Black Coffee: Forward March!

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?

Hitting rock bottom is an opportunity to rebuild.

— Anonymous

We’ve come to the edge of the abyss. Now it’s time to take a bold step forward.

— Ed Balls

Credits and Debits

Credit: Did you see this? A new Harvard poll has found that, for the first time in four years, a slight majority of Americans perceive the economy as “strong” – this despite constant fear peddling from mainstream media that trade tariffs will harm the economy. Huh. We’re not sure if this is more evidence that the mainstream media has truly lost any semblance of credibility, or that its ability to influence a significant portion of the public is finally dead.

Credit: On a related note, the CFO for Home Depot said this week that the home improvement retailer has diversified where it sources its merchandise and doesn’t plan to raise prices because of higher tariffs. In fact, more than half of all its inventory is American made – and no foreign nation supplies more than 10% of its inventory. This is in direct opposition to WalMart, which warned that it would most likely have to raise prices by the end of this month because the majority its inventory is currently sourced from China. See how that works? Oh, and speaking of sources …

Debit: Meanwhile, over on Wall Street, the Big 3 stock market indices all finished in the red on Friday. The Dow Jones Industrial Average sank 0.6%, the S&P 500 fell 0.7% and the tech-heavy Nasdaq Composite backed off 1%. That only served to make the major averages’ weekly performance figures worse than they already were. In fact, for the week, all three major averages fell more than 2%. Needless to say, the bear market continues. Then again, for some people, it’s always a bear market …

Debit: Last week, the Moody’s rating agency downgraded the US credit rating by a notch to “Aa1” from “Aaa”, citing rising debt and interest “that are significantly higher than similarly rated sovereigns.” For those not counting at home, that was the last top credit rating the US had among the major credit rating agencies. Yes; that means higher interest rates to borrow in the future. Oh … and we know what you’re thinking. So here’s a refresher for those who forgot what each of the credit rating scores actually mean …

h/t: @GoldSilverHQ via @TFMetals

h/t: @Foundation_Bots

Debit: The lower credit rating is not surprising when considering that the federal budget deficit is running near $2 trillion a year – that’s more than 6% of gross domestic product (GDP). At least the US government can print its own currency to “pay” the bills – unlike the many state and local governments who currently find themselves in deep fiscal holes. On the bright side, at least all of that local spending – and the taxes that partially support it – is being put to good use by highly-pragmatic leaders. Oh, wait …

Debit: Meanwhile, America’s nearly $37 trillion National Debt has already surpassed the size of its economy – especially since the pandemic borrowing. Making matters worse, higher interest rates have also pushed up the cost to service the debt. As sagacious macro analyst Franklin Sanders points out, “This year $9.2 trillion of that debt matures and must be rolled over at much higher rates. The snowball is rolling downhill. When does it become uncontrollable?” It’s a good question. Eventually the debt will lead to destruction of the US dollar (USD). If only that was as fun as destroying this stuff:

Credit: Macro analyst David Jansen pointed out this week that, “for decades … central banks have executed – and denied – inflationary monetary policies that inflated global debt and asset bubbles that are now collapsing. After their 2008 global bubble collapse, central banks purchased more than $21 trillion of assets to fake their value as a ‘solution.’” Oh … and speaking of fake news …

Editor’s Note: This applies to central bankers too.

Credit: With all that in mind, it shouldn’t be surprising that macro analyst John Rubino is reporting that a growing number of experts are concluding that a new Bretton Woods monetary agreement is imminent, which is why central banks around the world are “stocking up on gold” and, as a result, driving up its price. Hmmm. “Stocking up“? Or furiously replenishing their vaults before the monetary system SHTF with all of the yellow metal they leased into the market over the past several decades to keep the price suppressed?

Credit: Indeed, this week none other than the European Central Bank (ECB) warned that investors are now showing “high demand for gold as a safe haven and, a notable preference for gold futures contracts to be settled physically. So any disruption in the physical gold market could increase the risk of a squeeze, leaving (short sellers) exposed to potentially large losses.” Uh huh. Translation: Central banks expect a very sharp and sudden gold price increase to occur when the market finally calls speculators selling gold contracts who don’t actually own the yellow metal onto the carpet. Scoff if you wish. But as hot tips go, we bet it’s more credible than this:

Credit: Upon reading the ECB’s warning, precious metals analyst Chris Powell wryly noted: “Better late than never, one may suppose. Has the ECB now earned its own tin-foil hat?” The truth is, although they sometimes act like it, central bankers aren’t stupid.

Debit: You can be sure of this: It’s definitely not a coincidence that the seeds of the current monetary mayhem were planted in 1971, when the USD was decoupled from gold. Unfortunately, the current corrupt international monetary system – which is still stubbornly anchored to the fiat USD – continues to determine the totality of life on this planet. At least for a little while longer.

Credit: So here’s the bottom line: Central banks hold gold because they know it’s wealth insurance, par excellence, against a failure of their fraudulent debt-based monetary system and the fiat currency that backs it. So shouldn’t you own a little bit of the yellow metal too? You know … just in case.

The Question of the Week

VoteResults


Last Week’s Poll Results

Which of these bodies of water have you dipped your toes in?

Len PenzoSource