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.
And away we go …
“In time of peace there can, at all events, be no justification for the creation of a permanent debt by the Federal Government. Its limited range of constitutional duties may certainly under such circumstances be performed without such a resort.”
— John Adams
Credits and Debits
Debit: Did you see this? A new poll found that 46% of Americans favor government jobs for all. No, really. Never mind how something like this can ever be paid for. Oh, that’s right … I forgot: “Money” can be created by simply printing as many pieces of green paper with dead presidents on them as needed, without regard to real economic output.
Debit: Folks, with 46% of the population this ignorant about basic economics and willing to embrace the “free lunch” mindset, I think it is safe to say that the end of the current American Empire can’t be too far away. The Washington Post estimates that if such a program were implemented today, it would cost upwards of $2 trillion. Annually. Forward!
Debit: At the rate the US is now racking up debt, why worry about adding another $2 trillion per year into the debit column? On Monday the US Treasury announced that it borrowed $488 billion last quarter. That’s the single biggest quarterly debt sale since the US borrowed $569 billion during the final quarter of 2008. Of course, that was done to stave off a meltdown of the global financial system.
Debit: Then again, as Zero Hedge notes, when it comes to the Treasury’s latest single-quarter half-trillion dollar credit card binge, the difference is this time “there was no crisis; not even a recession.” Think about that.
Debit: Unfortunately, the central banks have been pulling back the reins on America’s credit limit by slowing their purchases of US Treasuries. As the WSJ notes, “The behavior of these bidders is crucial for the US to fund itself, at a time when the budget deficit is forecast to surpass $1 trillion by 2020 and remain above that level for the foreseeable future.” Does anybody else see a problem here? Okay … then how about here:
Credit: Oh, I know what you’re thinking: Why can’t we just borrow and print cash forever? Well … because the math won’t cooperate. Over time, the debt load becomes so large and unproductive that credit markets seize up. In 1971 a dollar of debt resulted in roughly $5 of GDP growth. But with each new dollar of debt generating less than $1 of economic output today, the end of the current system is in sight:
GDP growth net of Treasury debt issued has collapsed because each dollar of new debt created since the 2008 Great Financial Crisis has resulted in less than a dollar of economic growth. The monetary system is in a death spiral it can’t recover from because there is no entity left that’s big enough to take on the additional debt needed to keep the charade going. (Source: 720 Global via JSMineset)
Credit: By the way, if you think the world’s central banks don’t see this coming, then you better think again. Two weeks ago Turkey repatriated the 220 tons of gold they had stored at the Federal Reserve Bank of New York. That follows in the recent footsteps of the central bank of Hungary. And Germany. And the Netherlands. And Belgium. And Austria. Among others.
Credit: All of these European countries repatriating their gold is certainly raising concerns at the ECB in Brussels. Although they’ll deny it, the central bankers from those countries understand that gold held in their treasuries will help them transition to new national currencies — which is odd when you consider the world’s largest sovereign central bank apparently isn’t even sure why it holds the yellow metal:
Credit: So there you have it: If the world’s central banks are repatriating their gold stores — notwithstanding their absurd refusals to admit that the yellow metal is money — perhaps you should make sure you have a little bit of the yellow metal (and/or silver) too. Just in case. Oh, and make sure it’s the physical stuff — not that worthless paper version that will surely implode along with fiat cash in a currency crisis.
Debit: So how much longer will it be until the proverbial piper finally comes a’ knocking? Well … after analyzing their financial models, Deutsche Bank concluded that, “The odds of a US debt crisis in the coming years are set to surge to the highest-ever non-recessionary level.” Needless to say, if that’s true, just think how much higher those odds will be once the next economic downturn comes ashore.
Credit: With that in mind, Chris Martenson observes, we’ll soon reach a point where “the economic pie is no longer expanding, yet the keepers of the system are unable to (stop) grabbing more from that same pie, sucking economic oxygen from the middle and lower classes, and increasing the pressure on a creaking system. Someday this all ends very badly.” Very badly? Obviously, Chris likes to sugarcoat his predictions.
Debit: Our day of reckoning may be near, but the debt party keeps rolling on because the red ink has to keep growing in order to keep the debt-based international monetary system Ponzi scheme from collapsing — which is why Freddie Mac just announced a new 3% down payment option for first-time homebuyers … with no income restrictions. Uh huh. Too bad those lower lending standards will ultimately lead to this:
Credit: Finally … If you’re looking to buy a car from Ford, by 2022 you’ll only have one choice: a Mustang. Yep. Ford announced it’s shifting its resources to its more profitable vehicle markets: pickups, SUVs and crossover-utility vehicles. I know. I guess Ford believes US gasoline prices will never see a $4 or $5 handle ever again. Just remember, this is the same company that thought the Edsel was a good idea too.
