{"id":43900,"date":"2017-07-15T05:15:38","date_gmt":"2017-07-15T12:15:38","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=43900"},"modified":"2017-07-18T06:04:37","modified_gmt":"2017-07-18T13:04:37","slug":"black-coffee-15-july-2017","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id43900-black-coffee-15-july-2017.html","title":{"rendered":"Black Coffee: The Beatings Will Continue Until Morale Improves"},"content":{"rendered":"

\"\"It’s time to sit back, relax and enjoy a little joe<\/em> …<\/p>\n

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.<\/p>\n

Let’s dive right in this week, shall we? Here we go …<\/p>\n

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy. Its inherent virtue is the equal sharing of misery.”<\/em><\/p><\/blockquote>\n

— Winston Churchill<\/strong><\/p>\n

“One and one is eleven. Two and two is twenty-two. Won’t somebody kindly tell me, what the government is trying to do?”<\/em><\/p><\/blockquote>\n

— Frank Zappa<\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> Federal guidelines state that households spending more than 30% of their income on housing costs are considered “cost burdened.” Using that benchmark, the number of Americans who can’t afford housing has more than doubled<\/a> since 2001. Yep. Thirty-eight million people today spend “too much” of their income on rent or the mortgage — that’s an increase of 146%. Wow.<\/p>\n

Debit:<\/strong><\/span> The housing situation is so bad that, in San Francisco, a family with an annual household income of $138,000 may soon qualify for ‘middle income’ affordable housing. No, really<\/a>.<\/p>\n

Debit:<\/strong><\/span> Meanwhile, skyrocketing premiums caused at least 2 million people to ditch their healthcare insurance<\/a> in first half of 2017. As Zero Hedge wryly observed, most people bailing out on Obamacare were “18-34 year olds … You know, those who don’t really need coverage, but were forced to subsidize older, sicker people because, ‘spreading the wealth around<\/a> is good for everybody.'” Forward!<\/p>\n

Credit:<\/strong><\/span> Speaking of “spreading the wealth around,” last year it was reported that one ounce of silver would buy approximately three months of food<\/a> in the People’s Socialist Paradise of VenezuelaTM<\/small><\/sup> — and one ounce of gold would buy a house there. Hmm. With their economy only getting worse, I wonder what Venezuelans can buy with the same amount of silver and gold this<\/em> year.<\/p>\n

Credit:<\/strong><\/span> On a related note, bitcoin’s volatility has always been an impediment towards its use as a legitimate currency — but now it has another problem: As the price of bitcoin has risen this year, acceptance among retailers has been decreasing<\/a>. That growing reluctance to use bitcoin in business transactions is more evidence that the cryptocurrency should only be treated as an asset.<\/p>\n

Debit:<\/strong><\/span> Did you see this? Summer gasoline prices are the lowest they’ve been in years but, according to Bank of America, the cheap fuel hasn’t enticed more households<\/a> to enjoy a summer road trip. Are they kidding? I don’t know where those analysts live, but in my neck of the woods, the summer traffic is as bad as ever. If not worse.<\/p>\n

Debit:<\/strong><\/span> In other news, politicians and financial analysts waited breathlessly<\/a> as Fed Chair Janet Yellen read the chicken bones spread before her on the floor of Congress last week. Here was her verdict: “I see roughly equal odds that the US economy’s performance will be somewhat stronger or somewhat less strong than we currently project.”<\/em> I know. But she really does have a PhD in economics.<\/p>\n

Credit:<\/strong><\/span> Frankly, that kind of valuable insight<\/a> is precisely why the Fed is so qualified to manage the economy. Well … at least that’s what all those really smart Ivy League economists tell us.<\/p>\n

Debit:<\/strong><\/span> For those who don’t understand Ms. Yellen’s “Fedspeak,” allow me to translate: “Anyone with savings in the bank will continue to get robbed<\/a> by a combination of high prices and low interest rates.”<\/em> Of course, that policy is especially tough on retirees because low rates makes it impossible to earn a risk-free return above inflation, thereby resulting in a steady erosion of their savings.<\/p>\n

Credit:<\/strong><\/span> In fact, according to FA Magazine, the current low-rate environment is so punitive<\/a> that, when interest rates are zero, 25-year-olds making $50,000 annually have to save nearly 38% of pre-tax earnings during their careers to accumulate the $1.3 million required for an 80% income replacement rate in retirement. Thirty. Eight. Percent. See? Easy peasy!<\/p>\n

Debit:<\/strong><\/span> But — yes, there’s always<\/em> a “but” — the analysis has a catch: The $1.3 million those 25-year-olds need to accumulate assumes that Social Security will still be solvent in 2059. If it is isn’t — and it won’t be<\/a> — then today’s 25-year-olds need to save even more<\/em>. This is basic math, folks — and it’s the reason why there are going to be a lot of broken promises in the very near future.<\/p>\n

Credit:<\/strong><\/span> By the way, Ms. Yellen also warned<\/a> Congress “in the strongest possible terms” that it needs to tackle the National Debt by cutting off any further short-term stimulus. No, you’re not going crazy — apparently the Fed is suddenly really, really, really<\/em> worried about deficit spending.<\/p>\n

Debit:<\/strong><\/span> Curiously, the Fed saw no reason to issue a similar stern warning at any time between 2009 and 2016, when the government was on its greatest spending binge in US history, adding $10 trillion worth of debt to its balance sheet — more red ink than the previous 232 years of the Republic combined. Then again, maybe it’s not<\/em> so curious.<\/p>\n

The Question of the Week<\/strong><\/p>\n

[poll id=\"172\"]<\/code><\/p>\n

Last Week’s Poll Result<\/strong><\/p>\n

Credit or Debit: Which payment method do you usually use?<\/p>\n