Who Will Replace Ben Bernanke?

In an interview on PBS, Obama has hinted that Ben Bernanke’s time as chairman of the Federal Reserve will end in early 2014.  Obama said, speaking of Bernanke, “he’s already stayed a lot longer than he wanted or he was supposed to.”  This is about as strong an indication that you can get, without either Obama or Bernanke himself saying it directly.

I wrote about Bernanke’s possible departure a short while ago.  With Bernanke leaving, I think it means that Bernanke is in a mess and he knows it.  Perhaps I am wrong about this, but I have trouble believing that Bernanke believes the things that are coming out of his own mouth.  I just can’t imagine he is that stupid.

Of course, it is possible that Obama wants Bernanke to go.  Bernanke was originally put in as chairman by Bush, but that obviously doesn’t mean much.  Obama re-nominated him, which is an indication of just how different (not much at all) the two major parties really are.  But is it possible that Obama wants someone who is even more of a Keynesian than Bernanke?  Does Obama want someone even more dovish (on inflation) than Bernanke?  Is this even possible?

There are very few people I can imagine who would be worse than Bernanke.  Then again, I seem to say that about presidents and then their successor turns out to be as much of a disaster or worse than the one he is replacing.

One of the frontrunners being discussed by the media as the next chair of the Fed is Janet Yellen.  Believe it or not, she might actually be worse than Bernanke.  Her rhetoric is certainly worse.  It is hard to imagine that policy would be worse, but I suppose the Fed could create $2 trillion in new money each year, instead of “just” $1 trillion.  If Janet Yellen becomes the next head of the Fed, hold on to your hat.  I think I would be changing in most of my Federal Reserve notes in exchange for precious metals or any other hard assets.  Obama may as well choose the head of the Zimbabwe central bank.

Another name, that I am sure we will eventually hear, is Paul Krugman.  He is another person who could rival Janet Yellen as being one of the most disastrous choices.  Regardless of how powerful the Fed chair actually is, this would be a symbol that much more monetary inflation is coming.

I don’t think Krugman would accept the job, even if offered.  Krugman likes to have his cake and eat it too.  If he replaced Bernanke, he would actually be held responsible for the policy.  Whenever the economy turns sour now, he simply says that there was not enough government spending and not enough monetary inflation.  If he was the one in charge of the policy of monetary inflation, then he would have nobody to pin the blame on.  I think Krugman knows better than to get involved with the Fed.  His lies would be harder to cover up.

There are other names being thrown around too, like Tim Geithner, but it is hard to predict what will happen.  It might also depend on what happens with the economy between now and then.  We must not forget that Paul Volcker, who stopped the monetary inflation and let interest rates rise, was appointed by Jimmy Carter.  Despite appearances, the establishment has more of a say of who will run the Fed and what the policy will be, as opposed to the president.  The president is just the face of the establishment.

When Jimmy Carter was in office, we had double-digit price inflation.  We are nowhere near that now, at least as measured by the CPI figures.  While things can change quickly, it is doubtful it will be anything close to that by the end of the year.  For that reason, I expect that the next chair of the Federal Reserve will be as much of a disaster as the current one.

Velocity is Still Relatively Low

While I often focus on the money supply as measured by the adjusted monetary base, as well as the excess reserves held by commercial banks, it is important not to ignore the issue of velocity.  Velocity is the demand for money.  If velocity is high, then it means the demand for money is low.  High velocity means that money is changing hands quickly.

Low velocity is the opposite.  Low velocity means that people are trying to hold on to their money.  They are not spending as much.  This has the effect of lowering prices, or at least keeping them lower than they otherwise would have been.

Velocity is very difficult to measure, but I believe we have been in a low velocity environment ever since the fall of 2008.  Even though the Fed has quadrupled the monetary base, consumer price inflation has not reflected this.  A big reason for this is due to the fact that most of this additional new money has gone into excess reserves.  The new money is not multiplying via the fractional reserve lending process as it normally would have in the past.  But I also believe that the high demand for money (low velocity) is the other major factor keeping price inflation in check.

