{"id":71193,"date":"2022-02-12T02:15:09","date_gmt":"2022-02-12T10:15:09","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=71193"},"modified":"2022-02-14T17:12:32","modified_gmt":"2022-02-15T01:12:32","slug":"black-coffee-12-feb-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id71193-black-coffee-12-feb-2022.html","title":{"rendered":"Black Coffee: Welcome to the Beggars’ Banquet"},"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 hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …<\/p>\n

Don’t get up from the feast of life without paying for your share of it.<\/em><\/p><\/blockquote>\n

— William Inge<\/strong><\/p>\n

A borrower who doesn’t return is a beggar.<\/em><\/p><\/blockquote>\n

— Amit Kalantri<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? New Jersey’s massive ‘American Dream’ mega-mall looks as though it’s officially mega-broke<\/strong><\/em><\/a>. It turns out that, after making a $9.3 million interest payment that was due in January, the mega-mall – which officially opened in October 2019 – now has just $820 in its reserve fund. Furthermore, the owners say it’s ‘unclear’ whether or not they’ll be able to make their next interest payment on their $290 million debt that is due in August. As for the<\/strong><\/em> American Dream, it officially met its demise back in 2008.<\/p>\n

Debit:<\/strong><\/span> In other news, I see this week’s CPI release showed that it accelerated to 7.5%<\/a> year-over-year (YoY) – that’s the highest inflation rate in 40 years. Imagine that. Then again, I hope you’ll excuse me for believing that 7.5% seems just a tad<\/strong><\/em> on the low side …<\/p>\n

\"\"<\/a><\/p>\n

Credit:<\/strong><\/span> Normally, central banks can douse inflationary fires by raising interest rates. But this week, economist Andre Marques took some time to remind us that, “the Fed is trapped<\/a> in its own web because it doesn’t have room to raise rates without major complications; and if it ever starts, it won’t get far.” Yep. And that’s extremely<\/strong><\/em> bad news for anyone hoping the Fed can get inflation under control without unleashing a depression that results from plummeting stock, bond and housing markets, which the Fed will then be forced to parry with a final – and most likely, fatal – barrage of currency printing.<\/p>\n

\"\"<\/a><\/p>\n

Debit:<\/strong><\/span> Indeed, when it comes to controlling inflation, recent history suggests the Fed has very little wiggle room this time if only because during the last hiking cycle the National Debt was $22 trillion; today, it stands at $30 trillion<\/a>. So, how constrained is<\/strong><\/em> the Fed? Well … during the last<\/strong><\/em> hiking cycle the Fed Funds rate only reached 2.4% before they were forced to retreat in order to save plunging markets. Today, with even more<\/strong><\/em> debt on the books, the new threshold where the Fed Funds rate triggers another market melt-down will be far lower – possibly as low as 1.5%. Uh oh.<\/p>\n

\"\"<\/a><\/p>\n

Credit:<\/strong><\/span> Needless to say, the Fed continues to insist that it is going to begin raising rates next month – never mind that it should have started raising them more than a year ago when inflation began spiraling out of control. However, macro analyst Bill Holter thinks the Fed’s claim that it will eventually hike rates five or more times is “hilarious.” In fact, Holter says that the Fed “will do maybe two hikes, and possibly a third before everything blows up<\/a>. Then we’ll be back to more QE. The Fed is planning to bleed its balance sheet down from $9 trillion – but who<\/em><\/strong> is going to buy those assets?” Good question … but I think I found a candidate:<\/p>\n