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.
Summer is in its waning days, and for most people on Main Street, the financial crisis rages on. Meanwhile, for the suits on Wall Street, there’s still plenty of money being made — whether legitimate or not.
And with that, let’s get to this week’s financial commentary …
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.”
— Alan Greenspan
“The best way to destroy the capitalist system is to debauch the currency.”
— Vladimir Lenin
Credits and Debits
Debit: Did you see this? According to a new study, job losses from the COVID pandemic have caused the number of American adults living at home with their parents to reach a level not seen since the Great Depression. As of July, 52% of millennials were living with Mom and Dad — 26 million in all — that’s up from 47% in February. The “good” news is: the government is hiring. As usual.
Of the 1.371 million people who returned to work in Aug., 344,000 or 25% of them took government jobs. Since most of these jobs are non-productive, the cost of employing these workers is actually a drag on the economy, as it drains resources away from more productive private use.
Peter Schiff (@PeterSchiff) September 4, 2020
Debit: Speaking of our ever-growing government leviathan, The Wall Street Journal noted this week that, “US government debt will exceed the size of the economy in the 2021 fiscal year — a milestone not hit since World War II that’s been brought into reach by the giant fiscal response to the pandemic.” Okay … but we were almost there anyway. The pandemic just put it over the top.
Debit: Meanwhile, as global central banks continue to flood the system with money — and the Fed insists that inflation is so low that it can afford to let inflation run beyond the 2% target — a new study by the United Nations found that world food prices rose for the third consecutive month in August, led by increases in coarse grains, vegetable oils, and sugar. I see lima beans didn’t make the list. Again.
Credit: Then again, if you look hard enough, you can always find somebody who enjoys a good lima bean:
Credit: Financial analyst Dave Kranzler isn’t surprised. (Regarding inflation; not the global distaste for lima beans.) This week he wryly observed, “Powell’s inflation speech wasn’t a cruel joke; but it was loaded with ‘Fed speak.’ The bottom line is that ‘letting inflation run above the 2% target rate’ is code for: ‘We have to print a helluva lot more to keep stocks and the big banks from collapsing.'” Uh huh. As if the Fed hasn’t printed enough already. Check out the expanding US “money” supply:
Credit: Of course, as macroeconomist Alasdair Macleod points out, “The Fed is trapped by its inflationary policies. Since 1980, the M1 money supply grew at an average annual rate of 8.8%. From 2008 to last February, it grew 16.6% per year — but since then it has grown at an annual rate of 68%. So Powell is effectively admitting that M1 growth of 68% is not enough to ensure a US economic recovery.” Well … that’s not very encouraging.
Debit: By the way, it’s not just the Fed that is mindlessly printing their increasingly worthless currency at a breakneck pace. There is so much debauched confetti being created that central banks are now purchasing a staggering $1.4 billion in assets every hour just to keep the entire so-called “wealth effect” illusion from being revealed for the monetary scam that it is. Hey … speaking of scams, here’s another one:
Debit: This brings us back to that UN study on food prices. The question on the table is: Can central banks ignore food price inflation? The answer is not only “no” — but hell no. Why? Because, throughout history, soaring food costs have over a sustained period almost always lead to social unrest and food riots, if not outright revolution.
Debit: Oh, and here’s another thing the Fed better not ignore: Now that they’ve gone all-in on using monetary inflation to sustain the growing bubble in financial assets, the Fed has also inadvertently tied the dollar’s future to that bubble as well. In other words: when the financial asset bubble bursts, the implosion will take the dollar — and most of its dwindling purchasing power — with it.
Credit: If you’re wondering how quickly this could happen, keep in mind that although the Weimar hyperinflation event played out between 1921 and 1923, the final collapse took just six months. But that was before the advent of credit cards, debit cards, and other forms of electronic cash that allow near-instantaneous monetary transactions. As a result, Macleod estimates that a hyperinflation of the US dollar “could take as little as a few weeks.” Uh oh.
Credit: Unfortunately, breaking the dollar’s anchor to gold in 1971 was a poison pill for the currency that also started America’s de-industrialization. And now, as multi-millonaire Hugo Salinas Price observes, “the US is approaching its ‘Weimar moment’ — and no further elections will alter America’s destiny.” As a result, Salinas says, fundamental financial and social problems in the US can only be resolved via “its re-industrialization, on the basis of gold as money.” He’s right, you know.
Credit: You can bet former US Treasury Secretary, Paul Craig Roberts agrees with Salinas. This week he warned, “The dollar is under pressure. If that pressure intensifies, that’s when it comes home to the Fed. When gold hits $2500 or $3000 an ounce, then the Fed has got to see the writing on the wall.” If the America we all grew up with is going to survive, we can only hope.
By the Numbers
All bourbon is whiskey, but not all whiskey is bourbon. That’s because bourbon needs to be produced in America and made from 51% corn; whiskey doesn’t. With that in mind, here are the top 5 selling American whiskey brands worldwide:
5 Seagram’s 7 Crown
4 Maker’s Mark
3 Evan Williams
2 Jim Beam
1 Jack Daniel’s
Sources: Forbes; Men’s Journal
The Question of the Week
Last Week’s Poll Result
Do you think annual inflation for basic living expenses is running hotter than 2%?