It is certainly logical that velocity would be low, despite the massive monetary inflation by the Fed.  People are afraid of the current economy.  After the boom times ended about 5 years ago, people have been getting out of debt (aside from the huge number of foreclosures), or at least trying to pay down debt.  Unemployment is high and wages have been stagnant at best.  It is reasonable to expect people to cut back on consumer purchases in favor of setting aside some emergency cash.

We must also remember that things can change quickly.  Velocity is as much about perception as anything.  If people perceive that their money will be worth significantly less in the future, then they will be more apt to spend it, even if it is on something that they don’t need right away.

If your car is getting older and you think car prices will be 10% higher next year than they are right now, then you may decide to go ahead and buy your new car now instead of waiting.  This is rational thinking.

I expect the gold price will be a good measure of what is happening with velocity.  If the economy is headed back into a recession (if it ever got out of one), then the gold price could drop further from where it is now.  Velocity will stay low or go even lower.

On the other hand, if we see another artificial boom, propped up with more “quantitative easing” from the Fed, then we could easily see velocity go higher.  We can also expect a much higher gold price.  The stock market is already indicating that this is a possibility, but we can’t be absolutely sure.

The interesting thing with velocity is that it feeds on itself.  If people expect higher prices next year, then they will spend more now for consumer goods.  This in turn drives up prices, fueling the fear of rising prices.  This is really what started to happen in the late 1970’s, until Paul Volcker and the Fed stepped on the monetary brakes and stopped inflating.  Interest rates skyrocketed and the economy went through a deep recessionary period.  However, it also cleared out most of the previous malinvestment and allowed resources to be reallocated to better uses (according to consumer demand).  This allowed for some genuine prosperity to follow.

So while Fed policy will be important going forward, we must consider how people are reacting to Fed policy and what their expectations are for the future.  The demand for money will play a major factor in future price inflation, as well as the overall state of the economy.

Infinite Banking Concept or Whole Life Insurance

I have never been a fan of whole life insurance.  I have always thought of it as a rip off.  If you need life insurance, then get term life insurance.  You don’t need to mix two things – life insurance and savings/ investments.

Robert Murphy has written a post about the Infinite Banking Concept (IBC).  Apparently, which I did not know, he has given this a lot of thought and done some extensive research and writing on it.
To summarize IBC, you get a whole life insurance policy and make payments toward it.  In the future, if you need a loan for something (let’s say a car), then you can simply take a loan from your policy.  You don’t have to worry about showing collateral or getting a credit check done (as you would with a bank).  Your insurance policy is your collateral.  For more details and probably a more accurate description, I would suggest reading Murphy’s post on this.  I will warn you that it is quite long though.
I have a great deal of respect for Robert Murphy as an economist.  I am always open to new ideas and this IBC is intriguing.  With that said, I am still highly skeptical of the IBC and whole life insurance in general.
I can possibly see benefits to buying whole life insurance for a limited number of people.  Generally, I still think it is a scam though.  There are salesmen who solicit people to buy whole life insurance policies and these salesmen make a living doing this.  This doesn’t automatically make it bad, but I suppose it is due to the nature of the business.
I understand there are salespeople and there is marketing in almost every industry.  A car salesman makes a commission, but it doesn’t mean that you are getting ripped off when you buy a car.  But there are significant differences.  You can go online and get a quote for a term life insurance policy without speaking to anyone.  They will call you up and verify your information.  They may send out a nurse to you to get a physical to make sure you are healthy.  If you are young and healthy, you can get term life insurance that is quite inexpensive.  There really is no need for a salesman.  You aren’t picking out much in the way of special features.  It is mostly just the term length and the price per month or year.  You don’t really need a big sales pitch for that.
Whole life insurance is mixing things.  It is mixing life insurance and your savings and investments.  For this reason, it makes the numbers rather confusing.  I think the industry likes it this way.  But we all know there is no free lunch (at least those reading this blog who call themselves Austrians).  There is no magical rate of return just because it is a whole life policy.  There are no special interest rates to be earned.  The salesman’s commission has to come from the payments you are making on your policy (so to speak).
Ironically, I think a whole life insurance policy is probably only good for people who are not disciplined with their money.  It is like a forced savings plan.  You pay your monthly premiums and it builds up some savings for you over time.
If you are disciplined and can put away the same amount into a savings account and perhaps other investments, then you will likely be better off.  Your contributions to savings would have to be reduced by the small premiums you would pay for a term life insurance policy, if we are to compare them equally.
So if you buy a 30 year term policy when you are 25 years old, then that will cover you until the age of 55.  Meanwhile, let’s say you put away $250 per month.  That will add up to $3,000 per year.  Even without any interest, this can start to add up over several years.  Using the IBC theory, you can simply take a loan from yourself and pay yourself back.  If you have $100,000 saved in the bank and you take out $20,000 to buy a new car, then you can go ahead and make “car payments” to yourself.  It is up to you if you want to pay interest on it.  Framing the whole thing this way almost sounds ridiculous, but it is really not much different than the IBC, so far as I can tell.
The key here is that you still have to make your “car payments” if you want to replenish your funds.  But this is no different than with a whole life insurance policy.  If you borrow this money from your policy, then you will be making extra monthly payments of several hundred dollars on top of the premiums that you are already paying.  Again, there is no such thing as a free lunch here.
I am still not really seeing any advantages to the IBC, other than it being a good plan for those who lack discipline in their financial life.  If anything, IBC would be a disadvantage because of the commissions and fees that you are handing over, when you can simply do much of it on your own and cutting out the middle man (the salesperson).
In conclusion, I might have to read more of Robert Murphy on this subject.  I respect him and I want to make sure there is not something that I am overlooking.  But for right now, I would suggest sticking with a good term policy if you need life insurance.  Take care of your saving and investing separately.  I don’t see a need to combine the two together and confuse them.  That is how you get ripped off.

