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Black coffee: squeezing blood from turnips

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It’s time to sit back, relax and enjoy little Joe…

Welcome to another exciting edition of Black Coffee, your unique weekly look at what’s happening in the world of money and personal finance.

I hope everyone had an enjoyable week. Without further ado, let’s get down to this week’s comments…

The only two things that scare me are God and the IRS.

— Dr. Dre

People are trying to live within their means so they can afford to pay taxes to a government that cannot operate within its means.

— Robert Half

A person’s credit is not as good as their money.

– John Dewey

Credits and debits

Debit: Have you seen this? The recent winner of the $1.28 billion Mega Millions lottery — the second-largest jackpot in history — will only get that prize if he claims it after a certain amount of time. If they want the whole reward now, the payout is $747 million. Now the main line: it is earlier taxes. Once the federal and state governments get their share, the Illinois winner’s $1 billion-plus payday will be a “no-brainer” 433 million dollars. Yes, yes; I know. The “good” news is that these taxes will help pay 87,000 new IRS agents authorized by Congress this week. Hey… Remember when Americans started a revolution over a small tax on tea? Pepperidge Farms remembers.


Debit: Frankly, it looks like Americans will have to rely on winning the lottery if they want to climb the socioeconomic ladder because real average weekly earnings continue to fall; they are now fell for 16 months in a row as rampant inflation – this week’s updated CPI shows it “officially” stands at 8.5% but is actually closer to 18% – continues to eat away at any wage growth. Again, with real family incomes falling, middle-class Americans may be less likely to come under the scrutiny of those 87,000 new IRS employees. So that’s what.

Debit: Perhaps the fall in real wages is what American workers now say they will need on average 1.7 million dollars to cover expenses during their golden years, according to a recent retirement survey. And while that’s down from the $1.9 million reported in last year’s survey, only 47% of workers surveyed in 2022 now say they’re still “very likely to reach their retirement goals,” while only 13 % report that they are “unlikely” to achieve any of their goals. Meanwhile, inflation will continue to eat away at Americans’ purchasing power; young and old.

Debit: As a result, a sharp drop in stock and bond prices has left state and local public pension funds with assets to cover only 78% of what they ultimately must. Last year, the funds had 85% of the money they needed to meet their obligations — nearly $500 billion less than pension funds. So to try to make up the difference, pension funds are venturing into riskier investments that offer the chance of high returns, such as junk bonds. And if that doesn’t work, those same fund managers say they plan to take whatever money is left over to a Vegas roulette table, where they’ll bet it all on the red.

credit: Of course, it’s not just US pension funds that are at risk of defaulting on their financial obligations; neither does the federal government. As macroanalyst Matthew Pippenburg points out, “in 2015, payments accounted for 54% of US tax revenue; today’s annual payments in the US will soon reach 90% of US tax revenue.” In short, Pippenburg warns that the Fed’s policy of raising interest rates “will bankrupt the US government” unless they turn to cover the growing budget deficit with more printed currency. Ugh. But maybe, just maybe, there is too another an alternative…

Debit: Meanwhile, there are many small business sectors continuing to fight with high rents, including trucking companies, auto repair shops, restaurants, retail stores and beauty salons. In fact, continued rising rents, rising labor costs, persistent labor shortages, high gas prices, and low consumer spending all combine to create economic instability. Aside from these minor inconveniences, small business is doing better than ever. At least that’s what those in charge tell us:

credit: Speaking of responsible parties, financial columnist Franklin Sanders asked this week very good question: “Honestly, these central bank people couldn’t make a profit from a snow cone stand in New Orleans in July, and they think they’re going to rule the world?” The question was, of course, rhetorical. That being said, those same central bankers would just tell you it’s us ignorant people who don’t understand…

credit: As for the inimitable MN Gordon, he notes that “The failure of Keynesian policy coupled with the monetary frenzy, have put the US economy in an extremely unfavorable place: where consumer inflation is raging and the economy is shrinking. How much higher can the Fed (raise rates) before something breaks? We will find out soon. At this point, the Fed will have to cause a 1930s-style massive depression to stop inflation in its tracks.” Again, based on the, uh, “wealth” of their so-called quantitative tightening (QT) program, the Fed doesn’t seem very eager to go with that option.

