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.
Let’s get right to this week’s financial commentary …
As long as the bosses pretend to pay us, we’ll pretend to work.
— An adage from the old Soviet Union
Q: Is it true that the Soviet Union is the most progressive country in the world?
A: Of course! Life was already better yesterday than it’s going to be tomorrow!
— An old Soviet joke
The best way to destroy the capitalist system is to debauch the currency.
— Vladimir Lenin
Credits and Debits
Debit: Did you see this? As Franklin Sanders pointed out this week, the Bank Stock Index BKX has fallen more than 35% year to date, and has badly lagged other stocks since the March crash — which begs the question: What do bank investors know that the general public doesn’t?
Debit: You can bet investors know the banks are in trouble again. Until September of last year when the repo-markets imploded, they were fortunate that the the Fed and other central banks had been able to postpone the financial crisis that was originally unleashed back in 2008 — but the US financial markets have been in a constant state of resuscitation by the Fed ever since.
HOLLYWOOD UPDATE: Cruella de Vil and Mr. Magoo to team up in new Walt Disney Studios sequel, “Saving Mr. Banks 2 : Bail-In.” pic.twitter.com/3E46LeF9F2
Rudy Havenstein, now with sound. (@RudyHavenstein) September 21, 2018
Credit: But as economist Tumoas Maalinen notes, “Central bankers have been playing an extremely dangerous game of ‘extend and pretend.’ But to keep the markets afloat in a darkening economic picture will require ever larger bailouts and, eventually, the full socialization of the financial markets.” The good news is the Modern Monetary Theory (MMT) alchemists assure us there’s nothing to worry about. So there’s that.
Soon we will all start wondering why we even work for money that can be handed out free of charge
gotgold (@gotgoldnl) September 28, 2020
Credit: Maalinen also warns that central bank balance sheets are “turning into investment vehicles with no boundaries” — and if this continues, “central bankers will decide which countries, corporations, and even households would survive, leading to a global economic dystopia.” Maalinen says this is no different than how the old Soviet-era Gosbank operated. And we all know how that turned out. Well … except for the MMT crowd.
Credit: So history is clearly not on the central banks’ side. As macroeconomist Alasdair Macleod points out, “The management of John Law’s Mississippi bubble, when he used paper money to rig the market, is precisely what central bank policy is today. By binding the fate of the currency to financial assets, as John Law proved, it’s the currency that’s (ultimately) destroyed.” And folks, that’s regardless of whether asset prices crash or hyperinflate.
Debit: There definitely is a whiff of mismanagement in the air. If you believe the Fed’s data, they claim to be buying up $120 billion per month worth of assets at the same time their balance sheet is shrinking. It’s all very suspicious, don’t you think? That being said, the central bankers at the Fed clearly aren’t the only ones who are up to no good …
Credit: But, as Erik Wallbank observes, “Think about that in reverse; in terms of your credit card statement. What are the odds that you could have a balance on Friday of $2000, and after a shopping spree over the weekend, have a balance of $180 on Monday? No chance — the math doesn’t lie.” No, it doesn’t — but central bankers do. Hey … they can’t help it.
Debit: And while the Fed continues to tell us that inflation is low, even the CPI — which is highly-manipulated to suppress inflation readings — is showing that, as of the end of August, the three-month annualized inflation rate is above 3%. If the Fed is insistent on implementing yield curve control, that will prove to be problematic. Eventually.
Seen on Twitter…
“When is The Fed going to announce Yield Curve Control? I’m going to get really bullish on gold if they do.”
(HINT: YCC began on April 1. The Fed just hasn’t told anyone yet.) pic.twitter.com/UNWqVXlMTq
TF Metals Report (@TFMetals) September 28, 2020
Debit: So what can a central banker do to save the dollar? Not much; they’re officially out of bullets, since neither monetary or fiscal stimulus can save their fraudulent debt-based monetary system, where total destruction of the currency is a feature, not a bug. So all they can do is print now. Essentially flinging their empty policy Glock in a final — but futile — act of defiance. Kinda like this:
Credit: So what does this all mean? Well … as macoreconomic guru Bill Holter warns, “The bottom line is that the dollar is toast and no fix, other than ushering in a new non-fiat currency will do.” Oh … Holter also points out this unpleasant little factoid as well: “History is filled with destroyed currencies, and social unrest always accompanies them.” Uh huh. As if we haven’t had enough of that already.
Credit: It’s not all bad news — and here’s why … As Michael Maharrey observes, “In 1964 the minimum wage was $1.25. Put another way: A minimum wage worker earned five silver quarters per hour. Today, you can’t even buy a cup of coffee with five quarters. But today the melt-value of those five silver quarters from 1964 is more than $20.” Imagine that. There’s a lesson there for anybody paying attention.
By the Numbers
With the October 15 deadline fast approaching, the IRS has released state-by-state numbers of those who may be entitled to an Economic Impact Payment (EIP). Here are the states with the most unclaimed checks:
10 North Carolina (245,623 unclaimed checks)
9 Michigan (271k)
8 Pennsylvania (276k)
7 Ohio (283k)
6 Illinois (310k)
5 Georgia (349k)
4 New York (538k)
3 Florida (567k)
2 Texas (796k)
1 California (1.2 million)
The Question of the Week
Last Week’s Poll Results
How much of your paycheck are you currently setting aside for retirement?
- More than 15% (41%)
- None (25%)
- 11% – 15% (15%)
- 6% – 10% (13%)
- 1% – 5% (6%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that 5 in 9 of them are setting aside more than 10% of their paycheck for their golden years. Sadly, 1 in 4 are not contributing anything right now.
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: The Charity Chair
The chairman of a local charity was going over some files and realized that he hadn’t received any donations from the town’s most successful lawyer. So the chairman called the lawyer and said, “Good day, Mr. Jones. I’m sorry to bother you, but our records show that you haven’t made any donations to us.”
The lawyer replied, “Well, did your records show that my mom is sick with bills three times her annual income? Or that my sister’s husband died in an accident which left her penniless with three children, or that my brother is blind and has no money to pay for an aid or a nurse?”
Embarrassed, the chairman said, “Oh my … I’m very sorry, Mr. Jones. I had no idea.”
“You should be!” said the indignant lawyer. “After all, if I don’t give any money to them, why would I give any to you?”
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 suggestion regarding the smartest way to eliminate credit card debt, Walt shared a long list of his own personal finance tips and observations, including this one:
The evil cable company has lost its grip on me.
Me too, Walt! Unfortunately, I’m now in the clutches of the satellite company.
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