Is College Worth The Cost?

By Jeff Paul

The individual debt for college graduates in the United States is now above $30,000. Meanwhile, all of the world’s knowledge is nearly free because of the Internet. And we’re transitioning from a jobs economy to a skills economy. So we’re at a unique crossroads that creates a new paradigm for teenagers and their parents where college may not be a guaranteed path to a better life. But what choices do we have?

My oldest son is 18. He was homeschooled and has no plans to go to college. Instead of formal school, he traveled throughout his teens with us as a family and with Project World School. He’s already visited dozens of countries. Along the way, he acquired certifications for scuba diving, driving, and as a surf lifeguard — the only three tests he’s ever taken. He’s also started a few side hustles and learned skills like audio and video editing, blogging, and construction. He still doesn’t know what he wants to do (besides travel) for his career. And that’s okay with me.

First, I’m not against college. College is a fine place for young people to grow and learn and build important networks of friends and colleagues.  Yet, because the cost has gotten so out of hand for 4-year degrees, it’s simply a matter of doing a cost-benefit analysis (systematic process for calculating and comparing benefits and costs of a decision) based on the needs and desires of each individual student. Applying to college is only one way for teens to learn and grow after high school. Yet, in the current environment, some alternatives to college may be more fruitful.

Author and businessman James Altucher has been an outspoken advocate for skipping college. He’s even bribed his children not to go, to no avail. But he’s become a leading voice of why college is not necessary for success and what alternatives may be more valuable to pursue. Watch the video below for a quick overview of his take on college:

Altucher’s basic argument is that the cost of college has gone up much faster than inflation and that college debt levels now amount to years of indentured servitude for young people. He claims there are better, cheaper ways for young people to gain skills and knowledge and find success in the economy rather than starting off with a degree and debt. Additionally, he says that even if people still choose to go to college after a couple of years exploring alternatives, they’ll have a much better appreciation for the value of money and debt. So there is little downside for teens to broaden their horizons before getting into student debt.

Cost-Benefit Analysis

The average cost of college plus living expenses is over $20,000 per year. Here are the average tuition costs followed by the average cost of room and board for college students.

Source: Big Future College Board

And according to College Data the cost for room and board is over $10,000 per year:

The College Board reports that the average cost of room and board in 2017–2018 ranged from $10,800 at four-year public schools to $12,210 at private schools.

This $20,000 can be spent doing something else. By starting a job or a business, young people can turn that annual expense into income, all while learning priceless skills and developing an understanding of the value of money.

Here are just a four alternatives to college worth exploring. Their potential rewards may exceed the benefits of a college degree.

US Dollar Weakens Against Commodities and Other Currencies

By Jeff Paul

The US Dollar is quickly weakening compared to commodities, cryptocurrencies and other national currencies. Is it a normal cycle? Or is it something more serious this time?

Economist and money manager Peter Schiff recently summarized the current trajectory and consequences of the falling dollar in this tweet:

The U.S. dollar Index just broke below 90. Which will happen first, Dollar Index breaks below 80, Gold breaks above $1,500, 10-year treasury yield rises above 4%, or oil prices rise above $100 per barrel? What happens to the stock market & the economy if all 4 happen this year?

— Peter Schiff (@PeterSchiff) January 24, 2018

The dollar has fallen to its lowest level on the US Dollar Index (DXY) since December 2014:

4-year DXY chart from MarketWatch

The US Dollar is considered one of the least-worst national fiat money in times of financial crisis because of its petro-dollar status as the world’s reserve currency. Yet everyone is beginning to understand that it will eventually lose that status and its dominance. But when?

The recent peak in the strength of the petro-dollar was also marked by a low of $40.59 for a barrel of oil in January 2016, and it has been on a clear march higher for the past six months.

3-year Oil Price Chart from MarketWatch

And, of course, many readers of this site are well aware of how the dollar has weakened against cryptocurrencies this past year. Bitcoin began 2017 at $1,000. After peaking above $20,000 per bitcoin, today you need over $10,000 to buy one bitcoin.

1-year Bitcoin (BTC) chart from CoinMarketCap

Call it a bubble if you want. Cryptocurrency supporters will say it’s the 100-year national currency bubble that’s finally popping.

