I have been seeing a lot of polls and surveys recently about Congress.  The American people strongly disapprove of the job Congress is doing.  You can count me as one of them.  Some polls show support in the single digits.  This is incredibly low and I take it as good news, but also nothing to get too excited about.

The most remarkable polls and surveys I have seen recently show a majority of Americans saying that they will not vote for their incumbent politician in the House of Representatives.  This is different than the approval ratings for Congress.  The low approval ratings for Congress can be explained in that people disapprove, but they may like their particular congresscritter or just have a bigger dislike for the opponent in an election.

But with a majority saying they will not vote to re-elect their own congressman, it simply means that some people are not being truthful in the survey, or perhaps that they always change their mind around election time.  Does this mean that campaign ads work?  To some degree, that is the case.

If a majority say they will not vote to re-elect their incumbent, then that means that the entire House of Representatives should be fired in the next election, or at least something close to it.  But we know how it goes.  The incumbent re-election rate will run somewhere around 90% or higher.  If it is at 80%, then perhaps there has been some marginal change in thinking.

So what is the reason for this contradiction?  It is much like the American people saying they want a balanced budget, but then in a separate survey not wanting any major government programs cut.  They are not mutually exclusive things.  They go hand in hand.

I think the main reason for these poll results is that there is still major partisanship with the two major parties.  Most people tend to side with either Republicans or Democrats.  So you could have a Republican who is frustrated with Congress and wants to vote out the incumbents, but when it comes down to it, he will keep his incumbent Republican politician over the Democratic opponent.

Even for people who are frustrated with both parties, there tends to be favoritism towards one or the other.  I even see this with many libertarians and it will usually depend on what issue they are most passionate about.  Those who are most passionate about foreign policy, civil liberties, and social issues will still tend to favor the Democrats.  Those concerned with taxation, spending, and over regulation will tend to side with the Republicans.  Libertarians realize that both sides betray their constituents and do not follow through on what they say, but there still tends to be a greater dislike for one side versus the other.

A secondary reason, although less so, is that people know that others won’t follow through.  If a Democrat or Republican thought that everyone else would follow through and vote against the incumbents, then maybe that person would do the same.  But they know, when it comes down to it, most people will vote along party lines.  A Republican or Democrat isn’t going to make a point by voting against the incumbent and risking that the other side wins.

So while these polls and surveys seem contradictory and irrational, and perhaps to some extent are, there is also reasoning behind it.  Unfortunately, most people are still stuck in the party mindset.  I think this is slowly changing, but it will take some more time before a large percentage of the population really does dislike both parties almost equally.  Fortunately, the politicians these days are doing everything in their power to help people not like them.

With the whole issue of raising the debt ceiling being in the news again, we hear stories about how the U.S. government could default.  Of course, in terms of defaulting on U.S. government debt, it is completely false.  The interest on the debt is “only” a few hundred billion dollars per year right now.  The federal government collects well in excess of $2 trillion per year, maybe soon to exceed $3 trillion. So the government may have to break some promises, but it can easily pay on the debt.

But the issue of defaulting on the debt brings some interesting discussion with it.  From a purist libertarian standpoint, the government should default on its debt.  The only way to pay off the debt is by using force or the threat of force to extract money form people.  The contracts made between the borrower (the U.S. government) and the lenders (investors, foreign central banks, etc.) are not really valid contracts.  They are not valid because one side is promising to pay back the other by forcing a third party (American taxpayers) to make the payments.

But how would a default work?  Would someone just hit the delete key and erase more than $16 trillion in debt?

My suggestion is that the U.S. federal government should essentially file for bankruptcy and wipe out its debts.  However, it is not just a matter of simply erasing the debts and being done.  The bankruptcy should be similar to the procedures of when a company files for bankruptcy.

When a company files for bankruptcy, it doesn’t just shut down, with everyone going home and all investors getting nothing.  In most cases, the company still owns assets and has some things of value.  The company can just no longer keep up with its bills, including its debts.  It is a cash flow problem.

When a company goes bankrupt, the typical procedure is for the assets of the company to be sold off.  This may all be sold in one piece or various parts sold separately.  With the sale of assets, the money can then be used to pay off bondholders and others who are owed money.  It is usually the stockholders who are the last to get paid anything.

