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’ve got a busy weekend to attend to, so let’s get right to this week’s commentary …
The current account deficit is a ticking time bomb. We don’t know when it’s going to explode, but it can’t continue.
— Bernard Baumohl
Credits and Debits
Debit: Did you see this? Consumer confidence in November fell to its lowest point since February while consumers’ future expectations are now hovering at their lowest point since 2016. Imagine that.
Debit: By the way, those consumer confidence figures were reflected in key holiday shopping metrics; while Black Friday retail traffic was up 48% over last year, it was still 28% lower than the same day in the previous 2019 holiday shopping year. And the numbers were even worse for the day before, where Thanksgiving day visits to brick-and-mortar stores were more than 90% lower than the same day in 2019. On the other hand, looting was up significantly from prior years.
Debit: Meanwhile, I see that Cyber Monday sales declined for the first time ever. Maybe that’s because 63% of consumers say they have experienced a stockout situation so far this holiday shopping season – suggesting that particular gifts they were looking to buy were not in stock due to supply chain woes. Then again, maybe it’s because after they’re done covering their daily living expenses, there’s very little left for anything else.
Debit: Of course, for those who love spending money they don’t have, there will always be plastic. In fact, credit card debt soared by $10 billion last month, pushing total revolving credit outstanding over $1 trillion for the first time since April 2020. That’s not a trivial sum – especially with the average credit card interest rate currently at more than 16%.
Credit: Needless to say, the indebted American consumer has company. Macroeconomist Alasdair Macleod points out that, with US government debt more than twice as large as private sector GDP, “productive citizens – through taxes and currency debasement – are supporting far larger obligations than they realize, unaware they’re on a treadmill that’s going ever faster.” According to Macleod, “These are the dynamics of national debt traps which only need rising interest rates to trigger them.” In other words: it’s a ticking time bomb. Let’s hope somebody out there knows how to defuse it …
Credit: For those who fail to see the gravity of the problem facing most Americans, Egon VonGreyerz spells it out: “The US government is currently spending $7 trillion annually, but tax revenue is only $4 trillion. So there’s a net annual deficit of $3 trillion; 43% of the US budget. How can anyone believe the US can repay a current debt of $29 trillion – and rising to $50 trillion – with an annual deficit of $3 trillion, that is rising exponentially? The simple answer is: They’ll never repay it.” Agreed; they won’t, Egon. But the middle class will, via the decimated purchasing power of their dollar-denominated wealth.
Debit: Speaking of spending, spending on goods is up 46% since April of last year. Now here’s the kicker: Between December 2008 and January 2020, goods spending rose 48%. In other words, what took us 133 months to spend on goods before the pandemic, took only 18 months at nearly the same rate. Nope; no inflation there! And for those who prefer to see things in pictures, here ya go:
Debit: Then again, I guess it’s not a coincidence that consumer expenditure costs went ballistic during the exact same period when $4 trillion was printed out of thin air. Or maybe it is because – if you believe US Treasury Secretary Janet Yellen, the real culprit is high tariffs.
Debit: And now you know why the Fed said on Tuesday that it will back off of using the word “transitory” to describe inflation. As Fed Chair Jerome Powell explained, “We use ‘transitory’ to mean that it won’t leave a permanent mark in the form of higher inflation; but I think … it’s time to retire that word.” Ya think, J-Pow? Now all we need is for the Fed to admit it’s hopelessly trapped and unable to save the current fraudulent debt-based monetary system it lords over.
Debit: The Fed may be trapped, but they aren’t stupid. They know they’ve crossed the rubicon; with US tax receipts unable to cover both its spending obligations, as well as the interest on the debt, the Fed has officially lost control – and its only remaining option is to inflate its way out. As macro analyst John Titus notes, it’s a process that the Fed began back in August 2019, by directly injecting US dollars into the economy, which is directly responsible for the widespread inflation that has taken off this year. Clearly, it’s also been boosting stock prices – although some more than others …
Debit: By the way, has anybody else noticed that Microsoft CEO Satya Nadella just sold half his stock holdings in a two-day period, while Tesla founder Elon Musk recently unloaded $10 billion of the electric vehicle maker’s stock, following in the footsteps of retail king Jeff Bezos, who dumped $2 billion of his Amazon stock last month. Now … if you think that is mere coincidence, then I have some oceanfront property in Kansas to sell you. The big question is: What do they know that others don’t?
Credit: Unfortunately, corrupt money leads to a corrupt society, which explains why VonGreyerz also noted this week that we’re living in “a world which is morally and financially bankrupt – and all the king’s soldiers and all the king’s printed money will not put this Humpty Dumpty world together again.” Guys like Musk and Bezos, whose businesses directly benefitted from our corrupt monetary system, certainly know this. As for the rest of us, wealth insurance is – thankfully – still ridiculously inexpensive. Well … at least by some measures …
Last Week’s Poll Results
How much is your Christmas shopping budget this year?
- $100 – $500 (36%)
- $501 – $1000 (30%)
- More than $1000 (19%)
- Less than $100 (15%)
More than 2400 Len Penzo dot Com readers responded to last week’s question and it turns out that 2 in 3 are spending between $100 and $1000 on Christmas gifts this year. As for my household, our budget is about $750 this year.
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
By the Numbers
If you’re expecting more than a few package deliveries over during the Christmas season, you may want to know the ten worst US metropolitan areas for package theft:
10 Hartford, CT
9 Raleigh, NC
8 Greenville, SC
7 Portland, OR
6 Austin, TX
5 San Antonio, TX
4 Seattle, WA
3 Salt Lake City, UT
2 San Francisco, CA
1 Denver, CO
Useless News: Dominic’s Dad
“Today we’re going to relax a little and play a spelling game before we break up for the Christmas holidays,” said Mrs. Anand, the primary schoolteacher. “Each of you will stand up, tell us your name, what your father does, spell what your father does, and then explain it to us. All right, Jack, you can go first.”
