Black Coffee: Destroyers at the Wheel

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 wonderful week. And with that, let’s get right to this week’s commentary, shall we?

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced; paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: ‘Account Overdrawn.’

— Ayn Rand, Atlas Shrugged

Credits and Debits

Debit: Did you see this? Thanks to the new federal holiday that was created last week, there are now 44 paid days off for the average federal employee annually — that’s almost nine full weeks of paid-time off each year based on 11 federal holidays, 13 sick days and 20 vacation days per year, which costs taxpayers $22.6 billion annually. If only the average private sector taxpayer was so lucky.

Credit: In other news, this week a commenter at the TFMR blog shared the following 12-year weekly chart of the S&P 500, noting that “ever since the great financial crisis, when an established supporting trend line breaks, a new trend line is established with a steeper slope. Maybe the market will go vertical soon, sending prices to infinity. I wonder how this compares to Weimar Germany?” Good question; with the chart exhibiting the behavior of an exponential curve, I’d say it compares to Weimar quite nicely.

This is bullish for magic internet money.

unbound (@JoshS_unbound) June 24, 2021

Debit: One thing is certain: 10% of the US population now owns 88% of all stocks held by American households. And if you think that’s interesting, here’s another fun fact: 1 in 5 electric vehicle owners eventually switch back to gasoline powered cars. Imagine that.

gasoline solves this

AGTrader (@ag_trader) June 22, 2021

Credit: Keep in mind that the stock market isn’t the only thing on Wall Street that’s unbalanced. This week, macro analyst, Matthew Piepenburg, asked: “How can anyone call the Treasury market a ‘market’ when 56% of the $4.5 trillion of bonds issued since February have been bought by the Fed itself? Sounds more like an insider price-fix than a ‘market,’ no?” Uh, no. Wait … I mean, yes! (Sorry; but I’m terrible at French.)

Theyve got a lot of splainin to do based on their own definition of monetization. https://t.co/zicz5j4H73

The Rational Walk (@rationalwalk) June 24, 2021

Credit: Indeed, with the Fed artificially suppressing rates by propping up Treasuries, macroeconomist Alasdair Macleod is warning that, “Without rates being maintained at a level which discourages foreign holders from selling the dollar, either for other currencies or commodities and raw materials used in the course of production, its purchasing power has the potential to fall dramatically.” Potential? I think it’s a fait accompli. (Okay; so maybe I do know a little French.)

I paid $32 for a lobster roll, so this seems about right.

JM (@ATLIHS) June 23, 2021

Debit: As for when the dollar’s demise will finally become reality, Macleod says it will be when “it becomes clear to foreigners that dollars are no longer safe, the downside of Triffin’s Dilemma will become manifest.” In other words: Psychology will be the triggering event — not some arbitrary point or date on a monetary graph. Until then, the bread and circuses will continue. Enjoy!

How has the country changed?
In 1972, George McGovern promised $1000 to every adult if he won; he called it a ‘demogrant.’ Even his own party howled in derision. People then understood the government has no magic pot of money. They can only give out what they first take away.

Peter Schmidt (The 92ers) (@The92ers) June 23, 2021

Debit: Keep in mind that it was 60 years ago when Robert Triffin warned the US that, as holder of the world’s reserve currency, it would eventually be forced to print so many dollars to satisfy global demand that it would destroy the greenback. Well … after six decades of waiting, it looks like “eventually” is just around the corner. When that day comes, living standards will fall for most Americans. How low can they go? If you listen to these guys … very, very low:

Credit: By the way, Macleod is also warning that today’s “unprecedented market distortions, coupled with dishonest statistics and Keynesian cluelessness, is considerably more dangerous than the London gold pool failure and the ending of Bretton Woods” in 1971, which decoupled the dollar’s final anchor to gold. As a result, he says the dollar’s final implosion will be “sudden and very public.” If true, that’s bad news for those who believe they can time the market.

Can’t ride the two asses of reserve currency and massive deficits with the one ass named Jerome Powell. Triffin’s dilemma.

DecentralizationMaxi (@phoenixlion1982) June 21, 2021

Credit: As financial analyst, Lance Roberts, noted this week, “The recent government spending spree is problematic (because) there’s now a zero- to a negative-multiplier of debt on economic growth.” Or to put it another way: Non-productive debt not only fails to create economic growth, it kills it. Then again, you’ll never convince the modern monetary theory (MMT) fanboys that’s true — at least until the monetary system’s wheels completely fall off. Oh, look! Here’s one of ’em now:

Debit: Unfortunately, at the current pace, US debt load will reach $140 trillion by 2050. As for the Fed, if it only continues monetizing 30% of all debt issuance in perpetuity — an extremely conservative assumption — its balance sheet will swell to $40 trillion in the next 30 years. In the meantime, they’ve already doubled their balance sheet to $8 trillion over the last 12 months, effectively nationalizing the bond market. So it’s easy to conclude that the stock market will be nationalized next. And soon.

