The Ron Paul Homeschool Curriculum

It is here.  The Ron Paul Homeschool Curriculum.  They are already signing people up.  It will start on September 2, 2013.  I’m guessing there will be some bugs to work out at the beginning.  I’m also guessing that there will be a lot more material added as time goes on.

I can’t think of a better use for Ron Paul’s time and energy.  Actually, I don’t know how much time he really has to put into it.  It is being headed up by Gary North.  They will have teachers like Tom Woods, the great libertarian.  Tom Woods is one of the clearest thinkers I have read or heard.  It is good to have him on our side.

So maybe Ron Paul is just giving his name to this project.  I don’t know how much time he will put in overseeing the whole project.  Either way, as long as it is done well, it will be a great thing.

This really sums up Ron Paul’s life.  This whole project actually represents virtually everything that needs to be done for greater liberty.  It is quite symbolic in this way.

The Ron Paul homeschool curriculum does the following:

  • It focuses on education, rather than politics.
  • It takes a long-term view, instead of thinking we can push a magic button and achieve liberty overnight.
  • It encourages parents to turn away from the state.  And what issue could be more important than their own children?
  • It does not seek any subsidies from the state.
  • It is a product being sold in the free market, where parents are willing to pay money in exchange for a service.  In this case, the service is a better education for their children.

These are just a few of the benefits of this project.  Ironically, as happens so often in the free market, part of it is free.  You can get the curriculum for kindergarten through 5th grade and you won’t have to pay anything.  This may be a gimmick to get people to try it.  It may result in more sales for the higher grades.  It may be to get parents to try it and spread the word to others.  Maybe it is just a free gift to the cause of liberty.  Or maybe the reasoning behind the free part is a combination of some or all of these things.

Does this matter?  Again, it is voluntary exchange.  Someone could use the program up until 5th grade and then stop.  They wouldn’t pay a dime.  There are free loaders in everything.  But how many people will realistically do this?  The price is not outrageous after that.  Any parent that homeschools their child until 5th grade is likely to sacrifice a small price each year to continue it, particularly if they like it and agree with the overall philosophy.

This is truly a grassroots project.  Imagine if they sign up 50,000 children.  Imagine if it is 100,000.  We could have a large group of children growing up with a free market education.  They won’t learn Keynesianism, except to learn that it is illogical.  They might learn some of the real history in America and the world.  They will learn that the government is not the answer to our problems.  They will learn to be responsible and to think independently.  This literally could help change the world.

We should learn from this project.  We don’t need to elect the “right” politicians.  We don’t need to change things overnight.  We need to take a long-term view and understand that we will get greater liberty as more people understand the benefits of liberty.  The Ron Paul Homeschool Curriculum will help tremendously.

The Monetary Base vs. the Money Supply

The adjusted monetary base keeps exploding.  The last 5 years has been unprecedented.  We really are in uncharted waters.

As you can see, the total monetary base is now almost $3 trillion.  It was slightly over $800 billion before the fall of 2008.  If the Fed keeps expanding at its current pace for another year, it will hit $4 trillion.  That means that the monetary base will have grown by five times in less than 6 years.  As of right now, it is almost 4 times what it was.

Yet we haven’t seen exploding consumer prices.  The stock market has been going up and you can certainly see subtle price hikes at the grocery store and gas station.  But there is no question that the price inflation has not matched the monetary base.  So what is going on here?

We have to look at another thing that has been unprecedented in the the last 5 years.  Commercial banks have not been loaning out the amount of money that they are allowed to loan out.

The banks have reserve requirements.  In the U.S., the reserve requirements have generally been around 10% in recent history.  This means that banks can loan out up to 90% of deposits.

If someone deposits $1,000 into a checking account, the bank would loan out about $900.  Now a person or company has $900 and puts it in his bank.  His bank then lends out $810 of this, while keeping 10% on reserve.  The process continues, which effectively multiples the money supply in the system by almost 10 times.  So the original $1,000 deposited into the bank becomes almost $10,000.  Even though not everyone can get their money at once, it has the appearance that all of this money is available, and people and businesses act as though it is all available.

This whole system takes place because of a lack of free enterprise in banking.  The banks, particularly the big banks, are supported by the FDIC and the Fed.  This is what enables the banks to take these crazy risks and it keeps depositors from worrying about which bank has their money and what they are doing with it.

