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 …
Gold is money. Everything else is credit.
— JP Morgan
Because gold is honest money, it is disliked by dishonest men.
— Ron Paul
Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.
— Norm Franz
Credits and Debits
Debit: Did you see this? Apparently, the number of $100 bills in global circulation has been steadily increasing since the Great Financial Crisis (GFC) in 2008. In fact, there are now more $100 bills in circulation than $1 bills. CNBC suggests a panoply of potential reasons, including “global corruption.” I agree — assuming a decade of currency debauchery via QE and low interest rates is considered “global corruption.”
Debit: Then again, maybe there are so many $100 bills in circulation today because the average monthly payment for a new car has climbed to an eye-watering $545. Or is that confusing cause and effect? You know … like this:
Credit: By the way, anyone who believes the Federal Reserve’s repeated claims that inflation is running at 2% needs to have their head examined. As Mish Shedlock observes, “The amount of sheer nonsense written about inflation expectations is staggering.” Agreed. It’s almost as if nobody at the Fed buys groceries. Or writes rent checks. Or pays for car fuel. Or has health insurance. Or kids in college. Or …
Credit: But Bill Fleckenstein points out a bigger problem: “The fact that central banks have decided 2% inflation (is desirable), and it’s accepted universally by financial publications, is yet another example of when something stupid is repeated often enough, it passes for fact; 2% doesn’t sound like much, but it means prices double over 30 years. Think about that when you’re planning your retirement.” Oh, I do, Bill. I do.
Credit: Meanwhile, the stock market continues its miraculous recovery from its December lows. But as Lance Roberts observes, “The recent rally may not be justified, (making) further deterioration in forward earnings more problematic. This is particularly the case as valuations have reverted back to 30x earnings.” Historically, fair value for stocks has been roughly 14x earnings. But I’m sure this time is different. No, really.
Credit: Of course, as MN Gordon notes, “Someone with even a dim perception of the world around them can see that something grotesque has occurred. Stocks, bonds, and real estate have ballooned well beyond incomes. Moreover, those who deal in financial assets have gotten filthy rich because of it. This lopsided state of affairs would’ve never (happened) without the Fed.” True — but this, too, will pass. Eventually. Just ask Ernie Els:
Debit: In other news, this week S&P warned that, with governments around the world planning to borrow $8 trillion in 2019 — including $1 trillion by just the US — global sovereign debt could top $50 trillion; that’s 6% more than last year. What? You thought global debt should be declining? Heh. That’s impossible; if debt stopped accumulating, our debt-based fiat monetary system would implode. It’s simple math — and a losing game.
Credit: The system is now visibly cracking because we’re on the exponential part of the debt curve, which is why economist Luke Groman is warning that “the dollar end game has begun. The decline will continue until the US nominally defaults on its entitlements or US Treasuries, the US dollar is massively devalued, or the Fed implements ‘helicopter money.'” So when is “game over?” Groman says within the next 24 months. Uh oh.
Credit: In reality, the Fed is trapped in a monetary roach motel of its own making. As Stefan Gleason points out, this is because, “It may not be possible to withdraw much more stimulus from mortgage and equity markets without collapsing them, (or) unload US Treasury securities without causing a funding crisis for the government.” Which is a problem, because ever-increasing debt is not an option for the system — it’s a feature.
Debit: Yes, yes. I know what a lot of you are thinking: Why can’t we just make the wealthiest segment of society pay more taxes? You certainly could. Unfortunately, even if you did tax 100% of the wealth of the top 1%, it would only finance the US deficit for approximately five months. Aww, now there’s that inconvenient math bugaboo again.
Credit: The world’s central banks intentionally strive for inflation because they’ve got no choice. But as the late great investor Richard Russell observed, those central banks will eventually be forced to inflate, die, or devalue the dollar by increasing the dollar price of gold. That day is fast approaching — and gold is clearly the best way to short-circuit the ticking time bomb that is our debt-based fiat monetary system.
By the Numbers
With the average new car payment now well over $500, you might be interested to know the top ten selling cars last year in the US, presented in reverse order:
10 Chevrolet Malibu
9 Chevrolet Cruze
8 Ford Fusion
7 Hyundai Elantra
6 Nissan Altima
5 Nissan Sentra
4 Honda Accord
3 Toyota Corolla
2 Honda Civic
1 Toyota Camry
Source: Motley Fool
The Question of the Week
[poll id="257"]
Last Week’s Poll Results
How would you characterize your home’s location?
