Greenspan is Too Little and Too Late

Alan Greenspan is one of those people whom I find very intelligent, yet I have a lot of contempt for him.  He could have done so much for the cause of liberty, but instead he chose to sell out.

For some reason, I find parallels with Colin Powell.  This is a man who is supposedly very intelligent and honorable.  To me, Powell is the opposite of honorable.  He is a disgrace.  He sat in front of the United Nations and lied about weapons of mass destruction in Iraq.  He knowingly lied.  Whether or not he was pressured to lie or was just part of the evil people plotting war, I don’t know.  But he knew the information he was presenting was false.  He could have resigned his position in protest, and he wouldn’t have starved from being unemployed.

Greenspan was part of Ayn Rand’s circle in the 1960s.  He wrote one of the best essays ever on gold and its check against the state.

But Ayn Rand suspected that Greenspan was a social climber.  She did not live long enough to see this come to full fruition.

I know some libertarians, when asked what they would do if nominated to the Federal Reserve, say they would instantly resign.  But I don’t necessarily fault Greenspan for becoming Fed chair in and of itself.

The problem is that Greenspan used his long tenure as Fed chair to defend the establishment and continue the process of monetary inflation, bailouts, and loan guarantees.

Greenspan, even if he had sort of gone along with the system, still could have used his position for educational means.  At least Ronald Reagan was somewhat educational in defending liberty in his speeches, even if his policies did not always reflect that.

Greenspan’s policies were a disaster, and his rhetoric was a disaster.  Most people didn’t understand what he was saying half the time anyway.  If he had used his position as a platform to advocate a return to a gold standard, perhaps we could go a little easier on him.

Instead, when he was in office, he actually told Ron Paul that the Fed could essentially mimic what a gold standard would do.

In a recent interview, Greenspan referred to this moment, stating: “When I was Chair of the Federal Reserve I used to testify before US Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that US monetary policy tried to follow signals that a gold standard would have created. That is sound monetary policy even with a fiat currency. In that regard, I told him that even if we had gone back to the gold standard, policy would not have changed all that much.”

Yet, in that same interview, Greenspan said: “But if the gold standard were in place today we would not have reached the situation in which we now find ourselves.”

This is a typical politician.  It is like Vicente Fox all of a sudden showing some opposition to the war on drugs after his time in office as president of Mexico.  Now it doesn’t matter much.

When politicians do things such as advocate higher minimum wages or advocate more spending to stimulate the economy, we can’t always be sure if they are just economically ignorant or if they are knowingly promoting bad policies just to advance their own power.

In the case of Greenspan, I think it is clear.  Greenspan is not economically ignorant.  The policies he promoted as Fed chair were evil.  He was knowingly promoting policies that were harmful to the U.S. economy and the average guy on the street.  He was knowingly helping the bankers and the politicians to spend more.

This is why principles and ethics are so important.  I would rather elect a politician who is honest while economically ignorant, than someone who understands economics but is unethical.  Of course, the right combination is to have someone who is ethical and principled, and who understands economics.  But Ron Paul only comes around once in a generation, at most.

Would Gold Rise With a New Gold Standard?

There is always talk about a new gold standard coming within small circles.  But with the election of Trump and more focus on auditing the Federal Reserve, there is more talk than normal about the possible coming of a new gold standard.

The U.S. dollar has been the world’s reserve currency since at least the end of World War 2.  The dollar is a global currency.  It is used frequently in international trade.  Most importantly, it is used for trade in the oil market.  The Saudi’s use of the dollar is probably one of the main reasons that the U.S. government favors the House of Saud so heavily, despite its ties to terrorism.

As time goes on, the U.S. dollar will lose its status as the world’s reserve currency.  It is not because the yuan (China) or any other currency is going to replace it.  With globalism and today’s technology, there is just less of a need for a reserve currency.  The currency markets are digital and very liquid.  If some country wants to sell oil to Japan, they don’t need to get dollars.  They can easily accept yen and quickly convert them into their own currency, or whatever currency they want.

With massive worldwide debt (run up by national governments), and with major economic uncertainty, it is not out of the realm of possibility that gold will become something of a world currency again.  Of course, gold is already a reserve asset, as most major central banks hold a significant amount of gold.

While I don’t think the return of a gold standard (internationally, or by a national government) is imminent, I do think it is a possibility in the future.  There is already a wave of skepticism against central banks.  If there is a worldwide economic downturn and financial crisis that rivals 2008 (or worse), then public opinion can move quickly.

