Black Coffee: Off to the Races

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 …

I’ve read a lot of history, and I know that once upon a time, a coin was worth $5 if it had $5 worth of gold in it. Now we have paper that is just backed by fiat.

— Lloyd Blankfein

The desire of gold is not for gold. It is for the means of freedom and benefit.

— Ralph Waldo Emerson

There are decades where nothing happens; and there are weeks where decades happen.

— Vladimir Lenin

Credits and Debits

Debit: Did you see this? Last week $622 million in cryptocurrency was stolen from Ronin, which is a blockchain-based gaming network; in all, 173,000 etherium and more than 25 million “USDC” crypto coins were pilfered. I know what you’re thinking: But, Len … I was told that cryptocurrencies are totally secure! Nope. In this case, the attacker used hacked private keys (think: passwords) in order to forge fake withdrawals. Oh … and this just happens to be on the heels of a $611 million hacker theft from another network last August. Imagine that.

Debit: In other news, a recent study found that one in three adults have less than $5000 in retirement savings and nearly half (46%) have taken no steps to prepare for the likelihood that they could outlive their savings. Then again, if inflation continues to get worse, the only people who will have a chance at not outliving their nest egg will be those who lined their nest with at least a small amount of precious metals. No matter where they currently live …

Credit: Meanwhile, this week the blogger known as Capitalist Eric observed that, America’s “on-book debt is $30 trillion; not quite double what it was is 2013. We can reasonably assume the total debt according to generally accepted accounting principles is similarly doubled, at $450 trillion. How does one mentally conceive of such numbers? I’ll put it in simple terms: If you printed 450 trillion $1 bills, they would create a layer of paper covering the entire planet that’s one-half inch thick.” I think that puts things in perspective for even the most ardent Keynesian economists. I know … but I said, “I think.”

Debit: Anyway … it turns out that Eric was just getting warmed up, as we went on to note that “the rest of the world loaned us such vast sums because the dollar was the worlds’ reserve currency. And that worked, when the USA produced things of inherent value (like) oil and gas, manufactured goods, electronics, software, infrastructure products, and textiles. But these days we manufacture dollar bills and shoot anyone who rejects them.” He can say that again – because, when it comes to the US dollar, the honeymoon is most definitely over …

Credit: So how did we get here? Market analyst Dave Kranzler explains it this way: “The post-1971 fiat banking system enabled by the removal of gold from the monetary system is nothing more than a Ponzi scheme. One dollar of reserve capital is backed by nothing tangible – just the ‘full faith and credit’ of the issuing entity. In bankruptcy law, ‘full faith and credit’ would be considered, at best, an unsecured loan. Remember, fiat currency is an unsecured debt instrument of the issuing entity. So get in line and pray that there’s value left to be distributed to the unsecureds.” (Pro tip: There won’t be.)

Credit: Five decades after Nixon closed the gold window, Kranzler says, “it appears that Russia – likely with China’s tacit support – has set in motion a global monetary system reset.” In the new system, he anticipates that countries supplying the world with price-inelastic goods such as “oil, natural gas and food commodities, will have the power to enforce trade settlement in hard currencies such as gold. Welcome to Galt’s Gulch.” Sounds like paradise. Er … unless you’re a member in good standing of the free-lunch crowd. Or a fan of large government bureaucracies.

Credit: As market analyst Ronan Manly explains, with “Russia demanding payment for natural gas in rubles, Russian natural gas is now linked to gold via the ruble; and the same can be done with oil. So by playing both sides of the equation, Russia is fundamentally altering the global trade system while accelerating change in the global monetary system. This wall of buyers in search of physical gold to pay for commodities could certainly blow up the paper gold markets.” Yes. And that, in turn, will finally allow gold to find its true value in terms of the USD.

Debit: By the way, it should be glaringly obvious by now to even the most casual observer that if Russia begins accepting payment for its oil in the yellow metal, then other countries will almost certainly feel the need to follow suit, which will obliterate the last remnants of the current USD-based global monetary system. Unfortunately, when the dollar’s role as the world’s premier reserve currency status comes to its inglorious end, America’s middle class will feel the brunt of the pain. Why? Because its Top 5% are wealthy enough to weather the storm – and the poor have little to lose. The good news is, CBDCs are right around the corner!

