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:
The Question of the Week
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 …”
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