There have been recent stories appearing, even in more establishment sources, talking about the AI (Artificial Intelligence) bubble.  Many of these companies that are benefitting from AI in the form of higher stock prices are simply doing business with each other.

Let’s say I own a business and you own a business.  We make a contract with each other where I sell services to you for $1 million.  You will also sell services to me for $1 million.  There is nothing illegitimate about these transactions if we are actually providing useful services that are demanded in the marketplace.

But let’s just use an absurd example here and say that I am offering to edit your website articles for $1 million.  You only have 50 articles on your website, and this work can be done over a long weekend.  Meanwhile, you are going to write 10 articles for me in exchange for $1 million.

Again, there shouldn’t be anything illegal about this contract, and these are legitimate services.  But most people realize that it is a bit absurd to charge $1 million for these services.  But when we report our revenue next month, it will show $1 million in revenue for each of our companies.  Forget the fact that we also had $1 million in expense.

The examples with tech companies investing in AI are not this absurd, but this illustration does show an element of truth in what is happening with AI investment and inflated stock prices.

By the way, even if there is a massive AI bubble and a lot of it is bookkeeping games, it doesn’t mean all AI is not legitimate.  It doesn’t mean that AI will be useless.  We can already see that it is useful to individuals in gaining information.

There were some crazy companies and valuations in the late 1990s during the tech bubble.  The tech bubble burst, and several companies went out of business.  But it wasn’t the end of the internet.  It was just getting started.  The tech bubble bursting wasn’t a lesson that technology companies are bad or worthless.  It was a lesson that just throwing money at something because they are supposedly involved in the latest hot thing is not a good long-term investment.

The Nasdaq and Bitcoin

This past week was a rough one for Nasdaq investors and Bitcoin.  The Nasdaq gained back a little on Friday, but it was overall a bad week.  Meanwhile, Bitcoin fell hard.  It is currently under $100,000.  It actually dipped below $95,000 on Friday.

The fact that the Nasdaq and Bitcoin are somewhat correlated should really concern Bitcoin investors (speculators).  If the Nasdaq falls by 50%, it will probably be a lot worse for Bitcoin.  At least Nasdaq companies, even those trading AI investment money, provide some kind of service to consumers.  Most of them make some kind of profit.

Bitcoin is still new on the scene.  We have seen some big declines in Bitcoin over the years, but we haven’t seen a total crash.  I’m not sure if Bitcoin speculators understand that it could easily go below $10,000 in a relatively short period of time.

Circular Investing

When I see these stories about circular investing in AI, it reminds me of Bitcoin.

It sometimes reminds me of the whole stock market when the market is in a bubble frenzy.  Are people really getting rich because a company is trading at 50 times earnings?  You can get rich if you sell at the top and don’t buy back in, but that means somebody else is losing.

This can even apply to real estate.  If I buy a house for $300,000 and then sell it to you for $800,000 a year later, was any value actually created?  It is just more money changing hands.

This circular investing is really what defines a bubble.  People put money in because they expect to make more money in the future.  They expect more people and more money to pile into whatever it is.

When the last sucker forks over a bunch of money for fear of missing out, watch out below.  The problem is that we don’t know when this will happen.  But if history is any guide, it will eventually happen.

Trump and his economic central planners have floated the idea of having a 50-year mortgage.  This is in the name of making housing more affordable.  You know, like how subsidizing student loans has made college more affordable.  Or how subsidizing medical care has made medical care more affordable.

(Those last two sentences were sarcasm for those with a weak meter on reading sarcasm.)

Every libertarian must ask, “Why is the government even talking about this.”  It probably wasn’t in the vision of the Founders that the government would be floating ideas on what type of loan people should get to buy a house.

In a true free market, there should be no objection to allowing a business or an individual to loan money to another individual for 50 years.  That is between consenting parties.  There should be no law prohibiting that.  Whether it is a good idea is a different question.

A Lot of Interest

There may be some interest in a 50-year mortgage from people who can’t easily afford to buy residential real estate.  Unfortunately, they aren’t interested in the interest.

That is the interest someone would pay on such a long loan.  The amount of interest paid on a 50-year loan would be astronomical compared to the amount of principal, assuming the borrower took all 50 years to pay back the loan.

If someone took out a loan of $400,000 for 30 years at 6% interest, it would mean a monthly payment of about $2,398 per month.  The total interest paid over 30 years would be $463,352.  That is a little bit more paid in total interest than the $400,000 that is ultimately paid towards the loan.

If someone took out a loan of $400,000 for 50 years at 6% interest, it would mean a monthly payment of about $2,105 per month.  The total interest paid over 50 years would be $863,371.

