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 …
Until governments can prove their interests are with the people, and politicians refrain from defrauding the masses through currency debasement for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible – forms which only the precious metals provide.
— Elgin Groseclose
The Golden Rule: He who has the gold makes the rules.
– Anonymous
Credits and Debits
Debit: Did you see this? Roughly 70% of the country’s wealth is now in the hands of just 10% of the population, while the bottom half has only about 3% of wealth. When focusing only on savings and bank deposits, the numbers are even more skewed; 40% of those deposits are held by the top 1%, with the top 10% accounting for nearly all the rest. As for the reason why the bottom 90% aren’t in the top 10%, this has a lot to do with it:
Credit: Last week we noted that there is a bill in Congress that proposes to peg the US dollar (USD) to a fixed weight of gold bullion. Now Texas legislators have introduced a bill that would create a state-issued, gold-backed digital currency. Enactment of this legislation would create an option for people to transact business in sound money, set the stage to undermine the Federal Reserve’s monopoly on money and create a viable alternative to a central bank digital currency (CBDC). And unlike the bill in Congress, this one will probably pass. Then again, it’s still a digital currency, which suggests …
(h/t: @Apt_Learner)
Credit: By the way, the legislation requires the Texas state comptroller to establish a digital currency with 100% gold backing, that is held in trust at the Texas state depository. Furthermore, the new digital currency is also required to be fully redeemable in cash or gold. And, no; this is not a late April Fool’s day joke. Let’s just hope those Texas legislators don’t snatch defeat from the jaws of victory. As for those of you who prefer a more graphic description of what I’m talking about, let’s go to the tape:
Debit: Meanwhile, the world’s central banks are continuing to develop and experiment central bank digital currencies (CBDCs), which are the latest tool by governments and central bankers in their dangerously misguided war on cash. Why are they so dangerous? Because elimination of cash creates the potential for governments to not only track, but also control consumer spending. In fact, to no one’s surprise, Nigeria is currently in a mighty struggle to win public acceptance of its CBDC. At the same time, many nations – including China, India, and the US – have all launched pilot programs to test CBDCs.
Credit: Indeed, as macroeconomic analyst Iain Davis warns, “CBDCs are the endgame. If it is universally adopted, they will afford the bankers complete control over our daily lives. The surveillance grid will be omnipresent and every aspect of our lives will be engineered.” Yes, it’s disturbing — but not surprising. Just ask this guy:
Debit: For those looking for some encouraging news, there is a bill in Congress that would prohibit the Fed from establishing a CBDC, although the odds of it ever becoming law are far from certain. Let’s hope it does become law because, according to Davis, “the whole point of a CBDC is to control the herd and enhance the power and authority of the parasite class. CBDC is a social engineering tool designed to establish a prison planet. Unless you want to be a slave, there is no possible justification for using CBDC. Submitting to CBDC enslavement truly is a ‘choice.'” Imagine that.
Credit: Thankfully, there are alternatives out there that not only guarantee your financial freedom, but also act as a superior form of money too. How superior? Well … Professor William Greene, who is an expert on constitutional tender, said in a paper for the Mises Institute that when enough Americans actually start using gold instead of Federal Reserve notes, it would effectively nullify the Fed and end the federal government’s monetary system monopoly. Yeah … that’s sounds like superior money to me.
(h/t: r/wallstreetsilver u/boxofusedleftsocks)
Credit: For those wondering exactly how gold-backed state currencies could pull off a monetary system coup, financial reporter Michael Maharrey points out that “creating a gold-backed digital currency would take another step in the process of abolishing the Federal Reserve system by attacking it from the bottom up; pulling the rug out from under it by working to make it irrelevant at the state and local levels, and setting the stage to undermine the Fed monopoly by introducing competition into the monetary system.” One can only hope. And on a related note …
Credit: Of course, short of completely denationalizing our currency, returning the monetary system to a version of the gold standard with circulating specie would be an even better alternative, as it would ensure a tighter yoke on politicians’ desire to spend more than the nation earns.
(h/t: @goldseek)
Credit: It’s not a coincidence that the onset of all these banking problems in the western financial system is consistent with the sudden emergence of multiple countries suddenly appearing eager to abandon the dollar based monetary system. And all of the latest indications strongly suggest that any new system that eventually emerges from Russia and China to replace the current fraudulent debt-based USD system – whatever it is – will be based on a gold standard.
(h/t: @theapebitcoiner)
Credit: Unfortunately, as financial commentator Jeffery Tucker points out: “The case for a gold standard is tied to the case for a limited government that follows the Constitution and protects the rights of the people. And that’s precisely the problem that (statists) have with the idea; it puts a hard stop on Fed monetary discretion. It also requires the federal government to balance its budget the same way that states have to today. Lacking … the power to print unto infinity, (most) debates today about federal policy, domestic and foreign, would melt away.” In the meantime …
Debit: So the waiting game for the next global monetary system continues. Until then, the Fed will remain trapped in its monetary policy roach motel where any attempts to ease banking stress by lowering interest rates will accelerate price inflation and hasten the demise of the USD, while further tightening monetary policy will place even more pressure on banks and increase the likelihood of an outright financial depression. For now, the banking crisis seems to be taking precedence over fighting inflation. But it really doesn’t matter because, in the end, both paths lead to a new monetary system backed by gold.
