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The offbeat personal finance blog for responsible people.

Black Coffee: Peak Insanity

By

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.

Happy Father’s Day to all you dad’s out there!

I hope everybody had a terrific week. With the hardest part of it over, let’s get right to this week’s commentary …

The life of the inflation in its ripening stage was a paradox which had its own unmistakable characteristics. One was the great wealth; at least of those favored by the boom. Many great fortunes sprang up overnight. Prices in Germany were steady, and both business and the stock market were booming. Speculation alone, while adding nothing to Germany’s wealth, became one of its largest activities; the fever to join in turning a quick profit infected nearly all classes. Everyone from the elevator operator up was playing the market.

— Adam Fergusson, When Money Dies

Credits and Debits

Debit: Did you see this? According to a recent survey, 64% of millennials aged 25 to 40 regret buying a home, compared with 33% of those aged 57 to 75. The survey found that the older the buyer, the less likely they were to have homebuyer regret. What to make of this? Well … with at least a few of those gigantic mortgage payments under first-time homebuyers’ belts, I’d say the honeymoon phase of the latest housing bubble is officially over.

Debit: In other news, I see America’s debt-to-GDP ratio is now at 135% — that is an all-time high. In case you’re wondering, America’s average debt-to-GDP since 1790 is just 35%. Then again, the debt problem isn’t limited to the US. It took the world 2000 years to take global debt from virtually nothing to just under $100 trillion at the end of the 20th century — with most of that occurring since 1971. Since then, the pace has predictably accelerated, with the debt tripling from $100 trillion to $300 trillion.

Twas a time when the US used to run regular budget surpluses … then, in 1971 the government decided to break the dollar’s anchor to gold. It’s not a coincidence that 1971 was the same year Americans’ ability to comfortably support a family on a single blue-collar income began to wane.

Credit: Of course, that massive debt load is exactly why the statists leading this week’s annual G7 meeting were, as macroeconomist Daniel Lacalle points out, “light on detailed decisions, except on the most damaging of them all: a minimum global corporate tax. Why not an agreement on a maximum for global public spending?” It’s a rhetorical question. After all, these Brobdingnagian global bureaucracies didn’t get that way because the people running them believe in small, efficient, highly-decentralized government.

Debit: By the way, Lacalle goes on to note that, “An extremely dangerous idea is becoming mainstream: That all public spending is good and when stimulus plans fail to deliver all you have to do is spend more. All we hear is: 1) It was not enough, 2) This time will be different, 3) Repeat. The G-7 commitments look like the recipe for a very deep crisis in the not-too-distant future.” Just don’t tell that to our oblivious leaders …

Credit: The CEO of Sprott, Peter Grosskopf, warned that, “There are only three ways out of the debt bubble now gripping government finance: 1) default; 2) financial repression over decades; or 3) hyperinflation. Does anyone care that these end games are now mathematical certainties? Not yet, it seems.” You can say that again. Which is why it’s important that you, like this guy, carefully assess your risk before deciding how to respond …

Credit: You can bet the guy who made a fortune on the last housing bubble, Michael Burry, of The Big Short fame, understands the math:

Debit: In the meantime, the Fed will continue to meet rapidly accelerating and high short-term inflation with extremely loose financial conditions. I guess they forgot that they tried the exact same strategy back in the 70s only to see it fail spectacularly. In fact, chronic, debilitating inflation reigned over the US until Paul Volcker finally stepped in and raised interest rates to 20%; a surefire remedy that’s not available today due to America’s gargantuan debt load.

Credit: On a related note, macroeconomist Alasdair Macleod recently reminded us that, “Maintaining QE and interest rates at zero to help the economy is poppycock. The Fed has two unwritten objectives that override the economy: to fund a free-spending government as cheaply as possible, and to keep the bubble in financial assets inflated.” But he also assures us that the markets “will eventually force control over financial asset prices away from government agencies.” The response to which can be summed up thusly:

Debit: So why is the Fed seemingly so willing to let prices rise without any restraints? Because, as Macleod notes, “using monetary inflation to rig markets requires accelerating debasement to keep the illusion going. But at best, the sacrifice of the currency only delays matters temporarily.” Oh … and in case you’re wondering if anybody on CNBC — also known as the ultimate Wall St. fan club — actually understands this, the answer is: yes … but only one.

