The latest FOMC statement came out on July 27, 2022.  As expected, the Federal Reserve is hiking its target federal funds rate by 75 basis points.  It now sits in the range of 2.25% to 2.5%.  It was a unanimous decision by the members.

Let’s say you had isolated each FOMC member since the previous meeting and prohibited them from seeing market expectations of the next rate change.  They were given all of the inflation and other economic data, but couldn’t listen to what the financial analysts were predicting for the next FOMC meeting.  What are the chances that they would have all agreed on a 75 basis point rate hike without talking to anyone about it first?

We have now seen back-to-back meetings of a 75 basis point rate hike.  So the Fed is getting aggressive in fighting the inflation that it created.  But short-term rates are still just above 2% while consumer price inflation stands above 9%. Enjoy that negative 7% return on your money.

In the Implementation Note, it states that the balance sheet will be reduced as previously planned by $47.5 billion per month.  In September, it will increase to $95 billion per month if the plan doesn’t change.

This may seem like a lot, but it is more like a blip when compared to the $5 trillion that has been added over the last 2 and a half years to the balance sheet.

You can also see in the Implementation Note that the Fed directs the payment of 2.4% interest to commercial banks on their reserves.  Since 2008, this is how the Fed has controlled its target federal funds rate.  Paying interest on reserves essentially sets a floor for the federal funds rate.

Because of this, another thing has changed since 2008.  The Fed doesn’t necessarily have to drain its balance sheet in order to raise its target rate, and it doesn’t need to raise its target rate to drain the balance sheet.  The two things still go hand-in-hand, but they aren’t as connected as they once were.

Paying interest on bank reserves may be a rip-off for us.  It may be a subsidy to the banks.  It may increase the deficit higher than it would have been otherwise.  But it does make it possible for the Fed to “raise rates” while not necessarily engaging in monetary deflation.

Still, even if the balance sheet remained the same, there will still eventually be a recession.  If you read Mises or anything about the Austrian Business Cycle Theory, it becomes apparent that just a slowdown in monetary inflation will eventually lead to a correction of the previous malinvestment.

Before the FOMC statement was released, there was approximately a 30 basis point difference between the 2-year yield and the 10-year yield.  The 2-year yield is higher, which doesn’t make much sense unless the bond investors are expecting a major downturn.

The gap between the 3-month yield and the 10-year yield has narrowed significantly over the last several weeks, and I expect an inversion there within a short period of time.

Jerome Powell said that he doesn’t think we are in a recession.  He also said it isn’t up to him to define when we are in a recession.  And he is probably technically correct on both points, even though we are getting the second straight quarter of negative GDP.

Powell is hoping for a “soft landing”.  He doesn’t want to admit that we are likely to have a recession.  I don’t think he’s a total idiot.  I think he knows that the Fed is in a bind.

Whether or not we are technically in a recession right now is actually not that relevant because this isn’t the big one.  The Fed would be happy if this were deemed a mild recession and that’s the end of it.

If we hit a major recession and stocks crash, what will the Fed do?  I’m really not sure, and I don’t think Jerome Powell is sure either.  They will try to continue to walk a tightrope, but the rope is getting thinner.

If consumer price inflation is still raging at 9% and we hit a big recession, it is going to be tough for the Fed to start lowering rates and printing money again.

Stocks have had a rough year so far, but I believe this is only the beginning.  The bond market and the gold market are telling us that we should be more worried about a major recession than higher price inflation in the future.  It’s not to say that the gold market and bond market have to be right, but I have more trust in the prediction ability of these two markets as compared to the stock market.

There are leaders, and there are followers.  There are also those who like to jump in front of a marching parade, realizing which way the crowd is going.

There were many COVID hysterics back in 2020.  In fact, it was a significant majority of Americans.  There were different degrees of hysterics, just as there are now.

Some people were very fearful because that’s what the media and the so-called experts told them to be.  There were some who might have been a little skeptical, but went along with all of the hysteria anyway.

There were some people who were skeptical, but they didn’t dare to speak up and speak out against the hysteria.  They didn’t want to be seen as uncaring.  They didn’t want to be called a grandma killer.