What would happen if the U.S. or some other major country were to adopt a gold standard?  What would happen if gold were used once again in international trade, basically taking the place of the U.S. dollar?

In the case of a national government adopting the gold standard, this would mean that a government-issued currency would be redeemable in gold.  It would mean that the government would have to store gold representing the currency in circulation.  This would severely limit its ability to issue new debt and engage in massive monetary inflation.

As a side note, in a true free market, the issue of money would be left for the market to decide.  People could use gold, silver, a basket of commodities, cryptocurrencies or any number of things.  History has shown that gold is the most favored commodity for use as a medium of exchange, closely followed by silver.  But in today’s world, it is doubtful that we would go straight to this step.  It would be more likely that we would have some kind of government-controlled gold standard.

If the U.S. adopted a gold standard, or if gold were widely used in international trade, it would drastically increase the demand for gold.  And as we know, there just isn’t that much of the yellow metal to go around in this world.

If every individual on this planet owned the same amount of the entire supply of gold that has ever been mined from the ground, then each person would get less than one ounce each.  In other words, if you own just one ounce of gold, then you own more than your share already if it were divided up equally on the planet.  This includes all of the gold held by central banks.

I believe that just the announcement of some kind of gold standard, whether by the U.S., China, or some other major country, would instantly send gold prices soaring.  Again, I don’t think this is likely in the near future, but I don’t discount something in the longer run.

If the U.S. were to back every dollar by the gold that is reportedly currently held by the central bank, then the price of gold would be multiples higher than it is currently.  Depending on the money supply used, estimates vary from $10,000 to $40,000 or more per ounce.

It is also possible that the U.S. or any other government could provide a partial backing of gold to its currency.  This would not be the first time.  Even a backing of less than 100% would still likely result in a big spike in the gold price.

The bottom line is that any serious announcement or consideration of a new gold standard, or the widespread use of gold in international trade, would lead to an increased value for gold.  You would want to own gold before any such announcement or event takes place.

How to Achieve Financial Independence

I recently listened to a podcast episode of Radical Personal Finance.  In this episode, there were two guests talking about financial independence (FI).  The two guests have their own podcast called Choose FI.

One of the guests was talking about how he paid down a big student debt (in the six figures) and casually acknowledged that his higher-than-average income helped.  Luckily, the host of the show – Joshua – stopped him and basically said that having a higher income is a big piece of the puzzle in paying down debt and/ or achieving financial independence.  It is something that some may take for granted.

This interview took place at Camp Money Mustache.  For those who don’t know, Mr. Money Mustache is a famous blogger within the FI movement (if that is what it can be called) who advocates frugal living.

I am not a Mustachian.  I think being frugal is positive up to a point.  Even though I don’t watch a lot of television by American standards, I still like to watch cable television.  I also like having a smartphone for accessing the Internet practically anywhere.  My guess is that most self-identified Mustachians do not have cable, and a higher-than-average percentage probably don’t have smartphones.

In terms of becoming financially independent, I think it is important to figure out what you want.  Achieving financial independence is great in terms of reduced stress.  You generally don’t worry about unexpected bills because you know you have more than enough to cover them.

I find that many people who achieve FI status at a relatively young age continue to work and make money.  In this sense, I don’t think they really could retire for the rest of their lives with a decent lifestyle.  There are a few, but I don’t think there are many 40-year olds who really could afford to never work for money another day in their life.

The key here is that they have flexibility.  Some call it “F-You money”.  A more polite way to say it is that it is freedom money.  If you have very significant savings, it makes it easier to quit a job you don’t like.  Maybe you still have to get another job or source of income, but you could go for a couple of years or more without much worry.

One thing that Joshua (the host of Radical Personal Finance) has spoken about is living the life you want to live now.  This doesn’t mean not working.  It means finding work that is fulfilling.  It means doing things in life without necessarily having a huge retirement fund built up.

There are many people, particularly Americans, who have the mindset that you work for 40 years and then you retire and enjoy life.  They think you have to wait until retirement to travel and enjoy life.

Ask yourself what you would do if you were financially independent. In many cases, you could do those things now while still working.

I don’t advocate seeking a job that you always love, because most people do not like some aspect of their job.  Even a professional golfer may get tired of going to the practice range.  The key here is to find something that you are content with, but with the realization that most jobs are going to have certain aspects that may not thrill you.

If you already have your dream job, I think it gives you more flexibility just to enjoy life, both inside and outside of work.  Still, even for the rare person in this situation, it is still a good idea to save some money and look towards financial independence, even if you do it at a slower pace.  You should have emergency money.  Plus, you never know if your dream job will one day go away.

