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.
Gold is the currency of kings, silver is the money of gentlemen, and barter is the money of peasants — but debt is the money of slaves.
— Norm Franz
There’s a fine line between fishing and just standing on the shore looking like an idiot.
— Steven Wright
Credits and Debits
Debit: Did you see this? Despite a decade-long bull market in stocks, nervous retirees are too scared to spend their accumulated wealth. And the sentiment is so pervasive that Bloomberg reports, “financial advisers say even very rich clients often have a crippling reluctance to fully enjoy their money.” Strange, isn’t it?
Credit: Frankly, nothing makes sense anymore. For instance, consider the financial markets. As Simon Black notes, “We’re living in a world now where profits don’t matter. There’s more than $17 trillion worth of bonds with negative yields; banks are even loaning money to borrowers at negative rates. And some of the most popular investments in the world lose billions of dollars each year with no end in sight.” Tesla, anyone?
Debit: Speaking of not making sense, this week President Trump asked the Fed for more quantitative easing (QE) and an immediate 1% interest rate cut — despite his repeated claims that the current state of the US economy is the best ever. No, really:
…..The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!
Donald J. Trump (@realDonaldTrump) August 19, 2019
Credit: You’d think the President would know that economic stimulants doled out by central bankers — such as QE and extended periods of excessively-low interest rates — are pure financial heroin with rapidly-diminishing marginal utility. Looking back, he clearly did:
The Fed’s reckless policies of low interest and flooding the market with dollars needs to be stopped or we will face record inflation.
Donald J. Trump (@realDonaldTrump) September 29, 2011
Credit: Money printing and low interest rates only serve to extract growth from the future via massive debt infusions. As MN Gordon points out, this financial fraud has been going on for decades, and “hence, future productivity will be spent paying for this pathological madness, condemning future growth to mere stagnation.” In other words, a reckoning is coming — but it’s getting harder to defer with each passing day.
Credit: Meanwhile, Tom Luongo is warning that central bankers have finally run out of room to battle deflation: “QE, ZIRP, NIRP; it’s all essentially the same thing. How can we stuff fake money onto more fake balance sheets to maintain the illusion of price stability?” That’s easy: By increasing the drip rate on the economy’s heroin IV. Duh.
Debit: Of course, if Luongo is correct, then outright deflation is dead ahead. Unfortunately, at a time when western economies have piled debt sky high, deflation is the last thing they need because our debt-based monetary system isn’t designed to handle it; it’s like trying to run a car on water. Which is why the central bankers’ final desperate act will be to inflate away the debt — along with your life’s savings.
Credit: According to Sven Henrich, 2019 will be known as “the year when central banks began to choke at the absurd market structure they’ve imposed on the world: Ten years of intervention with little growth to show for it except rampant debt expansion, ever-expanding wealth inequality — and absolutely no admission of failure.” Don’t hold your breath, Sven … at least not while the Fed is still clearly fishing for answers. See for yourself:
Credit: For his part, Dave Kranzler believes that: “At some point, as the monetary policies of the central banks become more totalitarian, rational investors will turn to gold and silver rather than chase bond prices into even more negative territory.” He’s right. The question is: Will precious metals still be available to buy when the somnambulant masses finally wake up?
Debit: Unfortunately, the powers-that-be continue to act as if the stock market is the economy. But if that’s true, then what does that say about real economic activity — everyday commerce, manufacturing and technological innovation that made the US a world superpower? If that’s no longer important, then it’s time to start handing out monthly $1000 universal basic income checks to everyone. At least until the dollar dies.
By the Numbers
According to LendingTree, personal loans are the fastest growing form of consumer lending. Here are a few more numbers around personal loans, based on the latest data:
18 Percentage growth in personal loans last year.
60 Percentage of borrowers who take out personal loans to consolidate debt or refinance credit cards.
353 Average dollar amount of monthly payments.
9722 Average dollar amount of loans taken out by Gen X, which is the generation that takes out the biggest loans.
11,700 Average dollar amount of personal loans taken out in the first quarter of 2019.
34,300,000 People who have a personal loan in the United States.
Last Week’s Poll Results
Do you think Social Security will still be able to pay promised benefits in 2035?
- No (41%)
- Yes (38%)
- I’m not sure (22%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly less than 2 in 5 believe Social Security will still be paying out benefits 15 short years from now. As for me, I have no doubt the checks will still be coming in 2035; the big unknown is whether they’ll still have enough purchasing power to buy a cup of coffee.
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.
The Question of the Week
Useless News: The Test
A father was worried about his 22 year-old son because he was still unable to decide about his future career. So he decided to do a small test. He took a ten-dollar bill, a bible, and a bottle of whiskey, and put them on the front hall table. The father took his wife aside and explained the plan: “If our son takes the money, he will be a businessman; if he takes the bible, he will be a priest; but if he takes the bottle of whiskey, I’m afraid our son will be a drunkard.”
And with that, the parents waited nervously, hiding in the nearby closet.
Peeping through the keyhole, the parents finally saw their son arrive. The son immediately went to the table and picked up the 10-dollar bill; he looked at it against the light, and then slid it into his pocket. After that, he took the bible, and flicked through it. Then, he grabbed the bottle, opened it and took a whiff, to get assured of the quality.
The son then left for his room, carrying all three items.
The wife looked to her husband and asked, “So … What does that mean?”
The husband said, “It means our son is going to be a politician.”
(h/t: Sam I Am)
Other Useless News
Here are the top five articles viewed by my 27,222 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- My 11th Annual Cost Survey of 10 Brown Bag Sandwiches
- Old Wives’ Tales Masquerading as Financial Rules of Thumb
- 8 Powerful Ways You Can Invest In Yourself
- Does Birth Order Influence Your Financial Behavior?
- How I Live on Less Than $40,000 Annually: Randy from Missouri
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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 my recent Len Penzo dot Com article explaining how to avoid paying a mandatory gratuity for bad service, Samantha left this comment:
What really irks me is take-out restaurants like Denny’s that guilt you into leaving an 18%+ tip … Then you get back to your hotel to find out they forgot to give you your onion rings. Grrrr.
Well … it’s still better than forgetting the Moons Over My Hammy.
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