I recently wrote a post comparing Detroit with Washington DC.  I said that many people make a mistake in assuming there are absolutely no limits to the Fed and its ability to create money.  In reality, there is a limit and that is hyperinflation.  I have also written several times in the past that I think the Fed is likely to stop short of hyperinflation, as the Fed members would simply be ruining themselves and their control over the economy.

In response to my post, I received the following comment:

“Hyperinflation is not something that central banks or governments decide to do.  It is a market response to excessive debt and deficit and a central bank monetizing government debt.”

First, definitions are important.  I like to distinguish between monetary inflation and price inflation.  This comment is assuming that hyperinflation is simply referring to prices, which is fine, but I just want it to be clear.  Inflation can be defined as an increase in the money supply.  The definition of inflation was changed to mean rising prices, which is actually a result of inflation.  This definition change was implemented by the establishment so that monetary policy would not be strictly to blame for rising prices.

But let’s assume the comment is referring to prices.  The comment says that “hyperinflation is not something that central banks or governments decide to do.”  While it is technically consumers and market participants who bid up prices, it really is the central bank or government deciding it by creating massive amounts of money out of thin air.  The market is simply reacting to the situation that has been dealt.

The second sentence says that “it is a market response to excess debt and deficit(s) and a central bank monetizing government debt.”  The second sentence is just about contradicting the first.  Let’s just shorten and simplify the two sentences and we have the following: “Hyperinflation is not something that central banks decide to do.  It is a market response to a central bank monetizing government debt.” This is correct on a technicality at most.  It is obviously the central bank’s monetizing of debt that is causing the rising prices.  Therefore, the Fed or any other central bank can typically stop hyperinflation simply by ceasing to monetize more debt.

As I have written in the past, it is technically possible to have hyperinflation (in regards to runaway prices) without having a massive increase in the money supply.  Velocity could pick up just based on the expectations that there would be massive monetary inflation in the future.  It is even technically possible for a currency to lose most or all of its value simply based on the mood of the market.  If everyone in America read some literature on fiat currencies and gold and turned into libertarians overnight, it is possible that everyone could simply turn away from the dollar and start using gold and silver or some other medium of exchange.  But the likelihood of this happening without massive monetary inflation is extremely remote.

I have never heard of a hyperinflation situation where the central bank or government was not creating massive amounts of new money out of thin air.  So to say that hyperinflation is not something central banks and governments decide to do is extremely misleading at best.  The Fed, or any other central bank, can decide to stop monetizing debt and buying assets.  It can completely stop its monetary inflation.  This would be a decision to avoid hyperinflation.

One last thing I would like to point out is that the national debt and deficit do not cause hyperinflation.  There is a correlation because the debt will often grow more when more debt is monetized.  Or perhaps it could be said the other way around that there will be more monetization with the growth of debt.  But just because the debt is over $16 trillion, it doesn’t mean that the Fed has to keep buying debt.  It can stop inflating and tell Congress to figure it out.  Congress would be forced to scale back its spending.  So while high debts and deficits may be a predictor of hyperinflation to a certain extent, it is not a direct cause.  It is still the decision of the central bank to monetize more debt.

In conclusion, I think it is important to know that both the supply and the demand of money will affect prices.  But if the Fed does not want a situation of hyperinflation, it can avoid this simply by stopping its monetary inflation.  There may be some point of no return, but I highly doubt we are close to that point yet.  The Fed could simply stop its policy of monetary inflation right now and we will likely avoid hyperinflation.

It seems as if there is a headline almost every day about some government agency or some politician being caught in a corruption scandal or being accused of some kind of wrongdoing.  The almost inevitable response is for people to call for an investigation.  They will call for the wrongdoers to be brought to justice.  And those are just the ones who care.  Most Americans will go about their daily lives and not get upset about any of it, if they even know about it.

