Homeschooling in the United States

As libertarians, we often hear about the erosion of liberty in the U.S. and the growth of big government.  However, this is not true across the board, and we should recognize the areas where we have gained liberty.

Technology is certainly helping in advancing liberty.  While technology can be used against us (think of the NSA) by the government, I believe there is a net benefit towards liberty overall.

Uber is threatening the taxi cab monopolies throughout the U.S. and elsewhere.  Email and other online communications are making the U.S. Post Office more obsolete by the day.  The easy and cheap access to information is destroying what is known as the mainstream media.

Another area in which we have gained liberty, but which has little to do with technology, is in the area of homeschooling.  While its legality was questioned up until around the 1980s, it is essentially legal everywhere in the U.S. today.

To be sure, the state laws vary, and some are better than others.  Some states enforce strict standards for homeschoolers while others have minimal requirements.

This is a great symbolism of liberty.  It means that you have the right to teach your kids how you want to teach them, and you have the choice not to hand them over to the state.

It is difficult to get accurate statistics on homeschooling in the U.S., but it is estimated that close to 2 million students are homeschooled now.  This would be just over 3% of the U.S. student population, which is quite significant considering it was barely legal just a few decades ago.

Homeschooling is like the internet.  Some people say that the government will make it illegal, but I say that the cat is already out of the bag.  Homeschooling parents are very passionate about what they do and their right to do it.  They tend to have a strong voice.

When a German family sought asylum in the U.S. for homeschooling their children, the homeschoolers in America got behind them.  The Home School Legal Defense Association (HSLDA) has become something of a force to be reckoned with.  It will get behind cases that threaten parents’ rights to homeschool.

I recently attended a homeschool graduation (for any kids in the state) and a homeschool convention.  You will find a lot of smart kids and a lot of diversity in terms of interests and aspirations.

There are many who still criticize or question homeschooling.  Some are just apologists for the state.  They think that the government should have priority over parents in raising children.

Others are just not familiar with homeschooling and question whether kids will get proper socialization.

In response to socialization, my first comment is that anyone who thinks this way should walk through a public (government) middle school in America and point out all of the kids who would be a good influence for others.  I’m not saying that there aren’t any, but I’m guessing most would not exactly be role models at that age.

Also, most kids have activities in sports, music, clubs, etc.  There is nothing preventing homeschooled kids from doing these things.  With the popularity of homeschooling rising, it is becoming more common to have homeschool groups, co-ops, etc.

Homeschooling is not legal everything.  It is illegal in Germany and Sweden for example.  The general populations there obviously believe that children are owned by the state.  I am glad I do not live in those places.

While liberty in the U.S. has been lost in some areas, schooling is not one of them.  With more online curriculums coming, homeschooling will only get more popular.  It is not just hardcore Christians homeschooling anymore.  It is becoming more widespread and more acceptable.  Libertarians should be thankful for this and recognize it as a gain.

Libertarians, Stay Away from Rand Paul

I am a big fan of Ron Paul and have great appreciation for what he has done over the last several decades.  I don’t think highly of many politicians, and Ron Paul is often the one exception.

I generally believe that libertarians should stay away from politics.  You really aren’t going to change things politically by being politically involved.  The power runs too deep.  The only way to change things politically is by shifting public opinion.

The only reason Ron Paul was a success was because he used his platform as a congressman to spread his message.  He used it as an educational tool.  Even in his presidential runs, particularly the last two, he used these as a platform to tell people about his libertarian message.  He had little hope of actually winning in the primary.

If you are a libertarian going into politics, I hope it is for the purpose of spreading the message of liberty.  If it is to seek political change through your office, you will be really disappointed, or else really corrupted.

Ron Paul’s son, Rand Paul, is more of a politician.  I don’t know what his full intentions are at this point, but he is trying to play the political game.  He is certainly more knowledgable about the subject of liberty than the other 99 senators or any of the other major presidential candidates.

But this, in a way, just makes it that much more disappointing.  I think of Alan Greenspan who actually understands economics and central banking.  He sold out to the establishment as Fed chair.  I think of Colin Powell who sat there and lied in front of the U.N. about weapons of mass destruction.  He sold out in a major way.  In a sense, I am more mad at Colin Powell about the Iraq war than I am at Bush.

Rand Paul understands liberty, yet he is selling out.  Sure, he has done some positive things, including his latest stunt of opposing the NSA’s bulk collection of data.

