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 weekend is upon us, so let’s get this party started, shall we?
Buying on credit is much like being drunk. The buzz happens immediately and gives you a lift … The hangover comes the day after.
— Joyce Brothers
The future ain’t what it used to be.
— Yogi Berra
Credits and Debits
Debit: First up this week … the latest Census Bureau figures show that, after three straight years of growth, real American incomes remained essentially flat in 2018. Median household income climbed 0.9% to $63,179 — although the number is statistically insignificant after accounting for inflation.
Debit: Wages aren’t the only thing that’s stagnating — the US labor market is showing signs of a slowdown too. Yes, an average of 145,000 monthly new jobs were created this summer — but that’s 32% fewer positions than last summer. Now for the really fine print: The government makes no distinction between part-time or full-time jobs, and it takes roughly 180,000 new jobs per month just to keep pace with population gains.
Credit: By the way, last month 127,000 new service sector positions were created — versus just 2000 new manufacturing jobs. Yeah, that’s a problem — at least it is for those who want higher wages. As one Internet commenter astutely observed this week, the disparity represents “the perfect corollary to the transition from savings and production, to debt and consumption” — a 40-year party which shows no sign of ending anytime soon. And if you don’t believe me, just ask this guy:
Debit: Speaking of manufacturing, a US manufacturing gauge showed the sector contracted last month to the lowest level in more than 10 years. The ISM manufacturing Purchasing Managers Index fell to 47.8% in September — that’s the lowest print since June 2009, and the second consecutive month of contraction. Uh oh.
Credit: Needless to say, on the heels of the latest dismal manufacturing data, President Trump used his trusty Twitter account to blame the “true” responsible party …
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they dont have a clue. Pathetic!
Donald J. Trump (@realDonaldTrump) October 1, 2019
Debit: Then again, the dollar’s “strength” is relative; it’s the cleanest dirty shirt among the other world currencies, thanks in large part to negative interest rates being imposed by most other central banks. Sadly, those negative rates also gum up the financial system by discouraging productivity, fostering unprofitable zombie companies and — most absurdly of all — corrupting the basic monetary concept of time preference. Other than that, they work just fine.
Credit: Economist Tuomas Malinen certainly isn’t drinking from the negative-rate punch bowl: “Why would anyone want to lend if they need to pay the borrower? Negative rates seriously impair bank profits. They may be the single most destructive monetary policy ever.” Ahem. May? May? On second thought: chartering the Fed, decoupling the dollar from gold, and quantitative easing are just as bad, if not worse.
Debit: In other news, last week, East St. Louis’ firefighters initiated the seizure of $2.2 million from the city’s coffer to feed their ailing pension fund, thanks to a new Illinois law that allows government pension funds to hijack city revenues to cover shortfalls. In other words: cuts in city services and maintenance are now being forced upon taxpayers in order to sustain city-retiree benefits. Uh huh. So … who thinks this is going to end well?
Debit: Meanwhile, the US ended the 2019 fiscal year with record government tax revenue driven by stock market and real estate prices reaching all-time highs, corporate profits at record levels, personal income at a record high, and unemployment still near its all-time low. And yet the government still closed its balance sheet with a $1 trillion deficit. Yep. It’s more proof that the US doesn’t have revenue troubles. Rather, it has a spending problem.
Credit: Of course, if state government pension funds and the US balance sheet are already experiencing problems with the economy seemingly firing on all cylinders, then what’s going to happen when the economic sun isn’t shining so brightly? Well … let’s go to the tape:
Credit: This week a very sober Peter Schiff warned that the central bankers’ ability to continue propping up the economy and their fraudulant debt-based monetary system — via ridculously-cheap credit and endless currency printing — is quickly approaching its limit: “It was great while it lasted, but the party’s over.” Schiff may finally be right. If so, you better get ready for the hangover, because it’s going to be a doozy.
The Question of the Week
[poll id="288"]
Last Week’s Poll Results
How often do you check your credit report?
- More than once per year. (40%)
- Rarely (26%)
- Annually (22%)
- Never (12%)
I lost approximately 700 votes on this question last Saturday evening after a server failure. The good news is more than 800 Len Penzo dot Com readers responded after the system reset and, I’m happy to see that slightly more than 3 in 5 of them check their credit reports at least once per year. On the other hand roughly 1 in 9 never check their reports at all. Tsk. Tsk.
Hey … If you have a question you’d like me to ask your fellow 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
According to Statista, more than half a million Americans are facing the prospect of being homeless during the 2019 holiday season. Here are a few more numbers on homelessness in the US:
65 The percentage of US homeless currently residing in sheltered accommodation.
0.17 The percentage of Americans who experienced at least one homeless night in 2018.
5 Number of US states where fully one-half of all American homeless reside. (In order: California, New York, Florida, Texas, Washington)
25 The percentage of the US homeless population that resides in either Los Angeles County or New York City.
78,676 The number of homeless people who reside in New York City.
49,955 The number of homeless Americans who are currrently living in Los Angeles County.
