I remember hearing Harry Browne talk about dictator syndrome.  I also remember reading about it, but I thought it was an article. I recently discovered that it was in his book, Why Government Doesn’t Work, where he wrote about dictator syndrome.

This is an affliction that is suffered by almost every human adult, including libertarians.  You think to yourself, “What if I were in charge?”  The problem is that when you fantasize about being in charge, sometimes you actually think that you can be in charge, or that your thoughts can be carried out by others.

This is where libertarians tend to be realists.  You can say, “If I were in charge, I would do this and this.”  But hardcore libertarians understand that nobody should be in charge, at least when it comes to using initiated force. And also, if they were in charge, they would not be capable of running other people’s lives, or at least not well.

Think about the so-called democratic socialists out there.  They have these grand visions for society, if only everyone would go along with them.  But people aren’t going to go along with them, because they have their own interests.

This is why a socialist society that is enforced will result in authoritarianism and tyranny. People aren’t going to continually go against their own interests, especially when they are living poorly. Most people aren’t going to work hard just to see their productivity consumed by others.  Most people aren’t going to abide by the law if the law means mass starvation.

In a socialist society, the dictator has a choice of either not fully carrying out his socialist agenda, or else turning to extreme violence.  This is why hundreds of millions of people have died at the hands of their own government.

But even in a more mixed economy such as the present-day United States, there is widespread dictator syndrome.  It doesn’t necessarily mean that you want to be an authoritarian dictator.  Your goals might be very well intended to help people.  But the problem is that you are assuming that you can dictate the policy just as you prescribe it.

There are two problems with prescribing policies of more state intervention in order to supposedly help people.

First, what you prescribe may not be what other people want.  And the only way to enforce it is through initiated violence.

Second, even if a large portion of the people actually did want what you are proposing, the end result would not be anything like what you proposed.

Unintended Consequences

It is on this second point that Harry Browne spoke of the dictator syndrome.  People make this incredibly naïve presumption that the policy they (or their favorite politician) are proposing will magically perform just as intended.

They don’t consider the lobbyists and special interests.  They don’t consider constituents telling their representatives to include certain language in a bill.  They don’t consider the deal making in Congress.  They don’t consider the interests of those who make large political donations.  They don’t consider the lawyers writing the legislation.  They don’t consider the administrative agencies and their bureaucrats who will implement the legislation.  They don’t consider the interpretations of the legislation by the administrative agencies and the courts.

As Harry stated, “By the time your program has run this gauntlet, it will be far bigger and far more expensive (in money and disrupted lives) than you had imagined.  And it will have been twisted to satisfy many factions.  In fact, your program may end up being the opposite of what you had intended.”

I have used this tactic against people because of their partisan politics.  For example, if a Democrat today were to cheer on some kind of intervention (let’s say, in Syria), then I can just say, “Oh, you think Donald Trump knows what’s best for Syria?”

Likewise, if a Republican says he wants stronger drug enforcement or to have a more conservative education curriculum, you can say, “Oh, you want Nancy Pelosi and the lobbyists to keep drugs off our streets?”  Or, “you want Nancy Pelosi and a future Democratic president teaching your kids?”

I have heard many people propose that it should be an education requirement to learn personal finance in high school.  This sounds like a good idea, until you think about the fact that it would be implemented by government bureaucrats and taught by government employees. Think “Common Core”.  It would also be ironic that the government – with a current national debt exceeding $22 trillion – would give a lesson on personal finance.

I think there is a bit of dictator syndrome in all of us.  The key is to let people know that they are not actually the dictator and they probably never will be the dictator.  The things you propose now will be used against you in the future.  If you want to be a dictator, then focus on controlling your own life.

It’s only the start of 2019, and the Democratic candidates for president are already throwing out great entertainment, if you overlook the scary policy proposals.  It is a contest in outdoing the last person’s absurd proposals.

The new and young star of the left, Alexandria Ocasio-Cortez, is helping to contribute to the fun.  She sets the scale far to the left, and the presidential candidates feel the need to follow. There is the Green New Deal, which is already serving to embarrass those endorsing it.  There are also many proposals for tax hikes on the rich. If one person says to tax the rich at 70%, then someone feels the need to up the ante to 80% or 90%.  I’m waiting for someone to go over 100% at this point.

Elizabeth Warren tried to change things up a bit.  Since she didn’t want to go for a 110% income tax, she turned to another tax. She proposed a wealth tax.  Her proposal is to impose a tax on wealth of 2% per year for amounts over $50 million, and 3% for amounts over $1 billion.

This means that if Jeff Bezos were worth $100 billion at the time of counting up the assets, then he would owe in the neighborhood of $3 billion.

This would be one of the worst forms of taxation from a libertarian standpoint.  It is always debatable what forms of taxation are worse than others, but I see a tax on property as perhaps the most egregious.  It is actually similar in a sense to inflation, which acts as a tax.  Inflation hits your money, while a wealth tax hits everything you own.

In other words, you could just do nothing, and you would keep owing money.  You could refrain from earning income, driving, or buying anything, and you would still owe the tax if you meet the threshold. You could even be living in a tent on the side of the road, but you would owe the tax if you meet the threshold.

