It’s said that hindsight is 20/20.  Now that we are entering 2020, I am not sure what that means since we always seem to be living in hindsight.

I am not one to make a lot of predictions.  I know the risks of making predictions, especially when it comes to investing. This is why I have followed Harry Browne’s advice.

Harry Browne didn’t say this exactly, but this was his general advice.  You can’t predict the future.  When it comes to analyzing your investments, don’t try to predict what will happen.  Instead, ask yourself if certain scenarios are realistically possible. If some scenario does come to fruition, are you prepared for it?  Are your investments prepared for it?

I am a follower of the Austrian school of economics.  The face of Austrian economics is Ludwig von Mises.  He wrote the book Human Action.  One of the basic premises of Austrian economics is that humans act.  This makes it impossible to predict the future because you don’t know how millions of human beings will act.

You can make decent predictions on how people will react to certain things.  Incentives do matter.  If the price of something goes up, generally speaking, the demand will go down.  If the government sets a minimum wage that is high enough, unemployment will go up, all else being equal.

But to make specific accurate predictions is extremely difficult, and it is even more difficult when it comes to timing.  With that said, I am going to throw out my predictions for 2020, just for fun. If I am wrong, this doesn’t invalidate my political and economic beliefs.  Regardless of what happens in 2020, I will still believe that the initiation of force for political or social change is wrong. I will still believe that monetary inflation by a central bank misallocates resources.

Economic Predictions

I believe that a recession will start in 2020.  I am less sure about whether the general public will know that a recession has started.  Remember that the financial crisis from 2008 actually started before that. The official recession was dated back to December 2007.

I expect U.S. stock market indexes to hit new all-time highs in early 2020, continuing the trend from 2019.  But I don’t think we will see all-time highs again for many years to come after 2020.

My biggest question is whether a dramatic fall in stocks will begin before or after the November election.

I have valid reasons for expecting a recession to begin in 2020.  The yield curve – as measured by the 3-month and 10-year yields – inverted in 2019.  If history is any guide, this means a recession should start in 2020.

In addition, there is a mess that started in the “repo” market back in September.  The Fed has had to step in continuously to provide funding.  I don’t fully understand the reason or what institutions are in trouble, but that is because the Fed is so secretive.  I do know that it is not a good sign for the economy.

The dollar will likely remain strong through 2020 because the other major currencies are so horrible.

Bitcoin should go down as measured by the U.S. dollar, but I have been very wrong on this before. I don’t expect Bitcoin to go to zero in 2020, but I expect it will lose its luster.  There is always the possibility that people will seek out alternatives like Bitcoin in a financial crisis, but I think the dollar will still reign supreme for now.  Gold will reign supreme in the long run.

Speaking of gold, I am still bullish overall.  I think the dollar price of gold could go down in a recession, but it will be temporary.  It is best just to make it part of your portfolio for the long term.

As far as interest rates go, I expect that investors will seek safety in long-term U.S. government bonds.  Long-term yields will go down until there is a genuine fear of price inflation.  If you are looking to refinance your mortgage, I think it is best to wait if you can.  And if you are looking to buy (and not sell) a house, then I think it is best to wait for prices to come down.

Political Predictions

I think that Trump will survive the impeachment saga, and the Senate will vote to not remove him from office.  It is just a question of whether they will have a full-blown trial or just a short discussion and a vote.

I give Trump a 50/50 chance of being reelected.  There are so many variables (see above).  If stocks crash before the election, his chances go way down. Even if that does happen, I don’t completely discount that he could be reelected in a down economy.  If he gets lucky and has Joe Biden as his main opponent, then anything is possible.  If Biden keeps sniffing the hair of girls while on camera, you never know.

However, that is my next prediction.  I don’t think Joe Biden will be the Democratic nominee.  He can barely survive talking for 10 minutes during a 2 or 3-hour debate.  His campaign team sighs relief when he can get through a debate or speech without saying something completely stupid.  It would be great fun to have Biden up on stage for a 2-hour debate against Trump, but I think many Democrats are realizing how bad he is, especially when it comes to speaking.  I know George W. Bush got elected sounding like a total dolt, but Biden is old and sounds like a dolt.  It isn’t a good combination.

I predict that either Bernie Sanders or Pete Buttigieg will get the nomination.  If it gets down to these two, Mayor Pete will have the establishment backing.  Bernie will not, although they can probably tolerate him better than Trump. Even though foreign policy would be unlikely to significantly change under Bernie, he does occasionally tell the truth, which rattles the establishment.

Still, Bernie has the most hardcore followers of all the candidates for the Democrats.  He has a loyal following.  His followers, for all of their faults, know that the other candidates are not genuine, and for good reason.  They don’t trust Elizabeth Warren, as they shouldn’t.  They won’t get behind any of the obvious establishment candidates.

If several candidates stay in the race for a while, this will tend to split up the votes. Bernie may be able to come out on top this time because of his devoted followers.  He is in his upper 70s and just had a heart attack, but his followers know that he is the only real deal when it comes to being a so-called progressive/ socialist.

