Is It Your Fault You Don’t Have Enough Money?

This is a tough subject for me to address.  It is tough because I may sound contradictory if I am not precise with my language.

The middle class in the United States (not to speak of other first world countries) is struggling.  I understand that we have luxuries today that could have only been dreamed of a generation ago.  Still, a lot of middle class families are struggling with stress and money.  They work long hours and barely have enough to pay the bills each month, let alone actually save money for retirement or a rainy day.

When this issue comes up, I often hear conservatives talk about frugality and self-responsibility.  Even many libertarians go straight to this, and I often cringe.

I am all about frugality to a point, and being a libertarian, I am obviously in favor of self-responsibility.  But by addressing these issues first, I think it is letting the government off the hook to a certain degree.

The federal government spends nearly $4 trillion per year, with state and local governments spending at least another $2.5 trillion.  About 40% of our income goes to the government, and this isn’t even taking into account how much poorer we are because of regulations.

When you add up federal, state, and local government spending, it is about the equivalent of the median family income in the United States.  Figure that one out.

But I will read an article or listen to a talk show and hear about someone who makes a middle class income who is struggling with his finances.  Then I hear the horrible response that he could live in a small apartment and cut coupons and budget just a couple of hundred dollars or less per month for food.  I also hear that he doesn’t need a cell phone or cable television.

This is all like nails on a chalkboard to me, and let me tell you why.

The problem is that I am hearing this when the topic is mainly about politics or economics.  It is not coming from articles or talk shows that primarily deal with financial advice.  If I hear this from Dave Ramsey or Suze Orman, that’s fine.  It is probably good advice.  It is relevant advice.

The problem here is that the complaint is more general about how tough times are today.  The complaints are valid.  The middle class really is getting hosed, for lack of a better word.

Everybody knows they can live in a cheaper place and eat rice and beans for dinner every night.  They know they can get rid of all of their electronic gadgets and save some money.  But the point is that these people don’t want to do it, and I don’t blame them.

We are not talking about people with new $40,000 cars who take $10,000 vacations every year.  If they are complaining about their lack of money, then maybe I can understand this response.  But I am talking about people who are living a fairly modest lifestyle.  Maybe they have a new car and have their kids in some activities.  But are they supposed to drive a beat-up junker their whole lives and keep their kids fenced in at home?

There is a time and place for lecturing people on how to budget more wisely.  When you are talking politics and economics, that is not the time.

Conservatives and libertarians are missing a huge opportunity.  Maybe the conservatives don’t care because many of them really do love big government.

But for libertarians, we should be advocates for these people.  It is the state that is making their lives so difficult.  We should be able to have cell phones and cable television on a middle class income without feeling a major struggle.  We should expect an increasing standard of living where we have new luxuries that are affordable.

The problem is that our living standards are not increasing as they should because the state is holding us back.  The state in all its forms is hurting savings and productivity.  Libertarians should be defending the middle class, telling them that they would be able to have all of their gadgets and more without feeling the struggle if only the state would get off of our backs.

Sure, there are a lot of people who make unwise financial decisions, if we can even judge.  But there are also a lot of people who make good decisions.  And the middle class, even for those who have been relatively frugal, is struggling because the government is taxing and regulating us like crazy.

So let’s answer the initial question.  Is it your fault you don’t have enough money?

There is no clear-cut answer to that.  For some people, it really is largely their own fault.  For some people, it is primarily the state that has made them poor.  For most people, it is probably a mix.

I am not saying all of this as an excuse.  You shouldn’t just throw your hands up in the air and say, “the government is too big and there is nothing I can do about being poor.”  You still have to take control over your own life to the degree that you can.

The reason that Donald Trump and Bernie Sanders have done so well up until now in the presidential race is because they are acknowledging there is a major problem out there.  Most of their solutions may be bad, but at least they are recognizing the struggles out there.

Libertarians should be advocates for the struggling middle class, and the lower class too.  This isn’t to make excuses for anyone.  This isn’t to say that people shouldn’t take responsibility for their own lives.

If someone is looking for financial advice, you can give it to them, which might include budgeting techniques.  But if someone is looking for some sympathy because the government has made it tough to get by, you should provide some sympathy.  It is the perfect opportunity to let people know exactly why they are struggling so much.

One of the Toughest Issues for Libertarians

Libertarians will argue over abortion and immigration, but there are general things we can agree on with these issues.  At least some of the solutions can be found in decentralization and property rights.

