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.
I hope everyone is enjoying their weekend. I know I am … so let’s get this show on the road.
When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; and when lenders desert credit markets for other alternatives such as cash or real assets.
— Bill Gross
Credits and Debits
Debit: Did you see this? According to a recent survey, 4 in 10 people say they regret how they’ve lived their lives so far. The two biggest regrets were spending too much time at work, and not traveling enough. Those were followed by living an unhealthy lifestyle, and not making more family time. Huh … Apparently, I’m the only one who regrets wasting two hours of his life watching John Travolta play the title role in Gotti.
Debit: In other news, I see that hyperinflation has returned to Zimbabwe. The citizens can thank their government, which banned all currencies except for the Zimbabwe dollar last month. Since then, prices for everything from sugar to cooking oil to building materials have tripled. The good news is, government bureaucrats insist their new dollar has “officially” lost just 28% of its original value in the past month. So there’s that.
Debit: Speaking of inflation, as a reminder of just how brainwashed the mainstream media has become, the Financial Times ran an article this week about the sitting Fed Chair with the following headline: “Powell seeks a cure for disease of low inflation.” You can’t make this stuff up, folks. Low inflation, huh? I guess that’s just more proof that if you consistently repeat a lie, most people will eventually believe it. Sad.
Credit: On a somewhat related note, New York Fed head John Williams suggested last week that they need to quickly cut rates to 0%. Why? Well … according to market analyst Graham Summers, with Deutsche Bank imploding, liquidity issues within China’s banking system, and a temperamental US stock market, “something big is coming.” Uh huh … In fact, I had the exact same feeling last night after eating here:
Debit: But seriously, forget 0% … Europe has been embracing negative rates for quite a while now. For the first time ever, the yield on Greece’s 10-year sovereign bonds fell below 2%, which puts them lower than US Treasury yields — even though, at 181%, Greece’s debt-to-GDP ratio is significantly higher than the US’s 105% figure. As if anyone needs more proof that the global monetary system is hopelessly broken.
Debit: What’s that? You say you do need more proof that the Ponzi scheme known as our global debt-based fiat monetary system is broken? Okay. Consider this: This week, the 50-year Swiss bond yield went negative. Think about that; people are agreeing to pay the government to take their hard-earned cash and hold it for 50 years. It’s even worse when you consider lost purchasing power after 50 years of inflation.
Credit: Unfortunately, when it comes to monetary policy, the central bankers have no more tricks up their sleeves. As financial analyst Patrick Watson notes, it used to be that “When the economy slowed, the Fed would cut rates to encourage borrowing and investment. The problem is that easy money stops working when it becomes normal, as it is now; (low rates) only work if borrowers think it’s a limited-opportunity, which they don’t.”
Credit: Okay … so Fed policy may prove to be impotent from this point forward, but give them credit: The central bankers have their next round of cuts on the launch pad anyway, waiting to ignite yet another powerful financially-engineered global economic expansion. The trouble is, this is going to be the result …
Credit: Of course, despite the shortage of rocket fuel, the Fed has no choice but to try another round of rate cuts anyway. And it may work, if only for a little while. As financial analyst Lance Roberts notes, “Asset prices could rise in the short-term given the ‘training’ investors have received over the last decade to ‘buy the dip.’ However, the rate cuts won’t change the onset, duration, or intensity of the coming recession.” Uh oh.
Debit: So if the world’s central bankers are now a hostage to rock-bottom interest rates because raising rates would strangle global economic growth and trigger the implosion of our debt-based international monetary system, where do we go from here? Well … not far. After nearly 50 years of reckless debt accumulation, the end of the road is just around the corner — along with the painful reckoning that comes with it.
Debit: With that in mind, it’s certainly no coincidence that JP Morgan announced this week that they believe the dollar could soon lose its reserve currency status “due to structural reasons and cyclical impediments.” Ya think? You know, up until a few years ago only the tin-foil-hat brigade — including yours truly — and doomsday preppers dared to make such a “crazy and impossible” claim. Not any more. Why?
Debit: Here’s the punchline: A loss of reserve currency status means most Americans without wealth insurance will experience a substantial reduction in their current living standard. Then again, the US government will require a massive downsizing too. The question is: Is Washington DC ready for it? Are you?
By the Numbers
Europeans have already been struggling with the heat this summer, but meteorologists warn that it’s going to get even hotter this weekend:
102℉ The all-time high in Belgium, which was recorded earlier this summer.
101℉ The highest temp ever recorded in the UK. (Favershan, England)
102℉ The expected high temp in the UK this weekend.
106℉ Last Tuesday’s temp in Bordeaux, France.
108℉ This weekend’s expected high temp in Paris.
114℉ The all-time high temp in France, which was recorded on June 29th. (Gallagues-le-Montueux)
Source: CNN
The Question of the Week
[poll id="278"]
Last Week’s Poll Results
What is your biggest financial worry?
- Outliving my retirement savings (50%)
- Major medical expenses (17%)
- Losing my job (16%)
- Making ends meet on current income (11%)
- Something else (4%)
- College education expenses (2%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and half of them say their biggest concern is outliving their retirement savings. I’m happy to see that only 1 in 9 say they’re worried about making ends meet on their current income. I guess the low number is to be expected among those who visit personal finance blogs!
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.