However, he also stated recently that Edward Snowden should be in a jail cell.  Paul said, “Snowden and (James) Clapper should be in the same cell, talking about liberty and security.”

If Rand Paul truly believes that Snowden should be in jail for what he did, then Rand Paul is no friend to liberty.  If he is pandering to his audience, then he is dishonest and can’t be trusted.

I don’t know of anybody who has gotten into office and acted more libertarian than what they stated in their campaign.  It is usually the opposite.  Most candidates will talk a game about liberty and then be a proponent for big government policies as soon as in office.  George W. Bush campaigned on fiscal conservatism and a humble foreign policy in 2000, and we all know how that turned out for 8 years.

If you think Rand Paul will bring us in the right direction as president, you will be really disappointed.  He will be more in bed with the establishment if he actually gets the nomination, let alone the presidency.

I consider the issue of the Snowden leaks as something of a litmus test.  If someone thinks he should go to jail, then that person is generally anti-liberty.

I could ask someone two questions and get a pretty good idea of where they stand politically.  Should Edward Snowden go to jail for his actions?  Should the government get more involved in healthcare?

If you answer “no” to both, then you are libertarian or libertarian leaning.  A conservative will typically answer “yes” to the first one and “no” to the second.  A modern-day liberal will typically answer “no” to the first (but not always) and “yes” to the second.

An authoritarian will answer “yes” to both.

So Rand Paul is supposedly against the NSA spying, yet he thinks Snowden should go to jail for exposing the NSA’s criminality.  Does this make any sense?  Were there Germans in the 1940s who opposed the concentration camps but thought it was treasonous if anyone tried to expose what was happening?

If you are a libertarian, don’t waste your time on politics.  And don’t waste any time or money supporting Rand Paul.  He is not his father.

If Rand Paul were smart and actually wanted to play politics, he would be speaking a more libertarian message than what he is.  He is trying to play both sides, pleasing a libertarian element and pleasing the establishment.  Instead, he is displeasing both.

Right now, it seems that Republican candidates are entering the race by the boatload.  I can’t even keep up.  The only way Rand Paul can win is by differentiating himself.  This would mean giving a libertarian message.  Instead he is giving a lot of mixed messages.  If someone wants an establishment candidate, they can go to Jeb Bush or Scott Walker.

I originally thought about a year ago that Rand Paul might have a shot at the nomination.  I no longer think it is likely.  He is trying to play a political game and he is doing so horribly.  Don’t waste your time with Rand Paul.  He won’t win.  Even if he could win, you probably don’t want him there.  People would just blame all of the problems on his “libertarian politics”, even though his policies wouldn’t be libertarian at all.

I hope Rand Paul’s candidacy falls flat on its face.  I also hope the Libertarian Party puts up a real libertarian next year so that people will have some kind of a choice in the general election, if they want to vote at all.

Osama’s Reading List

I think the most bizarre story of the last week has to be the release of the titles of the books found in Osama bin Laden’s compound.  Many of these are U.S.-based, and they deal with political and economic issues.

I have a hard time to believe anything the U.S. government puts out in the way of information, particularly if it is coming from anything related to the FBI or CIA or “intelligence”.  In many cases, we later discover that not only was the information wrong that was put out there, but it was the opposite of correct.

I have always had my doubts about the story of Osama bin Laden’s killing.  I give it a better than 50/50 chance that he was actually killed that day, but the contradictory versions of the story make you wonder how things really went down.

In the case of this book information, I find it hard to believe that anyone could actually make this stuff up.  It is so bizarre that I’m not sure high level U.S. officials could make it up, but I could be wrong on that point.

Assuming that the information about the book list is true, it just shows some of the motivations and interests of Osama bin Laden.  I have not personally read any of the books on the list, but I have heard of a few of them.  And for most of the books, the titles alone can give you a pretty good idea of the topic at hand.

Was bin Laden really reading “Secrets of the Federal Reserve”?  Was he reading “Obama’s Wars”?

How about “Confessions of an Economic Hit Man”?  If the official stories are true, or at least somewhat close to true, then bin Laden is an economic hit man.  He sparked the war on terror, which has done more damage economically (not to speak of other liberty issues) than anything else.  The U.S. government has spent trillions of dollars on a war against a tactic.  For how much terrorism that actually exists, the war on terror is statistically insane.

