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 another busy weekend ahead of me, so let’s get right to this week’s commentary …
All fiat currencies always eventually return to their intrinsic value: zero.
– Voltaire
Credits and Debits
Credit: Did you see this? A diver near the coast of Sardinia, Italy, found an extensive cache of ancient bronze coins dating from the early fourth century. Even though the coins weren’t gold or silver, the discovery – which includes at least 30,000 coins based on their collective weight – will probably be worth millions of dollars anyway. Surprised? You shouldn’t be. Those bronze coins actually have intrinsic value – unlike the green confetti pretending to be money that everyone keeps in their wallets today.
Debit: Over on this side of the pond, the Social Security Administration recently released the national wage statistics for 2022 and the figures aren’t pretty; the median wage earner brought home just $40,847 last year. That breaks down to roughly $3400 per month – before taxes.
Credit: Hey … here’s some good news: Gas prices are down significantly from their summer highs. On the other hand, they’re still 21% above average for this time of year. But you probably already knew that.
Debit: Of course, there is inflation – and then there is shrinkflation. And shrinkflation is still running rampant. In fact, it’s so pervasive now that it is beginning to affect state license plates. No, really.
Debit: Not surprisingly, as inflation continues to cause many food package sizes in an effort to hide rising prices, and costs keep increasing for packages that don’t shrink, more Americans than ever turned to local food banks this Thanksgiving to get essentials for their holiday feast. Apparently, those folks are unaware that the economy is as “strong” as it has ever been. Okay … at least it is for those who equate a strong economy with sharply reduced purchasing power and the resultant lower standard of living.
(Graphic: Bloomberg)
Credit: Despite higher prices across the board, online shoppers spent $63 billion during the first three weeks of November – that’s up 5% from last year. Growth in mobile shopping is healthy too; it’s expected to reach $113 billion dollars during the November to December period – that’s up nearly 14% year-over-year. Then again, with year-over-year inflation running at least 5% then those higher sales figures are merely an economic mirage. And speaking of economic mirages …
Debit: The increase in consumer spending is welcome news – although not for the so-called big box retailers. That’s because stores such as Best Buy, Nordstrom, Macy’s, Kohl’s, and Target all saw same-store sales decline compared to last year, whereas value-oriented retailers Walmart and TJ Maxx saw low-single-digit gains. As for Lexus, it’s annual Christmas promotion continues to chug along for better – or worse …
Credit: In other news, the world continues to move away from US dollar (USD) as the central banks of China and Saudi Arabia have agreed on their first currency swap worth more than $7 billion over the next three years. Is that a lot in the grand scheme of things? No – but this won’t be the last currency swap between these two economic powerhouses. Or other global economic powers for that matter …
Debit: Meanwhile, in another blow to the USD’s status as the premier global currency reserve, the number of foreign buyers investing in US Treasuries continues its downward trajectory as interest in American debt continues to wane. This could be a real problem when one considers the federal government will need to roll over approximately $7 trillion in maturing debt, and another $2 trillion to finance the 2024 deficit. In the meantime, the Fed’s printing presses were refurbished over the long Thanksgiving weekend and are running smoother than ever, so there’s that.
(h/t: @Laughs4Liberty)
Debit: Ironically, the financial and monetary system is even worse in Argentina, where the Argentine peso is a failed currency thanks to unrestrained government spending. That’s bad. As a result, its citizens are now rejecting the peso. That’s good. In fact, most Argentine citizens today try to preserve their purchasing power by saving US dollars (USDs). That’s bad. Why? Because the fiat USD isn’t real money – it’s an IOU; fiat currency – which means the USD will eventually suffer the same fate as the Argentine peso. That’s good. Wait … on second thought, for middle class Americans without wealth insurance, that’s bad …
Debit: By the way, the Argentine government currently has 15 different exchange rates for the peso – all fake, of course – for the sole purpose of stealing from its citizens their US dollars at a fake exchange rate. That’s ba … oh, never mind. Suffice to say that its folly to expect every government – and their partners in crime, the central banks – to be as honest as the one in Washington DC. Oh, wait …
Credit: As macroeconomist Daniel Lacalle notes, after seven decades of fiscal mismanagement and unrestrained government growth, “Argentina was a rich country made poor by socialism. (So) shutting down its central bank is essential, and the country needs to have an independent regulator without the power to print currency and monetize the fiscal deficit.” Hear, hear! Thankfully, Argentina’s newly elected libertarian president has vowed to do exactly that and let his citizens decide which currencies to use for personal transactions. With that in mind, here’s a fun fact: Physical gold and silver are the only currencies that are also money.
Debit: Then again, the time is coming when even the USD will be unable to save Argentina’s economy and financial system, as the rapidly-eroding “Almighty Dollar’s” five-decade supremacy over physical gold finally comes to an end. Thankfully, there is still time to give yourself a hedge …
Last Week’s Poll Results
What is the minimum household income to be comfortably middle-class today?