Edward Snowden blew the whistle on the NSA and its program to track and spy on all Americans.  There is the IRS scandal, where certain groups and individuals were targeted by the IRS.  The latest one here is from Christine O’Donnell, who perhaps had her Senate election chances sabotaged from a phony IRS investigation.  For this topic, we can even bring in conspiracy theories, such as the downing of TWA Flight 800, where some of the former investigators are asking that the case be reopened.

There is a problem with all of this.  You don’t ask the wrongdoers to investigate themselves.  All of these things involve the abuse of power and criminal acts, or potential criminal acts by the federal government.  So why would you ask the same agency who is committing the criminal act and also doing the cover-up to investigate the situation?  It reminds me of the Kennedy assassination where Allen Dulles gets on the Warren Commission to investigate the death of the man who fired him.

There is a saying that if you can get people asking the wrong question, then you don’t have to worry about the answer.  I suppose this could be modified to say that if you get the right people to investigate a crime, you don’t have to worry about what will turn up.

Do you really think that the federal government is going to find itself guilty of something, even if some of the individuals doing the so-called investigating are different?  Do you really think the Justice Department or the Attorney General are going to do a proper investigation?  These are the people who are the criminals.  It would have been like the German people asking Hitler to investigate rumors that there were concentration camps.

The only solution to stopping, or at least minimizing, corruption and wrongdoing is by taking away the power in the first place.  If the budget for the NSA were a fraction of the size, it would not be able to monitor and store all of the data of tens of millions of Americans.  Better yet, if there were no NSA, there is no way the NSA could spy on Americans.  The same goes for the IRS.  If there were no income tax and no IRS, then there would be no abuse of power and wrongdoing inside the IRS, because it wouldn’t exist.

There is a direct correlation between the size and scope of government and the amount of corruption and criminality that takes place.  This is especially true with a government that is not a direct dictatorship.  When there is significant power, it is going to be abused.

So people can call for all of the internal investigations until they are blue in the face, but it won’t matter.  Perhaps some low-level guy will take the blame and be punished.  But the only way that politicians and bureaucrats will behave is if they simply don’t have the power to do bad things.  This means that they should have limited or no power in the first place.

If people want to spread democracy overseas, and have government-run retirement programs, and have government-funded education, and have the government tell us what we can put in our mouths and bodies, then there is going to be major corruption and wrongdoing.  When you give them the power to do good, they will surely use that power to do bad.

In conclusion, calling for the government to do investigations on itself is completely naive.  The only solution in stopping government criminality is to dramatically reduce the size of government and its power.  If there is no budget, there won’t be much wrongdoing.  The only way this will happen is if people withdraw their consent and decide to take responsibility for their own lives.

With Detroit having officially declared bankruptcy, the inevitable comparisons have started being discussed with Washington DC and the poor fiscal situation of the U.S. federal government.  For this post, I am going to offer what I think are similarities and differences between the two situations.

First, some people are saying that Detroit filed for bankruptcy because it was put in the hands of a single manager who made the decision.  But I think bankruptcy was inevitable.  For me, things always seem to play out longer than I would think possible, and this was another one of those situations.  Detroit has been a fiscal mess (along with being a mess in general) for many years now.  There was simply no possible way to fulfill all of the promises that were made by previous politicians.

Next, it is important to realize right off the bat the major difference between Detroit and Washington DC.  The federal government has a monopoly over the money supply.  There is a central bank (the Federal Reserve), which can create money out of thin air at any time.  The government in the city of Detroit obviously has no capability to create money.  It only has the ability to tax and that was not working much because most people with money were getting out of Detroit.  I also saw a statistic that almost half of the property owners in Detroit were delinquent in paying their property taxes.  Who can blame them?

It is often said that the Fed can print money out of thin air.  In today’s world, it is actually more accurate to say that the Fed can create digital money out of thin air.  Most of the new money supply is not in the form of currency, but in the form of digits in bank accounts.  Regardless, it is still essentially the same thing with the same bad consequences.

