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.
Well … another glorious week comes to an end, so let’s get this party started, shall we?
The Bank never goes broke. If the Bank runs out of money, the Banker may issue as much more as may be necessary by merely writing on any ordinary paper.
— From the Rules of Monopoly
O, what a tangled web we weave when first we practice to deceive.
— Walter Scott
The promise given was a necessity of the past. The word broken is a necessity of the present.
— Niccolo Machiavelli
Credits and Debits
Debit: Don’t look now, but financial analyst Dave Kranzler notes that: “The current non-mortgage personal interest burden is nearly 20% higher than it was just before the 2008 financial crisis — (and) roughly 75% higher than it was at the turn of the century.” Of course it is. But I’m sure there’s nothing to worry about. Financial statistics like that are perfectly normal in a thriving economy. Yep. The peak of fiscal health.
Debit: Meanwhile, Illinois politicians are looking at transferring public assets directly to state pensions. No, really. Yes, the plan sounds reasonable, but the asset transfers won’t solve anything because although those government pension funds might be made more secure, the Illinois government’s overall balance sheet will remain the same. So it’s all just an illusion … just not as slick as this:
Credit: According to one New York University professor, Illinois’ asset transfer scheme, as well as the governor’s plan to issue a $2 billion bond will never work — as if trying to borrow your way out of debt ever worked. “There’s going to have to be some actual sacrifice,” says the professor. Well … yeah. Just don’t tell that to Illinois’ government retirees and future-retirees; they seem to think the gravy train will never end.
Debit: Nevertheless, a new survey has found that two out of three Americans are worried about not having enough savings for retirement. And while only 3 in 10 American retirees say they’ve noticed a decline in their standard of living, Bloomberg warns that,”It’s entirely possible that government budget cuts, low saving rates, and weak market returns could make future retirees even worse off than seniors today.” Ya think?
Credit: As Charles Hugh Smith notes, “The Fed’s sudden return to dovishness in response to the stock market’s swoon telegraphs its intent to fire up QE. That sets up an obvious question: what happens when QE fails? What happens when the Fed launches QE and stocks fall as punters realize the rally is over, (and) when lowering interest rates doesn’t spark more borrowing?” Ooo, I know! Here’s a preview:
Debit: Oh, I hear ya: What about this modern monetary theory (MMT) that’s being hyped by today’s academics and pols? In short, MMT posits that a nation can’t go bankrupt as long as it borrows from itself. In other words, you really can have a free lunch! Heh. But what the MMT charlatans can’t refute is that MMT actually pays for that “free” lunch by slashing the dollar’s purchasing power, which reduces your standard of living.
Debit: Ironically, even the Fed recognizes the folly of MMT. Former Fed President Bill Dudley notes that, “MMT didn’t work out well for Germany in the 1920s; or Venezuela and Zimbabwe more recently. The US tried a milder version in the 1960s and 1970s. The result was inflation and America’s withdrawal from the gold standard.” True. Then again, Bill, since 1913 the Fed hasn’t worked out so well for the US either.
Credit: Of course, the Fed has done a fine job debauching the US dollar without the help of MMT, which is why Peter Schiff warned this week that the real national emergency isn’t the lack of a beefy barrier on the southern US border — instead, it’s America’s $22 trillion National Debt and $250 trillion in unfunded liabilities. And MMT is a desperate attempt by those with a vested interest in keeping our dying corrupt debt-based monetary system they depend on alive.
Credit: According to Bill Bonner, at some point: “All of these excesses and absurdities will be corrected; Mr. Market will take care of that. Then the leverage works in the other direction collapsing asset prices, credit, and the economy. That’s how the cycle goes. Elegantly. Effortlessly. Inevitably. An excess of animal spirits cured by a shortage of animal spirits. Too much credit cured by too little credit. And a bubble cured by a crash.”
Debit: It should be painfully obvious to anyone paying attention that Bonner is correct: Mr. Market will fix this. Only this time it’s going to take a global currency crisis to set things right. Unfortunately, for most people, that’s going to result in a significant reduction in their standard of living.