There were a few of us who did speak up from day one, or at least from early on.  Even if you have little knowledge of viruses and medicine in general, it shouldn’t be hard to be highly skeptical of what the establishment media and politicians are saying.

And for libertarians, it should have been easy to see in March 2020 that what was happening was wrong.  It doesn’t take any extensive study in the Non-Aggression Principle (NAP) to see that it is immoral, unlawful, and wrong to order people to stay at home and to shut down “non-essential” businesses.

Should We Forgive?

If you know (or know of) a person who was a COVID hysteric in 2020 and has now dramatically shifted their viewpoint, what is the proper response?

Should you:

1. Just pretend like the person was never a COVID hysteric and give them a pass?
2. Rub it in their face that they were so wrong a couple of years ago?

Perhaps there is a third option, which may be best for dealing with the average person.  You don’t rub it in this person’s face unless they were particularly obnoxious towards you back in the day of the hysterics.  You also don’t forget how the person bought into all of the lies.  You can somewhat give them a pass and let them join our side, but don’t seek their advice or leadership in the future on anything of importance.  They will just blow with the wind.

There is also some nuance to this whole thing.  I know (and know of) many people who were bad on COVID at the very start, including some libertarians.  Some got their head straight within a couple of months before it had become more acceptable to question the COVID “experts”.  As long as they weren’t too blatantly obnoxious during the first few months, it is easy to forgive them and move on.

If someone said in late March that they were not in favor of lockdowns but that they were isolating from others in order to do more research, then it is hard to come down on such a person.  It is a matter of humility.

In the case of politicians, I remind people that Ron DeSantis, the governor of Florida, did issue lockdown orders at the beginning of April 2020.  People were told to stay at home unless they were doing something deemed essential.  I emailed his office, and I was referring to him as Dictator DeSantis.

Little did I know that he would become one of the courageous people to take a stand against COVID hysteria.  The reason I am somewhat forgiving of DeSantis is that he took a stand before any other major politician had done so.  South Dakota was the only state that didn’t issue some kind of statewide lockdown or stay-at-home order.

Florida is a major state.  DeSantis took a major stand in the summer of 2020.  All statewide restrictions were lifted by September 2020.  Although DeSantis made a major mistake early on, I am willing to forgive it because he took a courageous stand against the establishment when almost nobody else was doing so.  For that reason, I will likely vote for him in the November election for governor.

I do not have a high opinion of Greg Abbott in Texas.  He shifted with the wind.  He only freed up Texans when it became popular (within conservative circles) to do so.  He was not courageous.  It is better to have someone like him than some leftist who maintained restrictions for a lot longer, but we have to remember how these people acted when it counted.

I was also reminded of this recently when I watched a recent video of Jesse Watters of Fox News interviewing Dr. Marty Makary, who is a regular on Fox News.  If you listen to them now, they sound rather reasonable when discussing COVID and vaccines.

But I won’t forget that Makary was a shill for the vaccines last year.  He wasn’t questioning their safety or their efficacy.  He was repeating the CDC talking points except he would deviate a little when he talked about natural immunity.  He didn’t sound like Fauci, but he wasn’t great on COVID, masks, and vaccines in 2020 and 2021.  And this is when it really mattered, as vaccine mandates (some of which are still in place) were being imposed.

I also won’t forget Jesse Watters.  I barely ever watch his show, but I remember seeing a segment in 2020.  He was interviewing a couple of young women who had been on spring break.  Watters was lecturing the young women for partying it up with their friends because they were being irresponsible and could bring the virus home to their parents and grandparents.  Watters was so smug and condescending.  He was wrong too.

In other words, both of these people were helping to spread the COVID hysteria, along with shilling for the vaccines.  Now they are taking on a different tune.  They are not leaders.  They are not courageous.  In fact, by writing this, I am rubbing it in their faces a little bit that they were cowards when it counted.  I won’t ever seek their advice or take seriously anything they have to say in the future.

