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.
Okay, off we go …
It’s a question that drives me hazy: am I or are the others crazy?
— Albert Einstein
It’s okay to be crazy, but don’t be insane.
— Sean Combs
I’m crazy, but I’m not stupid.
— Jackie Chan
Credits and Debits
Debit: Cryptocurrencies continue reaching for the stars; a single, ethereal, Bitcoin ended the week at $1562 — that’s currently 27% more valuable than an ounce of real gold and 95 times more than an ounce of physical silver. Is it just me or am I the only one who’s beginning to think the whole world has gone cuckoo for Cocoa Puffs?
Credit: Speaking of cuckoos, in the People’s Socialist Paradise of VenezuelaTM, President Nicolas Maduro proudly ordered a 60% increase in the nation’s minimum wage last week. Too bad el Presidente’s proletariat comrades are struggling with an inflation rate that’s quickly approaching 2000%. Forward!
Credit: Meanwhile, for us Norte Americanos here is the States, the value of stocks is higher now than at any time in history versus GDP. Hooray! I think.
Credit: Wait — it gets even better: The non-farm payroll increased by 211,000 jobs in April — although that number isn’t so great when you consider that it takes about 145,000 new jobs every month to merely keep up with population growth. Just keepin’ it real, homies.
Debit: By the way, the April payroll report is even more suspect when you consider that the loony “birth/death model” — that is, bureaucratic hocus pocus designed to goose employment figures — resulted in a positive adjustment of 255,000 jobs. Without that dubious manipulation, the economy actually lost 44,000 positions.
Credit: Of course, you’ve got to have a screw loose if you think that birth/death model is going away any time soon. After all, it’s been around for more than two decades — and without it, government officials wouldn’t be able to brag that US jobless claims are at a 43-year low as they were last month.
Debit: One thing is certain: Those US employment numbers better be as good as the government is reporting. That’s because a recent study by Northwestern Mutual found that 45% of Americans spend up to half their income repaying credit card debt. No, really.
Debit: With that in mind, I guess it should be no surprise that US households will soon have as much debt as they did right before the Great Financial Crisis of 2008. Uh oh.
Debit: Then again, Americans aren’t the only ones in debt up to their eyeballs — the US government is too. In fact, the US is going to expand its $20 trillion National Debt by another trillion dollars over the next five months. Yes, a trillion bucks. Yes, by September’s end.
Debit: Hey … Get used to it — the dollar Ponzi scheme won’t survive unless the National Debt hits $40 trillion over the next ten years. Er, assuming public confidence in the greenback can actually hold out that long. (Psst. The odds are it won’t.)
Debit: To put that gobsmacking, rapid, $1 trillion debt-increase in perspective, think about this: a trillion dollars is a thousand billion — or, if you prefer, a million million. Either way, adding that much debt in five short months is outright immoral — not to mention incredibly unfair to our children, who we’re expecting to pick up the tab.
Debit: Needless to say, there’s a very good reason why the debt is increasing faster than ever: it’s the only way our phony, broken, economy can generate growth anymore. Well … that is, assuming you can call 0.2% GDP “growth.”
Debit: Unfortunately — or fortunately, depending on your perspective — the Fed has no way out of the mess it finds itself in. Oh, sure; they can raise interest rates when the inevitable run on the dollar occurs — but if rates climb above 3.5%, massive defaults would probably follow. And at 5%, servicing the National Debt would cost $1 trillion — that’s more than one-third of current US tax revenue.
Credit: Those who said Soviet communism wouldn’t work because it couldn’t work were disparaged until the USSR finally imploded. America isn’t any different; ultimately, any economic system anchored by fraud is doomed to fail. The only question is “when?” — which is why economic collapses always come as a surprise, even to those who know they’re coming.
