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 an enjoyable week. Without further ado, let’s get right to this week’s commentary …
America’s abundance was created not by public sacrifices to ‘the common good,’ but by the productive genius of free men.
— Ayn Rand
Servitude, in many cases, is not forced upon by the masters, but by a temptation of the servants.
— Indro Montanelli
Credits and Debits
Debit: Did you see this? The People’s Socialist Paradise of Venezuela is planning to cut six zeroes from its inflation-affected bolivar. Why? Because a million bolivars currently has the purchasing power of just 32 US cents. For those of you counting at home, Venezuela has now slashed 14 zeroes off of its currency since 2007. Apparently, the simple-minded clowns in power still haven’t figured out that lopping zeros off their funny money will never stop the hyperinflation that has been ravaging their nation since then.
Go for it baby!!! pic.twitter.com/pWuJ4oTQ8i
Antonio Gonzlez C. 🇪🇸🇩🇴🇻🇪 (@TonyGonzalezC) July 4, 2021
Credit: Speaking of socialism, David Stockman noted this week that “the Fed has spent the last 13 years capping and smothering the money market rate; that’s socialism by any other name. And it’s leading to the same outcome as in the old Soviet Union: a failing economy for the masses and a concentration of wealth and privilege among the few elites who are close to the levers of control.” Imagine that.
JFC … its shot after shot after shot at anything resembling freedom. Globally. Social interactions, work, living space, food, education…everything. Are we becoming Serfs who exist to the pleasure of the few owners?
(I’m trying not to rant)
Tarr and Fether (@RomanGrandeur) July 8, 2021
Debit: In fact, since March 2008 the real Fed funds rate — that is, the nominal Fed funds rate minus the CPI — has been negative 96% of the time. Currently, the real federal funds rate stands at negative 2.37%, which is close to an all-time low. But, as Stockman points out, sane “participants in voluntary exchange on the free market would never lend money — even overnight — at a negative real rate because it defies logic.” True; but logic was never the Fed’s strong suit.
Why would they? How are they going to get paid on the already borrowed money? One day the population will understand the ponzi scheme we all live under
Libertyordeathbychocolate (@Liberty08071516) July 7, 2021
Debit: By the way, Stockman also points out that the Fed’s central planning produces “enormous malign effects” from the ensuing “erroneous incentives and price signals.” Uh huh. Even worse, it’s also forcing most people on Main Street to chase yields by taking big investment risks they wouldn’t normally do in a desperate attempt to stay ahead of inflation. Er … not to mention other high-risk low-reward endeavors …
Totally missed in the comments, this is also why we develop the Dad bod. Poor baby goes straight to the ground if pops has washboard abs. The gut provides the slope/friction to hold a toddler in place for precious seconds, as shown in video. It’s evolution really.
Matthew Keown (@IrishMatt05) July 5, 2021
Credit: As a result of all this free-market meddling, it’s no coincidence that macroeconomist Nouriel Roubini says we’re facing “the worst of both the stagflationary 1970s and the deflationary period from 2007 to 2010. Debt ratios are much higher today, and loose economic policies and negative supply shocks threaten to fuel inflation, setting the stage for the mother of stagflationary debt crises over the next few years.” In other words: the misery is just getting started.
The Nordic Investor (@InvestorNordic) July 8, 2021
Debit: Signs that the entire system is in dire straits can be found almost everywhere. For proof, Roubini says one only has to look at the high price-to-earnings ratios, inflated housing and tech asset prices, “and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway day trading.” Not convinced? I hear ya. If only he could have come up with a few more examples.