The weakening dollar seems to be accelerating, and the trend will create opportunities for savvy FOREX traders. I like to use a forex trading practice account to test my theories. However, most of my real money is in cryptocurrency these days because they have stronger technical behavior of a free market.

When the dollar begins to fall and commodities rise, the currencies that usually gain in value tend to be resource-rich nations like Canada and Australia. This has been the cycle for decades. So we should expect their dollars, respectively, to continue to strengthen against the US Dollar as this trend accelerates.

Another currency to watch is the Swiss franc. Switzerland may not be rich in natural resources, but they are rich in assets. The Swiss franc is quasi-backed by a portfolio of assets including $90 billion in stocks bought by the Swiss National Bank since 2008, as reported in article in QZ, “The Swiss central bank’s $90 billion stocks portfolio is insane”:

Since the financial crisis of 2008, central banks around the world have printed money and purchased assets as an aggressive way to stimulate the economy. But none more so than the Swiss National Bank (SNB).

The SNB has $836 billion of assets on its balance sheet. This isn’t huge as far as central banks go. The Federal Reserve, the European Central Bank (ECB), and the Bank of Japan (BOJ) all have five to six times that amount on theirs; the Fed alone has assets of $4.5 trillion (pdf). But the SNB’s balance sheet is striking compared to the size of the Swiss economy. The totality of the assets held by the Fed, the ECB, and the BOJ’s work out to 23%, 40%, and 90% of their countries’ annual GDP, respectively; the SNB’s assets are a full 127% of the Swiss GDP.

That means that the SNB has invested a quarter more than its entire economy produces in a year.

If this trend is not cyclic, but rather the beginning of the end for US Dollar dominance, nations with the deepest stack of physical gold may also see their currencies increase in value relative to the dollar. Russia has been increasing its gold reserves and has an abundance of oil and natural gas as well. Thus, the ruble could climb further.

5-year chart of Russia Gold Reserves – Source

Even the euro has climbed 20% against the dollar since its low in December 2016.

‘Good’ #euro morning! The euro is now up 20% against the #USD from the low in December 2016. Did #Draghi sleep well last night? pic.twitter.com/FuWFtYAmi0

— jeroen blokland (@jsblokland) January 25, 2018

And it may spell trouble for the US economy. Peter Schiff thinks it will be a disaster:

The new weak #dollar policy will be a disaster for the United States. If the dollar Index fell from 120 to 70 when we had a “strong dollar policy,” imagine how much lower it will go with a weak dollar policy! My guess is 40.

— Peter Schiff (@PeterSchiff) January 24, 2018

US Treasury Secretary Steve Mnuchin disagrees. He told reporters at Davos, “Obviously a weaker dollar is good for us as it relates to trade and opportunities.” He added that the dollar’s short term value is “not a concern of ours at all.”

This even shocked IMF head Christine Lagarde, who said, “I really hope that Secretary Mnuchin has a chance to clarify exactly what he said,” at the World Economic Forum meeting in Davos, Switzerland. “The dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of U.S. policy.”

People still don’t get it. The only reason the economy “recovered” is that a rising dollar kept interest rates low and consumer prices in check, allowing America to go deeper into debt and consumers to keep spending. As the dollar sinks the economy will go down with it.

— Peter Schiff (@PeterSchiff) January 25, 2018

Whether it is cyclic or indeed the end of dollar dominance; gold, silver, cryptocurrency, oil and some foreign currencies will likely continue to climb in the short term as the value of the US Dollar decreases.

Jeff Paul writes for Activist Post and is the editor of Counter Markets newsletter for libertarian entrepreneurs.

Renters Struggle As California Home Prices Climb Faster Than Official Inflation Rate

By Jeff Paul

The US government likes to pretend that the rising cost of living is under control. People in Southern California know better. According to a new report in the Los Angeles Times, median house prices in Southern California have nearly doubled in the last five years.

LA Times reports:

In many corners of Southern California, home prices have hit record highs. And they keep going up.

In Los Angeles County, the median price in June jumped 7.4% from a year earlier to $569,000, surpassing the previous record set in May. In Orange County, the median was up 6.1% from 2016 and tied a record reached the previous month at $695,000.