Insider Notes: Why the Dollars In Your Wallet Aren’t Money – They’re Debt
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By the Numbers
China’s first large jetliner took its maiden flight on Friday. The successful first flight is a big deal for China, and a signal that Boeing and Airbus will soon have a key competitor in an aviation market that they currently dominate:
487,000,000 The number of domestic and international journeys made last year in China.
168 Seats on the new Chinese commercial airliner, known as the C919. The plane will compete with Boeing’s 737 and Airbus’ A320.
5100 New airplanes similar in size to the C919 that China will need over the next two decades.
$1,000,000,000,000 Estimated cost for China to buy those 5100 planes from a foreign supplier.
55 Number of Chinese airlines in operation.
8 Nations that have developed large airliners. (US, Russia, Brazil, Canada, UK, France, Germany and China)
Source: CNN
The Question of the Week
[poll id="162"]
Last Week’s Poll Results
Which of these estate-planning options do you have?
- Will (36%)
- Both a will and a living trust (31%)
- Neither (30%)
- Living Trust (3%)
More than 1300 Len Penzo dot Com readers responded to last week’s question and I am glad to see that seven out of ten have taken the time to establish a will, or a will and a living trust for estate planning purposes. The Honeybee and I protected our estate with with both a will and living trust soon after our kids were born. And now that they’re on the verge of leaving the nest, it’s time to update both documents. Remember, it’s a good idea to review and update your estate planning documents every five to ten years because over time, circumstances change that may affect your original will and living trust.
Other Useless News
Programming note: Unlike most blogs, I’m always open for the weekend here at Len Penzo dot Com. There’s a fresh new article waiting for you every Saturday afternoon. At least there should be. If not, somebody call 9-1-1.
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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
This week, Shaun dropped the following question in my inbox:
Hey, Leo! [sic] I’m thinking of starting a blog. Got any tips?
Yes, occasionally. Thanks for asking!
I’m Len Penzo and I approved this message.
Photo Credits: (coffee) brendan-c; (debt) Michael Ramirez
We complain when inflation gets above 3%. I can’t imagine inflation at 2000%!!!!
Have a great weekend Len!
Sara
I know, right? Can you imagine if, say, the price for a loaf of bread increased 2000% in a single year? In January it’s $4 and by December it would be pushing $80!
Over time it gets even crazier. A year later the $80 bread would become $1600!
Len,
I about died laughing this week when the Atlanta Fed came out with a projection of 4.2 for the 2nd quarter GDP growth, this after most likely a 0 or negative GDP for quarter 1! I see everyone running to these crypto currencies that are exploding like a rocket! I suppose I’ll stick to my pet rocks, especially Silver, which the Cartel is trying to take down to $0 it seems. Guess we will see which one ends up worth more when this crap show blows. The Cartel is doing a great job, however the Dow and S&P looks to be running out of steam.
Maybe the sheep in our country will never wake up and this can continue forever?!?!
Jared
Yes, Jared, I thought that Fed estimate was laughable. What makes them think economic output will improve 24 times in the three month period between last quarter and next quarter? Remember, their original 1Q GDP projection in early January was 3.4% — which they gradually lowered on a weekly basis all quarter long. The final number was 0.2%.
These central bankers are total frauds — not just in the “money” they issue, but in almost everything else they say too. The one exception, for the most part anyway, is the “FRED” research data issued by the St. Louis Fed.
I’m 86.
Can “new age” medicine do surgery to excise 10 years?
If so, will “Trumpcare” pay for it?
Well … If you ask the Fed, I’m sure they’d answer “yes” to both questions, RD.
Monetary system collapse is not a rare occurrence. What is rare is this time the collapse will affect the entire world because all of the fiat currencies in the world are derivatives of the dollar. The result of this will be a better way of storing wealth, or else civil society as we know it will cease to exist. What’s coming is so compelling that anyone with their eyes open has no choice but to give it their full attention. Those who do will be rewarded with the biggest wealth transfer in history assuming the world can agree on a new monetary system before things completely go bonkers.