Aside from presidential politics, I predict that nobody significant will pay a big price (like jail time) for the whole Russia hoax.  We already know that the corrupt FBI made up things for FISA warrants.  I would love to see people like Comey, Clapper, and Brennan be taken away in handcuffs, but unfortunately I don’t think that will happen.  William Barr is an establishment guy.  Maybe a few low-level people will take some blame just to make it look like someone is getting in trouble.

The good thing is, and I have saved my best prediction for last, is that I think the establishment/ deep state will continue to slowly lose legitimacy.  I think the establishment media will continue to lose trust, as they should.  I think that more people will slowly learn of these things that aren’t covered by the media, such as the Afghanistan papers and the OPCW fake reporting of Assad gassing his own people in Syria.

Even though there will be some tough times ahead, the empire is losing legitimacy.  It is also going to essentially go bankrupt at some point.  When we hit the day where interest rates and price inflation are high, the Fed will have to finally scale back.  Congress will be forced to scale back as well.  It doesn’t seem possible right now, but it will eventually happen.  That is when we need our message of liberty to be the loudest.

Stocks are more than double from the previous bubble.  I’m a poet, and I didn’t even know it.

It seems that the U.S. stock indexes are hitting new all-time highs virtually every day. If you put money into an index fund in March 2009 and held it until today, you would have done very well.

But I don’t want to compare stock prices right now to what they were in March 2009, which was the low point of the great recession, at least for stocks.

I want to compare today’s prices with what they were when the good times were seemingly roaring. The Dow Jones Industrial Average hit a high of 14,164 on October 9, 2007.  As I write this today (December 27, 2019), the Dow closed at 28,645.  That is just over double in about 12 years.

The S&P 500 hit a high of 1,565 on October 9, 2007.  Today, the S&P 500 stands at 3,240.  Again, that is more than double from its previous bubble peak.

The Nasdaq hit a high of 2,811 on October 10, 2007.  That was its high for that cycle.  It had hit a high just above 5,000 in the technology boom/ bubble of the late 1990s and early 2000.  The Nasdaq stands today at 9,006.  It is not quite double what it hit 2 decades ago, but it is more than 3 times what it was during its 2007 peak.

The numbers are obviously more stunning when you compare today’s levels to what they were in 2009. But there was major panic at that time, as the country saw the worst financial crisis since the Great Depression. Stocks probably sold off more than what was justified.

But obviously there was a major bubble in stocks in 2007.  The big drop did not come until later in 2008.  It is a good lesson that the bursting of a bubble can start somewhat gradually at first.

Does anyone really think that stocks should be worth twice as much as what they were worth in 2007? Does anyone think they are worth 4 to 5 times what they were in March 2009?

Of course, they are worth what they are worth on the open market.  But are the valuations justified?  And what portion should we attribute to the great inflation that took place after the financial crisis began?

Inflation and Stocks

I have long maintained that monetary inflation is the main reason that, broadly speaking, stocks rise.  Sure, individual stocks go up and down based on earnings and other factors.  But as a whole, the stock indexes go up and down largely due to monetary policy.

If there were a fixed money supply, stocks would not likely go up (again, as a whole) over time as they generally do now.  You would invest in an index of stocks in order to get dividends from the earnings.  The main goal would not be capital gains, if at all.

But in our world today, it is one of central banking and fiat money.  And with this, there is mostly monetary inflation.  This is why stocks generally go up over time, in spite of the wild volatility on a shorter-term basis.

The Federal Reserve nearly quintupled the adjusted monetary base from 2008 to 2014.  However, with fear in the market, coupled with the Fed paying interest on bank reserves, much of the newly created money did not get lent out.  This helped contain consumer price inflation.

Consumer price inflation, as measured by the Consumer Price Index (CPI) has been relatively stable since 2008, running around 2% per year.  This still depreciates the money you hold in your pocket (or bank account), but it is mild as compared to what could have happened.

Prices in assets have not been as tame.  Housing prices have certainly risen again in most areas, although not necessarily to the same degree as in the 2000s.  But the obvious asset price inflation has happened in stocks, which does not get reflected in the government’s CPI calculations.

As investors search for yield, especially with low interest rates, the newly created money has been used to bid up stock prices.

Unfortunately, many people gauge the health of the economy with the performance of the stock market. There is certainly a correlation, but we have to be careful in distinguishing correlation from causation.

A recession is a correction of the misallocated resources.  The misallocation has already happened.  While unemployment is low, many people are struggling.  They feel like their cost of living is going up faster than their wages, and they are probably correct.

A correction (if allowed) is necessary to realign resources in accordance with consumer demand. When the correction becomes apparent, stocks will likely fall.  But it doesn’t mean that everything was great up until the peak of the stock market.  The misallocations had already happened.  Investors dumping money into stocks was part of that misallocation.

The crazy rise in stock prices is largely due to monetary inflation.  It isn’t because so many companies have become so much more profitable.  Stock prices have gone far beyond the rate of inflation.  This is especially true if we measure stock prices against consumer price inflation.

When the recession hits, we may actually see mild price deflation for a short period, although this won’t last long as the Fed is likely to step in quickly with more digital money printing.  The deflation in asset prices will be far more severe.  The higher they go, the harder they fall.

