There is an email circulating that is asking people to support a proposed 28th Amendment to the U.S. Constitution.  It is saying that people in Congress get exempted from certain laws and that the law should apply equally.

The text of the proposed amendment is as follows:

“Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States.”

I’m sure that many people will support this amendment, thinking that the politicians in Congress should not be getting away with these things.  However, I think there is something that most people fail to realize.  If this amendment were to pass and be properly enforced, then it would, in effect, abolish Congress.

While the website promoting the amendment addresses specific things like healthcare and Social Security, it fails to understand the key point that makes governments (as we know them today) unique.  The reason that a government is a government is because it exempts itself from the laws that it makes.

If this amendment were held true to its words, then Congress would not be able to tax us, start wars, enforce regulations, or do almost anything at all.  The only way that Congress and the government in general can do anything is because it is legally allowed to do what no individual citizen could do.

If you or I were to steal money or property, it would be called theft and we would be thrown in jail.  If the government does it, it is called taxation.  If you or I were to print fake money and try to use it, then it would be called counterfeiting.  When the government does it (via the Fed), then it is called monetary policy.  When we kill someone, it is called murder.  When the government does it, it is called war or collateral damage.

So as far as having laws apply equally, there is really only one that is necessary.  Tell Congress that they may not initiate force or the threat of force, as it is illegal for the average person.  If just that one thing would be applied equally, then Congress would essentially be abolished, or at least be in a minarchist state.

I don’t think the people proposing this amendment, and probably most of those supporting it, understand the unique feature of government.  Government is unique because it possesses the legal monopoly over the use of force.  Take away this one power and we have a libertarian society.

Gold is about to end the year with its 12th straight year of gains.  Of course, it hasn’t been straight up.  The fall of 2008 took gold down, along with stocks, but the price still ended the year higher than where it had started.  While you can’t get much more bullish than 12 straight years of gains, there is not a lot of excitement out there for gold right now, especially considering the circumstances.

Gold, while making slight gains in the last few months, seems to be stuck.  There seems to be a ceiling in the mid 1,700’s.  There also seems to be a floor just below 1,700.  Perhaps this is due to central bank buying, but it is anyone’s guess.  And aside from the metal itself, gold stocks have done especially poorly in the last 4 years or so.

So where do things go from here?  If anyone can tell you for sure, then he should be really rich.  Nobody knows for sure where the gold price is going, just like any other investment.  However, my best guess right now is that 2013 will be another up year for gold, at least in nominal terms.

The only way I can see gold not having a strong year in 2013 is if we have a really bad recession.  While this is certainly a possibility, the Federal Reserve is trying its hardest right now to kick the can down the road.  While it may be able to avert a recession in the short run, ultimately its policies will fail.

If we do go into a deep recession in 2013, then it will likely keep price inflation in check.  The demand for money will go up, which will, in effect, counteract the increases in the money supply.  So if we are in a bad recession and there is low price inflation, then the Fed might move on to another round of so-called quantitative easing (QE) and pump even greater amounts of money.  It is already scheduled to add $85 billion per month to its balance sheet.

So even if we do have a recession in 2013, the Fed will probably just continue to make things worse, which will ultimately make things better for gold.  And if we don’t have a recession in 2013, then gold should do quite well in the short term.  Either way, recession or no recession, gold is probably a good buy right now.  The only question is if there will be an even better buying opportunity in 2013.

If you are like me and you are betting on a higher gold price, then you can invest in gold by buying the actual physical metal or something like an exchange traded fund (ETF).  There are also companies where you can purchase gold and have them store it for you.  These are the best ways to play the price of gold.

So what about gold stocks?  These are a little trickier.  We have seen gold stocks do much worse than the gold price in recent years.  But it doesn’t always have to be this way.  I think gold stocks are far riskier, but they also offer more reward because of the high leverage.  If we hit a gold euphoria stage (and we haven’t yet), then I can envision gold stocks really taking off.  You could see some stocks go up ten-fold easily.  But just as a word of warning, if we do get a recession in 2013, expect gold stocks to get really hammered down.

