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, away we go …
“Fear the boom, not the bust.”
— Ludwig von Mises
“Throughout history, money has oppressed nearly all people in one of two ways: either it has been abundant and very unreliable, or reliable and very scarce.”
— John Kenneth Galbraith
Credits and Debits
Debit: I see the Bank for International Settlements (BIS) recently warned of severely negative impacts to international trade if the global tariff war continues. The fear is that higher tariffs could increase US inflation, which in turn would force the Fed to raise rates, thereby driving up the dollar and hurting both American exporters and emerging market economies. Or so they say.
Debit: On a somewhat related note, September 15th marks the 10th anniversary of the death of Lehman Brothers, which many say ushered in the “official” start of the Great Financial Crisis. Sadly, nothing much has changed since then. If anything, the risks to the international monetary system have increased many times over.
Debit: Did you see this? A new study finds that fine arts majors not only earn one of the lowest average salaries of the 162 majors that were examined but, even worse, they also have an unemployment rate of 9.1%. Compare that to the 5.7% unemployment rate for people without a high school diploma.
Credit: Speaking of unemployment, last week the President announced that last quarter’s GDP figure surpassed the unemployment rate for the first time in 100 years. Hooray!
The GDP Rate (4.2%) is higher than the Unemployment Rate (3.9%) for the first time in over 100 years!
Donald J. Trump (@realDonaldTrump) September 10, 2018
Debit: Unfortunately, the President’s claim is fake news — although it’s been awhile, GDP has eclipsed the unemployment rate at least twice before, in April 1968 and April 2000. Even worse, such a feat isn’t necessarily good news. The phenomenon has occurred — not surprisingly — at the tail end of recoveries, which makes it a leading indicator of a coming recession. Uh oh.
Debit: Another leading indicator worth watching is pending home sales, which typically portend closing sales, and give a general prognosis for the housing market. With that in mind, you can bet home-flippers across America won’t be happy to see that August’s pending home sales fell for the seventh straight month. Well … at least the flippers who are paying attention.
Credit: Is the crypto craze finally over? Yes, 500 new cryptocurrencies have been created since the start of 2018. But as Wolf Richter notes, “Even as the number of cryptos continues to swell, each crypto constantly creates new units through mining. This dilution and hyperinflation is worse than with all but the worst fiat currencies, such as the Venezuelan bolivar.” Hodl that, folks.
Credit: As Peter Schiff reminds us, unlike gold and silver, cryptocurrencies have no intrinsic value. In fact, if you think about it, when it comes down to it, cryptos like bitcoin are really nothing more than an entry in a fancy ledger. Then again, here’s a simpler way to look at cryptos that even a toddler can understand:
Debit: Of course, fiat money has no intrinsic value either — which central bank zero-interest rate policy has underscored for 10 years now. More and more people are finally figuring this out too. The hard way. For example, as Argentina’s peso collapses, barter clubs are springing up; the clubs already boast tens of thousands of members, and the rolls are growing rapidly. Sad.
Debit: Is it possible that barter clubs could be in America’s future? Frankly, it’s hard not to think so after the CBO announced that the deficit will approach $1 trillion by the end of this fiscal year — that’s more than a year sooner than what the CBO originally estimated back in April when it said that the deficit wouldn’t hit 13 figures until 2020.
Debit: As if the CBO’s announcement wasn’t bad enough, US government spending last month soared to $433 billion — that’s not only 30% higher than a year ago, but the highest monthly outlay of any month on record. Unfortunately, the Treasury only had $219 billion on hand to pay for that largess. Yes, the Fed had to “print” the rest.
Debit: Finally … It’s not just the federal government drowning in a sea of red ink. Illinois’ unfunded pension liabilities equaled 601% of state revenues in 2017 — but I’m sure everyone who is depending on those pension funds to stay solvent for the next 30 years has nothing to worry about. Especially if the fund managers figure out a way to legally print their own currency.