There were some people who got it right from the very beginning.  Why not listen to those people?  Ron Paul got it right from the start.  He never bought into COVID hysteria.  In March and April 2020, he was saying that kids should be outside playing football.  As with many things, the world should have listened to Ron Paul.

In 2019, the yield curve inverted.  The 3-month Treasury yield exceeded the 10-year yield.  An inverted yield curve points to a recession ahead, typically 6 months to a year in to the future.

We got a recession in 2020 after the inverted yield curve – sort of.  It was a strange situation.  It wasn’t strange just in the fact that the world shut down over a virus.  It was strange economically.

In March 2020 when coronavirus hysteria set it, the Federal Reserve immediately started massively inflating.  It was already in full gear when most of the world shut down.

Just look at this from an economic perspective and how different this central bank business cycle played out.

When there is a recession, the Fed usually takes dramatic action after the recession has begun and is evident.  There was already major trouble brewing in 2008.  In fact, it is now said that the actual recession started in late 2007.  Yet, the financial crisis didn’t become evident until September 2008.  The Fed started creating massive amounts of money and lowering interest rates to near zero after the economy was already in a deep recession.

In March 2020, we didn’t see major signs of a recession at the present time.  We had an inverted yield curve in 2019, and the repo market blew up in 2019.  So the Fed was already starting to go back to an easy money policy.  But if you looked at the headlines on CNBC, there was no indication of recession at the beginning of March 2020.

So the Fed started inflating like crazy before a recession had fully come on, or at least before it was evident.  This, in itself, was somewhat unique.  The Fed usually reacts after we are already in a recession.  On top of this, the Fed’s reaction was dramatic.  The only thing comparable in modern times is the 2008 financial crisis, when the Fed also dramatically increased its balance sheet in a short period of time.

Because of coronavirus hysteria and the lockdowns, the fall in economic activity in March and April 2020 was not blamed on previous Fed policy.  It was blamed on a virus.  The smarter people blamed government policy (hysteria and lockdowns) instead of directly blaming a virus.

There is no question that closing down “non-essential” services had a major economic impact, but there is a feeling that the Fed was let off the hook.  We probably would have seen a recession in 2020 anyway.

Not only did the Fed have something to blame, but the people at the Fed also had an excuse to dramatically inflate, thus getting ahead of the recession.  There is no question that the Fed’s actions made the recession short and mild, at least on paper.  There is still a question of whether we actually had a recession in 2020 at all.

The stock market went down in March and part of April and then just absolutely boomed for the next year and a half.

The problem, of course, is that the Fed didn’t allow a correction to take place and set us up for an even bigger disaster, which we face today.

The Fed’s massive monetary inflation has finally caught up with us.  The Fed got away with massively inflating in 2008/ 2009 up until 2014.  Although there was a massive misallocation of resources happening, we never got significant consumer price inflation.

Things are different now.  The Fed is faced with price inflation of over 9%.  That is why the Fed has essentially been forced to tighten.  As the Fed slowly deflates its balance sheet and raises its target rate to fight the price inflation it created, the bubble is going to pop.

As I write this, the Treasury charts show the 2-year yield is well above the 10-year yield.  There is about a 20 basis point difference (0.2%).

The 10-year yield has stopped rising and has actually been falling lately.  Meanwhile, the 3-month yield is rising, and it will likely continue to rise as the Fed is forced to raise short-term interest rates.

The 6-month yield already exceeds the 10-year yield.  I believe it won’t be long before we see an inversion of the 3-month yield and the 10-year yield.

There is going to be a major recession later this year or in 2023.

I don’t think the Fed can do what it did in March 2020.  Even if we get another virus, or another variant, or some other event, it will be difficult for the Fed to massively inflate like it did in 2020, and even 2008.

If the Fed reversed course and massively inflated from here, then the CPI number would take off.  We would be facing massive double-digit price inflation that could beat out the 1970s.

As bad as the Fed officials are, I don’t think they want to risk hyperinflation and losing the U.S. dollar.  They would be jeopardizing their own power.