In order to save money to achieve financial independence, there are really only two variables: how much you make and how much you spend.  The difference (accounting for taxes) makes up your savings. If you want to become financial independent, you need to spend less than you save.  This means that to increase your savings, you need to spend less, earn more, or some combination of the two.

To break down the income side into more detail, you can also earn investment income.  This could come from financial investments, real estate, a business, or something else.  In order to get to this point of having significant investment income, you first have to start a business or save money to invest.

The spending side of the equation and the earning side of the equation are both important for financial independence.  There are people who earn well into six figures who save almost nothing.  This is more of a spending problem than an earning problem.

Still, I think the answer for most people is to earn more.  I know it is easier said than done, but you are limited in how much you can cut your spending.  You still need a place to live and food to eat and clothes to wear.

You are not limited on the upside of earning money.  You could double your income, or you could increase it by 2,000% if you are creative enough.

If you are earning $55,000 per year (close to the median family income) and you are managing to save $2,000 per year out of that, then it will probably be hard to cut spending more.  And when you do, it isn’t going to add up to much.  If you are only saving $2,000 per year, you are going to take a long time to save up for a decent retirement.  It is better than saving nothing, but it still isn’t that much in today’s world.

The one good thing about someone in this scenario is that he is accustomed to living a simple lifestyle.  If someone else is earning $150,000 per year and saving $2,000 per year, then he is farther behind in a sense.  He has more luxuries in his life than the other guy, but he is going to need to save a lot more money in order to fund his current lifestyle.  The one good thing about this person is that he could possibly have a revelation at some point and start to save some of his high income.

The person making $55,000 has an upside though.  Perhaps he has a better chance of earning a higher income than the guy already earning $150,000 per year.  If he is able to get a higher income, he can more easily maintain his current living standard and save a lot of money.

We know the reality is that most people who earn more money are quick to move into a higher lifestyle.  If you always do this, then you will never save any significant money.

In the podcast episode I reference above, there was another throwaway line by the guest.  He said there are better ways to earn a six-figure income without going into debt.  I wish the host had asked him his thoughts on this.  It is interesting to get someone’s take on how to earn a six-figure income (without college) considering that the large majority of people are not earning this much.

It is important to not box yourself in.  If you are earning, let’s say, $50,000 per year, don’t assume that increased savings means having to lead a ridiculously frugal lifestyle.  Consider if there is a better job out there for you.  Consider if you can start a small side business or do some kind of freelance work on the side.  Consider other avenues in making money.

Nobody can tell you how exactly you should make more money.  But assuming you don’t already have a really high income, this is something that you should consider.  The way to achieve financial independence is by earning a high income (business or salary) and to live a middle-class lifestyle.  Then you can still enjoy life while you work, while also making progress towards your ultimate goal of being able to claim financial independence.

There is no secret formula other than making more than you spend.  For most people, it is actually easier to make more money than to spend less.

Will Trump and the Republicans Repeal Obamacare?

On January 8, 2016, Barack Obama vetoed a bill called “Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015”.  This legislation, if passed, would have repealed the Affordable Care Act (a.k.a. Obamacare).

The Republicans in Congress attempted many times to repeal Obamacare.  It was about a year before Obama left the presidency that a bill appeared on his desk that he vetoed.

There is no question that the Democrats in Congress, along with Obama, are responsible for having passed the disastrous bill that essentially requires the purchase of health insurance.  But both major parties are responsible for the overall calamity in medical care and health insurance in the country.

And while the Republicans have put on a unified front against Obamacare, it seems that things might have changed a bit.  Now that Donald Trump occupies the White House and the Republicans maintain a majority in the House and Senate, many congressional Republicans are all of a sudden becoming more timid about a full repeal of Obamacare.

From a libertarian standpoint, I think Trump’s fighting against the spy agencies and the lying establishment media are important.  Trying to stay out of war with Russia is extremely important.  Still, on the domestic front, there is probably nothing more symbolically important than repealing Obamacare.  Of course, it is important in substance too.  But if you offered me a $1 trillion cut in federal spending or a repeal in Obamacare, I would take the cut in federal spending.

The thing with Obamacare is that it is a campaign promise by Trump and the Republicans.  While Trump is doing battle with many in the GOP establishment, the repeal of Obamacare was supposed to be one unifying front against the Democrats.  If the Republicans fail to repeal this, they are going to come out looking really bad, as they should.

