The Safer Haven

We've talked about how bad the stagflation was during the late '70's and early '80's, but don't take it from me. Here's what Federal Reserve history has to say: [bold added]

The economy was already in weak shape coming into the downturn, as a recession in 1980 had left unemployment at about 7.5 percent. Both the 1980 and 1981-82 recessions were triggered by tight monetary policy in an effort to fight mounting inflation. During the 1960s and 1970s, economists and policymakers believed that they could lower unemployment through higher inflation, a tradeoff known as the Phillips Curve. In the 1970s, the Fed pursued what economists would call "stop-go" monetary policy, which alternated between fighting high unemployment and high inflation. During the "go" periods, the Fed lowered interest rates to loosen the money supply and target lower unemployment. During the "stop" periods, when inflation mounted, the Fed would raise interest rates to reduce inflationary pressure. However, the Phillips Curve tradeoff proved unstable in the long-run, as inflation and unemployment increased together in the mid-1970s. While unemployment trended down slightly by the end of the decade, inflation continued to rise, reaching 11 percent in June 1979 (Federal Reserve Bank of St. Louis).

(WSJ graph)

In 1971 Richard Nixon canceled the convertibility of dollars to gold under the Bretton Woods system, which had been in place since 1944. The delinking of the dollar from gold and the combination of inflation and unemployment unprecedented since the Great Depression made it a period of maximum economic uncertainty. The gold price spiked from the $35/oz. under Bretton Woods to a high of $850 by the end of the decade.

The gold market is spiking again. In fact it Hasn’t Rallied This Much Since 1979. [bold added]

A modern-day gold rush is stretching from Costco store aisles to underground vaults in London to the flickering screens of Wall Street. Old jewelry now glimmers with potential dollar signs.

Gold’s value has ballooned by 40% this year, putting it on track for a greater annual price jump than during the depths of the Covid-19 pandemic or 2007-09 recession, according to Dow Jones Market Data. Futures for the precious metal haven’t surged so much in a year since 1979, when a global energy crisis fueled an inflationary shock that thrashed the world’s economy.

Costco 1 oz. buffalo gold piece

These days, it isn’t a financial meltdown that is drawing people to one of the original market refuges. The recent run-up to record prices—reaching $3,682.20 a troy ounce on Monday—instead stems in part from the White House, with investors big and small rushing to shield themselves from an uncertain outlook for the U.S. economy and its role in the world.

A lot has changed in the past 50 years. What hasn't changed over the centuries is that people flee to gold in troubled times.

Bay Area: Last Stop?

(Image from first for women)

I bought Steve Martin's album A Wild and Crazy Guy in 1978 and found this bit to be hilarious:

You.. can be a millionaire.. and never pay taxes! You can be a millionaire.. and never pay taxes! You say.. “Steve.. how can I be a millionaire.. and never pay taxes?”

First.. get a million dollars.

Now.. you say, “Steve.. what do I say to the tax man when he comes to my door and says, ‘You.. have never paid taxes’?” Two simple words. Two simple words in the English language: “I forgot!”

The transcript does not do justice to his delivery, which was replete with pregnant pauses, shrugged shoulders, and goofy expressions. Plus, the two-part answer to "how can I be a millionaire and pay no taxes?" that began with "first get a million dollars" struck me as funny, and if you don't agree, dear reader, well, we laugh at different things.

I thought of Steve Martin's routine when I came across an article in the Chronicle about why many of us choose to live out our final years here: How to financially prepare to spend the rest of your life in the Bay Area . Certainly the drawbacks of staying in the Bay Area--or California in general--have been well publicized:

there’s plenty of talk about the bad. You don’t have to look far on the internet to find people blasting California for its high taxes, housing costs and homelessness. California has the top marginal state individual income tax rate at 13.3%, according to the Tax Foundation.

"But that’s not the whole story."

[Estate planning, trust and probate law attorney James] Cunningham broke down the hidden benefits in a post on his firm’s website titled “Why Retiring in California May Actually Be a Smart Idea.” For instance, though marginal rates are high, you’ll pay a lot less on your presumably diminished retirement income compared to some states with flat tax rates. California is one of the states that doesn’t tax Social Security benefits, and doesn’t tax capital gains when a spouse dies. And you’ll dearly miss that Prop. 13 property tax cap if you move somewhere like Texas.

