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.
And away we go …
When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes.
— Napoleon Bonaparte
America started to die when the Federal Reserve was founded, and it really started to die in 1971 when gold backing was taken away from the dollar.
— Jeff Berwick
When I did my research, I came to the startling conclusion that the Federal Reserve System doesn’t need to be audited — it needs to be abolished.
— G. Edward Griffin
Credits and Debits
Debit: It’s time for a reality check. As Egon VonGreyerz reminds us: “Very few realize that (our) high standard of living has nothing to do with real economic growth or productivity. Instead, it’s based on $500 trillion of debt and printed currency, including unfunded liabilities and pensions.” Sadly, that doesn’t stop everyone else from believing the monetary charade will continue forever.
Debit: No matter where you look, debt is everywhere. And while nations and corporations have racked up the majority of debt since 2008, consumers continue to drown in a sea of red ink too — especially when it comes to credit cards, as a new study has found that the average American household carries a monthly balance of $6929 — and pays $1140 a year in interest. Ouch.
Debit: Then again, consumer debt has grown progressively worse over the last 40 years. For example, in 1980 the average American carried a debt load equivalent to double his or her monthly salary. Today, that number has ballooned to the jaw-dropping sum of 5 times monthly wages. Does anybody see a problem here? No? Okay … well, then how about here:
Debit: With most consumers essentially tapped out, it’s no wonder that unconventional home loans aimed at those who can’t provide proof of income are making a comeback. In fact, lenders issued $34 billion of these unconventional mortgages in the first three quarters of 2018 — that’s a 24% increase over the same period a year earlier.
Debit: Meanwhile, the US Treasury Department is set to maintain elevated sales of long-term debt to finance the government’s growing budget deficit, with new issuance projected to top $1 trillion for a second-straight year. Remember, these trillion-dollar deficits are occurring during an economic expansion. During recessions it’s not unusual for deficits to double or triple from levels seen prior to the downturn. Think about that.
Credit: By the way, in light of the rapidly-escalating deficit, this tweet from Peter Schiff suggests that at least bitcoin owners finally seem to be waking up:
A poll of 4,000 #bitcoin investors showed their #1 investment for 2019 is #gold @schiffgold https://t.co/azKgH7hYKI
Peter Schiff (@PeterSchiff) January 29, 2019
Debit: Of course, while the Fed has been removing liquidity from the system for its quantitative tightening (QT) campaign, stock investors have been doing what they did when the Fed was printing dollars during their quantitative easing (QE) heyday — only in reverse, which caused the stock market to tank. And investors have been on edge because, until recently, the Fed has been implying that four more years of QT was on the way.
Credit: In theory, the Fed’s is supposed to protect the dollar. In theory. But it’s been apparent for years that the Fed is more concerned with the stock market. And the Fed only solidified those suspicions on Wednesday when it announced a pause in rate hikes, and intimated that QT may end sooner than expected. Hey … do you think December’s stock market plunge had anything to with that? You bet it did.
Credit: As macroeconomist John Williams notes, by prematurely stopping rate hikes, the Fed will intensify the next economic downturn, which in turn will necessitate even more QE. True, stock market investors will rejoice — but the ensuing currency devaluation will further erode global confidence in the dollar, as more people realize that QE is the only way to keep the dying debt-based global monetary system from imploding.
Debit: The Fed says the economy is healthy, but they’re clearly in panic mode now because stock investors had a tantrum last month. The truth is, price discovery is dead because the markets are being managed to delay the inevitable reckoning that’s coming. But the manipulation will eventually fail because the Fed is trapped. By trying to keep the stock market levitated, the Fed is simultaneously hastening the demise of the dollar.
Credit: If you ask financial analyst Lance Roberts, he’ll tell you that the real crisis will start when panicking pensioners start a run on their funds, causing “a debacle of mass proportions.” But Roberts notes that there’s also a silver lining to this impending financial disaster: “The good news, if you want to call it that, is that the next crisis, will be the great reset — which will also make it the last crisis.” Just don’t tell that to this guy:
By the Numbers
Here are some shocking numbers on the historic polar vortex that blanketed the midwest US earlier this week:
-77 The nighttime wind chill temperature, in degrees Fahrenheit, recorded at Thief River Falls, Minnesota, on January 29th.
-23 Record low temp in Chicago on the morning of January 30th; that was the lowest reading since the mid-1980s.