Credit: Speaking of accelerating currency debasement, macroeconomic analyst Bill Holter says the reason the money supply — and debt — has exploded in the last year is simple: “Every Ponzi scheme has to have new capital coming in to pay previous investors — and that’s what our monetary system is. Without the creation of new debt, the old investors don’t get paid and the pyramid collapses. It’s inflate or die; and the inflation must be created at an ever-increasing rate.” Yep. Sadly, exponential curves can be a bitch when you’re on the wrong end.

Debit: Meanwhile, savers are now getting almost no compensation for their capital, while those invested in the markets have become filthy rich. And thanks to the rapidly falling purchasing power of the US dollar, those savers who choose to not put any money into the Wall Street casino — almost half of all Americans — have only become poorer over time. The good news is, eventually, the masses are going to wake up. I think …

Debit: Unfortunately, Big Government — federal, state and city — has now become so large that further growth is unsustainable; the private sector that funds it is at its breaking point. And the public is stuck in a broken, centrally-planned economy controlled by a self-serving triumvirate of the Fed, mega-monopolies and duplicitous pols who are beholden to the other two. Now for the punchline: These clowns are doing everything in their power to keep it that way.

Credit: Needless to say, there’s only one way to escape the current fiscal, monetary and societal insanity in which we’re mired. Not surprisingly, the always-astute MN Gordon knows how to keep it real: “Sound money, and the just discipline that comes with it, would have prevented this madness to begin with. At this point, mass bankruptcy, liquidation, failed pensions, extended pain and misery, personal responsibility, and a return to honest living will be needed to clean up this mess, and clear out government bloat.” Amen.

By the Numbers

With an unprecedented number of hours spent as both a virtual teacher and tutor during the 2020 pandemic, the “salary” for being a dad skyrocketed to $51,293 — that’s a 36% increase from last year. The estimated salary is based on 17 jobs that dads do throughout the year, using wage data from the Bureau of Labor statistics for a comparable job. Here are the contributions from the 10 jobs that were responsible for the bulk of that $51,293 salary:

$946 Athletic coach

$988 Accountant

$1076 Maintenance worker

$1568 Groundskeeper

$1997 Cook

$2320 Judge

$2352 Computer and Info Systems Manager

$7090 Shuttle driver

$13,140 Tutor

$16,983 Elementary/Secondary School Teacher

Source: Insure.com

Last Week’s Poll Result

How do you like your steak?

  • Medium Rare (40%)
  • Rare (19%)
  • Medium (18%)
  • Well done (13%)
  • Medium Well (10%)

More than 2300 Len Penzo dot Com readers answered last week’s poll question and it turns out that, when it comes to steak, 3 out of 5 like it rare or medium rare. As for me, I want my steak to be mooing; the rarer the better!

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.

The Question of the Week

[poll id="377"]

Useless News: Supply Chain

Back in the days of the old Soviet Union, a Russian man walked into a local Moscow shop and noticed that all of the store’s display cases were completely devoid of any products whatsoever. So he asked the clerk, “You don’t have any meat?”

“Actually,” the clerk replied, “this is the place that doesn’t have any fruits or vegetables. The store that doesn’t have any meat is across the street.”

(h/t: Gregga)

More Useless News

I have exactly 13 followers at Gab — which means I actually lost one (1) follower this month. Well … getting to 20 may take a lot longer than I thought.

Yet More 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. Nunavut (2.00 pages/visit)
2. Alberta (1.89)
3. Manitoba (1.71)
4. Saskatchewan (1.64)
5. Yukon (1.50)

9. Ontario (1.39)
10. British Columbia (1.35)
11. Quebec (1.17)
12. Northwest Territories (1.13)
13. Prince Edward Island (1.00)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Nunavut, eh) — or not (ahem, all you hosers living on the frozen Prince Edward Island 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!