I understand that multi-millionaires and billionaires aren’t in this situation, but it is to prove a point.  It is one of the most immoral forms of taxation.  Libertarians often say that taxation is theft.  This kind of tax is theft to the degree that you can only avoid it by not possessing enough money and things.

Some might say that millionaires and billionaires did not obtain their wealth in a moral manner. If it is coming from the left, it is mostly nonsense.  They do not understand (or don’t want to understand) that wealth is created and that the money they possess did not come at the expense of others (unless through government means).

There is something to be said for the fact that some rich people obtained some of their wealth through government means.  But this isn’t an argument to tax wealth.  It is an argument to cut off government regulations and subsidies that benefit the rich (or anyone else).  Mostly, it is a mixed bag though.  You could argue that Jeff Bezos and Bill Gates have received some government favors and subsidies, but there is also no doubt that they have created great wealth too.  In a free market, wealth is an indication of having served society.

Again, the answer isn’t a wealth tax.  The answer is to remove government favoritism, which simply means removing government power.

The Economics of a Wealth Tax

Aside from the immorality of the proposed tax, it is highly problematical from an economics standpoint.  In fact, I believe it would be such a disaster that it would be problematical from a political standpoint.

Let’s say that Jeff Bezos has to come up with $3 billion per year.  I hate to break it to Elizabeth Warren, but he probably doesn’t have a checking or savings account with his bank where he can just write a check.  Most of his net worth is tied up in assets.  In his case, a good portion is in Amazon shares.

Therefore, to come up with the money to pay the tax, Bezos would likely have to sell a significant portion of his shares.  The same would go for most of the other billionaires in the country.  So you would have these ultra-rich people selling massive quantities of stock shares.  Next thing you know, they would have the SEC accusing them of rigging the markets or insider trading, even though they are just trying to come up with money to pay “their fair share”.

If there were any serious legislation of a wealth tax that was threatening to pass, I believe that stocks would completely tank.  It wouldn’t happen after the legislation is passed.  It would happen in anticipation of it.  This is why I believe that Warren’s proposal is mostly rhetoric.  It would be political suicide to implement something so foolish. The middle class has 401k plans that would be impacted.

On top of all of this, how would she propose to enforce it?  What about all of the collectibles in the Bezos household? Would you have to get a government appraiser walking through to price the current value of the fine art on the walls and the antique furniture?  This would be a bookkeeper’s worst nightmare.  It would also turn us further into a police state with the government trying to monitor it.

The Other Wealth Tax Once Proposed

This gets very little mention, although I have seen a few outlets that have covered it.  Neither Donald Trump nor Elizabeth Warren probably wants it brought up.  Donald Trump once proposed a wealth tax too.

Trump was considering a run for the presidency back in 1999.  He briefly did run in 2000.  In late 1999, he proposed a one-time wealth tax of 14.25% in order to pay off the national debt.  Unfortunately, I don’t think a 100% wealth tax on the rich would pay off the national debt today.

I was a young adult at the time.  I was not a full libertarian at that point, but I still recognized the idiocy of his proposal. I have never forgotten it either. I figured someone who was such an economic idiot was not fit to serve as president.  Maybe he just thought everyone else was an economic idiot, but that is still bad, as I would rather someone who would tell the truth.

Trump’s proposal was a lot bigger than Warren’s, although it would have been a one-time tax as he proposed.  Still, if some rich person got hit with a 14.25% tax one time, how could he be sure it wouldn’t happen again?

If Elizabeth Warren were to pull off a miracle and win the Democratic nomination in 2020, then it would be great fun watching the debates.  I wonder if Trump would keep referring to her as Senator Pocahontas.

If such a scenario were to play out, I sure hope that someone asks the question about the wealth tax and that Trump once proposed such a thing.  I think that he would repudiate his former words, but you know how Trump’s ego is.  It would be hard for him to admit he was wrong 20 years ago for proposing such a thing.

Trump is still an economic idiot with his tariffs and out-of-control spending.  But at least he hasn’t mentioned a wealth tax in a very long time.

Again, I don’t think it is a serious threat politically.  There could be other taxes or tax hikes coming in the future, but I don’t think a straight out wealth tax will be one of them.

As I write this on February 9, 2019, the yield curve has further flattened. The 3-month yield and the 3-year yield both currently stand at 2.43%.  The question is: why would someone lock in the same rate for 3 years as for 3 months?

When you buy a US Treasury bill, you are essentially locking up your money.  If you could collect the same exact interest rate, you would typically rather buy a 3-month bill over a 3-year bill.  You can keep rolling over your 3-month security while still having access to your money if needed.

The only reason to buy the 3-year instrument (the longer term) is that the rates might go lower. You want to lock in what you consider to be a high rate as compared to the future.

When longer-term rates fall below shorter-term rates (an inverted yield curve), this indicates some fear amongst bond investors.  They are locking in longer-term rates in anticipation of them dropping further. There is less demand for short-term securities.

In terms of the current yield curve, there is already a slight inversion between the 2-year and the 5-year.  There is just one basis point (0.01%) separating the 3-month yield and the 5-year yield.  Even the 1-month and 2-month yields are about equal.

The 10-year yield is still a bit higher.  There is a 20 basis point spread from the 3-month yield.  When looking for an accurate recession indicator, I like to compare the 10-year against the 3-month.

