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 …
The number of realists who are betting that both the ‘economy gets healthy soon’ and the federal government gets spending under control is a tiny group, indeed.
– Bob Beauprez
You can’t taper a Ponzi scheme.
– Max Keiser
Credits and Debits
Debit: Did you see this? With a technical default fast approaching, insuring US Treasury notes against default now costs more than insuring Mexican debt. Based on April tax receipts, the latest estimates are that, unless the debt limit is raised by Congress, the federal government will default on its obligations sometime in July. Or maybe June. If not sooner. Regardless, you can be certain that Congress will come to some sort of political decision before D-day gets here – even it is with only hours to spare. They always do.
Debit: Speaking of default, First Republic bank is now sleeping with the fishes. And although this failure – the fifth major failure in last 60 days – was not unexpected, it’s still jarring. For the record, FRB is now the second largest US bank failure in history. Then again, the year is still relatively young.
Debit: By the way, for those of you counting at home, according to market analyst Charlie Bilello, between 2009 and 2022, there were – believe it or not – 511 bank failures in the US with total combined assets of $339 billion. Compare that to the total assets of last three US banks that failed: $548 billion. But, hey … there’s nothing to see here, folks. Now move along.
Credit: Frankly, it should be obvious to anyone paying attention to the state of the world’s finances that, after more than a decade, Western governments’ reliance on Modern Monetary Theory (MMT) – also known as the “Magic Money Tree” – has pretty much run its course, which means the federal government’s money spigot will soon be shutting off. Permanently. And you know what that means. As for those who don’t know, well … here’s a preview of what it will look like:
Debit: Needless to say, MMT is nothing more than monetary and fiscal hocus-pocus created by statist economists as a way to justify unlimited government growth. The good news is that as long as the US dollar (USD) remains the world reserve currency, America will retain the privilege to control the global financial system, run multi-trillion-dollar deficits without consequences, and maintain an artificially-high standard of living. The bad news is other nations are now working very hard to end USD dominance – so it’s no longer a matter of if, but when. Unless you’re a member of the MMT cult … for them, debt doesn’t matter. Right, Gail?
Credit: For his part, Charles Hugh Smith correctly likens MMT to a perpetual motion machine. As for the dirty details, Smith explains how this perpetual motion machine works: “The government spends huge sums it doesn’t have by selling bonds to the central bank, which creates the money to buy the bonds out of thin air. Perfect! Nothing can stop it.” True … at least until the public wakes up and sees the illusion. At that point, the magic show comes to an abrupt end. As for perfection … we think you’ll agree this comes pretty close:
Credit: In other news, two months ago the yuan became the most widely-used currency for cross-border transactions in China, overtaking the USD for the first time, reflecting efforts by Beijing to internationalize use of the yuan. It’s just more evidence that the rest of the world is losing faith in the USD. Now, worry warts and members in good standing of the tin foil hat brigade point out that Americans’ living standard will fall significantly if the world stops using the USD as the global reserve currency. The good news is the MMT crowd vehemently disagrees. That’s comforting. Okay … no; it’s not.
Debit: The bottom line is that the world has finally become aware of the USD charade. Sadly, the same can’t be said for most Americans. More Smith: “I’m cursed with the gut feeling that the printing press on board the Titanic isn’t going to keep the whole shebang glued together as long as everyone else seems to think, and that substituting new financial gimmicks won’t restore the system, either. The lifestyle you ordered is out of stock and we have no idea when the back-order will be filled.” Oh, and speaking of charades …
Credit: It’s no coincidence that while the commercial banking sector is disintegrating – despite an army of highly-paid government bureaucrats who are supposed to prevent that from happening – central banks have gone into self-preservation mode by fleeing to the ultimate safe haven: gold. According to the Financial Times, “a poll of 83 central banks with a combined $7 trillion in foreign exchange assets, found that more than two-thirds of respondents thought their peers would increase their gold holdings in 2023.” Imagine that.