Conclusion

Stocks have more than doubled from the bubble of 2007.  If they plummeted from the 2007 levels, what will happen at the December 2019 levels, which are far higher?

To ask the question seems to answer it.

The House of Representatives has voted to impeach Donald Trump.  The establishment media has been trying to get Trump long before he was sworn in as president, so they took part of a victory lap with his impeachment.

The impeachment was a sham, just as the Russia-gate hoax was before it.  There are far bigger crimes that Trump has participated in (if you could call his phone conversation with the president of Ukraine a crime), and you could say the same thing for probably every president of the last 100 years.

Trump could be impeached for bombing Syria, threatening and sanctioning Iran (among others), and helping Saudi Arabia to starve the people in Yemen.  But almost nobody cares about these things, which actually kill people.  If anyone went after Trump on these things, then they would have to be consistent and give the same criticisms (or worse) to Obama and Bush before him.

I would like for Trump to be impeached for waging war, dropping bombs, and issuing sanctions. This would be a precedent that I want to be set.  But most of the leftists are not really anti war.  If they are, they are certainly more anti Trump than they are anti war.

Politically speaking, I think the Democrats may have overplayed their hand on this.  It is so blatantly partisan.  The Clinton impeachment 20 years ago was mostly partisan, but at least Clinton actually committed a crime.  It was made to be all about sex, and the Republicans got sucked into that narrative.  But Clinton did commit perjury, which is a felony, in the Paula Jones trial.  One could certainly make the argument that, while it was a felony, it only hurt the victim in court. It didn’t hurt the whole country. But at least there was an actual crime that would send most people to prison.

With the Trump impeachment, there really was no crime.  Trump asked the Ukrainian president to help find out what happened with Joe and Hunter Biden.  But there was no proof that Trump threatened to withhold money.  It may or may not have been because Joe Biden is running for president.  You do have to understand that Ukraine ties in with Russia and the whole Russia-gate hoax.  Trump may have been trying to find out more about who was trying to frame him and how.

The articles of impeachment were weak.  One was for abuse of power, which is incredibly vague.  And again, probably every president has abused power.  According to Biden, he knew how to use power too.  He did the exact thing that Trump was being accused of and admitted it on video.

The other article of impeachment was obstructing Congress.  This is so incredibly stupid.  Does Trump have to hand over anything that Pelosi and Schiff ask for just because they asked for it?

While the establishment media had its little celebration over the impeachment (again, overplaying their hand), it probably was a distraction to a certain extent.  I suppose I have played into that distraction just by writing what I have so far.

I heard someone say that it distracts us from the spending legislation.  The federal budget is approaching an incredible $5 trillion per year, while the annual deficit is around $1 trillion and rising.  And this is during a supposedly booming economy.

The only thing is that I don’t think most Americans would care about the budget anyway, even if impeachment weren’t a story.  They’ll say in polling that they care about spending and the debt, but they don’t really care when it comes down to it.

The Ignored Stories

I would contend that there are even bigger stories than the budget.  We expect the budget to keep growing as long as they are able to fund it.  So in that respect, it isn’t anything out of the ordinary.

But there have been at least three bombshell stories that have happened just within the last few weeks.  Yet, you barely hear a thing about them from the establishment/ corporate media.

The first story is about Afghanistan.  The Washington Post obtained documents showing that top leaders continually lied about the progress (or lack of progress) of the war for the last 18 years.  In other words, with the tens of thousands of lives lost and many more than that ruined, the whole thing is a farce.  The war just continued on, wasting lives and money, when the people waging the war knew it was a disaster.

The second story is about Syria.  Members of the Organization for the Prohibition of Chemical Weapons (OPCW) have disputed the final report that was released that claimed Assad used chemical weapons against his own people.  There are many people who dispute the final report and say it is unlikely that it was Assad.  They also point out that the chlorine traces that were found were very low levels, such as that commonly found in a household from cleaning products.

The claim that Assad gassed his own people has been an ongoing lie to help justify the immoral and illegal war in Syria.  It was likely the U.S. government that threatened the OPCW and rigged the report.  In other words, the U.S. government lied us into war in Syria.  But impeachment gets all of the headline news.

The third story is about the FBI.  The Inspector General report was originally hailed as showing that there was no evidence of bias in the FBI obtaining warrants to spy on the Trump campaign.  But when you dig into the details, it shows that the FBI withheld and distorted evidence to obtain the FISA warrants to begin spying (and continue spying) on the Trump campaign.  And the Steele dossier, which was put together by someone working for the Clinton campaign, was used as the primary source for the FISA warrants. In other words, it proved all of the things that were pointed out by those of us who have been calling it a hoax from day one.

The CIA, FBI, and other elements of the deep state have been trying to overthrow Trump since before he took office.  This is so blatantly obvious to anyone paying attention who can think rationally for a couple of minutes.

Maybe the average Democrat hates Trump for his brash personality and his insensitive Tweets. But the people trying to overthrow him hate Trump because he occasionally tells the truth and questions the nature of the empire.  This is why they so desperately want him gone.

But the media ignores all of the big stories that show that the high-level people in the military and the intelligence agencies are a bunch of liars and murderers.  Instead, they focus on Trump.