Communications Technology: Is It Good for Liberty?

Robert Higgs has written a piece that was linked at LewRockwell.com.  Higgs discusses modern communications technology.  While he acknowledges it has had some benefits for the cause of liberty, he is generally pessimistic and sees technology as more of a negative against the cause of liberty.

Higgs is one of us and I agree with him on many things.  He is a solid libertarian.  But I disagree with his assessment of things in this article.  I don’t understand how he can be such a long-term pessimist.  The state has continued to grow and there are certainly many things to be pessimistic about.  Yet it is not hard to see the bright side of things and the wonderful things that technology has brought us.

In Higgs’ article, he states, “What decides the issue in the end is neither guns nor information technologies, but the people’s ideologies.”  I completely agree that it is the ideology of the people that ultimately matters.  The government can only rule with an iron fist because a large portion of the people consent to it, even if tacitly.  But this is the whole reason that I think the great advancements in communications technology is such a glorious thing for the cause of liberty.

While I will acknowledge that there are some bad aspects of technology that the government will use against innocent people, I believe the benefits will far outweigh the negatives.  Higgs speaks of the importance of ideology, yet he fails to realize that technology has allowed the spread of ideas (as well as exposing the crimes of politicians).  In his article, he acts as though these ideas are put out there and they don’t stick.  But it is obvious that these ideas are having an effect on people.

I have to remind people that the whole libertarian movement was practically nothing about 10 years ago.  There was a Libertarian Party and a lot of literature on libertarianism, but the numbers were really small.  You could go to a crowd of a thousand people and you would be lucky to find 5 people who would call themselves a libertarian.

In the last presidential election, Ron Paul received about 2 million votes in the Republican primaries.  This would have been inconceivable just 6 years ago.

There is a vast following among young people and it is truly amazing because they really understand libertarianism for the most part.  It is not some watered down version like we see with some think tanks and some politicians who call themselves libertarian leaning.

While the percentages are not huge by any means, the number of libertarians, particularly young, far exceeds anything this world has seen in the last 100 years.  I think a small part of this is due to the bad economy and the wars.  But it is not as though we haven’t seen that throughout history.  I think a big part of it is the two Ron Paul presidential campaigns that made people more aware of the libertarian philosophy.  And I think the other big part is technology and the wide open communication that exists today.

It is kind of ironic that Higgs writes an article published on the internet about how communications technology will not really help the cause of liberty.  Yet, if it weren’t for the internet, I wouldn’t have read his article and I probably wouldn’t even know the name Robert Higgs.