There is a mistake that is made by some, including many libertarians, that assumes that there are absolutely no limits to the Fed and its ability to create money.  But in reality, there actually is a limit to their effectiveness.  The limit is hyperinflation.  There might also be a limit in the sense of what the American people are willing to put up with.  If the velocity of money picks up (money demand weakens) and price inflation starts to pick up significantly, the Fed will eventually be forced to stop its monetary inflation, or at least cut back significantly.  I don’t think the Fed is going to risk hyperinflation, as it would simply ruin itself and all of its credibility.

It is also important to consider that hyperinflation would not really solve the problems of the massive unfunded liabilities.  Medicare is the biggest one.  Social Security is another big one.  If the Fed simply tries to pay off the unfunded liabilities through massive inflation or hyperinflation, it won’t work because the cost of living will also go up, along with medical expenses.  If the government pays doctors for Medicare services at today’s prices while the cost of living goes up 5 times what it is now, then doctors will simply stop treating Medicare patients.

Regardless of what the federal government does at this point, there is going to be a default of some kind.  The Fed simply cannot just keep creating new money out of thin air like crazy without Americans suffering major consequences.  You can only kick the can down the road for so long, as retired government workers from the city of Detroit have found out.  Washington DC can kick the can down the road a bit further because of the Fed, but there are still limitations.

I think another major difference between Detroit and DC is that we are not going to see a full default announced in one day from the federal government as we just saw with Detroit.  It is going to be a series of mini defaults, group by group.  We have already seen the so-called sequestration.  We will start to see means testing with Social Security and Medicare.  We will see reduced pensions for government employees.  We will see a rise in the official retirement age to collect Social Security and Medicare.  Even this will probably come in steps.  Special interests will be cut, one by one.  There will be a lot of wailing and complaining, but there is simply nothing that can be done about it short of hyperinflation, which would still not really solve anything.  The politicians, since at least the days of FDR, have simply made more promises than can be kept.

In conclusion, I think it is fair to make comparisons between Detroit and Washington DC.  But the bankruptcy in DC is going to be a lot slower and drawn out.  It is going to happen in a series of steps in a more informal way.  But just like the pensioners in Detroit, the American people are not going to know what hit them.

The cost of government regulations on our society is enormous.  In the U.S., I have seen estimates of up to $1.8 trillion per year, and that is just for federal regulations.  These could easily add up to $15,000 per family living in America, the land of the free.

Just because it is mainly businesses that directly incur these costs, it doesn’t mean that we all don’t pay for them.  Every cost to business flows down to the individual level in some way.  A business is not some magical entity that has unlimited resources to spend.  When a business incurs an additional cost, it flows down to somebody, whether that is the business owner, a reduction in the stock price, a reduction in employee wages, or higher prices for consumers.  Sometimes it simply means that a product is not brought to the market that otherwise would have.

The sad thing is that most of these regulations are put in place by bureaucrats and lobbyists who are trying to stifle competition or individually profit.  Most of these regulations do not help employees or consumers as a whole.  In fact, like most things that the government does, regulations often have the opposite effect of their supposedly intended purpose.

You could have a food safety regulation imposed by the government.  But this can be a moral hazard.  It might make the objectives of the business to comply with the government safety regulations instead of doing their own testing.  It might make consumers less apt to do research to verify the safety of the food they are eating.  It might make independent regulators outside of the government less likely to “audit” the food under government regulation.

There can be many other unintended consequences.  Think of a business having to comply with rules providing handicap parking.  How many times do you drive through a parking lot and see many unused handicap spots near the front of the store?  While it is easy for someone to say that people should walk further and exercise, they don’t know everyone’s situation.  Perhaps someone has an injured leg but doesn’t have a handicap pass.  Perhaps there is a bad thunderstorm outside.  Many people make the wrong assumption that businesses would not provide such services if not for government regulations.