Credit: With the central banks eagerly buying so much yellow metal, Franklin Sanders points out that “since 2015 [cental banks] bought three times as much gold as treasury securities, and in 2022 they bought more gold than any other year since data began in 1950. If gold is good for central banks, why isn’t good it for you too?” That’s a rhetorical question, of course. The fact is, when it comes to your personal wealth, relying on the government – or anyone else – to protect you from an implosion of the monetary system is folly. Trust us on this one; the only one who cares about your financial health – and future – is you.
Credit: Thankfully, it is still possible to protect yourself by purchasing wealth insurance in the form of physical precious metals; that is, gold and silver. However, before you buy, it’s important to heed the wisdom of Mexican billionaire Hugo Salinas Price, who warns that “The real purpose of the precious metals markets of today is to confuse the public; confusion that has allowed the USD to survive as long as it has, as the (global reserve) currency.” Needless to say, their plan has worked to perfection.
Credit: By the way, Salinas Price also points out that “There’s one way – and only one way – to profit from precious metals: You buy when you wish to buy – at whatever the price is – and take possession of the metals you’ve purchased. Then you put your metal away, shut up about it, and wait. You may die before the price of the metal you bought goes up and stays up. On the other hand, if you’re still breathing when the USD dies and goes to Hell, what you’ll be able to purchase for just one ounce of gold will prove to be the greatest surprise of a patient life.” Indeed. Perhaps wiser words have never been spoken.
By the Numbers
A new study finds Americans confidence in having enough money to live comfortably throughout their retirement years is declining. The report also finds both workers and retirees are very concerned about inflation and its impact on their savings and spending. Here are some key findings:
64% The percentage of workers and retirees in 2023 who have confidence in having enough money to live comfortably throughout retirement.
73% The percentage of workers and retirees last year who were confident in having enough money to live comfortably throughout retirement.
2008 The last time that retirement confidence fell so sharply from the previous year.
84% The share of working Americans who say that increasing living costs are impacting their ability to save for retirement.
24% The percentage of current retirees who say debt is making it difficult to live comfortably.
51% The share of American workers who are confident that Medicare will provide consistent benefits.
38% The percentage of retirees who say their current medical expenses are higher than expected.
80% The share of retirees who are concerned that inflation will remain high for at least another year.
40% Percentage of workers who report that their retirement account balances have decreased over the past 12 months.
58% The share of retirees reporting that their retirement account balances have decreased over the past 12 months.
Last Week’s Poll Results
Do you use a budget to help manage your personal finances?
- Yes (46%)
- No (33%)
- I used to, but not anymore (20%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than half do not rely on a budget. Put me in the same camp as the 1 in 5 who used to keep a budget, but eventually stopped.
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
How much was your federal tax refund this year?
- I didn't get a refund (44%)
- $1000 or more (32%)
- Less than $1000 (24%)
Total Voters: 2,012
Useless News: Engineers & Accountants
Three engineers and three accountants were traveling by train to a conference.
At the station, the three accountants each bought tickets and watched as the three engineers bought only one ticket.
“How are three people going to travel on only one ticket?” asked the Chief Accountant.
“Watch and you’ll see,” answered the Chief Engineer.
And with that, they all boarded the train and the accountants took their respective seats, but the three engineers all crammed into a lavatory and closed the door behind them.
Shortly after the train departed, the conductor came around collecting tickets. He knocked on the lavatory door and said, “Ticket, please!” Then the door opened just a crack and a single arm emerged with a ticket in hand; the conductor took it and quickly moved on.
The accountants saw this and they all agreed it was a quite clever idea. So, after the conference, the accountants decided to copy the engineers on the return trip so they could save some money too.
When the accountants got to the train station, they bought a single ticket for the return trip. That’s when the accountants noticed, to their astonishment, that the engineers didn’t buy any tickets at all.
“How are you guys going to ride without a ticket?” asked one of the perplexed junior accountants.
“Watch and you’ll see,” the Chief Engineer replied.
When the six professionals boarded the train, the three accountants crammed into a lavatory while the three engineers crammed into another lavatory nearby.
The train departed and, shortly afterward, one of the engineers left his lavatory and walked over to the other lavatory where the accountants were hiding. The engineer then knocked on the door and said, “Ticket, please!”
