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?
What is Christmas? It is tenderness for the past, courage for the present, and hope for the future.
— Agnes M. Pahro
Remember this December, that love weighs more than gold.
— Josephine Daskam Bacon
Credits and Debits
Debit: Did you see this? The Turkish lira’s 58% decline this year had sent local investors flocking to stocks to shield their savings, making Istanbul among the best-performing markets of 2021 in local currency terms, but the worst when measured in US dollars (USD). Even worse, for the past week, Turkish stock prices have plunged in USD terms and are now back to levels last seen in 2004, confirming again that the stock market is not a viable store of value during hyperinflation. Remember that, folks.
Debit: On a related note, a new study has found that the historic levels of inflation will require the average US household to spend $3500 more in 2021 to achieve the same level of consumption of goods and services as in 2019 or 2020, with lower-income households spending roughly 7% more on such goods and services, while higher-income households will have to spend about 6% more. So needless to say, inflation is running hot … which is precisely how this guy likes it:
Credit: Not surprisingly, legendary macro-analyst Jim Grant of Grant’s Interest Rate Observer recently said, “I don’t know of a moment in financial history in which there was less inhibition about spending, lending, or borrowing, and speculating.” Then again, that’s to be expected when the Fed printing presses are running in overdrive …
Credit: After a decade of unrestrained spending, the worldwide debt run-up has finally unleashed price inflation that continues to grow with each passing month. However, as macro-analyst Ryan McMaken observes, “the Fed still thinks all that’s needed is a slight slowdown in quantitative easing (QE), and a 50 or 100 basis-point increase to the fed funds rate – then happy days are here again.” Not quite … at least according to the politicians and their media mouthpieces. Apparently, they’ll also need to rein in the grocery store CEOs, who are obviously the “real” culprits behind higher prices:
Debit: Not surprisingly, McMaken says, “the Fed is still thinking the way it has thought since 2009, when today’s QE experiment began: It’s never the right time to sell assets – and it’s never the right time to let interest rates increase by more than a percent or two. But the Fed justifies it because Wall Street is happy. And there are no signs that they’ll be pivoting away from that any time soon.” Uh huh. Essentially, what we’re witnessing is the monetary policy equivalent of Nero fiddling while Rome burns.
Credit: As a result of this inflation ennui, macro analyst Daniel Oliver warns that, “the Fed is staring down a deflationary collapse of asset prices and higher consumer inflation simultaneously. When these forces converge in the not-distant future, the credit cycle will reach a singularity that will demand a final choice: print or die. And not the QE kind of printing – cautious, hidden, and limited in scope – but public, no-limits, dump-currency-in-people’s front-lawns kind of printing.” In other words: you ain’t seen nothing yet. Hey … wait a minute. What’s that sound I hear coming from the peanut gallery??
Credit: Keep in mind that it took America 206 years to rack up $1 trillion in debt; today the US borrows a trillion every five months. As a result, economist Stephen Leeb says “it’s now only a question of when foreigners and others dollar-holders decide they’re so sick and tired of the endless debt that they refuse to hold Treasury bonds.” When that happens, Leeb says that’s when “you’ll see interest rates go up – and then you’ll see a country that’s addicted to debt can no longer afford to issue more debt.” Although, frankly, it’s hard to imagine the US being frozen out of the debt market. Well … unless you’re this guy:
Debit: In case you’re wondering, Oliver notes that officials can always keep the US dollar from hyperinflating away by employing the “solution” similar to the one that was imposed during the Cypress financial crisis back in 2013: “Drain the system of excess liquidity by canceling financial claims on assets through banking bail-ins. So instead of gold running into the $10,000s per ounce, nominal asset prices would collapse – as would the prices of goods as well, although less so.” Wait … is that supposed to be comforting? After all, both paths lead to a massive loss of wealth – especially for the middle class.
Debit: By the way, Oliver also warns that, “The (crack-up boom) pattern that Mises identified has played out over the centuries across innumerable countries; contemporary America will not be immune. The central banks are going to fail, global currencies are going to collapse, much value will be revealed to be imaginary, gold will reestablish itself as de jure currency and not just de facto money. When the credit cycle singularity hits, the world will be suddenly and forever changed.” In the meantime, the outright lying by those running the show will continue …
Credit: In the meantime, James Turk, author of Money & Liberty says, “We can expect two things to happen: First, inflation will continue to worsen. Second, in order to try keeping a broken monetary system from collapsing into an inflationary spiral, there will be more regimentation that erodes liberty and free markets. It doesn’t have to be that way; all we need to do is once again follow the monetary provisions of the US Constitution, (and) recognize that nature provides everything humanity needs to advance, including money. Gold is nature’s money.” That it is. Merry Christmas, everyone.
