of Natural law is that it is universally true and applicable to all.  The law of Supply and Demand, for example, can be ignored for a time, but every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached.  The result of the failure to comply with the law of supply and demand is material scarcity and ultimately death.

The same is true of the Golden Rule.  Every moment of ignorance causes the consequences of that ignorance to accumulate further until a final breaking point is reached.  In the case of the Golden Rule, the result of the failure to comply is by definition a failure to properly comply with the law of supply and demand as well, with the end result, as mentioned above, being material scarcity and ultimately death.

Compliance with the Golden Rule is a necessary prerequisite to compliance with the law of supply and demand, for the Golden Rule governs relationships in the purest sense.  This is evident to most who have taken the time to ponder it.  So broad are the implications of the Golden Rule that the origins of both the rule of law and more recently the concept of human rights can be traced to it.

What thrusts the Golden Rule out of the realm of being simply a good idea and into the realm of Natural Law is this:  All attempts to comply with the Golden Rule serve to coordinate the actions of men in such a way that the greatest number of human needs are met in the most efficient way.  Any deviance from the Golden Rule, by definition, is a failure to meet human needs in the most efficient way.  Again, by definition, failure to meet human needs in the most efficient way means that a greater number of human needs are simply not being met.

Far from being simply a moral standard, the Golden Rule is elemental in the determination of supply and demand.  As the equilibrium price serves as the beacon of production for the law of supply and demand, the actions taken by men, governed by the Golden Rule, initially determine the supply and demand factors which, when combined, produce the equilibrium price.  In this sense, the Golden Rule serves as the beacon for both supply and demand which enable the creation of an initial equilibrium price.

How can the Golden Rule run ahead of the Law of Supply and Demand?  This is one of the beauties of Natural Law.  Natural Law always compliments and never contradicts itself.

An Example of the operation of the Golden Rule

Each human being has needs and wants which are sources of uneasiness.  Human Action, to paraphrase Von Mises, consists of men acting to dispel their most intensely felt uneasiness.  If a man is hungry, he will direct his actions towards getting something to eat.  Other tasks will be put on hold until this intensely felt uneasiness is relieved.

The operation of the Golden Rule, in the example of mans the need to alleviate hunger, operates in the following way.  A man feels hunger.  He has two options before him with which to fulfill this need.  First, he can forage, hunt, fish, or perform any series of actions with the end of fulfilling this need.  Second, he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for something to eat.

As the second way is the most expedient, it is likely that a majority of people will elect this option.  Now reflect upon the Golden Rule:  “Love your neighbor as you love yourself.”  The person who chooses to comply with the Golden Rule will quickly understand that if he has the need to be fed, it is likely that his neighbor (in this sense, neighbor would mean anyone in the geographical realm in which he is equipped to serve, up to every person on the planet if it is possible for him to serve them) is likely to have the same need to some degree.  With this revelation, he unwittingly is on his way to discovering demand.

As he seeks to voluntarily fulfill this demand, he will need to either produce the supply of food himself or he can voluntarily cede some of his production (or production for others via his contribution of labor) or appeal to the charity of someone else in return for a supply of food with which to provide his neighbor with something to eat.  The information that his adherence to the Golden Rule provides him with regarding the needs of his fellow man will serve to guide his speculation as to where to best employ his limited time and capital.

It is a simple example, yet its simplicity serves to highlight the operation of the Golden Rule and can apply to any situation regardless of the complexity.  The Golden Rule, in modern business school lingo, is the origin of market research; it is the impulse for entrepreneurial activity and is the basis for subsequent human actions.

The Question of Charity

What about charity?  Wouldn’t adhering to the Golden Rule quickly lead to widespread scarcity and bankruptcy as catering to everyone’s preference to receive something for free would quickly deplete all available supplies and production?

The answer lies in the Golden Rule itself:  “Love your neighbor as you love yourself.”  Would you like to provide something for someone and not receive compensation?  Our guess is only if you are in a position to give something away and are willing to do it.  If all members of society are complying with the Golden Rule, the norms of charity will fall under the governance of the law of supply and demand.

