I normally would not care about these debates as much, but it is rare that someone like Ron Paul is running for president and getting some attention.  Here are a few random thoughts on the debate in Orlando, Florida.

The first notable thing is that Gary Johnson, former governor of New Mexico, was permitted to participate in the debate.  He is no Ron Paul, but he does have a lot of libertarian leanings and it is nice to see someone else on the stage who is at least decent and makes some sense.

It is interesting to compare the debates from this year to the debates from 4 years ago.  The candidates of this election cycle sound much more fiscally conservative and anti-big government.  I don’t believe most of them, but it is still notable.  I think one difference is who is occupying the White House.  The candidates in 2007/ 2008, with the exception of Ron Paul, felt compelled to defend Bush’s abysmal record.

On the last question about choosing a running mate on the stage, it was nice of Gary Johnson to pick Ron Paul.  I like Paul’s answer to the question too, but I thought he should have acknowledged Johnson as at least being the closest one to his views.  Another addition to Paul’s answer could have been him stepping outside of the box and naming a few potential running mates not on the stage.  If he had mentioned Lew Rockwell, Tom Woods, Robert Murphy, Judge Napolitano, etc., I’m sure a few people out there would have “googled” those names out of interest.

It was a little disappointing to see such a short discussion on foreign policy.  I always enjoy seeing the contrast of Ron Paul against the other candidates and we didn’t get to see that in this debate.  It is important for Paul to keep making this distinction.

Overall, a lot of the debate was more of the same.  But I am going to enjoy it because we are not likely to see another Ron Paul running for president as a major party candidate any time soon.  I can only hope that if Ron Paul does not get the Republican nomination that the Libertarian Party puts up someone good this time.

The Fed had one of its regular meetings on Tuesday and Wednesday and the FOMC announced today that the Fed would be buying long-term treasuries, while selling an equal amount of short-term treasuries.  This should have no effect on the monetary base.  It is simply an exchange for longer-term government debt.

This move by the Fed is meant to lower the long-term interest rates.  By buying longer-term government bonds, this drives down the long-term rates.  The announcement today caused the yield on the 10-year treasuries to drop below 1.90%.  The mortgage rates are highly correlated with this interest rate, which means that mortgage rates are at or near all-time lows.

If you have procrastinated on refinancing your mortgage, you still have a chance to do so now.  If someone will lend you money for 4% interest over 30 years, why not take it?  With the massive debt and quantitative easing programs, we can expect for the dollar to be devalued.  Why not pay off your loan in depreciating dollars?

Today’s action reinforces the power of the permanent portfolio as described in Harry Browne’s book Fail Safe Investing.  The stock market tanked today and gold also fell substantially.  Bonds did well, which caused less of a down day for anyone investing to imitate the permanent portfolio.

There will come a day to speculate in the bond market (on the short side).  I have held off on recommending this speculation, and it is a good thing.  If the economy falls back into recession (if we ever left recession) and the velocity of money stays low to keep price inflation in check, then we could continue to see bonds do well as interest rates drop.  There are ways to short the government bond market (symbol: TBT), but we need to be patient.

This move by the Fed today just shows more desperation.  I didn’t expect an announcement of QE3.  Perhaps the stock market did, since it dropped heavily this afternoon after the announcement.

The Fed will continue to support the banks (as it will also be buying mortgage-backed securities).  It will continue in its attempts to prop up housing prices and the economy in general.  It will do this in stages.  The free market is trying to liquidate the bad investments, but the Fed and the government are not letting this process take place.  We will continue to see this tampering by the Fed until it faces a scenario of massive price inflation.

Obama is proposing a new tax as part of a proposal to cut $1.5 trillion from the long-term deficit.  From a libertarian standpoint, there are a lot of points that need to be cleared up about this subject.

First, most of the politicians and mainstream media pundits, and even most Americans, start with the wrong assumption.  They assume that it is morally acceptable to take people’s money with the threat of force, as long as it is done through the government.  This is the sham that is democracy.  As Gary North says, “thou shalt not steal, except by majority rule”.

Second, why is this being called a millionaire’s tax?  It is not a tax on wealth.  It is a tax on income.  If someone makes a million dollars in one year, he is not necessarily a millionaire.  First, he has to pay all of the taxes that already exist.  Then he has to spend at least part of this money on sustaining his life and lifestyle.  If someone is working in a sales job and has one big year or if someone happens to win the lottery or if someone happens to have one extremely valuable asset that is sold, then these people might have one big year with a high income, but it doesn’t necessarily make them rich.