If there is monetary inflation, it will have to be more targeted.  Maybe they’ll bail out a few of their friends, but it won’t be on a massive scale as we have seen in the past.  I don’t think we are going to see trillions of dollars in bailouts and stimulus payments.  If I’m wrong on this, then you really better be prepared for tough times ahead.

The damage has already been done by past monetary inflation and artificially low interest rates.  It is just a question of how we deal with the damage now.

It is better to take some pain now in the form of a recession and popping of the Everything Bubble.  That is the least bad option.  It would be far worse if the Fed returns to monetary inflation and risks some form of hyperinflation.  Even a world with 25% annual price inflation is scary.

As of right now, it is best to prepare for a hard and deep recession ahead, knowing that the Fed does not have as much room to step in and “save” the economy from a recession.

I have to play a part in helping to remind everyone that there are still widespread vaccine mandates being imposed by the government.  Aside from mandates on government workers, including the military, there is still a ban on foreign nationals entering the United States who are not “vaccinated”.

There are many situations where a husband and wife live in, let’s say, Europe.  One is an American, and the other is some other nationality.  The American is able to travel to and from the United States.  The non-American spouse is unable to travel without being fully “vaccinated” for COVID.

It also means that non-vaccinated athletes who wish to compete in competitions in the United States are unable to do so at this time.

Novak Djokovic, one of the greatest tennis players of all time, will be unable to play at the upcoming U.S. Open if the rules don’t change.

This is one year after the CDC admitted that the vaccines neither prevent infection nor transmission.

In other words, the vaccines do absolutely nothing to stop the virus from spreading around society.  If anything, they are making it worse.  What kind of a vaccine would make no difference, at best, in stopping the spread of whatever it is intended to prevent?

And yet, this is the vaccine that has been pushed relentlessly with mandates that have cost hundreds of thousands of people (or millions) their jobs?

The best the vaccine pushers can say now is that getting the vaccine will make it less likely that you will get extremely ill.  I don’t even believe that.  That is the reason that they won’t show us any actual and real data.  We have no idea what percent of hospitalizations or deaths are in the vaccinated versus the non-vaccinated.

The last time they told us that number was about a year ago in 2021.  That is when they (the powers-that-be) were untruthful and said that something like 98% of hospitalizations were the “unvaccinated”.  Do you remember that this was supposed to be a pandemic of the unvaccinated?

But that statistic was fraudulent from the beginning.  They were counting the hospitalizations going back to January 2021 when they were at the worst point and almost nobody was vaccinated at that time.

Now we just don’t get any data on this, and I think we all know why.

Of course, there is also no consideration given to all-cause mortality, which is really what matters.  If the vaccine saves you from COVID but kills you because it causes some other problem in your body, then this should be known.

The Pfizer trials (see page 23) showed that more vaccinated people died than those in the placebo group.  This should have been the end of the story.  I can’t imagine what an honest Pfizer trial would have shown.

As a libertarian, I don’t think the FDA has the right to deny anyone a drug, vaccine, or treatment that they seek.  So I am not advocating that nobody should have been permitted to get a vaccine.  But the FDA should not have been recommending it, let alone actually trying to mandate it.

I heard Joe Biden say several times in 2021 that if you get vaccinated, then you can’t die.  You won’t get sick.

Biden is a liar, and his speechwriter is a liar.  First, to accurately convey what he meant, he should have said that if you get vaccinated, then you can’t die of COVID.  He just said that you can’t die.  I guess he wanted everyone to believe that they became immortal if they took the COVID vaccine.

Words matter.  But even if we give him the benefit of the doubt (there’s no reason to) and assume he meant that you can’t die of COVID if you get vaccinated, he is still a liar.  Anyone living in the real world can see this obviously isn’t true.

Anyway, even if you think that the vaccines are helpful at this point in preventing serious illness, the vaccine mandates still make no logical sense other than these people being evil.  The vaccines clearly do nothing to stop transmission or infection, so there is no more reason to mandate vaccines than there is to mandate eating vegetables.

I believe Kyrie Irving, a basketball player for the Brooklyn Nets, was important in pointing out the vaccine mandate absurdity in New York City, especially when he showed up at a game as a spectator but was prevented from playing.

