The FOMC released its latest monetary policy statement.  As expected, the Federal Reserve will keep its target federal funds rate between 2.25% and 2.5%. Even though investors were not surprised, stocks boomed because the word “patient” appeared in the statement.

The statement reads, “…the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Because of this one word, which indicated the possibility of less tightening in the future, stocks went up, long-term yields went down slightly, and gold went up.

It is hard to believe that one word in a policy statement can drive financial markets to such an extent.  But then again, if we look back to the Greenspan era, analysts were continually parsing his words to figure out whether to buy or sell.

The important piece of the FOMC statement is really the implementation note.  It states that the Fed will continue to roll off approximately $50 billion per month of maturing debt.  This is monetary deflation, and it is eventually likely to deflate the bubble from the previous monetary inflation.

Even though stocks boomed, the yield curve actually slightly flattened in some areas.  The 10-year yield fell just below 2.70%.  The yield curve hasn’t inverted yet, at least when comparing the 3-month to the 10-year.  However, it could easily invert in the matter of a couple of weeks if things start to get shaky again. We just don’t know if this is one last little run up before the big prolonged drop, or if we will see stocks test the all-time nominal highs again in the months to come.

Are You Basing Your Whole Financial Future on One Word?

There is something wrong with the big picture when one word – patient – drives the markets to this extent.  There is something wrong that this one committee controls the entire money supply for the richest country on the planet.  There is something wrong that they can distort interest rates (the price of money).  There is something wrong that a few people can cause a massive boom/ bust cycle.

The problem here is that your financial investments are reliant on a few words spoken by the central bankers.  Are you banking your whole retirement on the fact that Jerome Powell and company will calculate everything correctly?  Are you relying on the fact that they will use the right words, and the markets will react the right way, so that your portfolio goes up?

This is really no way to plan for your retirement.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind.  You don’t have to worry about stock market crashes or other economic events because of what the central bankers do. You can protect your portfolio from the central bankers who try to centrally plan an economy with 325 million people.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

(This e-book is on sale for just $2.99 if you get it by January 31, 2019.)

Pick up this e-book and protect yourself and your financial future from the word “patient”, or whatever key word is used in the next statement or press release.  The free market should determine the money supply and interest rates, but unfortunately we currently do not live in that world.

Therefore, take care of yourself and do what you can, given the situation.  Meanwhile, hopefully more people will grow tired of these central bank manipulations, and one day we can have real money again as determined by the marketplace.

As I write this, stocks have done well in the month of January.  After a scary few months, they have somewhat recovered, although still far from making up the lost territory from late 2018.

Whether this is one last fake move up before the full bear market sets in, we don’t really know. Or maybe the long-term bull market since 2009 has a few more legs.

The yield curve flattened a lot in 2018. At the beginning of January, the 10-year yield stood at 2.66%.  The 3-month yield stood at 2.42 %.  This was a spread of just 24 basis points.

At the end of Monday, January 28, 2019, the 10-year yield had risen back up to 2.75%, while the 3-month yield didn’t budge and was again at 2.42%.  This is a spread of 33 basis points.  So the yield curve has slightly steepened in January.

But consider that the 10-year yield had shot past the 3% mark in 2018, and it looked to be going continually higher.  Some people were rushing to refinance their mortgages while they could still lock in a decent rate.  Then stocks tumbled and investors went back into longer-term bonds.

Although the yield curve has slightly steepened in January, it isn’t much considering that stocks have done so well in the same month.  It will only take a day or two of turmoil to send the spread between the 3-month and 10-year back to where it was at the start of the year.

There is something of a ratchet effect going on with the yield curve.  It tends to flatten more when stocks are down, and it tends to steepen more when stocks are up.  But the flattening has tended to be more than the steepening. Therefore, the overall trend still seems to suggest a flattening yield curve that will soon be inverted. It is already inverted if you compare the 2-year yield to the 5-year yield.

This has recession written all over it.  There are no guarantees of what will happen.  For all we know, the Federal Reserve may announce tomorrow that it will be ceasing its quantitative tightening (deflation) and starting up another round of quantitative easing (inflation).  While I don’t expect that to happen, anything is possible. That would certainly play a role in delaying any recession.

The key here is that we just don’t know.  I think there is a good chance we will see a recession before the election of 2020.  But really, I was surprised that Obama got through 8 years without any significant downturn.

As Keynes supposedly said, the markets can stay irrational longer than you can stay solvent. This is one of the few times Keynes was actually right.  But let that be other people who become insolvent, whether it is betting against stocks too soon, or betting in favor of stocks for too long and holding on for the ride to the bottom.  We don’t have to be a part of this roller coaster ride.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind. You don’t have to worry about stock market crashes or other economic events that may hit.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to deeply study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  You don’t have to continually worry about the whether the yield curve will invert or whether the Fed will start another round of massive monetary inflation.  You can sleep at night knowing that your financial assets are safe in any economic environment.

The Federal Reserve does great damage to the economy by controlling the money supply and distorting interest rates.  It is primarily responsible for the boom/ bust cycle.

Without the Fed, there would still be companies that go bankrupt.  There would even be certain sectors that would have downturns based on supply and demand.  But we would not see recessions or depressions where companies and sectors virtually across the board experience a downturn all at the same time.

Perhaps there would still be bubbles without a Fed.  Even Austrian school economists can argue this point either way.  But there is no question that we would not see the major bubbles (stocks, bonds, real estate) in today’s world without the central bank.

