It’s time to sit back, relax and enjoy a little joe …
Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.
Let’s kick this baby off, shall we?
There are three things in the world that deserve no mercy: hypocrisy, tyranny, and fraud.
— Frederick William Robertson
It is a fraud to borrow what we are unable to pay.
— Publilius Syrus
Things gained through unjust fraud are never secure.
— Sophocles
Credits and Debits
Debit: Here’s more news suggesting that America’s high standard of living is essentially a house of cards looking for a windstorm: Yet another survey found that half of all US working families are living paycheck to paycheck. Just imagine how big that number would be if we weren’t eight years into an “economic recovery.”
Debit: It appears as if the economic punishment will only continue for those who are financially struggling. That’s because last month the Fed’s preferred inflation gauge supposedly hit its 2% target for the first time in five years. Uh oh.
Credit: I know what you’re thinking: But, Len, the true inflation rate has been higher than that for years! That it has, with few exceptions — which is why I said “supposedly.” The key takeaway is that the Fed data indicates that inflation is clearly picking up.
Debit: Meanwhile, Wall Street is suddenly fretting over the number of consumer auto loans given to Main Street borrowers with very low credit scores. They’re afraid those loans won’t be paid back if the “economic recovery” suddenly stalls. Heh. Too bad they didn’t think of that before they handed out those loans to anybody who could fog a mirror. Or even not fog one.
Debit: What got Wall Street’s attention? This: The share of auto securities tied to ‘deep subprime car loans’ — that is, those given to borrowers with credit scores under 550 — climbed from 5.1% in 2010 to 32.5% today. Now for the punchline: Not coincidentally, defaults on those bonds have risen significantly since 2012. Oops.
Debit: Speaking of debt, the amount of debt around the world has now eclipsed $215 trillion. If you think the great majority of that is ever going to be paid back, I’ve got a million bucks worth of $3-bills I’d like to sell you at a discount.
Debit: Forget the world — here in the US, total private and public sector debt is more than $63 trillion; that’s 1.55% more than last quarter and 3.11% higher than a year ago. Then again, what did you expect? Our debt-based monetary system is a legalized Ponzi scheme that must continue expanding in order to avoid imploding.
Debit: The US public sector is doing its part to keep the Ponzi scheme alive. In fact, as Zero Hedge notes, credit card debt surpassed $1 trillion last month for the first time since 2007, where it now joins both auto ($1.1 trillion) and student ($1.4 trillion) loan debt.
Credit: Of course, the Congressional Budget Office knows that Ponzi schemes are mathematically ensured to eventually collapse anyway — which is why they just warned that America’s exponential debt growth will one day lead to a financial catastrophe. Then again, they warn us every year.
Debit: According to the latest CBO report, “Federal debt is now at its highest level since shortly after World War II. If current laws remain unchanged, growing budget deficits would boost that debt sharply over the next 30 years.” I wonder how many overpaid bureaucrats it took to figure that out.
Credit: Apparently, the CBO has a sense of humor — after all, who actually believes the current monetary system has 30 more years of life in it? Thirty months is closer to reality.
Debit: The CBO also says, “If a fiscal crisis occurs, policymakers would have only limited — and unattractive — options: modify the contractual terms of existing obligations, use monetary policy to raise inflation above expectations, or adopt large and abrupt spending cuts or tax increases.” In other words, pick your poison: formal default, informal default, or an epic depression.
Credit: Just how far has the US been living above its means? Well … prior to 1971, trade deficits were settled in gold. The US supposedly owns 8000 tons of the yellow metal but, as Egon Von Greyerz notes, the US is so deep in debt that 453,000 tons (!) of gold would have been needed to settle the $12 trillion trade deficit America has racked up since 1999 alone.
Credit: And here’s the kicker: Since the dawn of mankind, only 170,000 tons of gold have ever been mined. Add it all up and the inescapable conclusion is that Americans’ cushy lifestyle has been an illusion based on monetary fraud for many years now.
Debit: Perhaps not coincidentally, last week a massive gold coin weighing 220 pounds was stolen from a German museum. No, really. And although police officials say they have few leads at the moment, they quickly eliminated Ben Bernanke as a suspect after he answered this question:
The Question of the Week
[poll id="158"]
Last Week’s Poll Results
What’s your favorite day of the weekend?
- Saturday (53%)
- Sunday (33%)
- Friday (14%)
Forget TGIF. That’s because only slightly more than one in seven Len Penzo dot Com readers say their favorite day of the weekend is Friday. At least according to the more than 1300 people who responded. Apparently, more than half prefer Saturday. For another one in three, it’s all about Sunday. I know Saturday is my favorite day of the week — but that’s only because Sunday follows it!