By the Numbers
For anyone who still cares, the 91st Academy Awards is scheduled for this coming Sunday. So here’s a few tidbits on the annual extravaganza:
$44,000,000 The total cost of the awards ceremony.
$24,700 The cost of the Oscar’s red carpet.
900 Hours required for workers to install the red carpet.
$2,600,000 The cost of a 30-second ad during the telecast.
$18,100,000 The cost of actress Cate Blanchett’s attire for the 2014 ceremony.
$150,000 The value of the gifts in this year’s Oscar goodie bag, presented to the show’s presenters and performers.
Source: WalletHub
The Question of the Week
How would you characterize your home’s location?
[poll id="256"]
Last Week’s Poll Results
What do you enjoy more?
- Saving money (70%)
- Spending money (19%)
- I’m not sure (11%)
More than 1500 Len Penzo dot Com readers responded to last week’s question, and 7 in 10 say they have more fun saving money to spending it. Are they crazy? Or crazy like a fox?
Useless News: Tax Return
The IRS returned a tax return after the taxpayer apparently answered one of the questions incorrectly. In response to question 23: “Do you have anyone dependent on you?” the taxpayer wrote: “2.1 million illegal immigrants, 1.1 million crack-heads, 4.4 million unemployable scroungers, 80,000 criminals in over 85 prisons, plus 650 idiots in Washington, and the entire group that call themselves politicians.”
On the returned form, someone at the IRS had attached a Post-it Note beside the question with an arrow and the words: “Your response to question 23 is unacceptable.”
The taxpayer sent it back to the IRS with his response on the bottom of the Post It Note: “Who did I leave out?”
(h/t: RD Blakeslee)
Other Useless News
Here are the top five articles viewed by my 25,214 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 4 Habits and Systems the Wealthy Follow Religiously
- Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
- How to Fix Your Finances Without More Money
- 36 Amazing Uses for the Lowly Plastic Grocery Bag
- The 9 Biggest Home Repair Scams
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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 my article highlighting the top 40 ways to improve your credit score, Ken Thomas left this comment:
There’s an old saying that, “If you’re depressed, you’re living in the past. If you’re anxious, you’re living in the future. And if you’re at peace, you’re living in the present.”
Okay … but I’m hungry. So that old saying isn’t a lot of help right now.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: spreadshirt.com
Apropos of nothing in particular: If any of us had been born in Mesopotamia ca. 1,900 BC, we would have been better protected from avaricious barmaids.
Code of Hammurabi, Article 108:
If the mistress of a beer-shop has not received corn as the price of beer or has demanded silver on an excessive scale, and has made the measure of beer less than the measure of corn, that beer-seller shall be prosecuted and drowned.
(Translated from the Sumerian language, Knoles and Snyder Readings in Western Civilization, J.B. Lippincott, 1951)
Yes, Dave … once upon a time, financial crimes were taken quite seriously — as they should always be. This is especially true of financial crimes that deal with counterfeiting and investment scams, as they are serious affronts to society in general.
Today there is blatant in-your-facing trading fraud that happens on a daily basis in the name of “national security” — see the obvious manipulation in the precious metals markets, and less transparent crazy goosing of the stock markets.
Hi Len,
You can never go wrong with a Wile E . Coyote clip! Thanks for another great cup of joe.
Also, I won’t be watching the Oscar show this week either. I have no interest in watching a bunch of overpaid hypocritical virtue signaling Hollywood types congratulate themselves.
Sara
I used to really enjoy watching the Academy Awards many years ago, Sara. But I haven’t watched them in a long time now because the event has been hijacked by the so-called social justice warrior set.
Len, regarding the Illinois pension crisis. I can’t understand how any young person would want to remain in that state if they’re going to be taxed to death to pay for others bloated entitlements. You can see the system collapsing in slow motion.
I hear what you’re saying, Cowpoke, but life is complicated and many people are tied down because of their family obligations, or employment.
