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.
We’re now six weeks into the Greatest Depression and the markets are clearly broken beyond repair, as the events of this week so vividly showed. So let’s get to right the commentary …
When a man has nothing of his own, and owes 50 crowns, it is certain that he has 50 crowns less than nothing, for if any one were to make him a present of 50 crowns to pay his debts, he would still be only at the point of nothing — though really richer than before. Therefore, as positive numbers are incontestably greater than nothing, negative numbers are less than nothing.
— Mark Napier
Every negative quantity standing by itself is a mere creature of the mind, and those which are met with in calculations are only mere algebraic forms, incapable of representing anything real and effective.
— Lazare Carnot
Credits and Debits
Debit: Did you see this? On Monday, the price for a barrel of West Texas Intermediate crude oil closed at negative $37.56. In other words, oil producers and speculators had to pay their customers to take the oil off their hands! No, really.
Credit: Of course, aside from being catastrophic for the oil industry, this is another nail in the petrodollar’s coffin. As Bill Holter notes, “The dollar has been supported from oil revenues being reinvested into Treasuries since 1973. Yes, the Fed will step in to replace the demand but this is outright monetization and anyone with half a brain knows where this will end up.” Yep; a monetary conflagration. (See? I do have half a brain.)
Credit: By the way, Holter also notes that, “Negative interest rates and oil prices make no sense whatsoever. For those who believe the Plunge Protection Team can rig all prices all the time, what’s happening shows there are loose ends and unintended consequences not previously thought of. They’ve lost control of the car and have only the gas pedal left as the brakes failed and the steering wheel is unattached.” In other words — kinda like this:
Credit: This week Franklin Sanders opined on negative oil prices too: “Friends, this just doesn’t happen. It’s a glowing sign in the heavens that markets are puking sick and about to projectile-vomit. The world doesn’t work like this. Better duck and run for cover.” Yikes. And I thought the coronavirus was bad.
Debit: Now for the bad news: The collapse isn’t limited to oil — it’s affecting food too. That’s right; everything from green beans, cabbage and tomatoes to hogs and cattle. But as producers plow over their fields and slaughter their livestock for whatever price they can get today, the wholesale destruction will almost certainly lead to higher prices down the road.
Debit: Of course, this unprecedented demand destruction isn’t the fault of the coronavirus. In fact, it’s a problem that’s been building ever since the repeal of the Depression-era Glass-Steagall Act that prohibited federally-insured banks from using their customers’ hard-earned deposits to
invest speculate on stocks and other Wall Street financial products.
Debit: But I guess demand destruction is to be expected when prominent Harvard economist, Kenneth Rogoff, is warning that the current collapse “seems likely to rival or exceed that of any recession in the last 150 years.” Uh huh. If you’re counting at home, that includes the Great Depression. And the Panic of 1907. And 1901. And 1896. And 1893. And 1884. Oh, yeah; and 1873 too. Then again, it could be worse — just ask the poor people who owned these houses …
Debit: For those who believe the Fed’s claims that the bailout money is being equally distributed between Main and Wall Streets, you need to think again. It turns out that when you include the $9 trillion the Fed has given to Wall Street in revolving loans since last September, a total of $13 trillion has gone to Wall Street, versus a relatively paltry $1.7 trillion for Main Street. Huh. Imagine that.
Credit: To be honest, when you look at the following chart from Deutsche Bank, it’s truly a wonder that anybody is still accepting the US dollar in trade for anything of real value.
Debit: Meanwhile, with central banks printing currency with reckless abandon, I guess it should be no surprise that the folly of universal basic income is rearing its ugly head again in multiple nations. After all, if there really are no monetary repercussions to conjuring money out of thin air — I know; but just play along — then why not? Heck … last week, even the Pope called for UBI to save the world. Yes, that Pope.
Debit: Despite inflation running at roughly 10% today, many people are wondering when the inflation fireworks will really start. Well … in the US, inflation has spiked quickly before. For example: In 1915, it took just two years to skyrocket from 1% to 17%; between 1945 and 1947 inflation soared from 2% to 14%; and in 1972 inflation was 3.2% — but it quickly climbed to 11% by 1974. Are you ready? You better be.
