Edward Snowden, the whistleblower who exposed the secret spying on Americans by the NSA, is on the run from the federal government.  Government officials don’t like whistleblowers when it exposes lies, corruption, and crimes being committed by the government.  Therefore, the government is trying to extradite Snowden, while Snowden is seeking asylum in another country.

Some people are faced with one or two life-changing decisions during the course of their life.  There are a few people who are faced with this several times.  There are others who never face a real life-changing decision.  I am not talking about a decision about whether to get married or change jobs.  I am talking about something that is really life altering.  Snowden’s case is extreme, but it is worth examining.

It is difficult to know how you would act in such a situation.  It is easy to say you would or wouldn’t do something in a particular situation when you aren’t in it and you aren’t the one facing the consequences. If Snowden is caught by the U.S. government, he is likely to face a lifetime in prison.  He can’t even be certain that he won’t be tortured.  And it is unlikely he will get any kind of a fair jury trial.

Even if he does get asylum in a place like Ecuador, he will probably always live with a feeling of paranoia.  He will always be looking over his shoulder, not knowing who he can really trust.

There is no question that Snowden has given up his normal life.  He left a well-paying job and he left his girlfriend.  I suppose if he gets protection somewhere, his girlfriend could decide to join him.

Snowden could have just quit his job contracting with the government in its spying operations.  He could have left on principle and given up a nice income, yet kept his mouth shut.  At the very least, he could have made the decision not to release sensitive documents (sensitive to the criminals in the government).

If I had been in his position, I don’t think I could have done what he did.  I have a family who relies on me.  But even if I were single with no children, it would be a difficult thing to do.

If you were in Snowden’s position, do you think you would have a moral obligation to do what he did? I don’t.  If a majority of Americans strongly opposed the U.S. government’s attempt to extradite Snowden, then he would have little to worry about.  The only reason the government can get away with such criminality (which includes going after Snowden) is because the American people consent to it.  They don’t have to explicitly give their consent, but just enough that they won’t kick up a fuss.

Therefore, I wouldn’t blame someone in Snowden’s position who doesn’t blow the whistle.  If a majority of Americans don’t care enough to speak out strongly in favor of a whistleblower who is exposing government wrongdoing, then why should anyone give up his life for the cause?  We have already seen what happened to Bradley Manning.  It is no surprise that the government is going after Snowden.  Snowden’s case is much more well known than Bradley Manning’s at this point, but we still don’t have anything close to a majority of Americans who strongly support the whistleblower who exposes government crime.

It would be a much tougher situation if by blowing the whistle you could potentially save lives.  But if you aren’t going to get strong support from a majority of the people, then in most cases you should not feel obligated to become something of a martyr.

We don’t really need more brave people like Snowden to blow the whistle.  Anyone with their eyes open can see the massive corruption and crime that is the U.S. government.  We really need for more Americans to support people like Snowden and for more Americans to withdraw their consent.  The government in DC cannot survive without the consent of most Americans.

Markets reacted negatively on Wednesday, June 19, 2013, after the FOMC released its latest statement and Bernanke spoke.  There was an indication that the Fed might start to reduce its rate of monetary inflation towards the end of the year.  Since the stock market has been juiced up by the Fed, it also sinks when the Fed gives a sign that it might be pulling back.

It was the following day that markets turned really sour.  Almost everything was hit bad.  The Dow was down well over 300 points, after having already suffered big losses the day before.  Gold was down as much as $100 and closed the week under $1,300.  And bonds really took a hit too.

Perhaps the bonds might be the biggest story out of this.  The 10-year yield ended the week over 2.5%. While this is still historically low, it is vastly higher from the rates we saw just a couple of months ago.  This is driving mortgage rates higher as well.

I continue to maintain that we are not going to see a huge spike in interest rates without seeing a rise in consumer price inflation.  The bonds fell and rates increased on fears that the Fed will be buying less government debt.  This is logical.  But it is important to think through the different scenarios with bonds and interest rates.

If the economy falls into recession or depression, then rates are not likely to go higher, unless it is accompanied by higher inflation.  Recessions tend to bring rates down as people look for safety for their investments.  In addition, if the economy goes into a deep recession and price inflation remains low, then it is likely that the Fed will jump back into action and create more new money.  This means more bond buying, which will bid up prices and bid down interest rates.  So while it is not surprising to see rates come off their near all-time lows, they are still really low by historical standards.

This whole thing is playing out at a seemingly slower pace than what we have seen in Japan.  In Japan, the central bank started inflating like crazy and the stock market there went crazy.  But then, within 6 months, it started having huge down days.  When the stock market is built up because of central bank monetary inflation, it doesn’t take much to spook the markets and reverse the trend.

