Black Coffee: Why 100-Trillion Zimbabwe Dollars Doesn’t Go as Far as It Used To

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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. Here’s what caught my attention over the past week…

If any of you out there plan on going on a first date this Valentine’s Day, try not to utter either of these lines — especially if you’re hoping to get lucky:

  • “I know we just met, but … could I borrow $100?”
  • “Go ahead and ‘super size’ it   — I found some spare change in the sofa today!”

Uh huh. Just as I thought. Crickets.

If that made you wince, folks, well, fair warning …   it’s all downhill from here.

Here we go.

The Way-Back Machine: Past Posts Of Mine You May Have Missed

From January 2010:

Your Money Horoscope – What’s your sign? In order to help my readers divine their near-term futures with respect to money and personal finance, I decided to try my hand at astrology. No, really.

And Here’s Some Other Posts You Might Enjoy …

Gen X FinanceSaving Money on Valentine’s Day

Wisebread99 Affordable Date Ideas

Money Under 3013 Inexpensive and Unique Valentine’s Gift Ideas

The Free Financial AdvisorLife Insurance: Why People Choose the Wrong Amount

The Question of the Week

Credits and Debits

Debit: Just how bad is the economy here on Main Street? Chew on this: only 31% of American adults under 30 — the so-called “Millennial generation” — currently have full-time jobs. Another 30% have part-time jobs. The remaining 38% aren’t working. Incredible.

Debit: With that in mind, it’s no wonder that a recent Pew study found 1 in 7 middle-aged breadwinners in the US are now supporting both their kids and parents. The researchers somewhat sheepishly call those breadwinners the “Sandwich Generation.” Pew is right.

Credit: I hope there aren’t any “Millennials” hoping to land a mail carrier job because this week the Post Office announced that it would stop Saturday mail delivery in August. The move, which is supposedly supported by 70% of Americans, will save $2 billion annually.

Debit: Unfortunately for the Post Office, they’re going to have to try harder than that if they want to permanently wipe out their operating deficits — they lost $15 billion in the 2012 fiscal year alone. I know.

Credit: Do you think the Post Office should take their $2 billion in savings and play the stock market? Both the Nasdaq and S&P 500 finished with another week of gains. Those who are counting will tell you that’s six in a row. Hooray!

Credit: Although the US stock market has been on a tear, hedge fund manager Kyle Bass isn’t impressed. He knows it’s an illusion propped up by the Fed’s relentless — not to mention inflationary — money printing campaign and their stubborn insistence on keeping interest rates at all-time lows.

Debit: In fact, the Dow, S&P 500 and Nasdaq — which are at, or approaching, all-time highs — in real terms are still lower than they were in 2000. Since then, the Dow is down 11.5%, the S&P is 26.8% lower, and Nasdaq is off a stunning 53.6%. Blame it on inflation.

Debit: In fact, Bass wisely points out that, Zimbabwe’s stock market was, in nominal terms, the best performer this decade. Even so, the end result is that an investor’s multi-trillion-dollar portfolio will buy just three eggs today, thanks to the insidious wealth-zapping nature of hyperinflation.

Debit: You remember Zimbabwe; the official home of the Z$100-trillion bill. It’s also a harbinger of what may lie down the road for other nations if the world’s central banks, in a desperate attempt to keep their economies afloat at any cost, press ahead with an ill-advised currency war. The opening salvos are underway.

Debit: In order to boost exports, Japan has announced a policy of massive money printing to devalue its currency. Of course, after inflation takes root and the purchasing power of the yen is crushed, the biggest losers will be Japanese savers and those on fixed incomes.

Credit: Then again, if you’re outside of Japan and looking to buy some imported Kobe beef, or a brand new Lexus … winning!

Debit: Although they officially deny it, one country currently grappling with a major inflation problem is Argentina, whose economy is now suffering from the ill-effects of a decade-long government-controlled economy. Yes, the same Argentina whose currency collapsed in 2001.

Debit: Annual inflation is now so bad in Argentina — unofficially north of 25% — that President Cristina Fernandez imposed a two-month price freeze on supermarket items. Apparently her economic advisors are unaware that price controls never work — unless the goal is to create shortages and long lines.

Debit: Meanwhile, the economy has gotten so bad in the socialist paradise of Venezuela, this week the country devalued its currency 32% – which means everyone in Venezuela just became 32% poorer. That’s the fifth devaluation there in nine years, comrades. Forward!

Credit: The end result of currency devaluation and inflation is identical — they both rob citizens of their wealth. The big difference is that inflation comes quietly, like a thief in the night. Currency devaluation, on the other hand, is more like being mugged at gunpoint.