Again, assuming the bin Laden reading list is true, it shows how much of a deep interest he had in political and economic matters.  He was a student of U.S. foreign policy.  It is more politics than religion.  It shows that his support for terrorist acts did not stem from religious fanaticism, rather of revenge.  As Ron Paul has said numerous times, it is a case of blowback.

If bin Laden was reading these books, he must have understood that some Americans do not support U.S. foreign policy.  If he understood this, would it have changed his position in attacking innocent people?

Osama bin Laden was an evil man, but there is also little question that he was well educated.  He came from a rich family.  He had a much greater understanding of foreign policy than any recent U.S. president.

Do you think Obama or George W. Bush had or has any kind of reading list like this?  Obama is not stupid, but I can bet that he is not that well educated, particularly in foreign policy.  If he is, then he is just as evil as bin Laden.

Bush is just stupid.  I know he became president, which means he could give a speech, although just barely.  He managed to get by, although just barely.  I can’t imagine Bush having read anything on bin Laden’s book shelf.

This is just a really bizarre story and I am not sure of what to make of it.  I am hoping to find more on this story as time goes on, perhaps from people who have read many of these books.

China’s Stock Bubble

Most people paying attention know that China has a major real estate bubble.  I should clarify that most people outside of China know this.

I am not sure if the Chinese know it.  That is part of being in a bubble.  There is irrational exuberance.  Most of the people in the bubble do not realize it.  If they did realize it, then it would pop, unless everyone is just pretending to not know it and waiting for the next sucker to buy a property.

It is easier to see a bubble from the outside.  You can call it objectivity.  When you see ghost cities that could house a million people, you know there is something wrong.  You know there has been a severe misallocation of resources.

The most surprising thing for me is just how long it has gone on.  The Chinese central bank won’t relent on its money creation.  Instead of a property bust in China, we are first getting a second boom.  This one is in the stock market.

The Shanghai Composite Index closed above the 4,500 mark today.  As of today, its 52-week low is 2,011.  When something goes up well over 100% in less than a year – especially in a loose money environment – you know it isn’t going to end well.

I am writing on this topic more frequently because it is going to be big news when it happens.  We should all expect it, yet we generally ignore it.  Maybe the stock bubble will go on for years like the real estate bubble, but I highly doubt it.

I don’t know where this thing will end.  It is in a parabolic move right now.  The Chinese stock market is going up faster than the Nasdaq did in the late 1990s.

When things come crashing down, I am not sure to what extent it will impact the U.S. economy.  We can be certain that there will be some impact.  You might not expect it to have too big of an impact because Americans mostly import from China.  In other words, the Chinese would suffer a lot more from a U.S. recession than the other way around.

But there are two colossal bubbles in China and if they both come crashing down hard, it may spook investors globally.  I would be surprised if it didn’t.  And we have our own bubble problems in the U.S., particularly with stocks, although not near to the same extent as China.

We’ll keep watching what happens in China.  When the bubbles burst, it is going to impact investors in the U.S. and elsewhere.

The American Government Bubble

There is certainly a lot to be thankful for in terms of living in the United States or any other first-world country.  It is also nice to live in the 21st century where there is not widespread famine and misery.  Most people don’t have to go hunting and gathering for their food each day.

We live in a kind of contradictory time.  Our living standards have never been higher in terms of technology and luxuries.  It doesn’t even compare to just 20 years ago.  Most people are walking around with smartphones that give them instant communication to the world, along with a video camera that fits in their pocket.

But in this same world of exponentially growing technology, we find struggles to pay for basic necessities.  People can afford smartphones, but they can barely afford health insurance and their grocery bill.

If it is a choice between a smartphone and food, I hope most would choose the food.  Most people aren’t starving, at least in the United States.  In a place such as Greece, it is actually becoming a problem.

I feel a similar euphoria now as how it was in the mid 2000s.  The stock market it booming.  Most people who want work are working, even if it isn’t for the wage they want.  Housing is not booming as much, but it is still relatively strong in many areas.

Just like the mid 2000s, I detect that people are struggling.  Most of my friends and relatives are middle class to upper middle class.  I don’t have any billionaire or deca-millionaire friends, at least that I know of.  Just from my general conversations, I find that people are tight on money and they can’t even really figure out why.