Surprisingly, Most People Don’t Even Pay Attention

The last few months of 2018 were brutal for U.S. stocks.  It had some investors worried.  Then things turned around in January as stocks soared.  I think it was relief to many investors who are heavy in stocks.  Despite the correction in late 2018, the downturn seemed to be put down, and stocks were heading up again.

However, we should ask, was late 2018 just a little blip down in a continued bull market? Or was January 2019 just a blip in the beginning of a new bear market in stocks?

I am tending to lean to the latter because of what the yield curve is telling us.  Despite the hot January for stocks, the yield curve didn’t steepen much.  Now it is slightly flatter than it was at the start of 2019.

I really think there is something to the fact that most analysts just don’t want to be too pessimistic.  I know there are some perma-bears out there who always think the sky is falling.  But if you look to the establishment financial media (just about anything you would see on television or read in a major newspaper), there is a heavy bias towards being bullish on stocks.  You may hear a few guests mention the yield curve, but most of the big players just ignore it.

It is incredibly hard to predict financial markets.  This is why most people don’t get rich by investing.  It is even harder to time markets.  Yet, the yield curve is the one indicator that seems to almost always be accurate.  When there is an inverted yield curve, it means a recession is coming, likely in 18 months or less.

The yield curve, as it stands right now, should really be the lead story almost every day on any financial network or website.  If you go to CNBC during trading hours, the yield curve should be the most discussed topic.  Instead, you get a lot of talk about management changes at particular companies and their revenue forecasts for the next quarter.  It is missing the big picture.

CNBC and other networks will discuss the Federal Reserve when there is a meeting on monetary policy.  This is big picture stuff, for sure.  But even with Fed meetings, sometimes I feel like the big points are being missed.  We hear a lot about the federal funds rate, but we hear less about the interest paid on bank reserves, which is controlling the federal funds rate.  We also tend to hear less about the Fed’s current policy of draining its balance sheet (monetary deflation).

Just because it is not being widely discussed, it doesn’t mean that the yield curve is not important.  I think it is the most important indicator out there right now.  It is telling us that the strong performance for stocks in January may not last long.

Unless the yield curve starts steepening again, it looks like an economic downturn is coming. Stock investors will be among the hardest hit.

Donald Trump has been president for over 2 years now, and he just delivered his 2019 State of the Union address.  I wasn’t sure if he would last in office this long with everyone trying to take him down.

I didn’t watch Trump’s speech, which is good, because I heard it was long.  These speeches are largely for show.  If you actually care what the president has to say, it is better to read a transcript.  You can do that in a fraction of the time than the actual speech.  Some people do like to watch the reactions of different people (like Bernie Sanders when Trump says we will never be a socialist nation).

I don’t like most of Trump’s policies, but it is hard not to cheer for the guy at times just because his biggest enemies in Washington DC are some of the most despicable people in existence.  Unfortunately, a few of those horrible people are people that Trump actually put in his cabinet.

With people like John Bolton and Mike Pompeo, who needs enemies?  If someone told me in early 2016 that those names would be in the president’s administration, I would have thought almost anyone but Trump had won the presidency (aside from maybe Jill Stein).  I would have thought Hillary Clinton had a better chance of picking those two for sure.

Trump’s foreign policy has been completely inconsistent, just as it was in the campaign. But what can you expect when you surround yourself with a bunch of war hawks?  He can’t even get a couple thousand troops out of Syria, in a war that never received any congressional approval.

Trump is horrible on Iran.  He’s horrible in continuing the funding of the Saudis and the Israelis (the governments, that is).  He is horrible in trying to interfere in Venezuela.  He has been decent in some of his rhetoric in intervening less in the Middle East, but his actions don’t typically match his rhetoric.  And with Russia, relations are horrible despite Trump saying in the campaign that he wanted to get along with Putin.

I do give Trump some credit on North Korea for seemingly avoiding conflict.  Trump was very diplomatic when he met with Kim Jong Un.

In other words, foreign policy is still mostly a disaster.  There is a tiny bit of hope with Trump in the presidency as compared to almost anyone else, but maybe that is a reason to be pessimistic. If Trump can’t end any wars overseas without his cabinet and the military generals completely turning on him, then there will certainly be no hope with someone more hawkish in office. And it doesn’t look promising that someone like Tulsi Gabbard will win the presidency.

Aside from foreign policy, let’s look at the state of the union from a libertarian perspective.

The Bad

One thing that mostly gets ignored by both major parties is the massive debt and spending coming out of Washington DC.  The national debt is about $22 trillion, with $1 trillion annual deficits coming as far as the eye can see.  That is actually the optimistic scenario, as the deficit could be far worse if we go into recession.

Meanwhile, the baby boomers continue to retire, and some estimates of the unfunded liabilities are in excess of $200 trillion.  It is almost a meaningless number except to portray that promises are going to be broken.

The annual federal budget is now about $4.4 trillion.  Per household, this is over $35,000 per year.  Are you getting $35,000 worth of “services” from your federal government?

I think the only solution to the spending problem now is for some kind of default.  It won’t be an outright default on the debt or on Social Security.  It will be a series of mini defaults.  Some of the default will be through monetary inflation. Some of it will be in the form of cutting “benefits” in the future.  People on Social Security and Medicare aren’t going to be completely cut off, but they will find that their money doesn’t go as far over time.  They are probably already experiencing this and don’t fully understand why.

