Black Coffee: Truth or Consequences

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?

There are only three ways to meet the unpaid bills of a nation. The first is taxation. The second is repudiation. The third is inflation.

– Herbert Hoover

The truth is an objective standard by which reality is measured.

– Tony Evans

Sooner or later, everyone sits down to a banquet of consequences.

– Robert Louis Stevenson

Credits and Debits

Debit: Did you see this? Tesla is significantly increasing prices at its Supercharger stations across Europe as the continent continues to deal with a sprawling energy crisis that shows no signs of slowing. How big are the increases? Well … it used to cost no more than $5 for a full charge at a Supercharger; now, prices are near $30, which means the cost to charge those “green” EVs is fast approaching the cost to fill up an internal combustion engine car with gasoline. One can only imagine how much more expensive electricity will be if EVs ever become a majority of the cars on the road, rather than just a few percent. In the meantime …

Debit: On a related note, this week a German bakery was slapped with a $330,000 gas bill from its energy provider – that’s an average of $82,500 for the four-month billing period. Compare that to last year, when the bakery’s large furnaces and heating system expenses averaged $5856 per month. “Are they crazy?” said owner Eckehard Vatter, who was given just two weeks to pay the bill. The owner also complained that he wasn’t given a reason for the price increase. Hmm. Maybe he should ask the European bureaucrats who are dictating German energy policy.

Debit: Meanwhile, on this side of the pond, more than half (56%) of all US households say inflation has caused financial hardships. In fact, the number of households reporting financial troubles caused by price increases has gone up 11% since November 2021. Then again, that’s really not surprising, considering that Americans will have to come up with an extra $11,500 this year if they want to enjoy the same standard of living they had in 2020.

Credit: Of course, the impact on American households depends on their place on the economic ladder. For example, half of all US income is earned by households making more than $100,000 per year. And as Morgan Stanley analyst Andrew Sheets points out, “since most of those households own their own homes, and either have no mortgage or have refinanced into a 30-year fixed-rate mortgage at an extremely low rate, their largest expense isn’t rising because, even as the Fed is hiking, their nominal wages are rising. So for them financial conditions are easing.” And if you find that to be surprising, then you haven’t seen this …

Debit: On the other hand, economic conditions look a lot different for those in the lower-income quartiles, where households are more likely to face high rent inflation and be more impacted by higher food and energy costs. In fact, the average American has been relying on debt to maintain their standard of living since 2009. And since then, the amount of debt required to maintain that quality of life has only grown; today it requires $7000 of debt a year. So living standards have been artificially high for more than a decade. Although some “experts” continue to insist that inflation is actually good for us. No, really:

Credit: Sadly, this inflation crisis we now find ourselves in was preventable – the result of uncontrolled government spending that’s been enabled by the Fed for more than a decade. Approximately $8 trillion has been conjured out of thin air by the Fed since the Great Financial Crisis of 2008 under the guise of quantitative easing (QE). But that monetary parlor trick can only be played for so long because, as macro analyst Tom Luongo noted this week, “you can’t heat your home or feed your kids with digital euros or dollars. That’s the QE trap – and it means at some point there will be a reckoning.” Yes; just don’t tell that to the free-lunch crowd.

Credit: If you’re looking for an apt analogy, picture the monetary system as the Titanic, which struck an ice berg (the Great Financial Crisis in 2008) and has been taking on water (hyperinflating) ever since. But now the ship is listing badly and captain Jerome Powell is painfully aware of its inevitable fate. As such he knows his only job is to keep panic at bay for as long as possible. How? Macro analyst, Daniel Oliver, says the Fed will try to keep the system afloat a bit longer by “decreasing both the money supply (the ability to spend) and asset values (the propensity to spend).” It may buy a little time – but it will be all in vain. Here’s why:

Debit: Needless to say, the Fed’s desired plunge in asset values is progressing as planned. Oliver notes that, “Notably, the $6.1 trillion collapse in household net worth recorded in the second quarter was net of a $1.4 trillion gain in real estate values. And the third quarter will show another large negative print as housing prices roll over. This metric should continue to drop sharply as the lagged effect of the Fed’s previous rate hikes bite . . . and the Fed is still raising rates.” In the meantime, the uneasy calm continues – especially in the housing market …