With the government, the same should be done.  The U.S. government owns massive amounts of land, particularly in the west, and it isn’t all just desert.  Much of this land is quite valuable, including land with oil in it.  The government should sell off its assets.  While land is by far the most valuable, there are also numerous museums, monuments, and other buildings.  It is hard to say how much all of this would be worth.  There is no way to know unless it is auctioned off in the free market.  Perhaps it might be better to auction it off over the period of a few years so as to get a reasonable price.  But with all of the land owned by the government, the amount would certainly be in the trillions of dollars.

This was actually a suggestion by Libertarian candidate Harry Browne when he ran for president.  I don’t remember him suggesting a default on the debt, but he advocated that land be sold so that Medicare and Social Security recipients could be paid off and the programs could be ended.

Of course, the big question would be, who gets paid first.  This is sometimes an issue when companies file for bankruptcy and it would certainly be an issue with a U.S. government bankruptcy.  There are all of the holders of government treasuries and bonds.  But there are also Medicare, Social Security, and government pensions.  Given who has the voting power and the numbers, my guess is that Social Security and Medicare recipients would be at least partially taken care of first.

While I don’t think this whole bankruptcy plan is likely to happen, I can foresee more advocates of a plan to sell some government land in the future.  The budget is only going to get tighter, especially once the Fed has to cut back on its purchases of government debt.  When things become more desperate in the years ahead, more people will be open to the idea of selling government assets to make up some of the shortfall.

I wouldn’t mind if Yellowstone is sold to private investors.  The owners would probably take better care of it than it is now.  And if all of these national forests were sold off, maybe we would stop seeing millions of acres burn in fires.  The idea of the government selling land and other assets should be viewed as a win-win situation for libertarians, assuming the proceeds aren’t used to start another war.

There have been numerous stories about the major computer glitches with the Obamacare website.  Some are claiming that it is because there are far greater numbers of people going to the site than were expected, although we don’t really know that this is the case.  But even if it were true, did they really not expect so much traffic in a country of over 300 million people where everyone is essentially forced to buy health insurance or pay a major penalty?

(As a side note, I don’t mind referring to the legislation as “Obamacare”.  Obama said in one of the debates last year that he accepted it and wasn’t offended by the term.  I would still use the term, but Democrats shouldn’t complain about the term if Obama himself accepted it.)

So all of the excuses are flowing out from the Obama administration, some of the media, and many Democrats.  But it is also interesting that a lot of Democrats are getting more quiet about Obamacare, as some people will never admit that it is a disaster, but don’t know what to say to defend the program at this point.  There are always excuses and some of them may be partially true.  Some people say that heads should roll.  Some people are wondering who was in charge of the programming and the website.  Unfortunately, this all misses the point.

Obamacare is a classic government program.  It simply doesn’t work and it won’t accomplish its stated goals.  When you use the initiation of force in order to solve problems, you will usually end up with more problems.  It will lead to unintended consequences.  It often leads to the exact opposite of what it was supposed to accomplish.  In other words, instead of cheaper and better medical care, we will likely end up with far more expensive medical care and far worse medical care.

Compare this government program to what would occur in a free, voluntary market.  A company releasing a new product is not going to release a product that doesn’t work or doesn’t come close to functioning as it should.  Actually, it is possible that a company could release a terrible product, but that company will quickly find itself out of business, or at least pulling that particular product off the market.  If a person or business fails in its release of a product, then it is the owner or owners who suffer the loss, along with anyone who lent them money.  But the losses are incurred only by those who voluntary invested in the product in the first place.

With Obamacare, all of the taxpayers lose.  It was tax money (or borrowed money) that paid for the systems to be implemented.  When the website doesn’t work as it should, it is not as if the taxpayers get their money refunded.

Nancy Pelosi said we needed to pass the healthcare legislation in order to find out what was in it.  I still have no idea what is in it and I’m not sure that anyone does.  But it didn’t take a genius to figure out that the legislation would be a total disaster.  We are finding out a little bit more about what is in it and it seems to get worse every day.

I am still not convinced that Obamacare will ever be fully implemented.  Health insurance premiums are going even higher now and people cannot figure out how the whole thing works.  On top of this, the people who are trying to sign up are mostly not able to because of the website.

It will not be the Republicans who defeat Obamacare.  It will be Obamacare that defeats Obamacare.

In 2004, Harry Browne wrote an article about Ronald Reagan, just following Reagan’s death.  It is an interesting read.  If you are a Reagan conservative, you will probably hate it.