In conclusion, I think gold, as an investment in the short term, will depend upon whether we have a recession in 2013.  But either way, it should be a strong investment over the next few years.  There is no sign of big price inflation yet and the Fed will be creating money out of thin air as fast as Congress can spend it.

Since the latest FOMC statement, it is surprising how little impact there has been.  With the Fed starting QE4, or whatever we want to call it, there has not been a strong reaction from the stock market.  In fact, the market ended up down today (Thursday), the day after the announcement.  So a day after the latest QE (so-called quantitative easing) is announced and stocks, bonds, and gold are all down.

I have always liked the analogy of injecting monetary stimulus into the economy to a drug user shooting up and getting high.  Just like the economy, the drug user has to continually inject more drugs into his body.  If he doesn’t, he will have severe withdrawal symptoms.  But the more he injects, the more severe the pain will be down the road.

There gets to a point where the drug user injects even more and it doesn’t even give him a high. It seems to have little effect.  So while he doesn’t feel any better from the latest injection, he has made his condition even worse and will suffer an even more painful withdrawal in the near future.

This is what has happened with the latest Fed monetary inflation announcement.  With past QE announcements, at least the stock market went up.  This time, it is not even doing that.  No matter how hard the Fed tries now, it can’t give a boost to the economy.  But it is making the conditions worse for a more painful downturn in the future.

It has been a struggle between recessionary forces and inflationary forces for a while now.  Think of a tightrope walker who is losing his balance.  He keeps tipping from one side to the other.  In order to prevent himself from falling, he has to overcompensate and then ends up leaning too far to the other side.

The Fed is fearing another deep recession and is trying to overcompensate with monetary inflation.  If it “succeeds”, then we will have massive price inflation ahead.  If its QE schemes are not enough, then we will go into recession anyway.  If it somehow finds the right balance, then it will prolong things a little while longer.  But eventually it will run out of rope.  We could end up with a scenario of the 1970’s where we have high price inflation and recessionary conditions at the same time.  Unfortunately, if we see a repeat of the 70’s, we should consider ourselves lucky.  It will probably end up being worse.

I really believe that Bernanke and the Fed don’t know what they are doing at this point.  Nothing has worked and they keep making things worse.  While I think that ultimately the legal tender laws should be repealed and the Fed should be stripped of its monopoly power over money, we at least need someone like Paul Volcker right now.  The monetary inflation must stop and Congress should be forced to cut spending in the face of rising interest rates.  Until then, they will only continue to damage the economy and make the coming economic troubles worse.

A man with a white beard delivered an early Christmas present.  While he might like to think of himself as Santa Claus, unfortunately he is not.  He is Ben Bernanke.  They both like to deliver gifts, but Santa delivers toys that are made by elves.  Ben delivers stimulus at the expense of other people.

The FOMC released its statement from the December meeting.  Another round of monetary expansion has been announced.  This is on top of the announcement from September.  September’s announcement was labeled as QE3 or QE Infinity.  I’m not sure what that makes this December announcement.  It can’t really be QE Infinity plus 1.  Perhaps we could call it QE 3 and a half.  Or QE4.

The Fed will buy $45 billion per month in longer-term Treasury securities.  I assume this is net, because the statement also says that it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities.  So with $45 billion per month in government debt and $40 billion per month in mortgage-backed securities (announced in September), the Fed will be adding about $85 billion per month to its balance sheet.  If it does this for all of 2013, then the monetary base should go up another $1 trillion.  Just remember that it was less than $1 trillion before the fall of 2008.

While the monetary base has not really gone up yet since the September announcement, I assume that the Fed is not bluffing here.

The other thing in the statement that may have received even more attention is that the Fed will keep the federal funds rate at 0 to .25% as long as unemployment stays above 6.5%.  Or at least that is what most of the headline articles are saying.  But we have to read the fine print.

