Black Coffee: Inflate or Die

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 hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …

The Fed’s job is to know ‘when to remove the punch bowl at the party.’ Under Alan Greenspan’s leadership its motto became ‘let’s all get drunk and see what happens.’ It’s now the morning after and the world must deal with Greenspan’s hangover.

— Said Elias Dawlabani

Face reality as it is; not as it was, or as you wish it to be.

— Jack Welch

Credits and Debits

Debit: Did you see this? After six years of hyperinflation, Venezuela’s currency has lost 99.999% of its value. As a result, their central bank recently issued a one-million bolivar banknote; in US dollars, that’s 52 cents. Keep in mind that a cup of coffee in the socialist paradise currently costs 2.8 million bolivars, which is 3000% more expensive than last year. Forward, amigos!

I don’t understand people who a) are concerned about the poor and b) are not concerned about inflation. Who do they think gets hit hardest when people lose confidence in the currency?

Carlo Lancellotti (@_CLancellotti) March 11, 2021

Debit: Speaking of socialist paradises, despite running a $650 million deficit, San Francisco is funding three tent cities to house 300 homeless people at an annual cost of $61,000 per tent. That’s $16 million per year. I know; but the cost includes 24-hour security, bathrooms, and three meals per day. Yes, yes; yet another self-perpetuating problem, brought to you by Big Government. Okay … who wants to bet that 90% of the funds are going directly or indirectly into city-bureaucrat pockets?

Why do that when we can just print money to fix poverty? 🤪 pic.twitter.com/r62hzY1xGG

sam callahan (@samcallah) March 11, 2021

Debit: Meanwhile, US consumers have paid down a record $127 billion in credit card debt in the last year. On the other hand, non-revolving credit rose as revolving credit dropped, with consumers increasing their student and auto loans in November by $9 billion. As of this month, Americans have accrued nearly $3 trillion in auto- and student-loans combined. And why not? I’m betting it’s only a matter of time before they eventually forgive car loans.

Credit: In other news, did you know the true price of silver should be pushing $250? Well … at least that’s what the price would be if silver were freely traded around the world — except during normal market hours on Wall Street. Surprised? You shouldn’t be; that’s a mundane statistically-normal outcome … And if you believe that, you probably believe the Fed is eager to see the yield on 30-year Treasury bonds reach 5% again too.

Debit: Speaking of bond yields, the 30-year Treasury yield is 2.26% and the 10-year is 1.53%. If those yields rise above 3% and 1.6%, respectively, interest on the National Debt will surpass expected US tax revenues. Yes; that would make the US technically insolvent. But don’t worry — as the MMT academics assure us: 1) we owe most of that debt to ourselves; and 2) the Fed can always print as much cash as it needs to pay for it. (Psst. Just ignore the fine print …)

Credit: Meanwhile, the stock market continues to hover near all-time highs, to the joy of everyone with a 401(k) and other retirement accounts. But as investment advisor Lance Roberts observes, “While the financial markets have soared higher in recent years, it bypassed a large portion of Americans. Such was not because they were afraid to invest, but because they had no capital with which to invest.” Imagine that.

Fortunately we still have the stock market pic.twitter.com/xw2JRfQeaz

Wim Grommen (@wimgrommen) March 11, 2021

1/ A hopelessly-indebted nation attempts to convince its domestic voters that it will do “whatever it takes” to support them, while simultaneously attempting to convince its creditors that it will not do anything to hurt the real value of their debt. This has happened before.

Luke Gromen (@LukeGromen) March 9, 2021

Credit: Unfortunately, BofA’s Chief Investment Strategist, Michael Hartnet is warning that after the Fed nationalizes the bond market via yield curve control, we’re destined for “bigger government (public sector monopolies), dollar debasement (inflation pays the debt), and a populist electorate (voting for UBI) — all in an attempt to fight the War on Inequality (taxes, regulation, redistribution).” In essence, the same stuff that got us into this mess. But worse.

One definition of inflation is “too much money chasing too few goods.” We’re borrowing trillions of dollars to send free money to over a hundred million people who never lost their job/income during the pandemic – for a third time. If this doesn’t create inflation, nothing will. https://t.co/eFLT2fiKgo

Charlie Bilello (@charliebilello) March 11, 2021

Credit: By the way, it’s not as if the bond market hasn’t already been destroyed by the Fed. How screwed up is it right now? Well … as hedge fund manager Matthew Piepenberg observes, “Today, investors desperate for any kind of return are getting a lower yield for junk bonds (!) than they got for Treasury bonds” prior to the Great Financial Crisis of 2008. So more risk for lower returns. That makes sense — just like everything else in the world today.