The beauty, the perfection, of the Golden Rule is that above all it demands balance in human relationships and by extension, balance in the supply and demand of material goods.

True Capitalism Enable Compliance with the Golden Rule

True Capitalist ideology completely subjects itself completely to the Golden Rule and, in return, most accurately directs human actions towards fulfilling the most urgently felt needs of the greatest number of people. 

Inefficiency is naturally wrung from the system at its source as errors are quickly corrected and information is quickly disseminated via equilibrium prices.  The proper identification of demand by default leads to the most efficient allocation of scarce resources possible.  The liberty of life and property which is ensured in the Truly Capitalistic system allows men to supply this demand by employing their limited time and resources without unnecessary hindrance.

The Golden Rule may not provide everyone with what they expect or what they think they desire, but complete submission to it not only creates the most efficient allocation of resources, it gives humans the best information to base their attempts to mutually cooperate to fulfill the myriad of human desires.  It has the added social benefit of creating the greatest amount of harmony and goodwill possible in human relations.

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 November 15, 2011

Copper Price per Lb: $3.49
Oil Price per Barrel:  $99.39

Corn Price per Bushel:  $6.45   
10 Yr US Treasury Bond:  2.06%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,781 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.0%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  12,096  

M1 Monetary Base:  $2,215,000,000,000 RED ALERT!!!  THE ANIMALS ARE LEAVING THE ZOO!!!
M2 Monetary Base:  $9,532,200,000,000 YIKES UP $1 Trillion in one year!!!!!!!

Natural Law: the transcendental importance of Supply, Demand, and Equilibrium Prices

11/10/2011 Portland, Oregon - Pop in your mints…

As Europe continues to unravel, we have been exploring, perhaps by accident, the foundations of society here at The Mint.  In case you have missed it, here is a brief recap:

Anarchy, the lack of government, is man’s natural state.  It is an ultimate given.  It simply is.  A clear understanding of the current state of affairs depends upon grasping this inescapable fact.

In response to Anarchy, man has two choices.  He can choose to mutually cooperate with his fellow man, respecting both his fellow man’s right to live and his right to property or He can choose to take his fellow man’s life and property through the use of force.

In other words, man may choose the path of True Capitalism or Might Makes Right.  Ideologically, there is no middle ground.  In practice, men live at various points on the spectrum between these two extremes.

We have argued that True Capitalism is the response which creates the greatest benefits to society in terms of peace, security, capital accumulation and material prosperity while the ideology of Might Makes Right by definition is the antithesis of the Truly Capitalistic ideology and consequently would create the greatest detriment to society.

Ironically, all of the Nation States in existence derive their power from the adoption of the Might Makes Right ideology by a majority of the people.  How, then, can we be so certain that True Capitalism is the proper response to Anarchy if the majority has embraced Might Makes Right?

The proof of the superiority of True Capitalism is that it allows man to best adapt and react to the inescapable demands of Natural Law.  Like Anarchy, Natural Law is immutable.  It simply is.  Man is bound to it whether he chooses to recognize it or not.  It does not change, for Its statutes are etched in the foundations of the earth itself.

It is as Ayn Rand stated:  “You can ignore reality, but you can’t ignore the consequences of ignoring reality.”

In our example, we take the reality that Rand refers to as Natural Law.  Natural Law may be ignored, but ignorance always comes at a price. 

The first of these Natural Laws is that of supply and demand.  The Law of supply and demand, simply stated, holds that supply of and demand for a good or service will tend to find a point of equilibrium at a certain price expressed in terms of money (the equilibrium price).  On a graph the relationship looks like this:



A Graphical Representation of Supply, Demand, and Equilibrium Price



It is a way of expressing what most people intuitively know about price and scarcity.  When an item is increasing in price, one of two things is happening.  Either people are demanding more of the good or service or the supply of the item at the previous equilibrium price point is diminishing.