In other words, you would pay $400,000 more in interest over the course of the loan for a monthly payment that is less than a $300 difference.

And this is assuming the same interest rate.  If you get a 15-year mortgage vs. a 30-year mortgage, the rate is often slightly lower on a 15-year loan.

If the lender on a 50-year mortgage charged 7% instead of 6%, the monthly payment would actually exceed the 30-year mortgage with a 6% rate.

Make America Free Again

This example just shows how absurd this whole conversation is.  Turning to a 50-year mortgage just means kicking the can down the road a little bit longer.  It means more debt.  And if housing becomes slightly more affordable in the short run, the prices may just rise higher in response.

Housing affordability is a supply and demand issue, but with a lot of government interference.  There is an issue with local zoning laws.  There is an issue with building regulations.  If Congress regulates how much water we can have in our toilets, you can just imagine how expansive and expensive all of the regulations are with all different aspects of a house.

There is also an issue of tariffs.  Yes, tell that to the tariff man himself.  When you make materials like metal and lumber more expensive, it becomes more expensive to build a house.

And then there is the central bank.  When our default situation is more monetary inflation, asset prices tend to rise in response.  If the government would stop spending so much money, and the Federal Reserve would stop monetizing the debt, then maybe housing would be more affordable to the average American.

The answer isn’t more debt with a 50-year mortgage.  That is symbolic of the problem.

They used to be called food stamps.  Now it is referred to as the Supplemental Nutrition Assistance Program (SNAP).  It is hard to call it supplemental nutrition when the money is often used to buy unhealthy food.

They are often referred to as SNAP benefits.  The term “benefits” may or may not be accurate.  It is not like getting company benefits for working somewhere.  These are benefits that other people are forced to pay for.

Programs like Medicare and Social Security are referred to as “entitlement” programs, as if every American is somehow entitled to them just for existing.

SNAP is government welfare.  There are an estimated 42 million Americans receiving SNAP benefits, which is about 1 in every 8 Americans.  This is an incredibly high percentage.

Some conservatives and libertarians like to go off on SNAP recipients for collecting government welfare.  Many of these same people never seem to go off on all of the people collecting government welfare in the form of free education (i.e., using the public school system).

For some reason, some forms of government welfare are more respectable than others.

Government Force

It is correct to be against SNAP in principle.  Like most government programs, it is just another form of theft.  The government forcibly takes money from some people and distributes it to others (typically with a bureaucratic instruction manual attached to it).

It is also true that food stamps/ SNAP is a light form of socialism that creates dependence.  That is often the unstated purpose of government programs.  It gets people dependent on the government for their very existence.  When more people get dependent, they have less of a tendency to oppose the system, even when the system as a whole is working against them.

SNAP, like other government programs, also disincentives people.  It can discourage people from working more or harder, and it isn’t just because they are lazy.  At some point, it makes financial sense to not earn a little more money because it would negate the “benefits”.

These are all valid points.  The issue is a topic of conversation because of the government shutdown.  Some recipients are getting smaller amounts, and some people are experiencing delays.

We are not on the verge of getting rid of the SNAP.  There isn’t even much talk about reducing the number of recipients or reducing the amounts.  At this point, it is just about delays from the so-called government shutdown.  Still, there is more debate about SNAP than most other things.

Last year, about $100 billion went towards SNAP spending by the federal government.  That is about 1.5% of total federal spending.

So, while we have an uproar over 1.5% of the total budget, what about the other 98.5%?

Priorities

The government isn’t really shut down.  The debt keeps climbing.  There are still military bases all over the planet.  The U.S. government is still funding Israel and Ukraine.  The government has plenty of money to bomb boats off the coast of Venezuela.

While libertarians should oppose the SNAP “benefits” in principle, there are many things that should be prioritized and brought up in discussion.  Instead of pulling money away for buying food, maybe it would be better to stop bombing and killing innocent people in foreign lands.

This is why I don’t take conservatives seriously for the most part.  They will fuss a little bit about food stamps, but they won’t question the obscene amounts of money spent making war all over the place.

In this sense, food stamps (or what is now called SNAP benefits) should be one of the last things on the chopping block.  Let’s stop all wars, all funding of foreign countries, and bring the troops home.  Let’s cut the Pentagon (Department of War) spending by $500 billion per year, at least.

Let’s actually get rid of the Department of Education.  Government schools are still primarily funded at the state and local level.

Let’s get rid of the Department of Agriculture and the Department of Energy.

The list can go on and on before we need to get to SNAP benefits.

Once we cut everything to the bone, then we can talk about SNAP benefits.  At that point, most people wouldn’t need them because the government won’t be sucking up our resources and misallocating them.  In addition, without all of these crazy departments and programs, we will be subject to far fewer regulations.  The economy would boom, and it would be an actual boom built on real prosperity that would benefit all Americans.