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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

Lola dropped me a note that included an observation on all of the negative comments that I received on my article explaining why I believe private schools are a rip off:

Wow, Len, you took a lot of flak on this one!

I sure did, Lola! But I can take it. After 25 years of marriage to the Honeybee, I’m battle-tested.

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

    drplastickpicker says

    Yeah I’m the first one to comment! Loved the joke. Love that you profiled amphibians.

    • 2

      Len Penzo says

      Well done! You are definitely an early riser, Dr. P! 😃

  2. 3

    Sara King says

    Hi Len,

    Thanks for another great cuppa. Happy Father’s Day!

    This week’s smash in gold and silver makes no sense at all. How do you explain this? Fed says it won’t raise rates for at least another 2 years even though inflation is going crazy. So everybody jumps into bonds and sells precious metals.

    You are right. It is insanity!

    Sara

    • 4

      Cowpoke says

      Sara: I don’t think “everybody” is selling gold/silver. The bullion banks are selling paper contracts. I’ll bet you a silver eagle 99% of those who are holding physical metal aren’t selling anything.

    • 5

      Len Penzo says

      The Fed bluffed that they are going to eventually taper QE (they’re not) and raise rates (they’re not) in mid 2023 — and although the 2-year note reflexively sold off, the 10-year Treasury yield fell.

      Why anyone would be buying long bonds when the Fed is signaling that it has no interest in defending the currency from rampant inflation is beyond me. The simple explanation is the Fed (and/or its proxies) essentially make up the great majority of the Treasury market now.

      It’s all a house of cards, built on a foundation of lies.

  3. 6

    Madison says

    Len, I want to start buying some silver. Would you recommend Ebay, or some place else?

    • 7

      Len Penzo says

      The only physical silver I might consider buying off Ebay is junk silver (US dimes/quarters/half dollars minted before 1965) because the risk of counterfeiting is low.

      • 8

        Madison says

        So where should I buy it?

        • 9

          Len Penzo says

          Like I said, I think Ebay would be fine for junk silver; and I would recommend anybody who is just getting their feet wet buying precious metals to buy junk silver. It’s called “junk” but its anything but — in fact, it is perfect for bartering if the need ever arises.

          APMEX and Miles Franklin are trustworthy online dealers, although there are other options too.

  4. 10

    Oscar says

    Oh yea, the markets ARE insane! But it’s also true what they say – markets can stay irrational longer than you can stay solvent. Besides, what choice do we have? My 401k doesn’t have PM or pure mining stock funds, so I am forced to play the game anyway.

    • 11

      Len Penzo says

      Nobody is forcing you to contribute to your 401k. You could take the cash you are putting into your 401k and buy mining stocks or physical precious metals. Of course, you have to consider that if you are getting an employer match, you are essentially earning an immediate 100% return on the amount that is matched. So another alternative is only contribute up to the employer match and then use any left over discretionary cash for alternative investments.

      DISCLAIMER: This is not investment advice. I am simply discussing possible options.

  5. 12

    Tango says

    Thanks for the Santelli clip. He is the only voice of reason on that entire channel. The emperor is butt naked and he is the only one brave enough to call it out. I’m surprised they haven’t shown him the door yet.

    • 13

      Len Penzo says

      No kidding, Tango.

    • 14

      Buck Fiden says

      I love Rick. Either he has friends in high places at CNBC or has a long contract they dont want to buy out. Other than that, Im sure Karen Sorkin and Liesman hate him.

  6. 15

    M4693 says

    Market insanity. Bitcoin fixes this!

    • 16

      Len Penzo says

      Heh . No it doesn’t; in fact, it is part of the insanity. (But keep using my blog to pump it.)

  7. 17

    TnAndy says

    Regarding home food supply survey: We measure ours in years, not months.

    • 18

      Len Penzo says

      Show off! 😉