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 everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …
I’d rather get bad news from an honest man than lies from a flatterer.
– Ursula K. Le Guin
Credits and Debits
Debit: Did you see this? The global food index, which tracks monthly changes in the international prices of globally-traded food commodities rose 1.3% last month. That’s the biggest increase in almost two years and a sign that higher food prices aren’t going away anytime soon. The latest price increase was driven by a 12% jump in vegetable oil. Among the major grains, rice prices have been hit especially hard – they’re up 20% this year. That being said, with the food inflation we’ve already experienced, I wonder if anybody even notices. As for America’s UPS drivers, they no longer care …
Debit: Economic headwinds may not be affecting UPS drivers, but they are affecting banks, as evidenced by the fact that, with two exceptions, they’re lending less money to both struggling consumers and businesses. The two exceptions: home loans and credit cards. Imagine that.
Debit: Speaking of struggling consumers, a typical American household now carries $10,000 in credit card debt – that’s an all-time high. Now consider this: At $250 per month, with 24% interest, you’ll be making payments until 2030. You’ll also spend a total of $20,318 in the process. That’s twice what you owed – and that assumes you never use the card again. Overall, Americans’ card debt stands $1 trillion – that’s up 33% in just two years. Yes; it seems inconceivable that so many Americans would rather run up debt than live within their means. But here we are. I wonder if that’s because they’re just getting a lot of bad advice …
Credit: I know … the economy is supposed to be booming. At least if you believe the headline data that is continually being touted by the mainstream media month-in and month-out. However, as macroeconomist Jeff Snider observes, since the start of the year, the Bureau of Lying Labor Statistics has quietly revised the employment figures in every single month of 2023, thereby erasing a quarter-million previously-claimed “new jobs” in the process. Obviously, those downward revisions are completely ignored by a complicit media. Oh … and speaking of complicity:
Debit: On a related note, I see that America’s public debt-to-GDP ratio is set to reach a record 134% by 2027. You can thank the sharp rise in interest rates that is increasing debt servicing costs. The cost to service the debt stood at $475 billion last year and it’s projected to reach $1 trillion by early next year. Yes; the government’s fiscal policy that has led to the enormous debt load makes absolutely zero sense. Then again, neither does this:
Debit: Unfortunately, America’s skyrocketing federal debt is occurring at the same time US tax revenue is experiencing its second-largest annual decline ever. Curiously, that’s in an economy that we’re told is supposedly growing at 2.4%. You can’t make this stuff up. Oh, wait … they did. Welcome to the world of government math. Want more examples? Okay … how about these:
Debit: Needless to say, all of that debt puts pressure on US Treasury bonds, as lenders demand higher yields to take on the resulting additional risk that comes with the fiscally-absurd debt burden. Never mind that those higher bond yields also raise the cost of servicing America’s $32 trillion – and climbing – National Debt. In fact, interest on the federal debt is projected to total almost $11 trillion over the next 10 years. And that’s assuming interest rates don’t rise even higher over the same period. As for those of you wondering if there’s any good economic news coming out of Washington DC, the answer is: Absolutely!
Debit: Meanwhile, both struggling banks and the Fed are reducing their Treasury holdings, while foreigners now collectively own about $5 trillion less USTs – about 10% – than they did in 2021. At the same time the so-called “Treasury put” means large fiscal deficits are soon to become entrenched. That means inflation is likely to get worse over time. Even if they are changing definitions again …
Debit: So …. if you add it all up, it quickly becomes apparent that yield curve control (YCC) will eventually be employed by the Fed to try and control rates in order to keep debt service costs manageable. When this begins, long rates will be capped. But that will result in sharply-negative real interest rates as nominal rates are held below the actual inflation rate. In other words: the Fed’s plan won’t solve anything. But, hey … when it comes to the Fed, that’s par for the course. And if you don’t believe me, here’s a guy who has learned everything he knows from the Fed about how to fix serious problems …
Credit: Of course, the ever-increasing debt is a feature of our fraudulent debt-based fiat monetary system – not a bug. Maybe that’s why central banks have bought a staggering $70 billion of gold last year; that’s the most since 1950.
Credit: By the way, all that central bank gold-buying prompted sagacious macroeconomic commentator Franklin Sanders to ask – and answer – this very good question: “If gold is good for central banks, why isn’t it good for us? Answer: It is.” Amen, brother. Ain’t no jive talkin’ there. Er … unlike here:
Debit: Here’s what governments and their central bank enablers don’t want you to know: When the USD’s anchor to gold was broken in 1971, the yellow metal was $43 per troy ounce on the open market. Today, the current market price of gold is approximately $1950, which means the yellow metal has returned 7.6% per annum for 50 years. Put another way: The USD has lost almost 98% of its value against gold since 1971 – and it should lose lose the remainder over the next few years. Just remember: Losing that final 2% is going to be extremely painful for those who fail to hedge their dollars and USD-denominated assets with gold.
By the Numbers
According to the Department of Education, total outstanding college-loan balances is nearly $1.7 trillion. That comes out to an average of more than $37,000 for each of the 44 million borrowers. That being said, not all states are equal when it comes to the burden of student loans. Here are the states whose residents carry the most – and least – average student debt load:
50 Utah (lowest debt load)
49 New Mexico
48 California
47 Nevada
46 Wyoming
5 Connecticut
4 Rhode Island
3 Pennsylvania
2 Delaware
1 New Hampshire (highest debt load)
Source: WalletHub
The Question of the Week
[poll id=”487″]
Last Week’s Poll Result
How long has it been since your last traffic ticket?