Bay Area retired acquaintances have told me that the primary factor that caused them to stay or leave was the state of their finances. Those who have a paid-up house and enough savings and retirement income to live on (daunting prerequisites, like "first get a million dollars") consider other factors, such as where their children and friends live, the quality of medical care, and, last but far from least, the temperate weather all year long.

If I had to bet, the Bay Area is our last stop, but circumstances can easily change.

Summer, winter, or fall the Foster City weather is nearly the same.

Money and Happiness: Not So Simple

We've commented before on the 2010 study that asserted that more money does lead to happiness, but only up to a relatively modest level of income, i.e., $75,000 per year:

In 2010 Daniel Kahneman and Angus Deaton analyzed data from over 450,000 responses to a daily survey of 1,000 U.S. residents by the Gallup Organization. They found that money does influence happiness at low to moderate levels of income. Real lack of money leads to more worry and sadness, higher levels of stress, less positive affect (happiness, enjoyment, and reports of smiling and laughter) and less favorable evaluations of one’s own life. Yet most of these effects only hold for people who earn $75,000 a year or less. Above about $75,000, higher income is not the simple ticket to happiness that we think it is.

(WSJ illustration)

Since that 2010 study more research has been performed on the relationship between money and subjective well-being. Now it seems that more money in absolute terms does make higher-income people happier. [bold added]

A big raise provides significant boosts in happiness even at household incomes of $500,000, according to a new research report...according to a paper by Matt Killingsworth, a senior fellow at the University of Pennsylvania’s Wharton School, the bonuses and leaps in income high earners reap are so large that they keep adding to well-being in the same way that smaller pay bumps do at lower tiers of earnings.

“I think of this as a ladder across society. The rungs are separated by more and more dollars, but exactly the same amount of happiness,” said Killingsworth, who published his report on his Happiness Science website.

An academic paper in 2010 popularized $75,000 as the salary threshold beyond which earning more money didn’t make people any happier. More recent research indicates that there is no such plateau.

Killingsworth and other researchers stress that many things influence human happiness, including your relationships, your job and the country you live in.

“No single factor, including money, dominates the equation,” Killingsworth said.

Previous studies on money and happiness have consistently demonstrated two things: that richer people are happier, and that it takes progressively more money to keep generating a well-being boost of a given size.

It makes sense that more money always makes people happier, ceteris paribus.

However, as people age money's importance diminishes (caveat: as long as one has enough to provide for retirement and health care) and no longer is the measuring stick of one's life; family, legacy, and discernment of life's meaning become foremost.

I wonder if there's research being performed on that.

Loud Budgeting

I missed this new term in personal finance: loud budgeting.

Lukas Battle (Instagram)

Loud budgeting began as a joke, said Lukas Battle, the 26-year-old comedian who coined the term in a December TikTok video after a night of overspending.

When Battle’s friends then messaged him asking to go out to an expensive Italian restaurant in Manhattan’s East Village neighborhood, he proposed they all cook dinner at someone’s house and have a game night instead. It was a riff on “quiet luxury,” the trend of favoring well-made, expensive, but understated fashions.

Battle’s video took off, generating over one million views and more than a thousand comments. Hundreds of people have shared their own examples of how loud budgeting helped them save money.

“People want a break or some sort of relief from this constant need to be spending and buying,” said Battle, who lives in New York.

Loud budgeting has helped some combat the peer pressure to spend.

Madeleine Burke (WSJ)

Madeleine Burke, 26, said her best friend visits the nail salon every two weeks for a manicure and pedicure. The last time Burke went with her, she paid $45 for a pedicure and instantly regretted the decision.

“I cannot believe I paid for that and I could’ve done it at home,” said Burke, who lives in New Orleans. The next time she was asked, she felt more comfortable declining. She credits loud budgeting with helping change how she approaches spending.

Burke said her friends now host more potlucks at each other’s homes and go secondhand shopping together.

Your humble blogger admits that during his career he yielded to social pressure by going on expensive outings that he didn't want and couldn't afford--or, to be more accurate, could pay for if he defunded activities that had a higher priority (e.g., retirement savings, replacing a 15-year-old car).

