I like to look at the updated Consumer Price Index (CPI) each month.  I look at the CPI that is most often quoted by the Fed and financial media.  I also like to look at the median CPI, which tends to be more stable.

The numbers in December show that consumer price inflation is continuing to tick upwards.  The CPI was up by 0.3% from the previous month.  Perhaps more importantly, the year-over-year CPI is now at 2.1%, which actually puts it slightly above the Fed’s 2% target.

The median CPI continues to be stable.  The year-over-year median CPI ticked back up to 2.6%.  It had been at 2.5% for the previous 3 months.

Since this is a libertarian blog, I have to give the usual disclaimer of why I am even looking at the CPI – a government statistic.  While it is true that the government’s numbers on consumer prices do not reflect the true inflation, the CPI numbers are important nonetheless.

It is impossible to measure overall consumer prices anyway.  It is impossible to account for all of the changes in quality, and it is impossible to know how much each consumer product is made up of each person’s expenditures.  Even if you could get an accurate account, the numbers are going to be different for each individual and their family.  Some families spend more on food, while others prefer to live in a bigger house.  Other families may have to spend a higher percentage of income on medical expenses.

The CPI numbers are important though for two reasons.  First, it is useful for telling us trends.  Maybe the CPI numbers are understated, but they are telling us right now that price inflation is ticking upwards, at least according to the government’s own numbers.

Second, the CPI is important to look at because it is used by the Fed and the financial media.  If the Fed is using the CPI numbers to base its decisions on monetary policy, then we must look at it too.

Right now, the CPI is telling us that consumer prices are slightly rising.  It is not a lot.  It is nothing close to the 1970s.

It is interesting though because the Fed has kept a tight monetary policy since it ended QE3 in October 2014 (over 2 years ago).  But there are other factors that impact price inflation.  These include productivity, the demand for money, and bank lending.

As I noted in a previous post, the excess reserves held by commercial banks have dropped significantly, even a little beyond the stated drop in the adjusted monetary base.  If banks are lending more money, this is essentially the same as an increase in the money supply due to the process of fractional reserve lending.

Regardless of the various reasons for an uptick in consumer prices, it is important in how it may impact Fed policy.  At this point, it seems it will make it more likely that the Fed will continue with its tight monetary policy, and that continued hikes in its target rate are more likely.

The Fed has been increasing (even if slowly) its target federal funds rate, which is the overnight borrowing rate for banks.  The Fed has been increasing this rate by paying a higher interest rate on bank reserves.  This is a continued subsidy (bailout?) for the banks.

So far, the Fed’s two rate hikes (December 2015 and December 2016) have not increased excess reserves.  If anything, it has been the opposite.  But if the Fed hikes its target rate enough times, it will have an impact.  It will discourage banks from lending, as it is easier for them to earn a decent interest rate by parking their depositors’ money at the Fed.  It is better to have a guaranteed rate with no risk of default.

It is possible we are in some kind of a mini-boom right now, as stock indexes continue to test new highs.  But we shouldn’t expect this to last long.  The Fed will have trouble keeping interest rates down if consumer price inflation continues to tick higher.  The Fed will not be able to credibly threaten more monetary easing either.

Even though criticism of the Fed is running high (at least compared to the past where it received almost none), the Fed has still had something of a free lunch.  It has been able to manipulate monetary policy with little fear of price inflation in the markets.  The Fed was able to multiply the base money supply by almost five times from 2008 to 2014, yet there was little consumer price inflation to show for it.

Perhaps the easy days are over for the Fed.  If consumer price inflation becomes any kind of significant factor, it is going to further limit the Fed’s ability to manipulate monetary policy, particularly on any future easing.

The worst-case scenario for the Fed would be a situation similar to the 1970s where there is increasing price inflation with recessionary conditions.  It is still possible we could see that again, even if it takes a few years to play out.

Donald Trump has officially become the 45^th president of the United States.  To be more accurate, he is the 45^th president under the U.S. Constitution.  We forget about the presidents who served under the Articles of Confederation.

As I have stated previously, Trump has put his life in great danger by taking some of the positions he has, and picking some of the fights he has.  This isn’t about him having squabbles with celebrities or certain reporters.  It is about his entire challenge to the establishment and the status quo.

Trump has questioned the U.S. empire overseas.  He has questioned belonging to NATO.  He says he wants to get along with the Russians.  More recently, he has been taking on the CIA and other intelligence (so-called) agencies.  He has also shown the establishment media for the liars that they are, at least for anyone who cares enough to look.

Trump has put himself in danger, but it isn’t from a lone nut who thinks he is a racist because he heard it on television.  The threat is from the establishment.  It is the heads of the CIA.  It is the Clinton family.  It is the Bush family.  It is McCain and Graham in the senate.  It is the other elements of what some refer to as the deep state.

I hear over and over again that Trump is a bully.  The only problem I have with this characterization is that most of the verbal fights that involve Trump are either with political opponents or people who initially went after him.  In this sense, he is a defensive bully if anything.

If Trump’s wife is worried about him being a playboy, I am not sure she has to worry much anymore.  He is too busy sending out tweets about celebrities at 3:00 in the morning.

Trump supposedly doesn’t sleep much though.  He really is the opposite of low-energy Jeb.  Trump can spend five hours a day responding to insults and still have another 12 hours to make speeches, have meetings, and study policy.

While some consider Trump to be a bully, I think his persona is the reason he won the presidency.  This is an important point to realize.  People are tired of being walked over, and they are tired of electing people who get walked over.  The typical Republican politician gets elected and then proceeds to backtrack on almost everything that was said about taking on Washington or reducing big government.

