Black Coffee: The Future of Money

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’ve got another busy weekend ahead of me, so let’s get right to this week’s commentary …

Money is a mechanism for control.

– David Korten

The desire for gold is not for gold; it is for freedom and benefit.

– Ralph Waldo Emerson

Credits and Debits

Debit: Did you see this? For only the third time since 1926, both US stocks and bonds lost money in 2022. How rare is that? Well … the only other times that happened were way back in 1931 and 1969.

Debit: Looking a little closer, US Treasury 10-year notes returned negative 16.5% – that’s the worst return on record. And over the last two years the 10-year note has returned negative 21%. As for stocks, the only two sectors generating positive returns in 2022 were energy (+65%) and utilities (+2%). And although it’s early, 2023 seems to be on a similar trajectory …

Debit: Then again, for as bad as the stock and bond markets faired, the cryptocurrency sector was even worse. In fact, cryptocurrencies were utterly decimated, with half of the top 10 crypto funds from 2022 now either bankrupt, missing in action, or both.

Debit: And although cryptocurrencies now find themselves on the back foot, central banks are still pushing a similar ledger technology known as the CBDC. But unlike cryptos that utilize a distributed ledger, CBDCs use a controlled ledger managed by the central banks – and the governments they serve. To date, 12 CBDCs are in use, 17 more are in limited beta-test pilot programs, 33 are in development and 39 are still in the research phase. In the US, the Fed has advanced beyond the research phase, and they’re now actively developing and testing prototypes.

Credit: Meanwhile, macro analyst Matthew Piepenburg is warning that CBDCs will most likely be introduced during the next monetary crisis, thereby allowing the government to convert your dollars to these digital central bank Frankenstein coins “while simultaneously keeping a percentage for themselves to pay its debts. And given that the entire world is over $300 trillion in debt, one can bet that a massive debt restructuring – akin to a global bankruptcy declaration – is inevitable. CBDCs are thus being rolled out beforehand to make this theft more efficient.” Then again, CBDCs will be super convenient. So there’s that.

Debit: In the meantime, the world’s central banks will continue to push the “convenience” of their fraudulent fiat CBDCs to the public, while ignoring the fact that they can expire, thereby preventing them from being used for long-term savings. Those same central banks also fail to mention that because central banks don’t have to worry about bank runs, CBDC holders are extremely vulnerable to involuntary incremental confiscation over time via negative interest rates. Even worse, CBDC transactions aren’t private – and any citizen who challenges government policies could, theoretically, even have their CBDCs frozen. Imagine that.

Credit: Of course, central banks are happy to extoll the virtues of CBDCs for public use – something they would never do for gold. Even so, they continue to hold the yellow metal in their vaults. In fact, last week Russia’s finance minister announced that their National Wealth Fund (NWF) doubled its maximum permitted allocation limits to 60% in Chinese yuan and 40% in gold. Historically, the NWF held US dollars, yen, euros and pound sterling. Today, it holds none of these currencies – it does, however, hold thousands of tons of gold. Talk about a de-dollarization signpost.

Credit: Most investment analysts have been educated to believe that gold is not money. Instead they think that cash notes issued by a central bank is money. But as macroeconomist Alasdair Macleod observes, all fiat currency, including the US dollar “very clearly has counterparty risk, minimal though that usually is, and it’s accounted for on a central bank balance sheet as a liability. Under any definition, these are the characteristics of credit and matching debt obligations.” Very true, Alasdair. Very true. Now can you please explain this? (h/t: the Honeybee)

Debit: Despite this, these same investment analysts who have a vested interest in seeing the current debt-based fiat monetary system carry on for as long as possible, have trouble explaining away the reason why central banks continue to hold massive quantities of gold bullion in their vaults as reserves. Although, to be fair, even central bankers will bend themselves into pretzels in order to try and deny the real reason why they hold the yellow metal. Which is why watching this particular exchange never gets old, pathetic as it is:

Debit: Of course, an honest monetary system would never conflate credit – or digital tulips – with real money. But here we are. And we’re now stuck with the long-term consequences of both scams.

Credit: As Macleod points out, “Over decades, centuries, and even millennia gold’s purchasing power as measured by commodities and goods has, on average, varied remarkably little. But we don’t need to go back centuries – looking at crude oil prices since the dollar was on a gold standard makes the point for us.” He’s right. See for yourself:

Credit: By the way, Macleod also notes that “when fiat currencies begin to slide to the point where domestic Americans realize that it’s the dollar falling and not gold rising, a premium will develop for gold’s value against consumer items and assets, such as residential property, reflecting the awful damage a currency collapse does to the collective wealth of the people.” Unfortunately, for those without a little wealth insurance in their portfolio, that epiphany will come far too late to make a difference.

Last Week’s Poll Results

How did your investment portfolio do this year?

• It finished in the red (65%)
• It finished close to even (18%)
• It finished in the black (9%)
• What investment portfolio? (8%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that, among those with an investment portfolio, just 2 in 7 were able to eak out a positive return in 2022. Let’s hope 2023 has better results for everyone out there.

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="456"]

By the Numbers

Did you ever wonder which US states are the most – and least – vulnerable to identity theft and fraud? Well … thanks to a recent analysis, you can wonder no more:

50 Montana (least vulnerable)

49 Arkansas

48 Indiana

47 Maine

46 Wyoming

5 Pennsylvania

4 Colorado

3 Rhode Island

2 Louisiana

1 Delaware (most vulnerable)

Source: WalletHub

Useless News: Playing Through

A young man, who was also an avid golfer, found himself with a few hours to spare one afternoon. So he figured that if he hurried and played very fast, he could get in nine holes before he had to head home.

Just as he was about to tee off, an old gentleman shuffled onto the tee and asked if he could accompany the young man, as he was golfing alone. Not being able to say no, the young man allowed the seasoned gentleman to join him.

To the young man’s surprise, his older playing companion moved fairly quickly; the old man didn’t hit the ball far, but he plodded along consistently and didn’t waste much time.

Finally, they reached the ninth fairway and the young man found himself with a tough shot. There was a very large pine tree about 20 feet in front of his ball and directly between him and the green.

After several minutes of debating how to hit the shot, the old man finally said, “You know, when I was your age, I’d hit the ball right over that tree!”

And so, with that challenge placed before him, the young man swung as hard as he could. The ball quickly went high in the air on a beeline toward the flagstick, only to smack into the top of the tree and thud back onto the ground not more than a foot from where the ball had originally laid.

The old man looked at the ball, and then offered one more comment to his young playing partner, “Of course, when I was your age, that pine tree was only three feet tall.”

(h/t: Tom)

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 a post from the bi-weekly “Grandfather Says” series by RD Blakeslee on the best thing about getting old, Ken in NZ added this:

“The best thing about being 60, 70, 80, or 90 is that you’ve made it that far.”

Pro tip: Regular naps actually prevent old age — especially if you take them while driving.

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

I’m Len Penzo and I approved this message.

Photo Credit: public domain