Now we have a star tennis player who would like to play in a major tournament in the United States but is unable to do so because he won’t get jabbed.  There is some pressure building on this absurd policy, but I believe more people need to become aware of it.  I’m hoping Djokovic will bring everyone’s attention to the fact that these immoral mandates are still in place in the “land of the free”.

The June 2022 CPI numbers are in.  As it has become a trend, the numbers came in hotter than expected.  The year-over-year CPI now stands at 9.1%.

I can’t emphasize enough that this is bad news for investors.  Or to be clearer, it is bad for investors holding assets like stocks, real estate, and commodities.  If you are short stocks, it may not be bad news.

The price inflation itself represents pain for consumers.  Since we are all consumers, nearly everyone feels some of the pain.  I don’t think Jeff Bezos is bothered much by the rising prices, at least as a consumer.

This means that the Federal Reserve will have to continue to aggressively tighten.  The Fed’s balance sheet will likely go down, but very slowly.  Of course, that is the main part of the problem.

On interest rates, the Fed will be forced to continue tightening.  There is talk now of even a 100 basis point hike in its target rate at the next meeting.  It is likely there will be at least a 75 basis point hike.

This means that short-term yields will rise.  If longer-term yields stay about the same, then we will see a major flattening of the yield curve.  The 2-year yield has already been higher than the 10-year yield the last several days.  Now we are going to see the shorter-term yields such as the 3-month yield approach the 10-year yield.

This has recession written all over it.  Some people think we may already be in a mild recession right now.  That is quite possible, and it just may depend on your definition.  Maybe we will have two consecutive quarters of negative GDP.

The American middle class is already in a recession no matter what.  They are faced with 9% price inflation, and most Americans aren’t getting an annual raise of 9%.

Even if we are in an official recession right now, it doesn’t mean we can look forward to a recovery in the near future.  There are massive misallocations caused by many years of reckless government spending and money creation from the Fed.

It doesn’t start with COVID either.  This goes back to at least 2008 when the Fed started massively expanding its balance sheet.  There was only a brief period (approximately 2015 to 2019) of the last 14 years when the Fed wasn’t inflating.  Ironically, the Janet Yellen era (when she was chair of the Fed) was probably the least bad.

So here we are, probably near the peak of the Everything Bubble.  Stocks probably already peaked many months ago.  Real estate might be right near its peak in most places, although I can’t be certain that mortgage rates will continue to go higher.

Bonds have a lot of contradictory forces working.  The high price inflation indicates that yields should go higher to compensate investors.  But the yields are way below where the price inflation numbers are.  It might just mean that investors are taking what little yield they can get, even if it is negative in inflation-adjusted terms.

You may be better off taking a negative 6 percent “return” in the bond market in real terms rather than risking a 30 percent loss in stocks.

Even with the high inflation numbers, long-term bonds could still ultimately go down from here.  U.S. government bonds are seen as the ultimate safety.  If we are going into recession, long-term yields could fall even with the high inflation rate.

And then there are commodities.  The price of oil has come down from its peak, and there has been a little bit of relief at the gas pump.  Just as with bonds, there are forces working for and against higher oil prices.  A deep recession should certainly soften demand for energy.

Gold – and worse, mining stocks – have been crushed lately.  One would think that gold would be soaring to new highs with the crazy price inflation rates.  Unfortunately, there have been some forces working against it such as a supposedly big discovery of gold in Uganda.

Gold just hasn’t been part of the Everything Bubble.  I guess that makes it the “Most Everything Bubble”.  The mania has been nearly everywhere but precious metals.  Speculators wanted the big action in the crypto market.  They have gotten some big action lately, but probably not in the way they wanted.

Also, with gold, the dollar has been relatively strong against other major currencies.  The euro just hit parity with the U.S. dollar.  That says more about how bad the euro is than how good the dollar is.

Anyway, I will have more analysis in future posts about the euro and gold.

The gold market and the bond market are telling us that we should expect a severe recession.  There doesn’t seem to be great fear about high price inflation years into the future.  The market is taking the word of Jerome Powell that the Fed will continue to tighten.

