The Productive Purpose of Speculation

11/29/2010 Portland, Oregon – Pop in your mints…

Today as tensions in Korea continue we find ourselves pondering an activity that is vilified in many circles yet is an indispensable part of everyday life, modern or otherwise.  This vilified activity is popularly called speculation.

What is speculation?  To read the financial news over the past two years, one could equate speculation with gambling.  In a way, they would be correct.  A speculative action involves accepting a known risk in exchange for a reward that is uncertain.  All that can be said for certain is that the speculator, the person taking the risk, believes that the reward to be received outweighs the risk that is accepted.  Only with the benefit of hindsight can one say that the speculation was brilliant or insane.  Before hand, all opinions as to the speculation are in and of themselves simply speculations with regard to the speculation that they are speculating about.

Bernanke Disses the Dollar in Frankfurt

11/26/2010 Portland, Oregon – Pop in your mints…

Isn't Thanksgiving wonderful?  It has all of the warmth of Christmas with a fraction of the chaos.  Most everything is closed and, with the normal pressures of everyday life aside, you can truly sit and enjoy a large meal with your family and friends?  What a great holiday.

Ben Bernanke made a speech in Frankfurt at the Sixth European Central Bank Central Banking Conference which is causing a stir.  He titled it "Rebalancing the Global Recovery.  After parsing the text, some are calling it one of the most significant speeches that the man has made, right up there with his infamous "Helicopter" speech in 2002.  As some of you may recall, in 2002 Bernanke stated that, if deflation were to occur, he would use the electronic version of a printing press to create enough dollars to assure that there was enough liquidity in the dollar system.  He went as far to say that they could drop US dollars from helicopters if necessary.

The Irish Whack the Euro, Tension on the Korean Peninsula

11/24/2010 Portland, Oregon – Pop in your mints…

We had hoped that the calm of yesterday would continue on through Thanksgiving.  We hoped that we would enjoy our favorite holiday at ease with the knowledge that the Plunge Protection Team would continue to save the world from the nasty side effects of Capitalism and the general upward progress that its operation brings to civilization.  Those nasty side effects, of course, entail the destruction of certain industries while new, more efficient industries take their place and the occasional destruction of overall capital in order to create new capital.

The Plunge Protection Team exists, for the most part, to ensure that on the surface the stock, bond, currency, and commodity markets as well as overall prices appear to remain the same or at least to move gently between one extreme and the other.  They strive to provide the false comfort that the status quo may be maintained or that any changes to it will occur in an orderly, predictable fashion.  In short, they try to create the illusion of stability.  Oddly enough, if the world simply adhered to the tenets of a stable currency structure and the institution of private property, meaning that each person would enjoy and/or freely exchange the fruits of their labor, the Plunge Protection Team would have no reason to exist.  It only came into begin during the Reagan years when the powers that be thought the world could no longer stomach capitalism running on a fiat currency.

Social Security, The Only Solvent US Government Program

11/23/2010 Portland, Oregon – Pop in your mints…

Today we awoke to the possibility of snow in Portland.  Unlike cities who experience snow on a regular basis, Portland is, by choice, utterly and completely defenseless to this winter phenomenon.  We say by choice because the environmental contingent which heavily influences, well, everything around here takes offense to the need to spread salt, chemicals, or simple gravel on the roads to make them passable when snow and ice hit.  The consequence is that the roads turn into a demolition derby of buses with chains and SUVs who have never left pavement let alone faced ice and snow beneath their 16 inch wheels.  Everything that can be delayed (schools, government services, bake sales) is and the city as we know it rests.

The financial markets, however, will not rest so we must continue to explore, pry, expose, and attempt to comprehend the incomprehensible.  On we plod, through rain and snow.  The markets today show no indication of collapse.  Could it be that they missed the Irish taking their bailout?  No, it is right there in the headlines.  What about large banks being $150 BILLION short of capital based on the new requirements that a group of world improvers saw fit to place upon them in Basil, Switzerland not many moons ago?  Not even flinching.  Could it be that the markets are seeing past these seismic events and see calm sailing ahead?

The Irish Take the Bait, Will Bad Debts Ever Go Away?

11/22/2010 Portland, Oregon – Pop in your mints…

We are excited for the upcoming Thanksgiving Holiday here at The Mint.  Thanksgiving is unique to America and I know of no other day that is simply set aside to give thanks, appreciation, for what one has.  One cannot give thanks and complain at the same time and since we hear so much of the latter, the former at least gets lip service one day a year.

At The Mint we are thankful that the Irish took the bailout.  We are thankful for the bailout because it means that the central thesis in the bond markets is intact.  That thesis is:  Any nation, state, government, bank, mortgage company, or group of special interests large enough to make the international news for its upcoming debt default will be bailed out by (insert name of larger, big brother type entity here).  In the Irish's case, the EU showed up at their neighbor's front door to force them to refinance.  "Brother please!  Save yourself some money and take on more debt!"  This insanity is excused by large phrases like "avoiding systemic risk" or in colloquial terms being "too big to fail."