Across the six-county region, the median price — the point where half the homes sold for more and half for less — rose 7.5% from a year earlier and is now just 1% off of its all-time high of $505,000 reached in 2007, according to a report out Tuesday from CoreLogic.

The price increase was even greater than the 7.1% rise recorded in May, and some agents say there are no signs of a slowdown in the Southern California market.

One of Twitter’s funniest economic sleuths, Rudy Havenstein, points out the obvious problem:

In case you’re confused, Rudy is referencing that the US government and its central banking partners desire a 2% inflation rate. Government measures the prices consumers pay for a basket of goods and services to determine the official inflation rate called the Consumer Price Index (CPI). However, the “core” CPI doesn’t include vital things like food and energy.

The chart below from the Bureau of Labor Statistics illustrates how much more dramatic the cost of living rate moves when food and energy are added:

Market optimists tend to quote the core CPI number because it’s less dramatic, but it’s not as accurate as the “headline” CPI with food and energy included. But the core CPI claims to be a good measure of housing costs. Until 1983, the measure of homeowner cost was based largely on house prices. Today, they use some voodoo math since a home is considered an investment and a living expense. Simply put, it attempts to account for owner-occupied homes which may be going up in value, but the monthly cost remains stable. Whereas rents in the same market will rise due to the increased value of homes.

A more reliable measure of home prices, the Case-Shiller Composite Home Price Index, was also released this week. It showed a nationwide increase of 5.6%, closer to Southern California’s rate than the CPI.

The Case-Shiller Index chart below looks very similar to the LA Times chart showing the boom in home prices beginning in 2012.

Home prices alone don’t tell the whole story. Renters are struggling the most. According to a recent report in the Orange County Register, the average rent for a house in Orange County is $3,114 per month and $2,548 for a home in Los Angeles County. The median household income in LA County is around $56,000, before taxes. So rent eats about 50-60% of wages. And Southern California is a microcosm of what is happening in many other cities in America.

The LA Times correctly identifies the market forces causing the price increases: “growing economy, rock-bottom mortgage rates and a shortage of homes on the market.”  And, of course, the LA Times shepherds government action to stop the surge in home values.

Government officials say they are trying to take steps to address the problem of affordability.

In Los Angeles, Mayor Eric Garcetti is advocating for a fee on new development to raise money for below-market housing — a policy known as a “linkage fee” and used in cities such as San Francisco, San Diego and Oakland.

And in Sacramento, Gov. Jerry Brown and legislative leaders have said they will put housing at the top of their agenda when they return in August from a monthlong break.

Legislators have proposed a package of bills aimed at raising money for subsidized housing and making it easier for developers to build all kinds of housing, which often faces pushback from residents concerned over traffic and neighborhood character.

Some cities in Southern California have already made some absurd laws trying to reduce cost of homes like banning Airbnb-type short-term rentals. Watch the video below where Activist Post’s Vin Armani explains this wrongheaded approach:

Markets tend to correct themselves without government interference. People also adapt. It’s one reason the co-living trend is exploding. However, sooner or later not enough people can afford house prices and a correction will begin. For instance, some people will move away and new housing units will be built to accommodate supply and demand.

Take a look as Case-Shiller’s HPI chart below from the boom-bust period of 2002 through 2008. You can clearly see the 2007 correction begin to have its effect.

After loose lending practices, low mortgage rates, and shady Wall Street re-packaging of housing debt enabled the boom period and inevitable bust, the downward trend continued until about 2012 as previously indicated.

Today rates are even lower. Lenders are getting creative again because Millennials don’t qualify due to high student debt and low wages. And Wall Street is as corrupt and greedy as ever. Combine that with the bloated municipalities in desirable areas making it expensive or impossible to get new building permits, and home prices may continue rising at this rate for a couple more years.

Jeff Paul writes for Activist Post and Counter Markets newsletter. Like us on Facebook, subscribe on YouTube, follow on Twitter and at Steemit.

This article is Creative Commons. You may republish in full with attribution and link to this post.

First India Bans Cash, Now It’s Targeting Gold

By Jeff Paul

In November of last year, India banned certain cash notes in a bold move to force businesses into the banking system to better harvest more taxes from its livestock. Now, under the guise of “improving transparency” and forming a “common market,” India has begun targeting gold with new taxes, regulation, and incentives for citizens to turn over their undeclared gold to the financial sector.

