It’s time to sit back, relax and enjoy a little joe …
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.
I hope everybody had a wonderful week. And with that, let’s get right to this week’s commentary, shall we?
Rules are made for people who aren’t willing to make up their own.
– Chuck Yeager
Whoever has the gold, makes the rules.
– Johnny Hart
Credits and Debits
Debit: Did you see this? A lot of economists are now saying a recession is on the horizon. On the other hand, many others would say we’ve been in a recession for a long long time now – especially after the government decided to change the long-accepted rule that formally defined a recession back in 2022. Oh, yes; they most certainly did:
Debit: Meanwhile, a new study has determined that the now-infamous Inflation Reduction Act that became the law of the land three years ago could cost taxpayers as much as $4.7 trillion by 2050. For those not counting at home, that’s roughly 12 times the originally-stated cost – never mind the inflationary costs this law unleashed. Not surprisingly, it also made a lot of politicians and their “green” energy cronies in the private sector wealthy. What a disaster. Now if only people would stop falling for these kind of scams.
Credit: By the way, one of the Inflation Reduction Act’s hidden “gifts” to taxpayers was the authorization of a “Waste Emissions Charge” (WEC) which was essentially a punitive natural gas tax to discourage its use. That, in turn, in some places led to increases in electricity costs as well. Thankfully, this week the new administration ordered the EPA to rescind the tax. In the meantime, many academic pedants are insisting that the WEC was not a tax – even though the financial consequences for consumers were identical. Those dubious claims are yet another reason why nobody listens to them …
Debit: In other news, the latest survey of US homebuilders has found that they expect recent tariff actions to raise the cost of the typical new house by $9200. For what it’s worth, the median price of a new US home was $446,300 at the beginning of last month. Is that overpriced? Hell ya! Then again, when it comes to overpriced, new homes can’t hold a candle to these places:
Debit: Stocks edged higher on Friday with the S&P 500 and Nasdaq snapping four-week losing streaks; the recent overall trend remains lower however. Then again, stocks apparently aren’t the only assets losing their value these days.
Credit: Speaking of stocks, the market in general has been getting beat up lately, but shares of both Procter & Gamble and Coca-Cola are hovering near their all-time highs. Why? Well … it certainly doesn’t hurt that both companies have raised their dividends annually for more than 50 consecutive years. Or continuing rumors of Coke engineers working to make the company a viable competitor to SpaceX …
Debit: The latest Treasury finance report was released last week and it shows that in February the total deficit exceeded federal government revenue. But wait … there’s more. It also turns out that more than half of all individual income taxes were needed just to service the existing National Debt. If this was an American household it would declare bankruptcy. Alas, it’s the federal government – which means they get to print US dollars (USD) out of thin air and then pass the costs off to us in the form of higher prices and a resulting lower living standard.
h/t: @moneysavvyminds
Debit: Not surprisingly, the Treasury report also shows that, at the current pace, the 2025 fiscal year deficit is on pace to hit $2.5 trillion. Yes; in just one year. How much longer do we think this can realistically continue? Judging by the mad dash for gold that has caused its USD price to soar more than 40% over the last 12 months, we say: “not much.”
Debit: Gold may be over $3000 now, but it’s no secret that the Fed and other national central banks have been leasing gold to suppress the yellow metal’s price for at least five decades. However, it’s becoming increasingly likely that that strategy is being abandoned by everyone – except the Fed. Why? Because they’re desperately trying to keep the “Almighty Dollar’s” purchasing-power illusion alive. Needless to say, their efforts are getting tougher with each passing day – if only because a rapidly-rising USD price of gold isn’t the only way us plebes can tell that American living standards are falling faster than green grass through a goose …
This picture was taken in 2020. The price of gold today is more than $3000 – so the number of $1 bills required to buy an ounce of gold today is nearly twice than what is shown in the photo. (h/t: @SallyMayweather)
Credit: So … what caused the central bankers’ change of heart? A new standard known as Basil III, which strengthens bank capital requirements, limits leverage, and increases liquidity standards to reduce financial risk and enhance system stability. It just so happens that this new standard is scheduled to go into effect in the US on July 1 – less than 100 days from now. As a result, there’s now a mad scramble to repatriate leased gold here in the US – most of it from the Bank of England’s vault – as that deadline approaches. After all, an audit awaits … we hope. Although it probably won’t be happening until Ft. Knox is restocked. Otherwise …
Credit: Finally … for those of you looking for a little more clarity as to the reason for the sudden gold scramble, market analyst Kevin Bambrough explains it this way: “Basel III elevated physical gold to a ‘zero-risk’ asset starting in 2024. This means banks can now rely on gold to meet stringent financial safety standards, pushing demand for actual gold over paper-based trading.” This begs the question: If the banks are now relying on gold to bolster their financial safety, shouldn’t you consider doing it too? Just make sure the precious metal you’re buying – whether it’s gold or silver – is free from counterparty risk.
h/t: @RichardCabezza
The Question of the Week
How many miles do you typically put on your primary each year?
- Less than 3000
- 3000 - 6000
- 6001 - 12,000
- More than 12,000
Last Week’s Poll Results
Have you ever been the victim of credit card or other financial fraud?
- Yes 72%
- No 28%
More than 1200 Len Penzo dot Com readers responded to last week’s question and it turns out that more than 70% of you (!) have been the victim of some type of financial fraud – that includes yours truly. Frankly, that number is far higher than I expected. How about you?
If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
By the Numbers