Black Coffee: Account Overdrawn

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 busy week is behind us. So with that in mind, let’s get this party started …

As long as we live beyond our means, we are destined to live beneath our means.

– Ron Paul

How can I be broke? I still have checks.

– Anonymous

Credits and Debits

Credit: Did you see this? The average monthly payment for home borrowers using a 30-year fixed rate mortgage in July was $2306 – that’s the highest based on records dating back to 2000. That’s a gain of $871 in just two years. Now tack on taxes and insurance, which averages an extra $550 per month. As Charles Hugh Smith points out, over the last 25 years, “the (Fed) has created $55 trillion out of thin air; a consequence of decades of unprecedented stimulus that gave the wealthiest households the means to bid up housing so it’s no longer affordable to the bottom 90%.” Yes. And don’t forget years of artificially-suppressed rates too.

Debit: So … just how fast have home prices been rising? Well … it turns out that 51% of homeowners who purchased in July are paying $2000 or more a month – that’s up from 18% just two years ago. Yikes. Additionally, 23% of new homeowners had payments of more than $3000, up from 5% in 2021. Thanks again, Fed. It makes me wonder if our central bankers have been getting lessons on how to be “helpful” from our four-legged friend here …

Debit: By the way, low- and middle-income earners have been especially hit hard by soaring prices on everything from rent, groceries, and new and used cars despite the Fed’s attempts to tamp down stubbornly-high inflation. In fact, the squeeze is so tight that Americans are defaulting on their credit card and auto loans at levels not seen since the Great Financial Crisis – or the Dot Com Bubble. Or the COVID pandemic. This year, credit card delinquencies have hit 3.8%, while 3.6% have defaulted on their car loans – both figures are the highest in more than a decade. Then again, I suspect most of that financial trouble is self-inflicted.

Debit: Not coincidentally, with inflation continuing to be a problem here in the US, the government announced this week that it is changing the Consumer Price Index (CPI) health insurance methodology. The new calculation goes into effect next month, and you can bet it will understate the inflation rate for healthcare – just like every other inflation methodology change since 1980 effectively understates actual price increases in America. As for the next product in line to get an inflation-methodology change, we’re betting on orange juice:

Debit: The conventional wisdom was that inflation was slowly returning to the Fed’s old 2% target. However, government data released this week shows that CPI is climbing again; rising 0.6% from July to August. That pushed the year-over-year inflation rate back up – from 3.2% to 3.7%. That’s also the biggest monthly inflation increase in 15 months – and that is based on the government’s deeply-massaged data, which is why credible economists call it the “CP Lie.” When measuring inflation by the original CPI methodology from 1980, annual inflation is actually closer to 12% – as anyone who shops for almost anything will attest.

Debit: Believe it or not, America’s corrupt CPI data doesn’t hold a candle to the shenanigans going on in Argentina, which has been overrun by socialism and endemic political graft since the 1950s. The corruption is so corrosive that economists say roughly 20% of all Argentine expenditures are devoted to cronyism and political spending. Then again, that’s all but inevitable when at least 55% of the Argentine workforce is comprised of government bureaucrats and other paper pushers. I say “at least” because that figure is from 2020; the odds are it is certainly even higher than that now.

Debit: In fact, the Argentine peso has been so badly debauched by runaway government spending and political corruption that restaurants there give diners a discount of up to 30% if they pay with cash. Those restaurant owners have figured out that they’ll lose at least that much by the time the banks finally get around to depositing the pesos that they’re owed from their customer credit card bills. Pro tip: Restaurants also try to keep costs down by buying in bulk. After all, it’s a tried-and-true way to maximize revenue. Well … it is for restaurant owners who remember to rotate their stock.

Debit: Speaking of runaway government spending and the resulting inflation, I see the US Treasury released another report last week warning that interest payments on the National Debt will exceed the combined costs of Medicaid, SNAP (food stamps), and Supplemental Security Income (SSI) before the end of this year. It’s almost as if they’re actually starting to get concerned about runaway federal-government spending. No; you’re not losing your mind … I said “almost.”