With immigration, if you end government welfare – which all libertarians should agree – then it automatically solves a major portion of the immigration issue.

I don’t know if there is a lot of disagreement, but one of the toughest issues for libertarians is the banking system.  We obviously share agreement that there should be a free market system, but how do we get there with our current system?

I know that most people opposed the bailouts in 2008.  And it is ridiculous that these companies received bailouts only to see the executives later receiving big bonuses.

Obviously the car bailouts were a case of protectionism and corporatism.  It’s not that the other bailouts weren’t, but just that they go deeper.

The public opposed the bailouts for the most part, but what if they had been given a choice between the bailouts and having the chance of losing deposits in their bank account?

The average American probably only has a few thousand dollars in a checking account, but it is still something.  And there is a general respect for property rights when it comes to “cash” in the bank.

We can’t be sure if this would have happened, but if there had been no bailouts, there is a good chance that the big banks would have gone under.  The FDIC was supposed to insure deposits up to $100,000 (now $250,000), but the FDIC barely has any money.  If the FDIC had covered all of the failed banks, then the FDIC would have needed a major bailout, which could only be feasibly done by the Fed.  Either way, it is a bailout.

In other words, unless you are prepared to say that the whole banking system should have been allowed to collapse, then the bailouts may have been necessary, at least to some extent.

The other option is that the government could have outright nationalized the major banks (or all banks), but what kind of libertarian would advocate that?  Actually, there are a few libertarians out there who did understand the depth of the situation and advocated nationalization as the least bad of the all of the options.

I still do not know what the answer was, other than the fact that the people should have never allowed the government to get into the mess in the first place.

I know some libertarians would say to let the whole thing collapse.  I myself say that with many issues.  But the banking system is everything.  Without a functioning banking system, all chaos really would break loose.  It might mean a severe breakdown of the division of labor.  Will the truckers deliver food to the stores if they can’t get paid?

In the U.S., there is basically no alternative money at this time.  In some foreign countries, the U.S. dollar functions as a secondary currency.  If the U.S. dollar broke down, something like gold would quickly replace it.  But without any other money currently in use in any significant way, the transition would be tough and not instantaneous.

Unlike some other libertarians, I am not an advocate of compelling banks to not engage in fractional reserve lending.  In a free market system, I believe it should be allowed as long as the parties are made aware of the situation.

But if 100% reserve banking were needed to get back to a free market banking system, it would be hard to oppose in the short run as a transition measure.

Over the last 8 years, banks have piled up a couple of trillion dollars in excess reserves.  It would be far easier to get to a 100% reserve system than it was a decade ago.  In this sense, the banking system is actually a little better off than it was in 2007/ 2008.

In a 100% reserve system, the banks would not be allowed to lend out money unless it were based on deposit money that is not instantly redeemable.  In other words, the money sitting in your checking account could not be loaned out.  It would mean that you would probably have to pay higher bank fees, but it would also likely mean a more stable banking system.

The banking system is one of the biggest and toughest issues we have to deal with.  It is so heavily controlled by the government, it is hard not to use some government solutions initially to get us out of this.

I hate writing and discussing this issue in a sense because I feel as though I am giving up my status as a hardcore libertarian by advocating interim measures and quasi-government solutions to get out of the current mess.  Still, it is a subject that is mostly avoided by libertarians (and everyone else) and I haven’t really heard a better solution that doesn’t involve total chaos.

Is China Selling U.S. Treasuries?

I keep seeing reports and articles saying that China is selling U.S. Treasuries.  Is this true?  There are obviously a lot of implications if it is true.

But according to U.S. government data, the Chinese central bank has reduced its holdings by only a minuscule amount.  Billions of dollars is not minuscule in our world, but it is when you consider that China still holds over 1.2 trillion dollars in U.S. government debt alone.

The latest statistics on foreign holders of U.S. debt were released on March 15, 2016.  China is still the number one holder, with Japan at number two.  The next highest is not even close to those two.

In 2015, China topped out its holdings in June with 1.271 trillion dollars of U.S. Treasury securities.  As of January 2016, this number stands at about 1.238 trillion dollars.  In other words, the People’s Bank of China is only down about 33 billion dollars in holdings from its peak last year.  Compared to January 2015, its holdings are down just over a billion dollars, which is negligible when you are talking about these amounts.

If anything, it is the Japanese central bank that has been selling off U.S. debt, or at least not rolling over maturing debt.  The Japanese went from 1.239 trillion dollars in holdings in January 2015 to 1.124 trillion dollars in January 2016.  There, you are talking about a reduction of more than $100 billion.