I think of government regulations much the same way I think of war and foreign aid, at least in terms of the cost.  (Obviously war is far more serious aside from the economics.)  These are easy cuts for the government to make our lives easier and increase our standard of living.  If the government stopped all wars and ended all foreign aid, it would be easy savings.  The federal government would be closer to balancing the budget without raising any taxes.

I see government regulations the same way.  I can only see benefits from reducing regulations.  Perhaps there would be a few lobbyists and bureaucrats who would be hurt by it.  Perhaps there would be some big businesses hurt by it by having to compete more.  But overall, dramatically reducing regulations would be a huge benefit to society, especially once the realignment of resources has taken place.  It would significantly help most businesses and would help to raise wages, raise production, and lower consumer prices.

There are some government programs that would be far more difficult to cut.  If Social Security payments were reduced, it would benefit some people, particularly those who are young and working.  On the other hand, it would be difficult for older people, especially those who are highly dependent on Social Security.

So why not make the easy cuts first?  Stopping war and empire building and ending foreign aid are “easy” reductions that would mostly only hurt the elitists in government or those connected to the government.  The same is true of government regulations.  Eliminating half of the regulations coming from the federal government alone would be a huge benefit to the economy and our standard of living.  The only thing that has to happen is for Americans to demand it.  The government is not going to do it on its own.

There are some libertarians, survivalists, and others who advocate avoiding the banking system.  It is usually for philosophical and principled reasons.  Even some on the left, such as the Occupy Wall Street crowd, would agree with some of the reasoning.  There is no question that the major banks are essentially an oligarchy, deriving benefits from the government and the Federal Reserve.  The big bankers really do get rich at the expense of the poor and middle class.

It is almost impossible to get by in America today without having a bank account, unless you plan to live in virtual poverty.  Almost everything is done electronically today.  If you have any kind of a normal job, you are probably highly encouraged to use direct deposit.  Even if you get a check on payday, you still have to use a bank to get the money.

There are some who advocate being “underbanked”.  This means that you just keep a small balance in a checking account and that is it.  It means that you keep just enough to pay your bills and regular expenses.

While I sympathize with the notion and I oppose the current banking system being so entrenched with the government, I don’t advocate that you make your own life miserable and vulnerable to make a statement.  By avoiding the banking system, you are really making things tough on yourself and putting yourself in a position of making yourself poorer.

While I don’t think the FDIC should have ever been invented and I don’t believe in any kind of government insurance (especially deposit insurance), it is the system we have in place today.  It means that bank runs are unlikely, at least in the conventional sense.  If there is a bank run, which would really be other financial institutions and companies refusing to loan short-term money, then the FDIC will cover deposits under $250,000 (the current amount since 2008).  If the FDIC doesn’t have the money, then it will receive money from the government or the Fed.  Or perhaps the Fed will simply nationalize the bank.

I think the government would allow a partial default on Social Security checks before it let the banking system fail.  That is the number one purpose of the Federal Reserve.  If the banking system goes, then the whole system goes.

For this reason, you shouldn’t worry too much about having money in a checking or savings account.  Your biggest worry is inflation eating away your purchasing power over time.  There will not be a Cyprus like event where money is directly confiscated.  The Fed does this in a much more subtle fashion.

As long as you stay under the $250,000 threshold at any one bank, then I doubt you have anything to worry about, except for the depreciating value of your money.  While it is a personal decision, I don’t recommend that you stress yourself out with being “unbanked” or “underbanked”.  You will probably not make a difference to the system, while just making life hard on yourself.  And if you don’t use any financial institutions, then you are setting yourself up for trouble by having all of your assets vulnerable to theft, fire, or something else.

I think it is best to diversify your assets.  This would include having some cash (digits) in the bank.  If the banks have to be bailed out (which they currently are), then you are paying for it regardless of whether you have a bank account or not.

