Congressmen Drink and Asia is on the line as half of US Companies Plan to Dump US Treasuries

10/7/2013 Portland, Oregon – Pop in your mints…

We recently saw reports that a number of Congressmen reeked of alcohol as they exited the chambers the night the Government shut down. Apparently the only thing worse than the pressure of public office is these days is having to face it sober.

We have been here before, you can read our commentary from the days when the minority in Congress realized they could hamstring the majority because the country lacked fiscal disciplineback in 2011, and all of this innocent bickering began:

US Debt Ceiling Vote to Ignite Armageddon in Bond Markets?

This time, as both sides appear to be playing a dangerous game of chicken, the dire warnings of what will happen should the government default appear to be reaching a deafening crescendo. The Chinese and Japanese governments, both large holders of US Treasury paper, are both pressuring Washington for some sort of assurance on their “Investments.”

US Financial Executives are also beginning to worry.  In a recent survey on the perceived effects of a hypothetical debt ceiling breach, the Association for Financial Professionals summarized the survey responses as follows:

“A default would make U.S. Treasury securities, an investment vehicle used in many companies’ short-term investment portfolios, far less attractive. The survey found that one-sixth of U.S. organizations currently holding U.S. Treasury securities would shift out most or all of those investments if the debt ceiling isn’t raised in time. Another 36 percent of organizations would hold onto their current holdings of Treasuries, but would not purchase these securities going forward. 

Meanwhile, half of the respondents say that a government default would harm their organization’s access to, and raise their cost of, capital. An increase in the cost of bank credit and higher cost of debt financing were each cited as possible outcomes by 27 percent of financial professionals.”

In other words, a default would cause a nearly instantaneous shift in short-term investment preferences away from US Treasuries.  While this in and of itself would not be a concern under current monetary policy, even the Federal Reserve would be hard pressed to come up with a program for purchasing Government securities that have not yet come into existence.

Further, Joe Weisenthal over at the Business Insider presents a Goldman Sachs chart which refutes the argument floated by some that the US Treasury could continue to pay interest on its debts once it hits the debt ceiling.

It appears that once Halloween passes and the Federal Employees and Social Security recipients come calling on November 1, the well will be dry.

The well has been dry for some time now, and while it makes for great theater, it is difficult to see why it is in the interest of the government and its direct dependents to let it play out. If it does, it can only mean that a new monetary system will be imposed, for the Mushroom Shaped Dollar Debt Sponge will have been squeezed.

However, should the US default on its debt, we reiterate our position that it “matters not,” for while the US Government and its dependents will be in a world of hurt, there will be a flood of new money available to private enterprise. For, contrary to popular belief, Federal spending acts as a damper on the Federal Reserve’s loose money policies, and a US default may represent the ultimate in monetary stimulus, if not true economic growth.

Stay tuned and Trust Jesus!

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for October 7, 2013

Copper Price per Lb: $3.28
Oil Price per Barrel: $103.03
Corn Price per Bushel: $4.49
10 Yr US Treasury Bond: 2.63%
Mt Gox Bitcoin price in US: $137.00
FED Target Rate: 0.08% ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce: $1,322
MINT Perceived Target Rate*: 0.25%
Unemployment Rate: 7.3%
Inflation Rate (CPI): 0.1%
Dow Jones Industrial Average: 14,936
M1 Monetary Base: $2,556,500,000,000
M2 Monetary Base: $10,726,300,000,000

Observations on the Government Shutdown

An exceptionally bold gambit has been played by the faction of the Republican party that has brought the machinations of the Federal government to an unplanned halt.  No matter what side of the fence American's may find themselves with respect to the shutdown, the practice is revealing on a number of levels.  Among the revelations that have surfaced over the past 72 hours are the following:

