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 commentary …
Sneaky and underhanded, the Fed has been sucking the life blood out of the United States since 1913. Like a black widow spider, it weaves a web of corruption and deceit. Unknown to its prey, the Fed’s bite is poisonous, deep, long-lasting and brings financial upheaval and misery to Americans.
– Jim McCarthy
Credits and Debits
Credit: Did you see this? Paul Singer is the latest top-trader billionaire-investor warning that “head-smacking craziness in the stock market is playing out right now,” adding that a “flamboyant line-up” of excesses will come back to haunt investors in the form of out-of-control “rampant” inflation that will shock policy makers, respected brokerage houses and bond investors alike. Okay, okay … but something tells me the Fed ain’t buying it.
Debit: Of course, Singer is pinning the blame for the current financial system troubles squarely on the Fed. He also warns that, “When (inflation) breaks out in an inescapably broad way, there will be a crowd of seriously confused policymakers making excuses and claiming that inflation doesn’t exist; it’s not their fault; it was completely unpredictable; and it’ll actually be good for people.” Frankly, I think we’re already there.
Credit: Singer isn’t the only economic expert blaming the Fed for the mess we’re in. The legendary Jim Grant of Grant’s Interest Rate Observer recently lamented that, “A worldwide regime of interest rate suppression and manipulation has left us with a bond market that’s been all but destroyed with respect to the proper functioning of a bond market.” (Psst. Hey, Jim. When it comes to the bond market, the Fed is just getting started.)
YOU: My cost of living is way up
PHD: Isn’t that great?!
Y: Huh?
P: What’s your credit card debt?
Y: $20K
P: With 5% inflation, that $20k will only seem like $19k!
Y: But I still owe $20k, plus interest, & my income didn’t go up.
P: You should work at the Fed. We do great.
Rudy Havenstein held the table for eleven games. (@RudyHavenstein) March 4, 2021
Debit: Speaking of rising prices, oil exploded to its highest point since 2008 — back when black gold was trading at $140 per barrel. Not surprisingly, the average national gasoline price continues to climb; it’s now $2.74 per gallon — that’s more than 30 cents higher since the beginning of February. And prices are expected to continue climbing, as declining domestic oil production is expected to return the US to being a net oil importer this year.
Credit: By the way, the latest scuttlebutt I hear is that the average US fuel price would be under a buck if California wasn’t part of the union. Not true; not true. But I’m guessing it’s pretty close.
Let me guess, you’re in #California.
Bimetallism Bro (@BimetallismBro) March 5, 2021
Debit: I also see that supply-chain strain is increasing as wait times for manufactured goods are now the longest since data collection began in May 2007. The biggest concern is that shortages of raw materials have become a growing problem, with record supply chain delays reported in February, contributing to the steepest rise in material costs seen over the past decade. Just don’t tell that to the Fed — they’ll probably blame the delays on FedEx and UPS.
Debit: Meanwhile, on Thursday the repo market showed signs of distress — again. As ZeroHedge notes, “if the September 2019 failure taught us anything, it’s that there’s nothing the Fed is more worried about than the repo market.” It also means that the trillions of dollars pumped into the financial system since then failed to fix it. One thing is certain: If the repo market collapses again, another large correction in stocks will surely follow in the coming months. No, really …
Sven Henrich (@NorthmanTrader) March 4, 2021
Debit: Of course, leave it to the Fed to determine that the best way to keep the inflation genie from escaping its bottle is to … wait for it … keep the printing press on overdrive and use the cash to buy more Treasuries in order to keep interest rates suppressed. Does that make any economic sense? Well … it does if you believe in running up the credit cards to make payroll — and then using counterfeit cash to pay your creditors.
I thought you were supposed to be satire, lol, you pretty much just shared the truth. In matter of fact, I think your most satirical article has more truth in it than all of CNN, MSNBC, CBS, ABC, and FOX News combined.
Jacob Marcy 🗣 (@JacobMarcy2) March 4, 2021
Debit: Amid rapidly falling federal revenue and a 2021 US federal deficit expected to be upwards of $5 trillion, the Fed is pinned between rising interest rates and monetizing the government’s debt because, as financial analyst Kevin Smith notes, “the Fed also needs to substantially increase quantitative easing to $300 billion per month to stop interest rates from rising.” Which is why the next Fed chair is rumored to be this guy …
Credit: In fact, Smith warns that, “Major foreign holders of US debt only bought 5.2% of all Treasuries issued last year. In the face of this enormous debt issuance, the Fed faces the impossible task of continuing to prop up historic asset bubbles while also preventing inflation. The extreme fiscal imbalances have put the central bank on a crash course to fail at both.” The good news is, if there’s one thing the Fed is really good at, it’s failure.
The short economic cycle recovery is in the early innings.