I am supremely confident the world will agree on a new system before, as you say, “things go completely bonkers” — which I assume you mean the social fabric of a civil society completely and permanently unravels. The world really has no other choice.
To me, the $64,000 question is will they implement the new system preemptively, or wait for our current ailing system go to belly up and then respond to the ensuing financial crisis out of necessity?
Len, it’s my first comment but I’ve been faithfully following your Black Coffee posts for more than a year now. I don’t think you are crazy. Keep preaching and informing others about our flawed financial system. You opened my eyes and for that I thank you.
Thank you, Charles.
I am old enough to remember a time when anything less than 3 percent GDP growth was considered too small for a growing economy. 3 was running in place. Now the stock market celebrates numbers near 0. Its a different world today.
People are giving up everything of any value in exchange for virtual money in a computer. It’s a scam!!!! Those who want virtual money better be ready to live in a virtual house and eat virtual food too.
Bitcoin has become popular in many places around the world were conventional means of banking is non existent and/or not safe. Your phone becomes your bank and you can run micro businesses right from your phone. It may not make sense to you or I from first glance but it could be life or death for someone in India or Africa. Transactions cut out the middleman fee. Yes its volatile and in its infancy, but you can see the applications. I still however prefer “Goldmoney’s” model. It works like Bitcoin but your cash is backed by physical gold.
Do you have a Goldmoney account, Paul? I am strongly considering one, but haven’t jumped in yet.
All this talk of currency collapse and trillion dollar deficits is getting me down.
Shouldn’t we try less complaining and offer more concrete proposals (Even if nobody is listening to us!!! 🙂 )? Who has the solution? And what is the solution? You should write an article on the 10 things that need to be done … with details.
All I have is:
1. irresponsible party 1 (cut taxes without attention to deficit and the economic boost from productive rich people will pay down the debt without doing anything and oh, it will make the poor people richer after all the trickling down)
or
2. irresponsible party 2 (give welfare and government spending without attention to deficit and the economic boost from productive poor people will pay down the debt without doing anything and oh, it will make the rich people richer after all the trickling up)
Kyron, this blog has been proposing a solution for the past five years: repeal and replace!
Repeal: Ditch the current debt-based international monetary system that’s based upon a floating US dollar. Of course, this will be extremely painful, as it will mean a temporary, but significant, reduction in most of the developed world’s standard of living — especially here in the USA. Then again, this is going to happen eventually simply because the system is unsustainable and mathematically-guaranteed to implode.
Replace: Reintroduce a new monetary system based upon honest money; that is, a system that anchors all currencies to gold (and, by extension, silver). Such a move will discourage debt accumulation, promote domestic production instead of cheap-imports consumption, jump start the process of “creative destruction” which has been short-circuited by low interest rates (thereby keeping unproductive zombie corporations afloat), and encourage saving — which is the key component for capitalism’s survival and proper function.
On the one topic of monetary policy, yes I agree you have been saying it clearly.
But I don’t think the problem stops with honest money.
I think people, instead of facing them with clarity and choosing yea or nay, don’t want to deal with unpleasant things.
Borrow now, somebody will pay later.
Not save for retirement now, somebody (SS?) will pay later.
Not insure yourself now, somebody will pay later.
I think this fundamental people problem will not be solved by honest money.
What is to stop the “honest money” government from unproductive policies? (tax retirement accounts, tax savers, discourage personal responsibility …)
What do you think?
Honest money instills financial discipline on people because it eliminates cheap credit, thereby forcing most people to save for the things they want. It also limits over-reaching government social programs that have made otherwise able-bodied people dependent on the nanny-state for their every need. And the absence of the nanny state also offers a strong incentive for younger able-bodied people to be productive (that is, produce more than they consume), save, live within their means and manage their finances properly.
Yes, there will be people who will not want to adapt — there always is — but honest money’s ability to greatly-restrict the nanny-state will make rebellion against the new system very painful for them.