Credit: Maybe things will get better in Venezuela if they nationalize more industries, print more money to pay for additional government pork projects and entitlements — or try imposing higher taxes on “the rich” to ensure they pay their “fair share.”

Credit: Say what? Venezuela has been doing that since Hugo Chavez took over in 1999? Hmm. But that strategy seems to be finally working for us here in America. Haven’t you seen the US stock market lately? Winning!

By the Numbers

Don’t cry for me, Argentina. Here are some facts on the current economic troubles there:

2 Bouts of hyperinflation that Argentina has suffered in the past 20 years.

44% Cumulative inflation rate in Argentina since 2007 according to “official” government figures.

137% Cumulative inflation rate in Argentina since 2007, according to independent analyst PriceStats.

$150,000 Fine for private statisticians in Argentina who dare to publish actual inflation data that differs from the “official” government figures.

1   Number of countries censured by the International Monetary Fund for publishing misleading “official” inflation data. Argentina was censured last week.

160 Argentina’s national ranking in the “2013 Index of Economic Freedom.” The index measures citizens’ rights to control their property and the fruit of their labor. (Venezuela and Zimbabwe are ranked at 175 and 176, respectively.)

Sources: The Economist; Los Angeles Times; Heritage Foundation

Other Useless News

Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. Arkansas (2.54 pages/visit)
2. Wyoming (2.34)
3. Delaware (2.33)
4. Arizona (2.29)
5. South Dakota (2.24)

46. Oklahoma (1.60)
47. New York (1.59)
48. Mississippi (1.58)
49. Connecticut (1.57)
50. Nevada (1.54)

Whether you happen to enjoy what you’re reading (like my friends in Arkansas) — or not (ahem, Nevada) — please don’t forget to:

1. Click on that “Like” button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!

2. Make sure you follow me on Twitter!

And last, but not least…

3. Don’t forget to subscribe to my RSS feed too! Thank you. :-)

Letters, I Get Letters

Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com

John O. took issue with last week’s post in honor of Valentine’s Day that explained how to tell if you’re dating a deadbeat:

Stereotype much? Because then, I could call you a dead beat. Have you been watching too many episodes of Seinfeld?

John, I could never watch too many episodes of Seinfeld! (Well … as long as we’re talking about Season 4 onward.)

I’m Len Penzo and I approved this message.

Comments

  1. 2

    KIM says

    I think I’m suddenly depressed, not that I haven’t been living in reality already. Just gonna pay off the house and hide in gold and strong dividend payers. But, I’m glad that “my sign” is tied for first in readership. Must mean I’m smart among the smart–since Len only brings in the realized. Come on Len, cheer me up! Turn off the stars and tell me what you’re doing! I believe you promised us some posts on how you were going to handle the impending doom. I’m certainly interested. I need to protect my ass..ets

    • 3

      Len Penzo says

      It’s coming KIM. It’s coming. I’m in the middle of writing it now. I was hoping to have it by Wednesday, but I have a business trip that may force me to push it back to a week from Monday. I’ll do my best to finish it in time for Wednesday though.

      As for my sign … it isn’t doing so well right now. ;-)

    • 5

      Len Penzo says

      Remember, if your debt is limited — and you have enough savings to withstand an extended bout of unemployment — debtors will actually make out in a hyperinflation scenario, Jane.

  2. 6

    says

    The hyperinflation scenario is scary, more important is the potential devaluation of the dollar. I hope we never get to a trillion dollar loaf of bread! Maybe it’s time to start owning some precious metals.

  3. 7

    Volfram says

    Born on the 21st = I get to pick from two signs, meaning my combined demographics make up 17% of the current poll percentages! Win!

    (Leo is currently winning with 15%)

  4. 8

    says

    From A-Z – Argentine to Venezuala. Yes they are all basket cases but they are the small fry so are squeezed by all the big players. I don’t see the rest of the world following their path at all.

    What will happen is that all the big currencies will deflate by a similar amount due to the printing presses so there will be a net zero gain except the government debt will effectively disappear. Business as usual as long as you have effectively preserved your wealth in some way.

    The victims will be to a small extent the ordinary person in the street but mostly those countries with totally screwed economies. Back to Argentina-Zimbabwe….

  5. 9

    Rachaelb says

    As a member of the “Millennial generation” it is depressing to see a third of the people (with many of them probably older then me) don’t have a job at all. Thankfully, I am part of the gainfully employed.

  6. 10

    Jordon says

    Long time reader here, Len. That being said, I’m an accounting student, with a question… What do you think of the new digital currencies like WebMoney and Bitcoin? Think they can provide some decentralized benefits in the coming years?

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