With the third round of quantitative easing set to begin, there are some people saying it is time to short bonds.  In fact, many of these people are libertarians and Austrian school economists.  They believe that a rise in interest rates is inevitable, as the Fed creates more money out of thin air.

If you look on the right side of my blog page, I link to Charles Goyette’s book called The Dollar Meltdown.  I highly recommend the book.  However, there is one point that I have been critical on with regards to Goyette’s suggestions.  He suggests shorting bonds, predicting that interest rates will rise.  He actually predicted this a few years ago and he has been completely wrong.  I don’t think it is a good idea to compete with the Federal Reserve, the biggest bond buyer of them all.

This doesn’t change with QE3.  While the Fed will buy more in the way of mortgage-backed securities, it also indicated that it will roll over expiring government debt.  While I agree with Goyette and others that interest rates will eventually rise, I have no idea when and I don’t think it is wise to assume that it will be sometime really soon.

So when will be the right time to short bonds?

Bonds go down in value when interest rates go up.  As long as the Fed is buying debt and price inflation remains relatively low, then I see no reason why rates would go up.  Interest rates are only likely to go up significantly when the Fed stops with its so-called quantitative easing.  When the Fed stops buying government debt, then rates are more likely to rise without the support.  And we can only rely on the Fed to stop creating new money out of thin air because of the threat of high price inflation.  The Fed doesn’t see price inflation as a threat right now, so it is creating money to bail out the banks and to supposedly stimulate the economy.

So until we see a pickup in the government’s price inflation numbers, then I don’t see any significant rise in interest rates taking place.  Price inflation will be the canary in the coal mine for interest rates, not the other way around.

So what would be the point of shorting bonds right now?  You could be waiting for a while before it starts to pay off.  In the short-term, you could easily lose money on this bet.

If you are going to speculate right now, why not buy something that does well with higher inflation?  Higher inflation is much more likely to occur before higher interest rates.  Therefore, for speculation, you should be buying hard assets like precious metals, mining stocks, oil stocks, real estate, etc.  These will all benefit from a depreciating dollar.

In conclusion, I don’t think now is the time to short the bond market, particularly while the Fed is engaged in quantitative easing that hasn’t yet produced high price inflation.  There may be a good time in the future to short bonds, but that will not be until we see higher price inflation.

The Daily Caller had an article on a new Gallup poll that showed 47 percent of Americans think that the government regulates too much.  The first question that popped into my head after reading the headline was, “What are 53% of Americans smoking?”

I spend a lot of time on this blog talking about monetary policy, government spending, and even taxes.  But we cannot ignore the huge burden that is placed on us from government regulations.  They lower our overall standard of living considerably.  They make wages lower.  They make prices higher.  They deter entrepreneurs from starting businesses.  They cause unemployment.  They are, in effect, a giant tax.

It is not just well-known regulations like Sarbanes-Oxley and Dodd-Frank.  They are horrible enough and put a huge cost on businesses.  There are tens of thousands of regulations.  Major companies have entire departments devoted to figuring out and complying with regulations.

It is actually probably easier to start a business in communist China than in capitalist America.  China has less red tape.  I think the U.S. is still stronger as far as property rights, but China has less bureaucracy in many ways.  Chinese businesses, operating in China, are not worried about such things as the Americans for Disabilities Act, which by the way, actually deters companies from hiring disabled people.

Repealing regulations is something that could be done almost instantly and few people would feel the pain.  It is not like cutting Social Security and Medicare.  It is not like cutting highway funds where either the state and local governments have to make up the difference or else the roads and traffic become worse.  If federal regulations are repealed, the only ones who experience short-term pain are the workers for the government agencies administering the regulations and the workers who help their companies comply with them.  I suppose that big companies might also suffer, in that they can’t use government as much to prevent competition from smaller businesses, but is that a bad thing?

While repealing thousands and thousands of regulations isn’t an answer to all of our problems, it is a low-cost way of helping the economy tremendously.  53% of Americans have no idea just how many regulations there are and how dramatically they affect their standard of living.  In fact, I would bet that a good portion of the 47%, who think government regulates too much, realize just how extensive the damage is.  They are correct in saying that there is too much government regulation and they probably only know a tiny fraction of the regulations in existence.

I think this is one area where Americans can unite in calling for smaller government.  It is not like Social Security where one group benefits at the expense of another.  Most people can benefit from less government regulations and more regulations from the free marketplace.  If America is ever to be truly prosperous again, it can’t happen with the level of government regulation that currently exists.