Browne admits in the article that he was somewhat sympathetic towards Reagan at the beginning of his presidency.  All of the proponents of big government were bashing Reagan to no end, and basically claiming that horrible things would happen.  It is hard not to cheer for a guy when your worst enemies are cheering against him.

As Browne states, the fantasy land of libertarians quickly came to an end, whether they realized it or not.  It became evident within a short amount of time, for those really paying attention, that Reagan would not be a great friend to the cause of liberty.  On the bad things he said he was going to do, he mostly followed through.  This would include social issues, foreign policy, and other issues of civil liberties.

On the good things Reagan talked about, he didn’t follow through, at least for the most part.  He did drastically cut income tax rates, which is probably one of the few really good things that he did.  Unfortunately, he also eliminated a lot of deductions and increased taxes at other times.

In terms of spending, Reagan was a total disaster.  The budget grew by about two-thirds during his presidency and the total debt increased by almost $2 trillion.  The Reagan years had the biggest deficits by far up to that point in history.  Of course, the last 6 years has dwarfed the Reagan deficits, incredible as it may be.

Looking back on Reagan, I think about the best thing that a libertarian could say about him was that he at least didn’t start any major wars, including a nuclear war.  He wasn’t good on foreign policy, as he did aggress against several small countries.  But in comparison to the Bush/ Obama years, Reagan was virtually a pacifist.

One thing about Reagan is that he sure knew how to give a speech.  He was brilliant with his rhetoric.  His digs against big government could have brought any libertarian to tears.  Unfortunately, his policies did not match his talk.

As I heard Harry Browne say, if only Reagan had actually done half of what the Democrats had accused of him.  The Democrats constantly said that Reagan was going to cut Social Security, pull welfare away, and dramatically shrink government services.  So there was just as much rhetoric coming from the other side.

Maybe one day we will get someone who is as articulate and persuasive as Reagan was, while also following through on a pro-liberty philosophy.  If the Democrats are going to make accusations of cutting government, I would like to see an actual reduction in the size and scope of government.

Obama has officially nominated Janet Yellen to be the next chair of the Federal Reserve.  It was widely expected after Lawrence Summers had withdrawn his name from consideration.  It is highly likely she will be confirmed by the Senate.  Of course, Obama and much of the media are fixated on the fact that she will be the first woman to head up the Fed.

At the official announcement, Yellen spoke and said, “Too many Americans still can’t find a job and worry how they’ll pay their bills and provide for their families.  The Federal Reserve can help if it does its job effectively.”

Yellen is really the perfect Obama nominee.  The two share the same philosophy.  They believe that central planners best know how to run other people’s lives.  They believe that they and their friends are the best ones to rule.  They believe that people should not be left free to make their own decisions in life.

So Yellen thinks that the Fed can help families find a job and pay their bills.  This is the arrogance that comes from these elitists.  Just like Obama, I’m not sure if she is an outright liar or if she is so full of herself that she can’t see her own stupidity.  If the Fed stopped creating bubbles, handing bailouts to Wall Street, and misallocating resources on a grand scale, then maybe families would find it easier to find a job and pay their bills.  But Yellen and company think they know best.

After the rumor broke about Yellen on Tuesday night, stock futures went up a bit on the news.  It didn’t last too long though and stocks ended Wednesday on a mixed note for the day.

Can it really get any worse?  Bernanke has overseen a Fed that has more than quadrupled the monetary base in the last 5 years and is currently creating about $85 billion per month out of thin air.  Of course, just when I think a president can’t get any worse, another president comes along to try to prove me wrong.  I suppose that might happen with the new Fed chair.

I am not sure that the particular individual who heads the Fed is really all that significant.  I suppose it is more symbolic than anything.  Just like the president, it is a position that is as much a figurehead than anything.  The particular individual in charge, whether we are talking about the president or the Fed chair, will not go against the establishment in any significant way.

I am still not sure what happened with Paul Volcker as Fed chair in the late 1970s and early 1980s.  He did what needed to be done to save the dollar and essentially save the American economy.  He stopped the monetary inflation, allowed a much needed recession (or recessions), and let the malinvestment flush itself out.  I don’t know if Volcker was really smart and made this decision on his own.  I am more inclined to believe that he and others received pressure from foreigners, warning that they would dump the U.S. dollar if the monetary inflation did not stop.  Regardless of the story behind it, the Volcker Fed did the right thing at that time.