It’s not that any one of these stories were a surprise to me.  They just added confirmation to what I already knew.  But these stories do provide evidence to what some of us have been saying all this time.  Yet the media ignores them for the most part.

The establishment media should be losing legitimacy.  I think it is to a certain degree, but still not enough.  There are way too many people who just hear the talking points and accept them as spoken.  But the media distorts and sometimes outright lies.  They lied with the Russia story.  They lied about Assad using chemical weapons.

Perhaps worse than their lies is just the ignoring of certain stories.  Just as ABC spiked the Epstein story years ago, they will ignore the stories of Syria that refute what they once said. They will mostly ignore the important details about the corrupt FBI.  They will mostly ignore the liars in the military-industrial complex who kept cheerleading the war in Afghanistan.

The establishment media should be ignored.  They want to control the narrative, which they have successfully done in the past.  Luckily we have some alternative sources today.

Whenever you hear a political story from one of the main networks, you should assume they are lying or distorting the story.  More importantly is to not fall into the trap of thinking that what they are saying is really the top story.

For whatever reason, the media does the bidding of the deep state.  This is why the FCC should be abolished.  There are other reasons for this too, which go back many decades.  But regardless of the reason, it is important to delegitimize the establishment media so that people stop listening.  Whatever they say, you should believe the opposite until you can verify the claims being made.

I have imagined many times before how much things could improve if we (the United States) had a libertarian president.  When I say “libertarian”, I mean philosophically, regardless of party affiliation.

I have pointed out the many things a libertarian president could do, even without a libertarian Congress.  Our libertarian president could end all wars right away.  Our libertarian president could pardon all non-violent drug offenders convicted under federal law, plus other prisoners convicted of victimless crimes.  Our libertarian president could veto every budget and force Congress to override the veto.  Our libertarian president could use the bully pulpit to encourage the American people to tell their representatives what to do.

Of course, if we ended up with a libertarian president, that means there would have been a major philosophical shift in the thinking of a large percentage of Americans. Maybe the stars would have to align with other unlikeable candidates in the election.  A few scandals wouldn’t hurt either.  But for a libertarian to be elected president, there would have to be some kind of major shift.  This would be the most important advancement towards liberty.

But let’s say that we got a libertarian president without a dramatic shift in public opinion. For a crazy example, let’s say that Trump is running against Biden in 2020.  Let’s say they both get caught in major scandals right before the election.  I am not talking about a made-up scandal by the CIA like what we have now with the impeachment. I am talking about major scandals for both sides where there is irrefutable evidence and where the loyal constituents even find it hard to forgive.

Meanwhile, let’s say that a real libertarian, like Jacob Hornberger, is in the race as a third-party candidate.  Let’s say that Trump gets 25% of the vote, Biden gets 25% of the vote, the Green Party and other candidates pick up 15%, while Hornberger gets 35%. Let’s say that Hornberger barely gets a majority in the Electoral College.

In this scenario though, people voted for Hornberger just because he seemed the most trustworthy out of the candidates, and they couldn’t vote for Trump or Biden because of their major scandals.  I know, the scandals would have to be really bad for this to happen.

Now let’s assume Hornberger is allowed to take office, meaning that the CIA and other factions of the deep state do not physically prevent him.  If you think they have fought hard against Trump for the last three years, imagine what would happen with an actual libertarian in there.

Hornberger could take office on day one and begin the task of dismantling most of the federal government.  Or could he?

The Deep State and the Administrative State

Americans face two great opponents that are both factions of the federal government.  Most don’t know they face these opponents, or at least cannot articulate it well, but they are opponents nonetheless.

There is the deep state, and there is the administrative state.

The term deep state has become common in today’s world.  If you used that phrase five years ago, you would have been written off as a conspiracy theorist.  Today, it is still possible to get called a conspiracy theorist, but even deep state members are admitting there is a deep state.  They try to justify the deep state, saying it is a good thing it is there in order to prevent Trump from destroying everything.

The deep state is certainly a major threat.  It is the more ruthless and violent of the two factions.  But at least some people are now aware of its existence, largely thanks to Donald Trump.  Really, more people are aware of the deep state today because of the deep state’s reactions to Donald Trump.

A less obvious opponent is the administrative state.  People call government a bureaucracy, so there is certainly awareness of the administrative state.  But people do not understand the threat it imposes because it seems relatively harmless.  You aren’t really afraid of a bureaucrat unless you are depending on them to approve important paper work that you are depending on, such as a permit or license for a business.

The major problem with the administrative state is that it is so ingrained.  It is almost impossible to get rid of, even for a libertarian president.

As libertarians, we can casually say that we should just abolish certain agencies.  And I do believe this could technically be done with enough support.  But just abolishing an agency would cause a lot of havoc in a lot of people’s lives.  It isn’t just the people working for the administrative state.  Imagine how much money is owed between different parties. Imagine all of the paperwork. You would have to find all of the corresponding regulations to repeal that go along with each agency. Otherwise, it might be against the law for people to do something without having any means of getting approval.

What about companies that have paid billions of dollars for trials with drugs or food?  What about people in medical school getting government licensure to become a doctor?  What about companies that are in the middle of government contracts that are getting paid for work that was previously done?  What about buildings that are under construction and half-built that are being funded by the government?