While I think Trump should continue to stand up to the liars who are trying to take him down (including many in the Republican camp), he needs to stop being distracted by the smaller things.  He is expending too much effort and political capital on immigration bans and keeping jobs in the United States.  The issue of keeping jobs in the U.S. is just bad economics.  And even if it were a legitimate battle, there isn’t much Trump can do about it anyway that wouldn’t devastate the economy in other ways.

Trump needs to start focusing on repealing Obamacare.  It is a campaign promise.  If he pushes it, and the Republicans in Congress fail to reproduce what they did a year ago, then they are going to look really bad.  Trump won’t look as bad as long as he is convincing that he wants repeal.

We have heard the phrase “repeal and replace” for many years now, but we never hear specifically on what replace means.  If there is a replace part, it should be to free up the market.  If it is only a partial repeal of Obamacare, or tinkering around the edges, then I don’t think the citizenry will be fooled by this.  They are going to expect a full repeal, or something very close to it.

If there is ultimately no repeal, I think the Republicans will lose their majority in Congress in two years.  It’s not that most Republicans will vote for a Democrat.  It’s just that some Republicans will decide to stay home on the day of the election.

I have my doubts about whether we will see a full repeal.  It is quite telling that it has even taken this long, even though we aren’t even a month into Trump’s presidency.  Still, there is no reason that the Republicans in Congress and Trump couldn’t have had something ready to go in January.

This is a real issue that impacts middle class America.  It is also a symbolic issue about the principles and honesty of Republican politicians in Congress.  It will be a good test.  So far, it isn’t looking good for them.

Price Inflation Rises in January 2017

The latest CPI numbers came out for January, up 0.6% from the previous month.  The year-over-year CPI is now showing 2.5%.

The more stable median CPI is, well, stable.  It did show a 0.3% rise from the previous month, but the year-over-year still stands at 2.5%.

According to this Bloomberg article, food prices only rose 0.1%.  In a true free market, many consumer prices would actually be going down.

It is hard to know if food prices are actually nearly flat.  There are hedonic adjustments that make it hard to judge.  Of course, there is no true way to measure consumer prices, since products are constantly changing and tastes are constantly changing.

Still, this little creep up in price inflation could be significant from the standpoint of the Fed.  Perhaps it makes it more likely that we will see a hike in its target rate in March.

I am actually optimistic that consumer prices may be picking up, but not for the same reasons as many others.  We are probably in some sort of mini-boom period right now, with stock markets hitting all-time nominal highs.

Higher prices could help gold prices, but that is not the main reason I am a little happy to see consumer prices picking up.  The main reason is that I want the damage to stop.

If we were in a boom period because of actual prosperity due to savings and capital investment, then that would be great.  But the problem is that much of the mini-boom we are in is because of previous Fed monetary inflation.  It is not all built on real wealth.

The boom needs to come to end in order to stop doing damage.  The artificial boom phase is actually a misallocation of resources taking place.  If the Fed is facing higher price inflation, it is less likely to prop up the artificial boom in the future.

The Fed has had something of a free lunch.  Sure, there is much more criticism now than in decades past, but the Fed is not exactly on the hot seat right now as long as the economy continues to hum along, even if slowly for the middle class.

The Fed was able to expand its monetary base by almost five times from 2008 to 2014, yet there was little consumer price inflation to show for it.  The Fed got away with this.  The problem is that it did major damage by allowing massive deficit spending and by misallocating resources.

If this insanity is going to end – meaning the Fed won’t come up with a new QE program every time there is a bump in the economy – it is going to be from higher price inflation.  The Fed will be forced to protect the dollar instead of reigniting another monetary boom.

Of course, this could all be out the window quickly if another market crash happens.  If we hit a deep recession, price inflation could fall back down quickly.

There is also a possibility of a weak economy with rising consumer prices as something similar to what was seen in the 1970s.  The late 1970s and early 1980s was the last time that the Fed allowed a good cleansing of the malinvestment in the system.  The Fed allowed interest rates to rise and did not engage in monetary inflation during this period.  We got a couple of recessions, and we also got a new base for some actual real prosperity.

We’ll continue to keep an eye on the consumer price inflation numbers, only to give us a hint of what the Fed is more likely to do in the future.  Right now, I think we should expect the Fed to keeps its monetary policy relatively tight, and we should not be surprised by another hike in its target rate coming out of the March meeting.

Money Doesn’t Buy Happiness With Stuff

We’ve all heard the expression: “Money doesn’t buy you happiness.”  There are different variations such as, “Money can’t buy you happiness.”  There are a lot of obvious statements we can make about life.  There is nothing profound about this.

