In a video from June 2020, finance guru Dave Ramsey received an interesting call on his show.  The caller told of his fears about Federal Reserve inflation and asked Ramsey about where he sees inflation going and whether gold should occupy a place in one’s portfolio.

Ramsey immediately responded, “Well, you’ve been listening to me for a while, so you know I’m not going to tell you to buy gold.”

Ramsey then says, for the sake of argument, that we pretend that hyperinflation does occur.  He then goes on to talk about the double-digit price inflation of the 1970s.

Right here, I do not agree with his definitions.  What happened in 1970s America was not hyperinflation.  It is admittedly difficult to nail down a good definition of hyperinflation, but I don’t think I had ever heard anyone refer to the 1970s as hyperinflation.  It was a period of high inflation, but 10 to 12 percent annual price increases does not meet the definition of hyperinflation for most people.

For me, I would want to see annual prices overall going up at 50% or more before I would consider it hyperinflation.  Even then, when we talk about hyperinflation from Zimbabwe or Weimar Germany, that was hyperinflation where prices were going up virtually every single day.  At its worse, prices were easily doubling in less than a month’s time.

Next, Ramsey says, if there is heavy inflation, “There is no promise that gold follows that.”  He says, “…they are not tied together in any way.  There is no index.  We do not operate on the gold standard any more.”

Of course there is no promise that gold follows.  There is also no promise that stocks will go up forever, even though Ramsey would have no problem recommending index funds.  But gold did go up significantly in the 1970s.  The last ties of the dollar to gold ended in 1971.  Gold went up in price substantially after this time.  So while we have no guarantee that gold will go up significantly with double-digit price inflation, there is a high degree of probability that it will, and it makes a good hedge against severe inflation.  It provides diversification for a portfolio.

Ramsey then says that gold is like all other commodities such as oil, silver, and wheat and that they go up based on a perceived shortage or they go down based on a perceived over supply.  He says gold goes up when people are greedy or when they are afraid.

It is curious why Ramsey doesn’t talk about depreciating dollars.  Isn’t that enough reason for any of these commodities to go up, or really anything at all?  If you have more money chasing the same goods and services, then eventually prices are likely to rise.  Gold wasn’t primarily going up in the 1970s because of a perceived shortage.  It was going up because of an oversupply of dollars.  It boggles my mind how Ramsey cannot understand this basic economic point.

Ramsey then says, “It is a golden colored rock.  It has no intrinsic value except for the fact that two different people are fighting over it, and that’s the only thing that gives it value.”  To his credit, he says the same thing about the dollar and other currencies.

In a sense, Ramsey is correct in that all value is subjective.  That’s the world we live in.  But you could say the same thing about any stock index fund.  They only have value because customers put a value on the products sold by the companies.

Gold does have value though outside of just being a form of money or investment.  It is used for jewelry.  It has many industrial uses.  There is a reason that gold was used as a form of money for thousands of years, which Ramsey seems to miss.

It was all frustrating to listen to from a libertarian standpoint.  Actually, it should be frustrating to anyone who just understands some basic economics.

I have written about Dave Ramsey and Suze Orman several times in the past.  I think they are both intelligent people who give great, and much needed, advice on money.

When it comes to investing though, I wouldn’t listen to them.  They do not understand the benefits of owning gold in a portfolio.  They do not understand the threats of a severely depreciating currency.  They have full faith in the U.S. dollar, which apparently means that have faith in the Federal Reserve System.

You can, and probably should, listen to Dave Ramsey when it comes to saving money, paying down debt, buying life insurance, getting a mortgage, and several other topics dealing with money.  Stay away from the bad investing advice though.

The scariest time for me in 2020 was in March and April 2020.  I wasn’t worried about a virus, but I was worried about the reactions to the virus hysteria, and I had good reason to be worried.

The shutdowns and stay-at-home orders dramatically changed everything.  It was a glimpse of totalitarianism in America.  I know libertarians often like to talk about socialism and authoritarianism, but Americans are still relatively free when it comes to most things.  The government is involved in almost everything, but we still have a degree of freedom that is underappreciated.

Although Florida has been open since September 2020 with few restrictions (there are still local restrictions in some cities, especially when it comes to masks), there were stay-at-home orders in April 2020.  I was calling Ron DeSantis a dictator back then.  As it turns out, he ended up being one of the best governors in comparison, which isn’t saying much.

I remember going to Publix (a grocery store for those not familiar).  I got there early in the morning, about 10 minutes before opening.  There was a line outside the door, going down the sidewalk.  It looked like a long line, but people were already “social distancing”, so it wasn’t as bad as it looked.

Mask wearing was not yet a big thing.  It wasn’t being preached by Fauci and company yet.  I have still never worn a mask into Publix, and I have never been questioned about it.  They are all about great customer service.

When the store opened, most people went straight to the toilet paper aisle.  I remember getting one of the few packages of toilet paper left.  One time we got this horrible organic toilet paper (yes, that exists), and it isn’t the most soothing on the body.

The really scary part was going to get meat and vegetables.  The meat aisle was the second place to go.  I was lucky to get a couple of chicken packages.  I believe the store was limiting purchases to two items for many products, which included meats.  The vegetables were also in short supply.