The Fed got away with massive monetary inflation from 2008 to 2014 because we didn’t see massive price inflation as shown by the Consumer Price Index (CPI).  The Fed did a lot of damage, but it didn’t show in significant price inflation or higher interest rates.  This doesn’t mean that it will always be this way. If we get to something like a 1970s scenario again, then the Fed will be forced to halt monetary inflation. The interest on the debt will become so massive that Congress will eventually be forced to cut back. This doesn’t seem possible now, but things can change rapidly.  And just because this game has gone on longer than what seemed likely, it doesn’t mean it will go on forever.

The Good

There are many other bad things I didn’t cover such as government spying, government regulations, government bureaucracy, and other invasions of civil liberties.

Still, as massive and intrusive as government has become, there is another side to the coin. I find that many libertarians don’t appreciate the positive sides, or the gains in liberty.

Despite the anti gun rhetoric from the media, there haven’t been any new major gun control laws put in place recently.  If anything, more people own guns than before.

Homeschooling has absolutely exploded.  You could say that parts of middle class America have seceded from the system, at least as far as education goes.  While the numbers are still relatively small as a percentage, it is no longer seen by most people as strange.  Because of the numbers, it has become socially acceptable.

While drug laws are still horrible, marijuana has been partially legalized in many states. It looks inevitable that federal laws will officially be eliminated and most states will have nearly full legalization.  Public opinion on this issue has changed drastically just in the last decade.

As libertarians, we also need to appreciate technology and decentralization.  I hear complaints about Google and Facebook censoring content they don’t like, and I don’t generally mind the criticism as long as people aren’t calling for more government involvement.  But let’s step back and appreciate what we are complaining about.  20 years ago, these companies were essentially non-existent.  30 years ago, the internet was basically non-existent. We have the greatest communication abilities now in history by a long shot.  While we complain about the censoring of alternative media, let’s appreciate that there actually is alternative media.  And let’s appreciate the fact that many millions of people access the alternative media and no longer have just the one choice of the establishment media.

Overall, there are things to be pessimistic about in the short run.  The wars and empire continue for now, but they will eventually be curtailed by economic forces.  There will be some pain in the short run in terms of the economy, and many people will have to temporarily reduce their living standards.

However, as long as we don’t have nuclear war or some other catastrophic event, then I think technology and decentralization will continue to advance, even in the face of bad economic conditions.  We will gain liberty in certain key areas while barely noticing.

Roger Stone recently awoke in the early morning to FBI agents pounding on his door with guns loaded.  He was arrested and taken in and then released later that day.  He is facing charges of lying to Congress and witness tampering, which originated from the investigation of the Trump campaign colluding with Russia.

The whole Russia-gate investigation is a hoax.  I’m sorry, but anyone who believes these charges is either evil or extremely naïve on the subject.  Mueller and the investigators are the criminals.

The whole story about Russia interfering with the presidential election is a hoax. It is highly hypocritical, considering the fact that it is the U.S. government constantly interfering with elections in foreign countries (see Venezuela, Ukraine, and Iran as just three examples), not to mention all of the other coups.

The Russia investigation is an attempt to kill at least three birds with one stone.  It is used as an attack against Donald Trump. It is used to cover up the crimes of Hillary Clinton and provide an excuse on why she lost the 2016 election. It is also a way to keep from having peaceful relations with Russia and to keep up the funding of the military-industrial complex.

The whole investigation started on the basis of some dossier that was provided by someone who was funded by the Clinton campaign.  And all of the so-called investigators (criminals) are anti Trump.

This is why they have arrested so many of Trump’s associates or people associated with the campaign. Most of the charges have been immaterial to the actual investigation of Russia collusion.  But they help to set a narrative that the Trump campaign was corrupt.  (I’m not saying that there was no corruption with the Trump campaign, but it certainly isn’t from the charges stemming from the Mueller investigation.)

Roger Stone is just the latest FBI takedown.  It is a setup.  These charges are bogus.  They are used for intimidation.  The victims are threatened with long jail sentences if they don’t enter into some kind of guilty plea bargain.  Then they are used to make false charges against Trump or whomever they are trying to get.  This is the way that federal “justice” works.  It is the reason that most people prosecuted for federal crimes end up pleading guilty for a reduced sentence.  They are afraid to take their chances, even if they are innocent.

The supposed crime of lying to Congress is especially a joke.  James Clapper lied to Congress about spying on the American people.  It was proven a lie by Edward Snowden.  Yet he was not sent to jail.

The people in Congress lie all the time.  This is what they do for a living.  They are mostly demagogues.  Why don’t they go to jail?  The answer is because the American people put up with the lying as long as they keep getting their government “benefits”.

Also, you can lie about chemical weapons in Syria or weapons of mass destruction in Iraq without any legal consequences.  You can lie us into war and cause hundreds of thousands of people to die, yet there is no trial or jail time.  Meanwhile, Roger Stone forgets about a text message that is immaterial to the actual case, and he faces decades (the rest of his life) in prison.  It’s a total joke.

