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.
Off we go …
Credits and Debits
Credit: For what it’s worth, President-elect Donald Trump spent $4.57 per vote. His challenger, Hillary Clinton, spent $8.80. I’ll let you fill in your own joke here.
Debit: Did you see this? The number of Americans who are not in the workforce swelled to 94.6 million in October; that figure was magnified by the loss of 9000 high-paying manufacturing jobs last month. Forward!
Debit: In fact, America has lost 36,000 manufacturing jobs since 2014 and replaced them with 547,000 waiters and bartenders. No, that’s not a viable strategy for increasing the nation’s standard of living — but it is a great way to ensure you’ll never have to wait long for a good seat at your favorite restaurant. Well … at least for those who can still afford to eat out.
Debit: Of course, the lack of manufacturing jobs is one reason why real wage growth has been non-existent for more than a decade.
Debit: I’m sure the growing number of Americans who are no longer in the workforce is partially due to the recent surge of Dallas policemen who have been prematurely retiring in order to ensure they could cash-out their pensions before the fund implodes.
Debit: Not coincidentally, there was a ‘pension fund panic’ in Dallas earlier this week when the city’s mayor warned that a 130% property tax hike would be required to raise the $1.1 billion in 2018 that the Dallas Police & Fire Pension (DPFP) board says is needed to avoid collapse. Yes, 130%. Apparently the mayor isn’t planning on running for reelection.
Debit: According to their website, the DPFP fund covers 9300 police and firefighters— which means that $1.1 billion tax hike represents almost $120,000 for each one of them. Wow. Too bad most Dallas taxpayers don’t have pensions of their own — even so, they’re still on the hook to save for their public servants’ retirement as well as their own. Am I the only one who sees a problem here?
Credit: Frankly, every government pension is in trouble — not just the one in Dallas. And while it’s true that our civil servants’ gold-plated retirement benefits are guaranteed by law, it’s also true that you can’t get blood from a stone.
Debit: Finally … Here’s another example of why you should never assume that your cash in the banking system is perfectly safe: Overnight — and without warning — India banned the use of 1000- and 500-rupee notes except for purchasing goods and services at hospitals, gas stations, pharmaceutical shops, and train stations. I guess that’s not so bad if you need a heart transplant. Or own a Hummer.
Credit: Think about it: If it’s that easy for bankers to steal your hard-earned purchasing power directly from the physical cash in your wallet, imagine how easy it is for them to control your electronic “wealth” stored on their servers.
Credit: The “good” news is that Indian savers who got caught with their pants down can go to their local bank and exchange every 1000 rupees in outlawed-bills for 700 rupees in usable currency; that’s an instant wealth reduction of 30%. Psst. The bankers are not your friends, folks — even the ones here in the US. Got gold and silver?
By the Numbers
Friday was Veterans Day in the US. Here are some facts on the annual holiday that honors those who have served in the military:
1938 Year that Veterans Day became an official US holiday.
18,800,000 Number of living US veterans.
1,600,000 Number of living US veterans who are women.
8 Percentage of US businesses that are veteran-owned.
1,600,000 Number of US veterans who are younger than age 35.
72 Median age of all US veterans.
3 Number of states with more than one million veterans. (California, Texas, Florida)
4.5 Percentage of New Yorkers who are veterans; that’s the lowest per-capita veteran population among all 50 states.
1 Alaska’s rank among states with the highest veteran population. (10%)
Sources: CtPost; Ballotpedia
Last Week’s Poll Result
What percentage of your paycheck are you currently setting aside for retirement?
- More than 15% (29%)
- 6% to 10% (28%)
- 11% to 15% (22%)
- None (14%)
- 1% to 5% (8%)
More than 1000 people participated in last week’s poll and, although any amount is noble, I’m very happy to see that slightly more than half of those who responded are setting aside at least 11% of their paychecks for retirement. At the other end of the spectrum, one in seven people say they aren’t saving anything for retirement. Hopefully, that’s only due to temporary adverse financial circumstances.
The Question of the Week
[poll id=”137″]
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. Wisconsin (1.99 pages/visit)
2. New Hampshire (1.92)
3. Idaho (1.90)
4. North Dakota (1.85)
5. Alabama (1.77)
46. New York (1.57)
47. Maine (1.52)
48. Washington (1.47)
49. Missouri (1.45)
50. Rhode Island (1.43)
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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
Apparently, my popular post knocking Coke Rewards didn’t go over too well with Joe Smith:
I think this is the dumbest article I have ever read.