This was the scariest moment for me.  I am particular in what I eat (a mostly low carbohydrate, paleo-like diet), so I can’t just stock up on some potato chips and frozen pizzas.  It showed how delicate the supply chain is.  Of course, the government regulations don’t help, as food supplied to restaurants can’t easily be redirected to be packaged for grocery stores.

In one sense, it is amazing how delicate the supply chain is.  In another way, it is amazing that the marketplace, to the extent that it is free, adjusts so quickly and efficiently.  There were all of a sudden tens of millions of Americans who previously ate out at restaurants who were all of a sudden buying groceries and cooking all or most of their meals at home.  Some restaurants were still open for takeout.

Being Prepared Without Overdoing It

Since that time, our household makes an effort to stay at least one ahead on certain items.  Sometimes we fail, but at least the thought is there.  This includes things like laundry detergent, dish soap, hand soap, paper towel, and of course, toilet paper.

I know a true prepper would laugh at this.  We wouldn’t last more than a couple of weeks with these extra things.  But if something bad does go down again, at least it buys you a little bit of time and leeway.

I have actually recommended a strategy before of buying extra things, not just to be prepared, but also to save a little bit of money.  If you wait for sales or coupons, sometimes you can get a good deal on certain goods when buying in bulk.  And if you buy a lot, you can be almost certain that prices aren’t coming down in the future.  In today’s time, prices are likely to go up.

As long as the items you are buying in bulk last (don’t expire quickly), then it is a strategy that is almost guaranteed to not lose.  You may have to be creative with some storage, but you know prices aren’t going down.  As long as you will use the stuff one day, then it won’t be wasted.  If anything, you will save a little bit of money in the long run by buying in advance.  And you will get the benefit of being prepared, which can be a mental benefit alone even if nothing bad happens.

Although the prepper movement seemed to be almost vindicated in 2020, I am not a hardcore prepper at all.  I understand my place in the division of labor.  Unless you are planning to buy a farm and move out into the country, then you will be reliant on the division of labor to a large degree.  If the trucks ever stop running, then a large portion of the population is likely to be dead within 6 months.

This is the biggest fear with hyperinflation.  This is the biggest reason we never want to see the money we use destroyed virtually overnight.  If the truckers don’t want to get paid with worthless currency and the trucks stop delivering food to the stores, then almost everyone is in trouble.

I really hope that we never see anything like 2020 again.  I do believe we are in for tough economic times ahead, especially given what has been done by the federal government and the Federal Reserve since March 2020.  But as long as we have some semblance of freedom, people will figure things out and get along.  Times may be difficult, but most people will survive.

It is also important to realize that much of life just goes on.  Most things revert back to some form of normalcy.  We most likely won’t see hyperinflation.  If you own a house with a mortgage, you will still have to make mortgage payments to your lender.  Maybe it will be in depreciated dollars, but it will still be there.

I am saying this as a reminder to myself and everyone reading that you shouldn’t take any drastic steps that are stupid.  You should try to maintain a steady income, you should save some money, you should diversify your investments, you should pay your bills, and you should try to take care of your health.

Sometimes life just requires a steady hand.  It is better to turn off the news in most cases.  You can be aware of what is generally happening in the world by paying attention for five minutes out of the day.  Most things you can’t control.  You just have to look after yourself and your family.

You can make good decisions and live a somewhat normal life while just being a little extra prepared for rough times, whether it be more virus hysteria, or high price inflation, or a crashing stock market, or whatever life brings us.While I think there will certainly be rough times ahead economically when the “everything bubble” pops, I have some long-term optimism for the future.

I am a long-time advocate of the permanent portfolio.  This is a portfolio going back several decades, which was promoted by the great libertarian, Harry Browne.

The permanent portfolio is designed to protect your wealth in any type of economic environment.  It is also designed for simplicity.  The allocation is for four equal parts (approximately) in four asset categories.  The portfolio consists of 25% in stocks, 25% in gold, 25% in long-term government bonds, and 25% in cash (or cash equivalents).

Each asset category is there to do well in certain economic environments.  When one or more of the categories does poorly, the others are there to make up the difference.

Stocks are there for times of prosperity.  This would include the current environment where some of the prosperity is illusory and is a monetary inflation-driven boom.

Gold is there for times of high price inflation.

Long-term government bonds are there for times of depression and deflation.  As interest rates go down, the value of long-term bonds rises.

Cash is there to smooth everything out.  In certain periods of recession, it is possible that all assets can perform poorly.  Cash will hold its value and make the portfolio less volatile.

As Harry Browne noted in his book Fail-Safe Investing, recessions are generally short-lived.  The recession will turn into an environment of depression/ deflation, or prosperity, or inflation.

Your permanent portfolio can certainly go down in value.  But it tends to not last long, and the downturns are typically not severe.  It isn’t like owning a 100% stock portfolio where you could lose 60% of the value in the matter of months.

There are no guarantees with the permanent portfolio, just like anything else.  It is also far from perfect.  But I also haven’t seen anything with its simplicity that is better.  Even without regard to simplicity, I don’t think I’ve seen anything better in terms of balancing wealth protection with growth.

With that said, the current environment is difficult.  It seems like nearly everything is in a bubble.  I have been calling this the “everything bubble”.  The one major exception may be gold.  But if there is a major crash/ recession in the near future, gold could easily go down in value (in dollar terms) as well.  I just don’t think it will be as severe as stocks.

