President Oprah – A Libertarian Perspective

There was quite a stir recently after Oprah Winfrey’s speech at the Golden Globe Awards.  There is now speculation on whether Oprah (known by her first name) will run for president of the United States.

I have already written on the prospects of a Mark Cuban presidency.

There is little doubt that Oprah would run on the Democratic ticket.  And assuming Trump is still around in 2020 and decides to run again, it would make quite the showdown in the general election if Oprah won the nomination.

The left would have a hard time trumpeting up Oprah’s success as a businesswoman.  After all, they hate Donald Trump, yet it is hard to deny his success as a businessman.  The same can be said with Mark Cuban.  It is true though that being good in business does not translate into success as a politician, at least not in terms of liberty.

Most business people will say that they can bring more efficiency to a bureaucratic government.  This almost never happens.  Plus, efficiency isn’t a goal for libertarians.  The goal is liberty.  In fact, there are many times that libertarians prefer an inefficient government to an efficient one.  We certainly don’t want an efficient IRS. I wouldn’t even necessarily want an efficient government education system.  It means politicians would be more efficient in teaching (indoctrinating) students with their ideas.

Being a good businesswoman is Oprah’s strength.  She was a highly successful talk show host and she is still highly successful in her business ventures.  She should keep doing what she is good at.  The marketplace has rewarded her with great wealth for providing value to others.  The profit signal tells her that she should keep doing what she’s been doing, and it will better serve mankind.

When you get into government, there are no signals of profit and loss.  There is no feedback mechanism.  This is why it is impossible for government to be efficient at allocating resources.

While I have several positive things to say about Oprah, her past judgement in company is not one of them.  She is close to the Obamas.  She has been in the company of the Clintons.  She was on the inside with Harvey Weinstein.  There are already a lot of pictures that tell more than a thousand words.

Oprah is not guilty of the crimes of these people for associating with them.  But it shows a lack of good judgement of character on her part.  I have no idea if Oprah is an honest person, but I like to give her the benefit of the doubt.  Either she lacks good character, or she lacks good judgement of character in others.  In other words, she would not be a good president.

If you can’t figure out that Hillary Clinton is a corrupt criminal that should be behind bars, then I really think that alone is reason enough to disqualify you in my eyes.  It is possible to have someone who is highly principled and believes in liberty, but just doesn’t pay any attention to current events.  If there were such a person and they didn’t know much about Hillary Clinton, then maybe that person could get a pass.  But Oprah knows the Clintons, and if she can’t figure out just how corrupt they are, then there is little hope for her in figuring out the corrupt system that is Washington DC.

Oprah is even closer with the Obamas.  I assume she mostly approves of their agenda.  If Obamacare doesn’t bother Oprah, and if the wars in Libya and Syria and elsewhere don’t bother Oprah, then she is certainly nowhere near on the side of liberty.

There is always a chance that someone could get into office and study up on the issues and realize just how bad and corrupt things are.  This may have happened with John Kennedy to a certain degree, at least in terms of foreign policy and the CIA.

However, if Oprah really is a good person and just naive about everything, then she is going to get eaten alive by the swamp.  If she even gets to the general election, then she will get hit hard by all of the lobbyists and the insiders if she is elected president.  She will be quickly corrupted, or else she won’t survive long.  She won’t even know how to handle it.  Also, if she doesn’t have a clue going in, then it will be the Obama and Clinton types who will surround her like vultures.  They will get the cabinet appointments and the advisor jobs.  She will get a lot of bad advice.

It is understanding that people want change.  That is why Obama was elected in 2008.  It is why Trump was elected in 2016.  If Oprah is elected president in 2020, it will be a continuation of the discontent with the status quo.

Unfortunately, if Oprah is elected, she will be eaten alive by Washington DC.  She will also preside over a very difficult time for this country.  The national debt is already out of control.  The unfunded liabilities (Medicare and Social Security) are on the verge of bankruptcy without some kind of reform.  And meanwhile, the empire overseas goes on.

If you happen to be reading this Oprah, my advice for you is to forget politics.  Maybe you can disassociate with your political friends too.  Just keep on making money and serving society through the marketplace.

Median CPI Rises 0.3% in December 2017

The latest Consumer Price Index (CPI) numbers were released for December 2017.  The CPI was up 0.1% last month.  The year-over-year now stands at 2.1%.

The median CPI, which is generally more stable, went up 0.3%.  Year-over-year, the median CPI is up to 2.4%.

Since the median CPI tends to be more steady, it is somewhat significant that this number has been trending up.  It indicates that this boom we have may have more legs.

To be sure, the boom we have right now is mainly in assets.  It is holders of stocks and real estate who are benefitting the most.  The stated unemployment rate is relatively low, but that does not reflect the struggles of the middle class with stagnant wages and rising healthcare costs.

There is a misconception that price deflation is bad because it is associated with depression.  Therefore, it is held that some inflation is good, as long as it isn’t too high.

