With the federal government pushed up against the debt ceiling again, get ready for more political drama.  Obama is perceived as the winner in the fiscal cliff ordeal (and it is the American people who are the losers, whether they know it or not).  In the upcoming debt ceiling debates, Congressional Republicans hold the stronger card.

There are now all of these different schemes being discussed to avoid this clash (which would make for another clash).  Some people are proposing this idea of creating a one trillion dollar platinum coin to fund the Treasury.  Of course, this is absolutely no different than simply monetizing government debt.  It is purely inflationary.  Luckily, it is being seen as the ridiculous idea that it is by most Americans.

There is also an idea that Obama could simply raise the debt ceiling by invoking a clause from the 14th Amendment.  I already disliked this amendment for many reasons.  This is just one more reason to not like it.  It has to be the most convoluted amendment ever written.  It is a perfect piece of government work.  Everything is vague and foggy.  Everything is left open to interpretation.  And of course we can always count on the Supreme Court and those enforcing the laws to interpret it in such a way as to expand the power of the central government.

Let’s just pretend for a minute that the Republican politicians in the House of Representatives actually did care about smaller government.  Let’s pretend that they aren’t really just lying to their constituents about less spending and lower taxes.  Let’s pretend that they really do want a balanced budget.

Even if Obama pulled one of these schemes to circumvent the debt ceiling, the Republicans in the House can still balance the budget.  All spending bills are supposed to originate in the House.  The Republicans control a majority in the House.  They can simply refuse to pass a budget.  Or they can appropriate just enough money (still well over $2 trillion per year) so that there are no more deficits.  It is really that simple.  But don’t worry.  It won’t happen.  The Republicans in Washington DC just like to talk and pretend about smaller government.

I frequently hear statements in the so-called mainstream media that the government will default on its obligations if the debt ceiling is not raised.  But this is completely false.  There will still be a couple of hundred billion dollars per month flowing in from various taxes.  This is more than enough to pay the interest on the debt.  It is even enough to fund Medicare and Social Security.  After that, it will get really tight.  Most everything else would need to be cut drastically or eliminated.  Perhaps this would be a default on promises made to Americans by politicians running for office.  But these promises always get broken anyway.

As always, the Republicans in the House will capitulate.  They will raise the debt ceiling for some bogus cuts that take place in the future and aren’t even actual cuts.  Both sides will continue to play this game until the Fed has to stop monetizing debt due to higher price inflation.  At that point, interest rates will go up and the federal government will be forced to cut spending.  The laws of economics are not limited to Greece.

James Altucher has written a piece titled “10 Reasons Why You Have to Quit Your Job This Year”.  He has written other similar pieces in the past.  I have discussed Altucher before.  I have both praise and criticism for him and his ideas.  Actually, I have more criticism for him and more praise for his ideas.

Altucher’s writing is very stimulating.  His personal stories are quite humorous, aside from being almost tragic some of the time.

I don’t recommend that you use him as a role model.  I recommend that you use part of his personality as a role model.  I recommend that you read his ideas to stimulate your own creativity.

He offers 10 reasons on why you should quit your job.  Some are much better than others.  I like his reason #9: “Its ok to take baby steps”.  It makes the whole piece a little less dramatic.  It brings you back to reality.  Some of the people making comments at the bottom may have skipped this one.  He is not necessarily recommending that you quit today or tomorrow.  He is recommending that you take steps so that you are able (financially and mentally) to quit in the future.

I really enjoyed reading some of the comments below the article.  There didn’t seem to be a lot of in-between comments.  There was a lot of praise.  There were also a few people that scolded him because they said they liked their jobs and did not want to become an entrepreneur.

One thing you can recognize from reading the comments is that everyone really is different.  You may hate your job, but it doesn’t mean that everyone else does.  Some people are completely satisfied working for a big company.  They like the daily routine, they like the benefits, and they like the lack of risk (aside from the possibility of losing their job).

There are some people who could never be happy working in an office or working for a big company.  This could be due to laziness or it could be due to a great entrepreneur spirit.  Again, everyone is different.

