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.
Let’s get right to it today …
Credits and Debits
Debit: Venezuelans lined-up outside banks this week to deposit backpacks full of cash after their socialist government followed India’s lead and laid down the law by giving everyone three days to turn in their 100-bolivar notes— worth less than $0.03 — before they became null and void.
Debit: One Venezuelan objected to the decree, saying, “I’ve been saving for so long, withdrawing money every week — and for what? Nothing!” Uh huh. That’s what happens when you put all of your faith into fiat money, amigo — not to mention the capricious politicians who can steal it from you with a mere edict.
Debit: You know the war on cash is getting out of hand when even Australia is now openly thinking about getting rid of their $100 note. I think it’s fair to say, beyond a reasonable doubt, that the officials in Oz have gone troppo too.
Debit: Of course, central banks need to move the world toward a cashless society because its the only way to maintain negative interest rates over the long term — and prolong the life of their failing fiat currencies a little while longer.
Credit: It’s a matter of record that the US dollar is both a fiat currency and the backbone of the debt-based international monetary system. Yes, the system is mathematically unsustainable and on its last legs — but for now economic reality is in abeyance, as the dollar’s resulting exorbitant privilege continues to provide Americans with an artificially-high standard of living.
Debit: The US is in trouble, folks — and the evidence is everywhere. Exhibit A is a fiscally-cavalier public, exemplified by voters in Montebello, California, who overwhelmingly approved a $300 million school bond tax — even though district administrators failed to identify a spending plan for the funds prior to the vote. Hey, why not? After all, only property owners have to pay the tab!
Debit: Then there’s Exhibit B: America’s $20 trillion national debt. In fact, during the past two months alone, the US bled another $181 billion in red ink — despite raking in $213 billion in income taxes. If you include unfunded liabilities such as Medicare and Social Security, we’re $104 trillion in the hole. I know … the Fed can always print more!
Debit: This week the Dallas city council provided Exhibit C, when they offered police officers a 27% pay increase over the next three years. Wow. Can you imagine if the private sector offered annual raises like that?
Credit: Yes, these are the very same public servants in Dallas whose gold-plated pension fund will soon go bankrupt unless it gets a $1.1 billion infusion from city taxpayers; that’s Exhibit D. It used to be that government existed to serve the people — clearly, that concept was turned on its head sometime ago.
Debit: Frankly, it’s hard to justify salary increases like that for municipal employees, especially in the face of Exhibit E, behold: between 1980 and 2014 income for the bottom half of Americans rose just 1%. It wasn’t always that way. Between 1946 and 1980 — when the American dream was still alive — real wages for that group actually doubled.
Debit: Exhibit F is the disappearance of generally accepted accounting principles (GAAP) and financial transparency. According to FactSet, more than 90% of S&P 500 companies are guilty of reporting non-GAAP adjusted earnings figures each quarter. It’s also no coincidence that 80% of the time those adjusted numbers make corporations look financially better. Think: lipstick for pigs.
Credit: Indeed, financial analyst Dave Kranzler makes the case by noting that, “If GAAP accounting standards from 1999 were applied to current earnings, both the Dow and S&P 500 would be at record valuation levels.” Imagine that. Caveat emptor.
By the Numbers
In North Dakota, 42 people collect government assistance for every 100 people who work outside the government and pay taxes. That is the lowest ratio of any state. Here are the number of dependents for every 100 private sector workers in the six states that currently have more people on the dole than private-sector taxpayers to support them:
148 New Mexico
116 West Virginia
114 California
111 Mississippi
108 New York
103 Arkansas
Source: Forbes
The Question of the Week
[poll id=”142″]
Last Week’s Poll Result
How many bathrooms does your current home have?
- Two (52%)
- Three (29%)
- One (14%)
- Four (3%)
- More than four (2%)
More than 1300 Len Penzo dot Com readers chimed in last week and it turns out that 1 in 20 of you actually live in a home with at least four bathrooms. On the other hand, 1 in 7 say they only have a single bathroom. My home has three; well, 2.5 if you want to get technical, but when nature calls — that so-called “half bath” is good enough!
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. British Columbia (1.47 pages/visit)
2. Quebec (1.37)
3. Alberta (1.35)
4. Newfoundland and Labrador (1.34)
5. Saskatchewan (1.32)
9. New Brunswick (1.29)
10. Northwest Territories (1.25)
11. Nunavut (1.25)
12. Prince Edward Island (1.13)
13. Yukon Territory (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in British Columbia, eh) — or not (you hosers living on the frozen Yukon tundra) — please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on Twitter!