Japan: The Lost Two Decades

Frank Shostak has written a nice article published on the Mises Institute’s website.  He discusses Japan and its poor economic growth over the last couple of decades.  In particular, Shostak points out that Japan’s central bank did not have a tight monetary policy, despite what many say.  He concludes that Japan would have experienced greater economic growth had the Bank of Japan not had such a loose monetary policy with artificially low interest rates.

One thing that Shostak did not emphasize, which he has tended to in other writings, is the importance of spending.  In this particular piece, Shostak focused on central bank policy.

This is a point that I try to continually make, especially when there is a raging debate about taxes and deficits.  The best indicator of economic growth is overall government spending.  Almost every dollar (or yen) spent by the government is a misallocation of resources in some way.  Every dollar has to come from somewhere, whether it is taxes, inflation, or borrowing.  The overall level of government spending is the best measure of the extent of misallocated resources.

Of course, governments would not be able to spend near as much if there were no central bank to buy government debt.  A central bank with a fiat currency allows the government to spend far more than it otherwise would, unless the people of the country are willing to pay higher taxes.

As a side note, I am not saying that government spending is the only thing that matters.  Obviously resources are distorted in different ways depending on how government spending is financed.  And of course government regulations and government laws also make a huge difference in what is allowed to take place and the extent of a free market economy.

In Japan’s case, the overall government spending from the late 1980’s to recent times is not surprising.  As a percent to GDP, it increased quite a bit.  You can view several charts here.  Here is a chart of Japan’s spending vs. the U.S. from 1984 to 2000.  As you can see, Japan’s government really ramped up spending in the early 1990’s, yet the economy was struggling all through the 1990’s (the first lost decade).  This goes against the philosophy of the Keynesians.

Japan has been more of a mixed bag over the last 25 years than people think.  But for the big government guys to point to it as an example of a struggling economy due to a lack of government interference is ridiculous.  As Shostak showed, the Bank of Japan had a loose monetary policy.  And we can also see that government spending increased considerably during this time.  According to Keynesian theory, the Japanese economy should have been booming.

The scary thing is that the Japanese central bank is creating new money out of thin air at a much more rapid pace now.  It does make its past monetary policy look tame.  This cannot be good for the future of the Japanese economy.  Of course, when everything turns sour, the Keynesians will try to blame it on the government or central bank for not spending and inflating enough.  It is never enough to them.

One interesting difference between the U.S. and Japan is that private investors have funded a large portion of the Japanese government debt, at least in the past.  The U.S. government’s debt is largely funded by the Federal Reserve and by foreign governments and their central banks.  I really have no idea why Japanese citizens are anxious to buy government debt at near zero interest rates.  I don’t know if they think it is their patriotic duty or if they are just simply foolish investors.  With the Japanese debt exploding, there will eventually be a day of reckoning and a lot of bond investors are going to get burned.

Right now, Japan is a perfect example of what not to do.  The Japanese government and the central bank are adopting policies that are wrong for their economy.  In fact, their policies are the exact opposite of what should be done to improve the economy.

The Power to Abuse

Harry Browne liked to quote Michael Cloud saying “the problem is not the abuse of power, it is the power to abuse.”  This is important to understand.  There will always be good guys and bad guys working for the state.  At top levels, it tends to be more bad guys.  There is a lot of power to be had, so it tends to attract the worst elements of society.  Bad people want to exercise power over others.

You should never judge a policy or law based on who is currently holding office.  In fact, it is rather naive to do so.  I wrote yesterday about Edward Snowden and how many Republicans want him to be prosecuted for divulging government secrets.  Aside from some of these evil people, there are many Republicans who are criticizing Obama and his administration for using these vast powers to spy on the American people.  They are right to a certain extent in calling Obama a hypocrite because he spoke out against these civil liberty invasions when he first ran for president.  But it is naive (or worse) for these people to criticize only the Obama administration.

This was one of the key points that libertarians tried to bring up when Bush and Congress were passing legislation (or simply doing it without legislation) to invade civil liberties.  It was libertarians who pointed out that it didn’t matter what the Bush administration was going to use the so-called Patriot Act for.  It mattered that it was giving the government expanded powers that could one day be used against innocent people.

