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.
Let’s get right to it this week …
“A system of capitalism presumes sound money, not fiat currency manipulated by a central bank.”
— Ron Paul
“The United States can pay any debt it has because we can always print currency to do that. So there is zero probability of default.”
— Alan Greenspan
“There is no pot of gold at the end of the rainbow.”
— Karen Black
Credits and Debits
Debit: How much has the richest Americans saved for a rainy day? Well … a new study found that the median savings for the top 1% of US households as measured by income is currently $1.1 million. To put that in context, the bottom 20% of households have zero saved for an emergency — or anything else for that matter. Yikes.
Debit: Did you see this? Although Venezuela’s new “sovereign bolivar” was released just a few short weeks ago to stop its rampant hyperinflation at the rate of 60 to the US dollar, it’s now trading at 87 to the dollar. Oh wait … that was yesterday. It takes 91 bolivars to buy a buck today — meaning the new hyperinflation-busting currency has already lost a third of its value. In less than a month. Forward, amigos!
Debit: In fact, inflation in Venezuela broke the 200% barrier for a single month in August — that means prices have skyrocketed 35,000% since January and 200,000% year-over-year. But wait … it gets better: The International Monetary Fund predicts Venezuela’s annual inflation rate will reach one million percent (!) by the end of this year.
Credit: Of course, people almost instinctively take an interest in gold during currency crises because it’s real money, with tangible value and zero counterparty or default risks — unlike the easily-debauched fiat paper currencies issued today by central banks and governments around the world. And that makes gold the ultimate form of wealth insurance.
Credit: Gold has reliably stored people’s wealth for 5000 years — so it’s no surprise that the Venezuelan government recently introduced a national gold savings plan for its citizens, most of whom have seen their life savings completely evaporate via hyperinflation.
Debit: Unfortunately, for the people of Venezuela, acquiring gold now is a tad too late — equivalent to buying homeowner’s insurance after the house has been completely gutted by fire. Then again, ignorance regarding the value of precious metals isn’t limited to South America’s socialist paradise — it’s clearly an American problem too:
Debit: At first blush, Venezuela’s new savings plan sounds very reasonable, offering workers and retirees the chance to buy small gold bars of 1.5 and 2.5 grams. But here’s the rub: According to Bloomberg, in reality, the buyers will only receive gold certificates, not the physical gold bars — so it’s essentially just another bankster scam. Imagine that.
Debit: Venezuela’s currency crisis has also spread to Argentina and to a lessor extent Brazil, with the Argentine peso seeing a double-digit decline last week against the dollar, after the Argentine government requested an early activation of an IMF loan, stoking fears that Argentina is struggling behind the scenes to repay foreign-denominated debt. Then again, most Argentinians have seen this movie before …
Debit: To stop the panic, Argentina’s great and powerful central bank hiked interest rates to 60%, but the damage is done: The peso is the world’s worst-performing currency in 2018. Well … excluding the Venezuelan bolivar. The peso has lost more than 50% against the dollar this year — which is why Argentina’s annual inflation rate is now more than 25%. You can’t easily hide that with shrinking package sizes.
Debit: Meanwhile, the Chilean peso is also taking it on the chin — it has lost 13% against the greenback this year. And the contagion seems to be spreading to Asia, with the Indonesian rupee now at its lowest level against the dollar since the 1998 Asian Financial Crisis. Uh oh.
Credit: Folks … the bottom line is that the international monetary system is unraveling right in front of us — yet most people are either blissfully oblivious or smugly apathetic. But as Charles Hugh Smith warns, “The belief that the US is disconnected from global markets and immune to the repricing of risk, debt, assets and currencies is magical thinking.” It is indeed. Hey … who wants a Snickers bar?
The Question of the Week
[poll id=”231″]
Last Week’s Poll Result
Are you ready for summer to end?
- Yes (44%)
- No (39%)
- I’m not sure. (16%)
More than 1600 people responded to last week’s question and it turns out that 4 in 9 Len Penzo dot Com readers are ready to say sayonara to summer. Not me … which is why I’m glad we still officially have two more weeks until the fall equinox.
By the Numbers
If you live in an urban area and rely on ride-hailing services like Uber and Lyft, you may have convenience on your side, but you’re likely to pay twice as much — or more — to get around than if you owned a personal vehicle:
$20,118 The average amount per year city dwellers who depend on ride-hailing pay for their transportation.
$27,545 The average annual ride-hailing cost for Boston residents; that’s the most expensive city in the US.
$26,397 The average annual ride-hailing cost for residents in Nashville, TN; that’s the second-most expensive US city.
$16,944 The average annual ride-hailing cost for people living in Dallas, TX; that’s the least expensive cost among America’s 20 largest cities.
$7321 According to AAA, the average cost to drive a new car per year (based on an average of 11,000 miles driven per year); that includes operating expenses and outlays for the vehicle itself.
$2728 The average annual cost to park your car in a large city.