14 Consecutive hours the wind chill temp was under 50 below zero F in Minneapolis on January 29th.
94 Temperature difference, in degrees F, between morning lows at Key West, Florida, and Key West, Iowa, on January 30th.
6 States with a temperature on the morning of January 30th that was equal to or less than the low of 27 below zero F registered at the South Pole Station. (North Dakota, South Dakota, Minnesota, Wisconsin, Iowa, and Illinois)
Source: AccuWeather
The Question of the Week
[poll id="252"]
Last Week’s Poll Results
How many homes have you owned in your lifetime?
- 3 (29%)
- 2 (28%)
- 4 or more (19%)
- 1 (13%)
- 0 (11%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that only 1 in 9 of them have never owned a home. Of those who have, most people have owned two or three during their lifetime. As for yours truly, I’ve owned two homes, including my current house, which I bought when it was brand new, 22 years ago. How time flies.
Useless News: Who’s the Boss?
One day, there was a catastrophic event which caused all living creatures on earth to die. To sort things out, everyone was sent to the Pearly Gates.
After a brief wait, God approached everyone and commanded, “I want all of the women to go with St. Peter. As for the men, I want you to make two lines. One line for the men who ruled their women on Earth, and the other line for the men who were ruled by their women.”
The next time God looked, all of the women were gone, and there were two lines of men. The line of men who were ruled by their women was a thousand miles long, while the line of men who ruled their women consisted of a single soul.
After doing a double take at the scene before him, God became angry and said, “You men should be ashamed of yourselves! I created you in my image and yet you were all whipped by your mates. Now all of you — behold the only one of my sons who managed to make me proud. Learn from him! Tell them, my son — how did you manage to be the only man standing in this line?”
“I don’t really know,” the man replied. “My wife told me to stand here.”
(h/t: Santander)
Other Useless News
Programming note: Unlike most blogs, I’m always open for the weekend here at Len Penzo dot Com. There’s a fresh new article waiting for you every Saturday afternoon. At least there should be. If not, somebody call 9-1-1.
Hey! If you happen to enjoy what you’re reading — or not — please don’t forget to:
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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
This week I heard from Z, a triggered BMW owner who left yet another comment on my post explaining why smart people aren’t impressed by people who drive luxury cars:
What’s next? An article shaming people who live in Tudor styled homes vs. ranches?
I bet you’re only asking that because your Beemer is a sporty Tudor.
If you enjoyed what you read here, please forward this to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Good morning Len, and thanks for another cuppa Black Coffee. So in learning about PMs as ‘wealth insurance’, I’ve been trying to understand why platinum is priced so much less than gold these days, as it’s STILL much rarer than gold. Any thoughts?
How about palladium? It’s $1354 per oz. Never thought I’d see THAT more expensive than gold. Crazy.
I never thought I’d see Bitcoin more expensive than gold.
You ain’t kidding! That too.
Bill: I’m shocked that an ethereal ledger address is still three times the price of a tangible troy-ounce of gold. We live in a wacky wacky world right now.
Cowpoke: As for the skyrocketing price of palladium, I’ve seen a similar explanation that says it is related to the automotive industry; in this case, there is high demand for palladium because of a surge in demand for new gasoline- and hybrid-vehicles, which typically use palladium rather than platinum in their catalytic converters. Is that the real reason? I have no idea!
Thanks, Lauren. It is odd to see platinum worth less than gold — especially at today’s prices with Pt significantly less than Au. However, this is far from unprecedented. The platinum to gold ratio has been above 1.0 (that is, platinum price is higher than gold) for almost all of the past 110 years. However, looking at a historic chart of the Pt:Au ratio between 1850 and 1906, it shows that platinum was consistently cheaper than gold. The explanation I’ve seen by the experts suggest that the recent plunge in Pt price is due to the decline in the sale of diesel cars, which use Pt as a catalyst. I’ve also seen an explanation that the Chinese used to be big buyers of Pt jewelry, but recent trends have been toward white gold.
Hi Len,
I’ll echo Lauren. This is the first place I head to every Saturday morning (with my cup of joe of course)! Have a nice weekend.
Sara
You too, Sara! I thought for sure you would comment on that last video. I’m still trying to figure out if that was real or staged. I hope it was staged, for the guy’s sake.
It seems real! I would never humiliate somebody like that.