I don’t mind anyone criticizing the Obama administration who also criticized the Bush administration for the same things.  Actually, I don’t even mind anyone who has simply evolved and changed their position on the matter.  But if you are criticizing Obama now, then I hope you are also criticizing what Bush and most of his fellow Republicans in Congress did.  If you are upset at Obama spying on Americans, then you should be repudiating most of what Bush did as president.

I was not surprised to learn that the government is tracking phone records and other communications.  I already assumed it was happening.  I am pretty sure I had already read several articles saying what is now news.  But I am glad it is a top story in the news now.  Edward Snowden did not have to become a martyr for the cause of liberty.  He made that personal choice.  I would not blame anyone who would do otherwise, as long as they walked away from their job of doing evil.  Snowden’s life will never be the same.  I hope for his sake that he is able to live a life outside of a prison cell.

I think this is somewhat of a symbolic issue.  I am glad that at least some people are upset about it.  I would be outraged except that I already pretty well knew this was happening.  I guess Snowden has provided documents to substantiate it.

I figure that the government can take down anyone that they want.  They can collect billions of phone records, but it is not like they have enough bureaucrats to go through even 1% of them.  They can look for key words in emails and Facebook posts, but even here it has to number in the hundreds of millions.  I figure that the worst things I have said about the government are already in the open on my blog.  This is not to say that I approve of what they are doing or that I don’t care.  I am just saying this to let people know that they shouldn’t lose sleep over this issue.

While the government data collection is real, they will be mostly overwhelmed with useless data.  This really is more of a symbolic issue, much in the way that the gun control debate is.  I think more and more people are realizing that the people who work in the government, particularly those at the very top, are not their friends.

At some point, there might be enough Americans who become outraged enough that they will actually withdraw their consent.  They will realize that any good things that the government provides are not nearly enough to justify all of the bad things that the government does.  Eventually, there may actually be a reduction in power.  The coming economic trouble ahead might help push public opinion further against the federal government.

The only way we will ever see a significant reduction in the abuse of power is when we see the overall power reduced.  This will come through budget cuts.  This will come as a result of a financial crisis or because more people are withdrawing their consent.  It might be a combination of both.

Edward Snowden: Traitor or Hero?

There is a great divide in America.  We once again have a whistleblower who has made government crimes public.  You can read about Edward Snowden here.  Some Americans think he is a traitor for divulging national (government) secrets.  Others think he is a hero for bringing wrongdoing to the public’s attention.

This is similar to other situations in the past.  Bradley Manning and Julian Assange come to mind first.  They exposed government wrongdoing.  There is a great divide of public opinion.  Some see heroes and some see traitors.  There tend not to be a lot in between, except for those who simply don’t care or aren’t paying attention.

I saw an interview on CNBC with John Thune.  He is a Republican senator from South Dakota.  He said that even if the release of these documents by Snowden shows government wrongdoing and leads to changes in policy, that Snowden should still be prosecuted.  Thune says we are “a nation of laws”.

John Thune, like so many other politicians in Washington DC, is a thug wearing a tie.  He says we must follow the rule of law, but what if it is bad law?  I suppose he thinks that whistleblowers against Hitler and the Nazis setting up concentration camps should have been prosecuted if they broke the law.  Don’t we have to ask if the laws are just?

In addition, this thug Thune is going after Snowden the whistleblower, yet he isn’t talking about prosecuting government officials.  What about the Bush regime that passed the Patriot Act?  What about the Obama administration who has expanded the illegal spying?  What about all of the people in Congress who voted and supported the Patriot Act?  It is people like John Thune who should face a trial.  He is part of the evil establishment who continually abuses power and who will spy on other Americans.

Then I heard some conservative radio talk show host who suggested that Snowden should get the death penalty.  He is probably saying it for ratings, although that is scary enough in itself.  I hope there is a nice hot place in the afterworld for people like this.

This issue may actually divide up the parties.  It is almost a good litmus test for someone on whether they love the state.  If they consider Snowden a traitor, then they are an enemy of liberty.  If they consider Snowden a hero, then they at least have the potential of being a friend of liberty.  Litmus tests don’t usually work that well, but it seems to paint a pretty clear picture of someone’s stance on the state in this particular case.

