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.
Are you ready? After my vacation in Maui, I know I am!
Off we go …
“No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts.”
— The US Constitution (Article 1; Section 10)
“A national debt, if it is not excessive, will be a national blessing.”
— Alexander Hamilton
‘How did you go bankrupt?’ Bill asked.
‘Two ways,’ Mike said. ‘Gradually, and then suddenly.’
― Ernest Hemingway, The Sun Also Rises
Credits and Debits
Credit: Is the iPhone hype finally over? Maybe. Despite all of the pre-sales hoopla for the iPhone8, demand for Apple’s latest offering has been, shall we say, less than brisk. At least it is if the smaller crowds outside stores and a muted customer reaction are any indication.
Credit: The astonishing lack of enthusiasm was so pronounced that only two people showed up for the most recent iPhone debut in Hangzhou, China. Not surprisingly, Apple’s iPhone proponents called that fake news. To be fair, they noted that if you count the security team hired to keep the, er … “crowd” from storming the doors, there were actually five people on hand for the iPhone8 debut:
Debit: In other news, US productivity growth peaked in 1972, the year after the US decoupled the dollar from gold in 1972 — and it’s been essentially downhill ever since. However, it’s been particularly dismal since 2002; believe it or not, US productivity growth since then is only on par with the agrarian economies from two centuries ago. Is this a classic case of a nation resting on its laurels — or something else?
Credit: For his part, Paul Craig Roberts wonders how American wages can be stagnant if one believes the US unemployment rate is just 4.4%, which is generally considered to be full employment. Good question. (Psst. Obviously, somebody has been “massaging” the unemployment data — and it’s one of those “deep tissue” massages.)
Debit: Then again, although real incomes have gone nowhere after more than 40 years, for most people it has continued to feel like their living standard has indeed remained stable. Why? One word: debt. And lots of it.
Debit: In fact, as financial analyst Dave Kranzler point out, when it comes to debt and “massaged data,” it’s 2007 all over again. At least it is if you consider the financial shenanigans by the usual jackals that led to the Great Financial Crisis of 2008 are back and bigger than ever. Let the good times roll, baby!
Debit: Meanwhile, 10-year Treasury bonds are currently yielding 2.36%. At the same time, the average yield of corporate junk bonds denominated in euros hit a new all-time record low of 2.30%. Um … does anybody else see a problem here? Anyone? Bueller?
Credit: Well … Wolf Richter does. He calls that perverted yield-dichotomy, “The central banks’ ultimate accomplishment: The total destruction of the market’s risk-pricing mechanism at the expense of other people’s money, including funds that play a large role in pension systems.” Why? Because those yield-starved funds have to buy those mispriced corporate bonds.
Debit: Richter continues: “And then there’s the comforting thought that when markets can no longer price risks, they can’t price anything at all because the price of risk underlies all financial market prices.” That it does. An economy without accurate price signals is really no different than an airliner flying in the dark without any instrumentation — and blindfolded pilots. The end result will be the same too.
Debit: Speaking of pension funds … I see that Kentucky’s 365,000 teachers and other public employees are now demanding that taxpayers contribute $5.4 billion to their pension funds — and that’s just during the next two years. As Zero Hedge notes, $5.4 billion equates to $3200 for every Kentucky household — and 25% of the state budget. Uh huh. This, folks, is why these Ponzi schemes
can’t won’t go on forever.
Debit: As mega-millionaire publisher Bill Bonner notes, America is broke and nobody cares. But, Bonner says, Americans should care — especially her top 1% who, thanks to the Fed, have seen their wealth soar more than 230% since the Great Financial Crisis of 2008 at the expense of the lower and middle class.
Debit: One thing is certain: When the next financial crisis hits, the rules will change; they always do. The big question is how will those rule changes affect people’s attitudes toward the ruling class?
Debit: A potential answer can be seen in Catalonia’s most recent drive for independence from Spain. That movement is the result a hollowed-out middle class, brought about by 10 years of relentless central bank printing — spurred by a desperate financially-strapped government promising more than it can legitimately deliver. Will America will see similar movements when public pensions begin failing en masse?
Credit: I’ll let Mr. Bonner sums things up: “It’s all very well for the feds to use crises to take more wealth from the lumpenproletariat, and arm the local police with tanks and assault helicopters to keep them in line. Still, every elite eventually goes too far. Every empire dies. And, in the final act, every jackass gets what he’s got coming.” Amen. And if you think Catalonia can’t happen here, folks … you better think again.
Last Week’s Poll Results
Have you ever filed for a personal or business bankruptcy?
- No (91%)
- Yes (9%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 11 of them have filed for bankruptcy at least once in their lives — either on a personal basis or on behalf of their business. According to the American Bankruptcy Institute, there were 794,960 bankruptcy filings in 2016, with only 3% of them being for businesses.
The Question of the Week
By the Numbers
The Fed says there’s very little price inflation; that’s a good one! Here are the average prices for select goods from 1970, which is the year before the US dollar’s anchor to gold was broken:
$0.06 A postage stamp
$0.25 One loaf of bread
$0.36 One gallon of gasoline
$0.39 Five pounds of sugar
$0.59 One dozen eggs
$0.62 One gallon of milk
$1.55 A movie ticket
$1.90 One pound of coffee
$3450 A new car
$23,450 A new house
Source: King World News
Insider Notes: Why Simply Saving Should Be Enough (But It’s Not)
Hey! You need to be an Insider to view this section! If you’d like to join, please click “Insider Membership” at the top of my blog page.
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.
Hey! If you happen to enjoy what you’re reading — or not — please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on Twitter!
3. Don’t forget to subscribe via email too! Thank you.
And last, but not least …
4. Consider becoming a Len Penzo dot Com Insider!
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
After seeing pictures of the $24,000 master bathroom remodel we did a few years ago, Rudy gave this review:
Great job! It looks like a 4-star hotel bathroom!
Yep. Unfortunately, unlike those 4-star hotel bathrooms, I still have to pay for the hot water every morning.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c