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.
Well … another busy week is behind us. So with that in mind, let’s get this party started …
Inflation can be pursued only so long as the public still doesn’t believe it will continue. Once the people realize that the inflation will be continued, and that the value of the monetary unit will decline more and more, then the fate of the money is sealed.
– Ludwig von Mises
We know they’re lying. They know they’re lying. They know we know they’re lying. And we know they know we know they’re lying — but they’re still lying.
— Aleksander Solzhenitsyn
You can ignore reality, but you cannot ignore the consequences of ignoring reality.
— Ayn Rand
Credits and Debits
Debit: Did you see this? For the second consecutive quarter, US household net worth fell. The end of the second quarter saw American households lose an astounding $6.1 trillion – that’s the largest quarterly loss ever. Yes, even bigger than the aggregate loss reported in the first quarter of 2020 during the peak of those ludicrous pandemic lockdown policies. Well … so much for that “strong” economy that the government and mainstream media continue telling us about.
Debit: In percentage terms, US household wealth fell from $150 trillion to $144 trillion, which is 4% – but keep in mind that is nominal wealth. However, thanks to inflation rising 2.3% over the same period – including a run of 27 consecutive months – real wealth fell by $9 trillion or 6.3% – if you accept the highly suppressed CPI data. And if you don’t, then real wealth plummeted by 9% – if not more – in the second quarter. Yes; that is financially devastating to most people. That being said, the mainstream media “reported” this week that American consumers’ dwindling paycheck purchasing power is their fault:
Credit: Of course, inflation doesn’t have a monopoly on Americans’ wealth destruction – government bureaucrats who are permanently latched onto the productive private sector teat do too. For example, as the inimitable MN Gordon points out, “In San Francisco, prospective restaurateurs must pay 17 fees totaling $22,648 before they can sell their first sandwich; it’s absolute insanity. And it’s highly destructive. So why bother? What’s the point of opening a restaurant when you can make more working for the city? Your day ends at 5 pm, you get weekends and holidays off, and the benefits are wonderful.” True. As for private sector stiffs, it ain’t all bad …
Credit: According to macroeconomist Alasdair Macleod, “We are seeing the West enter a new round of European monetary inflation to pay everyone’s energy bills. The euro, yen, and sterling are already collapsing – the dollar will be next.” Needless to say, when that happens, it’s going to catch a lot of people by surprise. Oh, and speaking of surprises …
Credit: On this side of the pond, Harvard professor Jason Furman has calculated that, “in order to get the inflation rate to the Fed’s target of 2% by 2025 would require an average US unemployment rate of about 6.5% in 2023 and 2024. With unemployment currently sitting at 3.7%, a 6.5% unemployment rate in 2024 would be equivalent to almost 5 million more unemployed than there are today – that’s an 80% increase.” In other words: If you think the Fed is going to engineer a soft landing, you’re probably related to this unwitting dad …
Debit: By the way, Macleod also warned that, “Russia has progressed her power over Asian nations, persuading Middle Eastern energy producers that their future lies with Asian markets rather than Europe, while subsidizing Asia’s industrial revolution with discounted energy. But there is one piece in Putin’s jigsaw yet to be put in place: a new currency system to protect Russia and her allies from an approaching western monetary crisis.” At least not yet. But it’s coming; it’s coming.
Credit: Needless to say, if the US dollar loses its exorbitant privilege of being the world reserve currency, the American middle-class will experience a sharp, if temporary, decline in its standard of living. And that day is getting closer, as Russia is now assembling a new gold-backed multi-currency system that will combine plans for a new Asian trade currency with its proposed Moscow World Standard for gold. Sadly, most Americans continue to be oblivious to this news – or how a new global monetary system could lower their current standard of living. In the meantime …
Credit: Frankly, it’s hard to blame those who believe the “Almighty Dollar” will remain mighty forever. But as David Brady observed this week, “Given the fiscal and monetary policies of the West and the weaponization of the dollar, the East is clearly turning away from the dollar.” Based on recent fiscal spending announcements in both Europe and the US, Brady predicts that the move away from the dollar is now “likely to accelerate. And what is the alternative of choice? Gold!” Imagine that.
Debit: At least one analyst estimates that Russia has accumulated a gold hoard approaching 12,000 tons. Compare that to the 8333 tons America claims to have in Fort Knox and several other vaults within the United States. Then again, with the last comprehensive audit of US gold reserves occurring more than seven decades ago, that number is more than a little suspect at this point – which should be disconcerting to every American when you realize that the old “he who owns the gold, makes the rules” saw applies to nations in the same way that it applies to individuals.