But the only reason that price deflation is bad is because it is in context with our world of central banking and the bubbles and busts that ensue.  If there were no central bank, or if the money supply stayed relatively stable over time, then price deflation would be beneficial and not associated with economic downturns.

While the Fed is not currently inflating the money supply, it did so heavily from 2008 to 2014.  And just the existence of the Fed places an implicit guarantee on the bond market and helps to keep interest rates lower than they otherwise would be.

When we see an uptick in price inflation in our current world, it can signal a boom period, at least up to a certain point.  The problem is that much of this boom is artificial and unsustainable.  If prices are rising because people are spending more money based on increased debt, then what seems like a boom is really just an unsustainable situation that will end with some pain.

If a family has $50,000 saved and decides to go on a lavish two-week vacation to spend all of the money, then that two-week period is going to seem like a boom time as long as they don’t think of the consequences of what is to come after the vacation is over.  When the family comes back from vacation with no savings, reality is going to hit a lot harder as compared to if they had only taken a $5,000 vacation.

The point here is that an uptick in price inflation is not the sign of a prosperous economy.  It is the sign of malinvestment.  And the longer the unsustainable boom goes on, the harder things are going to fall.

The stock market can keep hitting all-time highs.  It may do so for a while longer.  But when the crash finally comes, it is going to be devastating, especially to those who are heavily invested in the boom times continuing.

Will China Stop Buying U.S. Government Debt?

The major financial headline on Wednesday morning of January 10, 2018 was a report that Chinese officials are considering slowing or stopping its purchases of U.S. government debt.  This news sent bond yields higher.

It did not stay in the headlines for long though because the establishment media doesn’t  want to contemplate what might happen if the Chinese were to actually sell off U.S. debt.

China is currently the number one holder of U.S. debt (not including the Federal Reserve).  Japan comes in a close second.  As of October 2017 (the latest figures available as of this writing), China held about  $1.189 trillion.  Japan held $1.094 trillion.  In a distant third place was Ireland with $312 billion.

In October 2016, China held about $1.116 trillion, and Japan held $1.132.  In other words, there were brief periods where Japan actually took over the top spot.  Over the course of a year, China has increased its holdings a little, while Japan has decreased its holdings a little.  When I use the term “little”, it is in context with the total numbers.

Overall foreign holdings of U.S. Treasury securities increased from $6.044 trillion to $6.349 trillion.

Interestingly, Russia actually increased its holdings from about $75 billion to $105 billion, despite the anti-Russia sentiment coming out of the U.S.  Maybe the Russian government and central bank thought it could trust Trump more to regain good economic relations.

So what should we make of this report that Chinese officials are recommending a reduction in buying?

First, by looking at the numbers, the Chinese central bank has not been a big buyer lately anyway, at least in context with its total holdings.  A slowdown in buying has been expected for a long time now, and it has already been happening.  The Chinese are increasing their gold holdings faster than their U.S. Treasury holdings, at least on a percentage basis.

The biggest question that I don’t see answered out there is whether the Chinese would actually stop rolling over maturing debt.  This is how the Federal Reserve is very slowly reducing its balance sheet.  It is technically not selling any debt.  It just isn’t rolling over some of the maturing debt.

If China actually stopped rolling over existing debt, this would be big news.  Then we would start to see a reduction in its holdings.  But if it keeps rolling over maturing debt and maintaining a steady holding of U.S. Treasuries in the neighborhood of $1.1 trillion or $1.2 trillion, then this isn’t that significant of news.

I highly doubt the Chinese are about to drain off their holdings of U.S. debt.  The reason is that the top officials are mercantilists.  They believe that they need to keep U.S. Treasuries in order to help its exporters.  They do not want a strong yuan that would hurt exports, even though it would help over one billion consumers inside of China.

However, I do think that much of the rest of the world is getting tired of the U.S. government calling all of the shots when it comes to foreign policy and economic policy.  This is why many countries are finding alternatives to the dollar for foreign trade.  They aren’t outright abandoning the dollar, but there is no reason that people in China cannot trade directly with people in Russia without the use of U.S. dollars as a middleman.

U.S. consumers have long been subsidized by the fact that the U.S. dollar is the world’s reserve currency.  U.S. consumers are also subsidized by the Chinese government for propping up China’s export industry.  The Chinese ship products over to the U.S., and they use the U.S. dollars to buy U.S. government debt.  This is just stupidity on the part of Chinese officials, so it is no surprise that they are considering at least a reduction in this policy.

Unfortunately, the Chinese, in the process, are also subsidizing the politicians in Washington DC, along with the Federal Reserve.  When Chinese central bankers buy U.S. government debt, this means that the Fed does not have to buy as much, or interest rates are lower than they otherwise would have been.

For this reason, I hope the Chinese do stop buying U.S. government debt.  I hope they start selling.  It may hurt the U.S. consumer in the short run, but it will also hurt the spending politicians in Washington DC.  It will help to drive up interest rates and finally put pressure on Congress to spend less.  Nothing else has worked.  In order to see any serious cuts in spending, we need higher interest rates and a higher threat of price inflation.

