Black Coffee: A Fistful of Dollars

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.

Another busy week is crossed off the list. So without further ado, let’s get right to the commentary …

A decent cowboy doesn’t take what belongs to someone else – but if he does he deserves to be strung up and left for the flies and coyotes.

— Roy Bean

We all get the same amount of ice. The rich get it in the summer. The poor get it in the winter.

— Bat Masterson

Credits and Debits

Debit: Did you see this? The “official” inflation rate as measured by the CPI has remained above 2.5% for 13 consecutive months. And while that may seem like a long time, you should know that there was a period between 1967 and the early 1980s where CPI stayed above 2.5% for 188 consecutive months; a period characterized by similar macro forces serving as tailwinds for higher consumer prices. The good news is: If we are destined to break that dubious record, we only have to endure these runaway price increases for another 14 years!

Credit: Unfortunately, for the policy makers in Washington DC, macroeconomist Peter Schiff noted this week, “Americans care more about rising gas and food prices than the political class would like. So they trot out (politicians) to explain how government spending actually reduces inflation, and push pseudo-economic ideas like modern monetary theory to explain why more federal spending is always the cure.” Of course, government spending funded by increasing the currency supply is precisely why prices are now rising uncontrollably. And if you don’t believe me, just ask the late great economist Milton Friedman:

Debit: Of course, after a year of rampant inflation, the Fed has done absolutely nothing to tamp it down. But this week the Fed hinted that there would be multiple 50-basis-point (bp) rate hikes to the Fed Funds Rate (FFR) in the coming months, if not 75 bps. I know. If true, it means the gravy train for consumer- and corporate-debtors who have spent most of the past 14 years benefitting from the Fed’s zero-interest rate policy (ZIRP) will soon be coming to an end. However, what’s still unclear is whether or not rising rates will put an end to price inflation too. Er … assuming the Fed isn’t bluffing.

Credit: For his part, macro analyst Matthew Piepenburg believes that any Fed campaign to raise interest rates in an effort to squash inflation will be short-lived. In fact, he thinks a desperate attempt by the Fed at yield curve control (YCC) is coming sooner rather than later, justifying his prediction by pointing out that “it’s essential to recognize the illusion of Fed power in general, and the tragic fragility of the most liquid, doped, and artificial bond market in the world.” In other words: the Fed doesn’t have many rabbits left to pull out of its magic hat. Just ask the Bank of Japan …

Credit: Meanwhile, macro analyst Bill Holter thinks the Fed’s promises to sharply raise rates is just more central banker sleight of hand. He notes that “it’s impossible to raise rates on the most leveraged financial system in history. Raising rates will crush the real economy, and the financial markets.” Holter says this is because today’s markets are simply far too large today for the Fed to manage, as the central bank has increased its balance sheet ten times over since 2009 – from $900 billion to $9 trillion – just to keep the system from imploding. If true, that means the wizards at the Fed will continue regaling us with this tired trick:

Debit: Unfortunately for the Fed, Holter says, despite adding $9 trillion to its balance sheet, the financial markets are back to where they were just prior to the Great Financial Crisis in 2008 – and this time the central bank can’t afford another 10-fold increase from here to keep the game going any further, as it will destroy the monetary system. The good news is a new monetary system is eventually going to fill the void; in the meantime, Russia appears to be quickly moving to a gold standard.

Credit: Nevertheless, financial analyst Lance Roberts says the Fed will never change course because it is beholden to Wall Street. He notes that, “history clearly shows the Fed’s lack of fortitude to withstand financial instability. We suspect the Fed will be back to zero interest rates, and monetary quantitative easing (QE), far sooner than many expect.” In other words: the Fed is going to keep its foot on the gas pedal, despite an economy already drowning in liquidity. But don’t you worry – they’ve got this. No, really …

Debit: Just how absurd are the markets? Here’s just one example: Before Netflix shares plunged 37% last week, Wall Street considered the streaming company to be more valuable than ExxonMobil – which, as expected, led to the same obvious reaction from the energy behemoth’s more rational investors …

Credit: So how does inflation in both consumer goods and over-priced assets end? Schiff says, “Only with a recession or depression” – and with US GDP contracting 1.4% last quarter, a recession may be closer than we think. Schiff says, Congress needs to “slash spending, the Fed must stop buying assets and (suppressing) interest rates, and US debt must be allowed to mature and roll off the Fed’s balance sheet.” He also says the US should “sell land and other federal assets to pay its Treasury obligations and fund future Social Security entitlements.” That makes perfect sense – which is why it’ll only happen after the entire system implodes.