This is not to say that the government should be in charge of money either.  In fact, if Congress were in charge of the supply of money, that would be a sure road to massive inflation or hyperinflation. Instead, we should have a free market in money, where the market determines what gets used and supplied. Traditionally, the market has chosen gold as the best form of money.  In today’s world, if left to the market, we would probably see some form of digital gold.

Luckily for Americans, inflation in the United States tends to not be as bad as many other countries. We certainly have nothing like a Zimbabwe or Venezuela situation, and for that we should be thankful. Still, if we go back to the 1970s, there was double-digit price inflation.  Even today, if price inflation really is about 2% as claimed by the government statistics, that is still 2% per year.  It means the value of your money is cut in half every generation (about 36 years).

Planning for retirement is extremely difficult when you have to factor in inflation.  Maybe you are earning a great return of 8% every year that is compounding.  You seem to be well on your way to being wealthy for retirement.  But what if your nominal returns stay the same at 8% and price inflation goes up to 6%?  When you start drawing down some of your savings for retirement, things can get tight really quickly.  You almost don’t even know it is happening until after it has happened.

How are you supposed to plan without knowing what inflation will be a decade or two from now? How much do you really need to save to comfortably retire?  And what are you supposed to invest in to protect yourself from the inflation? Stocks can sometimes benefit from inflation, but the distortions in the economy from inflation can hurt corporate profits, so this is no guarantee.   There were periods during the 1970s when stocks did not do well, despite high price inflation.

Gold is obviously a good hedge against inflation.  But there are problems here as well.  Gold often does not do well during times when inflation fears are tame.  Gold also does not pay interest or dividends.  You are basically relying on the depreciating currency to get any gains. So while gold is good in many respects, you are not protected just by putting all of your money into gold.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind. You don’t have to worry about high inflation or stock market crashes.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

There is an inflation bias in the permanent portfolio.  It will tend to do better during times of higher price inflation.  But this should be considered a good quality of the strategy.  You want higher nominal returns during periods of higher inflation.  In real (inflation-adjusted) terms, the returns tend to be more stable.

This also makes it much easier to plan for retirement.  If you put most of your financial investments in a permanent portfolio setup, then you will be protected if price inflation suddenly jumps to double digits.  And if that doesn’t pan out and we have something closer to a deflationary depression, then you are also protected.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

You can get a more stable return by buying an annuity or bonds, but this is in nominal returns. This will not protect you in the case of a massively depreciating currency.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  You don’t have to continually worry about the rate of price inflation next year and next decade.  Don’t go into retirement in the dark without a flashlight. The permanent portfolio can help guide you into a more peaceful retirement where you don’t have to play guessing games on what the next move will be by the Federal Reserve.

In the United States, the advice is everywhere in the financial world.  It comes from Dave Ramsey.  It comes from the financial independence (FI) community. It comes from Warren Buffett. You may even hear it on CNBC.

The advice is for the average person to invest in low-cost U.S. index funds.  It is a strategy of buy and hold.  The basic script is that, in the long run, stocks always go up.  Or if they don’t go up, then we are all in trouble.  It is a bet on the United States of America.

Maybe it is patriotism or ethnocentrism.  Maybe it is just a matter of trusting the system.  Maybe it is just a matter of assuming that since things have always been this way (in our lifetime) that they will always be this way.  There is an assumption that, over the long run, U.S. stocks will always go up.

There have been prolonged periods of a bear market.  The Great Depression is the obvious example.  But that was close to a century ago.  Surely our system has to be more stable today, they say.

If I could go back to 1982 when I was a young child, and I knew then what I know now, then I would have told my parents to put everything in the stock market that they could scrounge up.  Better yet, I would have requested that they buy stocks in my name.

If I knew then what I know now, I actually would have told them to buy stock in Microsoft when it first became available.  But even just buying a bunch of major companies back then would have served well.  Despite some massive downturns, stocks have done very well over the last 3 and a half decades.

But as the SEC likes to say, past performance is not indicative of future results.

The Uncomfortable Situation of Japan

When I discuss this buy-and-hold strategy with someone advocating it, I like to bring up Japan.  It tends to make the buy-and-hold investors uncomfortable, and for good reason.

In 1989, the Nikkei stock index topped out at about 38,915.  As I write this, it is between 20,000 and 21,000. We are approaching the 30-year anniversary of the all-time peak in the Japanese stock index, and it is still nearly half of what it was.  This is not in inflation-adjusted terms.  This is in nominal terms.  It would be worse if we did it in real terms.

I understand I am cherry picking by going back to 1989.  But imagine someone took this buy-and-hold advice at that time. Imagine they dumped all of their life savings in Japanese stocks in 1989.  Are they still waiting for the “long run”?  How long are they supposed to wait?

Sure, this is Japan. It is not the United States. But we are not talking about Zimbabwe or Bangladesh.  It is a first-world country.  In fact, in the 1980s, there were some people worried about Japan taking over the world, economically speaking.

Japan has its problems.  It is densely populated.  The debt-to-GDP is astronomical.  The population is aging.  The economy has been somewhat stagnant.  But it is still a relatively advanced country.  It is still considered a first-world country.

The United States has problems too.  The debt is high here too.  The baby boomers continue to retire, and the unfunded liabilities are massive. Some estimates have put the unfunded liabilities over $200 trillion.

We don’t know how this will play out.  Will it be massive inflation?  Will it be a sustained depression?  Will it be stagnation similar to Japan?