Venezuela is a poor country.  It is poor because of the somewhat socialist policies that have been enacted there.  It is also poor because of sanctions, courtesy of the U.S. government.

The “leadership” in Venezuela has not been obedient to the U.S. empire.  This was the case under Chavez, and it continues to be the case under Maduro.  The U.S. empire doesn’t like it when others aren’t obedient.  They really don’t like it when there is oil and also a lack of obedience.

Therefore, it has been the policy of the U.S. government to topple the government of Venezuela.  This is especially true of Trump, who tried to topple the Venezuelan government in his first term.

Less than a year into this term, Trump and his war hawk advisors are at it again.  They have blown up several boats in the water off of the Venezuelan coast.  Now they are threatening even more.

Drug Dealers?

Where is the proof that the people murdered in these boats were drug dealers?  Did they get charged with this offense?  Were they brought to trial?

Even if they were drug dealers, since when does that deserve the death penalty?  According to Trump, it deserves death, but this is meaningless.  Trump is funding a mass slaughter in Gaza.  Trump is funding a war in Ukraine.  Trump has no problem dropping bombs on Yemen or Iran or anywhere else that is convenient to his war making.

The fact that Trump is ordering these boats to be blown up off the coast of South America is even worse.  Not only is he murdering people, but he is doing it in a foreign country.  It is an act of war.

What would Americans say if Russia blew up a boat off the south shore of Long Island because they suspected the boat had drugs?  In fact, what would Trump say about that?  You can picture us going into a nuclear war over it.  But somehow, it is ok for the murderous Trump to kill people arbitrarily in Venezuela.

Peace Prize?

Trump is trying to make a case that he deserves the Nobel Peace Prize.  This is the bizarro world we live in.  Trump doesn’t deserve any credit for stopping a war that he started or funded.  He doesn’t deserve credit for stopping conflicts that weren’t really wars or that he really had little to do with stopping.

Trump does deserve “credit” for starting wars in Iran, Yemen, and Venezuela.  He deserves credit for continuing to fund conflicts in Ukraine and Gaza.  He deserves credit for continuing conflicts in Somalia and other countries in the world.

Trump will sometimes talk about peace.  But most of his time in office in 2025 has been about making war or threatening war.  Trump is solidifying his place in history as another war criminal president.

What Trump and his administration are doing in Venezuela is murder.  They can call people narco-terrorists or whatever they want.  They have no moral authority to do what they are doing.  It doesn’t matter that they are government officials.  It is still murder.

The FOMC released its latest statement on monetary policy.  As expected, the Fed lowered its target rate by 25 basis points (0.25%).  The federal funds rate is now in a range of 3.75% and 4.00%.  The Fed will meet just one more time in 2025, but it is unclear if the Fed will cut again for its last meeting of 2025.

Jerome Powell pointed out that they have limited data because of the government shutdown.  The limited data gives the Fed an excuse to remain undecided on future rate cuts.  They probably really do want to see if price inflation continues to run high.  They also don’t know if and when this bubble is going to implode.

The CPI is still running at 3% (above the Fed’s supposed target of 2%), yet they are cutting rates anyway.  While the rate cut gets most of the attention, this isn’t what I believe was the biggest news.

The FOMC announced that it will stop its balance sheet runoff starting December 1, 2025.  In other words, we have one more month of approximately $40 billion coming off the balance sheet.

A Stable Money Supply?

The Fed has been slowly deflating its peak in 2022.  That was the same year that price inflation spiked higher.

Let’s recall that the balance sheet was just over $4 trillion when Covid hysteria hit in late February/ March of 2020.  It skyrocketed from there reaching a peak just short of $9 trillion in 2022.

Once the Fed finishes its quantitative tightening at the end of November, the balance sheet should stand at approximately $6.5 trillion.

So, we went from just over $4 trillion to almost $9 trillion in two years.  Now we are back to about $6.5 trillion another 3 and a half years later.  That is quite a ride.

But it is still over 50% higher from where it was at the beginning of 2020.  You can see why we have had the consumer price inflation that we’ve had.  You can also see why we’ve had the asset bubble we’ve had, which continues to this day.

Now that the Fed is going to a neutral monetary policy in terms of the base money, you have to wonder when quantitative easing (digital money printing) will be coming.  At this point, it should just take a big bank failure or a stock market crash to get the printing presses going again.

The Everything Bubble and Austrian Economics

When writing about the business cycle, Ludwig von Mises pointed out that you don’t necessarily need monetary deflation to bring on a crash.  If there has been an artificial boom, that boom will eventually come to an end.  Just a slowdown in a loose money policy can bring on the crash.  At some point the correction will happen.