And you’re obviously mistaking me for someone who cares.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Len,
Who knew the election of Donald Trump would do the exact opposite of what was expected! It must have erased our 20 Trillion in debt because the stock market shot up to new highs and Gold lost over $100 in less then 48 hours. I am so glad everything is back to the way it was in the good ole days! Perhaps it doesn’t really matter who is president because the bankers continue to impose their will upon the markets and I am not sure exactly if this will ever end because so many people in the world are dumb downed sheep.
Any thoughts by you on the action in the markets since Trump won the election?
Sincerely confused here,
Jared
I have been confused by the markets’ behavior too, Jared. I predicted a market crash if Trump won — and the night of the election, the Dow Industrials futures market did exactly that: it was down almost 1000 points before the open. Of course, when the markets opened the next day, they clawed everything back.
The stock market had its best week in 5 years this week. I can only figure that is the result of people fleeing the bond market, which has seen its worst performance since 2013. That is something that needs to be watched closely because the rising yields are a real threat to the derivatives markets — not to mention the US government, which has to pay interest on all of its debt.
Len,
Great explanation by Peter Schiff on his Saturday podcast, I understand much better now what’s going on and see that there is truly no way out of what’s coming.
Jared
Len! That’s a great stat about cost per vote. Fascinating. Trump sure did a good job to stay in the spotlight and make the most of social media to get his message out for cheap. Interesting that the impact of money might be fading a little.
Those pension fund stats are scary too. On one hand, if interest rates continue to rise they might be able to finally get more investment income. But on the other, with $20 trillion dollars in debt, can the US afford to start making higher interest payments?
Rising interest rates will help the pension funds in nominal terms — but not in real terms.
If the Fed loses control and the rates rise too high, they will trigger a currency crisis.
A lot of these city and state pensions are saddled with six figure annual lifetime pension liabilities based on lifetime benefits from the last 2 or 5 years of employment which are then padded with overtime, unused vacation and sick leave. The accounting is a sham, but it allows too many public employees to collect $100,000 or more for life, even though their highest pay was much much less. Social Security doesn’t work that way. (I wonder why!) They averaged the last 35 years up to a reasonable limit.
Frankly, I believe these government pension guarantees are null and void because the taxpayers didn’t have an advocate at the negotiating table. Neither the government employee unions or the politicians they were dealing with had a legitimate skin in the game.
Do these government employees truly think that taxpayers are going to stand for higher taxes so the public servants can continue living like kings and queens, while said taxpayers struggle to save for their own meager retirement? I think not.
The reality is, those pie-in-the-sky pension benefits will have to be sharply reduced — or it will be pitchfork and torches time.
Hi Len! Do you think Trump is going to make america great again?
Have a great weekend!
I think his policies definitely point us on the correct track, but ….
Nothing can be truly fixed until the current international monetary system is overhauled.
For example, in the unlikely event the current system doesn’t collapse, the National Debt will double again over the next eight years because our current monetary system is a Ponzi scheme. The math demands it.
As such, until we get a new system that re-anchors the international monetary system to precious metals, America’s debt troubles and sliding standard of living will continue no matter who is in the White House.
I would like to clarify on your comment on India’s banning of 500 and 1000 rupee notes. The main goal is to reduce black money in the country (most of which is hoarded in 500 and 1000 rupee notes). You would not be losing any many if it is through legal means. You can exchange the abolished notes at banks and post offices (there is a daily limit) or deposit them in your bank accounts.
The deposits will be tracked and large deposits will be compared with sources of income and income tax returns to catch any potential offenders. The loss you mention is people having black money buying gold or other commodities by paying a higher rate.
Thank you for the comments, Vinaya!
Yes, the official line is that elimination of the higher-denomination notes are for controlling illegal activities, but that is not the true reason.
The truth is the vast majority of high-denomination bills in any currency — be it rupees, euros or dollars — is held by law-abiding citizens. As an example, taking away Europe’s 500-euro bill and the US $100 bill would result in the elimination of more than 56% of all physical currency currently in circulation. To suggest the majority of that currency is due to criminal enterprise, as the government and bankers want us all to believe — amounting to several trillion dollars combined — is absurd on its face.
(By the way, the 500-euro bill is now being actively phased out.)