If proclaiming publicly that you don't have the dough gets your non-wealthy status out in the open, that's a welcome improvement over "my spouse and I have other plans" or "we can't find a babysitter." Any friends you may lose aren't really your long-term friends anyway.

It Still Has Heft

Three ways to spot a fake: with a machine, with a pen
or by checking the small banding on the bill. (WSJ)

Something I didn't know: there are more one-hundred-dollar than one-dollar bills in circulation:

The $100 bill is far and away the most common U.S. paper currency, dwarfing even the $1 bill. The number of bills bearing Benjamin Franklin’s mug more than doubled between 2012 and 2022, faster growth than any other denomination, according to the most recent Federal Reserve data

For all its prevalence, the $100 bill is more effective for storing money than spending it. Even when cashiers do accept the bills, they hold up checkout lines to verify they aren’t counterfeits...

One reason they have become so prevalent is that they enter circulation far quicker than they leave. They can last over a decade longer than $1s and $5s, partly because people are more likely to hold than spend them.

One hundred dollar bills are harder to spend because cashiers eye them suspiciously, perform tests to make sure they're not counterfeit (picture), or even refuse them. Fast-food restaurants often post signs that they will not accept bills larger than twenties.

If I have to break a hundred, I walk over to the nearby Lucky Supermarket and use the self-checkout machine, which makes change without any hesitation.

However, the friction of using a Benjamin is more than made up by its (still) psychological heft; upon receiving a C-note as a gift, the recipient usually sends a real thank-you note, not a text or email.

Finding Tradition on Their Own

It's a tale as old as time. These relationships still exist, and now some women are bragging about it.

Stay-at-Home Girlfriends Are Having a Moment [bold added]

The typical stay-at-home girlfriend video opens on a young woman in a pristine apartment. At 8 a.m., she makes the bed and cooks pancakes for her boyfriend before he goes to work. After a green juice, it’s time for self care: a private Pilates reformer session and a microcurrent facial. Then, she has lunch with a girlfriend at a local hot spot, goes for a long walk and listens to a podcast before it’s time to get ready for date night.

Clips like this abound on TikTok—smooth, hypnotic videos presenting an idealized vision of a traditional marriage, minus the wedding ring, plus a dose of the current wellness boom. Being a stay-at-home girlfriend (or SAHG for short) is all about supporting your boyfriend with tasks like cooking and housework, plus a rigorous self-care regimen to keep up appearances. The phenomenon reflects a Gen Z move away from mid-2000s “girlboss” hustle culture, and toward aspirations of a softer life.

As to what the men get out of these relationships, it may seem obvious from the photos of three SAHG's above, but the writer feigns ignorance.

Often, the boyfriends themselves are the ones to propose these arrangements. They’re working a lot, or traveling a lot, and want extra support at home. Or they just enjoy paying for everything.

This lifestyle choice is antithetical to woman-needs-a-man-like-a-fish-needs-a-bicycle feminism, but true liberation is the freedom to live the life you want, not the life that people say you should want.

Don't Get Stuck in the Money Room

Juan Amaya and Prop Movie Money product (WSJ)

There's nothing like the sense of excitement at the sight and feel of paper money, especially when one had so little of it in childhood. But enough about me.

One way to de-sensitize the emotional reaction to cash is to immerse oneself in it. It's unnecessary to have access to the real thing for the "treatment" to work, because fake money will do.

There is a space in the Atlanta office of RJR Props that workers call the money room.

Along one wall, about 20 feet of shelves hold a buffet of prop money, in stacks, bundles, cubes, rolls and other arrangements.

When outsiders enter the money room, they usually burst out laughing, said Rich “RJ” Rappaport, the company’s president. “It creates a very deep emotional reaction from everyone,” he said. “Well, except me. I’m ruined.”

“You’ve been around hundreds of millions of dollars in fake money,” he explained, “so it just completely loses its sense of wonder.”

Rappaport says that being more aware of money’s effect could put you in a better mindset for thinking about its place in your life.

He feels rich because he has a spouse, children, a house, a car and food. “To me, that’s everything,” he said. Meanwhile, it seems to him like many other people are, in a sense, stuck in the money room, marveling at the stacks.

