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.
Another busy week is crossed off the list. So without further ado, let’s get right to the commentary …
Keynes did not teach us how to perform the miracle of turning a stone into bread; instead, he taught the not-at-all miraculous procedure of eating the seed corn.
– Ludwig von Mises
Credits and Debits
Debit: Did you see this? While the average salary Americans say they need to be successful is high compared with what the average person is currently earning, the exact amount varies depending on your age. For millennials, it is $181,000; for Gen X, the figure is $212,000; and for Boomers it’s $100,000. Then there’s Gen Z – those adults between 18 and 27 – who say the annual salary they need to be successful is just a hair under $588,000. No, really. Okay … to be fair, that may be true five years from now, but today? Hardly. On the other hand, maybe Gen Z knows something we don’t …
Credit: One thing is certain: The health of the US consumer and the retail sector will come into better focus after the Black Friday sales data is released. Although initial reports are that … buyers continue to grapple with higher prices. Oh, and speaking of great shopping deals …
(h/t: @billysandytodd)
Debit: On a somewhat related note … Stop us if you’ve heard this before: A new survey has found that nearly six of 10 Americans admit that they’re behind on their retirement savings. This strongly suggests another 1 in 10 Americans are in denial.
Debit: Perhaps many Americans are having trouble saving for retirement because housing costs are, well … through the roof. On paper, owning a home is almost always more expensive than renting – about 14% more, on average, after factoring in expenses like insurance, taxes, and upkeep. But the homeownership premium is now pushing 35% over renting – that’s approaching an all-time high. Yikes! And we thought the cost of Thanksgiving dinner was high this year …
(h/t: @johnslade66)
Credit: In other news, the US weaponized the US dollar (USD) in 2022 after Russia invaded Ukraine. In the process, the Indi blog correctly observes that, “America has broken the stick and eaten the carrot. So why would anyone buy into (the USD)? The currency looks shoddy. It’s actually unclear what’s motivating anyone to follow them besides sheer inertia.” Not surprisingly, since then, roughly 3 in every 4 nations have joined China’s Belt and Road Initiative to ensure they have an alternative to the USD should the US ever turn on them. Consider it a monetary Get Out of Jail Free card for the prudent. As for the imprudent, well …
Credit: Then again, we have to wonder why most of the world’s nations didn’t start looking for an alternative to the USD sooner than they did. That’s because, as Peter Schiff reminded us this week, “With soaring deficits, soaring debt, and interest payments that can only be made by issuing a debt-based currency on which even more interest will be due, the USD can only possibly be described as an elaborate nation-state level bankster Ponzi scheme” that’s doomed to failure. Yep. It’s almost as if the world has seen this movie before. Oh, wait … it has:
Credit: Of course, the US is well aware that its exorbitant privilege for owning the world’s primary reserve currency is in serious jeopardy. That’s why sound-money advocate Judy Shelton, has proposed a innovative plan for reintroducing a gold standard for the USD that calls for issuing a Treasury bond that would be convertible into gold after 50 years. In the past, such an idea would be immediately dismissed as being unnecessary because everybody trusted “the Almighty Dollar” – but those days are long gone. And the good news is it appears that she should soon have some loyal advocates for her plan at the US Treasury …
Those who understand that gold is, first and foremost, wealth insurance are ALWAYS sitting on the sunny side of the bus. (h/t: @duediligenceguy)
Credit: So how would this 50-year gold bond work? Well … the bond would act not only act as a vehicle for legitimate gold price discovery without making drastic changes to the current monetary system, it would also effectively utilize the America’s substantial gold reserves via the issuance of extremely long-dated debt at lower interest rates. And, while not ideal, this new mechanism can be implemented without abolishing the Fed, thereby appeasing any misguided federalists in Congress who continue to insist that the US maintain its privately-owned central bank. Hey … that’s quite a trick! Then again, so is this:
Debit: Even if the gold-backed T-bond plan doesn’t pan out, we should all be thankful that if the USD ever does shit the bed, America has the largest gold reserves in the world – or so it claims. The trouble is, there hasn’t been a significant audit of the gold at Fort Knox, West Point, and the Denver Mint in more than 70 years. In the meantime, the Fed is furiously stocking up on lubricant for its printing presses. After all, they’ll be needing it very soon:
Debit: The lack of any credible audit of the US gold hoard begs the question: Why wouldn’t the US be transparent about the size of its gold cache unless it has something to hide? Despite the numerous accusations against the US Treasury that it actually has far less yellow metal than it claims, there is another plausible reason for the lack of an audit: America’s gold is very poor quality (that is, low purity and odd weighting). And that’s bad news for the USD. The good news is, it doesn’t have to be bad news for you …
Debit: The trouble with having a low-purity gold hoard is this: Even if the US has all of the gold it claims, the majority of America’s yellow metal would be rejected in international market trading. As a result, it could only be used for swapping trade-qualifying gold bars for low-purity and unusual weight US held gold bars among other central banks – assuming they’d even be interested.