Risk owning a Zombie for 3.92%
The last Tycoon (@mikeNjanice) July 8, 2021
Debit: Not surprisingly, Roubini also warns that, “Loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck. But at some point, this boom will culminate in a Minsky moment, and tighter monetary policies will trigger a bust and crash.” In the meantime, the debt continues to grow. And grow. And grow. And …
Debit: Of course, by pegging rates at zero for the last decade, the Fed has only served to widen the wealth gap by stealing from future generations. Despite this, few people complain out loud because the currency printing required to pin rates at the zero bound has also managed to artificially inflate almost every market and puff up the middle class’s quarterly 401(k) statements … even as inflation is threatening to decimate those nest eggs.
might ? that’s like saying pouring gasoline on a fire might make it burn hotter
Michael Carusone (@Trappped) July 7, 2021
Credit: Believe it or not, more than 250 years ago a banker named Richard Cantillon noticed an early version of this phenomenon, known today as the Cantillon Effect. He saw that the closer you were to the King, the more you benefited — and the further away you were, the more you were harmed. In essence, the first in line for additional funds from the crown got to buy financial assets early on at low prices — and then profit as prices climbed. As for everyone else? Well … in a fiat monetary system, they get higher living expenses, and eroding purchasing power.
Buying $8.00 gas and $20/lb ground beef is going to be awesome because my wages will go up? Seriously, do you guys eat paint chips in the break room?
— Nuclear Ironman 🏊♂️🚴♂️🏃♂️🏅 (@NuclearHerbs) July 8, 2021
Credit: After the dollar’s anchor to gold was broken in 1971, economist Nicholas Kaldor said the newly-unfettered dollar would turn “a nation of creative producers into a community of rentiers increasingly living on others, seeking gratification in ever more useless consumption, with all the debilitating effects of the bread and circuses of imperial Rome.” Heh. Well … I think it’s safe to say he nailed that prediction, folks.
When JPow saw the breadth of his domain, he wept for there were no more worlds to conquer
Truthtopower (@Truthto97096600) July 7, 2021
Credit: Asset manager Egon VonGreyerz noted this week that what’s coming “will be a very unpleasant period for the world as all the corruption and excesses of the past 100 years are unwound.” But it’s not all bad; he also noted that, “the coming forest fire is essential to get rid of the dead wood so that new green shoots can create a sound global economy and monetary system.” Yep. And if you don’t believe him, just ask this guy …
Debit: Unfortunately, 30 years of reckless monetary policies by a band of unelected central bankers are finally coming home to roost. And pinning interest rates at the zero bound for the last decade has been the most egregious policy of them all, as it has punished hard-working savers and other fiscally responsible people in order to fund an ever-expanding government. But a reckoning is coming. The good news is physical precious metals will preserve the purchasing power of your nest egg.
Good morning pic.twitter.com/ArzMc2cKJP
StockCats (@StockCats) July 8, 2021
By the Numbers
With the first half of 2021 officially over, here is the year-to-date performance of select major asset classes. What conclusion do you draw from this data?
52.6% Crude oil
29.4% Commodities (COMT ETF)
19.0% Real estate (IYR ETF)
14.4% S&P 500
12.7% Dow Jones Industrials
The Question of the Week
Last Week’s Poll Result
How much is your average monthly electricity bill during the summer?
- $100 to $199 (45%)
- Less than $100 (24%)
- $200 to $299 (21%)
- $300 to $400 (9%)
- More than $400 (1%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 3 in 10 have summer electricity bills of $200 or higher. On the other hand, 1 in 4 are fortunate enough to see only double-digit bills. Pretty impressive! Inflation? What inflation?
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: Groovin’ to the Beat
An old man was visiting his local Starbucks when he suddenly felt the urge to pass gas.
The place was packed but, thankfully, the music was really loud this particular day — so he decided to cover up his farts by timing them in rhythmic pulses to the music’s beat.
After several minutes of this, he figured his plan was working perfectly — then he noticed everyone was staring at him.
That’s when he remembered he was was listening to his iPod.
(h/t: RD Blakeslee)
More Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Nevada (2.21 pages/visit)
2. Montana (2.05)
3. North Dakota (2.02)
4. Maine (2.01)
5. New Mexico (1.98)
46. New Jersey (1.63)
47. Oregon (1.60)
48. California (1.58)
49. Illinois (1.41)
50. Iowa (1.33)
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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
Michael wrote in this week to tell me he’s had enough:
I’ve deleted your trashy website from my favorites. Hope your blog improves in the future. Good luck.
Don’t hold your breath, Michael. It’s been all downhill since my first post in 2008.
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