It's easy for oldsters who are done with the making-it phase of their lives to advise younger, struggling folks that money isn't that important. To be perfectly honest, my younger self would have listened with half an ear. Just don't think it's all important. Don't get stuck in the money room.

If You Snooze, You Get Frozen Out

Pro tip: don't try to send a copy of the deposit slip via text.

My brothers and I have a rainy-day account with combined checking and savings of $48,000. We haven't used it since 2021, but now we needed to tap those funds.

Yesterday I tried to move everything to the checking account, but, according to the online banking screen, the accounts were not "set up" for transfers.

A call to customer service revealed that the checking account was classified as dormant because there had been no activity for a year. (Posted interest doesn't count.) In dormant accounts funds couldn't be transferred in or out, nor would checks written on them be honored.

How could the checking account be re-activated? I would have to write a letter--email communications wouldn't do the trick--or we could make a deposit of any size. Obviously the latter was the easiest choice.

The last hitch came when I tried to text a copy of the deposit slip to my brothers. Repeated attempts failed. Apple, I'm guessing, blocks pictures of financial documents. I sent the information without an image, and it went through quickly. My brother made a cash deposit of $10 to the dormant account, and 12 hours later it's still "pending" (at least it's in process).

A word to the wise: there's no such thing as a "sleep well" investment. Even FDIC-insured bank accounts need to be monitored and used occasionally to see if they're functioning properly.

Worn Out

While shopping in San Bruno, I was ticketed for an unreadable license plate (picture, right). The plate is perfectly decipherable to human eyes, but traffic scanners have trouble discerning it.

I wrote a letter contesting the $50 fine. Not only did I point out that I didn't see(!) the problem, I also noted that the Camry had been parked outdoors for 16 years.

Any degradation in the license plate had to be due to wear and tear from exposure to the elements, and surely the law didn't mean to fine us folks who couldn't afford a garage or car port. The pity-me social-justice-y argument didn't work, and a harshly worded notice for $50 arrived four months later.

So I paid up.
1) Saving $50 wasn't worth pursuing the matter.
2) I did feel sorry for San Bruno. The plague of homelessness, drug use, and property crime has spread south from San Francisco, and SB is feeling financial pressure.

Later a Foster City cop pulled me over with a warning that the license plate was unreadable. At the DMV the cost of replacement plates was $22, under the condition that I give the old ones back.

The only advice I have after all this is to pick your fights with City Hall, because most of them aren't worth the price.

Too Much Too Soon

(WSJ illustration)

Polls have consistently shown that the principal subjects that married couples fight about are money, chores/responsibilities, sex/infidelity, and power/control.

Often money is listed as problem area number one, because the lack of money can be the source of enormous stress. It now turns out that large gains in wealth can also foment discord, especially if the gains occur over a short period of time,

Both gaining and losing money upends partners’ understanding of shared values, beliefs or assigned roles within the relationship. When couples cannot adjust to their new financial standing and fail to communicate their concerns or desires, the marriage may be in trouble, said researchers and relationships counselors...

Researchers [David] Cesarini and Anastasia Terskaya tracked lottery winners in Sweden for 10 years after they hit the jackpot. In a working paper published in March, their team found something surprising: who held the winning ticket significantly changed what happened to the marriage.

In the long-run, male winners saw reduced divorce risk and higher fertility, leading to stable marriages and family formation. When a woman held the winning ticket, the windfall of around $100,000 and $500,000 increased the likelihood of divorce, especially for low-income women and those who earned far less than their husbands.

There are additional strains because the sudden acquisition of wealth (e.g., lottery winnings, professional sports contracts) is often accompanied by fame. It's exceedingly difficult to work through relationship problems under the glare of publicity.

All things being equal, building one's wealth slowly allows the partners time to adjust their relationship, as well as avoid the risks of having friends, relatives, and even the general public know their business.

Kung Hee Fat Choy

Mirroring Foster City's demography, about 20% of the local Episcopal church's membership consists of people with Chinese ancestry.

And so it was that a lunch celebrating Chinese New Year was held after the service.

The liturgical calendar says the seasonal color is green, but for one day the walls were adorned with red posters and signs.

