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 …
In my intercourse with mankind, I have always found those who would thrust theory into practical matters to be, at bottom, men of no judgement and pure quacks.
— John Smeaton
The last duty of a central banker is to tell the public the truth.
— Alan Blinder, former Vice Chairman of the Fed
Credits and Debits
Debit: Did you see this? Illinois’ pension problems continue to compound, as Moody’s says new revenue likely will be required to keep their funds from imploding. But here’s the rub: Moody’s warns that out-migration is now a major credit concern. Unfortunately, the proposed tax hikes to rescue those pension funds are so big that they’re sure to accelerate Illinois’ out-migration trend, further eroding its tax base. Uh oh.
Credit: Needless to say, there is no realistic way to save government pensions in the Land of Lincoln because the state’s tax base has already eroded beyond the point of no return. Sadly, without a massive cutback in promised benefits, here’s what is eventually going to happen to those woefully-underfunded Illinois’ government pension funds:
Credit: In other news, the battle for Venezuela is also playing out within the halls of its central bank, where staffers have been waging a small mutiny by refusing to sign-off on key bank transactions. Yes, this is the same central bank that imports 95% of its own currency from foreign printers — delivered via 747s — because Venezuela lacks sufficient ink and paper. Ah, the wonders of socialism. Forward, amigos!
Credit: Speaking of central banks, financial analyst Dave Kranzler says the Fed blinked this week when, despite a supposedly “booming” economy, they not only deferred on future rate hikes, but also opened up the possibility of re-starting their dollar printing presses. Why? Because the Fed knows if it continues raising rates and removing liquidity, then stocks will crater and the entire financial system will collapse — they just won’t admit it.
Debit: Meanwhile, Americans over age 60 owe $86 billion in student loan debt that can’t be discharged in bankruptcy. In fact, seniors in their 60s owed an average of $33,800 in 2017 — and since 2010, their total student loan debt is up 161%. That’s the biggest increase for any age group, resulting in what the Wall St. Journal notes as, “the monetary suffocation of a generation.” Imagine that.
Debit: Some Americans are even having their Social Security checks garnished. Oh, yes … it’s true. Social Security benefits or tax refunds of more than 40,000 people aged 65 or older were garnished in 2015 alone because of delinquent student loan debt — that’s up an astounding 362% from the previous decade. I wonder how many of those student loans were spent on a STEM degree.
Credit: As Charles Hughes Smith notes, we’re in a state of debt exhaustion, where “lenders can no longer find creditworthy borrowers, borrowers either don’t want — or can’t afford — more debt, and the cost and risk of additional debt far outweigh the meager gains.” The end result? A sharp increase in defaults and collapsing asset bubbles, leading to depression. Well … at least until enough debt clears. And it will — eventually.
Credit: Then again, the way central bankers have mismanaged their currencies, why does anyone still put any faith in them? After all, as MN Gordon notes, their centrally-planned periodic adjustments of the most important price in capitalism — that is, the price of money, in the form of interest rates — is based on nothing more than pure quackery. Clearly, they’ve been studying their craft with this guy:
Debit: Of course, that hasn’t stopped the Fed from sending several trial balloons in recent days via the WSJ and other media outlets regarding the potential cessation of quantitative tightening (QT) in the near future, or even the use of negative interest rates as an economic salve when the next financial crisis hits. I know. As if the savers on Main St. haven’t been punished enough for the benefit of Wall St. investors.
Debit: Speaking of quackery, it’s no secret that central banksters have a license to lie; anyone who is paying attention knows those financiers have been doing it since time immemorial, which makes the following shameless tweet from the European Central Bank shocking — but not surprising:
ECB asset purchases have reduced inequality in the eurozone, our research shows. They have especially benefited low-income households, which suffer the most from unemployment. Full Research Bulletin here https://t.co/MlMQO2BXxK pic.twitter.com/4DtpcOsqms
European Central Bank (@ecb) January 30, 2019
Credit: Thankfully, Bill Bonner scoffs at the ECB’s ludicrous claim. He notes that the huge wealth gap between rich and poor could be solved if central bankers simply stopped rigging interest rates and let the free market decide. If we did, we’d surely see rates above 5%. “Then,” he says “In a flash, like champagne at Hiroshima, the post-2009 gains of the super-wealthy would evaporate.” Which is exactly why that will never happen. At least not willingly.
The Question of the Week
Last Week’s Poll Result
How far do you live from your job?
- 11 to 25 miles (33%)
- Less than 5 miles (28%)
- 5 to 10 miles (21%)
- 26 – 40 miles (10%)
- More than 40 miles (4%)
- I work from home! (3%)
More than 1600 readers responded to last week’s question and it turns out that, slightly more than half of them commute 10 miles or less to their workplace, including 3% who work from home. Not bad. On the other side of the spectrum, 1 in 25 have to travel more than 40 miles to get to their place of employment. Yikes.
By the Numbers
Don’t forget this Thursday is Valentine’s Day. Here are some numbers on how much money Americans spend on Valentine’s Day, what they’re buying — and their partner’s expectations:
$7,600,000,000 The amount Americans will spend on Valentine’s Day this year.
$3,900,000,000 The amount Americans will spend on jewelry.
$1,900,000,000 The amount Americans will spend on flowers; that’s $100 million more than the amount they’ll spend on candy.
8 The percentage of women who anticipate receiving a gift worth more than $100 from their partner.
10 The percentage of men who anticipate receiving a gift worth more than $100 from their partner.
25 The percentage of women who expect their partner to spend no money on them.
14 The percentage of men who expect their partner to spend nothing on them.
Source: 94.3 The Point
Useless News: Morris the Miser
Morris realized he needed to purchase a hearing aid, but he was unwilling to spend a lot of money. “How much do they cost?’ he asked the salesperson.
“That depends,’ the salesman replied. “They run from $2 to $2000.”
“Then let’s see the $2 model,” said Morris.
So the salesperson went to the backroom. Soon after, he returned and put the device around Morris’ neck. “You just stick this button in your ear and run this little string down to your pocket,” the salesman instructed.
“Okay,” said Morris. “But how does the thing work?”
“For two bucks it doesn’t work,” the salesperson replied. “But when people see it on you, they’ll talk louder.”
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. West Virginia (2.03 pages/visit)
2. Kansas (1.83)
3. South Dakota (1.78)
4. New Mexico (1.77)
5. Vermont (1.76)
46. Connecticut (1.28)
47. Alaska (1.27)
48. Minnesota (1.25)
49. Nebraska (1.18)
50. Mississippi (1.10)
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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
Angela left a very long rebuttal to my post explaining why it’s your fault if you can’t make ends meet on $40,000 per year that opened up with this:
I’m concerned with the value judgement I read on this blog. Fifty years ago, we didn’t need to have the luxuries that we need to get by today. It’s different now.
Sadly, Angela, you made my point and don’t even realize it.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: brendan-c