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The offbeat personal finance blog for responsible people.

Black Coffee: The Con Game Continues

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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.

Today is National Corn Dog Day. Hooray!

And with that, let’s get right to this week’s commentary — because I’m getting hungry …

The hardest thing to explain is the glaringly evident which everybody has decided not to see.

— Ayn Rand

The key is not to predict the future, but to prepare for it.

— Pericles

Credits and Debits

Credit: Did you see this? The editorial board at the hoary Financial Times decided to feature an opinion piece this week calling for “a great reset of the financial system” via a new monetary system tied to “some form of anchor.” Yes, that Financial Times. Anyway … until it happens, the bankers’ fraudulent immoral money game will continue.

Debit: Before you get too excited believing that the world has finally come to its senses, the FT hasn’t completely reformed itself; when it comes to anchor candidates, they only suggest more fiat trash such as the SDR, or a “central electronic currency.” Apparently, the ultimate monetary-system anchor — gold — never crossed their mind. Heh. They’ll figure it out. Eventually. After all, even the Babylon Bee gets it. Well … almost:

Credit: Meanwhile, the always-astute financial commentator, MN Gordon, recently lamented that, “Fiscal stimulus, including the latest $1.9 trillion American Rescue Plan Act, is a terrible joke. And the means for financing it is a terrible fraud. A massive deficit, piled upon a mammoth debt, made possible by dollar debasement.” That it is. The good news is even the Financial Times can now see this. The bad news is they still don’t understand how to stop it from ever happening again.

Debit: Of course, taxation used to be the primary way for nations to fund their expenditures. To that aim, the US is planning the largest tax hikes since 1993, which will include raising the corporate tax rate to 28% from 21%, and lowering the threshold on the so-called death tax. Needless to say, the big question for many Americans with retirement accounts will be the effect of those higher taxes on the markets.

Debit: On the other hand, with the year-over-year deficit now exceeding 100% of revenue, and more than 80% of the US budget funded directly via money printing now: Why bother with taxes at all?

Debit: In the meantime, free-spending politicians will corner their compliant central banks into printing even more currency to cover the bills and keep interest rates pinned near zero. In fact, the ECB said it would be accelerating the money-printing to keep a lid on euro zone borrowing costs “to promote an economic recovery.” I know; clearly, something got lost in translation. I’m sure the ECB actually said, “to finish destroying the euro and kill capitalism.”

Debit: It’s not just higher taxes that are threatening to pop the stock market bubble; the rising 10-year Treasury yield is now 1.73%. There’s little room for error according to yet another estimate from a Wall St. firm; this latest one says a 2% yield will trigger a 20% decline in the Nasdaq — followed by stock markets worldwide. The good news is last month we were told the doomsday number was 1.46%. And the month before that it was 1.35%. Heck … it’s hard to know what to believe anymore:

Credit: Then again, maybe not. As investment planner Michael Lebowitz points out, “Looking back over the past 40 years reveals a troubling problem. Every time interest rates reach the upper end of its downward trend, a financial crisis of sorts occurred. The current one-year change in the proxy interest expense on all debt is up 3.5% from a year ago. The last two significant crises happened when that proxy rose between 3% to 4%.” Indeed. See for yourself:

Debit: Now for the punchline: Lebowitz also warns that, “If the 10-year Treasury yield increases to 2.0% by May, the proxy will increase to 5.25%; that’s well above the 4.0% that popped the Dot Com and housing bubbles.” Uh oh.

Credit: By the way, if markets do eventually fall, Daniel Lacalle says don’t blame rising rates — blame the Fed: “There’s no problem with a 2% US 10-year bond yield in a normal growing economy with 2% inflation. But there are a lot of problems when markets base their valuations on inflationary policies not generating inflation. The risk of a financial crisis was created by lowering yields to unrealistic and unjustifiable levels.” Uh huh. Thanks, Fed.

Debit: Frankly, whatever the fateful rate for crashing these markets is, neither the ECB or the Fed have a choice when it comes to printing money because they’ve now effectively tied their respective currencies to market asset values. If rates increase too much, the economy will plunge into a depression of historic proportions. But if they continue printing, they’ll eventually destroy the dollar in a hyperinflationary supernova. Conclusion: ThE paRtY wiLL cOnTiNuE!!!