Credit: According to financial analyst Rafi Farber, a reckoning is coming – and soon. He says the world’s central banks can no longer control inflation by raising interest rates because that would put their balance sheet equity deep into negative territory, “which ultimately destroys confidence in their currencies.” As a result, he warns that central bankers are now in a situation where, ironically, “the more they raise rates, the higher prices will rise, and there’s nothing they can do about it short of liquidating all of the bad debt” – which should greatly concern sovereign bond investors. “That,” Farber says, “will be the great reset.” Speaking of troubles in Europe …

Credit: By the way, Piepenburg sees a similar future, predicting that the global monetary system “end game will boil down to YCC, which means more currency debasement – and central banks that secretly favor inflation over truth, and markets over Main Street, while killing the purchasing power of their mouse-clicked fiat currencies that are now dying in your checking account.” For those unsure about how to protect their hard-earned nest eggs, Piepenburg says physical gold offers “currency insurance in a world where currencies are already burning to the ground.” Yep. And 5000 years of human history proves it.

Credit: One final note: If you find yourself mentally exhausted from waiting for the monetary system game to finish playing out, take comfort from macro analyst Alasdair Macleod, who helped put things in perspective this week when he noted that, “Those of us arguing for sound money are fighting City Hall, as the establishment is still suppressing the rivals to its paper currencies. But those of us who understand that the world of paper money is about to be undermined will just keep stacking (gold and silver) and be thankful for the opportunity.” Indeed we will. At least while we still can.

By the Numbers

With the end of April here, let’s take a look at the year-to-date performance of select major assets:

37.1% Oil

24.4% Uranium

5.6% Gold

– 0.1% Silver

– 2.4% Platinum

– 13.9% S&P 500

– 17.2% 20-Year Treasury Bond ETF

– 19.2% Bitcoin

– 22.2% Nasdaq

– 25.4% Ethereum

Source: The Happy Hawaiian

The Question of the Week

[poll id="422"]

Last Week’s Poll Results

How old were you when you finally left the nest?

• 21 or older (34%)
• 18 (31%)
• 17 or younger (16%)
• 19 (13%)
• 20 (6%)

More than 2200 Len Penzo dot Com readers responded to this week’s poll and it turns out that 3 in 5 of them left home in their teen years. Compare that to a 2020 Pew study that found 52% of adult children still live with their parents. As for yours truly, I moved away from home to attend college one month after my 19th birthday.

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: The Stomach Ache

A man has a terrible stomach ache early one morning, so he goes to the hospital. When the doctor walks into the examining room, the guy says, “Doc, I feel terrible. I think I might have swallowed some live bugs when I was eating last night …”

The doctor then pressed on the man’s stomach in several places and then began to frown. He then asked his patient, “What time of day do you usually poop?”

“It’s like clockwork!” the guy replied. “I’m in the john at 10:45 every morning.”

The Doctor nodded his head and then said, “That’s good to know – but unfortunately it looks like we’re still going to have to operate. I’ll schedule the procedure for later this afternoon.”

Well … all of the bugs inside the man overheard this and began to panic. One of them shouted to his friends, “I don’t know about you guys, but I’m going to hide behind the liver!”

A second bug said, “Not me; I’m gonna hide behind the spleen!”

Then a third one spoke. He said, “You guys can do what you want, but I’m taking the 10:45 out of here!”

(h/t: Cakesquid)

More Useless News

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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 my article highlighting 18 amazing facts about ATM machines, Jack offered this suggestion:

Don’t forget the gold-dispensing ATMs a la Gold-To-Go. How else are you going to get your 24-karat fix when you’re jonesing for the yellow metal?

No need to explain yourself, Jack. You had me at “gold-dispensing ATM.”

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