Naturally, the opposite is also true.  When an item is decreasing in price, one of two things is happening.  Either people are demanding less of the good or service or the supply of the item at the previous equilibrium price point is increasing.

In either case, the change in the price of the item in monetary terms is providing crucial information to all of those either producing or consuming the good or service in question, for it guides their inherent speculations.

(Editors Note:  Speculation, far from being an illegal or immoral activity, is essential to everyday survival and without it, there is no hope of achieving equilibrium prices and therefore both production and consumption tend to cease.  It is important to clarify that the illegal or immoral speculation that is villianized today is generally the act of investing the money of other parties in types of speculations without the knowledge or consent of the other party to do so.)

As a producer, if one sees the price of the good or service that one provides increase, the producer will strive (speculate, as it were) to either increase production to take advantage of the opportunity to profit and/or others will strive to produce the good or offer the service for which the price is increasing.

As a consumer, if one if one sees the price of the good or service that one consumes increase, the consumer will strive to either decrease consumption to mitigate the effects of the higher prices or others will strive to find a less expensive substitute for the good or service  to offer in the place of the good or service for which the price is increasing.

Stay focused, here comes the important part.  The increase in production will increase supply which, as the Natural Law of supply and demand dictates, will eventually lower the equilibrium price as the increase in demand is satisfied.  Likewise the decrease in demand will have the effect of increasing the available supply. 

In either case, the individual decisions (again, speculations, as it were) of the producers and consumers serve to increase the available supply.  The process occurs tacitly, and is an example of what Adam Smith famously called the Invisible hand of the market.

To further sum it up in what may seem at first a paradox, the best cure for higher prices is higher prices.

There are no exemptions from the natural law of supply and demand, however, there are numerous examples of Nation States, guided by the principal that Might Makes Right, manipulating the pure message that price is intended to send to producers and consumers.

This manipulation may be achieved in overt ways, such as price controls (the setting the price of an item by decree).  However, most people understand that price controls are bad, so today’s Nation States commonly resort to other tactics.  Amongst these tactics are taxes, subsidies, and the granting exclusive privileges to either buy or sell the good or service in question via regulating the purchase of or granting monopolies to produce it.

Regardless of the tactic employed, the result is to always a manipulation of the equilibrium price for a good or service and consequently distort the signal which guides the speculations and ultimately the actions of all producers and consumers.  The result of society as a whole is always and in every case achieving suboptimum results to those that would be achieved if the price signal were as pure as possible.

In the case of Central Banking and centralized currency control, the Nation State, in addition to the tinkering mentioned above, adds the complication of manipulating the currency that the equilibrium prices are expressed in.  This further distorts the sacred price signal that is universally relied upon to direct the actions of producers and consumers.

You can imagine the confusion occurring all around us, every day.

The True Capitalist ideology, on the other hand, completely subjects itself completely to the law of supply and demand and, in return, provides producers and consumers with best opportunity to obtain and act on the most accurate price information possible.

A Truly Capitalist society quickly settles on Gold and/or Silver as currency and does not recognize the right of anyone to tax, regulate, or grant monopolies. The Truly Capitalist Society continually works to bring supply and demand into balance in the simplest, most efficient way possible:  By relinquishing all control to the market participants and by extension, natural law.

Inefficiency is naturally wrung from the system as firms that depend upon the false price signals or special protections or subsidies provided under the Might Makes Right ideology quickly go out of business.

True Capitalism not only quickly eliminates economic waste, it quickly directs the surplus capital into its most urgently needed employ, and it is accomplished by simply obeying and embracing the natural law of supply and demand.

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 November 10, 2011

Copper Price per Lb: $3.39
Oil Price per Barrel:  $98.04

Corn Price per Bushel:  $6.49  
10 Yr US Treasury Bond:  2.07%
FED Target Rate:  0.08%  ON AUTOPILOT, THE FED IS DEAD!

Gold Price Per Ounce:  $1,749 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.3%
Dow Jones Industrial Average:  11,861  

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!!!!!!!