The statement says, “In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”

With all of this monetary inflation, it is not hard to imagine seeing price inflation go up to 3 percent or more very quickly.  So, in other words, the statement regarding unemployment is meaningless.  Of course, it is meaningless anyway because the Fed isn’t directly controlling the federal fund rate now anyway.  The commercial banks have massive excess reserves from the Fed’s previous monetary inflation.  Unless the Fed drastically raises reserve requirements or forces the banks to lend, then the federal funds rate isn’t going up anytime soon anyway.

While I don’t think the comments about the federal funds rate are significant, I do think the announcement of more monetary inflation is significant.  It is a further misallocation of resources.  It is further damaging the economy and encouraging less savings.  We will all pay for this with a lower standard of living.  If you have been procrastinating in buying gold investments, I wouldn’t procrastinate any more.

Since it is Christmas time, it is a good time to discuss its effects on the economy.  It is a common question for people to ask if Christmas shopping is beneficial to the economy.  I have discussed this before and it is a basic element of economics that is important to understand.

There is this common misconception that spending drives the economy, particularly in the U.S.  If this is the case, then surely Christmas time must give a real boost, since the average American family spends far more in late November and December than at any other time of the year.

The whole notion of helping an economy through consumer spending is one big fallacy.  It is a Keynesian fallacy.  While spending may temporarily make things look better, it only means that there will be less to consume later.

A society can only consume what is first produced.  Without any production, there is no consumption. So in this respect, the long-term consumption habits of a society are actually a decent measure of productivity, unless the society continues to save vast amounts of capital.  But it is important not to confuse correlation with causation.  Spending does not cause productivity.  Productivity is what allows us to spend.

It is also important to note that spending is not a good measure of productivity at any given time.  A society could currently be consuming more than it is producing based on previous productivity.  This will be a problem down the road.  A lack of savings and capital investment now will lead to a lower standard of living in the future.

If consumer demand were all that mattered, then virtually every place inhabited on earth would be wealthy.  Does anyone actually think that people in India and Africa are poor because they don’t have enough consumer demand?  That is ridiculous.  I’m sure most poor people would love to have big screen televisions and iPods and fancy cars.  The reason that people in a society are poor is because productivity is low.  The reason productivity is low is because of a lack of savings and investment.  The reason for the lack of savings and investment is usually due to a lack of free enterprise and property rights.

Just to be clear, there is nothing wrong with Christmas shopping and spending.  If the spending is sustainable, then you are simply reaping the fruits of your labor.  Each individual has the choice of what they want to buy and how much they want to spend.

But just as a society can only consume what it first produces, the same is generally true of individuals and families, assuming minimal government welfare.  If you produce more than you consume, then the difference is your savings.  In order to consume more than you produce, then you must draw down prior savings or else get someone to lend you the money.  The lender is counting on your future production to get paid back.  And just like a society, an individual’s long-term spending habits are probably somewhat reflective of his productivity.  If the individual consumes beyond his productivity, then it won’t be sustainable and he will be forced to cut back on his consumption.

In conclusion, while there is nothing wrong with spending, including Christmas shopping, it does not cause a boost in the economy.  If you want to spend more in the future, whether we are talking about a whole society or an individual, then you must produce more.

Ron Paul is looking better and better every day.  That is because most everyone else is looking worse and worse – at least in Washington DC.

I don’t think most people, whether they are supporters or not, realize how much of a one-of-a-kind guy Ron Paul really is.  It is hard to find people in history that come close to matching him.  He was elected into Congress by campaigning as a libertarian and, even more astonishing, actually held true to his principles.  Sure, libertarians can quibble over a few tough votes over his more than 22 years in Congress, but he basically held true to his beliefs the whole time.

It is hard to find people in history like this.  Thomas Jefferson, while a great defender of liberty, was a terrible president.  Andrew Jackson was probably one of the few politicians who was actually more pro-liberty when in office, but he was certainly no libertarian by Ron Paul’s standards.  Grover Cleveland was pretty good as president.  Howard Buffett, father of big government Warren, was probably the second best congressman for liberty in the 20th century (Ron being the best).