Mises said that the only way to avoid the correction was to continually increase the rate of the growth of the money supply, which would eventually lead to a crack-up boom, which is really just hyperinflation.

Hyperinflation brings on its own correction, but it completely destroys the money.  Almost nobody should want hyperinflation.  Even government officials and central bankers don’t want hyperinflation because it could destroy their own wealth and power.

Even though this boom has lasted a long time, it doesn’t mean it can keep going forever.  We almost got a big recession in 2020, but the government handed out trillions of dollars to people with the help of the Fed.  This delayed the inevitable pain.  Now we have an even bigger bubble than what existed in early 2020.

The Fed is stopping its mild monetary deflation, but the damage is already done.  The damage was the massive monetary inflation and massive government spending over many years.

Yield Curve

With the Fed lowering shorter-term interest rates, the yield curve is normalizing.  It was inverted for 2023 and much of 2024.  Now that it is normalizing where short-term rates are lower than long-term rates, we are ready for a recession.

With stock indexes, gold, and Bitcoin all hitting new all-time highs, all the signs point to a massive recession ahead.  The Fed cutting rates by 25 basis points isn’t going to stop any of this.

The big question is what the Fed will do if and when a recession hits.  What if price inflation is still running at 3% per year?  You would think that a recession would bring this down, but that isn’t clear at this point.

Will the Fed just try to reinflate the bubble?  And what will happen to bonds?  What will happen to the dollar?  What insane things would Donald Trump try to do?

There are a lot of questions hanging out there.  The Fed is stopping its monetary deflation for a reason.  The CPI is still running high, but they are scared of something else.  Perhaps Americans should be more scared. Investors should be really scared.

Even with the government being shut down (sort of), we still got a release of the latest CPI numbers.  The market cheered because the numbers were a little better than expected.

The problem is that our expectations have become too low.  After the horrible price inflation of 2022, we are happy when it is “just” 3%.  Of course, that 3% is on top of the already-higher prices from the last 5 years.

The CPI showed a rise of 0.3% in September 2025.  The year-over-year has gone back up to 3%.

The median CPI is up 3.5% from a year ago.

What happened to the Fed’s target of 2%, let alone the target of an average of 2% over time?

In the face of price inflation at 3%, the Fed is actually lowering interest rates.  This doesn’t make much sense at all unless you consider that the Fed may not really care too much about getting price inflation down to 2%.

These are bad numbers on their own.  It doesn’t really matter if they beat expectations.  The expectations were bad.  Perhaps the positive is that we can say that people aren’t expecting much out of the Fed in the way of positive things.

Investors like the news because they see the Fed continuing with its rate cuts.  This is all that seems to matter to the general financial media and investors.

My Experience

I went to the grocery store yesterday.  My experience was much higher price inflation.

There are dark chocolate bars that I like (2 different brands).  They used to be $2.99 or $3.19.  I believe it was just earlier this year that they went up to $3.99.  Yesterday, they were something like $5.69.  Both brands had gone up.

To go up over 40% from last weekend is outrageous.  Maybe I will see the occasional sale, but this is the new standard.  I probably won’t be buying much here, as I can find cheaper brands at Walmart or Costco.

The price of the eggs I buy did not go up from last week.  They are already much higher than they were a couple of years ago.

Sometimes I buy coconut water.  I look for sales.  The price for a 1-liter bottle went above $6.  It was over $5 before.  It is not as dramatic as the chocolate bars, but still higher from the weekend before.

I have talked about other food items previously.  The price of the organic peanut butter that I buy has gone up over 50% in the last couple of years.

We have a good water filter we use, but we still occasionally buy individual bottles of water in a pack of 24.  Have you seen the price?  All of the brands have gone up in price as compared to a couple of years ago.

The prices I’m seeing at the grocery store are going up a lot faster than 3% per year.  When one product jumps 40% from last week, it tells me something is going on.

Tariffs and Monetary Inflation

Perhaps we are finally seeing the impact of the increased tariffs and the insane swings in what to expect future tariffs to be.  The chocolate bars I looked at are probably not imported, but I can’t say for sure.  It is also possible that certain ingredients are imported.  There were already high tariffs on sugar imports before Trump, but that doesn’t explain the hike in the price.

Sometimes the packaging can get more expensive too.  This can be because of tariffs or from general monetary inflation, or both.  Another thing I noticed at the grocery store is that the plastic bags for my groceries just seemed to be cheaper and lower quality.

Unlike leftists and even many non-leftists, I am not blaming the grocery store for being greedy.  I have no doubt that the store is experiencing higher costs and is just passing them on to the consumer.

