{"id":68489,"date":"2021-09-04T02:15:46","date_gmt":"2021-09-04T09:15:46","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=68489"},"modified":"2021-09-07T09:18:33","modified_gmt":"2021-09-07T16:18:33","slug":"black-coffee-4-sep-2021","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id68489-black-coffee-4-sep-2021.html","title":{"rendered":"Black Coffee: Pawns on the Chessboard"},"content":{"rendered":"

\"\"It’s time to sit back, relax and enjoy a little joe …<\/em><\/p>\n

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.<\/p>\n

I’ve got a busy weekend to attend to, so let’s get right to this week’s commentary …<\/p>\n

Tactics is knowing what to do when there is something to do; strategy is knowing what to do when there is nothing to do.<\/em><\/p><\/blockquote>\n

— Savielly Tartakower<\/strong><\/p>\n

In life, unlike chess, the game continues after checkmate.<\/em><\/p><\/blockquote>\n

— Isaac Asimov <\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> Did you see this? While most homes aren’t castles, they can be just as costly these days. How<\/strong><\/em> costly? Well … the national median rent has increased by 11.4%<\/a> since January 1st. Yikes. For comparison, over the same time period each year from 2017 to 2019, rent growth from January to July averaged just 3%. Even worse, rents are currently rising much faster in historically affordable cities, thereby giving people fewer options to escape the impacts on their housing budget.<\/p>\n

Debit:<\/strong><\/span> According to a survey by Magnify Money, 40% of all investors<\/a> have taken out debt to invest in the stock market. Then again, who can blame them. It’s become ridiculously apparent over the past 12 years or so — but especially the last 18 months — that stocks generally move in only one direction: up. And when they do<\/strong><\/em> drop, they don’t stay down for any appreciable length of time.<\/p>\n

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Credit:<\/strong><\/span> But as investment advisor Lance Roberts reminds us, “One of the significant benefits of a bull market is that it ‘forgives’ investing mistakes. Investors have taken on personal debt, and according to the survey, would do it again because the result has been profitable. The problem comes<\/a> when it isn’t.” That being said, I’m sure the following chart is nothing to worry about. After all, everybody keeps telling me it’s different this time …<\/p>\n

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Debit:<\/strong><\/span> By the way, it’s not just consumers taking on excessive debt; the government is too<\/a>. For example, in 2019, more than 95% of all revenue collected was being used to just to cover social welfare and interest on the debt. But that was then. This year, for the first time ever, the US Treasury is issuing debt to cover the mandatory spending. In case you’re wondering: No — this is definitely not<\/strong><\/em> going to end well for us pawns on the chessboard.<\/p>\n

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Debit:<\/strong><\/span> Of course, all of the debt required to cover the additional<\/strong><\/em> spending is being covered by central bankers, which artificially suppresses interest rates. Unfortunately, while financial engineering<\/a> can play the white knight by temporarily propping up asset prices, there is plenty of evidence showing that it always leads to negative economic consequences in the long run. And very perverse ones at that; inflation being just one of many:<\/p>\n

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Credit:<\/strong><\/span> In other news, this week Mexican billionaire businessman Hugo Salinas-Price predicted that the world won’t<\/strong><\/em> be returning to the gold standard<\/a> anytime soon. Why not? He says that although the current global debt-based monetary system is clearly in its death throes, the world just isn’t ready for a new system based on the yellow metal because “too many people depend on debt and government largess for their survival.” Yep … and Costco too:<\/p>\n

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Credit:<\/strong><\/span> Salinas-Price says that a more realistic alternative to the gold standard would be to extend the life of the current monetary system with a sharply-devalued dollar relative to gold — at least until society can better cope with the adjustment. Veteran money manager Mark Mobius agrees; he’s warning that, “Currency devaluation will be quite significant<\/a> next year given the incredible amount of (cash) that’s been printed.” Thankfully, we now have NFTs<\/a> to save the day …<\/p>\n

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Debit:<\/strong><\/span> Needless to say, a devalued dollar will decimate retirement nest eggs and lower the living standard of most Americans who fail to insure their wealth with precious metals. But as Salinas-Price correctly points out, it will also have “the immediate effect of reducing the amount of imported goods coming into the US, immediately reviving local industry<\/a> and putting millions of Americans back to work.” So there’s that.<\/p>\n

Credit:<\/strong><\/span> As author Stephen Leeb notes, “The decision to delink the dollar from gold in 1971 had momentous consequences<\/a> on America’s life and economy. One was the ascension of the financial industry — it became the receptacle into which money poured and poured.” And poured. And poured some more — to the detriment of Main Street and America’s manufacturing sector. Although the financial bishops on Wall Street will never admit it. If you don’t believe me, just ask this kid …<\/p>\n