The table groaned with chicken salad, desserts, and six different kinds of dumplings. I managed to limit myself to one plate, knowing that later that day many calories would be ingested watching the NFL playoffs.

Before the games started we made calls to elderly relatives--more important than calling them on Thansgiving or Christmas--and wished them a new year filled with health, happiness, companionship, and love.

By early evening the 49ers had defeated the Dallas Cowboys, 19-12, an auspicious beginning to the Year of the Rabbit.

Happy New Year!

Successful Excursion

Ho Tai Printing (723 Clay) is across the
street from Portsmouth Square

Red envelopes are widely available for Chinese New Year (January 22, 2023)--Amazon has new year lai si--but a relative from Hawaii wanted some with her family surname.

Ho Tai Printing has red envelopes pre-printed with dozens of common family names, and so it was that we headed to San Francisco's Chinatown to browse its wares.

Traffic on 101 North was moderate to light in the early afternoon, not yet equal to pre-pandemic levels.

It had been three years since we had been to Chinatown. Parking at the Portsmouth Square garage, we used to find it difficult to snag a space, but today there were plenty on the lowest level.

The print shop had an ample supply of envelopes with the name we were looking for. (We didn't see any of ours--the clerk said they had run out.)

In previous years we might have done some shopping. However, with many boarded-up storefronts San Francisco had lost its appeal.

It had already been a successful excursion, and unfortunate things usually happen when we press our luck for more.

Don't go for a home run and be satisfied with a single---sounds like a good motto for 2023.

Free the Tree

"Stanford hates fun" passes for controversy in 2022

Each of the two institutions of higher learning that I attended in the 1970's had a marching band that annoyed alumni greatly. Their halftime shows were filled with iconoclasm, not to mention scatological and sexual humor.

The more that our elders' generation was horrified the better. Halftime shows were a rollicking time, often better than the football game.

50 years later the people who want to clamp down on politically incorrect humor come from within the band, the student body, and faculty. Stanford University is a leader in this role reversal, and its mascot, the Tree, has become the center of a cultural contretemps. During halftime at a game between Stanford and ASU, "the Tree unfurled a 40-foot banner that said 'Stanford Hates Fun.'” [bold added]

The students on the band’s executive committee said in a statement to the Stanford Daily that they suspended the Tree because he used his platform to spread a message without going through the required channels.

"Required channels"? These brilliant students, many of them not old enough to drink, are going to be our future leaders and are already inured in bureaucratic pettifoggery. But it gets worse.

Administrators this year published a 13-page index of words to be avoided on the school’s websites. It suggested “ballsy” be replaced by “risk taker,” “you guys” by “everyone” and “Karen” by “a demanding or entitled White woman.”

The language policing is far more extensive than anything the blue noses attempted to do back in my day. With its multi-billion dollar endowment Stanford asks for but doesn't need my money. And I don't intend to give a another cent, at least until the Tree is free.

Happy New Year

(Illustration from Yale-China)

Today is the beginning of the lunar new year, the Year of the Tiger according to the Chinese Zodiac.

Ever since I was a toddler in Territorial Hawaii, adult relatives would give me red envelopes on Chinese New Year. Finding a dime inside was pretty good, and when I got a quarter--you could buy two DC comics plus five Bazooka bubble gums--I was rolling in it like Scrooge McDuck. A rich grand-uncle on my mother's side would give out one dollar bills, but I didn't get to go to his house often.

Now I'm the one that has to pass out the red paper, so Chinese New Year isn't as much fun. Nevertheless, subscribing to both the Gregorian and lunisolar calendars has its advantages. One gets to enjoy two New Year feasts, but more importantly one gets a chance to start again on resolutions that were already broken in January.

In other words we get a mulligan. Speaking of golf and tigers, it looks like an auspicious year for Tiger Woods to be making a comeback after his excellent showing in the PNC tournament in December.

Happy New Year (again)!

The Financial World is Passing Me By

Everyone used to know how to write a "check"

Trying to sign up for a business-related insurance policy, I sent the following e-mail to the broker:

Kelly, may I just mail a check for $700 to you? I will make it payable to _____ Insurance Agency unless you instruct otherwise. Thanks.