Money doesn’t buy you happiness if you aren’t a happy person.  It also can’t automatically buy you health, although it can help at times.

One key point is that little or no money can buy you misery.  I know there are stories of poverty-stricken people who live a simple life in a third-world country who are seemingly happy.  But some of these people may just have a good attitude given their situation in life.  It doesn’t mean they wouldn’t like a big meal, a soft bed, and a nice air conditioner.

We do get accustomed to the lifestyle we live.  It doesn’t mean we will find happiness by downgrading our lifestyle, but we should occasionally pause and give thanks to what we have.  This goes back to the joke of a guy in an airplane who is complaining that his Internet is running slowly on his laptop computer as he flies thousands of feet above the ground.

I have found that many on the political left, who do not necessarily view capitalism kindly, are quick to spend their money.  They don’t know how to handle it.  There are certainly many exceptions, and there are certainly many people who say they favor free markets who are more than willing to spend money and go into debt.

There is this crazy narrative that there are these rich greedy people who just want to roll around in money and spend frivolously.  Of course, there are such people.  But I find that the biggest spenders are the rich celebrities who seem to feel guilt over having money.  While they are quick to say that money doesn’t buy happiness, they are also quick to spend a lot.  It is as if they will be seen as greedy if they hold onto their money.

While Americans certainly like their consumer goods in the form of gadgets and luxury items, we shouldn’t underestimate the number of people who want to accumulate wealth just to buy some freedom.

If you ask most people what they would do if they won $5 million, I don’t think the majority of people would start listing the stuff they would buy.  I think the majority of people would say they would quit their job first.

This isn’t an issue of wanting more stuff.  They want freedom.  They want to buy time, whether it is in the form of leisure time, or in the form of time to do more fulfilling work.  They probably want to spend more time with friends and family.  Also, it shouldn’t be neglected that many people suffer from stress and anxiety over money, which is quickly alleviated with a significant amount of money.

Buying more stuff will not make you happy.  Maybe getting your kitchen remodeled will make you marginally more happy, but it is nothing compared to alleviating stress and having more freedom with your time.

It really is amazing how much stuff Americans accumulate.  There are many people who use storage units for the long term, and not just something temporary when moving.  The storage business is a big industry in America.

When I was younger, I thought it was better to buy something than to take a vacation because once the vacation was over, it was over.  If you bought something, you still had it after a week.  I have changed my view of this completely has I’ve gotten older.  If you are going to spend money, I think it is often better to buy experiences (and memories) rather than accumulating more stuff, unless it is stuff that you will use on an almost daily basis.

Stuff that you don’t use on a regular basis tends to accumulate.  It clutters your house, and it clutters your life.  If you are going to accumulate anything, it is better to accumulate digits in a bank account.

You can roll around in your money if you want to, but it is only because it is a feeling of joy that you get from being free.  If you want to quit your job, then you can do so.

For me, wealth is not defined by having a big mansion and a nice car to drive.  Maybe these things are nice, but not if you are working all of the time in a job that you don’t really like.  Having wealth means having the ability to make greater choices, including the choice of having more leisure time, or time to spend on your calling.

Money won’t buy you happiness if you are always trying to accumulate more stuff.  Money can help you be happier if it represents more freedom to you.

From Russia With Gold

The Russian people have been through some trying times over the last few years.  While it is nothing compared to the days under the Soviet Union, there has still been much economic and political turmoil.

If we are to believe the polling data, Russian President Vladimir Putin is very popular amongst the Russian population.

I don’t think Putin is a saint, but he is also not the evil madman that the establishment media in the U.S. make him out to be.  He is a nationalist who, in many ways, is like Donald Trump.  I’m sure he believes in a “Russia first” policy.

It is understandable that Putin and the Russian people do not want NATO on their doorstep (which is contrary to what was originally agreed to).  The U.S. government has been destabilizing the Middle East and causing mass chaos.  The Russian people don’t really want that chaos spreading to their borders.

Putin did not really invade Crimea as many people (including some libertarians) will state.  This is a stretch of language.  It was the U.S. government that orchestrated an overthrow of the elected government in Ukraine, which destabilized the region.  The people of Crimea, who are Russian for the most part, voted overwhelmingly to join Russia.  They essentially seceded from the disaster of the Ukraine.  Who could blame them?  Also, consider that the Russian economy is far stronger than that of Ukraine.  The people of Ukraine live in mostly deep poverty.

