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.
Okay, let’s get right to it this week …
Whoever is for higher taxes, feel free to pay higher taxes.
— Adam Carolla
Credits and Debits
Credit: The Dow crossed the 20,000 mark for the first time ever on Wednesday; the S&P also hit another all-time high on the same day. For those who are paying attention, the Dow is up 207% since its March 2009 low. Hooray!
Debit: Looking at the Dow you’d never know that US GDP was just 1.6% in 2016 — that’s the lowest print this decade. By the way, the US hasn’t had a year with at least 3% GDP since 2005 and the last 4% year was in 2000 — despite adding $15 trillion to the National Debt since then. This downward spiral will continue until our failing debt-based monetary system is replaced — or implodes beforehand.
Debit: Of course, stock investors around the world can thank central banks for the eight-year bull market — and 80% of the world’s central banks say they plan to continue buying stocks. Frankly, they have no choice; in an odd way, it has become a necessary component for keeping their Ponzi scheme going and maintaining faith in their failing fiat currencies.
Credit: Then again, as the Wall Street Journal points out, “Central banks care relatively little about whether such investments make profits or losses because they can always print more of their currency. So risk is less important.” Sadly, the only thing that matters to these bankers is keeping the gravy train rolling by maintaining their monetary illusion for as long as possible.
Credit: It may be true for the central bankers that risk is “less important” in the short run but, as financial analyst Bill Holter notes, while central banks can buy equities with their government-sanctioned green confetti that’s created out of thin air, the strategy has a fatal flaw: it eventually leads to currency destruction.
Credit: Driving home the absurdity of central bank stock-buying, Holter asks a logical question: “How does anything without (intrinsic) value ‘support’ the price of what is most important to everyday life and thus the real economy?” (Spoiler alert: It can’t! At least not forever.)
Debit: Yes, yes … I hear you: the US dollar is still king. Well … it is for now. But, as Simon Black points out, comparing prices of McDonald’s Big Mac around the globe clearly demonstrates why the buck is also currently overvalued against almost every currency in the world.
Credit: Eventually, a new system will have to be put in place — and many people are betting on a new gold-backed dollar. Well … assuming the US still has all of the gold it says it does.
Credit: If the US ever does return to a gold-backed currency, cuckoo exchanges like this between those who actually understand that a monetary system based upon real money is in the people’s best interest — and the central bankers who insist on maintaining the current scabrous and sinister debt-based Ponzi scheme they’ve imposed on Americans since 1913 — will finally become a thing of the past:
Debit: In other news, the Governor of the People’s Democratic Socialist Utopia of California, Jerry Brown — a.k.a. Gov. Moonbeam — unveiled his proposal for bailing out the state pension fund: raise gas taxes 42% and vehicle registration fees 141%. You can’t make this stuff up, folks. Sadly, for private-sector
working residents slaves like myself, the odds are he’ll get his wish. Forward!
Debit: Did you see this? Apparently, as the inevitable repeal of the “Affordable” Care Act draws ever closer, Americans have — incredibly — undertaken a last-minute love affair with Obamacare. Whaaa? Hmm. Perhaps Stockholm Syndrome is a very real phenomenon after all.
Credit: On the other hand, considering the abject failure of the ACA — and the widespread success of politicians pledging to repeal it since 2010 — it’s
more likely absolutely certain that the report is just more fake news, based on data generated by the same discredited organizations who gamed the recent US presidential polls.
Debit: Needless to say, rational people warned ACA advocates that, with more than 13,000 pages of regulations, the law would never reduce healthcare costs; indeed, that red tape only exacerbated healthcare costs for most Americans. In fact, the cost of government regulatory compliance on every facet of the US economy currently costs $20,000 for every American worker.
Credit: Can you imagine how much better off the US economy would be if all of that government red tape — and the bureaucrats who create and enforce them — magically disappeared and every worker had an additional $20,000 in their pocket each year to spend or invest? I don’t know about you, but I’m starting to feel all tingly inside just thinking about it.
