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.
Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see that money is flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.
Whenever destroyers appear among men, they start by destroying money, for money is man’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’
When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded.
That is an excerpt from Francisco d’Anconia’s famous “money speech” in Ayn Rand’s classic novel Atlas Shrugged. I think it is one of the finest books ever written, and I strongly encourage everyone to read it. Although Atlas Shrugged was published in 1957, the story — and the warning that comes with it — is more relevant than ever.
Okay, and with that, off we go …
Credits and Debits
Debit: Oh, noes! Don’t look now, but the “deflation monster” has come out from under the bed and it’s putting a big scare into a lot of people. Apparently, falling prices are a bad thing. At least in the upside-down world we live in today.
Debit: The Royal Bank of Scotland is so scared they’ve advised their clients to prepare for a “cataclysmic year” and “sell everything except high-quality bonds.” Everything? Even gold and silver? Wow. And you think I’m a fear-monger?
Credit: By the way, somebody should tell the Royal Bank of Scotland that “high-quality bonds” aren’t as high-quality as they used to be. Just sayin’.
Credit: For a little perspective, the Mises Institute points out that deflation doesn’t have to be a bad thing. In the US significant deflation was associated with its two greatest growth periods during the 1800s: from 1820 to 1850 and from 1865 to 1900.
Credit: Deflation has certainly hit the gasoline pumps. Heck, forget Star Wars; gas wars are back — with a vengeance. Well … at least in Michigan. A gallon of unleaded there could be had for 46 cents this past week. And, no, that’s not a typo.
Debit: Those low fuel prices are a reflection of the worldwide oil glut. Unfortunately, that spells serious financial trouble for the petroleum companies that produce it — and the banks they have loans with. As a result, the banks are now bracing for billions in bad oil loans to implode.
Debit: Perhaps this impending doom in the oil industry is just one reason why the New York Times felt compelled to ask this week if America’s best days are in the rear view mirror. Um, yes — for now. But I’m confident greatness will return. We’ll have to suffer through an economic reset first, however.
Debit: Although the Dallas Fed denies it, Zerohedge reports that they’re attempting to stave off bank contagion from oil loan defaults by “effectively suspending mark-to-market” accounting for petrol companies. The mortgage companies tried the same trick before the last financial crisis in 2008 — but it only delayed the inevitable.
Credit: Assuming the Zerohedge sources are legit, commenter “Phillipat” summed the situation perfectly: “Does anyone else remember there used to be this thing called GAAP, and an Accounting Standards Board that actually applied standards via public accountants? Just another example of how the entire US system is completely corrupt.”
Credit: Financial author Doug Casey remembers. In fact, he says America’s decline is because, “The institutions that made America exceptional: a belief in capitalism, individualism, self-reliance, and the restraints of the Constitution are now historical artifacts.” Sadly, Mr. Casey is spot on.
Debit: I believe the start of America’s terminal descent began on August 15, 1971; that’s the day President Nixon “temporarily” closed the gold window, officially severing the last link between the dollar and real money: the yellow metal. You can bet Francisco d’Anconia would agree with me.
The Question of the Week
[poll id="97"]
Last Week’s Poll Results
How many tickets did you buy for the $1.5 billion Powerball lottery last week?
- None (53%)
- More than 1 (32%)
- 1 (15%)
More than 900 people responded to last week’s question and just under half of them bought at least one Powerball ticket for a chance to win that ginormous $1.5 billion jackpot — and among those who did, twice as many people took a flyer by buying multiple tickets. Unfortunately, almost all of the 635,103,137 tickets sold ended up being losers. For the record, I’m part of the slim majority who didn’t buy any tickets — although maybe I should have because one of the three winners was sold at local market down the street from me. Yes, it’s true.
(The Best of) By the Numbers
According to the buzz over at Answers.com, “Utahans relate the beehive symbol to industry and the pioneer virtues of thrift and perseverance.” Here are a few more facts about Utah:
1959 Year the beehive became Utah’s official emblem.
5 National parks in Utah: Arches, Canyonlands, Zion, Bryce and Capitol Reef.
309 Height of Utah’s Rainbow Bridge, the world’s largest natural-rock span.
2100 Size, in square miles, of the Great Salt Lake.
13 Average depth, in feet, of the Great Salt Lake.
1 Rank among all states in literacy. Utah has the highest literacy rate in the nation.
14 Ski resorts that operate within Utah.
500 Average inches of snow that falls each year in the mountains above Salt Lake City.
Sources: Answers.com; 50States.com
Other Useless News
Here are the top 5 articles viewed by my 8530 RSS feed and weekly email subscribers over the past 30 days (excluding Black Coffee posts):
- When Good Personal Finance Practices Go Too Far
- 20 Easy Ways to Save at Least $5 a Day
- 5 Financial Lessons from the Past Everyone Should Learn
- 10 Red Flags That May Signal You’re In Big Financial Trouble
- 6 Ways to Avoid Becoming Small-Minded About Money
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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 out to me at: Len@LenPenzo.com
Last week I found this cryptic note in my inbox from somebody calling themselves Wang Bird:
I think your thing isn’t as advanced as I hoped.