On Wednesday, July 17, 2013, EPIX is airing a movie called TWA Flight 800.  It is a documentary about the plane that exploded off the coast of Long Island in 1996.  This airing will be on the 17th anniversary of the tragedy.  The documentary will focus on six former members of the team that investigated the crash.  It brings to light all of the eyewitnesses who say they saw something resembling a missile going from the ground up into the sky.  Eyewitnesses also discuss how they were either ignored or threatened by the FBI and the government.

When this event happened, it was really before the days of the internet.  I know that technically the internet was up and running, but it was almost nothing compared to what it is today.  The internet and social media were not there to spread the true news of what happened, or at least didn’t happen.  Unfortunately, there were also no smartphones at that time to take video and pictures.  This would be a different story if it happened in 2013.

Even though this happened before social media and before the internet really took off, I still knew about the high probability that there was a cover up not long after it happened.  I had heard that there were a lot of eyewitnesses who saw something resembling a missile hit the plane.  The government gave some lame explanation about how it was a trick to the eye and it just appeared that way, but it was actually the plane exploding and crashing down.  This happened before I was a hardcore libertarian, but even then I didn’t believe the government.  Unfortunately, like most other people, I didn’t have any outlets to find more information or satisfy my curiosity without going to great expense.  Again, there was no internet as we know it today.

The thing I find ironic about this film and what it is trying to accomplish (aside from education) is that they are promoting a petition for the government to re-open the TWA flight 800 investigation.  Why would you ask the very people who committed the evil act to then investigate themselves?

If there was a major cover up, which I assume there is, then the government really had something to hide.  I highly doubt that it was a terrorist attack as some people theorize.  If anything, the government would promote that idea in order to gain more power.

The best case scenario, in terms of the government being evil, is that it was an accident.  Perhaps the Navy accidentally thought is was something else and shot it down.  Perhaps they were doing training exercises.  But even if this were the case, the government could probably admit it and not suffer major repercussions.  If that were the case, then the cover up is worse than the crime, because the crime was an accident.

Unfortunately, I have a feeling that the government is covering up something more than a mistake.  There are a lot of theories as to why certain people in government would have wanted to take down a plane, or that plane in particular.  But if that is in fact what happened, then there are a lot of evil people at the top of government.  It is more than just politicians who are looking for sex and money.  These people are pure evil.  These were innocent people on that flight.

Even if it had been the Clintons taking out someone who “knew too much” who was on the plane, it still takes a lot more people to carry out the actual act and to cover it up.  So you would think there has to be at least a couple of dozen people who know what happened and are part of the cover up.

One thought I always find fascinating about conspiracy events (not just this one) is what would happen if the full truth did come out on something and it essentially proved that certain politicians were guilty of murder and conspiracy.  People would be mad.  There would probably be a few fall guys who would take the blame.  It would certainly help in lowering people’s opinions about government as a whole.

Unfortunately though, I think the majority of Americans would continue to give their consent to the government.  Sure, there are a bunch of murderers and evil people working in Washington DC, but we want our Social Security checks and our subsidized loans and our food stamps.  Oh, and we also trust these same people to go ahead and fight wars overseas in the name of freedom and democracy.

So while I am fascinated with many conspiracy theories on several different historical events, I also realize that exposing the truth will not turn everyone into a libertarian overnight.  The good news is that it does slowly change public opinion and make people less trustworthy of the top people in government.

• Last week, before the verdict came in, I wrote a post asking the question: What if George Zimmerman had been an undercover cop?  I stand by this comment/ question, suspecting that many defenders of Trayvon Martin would not be defending him if this had been the situation.  More likely, it never would have been a story in the national media.

• One anonymous commenter responded to my last post saying: “Mr. Zimmerman– NEVER identified himself.  Police, even undercover, MUST identify themselves.”  First, this is simply not true.  There are a lot of undercover police who do not identify themselves.  That is why they are undercover.  But aside from that, the comment is assuming that Zimmerman and Martin stood there having a conversation.  The more plausible scenario is that Martin punched him almost immediately when they came face to face.