- Yes (83%)
- I’m not sure (14%)
- No (4%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 4 in 5 people don’t buy the government’s “low inflation” narrative. The Chapwood Index, which monitors a consistent basket of common everyday goods across the 50 largest American cities has been averaging more than 10% in the US. Right now, inflation is running the hottest in California; in fact, the top six cities on the list are all located in the Golden State, where inflation is running between 12.8% (San Jose) and 13.4% (Sacramento).
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: Good Medicine
The owner of a drug store walked in to find a man leaning heavily against a wall. So the owner asked the clerk, “What’s with that guy over there by the wall?”
The clerk said, “Well, he came in here this morning to get something for his chronic cough. But I couldn’t find the cough syrup, so I gave him an entire bottle of laxative instead.”
Flabbergasted, the owner yelled at his employee, “You idiot! You can’t treat a cough with laxatives!”
The clerk replied, “Oh yeah? Look at him — he’s too afraid to cough now!”
Other Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Montana (1.89 pages/visit)
2. South Dakota (1.86)
3. Georgia (1.78)
4. Indiana (1.77)
5. West Virginia (1.68)
46. Minnesota (1.27)
47. Arizona (1.21)
48. Illinois (1.08)
49. Kansas (1.07)
50. Alaska (1.06)
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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 Starbucks’ expensive coffee, Garrett took exception to my suggestion for saving money by brewing Folgers at home:
I agree that Starbucks is overrated and overpriced, but Folgers?? Come on.
You’re right — but I was on a tight deadline and “Chock Full O’ Nuts” was too many words.
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
I have not had these since my grandmother died, but I always looked forward to these when we visited. Everything, even lima beans, is better with bacon.
Len Penzo says
Thanks for the recipe, MB. That actually sounds good enough for me to try them!
Karen E Kinnane says
These baked butter beans used to be served at the late, lamented Shartlesville Hotel in Shartlesville PA when Jimmy Lesher and then Pat Bowman ran it. I can’t choke down a plain lima bean but I’ve eaten more than my share of these butter beans with great pleasure years ago when the hotel was operating. Thanks for the recipe!
Sara King says
Thanks for another great cup of Black Coffee.
I love lima beans! Always have. I’m a weirdo though. I like brussel sprouts too.
Len Penzo says
I like b-sprouts too, Sara. Lima beans are another story for me though.
I heard somewhere, probably not from an expert on the subject, that the pronunciation of lima as lime-ah is incorrect. The correct pronunciation is lima as in Lima, Peru.
Sam I Am says
I never thought about how fast hyperinflation could happen today but it makes sense. It is really scary to think about. With online shopping for everything you could ever want, and electronic savings and checking accounts, I could drain them all with a few clicks of the mouse. The only thing slowing me down would be how fast I could shop!
Len Penzo says
It is frightening to think about, Sam. If hyperinflation does destroy the dollar that quickly — and I believe it can — then the silver lining is we can get to a new (and hopefully gold-backed) currency in short order too.
New reader here thanks to my cousin. Can you share your thoughts on Bitcoin?
Len Penzo says
Welcome aboard, Miller! I’ve shared my thoughts on bitcoin here in the past. I believe it is a total sham; it is an ephemeral faith-based alternative to the dollar. Its Achilles heel is that, unlike gold and silver, it must be valued in terms of the very fiat currencies it supposedly provides its holders shelter from.
(Remember, precious metals are real. They are atomic elements on the Periodic Table; as such, they can be valued in terms of their physical weight. It’s why gold and silver have been money for 5000 years.)
This is scare mongering. I don’t think we have to woory about hyperinflation. There are lots of monetary tools that can reduce inflation like lowering the money supply, increasing the cost of money by raising interest rates, and raising taxes.
Len Penzo says
I don’t think so, Dean. The debt-based monetary system does not permit any reduction in the currency supply; the system would implode if that happened. We experienced a relatively minuscule reduction in the currency supply in 2008 and that led to the Great Financial Crisis.
As for raising interest rates, the Fed can’t do that because the US debt is too large now — the resulting debt service would cripple US finances.
Raising taxes has its limits. Read up on the Laffer Curve.
Great post! How long have you been doing these?
Len Penzo says
Believe it or not, Shane …. about 10 years. It’s taken me awhile to “perfect” the column. The format has evolved over time.
You’ve gotta hand it to these guys. They’ve kept this game going longer than any reasonably skeptical person could have imagined. So who is to say that they can’t keep it going indefinitely?
Len Penzo says
Good God, I hope not! The math suggests otherwise.
Pauley Canuck says
Sorry, better late than never! But Folgers! Yeah it’s not bad, but you want good coffee at a better price than Starbucks? Find a local coffee roaster that buys directly from the farmer in your favourite coffee producing country. It’s so much better when it’s fresh roasted and you support your local little guy.
Len Penzo says
My preferred brew at home coffee is actually Dunkin Donuts brand. I absolutely love it, Pauley.