There has been talk for many years now – at least with some of the stuff I read and listen to – that China holds a card over the U.S. in being able to sell of U.S. Treasuries.  We are told it could collapse the bond market.  We are told that China is able to control the U.S. because of this leverage.

It might all be true if it weren’t for the fact that the Chinese central planners are a bunch of mercantilists.  They think they need to hold foreign debt and keep their currency down in order to prop up exports.  It does prop up their exports, at least in the shorter run, but it is done at the expense of the Chinese consumer, of which there are about 1.3 billion.

Meanwhile, the American consumer gets subsidized, in a sense, by having cheaper imports.

The bad thing about China owning all of this debt is that it also subsidizes the U.S. government, meaning the reckless spending habits of U.S. politicians.

If the Chinese (and Japanese) did not buy up all of this debt, then it would be up to the Federal Reserve and private investors to buy up most of it.  This would probably mean higher inflation and higher interest rates.  It would eventually mean less deficit spending by Congress.

For this reason, I really do wish the Chinese central bank would reduce its debt holdings.  Instead, it let’s the Fed get away with monetary inflation that does not lead to short-term increases in price inflation and interest rates.  There are other reasons this has happened as well (low velocity, excess reserves), but the Chinese buying of debt is a factor.

Putting yourself in China’s shoes, it is hard to say they are in control. It reminds me of the quote that if you owe the bank $100, that’s your problem.  If you owe the bank $100 million, that’s the bank’s problem.

The U.S. probably isn’t going to default on its debt to China any time soon.  But it will default in the same sense it constantly defaults on promises to the American people.  It will default through depreciation of the currency.  China will eventually get its 1.2 trillion dollars back, but it may not buy them much.

As of right now, China is holding pretty steady and Japan is reducing its holdings, although not drastically.  The Fed ended QE3 back in late 2014.  Yet interest rates have remained low.  There is demand for U.S. Treasuries, despite the lack of buying from the Fed and foreign central banks.

If anything, this indicates a recession is coming.  There is not an inverted yield curve yet, but long-term rates are staying down.  It may not have to invert for there to be a recession.  It has already flattened a bit.

The Government’s Take

Sometimes I have to remind people (if they ever knew) just how much the government is taking from them.  Most people will look at their income taxes and payroll taxes and think that is what they are forking over to the government.

There is obviously so much more.  Employers also pay payroll taxes for their employees, which means lower wages.  There are excise taxes.  There are corporate taxes that lead to lower wages and/ or higher consumer prices.  There are many other taxes.  There is also the issue of inflation.

The only proper way to measure what Americans are paying is by looking at government spending.  All money spent by government is really obtained through taxation in some form.  Even if it is done through debt and inflation, it is still diverting these resources.

The federal government is now spending close to $4 trillion per year.  There are about 120 million families in the United States.  This means that your family’s share of the government is over $30,000 per year.  This is just for the government in Washington DC.  It does not include all of the state and local spending that you fund as well.

Imagine if the federal government had no debt and actually stayed within the confines of the enumerated powers listed in the Constitution.  Imagine some basic defense spending (no offense) and a few other basic functions such as the courts.  Imagine the federal government only spending a few hundred billion dollars per year.

I understand this implies no spending on Social Security, Medicare, Medicaid, schools, transportation, and a bunch of other things.  But if you had an extra $30,000 per year of cash flow, would you really care about those things?  And if they really are critical, then couldn’t the states pick them up instead?

This just shows the absurdity of the whole system we are living under.  Such a huge percentage of our production is taken away from us, it is almost a miracle that our living standards are as high as they are.

With the presidential race going full swing, there is obviously a lot of discontent out there with the surge of the outsiders.  Maybe they aren’t outsiders, but they are at least perceived that way.

But the reason that the American middle class is struggling so much is because the government takes about half of their money away.  This makes it rather hard to get by.  This isn’t even accounting for the massive regulations and bureaucracy that we face.

The craziest thing is that if you add up government spending at all levels and divide it up by each American family, it is about equivalent to the median family income.  Again, how is it even possible that our society functions as well as it does?

That is a statistic you would expect out of Western Europe or some socialist country.  When government is spending more than the median family income, something has got to give.

By the way, the reason that statistic is even possible is because obviously the median income has already had a lot taken off the top of it.  If government spending were cut to a fraction of its current size, then our higher living standards would show up as a combination of higher wages and lower prices.

