Black Coffee: America’s Faustian Bargain

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.

Well … another busy week is behind us. So with that in mind, let’s get this party started …

Money is multiplied in practical value depending on the number of W’s you control in your life: what you do; when you do it; where you do it; and with whom you do it.

— Timothy Ferriss

Be thankful for problems. If they were less difficult, someone with less ability might have your job.

— Jim Lovell

Robotics aren’t the only job killers out there; outsourcing steals far more gigs than automation.

— Daniel Lyons

Credits and Debits

Debit: Did you see this? The Los Angeles Rams won the Super Bowl on Sunday. For the record, the Rams won the game despite losing the opening coin toss – that was the eighth year in a row the team that lost the opening toss won the game. The Rams also wore their white jerseys; 14 of the last 18 Super Bowl winners have worn white. Let’s hope those are all just coincidences, as this is what happened to the stock market – and the NASDAQ, in particular – the last time the Rams won the Super Bowl:

Debit: In other news, the latest producer price index (PPI) numbers for January were released on Tuesday; the PPI measures final demand goods and services. For those counting at home, the January PPI increased 1%, which was double Wall Street’s estimate of 0.5%. Over the past 12 months the gauge rose an unadjusted 9.7% – that’s just a hair under the all-time high. But just look at how prices have taken off since the pandemic started:

Debit: Unfortunately, higher producer prices eventually get passed on to the consumer. And to illustrate that point, a record 60% of surveyed corporations say they’ve already raised prices over the past three months, while another 45% say they plan to raise prices by April 30th. Both of those figures are the highest since 1975, which also happens to be the very first year of this survey. Why am I not surprised?

 

Debit: In case you’re wondering, thanks to price inflation, last year the typical American family spent an extra $600 on gasoline, $70 on electricity, $300 on natural gas and $1000 on heating oil. Cumulatively, the average American household paid about $1000 more in energy costs in 2021 compared to 2020. Now here’s the kicker: Because energy is such an important commodity, those higher prices are now baked into the costs of virtually all goods and services bought and sold in the economy which, in turn, contributes to across-the-board inflation.

Credit: Inflation also provides a misleading boost to the nominal GDP figure that is reported by the government on a quarterly basis, which is why macroeconomist Alasdair Macleod noted this week that politicians and central bankers point “to GDP growth as a primary measure of economic performance; but this confuses growth with progress, where quality of life is the driving factor.” Macleod goes on to say that using GDP to measure economic health is folly because, mathematically, GDP actually measures the quantity of currency in circulation. In other words: It’s a deceptive statistic that helps the Fed make the case for this:

Debit: Speaking of circulating currency, if growth in the “money” supply closely tracked a concomitant growth in products and services, then GDP growth would be a fair measure of economic health. Needless to say, most of the money supply growth over the past decade – as well as the current bout of raging inflation – has been the result of printing money out of thin air. Imagine that.

Debit: The truth is, many so-called “experts” who conflate GDP with economic progress will also insist that an expanding economy requires rising prices. However, that’s a ludicrous assertion; for example, between the end of the US Civil War and the inception of the Fed in 1913, Americans enjoyed more than 40 years of economic expansion with mild deflation under the gold standard – which increased the purchasing power of everybody’s long-term savings. Sadly, after more than 50 years of unfettered fiat currency printing, and with inflation now raging, it appears the chickens are finally coming home to roost.

Credit: It’s no coincidence that America’s transition from a manufacturing powerhouse to an economy dependent on financial services kicked off with the birth of the fiat dollar. But as Charles Hugh Smith explains, it was a detrimental transformation because “financialization doesn’t create value by producing goods and services, but by exploiting credit and leverage to reap big money.” Over time, Smith says those easy profits made it woefully apparent that, in today’s world, “producing goods and services that create jobs is for losers.” Yes; yet another good reason why there’s a labor shortage. But not to worry … the Fed is on it:

Debit: By the way, for those who excuse the offshoring of our manufacturing base because it led to an influx of less-expensive imports, Smith says: “Well-paid shills tally up all the ‘savings’ generated by crapification [sic], but they ignore the immense losses in utility and durability. A $500 appliance that lasts 20 years without any repair is far less expensive than a $400 appliance that fails in four years and can’t be repaired, or the repair costs almost as much as a new appliance. Hapless consumers of crapified [sic] goods end up paying more for poorly-made junk that falls apart or fails as cheap electronic components blink off.” Yes; and in more ways than one.