By the Numbers
The latest earnings report for Apple proves the iconic technology company is apparently still near the top of its game:
95% The current customer satisfaction rating across all iPhone models.
99% The current customer satisfaction rating for the iPhone8, 8 Plus, and iPhone X.
6.6 The number of iPhones that Apple sells every second.
30 The number of Macs that Apple sells every minute.
$17,660,000,000 Apple’s earnings from its services business during the last two quarters.
Source: Computerworld
The Question of the Week
[poll id="213"]
Last Week’s Poll Results
What is your biggest life regret?
- Something else (50%)
- Not saving/investing enough (22%)
- Not living a healthy lifestyle (15%)
- Choosing the wrong occupation (10%)
- Not getting a college degree (2%)
- Getting a divorce (1%)
More than 1300 Len Penzo dot Com readers responded to last week’s question and it turns out that, when it comes to life’s biggest regret, slightly more than 1 in 5 say they wish they’d done a better job of saving and/or investing. That seems low to me, but perhaps that’s because most people who visit personal finance blogs understand the importance of saving for the future.
Thanks to reader Warren for suggesting last week’s question. If you have a question you’d like me to feature here on my blog, drop me a note at Len@LenPenzo.com and put “Question of the Week” in the subject line.
Useless News: Ol’ Fred
Ol’ Fred had been a faithful Christian and was in the hospital, near death. So the family called their preacher to stand with them.
As the preacher stood next to the bed, Ol’ Fred’s condition quickly deteriorated and he began motioning frantically for something to write on.
Seeing this, the pastor lovingly handed him a pen and a piece of paper, and Ol’ Fred used his last bit of energy to scribble a short note. Then he suddenly died.
The preacher thought it best not to look at the note at that time, so he placed it in his jacket pocket.
At the funeral, as the preacher was finishing the requiem, he realized that he was wearing the same jacket that he had on the day when Ol’ Fred died.
He said, “You know, Ol’ Fred handed me a note just before he died. I haven’t looked at it, but knowing Fred, I’m sure there’s a word of inspiration there for us all.”
And with that, the preacher opened the note and read, “Please step to your left — you’re standing on my oxygen tube!”
(h/t: billhilly)
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
After reading my article explaining why smart people aren’t impressed by those who drive expensive luxury cars, fligthkb left several comments explaining why I’m wrong. He also took the time to brag about his home accoutrements:
“Maybe from your point of view an Infiniti is a dream car. My sofa set cost more than that.”
Really? Then maybe you should find yourself a new furniture dealer.
Estoy Len Penzo y yo apruebo este mensaje. Ole!
Photo Credit: brendan-c
“The latest earnings report for Apple proves the iconic technology company is apparently still near the top of its game.” – Black Coffee
Irony: Apple’s CEO wants to see “the end of money”:
https:// http://www.technocracy.news/apples-technocrat-ceo-seeks-elimination-money//
Wow … that was an eye-opening read, Dave. I immediately drew three conclusions:
1. There are plenty of supposedly intelligent people out there who have no understanding of what real money actually is.
2. Based on his claim that digital money is “more secure,” there are plenty of supposedly intelligent people out there who cannot fathom a higher central authority ever blocking somebody’s access to the same digital credits they claim is superior to cash and real money.
3. They don’t value the privacy that cash, gold and silver provide to their holders.
Did I miss anything?
You didn’t miss anything, Len.
These high and mighty folks might do well to read the philosophers of Greece’s golden age, about hubris.
That Bernanke clip never gets old, Len.
Interesting contradiction: In the clip, Bernanke says a treasury bill “isn’t money either” but, when asked elsewhere what money is, Bernanke whipped out a twenty dollar bill!
http://www.businessinsider.com/ben-bernanke-wallet-2015-10
I believe Bernanke will eventually be seen as being the man responsible for hastening the demise of our debt-based financial system, rather than saving it. Short of returning to a monetary system based on precious metals, if he had only let the market correct itself in 2008, rather than trying to print his way out of trouble with his multiple QE programs, we’d all be better off today.