We need a major correction.  The market tried to give us one in 2008.  For state and local government, it did help scale it back a little in some areas.  Unfortunately, the federal government has ballooned up more as a result.  It is not sustainable.

When something is unsustainable, it will come to an end at some point, even if most people don’t realize it.  There will be a harsh correction.  Eventually, the federal government will be forced to cut back.

The only question is how long it will take for it to happen.  If there is a severe recession, things will depend on Federal Reserve policy.  If the Fed helps fund the deficits by creating money out of thin air, then the ridiculous spending could go on for a while longer while making everything worse.

We should all be prepared for these scenarios.  The recession will come.  It is a question of whether it is allowed to play itself out or if the government and central bank will just make things even worse.

Not All Government Spending is Created Equal

All government spending – if it is not used to protect liberty or enforce contracts – is a misallocation of resources.  The qualifier in there is debatable amongst libertarians, but I don’t want that to be the focus of this piece.

If the government is spending money on something, other than anything that actually protects our liberty, then it is money spent on things that consumers would otherwise not have chosen.  If the government collected taxes on a voluntary basis, this could be a different story.  But since virtually all taxes are collected on the basis of force or threats of force, the state is spending money on something that we would not have chosen, otherwise the taxation wouldn’t have been necessary.

Government also spends money using inflation and debt, but again, this is essentially the same as forced taxation.  It may be a more devious form of taxation, but we are essentially being forced into this system.

Even though virtually all government spending is a misallocation of resources, we have to consider that some spending is more wasteful than other spending.

This is a point addressed in a recent piece by Ryan McMaken on the Mises Institute site.  He cites an interview of Marc Faber, where Faber points out that much of China’s government spending went into infrastructure.  And although this is wasteful spending, Faber points out that at least it could conceivably be useful one day.

I agree with Faber’s general point that the misallocation of resources is worse in some cases than others.  I’m not sure if China is the best example because of the massive ghost cities that have been built.  All of the roads and expensive buildings don’t do much good if there is nobody living in them.  Also, China’s misallocation may be the biggest bubble in human history.

Building an excess of roads in an area that is at least somewhat populated might be a better example.  If you have a road that only has about 1,000 cars per day go on it (assuming it is not part of a housing community), then it probably wasn’t worth the expense.  But at least it is getting some use, and even possibly relieving a little bit of traffic from other roadways.

Of course, it is impossible to know for sure if a particular road is “worth it” because there is no market mechanism in the form of profits and losses to indicate such.

Still, Faber’s overall point is well taken.  I would much rather see government money spent (wasted) on a road that nobody uses than have it spent dropping bombs on a foreign country.  I would rather see the government spend money to subsidize electric cars than to see it spend money on funding foreign dictators.

All of this spending is a misallocation of resources, but obviously some spending is more harmful than other spending.

I would probably get a lot of agreement from people on the left that subsidizing electric cars is a far better use of resources than fighting wars.

Unfortunately, the same people on the left can’t understand that subsidizing electric cars is in fact a misallocation of resources.  I have nothing against electric cars as long as they operate in a free and voluntary market.  The problem is that they don’t.  The only way that businesses can be profitable (it seems at this point) is by getting subsidies through the government either directly or given to the consumers.

In conclusion, some government spending is worse than other government spending.  But virtually all of it is a misallocation of resources.  This hurts our living standards and makes us poorer than we otherwise would have been.

FOMC Statement of 3/16/2016 and the CPI

The Federal Open Market Committee released its latest statement on March 16, 2016.  While the Fed did not hike its key interest rate – the federal funds rate – it did alter expectations for 2016.

It is now expected that the Fed will raise its key rate only 2 times this year, as opposed to the previous projection of 4 times.

The Fed is saying that price inflation is tame.  And by judging from the CPI, the Fed is correct.  It just so happens that the latest CPI numbers also came out on March 16.

The CPI actually showed up as negative 0.2% for February from the previous month.  Year-over-year, the CPI is up 1%.  However, the median CPI is still coming in at 2.4% annually.

There are a few problems here though.  First, we shouldn’t have this desire for 2% inflation.  In a free market system, we would typically expect prices to gradually fall to reflect gains in productivity and technology.  Imagine how inexpensive electronics would be today if the Fed weren’t partially counteracting these great gains.

Another major problem is that the CPI is not reliable in judging consumer prices.  I still watch the CPI because it is useful to see trends.  It also gives us a look at the data that the Fed and other analysts are looking at.