In the past, banks would lend out most of the money it was allowed to loan out.  If it was short on its reserve fund when all of the checks cleared on a given day, it would borrow overnight money.  It would pay the federal funds rate, which is usually controlled by the Fed.  However, with the massive excess reserves, most banks don’t need overnight borrowing now.  That is why the federal funds rate has been below .25 percent since 2008.

So most of the new money that the Fed has created has gone into excess reserves in the banks.  Banks have not been using the fractional reserve process to multiply the money supply like it has in the past.  This has helped to keep a lid on price inflation.

Let’s use some nice round numbers just so we can see what we are dealing with.  The monetary base in 2008 was just over $800 billion.  We will say it was $800 billion.  The banks loaned out about $720 billion, which turned into $7.2 trillion.  You can add in the $80 billion in reserve.  This would equate to about $7.3 trillion.

Now the Fed has increased the monetary base by $2.2 trillion.  But the excess reserves have also gone up, by at least $1.7 trillion.  That means that the banks have only loaned out a small percentage of the new money created in the last five years.  It has kept down the fractional reserve process of multiplying the money supply available.

For the sake of argument, let’s say that all $2.2 trillion had been kept in reserve.  From our original estimate, it would have increased the available money supply to $9.5 trillion (7.3 + 2.2).  This is still a 30% increase over 5 years, but it is far less devastating than what the almost 300% increase in the monetary base shows.

So while the massive increase in the monetary base does add to the available money supply and eventually to price inflation, its bad effects have been somewhat minimized, at least up until now, because banks have chosen to build up massive excess reserves, and consumers and businesses have chosen not to borrow as much.

In conclusion, we must continue to watch both the adjusted monetary base and the bank excess reserves.  This will help us be more aware of the looming threat of severe consumer price inflation.

Obama on Gun Control and Government Tyranny

Barack Obama recently gave a speech about gun control.  In it, he addressed an argument used by gun rights advocates (not used often enough in my opinion).  He commented on the position that essentially says we shouldn’t have more gun control because it is a last resort against a tyrannical government.

In his speech, Obama said the following:
“You hear some of these quotes: ‘I need a gun to protect myself from the government.  We can’t do background checks because the government’s going to come take my guns away.’  The government’s us.  These officials are elected by you…I am constrained as they are constrained by the system that our founders put in place.”
First off, if you watch the two minute segment, Obama comes across as a bumbling idiot.  He almost reminded me of Bush.  Who really thinks this guy is a good speaker?  Maybe he’s ok with a teleprompter, but he doesn’t have an original thought in his head.
Second, I find it amusing that Obama feels it is even necessary to counter this argument.  I have brought up this libertarian argument several times with friends and many of them have never heard it before.  They may be for or against more gun control, but they think of it in terms of hunting and protection from common criminals (as opposed to government criminals).  But for Obama to address this, he must have heard this more than once before.  The fact that he felt the need to even respond shows that the liberty movement is having an impact.
Now to the meat of his statement.  Is the government really “us”.  Are Obama and “these officials” really constrained?  Obama is trying to get us to believe that just because we live in a so-called democracy (I know, it is supposed to be a constitutional republic) that the government can’t become tyrannical?
I guess Obama would like for us to forget about the hundreds of thousands of Iraqis who died because of a U.S. government invasion and occupation.  I guess we should forget about all of the weddings in Afghanistan that had U.S. bombs dropped on them.  And let’s forget about all of the innocent children in Pakistan who have died from U.S. drone bombings.  Oh no Obama, the government couldn’t possibly do any harm, because we have elections.
This whole democracy thing is such a fraud.  Obama only got about 66 million votes in 2012 out of a country of over 300 million people.  And probably half the people who voted for him were simply voting against Romney and the Republicans.  Aside from this, it doesn’t matter what percentage of people vote for the winning candidate.  The government runs secret operations all the time.  How are people supposed to monitor what is going on inside the Defense Department, the CIA, the FBI, or any of the other agencies?
Before Hitler came into power, Germany was a democracy.  Hitler took over and became dictator.  Why couldn’t Obama do the same?  As long as it were blessed by the Supreme Court, then everything would be fine with the anti-nullification crowd, which is presumably many of the same people as the anti-gun crowd.
If Americans are well-armed, then perhaps we don’t need to worry about Obama going too far overboard in abusing his power against the American people, as long as enough Americans are on the side of liberty.  But if Americans are disarmed (except for the government), then what is to protect our precious democracy that Obama talks about?  Obama could just declare himself dictator, get the blessing of the Supreme Court, and then order the military to enforce what he says.  While this may seem impossible right now, it would certainly be far easier for a president to accomplish this in the future if Americans were disarmed.
The fact is that governments of the 20th century killed well over 100 million of its own people, and this doesn’t even count the hundreds of millions more who died fighting other countries in wars.  A well-armed society is symbolic of a free society, just as a disarmed society is symbolic of an unfree society.  This is not to say that we will see mass genocide in any country that bans guns.  But, it does make it more likely to happen in the future and it certainly makes it more likely that there will be a more tyrannical government, particularly to its own people.
I am glad that Obama addressed this subject.  It just draws more attention to the fact that we really do have to fear our own government, regardless of whether we are considered a democracy.