Bonds and Cash and a Depreciating Currency

I have received multiple comments recently regarding at least two of the components of the permanent portfolio.  It is hard enough for many people to swallow putting that much into bonds and cash.  It is that much more difficult for someone who is a libertarian.

It is easy to question the permanent portfolio at any time because one of the components will always be doing better than the others.  There will be at least one that is seemingly a loser, at least compared to the others.

The first thing I’ll say is that the permanent portfolio is up, certainly in nominal terms, and probably in real terms.  It is up quite substantially over the last year no matter how you measure it.  If you own PRPFX, which somewhat mimics the permanent portfolio, that is up about 30% from exactly one year ago.

Sure, if you are in the permanent portfolio, you are not up nearly as much as your friends who have 100% invested in stocks.  If you bought the Nasdaq one year ago, you would be up about 50%.

The whole point of the permanent portfolio is wealth preservation, while maintaining some growth over time.  There is nothing stopping anyone from going 100% into stocks, but I don’t think it’s a good idea.  I wouldn’t be sleeping well at night.  And if we hit a bear market with some kind of crash, it is impossible to know when it begins.  Even if we have one big down day where stocks fall 5%, you have no idea if it is the start of a major crash, or if it is just a one-day blip.

Libertarians tend to hate U.S. government bonds and cash for obvious reasons.  The Federal Reserve is creating money out of thin air like crazy, thus causing the money we have to depreciate in value.  The national debt keeps going higher, and some think there will be some kind of default.

I don’t think we will see an outright default in U.S. bonds any time soon, but we will see defaults on a continuing basis by devaluing the money in which they are priced.  That is happening now.

So why would you buy a 30-year bond that pays just over 2% annual interest?  Why would you hold cash/ money market funds that may pay 0.01% interest?

For the bonds, you are buying bond funds.  I don’t recommend purchasing long-term bonds through the actual Treasury. You can buy mutual funds and ETFs that fulfill this role.  If we hit a major crash, the long-term interest rates could go back down to near zero.  There would be significant appreciation in long-term bonds that would help offset the likely fall in stocks.  It is even possible that interest rates could go negative, as we have seen in other countries and regions.

If interest rates rise, then the value of the bonds will go down.  But then you will get the benefit of higher interest rates on your cash and bonds in the future.

It is important to remember that you rebalance the permanent portfolio.  If any one asset class strays too far from the 25% mark, then you rebalance.  You lighten the load on the assets that have gone up, and you add to those that have gone down or have not performed as well.  In other words, you are buying low and selling high.

It is important to stay disciplined with the rebalancing.  It is probably best to do it on a certain date a couple of times per year.  Or, if you are saving money by adding to your investment portfolio, then take your additional contributions and add it to whatever asset class is the lowest percentage at that point.

It is possible that bonds could go into a long bear market with interest rates going up.  If that is the case, then your other pieces are likely to do well, particularly gold.

I completely understand why people are concerned about investing in bonds and cash equivalents.  But you have to take in context with the entire portfolio.

I have previously offered alternatives to the bond portion, such as paying down debt, including a home mortgage.  But even here, I would still recommend having at least 15% allocated towards bonds.

There is a final important point to be made in all of this.  In Harry Browne’s book, he differentiates between speculation money and money you cannot afford to lose.  With the money you cannot afford to lose, it should go into the permanent portfolio or something similar.  You can set aside “play money” to speculate with, where you won’t be devastated if it doesn’t work out.

So if you believe that stocks and/ or gold are going to go sky high (in dollar terms) over the next several years while watching bonds get destroyed with higher interest rates, then you should speculate as such.

You could take 75% of your money (as an example) and put it into the permanent portfolio.  Take the other 25% and speculate in gold, mining stocks, Bitcoin, tech stocks, or whatever your heart desires.  Just make sure that it will not be devastating if those speculations do not turn out well.  For more conservative investors, maybe you will want to put 95% of your financial assets into the permanent portfolio, while playing with the remaining 5%.

As I have stressed a lot lately, this “everything bubble” is going to end at some point, and it isn’t going to end well for most people.  There are very few people who have cleaned up with speculative investments who will be satisfied and go completely conservative before the trouble hits.

Most of the people who have been invested heavily in stocks will be invested heavily in stocks when the crash eventually comes.

And for the people who are ultra conservative with their money who have a big pile of cash in the bank, they will end up getting burned by inflation.  The permanent portfolio may be considered conservative, but it does a great job of protecting against a depreciating currency.  In fact, the returns tend to be higher during times of higher price inflation, which is really what you should want.

Any one investment by itself is risky.  This includes holding cash.  The permanent portfolio diversifies this risk, while still providing for growth.

We are in the “everything bubble”.  This doesn’t technically mean that everything is going up or is in a bubble, but there is no question that most asset classes are going up in price right now.  It also seems unsustainable, unless the Fed is determined to bring us to some form of hyperinflation.

Stocks are booming.  Housing is booming.  Bitcoin and other cryptocurrencies are booming.  NFTs are booming.  Bonds, to a certain extent, have already boomed, but were limited to booming farther by zero interest rates.

Consumer prices are starting to rise faster.  We are going to get the Fed’s magical 2% inflation good and hard.  I have seen reports of raw materials such as lumber going up in price by 2 to 3 times what it was last year.  This partially explains the higher price for housing in most areas.

