Ben Bernanke is in his second term as chairman of the Federal Reserve.  He was nominated for his first term by George W. Bush.  He was nominated for his second term by Barack Obama.  Some call this continuity.  I call this the difference between Bush and Obama.  Their choice is the same when it comes to picking the most powerful guy in the world, at least when it comes to economic policy.

Bernanke’s second term will end on January 31, 2014.  As I write this, that is less than 9 months away. Most people assume that Obama will nominate him again if Bernanke chooses to stay.  The bigger question is whether Bernanke is willing to accept the position for a third term.

His decision will tell me a lot about the man.  I am always curious about politicians and whether they are corrupt and lying or just ignorant.  Sometimes it is a combination of both.  I am really not sure with Bernanke.  I don’t know if he believes the things that are coming out of his mouth.

I think his decision about whether to retire from the Fed will tell us a lot.  If he stays on as chairman, that tells me he doesn’t really know how bad the economy is.  He doesn’t understand that his policies have been mostly wrong.  He doesn’t understand that his artificial stimulus is going to come crashing down at some point.

On the other hand, if Bernanke announces his retirement, that will be a signal that he knows more than what he says.  Or, stated differently, he knows differently from what he says.  Or, stated differently still, he is a liar.  It means he has been playing the American people for a bunch of ignorant fools.  It means he knows that there is serious economic trouble up ahead and he doesn’t want to be involved in it or blamed for it.  It means he is getting out while he can.

It will also be interesting to watch if Bernanke does announce that he is not seeking a third term.  This could spook the markets for more than one reason.  Some will see it as I do that he knows there is trouble ahead and he is getting away from it.  Others will see it as a lack of continuity.  Others will see it as a possibility that the new chairman might pull the rug out from under investors and not continue with the massive monetary inflation.  There will be fear that the next chairman will not fly Bernanke’s helicopter.

Perhaps a Bernanke retirement announcement will be the catalyst for a new downturn.  There is trouble ahead and oftentimes it just takes one event to trigger everything.

This will be an interesting story to follow as we get closer to the end of 2013.

There is no free market in healthcare.  Instead of healthcare, we can also use the word medicine, which perhaps takes on a slightly different meaning.  Regardless, medical care in the U.S. is not free.  It is not even close.  We like to talk about socialized healthcare in other countries.  But we already have some form of socialized medicine in the U.S.  Perhaps it is more accurate to call it fascist medicine.

Everything is highly regulated, both at the federal and state levels.  Insurance companies are highly regulated.  There are license laws.  There are prescription requirements for certain drugs.  There are strict patent laws.  There is Medicare and Medicaid.  There are a number of other subsidies.  The lists of rules and regulations are so vast, it is hard to know where to begin.  And let’s not forget about Bushcare, the massive boondoggle to further socialize drugs.  Yet, at the same time, it is a windfall to the pharmaceutical companies.

Things in the U.S. are a lot different than they were in the 1950’s.  There was not a completely free market in medicine in the 50’s, but it was far more free than it is today.  Yet sick people weren’t left on the streets to die.  In fact, medical care was relatively cheap.  And the service was far better, with many doctors making house calls.

Today, it is a mess.  And now we have Obamacare to contend with.  Prices of medical care and health insurance keep going up, at a far faster pace than price inflation.  Meanwhile, the quality of care does not seem to be improving much, except in those few areas with significant technological advancements.  In some ways, medical care is actually declining.

I still question whether Obamacare will ever be fully implemented.  It is a complete mess.  I’m not sure there is any single individual on earth who understands the whole thing.  It is a nightmare for businesses.  It will keep some small businesses from growing, in fear that they will have to abide by Obamacare when they hit a certain threshold.  I’m just not sure if we will see certain provisions revised or repealed, or if we will see all of Obamacare repealed.

While there is not much room for the free market to innovate, there is a little room.  The free market usually finds a way to slip through the cracks.  We have seen what the free market can do when government involvement is more limited, such as in the technology industry.  I still have hope that we will see new innovations in delivering quality healthcare.

I can imagine entrepreneurs getting creative to skirt around the government bureaucracy.  I have heard the idea of parking cruise ships offshore in international waters and taking people by smaller boats out to the cruise ship clinic for medical care.  Then the doctors can practice freely, at least until the U.S. government tries to regulate that.

I can envision more doctors working on a cash basis.  Perhaps they will file for insurance.  But I can envision some doctors not even accepting insurance.  They will just have a flat fee schedule for visits and certain procedures.  They will allocate resources based on money, instead of based on time or political connections.  Things run much better when they are allocated based on price.