I think the point is, is that you can take what you want from reading articles like this.  Altucher offers a lot of things to think about.  He inspires many people, which I think is great.  Even if you disagree with him, you can still benefit from his writings.

But seriously, if you are going to quit your job, make sure that you have a good plan for yourself.

I have been wanting to write a post on this topic for a while.  I still haven’t put all of my thoughts together on this and perhaps I will write more in the future and try to articulate my thoughts better.  But since there is a lot of talk about gun control these days, I thought I would give a brief summary on this topic.

On the subject of the 2nd Amendment, I tend to differ with many libertarians.  I agree with most libertarians that peaceful people should not be prevented from owning guns.  But when it comes to the 2nd Amendment specifically, I have my own views.

First, I hold no high regard for the U.S. Constitution.  It is not a contract of any kind.  I didn’t sign it and neither did anyone who is alive today.  With that said, I think we would be much better off if the federal government were limited to the specific powers granted in the Constitution.

Second, I believe the 2nd Amendment would be completely unnecessary if the Constitution were actually followed.  Article I, Section 8 says nothing about granting Congress the power to regulate firearms or any kind of weapons in any way.  So even without a 2nd Amendment, there should be no federal laws regarding gun ownership.

Third, I don’t think the 2nd Amendment prevents state and local governments from regulating guns.  The 1st Amendment clearly says “Congress shall make no law…”.  It doesn’t say that everyone has a right to free speech.  While the 2nd doesn’t explicitly say this, I’m not sure why it would be any different.  I understand that many people argue that the 14th Amendment made the Bill of Rights apply to state and local governments.  I don’t really like the 14th Amendment for this reason.  It is extremely vague and open to interpretation.

I think to say that the 2nd Amendment is clear and that everyone has the right to own a gun is to misinterpret.  The federal government should have nothing to do with it.  Does that mean that someone in a jail cell should have the right to have a gun?  That’s the interpretation of the 2nd Amendment to many gun right advocates.  If everyone has the right to a gun, then are we going to start making exceptions for people in jail?  I thought the 2nd Amendment was absolute.

This is why I believe that state and local governments still have the authority to make laws regarding guns.  I don’t advocate that state and local governments take guns away from peaceful people.  But I do not think gun laws by state and local governments are unconstitutional (in regards to the U.S. Constitution).  I don’t think it is any of the U.S. Supreme Court’s business to strike down state or local laws regarding guns.  It would be appropriate for the U.S. Supreme Court to strike down ALL federal gun laws.

Fourth, I am just not that big of a fan of the word “rights”.  Again, I probably differ with many libertarians here.  I do recall Harry Browne talking about this subject many years ago on one of his radio shows.  While I much prefer the concept of rights as discussed by libertarians, I think the term can be subjective and misleading.  You can say you have the right to whatever, but it is only as good as your fellow human beings recognize.  You can say that you are born with natural rights, but we know that this isn’t really true.  If you are born in a place of tyranny, then your so-called natural rights won’t matter much.  You can tell the IRS that you have a natural right to keep the money that you earn as they throw you in jail.

The same goes for “2nd Amendment rights”.  In fact, this term is even worse.  If you are going to talk about rights, I would rather you talk about “gun ownership rights”.  Using the term “2nd Amendment rights” makes it sound like you are granted this right from the 2nd Amendment.  You don’t get your rights from the Constitution.  You don’t get your rights from the government.  The government is supposed to protect your rights.  The Constitution is supposed to protect you from government.  Beyond these things, they are violating your rights.  Your right to own a gun has more to do with the thoughts and opinions of your fellow citizens than it does with the 2nd Amendment.

I don’t mind having discussions about gun control and about the 2nd Amendment, but I really wish that libertarians would stop using the phrase “2nd Amendment rights”.  Also, if you are trying to advance gun ownership rights, then don’t advocate new laws.  We want to repeal as many laws as possible, starting at the federal level.

Given the current economic environment, I thought I would provide a summary of my investment recommendations for 2013.

