Black Coffee: Low Interest Rates, Combative Teens, and Other Troubling Trends

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.

Last night at the dinner table, Nina was lamenting why I wouldn’t drop her and her girlfriend off at Disneyland this weekend for a day of unsupervised fun.

“Because you’re just 13, that’s why!” I said.

“Well, when will I be able to go to Disneyland with my friends?”

“I think 16 is a reasonable age.”

Of course, Nina wasn’t impressed with that answer. At all. “What? But nothing bad is going to happen to us, Dad. Disneyland is the happiest place on Earth!”

Uh huh. Don’t you just love that counterargument?

Anyway, our back-and-forth continued for another few minutes. Oh, it was an amusing exchange for awhile, but the dialog eventually became repetitive, so I decided to end the conversation. “That’s enough, Nina! If you don’t drop this right now, I’m not going to let you roam the park with your friends until you’re 17. What do you think of that!?”

“That’s ridiculous!” she protested.

“Okay, make it 18!”


And with that, the war was on. In one final — but futile — blaze of glory, my daughter battled, begged, pleaded, whined, and cajoled for another couple of minutes.

Unfortunately for Nina, this time her incessant tirade really cost her. Now she can’t visit Disneyland with her girlfriend until she’s 45.

That’ll teach her to argue with me.

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

From June 2009:

The 5 Worst Jobs for Teenagers – Speaking of teenagers … After looking over this list of jobs with the highest teen fatality/injury rates, maybe you’ll think that working at McDonald’s isn’t so bad after all. Then again, how many teens actually spend their summer vacations building skyscrapers?

And Here’s Some Other Posts You Might Enjoy

MonevatorDay Trading Is Too Much Fun to Be Profitable

Afford AnythingThe Diderot Effect

Wisebread4 Ways Your IRA Beats Your Savings Account

The Oblivious InvestorHow Should I Count (Something) In My Asset Allocation?

Budgeting In the Fun StuffMortgage Deductions Don’t Exist for Everybody

Credits and Debits

Credit: The high US unemployment rate has spawned a huge underground economy that is equivalent to the entire GDP of Italy. Analysts estimate that $2 trillion in “under the table” activity is now being generated in America annually.

Debit: While that underground economy helps temper the economic fallout of the Great Recession, it is depriving the US Treasury of an estimated half-trillion dollars in lost tax revenue each year. That’s enough to cover the current interest payments on the National Debt — and then some. By the way, if you’re from the IRS, don’t look at me. Ahem.

Credit: American consumers — at least the ones with their hands above the table — were in a spending mood in the first quarter of 2013 as their purchase rate increased 3.2%. That’s the fastest pace since the fourth quarter of 2010.

Debit: Even so, it wasn’t enough to meet economists’ growth expectations. US GDP expanded at an annual rate of 2.5% last quarter, but that was a full half-percent below official forecasts — and proof to many analysts that the tepid economic recovery remains on tenuous ground.

Debit: Unfortunately, the increase in consumer spending last quarter came at the expense of savings. That’s because American households saw their biggest income decline in more than three years, falling 5.3%. And when consumers begin robbing their piggy banks to sustain their spending, that’s a portent of future economic weakness.

Debit: How badly was the savings rate affected? Well, last quarter’s household savings rate plunged from 4.7% to 2.6% — that’s the lowest pace since the fourth quarter of 2007. Still, the personal savings rate has been trending downward since peaking at just under 15% back in the mid-1970s. Sad.

Debit: Here’s another troubling trend: The average term of a new car loan continues to get longer. The average note is now a record 65 months long — although some consumers are getting loans with terms as long as 97 months. In 2009, only 11% of all new car loans were between 73 and 84 months; today, it’s 17%.

Debit: Cue the next car repo boom in 5, 4, 3 …

Credit: Did you see this? According to the US Bureau of Labor, the official annual inflation rate last month was just 1.5%. Wow. That’s pretty darn low. I guess all that money printing by the Fed really doesn’t result in high inflation after all.

Debit: Then again, if the US government measured inflation using the same formula it used back in 1980, the official inflation rate would be almost 10% today. Of course, if the government did that, nobody would loan it any money, considering that their 10-year bonds are currently netting a paltry 1.7% — and 2-year bonds just 0.22%.

Debit: As Chris Martenson points out, the Fed’s low interest rates continue robbing savers for the benefit of borrowers — the biggest beneficiary being the US government. Loan the US $10,000 for two years, and you’ll receive a whopping $22 in annual interest. But with real inflation running at 10%, the purchasing power of that $10,000 is reduced by $1000 per year. The bottom line: After two years, you’d be up $44 — but down $2,000 due to inflation, for a net loss of $1956. I know.

Credit: On second thought, perhaps it shouldn’t be so surprising that the household savings rate is so dismal — or that a Chinese woman is now suing the Fed for devaluing the greenback after she discovered her savings denominated in US dollars had declined by 30% since 2006.

Credit: Of course, precious metals are impervious to the insidious wealth-robbing effects of high inflation. So maybe it’s not a coincidence that gold had its biggest price jump in 10 months — and silver its best day in more than a year — last week.

Debit: Laws for thee but not for me. Some of the very lawmakers who voted in favor of Obamacare are now trying to exempt themselves from the bungled law. Apparently the obvious solution — a full repeal — is out of the question. If this wasn’t so pathetic, it would be funny.

Credit: Finally … This week the Huffington Post featured the story of Jack, a three-year-old Australian cattle dog who can balance almost anything on his head. I’m not kidding. You can see photos of this talented pooch balancing items such as an egg, two tomatoes, a frying pan, books, a tea pot and other stuff here.

Credit: Hey, maybe Congress should give Jack its annual budget.

The Question of the Week

Sorry, there are no polls available at the moment.