Ironically, there are many pro war Republicans who will defend Obama on this.  All you have to do is mention the word “terror” and you will have half of the Republican Party fall into line with whatever it is you are saying.  These people simply have no ability to think logically or morally, at least when it comes to government power.

I think it is interesting to take these opinions to their logical conclusion.  For people like Thune who think Snowden should be prosecuted because we are supposedly a nation of laws, there is really no instance of where a whistleblower would not be prosecuted, if they are blowing the whistle against their own government.  As long as it can be tied to national security in some way, then the person is supposed to keep quiet and obey their government superiors.

Someone working for the government could see a government official kill somebody in cold blood and the evil John Thune’s of the world would still want to prosecute anyone who reported it to the public.  According to Thune, every government crime should be kept completely secret if it has anything to do with national security.  I suppose Thune doesn’t want anyone to find out about all of his evil acts and the evil acts of his coworkers in Congress.

Ironically someone did blow the whistle on murder in cold blood.  The person who blew the whistle is currently on trial.  But John Thune and Barack Obama would prosecute anyone who divulges government secrets, even if they are reporting concentration camps with millions being murdered.

A Health Revolution

This post does not have a lot to do with money, investments, or politics.  Instead, I want to share my personal health story.  I am not a doctor and I am not giving medical advice, but I thought others might benefit from my story and try to implement some of my strategies.

Over a year ago, I went through a tough time.  My body had a lot of things going on.  I had a mild rash, I was experiencing fatigue, and I had some symptoms of arthritis.  I had random aches and pains in my body.  I also had some gastrointestinal issues where I had an upset stomach, particularly in the mornings.

I had blood work done.  I went to specialists when I could actually get in to see one.  I saw a couple of rheumatologists and a neurologist.  I have still never officially been diagnosed with any particular disease.

While most of the doctors I saw were nice and tried to be helpful, it was frustrating not getting answers.  I had the symptoms of an autoimmune disease, perhaps something like lupus.  When you look up autoimmune diseases, you will see that symptoms are very similar for the various diseases such as multiple sclerosis, lupus, fibromyalgia, Crohn’s disease, and several others.  For many of them, they cannot be easily identified with blood work.  It is not always a black and white scenario when it comes to health.  There is often not a definitive test with definitive answers.  This is even true of such things as HIV and cancer.

I ended up taking matters into my own hands.  I went to an acupuncturist and it seemed to help, but you never know the placebo effect.

I also started researching more on diet.  This is where my contrarian views come into play.  If you are a regular reader of my blog, you will know that I have no problem dissenting from the establishment and from majority opinions.  I don’t think that doctors have all the answers.  They all go to similar medical schools with similar curriculums.  Some doctors are better than others.  I think some medical issues are more important to see a doctor than others.

I was already familiar with the paleo/ primal lifestyle.  Lew Rockwell often ran articles on his site.  I then learned through Joseph Mercola about the importance of eating fermented foods due to their high content of probiotics.  This lead me to the GAPS diet.  It is short for Gut and Psychology Syndrome.  It was developed by Natasha Campbell-McBride, a Russian doctor living in England.  She cured her son of autism using diet and developed this program.

Dr. Campbell-McBride’s theory is that many of the problems and diseases that plague our present society is due to a compromising of the gut lining.  The good bacteria in your gut has been overwhelmed by bad bacteria.  Because of this, toxins get into your blood stream and cause havoc on your body.  This can proliferate into many different things.  Her book on GAPS relates to autism and psychological disorders such as ADD, bipolar, and schizophrenia, along with many others.  But she has since said that most of your immune system comes from your gut, so autoimmune diseases should be treated in the same way.

I can’t give the full rundown of the whole process and the whole diet that she recommends.  I can summarize her book only so much.  But her full GAPS diet is very similar to the paleo diet.  It consists of eating low carb foods and eliminating processed foods and foods high in carbohydrates.  It is also important to eat fermented foods like sauerkraut, which contain high doses of probiotics.

The staple foods of the diet consists of meats (not processed), vegetables (with exceptions like corn and potato), and eggs.  Also part of the diet is fruit and nuts, although to a lesser extent.  It is also important to eat foods high in fat (good fat) like coconut oil and avocados.