When Roger Stone Ran for Governor

In 2013, Roger Stone briefly ran for governor of Florida on the Libertarian Party ticket (for the 2014 election), or at least he was considering a run.  I couldn’t remember exactly when this happened, so I looked it up.  He was making the rounds in Florida, and I saw him at a local Libertarian Party meeting.  He spoke to our group and took questions.

At the time, I was somewhat active in the local Libertarian Party.  I already had my extensive disagreements with the national party, but I still had several friends locally, and we generally agreed on the local issues of less spending and lower taxes.

When Stone started taking questions, he was thrown some soft balls.  Then it was my turn.  I can’t remember exactly how I phrased it, but I asked him a big picture question about liberty and government spending.  If I am going to support a Libertarian (or anyone else) for any political office, I want there to be the chance for significant change.  I want a major difference from the conventional candidates.  I don’t want to hear about school vouchers and a 1% reduction for one particular tax.  I want something more radical that will get people excited.

Stone admitted to me that he believes in a good infrastructure provided by government. He said he supported the idea of a bullet train between major cities in Florida.  One of my good friends there, who is also a radical libertarian, piled on.  He went after the fact that if a bullet train is a smart idea, then the marketplace would provide it, and we shouldn’t need the government for it.  I believe we also gave him a hard time on education and the role of government.

I tried not to be impolite, but I also didn’t want to go easy on the guy.  I already knew he had a political history, although I obviously didn’t know he would be in the national spotlight in 2019.  At the end of the meeting, even though it didn’t go all that well for him, he made a donation to the local party.  He had a young assistant with him who took video of the event.

It was shortly after this that Stone dropped out as a Libertarian candidate.  I suspect he probably had a few other similar run-ins with other local chapters.  All it takes is one or two people asking some hard questions to make him realize that he doesn’t fit in all that well with the party.  Of course, that was before the days of Bill Weld as a Libertarian.  I would take Roger Stone over Bill Weld.

The Roger Stone Personality

It is hard to believe, but it seems that Roger Stone is almost thriving with the latest FBI arrest.  He likes the limelight.  I don’t know how nervous he is that he will go to prison for a long time.  The guy is 66 years old, so it could be the rest of his life. He says he is going to fight the charges, but we don’t really know.  I hope he does fight them, and I hope he wins.

Stone was a Nixon guy back in the day.  He comes across as somebody who would have associated with Nixon.  He was in person just as he is on television. He comes across as slick, and maybe a shyster.  But then there is also an element of honesty to him.  You could even say he has some personality characteristics similar to Trump.  In many ways, he is full of himself, but then there is something real about him too.

Stone is like a character in a movie who you think is one of the bad guys at first.  Then his character grows on you, and you end up rooting for him.  Not everything in life is good or evil.  There are shades of gray.  But when Stone is going up against the evil Mueller and his henchmen at the FBI, Stone is definitely more on the good side.

I’m not saying Roger Stone is going to turn out to be Han Solo, who didn’t necessarily show the best intentions at the beginning of Star Wars.  I don’t expect anyone to like him that much.  Then again, if he can help expose the crimes of Mueller and his phony investigation, maybe Stone will turn out to be something of a hero.  Sometimes heroes turn out to be people that don’t necessarily look the part at first.

Stay tuned.  I hope Roger Stone puts on quite a show and stands his ground.  I still have hope that some justice will prevail.

The FOMC released its latest monetary policy statement.  As expected, the Federal Reserve will keep its target federal funds rate between 2.25% and 2.5%. Even though investors were not surprised, stocks boomed because the word “patient” appeared in the statement.

The statement reads, “…the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Because of this one word, which indicated the possibility of less tightening in the future, stocks went up, long-term yields went down slightly, and gold went up.

It is hard to believe that one word in a policy statement can drive financial markets to such an extent.  But then again, if we look back to the Greenspan era, analysts were continually parsing his words to figure out whether to buy or sell.

The important piece of the FOMC statement is really the implementation note.  It states that the Fed will continue to roll off approximately $50 billion per month of maturing debt.  This is monetary deflation, and it is eventually likely to deflate the bubble from the previous monetary inflation.

Even though stocks boomed, the yield curve actually slightly flattened in some areas.  The 10-year yield fell just below 2.70%.  The yield curve hasn’t inverted yet, at least when comparing the 3-month to the 10-year.  However, it could easily invert in the matter of a couple of weeks if things start to get shaky again. We just don’t know if this is one last little run up before the big prolonged drop, or if we will see stocks test the all-time nominal highs again in the months to come.

Are You Basing Your Whole Financial Future on One Word?

There is something wrong with the big picture when one word – patient – drives the markets to this extent.  There is something wrong that this one committee controls the entire money supply for the richest country on the planet.  There is something wrong that they can distort interest rates (the price of money).  There is something wrong that a few people can cause a massive boom/ bust cycle.

The problem here is that your financial investments are reliant on a few words spoken by the central bankers.  Are you banking your whole retirement on the fact that Jerome Powell and company will calculate everything correctly?  Are you relying on the fact that they will use the right words, and the markets will react the right way, so that your portfolio goes up?

This is really no way to plan for your retirement.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind.  You don’t have to worry about stock market crashes or other economic events because of what the central bankers do. You can protect your portfolio from the central bankers who try to centrally plan an economy with 325 million people.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

(This e-book is on sale for just $2.99 if you get it by January 31, 2019.)