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 my article explaining why smart people aren’t impressed by others who drive expensive cars, Bobisignorant left a detailed commentary that included this gem of an observation:
Face it, there’s thousands of celebrities who make ten times what you make, yet their IQ is below 100.
I came to terms with that a long time ago. I’ll take brains over beauty any day of the week.
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
Sara King says
That picture comparing an old silver dollar to a paper one says it all. Real money vs. the phoney stuff. What a scam.
Have a great weekend everybody!
Len Penzo says
Well, Sara … “scam” is being polite.
Lauren P. says
I agree with Sara. That pic and the Salinas Price quote pretty much sum everything up. It’s amazing that the ‘print $ to buy our own debt’ scheme has lasted as long as it has, imo. Meanwhile, the Gov’t. continues to focus on DEI, etc., while the press focuses on “bread and circuses”. 🙁
Yes on the “bread and circuses”! It’s not a coincidence there are more distractions than ever to keep attention away from all of the corruption and treasury robbing going on under our noses.
And it’s working, sad to say.
Len Penzo says
Hi, Lauren! Hugo Salinas price is a gem. He has been a strong advocate for returning to real money for a long time. His website hasn’t been updated in a long while, but there is still a lot of good stuff on it.
Looks like more banks are on the verge of failing. Who do you think is going to be crossed out next on the bank failure bingo card?
I know this, Cowpoke – it won’t be the Bank of Madison! There’s REAL money in my safe! 🙂
Looks like PacWest is next.
Len Penzo says
It sure seems like PacWest will be next, but who knows?
I have to say, your round up hit the target this week (like most weeks). I can’t believe anybody takes Paul Krugman seriously. How he won a Nobel Prize in economics is one of life’s great mysteries.
Len Penzo says
Both the Nobel and Pulitzer prizes are now used for political purposes and given out to those who should never have received them. And I agree; Krugman is a first-class clown masquerading as an economist.
Sam I Am says
I see you went back into the past with the videos this week. I miss those old TV shows. Sanford & Son is one of my all time favorites.
Len Penzo says
Mine too, Sam. Redd Foxx was one of the greats.
Nixon detaching the dollar from gold was the beginning of the end for the US. It’s tough love but we need this house of cards to collapse ASAP because the longer this goes on, the worse pay back in going to be.
Everybody is talking about the failing banks, but I think the bigger problem that people seem to have forgot about is they’re inflating the debt away. There is a long way to go too.
Inflation is theft of human labor. If the Fed hadn’t stolen so much of our wealth, we’d all be much wealthier. Instead we have an ignorant populace who are content to be debt slaves and easily distracted by bread and circuses.
Len Penzo says
It’s unfortunate, but I agree. The sooner we pay the piper, the sooner we can get back to a time when a single-income blue collar family could afford a modest suburban home, a car or two in the garage, an annual family summer vacation, and still have enough left over to save for retirement and send the kids to college.
Nixon’s action was only part of the demise. In 1967, the government made a deal with the Saud family to ensure they stayed on the throne. In return, Saudi Arabia tied the price of oil to the US dollar. The government went wild with irresponsible spending. It has been in that mode ever since.
Slow motion train wreck for certain. Hard to avert my eyes. Trying to continue the basics. 10 percent in PM, and paid off useful stuff with material uses and needed by all. Reminding myself to relax and diversify. Thanks Len for the weekly cup of wake up.
Len Penzo says
You got it, CO2. Holding just a little wealth insurance is helping me sleep a lot better at night – even though I know what’s coming is still going to make things a bit uncomfortable for a while.
RD Blakeslee says
Nations’ gold buying accelerates big-time:
Len Penzo says
Yep. Don’t do what they say; do what they do.
I have forgotten the Congressman’s name but one time years ago, a US Congressman was interviewed by Tim Russert. The Congressman admitted that Congress knew there was a terrible problem. They knew the longer they waited to act the worse it would be. They kept kicking the can down the road hoping the failure would happen when they were all out of office. A crook telling the truth. (faint)
The public tends to blame whoever is currently in office, and almost always blame the political party they don’t support. They are ignorant as to what led up to the problem.
I miss Tim Russert. He was one of the few remaining national somewhat honest reporters. He’d be cancelled by today’s culture.