credit: Needless to say, the Fed doesn’t want to do that anything because any move could destroy the current debt-based monetary system, which is rapidly approaching its mathematical endpoint. As macro analyst Bill Holter points out, “Global GDP is $100 trillion, but global debt is $350 trillion. So the whole world is now inside banana republic territories. Now central banks are raising rates on a system of excessive lending, and this will eventually lead to a global credit crunch.” Holter says when what it happens that we will see an asset at the same time deflation with, oddly enough, harsh inflation in “things necessary for everyday life”. In the meantime…

Debit: So how can there be simultaneous inflation and deflation? Well … Holter answers this by first noting that our modern economy relies on credit, which in turn depends on the belief in the currency. He then uses a loaf of bread to illustrate: it takes several credit-dependent organizations to make that loaf of bread and bring it to market; from the farmer who sows and harvests the wheat, to the companies that provide the farmer with fertilizer, to the factories that grind the wheat into flour, to the bakeries that bake the flour from the bread, to the trucks that transport the bread to the stores. Without credit prices will be an increase due to shortages caused by disrupted supply chains. Er… and angry service providers:

credit: Remember: real money, by definition, can never by default. Unfortunately, a government dollar isn’t money – it’s credit; otherwise known as debt. So what only the way to protect yourself from a catastrophic credit collapse is to have are real money on hand – gold and silver – to carry out your operations. For smaller transactions, the best way to do this is with “junk” US silver coins minted before 1965 – dimes, quarters, halves and dollars – which you can buy from precious metals dealers. For example, a silver penny can always buy a loaf of bread or a pound of chicken; likewise, a silver quarter will always buy a gallon of gasoline. As for gold coins, they can be used for large transactions.

credit: By the way, last week a couple found a glass jar with $2,000 in Depression-era cash buried in their backyard. Anyone want to guess how much this humble stash would be worth if the contents of that jar were US $2,000 gold coins instead of fancy green Federal Reserve notes? Well…for those doing the math at home, at the current dollar price of the yellow metal, the answer is $174,150. Give or take a few hundred bucks. But hey…who’s counting?

Question of the week

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Last week’s poll results

How is your investment portfolio doing this year?

  • It’s under water (46%)
  • It Treads on Water (43%)
  • It’s Over Water (11%)

More than 2,500 Len Penzo dot Com readers responded to last week’s question, and a narrow majority say their investment portfolio is underwater this year. I know I have, but hey…we still have almost six months to make a difference!

If you have a question you’d like to ask the readers here, send it to me Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.

By the numbers

In light of the dog days of summer, let’s take a quick look at the results of a survey of 2,000 Americans regarding the downsides of summer:

5 The maximum number of summer hours the average American said they prefer to stay outside each day.

64 The temperature in degrees F at which the average American keeps the air conditioner running during the summer months.

45% Percentage of respondents who said it’s hard to find an activity that everyone wants to do on hot summer days.

35% Proportion of respondents who say the worst aspect of summer is feeling sweaty.

32% Percentage who think the worst aspect of summer is bugs.

31% The fate of those who say that the worst summer is getting sunburned.

31% Percentage of those who believe that the worst summer is stuffy air.

74% Percentage of parents who say they have a hard time keeping their kids entertained during the summer.

Source: Chatterbox

Useless news: wedding day shock

The wedding ceremony got to the point where the minister asked if anyone had anything to say about the union of the bride and groom.

A young woman carrying a child rose and walked slowly towards the minister; the congregation was shocked.

The groom’s jaw dropped as the woman approached.

The bride threw the bouquet in the air and burst into tears.

The groom’s mother fainted.

Kum grunted in confusion.

The minister asked the woman: “Why did you come forward? What do you have to say?”

The woman replied, “We can’t hear you from behind.”

(h/t: RD Blakeslee)

More useless news

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46. ​​Alaska (1.72)
47. New York (1.71)
48. South Carolina (1.69)
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50. Oregon (1.62)

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Letters, I receive letters

Each week I post the most interesting question or comment – assuming I get one. And people lucky enough to have a single question in their mailbag get their letter here, interesting or not! You can contact me at: Len@LenPenzo.com

From Blonde:

I love your blog! I found this when I googled “loan money to friends”.

Well done, Blondie! Thank you. Hey… Does this mean I can borrow $100 from you?

If you enjoyed this issue of Black Coffee and found it informative, please forward it to your friends and family. Thank you! 😀

Photo: public domain

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