And we drastically need lower spending coming out of Washington DC, as our living standards have taken a massive hit from the resources being consumed.  While most everyone focuses on tax rates, the real focus should be on total government spending.  All government spending is a consumption of resources, and those resources have to come from somewhere.  Whether you pay through the income tax or inflation or debt, it is still ultimately coming out of our pockets (unless the Chinese want to pay for it indefinitely).

In conclusion, I don’t take the news of China reducing its purchases too seriously.  If China actually starts to significantly reduce its overall holdings of U.S. debt, then we should pay closer attention.  It will ultimately be painful, but it would be better for the long run if interest  rates are forced higher and the Congress is forced to cut spending.

The Bond Bubble Will Be the Last to Pop

Many libertarians have been predicting much higher interest rates and a popping of the bond bubble for quite some time.  However, these predictions have yet to come true.  It is hard to believe after QE1, QE2, and QE3, along with a national debt exceeding $20 trillion, that interest rates  have remained low.

Even more incredibly, the bond market is not being directly propped up by the Federal Reserve at this time.  The Fed ended its QE3 in October 2014.  Therefore, all of the new debt (not counting rolled over maturing debt) has been bought by private investors or foreign central banks for the last three plus years.

As a side note, the Fed is still propping up the bond market by its past actions and its implicit guarantees.  Although the Fed is not currently buying new government debt, the market fully expects the Fed to step in, if needed.

While the current path is unsustainable, it doesn’t mean it can’t last for a while longer.  As Keynes once said, the market can remain irrational longer than you can remain solvent.  In other words, you shouldn’t be shorting the bond market right now.

Japan has proven that you can have massive monetary inflation and massive government debt without having imminent price inflation and higher interest rates.  In fact, Japan has seen negative interest rates in recent years, almost defying gravity.  The economy there has certainly suffered from the massive malinvestment, but it hasn’t yet proliferated in the form of significantly higher consumer price inflation and higher interest rates.

There are likely a lot of bubbles, both in the U.S. and throughout the world.  In the U.S., stocks seem to be in a bubble.  Real estate, while not to the same extent as a decade ago, is probably in a bubble in at least some regions.  Bitcoin and other crypto currencies that aren’t actually backed up by anything other than some fancy new technology are probably in a major bubble.

We don’t know for certain that anything is in a bubble because value is subjective.  If a large segment of the population has determined that owning a house is a higher priority than almost everything else in their lives, then maybe housing will stay permanently high for a long while.  Still, we can be sure that there are unsustainable bubbles because there is malinvestment from the previous rounds of monetary inflation and the artificial lowering of interest rates.  While we can’t be certain of any particular bubble, we can look at past history and make a decent judgement.

Is there technical justification for stock market indexes going up around 20% in 2017?  Does this reflect earnings and economic growth?

As for bonds, there should be little question that there is a bubble, especially since there is an implicit guarantee from the central bank to prop up the bond market (keep interest rates down) when needed.  One could argue that this is always the Fed’s policy, but that still doesn’t avoid the likely outcome of bubbles and busts.

However, I would argue that the bond bubble will be the last major bubble to go.  In fact, if stocks tumble and we have a new recession, interest rates would probably go down.  The Fed might start buying government debt again, and investors would be seeking safety.  Although many libertarians do not view U.S. government debt as a safe haven, the fact is that many investors do view it this way.  It is a safe haven in the sense that outright default is highly unlikely.

We need a popping of the bubble that is government.  We need drastic reductions in federal spending.  This overall government bubble goes hand-in-hand with the bond bubble.

As long as consumer price inflation is low, or viewed as low by the public, then interest rates will likely remain relatively low.  It gives the Fed the ability to step in at any time and create more monetary inflation.

We would have to see a scenario similar to the 1970s with higher price inflation before the Fed really feels the pressure to stop all monetary inflation and for the public to take it seriously.  This is when we would see higher interest rates and a crashing of the bond bubble.  It would also finally force the federal government to rein in some spending.

In conclusion, now is not the time to short the bond market.  This will be one of the last things to fall.  There will be a major fall in stocks before we see a major fall in bonds.

Cut Taxes, Even Without Spending Cuts

While the issue of tax reform has taken center stage lately, there is a minority out there who bring up the problem of federal government spending.  This minority does not include those on the left who are simply opposing Trump and the Republicans and complaining about tax cuts for the rich.

The issue of government spending is a major one that does not receive enough attention.  Politicians and the media can get away with ignoring the spending issue to a large degree simply because many American voters don’t care.  They may say that they care in a poll, but they still believe in a free lunch.  They say they don’t want deficits, but then they are not prepared to identify where the major cuts should be made.

In the debate over taxes, there are some (including libertarians) who say that taxes and spending are two separate issues.  When taxes are on the table, we should support tax cuts and/ or tax reform.  When spending is on the table, then we can support decreased spending.

The problem with this theory is that spending is pretty much never on the table.  Do you really think we are going to have as big of a debate about spending as what just happened with tax reform?  And even if there is a debate, we can be sure that it won’t entail major cuts to major programs.  If anything, the debate will be whether to increase the total budget by 2% or by 5%.