Pick up this e-book and protect yourself and your financial future from the word “patient”, or whatever key word is used in the next statement or press release.  The free market should determine the money supply and interest rates, but unfortunately we currently do not live in that world.

Therefore, take care of yourself and do what you can, given the situation.  Meanwhile, hopefully more people will grow tired of these central bank manipulations, and one day we can have real money again as determined by the marketplace.

As I write this, stocks have done well in the month of January.  After a scary few months, they have somewhat recovered, although still far from making up the lost territory from late 2018.

Whether this is one last fake move up before the full bear market sets in, we don’t really know. Or maybe the long-term bull market since 2009 has a few more legs.

The yield curve flattened a lot in 2018. At the beginning of January, the 10-year yield stood at 2.66%.  The 3-month yield stood at 2.42 %.  This was a spread of just 24 basis points.

At the end of Monday, January 28, 2019, the 10-year yield had risen back up to 2.75%, while the 3-month yield didn’t budge and was again at 2.42%.  This is a spread of 33 basis points.  So the yield curve has slightly steepened in January.

But consider that the 10-year yield had shot past the 3% mark in 2018, and it looked to be going continually higher.  Some people were rushing to refinance their mortgages while they could still lock in a decent rate.  Then stocks tumbled and investors went back into longer-term bonds.

Although the yield curve has slightly steepened in January, it isn’t much considering that stocks have done so well in the same month.  It will only take a day or two of turmoil to send the spread between the 3-month and 10-year back to where it was at the start of the year.

There is something of a ratchet effect going on with the yield curve.  It tends to flatten more when stocks are down, and it tends to steepen more when stocks are up.  But the flattening has tended to be more than the steepening. Therefore, the overall trend still seems to suggest a flattening yield curve that will soon be inverted. It is already inverted if you compare the 2-year yield to the 5-year yield.

This has recession written all over it.  There are no guarantees of what will happen.  For all we know, the Federal Reserve may announce tomorrow that it will be ceasing its quantitative tightening (deflation) and starting up another round of quantitative easing (inflation).  While I don’t expect that to happen, anything is possible. That would certainly play a role in delaying any recession.

The key here is that we just don’t know.  I think there is a good chance we will see a recession before the election of 2020.  But really, I was surprised that Obama got through 8 years without any significant downturn.

As Keynes supposedly said, the markets can stay irrational longer than you can stay solvent. This is one of the few times Keynes was actually right.  But let that be other people who become insolvent, whether it is betting against stocks too soon, or betting in favor of stocks for too long and holding on for the ride to the bottom.  We don’t have to be a part of this roller coaster ride.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind. You don’t have to worry about stock market crashes or other economic events that may hit.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to deeply study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  You don’t have to continually worry about the whether the yield curve will invert or whether the Fed will start another round of massive monetary inflation.  You can sleep at night knowing that your financial assets are safe in any economic environment.

The Federal Reserve does great damage to the economy by controlling the money supply and distorting interest rates.  It is primarily responsible for the boom/ bust cycle.

Without the Fed, there would still be companies that go bankrupt.  There would even be certain sectors that would have downturns based on supply and demand.  But we would not see recessions or depressions where companies and sectors virtually across the board experience a downturn all at the same time.

Perhaps there would still be bubbles without a Fed.  Even Austrian school economists can argue this point either way.  But there is no question that we would not see the major bubbles (stocks, bonds, real estate) in today’s world without the central bank.

This is not to say that the government should be in charge of money either.  In fact, if Congress were in charge of the supply of money, that would be a sure road to massive inflation or hyperinflation. Instead, we should have a free market in money, where the market determines what gets used and supplied. Traditionally, the market has chosen gold as the best form of money.  In today’s world, if left to the market, we would probably see some form of digital gold.

Luckily for Americans, inflation in the United States tends to not be as bad as many other countries. We certainly have nothing like a Zimbabwe or Venezuela situation, and for that we should be thankful. Still, if we go back to the 1970s, there was double-digit price inflation.  Even today, if price inflation really is about 2% as claimed by the government statistics, that is still 2% per year.  It means the value of your money is cut in half every generation (about 36 years).

Planning for retirement is extremely difficult when you have to factor in inflation.  Maybe you are earning a great return of 8% every year that is compounding.  You seem to be well on your way to being wealthy for retirement.  But what if your nominal returns stay the same at 8% and price inflation goes up to 6%?  When you start drawing down some of your savings for retirement, things can get tight really quickly.  You almost don’t even know it is happening until after it has happened.

How are you supposed to plan without knowing what inflation will be a decade or two from now? How much do you really need to save to comfortably retire?  And what are you supposed to invest in to protect yourself from the inflation? Stocks can sometimes benefit from inflation, but the distortions in the economy from inflation can hurt corporate profits, so this is no guarantee.   There were periods during the 1970s when stocks did not do well, despite high price inflation.

Gold is obviously a good hedge against inflation.  But there are problems here as well.  Gold often does not do well during times when inflation fears are tame.  Gold also does not pay interest or dividends.  You are basically relying on the depreciating currency to get any gains. So while gold is good in many respects, you are not protected just by putting all of your money into gold.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind. You don’t have to worry about high inflation or stock market crashes.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

There is an inflation bias in the permanent portfolio.  It will tend to do better during times of higher price inflation.  But this should be considered a good quality of the strategy.  You want higher nominal returns during periods of higher inflation.  In real (inflation-adjusted) terms, the returns tend to be more stable.

