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 …
Why … is gold the unmentionable, four-letter word of economics? The answer is threefold: A misunderstanding of the role of money; a misreading of history; and finally, visceral revulsion to the notion that a metal can do a better job of guiding monetary policy than a gaggle of finance ministers, central bankers and well-degreed economists.
– Malcolm Forbes
It is the mark of an educated mind to be able to entertain a thought without accepting it.
– Aristotle
Credits and Debits
Debit: Did you see this? According to the latest government data, GDP for the first quarter of this year came in at just 1.6%. Keep in mind that this is while the US is stimulating the economy by borrowing $1 trillion every 100 days. Yet more proof that, for the first time in five decades, stagflation is our midst. In 1980, the Fed had to raise its benchmark rate to 20% to break out of that economic quagmire. Unfortunately, doing the same now would shunt every penny of government revenue toward servicing its enormous debt.
Debit: Meanwhile, inflation is continuing to be a big problem – and government intervention in the free market is only making things worse. Take California’s newly-mandated $20 minimum wage for fast food employees. Not surprisingly, both chains and customers are complaining that burritos and burgers are getting more expensive – while some chains decided it was easier to permanently close. Imagine that. Clearly, the Golden State needs to raise the minimum wage to $30 to keep up with the inflation caused by the $20 minimum wage. Then again, why stop at $30?
Debit: Thanks to inflation, the US consumer is clearly struggling, as evidenced by Americans’ dwindling rainy day funds. During the first quarter, Americans’ savings as a percentage of disposable personal income was 3.6% -that’s down from 4% in the fourth quarter and well below the 6.9% level logged just prior to the pandemic in December 2019. “Greater pressure on the consumer,” writes Jeffrey Roach, LPL Financial’s chief economist, means “the economy will likely decelerate further in the following quarters as consumers are likely near the end of their spending splurge.” He can say that again …
Credit: For those not counting at home, it might surprise you to know that gold has outpaced the price increases in most staple items, with an astounding 74% gain since 2019. Don’t believe it? It’s true. See for yourself:
(h/t: GoldSilver.com)
(h/t: @NHpilled)
Credit: By the way, one of the major arguments in favor of central banks is that they stabilize economies by reducing the depth and frequency of economic downturns. However, a study by economist Joseph Davis found that there is no appreciable difference between the length and duration of recessions before or after the inception of the Fed. Imagine that. Maybe the Fed should hire him as a consultant. On second thought, maybe not …
Debit: In other news, the banking crisis may be rearing its ugly head again. No, really. It’s bad enough that US banks just saw the largest deposit outflows since September 11, 2001. But even more alarming is that last weekend the FDIC seized Republic First Bancorp based out of Philadelphia. Unfortunately, roughly half of all its deposits were officially uninsured – which means there are a lot of unhappy depositors who will be very lucky to get 50 cents on the dollar after all of this completely shakes out. As for the reason behind what’s actually driving all of those bank deposit outflows, well …
Credit: Of course, the reality is this was inevitable after the Fed’s bank bailout program ended last month. Why? Because conditions haven’t gotten any better over the past year for the banks stuck holding underwater US Treasuries on their balance sheets. Come to think of it, conditions haven’t gotten any better for the US government, as interest on the debt is projected to reach $1.6 trillion by the end of this year. Compare that to the entire federal debt in 1980 – it was under $1 trillion.