But perhaps the biggest problem is that the low CPI numbers are giving the Fed – and us – a false sense of security.  The CPI does not take asset price inflation into much account, which is where the bubbles often form.

This is especially bad because it falsely leads us to believe that the Fed is not doing much damage.  If we don’t see skyrocketing prices (ignoring health insurance and certain asset prices), then the Fed must not be harming us much.

But rising prices is just one consequence of a loose monetary policy.  Price inflation has remained low due to a lack of bank lending, coupled with a high demand for money.  The high demand for money means a lower velocity.  Right now, I believe this is a reflection of continued fear amongst the American people.

The Fed had an extremely loose monetary policy from 2008 to 2014.  Prices may not have gone sky-high, but the damage is done.  It has misallocated resources.  When those resources eventually try to realign to actual market demand, the correction is going to be painful.

There has also been a major misallocation in terms of savings and investment.  While spending may not be as crazy as the peak of the last bubble, there is little doubt that it is distorted and that savings should probably be even higher than they are.  We need savings and investment in order to set the stage for new prosperity that is actually sustainable.

So the main problem here is that the Fed will have no trouble starting QE4, or whatever they will call another round of money creation.  They will not perceive price inflation as a great threat.

Price inflation can jump quickly in these types of situations.  You should be prepared for this.  I recommend at least 20% of your investment portfolio in gold and gold-related investments for this reason.  You can also add in a little bit of silver.

Will Trump Allow the Establishment in the Door?

It seems that in every presidential election cycle, we hear some version of this: “This is the most important election of our lifetime.” It is usually the establishment characters of the two major parties who make this claim. Unfortunately, some naively believe it.

I don’t want to say that it absolutely doesn’t matter who is elected president, but it is not nearly as significant as what most would like to believe. One way I can equally irritate Republicans and Democrats alike is by pointing out that Obama is mostly a continuation of Bush.

We are supposed to get excited about the presidential race so that we are under the illusion that we are in control. We are in control, but not because we are voting. As long as people consent to the government taking care of them, then we aren’t in control. We are only in control (in a collectivist sense) because we can deny this consent at any time.

We are told that we should exercise our right to vote. But we are supposed to vote for a Bush or a Clinton or one of the other vetted candidates. If you vote for Trump, or someone such as Ron Paul, then you don’t know what you are doing and you should allow the elitists to choose for you.

While electing a new president probably doesn’t make much of a difference, it can be a reflection of public opinion. That is one of the reasons I am paying such close attention, especially to this election cycle. It is obvious that people are simply dissatisfied with the status quo. Or perhaps more accurately, they are downright mad at the situation.

People have a right to be mad. They are struggling to get by as their wages do not keep up with the prices of basic goods and services. And while they can’t necessarily articulate the problem, they understand that they are getting swindled, while the big players are getting taken care of. And some of the rich people really are getting rich off of the backs of others because they are getting bailouts and other special favors from the politicians and central bankers. They are not rich because they are satisfying consumer demand in a voluntary market.

Donald Trump and Bernie Sanders have identified a major problem, which is a start. It is better than any of the others did. And while most of their solutions are wrong, especially when it comes to economics, at least they are acknowledging that people are struggling.

As I write this, Donald Trump just won Florida and is likely to win the rest of the primaries on this Tuesday except for Ohio. John Kasich will win Ohio. While Trump is still not getting above 50% in most states, he is still dominating the Republican primaries.

At this point, it looks like it will be Donald vs. Hillary. But I can’t help but think it is not over yet.

On the Republican side, the establishment absolutely despises Trump. He cannot be easily bought and he questions the U.S. empire overseas. The establishment is still going to try to get rid of Trump, but it is looking more difficult to do so at the convention. If he is right around having 50% of the delegates and they still try to stop his nomination, it won’t look good. I think they will find other ways.

I have already discussed my fear for Trump that there will be an attempt to assassinate him. But even with that, the insiders probably don’t want to overplay their hand. If that were to happen, it would set his supporters on fire, who are already supporting Trump as a vote against the establishment.

I think the most likely scenario is that they try to treat Trump like they did Reagan. Of course, there was an attempt on Reagan’s life, and the alleged shooter was unsurprisingly connected with the Bush family. But the establishment learned to live with Reagan.

The reason is that it was mostly the Bush team that infiltrated the Reagan administration. The establishment probably knew they were fine as soon as Reagan agreed to have Bush as his running mate. Then James Baker and company got in the door.

