Black Coffee: You Have Two Cows …

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?

Capitalism: If you have two cows, you sell one and buy a bull.
Socialism: If you have two cows, the Government takes one and gives it to your neighbor.
Communism: If you have two cows, the Government takes both and then gives you some milk.

– Anonymous

The problem with socialism is that you eventually run out of other people’s money.

– Margaret Thatcher

If you put government in charge of the Sahara Desert, in five years there’d be a shortage of sand.

– Milton Friedman

Credits and Debits

Debit: Did you see this? It’s no secret that credit card debt being racked up by struggling Americans is at record levels. This, in turn, has increased the popularity of buy-now-pay-later (BNPL) programs. In fact, last week we discussed the large number of six-figure households who admit that they plan on missing at least one BNPL payment next month. Now for the punchline: BNPL credit isn’t tracked as part of the overall consumer debt calculation. So consumers are far deeper in debt than the “official” figures indicate. How bad is it? Well … if this is any indication, pretty bad:

Debit: Speaking of socialism … last year the Cuban government put its “cashless society” campaign into overdrive by making credit cards and/or digital currency mandatory for purchases of food, fuel and other basic goods. Predictably, many Cuban businesses ignore that inane edict and demand cash anyway – so cash is more precious than ever. Ironically, that has created another problem for the socialist paradise: a cash crunch. In 2018, 50% of all cash was held by Cuba’s productive working population; the other half was held by Cuban banks. But by 2022 just 30% of the island’s available cash was in the banking system – a figure that’s almost certainly even lower today.

Debit: By the way, if you believe the Cuban government – I know, but just play along – the island’s inflation rate “officially” stood at 77% in 2021 before falling to “only” 31% last year. Needless to say, those figures don’t reflect the Cuban public’s reality, with longer-term price inflation on the street reaching triple digits. For example, a carton of eggs, which sold for 300 Cuban pesos in 2019, sells for about 3100 pesos today. Keep in mind that Cubans who are fortunate enough to have a government job earn 6000 Cuban pesos per month. Hey … but they have “free” healthcare! Meanwhile, back here in America …

Debit: Pivoting to the other side of the world, it’s no secret that China and other BRICS countries have been offloading US treasuries worth billions since 2022. And last week China dumped a record number of US treasuries and agency debt bonds worth a staggering $53 billion. Historically, this is the largest sell-off initiated by China ever recorded. Hmmm. If we didn’t know better, it looks like the Middle Kingdom may finally be on to something …

 

Credit: Obviously, China and rest of the BRICS have known for sometime what financial “experts” in the US haven’t – at least until recently. Goldman Sachs CEO David M. Solomon is the latest business leader to sound the alarm on America’s deficit spending. Last week he opined, “I think the level of debt and spending in the US is something that we need a sharper focus on.” The investment banking chief also warns that if something isn’t done to rein it the spending, it could create problems. The good news is, we’ve been told that all our debt problems can be wiped away with the stroke of a pen. Er … or at least it can in Fantasyland:

Debit: On the other hand, massive deficits aren’t unique to the US, as evidenced by the fact that the global debt-to-GDP ratio is again at an all-time high. In fact, some of the largest debt-to-GDP ratio increases this year coming from the likes of China, India, Brazil, and Mexico. In other words: It looks like central bank printing-press buildings around the world are going to need a lot more regulatory signs …

Credit: Annual interest on our national debt is set to hit $1 trillion by year’s end. For those who are paying attention, it has become blatantly obvious that the US is now monetizing its debt. Indeed, as macro analyst Matthew Piepenburg observed this week, “the world is catching on to the blunt fact that the American empire is fatally spending more than it earns. However, it is far more sickening that Uncle Sam is paying its IOUs with debased US dollars (USD) that are literally mouse-clicked into existence.” And yet, there are those who are still buying supposedly “risk free” 30-year Treasury-bonds that pay less than 4.5% annually. You know the type …

Debit: Of course, history tells us that as sure as the sun always sets in the west, all debt-soaked spendthrift nations eventually try to buy time in a desperate attempt to save their currency by monetizing their debt – even though that policy leads to debilitating inflation that decimates the living standard of the middle- and lower-classes. So no one should be surprised that the US is doing this now. Just as nobody should be surprised when the USD’s stewards eventually fail in saving its global reserve status, destroying the USD’s purchasing power in the process. Even so, you can bet the media will be the first to claim that “nobody could see it coming.”