Again, this is a very brief summary.  If this topic interests you, I would recommend that you read the GAPS book and educate yourself.

The GAPS diet and paleo diet are very similar.  There might be a few conflicting foods, but I think anyone following either will benefit tremendously.  About a year ago, I mostly adopted a combination of the two.  I mostly follow a paleo diet, while also incorporating the fermented foods that are so important to the GAPS diet.

I eat eggs and bacon most mornings.  Bacon is a food that is not really recommended for GAPS, but is for paleo.  I eat a lot of meat and a lot of vegetables.  I am not a big fruit eater, but I will eat a banana or avocado for snack.  I will also snack on raw nuts (not peanuts) with sea salt.  I drink mostly water and little bit of coconut water.

I am not perfect with my diet.  Some people may need to be.  I have my cheats.  I will have a modest amount of salad dressing (which contains sugar) with salads.  I will eat a little dark chocolate for dessert, but I will also cheat and have the occasional ice cream or piece of cake.  Once or twice a week I will eat a meal that is not part of my usual diet, but even then I don’t go crazy.  So I am probably about 85% paleo and I eat small portions of fermented foods.

I guess you could say that the jury is still out regarding my overall health.  I am not perfect, but it has helped me tremendously.  Most of my symptoms of arthritis have gone down or disappeared.  Ironically, my diet has helped me in ways that I wasn’t really expecting.  I used to get acid reflux and would take over-the-counter medicine for it.  I have now not used anything in a year for it.  Also, I have had chronic sinus problems for a long time now and my sinuses seem to be much better with my current diet.

I also lost weight with the diet, even though I didn’t need to lose much in the first place.  Some people tell me I look a little too thin now, but I am not going to sacrifice my health and go back to eating junk food just to put on a few pounds.  I actually eat more than ever now.  So if you are looking to lose weight, this may be a good way to do it.  When you don’t eat high carb foods that turn into sugar and you mostly eliminate processed foods, then you will be amazed at what happens.

This could potentially help anyone with almost any disease.  It can help those with psychological disorders, with autism, with autoimmune diseases, with diabetes, and maybe even with cancer.  I have seen stories about people with MS who have essentially cured themselves just by eating meats and vegetables.

I am not a doctor and you should try to find a doctor that you can talk to and hopefully see eye to eye with.  But if you are struggling with your health, do not ignore your diet.  It may be challenging to make changes in your life, but it may be worth it to you if it can help you feel better.  I know there are tens of millions of Americans who suffer from different diseases and health issues and I’m sure hundreds of millions worldwide.  If this post can help just a few people in this world in leading a better life, then it is worth it.  You have to keep an open mind about it and realize that modern western medicine is simply failing to address the massive numbers of chronic diseases.

Government Spending is Not Unlimited

It is hard to believe, but government spending has increased at a far lower rate under Obama than it did under Bush, his predecessor.  It is not to say that Obama has been fiscally conservative in any way.  He started off with a much higher starting point.  But if you had asked me back in 2009 what I thought federal spending would be in 4 years, I would have guessed it to be well over $4 trillion.  It is not.  It will likely be about $3.8 trillion.

Obama has been a complete disaster in so many ways.  He has continued the Bush foreign policy of interfering and aggressing against other countries.  He has continued and expanded the assault on civil liberties.  He signed into law a huge “stimulus” bill.  He signed into law what has become known as Obamacare, which we still don’t know the full ramifications of.  He helped to raise income taxes.  And he has continued to spend massive amounts of money.

While the deficits have been horrible and unprecedented, it is still noteworthy that government has not been expanding as much.  It is not because of the House of Representatives.  It is not because of Obama.  It is simply that even the federal government has some limits.

Even with a powerful central bank like the Federal Reserve, there is still only so much the government can continue to expand.  It is limited by its ability to tax and it is limited by its ability to create money out of thin air.  Even the bureaucratic Keynesians, whether they’ll admit it or not, realize that they can’t take too big of steps or else the whole thing could blow up in their face.

Even the Fed is limited up to a point, unless it plans on becoming like Zimbabwe.  But the Fed does not want to become like Zimbabwe.  People like Bernanke would be ruining themselves.  Their government pensions are in dollars.  Their salaries are in dollars.  Plus, they would not want to face the angry mobs when the dollar becomes completely worthless.  So I don’t think we will see hyperinflation, or at least not purposely.

