{"id":45915,"date":"2017-11-11T04:15:40","date_gmt":"2017-11-11T12:15:40","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=45915"},"modified":"2023-04-30T06:59:30","modified_gmt":"2023-04-30T13:59:30","slug":"black-coffee-11-november-2017","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id45915-black-coffee-11-november-2017.html","title":{"rendered":"Black Coffee: Hedonic Adjustments, Fair Markets and Other Fish Stories"},"content":{"rendered":"

\"black<\/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

“There are lies, damned lies and statistics.”<\/em><\/p><\/blockquote>\n

— Benjamin Disraeli<\/strong><\/p>\n

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

Debit:<\/strong><\/span> According to Ron Paul, the proposed tax plan being considered by Congress increases the most insidious tax<\/a> of them all: the inflation tax! According to Paul, by adopting the chained consumer price index, the plan “understates inflation’s effects by assuming it hasn’t reduced Americans’ standard of living if, for example, people can buy hamburgers when they can no longer afford steak.”<\/p>\n

Credit:<\/strong><\/span> That bureaucratic substitution theory is better known as “hedonic adjustment.” Of course, Paul also points out the folly of hedonic adjustments: If people actually viewed hamburgers as a legitimate substitute for steak, then they would have bought hamburgers in the first place — before<\/em> Fed-created inflation made steak unaffordable. But let’s not confuse the public<\/a> with the facts.<\/p>\n

Credit:<\/strong><\/span> In other news, it appears as if the mainstream financial media has finally awakened. Why? Because CNBC recently featured an article about China’s yuan-for-oil plans<\/a>. Yes, that’s more than a month after I highlighted the previously-obscure story, and the negative implications for the petrodollar in this column. Better late than never, CNBC!<\/p>\n

Credit:<\/strong><\/span> Unfortunately, most Americans fail to understand that if the petrodollar dies, then so does America’s artificially-high standard of living — which is why, as Nick Giambruno points out, “As a candidate, Donald Trump blasted the Saudis. But, after he took office, President Trump did a complete 180<\/a>. He stopped criticizing them. In fact, he’s now singing their praises.” Imagine that.<\/p>\n

Credit:<\/strong><\/span> Then again, the Saudi’s no longer have the world’s largest proven oil reserves; that honor belongs to the People’s Socialist Paradise of Venezuela. Despite that fact, Venezuela is, incredibly, on the verge of default. No, really<\/a>. Fitch, Moody’s and Standard & Poor’s all say a Venezuelan default is all but certain. Uh huh. That’s what happens to societies where more people choose to be in the cart, rather than pulling it.<\/p>\n

Debit:<\/strong><\/span> Speaking of paradise … Don’t look now, but the US pension panic has moved to Maui<\/a>, as the Garden Isle’s contributions to its failing state Employees’ Retirement System will surge 52% over the next couple of years — and the taxpayers are going to get hit with the tab. This will be fun to watch, so grab some popcorn. Actually, grab lots<\/em> of it.<\/p>\n

Credit:<\/strong><\/span> It’s absurd to think that the majority of government pensions are on the brink of collapse even though the stock market has been on a steady eight-year climb — but they are. In fact, stocks are so<\/em> hot, the S&P 500 has gone 46 straight trading days<\/a> without a decline of 0.5% or more. The last time the index experienced such low downside volatility was two decades ago, during dot-com run-up.<\/p>\n

Debit:<\/strong><\/span> Although it’s true, the absence of a measly half-percent decline in the S&P over the past 46 days is only slightly<\/em> more believable than the harrowing story of those two women who were recently “rescued” at sea<\/a> after supposedly drifting in a damaged sailboat for more than five months — despite looking none-the-worse for wear, and having an onboard emergency beacon that they refused to activate. Heh. M’kay.<\/p>\n

Debit:<\/strong><\/span> By the way, in case you’re wondering why equities have been doing so well over the past several years, perhaps it’s because the Swiss National Bank (SNB) now owns $88 billion in US stocks<\/a>. Okay, okay; there’s no “perhaps” about it. It is<\/em> because of the SNB — and the Fed, and other central banks. Who wants to guess how much Apple shares would be worth without<\/em> that central bank support?<\/p>\n

Debit:<\/strong><\/span> On the other hand, without central banks, governments couldn’t live far beyond their means, like they do today. Hey … If you don’t believe me, ask Wolf Richer. He noted this week that, “On September 8, the day after the debt ceiling was ‘suspended,’ gross national debt jumped by $329 billion, and now has spiked by $640 billion to $20.5 trillion.” For those counting at home, that’s just eight short weeks<\/a>.<\/p>\n

Credit:<\/strong><\/span> You can bet David Stockman has been counting. This week he warned, “This debt madness — represented by $225 trillion outstanding on a global basis — is careening toward a financial and economic dead end that will soon crush today’s fiscally profligate politicians and heedless financial punters in a devastating reset of bond yields<\/a>.” Maybe. But for now the party rolls on! (Psst. Don’t bogart that 0% loan.)<\/p>\n

Credit:<\/strong><\/span> When the credit party does<\/em> end, precious metals will benefit. And financial analyst Dave Kranzler says that there are some subtle signs<\/a> in the gold and silver markets that may be indicating price inflation is finally “on the cusp of breaking out furiously.” As Kranzler notes, “When the money supply exceeds the supply of widgets, widget prices eventually have to go higher. We’re at that point.” Only time will tell.<\/p>\n

By the Numbers<\/strong><\/p>\n

Here are the top 10 states whose residents have the best credit scores:<\/p>\n

1<\/strong><\/span><\/span> North Dakota (Consumers with a credit score of 700 or higher: 57.2%)<\/p>\n

2<\/strong><\/span><\/span> Minnesota (57.1%)<\/p>\n

3<\/strong><\/span><\/span> South Dakota (55.0%)<\/p>\n

4<\/strong><\/span><\/span> Vermont (54.2%)<\/p>\n

5<\/strong><\/span><\/span> Iowa (53.9%)<\/p>\n

6<\/strong><\/span><\/span> Nebraska (53.7%)<\/p>\n

7<\/strong><\/span><\/span> Hawaii (53.6%)<\/p>\n

8<\/strong><\/span><\/span> Massachusettes (53.2%)<\/p>\n

9<\/strong><\/span><\/span> Montana (52.5%)<\/p>\n

10<\/strong><\/span><\/span> Wisconsin (51.6%)<\/p>\n

Source: Credit.com<\/a><\/em><\/p>\n

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

[poll id=”188″]<\/p>\n

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

Do you like spinach?<\/p>\n