I’m Stumped: 7 Perplexing Money Questions Without a Good Answer

Earlier this month, British Prime Minister David Cameron offered $1.54 million to the person who could solve mankind’s greatest challenge, whatever that might be. However, before the challenge can officially begin, Mr. Cameron must wait for an official list of the world’s biggest problems from a committee of extremely wise fellows who are now collecting the best suggestions from abroad.

The first candidate problem that immediately crossed my mind was how to get my teenage son, Matthew, to keep his bedroom clean.

Try solving that one, smart guys.

Of course, for every unsolved problem in the world, there are just as many unanswered questions. In fact, some of the world’s most perplexing questions are directly or indirectly related to the world of money.

Here are some real financial head-scratchers that are begging for a good explanation:

  1. Why do gasoline prices rise quicker than they fall? As sure as the sun rises in the east, whenever oil prices rise sharply, gasoline price increases follow almost immediately. However, on those rare occasions when oil prices experience a precipitous market decline, gasoline prices usually take days to respond in kind. Strange, isn’t it? For his part, the guy behind the counter at my local station insists that I’ve got it all wrong; he says he’s out there changing the prices on his signs just as quickly, regardless of whether oil prices rise or fall. Sure he is.
  2. Why is gasoline still priced in fractions of a cent? Speaking of gasoline prices, why in the world do gas stations continue to price their product to the nearest tenth of a cent? Supposedly, retailers started pricing gasoline that way during the Great Depression as a marketing gimmick — but back then, gasoline was 10 cents per gallon and fractions of a penny actually had an impact on struggling consumers. With gas more than 30 times more expensive today, that pricing strategy is obsolete.
  3. Why do we still bother pricing everything else to the nearest penny? In 1913 the once-proud penny had 23 times the purchasing power it does now. Today, a lone penny is essentially worthless. Ironically, each penny costs almost two cents to produce, which is another good reason why many folks consider it to be a financial nuisance.
  4. Why are so many people afraid of deflation? The central banks will never tell you this, but, for fiscally responsible people, benign price deflation resulting from increases in productivity (as opposed to “bad” deflation resulting from a reduction in money supply) leads to a proportional increase in purchasing power. As a result, deflation — unlike inflation — leads to higher living standards for savers, retirees, people with minimal debt, and other folks who live within their means.
  5. Why is tap water so cheap? For the most part, clean running tap water is ridiculously cheap here in the United States. Is it really that plentiful? Even where I live, in arid Southern California, I’m paying a mere half-cent per gallon for the stuff. No wonder we take water for granted.
  6. Why do so many people go to college when their return on investment is so poor? When it comes to ensuring financial success, college is no longer a slam dunk. Especially since the cost of college has risen more than 1000% over the past 30 years, far outpacing inflation in general. As a result, it’s riskier than ever to expect a decent return on your college investment unless you pursue a technical degree like engineering, or study to become a doctor or lawyer.
  7. Why do some folks eagerly buy stocks when their prices are at all-time highs? Everybody loves a sale. Well, except when it comes to stock prices. Is it just me, or is the stock market the only arena where many people feel financially smarter when they’re buying high and selling low?

By the way, if you have the answers to any of these confounded head-scratchers, let me know.

Just keep in mind that, unlike the British Prime Minister, I can’t afford to pay you millions of dollars for the answers.

Hopefully, you’ll find it in your heart to do it for the good of all mankind.

Photo Credit: Lincolnian (Brian)


  1. 2

    Daryl Bowling says

    question one about gas prices, the station has product that was bought at the higher price and they first want to recover their investment and second sneak a few days profit in there at the same time, and if they all are doing it, competition will not force the reduction in price.question 2 why the percentage of a dollar, habit, and the customer expects it and somewhere in the back of our collective minds we think it is a better deal. as for inflation or deflation, either way i win, inflation wages rise and are forced up which makes it easier to shed debt, deflation makes the money go farther either way is a win. the most important question you ask was how to get a teen age boy to clean his room, i admit i am stumped, good luck and welcome to hell.

  2. 3


    Regarding the gas question what makes you think there is a reasonable answer? I never understood why they changed the price when they already had the gas in their station tanks. I think the price should relate to the cost. Weird, huh!

  3. 5

    Arturo Rivero Rodríguez says

    1. They raise the price of the gas to increase profit, even though they paid a cheaper price for the gas, because it was bought before the oil price climbed. However, it takes longer to drop, because even though the price of oil drops, it still takes a while to sell the gas inventories bought when the oil price wss high.
    I guese the answer to all of your questions are related to the fact that we have been deceived by politicians. They have made us believe such things to control the population and because it fits their purpose, which is to maintain power and have the population depend on the “almighty” government to solve all of their problems. While the truth is that the population should be able to decide and be informed correctly.