Taxes and spending do go together.  They are linked.  It isn’t quite the same thing as a family separating their expense budget from their income.  With the federal government, it has become common to change the tax code without changing spending (or the pace of accelerating spending).  Taxes can be cut, and if there is a reduction in tax collections to the government, the difference is made up with an increased deficit.  In other words, it just gets tacked onto the national debt.

There are some who will make a Laffer Curve argument.  They will say that we can cut taxes without it resulting in decreased tax collections.  This can be true in some cases if the tax rates are confiscatory enough, but most people have not been arguing that with the current tax reform.  If the latest tax cuts end up being “revenue neutral”, part of that will be because of a reduction in the deductions.

When taxes are cut without commensurate spending cuts, and the deficit increases as a result, then we are not really getting tax reduction.  Specific individuals may get a reduction at the expense of someone else, but as a whole, we are not getting tax reduction.

If the federal government is spending $4 trillion per year, and then it continues to spend $4 trillion per year after tax cuts, then the government is still consuming (misallocating) $4 trillion worth of capital.  These resources are coming from somewhere.  Therefore, we are not going to see a significant improvement in living standards due to tax cuts if the government is still spending a huge amount every year.

With that said, I think we should still support tax cuts.  As individuals, for those of us who understand some economics, at least we have a slightly better chance of protecting ourselves.  If you are allowed to keep additional money (nominally speaking) from a tax cut, then hopefully you will use it wisely and not spend it frivolously.

But even on a national level, I believe we would be better off to have the tax cuts.  To illustrate why, let me use an extreme example.

Let’s say we could just get rid of all federal taxes while keeping spending the same.  The government would have to use debt and inflation in order to fund its $4 trillion plus annual budget.  Of course, it would never do this, even in the short run, because it would illustrate the absurdity of the system.

However, if this did actually happen, and the government had to issue $4 trillion of new debt every year to fund its budget, then it would not last long.  There would not likely be enough private investors to buy the debt, and the Federal Reserve would have to buy massive quantities of U.S. Treasury bills.  In other words, the Fed would have to engage in massive monetary inflation.

Consumer price inflation would likely spike higher, and interest rates on the debt would go up quickly.  This would quickly put a limit on the Fed’s monetary inflation, unless it wanted to risk hyperinflation.

While the current deficit/ debt is unsustainable in the long run, it has not been great enough yet to bring down the system.  The central bankers and the politicians have been able to kick the can down the road.

If the government were adding $4 trillion per year to the national debt, while much of this was also being added to the Fed’s balance sheet, then the game would end quickly.  They would have to start taxing again, or they would have to drastically cut spending.  Likely, it would be a combination of both.

The reason the middle class is struggling so much right now is because of the burden of government.  It is both regulatory and spending.  The U.S. federal government alone is consuming $4 trillion in resources.  Sure, some of this goes directly back to people in the form of welfare, but it is still a misallocation.  If we want to significantly improve our living standards, government spending has to be cut dramatically.

Since most people don’t care that much, and since politicians definitely don’t care, the only thing that is going to bring about lower spending is an increase in interest rates, likely coupled with higher consumer price inflation.  This seems to be the only thing at this point that can put a hard limit on the government’s ability to issue new debt.

If popular opinion can’t bring down federal spending, then the laws of economics will have to do it eventually.

Goals for 2018

Happy New Year!

I believe that a lot of people like celebrating New Year’s Eve and New Year’s Day because it marks a new start.  This is why we make resolutions.

Of course, you can mark a new start any time during the year, but there is something about following the calendar.  It doesn’t hurt also that it is right after Christmas when we tend to spend a lot and eat a lot.  This is reflected in many resolutions to lose weight or get out of debt.

It is important to set goals in our lives.  Otherwise, we tend to wander.  We tend to go about doing the same things over and over again.  If Einstein was correct in saying that insanity is doing the same thing over and over again and expecting different results, then most everyone is a little bit insane.

I believe that productivity is important, balanced with some leisure.  Productivity is important in order to obtain wealth.  It actually has to be productivity that is of value to others though.

But even aside from obtaining wealth, I believe that humans are supposed to be productive in some capacity.  We need a sense of purpose in life.  Even if I was a billionaire, I would still likely write and do other things.  I would probably write even more, as I could dedicate a greater proportion of my time to promoting liberty.

When setting goals, it is important to set the right goals for you.  It is important that many of the goals – particularly the shorter-term goals – are action based.

You can set a goal to become a millionaire or to get a 10% pay raise at work.  Maybe these are longer-term goals, or maybe you think you can achieve them this year.  The problem is that you may not be fully in control of these goals.  In addition, they are specific in terms of results, but they are not specific in terms of the actions you need to take.

This where people get lost in setting goals.  They set up too many goals with results.  Instead, they need to set goals in which they can take action and achieve.

If you want a 10% pay raise at work, you probably can’t control what your boss does.  You may do a really good job, but it may not be fully recognized.  Or maybe a pay raise isn’t in the department’s budget.