• One thing that you will often learn in a concealed carry class or other gun training is that you should always keep your distance from someone if you suspect the person might be a threat.  Now, it is possible that Zimmerman completely ignored this advice.  But common sense tells us that the most likely scenario is that Zimmerman did not intentionally get close to Martin.  It would make no sense for the very reason of what happened.  Once you get in a physical altercation, your gun may not be of use to you any longer and your opponent might even be able to get it.

• I think there is a silent majority in this case, even if the majority is slight.  I have a pretty good mix of friends on Facebook between liberal (in the modern sense), conservative, and libertarian.  Most of the comments are those against Zimmerman and defending Martin.  It is only my libertarian friends who are speaking out, not always for Zimmerman, but in defense of him and the jury decision.  I suspect that many people who agreed with the verdict are staying silent in fear of being called racist or politically incorrect.

• I have figured out what this case is mostly about, aside from race.  I have some friends who are against Zimmerman and think he should have gone to jail, yet aren’t bringing up the race issue.  For them, they don’t like the fact that Zimmerman was carrying a gun and, as they say, tried to take the law into his own hands.  Once again, if Zimmerman had been a policeman, then everything would be sitting well with them.  It is the fact that Zimmerman did not have a state-issued police badge.  These people want gun control.  They believe that only government officials should be allowed to own and carry guns.

• I find it fascinating to listen to some of my friends and other people I know who are defending Trayvon Martin.  They will also make comments about being a parent.  Yet, none of these people, unless they have some hidden personality, would never punch someone in the face and pound their head in a sidewalk because they felt “threatened”.  Most people would run the other way.  Most of these same people would also raise their children to not initiate any violence.  So here are all of these non-violent people who are defending the actions of Martin who, most likely, initiated the violence.  Just look at the injuries that Zimmerman had right after the altercation.  None of my friends would have been capable of doing this to another human being in anything other than self defense.

We really are living in unprecedented times right now.  The Federal Reserve has quadrupled the adjusted monetary base over the last 5 years.  Yet we haven’t seen high price inflation due to low velocity and a huge increase in excess reserves held by banks.

There was a severe recession in 2008.  There were severe misallocations that needed to be corrected.  Unfortunately, since that time, the Fed and the government have done almost everything to make it worse.  It lessened the blow of the recession then, but it has caused even bigger distortions.  The government continues to spend well over $3.5 trillion per year.  Add in the trillions by state and local governments and a huge chunk of capital is being sucked up and misallocated.  It is a huge waste of resources.  In addition, the onerous regulations hurt productivity even further and make us that much poorer.

This all needs to shake out.  Austrian school economists often get criticized because some people perceive their views as pessimistic.  But Austrians are just trying to be realistic.  It is not that Austrians want a recession and a lower standard of living.  It is just that Austrians will point out the inevitable.  When the government spends vast amounts of money and the central bank creates huge amounts of money out of thin air, there are going to be major distortions in the market and there are going to be consequences that people don’t like.

While I don’t really like making predictions, I do have a sense of what might happen over the next 10 years or so.  It is impossible to predict with certainty.  One major point that Austrian economics teaches is that economics is based on human action.  We cannot predict with certainty how humans will act in the future.  Perhaps Bernanke and the other Fed members will wake up tomorrow morning and decide that all monetary inflation should stop.  Perhaps Congress and Obama will decide we need massive spending cuts and a balanced budget.

Of course, we can make strong assumptions that it will not play out this way.  So I am only offering what I think is a probable scenario for the next 10 years.

At some point, I think we will be faced with another recession.  Perhaps it will play out similarly to 2008.  But regardless of whether it is more mild or worse than 2008, I expect the Fed will step in one last time.  We will see more monetary inflation.  The Fed will try its best to prop up housing and prop up the overall economy.  Of course, it will also take care of its number one mission, which is to save the big banks.