  4. 7

    Terry Pratt says

    5) In many parts of the country, water really is that cheap and plentiful. Rainfall (plus melt from snowfall) falls to the gound abundantly and flows into our streams and rivers and reservoirs, naturally filtered as it flows. Where it is not plentiful it can be pricey.

    6) There are a number of selection biases which lead people to pursue degrees that do not pay off financially. Many people go to college because their family expects them to go, especially if their parents did not go to college. It’s a lot easier to please your parents by going than to disappoint them by not going.

    Many people fall for the hype about the “much greater” earnings claimed to flow from a college degree.

    Even where people pursue degrees that do not make a lot of money, many believe that their outcome will be “above average” as if they were in Lake Wobegon, or that like the perceived invincibility of young people, bad outcomes won’t happen to them.

    7) Most people are followers, not leaders, and especially not contrarians. Most people are “late adopters” when it comes to embracing new consumer or tech products, and also when it comes to investments. That’s why most people invest after the smart money has flowed into an investment, and often after smart money has begun exiting that same investment. They are slow to move off the dime, and arrive late to the (investment) party.

    • 8

      Len Penzo says

      Re: Number 5. Terry, how do you explain that where I live — where we’re seemingly always being told we’re in some sort of drought condition — tap water costs just $5 for a 1000 gallons?

  5. 9


    I love this list. Thanks for sharing. Very legitimate questions that should be addressed. IT is not so much that there are not answers to the questions you pose, it is whether there is political will to change them.

  6. 10

    Olivia says

    My mom had several solutions to the “clean your room dilemma”. Move every two years, (each person does their own packing), or put the house on hydrolic jacks to tip the contents into a huge dumpster. She used neither, but reverted to the inefficient nagging method.

  7. 13


    I can answer the investing one, why people are diving into markets at high points.
    1. Humans are not rational.
    2. Herding behavior, a behavioral finance term, explains that we prefer to follow the crowd (even if it’s totally irrational).

    Good luck with the rest of the answers :)

    • 14

      Len Penzo says

      Well … Olivia answered the hardest question, Barb.

      If I get good answers for the others, it’s all gravy!

    • 15

      Corc says

      Completely agree. The problem is that the world is very uneducated when it comes to finance so people think because a stock price is increasing that is a sign of success and future profits. When in reality, you should be looking at the intrinsic value of companies and find “bargains”.

      Income statements, balance sheets, executive management, business plan, etc. All of these things can be evaluated to execute sound investing principles rather than the herd mentality Barbara refers to.

  8. 16

    Sam says

    4. No one is afraid of supply side deflation because the incomes of debtors would be growing! Similarly, people should be less afraid of demand side inflation where wages keep pace, because what they actually fear is supply side inflation where wages do not.

    • 17

      Len Penzo says

      Sam, I assume you’re talking about real, as opposed to nominal, income?

      For debtors, the trouble with any kind of deflation, is that their loan was bought with cheaper dollars — but they have to pay it back with more expensive dollars.

      In a deflationary environment, the time value of money is not a debtors friend.

      • 18

        Sam says

        Real, yes. Deflation caused by increases in productivity would not cause a debtor’s loan to become harder to service since everything besides the mortgage is easier to pay for. As you alluded to, a Fed induced reduction in demand causes nominal income to go down, while the real cost of everything besides the mortgage remains the same. This means savers will lose out anyway because of debtor defaults when they can’t continue to service their loan.

      • 19

        Volfram says

        Now I understand why so many people are afraid of deflation. I know fewer than a dozen people who are debt-free and I’m one of them.

        Some friends and I once observed that every single married guy we know in our general age group is terrible with money.

  9. 20


    In some Asian countries, except for European and American products, the price of everything is in whole number of the currency of the country. Even though Americans are supposed to be smart but they get deceived on a daily basis. Actually, they let themselves deceive by corporate America. They can do something but they won’t. The majority of folks don’t do “nothing” because they are happy in the “status quo.”

    • 21

      andrew says

      A whole number would really do no good since many places sales tax still has to be added on.

      I suppose that there is some psychological manipulation going on, but to call it being deceived is a bit much. You could very well say that we would be being ripped off were sellers to round up. It’s merely a convention. Different conventions in different cultures.