3. Subscribe via email too!
And last, but not least …
4. Consider becoming a Len Penzo dot Com Insider! Thank you.
Letters, I Get Letters
Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com
After reading my article explaining why waterbeds are for suckers, Bill Murry left a comment with several interesting counterpoints, including this one:
Your back problem is your opinion.
Interesting. Can you tell me how my back is feeling today? If it’s sore I want to take some aspirin for it.
I’m Len Penzo and I approved this message.
Photo Credit: breweddaily.com
Order in the court! Let’s hope Trump can turn things around.
Have a great weekend Len!
You too, Sarah. Sadly, I’m afraid there is nothing Trump can do in the long run to fix things because the real problem is the international monetary system is broken. He may be able to provide some temporary relief by rolling back regulations and cutting corporate and personal income taxes, but until we get a new monetary system our current negative trajectory will continue. The sad thing is it looks like Trump will be the stuckee holding the bag when the system finally implodes, although it won’t be his fault.
Thanks for another great weekend update Len. I had a friend visiting Venezuela this week and it was crazy to hear a first hand account of how it was so difficult to get cash. Scary to imagine people are living like that everyday.
With regards to US National debt (and municipal debt as well), I wonder how it will be financed if interest rates keep going up. If the trend continues I’m worried that interest expenses to pay the piper will start to eat up a larger and larger portion of income.
Thanks, Jay.
To answer your question, with China and Japan no longer buying our Treasuries, the US will end up financing its borrowing by having the Fed blatantly monetize the debt until everything goes boom.
I agree with everything you say and am hoping that things might change a tiny bit with the new administration. The entire electronic currency thing is simply an easy way for the government to simply seize anything they want from your bank account, brokerage accounts etc., as they did seize our General Motors investment when bailing them out. One day it was in the account and the next….poof….it was gone. And don’t you think the Dallas police pay raise was to avoid a mass walkout in light of the murders of the police and the subsequent resignation of 99 officers? I’m truly surprised cities of any size can even get people to become police officers in today’s anti-police climate.
Hi Kathy … good comments. Yes, clearly the raise offered to the Dallas PD was meant to staunch the run of early-retirements. The trouble is, despite the current climate, there will never be a shortage of people willing and able to become police officers — unlike doctors, engineers, and other specialized fields. I’ll use my own profession as an example; the starting salary for police officers is now approaching — and in many cases surpassing — the starting salaries for engineers. I appreciate all of the hard work police officers do, but that is ludicrous, considering the pool of available engineering candidates is several orders of magnitude smaller than the available pool of potential police officers.
Of course, the difference is that public sector salaries can be artificially inflated because, unlike engineering and other specialized fields in the private sector, the politicians who set their pay rarely ever feel the need to worry about the bottom line.
It’s been a slow process but the bankers have been gradually increasing people’s comfort level with the use of worthless paper over real money. First they got rid of gold coins and replaced them with gold certificates. After the sheep got used to that they went a step further by instituting the gold backed dollar. Then they eliminated silver coins. Then Nixon broke the last tie of the dollar to any real value at all when he closed the gold window.
Almost 50 years later and now they are talking about getting rid of large cash bills to “fight crime” That day is coming soon. It will be the last step before they eliminate all cash and make all transaction electronic. Thats when they will have complete control over us. Nothing to stop them at that point from making it impossible for anyone TPTB don’t like to buy anything just by cancelling their “electronic transaction cards”.
Most disturbing is most of the general public (the sheep) are lapping it all up.
Freedom cannot exist without an economy based on honest money (gold and silver).
That about sums things up. I’m not sure things will get that far though before the whole system seizes up. I do find it amazing how many people are in favor of converting from cash to all-electronic transactions — they just don’t think things through.
Hey Len,
Just curious if you’ve seen Laurence Kotlikoff’s “You’re Hired – A Trump Playbook For Fixing America’s Economy” and what you thought about it.
Enjoy your blog!
Joe
Thanks, Joe. I started to read it and he noted that his playbook is essentially a redux of the economic plan he presented on his website when he was running for President, which I read earlier this year. Here is a repeat of a comment I left on Greg Hunter’s USA Watchdog website in October regarding that plan:
“I went to (Kotlikoff’s) campaign website. Looking at his retirement and healthcare plans, he clearly thinks government is the solution for what ails us. I’ll pass, thank you. Amazingly, he also calls for price caps on healthcare — you would think an Ivy League economist would know that when price caps are imposed on products and services the end result is always shortages. Then again, considering the Federal Reserve is littered with the same Ivy League economists, maybe not.”