I know the answer to many of these questions is to still just abolish everything and let the chips fall where they do.  However, even those who may favor a dramatic reduction in government will feel a lack of justice if they have a direct interest in some particular agency or project.  They may feel they have invested a lot of time and money for nothing.

The problem is that there are thousands and thousands of examples of where people will not be pleased with the immediate abolishment of a government agency.  They may not have ever wanted to deal with the agency in the first place, but because of the regulations as they existed, they were forced to become somewhat dependent on the agency.

I bring this up as a libertarian not to say that it is impossible or that we should not keep calling for this.  I bring it up to point out that it is far more complicated than just repealing an agency, eliminating the budget, and sending everyone home.  What do you do with all of the files with names and Social Security numbers on them sitting in office filing cabinets?

For this reason, I actually think the administrative state is harder to repeal or scale back than the deep state.  I don’t even know how a libertarian president would go about starting the process, even with a decent percentage of the population supporting such an agenda.

Trump has trouble withdrawing a few thousand troops from Syria without the deep state going crazy. Maybe a libertarian president could stand firm and withdraw troops.  Maybe.  I am not even sure about this any more.

I am starting to think I have been naïve all of these years for saying that a president can just order the troops home as commander-in-chief.

It would be great if a libertarian president, or any president, could withdraw troops and end all foreign interventions.  It would save a lot of death and destruction for foreigners.  It would bring about a lot more peace. It would also save a lot of money in the U.S. budget.

Beyond this, I am not sure what a libertarian president could do at this point.  The mess has piled up for many decades.  Some of it goes back over a century.  There are so many regulations and different little departments within all of these government agencies that it seems nearly impossible to dismantle them.

If we had a dramatic shift in public opinion towards libertarianism, maybe the best we could hope for is a slow incremental dismantling.  Maybe budgets could be cut by 2% per year.  Maybe we would need government committees (did I really just say that?) made up of libertarian-minded people that could organize the dismantling of these agencies somewhat orderly.  I think there would be enough libertarians who would volunteer to do this without being paid by taxpayers.

The Soviet Union was largely disbanded overnight.  There was a lot of corruption and chaos that followed, but things sort of worked out, at least compared to the way things were.  I doubt the same thing would happen in the U.S.

It is hard to say what would happen if we had a libertarian president.  It would largely depend on the individual and how courageous the person is.  But even with someone who stands firm, I think it would be nearly impossible to dismantle the administrative state.  The best we could hope for is a start.

They say that one of the worst things you can say to your child (from your child’s perspective) is not that you are angry at them or that they are in trouble, but that you are disappointed in them.  I don’t really know if that’s true, but I have to say that I am somewhat disappointed in Tulsi Gabbard.

Of course, disappointment implies that you had expectations to begin with.  I don’t know if I ever had great expectations of Tulsi, but I certainly hoped that she would be a shining light in the darkness.

And don’t get me wrong; to a certain extent she was.  The Democratic debates would have been completely awful if she had not been in them (for those she was in).  Without her on stage, it is just a bunch of hacks arguing over who can better control the lives of 330 million people (or more, if you count foreign policy).

Tulsi had some great moments in the debates.  She took down the worst person of them all – the authoritarian Kamala Harris.

Tulsi repeatedly criticized U.S. foreign policy, particularly what she called the regime change wars. As a libertarian, this is what I think matters more than anything.  Not only is it a matter of life and death, particularly for the people in those countries, but it also ties back to our own civil liberties and our living standards.

Tulsi was probably the least bad on domestic issues, which isn’t saying much in this crop of candidates.  She didn’t stand up on stage and act like everything was free.  She didn’t continually engage in class warfare as the other candidates do on a regular basis.

And yet, with all of this praise I give her, she could have been so much better.  To paraphrase an old quote, she coulda been a contender.

Government Of, By, and For the People

It is probably good she will not be in the December debate.  If I hear her utter this phrase one more time, I will probably throw something at my tv.

It’s not that there is anything particularly bad about this saying – “Of the people, by the people, and for the people”.  It’s just that it is so commonplace in the realm of politics.

She complains that the media silences her, which to a large degree it does.  So she gets maybe a total of 6 minutes in a two hour debate to make her pitch, and she actually wastes 10 seconds or more, sometimes multiple times in one debate, making this statement.  It is something that could just as easily be said by Hillary Clinton or Joe Biden.  It is a meaningless phrase.

She also wasted her entire closing statement in the last debate talking about Hawaii and the Aloha spirit.

The reason I write about Tulsi is because there is something unique about her, at least as compared to the other Democratic candidates.  She is the only one speaking consistently about a more peaceful foreign policy.

Bernie Sanders will say a few good things in regards to foreign policy, but it is only when he is specifically asked.  He puts no emphasis on foreign policy.  He is too busy taxing the rich in his mind and coming up with more free stuff for the voters.  This is also the man that campaigned for the evil warmonger that is Hillary Clinton.

Tulsi will not be in the upcoming December debate.  She did not qualify.  And while I think this is partially because of the establishment and the establishment media, I do think she shares a bit of the blame.