Moore’s Law and Saving

Moore’s law, named after Intel co-founder Gordon Moore, is the observation that over the history of computing hardware, the number of transistors on integrated circuits doubles approximately every two years.  In other words, computing power doubles.  This has been changed to 18 months.

You can apply Moore’s law to many electronic devices.  You can see it with your own eyes.  Television screens are bigger and better.  Cameras are smaller, with far better quality.  I-phones today take better pictures than most digital cameras did just 5 years ago.  Cell phones and other mobile devices are like handheld computers now.  And most of these products get more and more affordable, even in the face of rising inflation.

Many electronics are getting better exponentially.  Even with a doubling of chip size every 18 months, this means that we can’t even conceive of what will be available in ten short years from now.

There is no reason that Moore’s law could not apply to other areas like cars and medicine.  Cars do get better and a lot of it is due to better electronic technology.  But cars are not keeping pace with computers in general.  Medicine is not keeping pace at all.  There is certainly some modern medicine that is incredible, but the prices keep going up and the quality is only getting better in certain select areas (again, usually dealing with electronics).

I believe that government never had a chance to get its hands on computers soon enough.  The technology exploded faster than government could react.  The government certainly would not have allowed the internet to come into existence if it had known what would happen.  Unfortunately, in an area like medicine, it is heavily regulated, controlled, and subsidized by government (at all levels).  This is the main reason that we have not seen the major advancements to the same degree as the computer industry.

I am a long-term optimist and a short-term pessimist.  Moore’s law is a reason to be highly optimistic.  It means that technology can outrun the bureaucracy of government.

But it also raises an interesting question.  If we are going to see incredible advancements over the next 20 years, is there much incentive for a young person to save now?  It is a tough question to answer because it is impossible to know what the future holds.

If 3-D printing and other technologies we can’t conceive of come to fruition, then what will that mean for us?  If a 3-D printer can one day build a house for a fraction of what it costs now, does that make real estate investing a bad choice now?

In fact, what if we have robots that can serve us our food and do our chores?  What if we only have to work a fraction of the time to enjoy the same (or better) standard of living that we enjoy now?

If you save and invest your money now, does it really pay off later?  There is an argument to be made that we may as well enjoy life now because we will be even richer in the future anyway.  Of course, if everyone took this advice and stopped saving, then we wouldn’t see technology continue to advance.  But from an individual perspective, there is an argument to be made that saving money now is not that beneficial for the future.

I think it is an interesting subject.  And again, it is impossible to know what will happen in the future.  Because of the uncertain future, I think it is good to strike a balance.  I think this is good advice anyway.

Hopefully you make enough money that you can save some of it and still enjoy life to a certain degree now.  It is important to find the best bang for your buck now, in terms of happiness.  You may enjoy driving a $100,000 car now, but it is probably not the best bang for your buck.  You have to find that balance between enjoying life now and planning for the future.

Even if Moore’s law continues and we see great advancements in technology from where we are now, I still think saving and investing will likely be beneficial.  You will be ahead of many other people and may be able to get in on the new technology first.  And if Moore’s law doesn’t continue, you will certainly be glad you saved money so that you can hopefully maintain a relatively high standard of living.

It will be interesting to look at this subject again in another 10 or 20 years and compare it to now.  I really don’t have any idea on what the future holds.

