Black Coffee: Cutting Out the Middle Man

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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?

If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good also. The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond plus an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way.

– Thomas Edison

Credits and Debits

Debit: Did you see this? The BRICS trading bloc wrapped up its annual summit this week in South Africa with many observers and talking heads predicting that a new currency with an anchor to gold would be unveiled to challenge the US dollar (USD). Well … that didn’t happen. But there’s no room for “Almighty Dollar” proponents to be smug, as it was announced that Saudi Arabia, Iran and the UAE will officially join the BRICS at the end of this year, thereby giving the economic bloc four of the world’s six largest oil producers (including Russia) and effectively killing the petrodollar in the process.

Credit: In other news, I see that Fidelity recently analyzed the balances of its 45 million retirement savings accounts and found that 378,000 people with Fidelity 401(k) plans had at least $1 million in their accounts at the end of June – that’s up 25% from the same time last year. And the number of individual retirement account (IRA) millionaires also grew by roughly the same amount over the same period, with 349,104 at the end of June. Hooray! Then again …

Credit: By the way, the total contribution rate – which combines employee and employer contributions – for the second quarter was 14%, in line with the generally-accepted 15% recommendation that many experts advise. That being said, a seven-figure balance is far from the norm. Overall, the average 401(k) balance today is just $112,400, while the average IRA balance is $113,800. No doubt those averages are skewed by extremely high and low balances at both ends of the spectrum, which is why it’s often more enlightening to look at median balances – that is, the middle value of all the samples in a given set:

Debit: That being said, there are far more Americans who can only wish they had any retirement savings at all, as evidenced by rising retail theft, organized crime, and vendor fraud. In fact, so-called “inventory shrink” was a $100 billion problem for stores in 2021 – that’s more than double the what it was in 2015 when the total was $45 billion. And based on last week’s earning calls from Home Depot, Target, Walmart, and other large retailers, the problem is only getting worse. How bad is it? As one example, Target complained that they lost $400 million in the past year to crime. And it’s not just retailers; crime is affecting the fast food joints too:

Debit: Then again, it’s hard to save for retirement when inflation is taking a big bite out of consumers’ disposable income, as evidenced by the ever-rising cost of a meal at Taco Bell – or a humble can of Campbell’s soup. But wait, it gets worse: Campbell’s soup – along with every other food item than come in cans – are expected to get even more expensive as newly-imposed tariffs on can metals could result in canned food prices rising another 30% soon. Imagine that.

Debit: Needless to say, it’s easy to see how the new tariffs will put more pressure on both inflation and credit card delinquency rates; last quarter delinquencies rose from 6.5% to 7.2%. This marks the highest rate since 2012. At the same time, the average credit card interest rate is now hovering near 21%, which is not far from the all-time high. As for those who insist that everything is fine as long as wages can keep pace with inflation, this excerpt from an old Fed comic book – no, really – suggests you should think again:

Debit: Meanwhile, Moody’s announced a ratings downgrade for ten different US banks last week, due to higher funding costs, potential regulatory capital weaknesses, and increasing risks associated with commercial real estate. Moody’s has also issued a warning that further downgrades may be on the horizon. The good news is: more taxes will fix this. Oh, wait …

Credit: So why do we find ourselves in this financial morass? Well … as macro commentator Charles Hugh Smith reminded us this week, “Flooding failing systems with trillions in borrowed money doesn’t actually solve problems, it makes them worse; much worse. (Instead) insiders are incentivized not to fix the problems but to skim the ‘free money’ and keep the problem active, so that ‘free money’ keeps flowing.” Uh huh. Kinda like this:

Credit: The best macroeconomist in the world is arguably Daniel Oliver of Myrmikan Research. This week he used historical economic data stretching all the way back to 1873 to illustrate why government attempts to meddle with the free market usually cause more harm than if they had done nothing at all. Never mind that the harm became magnified after 1913 with the introduction of a debt-based monetary system exclusively controlled by a cartel of private bankers – and then magnified again after that monetary system’s anchor to gold was broken.