Tulsi stated earlier in the week that she would not participate in the debate even if she qualified.  It was her form of protesting.  Maybe she saw the writing on the wall and knew she wouldn’t qualify anyway.  But what good does this protesting do?  It doesn’t help convey your message to anyone.

In fact, I didn’t even know that Tulsi had made this statement that she would not participate. The only reason I found out is because I looked up to see if she would qualify for the next debate. That’s when I found a story about her refusing to participate.

What purpose does this serve?  If you believe there is major injustice in the world because of U.S. foreign policy, wouldn’t you take every little opportunity you have to try to convey that message to the public?

I had a few minor frustrations with the Ron Paul campaign in 2007/2008 and again in 2011/2012. I was more frustrated with some of the commercials that were being run (and what was not being run).  I thought his commercials should have been more bold, particularly when it came to foreign policy.

But there wasn’t a lot of frustration when it came to the debates.  Ron Paul didn’t speak a lot of meaningless slogans.  Sure, some of his answers at times could have been better, just as is the case with any candidate.  For the most part though, Ron Paul stood his ground, and we wasn’t afraid to be bold in criticizing U.S. foreign policy. In fact, he would oftentimes get questions on the budget or economics in general, and he would take it back to foreign policy saying that we can save the money and reduce the budget by ending the wars.  This is what Tulsi should have been doing.

I don’t remember Ron Paul chewing up his time with slogans about “of the people, by the people, and for the people”.

Foreign policy is the one issue that distinguished Tulsi Gabbard from everyone else on the Democratic stage.  She should have been hammering this issue home on every question she got.

I know she is not a libertarian.  I know her foreign policy isn’t perfect.  I know that much her domestic policy is horrible.  But whether you are a libertarian or not, you have to admit that she was a bit different than the others.  This is why the establishment hates her.

The problem is that she didn’t emphasize this enough.  The establishment and its media wouldn’t like her no matter what, so she should have gone all-in.  Skipping the debate is the opposite of going all-in.

If Tulsi had been bolder in the last debate, maybe she would have met the threshold for this upcoming debate.  But that didn’t happen, and she already said she wasn’t going to participate.

The Tulsi Gabbard campaign is basically over at this point.  It was fun for the short time it lasted.  She made a very minor impact.  Compared to Ron Paul, it really was very minor.  There are hundreds of thousands of libertarians today who probably wouldn’t be if it hadn’t been for Ron Paul.

I hope Tulsi learns some lessons from this, and I hope radical libertarians also learn a lesson. It doesn’t help to issue slogans in an attempt to suck up to people.  What does work is a radical and principled message. Honesty also works.  This is a lesson that Rand Paul should have learned from his failed presidential campaign.  In contrast, the Ron Paul campaigns were not failures. He didn’t win the presidency, but he won the hearts and minds of hundreds of thousands of people.

The Federal Open Market Committee held its last meeting and released its last statement for 2019.  The Federal Reserve will keep its target the same (for now) for the federal funds rate.

The federal funds target rate is still between 1.5% and 1.75%.  The rate paid on required and excess reserves will remain at 1.55%. So the banks are still getting some free money for keeping their reserves parked at the Fed.

In the FOMC Implementation Note, it states the following:

“In light of recent and expected increases in the Federal Reserve’s non-reserve liabilities, the Committee directs the Desk to continue purchasing Treasury bills at least into the second quarter of 2020 to maintain over time ample reserve balances at or above the level that prevailed in early September 2019.”

The phrase “at or above the level” could mean $10 trillion for all we know.  It is mostly non-specific.  This is really probably the bigger story than the federal funds rate that the financial media focuses on.  The Fed’s balance sheet is the more important thing.

Jerome Powell says not to call it quantitative easing (QE).  I guess we can just go back to calling it monetary inflation.

The adjusted monetary base has gone up over the last couple of months, but not in a major way.  A hundred billion dollars or so would be enormous to anyone else, even Jeff Bezos, but for the Fed’s balance sheet, it is a rather small percentage.  It is more than a rounding error, but it is not that big of a change when you compare it to the last 11 years.  It would have been a big change if you compare it to early 2008.

After the announcement, stocks rallied a little bit.  This is in spite of the fact that the Fed is not anticipating any rate hikes in 2020.  Of course, everybody knows that the Fed will intervene quickly if anything goes wrong.

Meanwhile, the Fed continues to pump money into the repo market to prevent short-term rates from spiking.  When you read a story that the Fed pumps in $70 billion or $100 billion in a day, this is not an increase in the balance sheet every day.  It is a significant story that the Fed is essentially forced to support this market, but we should not be fooled that this is equating to monetary inflation, or at least not yet.

Perhaps some investors were a bit relieved that the Fed is holding for now.  If the Fed kept cutting rates, it would mean that they see major problems ahead with the economy.  They probably do see that, but they are doing their best not to encourage panic in the market.

The Fed is seemingly in a sweet spot right now.  They have gotten away with a lot over the last 11 years without noticeable consequences.  Middle class America is struggling, and it is largely because of the Fed’s inflation that has misallocated resources and allowed the government to run up spending.  But most Americans don’t blame the Fed. If prices across the board rise significantly, then more people will look at the Fed.

