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.
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.
Source: BBVA
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
[poll id="282"]
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
Hey, while you’re here, please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on Twitter!
3. Subscribe via email too!
And last, but not least …
4. Consider becoming a Len Penzo dot Com Insider! Thank you.
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
” … silver is the money of gentlemen … “ Norm Franz
“At some point, rational investors will turn to gold and silver.” – Dave Kranzler
“He’s right. The question is: Will precious metals still be available to buy when the somnambulant masses finally wake up?” – Len Penzo
Well, for us lower-brow, woke “gentlemen”, so-called “junk” silver is still widely available, but prices are rising quite fast, lately.
90% silver dimes and quarters are selling by the $100 face value bagful, for about $1,300 and we can buy “any quantity” according to the website: https://www.apmex.com/product/27/90-silver-coins-100-face-value-bag
So, silver coins are 13 times more “valuable”, priced in fiat dollars today, than they were when last in circulation.
But, that’s not really a measure of silver’s “increase”; It’s a measure of the fiat dollar’s decrease in purchasing power, so far.
Step right up, gen’ulmen – get’um while you can …
Good comments, Dave. For those just dipping their toe in the physical precious metals market for the first time, buying “junk” silver is a great place to start. The best part about junk silver is it is great for bartering small items (a dime will always get you a loaf of bread, a quarter will always get you a gallon of gas, etc.)
Us lower brow, woke “gentlemen” are also readily able to invest in silver bars and rounds. Apmex, JM Bullion, and others are great sources of wealth insurance. Though I don’t have a lot to put into such things, I invest what I can into physical silver. I also invest into stocks, as a person trying to hedge their bets should, and I’m branching out into “that which can be enjoyed during acquisition and throughout life, as opposed to papers in a drawer, like stocks and bonds.” Though I find that my lack of knowledge, as well as lack of capital sometimes makes this more difficult.
Glad to hear you ARE branching out, Jason! Follow your heart.
As much as you can, study on what you want to do and invest in that and “lack of knowledge” will disappear along the way.
When I was preparing to move the family from Warrenton, Va to the Appalachian Mountains, a friend of my wife asked: “what will you do there?” “Start a cattle herd, among other things”, I said. She: “But you’ve never farmed!” Me: “No, and I never built a harpsichord before the one you see standing there.”
Don’t let lack of credentials deter you.
No matter what you think about Trump, his attitude change is telling. Ask yourself what this is telling us about the state of the banking system?
My conclusion is that the financial system has to be in a lot of distress.
While there is no doubt the financial system is on an irreversible trajectory toward implosion. A reasonable alternative argument is that Trump’s call for QE and lower interest rates is a desperate attempt to hold off the coming economic downturn before the 2020 elections.
With the Democrats doing everything they can to sabotage the economy by destroying consumer confidence, there should be no surprise that President Trump is trying to hold the down turn till after election.
Hi Len,
Thanks for another great episode of Black Coffee. Did you see the comments from Mark Carney yesterday about the dollar? Things are starting to move really fast.
Keep stacking while you can!
Sara
Thanks, Sara. Yes, I did, but too late for including in this week’s BC. Carney made some extraordinary remarks for the head of the Bank of England — calling for the consideration of a new reserve currency to replace the US dollar!
I’ll discuss the ramifications of his remarks in detail next week.
You can lower the interest rates as much as you want, but if there’s no confidence in the future, nobody will borrow money no matter how cheap it is. Sorry Mr. President.
That’s a good way to look at it. I think the main reason few households and corporations are borrowing is because they are unable to take on more debt. Frankly, most governments are over-extended too now (except for Russia), but as the last-resort option, they will have no choice but to continue borrowing – -which is why a currency crisis is baked in the cake.
I first noticed the tales of doom and gloom about the currency crisis during the Carter administration. Run away inflation may have triggered the predictions.
Previous predictions did not come to fruition, but some day it will happen. I would put even odds that it will be it the next ten years, but cannot guess closer. Banker will continue to try and kick the can down the road.
Harry, good comments!
I think it is fair to say that there was indeed a dollar crisis in 1980, but Paul Volcker short circuited it by raising the Fed Funds rate to nearly 20%. Things were so bad back then that the US was actually experimented with Treasury bonds (colloquially called “Carter bonds”) denominated in Swiss francs and German marks to avoid further dollar weakness.
The next time there is a dollar crisis, the Fed will not be able to save the dollar by raising interest rates because the US has too much debt on the books. Well … they can raise interest rates, but the debt service will overwhelm tax revenues!
Things are so messed up. We should have allowed the economy to collapse back in 2007. We would have recovered by now.
As I see it, at some point we’re going to get hyperinflation anyway so why not get on with it? A reset was needed in 2008 but the Fed decided to keep the magic show going by printing cheap money. Trouble is they’re not going to be able to do it for much longer. And when this everything bubble finally pops you better have some savings set aside in gold/silver.
I agree, Steve. The time to fix this was when the system nearly imploded the last time. The system was doomed as soon as the powers-that-be decided to release the QE Kraken — rather than enduring the pain of letting stocks and housing fall to their economically-true price points.
Ha ha. Yea, more printing will fix everything.
To infinity and beyond!
Historians will be looking back in utter astonishment at the financial lunacy that has gone on this century.
Unfortunately it is worse that that. The government does not “print” they borrow from the semi-private Federal Reserve System that produces money through the magic of fractional reserve banking, then pay interest on it.
Actually, the 100% private Fed creates the currency out of thin air — no fractional reserve is involved at all. The fractional reserve hocus pocus takes place at the commercial bank level.
I didn’t know Denny’s had take-out service!
They all do these days, Sam! Even if they don’t, they do — there are other companies that will deliver your $10 “value meal” to your door for $50!
Those companies will go belly up once this cheap money period ends too.