I am a big advocate of the permanent portfolio, as described in Harry Browne’s book “Fail-Safe Investing“.  The quick summary is that you put 25% in stocks, 25% in long-term government bonds, 25% in gold (or equivalents), and 25% in cash (or equivalents).  You can also use the mutual fund PRPFX as a substitute.  While it is not a perfect substitute, it can be useful.

My recommendation is that you take 50% of your investment money and put it towards the permanent portfolio.  This can be done in a variety of ways and I recommend diversifying even here.  You can use PRPFX, you can use ETFs, and you can buy these investments directly.  The more money you have to invest, the more you should diversify, even in the types of instruments you buy.

For the other 50%, I think it will depend on your situation.  If you are in a good position to buy investment real estate, and you can get positive cash flow, then I recommend it.  You should be in a situation where you can afford some extra money for repairs or for a couple of months of vacancy.  You need a cushion.  I think most people will find that they can get a better return on their money in investment real estate than almost anywhere else.

Aside from this, I would put your additional money in gold, gold stocks, and cash.  I think shorting the stock market is risky at this point, especially with all of the Fed’s quantitative easing programs.  If you want to take a small risk and short the market, I would have at least 3 times the gold exposure as compared to exposure in shorting the market.  And this is outside of the permanent portfolio.

I really like the permanent portfolio, but I have to admit that the bond portion makes me really nervous at this point.  It is an important part of the portfolio as a hedge against deflation and depression, but it is tough to buy bonds at this point because of the historically low interest rates and the possible threat of higher price inflation.

One option is to replace your deflation hedge by buying less bonds and getting another deflation hedge.  If you have a mortgage for your house (or for an investment property), you could pay down some of the principal balance on your loan.  This locks in a guaranteed rate of return (the interest rate on your mortgage).  And with this return, you don’t pay taxes on it (other than perhaps a lower deduction).

So to sum it all up, let me take an example of a person with $100,000, who owns a house with a mortgage.

My suggestion is to take $50,000 and put it in the permanent portfolio.  Take $25,000 and buy investment real estate (assuming you can get positive cash flow and are in a good position and good location).  You could use $20,000 for the down payment and closing costs and use the other $5,000 as reserve money.  For the remaining $25,000, I would keep another $10,000 in cash (in a bank) and put another $10,000 towards gold and silver (or equivalents like GLD).  I would take the remaining $5,000 and gamble it on gold stocks (such as GDX or GDXJ).  For the $50,000 in the permanent portfolio, $12,500 of that would be going into government bonds.  If this makes you nervous, take about half (say $6,000), and redirect into paying down the principal balance on your home mortgage.

These are just my suggestions.  They are rough estimates and each individual has different needs, different risk tolerances, and different overall situations.  But I hope people find this helpful as at least a guide.

This economy is really tough right now.  Safety should be your number one goal in investing, especially now.  Any profits you can make in real terms should be considered icing on the cake.

Ron Paul is no longer part of Congress.  I can now say that ALL politicians in Washington DC are worthless.  I always had to make an exception in the past.  And believe me, Ron Paul is an exception.

It is not to say that they are all the same in DC.  They mostly are though.  They are not all evil.  Some people get into politics with good intentions.  But the power and prestige ultimately corrupts them.  Some are more evil than others.  Some may even have a good heart, but still lack principles and conviction.

Ron Paul is not passing the torch to anyone in Washington DC and this includes his son and Justin Amash.  I will send an apology along to any current politician in DC who proves me wrong.  If Ron Paul is passing the liberty torch to anyone, it is his devoted followers.

Am I too harsh on those politicians who supposedly lean in favor of liberty?  Am I really supposed to get excited when someone in Congress is principled enough to vote against budgets that are over 3.5 trillion dollars?  Am I supposed to get excited over a politician who doesn’t vote to increase taxes, when taxes at all levels are over 50% for some people?

So there are some politicians who are better than Joe Biden and John Boehner.  So what?  That isn’t saying much.