We really don’t know. The one thing I do know is that I don’t want to bet everything on one scenario.  I have worked hard for the money I have been able to save, and I’m sure most people would say the same thing.  Even if you haven’t worked that hard for it, it would make sense to want to preserve it.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio will probably not make you rich by itself.  What it will do is give you peace of mind.  You don’t have to worry about high inflation or stock market crashes. You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes or other events. That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  Don’t be a Japanese buy-and-hold stock investor of 1989.  You can do better than that, and it doesn’t take a lot of time or effort.  You do have to go against some of the conventional wisdom.

The other day, my dog was in our backyard hooked up to a dog chain (more of a cable really). The problem was that the other end of the chain, which is usually attached to a chair outside, was not hooked up.

I probably discovered this about five or ten minutes after being outside with him.  We were not paying much attention to the dog. By the time I figured out that the other end of the chain wasn’t hooked up to anything, he was grazing in the grass about 10 feet from the back patio where he was supposed to be.  In other words, he didn’t go far.

Luckily he didn’t see any ducks or any other dogs to chase, or maybe he would have taken off. I don’t think my dog realized that he wasn’t hooked up to anything and could have run off with the chain attached to him.  He isn’t one to run away, but he probably would have run to the backdoor of our neighbor’s house looking for their dog if he knew he wasn’t attached to anything.

Even when he is attached to the chair via the chain, it isn’t a particularly heavy chair. He would easily be strong enough to drag the chair somewhere.

But he knows the symbolism of the chain.  It restrains him.  When you hook the chain up to him, he basically restrains himself at that point.

Unfortunately, we humans often restrain ourselves, even though there is technically nothing restraining us.  Just look at the corrupt government we live under.  People think that they desperately need the government or else they wouldn’t be able to live their lives.

I am one who frequently points out the nature of government (i.e., the state).  It is an entity that relies on a monopoly over the legal use of force.  Only the government can legally use force against others that is not in self-defense.

There are 535 people in Congress.  There is one president.  There are 9 Supreme Court justices.  Yet these people rule over 325 million people (or more if you count the foreign intervention).  It is quite obvious that these people are ruling with the consent of those they rule over.  There are a few of us who don’t consent, but the vast majority consent to the system.

Sure, half the country hates Trump.  Almost just as many despise Nancy Pelosi.  But most of these people consent to the system that the politicians use to rule over them.

Even when you count the bureaucrats in Washington DC, the numbers are completely lopsided. There are far more people being ruled than ruling.  That is virtually always the case.  The only way this can exist in the long run is for those being ruled to consent to being ruled.

Finding Personal Freedom

For those of us who truly cherish liberty, we can only do so much to change the world around us. The best we can do is to try to educate others around us.  Our goal is to convince others that they are unnecessarily enslaving themselves.

At some point, we have to not depend on changing the hearts and minds of those around us.  We have some degree of freedom, and we should make the most of maximizing that freedom in our own personal lives.

Harry Browne wrote the book titled How I Found Freedom in an Unfree World.  I have seen people’s accounts on how it changed their life after they read the book.  It basically tells you to think outside of the box and to not box yourself in. You aren’t always confined to a limited number of choices that society seems to put in front of you.

In other words, don’t enslave yourself.  You can’t help it if others enslave themselves.  You can control your own life and how you live it.

If you have a chain attached to your neck, it doesn’t necessarily mean you are restrained. Maybe the other end of the chain isn’t tied to anything, just as was the case with my dog.  Maybe you can take the chain off without anyone noticing.  Maybe the chain is a lot longer than you thought.  You won’t really know unless you test it out.

I find that one area that really restrains people is social pressure.  Society puts us in this box.  It may be different for different people, and also dependent on the social circles that surround you.  Some may feel they have to drive a nice car.  Some may feel that having granite countertops in the kitchen is a basic necessity.  Some may feel that they have to have kids, or that they shouldn’t have kids, or that they should have a certain number of kids.  Some may feel pressure to buy Christmas presents for the whole family.  Some may feel pressure to go out with friends on the weekend.  Some may feel pressure to get married or to not get married.

It can be any number of things.  We all have our own boxes.  Some are worse than others.

I find that a lot of it goes back to money.  There is pressure to keep up with the Joneses.  This is part of the reason that savings rates are low. (Another part of this is simply that people are struggling because of the cost of government.)

When you are able to save some money and put it aside, then I find that gives people a certain degree of freedom.  You don’t necessarily need an amount that will last you for a lifetime of retirement.  You just need some flexibility.  Some have referred to this as FU money.

If you are in a tough place, having some extra money can often alleviate some of the pain. If you are in a bad job and told to do something unethical, do you feel comfortable reporting the incident knowing that it may cost you your job?  If you have a year’s worth of expenses set aside, your decision all of a sudden becomes clearer.

It is a good idea to have money set aside for the unknowns in life.  The unknowns can come about in many ways.  And since they are unknowns, they are usually surprises.

Freedom from Inflation

One objection I hear to saving money is that people simply don’t know what to do with it. They hate putting it in the bank, which may earn .02% in a savings account.  Actually, with inflation, they will lose money with it sitting there.

Still, I would rather have money sitting in the bank and losing 2% per year than wasting it on something that will not bring much pleasure in the long run.

I would rather have $10,000 sitting in the bank earning nothing than having nothing in the bank that also earns nothing.  With the $10,000, at least you aren’t on pins and needles about your car breaking down, or your child getting sick, or worse, losing your job.  That $10,000 can relieve a lot of anxiety.