Her answer:

Actually, I need to post an electronic payment to the policy to issue it. So a check would not work, and I cannot cash that to my agency because it needs to be applied directly to [Insurance Co. Name].

If you'd like to run it through your bank acct we can take the electronic check over the phone (routing/acct) and process that today to activate the policy.

Thank you!

I should have seen this coming when a young fellow wanted to pay via PayPal 20 years ago. My quizzical look undoubtedly amused him.

Dinosaurs didn't have the self-awareness to know that they were going extinct.

Inflation: Making Do With Less

At Costco Peanut M&M's crept to $12,50
over the past year, then Boom! $19.99 but
"marked down" to $15.99. C'mon, man!

Eighteen (18) months ago this humble chronicler saw the warning signs of inflation:

Now the Fed is buying corporate debt--even some risky pieces that pension funds won't touch--and the debt of state and local governments. It has crossed a line and can't go back. ("Why are you letting [State name] go bankrupt?")

Eventually the tidal wave of government debt and paper money will cause an inflation that will dwarf that of the 1970's. Thankfully, with a life expectancy of perhaps 20 years, I won't have to suffer through much of it.

Five (5) months ago a repeat of the 1970's seemed inevitable, though the experts resisted that conclusion:

The economy is warm if not hot, the Administration is proposing $trillions in additional spending, and the Federal Reserve is promising to keep rates low.

Now everyone sees it.

One bright spot: liquor prices are about the same,
and there is plentiful supply.

WSJ, 10/13: Accelerating Inflation Spreads Through the Economy

U.S. inflation accelerated last month and remained at its highest rate in over a decade, with price increases from pandemic-related labor and materials shortages rippling through the economy.

The Labor Department said last month’s consumer-price index, which measures what consumers pay for goods and services, rose by 5.4% from a year earlier, in unadjusted terms.

WaPo, 10/15: Uncomfortable inflation is here, and it’s changing the economy

News this week that U.S. inflation is running at a 13-year high of 5.4 percent confirmed what many Americans already know as they juggle their budgets: Food, energy and shelter costs are all rising rapidly, adding to the strain Americans were already dealing with from the higher costs of hard-to-find goods such as cars, dishwashers and washing machines...

Workers are demanding pay increases because they can see their wages aren’t buying as much with so many everyday necessities costing more, including rent. That leads companies to hike prices more, then workers turn around and demand another pay raise. Economists call this phenomenon a “wage-price spiral.”

The evidence is especially noticeable in the items we buy weekly. Where I shop, prices for beef and gasoline are more than 50% higher than in 2019.

I don't drive much these days, and I've learned more chicken and pork recipes. Like the 1970's, we're making do with less.

The Ultimate Example

I still believe that eventually President Biden, Speaker
Pelosi, and Majority Leader Schumer will do the right thing.

The Wall Street Journal opinion page sheds a little more light on the process of budget reconciliation . [bold added]

The parliamentarian has already said that Democrats can use reconciliation to raise the debt limit, so why won’t they do it? As it happens, Mr. Biden gave that game away when he was asked Monday why Democrats aren’t using reconciliation.

“There is a process” that “would require literally up to hundreds of votes,” Mr. Biden explained. “It’s unlimited number of votes having nothing directly to do with the debt limit; it could be everything from Ethiopia to anything else that has nothing to do with the debt limit. And it’s fraught with all kinds of potential danger for a miscalculation, and it would have to happen twice.”

In other words, Mr. Biden admits that Democrats could raise the limit via reconciliation, but then they’d also have to take difficult votes on many issues on the Senate floor. Some of those votes might be unpopular. Mr. Biden is admitting that the reason is political—that Democrats want Republicans to spare them from having to take those tough votes.

Republicans have been hinting (actually some have been shouting) that President Biden is out-of-touch and even senile. From the above quote he doesn't sound senile to me. His handlers should let him speak more--I like this truthful Joe.

But back to the issue at hand: the editorial does communicate more information about Democrats and Republicans' respective motivations and the what of budget reconciliation ("difficult votes on many issues"). Just why these votes have to be taken through this still-mystifying procedure is not something that has been explained clearly to John or Jane Q. Public.