Third, one thing that some Republicans and supply-siders get right is the Laffer Curve, named after Art Laffer.  It basically says that at some point, if you keep raising taxes, that it will actually lead to less tax collections by the government.  This is the same as all socialist and big government policies.  More taxes lead to a worse economy (relatively speaking) and to less incentive to work, especially when the marginal tax rates get really high.  So even if Obama were to get his proposal passed (which it won’t), it might not even cut the future deficits by one dollar.

Fourth, as Laurence Vance recently pointed out, Obama’s proposal is supposed to cut $1.5 trillion over ten years, which is equal to $150 billion per year.  Obama could just end the wars and bring the troops home and this would cut the deficit by that amount without having to raise taxes.

Democrats want to play class warfare and tax the rich (more accurately, high income).  Many Republicans actually want to tax the poor because almost half of Americans pay no federal income tax.  I am in agreement with Ron Paul that we are almost halfway there.  We should not want to tax the rich or poor more.  We should want to reduce taxes for everyone.  Even poor people pay many taxes.  Inflation is probably the worst thing that hurts the poor.

The only way to solve the economic mess we are in is to get the government out of our lives.  Taxes should be reduced drastically and government spending should be reduced even more drastically.  Regulations should be reduced drastically, instead of continually adding them.  We need to end the empire.  We need to end federal involvement in education, healthcare, energy, and every other aspect of our lives.  We need to end the federal monopoly on money.  We need for Americans to stop relying on government and to stop seeking government to solve our problems.  As Reagan said, “government is not the solution; it is the problem”.

Obama’s so-called millionaire tax will not pass.  If it did, it would only make things worse.  He does not understand economics at all.  He is also a demagogue.  If he wins re-election, it is only because the Republican nominee is just as bad.

Many people in the libertarian community do not realize just how lucky we are.  Although government continues to grow at great speed, we are in the midst of a turning.  Ron Paul has played a huge role in this process.  As libertarians, we should be thankful for having such a great representative.

In conclusion, libertarians should be thankful for the time period we live in and we should be thankful that we have a wonderful spokesperson for liberty in Ron Paul.  While his chances of winning the presidency might still be small, we are making huge progress.  When hearts and minds are changed, liberty will eventually follow.

While I’m not against investing in foreign currencies, it is not something that I advocate on a long term basis.  If you are going to buy foreign currencies, it should be for speculative purposes and for the short term.  It seems that a buy and hold is not the best strategy for holding foreign currencies, especially since there are none that are backed by gold or any other commodity.

I am an advocate of the permanent portfolio as described in Harry Browne’s book Fail Safe Investing.  Part of that portfolio consists of gold.  There is no place for foreign currencies.

There is a mutual fund (symbol: PRPFX) that is supposed to somewhat mimic the permanent portfolio.  However, the mutual fund changes the formula a little and puts a small percentage in silver and Swiss francs.  I think the big difference is that the mutual fund is actively managed.  If the Swiss central bank started creating new money like crazy, the mutual fund could change its position.

The permanent portfolio (not the mutual fund) is supposed to be an “investing for dummies” portfolio for those who don’t have the time, interest, or knowledge to actively manage their investments.  However, the permanent portfolio is also there for active traders who just want to keep a portion of their money safe and sound from the uncertainties in the world.

There are a couple of reasons that I suspect on why Harry Browne did not include any foreign currencies in the permanent portfolio setup.  First, as just mentioned, what if a particular central bank changed policy?  It would be easy to say that the yen and Swiss franc have been the best currencies due to a tighter monetary policy by their central banks.  But things can change over time and this would mean that the permanent portfolio would not be very permanent.

Second, all major currencies are fiat currencies.  They are not backed by gold or silver or anything else.  This means that there is virtually no limitation on central banks in creating more new money.  If you buy yen and the Japanese central bank is devaluing at a rate of 5% per year while the U.S. central bank is devaluing at a rate of 10% per year, you will still be losing money in yen.  You just won’t be losing as much as those who hold U.S. dollars.

Gold makes up 25% of the permanent portfolio.  This is your protection against inflation.  It makes it unnecessary to invest in foreign currencies.