While I believe that the main reason for QE3 is to bail out the major banks, one of the reasons that was given for QE3 is to stimulate the housing market.  So will QE3 help the real estate market?

The Fed is going to buy mortgage debt for this round of quantitative easing (money creation), instead of its typical method of buying regular government debt in the form or treasuries or bonds.  This is supposed to lower mortgage rates and help stimulate housing demand.

QE3 may or may not lower mortgage rates significantly.  Rates are already at or near all-time lows.  If you have good credit and a good down payment, you can get a 30-year fixed-rate mortgage for as low as 3.5% in some places.  Anything under 4% is really incredible.  I suppose if rates somehow go below 3%, then this will help the housing market on the margin.  However, I would think that most people who could buy a house and wanted to buy a house would have already done so.  So again, I think lower rates would help on the margin, but not very much.

There is a bigger issue that seems to be missing in many commentaries regarding real estate and QE3.  QE3 is inflation.  It is the creation of new money out of thin air.  If the demand for money doesn’t change (or goes down), then the increased money supply will eventually lead to higher prices.

In an inflationary environment, people go into hard assets.  This can be gold, silver, oil, stocks (yes, owning stocks are a claim on the assets of a business), paintings, diamonds, baseball cards, etc.  Of course, a house is also a hard asset.  Therefore, house prices will probably go up if we see significantly higher price inflation.

Housing prices may not go up in real terms.  In other words, if you adjust for price inflation, prices could still go down.  There is still a lot of inventory owned by banks and there are a lot of delinquent “home owners”, who really aren’t home owners at all.  The banks essentially own their homes, but they don’t want to go through the expense of foreclosing.

Just for an example, maybe we will see price inflation hit 10% per year, while housing prices are going up 5% per year.  Prices would be going down in real terms, but up in nominal terms.  It is still a better investment than having your cash in the bank, at least right now.  Plus, if you have a mortgage, then you would be paying it off with depreciating money.  The payments, adjusted for inflation, would be getting cheaper and cheaper as time went on and inflation kept going.

Of course, it is possible that housing prices could go up faster than price inflation.  However, I would be surprised to see another housing bubble start right now because so many people were burnt by the last one.  I think a bubble in another hard asset, like gold, is far more likely at this point.

If you are in the right position, investment real estate could be the deal of a lifetime right now.  You can buy at depressed prices with super low mortgage rates.  If price inflation picks up substantially, you can pay down your mortgage with depreciating dollars.  Meanwhile, rents will probably go up.

In conclusion, my guess is that QE3 will help the real estate market, but the low mortgage rates will not account for most of it.  It is the simple fact that money creation leads to higher prices in hard assets.

It is usually hard to tell how a third-party candidate is doing before an election.  It is not any different this time in the presidential race.  Libertarian candidate Gary Johnson is reportedly doing fairly well in the polls, at least for a Libertarian candidate in a national election.  Some polls have him as high as 3 or 4 percent and he polls even higher in some states, particularly his home state of New Mexico.

Polls don’t mean all that much though, particularly for a third-party candidate.  Many voters are spooked at the last minute and don’t want to supposedly throw away their vote.  They end up voting for the lesser of the two evils, whoever that may be in this case.

As I’ve written before, the Libertarian Party had a real opportunity in this election to put up a principled candidate and draw in most of the Ron Paul supporters.  While Johnson may get some Paul supporters, I doubt if it will be a majority.  Johnson is just not as principled.  He doesn’t have that radical side that appeals to so many libertarians.  Instead, we get this:

It is bad when Johnson makes the war hawks on Fox News seem happy.

I will be surprised if Johnson ends up getting one percent or more of the vote.  Based on Ron Paul’s campaign, the Libertarian Party candidate should be getting at least two percent in this election.  It should be by far the best showing ever for the LP, yet it won’t be.  It is disappointing, because it would have been interesting if there were a principled libertarian in the general election.

The hardcore Gary Johnson supporters will be paying attention on election day.  They will be disappointed.  They are hoping he gets into the debates.  He won’t.  They are hoping he will at least be a spoiler, but how can you ever know if someone is a spoiler?  People that vote for Johnson probably wouldn’t have voted for Romney or Obama anyway.

While Johnson is probably less evil than Obama and Romney, I don’t see him as having a strong set of principles.  He doesn’t completely understand what it means to be a libertarian.  He is not that great on economics and he apparently, from the video above, isn’t that great on foreign policy.  Unless I see some dramatic change in him in the next 6 weeks, he will not be getting my vote.  My vote will go to Ron Paul or nobody at all.