The scary part about this whole thing is that the Fed is currently monetizing debt at a pace of $85 billion per month.  That is about $1 trillion in a year.  The monetary base was only at about $800 billion back in early 2008.  The Fed has quadrupled the monetary base since then, and yet it still isn’t enough to even give an illusion that things are getting better.  If the current “quantitative easing” isn’t enough to keep things going, then the Fed really is in a bind.  It will either have to up the ante again or let a deep recession happen.  It will try to walk a tightrope between the two, but it can only last for so long.

The Austrian Business Cycle Theory is reality.  When the central bank creates monetary inflation, it misallocates resources.  Those resources have to be realigned to more productive uses in accordance with consumer demand.  For this to occur, there has to be a correction.  The central bank can continue to increase its rate of monetary inflation to keep the game going a little longer.  But at some point, we either see massive price inflation or the central bank has to cut back and we get a recession.  Sometimes we can even see massive price inflation with a recession.

The central bank doesn’t have to stop monetary inflation.  If it just reduces the rate, this can be enough to start the correction process, even though the central bank’s continuing inflation will prevent a full correction from taking place.

It is not being pessimistic to point out that a correction must occur.  It is realistic.  It is the consequence of the previous mistakes.  The Fed shouldn’t continue to exacerbate its mistakes.  I really don’t think Bernanke and company know what to do.  They are stuck.  Bernanke will be glad to retire.

With Edward Snowden blowing the whistle on the NSA surveillance program, I have heard a lot of liberty advocates saying that this isn’t about Snowden.  It is about the wrongdoing of the federal government.  Even Snowden himself has said that this whole thing shouldn’t be about him.

I think it is important to realize that there are several issues we are dealing with here.  I can break it down into 3 separate categories.

1) The NSA has been, and is currently, spying on Americans with no reason to expect that most of them have done anything wrong or illegal.

2) The NSA and the federal government have kept this surveillance program a secret, even though they are now defending it, saying it is necessary for national security.

3) Whistleblowers, like Edward Snowden, will be attacked by most politicians in DC, and they will try to prosecute him to teach others a lesson.  They will say that they encourage transparency in government and they will say that whistleblowers should be protected when it is involving a non-governmental entity.  However, any whistleblower who is exposing lies and wrongdoings of the government will be attacked, smeared, and prosecuted if possible.

So while many libertarians, along with Snowden himself, are saying that this whole thing shouldn’t be about Snowden, they are not entirely correct.  Perhaps the biggest issue in this whole saga isn’t about the NSA’s surveillance program (which people should have already known existed), but how whistleblowers are treated when they expose government wrongdoing.

Just to clarify, when I say that this is about Snowden, it has nothing to do with his level of education or how he acted when he was a teenager.  Those are just smears by people who are trying to change the subject and make him look bad.  But this whole thing is about Snowden as a symbol of how politicians in DC will treat someone who exposes the truth.  We have already seen it with Bradley Manning and Julian Assange.

This serves as a message that the establishment in DC will not tolerate anyone who exposes the truth, especially when it damages their own reputation.  The more serious the crime that is exposed, the more these thugs will go after the whistleblower.  As long as the American people let these criminals in Washington DC get away with these things, then they will keep happening.  There is no one person, even President Obama, who is capable of ending it.  There is probably a very logical reason that John F. Kennedy was taken out.  The establishment didn’t like what he was doing.

Again, the only way this will stop is if a majority (or close to it) of Americans strongly oppose any prosecution of Edward Snowden and others like him.  Americans must view these people as heroes.

It is ridiculous to think of someone like Snowden as a traitor who has committed treason.  It is not as if he was selling secrets to another government to make money.  He released this information, knowing that it would likely ruin his life.  He sacrificed almost everything he has and derived absolutely no benefit other than his knowing that he acted morally and in accordance with his principles.

So while the NSA surveillance program is a big issue that Americans should be outraged about, perhaps the treatment of government whistleblowers is an even bigger issue.  We cannot hope to be free unless the truth is allowed to be spoken.  The truth shall set you free.

The FOMC released its latest statement on June 19, 2013.  Compared to its previous statement on May 1, 2013, there was not much change.  There were a few sentences that were tweaked.

In the May 1, 2013 statement, the last two sentences of the first paragraph reads as follows:

“Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices.  Longer-term inflation expectations have remained stable.

Compare this to the June statement which reads as follows:

“Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.”

The other change comes at the end of the second paragraph.  The May statement reads:

“The Committee continues to see downside risks to the economic outlook.  The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.”