The Question of the Week
[poll id="470"]
Last Week’s Poll Result
Chocolate, vanilla or strawberry?
- Chocolate (45%)
- Vanilla (38%)
- Strawberry (17%)
More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that when given a choice, a strong plurality prefer chocolate to vanilla or strawberry. Frankly, I’m surprised the chocolate lovers couldn’t form a majority.
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.
By the Numbers
With the year-over-year inflation rate at 5.0% in March, the personal-finance website WalletHub today released its report on inflation in 22 major US metropolitan areas. Here are the metropolitan areas where inflation is rising the most – and the least:
22 Honolulu, HI (year-over-year CPI increase: 3.3%)
21 Minneapolis, MN (3.4%)
20 Los Angeles, CA (3.7%)
19 Washington, DC (3.8%)
18 Anchorage, AK (4.0%)
5 Detroit, MI (7.0%)
4 Atlanta, GA (7.2%)
3 Tampa, FL (7.7%)
2 Seattle, WA (8.0%)
1 Phoenix, AZ (8.5%)
Source: WalletHub
Useless News: Coast to Coast
An airline captain flying from New York to San Francisco got on the intercom in mid-flight and told his passengers, “Ladies and gentlemen, I’m sorry to report that one of our engines has stopped working. The good news is the other three engines are just fine. However, please be advised that it’s going to take us an extra 15 minutes to reach our destination. We apologize for the inconvenience.”
A little while later the pilot once again got on the intercom to inform the passengers that another engine had failed. However, he quickly reassured them by explaining that, “Although losing two engines is an extremely rare event, you need to know that there is absolutely nothing to worry about, as this plane is perfectly capable of safely flying with just two working engines; the only rub is that we’ll have to push our ETA back another 30 minutes. Once again, we’re sorry for the inconvenience.”
Fifteen minutes later, the pilot came back on the intercom yet again. This time he announced that a third engine had stopped working. After asking the passengers to remain calm and apologizing for the continued problems, he said, “Unfortunately, this means we’re going to be in the air for an extra hour because we now have just one working engine. Again, we’re very sorry. But thank you all for your continued patience.”
Upon hearing this, one passenger looked at the fellow sitting next to him and said, “Sheesh. If that fourth engine goes out we’re never going to land.”
(h/t: Known Fact)
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. Nunavut (3.00 pages/visit)
2. Manitoba (2.25)
3. Prince Edward Island (1.85)
4. Quebec (1.81)
5. Yukon (1.75)
9. Alberta (1.50)
10. British Columbia (1.33)
11. Newfoundland & Labrador (1.31)
12. Northwest Territories (1.25)
13. Saskatchewan (1.13)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Nunavut, eh) — or not (ahem, you hosers living on the frozen Saskatchewan tundra) — please don’t forget to:
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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
James had, well … this to say after reading my article explaining why waterbeds are for suckers:
“Only moron have water bed without a heater so you those reason just lost. Try doing a little research before making a silly black that makes you look like a sucker.”
Um … okay.
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: stock photo
Good ‘coffee’ this morning, Len; I’m passing it along to a few folks who need to wake UP!
Your last paragraph explains things perfectly, but I say the U.S. won’t consider any sort of gold standard until all those in Federal power have finished stocking up on it.
Hi, Lauren. I wouldn’t be surprised. Although most of them are so dumb, they probably believe the US dollar could never suffer a catastrophic rapid loss of purchasing power, a la the Weimar papiermark.
If we ran $1.1 trillion deficit in first six months, that means we are on pace for $2.2 trillion deficit for year. I think we ran a $2 trillion deficit last fiscal year. It’s crazy. I don’t blame other nations for getting away from the dollar!
It’s been a long time coming, Martin. I think the straw that broke the camel’s back though occurred when the US froze Russia’s USD reserves.
Hi Len,
Thanks for another delicious cuppa!
I don’t care how high credit card interest rates go because I always pay them off at the end of the month. I bet the CC companies hate me because I get 2% cash back on all my purchases.
Have a great weekend everybody!
Sara
Those bonuses make credit cards are a fantastic tool for those who are financially disciplined.
You gotta love Texas! Here’s hoping that gold backed currency becomes reality.
I know I’m interested to see how this plays out, Cowpoke.
What to do with those daily devaluing before our eyes fiat dollars? Hard to get our hands on precious metals. Do we go for other high demand items…..err my favorite beer? Interesting our local community banks trying to come up with reasons for us to keep our money in their bank. Time for the coffee can in the back yard with our silver?