Source: Statista
Useless News: Lost Car
A man walked out of a bar, stumbling back and forth with a key in his hand. Unfortunately for him, a cop on the beat saw this and quickly intercepted the guy.
The man was clearly intoxicated, so the cop asked, “Can I help you, sir?”
“You ssshure can, Ossifer!” said the drunk, “Sssshomebody ssshtole my car!”
“Where was your car the last time you saw it?” asked the cop.
“It wasssh at the end of thisssh key!” the drunk replied, logically, if a bit too literally.
About this time the cop noticed that the man’s member was being exhibited for all the world to see. So he asked the man, “Sir, are you aware that you’re exposing yourself?”
The bewildered drunk looked down and without missing a beat moaned, “Oh, Gawd! They got my girlfriend too!”
(h/t: Cowpoke)
More Useless News
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(The Best of) 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 post highlighting one way to reduce your annual grocery bill by thousands of dollars, Ray shared this:
I enjoy eating at home since I have an uncanny knack of always finding the worst meal at restaurants.
The Honeybee has a similar problem: She has an uncanny knack of always finding the most expensive meal at restaurants.
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
Hi Len,
Welcome back and thanks for another great cup of coffee. That guy in the video had some pretty nice moves!
Sara
He sure did, Sara. In fact, the guy reminds me of my father-in-law, Tony.
Re the homelessness statistics:
In some places, particularly on the Pacific coast, there is a great deal of discussion about housing prices and how that affects housing as an investment.
So, maybe the man who has always loved LA (for example) and sleeps on the street is less homeless that the man temporarily occupying a McMansion, intending to sell it.
A very interesting take, Dave.
Frankly, I am a big believer in whatever you subsidize you get more of. So, for example, NYC, LA, Seattle and SF have government bureacracies tasked with creating more government shelters — and their budgets grow every year. Yet they still can’t figure out why their respective homeless populations keep climbing! Likewise, these “compassionate” cities pass out free syringes (while banning plastic straws) and then wonder why they have huge numbers of drug addicts on the street. It’s insane.
I completely agree, Len.
The extreme situation I invented was merely to illustrate the propensity to blur the lines between the concepts of money, house and home.
Len: Totally agree with you. The homeless problem is self inflicted.
“On second thought: chartering the Fed, decoupling the dollar from gold, and quantitative easing are just as bad, if not worse.”
My vote is Nixon closing the gold window in 71. That move opened the door to QE and negative rates. My two cents.
I agree. When the dollar broke its last tether to gold in 1971, the system was essentially doomed.
Hey, Sam:
Your two cents has more value in it than a fiat buck, IMO – it’s made of real copper.
Good point RD!
The sooner this whole mess crashes the better. The longer it drags out the harder it is going to be on all of us. I think Trump knows this. I think Obama was told the system was dead and they could either start a new one or buy time too. He decided to buy time. Does anyone here really think this sinking ship is salvagable? We crossed the rubicon in 2008.
The monetary system “ship” can be salvaged, but we have to wait for it to officially sink first. Then we can outfit it with a brand new gold anchor.
We’re in a fake economy with fake money. The U.S. would be in a depression if it ran a balanced budget let alone spent “only” half a trillion in debt every year.
The deficits are a feature, not a bug. Robert Triffin identified the problem more than 50 years ago (i.e., Triffin’s Dilemma).
What is happening in E. St. Louis is criminal. Ban public employee unions! They shouldn’t be able to hold the public hostage to keep their lavish pensions funded. No pension in the private world allows employees to retire at 50 with 100% of their salary. And cost of living raises too!
Services to the taxpayers are being slashed, but the taxpayers are being taxed for nonexistent services. What’s not to love? This is what happens when you run out of other people’s money.
That which is not sustainable will not be sustained. These pensions are on an unavoidable collision course with economic reality. The fireworks will start sometime during the next economic downturn.
“more proof that the US doesnt have revenue troubles. Rather, it has a spending problem.”
Truer words were never spoken. Welcome back, Len!
Thanks, D! (And thank you to Dave for filling in for me last week!)
Can’t believe how long the system has stayed together. It boggles my mind how it keeps chugging along despite all of the debt.
As I said earlier, “that which can’t be sustained …”
The monetary system debt is now on the exponential part of the debt curve — as such, it’s end will come suddenly … a bolt from the blue. The math will not be denied.
While debt can continue to pile up, there is a severe shortage of good collateral available. That lack of trustworthy collateral is proving problematic and is going to force the issue.
For me, it’s not so much the rise in inflation for some goods, but instead the rise in property taxes and utilities, and healthcare costs.
Just last year, they re-appraised the houses in our city, basically raising my property taxes by 10%, and not accounting that taxes are always paid ahead, so I’m paying for the adjusted rate and arrears.
My Water and Sewer bill went up 8%
The health insurance coverage at work is getting worse as years pass and now I need to put an extra $200/per pay into an HSA.
I feel like I’m getting hit from all angles! 😜