- Suburban (55%)
- Rural (33%)
- Urban (12%)
More than 1200 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 3 say they live in a rural area, away from the hustle and bustle of the cities and suburbs. As for me, I’m here in suburban Southern California. Twas a time I thought I would retire to someplace a bit less populated and quieter — but I’m no longer sure that is in the cards for me. We’ll see.
This week’s question was submitted by Frank. Thank you, sir! And if you have a question you’d like to ask the readers here at Len Penzo dot Com, please send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
Insider Notes: More on Revaluing The Dollar Price of Gold
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Useless News: Forgive and Forget
The preacher’s Sunday sermon was ‘Forgive Your Enemies.’.
Toward the end of the service he asked his congregation, “How many of you have forgiven your enemies?” Only about half held up their hands.
Not satisfied with the response, the preacher repeated his question. As it was past lunchtime, this time about 80% of the congregation held up their hands.
Still disappointed at the response from his congregation, the preacher then repeated his question yet again. This time, everybody responded — except one small elderly lady.
“Mrs. Jones,” inquired the preacher, “are you not willing to forgive your enemies?”
“I don’t have any enemies.” she replied, smiling sweetly.
“Mrs. Jones, that’s very unusual. How old are you?”
“Ninety-three.” she replied.
“Oh, Mrs. Jones, what a blessing and a lesson to us all you are!” said the preacher. “Would you please come down in front of this congregation and tell us all how a person can live ninety-three years and not have an enemy in the world?’
And so the little sweetheart of a lady tottered down the aisle. When she got to the front of the congregation, she turned to face them and said: “I outlived them all.”
(h/t: Mikey)
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.
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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 my article highlighting 36 amazing uses for plastic grocery bags, Anke decided to drop this note in the Len Penzo dot Com complaint box:
This is a disgusting post. Plastic bags are an environmental plaque [sic]!
Uh huh. But would you change your mind if I told you plastic bags are also considered a suffocation hazard?
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Photo Credit: brendan-c
Len,
Didn’t realize there were more $100 bills in circulation then $1 bills. That’s simply telling that we are heading down the road of Venezuela or Zimbabwe! I knew the system was , but we truly are close to the endgame.
Stacking as fast as my fiat will allow!
Jared
80% of all cash is overseas. Just wait until all those hundies come back to the U.S. to be spent on things here.
It certainly seems like things will be coming to a head soon, Jared. The signs seem to be everywhere; imbalances in everything from the make-up of bills in circulation to the ever-widening wealth gap between rich and poor are just two of them.
“… silver is the money of gentlemen …”
Good for me! I’m higher up on the social ladder that I thought I was.
That makes two of us, Dave.
Hi Len,
Thanks for another great cup of Black Coffee! Don’t you think it’s interesting that a respected money guy like Luke Groman is giving an actual dates that the system will be reset by?
Sara
ps – As a silver stacker myself, I prefer to be called a gentlewoman.
Sara, before the Great Financial Crisis in 2008 discussions of an “economic reset” or the fall of the Almighty Dollar were reserved for fringe personalities. Now those topics are actually being discussed in most mainstream publications, albeit with a lot of hand waving and open skepticism. But, hey, that’s progress.
I do find Groman’s prediction of a major reset within the next 24 months to be very intriguing. I, too, think this will come to a head before 2020 is up — whether it is in the form of a reset, or much higher inflation.
Then again, who knows … the central banks seem to have had a lot of success holding things together with baling wire and duct tape since the last crisis.
Russell famously predicted the Fed would need to “inflate or die” but what he really meant was “hyperinflate or die.”
I assumed most people would infer that — but you’re correct, WA.
QE and ZIRP are corrupt policies by a corrupt group of unelected academics known as the Federal Reserve. They are helping one group over another, making the rich richer and poor poorer and it now looks like these policies will be permanent. SAD!
The policies can’t be permanent, Jack, but how and when they will end is not knowable.
“Now in all states there are three elements: One class is very rich, another very poor and a third in a mean. democracies are safer and more permanent than oligarchies (rule by and for the rich) because they have a middle class which is more numerous and has a greater share in the government; for where is no middle class and the poor greatly exceed in number, troubles arise and the state comes to an end.” – Aristotle, quoted from “The Politics” (interpreted from the Greek language, Knoles and Snyder, “Readings in Western Civilization”, J.B. Lippincott 1951.
