{"id":83302,"date":"2024-05-25T01:00:22","date_gmt":"2024-05-25T08:00:22","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=83302"},"modified":"2024-09-17T15:28:23","modified_gmt":"2024-09-17T22:28:23","slug":"black-coffee-25-may-2024","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id83302-black-coffee-25-may-2024.html","title":{"rendered":"Black Coffee: You Have Two Cows …"},"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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?<\/p>\n

Capitalism: If you have two cows, you sell one and buy a bull.
\nSocialism: If you have two cows, the Government takes one and gives it to your neighbor.
\nCommunism: If you have two cows, the Government takes both and then gives you some milk.<\/em><\/p><\/blockquote>\n

– Anonymous<\/strong><\/p>\n

The\u00a0problem\u00a0with\u00a0socialism\u00a0is that you eventually run out of other people’s money.<\/em><\/p><\/blockquote>\n

– Margaret Thatcher<\/strong><\/p>\n

If you put government in charge of the Sahara Desert, in five years there’d be a shortage of sand.<\/em><\/p><\/blockquote>\n

– Milton Friedman<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? It\u2019s no secret that credit card debt being racked up by struggling Americans is at record levels. This, in turn, has increased the popularity of buy-now-pay-later (BNPL) programs. In fact, last week we discussed the large number of six-figure households who admit that they plan on missing at least one BNPL payment next month. Now for the punchline: BNPL credit isn’t tracked as part of the overall consumer debt calculation. So consumers are far deeper in debt<\/a> than the \u201cofficial\u201d figures indicate. How bad is it? Well … if this is any indication, pretty bad:<\/p>\n

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Debit:<\/strong><\/span> Speaking of socialism … last year the Cuban government put its \u201ccashless society” campaign into overdrive by making credit cards and\/or digital currency mandatory for purchases of food, fuel and other basic goods. Predictably, many Cuban businesses ignore that inane edict and demand cash anyway – so cash is more precious than ever. Ironically, that<\/strong><\/em> has created another problem for the socialist paradise: a cash crunch<\/a>. In 2018, 50% of all cash was held by Cuba’s productive working population; the other half was held by Cuban banks. But by 2022 just 30% of the island’s available cash was in the banking system – a figure that’s almost certainly even lower today.<\/p>\n

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Debit:<\/strong><\/span> By the way, if you believe the Cuban government – I know, but just play along – the island’s inflation rate “officially” stood at 77% in 2021 before falling to “only” 31% last year. Needless to say, those figures don’t reflect the Cuban public’s reality<\/a>, with longer-term price inflation on the street reaching triple digits<\/strong><\/em>. For example, a carton of eggs, which sold for 300 Cuban pesos in 2019, sells for about 3100 pesos today. Keep in mind that Cubans who are fortunate enough to have a government job earn 6000 Cuban pesos per month<\/strong><\/em>. Hey … but they have “free” healthcare! Meanwhile, back here in America …<\/p>\n

\"\" \"\" Debit:<\/strong><\/span> Pivoting to the other side of the world, it\u2019s no secret that China and other BRICS countries have been offloading US treasuries worth billions since 2022. And last week China dumped a record number of US treasuries and agency debt bonds worth a staggering $53 billion. Historically, this is the largest sell-off<\/a> initiated by China ever recorded. Hmmm. If we didn’t know better, it looks like the Middle Kingdom may finally be on to something …<\/p>\n

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(h\/t: @ForgingLiberty)<\/p><\/div>\n

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Credit:<\/strong><\/span> Obviously, China and rest of the BRICS have known for sometime what financial \u201cexperts\u201d in the US haven\u2019t – at least until recently. Goldman Sachs CEO David M. Solomon is the latest business leader to sound the alarm on America’s deficit spending. Last week he opined, \u201cI think the level of debt and spending in the US is something that we need a sharper focus<\/a> on.\u201d The investment banking chief also warns that if something isn\u2019t done to rein it the spending, it could create problems. The good news is, we’ve been told that all our debt problems can be wiped away with the stroke of a pen. Er … or at least it can in Fantasyland:<\/p>\n

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Debit:<\/strong><\/span> On the other hand, massive deficits aren\u2019t unique to the US, as evidenced by the fact that the global debt-to-GDP ratio is again at an all-time high<\/a>. In fact, some of the largest debt-to-GDP ratio increases this year coming from the likes of China, India, Brazil, and Mexico. In other words: It looks like central bank printing-press buildings around the world are going to need a lot more regulatory signs …<\/p>\n

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Credit:<\/strong><\/span> Annual interest on our national debt is set to hit $1 trillion by year’s end. For those who are paying attention, it has become blatantly obvious that the US is now monetizing its debt. Indeed, as macro analyst Matthew Piepenburg observed this week, “the world is catching on<\/a> to the blunt fact that the American empire is fatally spending more than it earns. However, it is far more sickening that Uncle Sam is paying its IOUs with debased US dollars (USD) that are literally mouse-clicked into existence.\u201d And yet, there are those who are still<\/strong><\/em> buying supposedly “risk free” 30-year Treasury-bonds that pay less than 4.5% annually. You know the type …<\/p>\n