Gold Update – April 2, 2013

Gold prices struggled again earlier today, closing at approximately $1,575 per ounce.  While gold has not fallen much lately, it also hasn’t gone up much.  It seems to be trading in a somewhat narrow range. This is surprising many gold bugs.

There are certainly many reasons to favor gold right now.  Bernanke is creating digital money out of thin air like crazy.  It really is unprecedented what he and the Fed have done in the last 5 years.  Meanwhile, Cyprus has taught us that banks are no longer safe and that there is really nowhere you can get complete safety.  On top of all of this, the U.S. government keeps spending crazy amounts of money, racking up more debt, and ignoring the massive unfunded liabilities from the so-called entitlement programs.

Of course, there might be a few reasons to be bearish on gold.  While the U.S. dollar is a fiat currency that seems like garbage to some inside the hard money camp, it is still more highly favored than the euro because of the disastrous European Union.  Even the Japanese yen is not strong these days, as the government there is threatening much higher inflation.  Another reason to possibly be bearish on gold is just the fact that it may not do well in a recession and it is obvious that the economy is struggling.

Still, if you think gold should be going much higher, then don’t second guess yourself.  I don’t think you should ever put all of your eggs in one basket, but now is certainly an opportunity to expand your position in gold.  The same goes for gold stocks, which have really been beaten down.

It is important to remember that gold was less than $300 an ounce back in 2001.  If you look at it in this context, it has been an incredible investment.  It is not surprising that it would take a “breather”, even if it is poised to go higher.

The lack of excitement in gold these days is a good refresher lesson for Austrian school economists.  While you think gold should be going higher, most other people don’t (or are at least not excited enough to take any action to buy it).  You can’t predict the future.  In fact, that is really what Austrian economics teaches us.  Everything is dependent on human action.  I can’t predict whether my next door neighbor will wake up tomorrow morning and suddenly want to get out of the dollar and buy gold.  I certainly can’t predict what billions of people around the world will do.

The only thing we can do is take a good guess based on what we know to be true.  The fact that Bernanke and company are creating massive monetary inflation is an indication that prices are likely to go up in the future.  Right now, the new money seems to be flooding into the stock market.  Maybe we will see much higher oil prices next.  Maybe it will be food.  Maybe it will be gold and silver.  Or maybe it will be all of the above.

Now is actually the time to make money.  If you think gold is going higher, don’t wait for confirmation.  If you wait until it hits $2,000 per ounce, then you will have missed out on the easy money.  And even worse, you might be afraid to buy at that point.  If you really think gold is going higher, don’t wait for the mania to hit.  Get in at the bottom (which was really over a decade ago) and watch everyone else chase the mania.  If you are really good, then you will take some dollar profits when the mania does hit.

This is important for any potential investment or entrepreneurial activity.  Sometimes you shouldn’t wait for confirmation.  If you wait, then you will have missed the opportunity.  If you see something that others don’t, then take advantage of it while the others are still blind to it.

Murray Rothbard on Fractional Reserve Banking

I have written before on the subject of fractional reserve banking.  I believe the federal government and central bank enable fractional reserve banking, at least to a large degree.  While I don’t necessarily think it is good practice, I don’t necessarily view it as a criminal act, particularly if there is no intentional fraud.  If banking customers are aware that their deposits are being used by the bank (and in return probably getting higher interest rates or lower bank fees), then the banks should not be held criminally liable if depositors cannot be made whole.

The subject of fractional reserve banking has been a hotly debated topic within the Austrian school of economics.  Many of the heavy Austrian hitters think it should be illegal, but I’m not exactly sure what they think the penalties should be.  Would bankers go to jail in their world or be personally liable?  I’m not sure that there is any standard position.

I should note that (and this, I believe is consistent with Mises’ position) in a world with free banking and no government backstop, fractional reserve banking would be far more limited.  Threats of bank runs and bankruptcy would tend to keep banks in check.

I found it interesting to read recently, Chapter 8 of The Case Against the Fed, written by Murray Rothbard.  It was published as an article on Mises.org.  I read this book about 10 years ago when I was just getting entrenched into libertarianism.  It was the first full book I read on the Fed.  I did not remember the first paragraph of this chapter.  Rothbard started the chapter as follows:

“The fractional-reserve banker, even if he violates his contract, cannot be treated as an embezzler and a criminal; but the banker must still fact the lesser, but still unwelcome fact of insolvency.  There are two major ways in which he can become insolvent.”

