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.
The Labor Day weekend is here! But it’s hard to believe summer is almost over. I hope you all have a thoroughly enjoyable holiday.
And with that, let’s get to this week’s financial commentary …
The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.
— Winston Churchill
A nickel ain’t worth a dime anymore.
— Yogi Berra
Credits and Debits
Debit: Did you see this? Having exhausted all other options, the People’s Socialist Paradise of Venezuela is hoping that gold mining will extricate the country from economic ruin. In fact, the country has tripled its gold mining operations in the last year by pushing into protected areas of the Amazon. Yes, it’s an environmental tragedy. But, in Venezuela’s defense, they wouldn’t be taking such drastic measures if the Incas were still around. So there’s that.
My million Bolivars only buys 1 roll of toilet paper. pic.twitter.com/7VB5RMn5qF
David Rader (@DavidARader) September 1, 2020
Debit: Of course, Wall St. loves socialism too — which is why Fed Chair Jerome Powell announced a new policy that’s intended to buy a little more time before the wheels completely come off our fraudulent debt-based monetary system: stop worrying about inflation exceeding 2%. Why? Because, by their measure, inflation has been under 2% for decades. Heh. Apparently, central bankers don’t buy groceries. Or gasoline. Or pay rent. Or doctor bills. Or have kids in college. Or …
Debit: Needless to say, when it comes to our standard of living, accurate inflation reporting is essential. Unfortunately, the government’s two most important inflation measures — the consumer price index (CPI) and the personal consumption deflator — are critically flawed. That’s ironic when you consider that the CPI is tied to, among other things, the incomes of 80 million Social Security beneficiaries.
Debit: For example, as economist Joseph Carson points out, “The use of non-market prices creates accuracy problems for both measures because they base their estimates of housing inflation on what people would pay to rent their house; not actual transaction prices.” I know what you’re thinking … What, exactly, is going on inside the brains of people who actually believe that these absurd metrics make sense? Well … if I had to guess, probably something like this:
Credit: Carson goes on to point out that, “That creates a measurement issue because these items are not ‘sold’ to the consumer; this runs counter to the basic tenet of inflation measurement. That is, inflation indices are meant to capture what people (actually) pay — not what they may or could or pay.” By the way, the Fed knows this — but in order to keep their scam alive, they have to feign ignorance and hope the pubic doesn’t notice.
Credit: Now here’s the kicker: Carson says that — not surprisingly — “core CPI, even with its downward bias on housing inflation, has been running above the 2% target for four of the past five years before the pandemic.” Anybody who has been paying attention knows inflation has been running far above 2% for at least 20 years, if not more. The long-term impacts of which finally appear to be coming home to roost …
“I grew up in France, so I had a good dose of Marx in my education. The first thing Marx teaches you is that revolutions are typically the result of inflation.” – Louis-Vincent Gave https://t.co/iVMdi3Wfm1 pic.twitter.com/h5ucxTpWzf
Rudy Havenstein, I guess I don’t buy your premise. (@RudyHavenstein) November 23, 2019
Credit: Yes, the Fed’s money printing has temporarily staved off the latest financial collapse — but what’s coming will be even worse. As former Fed advisor Daniele DiMartino Booth recently warned, “The Fed has created armies of zombie firms, potentially setting up the US economy for a harder fall down the road by spurring investors to prop up firms that are not fit to survive.” One word, people: Tesla.
Credit: Sadly — and despite strong protests to the contrary — our corrupt Federal Reserve system was authorized by Congress in 1913 under the mistaken belief that it could stop financial panics. But, as economist Tuomas Malinen notes, “By backstopping Treasuries, corporate commercial-paper, municipal bonds, and short-term money-markets, it effectively became the financial markets.” In other words: the “Chicken Littles” were proven correct.
Debit: This will become apparent next year because $8.5 trillion of US Treasuries will mature by the end of 2021 and will need to be refinanced. Unfortunately, there isn’t enough global interest left to sop those up so, unless they want yields to spike, the Fed will almost certainly be buying most of them next year. Anybody care to guess what another 8.5 trillion freshly-printed greenbacks will do to the purchasing power of your retirement nest egg? (Psst. Here’s a quick demonstration …)
Credit: As the Speculative Investor blog points out, “If the Fed continues to prevent bond yields from reflecting rising inflation expectations then the steady shift currently underway towards hard assets and anything else that offers protection against currency depreciation will become a stampede. And once that happens, the sort of central-bank action that would be required to restore confidence would crash both the stock market and the economy.” Yep.
Debit: Folks, global debt has reached the point where real economic growth is now impossible. But central banks have painted themselves into a corner, with only two choices — both bad: 1) stop propping up assets and zombie corporations with printed currency, thereby crashing the markets and unleashing a default tsunami; or 2) keep the printing press on and inflate the debt away. This week the Fed officially announced its decision. Now what are you going to do about it?
By the Numbers
While government statistics say inflation is low, the more realistic Chapwood Index proves that the annual inflation rate is actually averaging more than 10% nationwide. Here are the top ten US cities with the largest price increases over the past year:
10 San Francisco (2019 inflation rate: 13.3%; up 1.2% year-over-year)
9 Raleigh (7.4%; up 1.3%)
8 Fresno (13.2%; up 1.4%)
7 Cleveland (10.8%; up 1.5%)
6 Mesa, AZ (7.2%; up 1.7%)
5 Wichita (8.9%; up 1.7%)
4 Sacramento (13.4%; up 1.8%)
3 Boston (10.9%; up 2.2%)
2 Louisville, KY (10.2%; up 2.3%)
1 Portland, OR (12.1%; up 2.3%)
Source: Chapwood Index
The Question of the Week
Last Week’s Poll Results
Excluding credit cards, how many loans are you currently making payments on?
- None (50%)
- 1 (31%)
- 2 (14%)
- 3 or more (4%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that fully half of them have the pleasure of not having to a write a monthly check to pay down a loan. I’m positive most of them understand that owing money to creditors is a form of indentured servitude that sacrifices future freedom in exchange for instant gratification.
If you have a question you’d like me to ask the readers here, send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
Useless News: Construction Site
An old nun who was living in a convent next to a busy construction site couldn’t help but notice the coarse language of the workers and decided she would spend some time with them to correct their offensive ways.
So the next day she made herself a brown bag lunch. Shen then walked over to the worksite with the intention of sitting down with the workers and introducing them to the Lord. As she approached a small group of men in hard hats, she gave a big smile and asked, “Do you men know Jesus Christ?”
The bewildered crew looked at each other, and they all shook their heads. Just then, the foreman looked up into the steelwork and yelled, “Hey! Does anybody up there know Jesus Christ?”
One of the steelworkers on the girders above shouted back, “No! Why?”
The foreman yelled, “Because his wife is here with his lunch.”
(h/t: Sam I Am)
More Useless News
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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 on why smart people aren’t impressed by those who drive luxury cars, Anonymous left a comment to brag about his $167,000 BMW Alpina B6 Gran Coupe sitting in his driveway — thanks to his in-laws, who had to cosign his car loan. No, really. Here’s a small excerpt:
Cars tell people who you are! I wish I could afford a Bentley Flying Spur but it costs about $80,000 more.
You mean you wish your mother-in-law could afford a Bentley.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: public domain