{"id":71774,"date":"2022-03-19T02:15:06","date_gmt":"2022-03-19T09:15:06","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=71774"},"modified":"2023-05-12T11:02:28","modified_gmt":"2023-05-12T18:02:28","slug":"black-coffee-19-mar-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id71774-black-coffee-19-mar-2022.html","title":{"rendered":"Black Coffee: A Matter of Trust"},"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

Well … another busy week is behind us. So with that in mind, let’s get this party started …<\/p>\n

Betrayal is the only truth that sticks.<\/em><\/p><\/blockquote>\n

— Arthur Miller<\/strong><\/p>\n

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

Credit:<\/strong><\/span> Did you see this? Last week the US Labor Department issued a caution to retirement plan fiduciaries “to exercise extreme care<\/a> before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.” So what are they so concerned about? Well … five risks, in particular: extreme price volatility; investor and fund manager inexperience compared with traditional investment options; vulnerability to loss and theft; unreliable valuation; and evolving regulation. But other than that, bitcoin is the ultimate<\/strong><\/em> safe haven. I know this because some guy with laser eyes on Twitter named Lebowski told me so.<\/p>\n

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

Debit:<\/strong><\/span> In other news, the last time inflation was 7.9%<\/a> was 40 years ago, when the 10-year Treasury yield was 14%. For comparison, the 10-year Treasury yield ended 2021 at 1.5%; today it’s currently only slightly higher, which tells you just how nonchalant the Fed has been about trying to control inflation. With that in mind, no one should be surprised that a recent Bankrate survey found that 26% of Americans believe their financial situation will be worse in 2022 – and of those, 70% say it’s because they expect more<\/strong><\/em> inflation<\/a>. Uh, or shrinkflation …<\/p>\n

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

Debit:<\/strong><\/span> Meanwhile, the Fed’s balance sheet inflated an astonishing $5.0 trillion<\/a>, or 135% since QE was restarted in September 2019. Then again, since the 2008 housing bubble collapse, the amount of all assets in the Fed’s possession has increased nearly ten-fold<\/strong><\/em> – from $0.9 trillion to $8.8 trillion. That increase in the Fed’s balance sheet represents the United States’ central bank stepping in as the lender of last resort and conjuring hundreds of billions of dollars out of thin air every single month in order to backstop the failing banking system.<\/p>\n

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

Debit:<\/strong><\/span> For those of you who aren’t<\/strong><\/em> counting at home, between 2008 and 2021 the M2 money supply climbed from roughly $8 trillion to $21.4 trillion – that’s an increase of 161%, or 7.7% annualized. Even more alarming, if you compare that to the money supply growth just since March 2020, you’ll see that it’s now accelerating at an annual clip of almost 40%<\/a>! That most-recent increase in money supply is the<\/strong><\/em> primary reason why price inflation is currently running rampant for everything from gasoline to fast food, as any Austrian school economist will tell you.<\/p>\n

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

Credit:<\/strong><\/span> Speaking of inflation, macroeconomist Alasdair Macleod said this week that, ultimately, central banks are going to ensure their respective governments can pay for these higher prices “by simply issuing more currency and suppressing interest rates<\/a> to keep the stock market bubbling; it’s a trick played on us all by using fiat currency masquerading as traditional money.” I’ll say. Frankly, their sleight-of-hand is despicable – although not as blatantly obvious as this<\/strong><\/em>:<\/p>\n