I think we will also see a revolution in holistic medicine.  With the internet, there are far more people today who are in to healthier eating and taking vitamins and supplements.  People will look to live healthier in order to avoid the disastrous medical care system.  I can also envision more people looking to alternative medicine from what is offered in the mainstream.  There is an epidemic of chronic diseases and most doctors just want to treat the symptoms.  They tend not to look at the overall picture and it is not often that a doctor will recommend natural treatments such as diet, exercise, and supplements.

I really don’t know how everything is going to play out.  But it is going to be a continual competition between the government bureaucracy and the free market.  While modern medicine is mostly a disaster compared to where it should be, I do have hope that the market will make some great strides.  Maybe one day we can enjoy a boom in the medical industry similar to what we have enjoyed with technology.  Maybe we will actually see prices going down while quality is going up.

Violence cannot solve problems.  This works both ways.  Those who promote government violence (and really, most of what the government does involves violence or the threat of violence) to solve problems will never find the solutions they are looking for.  In turn, anyone who thinks violence against the government is an answer to keeping the government at bay is completely wrong.

There was an article recently that was linked by Drudge Report.  It cites a poll in which 29% of registered voters think that an armed revolution might be necessary in the the next few years in order to protect our liberties.  While I can see where the wording of the question with the word “might” could lead to more affirmative responses, it is still an unexpectedly high number.  I’m also guessing that most of those who agreed are probably more liberty minded, although it would not surprise me if some of them were simply Obama haters.  (I use the term Obama hater here to describe someone who hates Obama, but who does not hate, or even endorses, George W. Bush, despite the similarity in their policies.)

When it comes down to it, violence is not necessary to keep the government from infringing further on our liberties.  In fact, it would be completely counterproductive.

As I’ve written so often, government can only exist with the consent of the governed.  It is not that the general population has to endorse particular candidates or even like the way the government is being run.  But the general population must accept the system they are under.  Many people may gripe about certain politicians or about how poorly certain government programs are run, but most of these same people accept the system that they live under.

If a substantial number of people all of a sudden did not even support the system of government in place, then it would become more and more difficult for that government to exist.  It would quickly lose legitimacy.  If that were the case, violence would likely be completely unnecessary.

If there simply weren’t a large enough group of people denying their consent, then using violence would do no good.  It would make the large majority just despise the small minority that much more and would solidify the government’s grip.

I always like to say that you could take every single member of Congress, along with the president and his cabinet, and make them disappear and it would not really make much of a difference in the long run.  All of the new people coming in would simply take over from where the others left off.  The power would attract corrupt individuals who seek to control others.  Unless public opinion changed, the seats would be filled by replacement sleaze balls.

So, once again, it all comes back to education.  If you want liberty to grow and government to shrink, then you have to spread the word.  You have to convince others that it would be beneficial for them to see less government and greater liberty.  You have to educate others on your moral principles against the initiation of violence and how we should apply the same principles to government.

As more and more people learn this message of liberty, then the rest will take care of itself.  The power-hungry politicians will lack support and lack legitimacy.  These are just a few individuals amongst a nation of over 300 million people.  If 150 million people want radically smaller government, then it will happen.  It won’t even require an election.  In fact, if just 50 million people want radically smaller government and another 50 to 100 million don’t care that much, then that will still probably be enough to tip the scales.

We don’t need a majority, but we need a bigger minority than what we have right now.  Our numbers are growing, but we still have a long way to go.

I recently read an article by Tom Woods where he hit on a point that I have brought up in the past.  I think it deserves attention because it can really help in showing the contradictory beliefs of others.  It may help bring clarity to others.

In Woods’ article, he was discussing the Greenbackers.  Early in his piece, Woods points out their contradictory beliefs in regards to conspiracies.  He says the following:

“This naivete on the part of the Greenbackers is especially hard to believe since so many of them are 9/11 Truthers.  That means their position is this: we believe the U.S. government conspired to kill thousands of its own citizens in the interest of furthering its imperial ambitions, but we think they are the best people to trust with the creation of money.”

Of course, in the comments section, some guy says, “Did antiestablishmentarian Tom Woods just call the position of 911 truthers (the negation of the official establishment account) terminally naive?”  I don’t know if the person who made this comment was trying to be deceptive, just didn’t read carefully, or is truly dumb.

Woods was not at all arguing for or against a position of whether 9/11 was a conspiracy or an inside job.  He was simply pointing out the contradictory position of some Greenbackers.