Credit: Needless to say, Manly also noted this week that, “The Bank of Russia linking the ruble to gold, and commodity payments to the ruble, is a paradigm shift that the media hasn’t yet grasped. But as the dominos fall, these events could reverberate in increased demand for physical gold, blow-ups in the paper gold markets, a revalued gold price, and increased bilateral trade among non-Western counties in currencies other than the US dollar.” Yep. But other than that, “the Almighty Dollar” has come out of this economic war essentially unscathed. Okay, okay … then whaddya say we just call it a draw?

Credit: Economist and former Assistant Treasury Secretary, Dr. Paul Craig Roberts, believes that the current debt-based fiat monetary system that’s been in place since 1971 essentially “collapsed when the West seized Russian central bank reserves; and it seems that the gold ruble adds to the end of the US dollar as the world reserve currency. The implications could be vast, and Washington DC (politicians) might very well wish they had left the Russians alone.” You can say that again. Just don’t hold your breath waiting for any US government officials to admit it.

Credit: As macroeconomist Alasdair concluded last week, “In the past, an alternative currency was always the sounder one, backed by – and exchangeable for – gold coin. That is so long ago that we in the West have mostly forgotten the difference between money (that is, gold & silver) and fiat currencies. The great unknown has been how much abuse of money and credit it would take for the public to relearn the difference.” Well … it looks like we’re going to find out fairly soon.

By the Numbers

Here are some key findings from a recent study of financial literacy in the United States:

14% The share of Wisconsin residents who spend more than they earn; that’s the lowest in the US.

27% Percentage of Alaska residents who spend more than they earn; that’s the highest in the US.

28% The share of New York residents who pay the minimum on their credit cards; that’s the lowest in the US.

46% Percentage of Mississippi residents who pay the minimum on their credit cards; that’s the highest in the US.

8% The share of residents in Colorado who had a financial counseling session in the past 12 months; that’s the highest in the US.

2% Percentage of West Virginia residents who had a financial counseling session in the past year; that’s the lowest in the US.

0.5% The share of residents in New Hampshire without a bank account; that’s the lowest in the US.

13% Percentage of Mississippi residents who don’t have a bank account; that’s the highest in the US.

Source: WalletHub

Last Week’s Poll Result

How many credit cards do you currently have?

• 3 (27%)
• 4 (16%)
• 2 (15%)
• More than 5 (13%)
• 1 (13%)
• 5 (10%)
• None (5%)

More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 20 of you don’t carry any plastic in their wallets. At the other end of the spectrum, roughly 1 in 4 have at least five credit cards. As for yours truly, put me among the plurality who have three cards – a hotel rewards Visa, a gasoline card (10 cents off every gallon – woohoo!), and another Visa from my credit union (which I’ve never used).

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.

The Question of the Week

[poll id=”419″]

Useless News: The Talking Dog

A guy spotted a sign outside a house that read: “Talking Dog for Sale.” Intrigued, he decided to check it out.

Once inside, the dog’s owner encouraged the guy to ask his amazing pooch a question.

So the guy asked the dog, “What have you done with your life?”

“I’ve led a very full life,” the canine replied. “For example, I lived in the Alps rescuing avalanche victims. Then I served my country in Iraq. And now I spend my days reading to the residents of a retirement home.”

After hearing the dog speak, the guy was absolutely flabbergasted. So he asked the dog’s owner, “Why on earth would you want to get rid of an incredible dog like that?”

The owner said, “Because he’s a liar! He never did any of that!”

(h/t: Mickey T.)

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. Kentucky (2.05 pages/visit)
2. Wisconsin (2.04)
3. Illinois (2.02)
4. Massachusetts (2.01)
5. Rhode Island (2.00)

46. Oregon (1.60)
47. Louisiana (1.59)
48. New Jersey (1.52)
49. Alaska (1.50)
50. South Dakota (1.24)

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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

After reading about my spelling demons, Amanda shared this:

My husband has been known to write checks for $13 and say, ‘Keep the change,’ to avoid having to spell ‘twelve.’ But I guess there are worse things.

You better hope your hubby never has to write a check for $12,000.

If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀

Photo Credit: public domain