A better goal would be to spend an extra hour at work each week helping your boss do something that he/ she doesn’t like to do.  Or maybe it means helping your co-workers more in order to raise the productivity of your department.  Or maybe you can work on the side to set up a website that your company can eventually use.  In other words, find something specific you can do.

If you want to be a millionaire, take specific steps that will help you earn more income.  Or explore assets that will provide you with passive income.  Or find specific ways that you can cut certain expenses out of your budget in order to allocate more to savings.  You can’t just say you want to be a millionaire without taking specific steps to make it happen.

Even when it comes to weight loss, your goal shouldn’t just be a number.  If you actually want to achieve your goal, then commit yourself to eating three servings of vegetables every day and drinking at least one liter of pure water every day.  Commit yourself to eating only one food on your naughty list each day (or less if you think it is achievable).  The important part is the action.

I am not going to make a goal of getting 1,000 unique visitors to my blog every week.  Instead, I can make a goal to write at least 2 to 3 posts every week.  I can make a goal to increase advertising.  I can make a goal to write for other sites to gain notoriety.

It is ok to make longer-term goals that are results oriented.  I would recommend the book titled “It Works“.  You can write down your goals and review them every day.  Ultimately though, you have to take action to achieve those goals.

If you really want to set a good goal for 2018, make it this: Take action!

The Libertarian Case: Morality vs. Utilitarianism

The great thing about being a libertarian is that there is seemingly little conflict between morality and utilitarianism.  Liberty is the most moral system, and it also produces the greatest prosperity on net.  Of course, non-libertarians would beg to differ.

The moral case for libertarianism is rather easy to make.  This isn’t to say that it is easy to convince others.

If you have a sick neighbor that needs money for medical care, would you personally go to another neighbor’s house and demand money to help the sick neighbor?  If your neighbor refused to give you any money (even if he is wealthy), would you demand the money at the point of a gun?

Most people, fortunately, would answer “no”.  They would not point a gun at anybody unless it was in self-defense.  Even if it was for a seemingly just cause, and even if they thought they could get away with it, most people would not point a gun at another person.

However, most people (i.e. non-libertarians) have no problem delegating this same task to the state.  While they won’t personally point a gun at their neighbor to help someone else, they will allow the state to do it for them.  Sure, the gun usually doesn’t actually come out, but your neighbor knows he has to pay his taxes and abide by the laws or else the guns will eventually come out to drag him to prison, or worse if he refuses to go.

So while advocates of state welfare and other state power like to claim the moral high ground in the name of “helping the poor”, or “doing good”, or “liberating foreigners”, they do not actually hold the moral high ground.  They are relying on the threat of violence in order to achieve their objectives.

Therefore, it is only libertarians, who oppose the initiation of force for political or social change, who can claim the moral high ground.

Fortunately, the libertarian position also yields the greatest peace and prosperity.  A free market will allocate resources in accordance with consumer demand.  It is only a system of property rights and free association that will yield the greatest prosperity.  Any state intervention that goes beyond the protection of property rights and the enforcement of contracts will make our living standards lower than they otherwise would have been.

Of course, in a libertarian society, people are free to be as charitable as they would like.  There is nothing prohibiting the wealthy neighbor from donating money to help the sick neighbor.  There is also nothing wrong with you asking your wealthy neighbor for a donation, as long as you are not threatening force and you are not encroaching on his property without permission.

Most hardcore libertarians who abide by a set of principles (mainly, some form of the non-aggression principle) understand both the utilitarian and the moral arguments for liberty.  They are both important.

It is rare to find a principled libertarian who abides or fully understands only one of these things.

In other words, if you find a self-proclaimed libertarian who does not fully understand or appreciate either one of these two aspects, then you will likely find someone who does not fully subscribe to libertarianism.

Ludwig von Mises was a utilitarian.  He is essentially the face of Austrian school (free market) economics.  He saw economics as value-free.  He did not present a moral case.  He is a rare exception of someone who was a utilitarian only, yet he remained mostly principled in favor of liberty.  This is because he truly understood economics, and he understood that free market economics was by far the best system for human flourishing.  Mises was one of the greatest economist ever in terms of his understanding.  (I would argue there are others who were/ are better at communicating it to the layman.)

Meanwhile, anyone who fully appreciates the fact that libertarians hold the moral high ground because they only rely on persuasion instead of violence for promoting their goals, is apt to remain principled.  It doesn’t matter the possible consequences of certain policies; it is not an excuse to initiate force.

You can explain the moral arguments to non-libertarians, and they may even agree with you initially.  But then you will inevitably hear something to the effect of, “But we still have to help the poor.”  In other words, they still don’t fully buy in.  They don’t fully understand free market economics.  And they are willing to allow the state to initiate violence on their behalf for certain, maybe even limited, things.

