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.
Let’s dive right in this week …
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
— Alan Greenspan
Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.
— Sam Ewing
Credits and Debits
Credit: Tax season is upon us, so I’m sure most US taxpayers will be happy to learn that the IRS is no longer rejecting taxpayer returns that fail to answer Obamacare-mandated health insurance questions. Well … that’s one less bureaucratic nightmare Americans have to endure.
Debit: Speaking of bureaucratic nightmares, I see the European Union has reasserted their tyrannical intention to ban cash. They insist the ban is to thwart terrorism and crime; the real reason, of course, is to support absurd negative real (as opposed to nominal) interest rates and eliminate the risk of institution-toppling bank runs.
Credit: Then again, considering that the euro is already a lost cause, the bankers’ ulterior motives shouldn’t be a surprise to anyone. Fortunately, the euro’s demise isn’t too far off — and that should make the EU’s war on cash a moot point.
Credit: Last week, Bank of England governor Mark Carney warned that “the central banks’ 15 minutes of fame was almost over.” As if to drive home that point, this week Federal Reserve Vice Chair Stanley Fischer admitted the Fed has no idea what comes next. I’ll tell you what comes next, Stanley: a currency crisis, followed by a new monetary system. Bank on it. (Sorry, I couldn’t resist.)
Credit: Then again, the Fed has never been good at predicting the future — or even observing the present. After all, as John Maudlin correctly observes, “The Fed not only failed to predict the recessions of 1990, 2001, and 2007 — it didn’t even recognize them after they had already begun.” Yeah, but on the bright side, the Fed’s track record can only improve from here!
Debit: Meanwhile, US Treasury receipts just turned negative for the first time since the 2008 financial crisis. Why is this important? Because since 1970, every time government receipts turned negative on an annual basis the US was either on the cusp — or already in the midst — of a recession. Uh oh.
Debit: Here’s another sign of an impending recession, not to mention a downturn in the housing market: January saw the largest spike in mortgage delinquencies in seven years, and delinquencies for those low-downpayment FHA mortgages that are a favorite of first-time homebuyers jumped for the first time since 2006. Double uh oh.
Debit: Meanwhile, the US government announced that its inflation indicator for January showed its biggest increase at the wholesale level in four years.
Debit: I hear you: Wholesale price increases don’t guarantee higher consumer prices. Unfortunately, last month the government’s consumer price index rose at the fastest pace in five years too. Too bad the problem was simultaneously compounded by falling real wages.
Debit: Let’s see … what do you get when the economy suffers from an increasing inflation rate at the exact same time it’s mired in a recession? President Jimmy Carter knows; it’s called “stagflation.”
Debit: The good news is stagflation can be killed, but it requires a two-pronged approach: raising interest rates to stop inflation and increasing deficit spending to eliminate the economic stagnation. The bad news is, unlike in 1980, the National Debt is so large now that’s no longer a realistic solution.
Credit: By the way, as Craig Hemke points out, it’s not as if inflation is suddenly appearing out of the blue; it’s been here all along. What’s changed is that inflation is threatening to get out of hand. As a result, officials are unmasking their inflation data because they need it to justify additional interest rate increases.
Credit: In case you haven’t noticed, Craig wears the same tin-foil headgear that I do. His just happens to be in the shape of a cowboy hat. I prefer propeller beanies.
Credit: Finally … Kyrgyzstan’s National Bank governor is urging all of his fellow citizens to save at least 3.5 troy ounces of physical gold. Yes, a central banker actually said that. Either hell has officially frozen over — or he knows the current monetary system end game is upon us.
Debit: Eventually, you may hear a similar plea from the Fed too. However, by the time you do, you can bet they’ll once again be a day late — and trillions of dollars short — because, thanks to Gresham’s Law, there won’t be any yellow metal available. Think about that. Please.
By the Numbers
Valentine’s Day has officially come and gone. Here is a closer look at some of the numbers behind the holiday:
$136.57 Amount the average person spent on Valentine’s Day this year.
54 Percentage of Americans who celebrated the holiday in 2017.
$1,900,000,000 Amount consumers spent on Valentine’s Day candy this year.
20 Percentage of consumers who bought jewelry as a Valentine’s Day gift in 2017.
250,000,000 Roses that were grown specifically for the holiday.
$2,000,000,000 Amount consumers spent on Valentine’s Day flowers this year.
190,000,000 Number of Valentine’s Day cards that were exchanged in 2017.
$1,000,000,000 Amount consumers spent on those Valentine’s Day cards this year.
Source: ABC News
The Question of the Week
[poll id="151"]
Last Week’s Poll Result
Are you expecting an income tax refund this year?
- Yes (52%)
- No (48%)
- I’m not filing a tax return this year (0%)
Well … the 1300 people who answered this week’s survey question are almost evenly split when it comes to whether or not they’ll be getting money back from Uncle Sam this year. However, what I found most curious was just four (!) of those respondents said they weren’t filing a return for the 2016 tax year. Really? Surely that number should be a bit higher than that. I wonder if some people were afraid to answer that question because they think I’m a secret agent for the IRS, or … something.
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Saskatchewan (1.82 pages/visit)
2. Alberta (1.74)
3. British Columbia (1.68)
4. Manitoba (1.65)
5. Nova Scotia (1.62)
9. Yukon Territory (1.50)
10. Newfoundland and Labrador (1.27)
11. New Brunswick (1.23)
12. Prince Edward Island (1.21)
13. Northwest Territories (1.20)
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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 me at: Len@LenPenzo.com
After reading my piece on why you should never buy a timeshare, R added his two cents to the conversation:
It’s exactly the same as phoning a hotel and letting them put charges on your credit card in case you ever decide to go there. That’s stupid.