The rest of the chapter is mostly irrelevant for the purposes of this discussion.  I wish Rothbard would have expanded on this one short paragraph, whether in this book or anywhere else.  This did not stick out to me when I first read the book.  It stuck out at me immediately when I recently read this.

I had always wondered how Rothbard could hold the position he did in regards to fractional reserve banking.  Rothbard was a hardcore libertarian.  In fact, he was proud of the fact that he was an anarcho-capitalist.  Yet I could never understand how he could hold such a position on fractional reserve banking, at least from a moral aspect.

By the way, it is not inconsistent for an anarcho-capitalist to believe it should be against the law to murder, rape, steal, etc.  It is just a question of whether the law should be upheld by a monopoly state.  But in the case of fractional reserve banking, it is hard to say that it is a violation of the non-aggression principle, particularly if banking customers are aware of what the bank is offering and doing, at least in general terms.

So all along, I thought Rothbard wanted to throw bankers in jail, or at least make them pay restitution from their personal funds.  But this one paragraph contradicts everything that I thought about Rothbard and his views on the subject.  Everything else I have read by Rothbard indicates that he thinks a fractional-reserve banker is a criminal.

For Rothbard just to say that the banker must face the “unwelcome fact of insolvency” is obvious, at least to libertarians.  I don’t think many libertarians would disagree with this position.  Of course banks should face insolvency.  Most hardcore libertarians are against the FDIC and the Federal Reserve, regardless of their thoughts on fractional reserves.  Without the FDIC and central bank, then banks would be subject to insolvency like any other business.  I don’t know of many libertarians that advocate government bailouts.

There is, of course, a great difference between a banker facing criminal penalties versus facing insolvency for his business.

It makes me curious if Rothbard wrote more on this subject that I am unaware of.  I have been curious about his position on this one subject for a while now because I found it inconsistent and I highly respect his work in general.  If Rothbard were alive today, maybe I would find more agreement with him on this issue than I originally thought.

The Problem With Cyprus

There are a lot of problems with Cyprus.  Actually, there are problems everywhere, but I am picking on Cyprus right now because of the government’s confiscation of bank deposits.  While this is a major blow to the country and to anyone who has high deposits in a Cyprus bank, there is an even bigger problem.  The bigger problem is that this so-called solution of confiscation will not fix any of the problems in the long term.

Right now, it is hard to say that banks in Cyprus are open.  They are open under tight rules.  There are cash withdrawal limits and severe capital controls.

How do people pay their mortgages?  How do they pay their other bills?  What do the banks and businesses do that are owed money and aren’t getting paid?  It is one big wave of bad effects.

Travis Holte posted this on the LRC blog.  I have no reason to doubt its validity.  Even if it weren’t real, this is the reality of the situation.  It shows the bank account statement for a business owner in Cyprus.  The total balance is almost $850,000.  The blocked funds are over $720,000.  The owner says, “The business is definitely ruined, all Cypriot workers to be fired.”

Money is vital in an economy.  It is at least half of most trades and transactions.  You buy something and pay money.  You sell something and you receive money.  You work (sell your labor) and you receive money.  If you don’t have a functioning medium of exchange, then business will slow down or come to a virtual halt.  There will be a severe contraction in the division of labor.

This is the reality for Cyprus right now.  It cannot go on with severe capital controls and a completely untrustworthy banking system.  Something has to change quickly or the standard of living there is going to plummet.  It is going to go down regardless.  But if the government would allow a true correction to happen without bailouts and more government involvement, then there would at least be some hope for a decent recovery in the near future.

Most major countries in the developed world are facing something similar to Cyprus.  It is not exactly the same, as some countries have their own central bank and fiat currency, which allows them to conceal the confiscations easier.  But there is way too much government all over the globe.  Almost all government spending is malinvestment.  Governments misallocate resources and don’t have the free market pricing mechanisms to correct for it.  This wastes resources and makes our standard of living lower than it should be.

I don’t think there was much choice in bank depositors taking a haircut.  It should have been handled as a bankruptcy.  This is the trouble when governments insure banks.  A bank that engaged in heavy fractional reserve banking or a bank that invested in risky assets (like Greek bonds) would likely never receive insurance in a voluntary free market.