Compare this to the June statement which reads:

“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall.  The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.”

These are really the only 2 differences between the two statements.  That little change from the last paragraph is saying that the FOMC sees the economy as improving.  Investors are taking that as a signal that the so-called quantitative easing of $85 billion per month is going to slow down at some point, perhaps as early as the end of the calendar year.  Market jitters over the Fed reducing its rate of monetary inflation sent stocks and bonds down significantly for the day.

The one other interesting change from the previous statement is the voting of the members.  In May, there was only one dissenting vote and that was by Esther L. George, who actually shows some concern for inflation.  In this latest June statement, there was another dissenting vote, in addition to George.

James Bullard dissented because he “believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings”.  This is truly remarkable that there is someone on the committee who actually believes that the Fed needs to inflate even more.

Other than that, things remain the same.  The Fed is still buying $45 billion per month in longer-term treasuries and $40 billion in mortgage-backed securities to bail out the banks (although they don’t say it like that).  In addition, the federal funds rate will continue to stay between 0 and .25 percent for a long while.

One thing I have noted is that many people are under the impression that the Fed is going to keep up its monetary inflation of $85 billion per month as long as unemployment stays above 6.5% and price inflation expectations stay below 2.5%.  I have even read more than one libertarian saying this.  It is incorrect.  This only applies to the federal funds rate and not to the monetary inflation.  The FOMC statement is clear that these measures are for keeping the federal funds rate below .25%, which is essentially meaningless because the Fed is not really controlling that rate now anyway.  It could raise this rate if it decided to pay banks a higher interest rate for excess reserves, but changes in the monetary base have little or no effect on the federal funds rate because banks are holding huge amounts of excess reserves.

In conclusion, not much has changed.  Investors didn’t like the latest statement, but it should be no surprise that the Fed could not keep pumping in new money at the rate of $1 trillion per year.  We are still living in unprecedented times and it will be interesting and painful to watch this whole thing play out.

In an interview on PBS, Obama has hinted that Ben Bernanke’s time as chairman of the Federal Reserve will end in early 2014.  Obama said, speaking of Bernanke, “he’s already stayed a lot longer than he wanted or he was supposed to.”  This is about as strong an indication that you can get, without either Obama or Bernanke himself saying it directly.

I wrote about Bernanke’s possible departure a short while ago.  With Bernanke leaving, I think it means that Bernanke is in a mess and he knows it.  Perhaps I am wrong about this, but I have trouble believing that Bernanke believes the things that are coming out of his own mouth.  I just can’t imagine he is that stupid.

Of course, it is possible that Obama wants Bernanke to go.  Bernanke was originally put in as chairman by Bush, but that obviously doesn’t mean much.  Obama re-nominated him, which is an indication of just how different (not much at all) the two major parties really are.  But is it possible that Obama wants someone who is even more of a Keynesian than Bernanke?  Does Obama want someone even more dovish (on inflation) than Bernanke?  Is this even possible?

There are very few people I can imagine who would be worse than Bernanke.  Then again, I seem to say that about presidents and then their successor turns out to be as much of a disaster or worse than the one he is replacing.

One of the frontrunners being discussed by the media as the next chair of the Fed is Janet Yellen.  Believe it or not, she might actually be worse than Bernanke.  Her rhetoric is certainly worse.  It is hard to imagine that policy would be worse, but I suppose the Fed could create $2 trillion in new money each year, instead of “just” $1 trillion.  If Janet Yellen becomes the next head of the Fed, hold on to your hat.  I think I would be changing in most of my Federal Reserve notes in exchange for precious metals or any other hard assets.  Obama may as well choose the head of the Zimbabwe central bank.

Another name, that I am sure we will eventually hear, is Paul Krugman.  He is another person who could rival Janet Yellen as being one of the most disastrous choices.  Regardless of how powerful the Fed chair actually is, this would be a symbol that much more monetary inflation is coming.

I don’t think Krugman would accept the job, even if offered.  Krugman likes to have his cake and eat it too.  If he replaced Bernanke, he would actually be held responsible for the policy.  Whenever the economy turns sour now, he simply says that there was not enough government spending and not enough monetary inflation.  If he was the one in charge of the policy of monetary inflation, then he would have nobody to pin the blame on.  I think Krugman knows better than to get involved with the Fed.  His lies would be harder to cover up.

There are other names being thrown around too, like Tim Geithner, but it is hard to predict what will happen.  It might also depend on what happens with the economy between now and then.  We must not forget that Paul Volcker, who stopped the monetary inflation and let interest rates rise, was appointed by Jimmy Carter.  Despite appearances, the establishment has more of a say of who will run the Fed and what the policy will be, as opposed to the president.  The president is just the face of the establishment.