It's often been lamented that nothing works in Washington, and if these inside-the-Beltway rules crash the U.S. dollar and the world's financial system, the American people will view this as the ultimate example of dysfunctional government.

If you thought Donald Trump was bad, wait till you see what comes next.

Laundry Inequality

(WSJ photo)

When we stretched our finances to buy our first house--it had three bedrooms--over 40 years ago, we had to sit on bare floors in the living room and two of the bedrooms.

Despite the lack of furniture our first major purchase was a Kenmore washing machine and dryer from Sears. The time wasted driving a half-mile to the nearest laundromat and waiting in line for a machine on the weekends (each of us was working more than 40 hours a week and driving at least a half-hour each way) was at least half a day.

Compared to the nearby coin-operated machines in college or the apartment complex, the time-sink was intolerable.

Never had we derived such pleasure from new equipment--and we're talking about a time when we got our first color television and our first microwave oven (both gifts). It's not much of an exaggeration to say that having one's own washer and dryer is a big step to achieving the American dream.

We were reminded of that distant past when we read about a new problem, a coin shortage, that has afflicted the appliance-deprived: [bold added]

Now I need quarters only for San Francisco parking
meters,which currently charge $2.50/hr. minimum
(and I'd rather not give the new meters a credit card).

The scarcity of spare change—brought on as people leaned on digital transactions and fewer coins circulated—has pushed the quarter-dependent to extremes. Many have spent hours trekking across their cities in search of coins they used to easily procure from local bank branches. One couple hauled four loads of laundry across several states where they could use a relative’s machines. And in some buildings, the yearning for clean sweatpants has resulted in neighbors forging closer bonds.

The flow of change first slowed in the spring of 2020. Restaurants and retailers posted signs encouraging digital and credit card payments and even asked people to exchange spare coins. The problem eased toward the end of 2020 but made a comeback in March as businesses were preparing for an influx of cash transactions after vaccination rates ramped up. Around that time, coin requests from banks began to outpace deposits, according to the Federal Reserve, which provides cash to banks through its regional banks.

Now there isn’t enough coin to go around, and the central bank is limiting orders on pennies, nickels, dimes and quarters. Banks and other financial institutions deposited about 15% fewer coins at their local Fed banks through mid-July compared with the same stretch last year, the central bank said. Coin deposits were 45% below 2019 over the same period.

Some bank branches are saving coveted coin rolls for their customers, according to apartment dwellers who have asked for quarter rolls at banks where they don’t have accounts. Other banks are telling would-be washers that they have no change to spare....

Digital options, such as reloadable payment cards or smartphone apps are gaining ground, but quarters have long been the default payment option, said Matt Miller, president of Coin-O-Matic, which outfits laundry machines with a variety of payment systems.

Demand for machines equipped with digital payment capabilities has roughly doubled since the start of the pandemic, Mr. Miller said. The most popular digital payment method is an app that users load money for laundry and connects to laundry machines via Bluetooth. Washers and dryers that accept credit or debit cards are less common because they require real-time Internet connections, which can be difficult to guarantee in the basements where many laundry rooms are located.

Wealth inequality manifests itself in housing, transportation, health care, and diet, but take it from one who's been there, the washer-dryer gap is more important than everyone thinks.

Inflation: the Transitory Story

We didn't buy it at $15 a lb. Look at it now.

We have previously voiced our fear that 1970's-style inflation is back. At the ground level we consumers see the evidence all around us: rising prices at the pump, grocery stores, and the real estate listings in our neighborhood.

The Treasury and Federal Reserve still insist that the price spike is transitory, and we cannot unequivocally say they're wrong.

Economists still have some authority with your humble blogger and aren't completely Democratic-Party cheerleaders like the other social sciences. So I'll listen to them though they may take the Administration's side.

On the side of transitory inflation is Prof. Alan Blinder, former Fed Vice Chair:

If you’re worried about a return to the double-digit inflation of the 1970s and ’80s, relax. There is a lot of angst these days as a result of the stunning 5% inflation rate (for the year ending May 2021) in the last consumer-price index release. We haven’t seen a reading that high in 13 years, but the huge supply shocks of the double-digit days aren’t present, and the Federal Reserve won’t let inflation soar. It is certainly possible, however, that inflation will linger above the Fed’s 2% target for a while...