Last week’s poll results:

Do you know how to drive a stick-shift automobile?

  • Yes … Like a pro! (67%)
  • Kinda sorta. (18%)
  • No   (15%)

By the Numbers – Contest Time: Win a $20 Gift Card from Starbucks or iTunes!

Yep, it’s contest time again! Below you’ll find a list of the 10 most expensive  US cities to live in. This week, I’ve got a prize for the person who can correctly guess how many cities on that list I’ve actually been to. (Hint: It’s more than half of them.)

Please place your answer in my blog’s comment section; I’ll only accept one answer per email address. If multiple folks pick the correct answer, then I’ll select the winner by a random draw among everybody who got it right.

The winner will have their choice of either:

  • A $20 Starbucks gift card OR
  • A $20 iTunes gift card OR
  • A real $100-trillion bill issued by the Reserve Bank of Zimbabwe. The bill is in mint condition — although, thanks to inflation, it won’t buy you much.

If nobody enters or gets the correct answer, then I’ll use the prizes myself.

The contest closes on Friday, May 3, at 5 pm, Pacific Daylight Time. Good luck!

1. New York City (Cost of Living Index: 228.3)

2. San Francisco (166.5)

3. Honolulu (165.8)

4. San Jose, California (154.3)

5. Stamford, Connecticut (147.4)

6. Santa Ana, California (144.7)

7. Washington, DC (144.6)

8. Boston (139.4)

9. Oakland, California (137.4)

10. Anchorage, Alaska (134.9)

Source: Kiplinger

Other Useless News

Here are the top 5 articles viewed by my 3856 RSS feed and weekly email subscribers over the past 30 days (excluding Black Coffee posts):

  1. Why Bag Ladies are Financially Savvier than Many Celebrities
  2. 4 Kick-Ass Debt Lessons from the Karate Kid
  3. Why Sneaky Package Size Reductions are No Longer Fooling Consumers
  4. Understanding Life Insurance: Does a Superhero Like Batman Need It?
  5. A Simple Trick for Getting Credit Card Interest Charges Waived

Each month I post some of the more curious queries my visitors entered into Google’s search engine that (according to Google Analytics) led them, somehow, some way, to Len Penzo dot Com:

  • can i buy glasses at dollar store and take them to my eye doctors to have the right lens  put in the frame?
  • can my HOA make me move rocks on the easement on my side of the street if my neighbors complained about the rocks?
  • if my son didn’t pay his cell phone bill an [sic] we got turned off can i still keep number and go buy pay minutes to turn back on my iphone?
  • can you have people arrested for running your debit card to [sic] many times at a restaurant?
  • i need to know if cocktail sausages with o [sic] sale date of april 7 can be used on april 21

Hey, no matter how you got here, please be sure to:

1. Click 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:

Doug Blasco had an observation about last week’s Black Coffee poll:

So (from) what I’ve read, roughly 30% of the US population knows how to drive a stick shift. Your poll shows that 70% of your readers shift like a pro. I don’t know exactly what this means but it is interesting.”

After thinking about this for a long time, I can only come to one conclusion: Stick shift drivers enjoy answering unscientific throw-away polls.

I’m Len Penzo and I approved this message.


  1. 2


    I finally had a minute to read Black Coffee- I am so happy!

    Nina’s kids may not like that she can’t take them to Disneyland until they are teens themselves. :) Don’t you love when kids don’t know when to stop arguing? My son is notorious for digging himself into such a deep hole. It wasn’t until he was a senior in high school that he realized that some inane argument is not going to change my mind.

    65 months on a car loan? That is a lot of time. Speaking of cars- gas prices skyrocketed here last week, seemingly overnight.

    Hope things are going great for you Len!

  2. 5

    Auntjenny7 says

    Hi Len, I’m going to guess that you have been to 8 of them. I thought I was reasonably well traveled, but I have only been to three of them!

  3. 8


    I’m saying 8 cities as well. If you ever watched “The Odd Couple” show from the 1970s (MeTV has it on at 10 PM in the Northeast), Oscar Madison had never been to Statue of Liberty. His argument was “I was born in New York City. I don’t have to go there.”

    On the same token, there was a show called Maude (Edith Bunker cousin). She didn’t know American history. Her argument was she was born in the States, she didn’t have to learn it.

  4. 13


    Len, I hate to break this to you, but you will never win an argument with a female offspring. You may think your ahead of the game but trust me, she will get the best of you in the long run :). Don’t forget, this is (I think) the same 13 Year old that is mature enough to have financial fears…. Man you are in so much trouble :D…….

  5. 15

    Beckybeq says

    I’m guessing 7. All the ones in CA + Boston, DC and NYC. Huh. I used to live just down the street from Santa Ana (Costa Mesa, CA) and I’m shocked that Santa Ana is on that list. The parts I saw were all definitely low rent.

  6. 17

    Olivia says

    I suspect consumer spending increased 3.2% because (food/household) prices went up. At least they have for us. It’s times like these you kind of wish you could keep chckens and goats in the backyard……

  7. 21

    KIM says

    8–ya know I want that coffee.

    Nina, honey, listen to your dad. Before you know it, you will be 45 and talkin’ just like him. I promise.

  8. 22

    Jim R says

    9. Also, I while I wish the govenment would get out of our way, I truly believe they can’t keep us down. We will recover, it’s just their involvement only slows us. This is being said with significant real goods stores in place.

  9. 23

    debbie z says

    Since I’ve been to all ten my guess is ten.

    Would be interesting on the car question to know pickup, van, suv or sedan and how many of each. I know that since I’ve had a suv I can’t see ever having a sedan again. So much easier on an older back and the suv can work as a truck with seats down and a tarp to protect the upholestry.

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