Ultimately, both moral and utilitarian arguments are important in convincing non-libertarians to become libertarian (or at least more libertarian).  It is very difficult to win someone over with just one portion.  You might change their positions on particular issues with utilitarian arguments, but they will not have a full libertarian view of everything.  They won’t apply some form of the non-aggression principle to everything they are confronted with.

The moral case is a critical component in explaining libertarianism.  At the same time, it is important to understand economics to reinforce the moral position and to let others know that libertarianism is both moral and pragmatic.

Should Politics Get in the Way of Friendship?

The holiday season (Thanksgiving and Christmas) can be particularly testing for many people, as they find themselves interacting with friends and family whom they don’t normally associate.  You may have Christmas dinner with an uncle who you see only once a year.

In some households, the discussion may turn to politics.  Even non-political discussions can turn into political discussions for the simple fact that politics has become involved in so many facets of our lives.  We can’t even talk about football any longer without politics entering the scene.

For libertarians, that Christmas or Thanksgiving dinner with the uncle may end up turning into a heated discussion.  This can go for anyone, but libertarians are particularly vulnerable because libertarianism is not widely accepted.  It is also not widely understood.

I know that libertarians tend to be very passionate about their positions.  There is a reason that Ron Paul signs were everywhere in 2007/ 2008 and 2011/ 2012.  His supporters were hardcore.  Yet, he didn’t come close to winning the Republican nomination.

Unfortunately, this passion can also turn people off.  If you get into a heated debate with your uncle (or whoever), then you probably aren’t going to convince that person of anything.  If anything, it may turn them off to your message even more.

This is especially problematic with family members because they know your flaws.  They may know that you are stupid when it comes to fixing cars or working on a computer or discussing classical literature.  They assume that just because they know there are a lot of things you don’t know, that you probably are far from being a political expert.

(Incidentally, it is only libertarians who acknowledge their own lack of knowledge.  They understand the importance of decentralization and the division of labor.  They understand that the marketplace is more knowledgeable than a bunch of central planners.  They understand that they are not smart enough to dictate society, but they also understand that nobody else is smart enough either.)

It isn’t easy being a libertarian in a non-libertarian world, but it is important to realize that you are not going to convince others, particularly friends and family, by being argumentative.  You can’t let every discussion lead to a point you have to make about liberty and against government.

On this same note, some libertarians need to learn to relax a little more.  If you are going to a movie, don’t let yourself become consumed with determining whether each scene has a hidden libertarian message or an anti-libertarian theme.  If the movie is not blatantly political, just try to let it go for a while and enjoy yourself.

The inevitable question is whether you should be friends with or associate with others who have vastly different political beliefs.  This is a question not just for libertarians, but for everyone.

For a libertarian, I think it is obvious that you cannot exclude all non-libertarians from your life because you are already in such a small minority already.  While the libertarian community has grown to a large degree in the last decade, the number of actual hardcore libertarians is still a couple of percent at best.

You obviously have to associate with others with different political beliefs.  You aren’t going to ask the cashier at Walmart what his political beliefs are.  You aren’t going to only buy a car from another libertarian.

Even on the family and friendship front, I don’t think it is a good idea to exclude someone from your life solely because of their political beliefs, but with a few exceptions.  I will get to those exceptions shortly.

Michael Malice was asked on the Tom Woods podcast (this was the 1,000th episode celebration) by an audience member about how he talks to his leftist friends about liberty.

Malice essentially said that he doesn’t get into arguments on a personal level.  He said that if he were in a tough situation, he wants somebody he can call and talk to about his bad situation rather than just have somebody say “I agree with you about the Constitution.”  In other words, you want your friend to be there as a friend.

The majority of my friends are not libertarians.  Most, if not all, of my family members are not libertarians.  But in a time of need, I know they will be there for me.

As I stated above, there are some exceptions.  There are some people who you should cut out of your life and not seek a friendship.

Libertarians generally believe that you should not initiate force for political or social change.  The difference between libertarians and most other people is that they apply this principle to the state as well as their own lives.  Most people, particularly in the U.S., live their daily lives as libertarians.  They don’t hurt people unless it is in self-defense.  They don’t steal from others.  They do things that they have agreed to do (contract law).  The only difference is that they don’t apply the same standards to the state.  They don’t see it as immoral for the state to steal or hurt others.

For me, the cutoff is for someone who uses aggression in their own life without going through the state.  If I know someone who intentionally hurts others (not in self-defense) or steals from others, then I do not want to be friends with that person.  I don’t want to associate with that person.

If someone calls himself a Bernie Sanders socialist, I can probably still get along with the person.  However, if that person really doesn’t believe in private property at all, then I will have trouble with any kind of friendship, or even association.  If he thinks it is ok to just rip the clothes off of my back, then I don’t want to be around such a person.

It is also important to acknowledge that part of friendship is having some things in common.  Therefore, if a rural guy in Mississippi who goes to church and the shooting range on weekends doesn’t want to be friends with a guy from New York City who spends his time at the opera, it is understandable.  It isn’t just that one might be a Republican and one might be a Democrat.  They just have different cultures and different values, and their politics may reflect this.