It’s amazing how many people end up selling their soul to high-pressure timeshare salesmen when all they really wanted was a free set of steak knives.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Another reason governments want to go away from cash is that when the currency is electronic, it is far easier to confiscate it. One click of a computer key sends it to the treasury. Similarly that is why the IRS wants everyone to file electronically. You don’t think they’re concerned about us getting our refund quicker, do you. It is all about making it easier to audit. Paper returns have to be stored and then located for an audit but electronically filed ones just have to be pulled up on an agent’s computer screen. As to inflation, I can’t testify that since we started tracking our expenses over 10 years ago, we pay much more for food and medicine that we did for the same stuff back then. But when figuring if we get a Social Security raise, they continue to claim there is no inflation. Ha!
Great comments, Kathy! Elimination of privacy is another problem that arises if cash is completely eliminated. Officials will have the means to track every single purchase you make, which I am sure nobody wants . But the most chilling threat is the government would then have the ability to make it impossible to conduct any transactions at all with the click of a mouse; a tyrannical government would have the ability to keep anyone they perceive as a potential threat — or even a potential threat — from buying food and other things they need for daily survival.
No doubt prices have been rising. Inflation figures are lower than they should be because manufacturers are reducing package sizes while keeping the prices the same. If a package size is reduced by 10% but the price remains the same it’s a 10% price increase that doesn’t show up in the statistics.
Absolutely correct, Ken. I can’t tell you how many more items come in smaller packages than they used to. Anyone remember 1-lb cans of coffee, or half-gallon ice cream tubs, or 16-oz cans of fruits and vegetables?
Len, If they can’t kill stagflation the way they did in 1980 then how will they do it this time?
Have a great weekend!
Sara
There is no solution, Sara. Increasing the already-insane rate of debt accumulation will only speed up the ultimate demise of the dollar via hyperinflation. If the extreme inflation of the 1970s return, the Fed will not be able to raise rates anywhere near the levels Paul Volcker had to get them to (near 20%) for any length of time because the interest payments on the current debt would overwhelm the budget.
The dollar is toast.
The people who are accused of wearing tin foil hats for warning that the dollar system is unsustainable aren’t kooks. But they regularly demonstrate they are very intelligent people who have a good grasp of math and history. Their loudest detractors are those in the financial products industry because the truth poses a direct threat to their livelihood.
I’ll take that as a complement, WA. Thank you.
3.5 oz of gold is an odd number to settle on. Why do you think he settled on that number?
I thought the same thing. In any case, I think Americans would be wise to save more than 3 or 4 ounces of gold or an equivalent in silver.
If you click on the link, it shows that he wants everyone to have 100 grams of gold.
Shelly: As Goldfinch notes, the central banker suggested 100 grams — which is actually a little more than 3.2 troy ounces. I used troy ounces because I figured since most of my readers are Americans, it would be easier to relate to than grams.
North Dakota: Silver is as good as gold — and with the gold-silver ratio far above its historical average, silver gives you more bang for the buck at the moment. Historically, 60 ounces of silver was equivalent to 4 ounces of gold. I think we’ll eventually return to that historic average over time.
Len,
When looking for gold / silver to purchase, I am seeing affair amount of articles on things to avoid, but every one says to know that your gold dealer is reputable. How would you know that? Do you have any specific places to trust ?
Kim, I deal exclusively with APMEX. Yes, you pay a little bit more, but they are the largest precious metals exchange in the US and their reputation is impeccable — as such, you don’t have to worry about getting counterfeit metal. Also, their product line is humongous — they carry just about every kind of bullion product you can think of –and if you aren’t happy with an order, they bend over backward to fix it. Most importantly, unlike a lot of smaller bullion houses, the risk of them going bankrupt and leaving you holding the bag is very very small.
Email me at len@lenpenzo.com and I will give you the name of my personal representative there. She’s awesome! (And, no, I am not getting a commission for the recommendation.)
Marcy was my rep, she was really nice and patient with me. That was the first place I ever purchased my metals. I have now expanded to Provident, JM Bullion and Modern Coin Mart. I like Apmex because President Trump deals with them. Wow, a president that loves Gold, go figure!!!
I know Marcy, Jared. She’s very nice, as are all the reps there! My personal rep is Brandi Brundige.
Trump definitely understands the importance of gold … however, some of his proposals leads me to believe he doesn’t understand how the international monetary system works because some of his proposals would hasten the demise of the whole system — either that or he understands that and he is working toward that aim so we can start anew. Frankly, that’s what needs to happen — but he needs to explain that to the American people or he is going to get blamed for the deep, but temporary, hardship that will follow.
Well, Fred … I don’t know about most folks, but I prefer to stay home on V-Day.
“Its amazing how many people end up selling their soul to high-pressure timeshare salesmen when all they really wanted was a free set of steak knives.” A boxed set of these “free” steak knives was sold on ebay this past week, all original, mint in box, for $2.79 plus postage.
That’s more than the old timeshares are selling for on eBay, Karen — people are trying to dump them for $1!
Len, is there any way to get rid of a timeshare? Luckily I never needed free steak knives so I don’t own one. It’s been said in my presence that you can’t give the timeshare back, you can’t get out of paying the maintenance, ever. Is this true? One of my friends has a time share WITH NO PROPERTY OWNED BY HER OR THE COMPANY, just a commitment for a certain property for a week every year if she chooses to take it, but the maintenance fee is collected every year whether she uses the “timeshare”or not. She says there is no way to get out from under the contract.
Karen,
I hear Dave Ramsay advertise a business called Timeshare Exit team on his radio show, saying he trusts them- maybe worth calling for your friend?