{"id":84182,"date":"2024-08-03T01:00:44","date_gmt":"2024-08-03T08:00:44","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=84182"},"modified":"2024-08-06T10:52:54","modified_gmt":"2024-08-06T17:52:54","slug":"black-coffee-3-aug-2024","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id84182-black-coffee-3-aug-2024.html","title":{"rendered":"Black Coffee: It’s a Tax!"},"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 another busy weekend ahead of me, so let’s get right to this week’s commentary …<\/p>\n

Inflation is taxation without representation.<\/em><\/p><\/blockquote>\n

– Milton Friedman<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? The combination of inflation and higher interest rates has forced Conn\u2019s – a 134-year-old US furniture chain – to close all 553<\/a> of its stores. Yet more evidence that our debt-fueled economy is not as healthy as government economists are telling us. Oh … and on a related note:\"\"<\/p>\n

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Debit:<\/strong><\/span> Needless to say, the Conn\u2019s furniture empire isn\u2019t the only<\/strong><\/em> thing being negatively impacted by inflation and rising interest rates; consumers who depend on credit to stay afloat financially are in trouble too. Credit card delinquency rates in the first quarter of 2024 rose to the highest level<\/a> since 2012, when the Fed began tracking the data. In fact, the proportion of card balances that were more than 60 days past due at the end of March climbed above 2.5% – that’s more than double the lows seen during the pandemic. As a result, people are starting to get creative …<\/p>\n

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Debit:<\/strong><\/span> Speaking of inflation, prices are still rising<\/a>, just not as fast as they have been. Yes; we know. But it’s time to quit complaining, get back to work, and pay your taxes, serfs \u2026<\/p>\n

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Debit:<\/strong><\/span> In other news … if you believe the raw numbers, durable goods orders in the US have risen 8% since January 2021. Not bad, right? Wrong<\/a>. After accounting for inflation, American durable goods orders have actually contracted<\/strong><\/em> almost 13% over the past three and a half years. So much for the booming economy narrative. Alas, printing currency can mask a lot of problems – for a while. In the end, reality always catches up with those who believe in utopia is just around the corner.<\/p>\n

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

Debit:<\/strong><\/span> For what it\u2019s worth, 99% of all US banks hold commercial real estate (CRE) loans in their portfolios. Curiously, it is the biggest banks that are stuck with a worrying level of non-performing loans (NPLs) in the CRE sector. And now the Fed is warning that the CRE NPL situation is expected to soon manifest itself in the form of banking failures<\/a> similar to what occurred in February of last year. So how will these big banks survive? Well \u2026 this helps:<\/p>\n

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(h\/t: TFMetalsReport.com)<\/p><\/div>\n

Debit:<\/strong><\/span> Meanwhile, the US is continuing to print $1 trillion in new currency every 100 days or so to cover its increasing debt obligations. In fact, the National Debt surpassed $35 trillion this week. Not surprisingly, this has sharply reduced foreign nations\u2019 appetite<\/a> for additional US Treasury bonds. As a result, physical gold is rapidly replacing US Treasury debt as the world\u2019s preferred means of storing wealth – which is bad news for the US dollar (USD) and Americans\u2019 standard of living – which has been artificially inflated for decades thanks to its role as the world\u2019s premier reserve currency.<\/p>\n

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Debit:<\/strong><\/span> By the way, here\u2019s another reason<\/a> why the world is moving from T-bonds to gold: Last week the European Union transferred the equivalent of more than $1.5 billion in frozen Russian assets to Ukraine. Like it or not, global trade requires trust<\/strong><\/em> to function, and physical gold is an apolitical currency that is not subject to electronic confiscation by other nations.<\/p>\n

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Debit:<\/strong><\/span> In the meantime, the US can no longer afford to keep servicing its gargantuan debt<\/a> at current interest rates – so they are strongly suggesting they\u2019re going to start cutting interest rates this autumn. That\u2019s great news for people looking to buy a home. The bad news is: Inflation is still running hot for many goods and commodities and dropping rates will act as more kindling for the inflation fire. And if you think that’s<\/strong><\/em> the craziest good-news bad-news story you’ve ever heard, then you haven’t heard this<\/strong><\/em>:<\/p>\n