The consumer price index (CPI) has stayed relatively low in the face of major monetary inflation by the Fed.  As we know though, the CPI does not tell the whole story.  It can’t tell the whole story.  There is surely asset price inflation, especially in stocks.  But even for consumer goods, our basic needs tend to be the most expensive these days.

The obvious big expense is health insurance.  It isn’t just because of Obamacare, but that is part of it.  Most people are seeing double-digit price increases from year to year for their health insurance.  Meanwhile, their coverage tends to get worse.  The CPI has hedonic adjustments.  If you applied the same principle to health insurance, it would be going up at 40% per year in many cases because you are paying more while your coverage (the quality) is getting worse.

Food prices overall are not going up by double-digits, but they are probably going up by more than the stated CPI numbers.  Even if food prices are going up by 5% per year, this really hurts the average middle class family over the course of just a few compounding years, especially when people’s wages are barely going up 2% per year, if that.

The biggest expense for most people is the cost of government.  That is why so many families have two working parents.  One parent has to pay for all of the government taxes and regulations and inflation and debt.

When you factor in the spending (not just taxes) by government at all levels, the costs are enormous.  This does not include the cost of government regulations, which is impossible to determine, but obviously really significant.  Many Americans are working to pay half of their money over to some level of government in some form.

I know of many people who make a decent salary who are struggling.  I know of many families that make six figures and are barely able to save any money.  It may sound ridiculous, but when you throw a few kids into the equation and you add up all of the expenses, you don’t have to be a big spender to find yourself in this situation.

The point is this: Life today is really expensive.

The main reason it is expensive is because of big government at all levels, along with central bank monetary inflation.  Some recognize this more than others, but almost everyone suffers under it.

This reminds me of the housing bubble.  Everyone is supposed to be feeling good about the good times.  But secretly, people are struggling.  Most don’t want to admit it openly.  They don’t understand because the economy is supposed to be doing at least somewhat well again.  Yet they find it difficult to pay their bills each month without going into debt.

This is a government bubble.  It is going to pop because people simply can’t keep up with it.  It can’t go on forever.  Either government gets rolled back or we start declining in our living standards.  I think it will initially be the latter, but will eventually lead to the former.  Government will get rolled back when people start to openly suffer more.

I can find out more by talking to 10 middle class families in America than I could looking at all of the government statistics about GDP growth, inflation, unemployment, etc.  Those middle class families are struggling to keep up right now.  Money is a major stress and most of them don’t really know why they can’t get ahead.

The government bubble is going to pop.  I think it is going to be sooner than most realize.  It will initially come in the form of a recession or depression.  It will be the best of times and the worst of times.  It will be really hard for most people, but at least we may get some relief from big government as a result.

Government and Central Bank Malinvestment

The term “malinvestment” is a phrase mostly used in the realm of Austrian school economics.  It was used by Ludwig von Mises.  It basically describes a misallocation of resources.

I would say that almost all central bank inflation and government spending is malinvestment.  Some people make the mistake of assuming that this is all completely wasteful spending, or that the Austrians are making this claim.

But malinvestment doesn’t necessarily mean total waste.  I would argue that some spending is completely wasteful, or even anti-productive to the economy.  In the latter case, war is a good example.  You would be better off, not only in terms of lives saved, but also in economic terms, of taking money spent on a war and instead using it to pay people to dig ditches and fill them in.

Some free market opponents will mischaracterize the term malinvestment and say that the government builds roads, infrastructure, etc.  But to say it is malinvestment is not to say that it is completely wasteful.  Sure, in most cases, you are better off with the road that the government built rather than having used the money to dig ditches for no good reason.

The government could also take our tax money (or use money created via inflation/ debt) to buy every single person in America a new television.  For a few people, this wouldn’t be a misallocation of resources.  If they hadn’t been taxed extra, they were still planning to buy a television anyway.

But for everyone else who would have done something else with the money, this is malinvestment.  It isn’t to say that they won’t use the new television.  They might even derive some enjoyment out of their new television.  But the point is that if they hadn’t been forced to pay for it, they would have done something else with their money.  Buying a new television was not the number one priority on their list.

When there is malinvestment, it makes us poorer than we otherwise would have been.  In the case of the government buying televisions for everyone, this money could have been put to better use.  Aside from the extra administrative fees of setting up such a program, we can’t ignore what each individual would have spent his or her money on instead.