This will be a wasted election for the Libertarian Party, just as it was in 2008.  There is almost zero chance of winning, so how can the party and the cause of liberty benefit from running a candidate?  The only benefit is if the candidate helps educate others and gets more people interested in the message of liberty.  Ron Paul’s campaign did that.  Gary Johnson’s campaign is not doing that.

The latest FOMC statement announced another round of quantitative easing or money creation, without actually using those words.  It said that it would start buying an additional $40 billion per month in mortgage-backed securities (MBS), without saying for how long.  I wrote on this the day the statement was released.

One of the things I touched on was that I thought this might be a bailout for the banks.  I have not seen anything to the contrary to change my mind about this.  Let’s look at it further.

The Fed is going to buy $40 billion worth of MBS each month.  Or is is really $40 billion worth?

After the fall of 2008, the Fed started buying MBS, but they were paying the amount that was shown on the books of the banks.  In other words, the Fed was paying a much higher price than they were worth.

Mortgage-backed securities are essentially many mortgages lumped together.  It is like a mutual fund of mortgages.  When the real estate bubble crashed, starting around 2006, these assets went way down in value because many people were defaulting on their mortgages.

If someone gets a mortgage and makes a down payment in the purchase of a house, then the bank making the loan is usually safe.  They have the house itself as collateral, in case the person defaults on the mortgage.  However, the real estate crash caused a major problem.  If someone took out a loan for $200,000 and the house is now only worth $140,000, then the bank holding the loan is going to take an approximate hit of $60,000 if the person paying on the loan defaults.

In the above example, the bank was still holding the value of the loan on its books at approximately $200,000.  However, because there was a default, the bank can really only recover $140,000 (not counting other expenses and commissions).  But the Fed came in and bought this loan from the bank for $200,000.  The Fed paid the book value instead of the actual market value.

This is a bailout for the bank.  The crash of the real estate bubble and the major defaults on mortgages was probably the primary reason that so many major banks were on the brink of insolvency about 4 years ago.  (I am not including the fact that banks were lending on fractional reserves, which doesn’t help the insolvency.)

So the Fed bailed out the banks and one of the primary ways of doing so was by buying these so-called toxic assets.  It overpaid for these mortgage-backed securities.

So the big question is: what value will the Fed pay now with QE3?  I have seen nothing to indicate that the Fed will pay market value.  If anyone has anything to prove me wrong on this point, please present it.  As far as I’m concerned, the Fed will be buying these securities based on a previous value that is no longer realistic.  They might pay $40 billion for securities in a month that are only worth, say, $25 billion.

The Fed’s primary reason for its existence is to support the big banks.  Its secondary reason is to fund Congress and its deficit spending.  QE3 is being implemented to support the big banks, along with Fannie and Freddie.

It almost makes me laugh to hear everyone debating the reasons for QE3 and whether it will work.  The whole thing is a facade.  The Fed isn’t doing this to help the economy, except maybe in the sense that it is keeping the big banks afloat.

My theory is that the Fed took a lot of heat for the bank bailouts that happened almost 4 years ago.  So instead of calling this a bank bailout, they are just implementing policy to help the stagnating economy, or so they say.  However, the real reason is to prop up the big banks.

Now, I don’t know if the big banks are on the verge of collapse and this is being done to prevent that, or if this is just a way to make the banking executives richer.  But I am rather certain that the main purpose of QE3 is to bail out the big banks.

The rationale for buying mortgage securities doesn’t even make much sense.  Mortgage rates are already near all-time lows.  Is lowering the rate by another half a percent going to really stimulate the housing market enough to significantly affect unemployment?  If the Fed wants to create money out of thin air and stimulate the economy, why can’t it just buy government debt as it has traditionally done?  There is no doubt that there is plenty of it to buy.

In conclusion, QE3 is another bailout of the big financial institutions.  The Fed has pulled one over on the American people.  I do not see this being discussed elsewhere, even amongst libertarians.  While many people understand that QE3 will not work to help the economy and will only make things worse, QE3 will work exactly the way that the Fed intends.  It will help the big banks.

Walter Williams and Thomas Sowell are often linked together.  Perhaps it is because they are both older, black, and conservative (at least viewed that way) and they both specialize in economic issues.  In addition, the two of them are friends and speak highly of each other.