The Fed’s balance sheet keeps exploding higher.  It is nearing $8 trillion.  Yet the Fed keeps adding approximately $120 billion per month to get to our 2% average inflation.  We don’t know the time period that this “average” is supposed to take place.

Even going by the government’s own statistics, price inflation has picked up.  This isn’t the metric that the Fed cites, but it is the metric many others look at.  The CPI for March was up 0.6% from the previous month.  If you annualize that, it is an annual inflation rate of 7.2%.

The median CPI was up only 0.2% for March, which tends to be more stable.

While high inflation doesn’t necessarily show in the CPI statistics, there is no question that price inflation is picking up.  You can probably see this in your everyday life.

What should we expect when the government is handing out money to people to not work, while also handing out money to most Americans, just because?  Where does everyone think this money is coming from?  Taxes haven’t been raised on the rich recently.  It is all coming from debt monetization.  The Fed is funding all of this so-called stimulus by creating money out of thin air.

With direct payments, people have money to spend.  Young people can easily set up a Robinhood account and buy Tesla, GameStop, or whatever the newest gambling fad is.  They can also buy Coinbase, a company that briefly became worth $100 billion because it facilitates trading a bunch of computer code.

A friend of mine sent me an article the other day referencing tulip mania.  My comment: At least with tulip mania you might get some pretty flowers out of the deal.  With cryptocurrencies and NFTs, you’ll be left with a bunch of computer code.

Investing or Gambling?

We are in a gambler’s paradise right now.  If you are an “investor”, it has been pretty hard not to make money over the past year.  Don’t tell that to the hedge fund that was heavily shorting GameStop though.

I am a relatively conservative investor compared to what is out there now.  I know others who are similar.  We almost look like chumps right now for not cleaning up in the casino.

If you are in the same boat, or if you have been fortunate enough to get some big wins over the last year, then I will suggest that this cannot go on forever.  It can’t go on forever unless we have some form of hyperinflation.  If that’s the case, then you’ll have other issues.  If we have hyperinflation, then you’ll want to own gold.  Or more importantly, you’ll want to own food, along with guns to protect your food.

We are in a massive boom right now.  I was shopping over the weekend and it almost seemed like Christmas time at the mall.  Maybe a lot of people are tired of being locked up for the last year (whether it was forced or voluntary).

The problem is that it is an artificial boom built on easy money from the Fed.  Some people are paying down debt.  Some people are spending money on necessities.  Some people are buying consumer goods that they don’t need.  Some people are investing, or more accurately, speculating.

People intuitively know that they don’t want a large chunk of money sitting in their checking account.  They know it will lose value (purchasing power) over time.  They also know that it will barely pay anything to have it in a savings account or a U.S. Treasury bill.  This essentially forces people to become speculators so as not to lose money to inflation.

This is why it makes sense to a certain degree for people to be bidding up the price of houses.  This is why people are trying to make a quick buck in the stock market and in cryptocurrencies.  But it is all a giant bubble waiting to be popped.

People look brilliant right now.  There are people bragging about 40% returns over the past year, and this is just for people who are buying index funds.  People in even more speculative investments are largely cleaning up.

I was in my 20s when the tech bubble blew up and then popped.  It was euphoria in the late 1990s, and then it came down hard in the early 2000s.  By the way, the Nasdaq peaked in that bubble at just over 5,000 in March 2020.  It now stands above 14,000, which is almost three times the bubble price 21 years ago.

Most people who make a lot of money from a speculative boom are not disciplined enough to take their money and run.  They don’t know when it will end, so they keep playing the game.  If there are a couple of down days, they don’t know if it is a temporary blip or if it is the start of a bear market.

I can guarantee you that the majority of people who are cleaning up right now will be severely hurt when the bear market arrives.  It will arrive fast and hard.  The people who have done the best will be the people who get hurt the most.

I know it seems like it will keep going, at least for a while.  But consider how quickly it can change.  Let’s say that inflation numbers come out showing that price inflation has spiked to near double digits (10%).

Would the Fed be so insane as to blow it off and say that it will continue with its policy of near-zero interest rates and asset purchases of $120 billion per month?  It’s possible that would happen.  It’s also just as possible that it would announce it has to stop inflating so as to control the price inflation before it goes completely out of control.

If the Fed suddenly announced a stop to its monetary inflation, it could turn the sentiment of investors (gamblers) right away.  It could lead to a major crash.  It could quickly expose the house of sand that this bubble is built upon.

The brilliant investors will become the suckers.  They will be the last to hold the bag.  The ones who got in late will really become the worst of the suckers.

There will be a few who really were brilliant who made a lot of money but were smart enough to head for the exits before everyone else.  There will not be many of those people.

Meanwhile, for the more conservative among us, we will have to be satisfied in knowing that we didn’t get sucked in too much and didn’t get burned too much.  Even if you experience a 10% to 20% reduction in your investment portfolio, you will start to look like the genius compared to all of the people who lost 50% or more in the casino.

I am afraid that down the road, Bitcoin will make libertarians look bad.  There are varying opinions about Bitcoin and cryptocurrencies even within the libertarian movement, but if and when Bitcoin fails, the enemies of liberty will be quoting the large segment who are currently promoting Bitcoin.

I am not so much talking about the investment or speculation side of Bitcoin.  If a libertarian, or anyone else, says that you should get into Bitcoin because it is going to $100,000 and you can make some quick money, that is one thing.  It is quite another to promote Bitcoin as an alternative form of money that will transform the world.