While a new television would be nice for many, it just isn’t their top priority, and nobody should try to claim they know better than everyone else.  One family may have had medical bills to pay.  Another family may have wanted a weekend getaway vacation.  Another family may have wanted to add to their savings for a rainy day.  Another family may have needed new tires for their car.

This is the problem with central planning that is forced on everyone.  It not only redistributes wealth and inhibits production, but it misallocates resources.  It makes us poorer than we otherwise would have been.

Why Bank Bail-Ins Won’t Happen in the U.S.

In 2013, there were bank bail-ins in Cyprus.  This means that some depositors essentially had their money seized from them.  Ever since that time, there has been some speculation, at least on the web, that the same thing could happen in the United States.

This could easily happen in Greece any day now.  If I lived in Greece, I would not have my money in the banking system there if I could help it.  But Greeks use the euro, which is controlled by the European Central Bank.  They can’t create money out of thin air to bail out the banks there.  Only the ECB could do that.

In the U.S., I believe the chances of any kind of bank bail-in are extremely low.  You have your money indirectly confiscated on an almost continual basis because it loses its purchasing power because of the Fed’s monetary inflation.  But in terms of the nominal value of your deposits, the chance of a direct confiscation is almost nothing.

After the great fall of 2008, the Fed bailed out the banks, along with some other financial institutions.  The American people hated this, but it still happened anyway.  The American people would have hated it worse if there had been bank failures and the FDIC (backed by the Fed) refused to make depositors whole.

Then the Fed began buying mortgage-backed securities (MBS) as part of its quantitative easing programs.  It would create money out of thin air by buying U.S. government debt, along with the MBS.  But you can easily bet that the Fed was not paying the going market rate for the MBS.  It was paying the original value on them.

Let’s say a bank owns a whole bunch of mortgages that are originally worth $1 billion.  Then half of the mortgages go bad because people stop paying on them.  They essentially walk away from their upside down house.  Now that same group of mortgages is paying out half of what it was before.  Let’s say they are now worth $500 million.  Well, the Fed comes in and buys them for the original value of $1 billion, thus saving the bank.  It is essentially a bank bailout for $500 million in this example.

Of course, the Fed and the media described this process as an attempt to help keep mortgage rates down.  Perhaps it had that effect, but it was a bank bailout nonetheless.  But since most people don’t dive that deeply into the topic, or they simply don’t understand it, the Fed got away with a hidden bank bailout.

Now the subject of the day is the Fed possibly raising interest rates.  When you hear this, it is in reference to the federal funds rate, which is the overnight lending rate for banks.  For the last 6 and a half years, much of the new money created by the Fed has gone into excess reserves at the banks.  This has kept the federal funds rate near zero.  Since banks easily meet their reserve requirements, they typically have little need for overnight borrowing.

As economist Robert Murphy recently pointed out, the only way the Federal Reserve is going to raise the federal funds rate is by increasing the interest paid to banks for their reserves.  The Fed would have to sell too much in the way of assets in order to raise the federal funds rate.

Murphy gives an example of what will happen if the target rate goes to 3 percent.  Using the approximate current reserves of $2.4 trillion, the Fed would be paying out $72 billion per year to the banks.  This is money that would have been remitted back to the Treasury if not paid to the banks.

In other words, if the Fed does raise the federal funds rate as expected, it will just be a further bailout of the banks.

The first time the Fed bailed out the banks in 2008, it received a lot of criticism from the American people.  Since that time, it has used two other methods to bail out the banks – buying mortgage-backed securities through quantitative easing and paying interest on bank reserves.  These two other methods have yielded little criticism from the American public.

If the Fed can bail out the banks quietly with little criticism, why would we see a bank bail-in that could start something of a revolution?  The answer is, we won’t.  The Fed will keep quietly bailing out the banks and the American people will unknowingly accept it.

We Don’t Know the Libertarian Solutions

Sometimes it is difficult being a libertarian in the sense of having to defend the unseen.  This goes along with Bastiat’s (and Hazlitt’s) theme of counting the unseen costs.

When the government does something or funds something, the proponents can point towards the seen.  It is easy to say, “Look at that nice new school that was built with the fancy gymnasium.”

But it doesn’t always have to be something nice looking or involve feeding starving children.  It can be something as simple as roads.  If you say you are against compulsory taxation, then you can bet you will hear the objection, “But what about the roads?”