While I have known for a while that Ron Paul is truly unique, this past week has just solidified it even more in my head.  Last week, Rand Paul (Ron’s son) made the disgusting move of voting for the National Defense Authorization Act.  The senate bill that he voted “yes” on is anti-liberty in too many ways to name.  While Rand never claimed to be a libertarian, he did try to take the mantle of being a libertarian-leaning conservative.  Sure, compared to John Boehner and Mitch McConnell, it is not hard to be relatively libertarian.  But Rand’s vote for the NDAA should prove to everyone that he is a politician first and he will always play politics when it suits his needs.  His principles come second.

Another interesting incident happened with Justin Amash, a congressman from Michigan.  When he was first elected a couple of years ago, Amash said that he would vote similar to Ron Paul.  Now after having been re-elected, Amash commented about the “fiscal cliff” and the debt problem.  He reportedly said, “I am not going to take anything off the table if we can resolve some of our biggest issues as a country.”

In other words, Amash is willing to increase taxes and hand even more money over to the government. He hasn’t even been a congressman for two years and he has already failed to live up to Ron Paul’s standards.  What kind of a libertarian would consider raising taxes when the government is spending over 3 and a half trillion dollars per year and taking about 20% of the GDP, while making up the difference through borrowing and monetary inflation?

I think most of the people attracted to politics are drawn to power.  Because there is a lot of power available in Washington DC, it tends to attract the worst elements of society.  But I’m sure that some people go there with good intentions.  However, it is obvious that they cannot avoid the temptations.  They ultimately cannot resist the power.  Power corrupts.

The recent votes by these two politicians, who are generally considered pro-liberty, should be enough to prove to libertarians that our answers do not lie in politics.  It is not about electing the “right” people into office, because most people cannot be trusted with power.  The only way to win this fight for liberty is through education.  When there are 10 million people who are willing to withdraw their consent, then we have a real chance of achieving something big.

Libertarians have to realize that Ron Paul’s career in Congress was really unique.  He is a rare person who did not get corrupted by the power that was available.  Instead of trying to duplicate his success in being elected, we should instead try to duplicate his success in educating others.  While political office can serve this goal, it is rare that anyone uses their platform strictly for educational purposes.  With the internet and with Ron Paul’s popularity to build on, we don’t need political offices for success.  We just need more education.  As hearts and minds change, so will policy.

With mortgage rates at or near all-time lows, and with the expectations of possible lower rates due to QE3, many people are wondering if they should refinance their mortgage.  The mortgage rates tend to be highly correlated to the 10-year treasury yield.  As of this writing, the 10-year treasury is at about 1.64%.  This is near the record low that was reached about six months ago, when the yield went just below the 1.5% mark.

It is impossible to know for sure what happens from here.  The Fed announced QE3 back in September, in which it promised to buy $40 billion per month in mortgage-backed securities.  While it hasn’t shown up in the adjusted monetary base yet, this should lower mortgage rates, assuming the Fed ends up following through on what it said.

Of course, there is a possibility that all of this monetary inflation leads to price inflation, which then in turn leads to higher interest rates.  This would eventually be bad for mortgage rates, but it is hard to know if this is right around the corner or if recessionary conditions will keep price inflation relatively low for a few more years.

So here is my suggestion regarding the decision to refinance, assuming that you are in a position to do so.  If, for example, you currently have an interest rate at 5%, and your home equity and credit score are good enough that you can get a 30-year fixed rate mortgage for 3.5% or less, then I would suggest refinancing now.  This is assuming that you plan to not sell your house within the next few years.  There would be enough of a difference in your monthly payments to justify a refinance now.  If rates go down to below 3%, you will not have lost out on that much.  But if rates jump higher sooner than expected, then you will lose out.

