{"id":52286,"date":"2018-12-22T04:15:12","date_gmt":"2018-12-22T12:15:12","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=52286"},"modified":"2023-11-04T10:03:41","modified_gmt":"2023-11-04T17:03:41","slug":"black-coffee-22-dec-2018","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id52286-black-coffee-22-dec-2018.html","title":{"rendered":"Black Coffee: ‘Tis the Season to Be Selling"},"content":{"rendered":"

\"\"<\/a>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

Merry Christmas, everyone!<\/p>\n

Put a log on the fire, grab yourself a big cup of hot chocolate, or some yummy egg nog, and let’s get started …<\/p>\n

“The first duty of a man is to think for himself.”<\/em><\/p><\/blockquote>\n

— Jose Marti<\/strong><\/p>\n

“The last duty of a central banker is to tell the public the truth.”<\/em><\/p><\/blockquote>\n

— Alan Blinder, former Vice Chairman of the Fed<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? Nearly one in three Americans say that dining out is the top budget buster<\/a> for them. Groceries run a close second. Hmm. Perhaps that explains — if only partially — why the average American today is fatter than ever<\/a>.<\/p>\n

Debit:<\/strong><\/span> Speaking of budget busters, the most recent actuarial report for the city of Chicago reveals that every household in the Windy City would have to pony up $140,000<\/a> to make state and municipal pensions solvent. That’s funny; considering the vast majority of those same Chicago households most likely have nothing saved<\/a> for their own<\/strong><\/em> retirement. Does anybody else see a problem here? No? Okay … then how about here:<\/p>\n

Debit:<\/strong><\/span> Then again, it’s not just Chicago; the debt for Illinois’ five state-run pension funds covering teachers, university employees, judges, lawmakers and other state employees climbed $4 billion<\/a> to $134 billion in fiscal 2018 — this despite a strong stock market and billions from taxpayers. You think people are finally starting to realize that those unrealistic benefit promises will eventually have to be broken? Me neither.<\/p>\n

Credit:<\/strong><\/span> On a related note, the central bank for the world’s central banks, the Bank for International Settlements (BIS), is yet again warning that the global financial system is unstable and ripe for a frightening chain-reaction collapse<\/a>. They say the reason is rising US interest rates, which are exposing the debt market weak links. The real<\/strong><\/em> reason is that our debt-based monetary system is nearing its mathematical limit.<\/p>\n

Debit:<\/strong><\/span> It’s been a nice ride but, 47 years after officially decoupling the dollar’s link to gold, the global fiat-currency monetary system is now on the nasty section of the exponential debt curve. Worldwide debt hit a record $184 trillion in the last year; that’s $86,000 per person<\/a> and more than double the average per-capita income. Overall, worldwide public and private debt is 225% percent of global GDP. Uh oh.<\/p>\n

Debit:<\/strong><\/span> By the way, unlike in 2008, the Fed will be unable to “save” us during the next financial crisis, as it has $4.1 trillion in bonds on its balance sheet. And its massive portfolio has suffered substantial paper losses thanks to sharply rising bond yields. In fact, the Fed suffered a $66 billion loss last quarter. Even worse, it only has $39 billion in capital — which means the Fed is now technically insolvent<\/a>. Imagine that.<\/p>\n

Credit:<\/strong><\/span> Of course, in the real world, negative balance sheets lead to bankruptcy. However, the Fed gets to create “money” out of thin air — which is why former Fed governor Kevin Warsh told Bloomberg this week that “a central bank with a negative net worth matters not, in theory<\/a>. But in practice, it risks chipping away at Fed credibility.” Psst. Hey, Kevin — the Fed lost its credibility<\/a> a while ago. And I mean all<\/strong><\/em> of it.<\/p>\n

Credit:<\/strong><\/span> Meanwhile, the so-called “everything bubble” is deflating as tighter central bank monetary policies weaken credit markets, leading over-indebted nations to struggle with dollar shortages and rising debt-service costs. But as banker Satyajit Das notes, “The fact that it’s happening relatively slowly shouldn’t blind us to the real threat: The world is dangerously underestimating<\/a> how hard it’ll be to deal with the fallout once it pops.” Just ask these guys who know all about underestimating danger:<\/p>\n

Debit:<\/strong><\/span> Needless to say, those tighter monetary policies are also impacting stawks — and not in a good way. The stock market ended its worst week in ten years<\/a> and is on pace for its worst December since 1931<\/a>. For the week, the Dow and S&P 500 each fell 7%; and they’re both down 10%<\/a> for the year. As for the Nasdaq, it lost 8.3%; the index is 22% below its August all-time high. Yes, that officially puts it in a bear market. Yikes.<\/p>\n

Debit:<\/strong><\/span> And, finally … Last December, 35% of Americans said the economy would get better in 2018, while only 20% said it would get worse. This<\/strong><\/em> year, it’s a different story: 33% expect the economy to get worse next year, while just 28% say it will improve; that’s the highest level of pessimism<\/a> since 2013. And if you think Americans are pessimistic now<\/strong><\/em>, just wait until they get their 401k statements next month.<\/p>\n

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

[poll id=\"246\"]<\/code><\/p>\n

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

How much is your Christmas gift budget this year?<\/p>\n