Black Coffee: The Printer and the Piper

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. With the hardest part of it over, let’s get right to this week’s commentary …

Government cannot make man richer — but it can make him poorer.

— Ludwig von Mises

Credits and Debits

Debit: Did you see this? Wells Fargo just announced that it’s shutting down all existing personal lines of credit; a popular product offered by the retail-focused Wall Street giant. Perhaps not surprisingly, many analysts say this suggests that Wells Fargo believes the economy is teetering on the edge of a sharp downturn. We’ll see. As for why the economy may be on, well … let’s call it “shaky ground” … Fed chair Jerome Powell has the answer:

Debit: Keep in mind that closing unused lines of credit can have a negative impact on one’s credit score — and significantly so if the line represented a large percentage of the customers total overall credit. But I’m sure a lot of people who ended up getting their Wells Fargo personal credit lines cancelled won’t figure that out for quite some time — if at all. Unlike like this head scratcher:

Credit: Ironically, the rock bottom interest rates being enforced by the Fed has made it harder for businesses to find credit too. Why? Because bank loans are no longer profitable enough. As a result, macro analyst Alasdair Macleod warns that, “bank credit has shifted from providing finance to businesses, to low-margin financing of ever-increasing government deficits and financial speculation.” It’s just another sign of the current fiat monetary system in its death throes.

Debit: If the monetary system was in the peak of health, companies focus on research and development and capital expenditures to grow their business. Unfortunately, once a nation begins depending on the printing press to expand its economy, businesses take the easy route via share buybacks at the expense of capex, which is great for shareholders in the short term — but detrimental to innovation and long term growth.

Credit: Meanwhile, total US public and private debt rose to 406% of GDP in 2020, with government debt alone increasing 19% to 127% of GDP. Unfortunately, as asset manager John Hathaway notes, that debt comes at a cost because, “the top-heavy magnitude of public and private debt blocks the economy from outgrowing its debt burden in real terms.” Think about that the next time you notice your monthly grocery bill has climbed another 10%, despite having less in your basket.

Debit: Not coincidentally, new data released this week shows inflation is continuing to soar, with the CPI now running at 5.4% year-over-year (YoY). In case your wondering, that’s the fastest pace in 30 years. Just remember … that’s the government’s number. Considering actual inflation has been running near 10% YoY while the “official” CPI was being reported at 2%, it’s not a stretch to believe that prices are probably climbing at an annual rate of 20%. If not higher. Then again …

Debit: By the way, skyrocketing prices aren’t limited to consumers; producer prices are soaring too, with the PPI now running at 7.3% YoY. Even so, that hasn’t stopped the mainstream media propagandists from continuing their efforts to convince the public that the rising prices they keep experiencing are imaginary …

Credit: Despite the inflation genie being out of the bottle, the Fed isn’t raising rates off the zero bound. Yes, that’s monetary malpractice; but there’s a method to their madness. As the always astute MN Gordon notes, with the Fed “pegging short term rates below inflation and printing dollars, Washington is able to extract wealth from your bank account and future earnings to indirectly pay down public debts.” In other words: Inflation is in the government’s best interest.

Credit: Actually, it’s even worse than that. Inflation is now the only way out for both the government and the Fed. In fact, financial market guru Jim Sinclair says the latest blow-up in the reverse repo (RRP) market is actually exposing a Ponzi scheme. Specifically, the Fed is using the dollars they’re receiving from the banks at the RRP window, and using them to buy their own Treasury bonds so they can keep QE going and hold down rates. It’s naked debt monetization, but nobody is ready to admit it. Yet.

Credit: Of course, the solution to the current monetary system predicament isn’t a mystery. As Mexican billionaire Hugo Salinas Price points out, if “countries used gold as their money, they’d have stable economies — and their exports and imports would compensate each other.” He also correctly notes that “this is how the world functioned in the 19th century, which is known for stability, prosperity and peace.” Imagine that.