Some people are worried about inflation, and rightly so.  You don’t want your savings to be continually eroded because of the policies of a few people running the Federal Reserve (again, enslavement). And many people – rightly so – do not want to dump all of their savings in the stock market where it could evaporate quickly.

Harry Browne, in addition to his advice of finding freedom in an unfree world, also gave investment advice.  He came up with the permanent portfolio, which I highly recommend.

He presented it in his short book titled Fail-Safe Investing.  The permanent portfolio will not make you rich. What it will do is give you peace of mind.  You don’t have to worry about high inflation or stock market crashes.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  From January 26, 2019 to January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts and take one step closer to achieving your own personal freedom.  You don’t have to be a slave to the system.  You don’t have to box yourself in according to what the financial gurus on CNBC are saying.  You can choose your own course.

As I write this, the partial government shutdown has been going on for 33 days.  It is a lot longer than most anyone expected, and it still isn’t clear when it will end.

Donald Trump took up this fight in his request for $5.7 billion to start building a wall on the Mexican border.  In the grand scheme of a $4.4 trillion annual budget, it is truly a drop in the bucket.  But it has become quite symbolic.

I believe it was because of Ann Coulter and her tweets that Trump decided to stand his ground (for now).  He probably realized that it was one of his major campaign themes.  When there are chants at rallies of “build that wall”, it would be hard to explain after 4 years why there is no wall, let alone why Mexico did not pay for it.

I can’t be certain, but I don’t think Trump is going to win this fight.  Pelosi and Schumer, as obnoxious as they are, understand the politics here.  They refuse to give any money to Trump to build a wall.  Some House Democrats are now saying that they are willing to give up to the $5.7 billion originally requested, but only for border security.  This would not include a wall.

Most of Trump’s supporters are behind him with this issue, perhaps with the exception of some government employees who are missing paychecks.  The problem for Trump is that most everyone else is blaming him for the government shutdown.

The left will hate Trump no matter what he does, but there are libertarians and middle-of-the-road people who have mixed opinions about Trump.  The middle-of-the-road people blame Trump for the government shutdown.  Some of them rightly see that he could have taken up this fight when the Republicans controlled Congress.

Maybe Trump just didn’t want more opposition coming from his own party.  But if he had taken up this fight with Paul Ryan when he was Speaker of the House, then I think Trump would have won that battle.  The Republican base would have been calling for Republican heads in Congress who refused to support funding the wall.

I don’t think Trump will be able to last forever on this.  Government employees are on the verge of missing their second paycheck.  Even though the total number is about 800,000 people who are missing their paydays, that may be enough to stop the shutdown once they get angry enough.  Sure, there are about 325 million people living in the United States, but we know that an irate minority can change things politically.

That’s the politics of the situation.  Now what about the actual shutdown and the potential lessons in the case for liberty?

Not Much of a Shutdown, But There Are Lessons

There are shills out there like Paul Krugman who claim that libertarians are finally getting their utopian experiment.  But even as Krugman admits in his column, it’s not like the marketplace can just jump in there in a matter of days and take over what were previously government-provided functions.  The government still won’t allow it in many cases anyway.

Of course, the main point in all of this is that it isn’t truly a government shutdown.  The military is still occupying many countries overseas and continuing to fight wars.  The troops aren’t coming home because of the shutdown.

Domestically, the Social Security checks are still going out.  The payments on the debt are still being made.  The hospitals are still accepting Medicare and Medicaid.  If Social Security, Medicare, and Medicaid had all stopped, then there really would have been a revolt by now.

If the government shutdown has shown us anything, it is that government is way too involved in every aspect of our lives.  If you haven’t felt a thing from the partial government shutdown, then you should be thinking that maybe we shouldn’t have all of these employees doing non-essential things, and we could save the taxpayers a lot of money.

If, on the other hand, you do feel a significant impact from the government shutdown, then you should be thinking that maybe the government shouldn’t be running these services. Unfortunately, most people do not take away that lesson.

If the government weren’t operating security (if that’s what you want to call it) at the airports, then a government shutdown wouldn’t matter.  If the federal government didn’t own so much land and so many parks, then it wouldn’t matter if the government shuts down.  The parks would still be taken care of by the owners.

Whether it is the FDA or air traffic controllers or museums, these things simply shouldn’t be funded or operated by the government.  Some things, such as farm subsidies, shouldn’t exist at all, unless private charities want to fund them.

The problem is obvious.  People and various industries are far too dependent on the government for their existence. Maybe some will see this lesson. But unfortunately, many people will just scream louder for more government.

The good news for libertarians is that most of the IRS is shut down.  It means they will get backlogged.  It means they won’t be able to do as much.

Feeling the Pain

A few libertarians will basically laugh in the faces of all of the government employees missing a paycheck.  I am a little more empathetic.  There really are some government employees who are just working to get paid.  They didn’t necessarily seek out power or try to land an easy job with great benefits.  They just took the job that was available at the time.  It doesn’t mean they should be allowed to suck off of everyone else forever, but we can still have some sympathy for regular people who are just trying to pay the bills and have no connection to the deep state.

If I could push a button and eliminate all of these jobs right away, I would do it.  These employees are having a tough few weeks without getting paid.  But what about the millions of taxpayers who work hard and are struggling to pay their rent and health insurance premiums?  They are forced to pay for a $4.4 trillion government, and it is seemingly endless.  There is no back pay for the average taxpayer.