It is already a tough economic environment out there, and it is only going to get tougher.

On April 25, 2022, I posted an article saying that “Elon Musk May Regret Buying Twitter”.

I noted that I was skeptical whether the deal would go through.  I was skeptical whether Musk could afford to buy Twitter or if he wanted to afford to buy Twitter.  There are a lot of leftist flakes who work at Twitter who would try to sabotage things from the inside.

I also warned that Musk might not know what’s coming his way.  The establishment would be gunning for him, and we saw how ruthless they were (and still are) with Donald Trump.

Now it is being reported that Musk is backing out of the deal.  Musk’s lawyer claims that Twitter failed to comply with the merger agreement.  It’s hard to say if this is the real reason.  Maybe Musk sees the recession coming (as he has said) and doesn’t want to overpay.  Maybe he sees the shots being fired his way by the establishment and doesn’t want to deal with it.

After I posted my article in April, someone commented as follows:

“This article did not age well and sounds retarded now that Musk did in fact buy Twitter.”

Aside from the commenter’s lack of eloquence and elegance, it was completely wrong.  I’m not sure that the person actually read my article carefully, as I had in fact written it after the two parties had tentatively agreed.

The commenter said my article did not age well when in fact it was this comment that didn’t age well.  I clearly said that it was not a done deal at that point.

Some people now think that Elon Musk was bluffing the whole time.  Maybe he was just calling attention to the ridiculous censorship of Twitter.  I think the ridiculous part is that they care much more about promoting their worldview than they do about actually making a profit for shareholders.

It’s fine if a company wants to discriminate against certain people.  It may not be fine with regard to the law, but it should be fine.  But it’s not as if Twitter advertised from the beginning that you weren’t allowed to express conservative, libertarian, or anti-establishment views.  The company still doesn’t say this.  It just says that they try to prevent the spread of misinformation (or is it disinformation?).

Alex Berenson was recently reinstated on Twitter because of a settlement from a lawsuit.  I don’t really agree with the lawsuit as a libertarian, but it is still something you can smile about in a sense.  Berenson was censored for spreading disinformation on COVID and vaccines, yet it was his comments that were pointing out the disinformation promoted by Fauci, Biden, the establishment media, and company.

Anyway, I can’t say for sure that Musk wasn’t bluffing from the start.  I had thought from the start that he might have been bluffing.  Then when they reached a preliminary deal, I figured he wasn’t bluffing after all.

If he had been bluffing completely, I don’t think he would have signed the original deal that has apparently now fallen through.  I do think he reconsidered because he realized what he was getting himself into.

Whether it was the money, the headache, or both, I don’t know for sure.  I think it is wise for Elon to back out.  Just like Trump, he has helped to expose the villains for what they are.  That’s really all that needs to be done.

If people want a platform that has relative free speech, they can find one.  And some people will continue to stay on Twitter and tiptoe around in order to reach more people.

As much as the oligarchs want to censor speech, I don’t think it is working very well.  I am surprised how much companies are willing to sacrifice customers and profits in order to promote a particular political agenda, but it will catch up with them.  And there are still plenty of places on the internet where you can speak and be heard.

In 2013, I wrote about the dollar store miracle.

In November 2019, I wrote the following:

“I have said that we will know that price inflation has gotten really bad when dollar stores no longer exist.  The same stores may still exist, but they will no longer be able to sell everything for a dollar.  Maybe we’ll see two-dollar stores with the same products.”

I recently had to go to the pet store, and there is a dollar store next to it.  I believe it is a Dollar Tree.  I needed a couple of things, so I went in and bought two items.  I found out quickly that they are no longer a dollar.

My two items cost $2.50 plus tax.  If I had bought those same two things in that same store a year ago, they would have been $2.00 plus tax.

So who cares about 25 cents or 50 cents (plus tax)?  I think every American who isn’t very wealthy should care.

That is 25 cents (plus tax) added to most products in the store.  If you had to pay 25 cents more for one product and that was it, it wouldn’t be a big deal.