By the Numbers
Congress will be moving on starting construction of the border wall. Here are a few numbers that help to illustrate the wall and its effects:
2000 The approximate length of the US-Mexico border.
415,000 The number of illegal aliens caught crossing the US southern border in 2016.
50 Maximum height of the proposed wall; it would be made of concrete.
700 Miles of new border fencing previously authorized by The Secure Fence Act of 2006.
652 Miles of new fencing already built under The Secure Fence act. As a result, work on the the first 48 miles of the new wall could begin immediately.
$12,000,000,000 Estimated cost to build the proposed wall.
Source: Palm Beach Post
The Question of the Week
Last Week’s Poll Results
Generally speaking, what time do you usually go to bed?
- 9:30 pm or earlier (22%)
- 10:00 pm (21%)
- Midnight or later (20%)
- 10:30 pm (18%)
- 11:00 pm (12%)
- 11:30 pm (6%)
More than 1300 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 2 in 5 say they generally hit the sack by 10:00 pm. Frankly, I expected that figure to be a lot lower. Another 1 in 5 don’t lay their head down on the pillow until sometime after the stroke of midnight — which is great if you can do it. Well … unless your name is Cinderella.
Other Useless News
Here are the top 5 articles viewed by my 12,029 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 4 Good Reasons Why Some Quarters are Painted Red
- The 7 Most Popular Ways to Commit Financial Suicide
- How People Spent Their Money During the Past 75 Years
- How Thinking Outside the Box Can Save You a Fortune
- The Only New Year Resolution That Really Matters
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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
Kevin had this to say after finding my article highlighting a hack for annoying DVDs with “unskippable” trailers and ads:
It’s disgusting how the entire world is slowly limiting people’s freedom. Soon they’ll decide when the DVD player lets you watch your movie.
I tell you what — they better not mess with my Raisinettes.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-
Lauren P says
Len, your arguments re: dollar printing and nat’l. debt have helped me convince my husband to buy silver. Now if I could just find a column about how jewelry counts towards that (Valentine’s Day IS coming, you know… ;o)
Len Penzo says
Jewelry and real silverware do count toward that, Lauren! The trouble is, in a crisis situation, it’s harder to correctly ascertain the true value of jewelry and silverware than it is the value of a gold or silver coins and bars.
I believe Mike Maloney actually sells “bullion” jewelry that supposedly helps overcome that issue at his goldsilver.com website.
Oh you touched on a topic near my heart…..fat cats complaining they don’t pay enough taxes. (…..cough Warren Buffet cough….) He can structure his income to pay a higher rate but he takes hi income in dividends and capital gains instead of salary, so he pays a lower rate. That is his choice. Most people don’t have that choice. And I remember a business reporter one time asking another ultra wealthy person who advocated higher rates, if he made voluntary contributions to the U.S. Treasury. His answer was “well, that’s not the point”, In other words….no. If Buffet compares his situation to this secretary’s one more time I think I’ll reach through the TV screen and choke him!
And on to the ACA (yeah right)…You noticed also that before the election everyone hated Obamacare but since Pres. Trump was sworn in now everyone loves it. Pure BS. Probably the same polls that predicted Clinton would win in a landslide.
Len Penzo says
I have a theory. The left is becoming so unhinged because there is finally enough people on the Internet to effectively shine a light on their misrepresentations and lies. In the past, the primary outlet where everybody got their information was from the left-dominated mainstream media, which propagated their narrative unchallenged for years, save for small counterpoints they allowed on the OpEd pages and Letters to the Editor.
Not any more.
Today, thanks to the Internet, there are just as many outlets able to broadcast their counterpoints to the left’s narrative — so people are able to get both sides of the story. As a result, more and more and waking up.
Jay @ ITF says
Thanks for another great weekend recap Len. I always enjoy reading these, and I’m always amazed at the insane debt statistics. Somehow markets continue to just creep higher!
Len Penzo says
Thanks for stopping by every week, Jay!