By the Numbers
The Fed’s current interest rate is just 2% and the Bank of Japan offers negative 0.1%. Looking at the other end of the spectrum, here are the ten highest central bank interest rates from around the world:
60% Argentina
24% Turkey
20.5% Venezuela
18% Iran
16.7% Egypt
14% Nigeria
7.75% Mexico
7.5% Pakistan
7.25% Russia
6.5% Brazil
Source: ZeroHedge
The Question of the Week
[poll id="232"]
Last Week’s Poll Result
Who is your favorite character fromThe Wizard of Oz?
- The Scarecrow (41%)
- The Tin Man (35%)
- The Lion (24%)
More than 1500 Len Penzo dot Com readers answered this week’s survey question and it turns out that slightly more than 2 in 5 of them say the Scarecrow is their favorite character from somewhere over the rainbow. He’s my favorite too!
Useless News: Bedtime Prayers
A dad was listening to his daughter say her prayers before bedtime. She said, “God bless Mommy and God bless Daddy and God bless Grandma and… goodbye Grandpa.”
“Why did you say that?” asked Dad.
“I don’t know,” replied his daughter. “I just felt like saying it.”
The next day, Grandpa dropped dead.
A month later at bedtime, the daughter prays, “God bless Mommy and Daddy. And goodbye Grandma.”
Sure enough, the next day Grandma breathed her last earthly breath.
By this time, the dad realized this is more than a coincidence, but he wasn’t sure what to do. He didn’t want to disturb his wife by telling her.
A few more months passed. Then one night the dad is listening to his daughter saying her prayers at bedtime: “God bless Mommy …” she said. Then she turned her head and looked straight at her dad — ” … and goodbye, Daddy.”
The man was petrified. “What!? Are you sure, Honey?” he said.
His daughter slowly nodded her head. And with that the man’s heart began to race and he broke out into a cold sweat. In fact, he became so upset, he couldn’t sleep at all that night.
The next day the dad went off to work and locked himself in his office. Then he took the phone off the hook, canceled all his meetings and awaited the inevitable.
Five o’clock came and went. But the man decided to stay locked up in his office because he felt secure there. He then watched the hours tick by until, finally, the clock struck midnight. At that point, the man realized he had somehow managed to cheat death.
He then drove home, drenched in sweat and his nerves frazzled.
When he walked in the front door, his wife was up and waiting for him. “Where the hell were you today??!” she said.
“Don’t shout,” he said. “I’ve had an absolutely miserable day!”
“You had a miserable day?” his wife replied. “I assure you mine was worse. It all started when the pool boy dropped dead in our back yard …”
(h/t: Boggs)
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Saskatchewan (1.79 pages/visit)
2. Alberta (1.76)
3. Nunavut (1.50)
4. Ontario (1.49)
5. Manitoba (1.48)
9. Newfoundland and Labrador (1.40)
10. New Brunswick (1.37)
11. Quebec (1.35)
12. Northwest Territories (1.33)
13. Yukon Territory (1.20)
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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 me at: Len@LenPenzo.com
After reading my replies to many of the nearly 250 comments on my article explaining why you have nobody to blame but yourself if you can’t live on $40,000 per year, Chris had this observation:
“You seem to have a reflexive anti-government attitude.”
I prefer to think of it as an attitude biased toward smaller government, more liberty, self reliance, and personal responsibility — but that’s just me.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
The debt doubled under Bush to $10 trillion. It doubled again under Obama to $20 trillion. And it is probably going to double under Trump to $40 trillion. Can anybody tell me where the tipping point is?
The nature of a Ponzi is that it has to keep growing. The moment a Ponzi stops growing it collapses. The banksters who control everything will not allow the money supply to contract. It will expand until there is a catastrophic collapse.
Politicians know that it’s much easier to increase the money supply, which imposes a tax on everyone in the form of price inflation, than it is to raise taxes overtly where the socially engineered winners and losers are out in the open for everyone to see.
I have no idea where the tipping point is, Cowpoke. All I can say for certain is that it gets closer and is approaching faster with each passing day.