If we had a free market system in banking, then customers would be far more careful with their deposits.  Banks would likely be far more conservative and would not engage in this severe form of fractional reserve banking, if at all.  I can envision competing banks.  One bank might have fractional reserve banking.  You could be a customer of the bank and getting higher interest rates, knowing that your money was more at risk.  Then you could have another competing bank where you pay a small fee and the bank does not engage in any fractional reserve lending on checking deposits.  Conservative savers could use this bank to keep their money safe and sound.

We have nothing resembling a free market in banking now, whether in the U.S., Cyprus, or any other developed country.  The government makes these ridiculous promises and then the banks take these big risks, knowing they will be bailed out if they turn out to be wrong.  Until this is fixed, we will continue to see problems around the world.  We need a free market in money and banking.

Is It Too Late To Save for Retirement?

I see stories often about people who are older who all of a sudden want to start saving for retirement.  They don’t know what to do or if it is worth it to even start.  Or they may be wondering if they can play “catch up” and still be able to retire at a decent age.

For this post, I am mostly talking about people in their 50’s and early 60’s, although some of the points could apply to almost any age.

It is common to hear stories of people in their 50’s with almost no net worth, except for a little bit of money in a checking account.  Even worse, there are some who actually have a negative net worth due to debt.  A more typical story of a middle class American might be someone who is 55 years old who has 15 years left on his mortgage, but has only $10,000 in savings (outside of home equity).  Then the person wonders if he can retire at age 65.

The answer is usually “no”.  Unless, in this particular example, the person makes a really high income or is about to come into some big money, then there is almost no chance for a comfortable retirement at age 65.  There is simply too much catching up to do and he won’t have the major benefit of many years of compounding interest.

So in this example, should the person bother trying to save at all?  My answer is unequivocally “yes”.  It is better to do something than nothing.  The person who is 55 years old is better off saving $5,000 over the next year than not saving it.  It provides a little more cushion in case of a loss of employment or some kind of emergency.  It is a small start to saving money, even if just modest.  Even if the person has to keep working way beyond 65, maybe he would have a chance for retirement at 75 instead of not at all.  Or there is the worse option of living in extreme poverty later on.

I am not sure why some people come to a realization of the need to save later in life.  Perhaps retirement just isn’t that far off any longer.  It is possible that some people were just barely scraping by and couldn’t find a way to save.  But this just shows the importance of doing the little things.  If you can just save 20 dollars per week, this will add up to over a thousand dollars per year.  If you do this when you are in your 20’s and you can make small increases in your savings amount each year, then you can accumulate some real savings over time, assuming you make smart investments and we don’t have some kind of a disastrous hyperinflation scenario.

I have written before about measuring how much you need for retirement.  Inflation makes it difficult, if not impossible, to figure out.  But I think the new reality is that most people are going to have to look beyond 65 years old and consider working at least part time after this age.  There will be major changes in Social Security and Medicare because of the massive unfunded liabilities that can’t be paid off.  The government retirement age will go up.  You can absolutely bet on that.

I wouldn’t rely on anything from Social Security.  If you want to retire at 65 or before, then you better have a high net worth, well over a million dollars.  Ideally you will have income producing assets like investment residential real estate.

I think everyone’s situation is unique.  But if you are in your 50’s or 60’s or even older, and you realize that you don’t have enough savings, then start doing what you can to increase your income and decrease your expenses.  Maybe you can make a really bad situation into a moderately bad situation.  Or maybe you can make a questionable situation into a good one.  You have to take the steps necessary to slowly build wealth over time.  It is better if you start really young, but it is never too late to start.

Say Thank You to Those Around

There are people all around who are constantly making bad financial decisions in their lives.  Some of these decisions are just really bad and benefit nobody.  Some bad decisions may benefit one other individual or a small group of a individuals.  Someone with a major gambling problem loses a lot of money and the casino owners benefit.

But there are also some widespread financial errors in which you can benefit in your everyday life.  You should thank these other individuals for their bad decisions that enable you to gain an edge.  Of course, I would just say “thank you” inside of your head and not literally to their face.

You can thank all of the people out there who don’t pay off their credit card balance each month (with the exception of those who have 0% interest).  This allows credit card companies to offer bigger rewards, including cash back.  So you can use your credit card, delay the payment coming out of your checking account, pay off the balance each month so that you don’t pay any interest, and, in most cases, you are still just as eligible as anyone to get cash back or other rewards for your purchases.  If we didn’t have all of these people with high credit card debt paying high interest, then this would not be possible.

