Black Coffee: The Real Consequences of Fake Money and Cheap Credit

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.

I hope everybody is having a great weekend! Okay, away we go …

We stand today at a crossroads. One path leads to despair and utter hopelessness; the other leads to total extinction. Let us hope we have the wisdom to make the right choice.

— Woody Allen

Credits and Debits

Credit: Hey! In case you missed it, the market party on Wall Street is back, as stawks continued their miraculous recovery from December’s panic attack. For the week, the Dow gained 3%, the S&P 500 advanced 2.9%, the Nasdaq finished 2.7% higher. As for the Russell 2000, it’s up 9.3% since January 1st; that’s its best start to a year since 1987. Hooray!

Debit: So, what’s driving the sudden surge in stocks? Two words: central banks. Their balance sheets began expanding (yet again) at the height of the December market downturn — and this week China injected $170 billion of freshly-printed yuan into the market. It all has to go somewhere, and most of it is going into stocks — both here and abroad. Enjoy the illusion, because it’s all smoke and mirrors. #FakeMarkets

Credit: Despite the recovering stock market, American consumers this month are the most downbeat on the economy since November 2016. The public’s sour mood comes after expectations reached a 16-year high just three months earlier. What was going on just three short months ago? Oh yeah, the Plunge Protection Team was on vacation because major stock market indices were still near their all-time highs.

Debit: The legal minimum wage for New York City employers climbed to $15 per hour from $13 on January 1st — and $11 per hour in 2017 — giving fast-food, retail and other employees a bump in pay. But some restaurant owners in the Big Apple say the latest minimum wage hike is forcing them to cut workers’ hours just to stay afloat. Huh. Well … Nobody could have ever seen that coming. Or this …

Credit: Speaking of restaurants, new research suggests soaring restaurant prices are signaling that inflation is higher than what the government claims; diners have seen their bills grow 8% annually since 2009 — meaning prices are doubling every 8.5 years. Researchers say dubious government inflation data could explain the rapid rise in consumer debt, and the disconnect between perceived versus reported quality of life. Unfortunately, what it can’t explain, is this:

Debit: Meanwhile, the Fed’s biggest proponent for further rate hikes has now reversed course, saying after raising its benchmark rate to 2.25% last month, the Fed can pause further rate increases for the foreseeable future. That’s odd. A booming economy should easily be able to handle interest rates twice that high. Hey … you don’t think the economy is actually weaker than we’re being told, do you? Nahhhh.

Credit: As Zero Hedge notes, “One can say that a decade of record liquidity injections and (0% interest rates) means the Fed is years behind the normalization process. But since they can barely weather a 20% drop in the S&P before halting rate hikes at 2.25%, it’s painfully clear that Ben Bernanke was spot on when he said that there will be ‘no rate normalization in my lifetime‘.” At least not if the Fed can help it.

Debit: Did you see this? A new study has found that most millennials expect to die in debt — and student debt is the main reason. Over 60% of Americans aged 18 to 37 are unsure when — or if — they’ll ever be able to retire their debt. Among those who say they’re uncertain about their ability to eliminate the red ink, 20% expect to die in debt. Sad. And just more proof that credit is financial crack. On steroids.

Credit: Of course, you can blame government loans for driving up college costs to the insane levels we have today. And as economist Ryan McMaken notes, “Were it not for subsidized (education) loans and tuition, the number of students able to afford degrees would shrink considerably.” He’s correct. If we eliminated the loans, then colleges would have to slash prices — and become much leaner — to prevent empty classrooms.

Debit: Needless to say, the student loan woes are just a subset of the larger issue: a global debt-based financial system that’s quickly approaching its mathematical limit. The time is coming when central banks will only be able to keep their fraudulent fiat system from imploding by distributing enormous sums of cash directly to consumers and governments. Ironically, that “antidote” will turn out to be fiat’s fatal poison.

Debit: In some places the banksters have performed small-scale trial runs of their “antidote” in the form of universal basic income. And this week, Sikkim, a small Indian state in the Himalayas announced an ambitious plan to implement the largest universal basic income program to date — they’ll be dispensing “free” cash to every one of its 610,577 citizens. No, really.

Credit: Then again, the coming collapse is about more than wanton debt; there are other fathers. As MN Gordon notes, “Economies mirror the veracity of the money and credit that flow through them. An economy with sound money and tight credit is industrious, thrifty, and honest. Whereas an economy with fake money and cheap credit is slothful, gluttonous, and deceitful.” Indeed, it is — and monetary karma is coming.

By the Numbers

Here are the tax rates for the 10 highest income tax states in 2018:

13.3% California

11.0% Hawaii

9.9% Oregon

9.85% Minnesota

8.98% Iowa

8.97% New Jersey

8.95% Vermont

8.95% District of Columbia

8.82% New York

7.65% Wisconsin

Source: TurboTax

The Question of the Week

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Last Week’s Poll Result

What do you need the most?

• Time (44%)
• Love (31%)
• Money (23%)
• Power (2%)

More than 1600 Len Penzo dot Com readers answered this week’s survey question and it turns out that, in the pantheon of wants and needs, a strong plurality (4 in 9) say they want more time above all else. For those with plenty of time, love was the predominant need. I’m happy to see that just 1 in 50 readers craved power more than time, love or money.

If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.

Useless News: A Bargain in the Garden

Adam was hanging around the Garden of Eden feeling very lonely.

So, God asked him, “What’s wrong with you?”

Adam said he didn’t have anyone to talk to.

God said that He was going to make Adam a companion and that it would be a woman. He said, “She will gather food for you, she will cook for you, and when you discover clothing, she will wash it for you.

“She will always agree with every decision you make and she will not nag you, and will always be the first to admit she was wrong when you’ve had a disagreement.

“She will praise you!

“She will bear your children, and never ask you to get up in the middle of the night to take care of them.

“And she will never have a headache.”

So Adam asked God, “What will a woman like this cost?”

God replied, “An arm and a leg.”

Then Adam asked, “What can I get for just a rib?”

Of course the rest is history!!!!

(Editor’s note: Ladies, please address your complaints to our resident grandfather, RD Blakeslee.)

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. Manitoba (1.68 pages/visit)
2. Quebec (1.62)
3. British Columbia (1.59)
4. Ontario (1.58)
5. Saskatchewan (1.52)

9. Newfoundland and Labrador (1.36)
10. New Brunswick (1.34)
11. Yukon Territory (1.33)
12. Northwest Territories (1.20)
13. Nunavut (1.13)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Manitoba, eh …) — or not (ahem, you hosers living on the frozen Nunavut 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!

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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 me at: Len@LenPenzo.com

After reading a recent guest post here from Len Penzo dot Com reader, Gayle Tate, on the high cost of being poor, Pierrette Brousseau left this comment:

Great post — candid and refreshing! Anybody who thinks owning a business and being poor is “glamorous” is a space cadet.

I agree — frankly, they should Apollo-gize for even thinking that way.

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.

Photo Credit: (coffee) brendan-c