I worry on a similar level about US debt in general and Social Security and Medicare in particular …. the stage, then, becomes the nation instead of IL ….
You said “And MMT is a desperate attempt by those with a vested interest to keep our dying corrupt debt-based system they depend on alive.”
Yes. The logical question is what comes after MMT. I’ll tell you. Confiscation of private property and laws against “hoarding” by the same people advocating for MMT.
We’ll see. If the reset is swift — say, in a step-function fashion over a weekend, or after a week-long bank holiday — then I can see a scenario where that doesn’t happen. If the system is allowed to continue festering as they are now, then you may be right.
Frankly, I believe we will have a relatively swift “planned” reset at some point that is going to catch almost everyone by surprise. That is preferable to letting the market implement the reset on its terms — I think a “market initiated” reset would be much more chaotic and drawn out. It’s better to just rip the band aid off, in my opinion.
Pension funds are why the Fed is now openly telling everyone that they will step in and buy assets if the stock market takes another turn down like it did in Dec. If the stock market plunges, the pension funds will blow up. If you don’t think we are living in a 100% centrally planned economy with a manipulated stock market, then I have some beachfront land in Kansas I want to sell you.
I totally agree with this. The Fed knows that a stock market crash will completely finish off most pension funds — so they’re going to do everything in their power to keep that from happening. Of course, the math (and market forces) will win out in the end. The piper will be paid because the math demands it.
No matter what happens to the economy, your best bet is to stay out of debt. If you do, everything else will take care of itself.
Well … staying out of debt is a good start, Steve. But that’s not good enough for people who have stocks, bonds and other paper wealth — unless they don’t mind seeing a good chunk of it go up in flames when the current system resets.
Steve:
Staying out of debt is a good first start.
Unfortunately, the country/world runs on debt. Take it away, and a lot of people will no longer be willing, or able, to go to work. Most people’s lives depend on a whole lot of other people (farmers, utility workers, etc) doing their job to keep them in the comfortable life they now live.
The more self reliant a person can become, and the less dependent on those folks to be able to work, the better off one will likely be….IMHO.
MMT = Magic Money Tree
I’ve seen that before, Mikey. It’s true!
Dark Knight, confiscation won’t work very well, even less well than in the 1930s, I think, because their is much more widespread disdain for the law now.
Back then:
“Many Americans dutifully turned in their holdings. But not everyone. Many simply ignored the order, assumed the risks and stashed them away knowing that gold was more valuable than the paper given in exchangeHow do we know? Most of the US mint made gold coins that were in circulation at the time ($2.50, $5.00, $10.00 and $20.00 denominations, but mostly the 10 and 20 dollar coins) were simply shipped off in bags by the thousands to European banks (primarily in Switzerland and Great Britain) Many coins thought long since melted appeared, looking as fresh as the day that they were made. Many coins that were thought to be numismatically rare (meaning that only a few examples have survived and were priced very highly) turned out to exist in quantities of hundreds, even thousands.”
https://www.gold-eagle.com/article/gold-confiscation-issue-history-and-future-predictions-0
I’ve read that 2 out of 3 Americans refused FDR’s executive order calling for Americans to turn in their gold. They were the smart ones.
Feds didn’t really care. The whole purpose was to eliminate competition to paper, allow for devaluation of that paper by about 80% when gold was repriced to the world at $35/oz, AND to eliminate gold contracts.
When the Supreme Court ruled (JUILLIARD v. GREENMAN 1884) that a debtor could pay either in paper or gold, since both were legal tender, the use of ‘gold contracts’ became popular. These required the debtor to agree in advance that they would pay only in gold coin. This kept the need for gold steady, and a threat to the plans of those wanting a manipulated paper standard….so making gold contracts illegal was a big part of the legislation.
Very interesting, Andy! Thanks for sharing that.
Len,
You think the reset will be relatively quick? Do you think the the gold that central banks are buying at a quickening pace every year will be revalued to the current amount of fiat in the world monetary system? Also have you looked into Kinesis, it’s a Crypto backed by physical Gold just as the Dollar once was? I’m pondering whether to put a little fiat into it, sounds like a decent system.
