Black Coffee: Empty Coffers and Sticky Fingers

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.

Despite the continuing economic slowdown, I hope all of you have a thoroughly enjoyable weekend.

Okay, let’s get right to it …

It’s easier to fool people than to convince them that they have been fooled.

— Mark Twain

Governments lie; bankers lie; even auditors sometimes lie. Gold tells the truth.

— Lord Rees Mogg

Credits and Debits

Credit: Did you see this? America’s coin shortage is still raging from sea to shining sea. It certainly isn’t helping that pennies minted between 1909 and 1982 — which are 95% copper — currently have a melt value of 1.85 cents. In other words: Why spend those pennies at a business, or take them to a bank and get face value, when you can almost double your money by toting them to a metals recycler?

Credit: In other news, the latest unemployment data shows that the workforce is continuing to claw back the millions of jobs on Main Street that were lost due to the coronavirus shutdowns — but there’s still a long way to go. As for Wall Street, well … the S&P 500 and Nasdaq are continuing to hover near all-time highs. So there’s that.

Credit: But, as Charles Hugh Smith correctly observes, “Markets that never go down aren’t markets; they’re signaling mechanisms of the ‘Powers That Be.’ The reliance on ‘good news’ narratives dooms our financial system and economy to a death spiral once reality breaks.” Yes — but it sure looks as if the current Wall Street party isn’t going to end until the Fed takes the punch bowl away.

When bulls are blindly buying into the highest valuations in history..pic.twitter.com/ku5zRcvtRB

Sven Henrich (@NorthmanTrader) August 13, 2020

Credit: Folks, the dollar is the world’s reserve currency for three reasons: 1) its perceived value stability; 2) the sheer size of the American economy; and 3) deep, liquid and open markets. In theory, that won’t change until a rival foreign currency can challenge it in all three areas. Then again, gold acts as a currency too, and its rapidly-rising price suggests that the dollar’s safe haven status is in jeopardy anyway. If true, so are most Americans’ standard of living.

Credit: However, Harvard economist Jeffery Frankel, believes the dollar’s position is secure for now. But he also says “spiraling debts and an overly aggressive sanctions policy could erode its supremacy in the long run.” Hmm. If he considers a 100-yard dash to be a “long run,” then I heartily agree. On a related note … if you’re looking for the guy representing the US dollar, he’s the one in green:

Debit: Unfortunately for the world’s central banks, the only way to alleviate the current debt crisis without imploding their fraudulent debt-based monetary system is to pile on ever more debt. But that game is almost over, which is why this week BoA credit strategist, Hans Mikkelsen, said, “There’s no escape without tremendous economic growth to offset it. There’s nothing central banks can do.”

Debit: Taking all forms of business debt into consideration, US companies currently owe an astounding $17 trillion. With that in mind, if there’s a second shutdown later this year, it’s possible that hundreds of companies could default on the interest payments, thereby increasing the possibility of additional bailouts that would be tacked on to the Fed’s already-bloated balance sheet. I know you know how this ends, but here’s a refresher for the late arrivals …

Debit: Keep in mind that central banks have already injected $24 trillion — or about a quarter of global GDP — into the market to keep it afloat. Now for the punchline: Bank of America says that figure is expected to hit $28 trillion within the next year. Heh. That sounds like an extremely conservative estimate to me. Regardless, the amount of currency debauchery is staggering — think of it as government’s version of the five-finger discount.

Credit: According to economic researcher, Chris Martenson, the US Treasury is officially broke. In fact, he says, “It has no gold. It has a net worth of approximately negative $200 trillion. So what’s left to loot? The purchasing power of every dollar in circulation.” I’m not convinced America’s gold is all gone, but I do agree the US will technically remain broke until the dollar-price of gold is at least an order of magnitude higher.

Interesting hearing people say Gold and Silver are overvalued or overbought yet are quiet on the Nasdaq and FAANG

Stalingrad & Poorski (@Stalingrad_Poor) August 7, 2020

Credit: Of course, gold is the barometer of any currency’s health; and with our debt-based monetary system on its death bed, significantly higher gold prices are inevitable from here. Macroeconomist Alasdair Macleod believes that, “We’re witnessing the cataclysmic end of the Keynesian fallacy. As the collapse progresses, fiat currency loses purchasing power, while gold gains it disproportionately.” Think about that; to help you out, the emphasis is mine.

Credit: There are still plenty of people on Wall Street and brokerage companies with a vested interest in the current monetary system — which is why they refuse to acknowledge its impending demise. But, as Macleod notes, “If you bind the fate of financial assets to your fiat currency, as the Fed is now, when the bubble pops the currency goes pop as well. It’s an outcome so obvious that the smart money is now getting out of fiat and into physical gold and silver.” Imagine that.

By the Numbers

The economic impacts of the pandemic continue to be staggering, with some data pointing to another economic stall-out after the initial re-opening upsurge:

30,000,000 Total US unemployment attributed to pandemic-related business shut-downs.

72.5 The University of Michigan Consumer Confidence Index rating for July — that’s down from 78.1 in June.

-27% July’s month-over-month decline in the Baltic Dry Index, a measure of the movement of goods in the world.

-29% Reduction in consumers’ usage of credit for the 18-week period that ended last week.

150 Bankruptcies of publicly-traded US companies so far this year — this translates into an annual rate that is almost double that of 2019.

Source: Forbes

The Question of the Week

[poll id="334"]

Last Week’s Poll Result

Are you a proponent of retiring a mortgage as early as possible?

• Yes (85%)
• No (15%)

More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that roughly 7 in 8 of them are in favor of retiring a home loan before its scheduled payoff date. I used to be in that camp too; between 1997 and 2010 I made two or three extra payments every year. But that changed after I noticed that the Fed was aggressively debauching the dollar via its quantitative easing programs (i.e., QE1, QE2, Operation Twist, QE3 — and now QE Infinity). But since 2010, with the greenback’s purchasing power being cut by half approximately every seven years — a time period that is getting shorter as time marches on — I’ve preferred to pay down my fixed-rate mortgage as slowly as possible using dollars that are guaranteed to get significantly cheaper over time.

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.

Useless News: The Evolution of Education

(h/t: J Siefert)

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 (2.25 pages/visit)
2. Ontario (1.97)
3. Northwest Territories (1.67)
4. Saskatchewan (1.62)
5. Alberta (1.61)

9. British Columbia (1.42)
10. Yukon (1.33)
11. Quebec (1.29)
12. Newfoundland & Labrador (1.13)
13. Nunavut (1.00)

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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

After reading my article highlighting 34 tricks for achieving early retirement, JD had this to say regarding my repeated references to the high cost of kids:

Kids aren’t cheap, Len. But neither is my darn dog.

No kidding, JD — just be glad we don’t send pooches to college.

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.

Photo Credit: stock photo