I want to see politicians who are willing to make the really tough votes.  For instance, Ron Paul voted against giving a medal to Mother Theresa.  It required funding from Congress.  There is no authorization in the Constitution.  The last president to do anything like this was Grover Cleveland.

As Ron Paul said in his farewell speech to Congress, we shouldn’t look primarily to politics for advancing liberty.  It must be done through example and through changing hearts and minds.  Ron Paul has done more to change hearts and minds than perhaps anyone in history.  There are millions of people who have a far better understanding of libertarianism due to the work of Ron Paul.

This was the low hanging fruit.  About 5 to 10 percent of the population are naturally inclined towards libertarianism.  Ron Paul spoke using his platform (the big one starting in 2007 with his presidential run) and some people found their home without having to do much research.  Now the really hard work comes.  We have to convince more people that liberty is far more beneficial and moral than big government.  There are people with these inclinations who need a better understanding.  This will be a matter of chipping away.

The future defaults that are coming by the federal government will probably help our cause in the long run.  When the politicians can’t keep the promises that were previously made, either by themselves or previous politicians, then the idea of voting for a free lunch will be up.  More Americans will be forced to deal with reality.  That will be the time when libertarians must close the deal.

In conclusion, I am happy for Ron Paul that he doesn’t have to deal with the slugs in DC any longer.  I hope he continues to work for liberty through education.  While it is possible that someone could replace him in Congress, it is doubtful.  Ron Paul is unique.

We don’t need a big advocate for liberty in Congress any longer.  He used his platform to promote his message.  We can carry on this message without needing a platform in the political arena.  We have the internet now.  The message can’t be stopped.

Right after we rang in the new year, Congress rang in the new year with more disastrous legislation.  Of course, it isn’t disastrous for them.  It is disastrous for the average American.  Most of the tax rates on income were kept in place and not allowed to go up.  This did not include tax rates on high income earners (single filers with an income over $400,000 and married filers over $450,000).  We often hear them referred to as the “wealthy”, but high income earners is a far more accurate term.  You could have someone win Survivor (the reality show) or have a lottery winner and that person may only be a high income earner for one year.  It does not mean the person is necessarily “wealthy”.

I’d say the biggest thing that will affect most Americans in the short run is that the payroll tax cut did not get extended.  The Social Security portion paid by employees will go back up from 4.2% to 6.2%.  So any low or middle income American will see 2% of their take home pay disappear.  This affects any person working in the U.S. who is reporting income.  This hurts the low and middle income brackets disproportionately.  (And it is not a “premium” for Social Security because it isn’t going into your own account.  There is no actual money for Social Security.  It has all been spent.)

Having Congress agree to allow the payroll tax cut to expire should tell us something.  It means that they are even a little scared of the massive deficits.  The Laffer Curve does not apply much to the Social Security payroll tax.  While it could hurt economic growth and employment eventually, it will not do much to change the behavior of workers.  It is not like someone earning $40,000 per year is going to work less because he is paying an extra $800 per year to the government.  So, at least in the short run, the higher payroll tax will probably lead to more “revenue” to the government.

It is no surprise that the Congress is also kicking the can again on spending.  This was easily predictable.  It is the opposite of what we need.

From everything I’ve read, it looks like no actual cuts will be made.  Anything referred to as budget cuts is actually just a smaller increase in future budget projections.  There are no cuts.  This will just make the day of reckoning that much worse.  As the days go on and things are looked at closer, we will see more pork and more items to favor those who are the most well-connected to the government.

By the way, if the Republican Party really were the party of smaller government, then it would still hold  an ace in the deck.  The Republicans have a majority in the House, which controls spending.  An easy way to balance the budget would be to refuse to raise the debt ceiling.  For right now, Geithner and the Treasury are coming up with tricks (accounting fraud for anyone else) to prevent default, even though the government debt has already passed the debt limit.

But don’t worry.  The Republicans will capitulate on the debt ceiling too.  I’m sure they will raise it by another couple of trillion dollars.  They don’t want to actually cut any spending.  They just want to continue to trick and deceive their constituency into thinking that they really want to cut spending.