Things are crazier by the day!
Jared
Jared: Gold has to be revalued. It is the only way to clear the system.
I stay away from all cryptocurrencies. Period.
Len how can you be sure that Gold will be revalued at that higher rate you expect? IE…more than the 1340 or so it is now?
I mean all books and such I’ve ever read state in order for gold to be tied to the dollar again, it would’ve been at a lower rate for justification.
Though I did read somewhere that there was a saying once:
One ounce of Gold should equal one share of the Dow.
Of course that was way back when the DJIA was 200-500 cant recall the article, date etc……have to hunt it down.
Anyway if that addage were to hold true, then Gold would be 25-26k now..but that doesnt take into effect the Dow will most likely crater into something around the loss of 40-50% maybe more. Either way if the adage was true, that would still make Gold around 10k (based on having the DJI lose 60%)…
I was just wondering what your info and items were on how you re-valued Gold
The only way to legitimately square the world’s balance sheet is by revaluing the dollar price of gold higher — not lower. The higher price is required to account for all of the additional dollar-denominated debt that has been created through the years. Pricing the dollar value of gold lower would only make the debt problem worse.
In 1980, the Dow-Gold ratio was 1 (Dow was 800 and gold was $800). I believe at some point after the next monetary crisis hits, the ratio will overshoot and go even lower — possibly to 0.5.
That can happen in lots of ways … for example, the Dow could drop to 10,000 and gold could go to $20,000. Or the Dow could go to 5000 and gold could climb to $10,000. Or the Dow could continue climbing to, say, 40,000 and gold would go to $80,000.
Hi Len!
I’m late to the party as usual!
I think I just never really knew when you did your Coffee thread.
I guess it’s on Mondays?
Anyway…
Here’s a couple that you might want to use in your next “Credit/Debit”??…….but of course these are all Debit. LOL
So they think pushing stuff into the pensions is good?
What about the Junk Bonds that will soon go into tailspin? Since no one is really reporting, or looking into the nightmare that our Mortgage Meltdown was never fixed? The banks are literally sitting on thousands of homes that are either 1. Not being foreclosed on and these are 2nd and 3rd defaults (where the people are living rent for for up to 5 years)
Or, 2. they didn’t want to release them into the markets and drive prices down. Oh yes…no one’s really talking about that, except the people who deal in that (RIA’s)
1: https://www.marketwatch.com/story/why-the-housing-and-mortgage-crisis-is-far-from-over-2019-01-07
2 : noted from 1 https://www.advisorperspectives.com/articles/2018/06/18/will-re-defaults-of-mortgage-modifications-undermine-housing-markets
Then this little number from another marketwatch article and the guys follow up
http://charleshughsmith.blogspot.com/2019/02/now-that-housing-bubble-2-is.html
Then we have this lovely piece. That of course many just ignored.
Can you say USA insolvency?
https://www.zerohedge.com/news/2019-02-24/demographics-debt-debasement-picture-american-insolvency
Are you all afraid yet? Maybe not afraid, but you should be worried.
Lord knows I keep thinking I want to dip my toes back into the markets..since I have no choice with my IRA’s/401ks etc…But I will sure as heck not buy at these prices, nor will I touch one thing that has MBS listed in the bonds.
But at this rate we might not be able to count on T-Bills. Yikes!
I think I got really really scared when I read that last article I linked. I share it on my twitter feed and the response I usually get is people saying “the markets fine, Trump will take care of things, our economy is booming”….and I just have to shrug and say, yes unemployment is down, but those Debt numbers should scare all of you into ensuring you have a decent amount of savings, some hedged bets like PMs, a good stock of food and such on hand…and last but, not least; god forbid dont have any debt. But…most don’t want to listen. Sigh…
Can’t say I didn’t try and warn them.
Thanks for the article Len!
Cheers!
I pour a fresh cup of Black Coffee every Saturday morning, TQ. Thanks for the links … they’re all telling a story for anyone willing to keep an open mind.