Debit: So here we are; precious metals are in short supply at the same time oil producers are paying people to take crude off their hands. At the same time, a bucket of Kentucky Fried Chicken is now more valuable than an ounce of silver. Frankly, it’s hard to believe that a US Army private in 1964 earned the equivalent annual wage of 77 ounces of silver. Sad. It’s almost as if money has lost its meaning. But you can bet those in charge want to keep it that way.
The Question of the Week
Last Week’s Poll Results
How much is the biggest tip you’ve ever given?
- Less than $100 (80%)
- $100 to $199 (15%)
- $200 or more (6%)
More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 1 in 5 have left a $100 tip or greater at least once during their lifetime. Frankly, I thought that number would be slightly higher than that — but, hey … what do I know?
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
I am confident that the impacts of shutting down the economy for the coronavirus will turn out to be one of the biggest risk assessment failures in human history. Here are the latest stats concerning the effect of the pandemic on the American restaurant industry:
500,000 Number of independent restaurants in the country.
8,000,000 Restaurant industry jobs that have been lost nationwide.
67 Percentage of all US restaurant jobs that have been lost due to the coronavirus shut down.
56 Percentage of independent restaurants that have at least $50,000 in new debt as a result of the pandemic.
70 Percentage of sales lost by American breweries.
73 Percentage of sales lost during the first 10 days in April by the coffee and snack segment.
$30,000,000,000 Revenue lost by the American restaurant industry in March.
$80,000,000,000 Projected lost US restaurant sales by the end of April.
$240,000,000,000 Projected lost US restaurant industry sales by the end of 2020.
Source: The Houston Chronicle
Useless News: Restaurant Recommendation
Two elderly gentlemen were talking, and one said, “Last night my wife and I went out to a new restaurant and it was really great; I recommend it highly.”
The other man said, “What is the name of the restaurant?”
The first man thought a while and finally said, “What’s the name of that flower you give to someone you love? You know, the one that’s red and has thorns.”
“Do you mean a rose?”
“Yes, that’s the one,” replied the man. Then he asked his wife, “Rose, what’s the name of that restaurant we went to last night?”
(h/t: RD Blakeslee)
Other Useless News
Here are the top five articles viewed by my 31,052 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- Are Gas or Charcoal Grills More Cost Effective?
- Economic Collapse: 10 Way to Prepare for the Unknown
- What’s the Best Way to Give a Financial Gift?
- How to Start a Booming Money Lending Business
- How to Manage Your Finances During a Depression
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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 this week’s featured article highlighting My 38 Secrets to Financial Success, long-time Len Penzo dot Com fan Lauren P. shared the following interesting observation:
Great list, Len. To any Star Trek: Deep Space Nine fan, your list reads like a counterpart to the Ferengi Rules of Acquisition!
And many of those 285 rules are actually related to personal finance, Lauren — like #162: ‘Even in the worst of times, someone turns a profit.’
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: public domain
Black Coffee? On a Friday? The world really has turned upside down!!!
Have a great weekend, Len.
Len Penzo says
Oops! You caught an unfinished version that actually “escaped” a day early, Jason — so you got a rare glimpse at how the sausage is made.
RD Blakeslee says
Speaking of sausage: A Mennonite gentleman (I mention his spirituality because it really makes a difference in life’s living) used to make the best sausage money could buy – around here, anyway. Last year, he quit. The bureaucracy had made it sch a hassle to sell it that he quit.
Last year I assessed the longevity of my tools and appliances. Generally, the newer they were the sooner they failed.
Cheap money cheapens all of life.
Len Penzo says
Yes, it does, Dave. Unfortunately, our money is also corrupt — so it has corrupted our entire society.
Nothing will change until we return to a monetary system backed by real wealth (precious metals), the majority of which is created via the production of real goods and services, rather than debt.
ps – I agree about things not being made as well as they used to. It’s why I am in no hurry to replace my current refrigerator, even though it is getting a bit long in the tooth.
RD Blakeslee says
Len, Miele appliances are made in Germany and are lasting 20 years and more in Europe.
We have one of their clothes washing machines and a dishwasher and would buy one of their refrigerators, if we needed one.
Sara King says
Things seem to be getting stranger by the day. Too bad my utility bills haven’t gone negative!
Have a great weekend!
Len Penzo says
You ain’t seen nothing yet, Sara. The “fun” is just getting started.