This also makes it much easier to plan for retirement.  If you put most of your financial investments in a permanent portfolio setup, then you will be protected if price inflation suddenly jumps to double digits.  And if that doesn’t pan out and we have something closer to a deflationary depression, then you are also protected.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

You can get a more stable return by buying an annuity or bonds, but this is in nominal returns. This will not protect you in the case of a massively depreciating currency.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  You don’t have to continually worry about the rate of price inflation next year and next decade.  Don’t go into retirement in the dark without a flashlight. The permanent portfolio can help guide you into a more peaceful retirement where you don’t have to play guessing games on what the next move will be by the Federal Reserve.

In the United States, the advice is everywhere in the financial world.  It comes from Dave Ramsey.  It comes from the financial independence (FI) community. It comes from Warren Buffett. You may even hear it on CNBC.

The advice is for the average person to invest in low-cost U.S. index funds.  It is a strategy of buy and hold.  The basic script is that, in the long run, stocks always go up.  Or if they don’t go up, then we are all in trouble.  It is a bet on the United States of America.

Maybe it is patriotism or ethnocentrism.  Maybe it is just a matter of trusting the system.  Maybe it is just a matter of assuming that since things have always been this way (in our lifetime) that they will always be this way.  There is an assumption that, over the long run, U.S. stocks will always go up.

There have been prolonged periods of a bear market.  The Great Depression is the obvious example.  But that was close to a century ago.  Surely our system has to be more stable today, they say.

If I could go back to 1982 when I was a young child, and I knew then what I know now, then I would have told my parents to put everything in the stock market that they could scrounge up.  Better yet, I would have requested that they buy stocks in my name.

If I knew then what I know now, I actually would have told them to buy stock in Microsoft when it first became available.  But even just buying a bunch of major companies back then would have served well.  Despite some massive downturns, stocks have done very well over the last 3 and a half decades.

But as the SEC likes to say, past performance is not indicative of future results.

The Uncomfortable Situation of Japan

When I discuss this buy-and-hold strategy with someone advocating it, I like to bring up Japan.  It tends to make the buy-and-hold investors uncomfortable, and for good reason.

In 1989, the Nikkei stock index topped out at about 38,915.  As I write this, it is between 20,000 and 21,000. We are approaching the 30-year anniversary of the all-time peak in the Japanese stock index, and it is still nearly half of what it was.  This is not in inflation-adjusted terms.  This is in nominal terms.  It would be worse if we did it in real terms.

I understand I am cherry picking by going back to 1989.  But imagine someone took this buy-and-hold advice at that time. Imagine they dumped all of their life savings in Japanese stocks in 1989.  Are they still waiting for the “long run”?  How long are they supposed to wait?

Sure, this is Japan. It is not the United States. But we are not talking about Zimbabwe or Bangladesh.  It is a first-world country.  In fact, in the 1980s, there were some people worried about Japan taking over the world, economically speaking.

Japan has its problems.  It is densely populated.  The debt-to-GDP is astronomical.  The population is aging.  The economy has been somewhat stagnant.  But it is still a relatively advanced country.  It is still considered a first-world country.

The United States has problems too.  The debt is high here too.  The baby boomers continue to retire, and the unfunded liabilities are massive. Some estimates have put the unfunded liabilities over $200 trillion.

We don’t know how this will play out.  Will it be massive inflation?  Will it be a sustained depression?  Will it be stagnation similar to Japan?

We really don’t know. The one thing I do know is that I don’t want to bet everything on one scenario.  I have worked hard for the money I have been able to save, and I’m sure most people would say the same thing.  Even if you haven’t worked that hard for it, it would make sense to want to preserve it.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio will probably not make you rich by itself.  What it will do is give you peace of mind.  You don’t have to worry about high inflation or stock market crashes. You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes or other events. That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  If you are reading this before January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts.  Don’t be a Japanese buy-and-hold stock investor of 1989.  You can do better than that, and it doesn’t take a lot of time or effort.  You do have to go against some of the conventional wisdom.

The other day, my dog was in our backyard hooked up to a dog chain (more of a cable really). The problem was that the other end of the chain, which is usually attached to a chair outside, was not hooked up.

I probably discovered this about five or ten minutes after being outside with him.  We were not paying much attention to the dog. By the time I figured out that the other end of the chain wasn’t hooked up to anything, he was grazing in the grass about 10 feet from the back patio where he was supposed to be.  In other words, he didn’t go far.

Luckily he didn’t see any ducks or any other dogs to chase, or maybe he would have taken off. I don’t think my dog realized that he wasn’t hooked up to anything and could have run off with the chain attached to him.  He isn’t one to run away, but he probably would have run to the backdoor of our neighbor’s house looking for their dog if he knew he wasn’t attached to anything.

Even when he is attached to the chair via the chain, it isn’t a particularly heavy chair. He would easily be strong enough to drag the chair somewhere.

But he knows the symbolism of the chain.  It restrains him.  When you hook the chain up to him, he basically restrains himself at that point.