(The Best of) By the Numbers
Amaze your friends with these bigfoot facts:
17 Length, in inches, of the typical sasquatch footprint.
1811 Year that the first sasquatch footprints were discovered.
35 A bigfoot’s top running speed, in miles per hour.
10 The maximum height of a bigfoot, in feet.
490 Typical sasquatch weight, in pounds.
80% Supposedly, the chance of surviving a bigfoot confrontation if you offer it food. (No, really.)
1965 Year that Russia put the sasquatch on its endangered species list. (Two years later, France and Germany did too.)
Source: Mirror
Other Useless News
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46. Mississippi (1.26)
47. Illinois (1.25)
48. Minnesota (1.23)
49. California (1.22)
50. Old Mexico (1.20)
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Letters, I Get Letters
Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com
After reading last week’s April Fool’s Day edition of Black Coffee, Bill dropped this message in my inbox:
Nice work. For once I actually found myself agreeing with what you wrote.
Well, Bill … if that’s true, then it will probably be the last time you agree with me too!
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Isn’t it interesting that the U.S. prosecuted Madoff for running a Ponzi scheme? I guess the treasury wants a monopoly on that kind of exploitation.
It certainly is interesting, Kathy — but it’s not surprising. When it comes to legal tender laws, it’s “do as we say, not as we do.”
Thanks for another great cup of Black Coffee Len!
Have a great weekend!
Sara
My pleasure, Sara.
I read the link to the credit about the U.S. needing 453,000 tons of gold to cover its trade deficit. That is based on the avg price of gold since 1999. If the gold price was higher, then the U.S. wouldn’t need all of that gold to make good on its trade debt. That infers that gold should be much much much more than it is today.
Yes … Behold the illusory power of fiat currency! Because the world tacitly agreed to abandon the Bretton Woods system when Nixon closed the gold window, America’s trading debt will eventually be settled in dollars — not gold.
Unfortunately for them — and us — those dollars will be sharply devalued. (Disproportionately against gold, compared to other tangible goods.)
Our biggest creditor, China, understands this … which is why they have been amassing gold at a rapid pace since 2009, and have opened up their own physical gold exchange market in Shanghai to compete with the current paper-gold-dominated price-setting exchanges in the US and London.
When the time is right, China will reveal the true price of gold using their gold market — and our phony, manipulated, paper-based exchanges will disappear into the night.
By the way … that’s the point where the USA better have all the gold it says it has because they will no longer be able to avoid an audit.
It’s a tough choice. Do you think continuing to live this way, even if it is an illusion, is better than going thru an economic collapse?
Obviously, there is going to be a lot of pain for everyone when the dollar is devalued to a level that reflects economic reality. In the long run it will be better for everyone — especially our kids — if we take our medicine sooner rather than later.
I am confident that once economic reality returns, our economy will eventually emerge from the ashes in a way that will once again allow hard-working families to own a home and put their kids through college on a single blue-collar income.
You say 30 months. It could 30 days.
Of course, that’s possible. Nobody knows.
I find it amazing that the Fed has managed to keep the game going this long — but their biggest advantage has been the ignorance of the general public. (That included yours truly until shortly after the last financial crash in 2008.)
If even 10% of the populace truly understood the fraud behind the US dollar and how the bankers are robbing them of their purchasing power, the system would have collapsed long ago.
Len,
I think the Stake could be driven into our modern day Ponzi scheme by summer, the modern day Joan of Arc (Marie Le Pen) is single handedly going to destroy the Euro when she wins the French election this spring. OPEC will fall apart in June, which will begin the quickening death of the Petro Dollar. The only place people will be able to run to then will be precious metals! China and Russia just got ahead of the game over the last few weeks by getting everything in place for a new gold trade deal. Only the people who have previously got into metals here at home will maintain a somewhat normal lifestyle. The scary thing is the 99% of people who didn’t will be wanting to take from those who did. That’s what I’m afraid will happen, thus guns and ammo will be just as important as precious metals.
Hope I’m wrong!
Jared
Re: the French presidential election … I don’t think LePen will win, Jared. She’ll get into the runoff, but she is trailing in all of the polls I’ve seen that pair her with one of the likely run-off candidates. Then again, if the polls in France are as manipulated as the ones in the US are, maybe she actually will win.
Good comments! We live in interesting times.