If modern monetary theory is correct . . .

Shelton, of course, knows its bullshit. But its amazing how much the present house of cards implicitly assumes otherwise.

Richard Wood (@WillMonox2112) June 25, 2021

Credit: Clearly, the wheels are coming off the system, as evidenced by the Fed’s recent policy moves designed to mitigate the latest reverse repo crisis. I know; that’s a tired analogy. So for those of you who prefer something different, this week macroeconomic analyst guru, Bill Holter, put it this way: “The Fed is now careening from wall to wall, like an out of control bobsled.” Yeah … that’s much better.

How do you shut up a Fed Governor?
Tie both hands behind their back

Capital EdgeNY (@CapitalEdgeNY) June 21, 2021

Debit: In the meantime, the Fed will continue to do its best trying to pull the wool over most people’s eyes, as they did this week when they had the audacious gall to claim that issuing coins with enough precious metal to maintain their face value didn’t effectively “create trust in the coins and facilitate a smooth-running economy.” As always, ignore what central bankers say; instead, watch what they do. There’s a good reason why they collectively keep more than 32,000 tons of gold in their vaults. And they aren’t selling.

Lmao. Even saying we live in clown world has become an affront to actual clowns.

#WarIsARacket☦⏳🍀🇵🇸 (@For2000years) June 21, 2021

By the Numbers

Forget margin debt. According to a new survey, 40% of all Americans who own stocks say they have taken out a personal loan to invest in the market. Here is the shocking breakdown by generation:

9% Boomers

28% Gen X

60% Millennials

80% Gen Z

Source: Magnify Money via King World News

The Question of the Week

[poll id="378"]

Last Week’s Poll Results

How long will your home food supplies last if grocer supply chains fail?

• Less than a month (37%)
• More than 3 months (30%)
• 1 to 3 months (20%)
• Less than a week (13%)

More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that they’re evenly split between those who have less or more than a single month’s worth of food in their pantry to tide them over in the event of an unforeseen grocer supply chain failure. As for yours truly, I keep a minimum six-month supply on hand at all times — but it’s actually more than that. Yes; building up your stores is expensive, but by doing it a little at a time, you’ll reduce the financial sting. It will also give you more time to develop your preferences for the type of food you choose to store — and where and how to store it — thereby making a large job much more manageable. Thanks to reader Rick K. for this week’s question!

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: Miracle Can

A man was driving along the highway, and saw a rabbit hopping across the middle of the road. He swerved to avoid hitting the rabbit, but unfortunately the rabbit jumped in front of the car and was hit. The driver, being a sensitive man as well as an animal lover, pulled over to the side of the road, and got out to see what had become of the rabbit.

Much to his dismay, the rabbit was dead. The driver felt so awful, he began to cry. A woman driving down the highway saw the man crying on the side of the road and pulled over. She stepped out of her car and asked the man what was wrong.

“I feel terrible,” he explained, “I accidently hit this rabbit and killed it.”

The woman told the man not to worry; she knew exactly what to do. So she went to her car trunk, and pulled out a spray can. She then walked over to the limp, dead rabbit, and sprayed the entire contents of the can onto the rabbit.

Miraculously the rabbit came to life, jumped up, waved its paw at the two humans, and then hopped down the road. About 50 feet away the rabbit stopped, turned around, waved at the couple, and then hopped down the road. Another 50 feet later, the rabbit turned and waved again before hopping into the roadside brush for good.

The man was astonished. He turned to the woman and demanded, “That was a miracle! What did you spray on that rabbit?”

The woman handed the can to the man so he could read the label. It said: “Hair spray. Restores life to dead hair. Adds permanent wave.”

(h/t: Jennifer)

More Useless News

Here are the top five articles viewed by my 38,917 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. A Few Minutes with Personal Finance Genius Rich Livingston
2. 9 Important Money Tips Every Dad Should Teach His Kids
3. Are Gas or Charcoal Grills More Cost Effective?
4. Why Pastry Chefs Are Financially Savvier Than the Common Man
5. What Are The Most Effective Ways to Save Money as a Couple?

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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

This week Brenda dropped a nice note in my inbox to introduce herself — and ask this question:

Love your blog, Len! Why didn’t you give it a fancy name like all the other (personal finance) blogs out there?

Well … because “John Smith dot Com” was already taken.

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