Black Coffee: Gradually, Then Suddenly

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.

I’m really excited that the Christmas season is finally here. The good Lord knows we could all use some holiday cheer. And with that, let’s get right to this week’s financial commentary …

Hyperinflation is a hellish carnival, where all the old standards of value, right and wrong, and good and evil are swept away.

— Bill Bonner

Then the real witches’ sabbath of inflation started. A pair of shoe laces cost more than a fashionable shoe store with 2000 pairs of shoes had cost before; to repair a broken window cost more than the whole house had formerly cost; a book, more than the printer’s shop with 100 presses.

— Steven Zweig

How did you go bankrupt? Two ways. Gradually, then suddenly.

— Ernest Hemingway, The Sun Also Rises

Credits and Debits

Credit: Did you see this? On Tuesday the Dow topped 30,000 for the first time ever. Hooray!

Debit: On the other hand, I’m sure the nearly six-million Americans who say they expect to face eviction or foreclosure by the end of this year aren’t impressed by the stock market’s latest all-time high. For those of you counting at home, that’s one-third of the 17.8 million adults in households who are currently behind on rent or mortgage payments.

Debit: Meanwhile, a new study has found that taxpayers will be footing the bill for $435 billion of the $1.4 trillion in government-backed student loans this year — even if no additional loans are issued going forward. Unbelievable. I’m sure that all of the responsible people out there who already dutifully paid their student loans in full feel like complete suckers right about now — and I don’t blame you.

Credit: As Wolf Richter points out, “The expected loss of $435 billion is far larger than the rosy estimates released previously, including the Congressional Budget Office’s (CBO) estimate in May 2019 of a loss of $31 billion, including administrative costs.” That’s not surprising. That’s the same CBO that is claiming the US deficits will average “just” $1.3 trillion per year through 2030. No, really.

Debit: On a related note, eight central banks are expected to add liquidity equivalent to, on average, 0.66% of annual GDP during each and every month in 2021. According to Morgan Stanley’s chief strategist, Matthew Hornbach, “We’ve never seen such a rapid global liquidity injection.” Ya think? I guess if there’s any good news here, it’s that the Fed is working hard to ensure the US dollar remains on pace to end the latest toilet paper shortage:

21% of all US Dollars were printed in 2020. https://t.co/wFcRxPxN9G

Sven Henrich (@NorthmanTrader) November 24, 2020

Debit: While the amount of freshly-printed currency that will be injected into the global economy next year is absolutely staggering, the Institute of International Finance says it’s only going to get worse; they see total global debt rising from $277 trillion at the end of this year to a monstrous $360 trillion by 2030 — that’s more than $85 trillion above current levels. Wow. I wonder if the CBO knows about this.

Credit: This week macroeconomist Alasdair Macleod warned, with “mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin, nothing can now stop the collapse of fiat currencies.” That’s including the dollar … one way or another:

Credit: For his part, legendary investor Bill Bonner warns that, “Inflation is one of the biggest threats we face over the next 10 years. If the record money supply expansion leaks into consumer prices, the social contract — and civilization itself — will break down.” Wait … what? “If” it leaks into consumer prices? The dam has been leaking for a long long time, Mr. Bonner. And if you don’t believe me, check the Chapwood Index — or ask your personal assistant.

Credit: Thankfully, Mr. Macleod reminds us that there is a way out from the chaos of a hyperinflating currency. “The solution,” he says, “is to mobilize gold reserves to back and save their currencies.” Ah, yes — but that comes with a catch: “Governments (must) be reset into a non-welfare minimalist role — which can only be achieved after the collapse of the current fiat system.” In other words: pain is coming. For everyone.

Because of her support of the #Gold Standard, @judyshel has been trashed by the #media & mainstream economists. But, the attacks tell you more about Sheltons critics than Shelton. https://t.co/bfjMRjur5s

Prof. Steve Hanke (@steve_hanke) November 21, 2020

Credit: Then again, it won’t be enough for any new currency — or the failing dollar — to be “gold-backed.” They must be convertible on demand for the yellow metal in the form of circulating gold coinage, as the US dollar was prior to 1933. Otherwise, the public will become so frustrated by the absence of real money and their rapidly-falling living standard that they’ll lose all faith in paper currency. Speaking of being frustrated …

Debit: Of course, this assumes the US Treasury actually has the 8000 tons of gold it claims to have in vaults at Fort Knox, the Denver Mint, and West Point Depository. Now, I know what you’re thinking: But, Len, there hasn’t been a legitimate audit of America’s gold reserves in more than 70 years! Relax, folks. After all, when it comes to matters of trust, the government is beyond reproach. (Psst. And I know this because the media told me so.)

Credit: By the way, for those of you who are considering bitcoin — which climbed above $19,000 this week — be very careful. Bitcoin isn’t tangible wealth, unlike gold and silver — which are both actual money. As such, bitcoin is purely a speculative bet. Yes, that’s my story, folks — and I’m sticking to it.

Credit: When it comes to my position on bitcoin, I’m in good company too. Well … at least I am if you believe Mexican retail tycoon, Hugo Salinas Price, who said this week that, “When the time comes that we have to have real money in hand during a life-or-death situation, bitcoin is going to show us how many fools populate the world.” Ouch. Hey … it’s okay to speculate. Just make sure you have a little wealth insurance before you do.

Electronic charge is not physical matter – it is a property of matter. The smallest unit of ordinary matter is the atom. Unlike bitcoin, gold (and silver) are made of atoms – physical matter that makes them real, tangible wealth. https://t.co/Gveg0teb33

Len Penzo (@LenPenzo) November 24, 2020

By the Numbers

The holiday movie season is here. With that in mind, how many of the 10 biggest movies of 1995 (box office gross) have you seen?

1 Toy Story ($191.8 million)

2 Batman Forever ($184.0 million)

3 Apollo 13 ($172.1 million)

4 Pocahontas ($141.6 million)

5 Ace Ventura: When Nature Calls ($108.4 million)

6 Golden Eye ($106.4 million)

7 Jumanji ($100.5 million)

8 Casper ($100.3 million)

9 Seven ($100.1 million)

10 Die Hard: With a Vengeance ($100.0 million)

Source: Box Office Mojo

Last Week’s Poll Results

Are you having Thanksgiving at home this year?

• Yes (84%)
• No (11%)
• I plead the 5th (5%)

More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that roughly 5 in 6 of didn’t go anywhere for the Thanksgiving holiday. And not surprisingly, in yet another sign of just how twisted 2020 has been, 1 in 20 people who replied refused to incriminate themselves. Frankly, I don’t blame them.

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.

The Question of the Week

[poll id="348"]

Useless News: Well … It’s True

(h/t: burnetto44)

Other Useless News

Here are the top five articles viewed by my 34,999 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. Why Thanksgiving Never Falls on November 29th or 30th
2. My 10 Commandments of Personal Finance
3. Money, Freedom, and a Lesson on the Importance of Saving
4. 8 Store Brand Items That Are Superior to Their Name-Brand Twins
5. 6 Common Mistakes People Make With Their 401(k) Plans

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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 the ethics of found money, Shelli told me about her latest windfall:

My husband recently found a $100 bill on a store floor.

What a coincidence; I recently lost a $100 bill! If the one your hubby found had a picture of Ben Franklin on it, please send it back to me.

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