Credit: Meanwhile, Russia is expanding economic cooperation with China, which has an enormous gold stash of its own. How big? Well … China is not only the biggest importer of gold in the world, but it also produces 400 tons of the yellow metal globally too; more than any other nation. Now consider that China has imported nearly 3000 tons since 2012 alone, and then add their gold production over the past 20 years as well as production from mines they own worldwide, and the number is likely closer to 20,000 tons – this despite their declared official holdings of just 1900 tons. Although a long-awaited update may be coming.
Credit: In the meantime, asset manager Egon VonGreyerz says we can “expect frantic money printing in a futile attempt to solve an insolvable problem. Then when that fails, we’ll see a disorderly reset that will (force) the world to start afresh with virtually no debt, a much smaller economy, and better moral and ethical values.” And while that will be great news for everyone in the long run, in the short run it will be catastrophic for anyone who doesn’t own wealth insurance or income-producing hard assets. Why? Because any cancelled debt will also destroy the debt-based paper assets on the other side of the ledger.
Debit: What we’re now witnessing is not the rise of China or Russia – it’s the fall of America’s phony fiat-currency empire that was born in 1971 when the dollar was officially decoupled from gold. After all, it’s no coincidence that, prior to 1971, a single blue-collar worker could comfortably support a stay-at-home spouse and multiple children, own a modest suburban home with a car or two in the garage, and still have enough discretionary income left over to enjoy an annual family vacation. The good news is, those days are coming back. The bad news is most Americans’ nest eggs will be wiped out before we finally get there.
By the Numbers
According to a recent survey of millennials and Gen Zers looking for their first home, here are the biggest barriers to homeownership:
13% Not enough desirable homes for sale
13% Too much debt
14% No desire to own a home
17% Mortgage rates are too high
22% Not ready to buy
22% My credit isn’t good enough
36% Can’t afford the down payment
39% Prices are too high
43% Not enough income
The Question of the Week
Last Week’s Poll Result
How large of an estate do you expect to leave for your children?
- $100,001 to $500,000 (30%)
- More than $1 million (23%)
- $500,001 to $1 million (17%)
- $0 (16%)
- $1 to $100,000 (14%)
More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that 2 in 5 said their children can expect to receive an inheritance of at least $500,000. Fortunate kids, indeed.
For the second week in a row, this week’s question was submitted by Kevinootz. 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: Long Cold Winter
One day in early September the chief of a Native American tribe was asked by his tribal elders if the coming winter was going to be cold or mild. So the chief asked his medicine man, but he too had lost touch with how to read the signs from the natural world around the Great Lakes.
In truth, neither the chief or the medicine man had any idea about how to predict the coming winter. Because of this, the chief decided to take a modern approach — so he called the National Weather Service in Gaylord, Michigan.
“Yes, it’s going to be a cold winter,” the meteorological officer told the chief. Consequently, the chief went back to his tribe and told the men to collect plenty of firewood.
Two weeks later the chief decided to call the scientists at the National Weather Service again and ask for an update. “Are you guys still forecasting a cold winter?” he inquired.
“Actually, we now think it’s going to be significantly colder than normal this year,” the weather officer told him.
As a result of this brief conversation the chief went back to the tribe and told them that it was imperative that every able-bodied man, woman and child should try to collect as much wood as they could possibly find.
A month later the chief called the National Weather Service once more to make sure that the coming winter was still going to be a really cold one. “Yes,” he was told, “In fact, it’s going to be one of the longest and coldest winters ever.”
“How can you be so sure?” the chief asked.
The weatherman replied: “Because the Native Americans of the Great Lakes are collecting firewood like crazy.”
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. Alberta (2.10 pages/visit)
2. Prince Edward Island (2.06)
3. Yukon (2.04)
4. Northwest Territories (2.00)
5. Ontario (1.80)
9. New Brunswick (1.71)
10. Nunavut (1.70)
11. Nova Scotia (1.69)
12. Quebec (1.66)
13. Saskatchewan (1.58)
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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 me at: Len@LenPenzo.com
This week, Shaun dropped the following question in my inbox:
Hey, Leo! [sic] I’m thinking of starting a blog. Got any tips?
Here’s one: blogging is for dinosaurs. Everybody’s a podcaster now!
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: stock photo