As Tom Woods has sarcastically stated, if it wasn’t for the government, we would just all be standing there staring at each other without roads wondering how to get anywhere.

I bring this up because sometimes I am asked for solutions to problems (or non-problems).  My solution is liberty and a voluntary society.  But people want specifics.

The problem is that I really don’t know how the market will function.  If we live in a society without state-funded education, I really don’t know what kinds of schools will pop up.  I can guess.  There would probably be different price structures.  You would have expensive schools for the rich.  You would have something like Walmart schools for poorer people, which undoubtedly would be better than most of the horrendous government schools we have today.  There would likely be charity schools too for the really poor.

Still, I really have no idea how things would work.  Nobody does.  That is why you leave it to the free market.  Millions of people would decide based on how they spend their money and also how they donate their money.  I don’t know how the road system would work without government because I’m really not in the road business and I probably wouldn’t be even if there were opportunities there.

I like to point out that if the government owned the grocery stores, everyone would wonder how things could function without the government.  Some people would just assume that we would all starve because there would be nowhere to buy food.

I can’t even tell you how grocery stores work now.  I can tell you that they exist and I know what a typical shopping experience is like.  But I have little idea of how they deal with shipping, inventories, accounting etc.  I really have no idea how the food is grown or processed or packaged or any number of other things.

The point about liberty is that voluntary people will find ways to make things work.  It is the collection of free people acting in cooperation that makes everything flow.  Nothing is perfect.  It is far from perfect.  But the market has a way of being the most efficient process at correcting mistakes.

I don’t know how competing courts would work.  I really don’t know how the extradition process works now between countries, just as one example.  I don’t know how the roads would work.  I don’t know how schooling would work.  I don’t know how licensing would work.

I do know that the free market would be the most efficient process in handling these things.  If it is up to a few central planners to decide, then you can be sure that it will not be efficient.  You can be sure it will misallocate resources.  The best anyone could do is mimic the market and meet consumer demands, but this is virtually impossible for the coercive state to do.

I don’t have the solutions for most of the problems in society other than to allow liberty to flourish.  No individual has the solutions because you can’t know what everyone else wants and needs.  But allowing a peaceful and voluntary society will ensure that millions of people will contribute a tiny fraction of the solutions we need for a well-functioning society.

Fast Food America

For anyone paying attention, it is obvious that Americans don’t eat the healthiest of diets, at least on average.  The fast food industry is big in the U.S., but like most things, there are multiple reasons for this.

Americans tend to live busy lives.  Fast food is a convenience.  When there are two working parents, dealing with driving kids around, then sometimes it just leaves little time for cooking.

Contrast this with a person living in France, who spends a couple of hours at the local cafe.  I understand this is stereotypical and there are a lot of exceptions, but it does somewhat reflect reality.

In the U.S., I also believe that the government contributes to bad eating habits in many ways from subsidizing certain things such as corn, to favoring big companies that process food.  Did you know that the U.S. government has massive tariffs on sugar imports?  This makes it convenient for many food producers to use high fructose corn syrup in its place.  It is cheaper because of the corn subsidies and the sugar tariffs.

The government also misleads Americans with its food pyramids and other conventional “wisdom”.  It prevents vitamins and supplements from being marketed as well as they could.  The government has also encouraged a low-fat diet, which is actually harmful.  Americans gave up butter for margarine and they don’t realize the damage it is doing to their health.

It is interesting that McDonald’s has been struggling with lower than expected earnings.  The company is trying to shake things up with its menu and its sales.  As a side note, speaking of “shake”, that is probably the one area where McDonald’s has improved.  I try to eat healthy, but the milkshakes there are really good.

On the occasion that I am in the position of eating at McDonald’s, I will eat a salad.  It is more like tolerate, at best.  Compared to other fast food places, I think the salads at McDonald’s are terrible.

McDonald’s is a cheap place to eat, as long as you aren’t ordering milkshakes.  You can get a decent sized meal for under 5 dollars in most places.  In this sense, it is a friend of the poor.  But in America, the poor people don’t look like many of the poor people  in third-world countries.  Poor people in America are more likely to be obese than really skinny due to a lack of food.

I believe that one problem with McDonald’s that perhaps is being overlooked is that many Americans are simply trying to eat healthier and they are trying to get their kids to eat healthier.  I am not saying this is yet a majority of people, although I don’t really know.  But more and more people are doing their own research and trying to clean up their diets.