Sara
“… currency devaluation will further erode global confidence in the dollar …”
Russia and China are dumping U.S. Sovereign debt and buying gold.
Pravda frankly says why:
http://www.pravdareport.com/business/finance/17-05-2016/134444-russia_china_gold-0/ .
Last year the world’s central banks collectively bought more gold than any time in the last 50 years.
https://www.cnbc.com/2019/01/31/world-gold-council-central-banks-buy-most-gold-since-1967-.html
There’s a reason for that, folks. If they’re buying precious metals, maybe you should consider buying a little too.
Plain and simple, the Fed is owned by a bunch of PRIVATE banksters. You won’t find it in the Constitution and it is NOT a part of the government. The dollar has lost 98 cents of its purchasing power since the Fed was established in 1913. They’re running a Ponzi scheme that requires the debt to keep growing or the whole thing will collapse.
Napoleon certainly was aware of the problems that come with letting private bankers control a nation’s money. Woodrow Wilson sold this country out in 1913 — and we’re still paying for it today.
By the way … one of this week’s quotations comes from G. Edward Griffin, who wrote “The Creature from Jekyll Island,” which is the definitive book on the Federal Reserve System.
There was a lot of impending doom in the article but not enough info on how us regular people can insure against it. Im guessing the obvious like have no debt, pay off your house, save money. Anything else? What if most of your retirement is in 401 k ? Or 1/2 in individual stocks?
Claudia, there is no reason to be scared. Monetary resets have happened many times in the past and the world and mankind is still here. Yes, I strongly suspect there will be some hardships we’ll have to endure during the transition, but there are ways to prepare and minimize the impacts to yourself. Having physical gold and/or silver in your portfolio (not paper ETFs) is the best way to ensure your wealth — most experts recommend a 10% allocation. That physical metal will make up for any losses to your paper wealth (i.e., 401k, bonds and individual stocks); it can then be used as a bridge to transfer your wealth to the next monetary system (whatever it will be). I have a minimum three month supply of food as well to guard against any potential temporary supply chain disruptions that may occur.
“We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it.”
Congressman Louis Thomas McFadden
Good one, WA!
The Fed should have let the system clear in 2008 but didn’t. They should let the system clear now but they can’t. The next big crisis we’re going to see the big central banks of the world:
1) print lots of cash
2) go to negative interest rates
3) monetize the debt
And then we get the reset.
Good summary, Mike. I think that is how things will start out but … I think it won’t be long before it turns into a currency crisis that leads to a new financial system.
Hi Len,
Have you read “Road To Ruin” by James Rickards?
He was there in the trenches during LCTM meltdown in 98, as he worked for them….he saw the 07/08 coming and tried to actually warn the Fed to help mitigate it, as well as McCain during the campaign…
His book is fascinating and frightening. While he does suggest holding gold as you do, he believes the new global money will be SDRs pushed by the Central Banks…we would keep a local money, but global money wont be gold…the banks hate it.. LOL….
Also with the advent of the G20 agreeing to “bail ins” back in 2014, that if there is another financial crisis the central banks will move to freeze everything. Including brokerage, IRAs, Money Market Funds etc…to keep the masses from trying to liquidate.
He believes the cliff we are being pushed to is so massive that the impact will be hard. There is literally no where to hide. It will be global and brutal.
His suggestion is to ensure the assets you cant touch now, are at least 30% cash, 10% PMs, others in things like art, real estate etc…
Of course you cant own all those things in retirement accounts unless you have a self directed IRA that is not done by a bank. (PM IRA etc)
He makes it point blank clear to ensure you do not have your gold, or cash you need, held by any bank whatsoever.
His stats and info on how messy things are currently, because of the recent laws, rules etc…allowing banks to be investors, is sickening. I honestly had no clue it was really that bad. Our elected leaders and such have been willfully blind.
All I can say is that I am upping my gold and silver at home and I am already prepped for at least a year’s worth of instability (food, water, power, grow my own, good job, debt will be paid in full next month etc)…
God help us when it comes, it will be ugly.
His personal conversations with top people on the inside are very informative. (meaning the Govt knows and is taking measures to ensure they can freeze things…aka looking to control more than just banks, but asset managers now, like Black Rock who manages some of China’s assets, as well as CalPers)…. As we know Govts are not supposed to be involved in asset funds. But they want to be and are moving in on them. (omg)
Anyway, if any one gets a chance, they should read it. Look past the weird title and see the real data in it.