By the Numbers
Here is a list of the CPI components with the biggest price increases for the first 11 months of 2021:
+43% Fuel oil
+11% Energy services
+8% Household moving & storage
+6% Food at home
+5% Food away from home
The Question of the Week
Last Week’s Poll Results
Are you an active RV’er?
- I prefer houses that don’t move (86%)
- Part time (14%)
- Full time (0%)
More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 7 say they occasionally vacation in a recreational vehicle. I still remember the year my dad borrowed his friend’s RV for a road trip we took into Northern California. Unfortunately, midway through the trip he rounded a corner on a mountain road and brushed up against a rock outcrop that proceeded to peel away almost the entire right side of the RV like a sardine can! Needless to say, that immediately ended the family road trip … and poor Dad had the unenviable job of explaining to his friend what happened to the RV.
This week’s question was submitted by reader Frank.
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: A Christmas Story
It was the day after Christmas at St. Peter & St. Paul’s church in Borden, Kent, England. Father John, the vicar, was looking at the nativity scene outside when he noticed Baby Jesus was missing from the figures.
Immediately, Father John’s thoughts turned to calling in the local policeman, but just as he was about to do so, he saw little Nathan with a red wagon – and in the wagon was the missing Baby Jesus figure.
So Father John approached Nathan and asked him, “Hello, Nathan! Where did you get the little infant?”
Nathan looked up at the vicar, smiled and replied, “I took him from the church!”
Surprised at the little boy’s honesty, Father John pressed further, “And why did you take him?”
With a sheepish grin, Nathan said, “Well, Father John … About a week before Christmas I prayed to Lord Jesus. I told him if he would bring me a red wagon for Christmas, I’d give him a ride around the block in it.”
More Useless News
Here are the top five articles viewed by my 41,112 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 10 Things That Today’s Middle Class Can No Longer Afford
- 4 Presumptuous Gifts That Can Strain the Recipient’s Budget
- The 4 Biggest Ways to Stretch Your Income
- The Big Problem with Cryptocurrencies
- A Really Sneaky Way to Reduce Your Restaurant Bar Tab
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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
From Jimmy D.:
Hey, Len! Of all the questions and comments that come your way, what’s the dumbest one you ever received?
Jimmy … I can tell you’re a man who likes to live dangerously.
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
What a nice surprise! Black Coffee on a Friday. Yay!
Len Penzo says
Yep! I finished it a day early (Thursday) so I could have more family time on Christmas Eve, and I figured I may as well publish it a day early too!
Merry Christmas, Madison!
The only thing the Fed knows how to do is to keep printing. I think the best case scenario is that we get a soft deflationary landing so that asset prices lose value over many years until they come back in line with reasonable values.
Len Penzo says
That scenario would work but it would essentially require a very deep and long depression too.
I’d rather they rip the bandaid off and massively devalue the dollar relative to gold. The short term pain would be terrible, but that would all be forgotten after a few years.
For $259 I hope that prime rib roast in the picture is at least seven bones! Merry Christmas, Len.
Len Penzo says
LOL! That doesn’t look like a seven bone rib roast to me, Cowpoke! Maybe three bones?
Really surprised there was a not a single full time RV’er. I am a wanta be for sure. Maybe Santa will help with that! Christmas blessings Len. 🎄
Len Penzo says
I think full time RVers are quite rare, CO2.
Wishing you a very Merry Christmas too.
Lauren P. says
Thanks for taking the time to post this Black Coffee and Merry Christmas to you and your family, Len! Now to see if Santa brought me any gold or silver… ;o)
Len Penzo says
LOL! 🤣 Hopefully he brought you a little of both.
Merry Christmas, Lauren!
Sara King says
Merry Christmas to you and the rest of the Black Coffee gang!
Len Penzo says
Merry Christmas, Sara!
Now that inflation is pretty much out of control in most places and can no longer be contained, in 2022 I believe we will see economic agents losing confidence in the dollar and making a big move to convert their money into real assets.
Len Penzo says
I think you’re spot on, Ted. 2022 is going to be an interesting year!
Cash Nazi says
So much of the economic pain and misery we endure today is due to people thinking they can just apply the rules they use for managing their household finances to the finances of a government that spends in the currency it controls. But that’s apples and oranges because government debt is IRRELEVANT. It’s an old accounting artifact from the days when we used hard currency to pay our bills, rather than today’s fiat that we create and destroy at will.
Len Penzo says
You mean like the fiat cash used by Germany during the Weimar hyperinflation? That fiat currency? The only thing saving the US dollar at the moment is its status as the world reserve currency, but that is quickly coming to an end.
Despite what you may have learned from the Modern Monetary Theory economists, there really is no such thing as a free lunch. 😁
Sam I Am says
When it comes to fiat money, I see a lot of creation, but I don’t see ANY destruction.