My wife actually said to the cashier that we noticed that some prices had gone up.  She acknowledged it and said she’s been seeing it too.

We are still getting the effects of the monetary inflation that was rampant in 2020 and 2021.  Even though the Fed has been slowly deflating its balance sheet, it is still far higher than it was 5 years ago.

When you add additional tariffs on top of this, it will be hard to tell how much of the price inflation is a result of the taxes on imports versus general monetary policy.

There are so many working parts in the economy, it is really hard to say how this will play out.  There will be winners and losers, although more losers overall.  The average American will see a relative decline in living standards.

In my case, I can’t justify paying over $5 for a single chocolate bar.  I will either eat less of it or find a cheaper brand.  And that’s just the cheap stuff.  I could easily choose to just buy the chocolate at the higher price.  When you start talking about insurance, there oftentimes isn’t as much choice.  You can’t just not buy car insurance because you don’t like the higher price.

Consumer demand will shift based on the new realities.  Sometimes a business can’t pass along higher costs because consumers will choose not to buy.  Less of certain things will be sold.  People find cheaper substitutes.

The government and central bank continually make us poorer than we otherwise would be.  Price inflation is not dead.  If anything, it is going higher.  We’ll see if my experience at the grocery store shows up in the October CPI numbers.

There is something very insincere about these “No Kings” rallies/ protests.  One of the problems is that most of the people who are protesting are really just protesting Trump.

To be sure, there is a lot to protest about Trump.  There are some valid points they make against Trump.  The problem is that many of these same people will cheer on authoritarianism from other politicians.

And this isn’t “what aboutism” because it isn’t a defense of Trump.  If the majority of people protesting “No Kings” were consistent in protesting against government authoritarianism, then we would have a much more libertarian society.  But they just criticize Trump and other Republicans.  They also oppose Trump on the occasion when he promotes less government interference.

Kings vs. Democracy

You don’t have to read Hans-Hermann Hoppe to understand that having a right to vote doesn’t give you freedom.  A country run by a king is not necessarily more authoritarian than a country that votes for its leaders.

I would take a benevolent king who collects a total of 5% in taxes and doesn’t start any wars over the horrible government we live under in the United States today.

Of course, Trump isn’t a king.  He was elected.  The problem is that he is largely authoritarian even with the supposed checks from other branches of the government.

The states should also be able to nullify many of his actions, but unfortunately the central government has become far more powerful, and there isn’t much of a federalist system left.  The “No Kings” people oppose things like states’ rights though.

The problem certainly didn’t start with Trump.  Trump has amplified certain things and made them worse.  He has also slightly improved things in some areas.  Trump is just continuing in a long line of presidents who have had way too much power.

As Harry Browne liked to say, the problem isn’t the abuse of power.  The problem is the power to abuse.

Both Republicans and Democrats will scream at the opposition party when the opposition party holds power. As soon as they regain power, then they do their own form of abuse to get back at the other side.  The cycle just seems to get worse and worse.

The Previous King(s)

There are some genuine people at the No Kings protests who do oppose authoritarianism.  They are a minority.  The majority of people are just protesting Trump and anything he does.  They are the same people who repeated lies about how Trump colluded with Putin to steal the 2016 election.

The really rich part is that these same people fully supported the authoritarianism of Biden and Biden’s handlers.

Biden (or his handlers) issued an executive order that tried to force about 100 million Americans to take an unsafe and ineffective jab in their arm.  If you refused, then you were not allowed to keep your job that allows you to make money to feed yourself and your family.

In terms of domestic policy, it doesn’t get any more authoritarian that that.  Luckily, the Supreme Court struck down the worst parts of the illegal and immoral orders.

It would be interesting to take a poll of the “No King” protesters to see how many of them opposed the vaccine mandates 4 years ago.

And let’s not forget all of the other horrible things Biden did or tried to do.  He just arbitrarily tried to forgive student loan debt.  He continued to push his other Covid restrictions.  He weaponized the “Justice” Department against people who opposed him.  And, like Trump, he helped finance foreign wars.

Honest Opposition

We need honest opposition.  We need more consistent opposition.  There should be protests against Trump for killing people in boats off the shores of Venezuela.  There should be protests against the wars and war financing.  There should be protests against turning cities into police states in the name of deporting illegal immigrants.

It just rings hollow at this point coming from people who continually lied and made stuff up about Trump.  There is plenty to criticize Trump about without having to make stuff up.  These people also supported many of the same things from Biden.

The leftist protesters are a bit like the boy who cried wolf.  They screamed and hollered about Trump for every little thing for 10 years.  Now that Trump is becoming more unhinged, their screams are not getting attention because they’ve been screaming for the last 10 years about Hitler.  Now that the wolf has come, other people are ignoring them.