Cheers!
Yes, I have read all of Rickards’ books: Currency Wars; The Death of Money; The Road to Ruin; and The New Case for Gold. They are all excellent books that are written for the layman and I recommend everybody read them. Although Currency Wars is now a bit long in the tooth. (But his prediction certainly played out as he scripted it!)
One of the few areas where I disagree with him is the SDR. While the powers that be will almost certainly try to implement the SDR as the new global currency, it will not last long. Why do I say that? Because the SDR is nothing but a basket of the world’s five major fiat reserve currencies (i.e., dollar, pound, yen, euro, and yuan) Putting five individual rotten apples into a “clean” basket does not make the contents of the basket any better. They’re still rotten apples!
Yes, the public may be fooled for a very brief period of time by the SDR, but it won’t take long for reality to set in — and the SDR will soon be seen for what it is: more worthless fiat repackaged into a new form. This lines up with the theory put forth by Jim Sinclair and Bill Holter; they say there will actually be two resets. The first one will be a short term “false” reset (using either the SDR or perhaps some form of cryptocurrency) put forth by the powers that be in a last desperate attempt to save the system — but it will fail because it can’t overcome the math problem. That will be followed by the true reset that results in a serious revaluation of gold (and silver) — and sharply diminished purchasing power for the dollar. (Because a revaluation of the dollar price of gold is the only way to mathematically solve the world’s debt problem.)
A most excellent point Len. I had reservations on his SDRs being able to withstand the public outcry. After all it may work for the Global Elite, but not for the common man.
The one thing in his book that terrified me, was his expectation of what he calls the Ice Nine…after all if he is talking to people in Black Rock who state the Govt literally wants to control how they do business and freeze assets (where govt does not belong since they are an asset manager not a bank!) that should terrify everyone.
After all we are not talking about just closing the banks, but freezing your access to MMFs, Cash in your IRAs/401ks, Cash in your brokerage, CDs etc…you name it. Yikes!
He makes a most excellent point about holding assets OUTSIDE the banking system…..or at the very least have some outside the major player banks etc…
Me? I started moving things around so I not only have Gold, Silver and Cash at home, but that all my cash and bank accounts are not in the same bank (as they used to be).
Call it hedging my bets (while also getting a better % in my savings) LOL
The one item I didnt get clarity on, was when he suggested Gold outside the banks,. Yes I get at home..but what about the IRAs you cant liquidate? He doesnt clarify the concept of PM IRAs, managed and stored by Self Directed Companies.
I was about to move some of my pension assets to one, but havnt pulled the trigger since 1; the fees are high, 2; though the place I would purchase and use as storage (OwnX.com) states the gold is held outside the bank in a good depository…
Can I really be sure the Govt wont seize that too?
Especially as Jim states, the Govt and Central Bankers will have no qualms whatsoever locking down (Ice9) or doing “bail Ins” on it’s people.
And yes people the G20 agreed to those items (bail ins) even in USA…stating it as depositors are considered fair game, as are shareholders etc…as if to placate it as a non tax payer bail out…which is just taking the money from a different pocket.
I looked the info up. They (all of g20) agreed to it.
They think they are saving tax payers, when all they are doing is giving banks the ability to seize your deposit as an “asset” to pay creditors if they go belly up. Much like they did in Cyprus. But depositors ARE taxpayers…the fools cant, or wont, see that fact.
Obama agreed to it in 2014. Yikes!
God knows if its been completely OK’d in any of the recent monster budgetary bills put out in 2014/2017 etc…
At this point I don’t trust any of them in Govt since it was their lack of management that got us into this nightmare. (never did trust them anyway, but thats the libertarian in me)
I agree everyone should read his books…especially the Road To Ruin.
I had no idea he was involved in the ground floor of the LCTM fiasco, which set up for the 07/08 meltdown. The sickening part? Is they have all known about this and didnt care. The elite got richer and the rest of us got nada.
Heaven forbid they go to negative interest rates. Yikes!
Anyway, Cheers all!
Protect yourselves. Make sure you are buying and collecting those PMs and have cash on hand!…Also have a good amount of preps like food, water, etc…cause when it hits, it’s going to be bad. I estimate at least a year or so before there is a semblance of normalcy (if that) and that’s me being optimistic.