You can look for your utility bills to go up…..not only due to inflation caused by the expanding money supply, but also caused by the lowered demand as folks tighten up their use. Utilities have built their pricing around a certain demand, and their cost to deliver doesn’t drop a lot if that demand goes down and the end up with an oversupply.
Sara King says
I kinda figured that! Us little people never seem to catch a break!
Lolol Black Friday is never finished!
Len Dave Stein nailed it on Money for rest of us. He is usually level headed. Last podcast suggested new currency. Wonder who will be on the new dollar bills?
Begs the question. If the old dollar is worth half is everything half? Old debt. You have to admit the dollar is the funniest currency in the history of the world! One has to chuckle as we all chase after the darn thing.
I have planned for a 30% social security cut. Not a New currency. Oh well let you and boys in the basement figure that one out.
As far as food waste, been going in dumpsters when things were normal. ( Watch for this to be a headline)
I did read this week there is more gold traded on paper than real gold. So now am thinking gold is 1200 and not 1700 ?
I think there is more than one treasury.
American Government Treasury
The Federal Bank Treasury
Wall Street Treasury
Main Street Treasury
Black market Treasury
I demand a treasury of the treasuries!
You want to have some fun. Go to market watch! Those contributors are stealing their content headlines from Penzonia!
Enough for now : )
Len Penzo says
Duke, one thing I do not believe will be cut (either in real or nominal terms) are people’s Social Security benefits. It is just too politically untenable.
As for Dave Stein, his prediction of a new currency seems more than level headed to me!
Sam I Am says
You say demand destruction has been building since repeal of Glass-Stegall. Nixon closing the gold window in the 70’s is more like it.
Len Penzo says
I think that is a more than fair statement, Sam. It definitely armed the bomb. But I think the repeal of Glass-Steagall was the thing that lit the fuse.
I can’t wait to get a negative interest mortgage on my house.
Len Penzo says
Me too. Although I just tried to refinance my house again and one lender told me my mortgage wasn’t big enough to be worth his time. LOL
Comment often made, like “I hope to fill up today and they hand me 20 bucks”. Not gonna happen in mortgages or gasoline. If the banks can’t generate a positive cash flow, they won’t lend.’
The negative rates that have popped up in Europe are on govt bonds, and bank accounts.
People with a LOT of cash money have to park it somewhere, and apparently being too stupid to buy gold, are willing for a while to lend to to governments and banks and get less back than they lent…..similar to a storage fee charged by bullion depositories to store your gold……not that I will ever have the problem of HAVING enough gold to worry about storage……ahahhaaaa
Len Penzo says
Andy, Denmark has been offering negative rate mortgages since last summer.
Color me amazed !
Hi Len. I found your weekly Black Coffees about a month ago and I am officially addicted. Now I’m sharing them with my friends and fam. Please keep ’em coming! : )
Len Penzo says
Welcome aboard, Christina! I’ve been doing this for about a decade now … I don’t plan on stopping anytime soon.
The Dark Knight says
Farmers are dumping their milk in the fields. Produce is being left to rot on trees and on the vine. The loss of demand is obvious. What else should anyone expect when most of the restaurants are forced to shut down?
The demand is still there…..people have to eat, whether out of their home, or in it. The demand merely shifted.
The problem is a supply chain that was geared up to supply a certain percent to commercial food supply and the rest to grocery store. It is not an overnight thing to change from commercial packaging to grocery store packaging….and there in lies a lot of the problem. The farmers are caught in the middle.
Just like the shortage in toilet paper. People are going to use the same amount, but now that a lot have shifted to using the bathroom at home, the paper suppliers need time to shift the way they produce (commercial toilet paper is not the same as home use), package and distribute their output.
I agree: “I am confident that the impacts of shutting down the economy for the coronavirus will turn out to be one of the biggest risk assessment failures in human history.”
They never put the numbers in perspective. 40K die in auto accidents annually. Similar death rate from flu. We need to take action, but could have managed this better (greater emphasis on protecting the old and vulnerable).
COVID-19: Approximately 203,432 deaths reported worldwide; 53,934 deaths in the U.S., as of Apr. 26, 2020.*
Flu: 291,000 to 646,000 deaths worldwide; 12,000 to 61,000 deaths in the U.S. per year. – Johns Hopkins