For hardcore libertarians who understand that there should be a complete free market with regard to money, the position is consistent that people should be free to use or not use Bitcoin or any other cryptocurrency or alternative currency as they want.

Many libertarians are sympathetic to Bitcoin just for the fact that it is a potential competing currency, and it calls attention to the harmful policies of the central bank.

In this sense, I don’t want to make enemies of the people who are hardcore Bitcoin supporters, as it is difficult enough in this world to find people who have some understanding of the Federal Reserve and actually oppose it.  However, I also don’t want to give a reason for all of the anti liberty people to be critical of the liberty movement when Bitcoin doesn’t fulfill its promises.

It’s Not Money

I recently listened to an episode of the Tom Woods Show.  He had on a guest talking about Bitcoin.  The guest kept insisting that Bitcoin is money.

This is completely untrue.  In the United States, U.S. dollars serve as a form of money and really nothing else.  Gold has a long history of being used as money and would probably be used if left to the free market, but gold really doesn’t serve as money now either.

To be money, it has to be widely accepted.  You can’t walk into Walmart and pay with Bitcoin.  You can’t buy airline tickets with Bitcoin.  You probably aren’t going to pay your car mechanic in Bitcoin.  Even if some of these places started to accept Bitcoin, they would be almost-instantly converting bitcoins received back into dollars.

There is also the continuing problem that you are supposed to pay capital gains taxes on any dollar gains made by trading Bitcoin.  This would make bookkeeping quite complicated for individuals and businesses trying to stay compliant with the law.

The guest on this episode of Tom Woods’ show wasn’t saying that Bitcoin had the potential to be money.  He wasn’t saying that Bitcoin was on its way to becoming money.  He was saying that it is money, which is wrong.

Tom Woods is a solid libertarian and very knowledgeable on many issues.  And while I don’t think my position differs in any way in terms of policy (let the free market decide), I didn’t agree with one of his points in this episode.

Tom said that most of the people out there criticizing Bitcoin are the same people who want to keep you under lockdown for the virus.  This is a faulty debating technique.  It also isn’t even true.

Sure, there are many pro lockdowners who criticize Bitcoin in the corporate media.  This is no surprise.  But there are also a lot of people who fully opposed the lockdowns who also are not proponents of Bitcoin.  Also, the people in the corporate media criticizing Bitcoin are often criticizing it for different reasons than some libertarians criticize it.  I have also seen several establishment-type figures promoting Bitcoin for investment purposes.

Peter Schiff is one such prominent person in the liberty movement who speaks against Bitcoin, but there are many others in the libertarian/ Austrian school camp who are not hyping up Bitcoin and are warning about it.

I think some libertarians are excited about Bitcoin now because it was a group of somewhat liberty-minded people who brought it about, and now it has become something.  It has made the ticker on CNBC, so it is in the big leagues of personal finance now.  And this all came about because of a bunch of techie nerds who were sympathetic to free market money.

The problem is that Bitcoin and the thousands of other cryptocurrencies are nothing.  They were invented on a computer screen.  They have taken off now as part of the everything bubble.  I have no doubt that there was a good chunk of people who took their free government money (stimulus checks) and bought Bitcoin or other cyrptocurrencies.  The Bitcoin bubble fits right in with the stock bubble.

The only thing that libertarians should be saying in terms of policy is that people should be free to choose whatever form of money they decide.  It should be left to the marketplace.

This doesn’t preclude anyone from predicting or speculating that Bitcoin will go higher in terms of dollars.  But that should be done outside of the realm of libertarianism.

It’s like a libertarian saying, “As a libertarian, I understand that price inflation will reach 10% by next year.”  This is incorrect.  You can say, “As a libertarian, I understand that the Fed’s monetary inflation will do harm to the economy by misallocating resources and potentially leading to higher prices.”

It would not be incorrect to say, “As a libertarian, I predict that price inflation will hit 10% next year.”  But in this case, identifying as a libertarian is unnecessary in order to predict price inflation, and if you get the prediction wrong, it doesn’t mean you are wrong about libertarianism.

If Bitcoin crashes in terms of U.S. dollars, I think libertarians are going to take a beating in terms of reputation.  I know that the powers-that-be will go after libertarians no matter what.  But in this case, they will have actual quotes and video footage of libertarians touting Bitcoin and how it will one day compete with (or replace) dollars.

If Bitcoin goes to zero, the libertarian position remains the same.  The marketplace should choose money.  Ultimately, there should be no central bank.

I am thankful that Peter Schiff has been a consistent critic of Bitcoin and cryptocurrencies in general.  Again, he’s not saying that anyone should be forbidden from trading it or holding it.  But he understands that Bitcoin lacks all of the good characteristics as a form of money.  That honor still belongs to gold.

On March 29, 2021, the Libertarian Part of Kentucky sent outthe following tweet.

“Are the vaccine passports going to be yellow, shaped like a star, and sewn on our clothes?”

The LP of Kentucky later sent out a clarification tweet saying, “If the Star of David tweet didn’t make it clear, The Libertarian Party of Kentucky is against #Vaccinespassports as they are a complete and total violation of human liberty.  This is the stuff of totalitarian dictatorships.”