We get to hear the heart-wrenching stories about government employees who are not able to pay their rent or their utilities.  But somehow, most people are surviving, whether it is through savings, or credit cards, or help from family, or short-term loans.

We don’t get to hear the heart-wrenching stories about middle class America on a daily basis. We don’t get to hear about the struggles to pay $500 per month in health insurance premiums for junk plans that barely cover anything.  We don’t hear about how expensive things have become in our lives. We certainly don’t hear about how government at all levels is spending about $60,000 per family in the United States.

The political lesson in all of this is that we need a lot less government.

There are personal lessons too.  The people not receiving paychecks are about to miss the second paycheck.  Yet, we hear these horror stories.  The lesson here is that you should have a rainy day fund.

It is extremely difficult these days for some of the reasons mentioned above.  Life is expensive because of the government.  But if you don’t have a month’s worth of expenses saved up in the bank, then you should make that a priority.  It doesn’t matter whether you are a government employee or not.  You should be able to access a month’s worth of expenses if you need it.

The government has made life really expensive.  The government has made many millions of people dependent on it, whether it is for a paycheck or for welfare benefits.  The government has made many people virtually helpless. And then when the benefits or paychecks dry up for even a brief period of time, it means disaster for millions of people.

You should never be dependent on the government if you can help it.  With the massive debt and unfunded liabilities, there are going to be defaults in the future.  Welfare benefits will be cut greatly at some point.  Consider this shutdown as a preview of bigger things to come in the future.

Tulsi Gabbard, a 37-year old congresswoman from Hawaii, has announced her intention to run for the U.S. presidency in the 2020 election.  There could end up being a couple of dozen or more candidates from the Democratic Party, but Gabbard stands out from the other names being mentioned.

She doesn’t stand out just because she is young and attractive.  It also isn’t because she was a member of the U.S. Army National Guard and an Iraq War veteran.  The main reason she stands out is because she is anti-establishment, particularly when it comes to the issue of war and foreign intervention.

Some would say that Gabbard is the left-wing version of Ron Paul.  But we have to get a bit more specific.  On cultural and economic issues, Gabbard is certainly mostly on the political left.  On the issue of foreign policy, Tulsi Gabbard and Ron Paul are basically in the same camp.

Gabbard will be 39 years old when the 2020 election is held.  She would be the youngest president in the history of the United States.  She would obviously also become the first female president.

The establishment has already taken their digs at Gabbard.  I suspect that the establishment media will try to ignore her as much as possible.  They will give her the Ron Paul treatment to a certain extent.  If she starts to gain significant support, then she is going to start to experience the Donald Trump treatment by the media.

Some so-called progressives have already come out against Gabbard to a certain extent.  They criticize her for having once been opposed to gay marriage, even though Obama did the same thing, and even though she would have been in her early 20s when she was vocal about it.  They criticize her for aligning with the BJP Party in India, as if most leftists in the U.S. have any idea about Indian politics.  It’s as if someone working for the establishment on the inside of the progressive movement has put out the talking points against her to be repeated.

On economic issues, Gabbard really is terrible from a libertarian point of view.  She favors a $15 minimum wage.  She also is a believer in the climate change agenda, i.e., using government to solve an unproven problem.

There are other issues aside from foreign policy where libertarians could potentially support her.  Gabbard has advocated for decriminalizing marijuana and for criminal justice reforms.  And while her economics are not good, she has opposed the Trans-Pacific Partnership and other managed trade deals.

Where It Matters

Libertarians should pay attention to the candidacy of Tulsi Gabbard.  She could be a game changer, or at least make things interesting.  She will have to find ways to avoid a media shutout and to strike down false and misleading stories about her.

While I believe good economics is crucial in achieving a free society, I think foreign policy is the most important issue.  It is an issue of life and death.  And even from an economics standpoint, the U.S. empire would have to be significantly scaled back in order to achieve any semblance of fiscal conservatism.

Gabbard was one of the few Democrats who actually met with Donald Trump after he was elected president.  She does not have Trump Derangement Syndrome as much of the left does.  She was positive about meeting him.  Interestingly, Steve Bannon was actually very complimentary of Gabbard.

Gabbard has been critical of Trump where it actually matters, such as striking Syria with missiles.  In other words, she has actually shown consistency.

The one thing that is really baffling about Gabbard is that she is listed as a member of the Council on Foreign Relations (CFR).  This is as establishment an organization as they come.  But when you consider her outspokenness on the issue of war, it is hard to believe that she would be under the thumb of the establishment.

Gabbard was in Iraq for a year in 2005 after having enlisted in the Hawaii Army National Guard. If she were really anti-war at the time, then she probably never should have signed up.  But at the same time, it was probably her time in Iraq that made her into the war opponent that she is today.

Gabbard has been incredible in her opposition to the war in Syria.  She met with Bashar al-Assad in 2017 and opposes trying to overthrow him. She has not accepted the word of the establishment that Assad has been using chemical weapons against his own people.  She seems to understand that a lot of lies and propaganda are fed to the population in order to support war.

Gabbard has been great (from a libertarian viewpoint) on most everything dealing with foreign policy.  She opposed the wars in Iraq and Libya.  She opposes funding the Saudis.  She has supported removing sanctions against Iran.

This is really where the presidency matters.  It is where the president should have the most control.  We have seen how hard it has been for Trump to follow through with some of his campaign promises.  The deep state opposes him at every turn whenever he takes an anti-establishment position.  Trump can’t even get 2,000 troops removed from Syria.  All of the war hawks in his cabinet are opposing him.