There could be a few possible exceptions to this.  If you live in the U.S. and your income is all in U.S. dollars, then it would seem unnecessary to invest in foreign currencies as long as you have gold as an inflation hedge.  However, let’s say you do business in another country and buy a lot of goods from there.  Or let’s say that you are retired and you spend 4 months a year in another country.  In these special scenarios, it might be beneficial to hold a portion of your cash/ cash equivalents in the currency of this other country.

In conclusion, other than certain special situations, I see no need to own foreign currencies.  With that said, I am not against the idea for speculation for short-term gains.  Just remember that, at least as of right now, all of the major currencies in the world are fiat currencies.  That makes gold a better hedge against a depreciating currency, rather than another depreciating currency.

This is what an article on Bloomberg said gold should be worth now or at least is putting its “fair value” at $10,000.  Of course, the price of anything is determined by buyers and sellers in the market, but these scenarios drawn up are always interesting to look at.

If gold does go to $10,000 per ounce within the next few years, it either means that it is in major bubble territory or else we are on the verge of hyperinflation.  Let’s hope, even for those with substantial gold holdings, that the price doesn’t go this high.  If it does, that means that there is major trouble in the economy.

If gold goes to $10,000 in the next few years, then it will be especially important to pay attention to the Fed.  If the Fed does not show signs of tightening, then a complete collapse of the dollar really could be coming (which I predict is not likely).  If the Fed is tightening and allowing interest rates to rise as it did in the late 70’s and early 80’s, then we can expect a major correction/ depression to occur that will make 1981 and 1982 look mild.

We must also keep in mind that velocity will continue to play an important role in the dollar and gold.  If there is a perception that prices will continue to rise dramatically, then this will just make things worse as people try to dump their cash for hard assets.  Velocity is one area of economics where perception really does play an important role.

Gold has pulled back in recent days, going below $1,800 per ounce today.  Again, this is not surprising considering what it has done in the last few months and over the last 10 years.  This presents a potential buying opportunity for those who do not have substantial holdings in gold and gold related investments.  You never know which time will be the last train out.  For all we know, the next phase up could be the final blast to the moon.

I have said before that I don’t think we are in anything close to a bubble yet.  There are too many people advertising for you to sell your gold.  We need to get to a point where most of the commercials are telling you to buy gold before it is too late.

Maybe when we hear about coin flippers (as in house flippers), then we will know we are in gold bubble territory.

Although the focus of this blog is mostly on economics, politics, and investing, I do like to discuss real estate from time to time.  If you are in the right position, I think you should seriously consider getting into investing in residential real estate.

If you are broke, I wouldn’t recommend it.  I also wouldn’t recommend it if you move around a lot, although this situation could be overcome.

Some people say that they don’t want to be landlords.  It is understandable that some people don’t want to deal with finding tenants and collecting rent each month.  They also don’t want to deal with other problems that arise.  However, it is easy to find a company that will manage your property.  They will typically charge you an upfront fee to find renters for you (maybe a month’s rent) and then will charge you a fee each month to manage the property.  This might be about 10% of the rent.

Of course, you will have to pay for anything that needs to be fixed, but even here the management company can help you.  They may have a handyman who will do things for a reasonable price.  If there is something more expensive, then the management company will notify you to get your approval.

I said above that it helps if you are not moving around, but even if you are, you can still hire a management company.  I still think it is preferable to be close to your properties, but some people just don’t have this option.

It is important to have some extra money to make it easier to buy a property and to give you a cushion for any additional expenses, particularly if there is a month or two in which it is not rented.

If this is something that interests you, I would recommend buying something inexpensive, but in a decent area.  I would recommend something simple like a 3 bedroom/ 2 bathroom house.  You don’t want to buy too much house.  You will not recover the extra cost as the rent will only be slightly higher.

Also, be sure to lock in a fixed rate mortgage, unless you are paying cash.

You should only buy something if it will give you positive cash flow, not counting months where it is not rented or you have additional expense.  Overall, you don’t want to be digging a hole for yourself.  It should be something that will usually put extra money in your pocket each month.  If you can find such a place, it might be worth considering.

You don’t have to buy a whole neighborhood or apartment complex.  Just start with one house and see how it works.  You can always buy more later.

The Republican presidential candidates had another debate last night.  This one was in Tampa, Florida and it was hosted by CNN and the Tea Party.  The media is making a big deal about Mitt Romney and Rick Perry, as they are the proclaimed front runners.

Unfortunately for the establishment, Ron Paul keeps telling the truth and his poll numbers are showing him in third place and not going anywhere but up.