At this point, my only advice is to not pay too much attention to all of this garbage.  We are still going off the fiscal cliff and the monetary cliff and the debt cliff.  It is unavoidable.  I would suggest that you prepare for it in any way you can.  And since there is not much you can do to stop the hacks in Washington DC, try to focus on things in your own personal life to help you and your family.  It looks like the economy will have to get worse before things can get better.

Harry Browne wrote a piece 14 years ago entitled “A Libertarian’s New Year’s Resolutions“.  He wrote 14 resolutions on helping the cause of liberty.  There were a few points in particular that stuck out to me.  While I have known they are good resolutions, it is not always easy to keep them.  It is good to remind yourself every now and then.

For number 2, he said, “I resolve to keep from being drawn into arguments or debates.  My purpose is to inspire people to want liberty – not to prove that they’re wrong.”

I recently read something similar by Doug Casey.  He said he doesn’t like to get into debates with people.  He doesn’t mind discussions where people can think about things and learn things.

I admit that I get sucked into this more often than I’d like.  I don’t think I can ever completely stop because sometimes I feel it is necessary to defend myself and my ideas.  But I do need to remind myself that there is no point in arguing with someone, particularly friends and family, especially when it will not change the person’s mind.  I resolve that I will try to take these discussions and instead of having arguments and debates, that I will try to pose thought-provoking questions that places the burden on the other person.

You can lead a horse to water, but you can’t make him drink.  It is important to realize that sometimes you have to introduce the water to the horse slowly and gently.

I do make certain exceptions with this though.  If you are on the radio with Sean Hannity or in some other public forum where you have a large audience, then I think it is acceptable to debate the person and be strong.  Just don’t be rude, or you and your position will look bad.  In this scenario, you are not trying to convince the person you are debating.  You are trying to convince the audience.

Another point made by Harry Browne that stuck out at me was number 7.  He said, “I resolve to acknowledge my good fortune in having been born an American.  Any plan for improvement must begin with a recognition of the good things we have.  To speak only of America’s defects will make me a tiresome crank.”

I know this is a problem for a lot of libertarians.  They always talk about the bad things.  They don’t offer the benefits of liberty enough (other points that Harry Browne made).  They complain about America, when they really mean the U.S. government.  They don’t acknowledge the benefits of living in America, even today.

If you are having trouble finding positives, I will offer a few quick ones.  America is still the best, or one of the best, places in the world when it comes to free speech, freedom of religion, free press, gun ownership, and individuality.  In particular, that last item is important.  While this may have faded somewhat, there is still a big streak of rugged individualism in the average American.  There is also no shame in being an entrepreneur and being successful in America.  A lot of Americans take these things for granted because they haven’t seen enough of the rest of the world.

I would add one more resolution for libertarians to Harry Browne’s list.  While it is important for libertarians to educate others on the benefits of liberty, don’t forget about yourself.  If you are going to be a spokesman for the cause of liberty, you should never stop learning.  You should be continually reading, writing, watching videos, or just sitting there and thinking about liberty and various issues.  Read more on issues that you aren’t as comfortable or familiar with.  Try to learn something new every day, even if it is not directly related to the cause of liberty.

I hope everyone has a happy, prosperous, and free 2013.

There is a particular point that I have been hammering home in the last few months.  It is that total government spending is what ultimately matters the most, whereas tax rates or total taxes are not nearly as significant.  This is especially important to know right now, with all of the talk about the so-called fiscal cliff.

The fiscal cliff is a combination of increasing tax rates and “forced” spending cuts.  While the cuts are almost insignificant, I think any cuts in government spending are a positive thing.  But most of the focus on the fiscal cliff right now is on the tax rates.

The federal government is spending over 3 and a half trillion dollars per year right now.  Regardless of where this money is coming from, it is being spent.  While it is not all a complete waste of resources, it is a big misallocation of resources.  The government is spending your money on things that you probably wouldn’t have chosen if you had been able to keep the money you earned.