The first boy in class stood up and said, “My name’s Jack. My father is a plumber, P-L-U-M-B-E-R, and he plumbs houses and fixes lots of clogged sinks and toilets.”
Mrs. Anand smiled and said, “That’s very good, Jack! All right … Dominic, it’s your turn.”
So Dominic stood up, with his eyes looking down at the floor. He shuffled his feet for a few seconds, then he said, “My name is Dominic. My father is a pharmacist, F-A-M … F-A-R-N … F-U-R-M …”
The teacher shook her head and said, “Dominic, I want you to go home tonight and learn how to spell pharmacist.” She then pointed at the next student and said, “OK, Bobby – you’re next.”
Bobby stood up and said, “My name’s Bobby. My old man is a bookie, B-O-O-K-I-E. And if he was here, he’d give you five-to-two odds that Dominic won’t be able to spell pharmacist by tomorrow.”
More Useless News
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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
Reader Bill had this to say after reading last week’s article highlighting 10 things that today’s middle class can no longer afford:
Social media has people foaming at the mouth to have the same or better than everyone else. I’m not in junior high school, and I don’t care what you ate for lunch.
Fair enough, Bill … then could I interest you in a few quick pics of last night’s dinner?
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: (flags) public domain; (cartoon) Investing.com
I’m the first one to comment!!! Yeah!!! I’m drinking not black coffee (finally able to stop the coffee) but drink matcha green tea soy latte , made from home! Hi Len!
Len Penzo says
Tea is good too, Dr. P!
(By the way … my peanut butter report is being pushed back to December 13th.)
Sara King says
This week I just want to remind everybody that silver and gold bullion makes a GREAT Christmas gift!
Lauren P says
Hey Sara, you’re right about that PM gift idea! We’ve given it to loved ones before, and I’d LOVE a gift like that (just lemme know if you need my address… ;o)
Sara King says
I was actually hoping a few people I know would take the hint and give me some! wink wink
Len Penzo says
I agree, Sara! That’s a great gift suggestion you’ll never see on most Internet gift guide articles!!!!
That silver price is really undervalued when you account for inflation. My inflation calculator says $50 in 1980 is equal to $167 today.
Len Penzo says
Crazy, isn’t it?
Great point Sara. A little physical silver or gold for the Holidays. The “value” of physical assets will go up. Adjust your mindset to the future fiat valuation on things.
Len Penzo says
Hey, Len! Can you explain how 5 or 6 stocks can account for such a big amount of an indexes gain?
Len Penzo says
It’s because the typical indices are the average share price of all the companies within the particular index, with each company stock in the index “weighted” based on its price per share – that is, the priciest stocks in an index are given a greater weight than those that are cheap.
As a result, moves in the most expensive stocks will affect an index disproportionately to the cheapest stocks.
RD Blakeslee says
Failing governments have historically resorted to war to keep the allegiance of their citizens.
The U.S. propaganda machine is cranking up for it:
Recent U.S. wars have been disastrous. If it happens again, against a major power like China or Russia (The current and immediate past government’s bogeyman) it’s unlikely the country will survive in anything approaching freedom and liberty.
In such times, there have always been survivors living under the radar. Hard money (PMs) has often saved the day for them.
Len Penzo says
Let’s hope cooler heads prevail, Dave.
Paul S says
I would also recommend living in, or helping develop, a tight knit community as well as keeping under the radar. It’s great knowing that if we had any problems we have a network of folks that would be at the door to help in just a few minutes. While we live rural, I am sure the same situation can exist anywhere.
Attending potlucks, local events, volunteering, (with an emphasis on listening :-), is an easy way to start the process. We have newcomers here who seamlessly fit in within a year or so and others who will never succeed or be supported. Even neighbours keep their distance.
Somebody write this down. I’m going out on a limb and saying 2022 is going to be the year the house of cards finally blows away with the wind.
You heard it here first. Book ’em Danno!
Len Penzo says
I wouldn’t be surprised if you’re correct, Cowpoke. Only time will tell!
I hear this often and do not disagree. But would like an understanding of what that means/looks like for avg household. Are we talking food shortages? Mass corporate layoffs?
Len Penzo says
Matt, when somebody is talking about a “collapsing house of cards”, I think most people are referring to a “monetary reset.” At a minimum, this will result in a sharp decline in the dollar’s purchasing power – either via the USD being sharply devalued relative to gold, or the USD losing its status as the premier world reserve currency, or both. When that occurs, those in middle class who do not hold wealth insurance will lose a great deal of their retirement savings – if not in nominal terms, in real (inflation-adjusted) terms.
Also, lower- and middle-class Americans will also experience a noticeable drop in their standard of living, as products that we used to import will suddenly become prohibitively expensive for many people. This will continue until the US begins manufacturing these products domestically; the good news is, the increasing US manufacturing base will allow the middle class to eventually regain its standard of living.
Even better, if the US returns to a monetary system backed by gold and/or silver, you can expect middle class incomes to thrive to the point where a single income will once again be able to fully support a family (as it did before the dollar’s anchor to gold was broken in 1971).
I also expect “big box” retailers will fall away in favor of localized “mom & pop” establishments again.
You quoted my comment about social media. I’m a star!
I’m glad I’m getting old. I feel sorry for all the younger people who will have to live their whole lives in the mess that is coming.
People look for someone to tell them what their itching ears want to hear. Hence all the lies in the media about the economy, government spending, and who caused it.
Len Penzo says
Thank you for all of your great comments here, Bill!