It is too bad that Trump did not get Gabbard into his cabinet.  She would have been great as Secretary of State or Secretary of Defense.  Instead he puts people like Nikki Haley, John Bolton, and Mike Pompeo in there.  If Gabbard were in Trump’s cabinet, at least he would have an ally in trying to pull troops out of Syria.

A few have suggested that Trump could dump Pence and run for president in 2020 with Gabbard.  I think this is highly unlikely, especially given the animosity between Democrats and Republicans.  If Trump couldn’t get someone like Gabbard in a high position in his cabinet, then I have no reason to expect him to join forces with her now.  Something would have to change drastically for him to take such a step.

A Libertarian Best-Case Scenario

If Gabbard were to get the nomination for the Democratic Party, I would actually consider voting for her.  It would be a treat watching two major candidates who are not complete war hawks.

For me, it would depend on where Gabbard focuses her attention.  If she spends half or more of her time talking about climate change and the right to free healthcare, then I wouldn’t support her.  I want to see most of her time being spent opposing war and the empire.

When Ron Paul ran for president as a Republican, he definitely made it a point to bring attention to the Federal Reserve and to promote a general message of liberty. But probably his biggest focus was on foreign policy.  Even when he was asked questions on economic policy, he would often return to the subject of foreign policy.  It was clear that his number one priority, if elected, would be to end the wars overseas.  I would want to get the same feeling from Gabbard.

If Gabbard did become president, I wouldn’t worry too much about her bad economics.  The best-case scenario from a libertarian standpoint would be to have a Republican majority in Congress.  They could oppose the more radical (radically bad) elements of her domestic agenda.  Meanwhile, if Gabbard is sincere and could resist the deep state, she could order all of the troops home and put an end to the wars.

Again, I understand her chances are slim.  Nobody should be naïve enough to believe that it won’t be an extremely hard road for her just to get the nomination.  Most of the left hates Trump more than they hate war. Therefore, it will be quite difficult to win over the left to her side.

Even though her chances are slim, I really hope that she is at least able to be in the debates. If she can promote her anti-war and anti-intervention agenda on the debate stage, it could change the whole tone of the debates.  It could force some candidates to adopt a less hawkish stance, even if they are insincere about it.

For this reason, I see only positive things coming from her candidacy, assuming she mostly sticks to her anti-war message.  She has the potential to be a good president where it matters most. Most of all, she can help move public opinion into a more libertarian direction when it comes to foreign policy.

I recently wrote a post about how to prepare for the possible coming of a recession.  I have also previously written about how middle class America needs a recession to alleviate some pain.

There will be greater short-term pain with a recession, but that is inevitable anyway.  Once the correction happens, it will actually straighten the course for a reallocation of resources that are more in accordance with consumer demand.  If the Fed doesn’t do too much damage in trying to stop the correction, then we might actually see a reduction in consumer prices, which is desperately needed for middle class America.

There is another benefit that could come with a major correction, but it will only be a benefit to a select few.  It will be an opportunity for those who are well positioned and for those who have their eyes open.

In the history of the United States, there are always people who come out looking good after a major economic downturn.  Even during the Great Depression, there were businesses that were started and eventually prospered.  There were people who bought investments for extremely low prices that nobody else wanted to touch.

Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.” In other words, the time to buy is when there is blood in the streets.  Buffett is a stock investor, but this doesn’t just apply to stocks.  It can apply to commodities, real estate, certain collectibles, and businesses (other than just owning a few shares).

Most people didn’t want to touch real estate in 2010/ 2011.  Perhaps more accurately, most people couldn’t touch real estate because they didn’t have enough money and couldn’t easily get the credit to buy.  Most of the people who did have the capability to buy real estate were too afraid to do it after what had just happened.  But if you had bought cheap condos or single-family homes in a decent areas back then, you would have done very well.

If you had bought stocks in March 2009 after they had just been hammered, you would have done really well.

If you owned a small business and had ramped up investment around 2010/ 2011, you likely would have done really well if you had made good use of your resources.

This is what you should actually look forward to towards the back end of the next recession. But in order to get any possible benefit, you have to be in the right position.

Preparation for Opportunity

Many of the tips for preparing for a recession are the same tips you should take in preparing to take advantage of opportunities.

You don’t want to be in debt, with the possible exception of a manageable mortgage on your primary residence.

You want to make sure that you maintain your primary source of income.  And if there is a high risk of losing your primary source of income, then you should really be taking steps now for a Plan B.

For the assets you own, you want to make sure that they will not be wiped out by a hard recession. I recommend a permanent portfolio for your financial investments.

There is a reason that people say “cash is king” in a recession.  It really is true.  You will actually benefit, assuming there is price deflation.  The purchasing power of your cash should rise.

(This does not mean you literally have to hold cash.  You can keep your money in a bank.)

And just as it is important to prepare for a recession with a proper mindset, you will also want to have a proper mindset in preparing to take a little risk to take advantage of opportunities.

We probably aren’t going to end up like Venezuela.  There may be some tough times ahead, but the entrepreneurial spirit is alive and well in America.  We aren’t going to turn into a third-world nation.  Even if Bernie Sanders becomes president, we aren’t going to full-fledged socialism.  There will still be something of a market economy.

When things are really bad, you are going to make up excuses on why you shouldn’t invest or seek certain opportunities.  I am not saying that you should be careless with your money.  You shouldn’t just be throwing darts at a dartboard.