- $100,000 (32%)
- $150,000 (22%)
- $75,000 (20%)
- $125,000 (17%)
- $50,000 (9%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that 2 in 5 of you believe it takes a household income somewhere between $125,000 and $150,000 to live a comfortable middle-class lifestyle. That could be a problem, considering the median wage earner in the US earned slightly less than $41,000 last 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
[poll id="513"]
By the Numbers
Using the average number of monthly Internet searches, these are the ten dog breeds that Americans most want to adopt:
10 King Charles Spaniel (Searches per 100,000 citizens: 3.55)
9 Pug (3.94)
8 Labrador Retriever (4.02)
7 Pembroke Welsh Corgi (4.15)
6 Siberian Husky (4.32)
5 Yorkshire Terrier (4.54)
4 German Shepherd (4.55)
3 Golden Retriever (4.78)
2 Beagle (4.80)
1 Chihuahua (6.01)
Source: ThePetLabCo
Useless News: Lucky Day
A frog telephoned the Psychic Hotline and was told, “You’re going to meet a beautiful young girl who will want to know everything about you.”
“Oh, my gosh! This is great news!” the frog said, barely able to control his emotions. “I can’t wait! When will I meet her? Maybe this week? And will it be at a party, or what?”
“No,” the psychic replied. “Next semester. In her biology class.”
(h/t: Susan)
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More Useless News
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(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 out to me at: Len@LenPenzo.com
Jessie shared a personal story with me about why he dislikes gift cards:
I just found a $50 gift card for Olive Garden that was given to me last Christmas … It’s now worth $24.48.
Olive Garden, huh? Frankly, Jessie … I’m not sure why you’re complaining.
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 morning, Len, and thanks for the Joe. LOVE the Universe Sign! 😀
Re: Argentina, I have a dear friend in Buenos Aries and she’s both excited and scared to see what the Milei future holds. They’re hopeful, but have been burned before going back to Peron. Just like here, they know that whatever happens, it’s going to be painful for awhile.
Meanwhile, a pound of Land O’ Lakes butter costs $8.19 here now! THAT’S $2+ per STICK!! The Amish lifestyle is looking better and better…
I made butter once. Once. It’s a lot of work when you have to do it by hand.
Spread the news. 😉
Hi, Lauren!
I too am hopeful Milei will follow through on all of his promises. He is 180 degree from the Peronists. Fingers crossed!
As for butter. My goodness … my family goes through SO much butter it is crazy. We buy it in bulk from Costco … otherwise I’d have to un-retire to pay the butter bills!
Hi Len,
Another Saturday, another tasty cuppa! I love it!
Sure seems like the pendulum is swinging back toward libertarianism. I guess people are finally getting tired of having their liberties taken away.
I just hope it’s not too late.
Have a great weekend everybody!
Sara
It’s never too late, Sara.
I heard read somewhere that there were 50,000 bronze coins found as part of that undersea treasure trove and that the find could be as much as $5 million. Can you imagine what those coins would be worth if they were silver or gold?
Okay … I’ll play. If those 50,000 coins were 11th century gold florins, the gold content alone would be worth $12 million. The toss in the historic numismatic premium and I’m sure we’re talking closer to $100 million.
Yay! Gold price broke the record on Friday for its highest price ever. Waiting now for silver to catch up!
You may not have to wait too long, Madison! Although both metals have had a nice run-up lately and are due for a perfectly normal pull-back.
People have been talking about the debt exploding since the 70s. So what will trigger it? I think it there will be some sort of economic implosion like a bank failure and then everything will snowball from there.
One possible example that could happen is if inflation starts screaming higher again. Yes, I know it’s high now, but I mean inflation like we had a year ago when prices were climbing 10% plus a month for everything and gas was $5+ a gallon. Anybody who lived through a decade of this in the 70’s knows what this feels like. I am not predicting this happening again since inflation seems to be cooling, but if it does it will be a real problem. Why? Things are already creaking a bit with interest rates that have not even reached historically average levels. But what if we have to push interest rates to 15% or 20% again? This will cause lots of problems for government and private debt holders.
First the government. If interest rates have to be pushed to 15% almost the entire budget will have to be used on just interest payments. Either major major cuts in programs will happen or major major tax increases will be required. Either way the economy will get hammered even bigger than 08.
But there is also a lot of corporate debt, and lots of those companies will go under. Combine those two things and things will get really really bad. All the knock on effects would cascade. To get a mortgage for a house the rate would be 20%. Nobody would be able to do that at current prices so house prices will crash bad. Now all those people with equity don’t and may be underwater.
Meanwhile right while that is happening joblessness would surge really high. It would be like a depression making 08 look tame.
Do I think this is likely? No. Is it possible, yes. Just look at the 70s. The difference is in the 70s the U.S. government didn’t have nearly so much debt. The debt doesn’t matter till it does. When it does, look out.
Well said!
“If interest rates have to be pushed to 15% almost the entire budget will have to be used on just interest payments. Either major major cuts in programs will happen or major major tax increases will be required.”
There’s a third option, which I believe is the most likely: They will simply print as many USDs are needed to keep the system from imploding. The result will be the middle class “paying” for all this debt via a sharply devalued USD and a lower living standard. That is why I end every Black Coffee column with a plea to consider buying a little wealth insurance – it’s the responsible thing to do.
I still don’t see that inflation has been “tamed”. I bought a 12-pack of soda this week for $ 7.00, and my state doesn’t have a food tax. At least one you see on your receipt. Time to switch to tap water which will be better for my health. Thanks Len.
My pleasure, CO2. I see no pull back in inflation either.
We are all being gaslighted by the government.