Black Coffee: It’s a Tax!

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 …

Inflation is taxation without representation.

– Milton Friedman

Credits and Debits

Debit: Did you see this? The combination of inflation and higher interest rates has forced Conn’s – a 134-year-old US furniture chain – to close all 553 of its stores. Yet more evidence that our debt-fueled economy is not as healthy as government economists are telling us. Oh … and on a related note:

Debit: Needless to say, the Conn’s furniture empire isn’t the only thing being negatively impacted by inflation and rising interest rates; consumers who depend on credit to stay afloat financially are in trouble too. Credit card delinquency rates in the first quarter of 2024 rose to the highest level since 2012, when the Fed began tracking the data. In fact, the proportion of card balances that were more than 60 days past due at the end of March climbed above 2.5% – that’s more than double the lows seen during the pandemic. As a result, people are starting to get creative …

Debit: Speaking of inflation, prices are still rising, just not as fast as they have been. Yes; we know. But it’s time to quit complaining, get back to work, and pay your taxes, serfs …

Debit: In other news … if you believe the raw numbers, durable goods orders in the US have risen 8% since January 2021. Not bad, right? Wrong. After accounting for inflation, American durable goods orders have actually contracted almost 13% over the past three and a half years. So much for the booming economy narrative. Alas, printing currency can mask a lot of problems – for a while. In the end, reality always catches up with those who believe in utopia is just around the corner.

Debit: For what it’s worth, 99% of all US banks hold commercial real estate (CRE) loans in their portfolios. Curiously, it is the biggest banks that are stuck with a worrying level of non-performing loans (NPLs) in the CRE sector. And now the Fed is warning that the CRE NPL situation is expected to soon manifest itself in the form of banking failures similar to what occurred in February of last year. So how will these big banks survive? Well … this helps:

Debit: Meanwhile, the US is continuing to print $1 trillion in new currency every 100 days or so to cover its increasing debt obligations. In fact, the National Debt surpassed $35 trillion this week. Not surprisingly, this has sharply reduced foreign nations’ appetite for additional US Treasury bonds. As a result, physical gold is rapidly replacing US Treasury debt as the world’s preferred means of storing wealth – which is bad news for the US dollar (USD) and Americans’ standard of living – which has been artificially inflated for decades thanks to its role as the world’s premier reserve currency.

Debit: By the way, here’s another reason why the world is moving from T-bonds to gold: Last week the European Union transferred the equivalent of more than $1.5 billion in frozen Russian assets to Ukraine. Like it or not, global trade requires trust to function, and physical gold is an apolitical currency that is not subject to electronic confiscation by other nations.

Debit: In the meantime, the US can no longer afford to keep servicing its gargantuan debt at current interest rates – so they are strongly suggesting they’re going to start cutting interest rates this autumn. That’s great news for people looking to buy a home. The bad news is: Inflation is still running hot for many goods and commodities and dropping rates will act as more kindling for the inflation fire. And if you think that’s the craziest good-news bad-news story you’ve ever heard, then you haven’t heard this:

Credit: Add it all up and now you know why government bonds are losing status as the unquestioned go-to safe asset. In fact, Michael Hartnett, chief strategist for Bank of America is reporting that this year’s big price increase in gold is largely due to the world’s central banks, which have been selling US Treasuries (USTs) and buying gold at any price in order to be in position to participate in the BRICS gold-backed currency launch this October. Is that sneaky? Absolutely – but not as sneaky as this …

Credit: Believe it or not, despite gold’s current price level, on an inflation-adjusted basis, the yellow metal still trails its previous peaks of 1980 and 2011. That’s great news for those who still haven’t bought the yellow metal for wealth insurance.

Debit: We’ll end this week’s wrap up with this: For nearly 100 years, the US has had the exorbitant privilege of issuing the world’s reserve currency. This lifted US living standards by allowing the nation to export its inflation, while enabling it to print as many USDs as it needed in exchange for other nations’ goods and commodities without repercussions. But those days are quickly coming to an end. Over time, this will gradually become apparent to every American who holds USD-denominated assets. Got gold (or silver)?

By the Numbers

A new study reveals how student loan debt is affecting young people in the United States.

45% … of people say their monthly student loan payments are less than $200.

5% … of respondents have a monthly student loan payment of at least $1000.

30% … say they currently owe between $20,000 and $50,000 on their student loans.

8% … have a student loan debt balance of $100,000 or more.

11% … of student loan holders say they’ve never had issues making the monthly payments.

18% … of respondents say their student loan debt hasn’t postponed any major life decisions.

21% … say they’ve delayed starting a family due to student loan debt.

27% … complain that their student loan debt makes it impossible to save for retirement.

28% … say their student loan debt is delaying a home purchase.

25% … admit they’re behind on their student loan payments.

Source: Best Brokers

The Question of the Week

[poll id="547"]

Last Week’s Poll Results

Do you plan on watching the 2024 summer Olympics?

• No (79%)
• Yes; but only occasionally (17%)
• Yes; regularly (4%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that 4 in 5 of you aren’t watching this year’s summer Olympics. Why am I not surprised?

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.

Useless News: The Sausage King

A man went into a store and asked the clerk behind the counter for five pounds of Polish sausage.

The clerk looked at him and asked, “Are you Polish?”

The guy, clearly offended said, “As a matter of fact, I am — but let me ask you something. If I asked you for some Italian sausage, would you ask if I was Italian? Or, if I asked for German bratwurst, would you ask if I was German? Or if I asked you for a kosher hot dog, would you ask if I was Jewish? Or, if I asked you for a taco, would you ask if I was Mexican? Well? Would you?”

The clerk nervously looked away from the customer he so clearly offended and said, “Well … no.”

Not satisfied, the offended man decided to drive his point home. “Well, all right then!” he said. “So why would you ask me if I’m Polish simply because I asked for Polish sausage?”

The clerk said, “Because this is Macy’s.”

(h/t: Johnny J.)

Buy Me a Coffee? Thank You!

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More Useless News

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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 out to me at: Len@LenPenzo.com

After reading my article discussing sneaky pizza delivery fees, long-time Len Penzo dot Com reader and top-commenter Karen Kinnane shared this:

I always pick up our pizza! I order online, use a coupon, pay with my United credit card to get miles, and drive home with a couple of clean bath towels wrapping the box to retain the heat. If you’re not severely handicapped and want to save money, get up and get your own pizza.

Excellent advice! In fact, I’d say there’s not mushroom for improvement.

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