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 never met anyone who gets up out of their bed after a night on the town and says, ‘Oh I wish I’d had another drink last night. That would have been a great idea.’
– Arthur Matthews
There’s one surefire hangover cure, and that’s time.
— Mikhail Varshavski
Credits and Debits
Debit: Did you see this? The G7 nations are working out a plan to cap the price fetched by Russian oil. But JPMorgan analysts say Moscow’s strong fiscal position means the nation can afford to slash daily crude production by 5 million barrels without damaging their economy, while much of the rest of the world ends up feeling the pain. In fact, the analysts warn that global oil prices could reach a “stratospheric” $380 per barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts. Trust the plan, folks. With inflation already raging, I’m sure we won’t even notice.
Debit: On a related note, the Fed said it was going to begin fixing the problem by selling $47.5 billion of bonds in June as part of a long-term quantitative tightening (QT) program. The reality is the Fed sold less than $1 billion last month; a mere $728 million, to be exact. Heh. It’s almost as if the Fed knows that if they stop printing currency – or even simply withdraw more than a tiny fraction of the money supply from circulation – both the financial markets, and the entire monetary system will collapse. Strike that … they do understand, which is why they’ll shrink the money supply as slowly as possible. If at all.
Credit: As asset manager Matthew Piepenberg points out: “In 2008 the Fed’s balance sheet was under $1 trillion; in 2020 it was $9 trillion. We printed more currency in 2020 than we did from 2009 to 2014, and our public debt is at an all-time high. So the next crisis will be infinitesimally worse than anything we’ve even seen, as the Nasdaq crisis at the turn of the century was relatively confined to tech stocks, and the 2008 crisis affected real estate, and mortgage-backed and asset-backed securities.” Yep. It was a terrific party, but the bar has finally closed and the tab needs to be paid. Now we just wait for the hangover …
Credit: For his part, economist Daniel Lacalle thinks the Fed can still avoid a monetary system meltdown if inflation is “addressed by reducing central bank balance sheets, raising rates, and cutting deficit spending. There’s still time. Ending the perverse incentives of excessive monetary (printing) will create another leg down in markets, but they’ll eventually recover. The destruction of businesses and families’ disposable income is far more challenging to restore.” That’s all true. However, the Fed ultimately only cares about the banking system it is beholden to – which is going to really bad news for everyone else.
Debit: The truth is, the Fed knows very well that their fraudulent debt-based monetary system will implode unless the debt increases in perpetuity. Why? Because it’s a Ponzi scheme, pure and simple – and, as Bernie Madoff found out, when you taper a Ponzi, it collapses. The trouble is, while the Fed can avoid tapering its Ponzi, thanks to inflation, it can no longer print additional currency to stimulate the economy because the marginal utility of every new dollar conjured out of thin air not only decreases, but actually works in reverse by boosting price inflation. In other words: It’s “game over” for the Fed.
Credit: Meanwhile, London-based macro analyst Alasdair Macleod reported this week that bank credit is beginning to contract. He is also warning that this “credit contraction promises to be even worse than the Lehman crisis because central banks are sure to protect financial asset values from collapsing (by putting the printers into overdrive) – so their currencies are likely to suffer instead.” Oh, Alasdair … you’re far far too kind. Folks, when Alasdair says “likely to suffer,” he actually means “become all but worthless.”
Credit: If you’re still wondering why our debt-based monetary system is in its death throes, macro analyst Bill Holter explains that it’s because “there’s nothing left to borrow against; that is, there is so much debt that there’s very little free collateral remaining. So we’re now eating our own seed corn.” Indeed we are. And for those of you who prefer a winter equivalent: We’re burning the furniture and floorboards to keep the house warm. Either way, the final outcome is the same.
Debit: Speaking of final outcomes, the hopeless predicament of our current monetary system is remarkably similar to another historic monetary system failure. As Macleod points out: “We’re rapidly drifting onto the same rocks which sank John Law in 1720. (Today’s) central bankers, like John Law with his Mississippi bubble, are prioritizing support for financial asset values over their currencies, which is what interest rate suppression is all about. Just as Law’s fiat livres rapidly became worthless, so will today’s fiat currencies.” True … but try telling that to the “It’s different this time!” crowd.
Debit: Of course, with public faith waning in most of the developed world’s currencies due of inflation, central banks are quickly approaching a point where they will be forced to present some sort of alternative system – at least if they are interested in maintaining any semblance of economic authority. Now you know the reason behind their subtle but expanding shift to central bank digital currencies (CBDCs). In the meantime, we’ll be getting a lot more of this:
Debit: Unfortunately for all of us, CBDCs are just more of the same debt-based fiat in a different package. And it may initially fool the public; but the ruse won’t last long because it doesn’t solve the underlying debt and inflation problems. Even worse, because CBDCs will be based on blockchain technology, they’ll also eliminate the privacy protection of cash, as all CBDC transactions can be tracked and cataloged. You can also bet the government will order central banks to freeze the digital accounts of any entity it wishes, thereby depriving targeted citizens of their money and ability to survive in the normal economy. Imagine that.
