Advanced Personal Finance

Here’s one from the ‘news you can’t use’ file.  Zimbabwe, home of 165,000% inflation, recently issued a $500M bank note.

It’s worth about $2 US dollars.  Oof.

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Here’s a new spin on debasing the currency.  According to this story, a Congressional bill due for a vote soon would instruct the US Mint to start stamping pennies and nickels in steel instead of their current alloys.

The cost of a penny is currently over one cent (1.26 cents) and a nickel costs 7.7 cents to mint - 50% more than it’s worth.

The rising cost of metal commodities is to blame.  Copper is near record high prices and zinc costs four times what it did in 2003.

So not only in the Fed debasing the currency, so is Congress, in a manner of speaking.

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As if investing in currency wasn’t speculative enough, I saw a laughable ad in USA Today…um, today.

It was an advertisement for purchasing the hard currency of…Iraq. Yes, folks, you too can get in on the bonanza that is the new Iraq. By sending in your check or money order, you’ll receive actual authentic Iraqi currency.

Use it as toilet paper! Makes a great floor covering for those training their dog! Great for starting fires!

Hurry, though. Apparently “Inventory is limited.”

Ugh.

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The San Fransisco Federal Reserve Bank has posted a neat little simulation of what it’s like for the Fed to try to set correct monetary policy.

In the game, you get the opportunity to change the federal funds rate every three months.  You react to ‘news’ and try to keep the economy on an even keel.  I’ve tried it a couple of times and even though there’s only one variable it’s surprisingly hard to do.

You’ve always wanted to be the Fed chairman. Now’s your chance.

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I’m a big admirer of investing legend John Bogle. Whenever I see an interview of him, I read it. Fortune had one recently and there was one question and answer I’d like to highlight.

The immediate concern for most investors is the subprime market, but over the long term what do you see as the biggest challenges facing the U.S. economy? - BEN LERMAN, CHICAGO

Externally, we are faced with $1.5 trillion already poured into Iraq and Afghanistan. So you have enormous expenditures in a corner of the world that is important to us, but it is very unwise to think we can bring democracy to a place that doesn’t share our values. There are also the challenges from low-cost production in China and India.

At home, we have a tremendous future financial problem with the federal deficit. We’ll have to take action on Social Security someday. Government spending has gotten to the point where we will have to either cut spending or raise taxes. Another problem is this deadlocked Congress. And I see the quality and caliber of our presidential nominees, and I am not impressed. It raises the question of whether this country is even able to run itself anymore.

Although he doesn’t get into it, he does nail the future problems of the U.S. The federal deficit in general and unfunded Social Security and Medicare liabilities in particular are the 800 pound gorilla in the room nobody wants to acknowledge.

And his last statement is killer: “It raises the question of whether this country is even able to run itself anymore.” Wow. Powerful stuff.

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