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 a terrific week. Now that the hardest part of it is over, let’s get right to this week’s commentary …
It’s not an exaggeration to say history is largely a history of inflation — usually inflations are engineered by governments for the gain of governments.
— Friedrich Hayek
In a hurricane, even penguins can fly.
Credits and Debits
Credit: Did you see this? The average bitcoin transaction fee has hovered between $5.55 and $31.48 this year. With that in mind, economist Peter Morici asks: “Why would anyone pay $10 to purchase a $4 latte at Starbucks with bitcoin?” Good question; those costly transaction fees are why even bitcoin holders now admit it’s not a legitimate currency. Hey … that’s progress. The next hurdle is getting them to realize it’s also not a proven store of value.
Debit: In other news, more investors’ cash has gone to stock-based funds in the last five months than the previous dozen years combined. Amid the frenzy, since November $569 billion has gone to global equity funds — compared with $452 billion in the previous 12 years. But, but … nothing to see here, folks. I’m sure any correlation to the rapidly-growing worldwide fiat currency supply is purely coincidental.
A wiser man takes time to understand market psychology and the madness of crowds. https://t.co/f2s8xTPGWo
Alasdair Macleod (@MacleodFinance) April 11, 2021
I heard J Powell and the team hired more interns to make sure the printers don’t overheat.
They’ve gone one step further and will announce that this is part of their new jobs program.
Got to make sure they’re diverse enough of course, else the mainstream will join #ENDTHEFED
Elliot Martin (@Elliot_Martin_) April 13, 2021
i thought he was waiting for silver to reach 100 dollars
Oliver (@Ojryan25) April 14, 2021
Credit: Meanwhile, global debt now stands at an estimated $284 trillion, which is an astounding 355% of global GDP. But wait it gets even
better worse: Macroeconomist Alasdair Macleods says that figure is most likely seen through rose-colored glasses because financial-sector debt is typically woefully underestimated. He also warns that the debt estimate doesn’t account for over-the-counter (OTC) derivatives, which have a gross value of $15.5 quadrillion.” Uh oh.
Credit: According to asset manager Egon VonGreyerz, the real problem with OTC derivatives is that the bankers who approve them don’t know how they work and underestimate the risks. As a result, he says “the account managers bet billions every day with no skin in the game and massive potential upside — if nothing goes wrong. But with extreme leverage and the bets now totally out of proportion to the equity, we’re entering an era when things will go wrong.” Ya think?
Peter (@Peter98442622) April 13, 2021
Debit: So … just how out of whack is this derivative leverage? It turns out that the banks’ equity is 0.17% of the outstanding derivatives — which means a loss of just 0.2% on the derivatives will wipe out the banks’ share capital. Oh yeah … and the banks too. Just be careful not to say that too loud.
Debit: Elsewhere, I see that China is on the verge of fully-unleashing its central bank digital currency. Perhaps the most alarming feature of the so-called “digital yuan” is that it’s programmable, with the Wall Street Journal reporting that, “Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start.” In other words, it would increase money velocity almost immediately and speed up inflation with it.
So the currencies will become milk in a fridge – use it or lose it. We are becoming nobodies alowed to own nothing. Heading towards a collectivist paradise ruled by clinically insane psychos telling you how to live your life because they think they know better. #silversqueeze
MistyTree (@haluzman) April 14, 2021
Debit: If the digital yuan’s expiration date isn’t scary enough, it’s also fully trackable, thereby allowing unprecedented surveillance and supervision over every single transaction. It’s certainly got Treasury officials’ attention; they’re worried the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency. As if America’s uncontrollable government spending isn’t a big enough problem. Oh … and speaking of problems:
Debit: Of course, the reason for the digital yuan is China’s desire to eventually offer up a potential reserve currency alternative to the dollar. And who can blame them with the US deficit hitting a record $1.7 trillion? That’s a lot of red ink. Especially when there’s still six months left in the fiscal year.
Debit: On a somewhat related note, the Fed is continuing to assure everyone that inflation is nothing to worry about; after all, just look at the prices of big ticket items you only buy once or twice per decade like new television sets! They aren’t wrong, of course. Well … as long as you ignore reality, where almost everything you need for basic everyday life requires more and more of the Fed’s green confetti with each passing month.
