Lew Rockwell has posted a nice piece on his website about voting, or perhaps I should say not voting.  He says that voting does not change the situation.  He says that not voting “makes them [politicians], just on the margin, a bit more fearful that they are ruling us without our consent.”

Ironically, Rockwell departs a little bit from his icon, Murray Rothbard.  Rothbard, even as an anarchist, was not afraid to ally himself with others, including politicians.  He saw nothing wrong with supporting the lesser of two evils, as long as it was a move towards liberty, or at least less tyranny.  Rothbard was willing to use the system, even if he disagreed with it.

Just to be clear, if Rockwell is disagreeing with Rothbard on this point, it is only a disagreement about strategy.  It is not a disagreement about where we should be going.

I take the middle ground between their positions, if that is possible.  Like Rothbard, I do not see any contradiction in voting, even if you are a radical libertarian.  The act of voting is not violating a libertarian principle of advocating the initiation of force.  I suppose someone could argue that counting the ballot might be a government expense, but this money was already extracted anyway.

If the act of voting can help move us closer to liberty, then I am all for it.  However, like Rockwell, I don’t see that it will change the situation in this presidential election.  (In my opinion, if Rothbard were alive today, I highly doubt he would be supporting Romney or Obama.)

If I am going to vote in any election, it can’t just be voting for the lesser of evils.  I will only vote for principled libertarians.  There are few people in Congress I would vote for.  I would vote for Ron Paul. I might vote for Justin Amash.  If I lived in Kentucky, it would have been a tough choice on whether to vote for Rand Paul.  If I lived in Kentucky and had a choice to vote for Rand Paul now, based on what I know, I probably wouldn’t vote for him.

The main reason I would vote for libertarians is so that they could spread the gospel.  Ron Paul has not been a great Congressman because he has affected legislation.  He has been great because he has educated millions of people.

I don’t trust people running for political office unless they can prove to me otherwise.  I won’t vote for someone who is pandering, unless he is a really good panderer on behalf of liberty.  I want to see consistency.  I want to see specifics offered in the way of dramatic spending cuts.  This goes for the presidential election, congressional elections, and even local elections.

I have not decided what I will do this November.  The one thing I am certain of is that I won’t be voting for Romney or Obama.  I am debating between 4 choices at this point:

1) Vote for Gary Johnson.
2) Vote for Ron Paul (as a write-in candidate).
3) Stay home.
4) Get a ballot and turn it in blank.

There is a strategy behind number 4.  It is different than staying home.  I don’t want to not vote and have people interpret that as apathy.  I am not apathetic.  I care about what the government does in that I want it to do much less.  If I drive to my voting place and get a ballot and turn it in blank, there is no mistaking that for apathy.  Some might call it stupid, but they can’t say that I didn’t care.

I think “none of the above” (NOTA) should be an option on every ballot.  Since that is not listed, then turning in a blank ballot is the next best thing.  If anyone else has a better idea, I’d love to hear it.

In yesterday’s post, I wrote about Paul Ryan and the massive unfunded liabilities of the U.S. government.  While I think Ryan is for big government, it is interesting that he is being portrayed as a government cutter.  While Ryan’s proposals have not advocated any actual cuts in overall spending (even his proposed budgets increase spending), there are discussions about Medicare and Social Security (called “entitlements” for some reason) and possible reform.

At the end of my post yesterday, I wrote that there is a coming divide in America in the next decade and that I will make a prediction as to which side will prevail.

The coming divide will be between generations.  Generally speaking, it will be between young and old.  The young side will be taking the more pro-liberty side.  The old side will be taking the more pro-government side.

As I stated yesterday, there are actually some estimates that the unfunded liabilities now exceed $200 trillion.  The biggest portions of this number belongs to Medicare, Social Security, and government pensions.  Out of those three, Medicare is by far the biggest.  The large majority of those unfunded liabilities (government promises for the future) are for older people.

The U.S. government is setting up the economy for a train wreck.  We are headed over a cliff at a high speed and there may be no way to stop.  Someone is going to get hurt.  The question is, who will get hurt the most?

Eventually, Congress will hit a brick wall.  Social Security has already begun to run a deficit.  More is being paid out than taken in from payroll taxes.  The difference has to be made up from the budget.  This means more debt monetization.  It means that spending will continue to increase until it can’t any longer.