All those banks have to do is raise the rates they pay their depositors to a competitive level. I have no sympathy for the banks that continue to pay 0.01% interest to savers, while charging borrowers 7% or more.
New here, and I love your style. The problem with a gold standard is there isn’t enough gold mined in the world to support the amount of money we currently use.
You must be new here, T. Welcome aboard!
By the way, I know you’re new here because my regular readers know there is always enough gold in the world to support global commerce as long as the yellow metal iscorrectly priced.
I thought the constitution says states can’t have their own money.
Oh, now we’re supposed to follow the US Constitution? 😉
Let’s set aside the Texas bill … I know allowing a private bank to issue legal tender not backed by gold and silver is unconstitutional.
It says the states can’t “coin” their own money, which I interpret to mean they are not allow to coin money denominated in dollars. I’m not sure why they can’t denominate their coins that are solely denominated by weight. (Which, in turn, could be exchanged for dollars.) Of course, it all comes down to what the Supreme Court says.
Frankly, it’s all a scam. The Constitution also says states are only allowed to accept payments for legal tender in gold and silver – but states don’t follow that law. It doesn’t help that the federal government stopped minting gold and silver specie in 1933 and 1964 respectively.
There is also a question whether use of Federal Reserve notes as legal tender is also Constitutional.
An interesting analysis on this can be found here.
Hi Len,
I remember you saying you were buying short term treasuries. What happens at the end of the term, do they auto-renew? I went to Treasury Direct.gov but could not find the answer to my question.
The choice is yours, Jack.
Treasury Direct gives you the option to auto-renew T-bills, and if you do choose to do that, you can choose how many times you want to auto-renew. You can also cancel the choice to auto-renew if you change your mind later on. Otherwise, the cash is automatically deposited into your favorite bank account when the bill’s term is completed.
Treasury Direct really makes buying T-bills easy. I currently have a pretty good chunk of cash laddered in four separate T-bills, and I have fully cycled through my entire ladder once and am now in “round 2”. Extremely convenient! And safer than CDs and Money Markets – plus they are exempt from state taxes.
Hello – the dollar is tied to oil.There will be no return to linking to gold-the economy will collapse a hundred times. And if all the gold on the planet is turned into coins, there will be enough for 30 countries, the remaining 170 countries will remain without gold coins. And please stop writing nonsense about returning to the gold standard, it’s unprofessional and impossible.Better pay your attention to the cryptocurrency.
Well, Alexander … I’m sorry you feel that my writing is “nonsense.”
However, what is nonsense is your claim that there is not enough gold; I explained the reason why to commenter “T Sevion” above. There is always enough gold if it is correctly priced.
As for cryptocurrencies, speculate away if that’s your thing. But it should never be confused as a proven and time-tested alternate form of wealth insurance that is comparable to gold. For the reason why, see this article.
By the way, a quick look at any gold:oil ratio chart shows that gold is also naturally tied to oil – and without any official agreements necessary, like there was (stress: was) for the petrodollar.
Can’t eat gold. I think if fiats go under there would be so much upheaval and violence it would be impossible to keep private stocks safe and no way to use it in any event. The military would step in to back whatever the govt felt it needed to do. I always remember what my Dad said about the Great Depression times. He lived in a small farming community in Minnesota. “We always had enough to eat, we just didn’t have any money, ever, and had no way to buy anything we needed. So we traded around and made do”.
No, folks are better living in a solid community and have good relationships with others.
No gold for me. I have land, tools, no debts, good friends, great gardens, etc etc. Like RD. Maintain your health. Relationships. Fiat goes under the killer bees will go ape, just sayin.
I don’t share your Mad Max theory, Paul. I just don’t. Maybe it is the engineer in me; there are always solutions available to fix broken and/or flawed human constructs, including our very-flawed debt-based monetary system.
If the fiat system failed, silver (esp. “junk” silver coins minted prior to 1965) could be temporarily used as an ad hoc solution to facilitate everyday commerce for regular living expenses. The public will find a way to keep commerce going.
Creating and implementing a new monetary system isn’t rocket science. And thinking that the government would rather see the social fabric completely unravel, rather than fix its failed monetary system seems to be a very cynical take – not to mention one that flies in the face of human spirit.
ps- You can’t eat fiat either. But if you have some delicious Federal Reserve Note recipes, please share them with the rest of us! 😉
“And all of the latest indications strongly suggest that any new system that eventually emerges from Russia and China to replace the current fraudulent debt-based USD system – whatever it is – will be based on a gold standard.”
I agree that a new system will likley emerge, but I disagree that it will be based on any gold standard. Going to a gold standard gives up control. No government will willingly give up control.
Thus any new system that emerges will likely be just as bad at the dollar system.
As The Who said so eloquently, “Don’t Get Fooled Again”
It’s very possible the government will try to introduce a new fiat monetary system after the current system implodes. However, I don’t think the general public – including a middle class that will have just watched most of its life savings turn to ashes – will trust it.
We shall see.