Credit: This week, macroeconomic analyst Peter Schiff warned that, “the market believes the Fed can keep inflation under control. But the markets are wrong; the Fed isn’t even going to attempt to fight inflation. It’s going to surrender. Inflation is going to win without a fight — then the bottom will fall out of the dollar and gold is going through the roof.” If he’s correct, that’s when we’ll finally get that much-needed monetary reset that even the Financial Times is suddenly clamoring for.

By the Numbers

According to a recent survey, here are the top items that Americans said they plan to spend their third stimulus checks on:

5% Vacation

6% Stocks

8% Clothes

9% Healthcare

11% Home improvement

18% Credit card debt

22% Housing

30% Food

34% Savings

Source: Bloomberg

The Question of the Week

[poll id="364"]

Last Week’s Poll Result

Are you planning any leisure travel this summer?

  • Yes, domestic (58%)
  • No (35%)
  • Yes, foreign (5%)
  • Yes, foreign and domestic (2%)

More than 2300 Len Penzo dot Com readers answered last week’s poll question and it turns out that 65% of them are planning at least some leisure travel this summer. It’s nice to see some semblance of normality returning to the world!

If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.

Useless News: Drinking Games

Two men were drinking in a bar at the top of the Empire State Building. The first drinker said to the other, “You know, last week I discovered that if you jump off the top of this building, by the time you fall to the tenth floor, the winds around the building are so intense that they actually carry you around the building and back into the window.”

The bartender just shook his head in disapproval while wiping the bar.

The second guy wasn’t having any of that story either. “You’re a crazy fool!” he said, “There’s no way that could ever happen.”

“But it’s true!” implored the first man. “Let me show you.” So the first man got off his barstool, staggered to the balcony, and then tossed himself over the ledge to the street below. Sure enough — when he passed the tenth floor, the high wind whipped him around the building and back into the tenth-floor window. The guy then took the elevator back up to the bar.

The second guy then said to the first, “You know, I saw that with my own eyes. That was absolutely incredible! But it had to have been a fluke!”

“Not a fluke at all!” said the first guy. “Here … I’ll prove it.” So once again, the first man staggered to the balcony and jumped off the ledge, hurling himself toward the street where the tenth-floor wind gently carried him around the building and into the window. Upon reaching the top floor bar, the first man urged his fellow drinker to try it for himself.

“Well what the hell!” said the second guy. “It works — and I’m going to try it!” And with that, the second man jumped over the balcony, plunging toward the earth at a rapid rate of speed. He found himself passing the eleventh floor. Then the tenth, ninth, and eighth floors. Two seconds later he hit the sidewalk with an awful splat.

Meanwhile, back upstairs the bartender turned to the other drinker and said, “You know, Superman — you’re a real jerk when you’re drunk.”

(h/t: Frank W.)

More Useless News

I currently have 13 followers at Gab. Hooray! Now that I’m in double digits, here’s hoping you can help me get into the twenties soon!

Other Useless News

Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. Alberta (1.87 pages/visit)
2. Ontario (1.82)
3. Saskatchewan (1.80)
4. Manitoba (1.74)
5. Newfoundland & Labrador (1.64)

9. Quebec (1.52)
10. British Columbia (1.45)
11. Prince Edward Island (1.44)
12. New Brunswick (1.33)
13. Yukon (1.25)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Alberta, eh) — or not (ahem, all you hosers living on the frozen Yukon tundra) — please don’t forget to:

1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!

2. Make sure you follow me on my new favorite quick-chat site, Gab — oh yeah, and Parler too! Of course, you can always follow me on Twitter too. Just be careful what you say there.

3. Subscribe via email too!

And last, but not least …

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Thank you!!!! 😊

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 me at: Len@LenPenzo.com

After reading this week’s story highlighting eight of the weirdest insurance claim frauds of all time, JB had a special request:

Len, send me an email. I have a great idea to make some quick cash.

First question: Have you been talking to any Nigerian princes lately?

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.