The day of reckoning will come when the Federal Reserve has to stop buying government debt.  There will come a day when interest rates go up and price inflation is high.  If that day doesn’t come, then the Fed will be sitting on its hands out of fear of those things.  Either way, there will come a time when the Fed has to stop creating money out of thin air.  I don’t think the Fed will go to hyperinflation and destroy the whole economy.  Instead, it will stop buying government debt and Congress will have to figure something out.

Congress will be faced with choices.  Voters will be mad, no matter what.  Voters want free lunches.  They want lower taxes with their free lunch.  When the Fed can’t print more money, then free lunches will have to go away.

That is why the American empire will probably fall first.  When given a choice, Americans will tell the politicians to stop fighting wars overseas.  They will prefer that to increased taxes or domestic spending cuts.

While cutting military spending can make a big difference, it won’t be enough.  More will have to be cut.  Some politicians will propose tax increases.  They will be geared towards high income earners, but they may also go after the middle class.  Either way, they won’t work.  Increased tax rates don’t necessarily lead to an increase in government tax collections.

I don’t think it will get to this point anyway.  I am waiting for the first serious politician to stand up and say, “If you vote for me, I will cut Medicare and Social Security benefits for seniors.  I will cut taxes for workers.  People should not have to work harder and longer and struggle to raise their families while older people are taking vacations and playing golf.”  It will be a turning point when that politician actually gets elected.

This will not happen in south Florida.  It also won’t happen in Los Angeles or San Francisco.  But I believe something like this will happen.  It will send shockwaves everywhere.  All of a sudden, there is a message sent to aspiring politicians across the land that you can threaten to take away Medicare and Social Security and not be destroyed in the voting booth.

It hasn’t happened yet because senior citizens vote in large numbers.  But if the economy gets bad enough, more young people will pay attention, as they are already starting.  The younger generation is not going to continue to pay higher taxes into Social Security and Medicare knowing that they won’t be receiving anything comparable in return, if anything at all.

While I don’t think that all Social Security and Medicare will be eliminated, I believe that major changes are coming.  It is inevitable.  The age to collect will go up.  The benefits may get cut, even for people in their 80’s.  Perhaps it will be done by eliminating a cost-of-living adjustment.  The checks will stay the same and they will buy less and less.

I’m not sure how this whole thing will take shape.  I don’t know if it will be divided along party lines or if it will be split.  If it does divide along party lines, I would expect that the Republican Party would represent the younger generation and the Democratic Party would represent the older generation.

Politicians will do almost anything to get elected.  If it becomes popular to take away granny’s Social Security check, then so be it.  Politicians won’t put it in those terms, but they will make it clear that the young people will not see their taxes go up.

I believe the young people will finally get with the program and start to vote based on their pocketbook.  The young side will mostly prevail.  If you are over 65 right now, you may or may not be ok.  Your biggest threat is inflation.  If you are in your 50’s, you will probably get stiffed.  I don’t see any way that you will retire in your 60’s while depending on the government for your retirement income.

Changes are coming.  There is no way that things can keep going on the way they are now.  Plan your future accordingly.

In my last post, I was highly critical of Paul Ryan and his abysmal record, particularly when Bush was president.  However, it is not his support of big government that has been receiving the most attention in the last few days since the announcement that he would be running as Romney’s vice president.  The most attention has gone to Ryan’s proposals to reduce the budget deficits (not the overall debt), in particular by making changes to Medicare and Social Security.

This so happens to coincide with another story that is not being discussed as much.  Economist Laurence Kotlikoff has warned of the coming fiscal calamity.  While I don’t agree with all of his solutions, he makes some valid points.  Kotlikoff writes, “Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt.”

Kotlikoff is referring to the unfunded liabilities of the U.S. government.  This really is an astounding number.  There is no way for me to verify if his estimates are even close.  It would take me several days to study the subject and analyze the data enough just to come up with a ballpark figure.  But I’m not seeing anything that disputes his numbers.

It was a few years ago that I first saw an estimate of unfunded liabilities that exceeded $100 trillion.  When I first saw the number, I didn’t think it could be right.  But the more I look at this issue and the more estimates I see, the numbers were probably a good guess and I’m guessing that Kotlikoff’s numbers may be just as good now.