At some point, the Fed will have to slow down its monetary inflation.  It is on pace to create $1 trillion in new money in this year alone.  This cannot be sustained.  At some point, we will see higher price inflation.  At some point, the Fed will slow down or stop its inflationary policies and we will see a severe recession, unless the Fed is somehow able to manage a slow deleveraging over the course of several years.

The more the government spends and the more the Fed creates money, the worse it will be in the future.  But there will be an end to all of this.  So-called entitlement spending is going to have to be cut in some way.  It is simply mathematically impossible for the government to fulfill its previous promises.

As long as we can muddle through and avoid hyperinflation, then I think things will turn out to be ok.  There will be some really difficult times ahead.  They are already tough, but it will get tougher.  But there is some light on the other side of the tunnel.  At some point, the government will be forced to cut back.

Why Are There No Libertarian Countries?

Tom Woods, one the greatest libertarian thinkers and writers of our time, recently wrote a piece that was a response to a critic.  He was responding to a piece from Salon in which the writer asked libertarians: “If your approach is so great, why hasn’t any country in the world ever tried it.”

Of course, there are different degrees of libertarianism, just as there are different degrees of socialism or communism.  There have likely been societies closer to outright libertarianism than outright socialism.  Even the Soviet Union relied on some elements of the free market, even if from the outside.

Woods responds in his normal witty way.  He asks the same question several times in a different fashion.  For example, he asks: “If your approach is so great, why do people prefer to earn a living by means of special privilege instead of by honest production?”

In most of his reworded questions, Woods is really explaining why so many people support the current system.  They want a free lunch, or at least special benefits from the government.  While a majority of Americans (and likely it is the same or worse in most other countries) probably perceive that they are beneficiaries from the current system, it is impossible that that could be the reality, unless the rich people were truly supporting a majority of others while continuing to produce.  But there is a wide divide between rich and poor, so it is hard to believe that the poor and middle class are the beneficiaries at the expense of the rich.  If anything, it is probably the other way around.

In other words, a majority of Americans (and others) do not benefit from the current system, despite what they may perceive.  So the real question is why Americans would support a system in which a small percentage benefit at their expense?

I have heard variations of this question about why, if libertarianism is so great, it isn’t being tried.  My response will vary depending on how much I like the individual asking the question and the sincerity of the question.  While I usually try to be polite, I do have a sarcastic side that comes out of me, just as I see sometimes with Tom Woods.

If I get asked that question, particularly in a way that is mocking, then I will return the question.  I will say: “I have read a lot of material and given the subject a lot of thought and I have come to the conclusion that libertarianism is the only moral system and the system that will provide for the most peace and prosperity.  So yeah, I don’t understand why it hasn’t been tried.  But I understand that it would be the best system.  I can’t understand why others don’t see it.  So explain it to me.  Why isn’t libertarianism being tried when it is so obviously a superior system, both morally and economically?  Since you do not advocate such a system, please explain why?  Because if more people like you understood libertarianism and its benefits, then we would have a libertarian society.  So tell me why we haven’t tried it yet when socialism and Keynesianism have failed so miserably.”

This is something I have thought about for a long time.  Why do people enslave themselves?  Why do people want higher taxes?  Why would anyone want higher government spending who is obviously not going to benefit personally from it?  Why would anyone think that the next government program is going to help the poor?  I really don’t understand and I can’t really answer these questions other than the fact that others simply don’t understand.

So that is why we don’t have anything close to a libertarian society right now.  It is because a majority of people simply don’t understand the benefits, both morally and economically, of a libertarian society.

I think Woods hit the nail on the head in his last question: “If your approach is so great, why don’t people want to try it out, after having been propagandized against it nonstop for 17 years?”

It all comes back to education, whether formal or otherwise.  Now with the internet, spreading the truth is easier than ever.  For that reason, I am optimistic for the long-term future.  I think we will come to a point, maybe decades from now, where libertarianism will be tried on a large scale.  Until then, we must help others see the benefits of drastically smaller government and more liberty.

Combining Free Market Economics with Investing