Credit: So as the Fed works on its CBDC, the blatant market interventions continue. But as Franklin Sanders notes, we should “never forget that manipulations always fail. Eventually nature asserts itself and shreds the schemes like damp toilet paper. The Nice Government Men will fail to keep stocks and the dollar up, and gold, silver and interest rates down. And when it all flies apart, it’ll sound like a cross between those old country songs, Hell Among the Yearlings and The Devil Went Down to Georgia.” Uh huh. Or may I be so bold to suggest: She Got the Gold Mine and I Got Shaft, coupled with My Everyday Silver Is Plastic.
Credit: No matter which song is played last on the monetary system juke box, no one knows the exact moment it will happen, which is why asset manager Egon VonGreyerz says “what’s critical to understand is that risk is now extremely high and investors are not going to be saved by central banks. Just remember: fire insurance can only be bought before the fire starts.” And the same holds true for wealth insurance in the form of physical gold and silver. Sadly, most people will only try to buy it after they realize their nest egg’s purchasing power has been consumed by the dying dollar. Of course, by then it will be too late.
By the Numbers
A new survey analyzed 11 factors that contribute toward financial security, such as unemployment rate, income growth, debt and credit score. Based on those results, here are the ten states in the best position for financial fitness and their score on a scale from 0 to 100:
10 North Dakota (Score: 71.0)
9 Wisconsin (71.1)
8 Pennsylvania (71.2)
7 Nebraska (71.3)
6 New York (71.9)
5 Massachusetts (73.7)
4 New Hampshire (74.0)
3 Utah (74.4)
2 Montana (76.5)
1 South Dakota (77.5)
The Question of the Week
Last Week’s Poll Result
Did you buy any fireworks to celebrate Independence Day this year?
- No (95%)
- Yes (5%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that just 1 in 20 bought fireworks for the 4th of July this year. That seems quite low to me. Then again, maybe it’s a sign of inflation taking a significant bite out of people’s discretionary income.
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: Heaven and Hell
The following is an actual question given on a University of Washington chemistry mid term. The answer by one student was so profound that the professor shared it with colleagues, via the Internet, which is, of course, why we now have the pleasure of enjoying it as well:
Bonus Question: Is Hell exothermic (gives off heat) or endothermic (absorbs heat)?
Most of the students wrote proofs of their beliefs using Boyle’s Law (gas cools when it expands and heats when it is compressed) or some variant. One student, however, wrote the following:
First, we need to know how the mass of Hell is changing in time. So we need to know the rate at which souls are moving into Hell and the rate at which they are leaving. I think that we can safely assume that once a soul gets to Hell, it will not leave. Therefore, no souls are leaving. As for how many souls are entering Hell, let’s look at the different religions that exist in the world today.
Most of these religions state that if you are not a member of their religion, you will go to Hell. Since there is more than one of these religions and since people cannot belong to more than one religion at a time, we can project that all souls go to Hell. With birth and death rates as they are, we can expect the number of souls in Hell to increase exponentially. Now, we look at the rate of change of the volume in Hell because Boyle’s Law states that in order for the temperature and pressure in Hell to stay the same, the volume of Hell has to expand proportionately as souls are added. This gives two possibilities:
- If Hell is expanding at a slower rate than the rate at which souls enter Hell, then the temperature and pressure in Hell will increase until all Hell breaks loose
- If Hell is expanding at a rate faster than the increase of souls in Hell, then the temperature and pressure will drop until Hell freezes over
So which is it?
If we accept the postulate given to me by Theresa during my freshman year that: “It will be a cold day in Hell before I sleep with you,” and take into account the fact that I slept with her last night, then number two must be true, and thus I am sure that Hell is exothermic and has already frozen over. The corollary of this theory is that since Hell has frozen over, it follows that it is not accepting any more souls and is therefore, extinct … leaving only Heaven, thereby proving the existence of a divine being which explains why, last night, Teresa kept shouting, “Oh my God.”
(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. Montana (2.81 pages/visit) (!!)
2. Nevada (2.79) (!!)
3. Wisconsin (2.59) (!)
4. Kentucky (2.27)
5. Iowa (2.18)
46. Connecticut (1.53)
47. Massachusetts (1.52)
48. Hawaii (1.27)
49. Kansas (1.21)
50. Wyoming (1.17)
Whether you happen to enjoy what you’re reading (like my good friends in Montana) — or not (ahem, Wyoming) please don’t forget to:
1. Subscribe to my weekly Len Penzo dot Com Newsletter! (It’s easy! See the big green box in the sidebar at the top of the page.)
And last, but not least …
4. Please support this website by patronizing my sponsors!
Thank you!!!! 😊
(The Best of) 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
Here’s a question I got from Brandy:
What’s it take to become a sulbmie [sic] expounder of prose like yourself?
Practice, Brandy. Lots and lots of practice.
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