When Jimmy Carter was in office, we had double-digit price inflation.  We are nowhere near that now, at least as measured by the CPI figures.  While things can change quickly, it is doubtful it will be anything close to that by the end of the year.  For that reason, I expect that the next chair of the Federal Reserve will be as much of a disaster as the current one.

While I often focus on the money supply as measured by the adjusted monetary base, as well as the excess reserves held by commercial banks, it is important not to ignore the issue of velocity.  Velocity is the demand for money.  If velocity is high, then it means the demand for money is low.  High velocity means that money is changing hands quickly.

Low velocity is the opposite.  Low velocity means that people are trying to hold on to their money.  They are not spending as much.  This has the effect of lowering prices, or at least keeping them lower than they otherwise would have been.

Velocity is very difficult to measure, but I believe we have been in a low velocity environment ever since the fall of 2008.  Even though the Fed has quadrupled the monetary base, consumer price inflation has not reflected this.  A big reason for this is due to the fact that most of this additional new money has gone into excess reserves.  The new money is not multiplying via the fractional reserve lending process as it normally would have in the past.  But I also believe that the high demand for money (low velocity) is the other major factor keeping price inflation in check.

It is certainly logical that velocity would be low, despite the massive monetary inflation by the Fed.  People are afraid of the current economy.  After the boom times ended about 5 years ago, people have been getting out of debt (aside from the huge number of foreclosures), or at least trying to pay down debt.  Unemployment is high and wages have been stagnant at best.  It is reasonable to expect people to cut back on consumer purchases in favor of setting aside some emergency cash.

We must also remember that things can change quickly.  Velocity is as much about perception as anything.  If people perceive that their money will be worth significantly less in the future, then they will be more apt to spend it, even if it is on something that they don’t need right away.

If your car is getting older and you think car prices will be 10% higher next year than they are right now, then you may decide to go ahead and buy your new car now instead of waiting.  This is rational thinking.

I expect the gold price will be a good measure of what is happening with velocity.  If the economy is headed back into a recession (if it ever got out of one), then the gold price could drop further from where it is now.  Velocity will stay low or go even lower.

On the other hand, if we see another artificial boom, propped up with more “quantitative easing” from the Fed, then we could easily see velocity go higher.  We can also expect a much higher gold price.  The stock market is already indicating that this is a possibility, but we can’t be absolutely sure.

The interesting thing with velocity is that it feeds on itself.  If people expect higher prices next year, then they will spend more now for consumer goods.  This in turn drives up prices, fueling the fear of rising prices.  This is really what started to happen in the late 1970’s, until Paul Volcker and the Fed stepped on the monetary brakes and stopped inflating.  Interest rates skyrocketed and the economy went through a deep recessionary period.  However, it also cleared out most of the previous malinvestment and allowed resources to be reallocated to better uses (according to consumer demand).  This allowed for some genuine prosperity to follow.

So while Fed policy will be important going forward, we must consider how people are reacting to Fed policy and what their expectations are for the future.  The demand for money will play a major factor in future price inflation, as well as the overall state of the economy.

I have never been a fan of whole life insurance.  I have always thought of it as a rip off.  If you need life insurance, then get term life insurance.  You don’t need to mix two things – life insurance and savings/ investments.

Robert Higgs has written a piece that was linked at LewRockwell.com.  Higgs discusses modern communications technology.  While he acknowledges it has had some benefits for the cause of liberty, he is generally pessimistic and sees technology as more of a negative against the cause of liberty.

Higgs is one of us and I agree with him on many things.  He is a solid libertarian.  But I disagree with his assessment of things in this article.  I don’t understand how he can be such a long-term pessimist.  The state has continued to grow and there are certainly many things to be pessimistic about.  Yet it is not hard to see the bright side of things and the wonderful things that technology has brought us.

In Higgs’ article, he states, “What decides the issue in the end is neither guns nor information technologies, but the people’s ideologies.”  I completely agree that it is the ideology of the people that ultimately matters.  The government can only rule with an iron fist because a large portion of the people consent to it, even if tacitly.  But this is the whole reason that I think the great advancements in communications technology is such a glorious thing for the cause of liberty.

While I will acknowledge that there are some bad aspects of technology that the government will use against innocent people, I believe the benefits will far outweigh the negatives.  Higgs speaks of the importance of ideology, yet he fails to realize that technology has allowed the spread of ideas (as well as exposing the crimes of politicians).  In his article, he acts as though these ideas are put out there and they don’t stick.  But it is obvious that these ideas are having an effect on people.