- More than 15 years (44%)
- 6 to 10 years (17%)
- I’ve never been caught! (14%)
- 11 to 15 years (12%)
- 1 to 5 years (12%)
- Less than a year (1%)
More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that roughly 1 in 8 of you have received a traffic ticket within the last five years. As for yours truly, it’s been about 13 years since my last ticket; it was an illegal left turn. In fact, my last two tickets have been for illegal left turns. Even so, the fine is just as expensive as a speeding ticket. Oh, well …
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.
Useless News: Tip of the Day
(h/t: Susan)
More Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Kentucky (2.29 pages/visit)
2. New Hampshire (2.28)
3. South Carolina (2.26)
4. Pennsylvania (2.23)
5. Kansas (2.21)
46. Nebraska (1.41)
47. Minnesota (1.40)
48. Oregon (1.38)
49. Virginia (1.33)
50. Iowa (1.27)
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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
This week I heard from Taylor, who left this comment after reading my article on what you need to know before choosing a concrete contractor:
Thanks for the great tips. My driveway is kind of old and lumpy, so I’ve been thinking it may be nice to replace it.
Your driveway sounds a lot like my mattress.
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
I’m Len Penzo and I approved this message.
Photo Credit: public domain
Good round up, as usual. I think falling tax revenue tells the story, Len. The “economy is booming” crowd has no explanation for it.
Yes, Sam; you would think tax revenues would be higher if there are more people working. What I wonder is this: If tax revenues are falling now, how much lower are they going to be when the economy really falls off the cliff?
Hi Len,
“Rich people stay rich living like they’re broke. Poor people stay poor living like they’re rich.” So true!
I’m going to be using that saying a lot.
Have a great weekend everybody!
Sara
Thanks, Sara!
I have a few dogs for sale if anybody is interested. 😉
I bet you do.
The case for booming economy is the stock market has been on a tear. Nasdaq up 40%+ in 2023.
I understand your point, and it is a good one. Although the fact that we use the stock market as a barometer of the economy seems specious these days. Especially in an environment where central banks are printing so much money; that cash has to go somewhere and a lot of it ends up in stocks. So is a rising stock market the sign of a healthy economy, or one that is being propped up by money printing?
New deal means UPS drivers will get $170k per year. I know that’s total compensation, but still a pretty good deal for driving a delivery truck that can only make right hand turns.
Yep. I saw one report that the top pay rate is $40 per hour; the rest is other compensation. Not sure if that is true or not. Still … that’s pretty decent pay for driving a UPS truck.
Hi Len, thanks for the cuppa. Question: We have interest rate increases for mortgages, credit cards, loans, etc., so how long before interest increases apply to SAVINGS accounts? Seems like it’s taking forever.
Lauren,
Regarding savings rates: most banks or credit unions are offering ‘high yield” CDs in excess of 5%. My “cash management” account at a major investment site is currently yielding 2.25%. I know of at least 3 banks that “high yield” savings. Just google “high yield savings” or go to credit union websites to find the rates.
Hi, Lauren! The banks can’t afford to pay the higher interest rates – so I suspect it will be a long long time, if ever. If you want higher interest rates on your savings, put your cash in T-bills. I’ve been putting all of my cash savings in them since late last year and the rates have been steadily creeping up over time. Even an 8-week bill is paying 5.4% right now. And as an added bonus – those T-bills are safer than money placed in a bank or credit union, and the interest earned is exempt from state taxes. So it’s a win-win-win.
By the way, I’ve laddered my T-bills so that one matures every four weeks (that way I always have access to a portion of my cash).
Buy them at treasurydirect.gov
Great info! Thanks, Len.
mp2c, thanks for the info re: high yield accts. my 2 credit unions currently offer only 1.5% on money market accts. May need to consider short term CDs.
Len, I know you’ve mentioned T-bills before, and they seem as ‘solid’ as anything else right now (short of PMs.) Trying to educate myself about them; a whole different animal than bonds! 🙂
Deposits at small town brick and motor banks continue to flow to large Money Market funds, investing in short term Tbills. Long term Tbonds definitely depressed. Still working to put 10 percent into physical PM. Thanks for the Cuppa.
Hi, CO2. You are right on all counts. While I advocate short-term T-bills for savings, I would never put my cash in long-term T-bonds or T-notes; too much risk in my opinion.
For those wondering what difference is between T-bills, T-notes, and T-bonds … it all depends on their duration: T-bills are one year or less duration; T-notes are 2-years to 10-years duration; and T-bonds are more than 10-years duration.
Hi, Len. Coincidence aside (my name is Leonard [Len]); I read what you had to say about them and began investing in Treasury about seventeen months ago. I hit the max, $20G with about the same in my credit union. Returns? Credit union = $3.00. Three freakin’ dollars! Treasury = $960. How’s that saying go; the proof’s in the pudding? Sure, if the pudding’s a + sign on your balance sheet!
What a great name! And I am happy you are reaping some interest on your cash!
To be clear … that annual deposit limit is for a special type of Treasury called “I-bonds” (I for “inflation-protected”). There is no limit on the number or amount of T-bills you can own.
I’ve always wondered about the credit card stats. Does the total cc debt include those who pay off their cc’s each month? I charge everything, so I (and those like me who pay off their cc’s monthly) would add substantially to the cc debt grand total, but then this total would not truly reflect “bad” cc use (rolling cc debt over month to month). Not always a bad thing, but most of the time it is, which I assume the stat is implying.
Hi, Frank. I think it is only balances that carry over from month to month.