Debit: Like it or not, the US is going to have to rely on its gold hoard when the USD inevitably loses its reserve currency status – no matter how little remains, or how poor its quality. With that in mind, let’s close this week with some final words from Mr. Schiff, who notes that “no amount of economic tinkering … can reverse or solve America’s (debt) problem without a major implosion that will cause terrible pain across the economy. Gold is one way to protect yourself from the fallout.” That’s why central banks still hold the yellow metal, even though they also own a printing press. So if they do, shouldn’t you too?
By the Numbers
The average credit limit decreased in 42 of the 50 states year-over-year as of June 2024, with the average decrease ranging from a low of 0.3% to a high of 15%. In fact, here are the ten states with the largest credit limit decreases, highlighting the areas where people might be currently struggling the most financially:
10 Wisconsin
9 Oregon
8 Hawaii
7 Massachusetts
6 Alaska
5 Connecticut
4 Maryland
3 Minnesota
2 Washington
1 Montana
Source: Wallet Hub
The Question of the Week
Last Week’s Poll Results
Are you staying home for Thanksgiving this year?
- Yes 65%
- No 35%
More than 1900 Len Penzo dot Com readers responded to this week’s poll and it turns out that roughly 2 in 3 of you stayed home for the Thanksgiving holiday. I’d say you also, therefore, got to relax, but anyone who is responsible for cooking the Thanksgiving dinner for a large gathering knows that the holiday can actually be the most tiring and stressful of the 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.
Useless News: The Rookie Salesman
It was the first day on the job for a young but very enthusiastic door-to-door vacuum salesman.
At his very first house, the salesman knocked on the door — and it wasn’t long before he was greeted by a very mean and tough looking lady. But before she had a chance to say anything, the eager salesman ran past her and dumped cow patties all over the living room carpet.
The salesman then said, “Ma’am, if this vacuum cleaner don’t do wonders cleaning this horrendous mess up, I’ll promise to eat every last chunk of it!”
Upon hearing that the lady smirked and said, “So … do you want ketchup on that?”
“Why do you ask?” said the salesman.
The lady replied, “Because we just moved in and we haven’t got the electricity turned on yet.”
(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
Christina wrote in after reading my post explaining why people who can’t live on $60,000 per year have nobody to blame but themselves:
Len, I have a small problem with this post.
Get in line, Christina.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message. 🙂
Photo Credit: stock photo
Always read Len P coffee post and comments with great respect for his common sense approach to personal finance, and most importantly, his take on personal responsibility for same. Which brings me to an often used quote as many of us worry about Govt debt, consumer debt, crazy expectations,and wonder where all this might end up?
“How did you go bankrupt?” “Two ways,” Mike said. “Gradually and then suddenly”. This line appears in his 1926 novel The Sun Also Rises
Time to be thoughtful in these tumultuous times. I did get a big laugh about the Gen Z survey needing over 500K per year to be wealthy. Add fifty years of living to that mindset and watch it shrink to having good health, meaningful relationships, little or no debt, and enough to get by….maybe some basic security.
I recently had to liquidate my friend’s ‘stuff’ over the last few years as he had no family to do it for him. A lifetime of collecting tools and stores went to a local high school, and boy were they glad to get it all. Trust me, none of his stuff mattered in the end. I am now in the process of dispersing his bank account to local charities as I wind down his estate. At the end of life his list of needs was down to three hots and a cot, and better health.
Black Friday sales? Crazy.
Great points, Paul. And you can never have enough tools – arguably one of the best possessions one can pass down to his family or charity.
As for Gen Z’s salary expectations … I know mine were quite high when I was just starting out too, but sheesh … $587,000 is a bit over the top!
Hi Len,
Thanks for the cuppa!
Regarding this week’s question, I’ve never had my insurance canceled but I have a friend in California who has their homeowners insurance canceled two times by two different companies because of wildfire risk (even though there was never a fire),
Have a great weekend everybody!
Sara
Hold my beer, Sara … we’ve had our homeowner’s insurance canceled by three different carriers in 28 years! I guess it is to be expected as we live on the edge of a large state park and national forest, and have endured two major wildfires in that timespan than led to evacuations.
I have more chocolate gold than real gold. But as you know Len, I have plenty of silver coins – real not chocolate!
Anybody else wonder why they don’t make chocolate silver coins?
Such are the mysteries of life, Madison.
Most depressing tweet of the bunch was the number of companies I could have invested $5k in and made a million bucks. Woulda coulda shoulda. Actually, I own a couple of them now, but I didn’t get in on the ground floor. Not even close.
No kidding. Then there are ground-floor employees who were paid in stock early on during the life of some of those companies. I have one fellow electrical engineer friend who I went through college with. He joined Cisco several years before it became a national name. Needless to say, he was able to retire many years earlier than I did!
If it makes you feel any better, there are a number of companies you could have invested in a decade ago that have gone to zero!
Indexing for the win!
I’m having a hard time seeing where issuing a government IOU, convertible to gold (that may of may not be there) in 50 years puts us back on the gold standard. Sounds like more kicking the can down the road.
You make a good point there, Ed. It would be much more credible if those bonds were much shorter in duration; say 5-years.
Us old timers might remember when we actually had to go to a store on Black Friday and shop in person. Imagine the horror! Actually, it was bad, as there were cases of trampling at Walmart and other stores when the doors opened in the morning. Injuries and a few deaths I believe. All for a deal on a big screen TV…..