The unfunded liabilities are all of the promises that the government has made, yet not funded.  Social Security is a big one.  The biggest one is Medicare.  The ironic thing is that several trillion dollars of those unfunded liabilities is from the Medicare prescription drug program that Paul Ryan supported.

I think it is important to realize the enormity and importance of these numbers, but at the same time, it is not the end of the world.

Most Americans understand there is a problem.  They can sense it.  They understand there is a debt problem.  Still, most don’t understand many details and they don’t understand the changes that are coming.  I hear younger people joke that Social Security won’t be there when they retire.  They may or may not believe it.  I’m not sure that people in their 40’s and 50’s understand that they are in trouble too.  In fact, almost everyone is going to suffer from this in some way.  Even if someone who is currently 75 keeps receiving the same Social Security checks, what are the chances that the purchasing power won’t decline?

The good news about the unfunded liabilities is that they are not like bonds.  They are not a legal obligation to pay someone (even though the government could default on bonds too).  The government can simply change the rules at any time and break previous promises.  In fact, that is exactly what should be done.

The government could pass a law tomorrow that raises the retirement age (the age to collect Social Security and Medicare benefits) to 75 years old.  With the stroke of a pen, they can eliminate tens of trillions of unfunded liabilities right there.  Sure, it will mean misery for many people as they are forced to return to the workforce, but I’m just pointing out that it is not the end of the world.  Anyway, anyone can retire whenever they want if they don’t want to depend on the government.

Paul Ryan has been assuring people in the last couple of days that he does not support any changes for those who are already 55 or older.  What?  That is a major portion of the baby boomers.  If there are no changes made to someone who is currently 56 years old, they could end up collecting for 30 plus years in retirement if they live long enough.

In other words, Paul Ryan’s plan, while perhaps a better start than most other politicians in DC, does little to close the fiscal gap.

Radical changes are coming, one way or another.  Congress will eventually be forced to cut back.  There are going to be battles on who gets cut the most.  The sooner the problems get addressed, the less devastating the effects will be in the future.  Unfortunately, there is no immediate sign of anything being fixed.

Tomorrow, I will discuss the major divide that is coming to America in the next decade.  I will also make a prediction on which side will prevail.

UPDATE: In the post above, I mistakenly linked to an article from 2010.  Here is a link to the most current article.  Kotlikoff is actually saying that the unfunded liabilities are now $222 trillion.

Mitt Romney has chosen Paul Ryan as his running mate as the presumptive Republican presidential nominee.  As a libertarian, I am quite disappointed in this choice, but mostly for very different reasons than most others would cite.

Paul Ryan, unfortunately, is a fake.  I don’t agree with him on foreign policy or civil liberties, but I won’t even discuss that any further in this post.  For now, I will just focus on his rhetoric and his prior stances on fiscal policy.

Ryan is thought of as a big fiscal conservative, or at least he is portrayed that way in the media and by other politicians.  He is hailed by conservatives for his fiscal toughness.  He is criticized just as much by the Democrats and those on the left.  They will accuse him of all of these bad things because he supposedly doesn’t support their big government policies.

But, like most other politicians, you can’t just listen to the things they say.  If they have a record, you have to actually look at it.  Ryan supported most of the big government policies during the Bush era.  In other words, he is really only a fiscal conservative when a Democrat is president, but even this is arguable.

Ryan supported the Medicare prescription drug bill that was pushed by Bush.  You could call it Bushcare.  It grew the unfunded liabilities by trillions of dollars.  If any Democrat passed anything like this, Republicans would be screaming “socialism” at the top of their lungs, just as they have done with Obamacare.

Ryan also voted for TARP, which was the massive bailout of banks and financial institutions in 2008.  Ryan also supported the bailout of GM and Chrysler.

Ryan also voted for “No Child Left Behind”, for Head Start, for Section 8 Housing, and for an extension of unemployment benefits.  These are just a few of the major highlights.  And again, I am only talking about fiscal issues.  I am not talking about war and civil liberties, which are also fiscal issues, but are in a different category than regular welfare spending.

I’m sure I will have more to say on Ryan’s record in the future, but I think it is obvious for anyone who actually looks at his record to realize that Ryan is no fiscal conservative.

Even Ryan’s “Roadmap for America” is not anything close to resembling libertarianism or fiscal conservatism.  It does not cut spending.  It does not cut the debt.  It only reduces the rate at which the debt would grow, and even this is based on some questionable assumptions.