When the U.S. (under Obama) placed sanctions on Russia, the ruble (the Russian currency) fell dramatically.  Fortunately for them, the Russian central bank allowed interest rates to rise in order to stop the bleeding.

While the ruble is still down considerably since its high back in 2008, and since dropping from the imposed sanctions in 2014, it has held up reasonably well against the U.S. dollar over the last couple of years.

There are a few significant things to note that have happened since the sanctions were first instituted in 2014.  First, the Russian central bank has been continually adding to its gold reserves.  Since January 2014, gold reserves have increased a total of about 50%.

The other interesting thing to note is that the Russian central bank has decreased its holdings of U.S. government debt.  Its holdings of U.S. Treasury securities at the beginning of 2014 was $138.6 billion.  At the end of November 2016, its holdings were $86.6.  There was actually a bump up in November too, but we don’t know if this is related to the election of Donald Trump.  It should be noted though that the Russians were already decreasing its holdings prior to the U.S.-imposed sanctions.

The overall trend is clear.  The Russians are diversifying away from U.S. dollars.  And who can blame them?  Perhaps it is ironic that the advocates of big government are the ones who pushed for sanctions on Russia, while these same people are the ones who depend on debt financing from other countries.  They also depend on a strong dollar.

This may be a slow process, but the Russians are helping to undermine the dollar.  They are coming to the same conclusion that many other countries are realizing – that you don’t have to use U.S. dollars as a middleman for world trade.

I believe the Chinese and the Russians are both increasing their gold reserves in order to shore up their own currencies, as well as to have a true world reserve currency that doesn’t involve the dollar.

While the sanctions hurt Russia, they are finding ways to get around them.  I believe that turning towards gold, even if slowly, is one of the ways to bypass the U.S. dollar.

This is a long-term reason to be bullish on gold.  As more foreign governments become tired of the antics and bullying of the U.S. politicians, they are going to cut out the U.S. dollar if they can.  The world will eventually return to gold as the most reliable form of money.

How Much Does Medical Care Impact Life Expectancy?

It was recently reported that life expectancy in the U.S. dropped for the first time since 1993.  This was a reflection of the statistics from 2015, which saw a decrease of one-tenth of a year from 2014.

These numbers don’t mean a whole lot because there are so many variables determining life expectancy.  Many people look at medical care as a big driving factor, but it probably does not account for much.

There are issues such as crime, suicides, and, of course, diet.  Advocates of socialized medicine will often point to the fact that some countries with socialized healthcare (Canada, for example) have higher life expectancy rates than the United States.  They therefore conclude, or want you to conclude, that the government-run system is responsible for this.

When you look at the U.S. as compared to Western Europe or Japan, the U.S. has a relatively high rate of obesity.  If you want to blame anything on the lower life expectancy, you should look to culture before medical care.

Of course, the U.S. does not have anything resembling a free market in medical care.  It is mostly a fascist system, and also partially socialized.  You can still find a doctor and pay the doctor from your own pocket (something HillaryCare would have made illegal), but it is nothing close to a free system.

If you have a serious accident and need trauma care, there is probably no better place to be than in a large city inside the United States.  But outside of true emergencies, sometimes I think it is better just to not go to the doctor in many circumstances.  The U.S. is an overly-medicated society that turns to drugs to fix symptoms.  The medical establishment does not look at the root causes.

If socialized medicine helps in life expectancy in any way, it is because people are less likely to go to the doctor because of wait times and hassle.  It is easier to go to the doctor in the U.S.  If you don’t go to a doctor, then you figure out how to deal with your ailment.

In the libertarian world, we talk about how big government kills people with their wars of aggression.  But big government kills people in many ways.  While some will correctly point to the FDA keeping life-saving drugs from coming to market, I believe the entire government apparatus has been extremely detrimental in putting out bad information.

I recently went to the grocery store and my kids were picking out some yogurt off the shelf.  Most of the yogurt was labeled as “low fat”.  These little containers typically contained anywhere from 14 grams to 18 grams or more of sugar.

The American culture, largely promoted by big government working to protect a few big food/ agriculture companies, has been brought down with bad food choices.  People have been fooled into believing bad science.

The government promotes these diets that are high in carbohydrates and sugars and low in fat.  The low fat diets are not healthy for most people.  Here, we are not talking about trans fats.  It is healthy fats, which includes saturated fats.