My only hope is that when things get really bad in the economy this time around, Yellen will still be considered in charge.  Perhaps we should be scared of her policies, but at least her Keynesian/ big government philosophy can take the blame for it.

For the few articles I read about Yellen’s nomination, I glanced at the comments below each story.  These were not stories from libertarian blogs or anything like that.  Yet, most of the comments were bashing Yellen and Obama and criticizing her eagerness to print more money.

So while the nomination of Yellen is bad news, even though expected, we should not despair.  There is a greater focus on the Fed now than ever before and more and more people every day are figuring out that they are getting ripped off by the Fed and its disastrous policies.

There was an article linked via Drudge about the U.S. Treasury having to pay off a record of over $7.5 trillion in maturing securities in fiscal year 2013 (October 2012 to September 2013).  Meanwhile, the article also states, the Treasury issued over $8.3 trillion in new securities during that same period.  The difference essentially makes up the accumulation of additional debt for the year.

Most Americans know little about how the Fed works and how the interchange works with the Treasury.  I find even many people knowledgeable about the Fed who do not really understand what happens.

The Fed increases the monetary base (creates inflation) by buying assets.  They essentially make up digits out of thin air.  The Fed can buy just about anything.  Prior to 2008, the Fed bought only U.S. government debt.  Since then, it has also bought mortgage securities, essentially bailing out banks with bad assets.

When the Fed buys, let’s say, a 5 year Treasury note, then the Fed generally holds this asset for the full 5 years.  Meanwhile, the Treasury (the federal government) pays interest on this to the Fed.  After the 5 years is up, the Treasury note reaches maturity and the Treasury pays back the principal value of the note.

As a side note, the Fed pays back the interest it collects to the government, minus its operating expenses.  In other words, it is all an accounting game.

If the Fed held a Treasury note worth $1 billion, then allowing the note to mature and not taking any other action would actually be deflationary.  The Treasury would pay back the $1 billion and those digits would disappear, just the reverse of how the Fed created the digits 5 years before.

But in most cases, the debt will be rolled over.  In other words, the Fed would simply buy another 5 year note worth $1 billion.  The only thing that might be different is the interest rate.

So when the Fed is buying a lot of Treasury bills with a short maturity (a year of less), then this means that it will be rolling over a lot of debt.  This is why the figure of over $8.3 trillion is so large.

If you read one of the FOMC statements that comes out about every 6 weeks, you will see it stated that the Fed will continue to roll over maturing assets.  It says, “The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.”

When we hear about the Fed buying $85 billion per month in its “quantitative easing”, this is a net amount above the rolling over of maturing securities.  So the Fed is actually buying far more than $85 billion per month in assets.  But much of this is just replacing what is expiring.  The $85 billion is the net amount being added to the Fed’s balance sheet.

With this in mind, the Fed must essentially continue to buy government debt forever, as long as it is in existence.  The Fed is not going to pursue a highly deflationary policy of allowing maturing debt to expire without rolling it over.  We would be lucky at this point to see a policy where it simply renews maturing debt and doesn’t buy any additional assets.  This would mean a stable monetary base, which would also mean a huge recession.  I don’t think the Fed will pursue this policy for a long period of time until it is faced with the consequence of high price inflation.

I just recently wrote a post about the 100th anniversary of the federal income tax taking effect.  I pointed out what a disastrous year 1913 was for liberty.  Aside from the institution of the income tax, we also saw the formation of the Federal Reserve and passage of the 17th Amendment to the U.S. Constitution?

If you ask the average person on the street, they probably will have no clue what the 17th Amendment is about.  If you explained that it changed the way that U.S. senators were elected, then most people would probably admit that they didn’t know there had ever been another method of electing senators.

Unfortunately, this amendment did a lot of damage to the preservation of liberty under the disguise of democracy.  Of course, students of liberty understand that democracy and liberty are not the same thing and they don’t go hand-in-hand.  In fact, they can often be opposites, as democracy is quite anti-liberty for those who are in the minority.

I have my criticisms of the U.S. Constitution.  At the time, it overtook the Articles of Confederation.  The Constitution centralized power and in many ways led to the behemoth central state that we have today.  But at the same time, the Constitution did have some semblance of logic and rationale to it and there are some mechanisms that at least seemed to attempt to preserve some liberty.