But here is the really bad thing about Paul Ryan.  He is widely considered as a fiscal conservative and a friend of the Tea Party.  In other words, he is giving a bad name to fiscal conservatism and capitalism in general.

Paul Ryan could end up being like another Reagan (from a bad standpoint).  The Democrats will make their ridiculous accusations that children will starve and old people will be forced to give up their medications and eat dog food.  They will accuse Ryan (and Romney) of cutting government to the bone.  Meanwhile, no such thing will be happening.  Government will continue to grow.  Then the Democrats will blame a bad economy on them, but not because of the growth of big government.  They will say that capitalism has failed.  They will say that cutting government spending doesn’t work.  They will say that fiscal conservatism is bad for the little guy.

If we are going to have big government, I at least want it recognized as such.  I want the big government policies to take the blame for a bad economy, as they rightly should.  I don’t want smaller government blamed for a bad economy when nothing resembling small government has been tried.

This is actually another reason to think that Obama may actually be the lesser of the two evils.  If we are going to have big government, at least let big government get the blame when things go bad.

There was an article by Reuters earlier that was linked on Yahoo Finance.  The title of the piece is “Analysis: Five years on, central banks not yet out of options”.  I can’t say that I disagree with the title.  The central banks, particularly the Fed, have more options with which to further destroy economic growth.

It is an interesting article with a variety of material covered, so I will just hit on a few points that stood out to me.

The article stated: “Conventional monetary policy may be constrained because interest rates in major economies are close to zero, but central bankers retain a plethora of less orthodox options and are increasingly likely to resort to them in coming months if growth prospects keep deteriorating.  Possible courses of action include buying private-sector assets, not just government bonds, and charging banks for parking funds at the central bank with the aim of galvanizing them into lending the money instead.”

On the first point of buying so-called “private-sector assets”, this is nothing new.  These rules were changed four years ago and implemented in late 2008 to bail out the banks.  The Fed gave a direct bailout to the big banks and financial institutions by buying mortgage-backed securities.  The major problem is that the Fed paid a much higher price than what would have been paid in the open free market.  It is as if someone bought a stock at $80 per share and the market price drops to $50.  The Fed comes in and buys the stock at the original price of $80, even though it is only worth $50 now.  It was a pure bailout.

On the second point, it is interesting that the article even mentions charging banks for keeping money at the Fed.  The Fed now pays a quarter of a percent of interest on excess reserves.  With the massive monetary inflation of the last 4 years has come a massive buildup of excess reserves by the commercial banks.  I think it is more out of fear than out of wanting a small .25% interest rate.  The article is correct that the Fed could start charging a fee and that this would press the banks into lending.  The thing the article doesn’t mention is that the Fed is likely not going to do this because it will just cause a massive wave of price inflation.

Then the article talks about Mervyn King of the Bank of England.  In referring to King, the article asks, “Wasn’t it time, he was asked, to try something more radical than ‘quantitative easing’?  How about directly financing government deficits?  How about cancelling the bonds the BOE has bought to create room for tax cuts?  How about bypassing the banks and handing out newly printed central bank money to the public- the late U.S. monetarist Milton Friedman’s famous ‘helicopter drop’?”

Ah yes, the famous helicopter drop.  That is how Ben Bernanke got the nickname of Helicopter Ben.  So in other words, buying government debt indirectly by the central banks is not enough.  While King rejected the ideas, it is funny how many people are pushing the central banks to take “bolder” steps.  In other words, they want more direct inflation and more of it.

There are a lot of schemes being discussed by the “experts” and commentators on what central banks should do.  Their Keynesian style money creation has failed to work and they are desperate for more drastic measures, which will only make things worse.

The Federal Reserve (or any central bank) is not capable of creating wealth.  They can only stimulate the economy at the expense of the economy further down the road.  At some point, the game ends.  Either there will be a correction and a major reallocation of resources (which is what we need) or we will first suffer from major price inflation and higher interest rates.  But even in the second scenario, we will still eventually get a major correction.

There will be another correction regardless of what the Fed does at this point.  They can try charging banks for holding excess reserves.  They can try more “twisting” with buying longer-term debt.  They can try more quantitative easing and they can call it whatever they want.  They can try any scheme they want.  They are only delaying the inevitable, which is another major correction.