1. The Federal government has somewhere on the order of 800,000 “non-essential” employees. The President is the one who decides which classes of employees are essential and non-essential. The President’s choices provide an interesting insight into his priorities. The distinction between essential and non-essential functions should also inform future discussions about austerity.
2. The President, in delaying the penalties for businesses with regards to the Affordable Care Act for a year, neglected to offer the same treatment for individuals. While on the surface, this appeared to be an administrative move, the faction of Republicans who are blocking a clean continuing resolution have called the President out on this slight of the American Public.
3. Even if there was a clear administrative need to selectively apply the Affordable Care Act’s provisions, the act of selectively applying the laws provisions undermines the credibility of the law itself. This is a matter of principle that is worth standing up for. The fact that governance in America has degenerated this far and that it takes a budget or other fiscal crisis for an issue of such gravity to eventually rise to the surface is a national tragedy in and of itself.
4. Despite daily appeals stating the contrary, the American Economy will eventually be much better off were the Government to remain shut down and allow the private sector to either take up the non-essential tasks or leave them undone as demand dictates.

It has been estimated that $60 billion per day is simply disappearing because the government is not spending it on the wages of non-essential employees. This simple analysis of the damage caused to the economy by the Government shutdown fails to see beyond what has disappeared and envision and recognize what will appear in its absence.  The reality, which has held true come debt ceiling debates, fiscal cliffs, and budget showdowns, is that the economy is likely to grow exponentially under current monetary policy, regardless of what the government does.

For more information on the effects of the Government Shutdown, click on the following link to see a brief video featuring Jen Markham, courtesy of Buzz:60
 http://avideos.5min.com//533/5179533/517953269_2.mp4

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

A Debt Deal is Struck, America further Seals Her Fate

8/2/2011 Portland, Oregon – Pop in your mints…

After a long absence, we offer a brief Mint.  As the entire financial world knows, the US Government decided to go deeper into debt to the tune of $2.4 Trillion.  Something was mentioned about spending cuts but they are inconsequential and probably will never materialize.

America continues to march towards Her Imperial destiny, as Bill Bonner of the Daily Reckoning has been expounding upon recently:

“The US is now conducting war-like operations in at least six different countries. The problem, of course, is that it is ruinously expensive. In all of history no empire has been able to resist the urge to overdo it…to commit suicide – either by military or financial “overstretch.” In America’s case, it does both. 

The cost of maintaining the empire…fully loaded…is about $1.2 trillion a year. That’s the Pentagon, the Department of Homeland Security, fortified embassies – everything. Take it away, and the US budget is almost in balance. 

But Washington won’t seriously cut military spending.  Why not?  It’s the way destiny works.  First, she disarms you of your critical intelligence.  And they she shoots you in the back of the head. 

An empire continues until it drops.  It does not back up.  It does not reconsider its mission – not until it is forced to.  How is it forced to?  In the usual way…it runs out of money…”

Yes, it appears that America is intent upon losing its place as the leading private security agency on the planet, for as a practical matter, that is all that what we frequently refer to as nations are.  More on that to come.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  Don’t believe what you read about the Nebraska corn harvest, it will be just fine and as abundant as ever!

Key Indicators for August 2, 2011
Copper Price per Lb: $4.36
Oil Price per Barrel:  $93.33
Corn Price per Bushel:  $7.11
10 Yr US Treasury Bond:  2.62%
FED Target Rate:  0.17%  TIGHTENING?  NOT!
Gold Price Per Ounce:  $1,660 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  -0.2%!!!  PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average:  11,866  TO THE MOON!!!
M1 Monetary Base:  $1,937,200,000,000 RED ALERT!!!
M2 Monetary Base:  $9,260,300,000,000 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.

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.

Bernanke fires up the Helicopters and Precious Metals Blast off!

7/13/2011 Portland, Oregon - Pop in your mints…

Today Bernanke went before the US Congress and gently laid down the gauntlet. If Congress fails to raise the debt ceiling soon (by August 2^nd, we are told), it could have catastrophic effects on the economy.