As a libertarian, I have a strong preference towards Walter Williams and I always have.  Earlier this year, I wrote a rather scathing post about Thomas Sowell.  I am highly critical of him and I do not consider him to be a libertarian.

I am much more sympathetic towards Walter Williams.

Thomas Sowell is a great writer.  He is often witty and eloquent with his words.  If Sowell has any advantage over Williams, this is it.  That is not to say that Williams is not a good writer.

One major difference is that Williams sticks to his knitting.  He mostly focuses on the things he knows well and can explain well.  He particularly focuses on economic issues.  He also writes about cultural issues in the black community.  I agree with most of what he writes.

On a rare occasion, Williams will wander from his niches and write about foreign policy.  This is where he is weak (at least from a libertarian standpoint).  He doesn’t understand how many problems the U.S. empire creates throughout the world.  He doesn’t really understand the concept of blowback, or at least hasn’t shown that he does.  Perhaps he doesn’t know his history well enough.

I consider Williams and Sowell to be both pro war.  But Williams doesn’t talk about it much, so I can tolerate him.  Sowell wanders off into foreign policy quite a bit more.

But even aside from these issues, I have always had a preference for Williams over Sowell.  Last week, I read an article by Walter Williams that clarified it all for me.  In the article, Williams discusses the fact that the Constitution gave Congress the ultimate authority to tax and spend.  He says that a president cannot spend one dime that is not first appropriated by the Congress.

Williams goes on to stress a point that I often make and that we rarely see in the mainstream media.  He points out that a Republican-controlled House of Representatives controls the purse strings.  He even points out that if the Republicans were really against Obamacare, they could pass an appropriations bill that would deny money for it.

So this is the biggest difference between Sowell and Williams.  Williams is highly critical of the Republicans.  Sowell is mostly an apologist for the Republican Party.  Sowell will criticize Obama and Democrats all day long, but then barely says a harsh word about Bush or the Republicans.  (I say Bush because of the 8 years of damage that he did and the fact that Obama has simply continued most of his policies and spending.)

In conclusion, I will take Walter Williams over Thomas Sowell any time.  At least Williams sounds like a libertarian a good part of the time.  Sowell thinks we can get smaller government by turning to people like Newt Gingrich and other Republican hacks.  Sowell will never learn.  He will keep doing the same thing over and over again.  He thinks this time is different, but we keep getting the same results: bigger government.  Sowell is the definition of insanity.  Meanwhile, Williams understands that the Republicans are a major part of the problem.  He should pass the message along to his good friend.

With the announcement of QE3, gold and silver bulls are excited again.  While most people will not benefit from QE3, it is certainly a good idea to ease some of the pain by owning some investments in hard assets, gold and silver included.

I have always favored gold over silver.  It has more characteristics of acting as money.  Gold is primarily used for jewelry and for investing/ saving.  Only a small percentage is used for other purposes.  Meanwhile, silver is used more as an industrial metal.  It is also used for the purpose of investment and savings, but usually to a lesser extent.

Gold also has an advantage right now in that central banks are tending to buy gold instead of sell it.  It hasn’t always been this way.  But this alone has seemed to put a floor on the price of gold.  If there is a drop, a country such as China will buy some.  Central banks don’t buy and hold silver that I know of.

Gold tends to be far less volatile than silver.  This sometimes gives an advantage to silver in a metals bull market.  But when the crash comes, it comes hard for silver.  We have seen that just in the last few years.

Therefore, if you are going to invest in silver, I suggest a much smaller percentage than your gold holdings, in terms of dollars.  Silver is much riskier and you really don’t need the high volatility.

With all of that said, it would not surprise me to see silver outshine gold in the next few years, assuming we don’t have a big crash.

Aside from its history of higher volatility, there is another reason that I think silver might far outperform gold if QE3 continues.

QE3 will hurt the average American, just as QE1 and QE2 have.  While people like to see the stock market go up, this does not mean that much to the average American.  Most Americans don’t own a lot of stocks outside of their 401k plan.  Meanwhile, more money creation, which QE is, will only cause prices to go higher.

This is going to be a theme that I revisit often.  The average American is hurting.  We may not officially be in a recession, but it doesn’t matter.  I can see it on the street.  I talk to friends and coworkers.  I know how hard it is for people who are employed.  I can only imagine how difficult it is for the unemployed.