Useless News: Frogs
A little boy kept pestering his Grandpa, “Make a sound like a frog. Make a sound like a frog!”
After several hours of this, Grandpa finally asked his grandson, “Why on earth do you want me to make a sound like a frog?”
The boy replied, “Because I heard Mom and Dad talking. They said that as soon as you croak, we can go to Florida!”
(h/t: Kerri L.)
Other Useless News
Here are the top five articles viewed by my 26,713 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- The 13 Most Important Items to Keep In Your Fireproof Safe
- 5 Signs That Your Spending Is Out of Control!
- What Were They Thinking? The 10 Biggest Grocery Product Flops
- 6 Ways to Avoid Becoming Small-Minded About Money
- Online Jobs You Can Start Doing From Home Today
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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 Len Penzo dot Com article explaining how to save money by managing your own investment portfolio, Eve left this curious comment:
What a stuff of unambiguity and valuable experience regarding unexpected feelings!
Thank you, Eve … I think.
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Photo Credit: brendan-c
“… people are agreeing to pay the government to take their hard-earned cash.”
Len, is it really just “people” and “hard-earned cash”?
Or is it institutional buyers and the very wealthy (NOT hard-earned money) that is, in effect, bribing the central bankers to keep the fiat flowing so more really hard-earned money can be “stealth extracted” from the savings of the lower classes?
That’s not their recognized motivation. Those are the desire to accumulate more while conserving what’s been acquired already (the wealthy) and keeping their institution’s balance sheet and cash flow alive (institutions).
Yes, I think your explanation is more to the point, Dave. Pension funds, and companies like Apple with billions in cash on the sidelines have to park that money somewhere. It’s just not realistic to put $10 billion in a mattress or home safe.
Len, thanks for another informative issue of Black Coffee and I’m glad you touched on PM’s again. BTW, I got a ’64 silver quarter in change last week! First time in YEARS that’s happened & I wondered if the young man behind the register had ever seen one or even knew the difference. In this case, age DOES have it’s advantages… ;o)
Thanks, Lauren. It’s always a treat to find a silver dime or quarter these days! All you have to do is drop one on a table to hear the difference between the real money of yesteryear and the funny money of today. The last silver coin that I found circulating in public was a 1964 dime that I received as change from a Coke machine — but that had to be about five years ago. Since then … nothing!
Hi Len,
I’ve got my wealth insurance! It’s the only sane way to save in my opinion.
Have a great weekend!
Sara
It is certainly the safest way, Sara!
“However, the rate cuts wont change the onset, duration, or intensity of the coming recession.”
I think the guy who said that should have said “depression”.
My position is that we’ve never really recovered from the Great Financial Crisis of 2008. It has required more than $4 trillion of “money printing” in the form of QE, and zero- or near-zero interest rates since then just to keep the economy treading water.
Do you notice that economists today only use the term “economic recovery” rather than “economic expansion.” The latter term is what used to occur after a recession. But not any more. That is because debt hasn’t provided any bang for the buck since then. In 1970, we used to get $4 or $5 of GDP growth for every dollar of debt. Today we get less than a dollar of GDP growth — about 40 cents — for every dollar of debt. In other words, the debt is now doing more harm than good — which is to be expected, since we are on the exponential part of the debt curve that is a feature of our debt-based monetary system.
It’s simple math … and it is telling us what the future brings. Yet nobody wants to believe it.
I expect the implosion of Deutsche Bank should be the catalyst to bring it all down, worldwide. DBs exposure to derivitives is staggering. They could only be bailed out by the US taxpayer or maybe China. And that would only kick the can a very short distance down the road. There’s no way to fix the massive stupidity that DB has put on display.
I agree, Ed. I think DB is smoldering behind the scenes. Kind of like how Lehman was smoldering before it went down and kicked off the GFC of 2008. There were plenty of warning signs back then too.
For us savers, interest rates are already near 0. If they go negative, I’m going to seriously consider pulling my cash out of the bank and keeping it in the mattress. Anybody else remember actually earning a REAL return on their savings? $10000 in the bank used to earn $500 in a year. Now I’m lucky to get $50.
Don’t forget bank fees, Steve. If you include them, they can eat up that meager interest (if not more) you’re earning on your savings, resulting in the same net effect as negative interest. In other words, you may already be paying negative interest!
Len,
Come to find out I will now be taxed when buying gold or silver! This Government is really pissing me off now! How can you be taxed for exchanging currency for real money?! Guess this is a way to curb the buying when things really get bad! Been buying since 2015 and no tax was added, but this month I was taxed and boy am I hot! Im so tired of all these taxes flying around, is the Constitution Dead!!!!!!
Angry in Virginia!
Jared
Don’t get me started, Jared. California passed a similar law that went into effect here this year on any precious metals purchase under $1500. It is infuriating, but not unexpected considering the people who are running the show up in Sacramento.
The good news is, for the first time in years, it looks like the dollar price of gold has a real opportunity to get to $1500 by the end of this year, which will exempt one ounce gold coins bought by Californians from the absurd tax.
In the meantime, I am simply saving my cash until I have enough to purchase at least $1500 worth of gold and silver at one time.
Len, I just want to say I enjoy your weekly reports. You make an important but sometimes dry subject enjoyable and easy to understand. Thank you.
Thanks, Mark!