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?
It is what it is, but it’s not what it seems.
— Paul Hewson
There are some ideas so absurd that only an intellectual could believe them.
— George Orwell
There are three roads to ruin; women, gambling and technicians. The most pleasant is with women, the quickest is with gambling, but the surest is with technicians.
— George Pompidou
Credits and Debits
Debit: Despite being unable to repair and maintain the existing network of roads and highways, US states are continuing to build more of them anyway, which is creating new financial liabilities. As it stands now, the US would have to spend roughly $250 billion annually to keep its existing infrastructure properly maintained and restore the current six-year backlog of roads in a poor condition. Yeah … I hear ya, folks: Only six?
Credit: Perhaps all of the new roads being built is why Americans’ confidence in the US economy is at its highest point in 20 years. It’s possible. But here’s the problem: Living standards have been slowly declining ever since the dollar’s anchor to gold was broken in 1971. Huh. Who says Boiling Frog Syndrome isn’t real?
Debit: Ironically, Americans’ growing consumer confidence also suggests they’re blissfully unaware that a middle class lifestyle is now 30% more expensive than it was 20 years ago. Well … not all Americans; at least not the 23% who say that paying for basic necessities such as rent, utilities and food is the biggest contributor to their credit card debt.
Debit: It’s scary to think that nearly a quarter of all Americans are going into debt paying for basic necessities 10 years into an economic recovery. But anyone who is paying attention to rapidly-falling bond yields can see they’re signaling that both the US and global economies are in a heap of trouble. Then again, bond yields have been anemic since the Great Financial Crisis, which means there never really was a true recovery anyway.
Debit: So … How low have bond yields fallen? Incredibly, in many cases, less than 0%. There are currently trillions of dollars of bonds in the world with negative yields. And until recently, negative yields were limited to relatively-safe bonds issued by governments and large corporations. This week, however, much riskier mortgage-backed bonds joined the party. At least, they did in the Netherlands. No, really.
Credit: But wait … it gets even crazier. Thanks to those mortgage-backed bonds, bankers in the Netherlands are now offering mortgages with negative rates. That’s right; instead of collecting interest, the lenders are effectively issuing a monthly rebate to their mortgage holders. This begs the question: What’s the true value of fiat currency today if bankers are paying people to borrow it? (Psst. Voltaire knows.)
Debit: Meanwhile, the slowdown in global trade is putting pressure on the creation of US dollars — which is a big problem because the greenback is the lubricant for the economic engine better known as the global financial system. Without an ever-increasing supply of dollars, that engine is bound to seize up, leaving the global economy and financial system vulnerable to tighter financial conditions. Hey … this guy gets it:
Credit: Jim Rickards, author of The Road to Ruin, certainly sees the dollar-lubricant “idiot light” flashing red on the world’s economic dashboard. He says, “Given the trillions in dollar-denominated emerging-market debt, a full-scale foreign sovereign debt crisis could be in the making if they can’t earn dollars from exports to pay their debts.” In other words, we need even more IOUs to “settle” existing IOUs — stat! Yes … welcome to Crazy Town.
Credit: Of course, as MN Gordon wisely observes, “The gripes of all workers of the world should be united not against capitalism, as promoted by Marx, but against the curse of fake money and the governments that perpetuate it.” Fake money is a poor store of value because it’s debt; it’s also mathematically impossible to sustain because the international monetary system that supports it is a Ponzi scheme, otherwise known as this:
Credit: Unlike a precious metals-based monetary system, our debt-based system requires debt to grow exponentially, ad infinitum. Unfortunately, we’ve reached the point on the curve where the current system begins to self-destruct. Perhaps that’s why the President is nominating Judy Shelton, a gold standard advocate, as a Fed governor. Can Shelton save the current system? No; but unlike the current batch of Fed intellectuals, she actually knows how to fix the problem.
Insider Notes: More on the Folly of a Debt-Based Monetary System
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The Question of the Week
Last Week’s Poll Results
Will you be taking a summer road trip of 500 miles or more this year?
- No (57%)
- Yes (29%)
- Maybe (14%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that 3 in 10 of you plan to take a road trip this summer of 500 miles or more; another 1 in 7 are thinking about it. Here’s hoping gasoline prices continue to stay relatively inexpensive through the Labor Day weekend!
If you have a question you’d like me to ask the readers here, send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
By the Numbers
Current Jeopardy! Champion, James Holzhauer, 34, is not only amassing millions of dollars in Jeopardy! winnings, but he’s doing it at a blistering pace. Here’s a breakdown on about Holzhauser’s incredible run through his first 28 games, courtesy of freelance writer Bill Rice, Jr.:
0 Number of Daily Double clues answered incorrectly by James in the game’s “Double Jeopardy.”
5 Games where James won more than $100,000.
10 “Perfect games” with no incorrect responses recorded by James.
10 Games where James had only one incorrect response.
120 Consecutive correct responses by James in Games 22 through 24.
15 Games where James won more than $80,000.
21 Times that James went “all in” on the first-round Daily Doubles.
15 Number of spots James holds in Top 15 all-time winnings on show
13 Number of years James tried to get on Jeopardy! before finally being selected as a contestant.
Source: Zero Hedge
Useless News: The Nail
One morning, on his way out to check the cows, a rancher said to his daughter, “The insemination man is coming over to impregnate one of our cows, so I drove a nail into the 2×4 just above where the cow’s stall is in the barn. Please show him where the cow is when he gets here.”
And with that, the rancher departed. After a while, the artificial insemination man arrived and knocked on the front door. “I came to inseminate the cow,” he said.
So the daughter took him to the barn, and they walked along the long row of cows until she finally spotted the nail her father told her about. “This is the one, right here,” the rancher’s daughter said.
The man, who assumed he was dealing with an airhead said, “Tell me, lady, ’cause Im dying to know: How would YOU know that this is the right cow to be bred?”
“That’s simple!” she said with confidence, “By the nail that’s over its stall.”
Laughing rudely at her, the man then asked, “And what, pray tell, is the nail for?”
As the daughter turned to walk away, she said sweetly over her shoulder, “I guess it’s to hang your pants on.”
(h/t: RD Blakeslee)
More Useless News
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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 reading a recent Len Penzo dot Com post that shared some clever How to eliminate your financial problems without more money, Frank had this to say:
I think some people have financial problems because they spend too much.
Frank, I this most people have financial problems because they spend too much.
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