The average American is paying more and more each year for medical expenses and insurance.  It also costs more for a trip to the grocery store and to fill up a car.  While the price inflation index is going up only modestly, wages are not keeping up.  Real wages are stagnant or even down.  The average American is having trouble understanding why his standard of living seems to be going down, as long as you don’t count the new technological gadgets.

So what does this have to do with gold and silver?  Simply that most Americans do not have much in savings outside of the equity in their homes (which is far less now) and their retirement plans.  Most Americans do not have much in the way of liquid savings.  So if we hit a mania in the metals market and people think that inflation is getting out of control, they aren’t going to be able to buy gold if they want to.  It will be possible for someone to scrounge together $35 for an ounce of silver (who knows what the price will be a few years from now).  Not many people will be able to pay $1,800 for an ounce of gold.  Even a gold coin that is one-tenth of an ounce will still cost you almost $200 today.

The only thing that might counter my argument a little is the invention of ETFs.  It is possible for someone to invest in gold through an exchange traded fund such as GLD.  They could buy as many shares as they can afford, although it would be kind of crazy to buy just a couple of hundred dollars worth and pay a relatively high commission.

In conclusion, I favor gold over silver for your portfolio due to it being less volatile.  However, because struggling Americans will be able to buy silver coins easier, it would not surprise me to see silver do quite well if QE3 continues for a while.

I recently wrote about the so-called “fiscal cliff” that is supposed to be coming.  I pointed out that tax hikes and spending cuts are completely different, and that spending cuts would actually be beneficial to the overall economy, at least in the long run.

Frank Shostak recently wrote a piece for the Mises Institute.  He also discussed the “fiscal cliff”.  I would recommend that you read his article, if you haven’t done so already.

I do have one point where I have somewhat of a disagreement with Shostak.  I will first get that out of the way.  Shostak wrote, “What about the fact that we will also have an increase in taxes as a result of the expiration of the Bush tax cuts?  To the extent that government outlays are going to be curtailed the increase in taxes should be regarded as a monetary withdrawal from the economy.  In this sense it is like a tight monetary policy.  A tighter monetary stance in this respect should be seen as positive for wealth generators since it weakens various bubble activities that sprang up on the back of past loose monetary policies.”

I think I understand Shostak’s point there.  He is saying that a smaller budget deficit is the equivalent of a tighter monetary stance.  If there is a smaller deficit, the Fed would not have to buy as much government debt to keep rates low.

My area of disagreement is in regards to the Laffer Curve.  Higher tax rates can lead to less economic activity, including labor and investment.  So regardless of government spending, higher tax rates can reduce productivity due to incentive.  If you accepted static scoring and human behavior did not change, then I would agree with his assessment.

Aside from my one point of contention, Shostak’s main point in his article is that government spending is what matters the most and a cut in government spending is good news for the economy.

I think this point is lost on most everyone, including many libertarians.  Conservatives especially do not understand it, or at least do not stand by it.  Conservatives seem to care so much about the so-called Bush tax cuts, yet any benefit from the tax cuts is extremely small compared to the vast damage of the massive spending done during the Bush years.

It is important to understand Shostak’s article.  All government spending hurts wealth generation, except, arguably, if the government spending is protecting life and property from aggression.  Government spending misallocates resources and hurts productivity that will most benefit consumers.

It doesn’t matter if there is a balanced budget or huge deficits.  If government spending is huge, then it is going to have a huge detrimental effect on productivity and wealth generation.  It doesn’t matter if it is funded through taxation or debt or inflation.  Government is spending resources when it spends money.

Think of a group living on an island where they have a finite number of coconuts, bananas, and fishing poles.  If the government there pays someone one coconut, one banana, and one fishing pole in order to  build surfboards, then this would be a misallocation of resources, unless everyone agreed that they wanted surfboards (in which case government action wouldn’t be necessary).  Perhaps, if left to the market, people would have chosen to pay the person to build stronger shelters, instead of surfboards, because that was more important to them.

Again, it shows that government misallocates resources.  And you can see in this example, the government had to seize one coconut, one banana, and one fishing pole from someone else in order to pay for its surfboard program.  It doesn’t matter if the government uses taxation, or inflation, or promises to pay back the food and fishing pole at a later date.  It is spending resources at that time and it is misallocating them.

In conclusion, the main point of Shostak’s article should be understood by anyone who is studying free market economics.  Do not get distracted from the big picture.  Total government spending is perhaps the most important figure, as it alone shows the resources being consumed and/ or misallocated.  The less government spending there is, the more wealth generation we will see.