Len, I too was left speechless by how many people seem to be in favor of $15/hr gov’t jobs for whoever wants one. It is insane and frightening at the same time. It’s not just the fact that it is economically undoable. Has anybody wondered what everyone would be doing?
My lawn needs cutting. The Federal Dept. of Gardening and Lawn Care might just work.
Stan, something similar was one of FDR’s programs during the great depression of the 1930s. It was called “the Department of Public Works” (DPW)
It was known locally as “damned poor workers”,. Most leaned on their shovels all day.
Yes, that was an evil program that displaced Americans of their homes in the Blue Ridge of Virginia, ha and they say we live in a free country! It hasnt been a Free Republic since 1865 and so many are blind to the fact that the South was fighting on the side of States Rights and not slavery! The Southern population was made up only of 2-3 % slave owners. Sorry to say America you were duped in your history classes, but the South was fighting to save our Constitution as the Founders intended it. Things have only snowballed since Appomattox Courthouse to where we are this present day.
Truth in History!
Jared: You are absolutely correct about the civil war being fought over states’ rights, rather than slavery, but so many people today have been incorrectly taught in our public schools that it was a fight over slavery, that lie is accepted as “fact.”
Not much, Cathy. Essentially, it’s nothing more than a Guaranteed Basic Income program on steroids.
That government job trial balloon is pure socialism. Plain and simple. Socialism destroys our incentive to work, innovate, and improve. It destroys our communities, our families, and commerce. It has failed every single time it’s been tried and the only people who end up prospering are the political elite who pretend they know what’s best for the rest of us. It looks like it won’t be long before it is foisted on everyone here.
It certainly does look like the nation will continue heading in that direction, Timothy. If you think about it, the US socialism experiment started rolling once FDR got into office (Social Security, expansion of other government agencies/services) and the pace picked up with LBJ (welfare programs).
All of these countries that are taking back their gold believe that if/when things go sideways, the US (and England and other places that store gold for other nations) will steal it. What we are seeing here is a collapse of trust that’s resulted from way too many lies becoming exposed.
Absolutely. I know many people have never put two and two together, but a dishonest monetary system ultimately results in the gradual debauchery of society. For anyone who is wondering why today black is white, down is up and slavery is freedom, look at our dishonest monetary system, which promotes and enables such thinking and behavior.
A return to a financial system anchored by real money will eventually turn things back around.
Q: What do you do with a spoiled jar of Hellman’s?
A: Cinco de Mayo!!!!
Okay, but I prefer we taco bout money.
Why are American brand name cars like Ford lower in quality then their foreign brand name competitors ??
Great question, Mik. I thought about this for awhile myself and couldn’t come up with a good answer, so I looked to other people for their thoughts. The best answer I found was from NHRA racer Denis Rubin:
“The Japanese chose to compete on the basis of quality. The Europeans stuck with performance and design. The Americans chose marketing … While American cars have improved significantly over the years, the image persists and the success of the Koreans has only exacerbated the problem. American cars continue to improve but this is one of those matters where perception is reality.”
Denis’ entire comment can be found here.
So what is a person to do after reading this article? I like the debit and credit part any suggestions what a person should do. Long time reader first time comment.
Hi, Luke. Nice to meet you and thank you for the comment. It’s a great question! Unfortunately, I am not a certified financial planner/advisor, so you’ll have to make your own decisions. That being said, a common rule of thumb to protect your portfolio from a potential currency collapse (the “tail risk” that Mr. Bernanke speaks about in the video) is to put at least 10% of your investable assets in physical gold and/or silver. For a nice explanation of how just a 10% allocation will protect your wealth, please refer to this excellent explanation by macroeconomist Jim Rickards.
Thank you
It’s amazing what’s going on in America.
Have you heard of the big meeting of progressives in Atlanta recently and their vision for the future? I just read this on another website.
“According to reporting by The Washington Beacon, the conversation was all about a future liberal agenda that might be imposed on the country.
Heading up the wish list were the following: free health care for all via Medicare, free college tuition, and reparations for slavery to African-Americans.
Powerful groups like this below are mobilizing backed by Big Progressive donor money.
https://solidairenetwork.org/
I just see disaster looming on the horizon.
Me too, Paul. Welcome to 1984. Slavery is freedom. If you think the nanny state is bad now, just wait …
There are too many people today happy to trade their liberty in exchange for substandard “free” government “support.” I wish they’d ask the people in Cuba, Venezuela and North Korea how that is working out.