You can thank all of the people who do regular food shopping at drug stores and convenience stores, where the prices are usually marked up significantly.  It makes little financial sense to do your regular shopping in these places in most cases.  It is far cheaper at a grocery store, or even more so at Target or Walmart.  But if I ever have an emergency where I need some milk or butter, then I can run into a gas station convenience store, maybe even on a major holiday, and get what I need.  I would never do any large purchases at one of these convenience stores unless it was an emergency.  But in this case, they really can be “convenience stores”.  I’m not sure if they could stay in business though if it weren’t for their “regulars”.

You can thank all of the people who make monthly payments on their car insurance and homeowners insurance when they have the option of paying it in full upfront and getting a significant discount.  You can often save hundreds of dollars over a 6-month period over over an annual period, just by paying it in full at the beginning.  This is huge savings, especially when you can’t even get a 1% interest rate on your savings in a bank.  If it weren’t for all of those people making monthly payments (probably because they live paycheck to paycheck), then these significant discounts would probably not be available.

On a bigger scale, you can thank the Chinese government and all of the Chinese workers who export inexpensive products to the U.S.  If the Chinese would simply let their currency strengthen and not be obsessed with exporting, then the Chinese people could consume much of what they produce.  Instead, they prefer to subsidize American consumers, while buying overpriced U.S. government debt.  I’ll take the subsidy while it lasts.

What other things can you think of where you can benefit at the expense of others because of their poor financial decision making?  They are often all around us, yet we never stop to think of them.

Can States Nullify and Secede?

Tom Woods, one of the top libertarian thinkers of our time, has written a piece about state nullification. As he has done in the past, he argues that states have a right to nullify federal laws, regardless of what the U.S. Supreme Court says.  He argues his side from all different avenues.

I think it is important to make arguments using various avenues.  There are moral arguments, Constitutional arguments, and just common sense arguments.

One of the things that Tom Woods has argued is that the Supreme Court is an arm of the federal government.  So why would we depend on it as the final decision maker?  He is absolutely correct.  The Supreme Court justices are nominated by the president and approved in the Senate.  But regardless, would we really want to give dictatorial power to 9 people in robes?

I would like to take this whole thing to its logical conclusion.  Let’s say that someone argues that state nullification, let alone state secession, is impermissible.  It doesn’t matter whether the person arguing this point is trying to use a Constitutional argument or just giving his opinion.  This person is basically giving his consent to a dictatorship.

Let’s say the president issues an executive order that mandates all babies to be bottle-fed.  Mothers are no longer allowed to breast feed because it is unfair that some working mothers don’t have the same opportunities as stay-at-home mothers.  It is not equal, therefore the president orders all breast feeding to stop in the name of fairness and equality.  If you don’t like my example, pick another example of a law that you would strongly disagree with.

But you and many of your fellow Americans do not like this executive order.  You think the executive order is unfair.  You think it is illegal because the president didn’t get legislation passed by Congress.  But even if Congress passed something, you still deem it unconstitutional, aside from the fact that it is tyrannical and does not belong in a free society.

So someone challenges the ridiculous “law” or executive order to the U.S. Supreme Court.  But let’s say the U.S. Supreme Court upholds the executive order.  Let’s say that the Supreme Court rules that it is looking out for the general welfare and is therefore constitutional.  According to the anti-nullification crowd, that is the end of it.

Of course, you could come up with even more outrageous examples, whether you think they are realistic or not.  Maybe the president declares a national emergency and declares himself (or herself) dictator.  If the Supreme Court upholds it, then that is the final word.  Unless you can appeal to your so-called representative in Congress to impeach.  But maybe the new dictator will just declare that he can’t be impeached.  After all, he is the dictator.  As long as the Supreme Court upholds everything, then the anti-nullification crowd can’t really complain too much.

The choices here would be a revolution or some kind of nullification or secession (or accepting slavery).  So the anti-nullification/ anti-secession people are either in favor of violent revolutions or else they are in favor of giving dictatorial powers to the federal government.

They can say that “it can’t happen here” all they want, but do they really know that.  What if it did happen here?  Would they then deem it ok for states to nullify or secede?  And who is to decide what goes over the line?  These are some tough questions that the anti-nullification crowd needs to answer.

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