In the original tweet, the LP of Kentucky is comparing the idea of vaccine passports to Hitler and Nazi Germany.  Instead of being tagged as Jewish, people would be tagged as unvaccinated.  And, of a course, unless you deny that the Holocaust happened, we know that millions of Jewish people were slaughtered in the early 1940s.

If there was one thing wrong with the tweet, it was that it got things a little backwards (which was later admitted).  The vaccine passports won’t be the equivalent of the Star of David. It will be people who are not vaccinated who will have the equivalent of the Star of David.  It will be the people not vaccinated and without “passports” who will be the mark.

This original tweet stirred up a big response.  There was a lot of backlash and support.

I think most of the people condemning the tweet are being hypocrites.  If someone says it is not an apt comparison, then that is one thing, and it can be debated.  The problem is that most of the critics are calling it insensitive or worse because it is comparing taking a vaccine to killing millions of Jews.

But that’s not what the tweet is doing, as I will discuss shortly.

Most of the people chiming in are hypocrites because they themselves use Hitler/ Nazi analogies for the things they hate.  At the very least, they don’t flip out and call it insensitive when others make an analogy for the people or things they hate.

Do you know how many times Trump was called a Nazi?  Did these same people speak out saying that it is insensitive or repulsive to compare Trump to Hitler or the Nazis because it compares Trump’s policies to killing millions of people?

I’m sure there may be a few consistent people out there, but not many who were attacking this tweet.

I can understand if a libertarian is criticizing it because he doesn’t want it coming from an organization with the “libertarian” name in it.  But even here, if they aren’t being hypocrites, I still think they are wrong.

When it comes down to it, most of the people criticizing this tweet aren’t criticizing it because it invoked the Holocaust.  They are criticizing it because they favor pushing the vaccines and are not opposed to the idea of vaccine passports.

It’s an Analogy

An analogy is an analogy.  Ayn Rand, call your office.  A is A.

An analogy doesn’t mean that we will literally have yellow-shaped stars sewn on our clothes if we don’t get vaccinated.  It also doesn’t mean that we will be marched off to concentration camps. It is an analogy, and it is a warning.

The comparison is also not referencing the same period of time as the actual Holocaust.  This is the point.  The Holocaust didn’t just happen.  The German officials didn’t just wake up one morning and decide they would march Jews off to concentration camps.  There was a groundwork laid down, and this tweet was a warning of groundwork being laid for something worse to come.  It doesn’t mean that all unvaccinated people will be taken to concentration camps and killed.  It was a warning against laying the groundwork for tyranny.

Hitler came to power in 1933.  The Nazi regime had to stir up a lot of propaganda and hate against the Jews.  There had to be a lot of groundwork laid down. Most of them were probably not even doing it with the ultimate intention of slaughtering millions of people.

So for all of the people who think that tweet is insensitive, repulsive, offensive, etc., I say you need to understand analogies.

Maybe it was over the top, but I am not even sure about that.  Again, it wasn’t comparing vaccine passports to the Holocaust. It was comparing vaccine passports to what was happening before the Holocaust.

And is it really so crazy that libertarians are making these comparisons after what has happened over the last year?  When people were talking about the possibility of vaccine passports less than a year ago, they were called crazy conspiracy theorists.  So what is supposed to be said now that vaccine passports are being publicly discussed and widely advocated by people with power?

In the last year, across America, people have been told to stay at home.  They have been told to wear masks and keep their distance from others.  Businesses deemed “non-essential” by government were forced to shut down.  People were told they couldn’t have weddings and funerals. People were told they shouldn’t see their loved ones on Thanksgiving and Christmas.  And now we’re being told that we might need a vaccine passport to just carry on with a normal life.

Tyranny has already arrived.  It doesn’t mean we have concentration camps and mass murder.  But if the above doesn’t qualify as some form of tyranny, I’m not sure what would.

What do the so-called libertarians who criticized this tweet think should be said at this point? Should we all be polite and say, “These vaccine passports may not be a good idea.  They could lead to an infringement on our civil liberties.”

There is a time and place for politeness, and I don’t think this is one of them.  It’s not to say that you shouldn’t be polite to others, but I don’t think we should be polite in the sense of holding back the truth because we are afraid to offend others.

I don’t know if using a Hitler/ Nazi analogy works in convincing others on the dangers of vaccine passports or anything else.  But I do know that libertarians who hold back the truth because they are afraid to offend others are mostly irrelevant and ineffective, at best.

Some people need to be figuratively hit over the head with a sledgehammer.  They need the bold truth thrown in their face.

I believe the LP of Kentucky did nothing wrong here (other than getting the original wording backwards), as they are fighting for liberty and trying to be bold about it. The tweet was not insensitive towards Jewish people or minimizing the Holocaust in any way.  It was a warning that we don’t even want to begin to go down any similar path in any way here.

This idea of vaccine passports is a dangerous idea and antithetical to liberty.  If only there were more people and organizations that would realize just how dangerous this whole idea is.

I think we are in a gigantic stock bubble.  I thought we were in a bubble in 2019 and 2020.  Now it is just ridiculous.

As Keynes supposedly said, “The market can remain irrational longer than you can remain solvent.” It was one of the wiser things that he said.

So I’m not telling anyone to short the market or short any particular stocks.  I am not telling anyone not to either. Shorting involves a high degree of speculation because of the issue of timing.  If you shorted the market in 2019 or 2020, it was too early. It may still be too early in April 2021.  We just don’t know.