Photo Credit: stock photo

Comments

  1. 1

    Sara King says

    Hi Len,

    I’ve had this weird feeling for the past month or so that something is bubbling jist under the surface and is ready to blow. Everything seems to be fake. Everything! We’re told one thing on the news and from elected officials, even though we can all see that it’s really something totally different. It just feels like the whole world is living a lie.

    Sorry to be a downer today, but I need a hug!

    Sara

    • 2

      Len Penzo says

      If I knew how to insert a “hug” emoji here for you I would, Sara.

      When they fix the monetary system, the BS that is all around us will disappear and the healing can begin — but not a minute sooner.

  2. 3

    Nicole says

    So if a reset really is coming how do we to protect ourselves? I remember in the past you’ve said it will lower our living standard. How is that a good thing? Wouldn’t it be better if they could fix the current system?

    • 4

      Cowpoke says

      You must be new here. Physical gold and silver that you can literally hold in your hand.

    • 5

      Len Penzo says

      Nicole, what I said is if the dollar loses its reserve currency status, then America’s living standard will fall. It is artificially elevated at the moment because we have been able to export our inflation to other nations. That is changing because the rest of the world is not buying enough of our debt any more to contain inflation on our shores.

      When we transfer to a new monetary system — hopefully one where our currency is convertible on demand at any bank into gold — I expect there will be temporary pain for a year or two until the economy can fully reboot itself.

      The good news is, when the finally clouds break, we’ll return to a vibrant economy that should once again permit people to live on a single income, not unlike the time before 1971 when the US broke the dollar’s anchor to gold.

      Those who hold physical precious metals will be able to transfer their wealth from the old system to the new system. Those who don’t will take a big haircut.

  3. 6

    RD Blakeslee says

    The institutions dealing in “paper” PM (e.g., COMEX) trade far more metal than they actually hold physically, but they are now facing rapidly increasing demands for deliver of the physical metal, It’s called a “squeeze” and if and when the institutions cannot get enough metal to meet the demand anymore, the “real” price of the metal in terms of fiat currencies will be discovered.

    https://www.zerohedge.com/news/2021-03-16/comex-delivery-update

    Unlike the fractional reserve system of the fiat currencies, the metal cannot be printed out of thin air to meet demand.

    • 7

      Victor says

      It’s happening, but it could happen even faster if everybody who could bought 10 oz of silver today. Then the game would be over instantly.

    • 8

      Len Penzo says

      “Unlike the fractional reserve system of the fiat currencies, the metal cannot be printed out of thin air to meet demand.”

      Which is why the government hates the gold standard — or any derivative system that legitimately anchors their currency precious metals in any way.

    • 9

      Bill D. says

      Perth, Royal, Sunshine and the US Mint all defaulted on silver deliveries this week.

  4. 10

    Kev says

    Len, I look forward to these posts all week. If you had to choose, do you you prefer gold or silver as “financial collapse insurance”? It seems to me like gold is more stable and has the benefit of being owned by central banks, But silver is obviously more affordable and has more potential to skyrocket in price.

    • 11

      Len Penzo says

      Thanks, Kev!

      As pure wealth insurance, I prefer gold. I also prefer to hold enough junk silver (US silver dimes, quarters, halves, and dollars minted before 1965) to use for local barter in the event supply chains break and the credit system goes down for any length of time.

      Because silver is clearly the most undervalued asset in the world right now — how many commodities can you name that are half the price they were in 1980? — I look at silver more as a significant investment opportunity with limited downside risk. As a bonus it also doubles as wealth insurance (albeit a much more volatile form of it).

  5. 12

    Victor says

    The financial system’s list to starboard is getting bigger. I’m stacking more phyz today before the ship capsizes and sinks to the bottom. I just know that’s what smart money is secretly doing.

    • 13

      Len Penzo says

      Correction: The financial system is listing to port — not starboard.

  6. 14

    Sam I Am says

    Spending your stimulus check on silver or gold is technically saving money.

    • 15

      Len Penzo says

      Bingo.

  7. 16

    Bill says

    I hope people like dandelion salad. They’ll be eating the weeds out of the yard.

    • 17

      Len Penzo says

      It could happen.