Debit: Of course, by shipping good-paying manufacturing jobs overseas in exchange for slightly lower prices, the United States sold its economic soul to the devil. Ever since the dollar’s anchor to gold was broken in 1971, the US has not only been losing high-quality American-made consumer goods but – more importantly – the high-paying jobs that came with them and provided a higher standard of living for its citizens. Unbelievably, it’s a problem the US proceeded to make even worse with the passage of NAFTA in 1993. But, hey … it’s not as if we weren’t warned:

Debit: Today, there are no longer enough good high-paying jobs to provide the entire US population with the same standard of living it had in 1971 – which is why people are demanding “a living wage” for low-skilled entry level jobs that in better times were never intended to be a career, let alone support a family. Even so, the American economy has become so atrophied that many people today argue with no hint of irony that the lower-cost low-quality imported goods the US enjoys are a godsend due to the lack of high-paying manufacturing jobs. Well … at least until the supply chains break.

By the Numbers

Among the 50 industries with the most employees, here are the ten where wages are currently growing the fastest, relative to their employment opportunities. This shines a light on the industries that are currently having the most trouble attracting new employees, regardless of whether the number of jobs required for that particular industry are rising or falling compared to the previous year:

10 Telecommunications

9 Corporate Management

8 Credit Intermediation

7 Electronics Sales

6 Nursing and Residential Care

5 Computer and Electronics Manufacturing

4 Securities, Contracts and Investments

3 Non-Internet Publishing

2 Automotive and Auto Parts Dealers

1 Hotel Accommodations

Source: Magnify Money

The Question of the Week

[poll id="412"]

Last Week’s Poll Result

How much of your income are you currently setting aside for retirement?

• More than 15% (48%)
• None (22%)
• 11% – 15% (13%)
• 1% – 5% (10%)
• 6% – 10% (7%)

More than 2100 Len Penzo dot Com readers answered last week’s poll question and it turns out that almost half of you are saving more than 15% of your income for your golden years. On the other hand, more than 1 in 5 say they aren’t currently saving a single penny – which to me is quite surprising! Perhaps it is a sign that inflation is making it harder to save?

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: Signs of the Time

A lady about eight months pregnant got on a bus. She noticed a young man in his early 20s sitting in a nearby seat who kept grinning at her. Since that made her uncomfortable, she decided to move to another seat – but as she sat down a second time, she noticed the man’s grin turned into a big smile.

So she moved again. Unfortunately, despite changing seats, the pregnant lady saw that the man just kept smiling at her – only now he seemed even more amused.

She then got up and changed seats for a third time. However, this time the man broke into a bout of uncontrollable laughter!

Well … by now the pregnant lady had had enough, so she complained to the bus driver, who had the annoying man arrested.

A few months later, the case came up in court. After hearing the lady’s story, the judge asked the man if he had anything to say for himself.

The man replied, “Well, your Honor, it was like this: When the lady got on the bus, I couldn’t help but notice her condition. Then I looked up and noticed that she had sat under a chewing gum sign that said: ‘THE DOUBLE-MINT TWINS ARE COMING’ … that made me grin.

“Then the lady moved and sat under a different sign. This one said: ‘LOGAN’S LINIMENT WILL REDUCE THE SWELLING’ and I just had to smile.

“Then she placed herself under a deodorant sign that said: ‘WILLIAM’S BIG STICK DID THE TRICK!’ … Your Honor, I admit after that I could barely contain myself!

“But I finally lost it when she moved for the last time and sat under a sign that said: ‘GOODYEAR RUBBER COULD HAVE PREVENTED THIS ACCIDENT.'”

Upon hearing the man’s testimony, the judge immediately struck his gavel and said, “Case dismissed!”

(h/t: Nathan)

More 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 (2.05 pages/visit)
2. Saskatchewan (1.96)
3. Alberta (1.92)
4. Quebec (1.87)
5. British Columbia (1.85)

9. Nunavut (1.67)
10. Ontario (1.52)
11. Prince Edward Island (1.43)
12. Newfoundland & Labrador (1.40)
13. Northwest Territories (1.33)

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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 me at: Len@LenPenzo.com

After reading my article explaining why we’ve got nobody to blame but ourselves for tip inflation, Rob left this comment:

We need to stop calling it a ‘tip’ and start calling it what it is … ‘missing wage compensation.’

I’ll drink to that, Rob.

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

Photo Credit: stock photo