{"id":26733,"date":"2014-08-30T11:29:18","date_gmt":"2014-08-30T18:29:18","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=26733"},"modified":"2022-02-05T13:13:44","modified_gmt":"2022-02-05T21:13:44","slug":"black-coffee-somebody-is-knocking-at-the-door-but-its-not-dominos","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id26733-black-coffee-somebody-is-knocking-at-the-door-but-its-not-dominos.html","title":{"rendered":"Black Coffee: Somebody Is Knocking on the Door, But It’s Not Domino’s"},"content":{"rendered":"

\"\"<\/a>It’s time to sit back, relax and enjoy a little joe<\/em> …<\/p>\n

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.<\/p>\n

Let’s get right to it this week …<\/p>\n

Credits and Debits<\/strong><\/p>\n

Credit:<\/strong><\/span> Wanna getaway — in style? A first class seat on Singapore Airlines runs $13,325 for a round trip ticket between Los Angeles and Singapore. Wow. No wonder a growing number of airlines are phasing out first class<\/a> seats from their planes.<\/p>\n

Debit:<\/strong><\/span> Speaking of high prices, the next time somebody tells you there’s no price inflation, point them towards a grocery store. Last week, US ground beef prices hit an all-time high. This week, the dairy section was affected. That’s because butter futures reached a record $2.55 per pound<\/a>.<\/p>\n

Debit:<\/strong><\/span> More inflation news; this time from Forbes: “A new analysis from PricewaterhouseCoopers projects that average premiums for (Obamacare) policies will increase 7.5%<\/a> in 2015. In nearly one-third of the 29 states that PwC investigated, premiums will rise by double digits.” <\/em>I know<\/a>.<\/p>\n

Credit:<\/strong><\/span> Looking for more evidence of inflation? Pull up a chart of the S&P 500<\/a>; the stock market index made another<\/em> all-time high this week after topping 2000<\/a> for the first time ever; less than three years ago it was 1100. Apparently, the economy is really booming. Somewhere.<\/p>\n

Debit:<\/strong><\/span> Unfortunately, as Goldsqueeze points out<\/a>, there is strong evidence suggesting that five years of unprecedented money printing by the Fed has completely decoupled the S&P 500’s performance from economic activity. Take a look at this chart, which uses a green circle to indicate the start of the Fed’s quantitative easing (QE) programs, and see if you don’t agree:<\/p>\n

\"S&P500<\/a><\/p>\n

Credit:<\/strong><\/span> Correlation does not imply causation, but the graph arguably bolsters claims that stocks in general may be unable to maintain their upward trajectory<\/a> as the Fed finishes winding down its latest QE program in October.<\/p>\n

Debit:<\/strong><\/span> The rising stock market is in direct contrast to bond market signals. Already-low long-term US yields have dropped almost 25%<\/a> this year alone — which indicate an economy in severe distress. And it’s not just US bonds; German short-term rates are so low they’re now negative<\/em>.<\/p>\n

Credit<\/strong>:<\/span> One thing is certain: The stock and bond markets can’t both<\/em> be right — one of them is misreading the state of the economy. The answer<\/a> depends on whether or not all of the massive currency printing continues to make things better — or worse.<\/p>\n

Debit:<\/strong><\/span> Interest is the rental price of cash<\/a>. Today, the world’s currencies are so abundant — thanks to central bank printing presses stuck on hyper-drive during the last five years — that their rental price is dirt cheap. As such, savers will continue receiving pitiful interest rates.<\/p>\n

Debit:<\/strong><\/span> The Fed printing press is why former Fed Chairman Alan Greenspan once assured Americans that, “The United States can pay any debt it has because we can always print money<\/a>.” That’s comforting. Or not.<\/p>\n

Credit<\/strong>:<\/span> Of course, that dubious philosophy was also espoused by the central bank of Zimbabwe at turn of the 21st century. In 2009, they eventually saw the folly of that position — but not before a loaf of bread there reached 1.6 trillion Zimbabwe dollars<\/a>.<\/p>\n

Debit:<\/strong><\/span> The quest to turnaround our failing financial system has become so desperate, the highly influential Council on Foreign Relations — yes, the one led by former US Treasury Secretary Robert Rubin — is now urging central banks to transfer cash directly to the people<\/a>. Hyperinflation, here we come.<\/p>\n

Debit:<\/strong><\/span> So why propose such a scheme? The truth is, the bankers understand that there are only two ways over-extended nations can get out from under the massive debt overhang that’s acting as a drag on the world economy: default or inflate<\/a> the debt away.<\/p>\n

Debit:<\/strong><\/span> Unfortunately, while inflating the debt away buys time, both roads lead to currency destruction. Sadly, it won’t be too long before everyone<\/em> learns that there’s no such thing as a free lunch. The piper is finally knocking on our door — and he ain’t leaving until he’s paid.<\/p>\n

The Question of the Week<\/strong><\/p>\n

[poll id=\"23\"]<\/code><\/p>\n

Last Week’s Poll Results<\/strong><\/p>\n

Have you ever been the victim of a burglary?<\/p>\n