Roughly 86% of India’s economic activity happened in cash at the time much of it was banned. Presumably that includes the $19-billion-per-year retail gold industry. Again, it appears that India’s government (central bankers) wants a bigger cut of the action and to better track the private assets of citizens.

Bloomberg has been reporting that India’s government is teaming up with crony gold dealers to plan a complete revamp of its gold policy – which is always code for “control, regulate and tax.”

Bloomberg reports:

India, which vies with China as the top consumer of bullion, is working on new policies to improve transparency and help expand its $19 billion gold jewelry industry, according to people with knowledge of the matter.

The plans being worked out by the finance and commerce ministries along with industry groups should be finalized by the end of March, the people said, asking not to be identified because they aren’t authorized to speak publicly….

The start of a spot bullion exchange, to make gold supply more transparent and help enforce purity standards, is under consideration, the people said. An import tax of 10 percent could also be reduced as the government seeks to eliminate smuggling, they said. The plans also include a dedicated bank for the jewelry industry, according to one of the people.

The overhaul of India’s disorganized and fragmented gold jewelry industry is meant to bolster confidence among consumers, where the gifting of gold at weddings and festivals or its purchase as a store of value are deeply held traditions. Ensuring quality standards and allowing supply chains to be easily tracked are ways to enhance trust.

In addition to a 10% import tax on gold, which authorities admit causes smuggling, India recently placed a 3% nationwide goods and services tax on gold that goes into effect on July 1st. Grateful slaves celebrated the event as a “lower than expected rate” and as creating a “common market,” Bloomberg reported when the tax passed:

India fixed the duty at 3 percent over the weekend, lower than the 5 percent expected, Ketan Shroff, joint secretary at the India Bullion and Jewellers Association Ltd., said Monday. The goods and services tax, to be implemented from July 1, will replace more than a dozen domestic levies including excise tax and state tariffs, drawing India for the first time into a common market.

ProTip to wannabe dictators: If you’re a tyrant who wants to centralize power over an industry, first frighten large businesses into your cartel protection racket. Then, eliminate local sovereignty over markets while imposing your own regulations and taxes. But call it “drawing into a common market” and “improving transparency to protect them.” Works every time. The final step is to prosecute non-compliance using men with guns.

The creation of a spot market and special bank for gold jewelers (as rumored above) seems like a function that doesn’t require government at all. Yet if your goal was to track, trace and database your citizens’ undeclared gold assets, it makes perfect sense.

Bloomberg makes clear that the new policies aim to encourage citizens to turn over their “idle gold” to the financial system:

The government is also keen to get the public to recycle its jewelry to reduce the nation’s reliance on imports. After a slow start to its plans to monetize the precious metal held in households and institutions, the government is looking to tweak the scheme and attract more participants, the people said, without giving details. The initiative, launched in November 2015, was aimed at returning an estimated 20,000 metric tons of idle gold to the financial system.

It’s reminiscent, albeit a softer version, of Franklin D. Roosevelt’s Executive Order 6102 “forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States” which criminalized the possession of monetary gold. Citizens were forced to turn over their gold for a set amount of government currency. We’ll have to wait and see how India “tweaks the scheme.”

Credit Suisse confirmed the latest moves in India are designed to force the gold trade onto the banking system in partnership with the central government to better track and tax the industry.

Credit Suisse Group AG told Bloomberg “the (gold) sector will find it tougher to evade taxes as legal imports go through the banking system, and a full trail will now be established by the new nationwide tax compared with previous duties which were levied at the state level only.”

This echoes what Credit Suisse Group AG analysts Arnab Mitra and Rohit Kadam previously said of the coming changes to the Indian gold industry: “Over the next two to three years, the new tax should gradually force smaller, unregulated players to become tax compliant and take away their price advantage, increasing market share for bigger, organized businesses.

There you have it. The cashless agenda of control laid bare. There shall be no economic activity outside of State control. Cartels that play nice will be rewarded with more market share.

It remains to be seen if an already angry Indian citizenry can be persuaded to gift up their tradition of storing and gifting gold.

Jeff Paul writes for Activist Post and Counter Markets newsletter. This article is Creative Commons. You may republish in full with attribution and link to this post.