Given that nearly the entire banking system on the planet depends upon the US Treasury being Grade A debt, Mr. Bernanke may again be credited with the understatement of the year!

We pity Mr. Bernanke. He is like a pilot flying an Airbus aircraft that is stalling at extremely high altitute. We don’t know much about aircraft but we understand that Airbus aircraft, with their European design slant, do not give a pilot much freedom to override the plane’s automated systems. It assumes that all of the necessary corrective actions can be pre-programmed and, if the plane begins to stall, the computers take over to attempt to correct the problem.

Actual Airbus pilots are free to dispute the merits of our oversimplification. We just needed a metaphor.

Back to Bernanke, with the autopilot mechanism failing, the pilot does not know what to do. If the US Congress had dutifully raised the debt ceiling as it had 94 times in the past, as the Airbus autopilot manual said it would, Bernanke’s reaction to the most recent US jobs report would have been to simply propose a third round of quantitative easing (read: money printing or counterfeiting of currency).

On the Airbus, he would get on the intercom and say “please fasten your seatbelts until we pass through this patch of rough air.”

However, the failure of the US Congress to reach a deal to raise the debt ceiling has thrown a wrench in his plans. What is his plan now? Think helicopters, Zimbabwe, Gideon Gono.

Mr. Bernanke is going on a safari!



Yes, fellow taxpayer, with each day that passes, it is becoming clearer to the majority that Mr. Bernanke is unwittingly following in the footsteps of none other than Gideon Gono. Some may recall that Mr. Gono, the Governor of the Reserve Bank of Zimbabwe, was forced to “do extraordinary things that aren’t in the textbooks,” meaning that he oversaw the printing of large amounts of his country’s currency which produced an amazing modern example of hyperinflation.

In an interview with Newsweek in early 2009, Gono offered an explanation for his actions and predicted that the US would do the same, as it has:

“I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.”


The hyperinflation in Zimbabwe led to shortages of real goods and destroyed the economy. Why would Mr. Bernanke’s experiment end any differently?
Meanwhile, over in the Eurozone, the Airbus is in rapid descent and everybody on the plane is offering ideas as to what went wrong and how to fix it. Its auto-pilot has not been programmed to deal with the failures the plane is experiencing and as the pilots and passengers engage in a heated debate, none are able to grab the controls much less safely land the aircraft.

it will not be long before impact and the smarter passengers are starting to grab for the parachutes made of Gold and Silver. Gold closed up almost 1% to a record of $1,583 and Silver gained nearly 6% on the day.

Back in the US, whether or not Congress passes legislation to raise the debt ceiling is irrelevant. The US Treasury will borrow and the FED will print even without Congressional approval. That is what makes modern Government fun, if you don’t like a rule, just ignore it and claim that you were exercising “Leadership.”

All of the countries in the Eurozone will soon surrender their sovereignty to Germany and the IMF in exchange for the “privilege” of using Euro as currency. The ideological divide that is being exposed in the US may eventually lead to civil war.

But these events may be small compared to what is occurring in the Middle East. Iran opened its own international Crude Oil exchange today which is akin to declaring war on the western governments and banking interests.

And keep your eyes on Palestine. The UN vote on Palestinian statehood in September is eerily similar to the vote 62 years ago when the UN accepted Israel as an independent state. Our guess is that this vote will spark events there that will capture the attention of the whole world.

Stay tuned and Trust Jesus.
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 13, 2011

Copper Price per Lb: $4.35
Oil Price per Barrel: $97.83
Corn Price per Bushel: $7.26
10 Yr US Treasury Bond: 2.89%
FED Target Rate: 0.07% JAPAN HERE WE COME!
Gold Price Per Ounce: $1,582 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): 0.2%
Dow Jones Industrial Average: 12,492 TO THE MOON!!!
M1 Monetary Base: $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base: $9,112,300,000,000 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.