The government has had a war on cholesterol, while the big pharmaceutical companies push to put people on these cholesterol lowering drugs.  They are making these ridiculous claims that people should not eat such things as egg yolks, when egg yolks are healthy and highly beneficial to most people.  The government is not just wrong; it is giving information that is the exact opposite of the truth.

There is a massive epidemic of obesity and disease in the United States.  Most people understand heart disease is a major killer.  But many people suffer from auto-immune diseases that just weren’t that prevalent in the past.  The number of type-2 diabetics has absolutely skyrocketed.  There are an estimated 29 million Americans who are diabetic.

This is mostly diet related.  A lot of it is a result of government pushing these foods that are bad for us, while telling us that some of the good foods are bad for us.  The government works with the big food/ agriculture/ pharmaceutical companies to put out this bad information.  Of course, the medical establishment carries a great deal of blame too.

This is why we need a separation of health and state.  The government shouldn’t be giving us information on what is supposedly healthy and unhealthy.  The FDA should be abolished.

Still, as individuals, we have a responsibility to exercise the freedom that we do have.  There is a world of information that exists out there that didn’t exist a couple of decades ago.  We must question the state at every turn and not buy into the bad science.

I preach often on this blog about being careful with your money and making good investments.  But health should figure into this as well.  You must invest in yourself, which includes being healthy.  You are free to eat whatever you want and do whatever you want to your body, just as you are free to invest in anything you want.  But it doesn’t mean you should throw away good judgement.

Eating a reasonably healthy diet and taking care of your body is truly one of the best investments you can make.  It will save you money in the long run, and you will live a more fulfilled life.  Just as being future-oriented is important for saving and investing, it is just as important in treating your body well.

I see people who are future-oriented in their careers and saving money, yet they generally ignore their health.  This eventually catches up with them.

While we live in a world of big government, we still have choices.  Just because you have a choice to eat whatever you want, it doesn’t mean you should not make wise choices.

Accept Your Luck

If you are not an American football fan, bear with me on this post.  It is still relevant to you.

The New England Patriots just won the Super Bowl, making an incredible comeback after being down by 25 points in the second half.  Tom Brady won his fifth Super Bowl.  He has appeared in the NFL championship game 7 times now, as the Patriots lost to the New York Giants in two previous appearances.

When the Giants won both Super Bowls against the Patriots, there was an amazing catch each time late in the game.  There were several key plays where it could have changed the outcome of the game on both occasions.

There was also a crazy catch in the Patriots’ victory over the Falcons.  But as Brady said after the game, there were probably 30 plays where if something different had happened, it likely would have impacted the result of the game.

There were a lot of factors leading to the great comeback by the Patriots.  Some of it was probably just bad coaching and play calling by the Atlanta coaching staff.  Some of it was obviously the incredible skill and determination of Brady and his teammates, along with his coaching staff.  Some of it was just plain luck.

And I want to focus on the luck part.  I once had someone say to me that the two victories by the Giants in the past over the Patriots in the Super Bowl were a fluke.  And to be sure, there was some luck involved.  But let’s face it; they were in the position to be lucky.

Brady and his team have had their share of luck too, especially in this latest Super Bowl win.  But on every occasion, they put themselves in a position to accept the luck.

Does it ever seem that some guys just get lucky more often than others?  If that is the case, it probably isn’t all due to luck.

You have to put yourself in a position where you can actually get lucky and benefit from it.  And when luck does come your way, you have to be able to seize the moment.

Here is an example of not seizing the moment.

This, of course, isn’t just about football.  This is life in general.  It is business opportunities.  It is financial wealth.  It is relationships with others.  It is life.

If you write a book, you probably won’t be a best-selling author.  If you do, some of it will probably be due to luck.  You may just happen to pick the right topic at the right time.  There is one thing for sure though.  If you never write a book, you definitely will not become a best-selling author.

There are musicians who have been extremely lucky in getting in front of someone and making it big.  There are probably other musicians in the world who are more talented.  But if you don’t put in the time to practice and then put your work out there, then you will definitely never be a star musician.

There are YouTube videos out there with 20 million views.  They happened to go viral.  Some of them are really well done.  Some are just stupid, but it all depends on your perspective.  Either way, for many people, they got lucky with their video going viral.  But again, if they had never uploaded the video to YouTube and told their friends about it, they never would have gotten “lucky”.

I know people like to criticize Donald Trump for his many failed business ventures.  But trying different ideas lets you know what works and what doesn’t.  Even if he just got lucky on the ones he tried, at least he tried.  And most of the people criticizing him have never tried any business venture, even on a small scale.

