{"id":55014,"date":"2019-06-01T02:15:29","date_gmt":"2019-06-01T09:15:29","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=55014"},"modified":"2019-06-04T05:06:40","modified_gmt":"2019-06-04T12:06:40","slug":"black-coffee-1-jun-2019","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id55014-black-coffee-1-jun-2019.html","title":{"rendered":"Black Coffee: Driving Down the Road to Ruin"},"content":{"rendered":"

\"black<\/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

Well … another glorious week comes to an end, so let’s get this party started, shall we?<\/p>\n

It is what it is, but it’s not what it seems.<\/em><\/p><\/blockquote>\n

— Paul Hewson<\/strong><\/p>\n

There are some ideas so absurd that only an intellectual could believe them.<\/em><\/p><\/blockquote>\n

— George Orwell<\/strong><\/p>\n

There are three roads to ruin; women, gambling and technicians. The most pleasant is with women, the quickest is with gambling, but the surest is with technicians.<\/em><\/p><\/blockquote>\n

— George Pompidou<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Despite being unable to repair and maintain the existing<\/strong><\/em> network of roads and highways, US states are continuing to build more of them anyway, which is creating new financial liabilities<\/a>. As it stands now, the US would have to spend roughly $250 billion annually to keep its existing infrastructure properly maintained and<\/strong><\/em> restore the current six-year backlog of roads in a poor condition. Yeah … I hear ya, folks: Only six?<\/em><\/p>\n

Credit:<\/strong><\/span> Perhaps all of the new roads being built is why Americans’ confidence in the US economy<\/a> is at its highest point in 20 years. It’s possible. But here’s the problem: Living standards have been slowly declining<\/em><\/strong> ever since the dollar’s anchor to gold was broken in 1971. Huh. Who says Boiling Frog Syndrome<\/a> isn’t real?<\/p>\n

Debit:<\/strong><\/span> Ironically, Americans’ growing consumer confidence also suggests they’re blissfully unaware that a middle class lifestyle is now 30% more expensive than it was 20 years ago. Well … not all<\/strong><\/em> Americans; at least not the 23% who say that paying for basic necessities such as rent, utilities and food is the biggest contributor to their credit card debt<\/a>.<\/p>\n

Debit:<\/strong><\/span> It’s scary to think that nearly a quarter of all Americans are going into debt paying for basic necessities 10 years into an economic recovery. But anyone who is paying attention to rapidly-falling bond yields<\/a> can see they’re signaling that both the US and global economies are in a heap of trouble<\/a>. Then again, bond yields have been anemic since the Great Financial Crisis, which means there never really was a true<\/strong><\/em> recovery anyway.<\/p>\n

Debit:<\/strong><\/span> So … How low have bond yields fallen? Incredibly, in many cases, less than 0%. There are currently trillions of dollars of bonds in the world with negative yields. And until recently, negative yields were limited to relatively-safe bonds issued by governments and large corporations. This week, however, much riskier mortgage-backed bonds joined the party. At least, they did in the Netherlands. No, really<\/a>.<\/p>\n

Credit:<\/strong><\/span> But wait … it gets even crazier. Thanks to those mortgage-backed bonds, bankers in the Netherlands are now offering mortgages with negative rates<\/a>. That’s right; instead of collecting interest, the lenders are effectively issuing a monthly rebate<\/strong><\/em> to their mortgage holders. This begs the question: What’s the true<\/strong><\/em> value of fiat currency today if bankers are paying<\/strong><\/em> people to borrow it? (Psst. Voltaire knows<\/a>.)<\/p>\n

Debit:<\/strong><\/span> Meanwhile, the slowdown in global trade is putting pressure on the creation of US dollars — which is a big problem because the greenback is the<\/strong><\/em> lubricant for the economic engine better known as the global financial system. Without an ever-increasing supply of dollars, that engine is bound to seize up<\/a>, leaving the global economy and financial system vulnerable to tighter financial conditions. Hey … this guy gets it:<\/p>\n