But unless the Fed goes into some form of hyperinflation, then I believe a dramatic decline in stocks is nearly a sure thing.  It is just a question of when and how much.  It is also a question of how long it lasts, given the Fed’s penchant to try to bail everything out as soon as something happens.

The Fed’s balance sheet continues to go higher. It is near $7.7 trillion now. For context, it was just under $4 trillion in September 2019.  The big explosion happened in March, April and May of 2020.

At some point, something has to give.  I sound like a broken record repeating this, but I can’t emphasize it enough. We are either going to see massive price inflation or we are going to see a major recession, which will likely include a stock market crash.  Maybe we’ll see both.

I believe that price inflation is already a factor.  I believe it is probably beyond the 2% goal stated by the Fed, which the Fed now wants as an average.  It doesn’t say over what time period though.  I think for the basic necessities of life (housing, food, medical care), price inflation is already well exceeding 2% per annum.

Where it Counts

There is a major disconnect between the stock market and people’s actual living standards. This is one reason it should be apparent that stocks are in a bubble.

I know that people are enjoying their “free” government money, with unemployment checks and stimulus checks, but tens of millions of people are struggling right now, even with the government money.

Of course, this “free” money is not free.  The government is spending it by continuing to issue more debt. Most of the debt is being monetized.  In other words, the central bank is creating money out of thin air to pay for it.  This causes resources to be misallocated, and it causes prices to be higher than they otherwise would have been.

I think it is important to look at the stock market for a few reasons.  First, if there is a crash, it is going to mean that the whole economy goes down with it.  In a way, this could be seen as a positive, as it would liquidate malinvestment, increase savings, and clear the way for new prosperity.  There is a good reason it is called a correction.

The problem is that we have to worry about the reactions from the Fed and the government. Just as in 2008/ 2009, they do not allow the full correction to take place.  Instead, they pile onto the problems by trying to temporarily hide them through monetary inflation and massive spending.

The other major reason to look closely at the stock market is for your own personal protection. Most people who have any significant savings have money in the financial markets.  This is especially true of stocks.  Most people who have 401k plans and other retirement plans have some exposure to the stock market.

If you have significant exposure to stocks, then you should be taking steps to reduce that exposure if you haven’t already.  It is bad enough when a recession hits.  Many people are facing unemployment or reduced wages or increased hours.  It makes it that much harder if you watch your net worth get cut in half because you were heavy in stocks.

The other day, I heard a segment with J.L. Collins.  He is a big figure in the financial independence/ retire early (FIRE) community.  He has a lot of good advice.  The one major area where I disagree with him is that he preaches buying and holding index funds. In other words, he generally suggests someone with a somewhat-long time horizon invest heavily in stocks. He might even suggest a good portion in stocks for those who don’t necessarily have a long time horizon.

I heard much praise being heaped on J.L. Collins for his work and his advice.  Of course, he looks like a genius right now because we have had an unprecedented bull market in stocks.  I have to wonder how much praise would be going his way if U.S. stocks looked more like Japan, which has essentially had a bear market for over 3 decades.

If you had invested in the Japanese stock market in 1989, you would still be way down now, over 30 years later.  Would you consider 30 years to be a long enough time horizon for investing?  Are you supposed to wait 50 years for positive returns?

https://en.wikipedia.org/wiki/Nikkei_225#/media/File:Nikkei_225(1970-).svg

What if we are Japan in 1989?  What if U.S. stocks take a massive haircut of 50% or more?  Worse, what if they stay down for a decade or more?  How would that impact your plans for the future?

In the FIRE community, there are tens of thousands of people who take the advice of J.L. Collins and others like him to heart.  What if they are buying index funds now while it is like buying Japanese stock funds in 1989?

Many of these people have been experiencing 25 or 30 percent annual gains over the last few years. They will admit that they are extraordinary, but most of them still expect something around 8% in the long run from here on out.  They say that stocks always go up in the long run.  What if they’re wrong?

What if stocks go down by just 30% and stay there for a decade?  In other words, they perform better than Japan from 1989 to now.  That would still be quite devastating for a lot of people.  It would certainly disrupt a lot of plans for people who plan to retire early (or retire at all) and live financial independence by traveling and sitting on the beach somewhere without having to work.

The stock bubble is not your number one priority.  Your health is more important.  Your income is more important, which is hopefully not too reliant on stocks.

But if stocks make up a significant portion of your portfolio, you may want to ask yourself if you would be able to live with a scenario of a dramatic drop without having a return to these levels for decades.  If that scares you in any way, then you should remedy the situation by getting out of stocks.

I am not predicting a Japan-like scenario for U.S. stocks.  I actually think higher price inflation is more likely in the longer run.  But I can’t discount the possibility either.

Buying stock index funds is not diversification.  It is just diversification between different stocks.  But if the whole stock market is in a gigantic bubble, most of the stocks are going to fall in tandem.  You should prepare accordingly.

I believe that some of the people in the FIRE movement are going to lose credibility if and when stocks implode.  I believe most of these people have many great things to offer in terms of advice.  I just don’t think going mostly all-in on stocks is one of them.

“Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them…”  ~Frederick Douglass

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”  ~H. L. Mencken

Libertarians always seem to be warning about the coming tyranny.  Much like people in the prepper movement, libertarians are often called alarmists.  The opposition likes to make fun of them and say that they are still waiting for these dire predictions to come true.  Of course, libertarians can just as easily point out that the dire predictions of the climate change alarmists haven’t exactly materialized yet either.

In 2021, there are still libertarians who are warning of the globalists, the Great Reset, the New World Order, and many other similar things.  When it comes down to it, they are warning about coming tyranny.

Maybe it will get worse from here, but to warn of the coming tyranny seems a little late at this point.  The tyranny already arrived in 2020.

Let’s see.  We were told to stay in our homes, don’t travel, obey a curfew, wear face masks, distance from others, businesses deemed “non-essential” were shut down, and people were told not to see their friends and families, even at Thanksgiving and Christmas.  If that’s not tyranny, I hate to see what is. The tyranny is alive and well. Libertarians who previously warned of coming tyranny have been vindicated.  I don’t care if you think there is a terribly deadly virus out there.

Land of the Free

While political correctness, “wokeism”, class warfare, socialism, climate change hysteria, virus hysteria, and a host of other things have become really bad and are an ominous sign of things to come, all hope is not lost.

There is still a sense of rugged individualism in the United States of America that just doesn’t exist in most other places on the planet.  There is a spirit of entrepreneurialism, and it is generally seen as positive when someone has a rags-to-riches story, or a story of building up a company from scratch.

There are also a lot of Americans who do question the narrative sold by politicians and the media.  Say what you will about Trump and his loyal supporters, but Trump didn’t win the presidency in 2016 (and nearly 2020) with a bunch of sheep in the country.  Sure, the hardcore anti Trumpists will say his followers are a bunch of sheep for following him, but that means they are ignoring the corporate media and the conventional opinion.

The media told Americans in 2015 and 2016 that they were stupid if they dared to vote for Trump. They essentially laughed at anyone who considered voting for anyone other than Hillary Clinton.  Yet, over 62 million Americans in 2016 voted for Trump anyway (and far more in 2020).  Some may have voted for him just because the establishment and its media were telling them that they shouldn’t vote for him.

It is similar to what happened with Brexit in Great Britain.  But when you look at the extent of the lockdowns and other authoritarian measures in Britain, it is hard to say they value liberty anywhere near as much as Americans.  The British people seemed to free themselves from the European Union while being enslaved at home anyway.

There have been mass protests in several parts of Western Europe.  I have heard some people in the U.S. who generally oppose the lockdowns comment that you aren’t seeing that in America.  But that is because the lockdowns and other restrictions in the U.S. are far milder.  And the people in places like New York and California who don’t agree with the lockdowns (and even some hypocrites who do) are vacationing in places like Florida that is open.

If there were brutal lockdowns in the U.S. like there are in places like Germany and the U.K., then you better believe there would be mass protests in the United States. There would also be a lot of people ignoring the “laws” (which are mostly just dictates from mayors and governors), just as some are doing now anyway.

While the establishment and most leftists are trying to curtail free speech (“we have to stop hate speech” – they say), you can still get away with saying most things in America as long as you aren’t threatening violence.  I also look at other issues such as gun control and homeschooling, and the U.S. typically comes out near the top in terms of liberty.

Public Opinion Matters

Politicians will do what they can get away with.  But they are eventually limited by public opinion.  This is even true to a certain extent in the most authoritarian regimes.  There has to be a certain degree of consent by those being ruled.

In Canada, Trudeau is enacting authoritarian edicts, including forcing people into quarantine in government-designated facilities (one could call them internment camps) when returning to the country, even with a negative result on a virus test.

It is happening in Canada because the people are allowing it to happen.  They may not explicitly approve of these tyrannical policies, but they generally accept them.  There are some people who don’t accept them, but they are too much of a minority right now.  The majority of people accept them, so they happen.  What politician do you know will relinquish power, knowing they can get away with using the power?

When you think of politicians, don’t think they are all entirely evil.  They will generally abuse power when available, but their reputation matters to them.

Think about the people who make up the state (i.e., the government) and the people who work for the state.  Most of these people are not evil.  Think of the police, military, judges, people who work in alphabet agencies, and even politicians. They have families.  They have to go home and talk to their families.

“Welcome home, honey. Dinner will be ready soon. How was your day today?”

“Oh, it was fine. I had to march a few more people off to the concentration camps today to be executed because they were saying some things contrary to the regime.  Other than that, there wasn’t much happening at work.”

These conversations just don’t happen.  I mean, I don’t know what conversations took place with the Clintons, if they were ever eating a family dinner together.  But the reality is that most people are not pure evil.  And for the few who are, most people around them are not pure evil.  Again, I am not talking about the Clintons.

This is why, when the state is doing something evil, they have to hide it and make it sound good. They have to take your guns for public safety.  They have to lock down businesses to keep everyone safe from the virus.  They have to steal money (taxation) in order to build infrastructure and take care of the needy.  They have to start a war in order to spread democracy or stop terrorism or confiscate weapons of mass destruction.

This is why the state so heavily relies on propaganda.  If the state lies are exposed, the whole game falls apart.  Most people are good, so the statists have to rely on lies and propaganda to convince people to consent to their own enslavement.

This is why liberty is always a matter of education.  The more people you can convince that they are being lied to and that liberty is better (morally and pragmatically) than statism, the more liberty will flourish.