Credit: I know what you’re thinking: The Fed’s plan should work because once they pop the market bubble, falling asset prices will tame inflation. Yes. But here’s the rub: The debt-based monetary system will implode under sustained deflation. So once the bubble pops, the Fed will have to almost immediately reverse course and print even more currency than it already has to keep things from breaking. And as, macroeconomist Alasdair Macleod notes, central bank printing “has a far greater inflationary impact than the deflationary impact from contracting bank credit alone.” In other words: it won’t be long until the monetary system is …

Debit: By the way, Macleod also warned this week that, “Attempts to rescue the American, European, and Japanese economies by replacing commercial bank credit with central bank credit will probably be the coup de grace for fiat. We can begin to anticipate the path to the destruction of purchasing power for all fiat currencies, not just those of Zimbabwe, Turkey, and Venezuela and other nations. A global hyperinflation is proving impossible to avoid.” Don’t tell that to the mainstream media – or those charlatan economists who believe in the Magic Money Tree …

Credit: Unfortunately, as conflicts in Ukraine and elsewhere around the world continue to unfold, macro analyst Steven Leeb is warning that, “It’s no accident that we’re going to have a bipolar order or – if the West continues to refuse to cooperate – something much worse. As a result, we’re on the verge of a massive change in the global monetary system. So anybody who cares about their own (financial) security must have (physical) gold and silver.” I think almost everybody cares about protecting their wealth. The trouble is, most people have absolutely no idea that they are at risk.

Credit: And finally … For those who are still trying to make sense of it all, I’ll let Mr. Oliver explain, “Central banks print like this not because they’re insane, but because the path to hyperinflation is paved with deflationary scares; and the path to hyperinflation is also characterized by sharply-rising volatility. The economic data suggests we’re about witness both. Gold will seem to be volatile but it’s, in fact, the anchor of stability; its nominal price volatility reveals the decaying spiral of fiat currency.” Indeed. Gold can be your bedrock of monetary truth in a world full of fraud, lies, deceit – but only if you let it.

By the Numbers

Among the 50 biggest US cities, here are the ten where you can get away with making the least and still afford an average apartment, assuming 30% of your income is spent on rent:

10 Omaha, NE (rent: $1339; min. income: $53,554)

9 San Antonio, TX ($1337; $53,461)

8 Tucson, AZ ($1332; $53,299)

7 Memphis, TN ($1316; $52,627)

6 Indianapolis, IN ($1301; $52,059)

5 Kansas City, MO ($1286; $51,437)

4 Arlington, TX ($1264; $50,573)

3 Corpus Christi, TX ($1102; $44,069)

2 El Paso, TX ($1100; $44,010)

1 Wichita, KS ($719; $28,741)

Source: ApartmentGuide.com

The Question of the Week

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Last Week’s Poll Results

Who handled the family’s personal finances when you were growing up?

• Mother (41%)
• Father (26%)
• Both parents (22%)
• I’m not sure (11%)

More than 2200 Len Penzo dot Com readers responded to last week’s question and it turns out that in more than 3 out of 5 households, it was Mom who took care of the family’s finances, either all by herself or with help from Dad. That lines up with my house when I was growing up, where my mom was the one who handled the everyday finances. Today, I am the household CEO, while the Honeybee handles the household CFO duties.

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: Sugar Daddy

A 55 year old multi-millionaire was getting married to an unbelievably gorgeous woman who was just 22. So he decided to throw a grand wedding reception on the couple’s big day.

Of course, some of his friends were quite jealous of the millionaire’s 22 year old bride. So in a quiet moment, one of them took the millionaire aside and asked how an older guy like him ever managed to land such a beautiful young woman.

“Simple,” said the millionaire, “I faked my age.”

His friend was stunned. “How old did you say you were?” he asked.

“Well,” the millionaire replied, “I told her I was 89!”

(h/t: Cowpoke)

More Useless News

Here are the top five articles viewed by my 43,515 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. Mailbox: What Happens to My Mortgage If Hyperinflation Kills the Dollar?
2. 19 Products That Get Deep Retail Discounts In Autumn
3. How I Survived Two Armed Robberies (and How You Can Too)
4. What’s the Difference Between Frugal and Cheap?
5. Why Insurance Companies Don’t Want You to Know About Concierge Doctors

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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 piece explaining why whirlpool tubs are for suckers, bjbeetlebabe had the following question for me:

Oh, my gosh! When were you in my bathroom to take this picture??

Last week. Hey … when you got to go, you got to go!

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