Rick Perry took a bit of a beating on the stage last night and deservedly so.  His executive order to vaccinate young girls is an outrage to anyone who believes in liberty.  Ron Paul also pointed out that taxes and spending went up in the last ten-plus years under Rick Perry.

It is good to hear the candidates continue to bash Ben Bernanke.  I’m not sure if one candidate would reappoint Bernanke as Fed chairman.  Bernanke is very unpopular and we can credit Ron Paul and his supporters for a big part of this.

I was thinking about Herman Cain’s so-called 9-9-9 tax plan.  He wants a 9% corporate tax, income tax, and national sales tax.  This is worse than the so-called Fair Tax.  At least the Fair Tax attempts to repeal the 16th Amendment and do away with the income tax.  With this latest plan from Cain, we would have an income tax and a sales tax.  And I’m sure there is no way that Congress would ever attempt to raise the rates on these in the future (this is sarcasm).  With Cain’s 9-9-9 plan, many middle class individuals would be paying far more in taxes, assuming that many deductions are done away with.  This is just one more example of how Cain is a statist.  I also get the feeling that he is not that bright.

Rick Santorum, once again, challenged Ron Paul on foreign policy.  Some of the audience booed Congressman Paul as he tried to explain that the terrorists don’t hate Americans for freedom but because of U.S. government foreign policy.  Unfortunately, this is going to be the roadblock for Ron Paul from getting the nomination.  He is absolutely correct in what he is saying and he should continue to say it, but there are too many militaristic Republicans who want more war and more foreign entanglements.

The good news is that Ron Paul continues to change minds.  This is reflecting in the polls, even if slightly.  Just think, every time Paul goes up one percentage point in the national polls, that means there are hundreds of thousands of more supporters than there were before.  Last night, he talked about shutting down the Departments of Education and Energy.  He also talked about letting young people opt out of Social Security.  These things can get people’s attention.  For some people, they might say, “how can he be so good on all of these issues and yet wrong on foreign policy?  Maybe I should examine his foreign policy more to see if he has a point.”

This is how minds are changed.  Ron Paul should just keep telling the truth and whatever happens, happens.  He will continue to convert more people to libertarianism and this will help save our future, even if we don’t have a President Ron Paul.

Last week, the Swiss central bank announced that it would put a cap on how high the Swiss franc could go in relation to the euro.  This drove the Swiss franc down over 10 cents in one day against the U.S. dollar.  This is unprecedented.  It is rare to see a currency move almost 10% in one day.  This is basically a formal devaluation.

The Swiss National Bank has only one way to ultimately put a ceiling on the franc.  The only way to do this is to create new money out of thin air.  This is unfortunate because the Swiss franc has been one of the most reliable currencies.  Even though it is no longer backed by any gold and is a fiat currency like the rest of them, there has always been this sense that the Swiss central bank is tighter with its monetary policy and less political.

Assuming this announcement works and the Swiss franc stays capped, then it would not surprise me to see the Bank of Japan try the same thing.  The yen is another fiat currency that has been more reliable in relation to the others and some are saying that the yen is appreciating too far and too fast.  It astounds me that the yen is as strong as it is, considering that the debt-to-GDP ratio of the Japanese government is over 200%.  This makes Greece look good.

The Japanese central bank has been able to maintain a relatively tight monetary policy because the moron investors keep buying Japanese government bonds for some reason.  With the massive debt that the Japanese government has run up, the rates on bonds there should be somewhere near the Greece level.  That is, the rates should be indicating a default is near.  Instead, rates in Japan are extremely low, despite a lack of buying from the central bank.  This means that private investors are funding this massive debt.

This move by the Swiss central bank is stupid, assuming that they weren’t being threatened with a nuke by the U.S. government or something crazy (although not that far fetched) like that.  Why does the Swiss government feel like they can’t let their currency appreciate?  Why is this the same with other governments?

Basically, these are a bunch of mercantilists making this decision.  Their excuse is that they cannot have too strong a currency or it will hurt their export sector.  But what about their import sector?  If you have a strong currency, you can import goods and services from other countries for cheaper prices than otherwise would have been the case.

Although weakening their currency might benefit the export sector, overall it will hurt the Swiss people more.  It means that people will have to pay more for goods and services.  The Swiss central bank will be devaluing their currency now like most of the other central banks around the world.

The U.S. dollar is losing its status as the reserve currency of the world.  I don’t think there is any other currency likely to take its place.  I think that either there will be no reserve currency or else a commodity or basket of commodities will serve this purpose.  Gold may become money again faster than we think.