There is constant talk about unemployment, and for good reason.  The unemployment rate is high right now.  It is officially at 8.3%.  If we counted those who have given up looking for work and those who are working part time (who want to be full time), then the unemployment rate would be over 15%, and this is a conservative number.

This is, of course, highly significant for individuals and families who have been directly affected.  Times are tough enough with a steady income.  It is incredibly hard for those who have lost their job and cannot find another job that pays a comparable salary.  In discussing the economics of this issue, it in no way is attempting to show a lack of empathy for people who have faced unemployment.

The problem with the subject of unemployment is that employment itself seems to become the goal.  This is reinforced by the media, by politicians, and by bad economists (which is the majority of economists).

Low rates of unemployment is not the ultimate goal.  If we didn’t live in a world with scarce goods, then employment wouldn’t be necessary.  If we could have robots do all of our work, then we would not need to work.  If robots could provide all of our food, clothing, and housing, along with luxury goods and services, why would we need to work?  Everything would be handed to us.

The reality is that we don’t have robots to do everything.  We certainly have more advanced technology than in the past, but it is still necessary for humans to work to satisfy our wants and needs.

When we discuss employment as an end instead of a means, then we lose focus and we get bad economics.  The key to making a society richer is by having greater productivity.  That is the main problem with high unemployment.  There are people who are willing and capable of working who are not working.  They are producing nothing.  (I’m not including things they may do at home for their families.)  They are not contributing to society.  It’s not that anyone has an obligation to contribute to society, but having people wanting to work and contribute in order to improve their own lives is a benefit to everyone in society, as long as it is done honestly.

There are many reasons for the high unemployment numbers and most of them have to do with government.  I have discussed some of these things before.  And now we have people suggesting things that will only do further damage.

This thinking leads people to say things like, “we can’t stop this war or there will be defense contractors who will have to let people go and we will have even higher unemployment.”  Aside from this being possible war propaganda, it is also really bad economics.  If productivity is going needlessly to a defense contractor, then it should not be sustained.  Those resources need to be reallocated to better meet the needs and wants of consumers.

If getting people employed were all that mattered, then we could simply get people to dig ditches and fill the ditches back in with dirt.  But someone would have to pay them.  It is easy to see that this does not lead to any net wealth for society.  It may redistribute some wealth, but it does nothing to create any.

Employment should not be the ultimate goal.  Employment is a means to get more productivity.  With higher productivity, a society has a larger amount of wealth in the form of goods and services.  It means a higher standard of living.  So we should want people to get back to work who want to work, but it should not just be for the sake of working.  It should be for the sake of productivity to meet consumer wants and needs.

In my last two posts, I discussed the factors of price inflation and the possibility of price inflation with excess reserves remaining high.  I wrote that price inflation is primarily determined by the supply and demand of money.

There is another factor in price inflation and that is productivity.  While this would not usually cause significant price swings in the short run like the supply and demand of money can, productivity does have an effect, especially over the long run.

To be clear, this has little to do with the pricing of individual products.  Prices of certain goods and services can go up and down based on the supply and demand.  For instance, if there are really cold temperatures in Florida which cause orange trees to be destroyed, we would expect for orange prices to go up because of a lower supply.

For this discussion, the focus is on the overall general price level.  For the sake of discussion, let’s assume that the supply and demand for money remains constant and we have a free market economy.

It is obvious that a farmer using a tractor can and will be more productive than a farmer using hand tools to do all of the work.  If country A has many farmers who use tractors and country B has farmers that mostly use hand tools, then we can expect food production to be higher in country A.  If not, then country B would be expending a lot more resources in the form of labor to match the food production of country B.  Either way, we can expect food prices to be lower in country A.

This is because of capital investment and technology.  Some farmers have tractors to use because they have prior savings that could be used to buy a tractor.  The savings do not even necessarily have to be from the farmer.  He may borrow money that someone else saved and promise to pay back the loan with the food he is able to produce with the use of his tractor.

The point is that you need capital investment and increases in technology in most cases to significantly increase production.  This will happen to a higher degree in a more free market economy.  If there are productivity gains throughout a society, it will actually lead to noticeably lower prices.  If the same amount of money is chasing a larger number of goods, then prices will go down.