The sovereign debt long cycle is in the bottom of the 17th inning, tie game, bases loaded, nobody out, a 3-2 count on the hitter, & both teams are totally out of pitchers.https://t.co/otarcQeTLW
Luke Gromen (@LukeGromen) March 2, 2021
Debit: In the meantime, the Fed must implement yield curve control (YCC) in a desperate attempt to hold the monetary system together. As a first step, it’s preparing a revival of Operation Twist in 2011, where they sell some of their short-end bills while buying longer-dated bonds in order to reassert stronger control over interest rates at both ends of the yield curve. Wait … am I the only one who feels these guys are just making this stuff up as they go along?
Fed shouldn’t implement YCC, but they have no backbone (as history has shown). So let’s get it over with. Stop pretending they’re in control. Let stock mkt have its hissy-fit so Fed is “forced” to intervene. There should be NO confidence in these clowns. YCC will help prove it
fred hickey (@htsfhickey) March 4, 2021
Credit: Unfortunately, the Fed’s printing addiction reduces the purchasing power of the dollars they issue. As such, Charles Hugh Smith rightly observes that in order to compensate, “We can trade more hours for more (dollars), but the extra (cash) buys less. It’s an asymmetry that should inform our decisions going forward because: They can always print more currency — but we can’t print more time.” Amen, brother.
Last Week’s Poll Results
What do you think is the smartest career decision for young people today?
- Learn a vocational trade (74%)
- Get a college degree (15%)
- Start a business (11%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and — in a very happy surprise — it turns out that almost 7 in 8 agree that the smartest career decision for young people today does not involve buying an absurdly overpriced sheepskin of questionable value that is adorned in a fancy font and stamped with an official seal. Well done, readers!
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="362"]
By the Numbers
Wallet Hub recently revealed the median credit scores of residents in 2572 US cities. Here are the median scores for the top — and bottom — five cities:
805 The Villages, FL
789 Sun City West, AZ
789 Sun City Center, FL
788 Green Valley, AZ
784 Los Altos, CA
561 Chester, PA
560 East St. Louis, IL
552 Camden, NJ
552 Detroit, MI
552 Gary, IN
Source: Wallet Hub
Useless News: Guessing Game
(h/t: GLH)
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
This week I got some exciting news from Francis Egoyibo, an officer for the Office of the Accountant General:
The Auditor-General for the country of West Africa has determined that you are owed US$9,241,000.66. We would like to know how you wish to be paid …
Great! Please send a check for the entire amount to the IRS as an advance tax payment on my future income.
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
Len – Love your blog but I live for the weekly joke at the end each week’s Black Coffee. It kind of offsets all the dreary financial darkness looming in the future you speak of. I only laughed when I read about your $9 million windfall retort but I need that joke! Please bring the joke back so we can laugh a little more at the end of the read. They are really funny!
I think, Duane, “the joke” this week is the “Guess the Animal” game. Not that funny, eh?
In other cheerful news, I saw in the Nikkea Asia that China is making progress on spreading their digital yuan to other countries. Can the demise of the dollar be far behind?
I wouldn’t be surprised if the Fed introduces their own Fedcoin soon — although I suspect it will be just digital fiat trash.
Thanks for the comment, Duane. And you nailed it — I purposely add some humor at the end of each week to counterbalance the doom and gloom.
The animal photo was supposed to be this week’s “funny” entry. Well … it made me laugh anyway! 😀
By the way, folks … if you find a funny joke or meme you’d like me to feature here, send it my way! That kind of stuff always brightens my day.
OMG Len my apologies, for some reason this week I looked at your Black Coffee on my phone and the Guess the Animal photo did not show up. So, you did not let us down after all, my phone did… Hey next time don’t scratch out the animal’s faces. It made it kind of tough for some of to guess. LOL!
No worries, Duane! I appreciate you taking the time to leave a comment.
Good morning and happy Saturday, Len! I saw more articles & op-eds regarding our coming national bankruptcy (AND inflation) than ever this week, so I’d like to think at least SOME folks are focusing on that rather than on Dr. Seuss. ;o) Thanks for the morning coffee and the giggle; I agree w/Duane about the jokes!
And to you too, Lauren! 😀
I know what you mean about the articles and op-eds.
As recently as two years ago this stuff was considered the exclusive domain of the tin foil hat crowd. (Which is why every weekend I proudly wear mine as a reminder of that.)
Ten years ago, the end of the “Almighty Dollar” was considered unfathomable.
Now the currency crisis and hyperinflation narrative has gone mainstream.
Hi Len,
I love it! #silversqueeze We have them on the run. The official price of silver is supposedly $25 but you have to pay $38 for silver Eagles at APMEX, which tells you what a sham the paper price is!
And yes, I’m with Duane too. The jokes at the end are a big part of the weekly roundup. Helps to keep everything is perspective. I thought the guess the animal picture was funny. Thanks for sharing GLH!
Have a nice weekend!