I shared some thoughts on QE3 on the day that the FOMC statement was released.  Overall, it is bad for the economy.  There may be some short-term excitement with gold and the stock market going up, but it is going to turn into a nightmare.  It is misallocating more resources, it will lead to higher price inflation, and it will prolong the agony.  In fact, it will make the inevitable correction that much more severe.

There was one bit of good news that I saw when reading an article on QE3 on the day it was announced.  I read the first dozen comments or so at the bottom of the article, and every one, except one, was negative towards the Fed.  Even the one exception was not in favor of QE3, but a simple comment from a naive (yet open-minded) reader asking where the Fed will get money to buy the mortgage debt.

Not only were the comments negative towards the Fed, they were mostly well thought out and articulated.  Some people ridiculed Bernanke and the Fed, while others gave more serious input.  But most everyone understood the negative consequences associated with more money creation.  I thought it was encouraging just in the fact that the commenters understood that QE3 was simply more money created out of thin air.

The best news is that this article was on Yahoo Finance.  I am not aware that it was linked by any popular libertarian website like LewRockwell.com.  It was just a standard article talking about the FOMC meeting and statement.

I don’t think we would have seen comments like this 10 years ago, or even 5 years ago.  There might have been a few, but it would not have been the vast majority.  I credit Ron Paul to a large degree.  He has educated millions of people on the subject of the Fed.  I also give credit to all of the libertarians and their educational efforts who set the stage for two successful Ron Paul campaigns (in the sense that millions were educated from his campaigns).

The cat is out of the bag.  Bernanke and the Fed cannot hide.  It is funny that the term “quantitative easing” or “QE” was first used as a technical term for money creation.  Now it seems that Bernanke and the Fed avoid using the term because of its negative connotation.

This is why I think hyperinflation is not only not inevitable, but actually unlikely.  If we start to see any signs of serious price inflation, then there will be a lot of pressure on the Fed to stop.  Perhaps we might see double digit price inflation like there was in the 1970’s, but I can’t imagine that it would get worse than that.  Everyone and their brother who has any understanding of this would be posting messages on Facebook and spreading the word, explaining that the rising prices are due to Federal Reserve monetary policy.  I think the Fed would be too embarrassed to go any further, or else people would start marching in Washington DC.

In conclusion, QE3 will cause more pain down the road for the economy and our overall standard of living.  The good news is that I see some hope for the future.  The Fed can no longer hide.  It has a spotlight on it like never before and it is not going to be turned off until the Fed is no longer in existence.

There are certainly a lot of pros and cons to consider when deciding on whether to try to start a business.  It is hard enough to start a successful business at any time.  During the current economic environment, it is very difficult.

The good news is that we are living during this time when the web exists.  You can accomplish so much more now using the internet.  It actually gives the little guy a chance at competing.

If you are going to attempt to start a business, my recommendation is to start small.  The restaurant business is brutal.  Many other types of businesses are really tough to start, especially when you are competing against franchises.  Instead, you should look for small things where you can develop a niche.  It doesn’t have to be completely unique, but it shouldn’t be something really common either, otherwise it will be too hard to compete with existing businesses.

I don’t recommend taking loans, but I never say never.  I’m sure there are quite a few business owners worth many millions of dollars who started out by taking a loan.  But you better be sure that it has a really good chance at succeeding.  For every one business that is worth millions, there are hundreds of businesses that failed.  In other words, the odds aren’t good.  I don’t say this to discourage people, but only to keep them from taking huge risks that are likely to fail.

If you are going to start a business, try doing it without hiring anyone.  Keep it simple, at least in the beginning.  Invest your time instead of your money.  Even if you have money to blow, you still need to invest the time.  You can spend a few bucks on a website and a few necessary tools to run your business.  But don’t start spending thousands of dollars on something that hasn’t even been tested.

Of course, it is best to spend time outside of your regular job in setting up a business.  Start it small and see if you can get it to be profitable.  You should only quit your day job if you can get your business to a point where it is making you as much money as your job, or at least something close.

There are a lot of things to think through when starting a business.  You need the right idea or product.  You need a way to market your product.  You need to attract customers and actually get them to buy.  In addition to all of this, you need to know some accounting and some basic business skills.  If you do a poor job at any one of these things, then your business will likely fail.

In conclusion, I think it is a good idea to attempt starting a business.  You should understand that most business attempts fail.  Therefore, you should start small.  You should not take out loans.  You should invest time and little money.  You should take small steps each day to work towards your goals.