Black Coffee: Back to the Future

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?

The truth is, time travel is hard, and people are lazy.

– Margaret Petersen Haddix

Sooner or later, a gold monetary system will return with the force and inevitability of natural law, for it is the money of freedom and honesty.

– Hans Sennholz

Credits and Debits

Debit: Did you see this? What used to save you money – cash payments – now costs more, as the war on cash intensifies. A recent visitor to Yankee Stadium found this out the hard way after being forced to use a “reverse ATM” when trying to buy food from one of the baseball park’s concession stands. The man inserted $200 into the machine only to receive a debit card with $196.50 – after he was hit with a $3.50 service fee for the ‘convenience’ of going cash-free. Sounds like Utopia, doesn’t it? Oh, and speaking of convenience fees …

Debit: In other news, the insane California real estate market has been cooling down for a while now. Then there’s Silicon Valley, where the owner of a condemned house just made a small fortune selling it anyway. We get it; the sale was for the lot, not the home. But still, the modest seven bed, two bath 124-year old house – replete with an incredibly-dated interior, scuffed walls, broken doors, dated appliances and a pink tile bathroom – sold for $755,000, surpassing the $699,000 asking price. Ironically, this home was deemed “unfit for human occupancy” while cardboard shacks are allowed to remain on city sidewalks not far from there. Makes sense.

Credit: Speaking of high prices, cocoa is also selling near it recent all-time high. However, Mondelez International, which makes Oreo cookies – and lots of other sweet snacks – remains optimistic that cocoa prices will drop at some point next year despite the current weather-induced global shortage. Even better, the company reassured investors this week that, despite skyrocketing cocoa futures, it won’t raise prices on Oreos and their other chocolate-based products to protect its sales volume. So … is this a sign that better economic days are in store for all of us? Well … like everything else, it’s all depends on your perspective:

Debit: Here’s some trivia for you: Did you know that at least 46% of all American employees – roughly 62 million people – are employed by small businesses? It’s true. It’s also true that a new survey has found that 67% of small business owners are fearful about the economy as it stands today, marking a 10-point increase from sentiments two years ago. And it’s not just your everyday mom and pop stores that are struggling. Last week we went to buy a toaster oven and they gave us a bank. Then again, maybe it was just an innocent mistake …

Debit: By the way, it’s not just small business owners who have lost confidence. Sixty-five percent of middle class American households – defined as those earning $60,000 or more annually – say they are struggling financially and expect to do so for the rest of their lives, with 33% of survey respondents reporting “extreme stress” over paying their bills. Ironically, 25% of people in households with incomes above $150,000 a year also feel hard-pressed financially. Yes; that’s hard to believe. But on closer inspection, they certainly seem to be in a surly mood …

Debit: In case you’re wondering, surveys show the recent bout of declining confidence – which is at a seventh-month low – stems mostly from rising anxiety among middle-and lower-income Americans. Economists say that’s because wealthier households have a bigger financial cushion, economists note, and the surging stock market has added to their paper wealth, while Americans of lesser means have exhausted most of their pandemic savings – forcing them to rely on credit cards and what they earn from their jobs to keep up with ever-rising prices. Imagine that.

Debit: The general public aren’t the only ones who are struggling; the US federal government is too. In fact, the National Debt is on the verge of surpassing $35 trillion – and that doesn’t include more than $100 trillion in unfunded liabilities (that will most likely never be paid for). Ironically, politicians continue to argue over tax rates despite the fact that the federal budget no longer has anything to do with tax revenues, or even the amount of credit other nations are willing to extend to us. That’s because they’ve decided is easier to simply print whatever they need – which is why we have inflation.