We can see this in the electronics industry where computers and televisions get cheaper every year.  If they don’t get cheaper, then you are getting more for you money in terms of chip speed, storage space, quality, etc.  This is in spite of the Fed’s monetary inflation and an overall positive CPI.  If only healthcare and education could be more like the electronics industry, where we see things getting constantly better and cheaper at the same time.

Price deflation is not a bad thing if it is due to an increase in productivity.  There is nothing to fear in that case.  It is a good thing.  It means that our standard of living is increasing.  It means that we can purchase more goods and services with the money we have.

While we don’t want to see deflationary situations due to failing banks and boom and bust cycles caused by the Fed, we shouldn’t let that scare us about having falling prices.  We should cheer on falling prices that are due to productivity gains and increasing technology.  We should be thankful that we still have a free enough economy that some sectors see productivity gains.

In my last post, I discussed the different factors of price inflation.  These factors are the money supply, the demand for money (also known as velocity), and fractional reserve lending.  Even this third thing really fits into one of the first two categories.

(It should be noted that production also has an effect on prices in the long run.  If there are increases in production, it can actually lead to a decrease in prices.  For the sake of this discussion, we are assuming that productivity and technology remain constant.)

While some Austrian school economists predicted the housing bubble, many have not been as accurate with their prediction of price inflation, or at least not yet.  This is the danger of making predictions.  It gives a little ammunition to people like Paul Krugman.  The ironic thing is that Austrian (free market) economics should make us careful in making bold predictions.  Austrian economics teaches that economics is really the study of human action and human action cannot be predicted with certainty.

So what has happened with price inflation?  While many claim that it is understated in the government statistics and they may have a valid claim, it is obvious that price inflation has not been severe.  We are not anywhere near the 1970’s, or at least not yet.

Milton Friedman said that inflation is always and everywhere a monetary phenomenon.  This is essentially correct with a long-term view.  However, in the short term, it is more than just monetary policy that dictates consumer price inflation.

One thing that is important to note is that inflation is not uniform.  Monetary inflation can cause pockets of high price inflation and it doesn’t just have to be in consumer goods.  It can also be in stocks, bonds, gold, or any number of other things.

There are basically three things that will affect overall consumer prices.  One is the money supply.  Two is velocity, or the demand for money.  Three is fractional reserve lending.

Actually, number three really fits in with the first two.  Velocity can drive the degree of fractional reserve lending and the degree of fractional reserve lending affects the money supply, at least in a sense.  While the actual supply of money doesn’t increase with fractional reserve lending, it gives multiple people the claim on the same money.  Therefore, the actual digital bank accounts of people and companies are higher than they would be without fractional reserve banking.

I say that velocity affects fractional reserve lending and we can see that with the current situation.  The commercial banks have built up massive excess reserves over the last 4 years and it is not because their reserve requirements have gone up.  Due to the hard economic times, there is more demand for money. In other words, velocity has slowed down considerably.  People are scared and are trying to build up cash reserves and pay down debt.  The same goes with businesses.  The banks are also scared of making bad loans and would rather sit on the money than risk lending it out.  So the overall recession and the scary economic times have slowed velocity and built up excess reserves.

This is what was missed by people who predicted imminent and severe price inflation.  The Federal Reserve has tripled the adjusted monetary base since the fall of 2008, yet we have not seen a corresponding increase in overall prices.  I believe this is due to the high excess reserves, which prevented another de facto increase in the money supply from fractional reserve lending and I believe it is also due to the low velocity.

When there is a higher demand for money, this is the equivalent of lowering the money supply.  Therefore, an increase in the money supply can be offset by a higher demand for money.  The Fed can control the money supply.  It has a certain amount of control over excess reserves with its policies.  The Fed has far less control over the demand for money.  However, I won’t say that the Fed can’t affect the demand for money at all, because it could if it went crazy enough with money creation.  The Fed could also cause velocity to drop even more if it stopped buying government debt.

Unemployment is high and people are still spooked from 2008 and rightly so.  Therefore, they are paying down debt and trying to build up cash (or the equivalent of cash in their bank accounts).  This means that they are spending less.  This means they are not bidding up prices as much.  It means that the higher money supply is being offset by a higher demand for money.

This is the reason that we have not seen high price inflation.  It is possible that it could continue and it is possible that it could reverse quickly.

In my next post, I will discuss the possibilities of price inflation with excess reserves remaining high.