In 2016, there were a lot of relationships that were tested because of Donald Trump.  There were marriages that broke up, and there were friendships that were lost because of a difference in politics.  But you can’t blame Donald Trump.  Sometimes two sides are just at opposite ends and there is no reconciliation.  If both sides are really passionate about their positions, then they will likely either have to agree not to discuss it, or they will have to go their separate ways.

With Trump, some may see him as a bully and a creep, while others may see him as someone who is willing to take a stand against the creeps in Washington DC.  If there is disagreement over his character, then it should be realized that this is somewhat subjective, and it is just a different judge of character.  But if you start to disagree over key issues that could impact your life, then there may be no way to reconcile.

A husband and wife can disagree over whether the rich should pay more taxes or whether minimum wage laws significantly increase unemployment.  The problem comes when they disagree over whether a gun should be in their home or whether their children should be homeschooled.

In conclusion, I don’t think libertarians (or anyone else) should shut people out of their lives who have differing political opinions unless those political opinions extend beyond what the state should or shouldn’t do, or if the political opinions impact the friendship in a personal way.  If a cancer patient uses medical marijuana, it would be understandable for that person not to be friends with a hardcore drug warrior.

When finding a spouse, there are certain key issues where you should probably be in agreement.  The most important is having a similar view on how to raise your children.

10 Reasons the United States is a Great Place for Libertarians

Libertarians tend to be pessimistic because we understand the damage that big government does.  We hear all of the bad stories around us that others tend to block out or never hear in the first place.

However, libertarians tend to underestimate the power of the free market (or somewhat free market), which is curious.  It seems easier to overestimate the bad and underestimate the good.  But despite all of the government interventions, our economy still manages to function to a relatively high degree.  Sure, there is some false prosperity based on inflation and debt, but the houses we live in and the smartphones we use are real.  Our living standards, at least in some areas, still get better.

It is also easy for libertarians to get down on the United States.  If there is one negative aspect of a relatively free market, it is that the massive wealth created can eventually be siphoned off and used for bad purposes by the state.  The U.S. government would not be so destructive, especially towards other countries, if there were not so much wealth available in the first place.

Despite the out-of-control U.S. government, the U.S. is still a relatively great place to live in many aspects.  It is a great place for libertarians to live, despite the many problems.  Here is a list of 10 reasons why the United States is a great place to live for libertarians.

  1. There is a high regard for free speech.  Despite the leftists shutting down speakers on college campuses, you can still say almost anything in the U.S. and get away with it, as long as you aren’t threatening anyone directly.  Sure, there are always stories out there to the contrary, but the general rule is you can say almost anything.  You can call the president or any politician every name in the book, and you can criticize the government.
  2. Gun ownership is greater in the U.S. than anywhere.  Despite some gun regulations, most people can own guns.  The gun control advocates have not made much progress in the last several decades.  If there were ever a foreign invasion in the southern part of the United States, the invaders wouldn’t last long.
  3. There is still some degree of federalism, meaning there is a difference between different areas.  If you really want to smoke marijuana legally, you can move to Colorado.  If you care about low taxes, you can move to New Hampshire.  If you want to gamble, you can go to Las Vegas.  While not one area is completely free, at least we can choose certain states and cities that favor the things we care about the most.
  4. Property rights are still held in high regard in general, at least compared to most other places in the world.  Sure, taxation is much higher than we would like, but at least there is some predictability in what we can keep.
  5. Entrepreneurship is respected in the U.S.  In some cultures, making money is demonized.  This is one of the great advantages of the American culture.  Despite some class warfare, most people will respect the entrepreneur who provides a great product or service to others.  Americans still appreciate the rags to riches story.
  6. Homeschooling has become widespread across the United States.  It is easier to do in some states as compared to others.  But it is legal in most states, and it is becoming more popular.  This is not the case in many other parts of the world.
  7. The U.S. is still by far the richest country in the world.  If you think some of the wealth in the U.S. is a fraud, take a look at China where the economy is one giant malinvestment.  There are certainly some small countries like Singapore where per capita income is higher than the U.S., but the U.S. is still by far the richest country against all other large countries.
  8. Despite being overtaxed, Americans are still very charitable.  Despite the welfare state, most Americans are generous and willing to help out those who are truly in need.  Even when disasters strike in other countries, Americans open their wallets.  If government didn’t try to act as a charity, it would be amazing to see how much more Americans would donate to charity.
  9. Most Americans act as libertarians in their daily life.  They work, they buy things, and they enter into contracts.  Most people do what they have agreed to do.  They enter into mutually beneficial exchanges on a daily basis.  They are just inconsistent when they permit the government to do things that they otherwise wouldn’t do (i.e., using force).
  10. One of the best things about living in the U.S. for libertarians is that there are many other libertarians living in the U.S.  Sure, the percentages are still low, but the percentage is near zero in most other countries.  A Ron Paul type candidate for president wouldn’t even be possible in most other countries.  We should be thankful that we can interact with so many other libertarians, even if it is through Facebook or reading articles or listening to podcasts.