I have to remind people that the whole libertarian movement was practically nothing about 10 years ago.  There was a Libertarian Party and a lot of literature on libertarianism, but the numbers were really small.  You could go to a crowd of a thousand people and you would be lucky to find 5 people who would call themselves a libertarian.

In the last presidential election, Ron Paul received about 2 million votes in the Republican primaries.  This would have been inconceivable just 6 years ago.

There is a vast following among young people and it is truly amazing because they really understand libertarianism for the most part.  It is not some watered down version like we see with some think tanks and some politicians who call themselves libertarian leaning.

While the percentages are not huge by any means, the number of libertarians, particularly young, far exceeds anything this world has seen in the last 100 years.  I think a small part of this is due to the bad economy and the wars.  But it is not as though we haven’t seen that throughout history.  I think a big part of it is the two Ron Paul presidential campaigns that made people more aware of the libertarian philosophy.  And I think the other big part is technology and the wide open communication that exists today.

It is kind of ironic that Higgs writes an article published on the internet about how communications technology will not really help the cause of liberty.  Yet, if it weren’t for the internet, I wouldn’t have read his article and I probably wouldn’t even know the name Robert Higgs.

Harry Browne liked to quote Michael Cloud saying “the problem is not the abuse of power, it is the power to abuse.”  This is important to understand.  There will always be good guys and bad guys working for the state.  At top levels, it tends to be more bad guys.  There is a lot of power to be had, so it tends to attract the worst elements of society.  Bad people want to exercise power over others.

You should never judge a policy or law based on who is currently holding office.  In fact, it is rather naive to do so.  I wrote yesterday about Edward Snowden and how many Republicans want him to be prosecuted for divulging government secrets.  Aside from some of these evil people, there are many Republicans who are criticizing Obama and his administration for using these vast powers to spy on the American people.  They are right to a certain extent in calling Obama a hypocrite because he spoke out against these civil liberty invasions when he first ran for president.  But it is naive (or worse) for these people to criticize only the Obama administration.

This was one of the key points that libertarians tried to bring up when Bush and Congress were passing legislation (or simply doing it without legislation) to invade civil liberties.  It was libertarians who pointed out that it didn’t matter what the Bush administration was going to use the so-called Patriot Act for.  It mattered that it was giving the government expanded powers that could one day be used against innocent people.

I don’t mind anyone criticizing the Obama administration who also criticized the Bush administration for the same things.  Actually, I don’t even mind anyone who has simply evolved and changed their position on the matter.  But if you are criticizing Obama now, then I hope you are also criticizing what Bush and most of his fellow Republicans in Congress did.  If you are upset at Obama spying on Americans, then you should be repudiating most of what Bush did as president.

I was not surprised to learn that the government is tracking phone records and other communications.  I already assumed it was happening.  I am pretty sure I had already read several articles saying what is now news.  But I am glad it is a top story in the news now.  Edward Snowden did not have to become a martyr for the cause of liberty.  He made that personal choice.  I would not blame anyone who would do otherwise, as long as they walked away from their job of doing evil.  Snowden’s life will never be the same.  I hope for his sake that he is able to live a life outside of a prison cell.

I think this is somewhat of a symbolic issue.  I am glad that at least some people are upset about it.  I would be outraged except that I already pretty well knew this was happening.  I guess Snowden has provided documents to substantiate it.

I figure that the government can take down anyone that they want.  They can collect billions of phone records, but it is not like they have enough bureaucrats to go through even 1% of them.  They can look for key words in emails and Facebook posts, but even here it has to number in the hundreds of millions.  I figure that the worst things I have said about the government are already in the open on my blog.  This is not to say that I approve of what they are doing or that I don’t care.  I am just saying this to let people know that they shouldn’t lose sleep over this issue.

While the government data collection is real, they will be mostly overwhelmed with useless data.  This really is more of a symbolic issue, much in the way that the gun control debate is.  I think more and more people are realizing that the people who work in the government, particularly those at the very top, are not their friends.

At some point, there might be enough Americans who become outraged enough that they will actually withdraw their consent.  They will realize that any good things that the government provides are not nearly enough to justify all of the bad things that the government does.  Eventually, there may actually be a reduction in power.  The coming economic trouble ahead might help push public opinion further against the federal government.

The only way we will ever see a significant reduction in the abuse of power is when we see the overall power reduced.  This will come through budget cuts.  This will come as a result of a financial crisis or because more people are withdrawing their consent.  It might be a combination of both.