I think we will eventually see a point where consumer prices go up.  The Fed has been playing the Goldilocks game of not too hot and not too cold.  While they say they want the banks to lend, in actuality they are quite happy with the banks not lending too much right now.  If the banks started lending more and lowering their excess reserves, then price inflation would pick up quickly.

But at some point, I expect to see a surge in price inflation.  We will likely see higher gold prices.  We will probably see higher oil prices.  The Fed will continue to walk a tightrope, but it will eventually run out of line to walk on.  We will eventually get a scenario where price inflation is high (maybe 10%) and the economy is still struggling with high unemployment and stagnant growth.

The Fed will eventually have to choose between more monetary inflation (and risking hyperinflation) or stopping monetary inflation (and allowing a severe recession).  I think the Fed will ultimately stop short of hyperinflation.  They will not want to lose the U.S. dollar’s status as the world’s reserve currency.  They would lose complete credibility if we saw price inflation jump completely out of control.

Eventually, we will see a major shakeout.  The Fed will stop its monetary inflation, except perhaps to save the big banks.  If the Fed has to choose between keeping the big banks afloat and buying government debt, it will choose in favor of the banks.  Congress will be forced to cut back its spending dramatically.  There will be no one to buy the government’s debt at low rates.

Overall, I think things will play out somewhat similarly to the 1970s and early 1980s.  Of course, as the saying goes, history never repeats, but it does often rhyme.  I think this time will be far worse than the 1970s.  Perhaps the price inflation rate will not be worse, but I expect the temporary drop in living standards to be far more severe.  I don’t think most people are prepared for what is coming their way.

I say all of this not to be pessimistic.  I am just being realistic.  The Fed can’t quadruple the monetary base in 5 years without there being severe consequences.  In addition, we will be faced with baby boomers hitting retirement age and unfunded liabilities of hundreds of trillions of dollars.  People are going to be forced to work harder and longer than they expected.

I think we will eventually see better times ahead, but it is going to be a bumpy road to get there.  You should be prepared, especially mentally.

The George Zimmerman trial is about to wrap up.  He is being charged with murdering Trayvon Martin.  It is mainly a question of whether Zimmerman acted in self defense.  I would be surprised if Zimmerman is convicted, but you can never be certain with who is on the jury.

This is an extremely divisive case.  I think a slight majority of Americans side with Zimmerman, at least to the point that he should not be convicted on murder charges.  Personally, I think there never would have been a trial if politics and the media had not entered into it.  Zimmerman was only later arrested and prosecuted after the incident became well known and the illustrious Obama spoke (note the sarcasm).

For those who are against Zimmerman and believe he should be convicted, I find that there are two main reasons for this opinion.  One reason is racial.  If Zimmerman were black or Martin had been white, then most people wouldn’t care about what happened and it wouldn’t be on the news.

But not everyone against Zimmerman is black and not everyone against him necessarily thinks that Zimmerman is some kind of a racist or bigot.  The second main reason that people oppose Zimmerman is because they view him as taking the law into his own hands.

Some people will say that Zimmerman was the aggressor because he followed Martin and got out of his car.  We can have a legitimate argument about whether this was poor judgement on Zimmerman’s part, but poor judgement does not make him a murderer.  I could go walking down the street in the ghetto in the middle of the night.  It would be poor judgement on my part whether I am looking for a fight or not.  But if someone comes up to me and physically attacks me, then I have the right to defend myself, regardless of my poor judgement of walking in a rough neighborhood.

For those who oppose Zimmerman and think he should be convicted because he got out of his car, I pose a serious question.  What if George Zimmerman had been an undercover cop?  Would you still believe that he should be convicted of murder?  If not, why is there a difference?  Do you think a government-issued license (a police badge) should change the verdict?