That 25 cents is an additional 25 percent (plus the additional sales tax to the government) on nearly everything.

The woman in front of me had a cart full of stuff.  I was actually impressed with how much shopping she had done in such a small store.  But it wasn’t junk in her cart.  A lot of it was food and household necessities.  And the food wasn’t all junk food either.

Her total came to $107.  If you take out the tax, she spent $100.  If she had paid that amount a year ago, it would have been 100 items purchased (or around that, as there are a few things that are less expensive than a dollar).

In 2022 America, she only got 80 products instead of 100.  That is a major difference, especially given the short timeframe.

This shows how insidious inflation is for consumers.  And we are all consumers.

Just in case some leftist is reading this who has no clue about economics, I am not at all blaming the dollar store.  In fact, I find it incredible that they are able to sell some of these products for such a low price.

After watching the woman in front of me, I am thinking that I should buy more things at the dollar store when it makes sense.  It wouldn’t be my main grocery shopping, but there are things there that the kids will eat, especially in the way of snacks and desserts.

As a side note, the woman in front of me at the checkout was emptying her cart and offered that I go ahead of her since I only had a couple of things in my hand.  I wasn’t in a rush, so I declined and told her to go ahead.  I wasn’t planning to write a blog post about it, but I’m glad I waited.  Again, I was actually impressed by how much she was able to buy there.

I have written several times about the phenomenon of the dollar store.  I guess this means that consumer price inflation really has gotten bad.  It is still called a dollar store, but you can no longer walk in knowing that everything will cost a dollar.

When I wrote about it in November 2019, I didn’t necessarily imagine that it would happen in just a couple of years.  But a lot has happened since that time including many trillions of dollars having been created out of thin air.

To all of the dollar stores out there, I know it is not your fault that you couldn’t hold the dollar standard.  It is the fault of the central bankers, the politicians, and those who endorse their wicked policies.

Dollar stores are a great benefit to struggling Americans.  They actually help improve our lives while the central bankers and politicians are working hard to destroy our lives.

Hopefully it will still be a while before the products in the dollar store are priced at two dollars.

Happy 4^th of July!  You can also call it Independence Day or Secession Day.  For some reason, it is socially acceptable to celebrate independence, but not so much secession.

But that’s what independence was for the American colonies.  They declared their independence from the British crown. They declared their secession.

It was also the decentralization of government.  The British Empire got a little bit smaller, and it proceeded to get smaller over the following two centuries.

Unfortunately, centralization grew after that in America.  The first major step was abolishing the Articles of Confederation and replacing them with the Constitution.  The U.S. Constitution gave far more power to the national government.  But to be sure, we would be much better off today if we actually followed the Constitution as compared to what we’ve got.

Ultimately, our only way back to liberty is through decentralization.  We can’t try to impose our views on others except to be left alone.  If New Yorkers want strict gun control, maybe we have to let that happen.  If California wants socialist healthcare, they can have it as long as it isn’t imposed on the rest of us.

I think more people are realizing that this is the only way forward.  We have an extremely divided country.  With the internet and the decentralization of information, that divide has only grown.  You can see that with abortion.  You can see that with COVID.  You can see that in the culture.

The only peaceful way forward is some form of separation.  It doesn’t necessarily have to be full-blown secession.

Just as Roe v. Wade was recently overturned by the Supreme Court, we need this separation with everything.  Unfortunately, many people didn’t see that decision for what it was.  It decentralized government and gave greater control to state governments and the people.

We don’t need a national policy on abortion, just as we don’t need a national policy on drugs, or healthcare, or a minimum wage, or even taxes.  It would even be great if we didn’t have a national policy on foreign policy.

I believe libertarians need to start advocating more for this separation.  Instead of fighting to change national policies that are mostly bad, we need to fight to not have a national policy at all.  If we aren’t ready for state secession, we at least need policy secession.

Despite the chaos and totalitarianism we have seen within our shores in the last few years, I believe great progress has been made in exposing the establishment and their lies.