I hope libertarians living in the United States realize the many positive aspects of living in the United States.  Despite the problems, there are many things to be thankful for.

Should Libertarians Cheer for Additional Tax Deductions?

As tax reform is in the news, there is inevitable debate on the pros and cons of it.  There is even debate amongst libertarians.

There are certain portions of the tax reform that most libertarians will cheer.  For example, most will agree with reducing corporate tax rates and eliminating the estate tax.  But even here, there are people like David Stockman who will criticize the fact that most of the tax cuts go towards the rich.

There are also libertarians who say that tax reform doesn’t do much good if you don’t cut spending.  Some will argue otherwise, saying that these are two separate issues that should be argued separately. When it is time to argue for spending reductions, we can do that then.  For now, we are talking about tax reforms, so we should argue for tax cuts, they say.

I fall into the former camp.  To me, the two things are related, and it is difficult to separate them.  If the federal government is going to continue to spend $4 trillion annually, then they are still consuming these resources whether it is through direct taxation, or borrowing, or inflation.  The one main reason I favor tax cuts even without cuts in government spending is because it is more likely to bring on higher interest rates and price inflation faster, which will put an end to the reckless spending faster.

Within the tax reform debate, there is also a huge debate about whether to expand or reduce tax deductions.  Most libertarians will agree that refundable tax credits should be reduced or eliminated because this is pure welfare.  It means that some people will actually receive money who don’t pay any federal income taxes in the first place.  (They do pay other taxes.)

The big debate is for non-refundable tax credits and deductions.  In the current tax reform, there will be a reduction in the deductions, which will hurt people who itemize.  This will disproportionately hurt those in states that have higher taxes and higher costs of living. In other words, it will hurt taxpayers in blue states more than red states.

Some libertarians favor reducing deductions as long as it is coupled with a reduction in rates or an increase in the standard deduction.  They argue that the tax code is too convoluted (which it is) and that it plays favoritism for some groups at the expense of others.

Other libertarians argue for the expansion of deductions, or so-called loopholes.  They argue: the more, the merrier.  When deductions are expanded, it means more people get to keep more of their money (ignoring the spending issue described above).

When we talk about tax reform in general, some people mistakenly believe that the biggest issue is the complicated tax code.  But while I wish our tax code were simpler, the bigger issue is the amount we pay.

The average American family is paying over $30,000 annually for the cost of the federal government alone.  You have to make this calculation based on government spending, not on government tax collections.

If I spend 10 hours in early Spring doing my taxes, and I pay a total of $30,000 per year, which do you think matters more to me?  I would spend an additional 100 hours per year doing my taxes if it meant I could reduce my total tax burden in half.  I would gladly trade 100 hours for $15,000.  That would be $150 per hour (tax-free).

Again, the main issue isn’t the fact that the tax code is complicated.  The main issue is the amount being confiscated by the government.

I am sympathetic to both sides of the tax deduction issue when dealing with libertarians.  Those who argue for greater loopholes will quote Mises and Rothbard and say that we should keep expanding loopholes until nobody is paying.

At the same time, we know that wouldn’t happen.  It would be easier to reduce the tax rates to near zero.  Plus, the libertarians who argue against tax deductions are correct that there is favoritism.

I take an exception to the libertarian argument that we should favor all expansions of deductions.  I can easily use an absurd example for illustration.  If there were a proposed tax deduction for former presidents of the U.S., I would certainly oppose this.  Even if there were a proposed additional deduction for all federal government employees, I would not support this.

Then you get into all of the other questionable deductions and whether most people in these groups are really deserving of them.  I understand the libertarian argument that it is their own money, so you should support allowing people to keep more of their own money.  But what about people who “earn” their money through the taxpayer in the first place?  And what about people who “earn” their money through other government favoritism?  Plus, if you reduce the tax burden on some groups, they may care less about the burden placed on those who are paying a heavy load.

If there were a proposed additional tax deduction for all employees of military contractors, should libertarians really support this?  If there were an additional tax deduction for all senior citizens, should we support this (even though they get Social Security and Medicare)?  You can see where we can start getting into a lot of gray areas where there isn’t necessarily a clear-cut answer for libertarians.

There are a lot of difficult questions here because we already have a system of massive political power and corruption, which puts different groups up against each other.

There is no easy answer, but I believe libertarians need to judge each scenario, but in context with the big picture.  I know some libertarians will never support a tax reform that institutes a new tax.  But if there were a proposal to eliminate all federal income taxes and payroll taxes and replace it with a 1% national sales tax, it would be hard to oppose this, especially if it means the average American will pay tens of thousands of dollars less each year.

We also must continue to point out what we want.  We should not separate issues completely.  When tax reform is being discussed, we need to point out the reckless $4 trillion per year spending.  When there are crazy tax deductions being discussed, we need to continually advocate lowering rates across the board.

We know the power elite is still holding strong when they can get libertarians arguing over legislation.  We can disagree on individual pieces, but we should be united in calling for reduced government spending and reduced tax rates across the board.

Combining Free Market Economics with Investing