{"id":54765,"date":"2019-05-18T02:15:18","date_gmt":"2019-05-18T09:15:18","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=54765"},"modified":"2023-05-12T10:34:31","modified_gmt":"2023-05-12T17:34:31","slug":"black-coffee-18-may-2019","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id54765-black-coffee-18-may-2019.html","title":{"rendered":"Black Coffee: Reaping the US Dollar Whirlwind"},"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

I hope everybody is having a great weekend! Okay, away we go …<\/p>\n

Money is stored labor. Labor is part of human life. To devalue money is to debase life.<\/em><\/p><\/blockquote>\n

— John Kenneth Galbraith<\/strong><\/p>\n

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

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

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

Debit:<\/strong><\/span> Did you see this? A new survey has found that 49% of all millennials say their spending habits are driven by their friends<\/a> bragging about their purchases on social media; compare that to just one-third of Americans in general. Sad. Hey … I wonder if the advertising world has caught on to this; if not, they’re missing out on a slam-dunk marketing opportunity.<\/p>\n

Debit:<\/strong><\/span> In other news, the world economy has been in a significant slowdown for a quite awhile now. How slow, you ask? Well … the best way to visualize the dire situation that the world economy finds itself in is it to look at global trade, which has tumbled<\/a> to levels last seen during the 2008 financial crisis. See for yourself:<\/p>\n

\"\"<\/a>

click to enlarge<\/p><\/div>\n

Debit:<\/strong><\/span> I see Uber went public last week. But as Bill Holter notes, “Never mind Uber has lost $10 billion over the last three years, and they really have no business plan to earn one thin dime going forward. But Wall Street peddles whatever crap they can peddle. In fact, over the last year roughly 80% of all<\/strong><\/em> new issues were for money-losing operations<\/a>.” Then again, such shenanigans are expected when financial services exceed 20%<\/a> of GDP.<\/p>\n

Credit:<\/strong><\/span> Meanwhile, MN Gordon observed this week that, “After a decade of increasing wealth inequality, the masses have reached a moment of certain hopelessness. Currently, people are after an ounce of hope they can latch onto; a means to an easier way is in high demand. Hence, fresh pitchers of Kool-Aid<\/a> like MMT are being served up to meet this unquenchable thirst.” Wow. That’s so poetic it would make TS Eliot jealous.<\/p>\n

Debit:<\/strong><\/span> Last week the Fed warned that credit standards continue to slip, as loans to firms with especially high debt now surpasses previous peaks seen in 2007 and 2014. According to a Fed spokesman, “The historically high level of business debt and concentration of debt growth among the riskiest firms could pose a risk<\/a> to those firms and their creditors.” Uh huh. Thanks for that wickedly astute insight, Captain Obvious.<\/p>\n

Debit:<\/strong><\/span> Speaking of risk, the latest Social Security balance sheet update reveals that its liabilities are $43 trillion larger than its assets — that’s $9 trillion more than last year<\/a>. No, really. As a result, America’s national pension plan is now underfunded by 33%; and funds are expected to be exhausted by 2035. The good news for millennials is that SS can remain solvent indefinitely if the retirement age is raised to 105.<\/p>\n

Debit:<\/strong><\/span> Of course, America’s general fund has fiscal issues too. The Congressional Budget Office forecasts that, starting in 2020, the US will never<\/strong><\/em> again see an annual budget deficit of less than $1 trillion<\/a>. Considering the IRS will collect more than $3.6 trillion<\/a> this year, it’s clear that the US isn’t in this predicament because of insufficient tax rates. The truth is: America has a spending problem.<\/p>\n

Credit:<\/strong><\/span> Here’s another nugget of fiscal reality: deficits do<\/strong><\/em> matter. This week Michael Lebowitz warned that central bank policies “come at the expense of their currencies, since their value is what supports trust in the currency and allows it to retain its functional purposes — (but) current policy throws all trust to the wind<\/a>.” Yep. Unfortunately, although the banking sharks are sowing the wind, we’ll all<\/strong><\/em> get to reap the coming whirlwind:<\/p>\n