This sweet spot isn’t going to last forever.  There will be a recession.  It doesn’t seem like it will happen now because this game has gone on for so long.  At some point, the spotlight will be back on the Fed.  Unfortunately, when things go bad, they will probably go full force towards zero (or negative) interest rates and more massive monetary inflation.

Paul Volcker, chairman of the Federal Reserve from 1979 to 1987, has died at the age of 92.

Volcker was nominated as Fed chair in the late 1970s by Jimmy Carter at a time when price inflation was roaring in the double digits.  It is by far the highest price inflation the U.S. has ever seen in our modern day.  Although it started while the war in Vietnam was still going on, the worst of it was during a relatively peaceful period.

It is probably no coincidence that the worst of the inflation happened not long after Nixon closed the last remnants of the international gold standard in 1971. The dollar was no longer redeemable in gold by foreign governments.  This meant that the Fed was free to create money out of thin air, or so they thought.

The problem is that the price inflation was due to the Fed running the printing press (or its digital equivalent).  The powers-that-be can blame high oil prices or corporate greed or whatever they want, but the price inflation will stop if you stop creating money out of thin air.

The tables were briefly turned on the establishment.  The roaring inflation of the 1970s put the U.S. dollar at major risk.  If the inflation continued, then it would eventually cease to be the world’s reserve currency.  The U.S. establishment would lose much of its power and the empire with it.  Even the Fed members would lose power to control things.  They would also be looking at pensions that aren’t worth much.

I have no idea how much, if any, say that Jimmy Carter had in bringing Volcker to the Fed. But I believe he was put there to do exactly what he did.  He allowed interest rates set by the Fed to rise, and he slammed on the monetary brakes.  The monetary inflation stopped, at least for a while, and the drop in price inflation followed.

This created back-to-back recessions in the early 1980s.  It helped get Reagan the presidency.  It deflated some asset bubbles, especially in gold and silver. The high yields on bonds finally started to come down.  If you invested in bonds in 1980 and held for a while, you did well.

This was probably the last time that the U.S. economy had a good cleansing.  Every recession since then has been met with more monetary inflation.  The corrections are not allowed to fully correct.  The resources that were misallocated instantly start to get misallocated again.  If anything set the stage for prosperity in the 1980s, it wasn’t deregulation or income tax cuts. The primary factor was the Fed allowing a correction to take place.

Paul Volcker, the Man

Some libertarians could argue that we would have been better off if the U.S. dollar had been destroyed.  There are certainly arguments to be made, as the U.S. empire would not be as possible if that had happened.

On net, I think the monetary tightening was positive.  No society wants to go through hyperinflation, which destroys the economy and the culture.  Does anyone think Venezuela is better off for having hyperinflation?

And hyperinflation is ultimately what Americans faced in the late 1970s if nothing was done about it. When I say “nothing”, I mean allowing the status quo of having the Fed creating new money like crazy.

Volcker was the right man at the right time.  I don’t know if he was told what to do by others, but he basically did the right thing.  Sure, I wish he had put the dollar back on a gold standard.  Better yet, I wish he had ended the Fed and allowed the market to decide on the form of money.  But aside from libertarian arguments, Volcker did the right thing when he stepped in as Fed chair.

Volcker was a slice of sanity during a time of mostly insanity.  Most Americans today can’t fathom getting a home mortgage with an interest rate over 10%.  Aside from health insurance premiums, education, and some real estate, it is hard to imagine prices going up over 10% per year.  This would be a doubling of prices in just over 7 years.

Paul Volcker was a tall man of 6 feet, 7 inches.  He smoked cigars and was a presence.  From what I have heard, he was a decent man.  Ron Paul has said favorable things about Volcker, at least from a personal standpoint.  He has said that Volcker was friendly and willing to talk.

It’s hard for me to praise a central banker too much.  Perhaps it is a matter of comparison.  Although Greenspan seemed favorable towards gold and liberty in the 1960s, I am a bigger fan of Volcker.  I consider Greenspan to be a sellout.  Or maybe he was a social climber as Ayn Rand said, and he just said whatever advanced him the most at the time.  Either way, Greenspan knew better, so I am not forgiving for his horrible time as Fed chair.

If we ever get another time that is like the 1970s, it will be interesting if someone like Volcker (the right person at the right time) will show up and be nominated.  I would rather that than end up like Venezuela.

Earlier this week, Trump made a comment that maybe he wouldn’t make a deal with China until after the election.  This sent stocks down quite a bit.

Aside from the fact that the tariffs are foolish and that his comments were politically foolish, there is a much larger problem here.  Why does one person get to dictate the tariffs that impact 325 million people (or well over a billion people if we count the Chinese)?

This could be said about many different things, although they all go back to political power.

Why do the Federal Reserve chairman and a handful of others on the FOMC get to dictate monetary policy for the entire country?  You know it is bad when the financial media is trying to parse every little word coming out of the mouth of the Fed chair.

Why do nine Supreme Court justices get to essentially make law for over 300 million people?

Why does the president have the power to start a war on his own command?