Later this week, I will discuss my thoughts on investing in foreign currencies.

Tomorrow marks the 10th anniversary of the September 11, 2001 terrorist attacks.  As a libertarian, I have a lot of mixed feelings on the event and what has taken place since.

First, I don’t believe these attacks happened because America is free or America is a democracy (although America is not free and it is not supposed to be a democracy).  The reasons given by the terrorists have been consistent.  It is mainly due to U.S. foreign policy.  These attacks were revenge for U.S. wars, U.S. occupations, U.S. sanctions, U.S. aid to dictators, U.S. aid to Israel, and other related reasons.

Of course, all or most of the victims of September 11, 2001 had little to do with U.S. foreign policy.  These were innocent people.  It is the U.S. government responsible for foreign policy.  Although one could sympathize with people in the Middle East suffering the consequences of U.S. foreign policy, it is wrong of the terrorists to target innocent people, regardless of their lack of options.

Although, by the same token, it is wrong of Americans to want to hurt or kill anyone who was not directly responsible for the terrorist attacks.  You can call it collateral damage or anything you want, but it is still morally wrong to have people in Iraq, Afghanistan or anywhere else die because Americans are seeking revenge.  The terrorist acts should have been treated as criminal acts.  If a criminal runs into a building, you are not morally justified to blow up the whole building if there are innocent people inside.

Unfortunately, September 11, 2001 gave the U.S. government an excuse to vastly expand with war and infringements on civil liberties.  America is less free in 2011 because of it.  The good news is that more people are waking up to this, with much credit due to the internet and Ron Paul.

You will mostly hear patriotic rhetoric if you watch television tomorrow.  If you go on the internet, you will find other stories.  There is a movie being released tomorrow that discusses the falling of the towers. It is not being called a conspiracy theory movie, but that is basically what it is.

I also have mixed thoughts on the conspiracy theories.  Some of them really are way out there.  However, I have always been suspicious of how the twin towers fell.  They both fell, basically into their own footprint.  But to make the whole thing worse, is the falling of World Trade Center 7.  WTC 7 was a 47 story building.  While that is much smaller than the twin towers were and typical in Manhattan, a 47 story building would be considered a skyscraper in most cities.

WTC 7 fell at close to free fall speed.  Go on YouTube and watch a video if you haven’t seen it.  This building supposedly collapsed because of fired ignited from when the twin towers fell.  WTC 7 collapsed just after 5:00 in the afternoon of September 11, 2001.  It is only the third big building I know of to have ever collapsed like that due to a fire.  The first two happened that morning.

If WTC 7 fell due to explosives, which is what appears to have happened, then that leads to all kinds of questions.  It means the explosives had to have been planted before that morning.  It means that insiders knew an attack was going to happen.  It means that a few elites knew the attacks were coming and did nothing, allowing almost 3,000 people to die.

The only thing that makes me go the other way is that it is hard to believe that a few government elitists could pull off this whole thing.  The whole thing probably could have been done with just a couple of dozen people knowing.  While government as a whole is incompetent, certain individuals in government and connected to government can be intelligent enough to plan something like this.

Regardless, if WTC 7 was taken down by explosives, it leads to hundreds of more questions on what happened and who knew.

I don’t push this subject all that often, except for those who show interest.  The crazy thing is, even if people believed that the government was complicit in the 9/11 attacks, they still wouldn’t be libertarians.  That is another reason I don’t push the conspiracy theories all that often.  While I think it would help liberty in the sense that less people would be as trustful of their government, it still would be far from a victory for a libertarian agenda.

I know socialists/ leftists who believe in these conspiracies.  At the very least, they believe the U.S. government is fighting illegitimate wars and responsible for killing hundreds of thousands of people.  Yet, these same leftists want the government to provide our healthcare.  What?  So you think that the government starts wars and kills people, yet you want these same people that you call murderers to oversee the healthcare system in the name of helping the poor?  If you think there are a bunch of murderous thugs running DC, why would you want them running the healthcare system?  Do they all of a sudden become honest and genuine in what they say about helping the poor?

In conclusion, I would like to know what happened to WTC 7.  If I knew, it would probably lead to a bunch of other questions.  While exposing this would help the general public become more skeptical of government, it also won’t magically turn them into libertarians.  I do hope we eventually get answers though and I hope that Americans start withdrawing their consent to be governed.  The sooner the wars and occupations end, the safer we will become.