Credit: Of course, I’m not surprised that sagacious macro commentator Franklin Sanders read Mr. Oliver’s report too. He sums it up this way: “Raising interest rates and ballooning the money supply has never worked and won’t now; it always ends in a depression. The result is always, two years to bust. Clock is ticking loudly on the Fed’s campaign that started in March 2022. It’s NOT different this time; it never is.” In the meantime, the federal government continues to spend like drunken sailors. Which really isn’t fair to those sailors, since the money they spend was legitimately earned with their hard-earned labor.

Credit: It’s not a coincidence that Thomas Edison and Henry Ford – two of America’s most industrious citizens – both understood that it made absolutely zero sense for the federal government to pay interest to a private banking cartel for the use of its own money – especially when the US Constitution permits the US Treasury via Congress to issue those same dollars without interest. So why not cut out the parasitical banking-cartel middleman by returning to a monetary system where the USD is issued into existence for free, rather than borrowed into existence with an interest expense? Yes, that seems like a pipe dream … but just play along.

Credit: According to banking consultant Patrick Barron, while the USD has been the world’s monetary top-dog for 80 years, its reign is in jeopardy, noting that if the yellow metal ever becomes “the focal point of the BRICS’ monetary reforms, the US will start losing friends until it too reluctantly regains its senses and returns to gold, honest dealing, and respectful statesmanship. America will need new leaders for this task; they’re there, waiting to be called by the people – and the US and the world will be a much better place as a result.” Amen. Regardless, a monetary system upheaval of some kind is on the horizon. The math will see to that.

By the Numbers

A recent study analyzed the tuition and required fees for full-time four-year courses for every public US college. Here is a breakdown of the top ten most expensive college tuitions for in-state students:

$18,016 New Jersey Institute of Technology

$18,524 University of Connecticut

$18,898 Pennsylvania State University

$18,962 University of New Hampshire

$19,002 University of Vermont

$19,244 University of Virginia

$19,538 Colorado School of Mines

$19,670 Virginia Military Institute

$20,362 University of Pittsburgh

$23,812 William & Mary

Source: DegreeChoices.com

The Question of the Week

[poll id="489"]

Last Week’s Poll Results

How many keys are on your key ring?

• 6 or more (31%)
• 3 (22%)
• 2 (14%)
• 1 (13%)
• 4 (13%)
• 5 (8%)

More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that roughly 1 in 4 of you have a key ring that carries just one or two keys. At the other end of the spectrum, nearly 1 in 3 carry around at least six keys with them. Put me in the latter group. Thankfully, I can still tell you what each of those keys is for.

If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.

Useless News: Have a Heart

A wealthy man who was having heart trouble went to the doctor to see what his options were. Naturally, the doctor recommended a heart transplant to his patient.

So the man reluctantly agreed, and asked if there were any hearts immediately available, since money was no object.

“I currently have three hearts ready for transplanting,” said the doctor. “The first is from an 18-year old kid, non-smoker, athletic, swimmer, with a great diet; he hit his head on the swimming pool and died. It’s $100,000. The second heart is from a marathon runner, 25-years-old, great condition, very strong; he got hit by a bus. It’s $150,000. The third is from a heavy drinker, cigar smoker, and steak lover. It’s $500,000.”

“Hey, why is that heart so expensive? He lived a terrible life!” asked the patient.

“That’s true,” said the doctor, “but it’s from a lawyer — so it’s never been used.”

(h/t: Sam I Am)

More Useless News

Here are the top five articles viewed by my 46,547 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. My 15th Annual Cost Survey of 10 Popular Brown Bag Sandwiches
2. How to Fix Your Finances Without More Money
3. How Intentional Obsolescence Is Robbing You Blind
4. What the Producers of House Hunters Will Never Ever Tell You
5. The Definitive Homebuyer’s Guide to Mortgage Junk Fees

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(The Best of) Letters, I Get Letters

After reading this piece on concierge doctors, Shorty Love left a long rant which included this:

“Once again the rich get to be healthy and kill off the poor! Just another way to get around Obamacare … What ever happened to the hypocritical [sic] oath?”

Based on what I can see, Shorty, the hypocritical oath is alive and well.

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