Debit: Unfortunately, the piper is going to get paid. “The US dollar, will inevitably end,” Price explains, “because all lies come to an end, sooner or later. How it will end, nobody knows. But the death of the dollar will upset absolutely everything that we take for granted today.” That it will — which is why you should consider protecting yourself with a little wealth insurance while it’s still available. It’s certainly easy to do; in fact, the process isn’t much different from buying other kinds of insurance …

Hmmm I wonder why I haven’t got any scam calls today… 🤔

Shawn Farash ❌🐻 (@Shawn_Farash) July 15, 2021

By the Numbers

With the Summer Olympics in Tokyo less than a week away, here’s a look at some of the numbers:

3 The number of consecutive Olympics originating in Asia between 2018 and 2022. (Pyeong Chang; Tokyo; Beijing)

200 Nations that will be represented.

11,000+ Number of athletes participating.

4 New sports that will make their Olympic debt. (karate, sports climbing, skateboarding, and surfing)

33 Total number of Olympic sports that will be presented this year. That’s five more than the 2016 Rio de Janiero games.

$12,600,000,000 Estimated cost to host the 2020 Tokyo games before they were postponed.

$15,400,000,000 Estimated hosting cost of the 2021 Tokyo games. Apparently, inflation has hit the Olympics too.

Source: Forbes

The Question of the Week

[poll id="381"]

Last Week’s Poll Result

What is your recommendation for today’s potential first-time home buyers?

• Do it only if you plan to hold it long term.(45%)
• Don’t do it! Wait until prices fall. (31%)
• Do it! Prices will only keep going up. (17%)
• It’s never a good time to buy a home. (7%)

More than 2300 Len Penzo dot Com readers answered last week’s poll question and it turns out that, almost 2 in 5 of them say now is definitely not the time to for first-time home buyers to pull the trigger. I’d have to agree, unless the buyers were absolutely positive they were going to be able to hold the home for at least a decade. When housing markets turn, if you’ve bought near the top, it can take many years for people to regain equity in their home. Trust me on this one; I speak from experience.

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.

Useless News: Homeward Bound

A man spent the entire night drinking at a pub. When he finally stood up to leave at 2 a.m., he fell flat on his face. He then tried to stand one more time, but to no avail; he fell flat on his face again.

The man then decided to crawl outside, hoping that the chilly fresh air would sober him up. However, after a few minutes soaking in the cold early morning air, he stood up only to fall flat on his face yet again.

So, unable to sober up, the man decided he would crawl the four blocks from the pub to his home.

When he finally arrived at his front door, he stood up and fell flat on his face again.

Eventually, the hopelessly drunk fellow managed to get the door open, where he proceeded to crawl into his bedroom.

When he reached the side of the bed, the man struggled again to stand up. As before, he managed to briefly pull himself upright, then quickly fell again — although this time he mercifully landed on the bed, where he passed out the instant his head hit the pillow.

The next morning the man awakened to see his wife standing over him, shouting, “So! I see you’ve been out drinking again!”

“Why would you ever say that?” the man asked, feigning innocence as best as he could.

“Because the pub called,” his wife replied. “You left your wheelchair there again.”

(h/t: Gregga)

More Useless News

I have 15 followers at Gab — which is two more than I had last month. Hooray! Who knows … we may just make 20 followers by the end of the year yet.

Free speech lovers … you can join me at Gab. https://t.co/XRrdR4rSLO pic.twitter.com/2DaJ4G3Gvs

Len Penzo (@LenPenzo) January 11, 2021

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. Newfoundland & Labrador (2.10 pages/visit)
2. Alberta (1.95)
3. Saskatchewan (1.82)
4. Manitoba (1.73)
5. Ontario (1.64)

9. Quebec (1.41)
10. British Columbia (1.37)
11. New Brunswick (1.33)
12. Prince Edward Island (1.30)
13. Nova Scotia (1.25)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Newfoundland & Labrador, eh) — or not (ahem, all you hosers living on the frozen Nova Scotia tundra) — please don’t forget to:

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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

From Benjamin:

Hello, Len. First time reader here, and I must say, you’ve frightened me.

No need to be scared, Benjamin. Most people say I have no idea what I’m talking about.

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