Of course, constitutionally speaking, these things aren’t really allowed.  But other than some procedural stuff, the Constitution is mostly ignored.  Congress has long abdicated its power to the presidency, especially when it comes to war-making power.  The Congress delegated the little power it had over monetary policy to a central bank in 1913, which now fully controls the money supply and can manipulate interest rates.

Both major parties will complain about the other, but rarely do you hear suggestions that the power should be eliminated.  Instead, they want to obtain the power.  This is the difference between a libertarian and anyone else. A true libertarian understands that you have to take away the power.

Cutting Budgets

As Harry Browne liked to say (quoting Michael Cloud), the problem isn’t the abuse of power; it’s the power to abuse.

The only solution is to remove this power.  That will only happen when a sizeable percentage of the population demands this.  People need to withdraw their consent.

Most people do consent to the system.  They will complain a lot about government and particular politicians, but they still endorse the system.

The Patriot Act, which the government relies on as an excuse for its surveillance powers, was recently extended.  It was hidden in a bill that went through Congress. There is little uproar except for libertarians and perhaps a tiny few on the far left.

It is interesting that Democrats cry all day long about what a horrible person Trump is and how he should be removed from office.  Yet, they fully endorse the things that give him more power.  Maybe the surveillance state isn’t the best example of that, since it was probably used against Trump and his campaign, but you get the point.  Why are you giving more power (including spending power) to someone you so despise?

There is only one solution to all of this.  It is to drastically reduce government power.  And the only way to do that is to cut budgets, preferably all the way in order to eliminate entire departments.

As long as budgets are passed to fund all of these alphabet agencies, then there will be major power available.  And as long as major power is available, bad people will seek out this power and abuse this power. This is why the worst tend to get on top.

Trump is bad on many things, but he is not the worst.  This is why the establishment hates him so much.  They will only tolerate the reliable criminals who will always support the military-industrial complex and the rest of big government.

There is a store named Five Below, where everything in the store is priced below five dollars. Except, that isn’t the case any longer.  They now have a section that is ten below.  This section has products priced between five and ten dollars.

I don’t know if this store will end up being the equivalent of Motel 6, which was originally named because you could stay there for 6 dollars per night.  Five Below is no longer five below.  It is really Ten Below.  Maybe it will be Twenty Below before we know it.

I have pointed out before that you will know price inflation has gotten bad when the dollar stores break the buck.  If the dollar stores that currently sell everything for one dollar or less have to go above a dollar for certain items, then you know the Fed has been effective (from its viewpoint).

To be clear, I don’t think Five Below went above the five-dollar threshold just because of price inflation.  I think the business model has been successful enough, and the company just wants to be able to expand the number of products it can sell.

I have been in a Five Below store before.  For the most part, I don’t like it that much because I don’t need or want most of the things in it.  Some of the products are priced about the same or even higher than what you would find at Walmart.  But I have seen some products that seem like a pretty good deal if you happened to be looking for certain things in particular.  Some items really are a bargain.

I tend to like dollar stores better.  Sometimes I need plastic utensils that I can throw away when I am eating away from my home.  I can buy a package of 16 spoons, 16 knives, and 16 forks, all for a dollar.  That’s 48 plastic utensils for a dollar (plus sales tax).  That is quite amazing. It is actually amazing that dollar stores are able to exist.

The Great Contradiction

This is part of the contradiction of the times we are living in.  You can shop in a store with thousands of products that are priced at one dollar or less.  Meanwhile, one night in the hospital will cost you and your insurance company several thousands of dollars, or maybe tens of thousands of dollars.

I am amazed at how inexpensive some things are.  At the same time, I am amazed at how incredibly expensive some other things are.

Unfortunately, it seems to be more needs than wants that are in the expensive category.  Medical care and insurance are extremely expensive.  Housing is mostly expensive.  Education can be very expensive, although higher education is not a need.  The expensive things tend to be in areas where there is a large presence of the government (i.e., the state).

Food is obviously a need, but it is not as insanely expensive as other needs like medical care.  Food prices have gone up, but somewhat more in line with average price inflation.  The government certainly has its hand in food production, but the price inflation is largely reflective of the central bank and its money creation.

Meanwhile, you have some new technologies, especially when it comes to electronics, where prices are actually going down.  In some cases, prices stay about the same, but you get much better quality. This is all in spite of a monetary system that favors inflation.  Imagine if the Fed wasn’t creating money out of thin air for the last decade or more.  We could have even lower prices for smartphones, tablets, and televisions.

I find the prices of big-ticket items are also high these days.  If you need a new roof or air conditioning unit for your house, you are going to pay a lot.  This is due to a combination of many factors, including central bank inflation, tariffs, regulations, and other taxes.  The government is extracting a lot of resources, and it makes our living standards lower than they should be.

As I’ve written about before, a roofer putting on a new roof isn’t making huge bucks.  Even the company owner may not be making massive profits.  It is all of the costs of the materials, the labor costs (other than salary), the insurance costs, the associated taxes, and regulation compliance costs.  It makes life expensive.

This will be the positive aspect of the next recession (correction).  It will hurt many people because asset prices will come down.  Some people will lose their job.  But for all American consumers, it should actually lower prices as long as the Fed doesn’t get too crazy too fast.

We need a correction just to make life more affordable again.  We need to keep the dollar stores as dollar stores.