Credit: So how did we get here? Well … as my fellow redneck tin-foil-hatter, James Howard Kunstler, pointed out this week, “A system based on credit is one thing, when credit can plausibly be paid back – but that system is gone. The truth is that our debts are not payable and everybody knows it. Fugazi finance is finally hitting the wall it has been seeking. Wealth based on pretense eventually runs out of hallucinatory mojo.” With that in mind, let’s revisit this all-time classic – from a time not that long ago – when the financial world’s hallucinatory mojo was still as strong as a garlic milkshake. Unlike today.

Debit: Kunstler goes on to point out that, “zooming gold and silver prices signal that the USD is in distress; the eagle is flying upside down. The consequences await. Any way you slice that – bond market blow-up, raging inflation, bank failures, stocks cratering, a ‘great taking’ of collateral (your property) – the effect is the same: a crashing standard of living.”  In the meantime …

Credit: While there is no telling which consequences our debt-soaked spendthrift nation will eventually be subjected to – if any, assuming you believe the Magic Money Tree “scholars” – the good news is there is still time to hedge yourself by protecting your hard-earned nest egg and daily purchasing power from a currency crisis with physical precious metals. Or you can simply continue putting faith in the same ideologues who have managed a 98% decline in the USD’s purchasing power since 1913. The choice is up to you.

By the Numbers

A new study determined which car dealerships actually earn the title for pushiest in America by analyzing more than 40,000 Google reviews for nearly 7000 dealerships in 100 cities. It turns out that Volvo salesmen are the least pushy. At the other end of the spectrum, here are the 10 pushiest dealerships by car brand:

10 Honda

9 Dodge

8 Toyota

7 GMC

6 Nissan

5 Hyundai

4 Mazda

3 Chrysler

2 Kia

1 Fiat

Source: TintingChicago

The Question of the Week

[poll id="537"]

Last Week’s Poll Results

French toast, pancakes or waffles?

• Waffles (39%)
• French toast (32%)
• Pancakes (29%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that, when it comes to breakfast batter, almost 2 in 5 of you prefer waffles over French toast or flapjacks. I prefer French toast … but I will say that waffles are a close second as they tend to hold better under the syrup.

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: Taxi Ride

A woman and her 12-year-old son were riding in a big-city taxi through a seedy part of town. It was raining and all the prostitutes were standing under awnings.

“Mom,” said the boy, “what are all those women doing?”

“They’re waiting for their husbands to get off work,” she replied

The taxi driver turns around and says, “Geez lady, why don’t you tell him the truth? They’re hookers, boy! They have sex with men for money.”

The little boy’s eyes get wide and he says, “Is that true, Mom?”

His mother, glaring hard at the driver, answers “Yes.”

After a few minutes, the kid asks, “Mom, if those women have babies, what happens to them?”

She said, “Most of them become taxi drivers.”

(h/t: Gary H.)

Buy Me a Coffee? Thank You So Much!

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More Useless News

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1. Gas or Charcoal Grills: Which Is More Cost Effective?
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3. How to Find a Discount Plumber Who Won’t Rip You Off
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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 me at: Len@LenPenzo.com

After reading my article on how to find a reputable low cost pest control company, Gerri in Bangladesh — no, really — shared this:

Me and my boyfriend moved into our new apartment and we wanted to make sure that there were no pests in it. Unfortunately, we found out it has fleas infested with bubonic plague.

Call me a cynic, but something tells me you don’t really live in Bangladesh. Los Angeles, maybe; but Bangladesh … nope.

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