    • 22

      Volfram says

      One American company actually tried to do this. They called it the “Square Deal” project.

      Look it up. It’s heart-breaking.

  10. 23

    Sean says

    With regards to 6, I think there are several reasons, but there are two that come to my mind. First, there is the common refrain that college gradudates make [X] amount more than non-graduates over the course of their career. However, these statistics are misleading when the choice is between no college and an expensive and not terribly selective private or for-profit college. Second, teenagers have little concept of how much college is worth and how much it costs. When you take on a loan as a seventeen year old, you have little concept for how much the monthly payments will be, how likely it is you’ll get a job to cover those payments, ect. It’s quite an odd situation that we allow people who can’t live on their own to take out 100k+ in non-dischargable loans.

  11. 24


    #7 has a lot to do with the psychology of herd mentality. When we are shopping, unless its a midnight sale before Thanksgiving, its alone so you feel a jolt when you score a great deal. Stocks and bonds bought on tips, through the articles in the trades or via CNBC promotions are done in a group.

  12. 25

    Volfram says

    4: I understand NOW(see my post half a page up), but still think it’s stupid. Debt is a terrible state to be in, and I intend to never do it again.

    6: I’m not sure about other people or majors, but the 8 years it took me to get my degree paid for themselves within 1 year. On the other hand, I went to a relatively cheap engineering college and got a very decent programming job right out of the gate. Paid off my school debts after 2 months, haven’t owed anybody a penny since then.

  13. 26

    Lincoln says

    Fuel prices rise faster than they fall for the single reason that the guy who runs the station wants to make a profit. It’s also for the same reason that the prices don’t fall as fast as they rise. Talk about the time value of gasoline!

  14. 27

    Lincoln says

    In regard to # 7, I think people buy stocks when they are at their most expensive because they expect the prices to continue climbing. They’ve been climbing so they ought to keep doing that! Rarely do most people take the time to understand the forces driving the prices high, leave alone the other factors that could and do change the market dynamics.

  15. 28

    Stephan says

    1) The rise in fuel prices is directly related to the cost of future inventory, while the decrease in fuel prices is directly related to competition and greed.
    2)Old habits die hard.
    3)Dido. Plus everyone knows pennies are lucky!?
    4)Because they are all taught to fear it and cannot grasp an environment that almost never exists.
    5)Water is essential to our lives and no one wants to imagine there is so little in an area that we would have to pay a lot more for it. Plus, utilities in arid areas have to stay more or less on par with those in wet regions or no one would want to live there.
    6)Because its the “right thing to do.” Everything in middle school/high school prepares students for college – you would be weird not to do what everyone else does.
    7)Why do people buy lottery tickets?

  16. 29

    Mary Anne says

    In answer to question No. 1: A gas station owner (or anyone who sells a product) must price present inventory to cover the price of future inventory. Sure a gas station owner may have only paid $3.00 a gallon for what’s in his storage tanks, but if he knows that his future costs will be $3.25 a gallon, he has to base his pricing on that. Otherwise, he will not make enough money off of present inventory to purchase future inventory. Prices do not fall as fast as the station owner must sell his inventory for at least as much as he paid for it or else go out of business.

    • 30

      James says

      So if he pays 3.00 for what is in his tank and the price goes down for the future, he could drop the current price just as easily, but most generally probably don’t do that. I think that is what everyone is saying.

  17. 31

    DrewShock says

    Why do some folks eagerly buy stocks when their prices are at all-time highs?

    Len I’ll take a stab at this one. Actually the best time to buy a stock is at or close to it’s all time high. But it has to be technically the best time also. It technical analysis the best performing stocks where ones making new highs. If the company was beating earnings estimates and was predicted to do so for the next few quarters, then yes you want to be in that stock, even if making new highs. A stock that had been beat up and is now climbing back has to fight through all the people selling who bought when it was higher, then it dropped, now they are selling to breakeven. We called it overhead. Once in a new high the overhead is gone and it’s free to run. It’s almost counter intuitive to buy in a new high, we as humans looks for sales. But if a stock is on sale, it usually means something is not right with the company.

    But you also want to buy new highs in a new bull market, not a five year stale one getting ready to become a bear.

    It’s part of the CAN SlIM (http://en.wikipedia.org/wiki/CAN_SLIM) approach developed by Investor’s Business Daily editor William O’Neil. If followed to the tee, can be quite lucrative. My personal problem wasn’t buying but holding on too long to loser stocks.

    The best innovative companies usually have stocks that lead the market and are constantly making new highs.

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