While Woods’ article is specifically talking about Greenbackers, I think this contradiction holds with many, particularly on the radical left.  There are many on the left who just didn’t like George W. Bush and the way he did things.  They think the key is to have the “right” guy in office, such as Obama.  While this position is incomprehensible to me, it is not the group I am referring to in this discussion.

There are some on the more radical left who think the government was involved in 9/11.  There are others who just think that the government’s wars and drone bombings are immoral.  They consider this murder, and rightly so.  In this regard, many on the radical left find common ground with libertarians.

But there is a severe contradiction here, just as Woods pointed out with the Greenbackers.  Many on the left will accuse their own government of murdering innocent civilians, yet they want the very same people to provide free healthcare and better education.  Do you see a problem with this?

Can you imagine a Jewish person escaping a concentration camp in the early 1940’s in Germany and saying that he just wants Hitler to provide a social safety net with better healthcare for his citizens?

It doesn’t matter whether the leftist thinks that healthcare is a right.  It doesn’t matter if he thinks that the state should run the education system.  If he thinks that the politicians in charge are a bunch of murderers, why would he put them in charge of education and healthcare?  Does he think they all of a sudden turn into good people?

This is an absurd position and I believe it is important to point it out when you come across it.  While it may not teach a hardcore Democrat any economics, maybe it will at least let him see the major moral contradiction in his position.  Maybe it will show him that a little common sense needs to be followed.

The FOMC statement was released by the Federal Reserve today (May 1, 2013), drawing little attention from the media and the markets.

The Fed will keep buying $40 billion per month in mortgage-backed securities, which is nothing more than a bailout for the banks.  The Fed will also keep buying $45 billion per month in long-term treasuries.  This, coupled with reinvesting principal payments, will add about $85 billion per month to the monetary base.  If this stays on track, it will be about $1 trillion over the period of one year.

All of this debt buying by the Fed has kept interest rates down.  The 10-year yield continues to stay down, which has also kept mortgage rates low.  I expect this to hold for a while, either until the Fed changes its policy in a different direction or we start to see serious worries about future price inflation.

The votes for the current policy have not changed.  Just as what happened for the last statement, all FOMC voting members voted in favor of the statement, with the lone exception of Esther George.

It is interesting to compare the current FOMC statement with the prior FOMC statement.  They are very similar, with the main exception being one sentence in the fourth paragraph.  In the most current statement, there is the following addition:

“The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.”

So while we will likely get more of the same, the Fed may adjust its so-called quantitative easing program.  The Fed could reduce its buying if it sees higher inflation or a better economy returning.  Or, scarily enough, if the Fed sees more weakness in the economy, it could actually decide to increase its already astounding pace of creating new money out of thin air.

So while we are already in unprecedented territory, the Fed has actually left open the door for even greater monetary “stimulus”.  I really don’t think Bernanke and company know what they are doing.  This is new to everyone.  The Fed is really boxing itself into a corner.  We will know that imminent danger is ahead when price inflation starts ticking up.  The Fed will eventually have to choose between a severe recession and saving the dollar.

While I expect the Fed to eventually save the dollar and stop the digital printing presses, we can never be absolutely certain.

I have witnessed some people with really bad time management skills.  You could literally give them 48 hours in a day and they would still find a way to fill it up with useless or unproductive work.

Time management is an important skill for your life.  It is important for productivity, for happiness, and for your overall well being.  I have seen people with good time management skills and they may or may not be good with managing their money.  But virtually everyone I see with bad time management skills is terrible at managing their money.  So while good time management skills won’t guarantee that you will handle your money well, bad time management will almost certainly guarantee that you won’t handle your money well.

I am not sure it this is correlation or causation, but I tend to think that bad time management is at least partially a cause for bad money management.

I’ve known people who waste money because they don’t have the time (or don’t make the time) to step back and look at the big picture.  Imagine somebody who has a gym membership at $100 per month, who rarely uses the gym.  Over a period of a couple of years, it adds up to thousands of dollars of waste.  But the person just procrastinates saying that he will eventually cancel the membership or will eventually start using the gym.

There is a theory that people will always use the time they are allotted for a project.  This really is true to a large degree, at least when applied reasonably.  If you are given 30 minutes to write a 100 page book, there is no way it can be done.  But someone given 30 days to write a 100 page book might be just as likely to get it done as someone who is given one year, or even no time limit at all.

Sometimes a little bit of pressure in life is necessary.  If we have too much time to make a decision, it makes us indecisive.  Deadlines can be good.

