Black Coffee: “Trust Us”

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 an enjoyable week. Without further ado, let’s get right to this week’s commentary …

Investors are sometimes too busy looking for profits to notice where the truth ends and the deception begins.

– Andrew Ross Sorkin

Governments lie; bankers lie; even auditors sometimes lie. Gold tells the truth.

– William Rees Mogg

Credits and Debits

Debit: Did you see this? Long-standing discount chain 99 Cents Only – whose stores are spread throughout California, Texas, Arizona and Nevada – is going out of business. No, really. Among other things, the company blames rising costs and excessive merchandise losses from shoplifting. As a result it’s now in the process of liquidating remaining inventory and selling off all the fixtures, furnishings and equipment at their 371 stores. I guess the good news is American living standards are higher than ever, so nobody should miss these discount stores anyway. Or so we’re told.

Debit: On a somewhat related note, credit card has surged to a record $1.34 trillion, which means that the trend line from the pre-pandemic era has now been surpassed, while the savings rate is at an all time low. Hmm. If only there was a plausible explanation that explain why. Oh, wait …

Debit: Of course, the American consumer isn’t the only one in a tough spot. Most major US cities are dependent on commercial real estate (CRE) property taxes. For example, New York City’s CRE accounts for 10% of its overall revenue; in Boston it’s a staggering 22%. The trouble is, CRE prices are plunging, as vacant office buildings equate to plummeting revenue. In turn, this is forcing cities to scrounge for funding elsewhere in order to maintain bloated municipal budgets – either by increasing resident taxes or reducing spending. With that in mind, let’s check in to see how most city leaders are handling this incredible challenge:

Debit: In other news, a Freedom of Information Act (FOIA) request was filed for records reflecting how much gold the Fed currently holds in its vault for both the US and foreign governments. The request also sought records about the Fed’s gold holdings prior to Russia’s invasion of Ukraine – but this week the Fed denied that request. What’s the reason for the lack of transparency? We suspect the Fed is trying to hide the fact that foreigners are pulling their US reserves due to a loss of faith in the global fiat monetary system. Then again, foreigners aren’t the only ones losing faith …

Credit: Meanwhile, according to financial analyst, Jared Blikre, “Recent hotter-than-expected data in the US is prompting questions of whether rate cuts are advisable for an economy that’s … showing nascent signs of (reigniting) in certain areas. Powell’s big headache right now is an economy that reaccelerates, requiring further rate hikes. This is the so-called no landing scenario.” Well … whatever it’s called, it’s really the only option that has any chance of putting the inflation genie back in the bottle.

Debit: Young Americans may be unaware that the US suffered a similar bout of debilitating inflation in the late 1970s. At the time, the Fed was led by Paul Volcker, who raised the Fed Funds rate to 20% in 1980 to tamp down inflation, despite being in the midst of a “double-dip” recession. Coincidentally, the same fate is facing current Fed Chair, Jerome Powell, who is – for now – refusing to administer similar rate hikes because the US debt situation has all but tied his hands. As such, there are more holes in the dam than the Fed has fingers to plug them – which means it won’t be long before we’re all going to be dealing with this:

Credit: We’re sure Zimbabwe’s central bank (ZCB) knows how the Fed feels; they’ve been trying to stabilize an economy that has lurched from crisis to crisis since 1999. Not only is annual inflation there now 55% – but the current version of the Zimbabwe dollar (ZWL) had lost 75% of its purchasing power this year alone. As a result, the ZCB jettisoned its old dollar in favor of a new “gold-backed” currency called “the ZiG.”  Apparently, the “soaring” Zimbabwe stock market hadn’t been fooling anyone. Okay … maybe a few people.

Debit: In late 2016, the ZCB introduced the now-discontinued ZWL, which was supposed to be maintained at par with the US dollar (USD). But the new currency eventually crashed after the printing press was put into overdrive by the ZCB to cover its spendthrift government’s humungous budget deficits. Needless to say, Zimbabwe politicians are again promising that future deficits will not be tolerated. Unfortunately, the central bank isn’t circulating ZiG-denominated gold specie – which would hold the government’s feet to the fire. So the ZiG may be “gold backed,” but the government is saying: “trust us.” Again. As a result, public reaction to the new ZiG has been subdued.

