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.
I hope everybody is having a great Easter weekend! Okay, away we go …
A US dollar is an IOU from the Federal Reserve Bank. It’s not backed by gold or silver; it’s a promissory note that doesn’t actually promise anything.
— PJ O’Rourke
When it comes to chocolate, resistance is futile.
— Regina Brett
Credits and Debits
Credit: Chocolate is a popular gift during Easter but, sadly, as Mark Dice demonstrates, for most Americans it’s actually a bit too popular. The ignorance on display here is astounding — especially when you consider that, at the time this was recorded, a 100 troy-ounce bar of silver was selling for almost $2000:
Debit: Back in 1964, a freshly-minted silver US quarter bought a gallon of gas — and, at a current melt value of $3.07 it still does today. Well … except here in California where, after seeing a gallon of 87 octane soar 70 cents in the past month, and 21 cents since last week, the average Golden State motorist is paying more than $4 at the pump for the first time since July 2015. Ouch.
Credit: The good news is that higher gasoline prices didn’t stop the US retail sector from enjoying its biggest gains in 18 months. And while the sector’s year-over-year performance in March was 3.6% higher, it’s not expected to be enough to prevent GDP growth in this year’s first quarter from being weaker than the final quarter of 2018.
Debit: Meanwhile, foreigners have now sold more US stocks than they’ve purchased for a record ten consecutive months — and 12 of the past 13. In fact, the aggregate $205 billion in net sales over the past 12 months is the largest foreign liquidation of US equities on record. Of course, that hasn’t stopped the stock market from once again toying with their all-time highs this month.
Credit: Needless to say, it’s no coincidence that stocks staged a miraculous recovery from their December meltdown shortly after the US Treasury Secretary summoned a Christmas Eve meeting with the Plunge Protection Team, and the President openly discussed firing the sitting Fed Chair. You know … twas a time when some people actually understood the folly and danger of Fed interventionism in the markets:
The Fed should not do QE3. Neither the economy nor the dollar can withstand another round of artificial liquidity.
Donald J. Trump (@realDonaldTrump) April 11, 2012
Debit: But that was then, before Mr. Trump was elected to the presidency. Sadly, this is now — and it’s a much different story:
If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%…with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!
Donald J. Trump (@realDonaldTrump) April 14, 2019
Credit: The exact opposite of quantitative tightening is quantitative easing. The paradox is: If the economy is as strong as the we’re being told, then why does the Fed need to not only stop QT, but restart the market-distorting almost-last-resort policy of QE? After all, this week’s job print revealed that November 1969 was the last time so few Americans sought the help of government after losing a job. So there’s that.
Credit: Then again, applications for new unemployment bennies is a very misleading statistic, as it hides the fact that almost 100 million people are no longer in the workforce. By the way, this week economist David Rosenberg pointed out a few new interesting economic data points of his own:
The three-month trend in production of consumer durable goods has collapsed to a -15% annual rate this takes out 2016 and takes us back to the late stages of the 2008-09 recession. Shhh! Don’t tell the stock market that the recession may have already started! pic.twitter.com/TKmo7Y3mDK
David Rosenberg (@EconguyRosie) April 16, 2019
Debit: So there you have it: After a 10-year expansion, the latest economic data strongly suggests that the US may now be in the midst of another recession. The trouble is, the Fed is still depending on the financial crutches they implemented during the last recession.
Debit: Of course, the latest 10-year economic “expansion” has only been possible because central banksters and politicians worldwide implemented policies that have badly distorted markets globally in order to avoid the relatively short-term economic pain that would have been required to get through the Great Financial Crisis in 2008. One example: Greece’s 5-year bond now has a lower yield than a 5-year US Treasury note. Talk about absurd.
Debit: But there’s a bigger problem: Between 1970 and 2008, it took $0.77 of debt to produce $1 of GDP. But since 2000, real GDP growth in the US has been negative: From 2008 to 2019 it’s taken $4 of debt to produce $1 of GDP — and that gap is only going to get wider because ever-expanding debt is not a bug, but a major feature of the dollar-based international monetary system. Without it, the system would implode.
Credit: In simple terms, until there’s a global monetary system reset by massively devaluing the dollar against gold, economic “growth” will continue to be a mirage, propped up by abnormally-low interest rates and central bank money printing at an ever-increasing rate. Short of returning to the gold standard, it’s the only way out. The question is: Do the politicians and banksters have the courage to make it happen?
By the Numbers
Americans will spend $18 billion on Easter this year, more than double what’s spent on Halloween, but not nearly as much as the $400 billion that will be spent on Christmas. With that in mind, here’s a quick breakdown of how people are spending their cash this year for the Easter holiday:
$151 The average amount Americans will spend per household.
$5,700,000,000 The total amount spent on food.
$3,300,000,000 The total amount spent on clothes.
$2,900,000,000 The total amount spent on gifts.
$2,500,000,000 The total amount spent on candy.
$0 The total amount spent on silver.
Last Week’s Poll Result
Should all prices be rounded to the nearest nickel?
- No (48%)
- Yes (33%)
- I’m not sure. (19%)
More than 1500 Len Penzo dot Com readers answered last week’s survey question and it turns out that, just under half of them think we should continue pricing items to the nearest penny. Not me. After all, the dollar has lost so much value during the last 100 years that rounding to the nearest cent as a unit of account makes very little sense. Frankly, I’d argue that we probably should be rounding prices to the nearest dime.
If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
The Question of the Week
Useless News: The Psychiatrist
The psychiatrist was not expecting the distraught stranger who staggered into his office and slumped into a chair. “You’ve got to help me. I’m losing my memory, Doctor,” the stranger sobbed. “I once had a successful business, a wife, home and family; I was a respected member of the community. But all that’s gone now. Since my memory began failing, I’ve lost the business; I couldn’t remember my clients’ names. My wife and children have left me, too; and why shouldn’t they? Some nights I wouldn’t get home until four or five in the morning. I’d forget where I lived … and it’s getting worse. Doctor — it’s getting worse!”
“This is not an unusual form of neurosis,” the psychiatrist said soothingly. “Now tell me, just how long ago did you first become aware of this condition?”
“Condition?” the stranger said as he sat up in his chair. “What condition?’
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Manitoba (1.58 pages/visit)
2. British Columbia (1.48)
3. Quebec (1.38)
4. Newfoundland and Labrador (1.36)
5. Ontario (1.35)
9. Northwest Territories (1.25)
10. Nova Scotia (1.22)
11. Yukon Territory (1.20)
12. Nunavut (1.11)
13. Prince Edward Island (1.05)
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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 me at: Len@LenPenzo.com
It’s good to know that I’m not the only one deducting $5000 in body oil every year.
Yeah … just remember: It’s oil fun and games until somebody gets audited.
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Photo Credit: Teresa Whitaker