Sara
It’s selling for $38 but its not available. If your lucky and they get some you’ll have to wait 2 months for delivery. If silver was fairly priced there wouldn’t be any empty shelves.
Next week I will be focusing on the disconnect between paper and physical precious metal prices, with evidence that suggests why the true price of gold — and silver, especially — would be much higher if the markets were truly free and fair.
I’m stumped. What’s the mystery animal in the photo?
It’s a Texas Longhorn. I’m surprised you can’t see that, Cowpoke! 😉
Not sure why the big fuss over yield curve control. Chicken Little much? It’s just another tool that gives the government additional spending flexibility for unemployment relief, job programs, and other important programs without having to worry about debt service payments.
Well …it’s the LAST tool they have. And you’re assuming it won’t fail. I assure you, it will fail; it always does.
The Fed is out of bullets and YCC is the equivalent of using their gun as a hammer.
First off, think about what YCC really is: The nationalization of the bond market — a naked attempt to hold down interest rates at all costs, regardless of inflation.
It is essentially the Fed abandoning any pretense of defending the remaining purchasing power of the dollar in order to permit the government to continue expanding and living beyond its means.
YCC is blatant debt monetization; banana republic stuff.
The result will be higher and higher price (and monetary) inflation until the public finally says “enough is enough” and decides the dollar is no longer worth the paper it’s printed on. When that happens, the public will get rid of the worthless fiat dollars they earn as fast as they can by immediately exchanging them for real goods and services. Then come the empty shelves and it’s officially game over — the dollar is dead and anyone who didn’t have a little wealth protection (hard assets) will see the majority of their paper-based life savings wiped out.
Remember, hyperinflation is a psychological event — not a monetary one. As such, once the public psychology begins to turn, the end of the dollar will occur in relatively short order.
So there you go.
You know, Len, what is really frustrating to me is that so many people worship at the altar of these Central Bank clowns. As a retiree trying to survive on a small nest egg, I resent being punished for a lifetime of hard work and prudence with their financial repression. They can get away with it for awhile but not forever. They’ve ruined a lot of people’s retirements.
I know, Jack. I am on the verge of retirement myself. Many oblivious retirees are going to be wiped out. It is going to be especially hard for those retirees who are currently enjoying those meaty pensions we all read about — most of which are going to go belly up.
This is why every week I beg everyone to protect themselves with a little wealth protection in the form of physical precious metals — especially retirees, because they don’t have the luxury of time to recover.
And while it’s getting tougher to find precious metals now, it’s still possible. People just have to wait and hope the system holds on until they get the metal in their hands. (Note: That is NOT an assertion that an implosion is imminent.)
The time to buy insurance is before the house burns down — and right now, a faint smell of smoke is wafting through the air.
Thanks for another great wrap up! We are definitely living in historic times.
Thank you, Susan.
Floridian here. I noticed something interesting in the credit score section. Two Florida “cities” are on the list. It happens that both are literal retirement communities. And at quick glance, I can confidently say that the areas at the bottom of the list are all low income minority communities. I guess it’s the haves and have nots.
Yep. And the Fed has only made it worse; the wealth gap between rich and poor has never been greater. In fact, the wealth gap had been narrowing for many decades until the dollar’s anchor to gold was broken in 1971. Then it reversed, and has grown worse with each passing year.
Larry Burkett predicted a lot of this 30 years ago.
I have a strong feeling that if it gets bad enough, people will scream for the government to take from those who have, and share it with everybody. Socialism to an extreme will bring in European level taxes, strict government control, loss of personal freedoms, less homeownership, and the American way of life will be dead.
Envy in this county is already at an amazingly high level. People feel like if they can’t have it, you can’t either.
You’re right, Bill. Socialism always leads to equality of misery.
Sadly, it’s those of us in the middle class who have been responsible with our finances who will end up losing the most. The top 1% have the wealth insurance, property, and/or the incoming producing assets to preserve their standard of living — and the poor have nothing to lose.
Hi Len. I do enjoy your weekly Black Coffee although I am not a coffee drinker. Your take is factual and I am mostly in agreement. I have bought gold and silver in both paper and physical forms since the 1980s. I usually buy physical form now from time to time as a “just in case.” I do want to point out that in 1980 gold was $595 per oz. The Dow was 890 or so as I recall. Today gold is hovering around $1,725. The Dow is at approx. 32,200. I owned 10 oz. of gold back then so I have tripled my money. I had $15,000 in the market in a retirement investment account and I am now drawing $3, 000 per month from that retirement account which is basically my income. I am 72. I am very middle class and do not spend much money on anything but food, shelter, and medical. I have a 14 year old Toyota SUV. I put my kids through school including college and did it with mutual funds and savings. My kids are both good savers and investors. As modest as my existence may be, saving and investing provided for my family and now for my basic retirement.
I very much enjoy your blog. Keep providing an alternative point of view.
Take care.
Harry
Thanks, Harry.