Much of this year’s inflationary surge can be traced to two transitory factors: bounceback from the anomalous negative inflation readings of early 2020 and bottlenecks as the economy reopens unevenly.

...there are three counterarguments [to the high-inflation argument].

First, this worry reflects Phillips curve thinking, which hypothesizes that low unemployment rates make the inflation rate rise. But inflation wasn’t rising before the pandemic despite a 3.5% unemployment rate.

Second, the bond market isn’t buying the argument. Inflation forecasts embedded in bond yields remain consistent with the Fed’s low target.

Third, much of the extreme fiscal stimulus that has been driving spending is transitory. Most pandemic relief spending will be ending soon, and I don’t think Congress will approve much more spending this year that isn’t paid for.

At the heart of the inflation story, like many other important issues of the day, is the battle between our fears (derived from past experience) and hopes (the professionals know what they're doing). Well, once in a while the experts are right.

Meanwhile, as we said in May, it would be wise to hedge your bets:

shift some investments into real estate, gold, art, or more stable foreign currencies that can keep up with dollar inflation. (I would recommend cryptocurrencies, but I don't understand them well enough.) Get out of bonds and low-growth dividend paying stocks. If you have variable-rate loans, convert them to long-term fixed-rate debt.

Good luck.

That '70's Show

My grandfather was a dad in his thirties during the Great Depression. Like many who lived through that period, he was extremely conservative in his finances and refused to take on debt (he did a home mortgage on his one-and-only house during the 1920's, before the Depression).

We baby boomers had a similar chastening experience during the "stagflation" of the 1970's. Many economists of the time argued that the U.S. could not pay for both the Vietnam War and the Great Society ("guns versus butter") without a massive increase in taxes. At the time the Federal Reserve couldn't "print money" willy-nilly, that is, buy unlimited amounts of Treasury debt, because the quantity of dollars was constrained by the amount of gold held at Fort Knox.

Richard Nixon caved to the intense pressure to de-link the dollar from gold ("go off the gold standard") in 1971. The money supply could now increase more freely, and all the bad things we hear about the 1970's---runaway inflation, a stagnant economy, fixed-income retirees losing ground (by the way, California property taxes at the time increased by double-digit percentages along with home prices, giving rise to 1978's Proposition 13 that capped property tax increases at 3%/year), gas shortages, wage and price controls, "windfall profits" taxes on oil companies--are an indelible memory for those of us who lived through that period.

Ronald Reagan and Paul Volcker (London Times)

Inflation was finally whipped, albeit painfully, by Fed Chair Paul Volcker during the early 1980's by limiting the growth in the money supply, almost as if we were back on the gold standard again. Treasury rates rose to 15% or higher, and consumer and mortgage interest rates followed, before getting back to normal a couple of years later.

As a boomer now living off of savings, I have no desire to experience another round of 1970's-like inflation, and I certainly don't want to live through another "cure."

To be fair, there have been several instances after the Volcker era when the money supply rose dramatically, usually in response to a financial crisis, and inflation did not occur. Many economists have convinced themselves that the world has changed, and that we can "control" inflation.

Perhaps because I entered the workforce and paid bills during the 1970's I give more weight to 40-year-old negative experiences than latter-day economists, but I believe big inflation is coming.

The economy is warm if not hot, the Administration is proposing $trillions in additional spending, and the Federal Reserve is promising to keep rates low. [bold added]

The Fed has kept interest rates near zero for the past year and signaled rates won’t change for at least two more years. It is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation—that is, real yields are deeply negative —for only the second time in 40 years.

If we are going to reprise the 1970's, shift some investments into real estate, gold, art, or more stable foreign currencies that can keep up with dollar inflation. (I would recommend cryptocurrencies, but I don't understand them well enough.) Get out of bonds and low-growth dividend paying stocks. If you have variable-rate loans, convert them to long-term fixed-rate debt.

It is possible that the economy will not experience inflation if high government spending on the wrong things (unemployment insurance extensions that keep workers home), high taxes, and high regulation results in stagnation. But an economic boom and low inflation? No way...and I hope my pessimism is wrong.