Debit: Unfortunately, our debt-based monetary system has been mathematically doomed ever since the US dollar’s (USD) anchor to gold was broken in 1971. And now we are quickly approaching that point where exponentially-growing debt levels can no longer be serviced through economic growth alone – that’s a feature of our corrupt monetary system, not a bug. As a result, authorities can only prevent the system from destroying itself in a deflationary implosion by increasing debt and printing currency at an ever-increasing pace – which will also destroy the system. Until then, the monetary system will continue doing this: (h/t: @alifarhat79) 

Debit: Of course, you can’t print USDs out of thin air, send them into the economy, and then call that “economic growth” and innovation. Yes; the strategy has been working for more than 50 years – but it turns out that producers despise getting nothing for something – which is why that grift will be ending soon. The USD scam is also why down is up, and black is white in today’s fraudulent world. But what else should one expect when the “money” we’re forced to use when conducting business, paying bills, submitting our taxes, and running the economy isn’t money at all – but an IOU? Yes; it’s an outrage. But just one of many these days …

Credit: So how can we get out of the collective mess that we’re currently facing? Well … not surprisingly, Ron Paul says, “It will take a shock-like the rejection of the dollar’s reserve currency status and the resulting dollar crisis to force the US government and the American people to kick their addictions to spending and fiat currency. This will mean tough times ahead.” Yes; especially for those who aren’t hedged with physical gold. “The good news,” Paul says, “is the crisis could lead to (smaller) government, and a true free-market monetary system.” Indeed. Let’s just hope those in charge come to their senses and make the necessary changes before everything unravels – not after.

By the Numbers

The release of each new iPhone model is always a big event for Apple. Although a recent survey shows that, with inflation continuing to put a strain on people’s wallets, buying the new iPhone 15 could be a tough decision for most American consumers. Here’s why:

75% … think the new iPhone 15 is overrated.

40% … say they plan on purchasing the new iPhone 15 this year anyway.

21% … categorize someone who always has the newest iPhone as “rich.”

33% … consider someone who always has the newest iPhone as “wasteful.”

80% … say buying a new iPhone is not worth going into debt.

40% … think it’s better to buy a cell phone in installments.

33% … say their iPhone is their most important possession.

16% … think not having the latest iPhone is a sign of someone who is struggling financially.

Source: WalletHub

Last Week’s Poll Result

How old is your smartphone?

• More than 3 years old (40%)
• 1 to 3 years old (39%)
• Less than a year old (12%)
• I don’t have a smartphone (9%)

More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that 2 in 5 of you have a smartphone that is more than three years old. Count me in that group; my iPhone 8+ is almost six years old – and still going strong.

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.

The Question of the Week

[poll id="492"]

Useless News: Ribbiting Request

A little boy kept pestering his Grandpa, “Make a sound like a frog. Make a sound like a frog!”

After several hours of this, Grandpa finally asked his grandson, “Why on earth do you want me to make a sound like a frog?”

The boy replied, “Because I heard Mom and Dad talking. They said that as soon as you croak, we can go to Florida!”

(h/t: Kerri L.)

More Useless News

Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. Ontario (2.22 pages/visit)
2. Prince Edward Island (2.12)
3. Manitoba (1.91)
4. Alberta (1.72)
5. Quebec (1.69)

9. Saskatchewan (1.50)
10. Newfoundland & Labrador (1.44)
11. New Brunswick (1.40)
12. Nova Scotia (1.37)
13. British Columbia (1.31)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Ontario, eh) — or not (ahem, you hosers living on the frozen British Columbia tundra) — please don’t forget to:

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Thank you so much!!!! 😊

(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 me at: Len@LenPenzo.com

After reading my article explaining why smart people aren’t impressed by people who drive luxury cars, a clearly offended person named Z left this comment:

Every crappy Honda or Hyundai driver loves saying how much money they are saving blah blah blah. I drive a BMW because I go to 60 in 4.4 seconds. Do you have any idea the feeling?

Nope; my lowly Honda only does 0 to 60 in 5.5 seconds — but I can honestly say if I die tomorrow I’ll have no regrets about the 1.1 seconds I could have saved off the line at every stoplight.

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: stock photo