This presidential election gives us Willard Mitt Romney against Barack Obama (supposedly known as Barry Soetoro as a child).  Since the Ron Paul news has quieted down, I haven’t spent as much time on presidential politics.  For today’s post, I am going to discuss the possible implications of either one of these two winning the presidency.

First, unless there is some major event, it will be one of these two men.  I know that Romney isn’t officially the Republican nominee yet.  I know that people like Gary Johnson are running on a third-party ticket.  However, barring something huge, there is no way that someone like Johnson is going to come anywhere close to winning.

Most Republicans are absolutely terrified of Obama.  While I somewhat concur, I don’t find him any more terrifying than most others running for that office.  Obama probably really does have Marxist roots.  He truly believes in big government.  He believes that government is the primary reason for prosperity in our society.

With that said, Obama is a politician first.  He rarely let’s his philosophy interfere with his political calculations.  He did overstep his bounds when he said that if you have a business that you didn’t build it; that someone else did.  He let his true philosophy slip out of his mouth.  It wasn’t a good political calculation.  But when it comes to policy, Obama probably isn’t even the one making the decisions.  It is his advisors around him.  It is the establishment telling him what to do.

Many Republicans fear that if Obama is given a second term that he will be out of control.  They believe that if he doesn’t have to worry about another election, that he will do whatever he wants.  The problem with that theory is that it simply hasn’t been true in the past.  Bill Clinton, at least domestically speaking, was actually probably better in his second term.  That was when the budget actually came close to being balanced.  (It was really borrowing from the Social Security fund, so there wasn’t truly a surplus, but it was still much better than we have seen since.)

If Reagan was really a great conservative who believed in small government, then why didn’t he act that way in his second term?  Government spending and deficits were still obscene in Reagan’s second term.

I doubt that Obama will be out of control in a second term.  He will probably do less.  Also, if there is a Republican majority in Congress, then we will actually have some opposition to big government, even if just in rhetoric.  While I don’t expect a Republican Congress to control spending any better than it is doing now, we wouldn’t see any more disasters like Obamacare.

While Obama has been bad on foreign policy, he hasn’t been as bad as he could be.  While he has continued Bush’s wars and started some smaller ones, at least he hasn’t directly attacked Iran.  I’m not saying it can’t still happen under Obama, but I would hate to see what the world might look like if John McCain had been elected 4 years ago.

That brings us to Romney.  I have no idea what Romney’s foreign policy will look like.  He sounds belligerent now.  He just visited Israel to show his support there.  He seems like a war hawk.  Again, it is impossible to say what he will be like in office.  Because of that, I would give a slight edge to Obama on foreign policy in terms of liberty.

Now you would think that Romney would at least be much better on economics than Obama.  But I don’t think this is the case at all.  He may have been successful in business, but he doesn’t understand free market economics at all (unless he is a complete liar).

I heard Romney on Sean Hannity’s radio show today.  Hannity asked him about cutting spending.  The only thing Romney said was that he favors entitlement reform in the form of means testing.  In other words, he wants to deny Social Security checks (or reduce them) to rich people.  Regardless of whether this is right or wrong, it is a drop in the bucket.  I hate to break it to you conservatives out there, but even if he got through that reform, we would still have trillion dollar budget deficits.  Romney has not offered one other specific cut that is anything of significance.  He has not called for the elimination of any departments.  How could he when he hasn’t even called for any cuts in them?

The other thing I heard Romney say is that China is not playing fair.  I remember him saying this multiple times during debates.  This means that Romney is a Keynesian.  He is not a monetarist in the mold of Milton Friedman.  He is a Keynesian in the mold of Keynes.  He does not understand free market economics at all (again, unless he is lying).  Either way, Romney is sounding like a mercantilist. Does he think that China’s currency is harming Americans?  Does he think that having the Chinese sell inexpensive products to Americans is harmful?  Does he not understand that this is beneficial to the American consumer?

If Romney is saying these things now, I can only imagine what his policies will look like.  If a candidate is already talking like a lover of big government before he gets into office, then it isn’t going to get much better when he is elected.

So for economics, I can’t even say that Romney will be better than Obama.  If Romney is president, then we lose all opposition to big government in Congress, just as we saw during the Bush years.

In conclusion, if you love liberty, there is no way you should vote for either one of these two.  If I were absolutely forced to pick between the lesser of two evils, I think Obama may actually be the lesser of the two evils.  At least we know what we are getting.