This is something to watch for with Trump. Who will he choose as his running mate? Who will his most important advisors be? The Republican establishment may decide they can deal with Trump as long as they have some of their people helping to advise him.

On the Democratic side, Hillary Clinton will be the nominee unless we see an indictment. While I wouldn’t bet on an indictment, I give it a much greater chance than I would have just a few months ago.

What will happen if the FBI issues an indictment just before the convention? Or what happens if an indictment is issued just after the convention? She may need to get elected just to essentially pardon herself and avoid prison time.

I think the Clintons and the Democrats absolutely fear Trump. He is a loose cannon. Is he going to say anything about Bill the rapist? Is he going to bring up Vince Foster or any of the number of Clinton associates who ended up dead? This could be really interesting.

I don’t know if Trump will be any good in scaling back U.S. intervention overseas. Maybe he will be a total disaster as president. But he sure is making things interesting and entertaining.

Investing in Yourself

While my focus here is typically on libertarianism, economics, politics, investing, and money management (and sometimes all of those put together), I do occasionally have to remind others (and myself) that investing in yourself is more important than any financial investments you can make.

Investing in yourself can mean almost anything, but it generally means taking steps to improve your situation in life.  Some will mistake this as formal education, but that isn’t what I mean.  Formal education can serve this purpose, especially if it means a certification for a particular career.  But I am generally referring to informal education and other activities that can enhance and improve your life.

I recently wrote a post on Donald Trump as a businessman.  I made the point that you have to be willing to try different things and learn from your failures.  You can’t just try one thing and go for broke because you are likely to fail.  Even worse, some people never try anything at all.  You have to be willing to fail many times and then embrace what is successful.

I recently listened to a podcast with James Altucher interviewing Gary Vaynerchuk.  I am not really familiar with Vaynerchuk’s work, but I really enjoyed the interview.

As far as Altucher goes, he is a complete mess in some respects.  I have written about him in the past.  He is someone you can learn a great deal from.  You can learn from his creativity, and you can also learn what not to do.  His life is too much of a roller coaster for me, but his ideas and creativity are incredible.  He is also a great interviewer, as he is able to pull out a lot of great information from his guests.

In this particular interview, Altucher asked Vaynerchuk about a hypothetical guy working in middle management who wants to get out of a rut working in the corporate world (or something to that effect).

Vaynerchuk says that the first thing the guy should do is to not spend his whole Saturday watching House of Cards.  Actually, he used more colorful language than this, so be cautious about listening to this podcast in front of kids or sensitive ears.

Vaynerchuk’s point is about time management.  We find ways to whittle away our time.  I don’t watch House of Cards.  I do watch television, but I am fairly limited to a handful of shows, along with some sports and a few other things.  I don’t get a lot of downtime, so watching television is a little bit of time for decompressing (in the words of George Constanza).

Vaynerchuk said that the person should be spending that time (on Saturday instead of watching House of Cards) investing in himself.  He didn’t quite use those words, but that is what he meant.  It is about finding a passion, or something you are good at, or hopefully both, and making something out of it.

It could mean starting a blog, or a YouTube channel, or setting up a website to sell something, or to just give something away.  You aren’t going to get rich right away.  You probably won’t even make any money right away.  But you have to get started.

How do you eat an elephant?  One bite at a time.

When you do little things on a consistent basis, they start to add up to bigger things.

Vaynerchuk said in the interview that Johnny Crest (their fictional character) might realize that he likes his life.  He likes getting drunk with his friends on Thursday night.  He likes watching House of Cards.  It is really a matter of preferences.

Anyone can say they want to be rich, but that isn’t the question.  It is whether they are willing to sacrifice certain things (like watching House of Cards all day Saturday) in order to even have a legitimate chance to get rich.

The majority of people – probably the large majority – fritter away time easily.  I am not saying that you should never have fun or never have downtime.  Some relaxation is important.  But again, we do have choices to make.  Can you find an extra hour in each day to do something to invest in yourself?

The question that often gets asked is, “But how will I make any money doing that?”  The answer is that you may not make any extra money doing it.  It could go either way.  But there is one thing I am absolutely certain of.  If you don’t try that extra thing, you definitely will not make any money off of it.

It doesn’t mean you can’t abandon projects if you see a dead-end ahead.  You learn from your failure.  But it really isn’t a failure.  It is just a necessary step in the process of finding what you are good at and what people are willing to pay you for.