Credit: Needless to say, it’s easy for governments to print as much currency as they wish when it’s not anchored to the physical gold in its Treasury vaults. The US dollar’s (USD) anchor was broken in 1971. And as macro analyst Michael Snyder correctly observes, since then “our leaders have been able to keep the game going by pumping trillions upon trillions of USDs into the system. But they didn’t fix anything. Instead, they just delayed the inevitable.” And now the US is so deeply engulfed in debt there is absolutely no mathematical way out. As a result, the point where the Fed lost control is in now the rear view mirror. If you don’t believe me, let’s go to the tape:

Debit: Not long after America broke the US dollar’s (USD) anchor to gold in 1971, the nation struck a deal with Saudi Arabia and other OPEC countries where oil would be traded exclusively in USDs. In return, the US provided military protection and economic support. This agreement marked the birth of the petrodollar system. Fortunately – and unfortunately – the petrodollar was also the mechanism that allowed the US to print fiat currency with impunity and greatly expand the size and scope of the federal government by exporting its burgeoning inflation – rather than foisting it upon its own citizens. A double-edged sword indeed.

Debit: But now the effects of the petrodollar’s fiscal novocaine will soon be wearing off, as the middle- and lower-class will soon discover. That’s because the petrodollar unofficially died last week when the United States-Saudi Arabian Joint Commission on Economic Cooperation agreement expired. This will almost certainly weaken the USD’s purchasing power by accelerating the trend of using alternative currencies for international trade – if not the outright end of our current fraudulent debt-based monetary system. In addition to higher prices, Americans can also expect a weaker bond market too, resulting in rising interest rates over time.

Credit: Of course, nobody should conflate the sunsetting petrodollar with the end of the world. Life will carry on – just as it always has during every other monetary system upheaval in world history. As the sagacious macro commentator Franklin Sanders pointed out this week, “BRICS countries are replacing the US dollar as the world’s reserve currency with politically-neutral gold. Remember, the dollar’s repudiation as world reserve currency is not an event, but a process. This event belongs to that process.” Indeed. And the sooner that process finishes playing out, the better. For everyone. Just don’t tell this guy …

By the Numbers

When it comes to paying for goods and services, a growing generational divide among those using cash versus electronic payments. Consumers younger than age 55 used cash for just 12% of payments in 2023, compared to 22% for those age 55 and older. Here is the percentage breakdown for all transaction payment types in 2023, regardless of age, as well as their respective percentages in 2016 – which was the last time cash was the dominant form of payment:

33% Credit (2016: 18%)

30% Debit (27%)

16% Cash (31%)

13% Wire (9%)

6% Other (8%)

2% Check (7%)

Source: Federal Reserve

The Question of the Week

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Last Week’s Poll Results

Were you born east or west of the Mississippi River?

• East (59%)
• West (41%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that 3 in 5 of you were born east of the Mississippi River. Coincidentally – or not – that roughly comports with the latest US Census data which reports that 64% of all Americans currently reside east of that mighty waterway.

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: Cheap Yardage

Walking up to a department store’s fabric counter, a pretty girl asked, “I want to buy this material for a new dress. How much does it cost?”

The male clerk behind the counter smirked and said, “That material is on special today: It’s just one kiss per yard!”

“That’s fine,” replied the girl. “I’ll take seven yards.”

So, with expectation and anticipation written all over his face, the clerk hurriedly measured out and wrapped the cloth, and then held it out teasingly. The girl grabbed the package and pointed to a little old man standing nearby. “My Grandpa will pay the bill,” she said.

(h/t: Sharon)

Buy Me a Coffee? Thank You So Much!

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More Useless News

Here are the top five articles viewed by my 48,883 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. The 10 Most Expensive Country Clubs in the US
2. 20 Easy Ways to Save $5 a Day
3. How to Buy Cheap Eyeglasses Without Compromising on Quality
4. How to Find Discount Plumbers Who Won’t Rip You Off
5. 4 Important Small Business Tax Tips

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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 me at: Len@LenPenzo.com

After reading my article discussing the ethics of found money, Cpc left the following comment on Wednesday:

The cops tell me my husband found $170,000. He says it wasn’t that much, but that after he realized what it was he was terrified that it was drug money and that the cartel would be looking for him.

Well … if the cartel isn’t looking for him, you can bet the IRS will be.

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