We all know about checks and balances.  But this isn’t just the three branches of government keeping tabs on each other.  This is the federalist system of having a confederation of states.  At one time, it was common to use “United States of America” as plural instead of singular.  For example, someone might say that “the United States of America are south of Canada”, instead of “the United States of America is south of Canada”.

Part of the overall system meant having states keep a check on federal power.  The Constitution permitted the federal government to collect taxes by apportioning it to the states.  In other words, states could be taxed in proportion to their population.  This is why an amendment had to be passed to allow for a direct income tax.

The U.S. senators were also a vital part of this system in keeping the federal government in check.  Senators were elected by the state legislatures.  Therefore, senators served the interests of their own state and their state legislature.  It had much less to do with serving their party and serving special interest groups.

If the 17th Amendment had never passed and senators were still chosen by the state legislatures, it is hard to say what things would look like.  I don’t pretend that we would have anything close to a perfect world, but perhaps the federal government would have been more limited in its overall growth.  It is unlikely that something like Obamacare would have passed if senators were serving the interests of their home state.

Ironically, proponents of the 17th Amendment will say that it is more democratic and that the people have more of a say.  But in reality, it is actually almost the opposite.  Was a majority clamoring for Obamacare?  While I am no fan of democracy, I oftentimes think we would be better off if things actually were more democratic.  The politicians only listen to their constituents if the calls are for bigger government.  Occasionally they will listen due to overwhelming public pressure, but even that isn’t always the case.

Instead, politicians are listening to the lobbyists and special interest groups.  They are usually passing laws that people aren’t clamoring for.  Worse, they are passing laws that many people, sometimes even a majority, are firmly against.  They are not serving the interests of the people at all.

At this point, I don’t think we should worry about repealing the 17th Amendment.  If enough people understood the importance of it, then it wouldn’t need to be done at that point anyway.  At this point, we just need more people to withdraw their consent from an overbearing federal government that resembles nothing like it did 100 years ago, at least in terms of size and power.

The United States of America has now had an income tax for over 100 years.  The official anniversary was on October 4, 2013.  The income tax began in 1913 after the passage of the 16th Amendment to the Constitution.

1913 was an ominous year for liberty.  Not only did it mark the beginning of a permanent federal income tax, it also featured at least two other major things.  Right after the 16th Amendment was passed, another anti-liberty amendment passed.  The 17th Amendment changed the way that U.S. senators were chosen.  It went from a system of senators being chosen by the state legislatures to a system of direct election as we still have today.  Perhaps I will write a future post on why this was such a bad thing for the cause of liberty.  The third major thing in 1913 was the formation of the Federal Reserve.

Just these three things alone guarantees Woodrow Wilson as one of the worst presidents of all time, at least from a libertarian perspective.  And that is really bad considering that most presidents were bad in some way.

There were a few articles on the 100th anniversary of the beginning of the permanent income tax.  Drudge linked to one of them.

I think it would be an interesting poll or survey to find out how many Americans know how old the federal income tax is.  In fact, what percentage of Americans even know that there was once a time when there was no income tax?

I will occasionally mention to people in conversation that there used to be no income tax.  A typical response I get is that it was a much different world 100 years ago.  I usually respond in agreement saying we sure do live in a different world today.  There was actually a time in American history when people were free to keep most of the money that they earned.

Of course we need an income tax or some other massive form of taxation if we expect the federal government to be involved in virtually everything, from empire building, to retirement, to medical care, to just about anything else you can think of.

The difference between now and 100 years ago is that the federal government was very small and almost insignificant in the daily lives of most people.  There were tariffs and excise taxes, but overall amounts were a tiny fraction compared to what we are forced to pay today.  In addition, we get a lot of the government we pay for today.  In 1913, there was nothing in comparison when it came to regulations and overall government involvement.  It’s not to say that the federal government did not cause problems and misallocate resources back then.  It’s just that it was a small percentage compared to what we have today and it had a minor effect on most people.

I am hopeful that one day Americans will beat back this monstrosity.  There is absolutely no reason that we can’t live in a world without income taxes, except for people wanting big government.  If more people can see that they don’t need big government and that they could actually keep the money they earn without the world falling apart, then maybe the income tax will one day be a thing of the past.

If Congress does not raise the national debt ceiling, does that mean that the government will default?

This is a claim that I have heard several times already and yet we are not even into the final days of debating the national debt limit.  This really is deja vu.  I went through all of this the last time the debt ceiling was a big news item.  Unfortunately, the many myths are still being propagated out there, so I feel the need to set the record straight.  The fewer people being fooled by the propaganda, the better.