If you are happy in your job or whatever it is you do, and you are generally happy with your life situation, then that is fine.  You can have your daily gripes about little things, but just don’t gripe about your life or your big picture of things.

If you feel like you are in a rut, then change something.  Try something different.  This doesn’t mean leaving your responsibilities or quitting your job.  I am not talking about running away.  I am talking about embracing something new.  If it doesn’t work out, you can always try something different with little lost except some time.

But if you are in a rut and all you do is complain about it, then you are probably not going to get out of the rut.  You can keep complaining about it and be miserable.  Another option is to change your attitude and embrace your current situation.  But a third option is to change your attitude, embrace your situation, and try something new that may open up new opportunities.

Invest in yourself.  It is up to you to figure out the optimal way to invest.

Is Trump a Good Businessman?

There is obviously a lot of talk about Donald Trump these days, since he is currently the frontrunner to get the Republican nomination for president.

There are many things I don’t like about Trump, politically speaking.  He is absolutely terrible on economics.  Being good in business does not necessarily make one competent in economics.  I could say the same thing about Warren Buffett, but I’m not sure how much of it is economic incompetence or simple dishonesty when it comes to Buffett.

Back in 1999, Trump was talking about running for president.  He proposed a one-time wealth tax of 14.25 percent in order to pay off the national debt.  His plan would have applied to people with over $10 million in net worth.  Luckily he hasn’t floated this idea this time around.

Not only was his proposal immoral in stealing people’s property, but it would have been disastrous economically too.  Imagine businessmen having to sell off 15% of their businesses or stock holdings in order to pay the government.

Even without that proposal, Trump is still a disaster economically.  He wants to put tariffs on Chinese goods.  This is nothing more than a tax that will make life more expensive for the already hurting American consumer.

As a libertarian, I also oppose Trump for the simple fact that he doesn’t propose any serious significant cuts to government programs, except perhaps in scaling back wars.

And it is in foreign policy where Trump offers a glimmer of hope.  He is standing up to the Republican establishment on this issue and they absolutely hate him for it.  That is why the establishment can still tolerate Ted Cruz.  Cruz has no trouble in maintaining the U.S. empire.

Aside from Trump’s political views, what about Trump as a businessman?

Mitt Romney recently gave an anti-Trump speech.  It was sad and pathetic.  Romney is the face of the establishment, and it probably just solidified support for Trump.

I have never liked Romney and I have always hated his politics.  Still, he seemed like a half decent guy despite being embedded with the power elite.  I remember Ron Paul saying some nice things about Romney.  I think Romney’s wife was the only one who was friendly towards Carol Paul at the debates.  Mitt Romney’s wife really does seem like a nice lady.

I don’t know if Romney is trying to position himself as a candidate for a brokered convention, or if he was just pushed out there by the establishment to oppose Trump.  Romney never said such harsh words against Obama when they were facing off.

It was particularly interesting that Romney said Trump is not a good businessman because of all of his failures.

To be clear, I haven’t agreed with everything Trump has done as a businessman, particularly in his use of eminent domain.  Aside from that, I do understand his political donations and connections.  He has played the game that is given to him.

I have heard from more than one source that Trump is very kind and good to his employees.  I don’t know this firsthand, but that is what I have heard.

I have also heard that Trump University was a decent, if expensive, program.  Again, I don’t know firsthand, but supposedly the material was high quality as compared to other get-rich programs.

But for Romney to say that Trump has not been a good businessman because of all of his failures is utterly ridiculous, and someone like Romney should know better.  Maybe he does know better and was being dishonest.

How many people wouldn’t trade places with Donald Trump in terms of business success?  The numbers don’t lie.  And certainly Trump did start out ahead of others.  He says he started out with a million dollars.  Still, to turn that into billions is incredible.  It is not anything comparable to someone such as George W. Bush who used his family’s money and connections for business deals.  Bush was not actually an entrepreneur, nor a good businessman, except in using government power.

Trump has tried a lot of different things.  Some of them have failed and some of them have been successful.  That is what businessmen do.  Entrepreneurs have to somewhat guess at what consumers want.  They don’t really know until they actually offer the product for sale.  Profits and losses will dictate if it is something that the consumer desires.

In order to be a successful entrepreneur, you have to take chances.  You have to put things out there to see if consumers want them.  There are no 100% guarantees that anything will work because consumers have the final say, unless you are talking about government monopolies.