When opportunities present themselves in life, accept your luck.  But in order to get lucky in the first place, you have to put in the work, and you have to put yourself out there in a position to get lucky.

Can Trump Avoid a Recession?

During his campaign, Donald Trump warned that stocks were in a bubble that was going to pop.  While it wasn’t a theme he repeated often, his tune has changed somewhat since winning the election.

No president wants to issue dire warnings of a recession or stock market collapse.  But if a major downturn is going to occur in the next 4 years, from Trump’s point of view it would be better if it happened sooner rather than later.

The question is: If Trump is actually successful in implementing an agenda of reduced taxes and reduced regulations, would that be enough to avoid a possible recession?

Frank Shostak recently wrote an article for the Mises Institute titled “Tightening the Money Supply will Inevitably Lead to a Bust”.  Shostak’s article focuses on the Fed, and more specifically following the Taylor rule.

Shostak states in his article the following: “Unfortunately, a gradual tightening cannot prevent a subsequent economic bust.  Economic busts are simply the inevitable removal of various activities that emerge on the back of loose monetary policy.”

As followers of Austrian school economics and the Austrian Business Cycle Theory understand, the bust phase is not the problem.  It is a problem only in the sense that it is the time that people feel the most pain.  But the damage was done during the artificial boom phase.  This is when resources are misallocated.  The bust phase is trying to correct the previous misallocations.

The Fed had an extremely loose monetary policy from 2008 to 2014.  Although the Fed has only hiked its target federal funds rate twice since that time, it has kept a tight monetary policy since October 2014 when it ended QE3.

While the lack of bank lending helped to limit some of the damage, we cannot pretend that there was no damage done.  The Fed nearly quintupled its balance sheet in this six-year period.  There have been misallocations.

Given that the damage has already been done, is there anything that Trump can do to stop it?

The answer is “no”, but he can certainly do things to alleviate the pain.  Cutting taxes, including corporate taxes, would certainly help.  Repealing burdensome regulations would help, which would include Obamacare.

The one area where libertarians focus more is on overall government spending.  Unfortunately, it does not seem that Trump or the Republican Congress is going to do anything in the near term to cut federal spending in any significant way.

We need huge spending cuts in order to leave more capital in the private sector.  When the government spends money – whether that money is obtained through taxes, debt, or inflation – it is misallocating resources.  It is being spent on things that are not in accordance with consumer demand.

If Trump were to accomplish significant cuts in spending (unlikely), along with reducing regulations and taxes (slightly more likely), then it could go a long way to lessening the severity of a recession.

Still, the misallocations need to correct at some point.  They corrected in the oil industry to a large degree a few years ago.  Many companies went into too much debt and invested too much in drilling for oil that was only worth it at a higher oil price.  When the oil price went down, it was quickly discovered that some of the investment was actually malinvestment.

If there are minor misallocations due to central bank policy, it is possible for technology and productivity to offset the reallocation (bust phase).

Think of it this way.  If the Fed were to inflate the money supply 1% higher, it is still a misallocation of resources.  But it is small enough in comparison to the entire economy that growth would likely offset that in the future.  You could still have a small bust in some sectors, but overall growth could still be positive despite the corrections.

The problem we are facing here is that the misallocations are likely much larger.  Again, the Fed went on a digital money printing spree from 2008 to 2014.  While oil has corrected, there is a lot that hasn’t corrected, including U.S. stocks.

I don’t think it is possible for Trump to avoid a recession at this point.  If the Fed decides to start inflating again (unlikely at the moment), this could delay a recession.  Even a massive increase in government spending could temporarily delay a recession.  But these actions only delay the inevitable, and they also ultimately would make the recession worse when it does come.

Trump is better off getting a major recession over with now.  Reagan survived the recession years of 1981 and 1982 and won re-election by a landslide in 1984.  If there is a recession after 2018, Trump will not have much chance of being re-elected.

If Trump can repeal some significant regulations and actually cut government spending, this is going to ultimately help the economy.  If a recession happens within the next year, maybe things will be looking up in time for the next presidential election.

But if the government keeps spending more money, we are not going to see any strong growth that is sustainable.  The middle class people (who elected Trump) are struggling.  They are struggling because so much of their money is flowing to Washington D.C. where the elites live well.

I don’t think Trump can avoid a recession at this point, and I also don’t think he should try.  We have to get the painful adjustment over with.  He can help make it a little less painful by removing Washington’s boot on our throats.  This would not just lessen the pain of a recession, but also help set the stage for some actual sustainable growth in the future.

Combining Free Market Economics with Investing