If south America is any indication.. the inflation rate could be 50% and the official CPI will say 5%
ishimon (@ishimon86) April 15, 2021
Debit: Then again, if the Fed seems to be indifferent to inflationary forces, it’s because they’re now at a point where they need visible signs of inflation to keep the debt-based monetary system from imploding. Why? Because even Stevie Wonder can now see that the debt is far too large compared to the entire economy — so they have to make the economy appear larger than it really is. In other words: it’s just more banker hocus pocus.
Peter Sutherland (@econ_713) April 13, 2021
Debit: By the way, for those wondering why the Fed is killing the dollar, Treasury secretary Janet Yellen revealed the answer when she noted this week that it’s important to ensure “all citizens fairly share the burden of financing government.” Uh huh. For those who don’t understand Fedspeak, allow me to translate: “By hook or by crook, the public must continue to endure the burden of government inefficiency, ineptitude, fraud and tyranny.”
When the MMT bubble inevitably bursts unfortunately the consequences will then be kicked downstairs in the form of egregious taxation, hyperinflation, supply shortages, and possibly famine and/or war. Prepare accordingly.
The Rebel Stoic (@ausenhus) April 12, 2021
Debit: Needless to say, there’s mathematically no way out of the current economic environment — which is probably why Yellen compared this week’s discussions with the IMF and World Bank to the Bretton Woods Conference that redefined the international monetary system in 1944. Of course, if you think these new meetings will result in a restoration of the resulting gold-based system we abandoned in 1971 — to the detriment of almost everyone without a connection to Wall St. or Congress — well … I suspect the Fed has a bridge it wants to sell you too:
Jesse Livermore (@Jess3Livermore) April 14, 2021
The Question of the Week
Last Week’s Poll Result
Should you be allowed to opt out of Social Security?
- Yes (59%)
- No (35%)
- I’m not sure (6%)
More than 2100 Len Penzo dot Com readers answered last week’s poll question and it turns out that almost 3 in 5 of them think they should be able to opt out of the Social Security program. No matter what your viewpoint is, I suspect most people believe their retirement nest egg would be much better off if they were allowed to keep their own money over the years and manage it themselves.
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.
By the Numbers
According to a recent study, these are rankings for the states (plus Washington, DC) with the five biggest — and five smallest — average household retirement nest eggs:
51 Utah (avg. household savings: $300,392)
50 North Dakota ($310,766)
49 District of Columbia ($325, 671)
48 Oklahoma ($340,389)
47 Mississippi ($340,894)
5 Virginia ($468,579)
4 Alaska ($489,070)
3 New Jersey ($489,664)
2 New Hampshire ($494,562)
1 Connecticut ($523,568)
Source: Personal Capital
Useless News: Friendly Skies
The airline had a policy that required the first officer to stand at the door while the passengers exited, smile, and give them the obligatory ‘Thanks for flying XYZ airline!’ send-off.
An airline pilot on this particular flight hammered his plane into the runway extremely hard.
In light of his bad landing, the first officer had difficulty looking the passengers in the eye as they deplaned because he was constantly worried that a passenger would have a smart comment. However, once most of the passengers were off the plane it became apparent — to the relief of the pilot — that they were all too shell-shocked to say anything.
Finally, everyone had gotten off the plane except for one little old lady who was walking with a cane. “Sonny,” she said, “Do you mind if I ask you a question?”
The pilot said, “Why no Ma’am. What is it?”
The little old lady said, “Did you land this plane — or were we shot down?”
More Useless News
I still have exactly 13 followers at Gab. Yes, yes … that’s the same place I was at three weeks ago. Here’s hoping you can help me get into the twenties soon!
Len Penzo (@LenPenzo) January 11, 2021
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. Manitoba (1.97 pages/visit)
2. Ontario (1.88)
3. Quebec (1.81)
4. Alberta (1.78)
5. Yukon (1.75)
9. Saskatchewan (1.56)
10. Prince Edward Island (1.47)
11. British Columbia (1.41)
12. New Brunswick (1.22)
13. Nunavut (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Manitoba, eh) — or not (ahem, all you hosers living on the frozen Nunavut tundra) — please don’t forget to:
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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 me at: Len@LenPenzo.com
Taddy left this comment after reading his personal finance horoscope, which warned him to stay away from Hamburger Helper. (I know … If you’re really curious, check it out.)
Oh no! Scorpio here. I’ve been eating cheeseburger helper for most of a month.
Okay. But please vary your diet by occasionally eating something from the other three bachelor food groups too: ramen, beer and mac & cheese.
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