{"id":56694,"date":"2019-09-07T02:15:59","date_gmt":"2019-09-07T09:15:59","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=56694"},"modified":"2019-09-10T06:29:34","modified_gmt":"2019-09-10T13:29:34","slug":"black-coffee-7-aug-2019","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id56694-black-coffee-7-aug-2019.html","title":{"rendered":"Black Coffee: Giving Credit Where Credit Is Due"},"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 weekend is upon us, so let’s get this party started, shall we?<\/p>\n

We spend our way to the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don’t need, refinance them for more spending money, and declare bankruptcy, often leaving them full of garbage in our wake. Thrift is inimical to our being.<\/em><\/p><\/blockquote>\n

— JD Vance<\/strong><\/p>\n

When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets.<\/em><\/p><\/blockquote>\n

— Bill Gross<\/strong><\/p>\n

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

Debit:<\/strong><\/span> A new study found that US GDP per capita would plunge into negative territory<\/a> if consumers couldn’t borrow, with annual income per capita cratering from $66,900 a year to negative<\/strong><\/em> $4857. In other words: if the credit markets ever dry up, total economic collapse is assured. Of course, this would all be moot if Americans still saved money to buy things — but in today’s credit-based world, saving has become a lost art<\/a>.<\/p>\n

Debit:<\/strong><\/span> Speaking of negative territory, it won’t be long before the spread of negative interest rates reach the US<\/a> — at least according to former Fed Chair Alan Greenspan. “It’s only a matter of time,” he says. More like a matter of trust — something central bankers no longer have.<\/p>\n

Debit:<\/strong><\/span> By the way, although the Fed hasn’t made an official announcement yet, according to market analyst Chris Hamilton, the latest data suggests the Fed has already started implementing<\/a> the next round of QE — kicking off the inevitable march towards negative rates here in the US. Okay … I take it back — I guess we can trust Mr. Greenspan this<\/strong><\/em> time. But that’s it!<\/p>\n

Credit:<\/strong><\/span> According to Alasdair Macleod, if the US goes to negative rates, the move “will almost certainly lead to a flight out of the dollar<\/a> and into commodities.” It will also significantly reduce the dollar’s purchasing power. After all, accepting negative rates for US Treasuries would be like paying your irresponsible spendthrift neighbor to borrow cash from your retirement savings. Um, or something like that …<\/p>\n