There are three main ways that the government can get money.  It can get it through taxes, borrowing, or inflation.  I do not count “revenues” from things like the Post Office, because the revenues aren’t even enough to cover the expenses.  And even if they were, it is only because the government is using the threat of force to keep away competition.  There is also the possibility of the government selling land or buildings or other assets, but this is not common and will be disregarded for this discussion.

If the government is getting most or all of its money from taxes, borrowing, and inflation, then that capital is being drawn away from someone else.  It means that some individual or business cannot use that money.  It doesn’t really matter how it is obtained.  In one way or another, it is money (which represents resources) that is being drawn in to the government and spent.  We pay for it in some way or another.

We frequently hear that running up the national debt will burden our grandchildren and future generations.  But it is really burdening us now.  We are paying for it now.  Future generations are only paying for it in the sense that there is less savings, less capital investment, and less advances in technology than would have otherwise occurred.

Even if a private investor is buying a government bond, he is still handing resources over to the government.  I suppose the only case where the total spending scenario does not hold completely true is when a foreign central government (like China) buys government debt.  The Chinese government is subsidizing the U.S. in a sense.

I know everyone wants to focus on the taxes, because that is what you see on your paycheck.  While it might matter in the very short term, it really doesn’t matter much ultimately.  Perhaps it will matter a little in how wealth is distributed, but it means very little to the overall health of the U.S. economy.

The government could cut all taxes to zero and keep spending what it spends now.  Do you not think that you would pay for this?  If it had to resort to inflation to spend over 3 and a half trillion dollars per year, you would see massive price increases in a short period of time, with most wages lagging far behind.  So your bigger paycheck wouldn’t really get you any more.

This is why the focus must be on total government spending.  If you are going to waste time writing to your congressman, at least focus on the right thing.  Don’t tell him to keep taxes low.  Tell him to dramatically cut spending.  That is really what ultimately matters.  If spending is cut enough, then taxes can eventually follow.  Just cutting spending enough to stop the Fed from monetizing any government debt would be a big accomplishment at this point.  At least we wouldn’t be paying the hidden tax of inflation.

This whole issue of total government spending vs. total taxes is what has allowed the Republican politicians to get away with having a label as the party of smaller government.  It is easy for them to advocate lower taxes.  But lower taxes don’t matter if they keep increasing spending.  We are paying for it one way or another.

We are not burdening future generations like we think.  We are burdening ourselves now.  We are not going to see a really strong economy again until government loosens its grip.  That means that government spending must be cut drastically.  Until that happens, it doesn’t matter much in the long term what the tax rates are.

Robert Higgs has written extensively on “regime uncertainty”, particularly as it relates to the Great Depression.  In a nutshell, he says that uncertainty regarding future policy helped contribute to the lack of investment during the Great Depression.  When individuals and businesses don’t know what the laws will be in the near future, it serves as a deterrent to starting or growing businesses, along with investing in them.

We have major economic problems for a variety of reasons, but they all somehow revolve around the government (or governments if you include state and local) and the central bank (the Federal Reserve).  Spending, debt, inflation, taxes, and regulations all contribute to our problems.  With that, you can add regime uncertainty, which is the lack of predictability with all of these factors.

I am writing this post on December 27.  We go over the so-called fiscal cliff on January 1.  I don’t really include any spending cuts as part of this, as I view this as a positive thing, even if small.  But there are a bunch of different taxes that are scheduled to go up.  While the president and Congress are supposedly trying to work something out, we have no idea if any agreement will be reached, and if so, what it will entail.

As an individual, assuming you are working or making money, you don’t know what your tax rate will be in less than 5 days.  If you are a small business owner, you don’t know what your taxes will be in less than 5 days.  If you are an investor, you don’t know what your taxes will be in less than 5 days.  If this isn’t regime uncertainty, I don’t know what is.

This distorts the market in many ways.  It affects investors on their decisions to buy and sell stocks (or other investments).  It affects business owners on whether to expand their business or hire new people or even to replace someone who has left.  It affects individual workers on their decisions to save, or buy a house, or buy a car, or plan a vacation.  Even if the tax changes mean “only” $200 per month to a family, this could affect their decision making if they are on the margin.