Trump is actually a great example for aspiring entrepreneurs.  I am not saying you should risk a lot of your money or dump all of your efforts into one thing.  Obviously Trump has money to play with.

But to be a successful entrepreneur, you have to try something.  You can’t be afraid of failure.  You just have to limit your risk on new ventures so that you can keep going if it fails.  And that is something that makes a great businessman – the fact that failure does not keep him down.

If someone puts out 10 products and 9 of them fail, then I guess Romney would consider that person to be a 90% failure.  But if the 9 failures were limited in losses, and cut when they were obvious losers, then these are just as much successes as anything.

And compare that person to someone who has an idea for a product or business who never puts it out there.  According to Romney, that person has never failed because he never tried.  But maybe that is the person who is failing all of the time.

The 90% failure guy has his one success.  He didn’t know which one of his 10 ventures would be a success.  But if he didn’t put all 10 of them out there, he wouldn’t have his success.

If you are an aspiring entrepreneur, don’t listen to what Romney says.  Failure is actually good as long as you limit the damages and it doesn’t discourage you from trying again.  Part of being a good businessman is trying many things and keeping with the things that work.

Trade Deficits Don’t Matter

I find this is an economic myth that stays with us.  Even many libertarians fall into the same trap, or simply don’t understand the subject.

Anyone who talks about the dangers of a trade deficit better be really clear on what they are talking about.  At least 95% of people (probably higher) who complain about the trade deficit really don’t understand what they are talking about, at least on this subject.

A trade deficit is defined as when a country (or region) has imports that exceed exports.  In the case of the United States, there is usually a trade deficit.

To be clear, some of the reasons for a trade deficit may not be good.  But the trade deficit itself isn’t the problem here, but just a symptom.

For example, government deficits can contribute to a higher trade deficit.  In the case of the U.S., where a lot of U.S. debt is bought by foreigners – particularly the central banks of China and Japan – the trade deficit is higher as a result.  There are various reasons for this, which includes the dollar still being the world’s reserve currency, along with the fact that the central planners in China and Japan are a bunch of mercantilists.

But the answer to this problem isn’t to narrow the trade deficit.  The answer is for the government to stop spending so much money and running up the debt.

If you take government debt out of the equation, all of a sudden things don’t look bad at all.  In fact, a trade deficit can be a sign of prosperity, or an advanced civilization.

Instead of thinking about countries, think about cities.  New York City has to have one of the biggest trade deficits in the world.  How much agriculture or manufacturing of products happens in Manhattan?  I won’t say its zero, but it is pretty close.  Should New York City residents try to lower their trade deficit by focusing on manufacturing or farming instead of finance and banking?

The same people who say we need a lower trade deficit (without blaming the government’s deficits as the main problem) usually will also say we need more manufacturing.  Again, apply the example of New York City.

There is nothing magical about manufacturing jobs.  Actually, the U.S. is still huge in manufacturing goods, but it just takes fewer people to do it.  This is a sign of an advanced civilization and a high division of labor.  It is a sign of increased productivity.

If you go back over 100 years ago, the majority of people had to grow their own food.  Now only a tiny percentage of people consider themselves to be farmers.  This frees up our time to do other things, meaning we are able to provide other goods and services, including many luxuries.

There is nothing wrong with having what is considered to be a service economy.  Again, it is a sign of our prosperity, at least as compared to a long time ago.

There is also the issue of comparative advantage.  There are many goods that could be produced in the United States, but which are not.  They are produced by foreigners and imported by Americans.  It doesn’t mean that they are better at producing these goods (or perhaps they are).  It just means that our time is better spent producing other things, while their time is better spent what they are doing.

The CEO of McDonald’s could be the greatest cashier and hamburger flipper in the company.  But he isn’t going to flip hamburgers and collect money at the cash register, even though he is the best at it.  His talents are better spent in another function.  It is an issue of comparative advantage.

The only way all of this can be sorted out is by the voluntary marketplace where there is open and free trade, and buyers and sellers decide what they want to buy and what they want to sell.  This includes the buying and selling of labor.

In a free and open market without government debt, there is no need to worry about any trade deficit because there really is no deficit.  It is parties exchanging goods and services.  If one party buys a good (imports) and the other party sells the good (exports), why should we think the buyer is worse off because of a supposed trade deficit?  It is a voluntary exchange.

If anyone at all should be worried about a trade deficit, perhaps it should be the Japanese and Chinese who are collecting trillions of dollars of depreciating currency.