It’s time to sit back, relax and enjoy a little joe …
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.
Well … another busy week is behind us. So with that in mind, let’s get this party started!
You can’t help a friend by putting coins in his pockets if he’s got holes in them.
– Elizabeth Bowen
Credits and Debits
Debit: Did you see this? A trip to a Disney theme parks is more expensive than ever; the cheapest one-day, one-park ticket for Disneyland ranges from $104 to $206 depending on the day. We know; you’ve heard this before – but it just keeps getting more absurd. For example, SFGate priced a three-day vacation in June for a family with two children under the age of 10. At $531 per night for Disneyland’s cheapest hotel and four basic three-day, one-park per day tickets, the cost was $3500 – not including food, transportation, and souvenirs. It also doesn’t include Disney’s $400 line-skipping service – per person. Uh … yeah no.
Debit: Meanwhile, back in the real world, the price of car insurance premiums climbed an average of 15% in 2024, with American drivers now shelling out an average of $2313 annually for full coverage. Both Maryland and New York had the biggest percentage increases last year (53% each), with annual full-coverage car premiums of $4060 and $3804, respectively. Hmm. That doesn’t sound like the machinations of a smooth-running economy to us. By the way, here’s another machine that’s anything but well-oiled …
Debit: Then again, at least most people never have trouble finding somebody willing to sell them car insurance. If you believe Fed chair Jerome Powell, he believes that, “10 or 15 years, there are going to be regions of the country where you can’t get a mortgage,” noting that banks and insurance companies have been pulling out of coastal and fire-prone areas they now deem to be far too risky. Then again, in many cases these same companies refuse to pay out any claims on their policies anyway – or at least they don’t without a long painful fight.
Debit: On the other hand, who needs home insurance if you can’t afford a mortgage in the first place? We say this because a new survey is out that reveals Americans are growing increasingly pessimistic that housing affordability conditions are going to improve anytime soon. In fact, a growing share of Americans expect home prices, rent prices, and mortgage rates will all go up in the coming year. Not that many can afford one now …
Credit: Turning to macroeconomics, the sagacious macro analyst Franklin Sanders observed this week that, “Most people don’t grasp the point of investing in gold or silver because their numeraire is the US dollar (USD) — they value everything in USDs. Problem is, inflation is continuously devaluing the USD, so trying to measure value over time in USDs is like trying to shoot skeet off the back of a bass boat in a storm.” He can say that again. By the way, if anyone here was still wondering what the heck “sagacious” means – well … now you know.
Credit: To prove his point about the futility of comparing prices of goods in USDs over long periods of time, Mr. Sanders provides the following example: The median US house price on 31 December 2000 was $172,099. When 2024 ended the median house price was $419,200. In USDs the price has increased 144% – which pleases homeowners who bought at the turn of the 21st century while simultaneously frustrating first-time homebuyers who are unable to cope with the current housing affordability problem. Or should we say, just the ones who hold their savings in USDs. Oh … and speaking of not coping … (Wait for it!):
Credit: While the median US house price climbed 144% in 24 years, Mr. Sanders gives us the rest of the story: “Hold it right there!” he implores. “Now let’s price the house in gold and see what’s happened. With gold at $272 on the last day of 2000, that house cost 633 ounces. With gold at $2629 the last day of 2024, the house cost 159 ounces; a 72% loss in 24 years. That is the reason you buy gold: To preserve the purchasing power of continuously depreciating dollars.” Indeed it is … because we all know that the federal government that’s entrusted with responsibly spending fiat USDs certainly has no interest in doing so.
Credit: Speaking of high prices, we see that President Trump has directed the Treasury Department to stop minting new pennies, citing the rising cost of producing the one-cent coin. How expensive is it? Well … the US lost $85 million last year to produce nearly 3.2 billion pennies. That’s because every penny currently costs 3.7 cents to produce. In other words: The USD has become so devalued that a penny doesn’t even buy a penny anymore.
Debit: Somewhat ironically, the Treasury lost even more money in 2024 minting nickels than pennies: $123 million, to be exact. In fact, today the Treasury loses 8.7 cents on every nickel the mint produces. Does anybody else see the trend here? One can only imagine how much money the US Treasury would be losing if it was still producing silver dimes, quarters, half-dollars and dollars.
The US government’s price to produce a penny, nickel, dime and quarter between 2004 and 2024. Source: Washington Post
Credit: On a somewhat related note, the new US Treasury Secretary, Scott Bessent, pledged to “monetize the asset side of the US balance sheet.” This, in turn, has increased speculation around the globe that a gold revaluation – or, more accurately, a USD devaluation – is coming in the near future.
Yes; the increase in the USD price of gold has been incredibly strong over the past few years, but does that suggest it’s finally running out of steam? Considering the current state of our debt-based fiat monetary system, we don’t think so. (h/t: @vulehoangbao)
Credit: Of course, the big question is: If there is a gold revaluation in our future, what price will the world’s central banks ultimately settle upon? Well … one way to determine that is by dividing the weight of all the central bank foreign currency reserves by the amount of gold they claim to be holding in their vaults. Currently, that figure is almost $11,000. Needless to say, if the central banks are holding less gold than they claim, then the yellow met
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Author : Len Penzo