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 an enjoyable week. Without further ado, let’s get right to this week’s commentary …
A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether.
– Roy H. Williams
Credits and Debits
Debit: Did you see this? A Citigroup attempt to credit a client’s account with just $280 went wildly wrong, with the financial services giant crediting it with $81 trillion instead. Yes; that’s trillion with a “t.” To put that $81 trillion figure in perspective, consider that the current M2 measure of US money supply is “only” $22 trillion. Hey … the error is completely understandable. I mean, we all make data entry errors of 11 additional significant digits from time to time. Besides, there are mistakes out there that are far more dangerous …
Debit: For those of you who aren’t counting at home, this followed the accidental transfer of $900 million to Revlon in 2020. Yes; that’s million with an “m.” Never mind that that’s nearly $1 billion – with a “b.” Regardless, it’s extremely gratifying to learn that Citigroup has been diligently working over the past four years to correct obvious flaws with their technology and errors in their quality control policies.
Debit: In other news, this week the Fed forecast that GDP would finish the first quarter of this year at a negative 2.8%. That contraction estimate marks the worst forecast since the 2020 pandemic. That shouldn’t be too surprising because the Fed can’t seem to learn from its own mistakes. As macro analyst Jesse Columbo points out, “In general, the Fed raises rates until something breaks – and that something is typically industries or speculative booms that flourished in the prior low-rate environment.” Then they print even currency to paper over the carnage.
Here’s a historical look at the Fed Funds Rate since 1975. Notice that every Fed hiking cycle has led to financial crises of varying degrees. (h/t: Jesse Columbo)
Coming soon …
Debit: A big reason for the Fed’s poor outlook on GDP is due to stagflationary signals that became more obvious this week. First it was slower consumer spending. That was followed by the latest PCE price index showing inflation is running at 2.5% annually. Meanwhile, consumer sentiment is only worsening amid these economic pressures, with most Americans reporting their incomes aren’t keeping up with the latest spike in inflation – and that is holding down household savings and discretionary spending. In other words: the economy is a mess.
Source: Incrementum via @IGWTReport
Debit: Despite the Fed’s worsening economic sentiment – not to mention US government and private sector plans to reduce payrolls at the fastest pace since the 2020 pandemic – major American stock market indices are only now starting what appears to be a noticeable pullback from their all-time highs … which just goes to show that, upon a quick glance, things aren’t always as they seem.
Debit: Although it may seem like it, the price of everything isn’t climbing. The highly-speculative asset better known as bitcoin fell 17% in February, marking the cryptocurrency’s worst monthly performance in nearly three years. It could have been worse – after topping at $109,000 the crypto coin traded below $80,000 on the last day of the week before staging a late rally. Oh, well … live by the scam, die by the scam.
Credit: On a somewhat related note, US Treasury Secretary Scott Bessent says he expects that by July of next year, DOGE could ultimately root out $300 billion in federal waste, fraud, and abuse; that’s about 1% of GDP. Bessent added that the cost-cutting agency has already uncovered substantial inefficiencies – along with a staggering amount of outright fraud. He admitted that, when in comes to waste, fraud, and abuse most people think in terms of waste and abuse, but “I’ve got to tell you that I’m slightly shocked at the fraud we’re finding.” Really? Because we’re not, Mr. Secretary. At all.
h/t: @LibertyPillMeme
Debit: Unfortunately, 50 years of price suppression in the world’s only true safe haven from our debt-base fiat monetary system – that is: physical gold – will ultimately manifest in a much bigger spike in food price inflation over the coming years. In fact, precious metal analyst David Jansen warned last week that, “as capital continues to move from intangible investment assets, into which monetary inflation was temporarily diverted, and into real goods like gold and food stuffs, we will increasingly see food poverty and famine show its face – in the West.” And you thought tariffs were going to be a problem. Or not …
Credit: Fortunately, the world is finally waking up to the fact that gold is currently undervalued. How much? Well … according to macro analyst Egon VonGreyerz, “at $2920, all the gold officially held by the world’s central banks amounts to approximately $3 trillion. At the same time just one US stock – Microsoft – has a market cap of $3 trillion. (So) a single company equals the total value of all central bank gold holdings.” Now … I know what you’re thinking: What, exactly, is going on inside the brains of people who actually believe that these absurd numbers make sense? Well … if we had to guess, probably something like this:
Credit: By the way, VonGreyerz also had this observation about the yellow metal this week: “Whether the gold is or is not in Fort Knox, it could be seen as a sideshow. After all, it accounts for only 2% of all the gold ever mined in history. But on the other hand, either little or no gold there, results in no confidence in the US or in the USD.” For now, the USD remains the strongest currency in the world, but gold is gaining quickly. In fact, if the currency wars were a footrace, it would probably look a lot like this, where the USD is represented by the runner in green:
Credit: Macro analyst Alasdair Macleod believes the current economic situation is eerily familiar to another infamous time: “The combination of a credit bubble coupled with punitive tariffs is promising to collapse global trade and repeats the conditions