On the other hand, if you are right on the margin, it would probably pay to wait.  If you have a current rate of 4% and you can get a new rate at 3.25%, then you can take the chance of waiting for an even lower rate.  If you are wrong and rates go higher, the difference won’t be enough that you will be really mad at the lost opportunity.  But if rates go below 3%, then it may be worth it to you at that point to refinance, assuming that your refinancing costs are a low enough percentage as compared to your loan value.

The Federal Reserve is subsidizing the banks and the government, and it is misallocating resources on a grand scale.  But if you can take advantage of low rates on a refinance and save yourself a hundred dollars a month or so, then you should take what you can get.  If you are right on the margin of whether a refinance is worth it, then I suggest you wait.  If you can significantly improve your position now by refinancing, then don’t wait.

The U.S. Senate has passed the 2013 version of the National Defense Authorization Act (NDAA).  The previous version of the NDAA was an extremely controversial bill in that provisions essentially allowed the permanent detainment of American citizens.

While the 2013 version of the NDAA has an amendment that is supposed to guarantee a jury trial for Americans, it still permits the president to detain Americans.  In fact, the amendment may be worse in the fact that it is more explicit in its permission.  In addition, the amendment applies to Americans.  I guess non-Americans have no rights and the politicians can play with them like they are little toys.

The Senate passed this bill unanimously.  It was 98 to 0, with two senators not voting (Kirk and Rockefeller).  Whenever the media or politicians talk about bipartisan support for legislation, you should cringe.  And this bill is no exception.  Legislation that is passed unanimously, or close to it, are usually the most anti-liberty bills out there.

There are 100 senators who are supposed to represent their state and people, and yet not one could vote against this atrocity.  This should be a message to all Americans that the government is not on their side.  The senate is loaded with a bunch of thugs.

Rand Paul, son of the great libertarian Ron Paul, has shown his true colors again.  Based on this vote alone, I will absolutely never support one of his campaigns, whether it is for senate or president.  He has just shown that he has very little in the way of principles and he should be ashamed of what he is doing, especially since his father has been such a great example.

Not only is this legislation atrocious in its violation of basic human rights, it is also a massive boondoggle in spending.  Its spends $631 billion on the Pentagon.  And Rand Paul claims to favor a balanced budget?  Just based on the massive spending alone, this would be a “no” vote for anyone who favors liberty.

A spokesman for Rand Paul admitted that the amendment did not do enough to preserve due process, but said it was a step in the right direction.  If this is the right direction, then I want to be wrong.  I don’t want to go in that direction at all.

This whole thing is disgusting and any American that values liberty should be disgusted.  These people are thugs, pure and simple.  This is not a free country.  It is up to the American people to put a stop to this.  We must withdraw our consent.  If we let the government provide us our healthcare, our retirement, and education for our children, then we are going to end up with things like the NDAA.  When you give the government power, the politicians will continually try to build on it.  We must not permit this power.  These people in the senate are evil and they must be stopped.  I encourage everyone to withdraw any support or consent.

It is fairly well understood that libertarians and Republicans (not including the libertarians who are registered as Republicans) are quite different on some issues.  On civil liberties and foreign policy, you could almost say they are opposites.  But it is assumed that Republicans and libertarians are much closer on fiscal issues.  Perhaps this is true in comparison to the Democrats and libertarians, but it should be known that Republicans and libertarians are generally quite different, even on economic and fiscal issues.

I heard a few minutes of Marco Rubio (Republican senator from Florida) on Sean Hannity’s radio show.  Hannity asked him about John Boehner (Speaker of the House) and his proposal to raise tax “revenue” by closing so-called loopholes and reducing deductions.  Rubio gave his compliments to Boehner, but said he disagreed with him on how we should increase government revenue.  Rubio said we should do it by generating economic growth and increasing employment.

So while Rubio is not in favor of raising tax rates and is apparently not in favor of reducing deductions, he is saying that he has a goal of increased government revenue (I hate that word in this context) to close the budget deficit.