Of course, Trump has governed the last 6 months or so as if he is trying his best to prove his worst enemies correct.  He really is acting like a dictator in many ways.  Now the leftists get to say, “See, we were right.”

They were right in the general assessment that Trump is bad, but they were wrong in almost every other respect.  Just as many on the political right will cheer on tyranny when it is imposed from their side, the left will go back to cheering on tyranny as soon as Trump leaves office.

Libertarianism, anyone?

Something has to give with this economy.  There is simply too much craziness for this to continue.

The stock market is still booming as if the economy is just wonderful.  Gold has surpassed the $4,000 mark after just surpassing $3,000 earlier in the year.  Silver is at new all-time highs, surpassing the $50 mark.

Not only did gold and silver touch new milestones, but they blew past them.  Two days of gains in these metals can make for a good annual gain in a typical investment.  It isn’t normal for an asset to go up 5 to 10 percent in just a few days.

Perhaps gold and silver are just catching up with the rest of the Everything Bubble.  Stocks and Bitcoin have been in bull markets for many years with small periods of pullbacks.

Even with the insane national debt and the insane monetary policy of the last two decades, it is still surprising to see the price of gold go up this far and this fast.  Even if you are an investor in gold, it is still a bit jarring.

Now there is talk of $10,000 gold.  I’m not sure I want to see $10,000 gold any time soon.  It means something else is really off.  We really don’t want to see the dollar depreciate this much.

The Tariff Economy

Trump has become unhinged in his second term as president.  He has always been bombastic and all over the place with his rhetoric.  But he has taken it to a new level.  It isn’t just Trump mouthing off.  It is having real-world consequences.  In addition to his insane foreign policy, he thinks he is playing some kind of game (maybe a different version of Monopoly) where he can just bully other people to “negotiate” with him.

Trump has threatened to impose a 100% new tariff on all Chinese products.  This would be an additional tariff on top of the already-existing tariffs.

There are about 1.4 billion people in China.  The Chinese produce a wide variety of products that are exported throughout the world.

Trump is essentially sanctioning the entire country of China and the 1.4 billion people who live there.  If this 100% tariff goes through, Trump is effectively blocking trade with China.  It isn’t much different than the blockade with Russia.

There are already tariffs on Chinese imports.  If you add a 100% tariff, it means the price will be more than double what it should be.  It would not be worth it to Chinese producers and American consumers to have much, if any, trade at all.  At some point, it becomes more of a sanction than a tax.

If the government were to put a 100% additional tax on cookies at the grocery store, most people would stop eating cookies or they would make their own.  A few people might still buy cookies because they really like them and don’t care much about paying double the price.  But you can imagine that a great percentage of people would find something else for dessert.

Unpredictability

Some people talk about Trump as TACO (Trump Always Chickens Out).  Why don’t people use this against Trump in his funding of wars?  Trump always chickens out and continues to fund foreign conflicts.

But Trump doesn’t always chicken out when it comes to tariffs.  While he has backed off on the percentage many times, there are still additional tariffs in effect that weren’t there before.

Even if Trump does “chicken out” on these 100% tariffs on China, it is hard to estimate just how much of an impact this has on business.  This goes for small and big businesses.

Even if your primary product is made in America, manufacturers rely on certain materials and parts that are imported from other countries.

Just imagine you have a business that sells a product that costs $100 to produce.  One-fifth of the cost of that product is from materials imported from China.  That $20 portion may now rise to $40 with Trump’s new tariff.  So, the cost of that product is now $120 instead of $100.

Will consumers pay a significantly higher price so that your business can still make a profit?  Will you order the materials and then see the tariff go back down?  Should you order a huge supply of materials in anticipation of the tariff coming soon?  What if you order too much and they don’t sell?  What if you don’t order enough and will have to quickly raise your prices?  What if Trump wakes up grumpy tomorrow morning and decides it will be a 200% tariff?

The uncertainty here is enormous.  This is happening for thousands of businesses across the country.  It impacts homebuilders.  It impacts sellers of electronics, toys, furniture, and a lot of other things that are a big part of our lives.

Even if everything else in the economy were solid, this alone creates massive havoc and uncertainty.  It is very bad for business.

The Yield Curve

Let’s not forget that the yield curve was inverted for 2023 and most of 2024.  It is slowly normalizing.  The 10-year yield is hovering around 4%, along with the 3-month yield.  The short-term yields should continue to decline with the Fed in interest rate cutting mode.

The inverted yield curve is a warning indicator for a recession.  The recession typically comes after the yield curve has somewhat normalized (gone back to not being inverted).  We are reaching that point now.