You should try to structure your life in this manner where you can.  You should also give yourself deadlines when it comes to your money.  Let’s say you are planning to buy your first gold coin or you are planning to look at your first investment house.  Sometimes you need to give yourself an artificial deadline to do it.  If you wait too long, you may never take the first step.

It seems there is always a trade-off in life between time and money.  But as you get older, you will probably find you want more time.  Time is money.  But your time on this planet is also limited.  You can always get back lost money.  You can’t get back lost time.

CNBC ran an article (linked via Drudge) referring to the $2 trillion underground economy.  The article actually starts off saying, “The growing underground economy may be helping to prevent the real economy form sinking further, according to analysts.”

Americans typically don’t give a lot of thought to the underground economy.  Perhaps they may think of drugs or prostitution.  Perhaps they may think of other countries.  It is easy to imagine a marketplace in India where people are bartering for items or little shops on the side of the road.  But with mega-corporations like Apple and Walmart, Americans don’t think of their own country as having a huge underground economy.

Yet the underground economy is all around us.  Whenever someone babysits their neighbor’s kids, do you think most people would report that as income to the IRS?  What about mowing lawns or shoveling snow?  And this is just the tip of the iceberg.

The underground economy is undoubtedly much bigger today with the internet.  Just think of a website like Craigslist.  There are millions of people transacting, most of whom are not reporting sales or income to the various governments at all levels.

While many in the anti-Obama camp like to point out that unemployment statistics are false because they don’t include many people who have given up looking for work (and they are certainly correct in pointing this out), you could also argue the other way and say that there are some people who are working who are not reporting it.

I know some people who are collecting unemployment or disability and will not find a “regular” job because they don’t want their so-called benefits cut off.  It is actually a rational choice they are making (regardless of whether you think it is moral).  It isn’t even a matter of finding a job that pays more than your government checks.  You could be getting government checks that total $25,000 per year, yet be able to find a job for $30,000 per year.  But would it be worth it to work 40 hours per week just to make an extra $5,000 per year?

The person in this example can simply find some underground work on Craigslist.  He could help people move their furniture, mow lawns, babysit, shovel snow, paint houses, etc.  If he can earn $1,000 per month doing this, while still collecting $25,000 per year from his government checks, he will be making far more than if he worked a regular job.  He also gets to work far less and also avoid paying taxes on the money he does earn.

I suppose some people may look down on the underground economy with the above example.  But the problem in that example is not the underground economy.  The problem is our massive welfare state that encourages disability and unemployment.

I think in most cases, the underground economy is a positive thing.  The bad thing about it is the simple fact that it is so big because the government is so big.  Imagine if there were no income tax.  Imagine if small businesses did not have onerous regulations to follow.  Imagine if all acts between consenting adults were legal.  If we didn’t have big government, we wouldn’t have a big underground economy.

About a year before World War II ended, delegates from 44 nations met in Bretton Woods, New Hamphsire.  Out of this came the Bretton Woods system, which refers to the agreed upon monetary system.  It essentially was the beginning of the U.S. dollar becoming the world’s reserve currency.  While the Federal Reserve had been established in 1913 and Roosevelt outlawed most gold holdings in 1933, the Bretton Woods system still maintained an international gold standard.  Foreign governments could redeem U.S. dollars into gold.

In 1971, Richard Nixon formally terminated the U.S. dollar’s convertibility.  He officially closed the gold window.  This was the final nail in the coffin of the gold standard.  So amongst the libertarian and hard-money groups, Nixon takes most of the blame for ending the last vestiges of the gold standard.

While Nixon was certainly president at the time, and while he was the one who made the announcement, is it really Nixon who should take the blame?  I see Nixon as just another politician.  I am not sure that it would have mattered who had been president during that time.  You could have taken any statist president from the 20th century (which was most or all of them) and they probably would have done the exact same thing as Nixon.  It was inevitable that the system would fail.

The U.S. government and central bank were presiding over a fiat currency, while at the same time promising to redeem it for gold (at least for foreign governments).  In the 1960’s, the president of France, Charles de Gaulle, called the U.S. government’s bluff and began exchanging dollars for gold.  There was no possible way for this to last, unless the Fed had been willing to withdraw huge sums of money from the economy.  This would have meant massive deflation and massive cuts in government spending, something that was not going to happen.

By 1971, Nixon had no choice but to default.  If the U.S. had kept paying out gold, the vaults would have been emptied out.  There had simply been too much prior monetary inflation to redeem at the fixed price of $35 per ounce.  The whole Bretton Woods system was destined to fail from the start.