For radical libertarians, this should be appalling.  Rubio admitted that he wants more money going to the government.  For most libertarians, they want less money going to the government.

I am a defender of the Laffer Curve in that it makes sense that higher income tax rates do not necessarily lead to higher government tax collections.  If you raise the tax rate to 100%, who is going to work?

But I am not a defender of the Laffer Curve when it is used simply for the goal of maximized government tax collections.  I don’t want the government to get more money.  I want them to get less.  In fact, there is no evidence that an increase in tax collections would decrease the budget deficit anyway.  The government would probably just spend more, leaving the budget deficit just as big (or even bigger as seen in the Reagan years).

All of this focus on taxes is a major distraction.  There is only a tax problem because there is a spending problem.  If government spending were drastically reduced, then we wouldn’t have to worry about high taxes and government “revenue”.

It is all about the spending.  As long as the government continues to fund virtually every human activity, then we are paying for it in one way or another.  It is consuming and misallocating resources.  It is making us poorer than we should be.  It will only stop when the American people put a stop to it or there is a major default.  We’ll wait and see which happens first.

It is challenging and difficult to be a libertarian, particularly when the government is growing its power by leaps and bounds almost every day.  It often gets tiring trying to defend pro-liberty positions against those with a closed mind.

I remain a long-term optimist, although many libertarians even find that hard to believe.  They think that human tendency is always on the side of wanting to be told what to do.  While that certainly can be a tendency, it does not necessarily mean that we are doomed towards statism forever.  There is also a tendency among many individuals to prefer liberty over being told what to do.

One thing I hear from the anti-liberty side quite frequently is that if you don’t like it here (America), then you should leave.  Of course, there aren’t many places on earth that you can go to without having big government in your face.  Some places are better than others, but you can’t find total freedom anywhere, unless you want to live on a lonely island somewhere in the middle of the ocean.

Imagine applying this argument of moving to the American colonists.  Tell Thomas Jefferson and Thomas Paine, “if you don’t like British rule, why don’t you just move somewhere else?”

Many people confuse their government and their country.  Just because I criticize the U.S. government (although I criticize every government), it doesn’t mean I don’t like America or Americans.  In fact, it is quite the opposite.  I appreciate my fellow Americans so much that I want to be able to voluntarily trade with them, do business with them, and live in peace with them.  I also want a higher standard of living for Americans and for people all around the world.

I want more peace and more prosperity.  I don’t want to see needless suffering, war, poverty, starvation, disease, and all of the other horrible things around the world.  While we can’t press a magic button and make all of these bad things go away, we can work towards significantly improving things.  And this will only be done through liberty.

The only way we can achieve more liberty is by reducing government.  The only way we can reduce government is by convincing others that their lives would be better off.  It is all in the hearts and minds of the people.  If a substantial portion of the population no longer believes in big government (and not just in words), then big government will not survive.  Government can only continue by having the consent of the large majority of the population.

The good news is that we don’t even need a majority to turn back the tide of big government.  If only 10% of the population is well educated in libertarian philosophy, then this may be enough, assuming that a good portion of the population remains somewhat apathetic.

I almost laugh when I hear young Ron Paul supporters talking about how bad things are and how stupid some people can be.  I think to myself (or sometimes say it), you should have seen things ten or twenty years ago then.  With the internet and the last two Ron Paul presidential campaigns, there are probably more libertarians now than there have been in at least a hundred years or more.  I would even venture to say that today’s libertarians are far more libertarian than the American colonists (even if the percentages today are still lower).

Government can be reduced.  It is not about elections or convincing your representative to sponsor a particular bill.  It is not even much about money, especially now with the internet.  It is about spreading the message of freedom and how almost everyone will be better off with more liberty and less government.  Once hearts and minds are changed, then the government will start to change to reflect that.

With the continuing advancements in technology and the growing liberty movement, the prospects for liberty in the long run are actually quite good.