This alone should be a major warning sign that a recession is on the horizon.  Add to this the tariffs.  Add to this the massive market bubble where assets keep going higher to insane prices.

This whole economy could blow at any moment.  So far, things have held together in spite of Trump’s tariffs and his tariff threats.  That doesn’t mean things will continue to hold together.

The government has been “shut down” for over a week and a half, and I haven’t commented on it in writing up until now.  That’s because I don’t think it will be that significant in the long run.

The first thing to point out, that people generally know, is that the government isn’t truly shut down.  You still have to pay your taxes.  The military is still funding wars, fighting wars, and operating military bases all over the world.  The Social Security checks (direct deposits) keep coming in.  Medicare and Medicaid keep operating for patients.  We are still subject to all of the government regulations out there.

Most unfortunately, the Congress and president are still active, including an announcement from our economic czar that he wants to impose 100% tariffs on China because he doesn’t like how they’re acting.

Impacts

This isn’t to say that the government shutdown doesn’t have its impacts on people.  There are many government employees who aren’t reporting for work and who won’t be receiving a paycheck.

Even though I don’t think most jobs done by government employees should exist, it doesn’t mean we can’t have sympathy for some of these people.  There are also disruptions for people who just need to deal with the bureaucratic machine.

This shutdown might be hard for government employees who live paycheck to paycheck.  They will still need to pay their rent or mortgage and other bills even when they miss a paycheck.  This is one reason why it is good to not live paycheck to paycheck.

On the other hand, the government employees who are currently not working know that they will receive backpay when the government officially reopens.  Even though the paycheck will be delayed, they will be getting what is essentially a paid vacation.

Here’s a note to people on Facebook and other social media.  It isn’t necessarily a good look to advertise your glee over a government shutdown because you get a paid vacation from your job.  Then again, I suppose it does help the cause of liberty by making people realize that there are too many government jobs out there that we don’t need.

Politics

It is important to realize that the government is shut down because of politics.  Both sides (Democrats and Republicans) see it as potentially advantageous, politically speaking.

If public opinion starts shifting in favor of one side, expect the other side to find a resolution.

The Republicans are generally blaming the Democrats because the Democrats want to make subsidies permanent for the Affordable Care Act (i.e., Obamacare).

The problem for the Republicans is that they hold the presidency and a majority in both houses of Congress.  Even though they essentially need 60 votes in the Senate for a continuing resolution, most people don’t follow it that closely.

My guess is that the Republicans will capitulate because they will get more of the blame.  If you are a very casual observer of politics, you can see that the Republicans hold the presidency and a majority in Congress, so they would be more to blame for the government shutdown.  Of course, if you like the shutdown, then maybe you would praise the Republicans for it.

Most people don’t care that much.  The ones who care the most are the ones who are the most directly impacted.  At some point, the people most impacted will have the loudest voices and the most influence.

Trump has threatened to start permanently laying off employees if the shutdown continues.  I don’t think these will be mass layoffs.  He will be going after very specific agencies that he sees as working against him.

Trump is probably not wrong in this respect.  There are government employees who are actively working against him.  They are also actively working against the American people.  But let’s face it.  This will be tinkering around the edges.

We know how these things typically work out.  Trump will try to fire a few thousand people out of millions, and these people will take it to court.  There is a good chance that the courts will rule that the government shutdown was not a legitimate reason for firing these people.

Conclusion

It is hard to say how long the government shutdown will last, be we can say with a lot more certainty that there won’t be any major permanent changes that come from this.  Most government employees will eventually return to work and get their pay.

Trump has done a lot of bad things that go against the cause of liberty.  He has done a few good things too.  The problem is that most of the good things will just simply be undone by the next Democratic president, or maybe any president.Meanwhile, even with the so-called shutdown, government spending will continue to grow, and the debt will continue to grow.

As I write this, gold is trading at around $3,900 per ounce.  It had just broken through the $3,000 mark for the first time ever on March 14, 2025.  It was already on a run when it topped $3,000.  It has now gone up about 30% in the last 7 months.

Gold has joined the Everything Bubble with stocks and crypto.  There was been a party with assets for a while that didn’t include gold.  Now gold and silver have gotten into the action, while Bitcoin and U.S. stock indexes continue to touch new highs.

The other thing that has joined the party is gold mining stocks.  The gold stocks did just about nothing for many years, and they looked quite pathetic compared to the overall stock market.  Now the gold miners are finally having their day in the sun.

Just as an example, GDX – the VanEck Gold Miners ETF – is up an astounding 117% year-to-date.  Some of the individual companies that are big players have been extraordinary.  Newmont Corporation (NEM) is up about 125% year-to-date.

