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 …
The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion — policemen, customs guards, penal courts, prisons; in some countries even executioners — had to be put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done, and hailed the dawn of the fiat-money millennium.
— Ludwig von Mises
Credits and Debits
Credit: Did you see this? According to a new survey of 2100 people, the lack of commutes — and the associated cost savings of working from home — are the top two benefits of remote work. So, just how much money are telecommuters saving? Well … more than one-third of those polled said they save at least $5000 per year by working remotely. For most people, that’s not chump change. Well … at least not yet.
Yeah they just made 6 figs in one day on meme stonks. I would too.
Cpt Oblivious (@Cougsky) June 3, 2021
Debit: Speaking of overpriced stocks, Warren Buffett famously described the stock market capitalization-to-GDP ratio as “the best single measure of where valuations stand at any given moment.” This ratio, known today as the Buffett Indicator, compares the size of the stock market to that of the economy. A high ratio, which is what the index is currently showing, indicates an extremely-overvalued stock market. In fact, the current ratio continues to plumb new all-time highs.
Liquidity Trader (@Lee_Adler) June 3, 2021
Credit: Meanwhile, legendary gold investor Jim Sinclair warned this week that, with interest rates at zero, “all of the Keynesian tools have been used up.” And for the naysayers and ‘magic money tree’ oafs who continue to believe that the dollar can be printed endlessly without consequences, Sinclair pointed out that the massive dollar injection during the GFC of 2009 was sterilized — isolated to avoid inflationary price effects — because it simply erased realized over-the-counter derivative losses.
SnowGlobeTrotter💯🇺🇸 (@Clay25690731) August 27, 2020
Debit: Sinclair went on to warn that, unlike 2009, inflation is raging today because the trillions of dollars in economic stimulus being injected into the system has no such sterilization effect. In other words: this new money will be spent into the economy. And quickly. In fact, Sinclair says current Fed policy is actively “setting the stage for a coming hyperinflation of the US dollar.” And even more ominously, he says hyperinflation is “inevitable.” If true, the worldwide king of currencies is …
Credit: On a related note, economist Mark Hendrickson reminds us that although “the Fed has assured the public that inflation is transitory and under control, since its inception, they have a terrible track record accomplishing any task assigned to them by Congress. It’s impossible for the Fed — or any other entity — to control millions of prices and, therefore, the inflation rate.” Um … I guess that means their latest plan to “fix” the climate “crisis” isn’t going to work either.
its one thing to be fed these sort of lies from politicians, but what business do central banks play in capitulating to this nonsense?
Jln Ledt (@hledt) June 4, 2021
Debit: Hendrickson also points out that, “Tragically, the Fed has been trying for years to boost inflation to 2% annually. How bizarre that our central bank would deliberately strive to reduce the value of our (currency); at 2% per year, it loses half its purchasing power in 35 years. That would be half of your nest egg, millennials!” Psst. Hey, Mark … It’s also half of all Boomer and Gen X nest eggs too.
Debit: Of course, if the ivory-tower MMT clowns in academia are correct, then the inflation that’s now plaguing almost every sector of our economy should be “easy” to dissipate by sharply raising taxes on everyone and everything. Okay, fine … assuming that’s true, then it’s time to put up or shut up.
They better get some new cartridges for their printers.
/EScapemyfate (@We_are_the_wall) June 3, 2021
Debit: Then again, maybe we should let inflation keep running. After all, if you listen to National Economic Council Deputy Director, Bharat Ramamurti, this week he said that, “The faster than expected increase in prices is actually a good sign in the sense that the economy is recovering faster than a lot of people expected.” Heh. And, yes, he actually spewed that garbage with a straight face.
Did you factor in the hedonic adjustment for eating insects rather than beef or chicken? #deflation
Dave_Cash (@DaveCashInvest) June 3, 2021
Credit: Asset manager Egon VonGreyerz certainly sees the game that’s being played. He says that the “fundamental law of nature and economics has been set aside by the MMT ‘wizards.’ Remember: the piper always gets paid — and the cost will be the whole financial system. The printing will continue until the world wakes up to the fact that there was no value in the ‘money‘ that inflated stock, bond and property prices.”
Here is former Finance Minister of India advocating print money. He is Harvard graduate. https://t.co/udHg1O22Qc
Bikoo1999 (@bikoo1999) June 3, 2021
Credit: As financial analyst Matthew Piepenburg observes, “Pension fund managers can’t ignore that currency debasement has reached extreme levels, five times the depth seen post-Lehman. Neither can they ignore the fact that commodity price inflation is at double-digits. As such, the once-faithful are catching on to the fact that they’ll need to start thinking seriously about tail risk and inflation hedging; this means that gold can no longer be ignored.” (Something that apparently wouldn’t be necessary if fiat currency was made from milk …)
Debit: By the way, you can bet these large-fund money managers also noticed the admission this week from White House economists who said their planned budget deficits can only be realized with negative real interest rates for the next ten years; those fund managers also know negative real rates are high-octane fuel for the price of gold. The alternative would require a sharp reduction in the size of the federal government — an option that our Big Government pols will never willingly allow to happen.
Its lucky weve got CPI to keep track of inflation.
Brisket (@BTCBrisket) June 2, 2021
Debit: If you’re wondering how to survive the financial and monetary maelstrom that’s lurking just offshore, you may want to take some time to figure out exactly what the con artists running this mess are doing behind the scenes. As Piepenburg notes, “The players in this rigged game may be corrupt, but they aren’t stupid. They may say they hate gold in public, but they own a lot of it in private.” Frankly, I’d expect nothing less.
Yea paid for by the next 10 generations
Dennis Reynolds (@GoldenGodWisdom) June 3, 2021
By the Numbers
Here is a performance rundown for select major assets in May:
0.2% Russell 2000
0.7% S&P 500
2.2% Dow Jones Industrials
The Question of the Week
Last Week’s Poll Results
How many miles did you put on your primary vehicle in the past year?
- 3000 – 9000 (32%)
- 9001 – 15,000 (27%)
- Less than 3000 (23%)
- More than 15,000 (18%)
More than 2300 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than half drove less than 9000 miles in the past year — which probably isn’t too surprising considering the pandemic restrictions and increased number of people allowed to work from home since then. As for yours truly, I’ve put far less than even 3000 miles on my 2013 Honda Accord in the past year — in fact, the number is just over 1000 miles.
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: Goodbye, Cruel World
Bruce was a lifelong environmentalist living in California. But he was sick of the world; of Covid-19, Brexit, Russian belligerence, global warming, racial tensions, and the rest of the disturbing stories that occupy today’s media headlines. In fact, Bruce was so despondent that one day he drove his car into his garage and sealed every doorway and window as best he could. Then he got back into his car, rolled down the windows, selected his favorite radio station, started the car, and revved it to a slow idle …
Several days later, a worried neighbor peered through Bruce’s garage window and saw him in the car. Aghast at what she saw, the neighbor notified emergency services; they arrived quickly, broke in to the garage, and pulled Bruce from the car.
The paramedics attending to Bruce gave him a small sip of water, happy to see that he was in surprisingly-good condition — although his Tesla had a dead battery.
(h/t: Boomer Sooner)
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
After reading 41 reasons why I refuse to lend money, Joe left this comment:
Anyone pandering this crap to get clicks is a bigger deadbeat than anybody I know who might need a couple bucks from time to time.
Why do I get the feeling you’d change your mind if I offered to loan you a couple bucks?
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