That was written about two thousand, four hundred years ago. It has proven to be universally true, throughout history, ever since.
BTW, if you are not familiar with the downright hateful attitude of contemporary august scholars toward classical Western civilization, you might be interested in this:
https://www.breitbart.com/politics/2019/03/02/delingpole-o-tempora-o-mores-social-justice-is-killing-classics/
Breitbart is sensationalistic and biased, but mainline journalism largely ignores important information available there.
Calling them a “corrupt group of unelected academics” is too kind, Jack. I have to believe the central banks understood the moral hazard that would ensue by implementing QE.
And Fed Chairman Powell did nobody any favors when he signaled a pause in interest rate hikes after the stock markets sold off in December — well, except for Wall St. and the pension fund managers. The Fed is now clearly being held hostage by the stock market, and the stock market is being propped up by the Fed.
It’s all one big fraud and when economic law is finally and mercifully restored, the resulting implosion is going to be epic.
This is just plain wrong. The Fed doesn’t care what the price of gold is as it is no longer tied to the dollar. Besides, there isn’t enough physical gold out there to back a new monetary system.
Wrong. There is always enough gold *** at the right price ***.
If they didn’t care about gold, it would be multiple thousands of ‘dollars’ in price. Silver the same.
The fact that both are the ONLY ‘commodities’ that are massively sold short….naked short, as in the physical amounts sold short are not possible to come up with…. to keep the price down shows SOMEBODY cares about the price. If you tried to do this with any other commodity like plywood, or orange juice, or pork bellies, you would go to JAIL.
@ TnAndy: I didn’t quite understand this. Can you please explain?
Are you saying naked shorting of all other commodities is illegal but naked shorting of precious metals is legal?
And/or are you saying a central bank is doing this naked shorting of precious metals?
Kyron, rather than having Andy or myself reinvent the wheel explaining the “wash, rinse, repeat” cycle of naked gold shorting, here it is explained by none other than former Asst. US Treasury Secretary Dr. Paul Craig Roberts:
https://www.globalresearch.ca/naked-gold-shorts-the-inside-story-of-gold-price-manipulation/5365360
I admit that Im not knowledgeable enough to fully understand that article in one read But Im going to go home and read it carefully.
But wow! That is scary shit. Thanks for the article Len. This is why I always read your blog.
I thought the Fed had to publicly announce their balance sheet. How can they get away with undisclosed trades and (unlimited) naked short liabilities? (not that I would put it past them …..)
We know the derivative market liabilities are 10-100 fold of actual underlying investments. Im curious also (and perhaps the article answers this already. If so like I said, I need many hours to read it carefully) how is it not some HFT in Goldman Sachs running these kinds of massive trades after Fed announcements of their QE strategy? (I wouldn’t put it past these wall street guys too … as they have a vested interest in holding down gold ….)
Andy and Cowpoke: Between the two of you, you correctly dispelled both of Christopher’s specious assertions. Thank you.
That’s kind of funny….
Considering when we were still on the Gold standard there was a “specific amount” in the world. Enough it seems to tie at least our money too…
Fast forward 50 years and all that mining?
Hmm….Me thinks that unless Gold can actually turn itself into water, air, or iron….I think there is still quite enough in the world. If not actually more.
It doesn’t just dissipate.
BTW might wanna get you some Gold today….after all it’s finally down again….and seen the market?
Catch the news on weak construction spending? Sending the markets in to a 400 point sell off before they regained some back?
Yeah…the cracks are there…trust me they are there….and with EU GDP growth pegged at under 1%? It will spread.
China is propped up on debt too….
Hey Len?
Skyscraper Index Theory….while Luke gives it a shot, I would say that the Austrians, who’ve tracked the Skyscraper Index, have it about right.
Meaning 2020 for the big date….and it should start in SA with the Jeddah Tower.
Sounds like Luke and the Austrians are on the same page!
I enjoy your weekly comments.
The entire global economy and financial system is a giant Ponzi scam. All Ponzi scams eventually collapse on their own accord. Tick tock.
Thank you, Glenn. And I agree it’s one big Ponzi.