Obamacare was bad enough.  It created regime uncertainty.  As Nancy Pelosi said, we will find out what is in the law, now that it has passed.  But for people and businesses to not know what the tax rates will be (in many different categories) in just a few days from now, it is hard to imagine that this isn’t affecting human behavior on a grand scale.  It may even encourage some people to die early.

While I still believe that overall government spending is far more important than the tax rates, the looming fiscal cliff is just another example of how the government makes us poorer.  This regime uncertainty is preventing individuals and businesses from engaging in activity that could make our lives better.  We will never get to see the new products and services that we could have had if only the government had made our laws more predictable, along with being less tyrannical.

In conclusion, it doesn’t matter at this point if we go over the so-called fiscal cliff or not.  It has already damaged and distorted our economy.

I recently wrote a post stating that I would not be shocked if we end up having another real estate bubble.  The government and the Fed are engaging in policies that distort the market and it is quite likely that some of this capital is being directed (or misdirected) into housing.

I received a comment from that post that said the following:

“You’ve recommended buying real estate as an investment, and I’m curious why that is?  What makes a single family home or a duplex a suitable investment rather than a depreciating good like a car, other than the hope that inflation might outpace the depreciation?  Just wondering what your thoughts are.  Thanks.”

As stated above, I have recommended buying investment real estate several times.  I have said this without thinking that there will necessarily be another real estate bubble.  I have multiple reasons for liking the prospects of investment real estate.  It helps that prices are much lower than they were 5 years ago.  Housing would not have been a good investment in most places 5 years ago when you can now buy in some places for almost half the price.

I also like investment real estate because of Federal Reserve policy.  With huge deficit spending and other problems still to come (like the massive unfunded liabilities), I think the Fed will continue to pursue monetary inflation, at least until price inflation gets out of control.  Since houses are hard assets, they can benefit from inflation, or at least provide some wealth protection.

It also helps that you can get a 30-year fixed-rate mortgage for under 4 percent right now.  You get to borrow money at a low and fixed rate and have your renters pay it off.  If inflation continues, then you will pay off your loan with depreciating money.

In response to the question about buying housing versus buying a depreciating good like a car, the question already has the answer.  A car is a depreciating asset.  The more you drive a car (and even if you don’t drive it) the less it is worth.  The engine wears down fast.  While both cars and houses are consumer goods, houses hold their values better.  There are repairs involved with housing too, but there are many houses that are decades old and still in good shape.  That is rare for cars.

If price inflation is bad enough, then perhaps the nominal price of a car could go up.  But the real (inflation adjusted) price will almost always go down, unless you foresee a huge shortage in cars.

The other major difference between houses and cars is that you can continue to rent out a house.  I don’t really know anyone who rents out cars, other than car companies and rental companies.  Rents are another hedge against inflation.  Rental prices for housing are likely to go up in an inflationary environment.  Even if rents do not go up as much as price inflation, you don’t need to worry as a landlord.  You may have some variabilities with taxes, repairs, and insurance, but your biggest cost is fixed.  It is even better once you pay off your loan.  So your revenue should go up more than your expenses, at least over time.

If you personally need a car to drive, it may be a good time to make a purchase if you can get good terms on a loan.  But it is only an investment in that it can get you to work and to the store.  It is more of a necessity than an investment.  But I do not see it making sense as an investment in the sense that you would buy investment real estate.

One other thing to note is that housing has an advantage even against other hard assets like gold.  As stated above, you can rent out your investment housing.  It is much easier to buy gold.  It is much easier to hold your gold.  And gold is a good hedge against inflation.  But you aren’t going to rent out your gold.  You will rent out your investment housing, which will help you pay for it and will provide a nice stream of income if you accumulate enough and start to pay off loans.  It is more work, but most things aren’t free and easy in this world.  If you get any appreciation on the price of your housing, that will be like icing on the cake.