Anyone who had been patient with the gold miners and held on has been rewarded in 2025.

Dollar Profits

You could say that the dollar gains in gold and gold stocks is really just a loss in the dollar.  It is the continually depreciating dollar that gives these types of returns.

Whether we like it or not, we live in a world of fiat currency.  For Americans, the dollar is money.  That is what you use to buy food at the grocery store and to pay your bills.

Even if the “profits” this year from gold are really just a representation of a falling dollar, we are still dealing with dollars in everyday life.  That is the measurement we use.  Most people don’t say that the price of a house (or anything else) changed value based of the number of ounces of gold it takes to buy.  A house is priced in dollars, and the transaction and contract are made in terms of dollars.

So, whether you want to consider the dollar-price gain in gold as profits or just retaining value, the question arises of whether you should sell any of it at this point.

If you absolutely knew that the price of gold or gold stocks would fall by 25% in the next 6 months, then it would make sense to sell right now and buy it back after it falls.  After all, you could have more gold and shares of gold stocks if you did this.

Of course, you don’t know what the future holds, but I present it this as a thought experiment.  I am trying to stop the people who reflexively respond, “Gold is money, so you should never sell it for dollars.”

Taking Profits

I recently listened to an interview with David Gardner, one of the founders of the Motley Fool, which is a company that gives investment advice.  He talked about his thought process in buying (and holding) stocks.

One of the big takeaways for me is that you really should hold things for the long term if you bought it as a long-term play.  Personally, my biggest investing mistakes in my life happened when I sold something for a gain.  It wasn’t from the losers that I bought.

I owned stock in both Amazon and Apple a long time ago.  I even rode Amazon through the tech crash in the early 2000s.  I made some modest gains from both stocks at different times.  I sold and took profits.  I should have held, even though I obviously had no way of knowing at the time.

I try not to play the “what if” game too much.  It is easy to do in life.  If I had held, I probably would have turned something like $1,000 into $100,000, or maybe more.  I had bought shares in these two companies because I liked them and saw potential.  So why did I sell?

At the same time, I don’t want to give the impression that you should never sell.  There are plenty of stories out there where people should have taken money off the table and didn’t.  These stories are even more painful.  Imagine having a million dollars in a stock and then watching it go to zero.  It’s fine if you are Warren Buffett, but most people aren’t.

If someone had bought Bitcoin when it was less than $1,000 per bitcoin, they have obviously done quite well.  If they sell it all now, they are missing the chance of Bitcoin going to $1,000,000.  But they are also risking these impressive gains if they don’t sell.

My advice is to look at it in context to your whole portfolio.  If you are worth $5 million and you have one bitcoin worth about $120,000, then you can afford to let it ride.

If you have 8 bitcoins worth almost a million dollars, and that is the large majority of your net worth, then it would be foolish not to sell some of it.  You could easily go from a million dollars to near zero in a short amount of time.

My overall recommendation is to sell some and let some ride (if you still think it is a solid investment).  We aren’t talking about owning a big house.  Things like Bitcoin, stocks, and even gold to a certain extent, are divisible.  If you own 100 shares of a stock that has done very well, you can sell half.  Take some profits while letting some of it ride for the potential of even bigger gains.

Balancing a Portfolio

If you invest in gold as part of a well-diversified portfolio (such as the permanent portfolio), then the answer here is to keep your portfolio balanced.  If you want gold to make up 20% of your overall portfolio, and it is now worth 25%, then sell enough to bring it back down to 20%.

If you have speculated in gold mining stocks, you have made some big paper gains in the last year in terms of dollars.  This isn’t an all or nothing game.  I don’t recommend selling it all because gold mining stocks might continue to go multiples higher of where they are now.

I also don’t recommend holding everything and not taking any profits.

Personally, I have some gold funds in a retirement account.  Because of the recent run, they make up a larger percentage of my account now than they did a year ago.  I am thinking about selling a small percentage.  It may be something like 10%.  The gold funds would still make up a larger percentage of my retirement account than this time last year, but at least I would be taking a little off the table.

There is no right answer here, but I think it is best to stick to a strategy.  If you have something like a permanent portfolio, you should rebalance, which will probably mean selling some gold.  If you own PRPFX, this should be happening for you by the fund manager.

If you have speculated in gold or gold stocks, there should be a deliberate strategy to take some profits while also allowing room for a big homerun.

Regardless of whether it is gold, stocks, Bitcoin, or some other tradeable asset, this is not an all or nothing game.  You can sell 10%.  You can sell half.  If you bought in for the fundamentals of the asset for the long term, then don’t sell it all until you hit a certain target.  You will never be a really successful investor if you are not willing to let the good things run.