So while Nixon was the person who presided over the final closing of the gold window, it is hard to put the full blame on him.  Nixon was a statist and a crook to be sure.  But the system would have come to an end under almost any president, unless the president was willing to take a radical system of deflating the money supply and drastically cutting the budget.  Of course, even if that had been the case, then Bretton Woods still likely would have come to an end for different reasons.

This is really what happens with many things in politics.  One president gets the blame (or credit) for something that was inevitable anyway.  I suppose that the upcoming president (probably the next one) who has to make deep cuts to Social Security and Medicare will take a huge hit in popularity and will be blamed for pulling the rug out from under senior citizens.  But it is already baked into the cake.  The programs are simply unsustainable in their current form.  Something will have to change.  There is going to be some kind of a default.  This will probably start off as means testing (not giving Social Security payments to the rich) and raising the government’s retirement age.  Again, this is inevitable because of the system that was set up and because of the reckless politicians of the past who spent all of the surplus money.

It is always easy to make one guy out to be a villain.  He or she probably is a villain, just like Nixon was.  But it doesn’t solve anything when it is the whole system that is bad.  It wouldn’t have mattered who was president in 1971.  The Bretton Woods system was going to fail.  It won’t matter who the next president is.  The so-called entitlement programs are going to be cut.

There is currently a push in Congress to pass a bill that would allow states to collect sales taxes from online sales.  While it is not inevitable at this point that it will pass, it is looking more and more likely that something will get through.

There was a poll on Yahoo Finance that asked the following:

“The Senate is considering a bill that would allow states to collect taxes on online purchases.  Should there be an internet sales tax?”

As I write this, the answers were as follows:

10% answered, “Yes, states need the income.”
28% answered, “Yes, it levels the field for brick & mortar stores.”
43% answered, “No, zero tax is part of the e-commerce appeal.”
19% answered, “No, it will hurt small online businesses.”

Of course, this is not a scientific survey or sample.  But it does give us an idea of where the American people stand on this issue.  For the 10% who say that the states need the income, they are almost completely hopeless.  They are so far gone that I do not even try to speak to them.

For the 28% who are in favor of an internet sales tax because it would level the playing field, I have some hope for.  They are wrong, but their reasoning is a little bit understandable.  It is true that it is not exactly fair the way things are right now.  Online stores have an advantage over physical stores that have to collect sales taxes for everyone who buys.  But this is no reason to punish the online stores.  If they want to advocate fairness, then how about reducing or repealing sales taxes for the physical stores.

Having to pick just one answer, I would pick with the plurality here, although I also could concur that online taxes will hurt small online businesses.  But it is good to know that a majority at least voted against having the tax.  I suspect that a poll with a valid sample would show something similar.

Unfortunately, I don’t know if this will be enough to stop it.  It will depend on how strong of an opinion the slight majority holds.  If people are irate and start emailing and calling their so-called representatives, then it may actually stop it from passing.

If Congress does pass it, I have no doubt that Obama will sign it.  Obama and his fellow Democratic politicians like to talk about helping the poor, but most of them are simply lying.  They don’t care about the lower class or the middle class.  If they can pass another tax, they will do it.  (This isn’t to say that Republican politicians care about the poor.  It is just that their rhetoric about it is not as strong.)

One time a couple of years ago I attended a presentation given on the so-called Fair Tax (which I don’t agree with because it doesn’t do anything to cut government).  After the presentation, a few of us (mostly libertarians) were having a discussion with the guy that presented.  The subject of an internet sales tax came up.  The guy assumed that we would be in favor of it.  I am not sure why he was surprised, given that most of us were not keen on the idea of a national sales tax.

On the other hand, I think most of us were surprised that he so heavily favored a national sales tax.  I suppose I was a little naive in thinking that he at least somewhat favored free markets.  But that really clinched it for me that most hardcore Fair Tax supporters are really statists.  They don’t really want to see a big reduction in government.  They just want to try to make it more “fair” in how we are getting ripped off.

This is typical Republican conservatism.  Most Republicans will say that it is unfair that almost half of adult Americans do not pay any federal income tax.  Their solution is that everyone should have to pay something.  My solution and the solution of most libertarians is that nobody should have to pay federal income taxes at all.

In conclusion, I don’t know if the American people will be strong enough to oppose an internet sales tax.  The federal and state governments are desperate for more money right now and they are trying everything they can.  It is all going to come crashing down on them.  In the meantime, I hope that I can keep buying things online without paying sales taxes in most cases.