{"id":75080,"date":"2022-10-08T02:15:53","date_gmt":"2022-10-08T09:15:53","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=75080"},"modified":"2022-10-10T20:06:40","modified_gmt":"2022-10-11T03:06:40","slug":"black-coffee-8-oct-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id75080-black-coffee-8-oct-2022.html","title":{"rendered":"Black Coffee: Money and Madmen"},"content":{"rendered":"

\"\"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

I hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …<\/p>\n

If wisdom were measured by the length of a beard, goats would be philosophers.<\/em><\/p><\/blockquote>\n

— Danish proverb<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? The UN agency dealing with global trade is demanding all<\/strong><\/em> central banks stop hiking interest rates and instead switch to price controls<\/a>. Apparently, the UN bureaucrats who decided that price controls are a good idea failed both Econ 101 and world history, as there are plenty of examples proving that price caps are effective at one thing, and one thing only: creating shortages. But fools will be fools. Hey … speaking of the best laid plans of mice and men:<\/p>\n

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(h\/t: quickmeme.com)<\/p><\/div>\n

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(h\/t: @publordhodl)<\/p><\/div>\n

Debit:<\/strong><\/span> Of course, nobody would be suggesting price controls if persistent inflation wasn’t weighing on the populace. Heck, things are getting so bad, even Americans who earn six figures are feeling the strain. In fact, in a recent survey, 45% of them admitted that they’re currently living paycheck to paycheck<\/a>; that’s compared to 38% last year. Overall, 3 in 5 Americans of all income levels said they’re living paycheck to paycheck. Strange, isn’t it? It’s almost as if the “official” CPI of 8.3% is a lot lower than what everyone else is experiencing in the real world.<\/p>\n

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Credit:<\/strong><\/span> It’s no secret where the blame lies for the inflation predicament we currently find ourselves in. As economist Daniel Lacalle notes, it’s because the “government’s unconventional response to the pandemic ended up being the most conventional of them all: printing and destroying the purchasing power<\/a> of the currency. A policy implemented for centuries with the same disastrous effects – only to be dusted off by a new group of bureaucrats that promised that this time would be different.” Imagine that.<\/p>\n

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Debit:<\/strong><\/span> By the way, Lacalle also points out that, “the problem is that US policymakers never learn because they benefit<\/strong><\/em><\/a> from inflation and currency depreciation, as it’s a form of taxation and wealth transfer from the productive to the politically connected. And the results are always the same: (Americans) suffer the loss of the US dollar’s purchasing power and the collapse of their investments, while the rest of the world sees their real wages vanish and their currencies become worthless. Cheap money is expen<\/span>sive. Always.” Well … except for those who are closest to the printing press. For them, it’s essentially free.<\/p>\n

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Debit:<\/strong><\/span> In other news, the end of the third quarter saw the stock market wipe out all of its gains from 2021<\/a>.<\/span> Then again, when the markets are dependent on currency printing to maintain their lofty valuations, nobody should be surprised to see equities fall during periods when central banks are withdrawing liquidity and shrinking their balance sheets. Oh, I know what you’re thinking: But, Len, correlation doesn’t imply causation!<\/em> M’kay. Except in this case … it really does:<\/p>\n

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He’s not sayin’. He’s just sayin’.<\/p><\/div>\n

Debit:<\/strong><\/span> Meanwhile, as stocks continue to melt down<\/a> – albeit in a remarkably controlled fashion – you may find it interesting to know that the S&P500 has dropped 15% or more nine times<\/a> post-World War I, including during the third quarter of 2022. The only other time that the following quarter posted negative returns was during the first quarter of 2009. Yes; that would be during the Great Financial Crisis. Coincidence?<\/p>\n

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Debit:<\/strong><\/span> Apparently, Americans can’t even afford to rent stuff any more, let alone buy. Last week Rent-a-Center stock plunged 20%<\/a> in a single day<\/strong><\/em> after the floor fell out of the rent-to-own store chain’s adjusted earnings forecast for the third quarter. Thankfully, these extremely talented guys were smart enough to buy this<\/strong><\/em> table with money they diligently saved over time …<\/p>\n