However, there will be opportunities that only come about once in a decade or less.  If the recession is bad enough, some of the opportunities may be once in a lifetime.

If you have been meaning to buy investment real estate, then sit tight.  Your opportunity will be coming, but you have to be patient.

If you have been meaning to start a business, then I am not going to say sit tight, unless it is capital intensive.  I would never recommend opening up a restaurant, but if that is your dream, then I would definitely recommend waiting.

But for any kind of online business or something else that doesn’t require a lot of capital investment, then I don’t think you should wait.  I do think you should start out very slowly with the anticipation that a recession will hit soon.  Once we are deep into the recession, then your infrastructure will already be set up.  Hopefully you will already have a good functioning website and you already have a few sales. You will be in a position to pour more time, and possibly money, into your venture at the back end of the recession.  And if you do require the purchase of any major assets, then you will get them on a giant sale.

Prepare for a recession, and prepare to take advantage of the opportunity that comes with a recession.  Be patient. When there is blood in the streets and virtually everybody is bearish on everything, that is the time to strike while the iron is hot.

Alexander Ocasio-Cortez, the 29-year old democratic socialist from New York, recently took office in Congress.  She has gained national fame and is trying to be the young female version of Bernie Sanders.

Ocasio-Cortez is a proponent of a “Green New Deal”.  In other words, she favors a massive expansion of government.  A “Green New Deal” is just a sales pitch for higher taxes and massive subsidies to certain favored industries.

Ocasio-Cortez has suggested that the U.S. adopt a 70% marginal tax rate for the highest income bracket.  Some of the left may be cringing at this suggestion (partially for political reasons), while some other parts of the left are cheering it on.  One of the common themes of those defending such high tax rates is that the U.S. once had even higher tax rates and did just fine.

My first question to the left is: Why do you want the government to collect more money? I fully realize that the government probably won’t collect more money, but I doubt that most leftists spouting a 70% marginal tax rate are thinking about the Laffer Curve.

Do they want more money to pay down the debt?  Do they want more money to ramp up the federal war on drugs?  Do they want more money in order to fight more wars overseas?

Of course, most leftists will say that they want greater welfare at home.  They will use terms such as “greater social benefits”, “free healthcare and education”, and “taking care of those in need”. Some might also say that we can spend more on building infrastructure to create more jobs.

This is mostly nonsense.  Even if the government did collect more money, we know that most of it would be wasted (at least from our perspective).  It wouldn’t be wasteful to the bureaucrats, lobbyists, and cronyists who live at our expense.

People have this syndrome of playing king.  They naively say that if only the government would implement their plan, then it would make things better.  But Congress never implements their plan, and the plans laid out never work as stated.

Does anyone honestly think that the government would run more efficiently or could significantly help more people (aside from those connected inside the beltway) if it could just have a few hundred billion dollars more to spend each year?

Central Banking and Income Taxation

With all of that said, the premise of having a 70% tax rate and being just fine is wrong. Ocasio-Cortez, Paul Krugman, and the other leftists defending this kind of idea are getting it wrong (whether intentional or not).  They are not comparing apples and oranges.

After World War 2, the highest tax rate was over 90%.  It came down to 70% in the 1960s.  After Reagan took office in 1981, the highest rate went down to 50%.  It ended up at 28% at the end of Reagan’s presidency.

The 1950s was a time of decent prosperity, and the highest marginal tax rate was over 90%.  It was also a time when the federal government was barely involved in medical care and insurance as compared to now. That was the time that a doctor would make house visits, and a stay in the hospital was rather affordable. Medicare and Medicaid did not exist at this time.

After World War 2, federal government spending went way down.  Overall, government was far smaller than what we have today.  There was less spending and less regulation.

In the 1950s, the U.S. was still on an international gold standard.  The U.S. was off the gold standard domestically, but the possibility of foreign governments redeeming gold for dollars kept something of a check on the Federal Reserve.  Therefore, it was a time of relatively low inflation as compared to what was seen after the abandonment of the international gold standard in 1971.

So many people, including economists, focus on tax rates and other factors.  But central banking is huge.  Virtually every transaction includes money on at least one half of the transaction.  When a central bank is tampering with interest rates and the money supply, it is tampering with the entire economy.  When you have a relatively stable money – as was the case in the 1950s – you will tend to get a good economy, in spite of higher tax rates.

As for the tax rates themselves, consider that the highest marginal rate of 90% or more was rarely actually paid.  It was only for incredibly high-income earners, and even then there were many deductions and other ways to shelter income.  You can call them loopholes or whatever you want, but the effective tax rate for most people was nowhere near the 90% rate that is frequently quoted.

The 1950s vs. The 1880s

There is one last important point to make in all of this.  Those calling for a high marginal tax rate, such as 70%, like to reflect on the 1950s.  But why not go back to the 1880s?

The 1950s is seen as a decent time for middle class American, and certainly it did introduce something of a new era of relative prosperity after the horrors of the Great Depression and World War 2.  But the time period after the Civil (so-called) War and before 1913 (the introduction of central banking and the 16^thAmendment) was perhaps the greatest period of prosperity in the history of the world.

It is that period where we saw the introduction of cars, airplanes, electricity, modern-day refrigerators, and so much more.  It was a time of good deflation, where real wages went up.  Due to massive increases in innovation and productivity, prices dropped and new products came to the market at an astounding pace. Living standards vastly improved from each generation to the next.