Unfortunately, we humans often restrain ourselves, even though there is technically nothing restraining us.  Just look at the corrupt government we live under.  People think that they desperately need the government or else they wouldn’t be able to live their lives.

I am one who frequently points out the nature of government (i.e., the state).  It is an entity that relies on a monopoly over the legal use of force.  Only the government can legally use force against others that is not in self-defense.

There are 535 people in Congress.  There is one president.  There are 9 Supreme Court justices.  Yet these people rule over 325 million people (or more if you count the foreign intervention).  It is quite obvious that these people are ruling with the consent of those they rule over.  There are a few of us who don’t consent, but the vast majority consent to the system.

Sure, half the country hates Trump.  Almost just as many despise Nancy Pelosi.  But most of these people consent to the system that the politicians use to rule over them.

Even when you count the bureaucrats in Washington DC, the numbers are completely lopsided. There are far more people being ruled than ruling.  That is virtually always the case.  The only way this can exist in the long run is for those being ruled to consent to being ruled.

Finding Personal Freedom

For those of us who truly cherish liberty, we can only do so much to change the world around us. The best we can do is to try to educate others around us.  Our goal is to convince others that they are unnecessarily enslaving themselves.

At some point, we have to not depend on changing the hearts and minds of those around us.  We have some degree of freedom, and we should make the most of maximizing that freedom in our own personal lives.

Harry Browne wrote the book titled How I Found Freedom in an Unfree World.  I have seen people’s accounts on how it changed their life after they read the book.  It basically tells you to think outside of the box and to not box yourself in. You aren’t always confined to a limited number of choices that society seems to put in front of you.

In other words, don’t enslave yourself.  You can’t help it if others enslave themselves.  You can control your own life and how you live it.

If you have a chain attached to your neck, it doesn’t necessarily mean you are restrained. Maybe the other end of the chain isn’t tied to anything, just as was the case with my dog.  Maybe you can take the chain off without anyone noticing.  Maybe the chain is a lot longer than you thought.  You won’t really know unless you test it out.

I find that one area that really restrains people is social pressure.  Society puts us in this box.  It may be different for different people, and also dependent on the social circles that surround you.  Some may feel they have to drive a nice car.  Some may feel that having granite countertops in the kitchen is a basic necessity.  Some may feel that they have to have kids, or that they shouldn’t have kids, or that they should have a certain number of kids.  Some may feel pressure to buy Christmas presents for the whole family.  Some may feel pressure to go out with friends on the weekend.  Some may feel pressure to get married or to not get married.

It can be any number of things.  We all have our own boxes.  Some are worse than others.

I find that a lot of it goes back to money.  There is pressure to keep up with the Joneses.  This is part of the reason that savings rates are low. (Another part of this is simply that people are struggling because of the cost of government.)

When you are able to save some money and put it aside, then I find that gives people a certain degree of freedom.  You don’t necessarily need an amount that will last you for a lifetime of retirement.  You just need some flexibility.  Some have referred to this as FU money.

If you are in a tough place, having some extra money can often alleviate some of the pain. If you are in a bad job and told to do something unethical, do you feel comfortable reporting the incident knowing that it may cost you your job?  If you have a year’s worth of expenses set aside, your decision all of a sudden becomes clearer.

It is a good idea to have money set aside for the unknowns in life.  The unknowns can come about in many ways.  And since they are unknowns, they are usually surprises.

Freedom from Inflation

One objection I hear to saving money is that people simply don’t know what to do with it. They hate putting it in the bank, which may earn .02% in a savings account.  Actually, with inflation, they will lose money with it sitting there.

Still, I would rather have money sitting in the bank and losing 2% per year than wasting it on something that will not bring much pleasure in the long run.

I would rather have $10,000 sitting in the bank earning nothing than having nothing in the bank that also earns nothing.  With the $10,000, at least you aren’t on pins and needles about your car breaking down, or your child getting sick, or worse, losing your job.  That $10,000 can relieve a lot of anxiety.

Some people are worried about inflation, and rightly so.  You don’t want your savings to be continually eroded because of the policies of a few people running the Federal Reserve (again, enslavement). And many people – rightly so – do not want to dump all of their savings in the stock market where it could evaporate quickly.

Harry Browne, in addition to his advice of finding freedom in an unfree world, also gave investment advice.  He came up with the permanent portfolio, which I highly recommend.

He presented it in his short book titled Fail-Safe Investing.  The permanent portfolio will not make you rich. What it will do is give you peace of mind.  You don’t have to worry about high inflation or stock market crashes.  You can protect your portfolio from virtually any economic environment, while still making a decent return over the long run.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

I just released this e-book late in 2018, but I have not promoted it up until now.  From January 26, 2019 to January 31, 2019, I am running a discount where you can get this book for just $2.99.  Again, this is a miniscule price to pay for less anxiety and possibly saving your portfolio many thousands of dollars over the years.  It will probably save you a ton of time too, as setting up a permanent portfolio is not difficult.  You don’t have to study the financial markets to implement the portfolio.

Pick up this e-book while this discount lasts and take one step closer to achieving your own personal freedom.  You don’t have to be a slave to the system.  You don’t have to box yourself in according to what the financial gurus on CNBC are saying.  You can choose your own course.