My guess is that most people, even those who currently oppose Zimmerman, would think that an undercover cop should not be convicted if the same exact scenario had happened.  I believe these people are hypocrites for thinking this way.  They are not being consistent.  Zimmerman was carrying a gun legally.  But the people who oppose Zimmerman mostly think that the state should have a monopoly on violence.  Most people who oppose Zimmerman do not believe “regular” citizens should be able to carry guns. (I am generalizing here and I know there are exceptions.)

So if Zimmerman had been a police officer, even if undercover, then attitudes would be different right now among many people.  But since he didn’t have a state-issued badge, he is on trial for murder, despite the injuries he sustained.  If Zimmerman had to do it all over again, I’m guessing he wouldn’t have left his car.  He is now faced with a life in prison or a life in hiding, despite the evidence that he most likely acted in self defense.  But regardless of whether he used poor judgement in leaving his car, it doesn’t make him guilty of murder.

Minutes from the FOMC meeting in June 2013 were released, showing a split in policymakers’ opinions on the timing of halting the Fed’s latest asset buying program (QE).  Here are some questions that should be asked of the Fed, particularly by Congress, but probably won’t be asked.

1) If the Federal Reserve stops buying government bonds, who will buy the government’s newly issued debt?  Will private investors pick up the slack?  Will foreign governments such as China and Japan add to their holdings?  Will interest rates rise?  Will Congress be forced to cut spending?

2) If the Fed stops buying mortgage-backed securities, will the big banks be stable?  Since last September, the Fed has been buying about $40 billion per month in mortgage securities, which is essentially a bank bailout.  Will the big banks now be able to survive without further Fed subsidies?

3) If the economy can barely grow with the Fed adding to the monetary base at a rate of about $1 trillion per year, what will happen when the Fed stops inflating?  Will the economy continue to grow?  Will there be any kind of a correction?

4) What happens if the economy starts to sink back into recession?  Will the Fed start another QE program, or will it let the economy sink?

5) What if the commercial banks decide to start loaning out more money and reducing their excess reserves?  Will the Fed allow this?  Will there be massive price inflation?  Will the Fed increase reserve requirements to prevent the banks from lending?

6) What are the consequences of allowing the QE program to continue?  What are the downsides?  Does this cause distortions in the marketplace?

7) What will the Fed do if long-term interest rates continue to rise?  At what point would the Fed step in and increase its buying of government debt?  Would the Fed allow interest rates to rise to 10% or above?

8) If the Fed believes it is doing a good job of managing the U.S. dollar, would Fed policymakers oppose legislation to allow competing currencies developed from the free market?

I don’t expect most of these questions to be asked, at least not directly to Bernanke and other Fed officials.  And I am in no way suggesting that the Fed should step in if interest rates rise, if there is a recession, etc.  In fact, I believe that the Fed should stop all monetary inflation immediately.  I am only pointing out that the Fed has had an unprecedented loose monetary policy over the last 5 years, yet the economy isn’t showing any signs of booming, except perhaps the stock market.  It is scary to think of how much malinvestment there is in the system and how bad the shakeout will be when the Fed does slow down or stop its monetary inflation.

I really don’t think that Bernanke and the Fed know what to do.  Bernanke knows what to do in the sense that he will be retiring in January, but he will be leaving a messy situation for someone else to deal with.

I think we will eventually have to go through some kind of a deep recession/ depression for a major reallocation of resources.  It is going to be painful.  The Fed can only cover it up with monetary inflation for so long.  I don’t think the Fed will risk hyperinflation.  At some point, it will stop buying government debt and essentially tell Congress that it is their problem.  Congress will have to cut spending.  The Fed may still have to bail out the big banks, but it will help the banks over Congress if it is a choice between one or the other.

In conclusion, I think gold and cash (digits) are the best investments right now.  Gold is your best hedge against inflation and cash is your best hedge against a major recession.