Yes, they keep kicking the can down the road, but every time they do the can gets larger, heavier and harder to move. At some point, the bankers will kick the can but only manage to stub their toe.
Sara King says
Len, I read somewhere if the U.S.A. taxed every person in the highest tax bracket at 100%, it would only pay for an additional month or two of expenses.
Have a great weekend!
Len Penzo says
That is correct, Sara. You have a nice weekend too!
That is a very nice sound bite but it misses the exact point it is trying to address.
The people IN the highest tax bracket are not the problem, it is the people who SHOULD be in the highest tax bracket but AREN’T. (however you define “highest” … 39 … 36 …. 25 … …. that is a separate independent topic)
The people IN the highest tax bracket are high wage earners … they are doctors, laywers, PhDs … people like me who take home less than 40-50% of their wages. But they aren’t very many of them. That is why forcing them to pay 100% rate doesn’t generate that much money.
This issue is about the bigger chunk of income of millionaires and mega millionaires that isn’t wage income and how it is structured (cap gains, carried interest, loophole this, loophole that) so they get away with 15% or lower rates.
By all means, if you give money to a startup / IPO, that money is directly used to hire new people / build new products (because the stock price you pay goes into the company’s raised capital). Then, Im all for even a zero percent tax on your capital gain when you sell the stock after ward.
But any other traded stock / commodity … just changes hands. The money you pay doesn’t go back to foster innovation …. so, I think you should get rid of all other forms of “long term capital gains” and advantaged rates.
Just keep the system simple. Flat or slightly progressive. You earn more, you pay a equal / flat or slightly higher rate.
That video of Ron Paul and Ben Bernanke never gets old. The look on Bernankes face when asked if gold is money is priceless.
Len Penzo says
The central bankers try to downplay gold’s importance in the monetary system, and yet they hold it in their vaults.
If you believe they only hold gold because of tradition, I have some swampland I’d like to sell you!
Most govt regs could be eliminated tomorrow and nobody would miss them. Take regs on which light bulb people can and cannot use or the size of their toilets as a good example. But the regs that are the worst are the ones that impose costly red tape on businesses. Most of those are no value added other than employing more govt workers or increasing fees and taxes to help cover their crazy pensions.
Len Penzo says
The biggest problem with most of these regulations are that many are enacted by unelected heads of various government agencies; the EPA probably being the biggest offender of them all.
I think the Big Mac story has it all backwards. If it requires more dollars to purchase a BigMac in the US than elsewhere, then the currency must be worth less, not more as the article suggests. Who writes this stuff?
Maybe a better reply would be that McDonald’s must think that the USD is less valuable than the other currencies. Then again, wages are likely the bigger factor in the varying costs of a Big Mac.
Len Penzo says
It’s counterintuitive, I know. The key assertion Simon Black is making is that a Big Mac should cost the same (using the dollar as a benchmark) in every country. That’s debatable, especially when you consider the cost of labor, as you point out below. That being said, when one considers our trading deficit with the rest of the world, there is no doubt that the US dollar is woefully over-valued; the only reason it still has any purchasing power at all is because it is the world’s reserve currency.
Do you think it’s right and just to let Mexico pay for the wall and will it also benefit Mexico from the construction of the wall?
Len Penzo says
Yes … and there are countless ways to make Mexico pay for the wall without them having to directly pay out of by pocket by “writing a check.”
KAREN YOUNG says
Ok, here’s a story for you about needless gov’t regulation. I have a small S-corp – I am the Pres, treasurer and secretary. My husband is the Vice Pres. Because my husband has a position in the company the state of HI wants me to pay for workmans comp insurance, in case he gets hurt during our half-hour quarterly meetings.
Len Penzo says
I’m not surprised, Karen. Wow.
Regarding the quote at the beginning of this article, the last name is Carolla, not Corolla. Weirdly, I was listening to his podcast as I read this article.
Len Penzo says
Fixed it. Thanks, Amanda!