The tipping point will be easy to see…….once it happens. ahahahaaaaaaa
Until then, the prudent person will see the train wreck coming, prepare for it by having some basics of life set aside, plus a means to feed, water, house, warm, etc, themselves when many will be holding worthless fiat and lack the means to do so.
“Throughout history, money has oppressed nearly all people in one of two ways: either it has been abundant and very unreliable, or reliable and very scarce.” – John Kenneth Galbraith
“You seem to have a reflexive anti-government attitude.” – Chris
“I prefer to think of it as an attitude biased toward smaller government, more liberty, self reliance, and personal responsibility – but thats just me.” – Len
Its not just you, Len!
Its all of us who agree with you and who, by the way, put the lie to the arch-typical government interventionist Galbreath’s statement.
Scarce, reliable money does NOT oppress those of us who soundly acquire it by living as you describe.
Good to know, Dave!
My quibble with Galbraith’s quote is that, in reality, reliable money is never scarce at the correct price. The trouble is, looking at the debt on the books, precious metals are not currently priced correctly.
But they will be after the system breaks!!!
Technically, tulip bulbs never went to zero because even if nobody wanted to buy it from you, you still had the bulb. If nobody wants to buy your bitcoin, what do you have left? Ernie finally figured it out.
As I have noted here before many times in the past, bitcoin’s big problem (along with all the other cryptocurrencies) is that they’re a derivative of other fiat currencies. If the fiat currencies implode and a dollar becomes worthless, then what is a bitcoin valued at “infinity” US dollars truly worth?
Gold and silver don’t have that problem because they are real — atomic elements that can be measured by weight and used as a rock solid (pun intended) measuring stick to determine value and act as a monetary system numeraire.
Hi Len, I’m glad I didn’t buy bitcoin when it selling for $10,000 or at the peak when it got to $20,000! What percentage of those people do you think are underwater today?
Sara
I suspect the vast majority of those who bought at those levels were speculators who bought from long-term early-buyers, thinking that the supply of “greater fools” was endless. As such, if I had to guess I suspect more of them got blindsided and are now left holding the bag.
Ha ha. Great video.
Yeah, I loved it too.
Peter Schiff gets a lot of flack from smug “the broken clock is right twice a day” crowd, but he understands how our monetary system works better than almost anybody.
All bitcoin needs to have intrinsic value is for somebody to figure out how to turn it back into the electric power it took to create it.
I ain’t holding my breath……or buying any of the silly stuff.
EXACTLY, Andy!
Len. Love your Black coffee writings . What a great way to start the weekend. Do you think someone ( banks ,Wall Street and or the government ) is pushing down gold and silver prices to keep more money in stocks ? But the lower metals are the more I can stack Thanks for all your insight.
Thanks, Doc. Banking proxies for the US Treasury and the Fed have been holding down the price of gold and, especially, silver via naked short selling of paper contracts on the COMEX. It’s been patently obvious, in my opinion, since April 2013.
I’m not complaining either. I prefer to buy stuff when it’s on sale — the lower the better!
Len’s blog discusses silver, as well as gold. Most blogs are all over gold, only.
Hi Len,
What do you think the low is on silver/ gold?
What sill happen to gold/silver prices when spot price starts to dip into the cost of producing the metal. I’m guessing driving prices up.
Anyway, thanks for the articles and hope to see a silver and gold write up from you soon. Also, I appreciate when you’re on Stacking Benjamins.
Hi, Don. Thank you for the kind words.
I have no idea what the bottom price will be on paper silver and paper gold. I do know that during the last financial crisis in 2008, prices dropped significantly – but those were offset by higher premiums and massive shortages of physical metal. I also know gold and silver prices eventually turned up and began their second significant upward price run before stocks did.
In your your “Question of the week” would you consider a higher combination of technologies style Hybrid car electric? Like the Toyota Prius or the GM Volt? They are electric cars with an on board generator to re-power the battery that burns fuel. (more so the Volt) It wasn’t an option to choose, so maybe your results could be misleading?
Yeah … I was actually thinking about a hybrid vs. purely electric vehicle. Question should have been worded better … I could be wrong, but I think most people equate hybrids with “electric.”