Americans do not have a really high life expectancy compared to some other advanced countries.  I have heard people argue in favor of nationalized healthcare because Canadians have a longer life expectancy than Americans.  Of course, there are many factors that go into that statistic and healthcare is just one of them.

In terms of healthcare systems, I believe that Canadians may have an advantage.  Because of the long waits in many cases, people there just avoid going to the doctor and it may actually benefit them in some cases.  Americans are more than happy to see several doctors and get a list a mile long of prescription medication.  Again, this is partially a result of big government colluding with big pharmaceutical companies.

I think technology and the Internet are going to improve things in the U.S. and elsewhere.  There is more information available than ever before.  I know a lot of people who eat a paleo diet and most of my diet would be considered paleo.  It may not be the most accurately named diet, but the key is that many people are eliminating or cutting down on processed foods.

If McDonald’s is going to revamp its style, then perhaps it should offer some healthy food that actually tastes good.  If it isn’t going to do that, then it should just stick with its niche of providing cheap food to the masses.  People looking for healthy food will find alternatives, even if they seek convenience because of their busy lives.

Are 401k Plans a Scam?

James Altucher, a writer and entrepreneur, has been saying for quite a while that you should forgo contributing to your company’s 401k plan.  He says they are a scam and has his various reasons.

I have written about James Altucher before.  He is a great motivator and a brilliant mind.  He has also made some terrible mistakes in his life by making a lot of money and then blowing it all.  I think people should listen to him.  You can learn from him in what to do and what not to do.

He likes to go against the grain on many things.  He says you shouldn’t buy a house.  He says you shouldn’t go to college.

He recently was in a video making his case on why 401k plans are a scam.  He received a lot of flack, as several major outlets published articles criticizing him, such as this one.  Altucher responded in another podcast.

While I am no moderate when it comes to my political views, I am something of a moderate on this topic.  I think there are advantages and disadvantages of contributing to a 401k plan.

In a sense, they are a bit of a scam.  It is a government invention.  If there were no income tax, then a 401k plan would not be necessary.  You wouldn’t need to defer taxes because there would be no taxes.  You could just save your money how you want.

The advantages of contributing are obvious and they are ingrained in our heads.  Most people can get a company match.  You can defer your income taxes.  I don’t need to go over these in detail because they are well-known.  Instead, I will discuss the disadvantages.

One major problem is that the government is in control of your 401k plan.  The government could change the rules at any time.  It could make it even harder to withdraw by raising the age and making early withdrawal penalties stiffer.

There is also the issue of taxes.  You are supposed to contribute because you can defer your taxes.  Unless you are talking about a Roth 401k, then you really don’t know if your plan will benefit you.  What if taxes are much higher when you retire?

But my biggest case against contributing to a 401k plan is that you are locking up “your” money and there are potential opportunity costs to it.

If you contribute $5,000 in a year to your 401k plan, then that is $5,000 that you don’t have access to right now (maybe a little less because of taxes).  You can’t touch that money, except in certain circumstances, and even then you will probably have to pay a penalty on top of income taxes.

What if someone comes to you with a business offer that you think is great but you need $5,000 to get it started?  What if you don’t have the money because you put all of your savings in a 401k plan?

What if you took that money and put it in investment real estate?  Would you rather have a debt-free investment property in 30 years or a mutual fund that may or may not go up in value?

In the case of James Altucher, he would be much better off with the money today than locking it up in some retirement plan.  As long as he doesn’t return to his reckless ways, he would find a way to put it to good use in investing in himself and his many business ventures.

In this sense, 401k plans are good for people who have no other plan. If it is between saving for retirement or spending it in Vegas, then you should probably go with retirement.  But even here I can’t say for sure because you may derive a lot of pleasure in Vegas.

So overall, I think the decision of contributing to a 401k plan should really depend on your own circumstances.  It is the same with buying a house.  What are your opportunity costs?  What would you do with the money if you didn’t contribute?

If you own a side business, perhaps it would make more sense to take that extra money and put it into advertising or product development. If your side business takes off, that will probably give you a far better return than any mutual fund.

In conclusion, I wouldn’t dismiss several of Altucher’s arguments against 401k plans.  I think it depends on each person, but just be sure to consider the opportunity costs.  Once you lock up that money, it may be a while before you can get your hands on it again.