Source: Forbes
Useless News: The Pub’s Wifi Password
Me: What’s the wifi password?
Bartender: You have to buy a drink first.
Me: Okay, I’ll have a Miller Lite.
Bartender: Is Bud Light ok?
Me: Sure. How much is that?
Bartender: Five bucks.
Me: There you go. So what’s the wifi password?
Bartender: You have to buy a drink first. No spaces; all lowercase.
(h/t: Boggs)
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. South Dakota (2.25 pages/visit)
2. Maine (1.88)
3. Alaska (1.86)
4. Minnesota (1.72)
5. Arizona (1.68)
46. Wyoming (1.23)
47. Montana (1.18)
48. New Mexico (1.16)
49. Vermont (1.13)
50. Oregon (1.10)
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(The Best of) 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 last week’s Black Coffee, somebody with the moniker Your [sic] An Idiot left me the following comment:
“Every overly opinionated idiot with enough sense to turn on a computer has the right to publish any amount of worthless, meaningless, biased, thoughtless and useless words that they have time to salvage from the biological landfill they call their brain.”
I see what you mean.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Thinking (there’s that word. again) about the gold-coin-vs.-snickers video, I wonder what the answers would have been had the the no-takers of either been asked” “why”?
Also, did anybody take the gold coin? We’ll never know.
This is not to deny the fact that U.S. citizens generally are woefully ignorant about our economy – there’s plenty of evidence for that, everywhere.
Dave I’d be surprised if Dice didn’t have a couple people take the coin — I’d like to think there were at least a couple of people who realized that coin was worth roughly $125 at the current price.
Still, the fact that even a handful of people were unwilling to take the coin, either because they wanted the candy bar or didn’t want to take either, is a sad indictment on our education system.
yeah genius except for the fact that if your on disability to SSI you make 750 bucks a month how the f*** are you supposed to live on 750 bucks a month you should try coming into the real world for a second disabled veteran got to live in his car people like you crack me up or should I say people like you should crack me up if I wasn’t freezing my ass off in a Walmart parking lot right now
Huh?
Hi Len,
I love Mark Dice! Glad you showed that video. He did one with silver too and he got the same result. It’s shocking really.
Thanks for my weekend black coffee fix!!!!!
I’ll show the silver video another time, Sara. That one was giant Hershey bars vs a 10 oz silver bar.
I wanted to buy 150 1 oz silver bars from the Sunshine Mint yesterday but they didn’t have any. None of the other on line dealers had any either.
Hmmm. APMEX has plenty of silver bars for sale.
Len, thanks for another scary but informative edition of Black Coffee. BTW, if you see Mark Dice please tell him he’s welcome to include ME in his little choice test…
I agree, Lauren. Why am I never around when these kind of social experiments are being performed!
Inflation is the government’s way of wiping out their national debts. The people can also use it to get rid of mortgages, car loans and long-term business debt with a fixed interest rate. So until a new currency is introduced by the government, inflation is always a debtor’s best friend. That’s why I seriously doubt the banksters who control our financial system will ever allow it to get out of hand. They’ll let asset prices hit rock bottom and tolerate a society living in the resulting depression so they can take advantage by buying up everything at fire sale prices.
I don’t think so, OOB. The central banks can play that game … but the private banks and the governments they support can’t afford to because just as inflation is a debtor’s friend, deflation is a debtor’s mortal enemy. And the US and other major national governments are now HUGE debtors. As for the private banks, they don’t want deflation either because their debt-based “assets” would inevitably be vaporized by their defaulting depression-bound debtors.
Opps. The bolivar is 92 today – another 1% drop.
Surprised?
“If you live in an urban area and rely on ride-hailing services like Uber and Lyft, you may have convenience on your side, but you’re likely to pay twice as much — or more — to get around than if you owned a personal vehicle:”
Sure, if you take Uber every day then I can see that. But most people who live and work in urban areas can walk and/or take the train/subway.
I think you make a fair point there, Willow.
Len, what do you think about the gold silver ratio being above 84? I think that ‘s the highest ever. Either silver is screaming buy or gold is very overpriced.
Silver comes out of the ground at 10:1 compared to gold. As far as I am concerned, Bruce, it shows silver is undervalued compared to gold. And if you compare the current gold price to the M2 currency supply, then gold is undervalued by a significant multiple. And if that’s true, then how undervalued is silver? A lot, in my opinion. But what do I know?
All that being said, the price of silver could continue dropping, and the GSR could climb even higher. It did hit 100 for a brief period a couple of decades ago.
That 100 yr bond Argentina sold earlier this year isn’t looking like such a good deal anymore.
LOL! No kidding, WA. The price of those bonds is down more than 30% from when they were originally offered.
Argentina has defaulted on its debt 10 times since 1800. Ten times. Anybody who bought those 100 year bonds deserves what’s coming.
They sure do, DK. It’s not as if the writing was on the wall when they were first introduced.