(h/t: Egon VonGreyerz)
Credit: Needless to say, the US is trying to escape from its own debt trap – but the noose is only growing tighter. As macro analyst Alasdair Macleod points out, as a result “the (US) is desperate to secure funding without interest costs rising, thereby making a deteriorating government debt position even worse. So the US Treasury is liaising with the Peoples Bank and China’s treasury officials, trying to persuade them not to sell but to buy more US Treasuries.” Good luck with that. The more likely outcome is China will continue to save in the only truly risk-free asset – gold. Not coincidentally …
Debit: Now for a little history lesson: In 1923, with its currency effectively worthless – $1 was equal to 4.2 trillion marks by the end the year – Weimar Germany was essentially reduced to a barter economy; new shoelaces were exchanged for bread; a lump of coal bought a cinema ticket, and a bottle of paraffin could buy a silk shirt. The middle class saw their life savings evaporate and hunger became a common occurrence as the monetary system broke down. In short: Germany’s finances descended into chaos, while its social fabric not only frayed, but came apart at the seams. Sadly, there also were no motivational speakers to give the masses some hope …
Credit: Indeed, as James Howard Kunstler noted earlier this week, in the future, the US government is “going to be smaller and leaner, and not nearly as complex as the tottering Rube Goldberg apparatus we’re currently trapped in; (although) we don’t know yet what the shape and texture of that America is going to be. As the sage Yogi Berra observed, our whole future is ahead of us. If you’re not among the insane, have faith. We’ll get there and everything is going to be alright.” Absolutely – but only after an unavoidable and necessary monetary reckoning arrives. Besides …
(h/t: @WallStreetSilv)
Debit: Here’s the bottom line: After a 100-year run, the US dollar’s (USD) days as world reserve currency are clearly numbered. However, that reign will end only after the world’s major exporting nations insist on being paid in gold for their goods and services, rather than the severely debauched USD. That’s the point where it will indeed be “game over” for the Fed’s fiat currency fraud. Let’s just hope by then US monetary officials will be wise enough to re-anchor the USD to the yellow metal in order to avoid the hyperinflation and inevitable social unrest that always follows in its wake. Got gold?
By the Numbers
The graduation season is upon us. With that in mind, a new survey of college students was released this week regarding their thoughts about higher education and personal finance. Here are some of the key findings:
49% … think their school isn’t doing enough to educate them about personal finance.
46% … say they’ll try to make as much money as possible professionally rather than follow their passion.
39% … confess that their biggest post-graduation fear is not finding a job.
35% … say say their biggest post-graduation fear is student-loan debt.
13% … worry the most about paying off their credit card debt after they graduate.
75% … admit they feel pressured by their peers to spend beyond their means.
54% … report that parental debt has negatively impacted them.
33% … describe their parents’ attitude toward personal finance as “overly cautious.”
Source: WalletHub
The Question of the Week
[poll id="534"]
Last Week’s Poll Results
What is the minimum amount of money you could spend in a year and still make ends meet?
- $30,001 to $40,000 (21%)
- $20,000 to $30,000 (17%)
- More than $70,000 (15%)
- $50,001 to $60,000 (14%)
- $40,001 to $50,000 (13%)
- Less than $20,000 (12%)
- $60,001 to $70,000 (8%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that exactly half of you say you can spend less than $40,000 per year and still manage to make ends meet. I suspect the majority of those respondents are homeowners who have no mortgage. What do you think?
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: Wellness Check
A physician who had been seeing an 80-year-old woman for most of her life finally retired. At her next checkup, the new doctor told her to bring a list of all the medicines that had been prescribed for her.
As the doctor was looking through her medicine list, his eyes grew wide as he realized Grandma had a prescription for birth control pills.
“Mrs. Smith,” the doctor said, “Do you realize you have an active prescription for birth control pills?”
“I certainly do, doctor. They help me sleep at night.”
“Mrs. Smith, I assure you that there is absolutely nothing in these pills that can help you sleep!”
The grandma smiled. She then reached out and patted the young doctor’s knee and replied, “Yes, dear, I know that. But every morning, I grind one up and mix it in the glass of orange juice that my 16-year-old granddaughter drinks. Believe me … it definitely helps me sleep at night.”
(h/t: Gary H.)
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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 highlighting 15 reasons why only suckers buy waterbeds, Billy replied to my assertion that waterbed sex is overrated:
Sex? What’s that? Seriously, it was good for me until I kicked her out – and for good reason.
Your comment reminds me of the guy whose girlfriend wanted to make him have sex on the hood of her Honda Civic. He refused. He told her if he was going to have sex, it was going to be on his own Accord.
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
Hi Len,
I love my weekend cuppa!
Regarding your question of the week … I don’t know anybody who goes to the movies anymore. All they put out these days are remakes and sequels. Seems like all creativity is gone!
Have a great weekend everybody!
Sara
Hi Sara! The last movie I went to see at a theater was Top Gun: Maverick. Great movie!
Another good cuppa Joe, Len. But I question J. H. Kunstler’s contention that “We’ll get there and everything is going to be alright”, given the complete lack of civility of many in our nation today. Add several million newcomers unfamiliar with the U.S., and I see a recipe for chaos.