Debit: The late great investor Richard Russell warned that our debt-based monetary system would eventually reach a point where the Fed would be forced to “inflate or die” — even though that would hasten the end of the dollar. With 43% of all dollars created in the last year, we’re now clearly on the consequential side of the exponential debt curve. Or you can believe the government inflation data; they say February’s rate was just 1.7%. Heh. M’kay.

peter, the big question is when will the public start to dustrust the data because it bears no resemblance to their daily life???

bill fleckenstein (@fleckcap) March 10, 2021

what kinda bullshit is this? pic.twitter.com/AjXvhcpQnv

HedgedIn (@noalpha_allbeta) March 10, 2021

Debit: Believe it or not, in a system where dollars are born via the creation of new loans, it is mathematically impossible to repay any of the interest without going even deeper into debt. That’s quite a scam; which is why the banks love it. But eventually, the exponential function exacts its monetary revenge on the currency. And 50 years after breaking the dollar’s anchor to gold, we are almost there now. Speaking of broken anchors, what’s going on here?

Credit: In other words, our current predicament is merely the ugly end-game of a system that was doomed to fail from the start; failure is baked into the cake. It’s just math — but for those who aren’t so good with numbers, this week Erik Wallbank provided a non-technical summation of our current predicament: “Economic collapse is a ‘when’ — not an ‘if’ — because when an entity spends itself into oblivion, oblivion is inevitable.”

1/ A hopelessly-indebted nation attempts to convince its domestic voters that it will do “whatever it takes” to support them, while simultaneously attempting to convince its creditors that it will not do anything to hurt the real value of their debt. This has happened before.

Luke Gromen (@LukeGromen) March 9, 2021

Credit: As hedge fund manager Eric Peters reminds us, “Today’s monetary magicians do only one thing: pull future prosperity to the present. They produce nothing; for that we rely on entrepreneurs, who take calculated risk in pursuit of material progress. And we pray they improve our prospects faster than bankers pull them to the present.” Pray all you want, but reality will ensure that those prayers go unanswered. So plan accordingly.

By the Numbers

Here are historic amounts of gold and silver required to buy the average-priced US house in select years:

834 Ounces of gold to buy the average priced house in 2003

465 Ounces of gold to buy the average priced house in 1976

195 Ounces of gold to buy the average priced house last year

135 Ounces of gold to buy the average priced house in 2012

85 Ounces of gold to buy the average priced house in 1980

55,175 Ounces of silver to buy the average priced house in 2003

41,663 Ounces of silver to buy the average priced house in 1992

13,684 Ounces of silver to buy the average priced house last year

5521 Ounces of silver to buy the average priced house in 2011

1464 Ounces of silver to buy the average priced house in 1980

Source: GoldSilver

The Question of the Week

[poll id=”363″]

Last Week’s Poll Result

Have you filed your taxes yet?

• Yes (53%)
• No (38%)
• I’m not filing this year (8%)

More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that 3 in 5 have either already submitted their taxes to the IRS — or have no intention of filing a return this year. Frankly, as several readers have noted here in the past, with the Fed printing printing dollars with reckless abandon now, it’s a wonder why people are required to pay any taxes at all.

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: Quick Thinker

One day a wife went into the garage, where her husband was under the car, struggling to fix a pesky motor. “Honey,” she said, “if you were asked to describe me, what would you say?”

Without hesitating or stopping his work, the busy husband replied from under the car, “ABCDEFGHIJK.”

Bewildered by her husband’s seemingly thoughtless response, the wife asked, “What on earth does that mean?”

As he continued his wrench-turning, the husband again replied without any hesitation whatsoever: “Adorable, beautiful, cute, delightful, elegant, fashionable, gorgeous, and hot.”

The wife began to blush and said, “Aww, thank you, Honey! That’s really sweet!”

The man continued to work on the car. A few seconds later, the wife said, “Honey …”

“Yes?” replied her husband, still working furiously.

“What about IJK?”

The husband said, “I’m just kidding.”

(h/t: Sam I Am)

More 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. Vermont (1.95 pages/visit)
2. New Mexico (1.89)
3. Oregon (1.66)
4. Nebraska (1.58)
5. Alabama (1.55)

46. Georgia (1.21)
47. Arizona (1.19)
48. Alaska (1.15)
49. Mississippi (1.10)
50. Montana (1.09)

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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 explaining why jacuzzi-style tubs are a waste of money, Chung offered this counterpoint:

I think whirlpool tubs are simply sublime in soothing us from throbs.

Well, now … that’s certainly an interesting way to put it.

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