I think some form of separation is the next step.  We don’t need Trump to make America great again.  We need to make America free again.  And in order to do that, we need to make America decentralized again.

We can learn from July 4^th as a day of secession and decentralization.

At the start of June 2022, the 10-year yield was 2.85%.  It proceeded to go as high as 3.49% on June 14, 2022.  But then it fell again and closed at 2.88% on July 1, 2022.

This is quite a bit of volatility.  It isn’t Bitcoin volatility.  But for something that is seen as about the safest investment on earth if you don’t count the inflationary effects, it is quite volatile.

The 10-year yield was well below 2% at the start of the year.  So it has gone up a lot since then, at least in percentage terms.  This is a main reason why mortgage rates have also gone up significantly.  Mortgage rates have a high correlation with the 10-year yield, even though most mortgages are for a longer time period than 10 years.

If you look at the 3-month yield, it started the year at 0.08%.  That’s almost zero.  It is now up to 1.73%.  Short-term rates have gone up by a greater degree than long-term rates.  The big picture is that the yield curve has flattened a bit.  We already see the 2-year yield close to the 10-year yield, and this has in fact already inverted at times this year.

With the government reporting consumer price inflation above 8%, the Fed has been raising its target rate for overnight bank lending.  This helps to drive rates higher, but especially short-term rates as we have seen.

It seems to be an almost unanimous consensus that yields are going higher, including longer-term yields.  I can hear that opinion from Austro-libertarians, and I can hear that from a conventional analyst on CNBC.

There are exceptions, of course.

While I am not predicting that long-term yields won’t go higher, I will point out that this certainly doesn’t have to be the case.  In fact, there are just as strong reasons to argue that long-term yields may fall again, at least in the short run.

I am not talking about what rates will look like 5 or 10 years from now.  But over the course of this year and into next year, I think there is a good case that long-term yields may fall back down.

If we get a hard recession, I fully expect this to happen.  The wildcard in this is price inflation.

If the price inflation keeps coming in high and the Fed keeps tightening and raising its target rate, then long-term yields probably won’t come down much in the near term.  We may end up in a stagflation situation similar to the 1970s when interest rates were in the double digits.

But I can’t discount that the Fed will be “successful” in bringing down the CPI number to somewhere around 3%.  While there are a lot of distortions in the economy right now, I do think that many households are starting to cut back.  They almost have no choice, as wages have not kept up with prices.

It is quite reasonable to think that the rate of price increases will go down.  This will most certainly be true when it comes to asset prices (stocks and real estate).  But if the Fed keeps following through on tightening, we could see consumer prices slow down.  It doesn’t mean that these prices will fall, but the rate of increase will fall.

In a recessionary environment, investors look for safety.  Long-term government bonds are considered really safe to own, unless you are the Russian government.

The only problem with long-term bonds is that they are bad during price inflation (i.e., a depreciating currency).  You don’t want to get a yield of 3% while your money is depreciating at 8%.

But even here, it isn’t a question of whether your return beats inflation.  It is a question of whether you can get a better return elsewhere.  It is better to take a 5% loss in inflation-adjusted terms than to put money in stocks and lose 25%.

I have been a long-time advocate of putting a portion of your investments in the permanent portfolio for wealth protection.  This is why the portfolio is made up of 25% long-term government bonds.  If long-term rates fall from here, the value of the bonds will go up.  And if long-term rates fall from here, it probably means we are in a recession and stocks will not be doing well.

This is all guesswork.  This is why the permanent portfolio is there.  It doesn’t take away all of the uncertainty, but it is a hedge against disaster.

I see some people who have poured money into crypto who are taking a major hit.

But even the index fund investors in the stock market are taking a hit right now.  Some of them are buying more.  They reason that stocks are on sale, so to speak, as they have already declined quite a bit this year.  But just because you’ve lost 20 to 25 percent on your stock portfolio doesn’t mean you won’t lose another 20 to 25 percent in the next 6 months as well.

At some point, I will actually look at buying and holding some stocks aside from the permanent portfolio.  This is not that point.  I want them to be truly on sale.  I still think there is a lot of air in that bubble.