In other news, your column “How Much Gold and Silver Should People Own” is missing from your site; did you sell it for some gold/silver? 😉
The other thing about JH Kuntsler is that he has turned into a right wing crackpot ever since his forecast of collapsing oil production in 2005 did not happen. (The Long Emergency). The Long Emergency did not materialze due to fracking increases, higher prices for crude, and new discoveries and processes. Add in improved efficiencies, higher prices for fuels, etc etc the World has somehow kept chugging along. Now, it is all about debt and pinkos; writing like the redneck area he lives in.
He makes a living off doom and gloom. Maybe the sky is falling, maybe it will fall one day, and certainly there is wisdom in folks having some preps, but I would certainly look for other opinions for financial wisdom.
The Long Emergency was a very good book. The premise was sound, but……. Now he has a different set of Tarot Cards he plays with.
“JH Kunstler … is all about debt and pinkos; writing like the redneck area he lives in.”
Struck a nerve, Paul? Wow. I know this: If JH Kunstler was writing about the “benefits” of socialism and the “joys” of living in an authoritarian nanny state, you wouldn’t disparage him as a “left-wing crackpot” or the community he lives in as an area comprised of “rednecks” – you’d be singing “Hallelujah!”
Whatever you may think of Mr. Kunstler, his ability for self-reflection caused him to finally open his eyes. As such, he is now on the correct path, shining a white-hot spotlight where the feckless mainstream media won’t: That is, on the widespread government corruption and accompanying debt crisis that is plaguing the US (and much of the Western world). If that makes him a “right-wing crackpot,” then I guess that makes me one too. But you already “knew” that.
Hi Lauren, hmmm … the article is available here: https://lenpenzo.com/blog/id23998-economic-collapse-101-how-much-gold-and-silver-should-people-own-3.html
Did you find a broken link somewhere?
Interesting Len; I’d bookmarked that article, and get a 404 error when I open the bookmark (“Well… I’m pretty sure that article was here yesterday!”) No worries, I’ve bookmarked your link above; thanks! 😀
Good round up, Len. I think we’re going to be seeing more bank failures soon. Interest rates haven’t come down which means a lot of banks are still deeply underwater on their Treasury holdings.
Anybody who thinks the banking crisis is under control is living in a fantasy land. The Fed has played some accounting tricks that have managed to sweep the banks’ balance sheet problems under the rug. The Emperor has no clothes; unfortunately, our feckless media still pretends not to see the true ramifications of what is going on.
Wouldn’t it be great if the Fed offered to “temporarily” take every bad investment we ever made off our books by reimbursing us for our paper losses until they eventually recovered? Of course, as George Carlin said, “It’s a big club, but we’re not in it.”
99 Cent Only is gone. When the dollar loses reserve currency status, 99 Dollar Only will be just around the corner.
LOL! 🤣
The precious got kicked in the teeth this week. That makes sense, doesn’t it? Inflation is still high. Gas prices on the rise again. Banking system saw another bank failure.
The powers that be are desperate to keep gold and silver prices under control. It’s obvious though that it’s getting tougher for them!
Yep. They’re still wrangling to keep precious metals prices contained, but they have a tiger by the tail and it seems like their suppression efforts are getting less effective with each passing day. I notice their smashes are much smaller in size and the negative effects are usually gone within a few days – many times within hours. In the past those smashes were quite deep and and the market would take many months to recover. Not anymore.
Thought it was James, not John…
It is, Billy Bob. I’ve corrected it (and fired my blog editor). 😉
Thanks for the heads up.
This week Jamie Dimon (JPMorgan Chase president) announced that the economy was in very good shape with the stock market high and full employment. How can things be fixed with the elite in such a BUBBLE? Jamie Dimon heads an enormous financial institution and he is totally clueless of the financial condition of the vast majority of Americans. I have to earn double what I did under the previous administration to have the same quality of life. It is time to stop all hiring of those with Ivy League educations as they have no contact with reality.
Before the Dot Com Bubble got going, nobody conflated stock market performance with the nation’s economic health – because they truly had nothing to do with each other. Today, like it or not, America’s economic health is indeed directly related to the stock market because – regrettably – our economy has become so financialized. The seeds for that were sown when the US dollar’s anchor to gold was broken in 1971.
The photo of the Starbucks van is the best laugh I’ve had all day.
I thought that was pretty good too, Bill. And not a fruitcake in sight!