Why doesn’t the left talk about an earlier decade, such as the 1880s?  It is because they don’t want to talk about tax rates at that time.

What was the highest marginal tax rate in the 1880s?  It was zero percent.  There was no federal income tax.  It was after the 16^thAmendment passed in 1913 (the same year as the forming of the Federal Reserve) that the income tax began (with a couple of brief unconstitutional exceptions).

For me, pointing to the late 1800s just destroys the whole argument coming from the left that higher tax rates are fine because they were high in the 1950s.  If we are going by the standard of what times were most prosperous (according to the logic of the left), then we should just return to a zero percent income tax.

Donald Trump addressed the nation (for those who watched) on Tuesday night from the Oval Office. While there was originally some talk of the network stations not carrying the short speech, all of the major networks covered it.

A speech to the American public was long overdue for Donald Trump.  Unfortunately, he picked the wrong topic.

Maybe I say this just because I don’t feel that strongly about the immigration issue.  It is a tough issue for libertarians to deal with because we live in a world of massive government and government-owned land. If we didn’t have a welfare state at home and a warfare state abroad, then I think that would resolve at least 90% of the issue.  Most people wouldn’t be coming to the U.S. to hurt people (which they mostly don’t anyway) or to look for handouts.  The only handouts immigrants would be able to get would be from voluntary charity.

Trump has become obsessed with his wall.  It was a major campaign issue of his in 2015/ 2016, so you could say that he is just trying to fulfill his campaign promises.  I have my doubts that a wall would be that effective in keeping people out, and as Ron Paul used to say, it could eventually be used to keep people in.

I think the whole partial government shutdown standoff is due to Ann Coulter, and perhaps a few other conservative voices.  Coulter always throws her support behind the latest bold conservative. She had a political love affair with Chris Christie at one time.  Then she realizes that the person is more talk than action.  She thought Trump was different when she supported him.  So when it looked like the wall was quietly being dropped from his agenda, she attacked him on it.

If Trump were really serious about the wall, then he wouldn’t have waited until the end of 2018 with an incoming Democratic majority in the House of Representatives. Why wasn’t Trump doing this a year or more ago with Paul Ryan as Speaker of the House?

Now Trump is stuck. Nancy Pelosi and Chuck Schumer won’t budge.  Those two are terribly annoying people, but I have a feeling they are going to win this round of the political battle.

Most of the government has not shut down (unfortunately).  In particular, the wars overseas never end during a government shutdown.  Most of the IRS has closed for business with the latest shutdown, so that seems reason enough to keep it going.  But I don’t think Trump is going to be able to get his way on this.  The Democrats know what they are doing. They don’t care about $5 billion. It is a drop in the bucket in comparison to the well over $4 trillion annual budget.  Pelosi and Schumer just don’t want to fund any part of a wall because they don’t want any symbolic victories for Trump.

Trump’s only option to get his wall is to declare a national emergency and go ahead without Congressional approval.  I think this would be a great mistake, and it would set a bad precedent for the future.  It took Marco Rubio to point out that the Democrats might use this power in the future to declare a national emergency with so-called climate change.

The Real Issues

I have been preaching for a while now that Trump should address the nation in primetime, but not on immigration.  He should address the deep state that opposes him at nearly every turn. He should address the spy agencies and the intelligence agencies that operate with virtually no Congressional oversight.  He should address foreign policy and explain his commitment to withdrawing troops out of Syria and other wars in the Middle East.

Most of all – and this is related to the other points about the deep state and the secretive agencies – Trump should address the allegations of colluding with Russia and Russian interference in the election.  These false and unsubstantiated allegations are just continually thrown out there by the talking heads in Washington DC and in the establishment media.  They have no credibility.

It is weapons of mass destruction all over again.  In this case, they make accusations against Trump and Russia in order to kill several birds with one stone.  It increases tension with Russia and stops any sustainable talk of peace and friendship.  It provides a reason on why Hillary Clinton somehow lost to Trump in the election.  And it threatens Trump’s presidency with distractions and the possibility that he could even be prosecuted.

I don’t think Trump will go to jail for any of the made up stuff.  Maybe his lawyer really did pay off women to not talk, but I don’t think this qualifies as any kind of crime.  Of course, with federal law, they can make anything a crime.

If anything, they would use the threat of prosecution to get Trump to step down as president. They wouldn’t actually try to send him to jail or otherwise you would see a version of Trump that would make any previous version look tame.  He can obviously be a fighter, and if he thought he might go to jail, he would go down swinging.  He would try to take the deep state down with him.

Make no mistake about this.  Mueller and all of the other “investigators” are part of the criminal gang.  They are the ones who should be on trial.  They are liars and much worse.  They are the thugs of society who happen to dress up in suits.

I still have no idea how much Trump understands in all of this.  He obviously knows that a lot of people are out to get him. I don’t know if he understands the depth (for lack of a better word) of the deep state.  I don’t know if certain people have gone to him directly and made threats to him.

I expect Trump will run for re-election in 2020, but nothing is certain right now.  A lot can change when you have a whole swarm of corrupt actors trying to take you down.

Trump is far from being a libertarian, but he can do a great service for liberty by helping to expose the stench of Washington DC.  He has already done that to a certain extent, but he could do so much more.

When Trump expends his political capital on a fight for a wall at the Mexican border, it doesn’t expand liberty.  We can only hope that he will start expending even more energy on exposing the criminality of the deep state that is trying to take him down.