Not raising the debt ceiling will not mean a government default, at least on the interest payments on the debt already issued.  The only government default that would need to take place is broken promises.  Over 300 million people living in the U.S. have been promised goodies from the public treasury and Congress would be forced to not make good on many of its promises.  I suppose politicians in Israel and some third world dictators would also be directly affected if foreign aid were cut.

If the debt ceiling is not raised, then this simply means that the government cannot issue any more debt. It means that Congress would be forced to submit a balanced budget.  But we must realize that, due to tax receipts, the federal government alone would still be able to spend well over $2 trillion per year.

The problem here is that Congress does not want to make these drastic cuts.  It would mean cutting foreign aid.  It would mean cutting the so-called entitlement programs.  It would mean ending wars and occupations.  It would mean drastically reducing the welfare state at home.

Congress does not have the political will to do these things.  The politicians love their power.  And right now, unfortunately, public opinion is not strong enough in favor of cutting all of these things.

If you poll Americans, probably a good majority will say they would like to see a balanced budget.  But most do not know what this entails.  If you ask them if most of these government programs should be cut in order to achieve a balanced budget, then you quickly lose your majority.  Most Americans are contradictory in their thoughts, or else they simply have no idea what they are talking about.  They want a balanced budget, but they also don’t want to see their favorite programs cut.

This is why the Republicans in Congress will capitulate.  They will eventually raise the debt ceiling.  There is no way they are going to present a balanced budget.

We won’t get a balanced budget until we see a crisis in the dollar.  When the Fed is forced to stop buying government debt to avoid hyperinflation, then we will finally get an actual significant reduction in government spending.  If there is nobody who wants the U.S. government’s debt at lower interest rates, then Congress will have trouble issuing so much debt.  At some point, we will get something close to a balanced budget.

At that point, the question is what will be cut first.  I don’t know that I can answer that, but I am guessing that Medicare and Social Security will be the last to go.  I think Congress will raise the official retirement age, somewhere above 70, but current retirees will still see checks.  The checks may not buy as much, but there will still be checks.

In the meantime, you can count on more government spending and more monetary inflation by the Fed.  But don’t count on Congress to hold firm in not raising the debt limit.  And you certainly shouldn’t count on any kind of default in terms of U.S. government debt, except in regards to a devalued dollar.

Frank Shostak has written an article for the Mises Institute about the Fed and the money supply.  Shostak is one of my favorite writers when it comes Austrian school economics and monetary policy in general.

In this article, Shostak says that the Fed could delay its tapering until after December.  In other words, the Fed may keep its foot on the accelerator and continue to pump in $85 billion per month.  He sees this happening because he is predicting a slowdown in growth.

Shostak rightly differentiates between the Fed’s balance sheet and measures of the money supply.  Shostak in particular uses “AMS”, a measure of money supply that he prefers.  The Fed’s balance sheet (I usually refer to the monetary base) is what the Fed directly controls.  But the lending of fractional reserves by banking institutions then drive the money supply in circulation.

The whole ballgame has changed since 2008.  Excess reserves are well above the $2 trillion mark.  They were a rounding error above zero back at the beginning of 2008.  Before the fall of 2008, banks lent out most of the available deposits.  They just kept enough on hand to meet reserve requirements.  The lending process of fractional reserves essentially multiplies the money supply in circulation.

Since the large majority of new monetary base money has gone into excess reserves, this has kept the money supply in circulation from rising as dramatically as it would have.  It is important to understand this because this is one of the reasons for what has allowed the Fed to pump in so much money without seeing really high consumer price inflation.

So despite the massive pumping (QE) by the Fed, Shostak still sees a reduced rate of growth.  He sees the economy weakening and hence his prediction that the Fed could delay tapering past December.

This is basically a lesson in the Austrian Business Cycle Theory.  You can still have a bust with continual increases in the money supply.  Just a reduced rate of increase is often enough to trigger the bust.  Of course, a bust is virtually inevitable when the boom is built upon loose money and artificially low interest rates.

In conclusion, if Shostak is right about all of this, then we may see a recession in the somewhat near future.  Unfortunately, if we do have another official recession hit, then it may just encourage the Fed to create even more money out of thin air.  This will mean an even greater misallocation of resources and a worse standard of living for the average person.  It also means we have to continual fear bank lending and the possibility of much higher price inflation.