Are you sure you got the right guy? I don’t remember ever showing you my thing.
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Photo Credit: brendan-
Len,
Yeah, 1971 is the year we finally rid ourselves of that Barborous metal! Things have gotten so much better since, we can now print as much money as we want and not worry about the repercussions, at least that is what the government and media wants everyone to think. It’s strange how there are trillions of Dollars being dumped worldwide and they are disappearing into thin air. Listened to an interview with Rob Kirby and he believes the U.S. is using some kind of an exchange fund within our treasury to buy these up, so as to protect the Dollars value. I see that Super Mario used some of his magic Draghi dust called QE to rescue the markets this week. Not sure how long that will last. Basically comes down to the worldwide economy is a mess! Who knows, maybe that 1988 cover of the Economist with the Phoenix hovering over the burning fiat currencies will come true for 2018? Not sure what to think because that silly bird is just holding that out dated Barborous relic called Gold, cmon now what good is that. lol
Ready for the reset!
Jared
Yes, according to Bloomberg, there have been $1 trillion in t-bills dumped by other nations since August 2014, but there is no record of who sopped up all of those sales at the US Treasury. That is 8% of the world’s US dollar reserves — an alarmingly huge figure — and they just went into a black hole. Nobody knows who bought those bonds. It’s just more accounting hocus pocus designed to keep America’s artificially-high standard of living going a little while longer.
As Hugo Salinas Price, who originally brought this issue to the world’s attention, asks: “What happens to the world’s confidence in its financial system, when $1 trillion dollars’ worth of bonds, and counting, just magically turn into cash?”
For now, 99.9% of America has its head in the sand — but the day is quickly coming when that will no longer be possible.
Love the post. I agree with you that High Quality Bonds are not what they once were. I was surprised to see your Utah details. It happens to be my favorite State. I live now in neighboring Colorado. Utah has everything Colorado has with only about a 25% – 30% the number of people (just guessing). I always feel that CO gets all the press but UT is the real gem for outdoor recreation and its diverse natural beauty. The difference in perception must be becasue of Utah’s goofy liquor laws.
Thanks, Tommy. I travel to Utah quite often for business. Yes, it is a very beautiful state. The industrious self-reliant nature of the majority of its citizens, coupled with its relatively small government, and business-friendly laws will also help it to better cope with the coming economic storm that will soon be washing over the US and the rest of the world — at least compared to most of the other 49 states.
Hello Len, I almost always read at least the “Black Coffee” part of your email newsletter. I really appreciated your comment about the fact that “greatness will return”. Sometimes the gloom and doom scenario overlooks the idea that all systems require correction when things get too far out of whack. Although I don’t agree with you on every point, I really look forward to the thoughtfulness, mixed with a beautiful wry humor, that goes into your posts.
Thank you, Steve. Yes, the mistake a lot of people make is that the coming financial reset will be “the end of the world.” You can rest assured that that will not be the case. It will simply be a monetary bookkeeping reset — a financial audit, if you will — that verifies and makes official who owns the actual wealth in the world. That will hurt many people initially, but it will also spur on the rebirth of real economic growth and fresh opportunities for everyone. I am excited for the fact that the reset will make it possible for the US to once again become a manufacturing powerhouse. My prediction is that after the reset, the majority of the warehouses you see in the US now (that receive and act as a hub for the distribution of imported goods) will be converted into manufacturing houses (that will produce products for export and domestic consumption).
Hey Len – how about a quiz regarding Atlas Shrugged? Have you read it, how many times, will you read it. Or maybe did it change how you thought about capitalism or did you think it overwrought.
It made a big impact on me – read it in high school, all those years ago.
I didn’t read it in high school, but it made a big impact on me too. Sadly, I don’t think many high schools today have Atlas Shrugged on the reading list. Its strong Libertarian message doesn’t tow the Big Government party line prevalent in most public school districts today.