Credit: The main lesson from Zimbabwe’s latest monetary roll-out is that simply declaring a currency to be “gold backed” is not enough to restore public confidence, as there’s nothing stopping politicians from violating their pledge to avoid massive deficits. The only way to restore confidence – and ensure the government won’t print currency in excess of economic output – is to put specie (gold coins) into circulation. And, yes; I’m fully aware that this is an idea that appeals more towards those who cherish liberty and prefer limited government. Ah, such is life – and perfectly understandable too. For instance …  (GET LINK)

Debit: In the meantime, back here on this side of the Atlantic, it looks like lowering interest rates and letting inflation surge probably represents the best of a selection of bad options facing US policymakers. Ultimately, this will only exacerbate the decline in the USD’s purchasing power. That’s grim news for Americans – especially those in the middle- and lower-class – as they depend on the USD for all of their transactions. However, it’s also bad news for nations that hold significant amounts of dollar assets; China, especially. But it also goes a long way toward understanding the world’s current gold-buying spree.

Credit: We’ll close this week’s commentary with this lamentation from Jim Quinn: “I’ve followed the rules and believed if I saved, lived beneath my means, and invested carefully, I’d be rewarded with a relatively comfortable retirement. It’s extremely difficult to comprehend how the psychopaths pulling the levers of this world could … cause so much misery and pain to so many. Everything that has happened since 2008 has been nothing more than a vast pillaging operation disguised as saving humanity from a never-ending series of crises, (all) created by the same psychopaths who created those crises in the first place.” Indeed. Got gold?

By the Numbers

A recent survey asked people which car brand is most likely to suggest that the driver is financially successful. Ironically, several non-luxury car brands made the list – and several luxury brands didn’t. According to the study’s authors, this shows that many people refuse to view a luxury car as being a reliable symbol of financial success. Here were the survey respondents’ top “status symbol” car models:

10 Range Rover

9 Land Rover

8 Toyota

7 Cadillac

6 Porsche

5 Ford

4 Lexus

3 Mercedes Benz

2 BMW

1 Tesla

Source: TintingChicago

The Question of the Week

[poll id=”532″]

Last Week’s Poll Result

When was the last time you paid interest on a credit card balance?

• It’s been so long I can’t remember (41%)
• Never! (31%)
• More than a year ago (20%)
• Less than a year ago (8%)

More than 1700 Len Penzo dot Com readers answered last week’s question and it turns out that almost 3 in 4 of you have never paid a dime of interest to your credit card company – or haven’t in so long that you can’t remember the last time you did. Fantastic! Although, to be honest, I kind of expected those would be the primary responses from my readers. 😉

If you have a question you’d like 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: Welcome Aboard

One day at a busy airport, the passengers on a commercial airliner were seated, waiting for the cockpit crew to show up so they could get under way. Eventually, the pilot and co-pilot finally appeared at the rear of the plane, and began walking up to the cockpit through the center aisle; both appeared to be blind. In fact, the pilot was using a white cane, bumping into passengers right and left as he stumbled down the aisle, and the co-pilot was using a guide dog.

At first the passengers didn’t react, thinking that it must be some sort of practical joke.

However, a few minutes later the engines started spooling up and the airplane started to move. As the plane began moving down the tarmac, the passengers looked at each other with some uneasiness, whispering among themselves and looking desperately to the flight attendants for reassurance. As the airplane rolled down the runway, its rate of acceleration increased rapidly and the passengers began panicking. Some prayed and, as the plane got closer and closer to the end of the runway, their voices become more and more hysterical until, with just 20 feet of airstrip left, those screams of panic reached a crescendo before turning into a chorus of wild cheers as the airplane became airborne.

Meanwhile, up in the cockpit, the co-pilot breathed a sigh of relief and said to the captain, “You know … one of these days the passengers aren’t going to scream and we’re gonna get killed.”

(h/t: Cowpoke)

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More Useless News

Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

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46. Idaho (1.58)
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48. Alaska (1.55)
49. New Mexico (1.52)
50. Hawaii (1.17)

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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 Len Penzo dot Com article highlighting the benefits of maintaining your vehicle, Jenna left this note:

My brother is having a lot of trouble with his VW bus. It would be really nice if he could get a professional to help him.

Well, I’m not a mechanic, Jenna, but that’s okay; my boss threw me under the bus so many time I swear he thought I was a mechanic too.

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.