The real reason for banning high-denomination notes is to make it easier for central banks to maintain their negative interest rate policy and impose capital controls on the populace should they have to in a crisis.
How does banning large denomination bills help maintain NIRP, you ask? By reducing the amount of currency in circulation, the banks can more easily prevent a bank run by savers who don’t wish to have their wealth confiscated by those negative rates.
Len, while I agree with your comments, in general, about central banks and their devious monetary policies (politics?), in this particular case, there is no deeper conspiracy theory.
The demonetisation is sudden only to people not paying attention. Indian government has been offering numerous policies to its citizens to declare their illegal income / assets and pay taxes / modest penalties in the last year. Read them up.
India does indeed have a huge problem with black money, i.e. money used under the table without declaring it on your tax returns. Overwhelming majority of black money is due to bribery, corruption, underhanded deals, etc + presumably these criminal counterfeiting, etc and actually most of it is NOT in cash but in real estate and other holdings. Demonetisation is just the latest salvo. It affects the legal cash users true, but it is a body blow to people with illegal cash / assets.
If demonetised Indian currency in anybody’s account / pocket is worth less today than yesterday, it is purely because they cannot use legal channels to exchange that for new currency and prove that they paid taxes on the money. Same is true of legal vs illegal assets.
Yes, there are problems with shortage of the new currency as it is primarily a cash based economy but they will pass in a few months (at extreme discomfort to India’s citizens).
If the economy is primarily a cash-based economy — and I agree with you; it is — and one buys into the premise that the overwhelming majority of black money is due to bribery, corruption and underhanded deals, then one has to also believe that the overwhelming majority of India’s economy based on illegal activities. With all due respect, Kyron, that defies credulity — otherwise, why go to such a dangerous extreme of banning nearly 90% of the nation’s currency supply literally overnight and with virtually no warning, thereby risking a currency crisis and economic collapse?
Allow me to adjust my tin foil hat for a moment — I believe the real reason for the ban on large denomination notes is to control India’s gold market; no country has a bigger appetite for gold than India, this is their peak buying season, and rumors and evidence are growing louder with each passing day that the physical precious metals market in critically short supply. What better way to dampen India’s appetite for gold than to eliminate the currency required to buy it?
It seems to me that the problem is not the citizens of India who are the problem, it is the government that is issuing the fiat currency.
Good comments. Thanks for taking the time to share them!
1. Your logic is incorrect. Money = clean money + black money. Overwhelming majority of black money is due to illegal activities; YES. correct. That doesn’t mean “overwhelming majority of India’s economy” is illegal. There is clean money as well. All the clean money is above board and people pay taxes on it, etc.
2. And you might think it defies credulity but that is being a narrow minded American and not being a global citizen. There are lot of countries outside America. India is a cash economy, people buy cars and homes with cash (yes, this is reality. India’s inflation is 5-7% and loans cost 9-15% …. would you pay 9-15% interest for your home or pay cash? … and just so you know, homes and rents are not cheap in India, …. it is a rapidly growing economy). 1/4th to 1/3rd of all transactions in India are estimated black. African percentages are even higher, hitting 40-50%.
3. I’ll say this again. If you have old currency in your possession, then the only reason you cannot exchange it for new currency is because you can’t prove it resulted from a legal transaction. You can happily go to a jeweller and buy as much gold as your heart desires with either new currency or digital forms of old or new currency (electronic checks, debit cards).
If you want to tie everything into monetary policy and buying gold, that is your choice.
It’s odd that the US has still debts despite the fact that it supports many developing and underdeveloped countries in terms of development fund and others such as military operations.
Here’s a fact to ponder. The IRS encourages everyone to file their tax return electronically because it is easier for them to audit it.
I wouldn’t be surprised, Kathy. It makes sense.
Not all of them……but its like finding a rare coin.
Fresno is only one of seven cities or states nationwide with a pension surplus, according to a study by Fellner’s organization and the group Wilshire Consulting. The rest are $6 trillion short, setting aside just 35 cents for every dollar promised.
http://www.foxnews.com/politics/2016/10/25/pension-crisis-fully-funded-ones-rarity.html
Thanks for showing us that there’s always an exception to the rule, John. The key to Fresno’s success according to the article — the absence of greed:
“Pensions in the city of Fresno average $39,000, almost $20,000 a year less than the county.”