People want an advocate.  They want a fighter, as long as he is perceived to be on their side.  They don’t want somebody who is going to roll over.

For all of you libertarians out there, imagine if Rand Paul had won the presidency.  Do you really think he would have the guts to take on the CIA directly?  Do you think he would tell a CNN reporter that he works for a horrible organization that puts out lies?  Do you think he would continually challenge the establishment?

Ron Paul, if he had been elected president, probably would have challenged the establishment in a more quiet way.  Ron Paul is a gentleman and probably wouldn’t have gotten involved in squabbles.  Then again, it may be part of the reason he didn’t get even more votes than what he did in is presidential runs.  If you don’t fight back, then the American public accepts the lies that are told about you.

Here is a reality check.  If Trump hadn’t continuously fought back on Twitter and elsewhere, he would not be the president.  He had to fight back, or otherwise the lies told about him would have stuck more than they did.  They have still stuck with about half the country, but the other half likes that he fights back.  They want him to fight on their behalf as well.

We have no idea what Trump will do as president.  Maybe he will continue with his tough words but lay down on the major issues.  Maybe it will only be a slightly different status quo, although we can hope for better.

The major problem with Trump for libertarians is his lack of grounded principles.  He does not understand basic economics, and he does not have any firm and consistent beliefs that span the issues.  His main principle is that he wants to judge each individual issue on its own merits.  He certainly has no understanding of a concept such as the non-aggression principle.

Still, given our current populace, I think Trump might be as good as we could have hoped for.  If he has some honesty in him, and he tries to take on the forces of evil, then it will be a service to all of the good people in the country (and outside the country) whether they know it or not.

We have not had an honest president since at least Ronald Reagan, and I’m not even sure about him.  It’s possible that Jimmy Carter was honest, but he was too incompetent even if he was.  I think Kennedy had some honesty within him, which is likely why he was taken out by the CIA.

Over the next 4 years, I think a major goal for libertarians should be to help honest Trump haters understand just why he was elected.  There are some people out there who hate Trump and can’t understand how he could be elected, yet might be open-minded enough to listen to some reasoning.  The biggest problem these people face is that they do not comprehend how evil the establishment forces are.  They don’t understand how bad big government is to their liberties and their pocketbooks.

You don’t have to defend everything Trump does in order to do this.  We know Trump will do some horrible things, particularly on the economic front.  But it is important to point out that people voted for Trump because they feel forgotten and wanted an advocate.  They were tired of the lies, and they were tired of the elite who think the little people don’t matter.

Trump may or may not be a bully.  But many millions of Americans saw his toughness as a giant middle finger to the establishment.  Some people are tired of being walked over and want to be left alone.

There hasn’t been a whole lot for libertarians to celebrate over the last 8 years of an Obama presidency.  It’s not that there was a lot to celebrate prior to Obama either, but there was at least a glimpse of hope in 2008 that maybe Obama would follow through on some of his campaign promises of less war and greater civil liberties.

The few good things I can say about Obama are things that he didn’t do.  He didn’t start a war with Iran.  He didn’t impose martial law.  He didn’t aggressively go after states that legalized marijuana.

Obama also opened up some trade with Cuba, although even here you could argue that he just stopped enforcing the embargoes.

Most everything Obama did do was wrong and anti-liberty.  I already pointed out 6 of his biggest lies.

Well, Obama may have done something at least somewhat right, just as he is leaving office.  It was reported today that Obama has commuted most of the rest of the prison sentence for Chelsea Manning.  Manning was sentenced to 35 years in prison, but will be set free on May 17 of this year.

I don’t fully know the reasoning that Obama did this.  I know it was not out of pure principle and the goodness of his heart because Obama is a liar and has helped kill tens of thousands of people overseas.  In 2017 alone, Obama’s military dropped over 26,000 bombs.

There must have been some pressure from certain groups to free Chelsea Manning.

Chelsea Manning (formerly Bradley Manning) is in jail for exposing the criminality of government workers.  Manning exposed some of the many atrocities of the Iraq War, including abuse of detainees.  A video was also released showing a helicopter attack on people on the ground in Iraq, as the American murderers in the helicopter casually comment on the death.

This is the world of the Obama presidency.  He campaigned to have a transparent administration, with protection for whistleblowers.  But I guess he meant he would only protect whistleblowers from private corporations.  If you expose the criminality of government, then you yourself become the criminal.

It is the same with Edward Snowden, who exposed the top-level liars at the NSA.  He exposed the criminal spying of the NSA, only to become one of the most-wanted men in the world by the U.S. government.

I don’t know if it was the pressure of anti-war groups, transgender groups, civil liberty groups, or a bunch of groups combining forces.  But for some reason, Obama decided to commute Chelsea Manning’s long sentence.  Of course, he should have issued a full pardon and immediate release, but it is still a small shining light.

This obviously does not change my opinion of Obama in any way.  He still holds much responsibility for all of the death and destruction that has rained down on the Middle East over the last 8 years.  Still, we can celebrate this one minor victory for the cause of liberty and justice.

The Trump presidency is going to be one for the ages.  He challenged the establishment media again in his last press conference, essentially calling the people at CNN a bunch of liars and propagators of fake news.

As I write this, there is less than one week to go until Trump is set to take the presidency.  We’ll see if he can make it there.

Rosie O’Donnell stated earlier in the week that she supports delaying Trump’s presidency by imposing martial law.  I don’t think even Obama will try to get away with this though.

The scarier aspect is just how many enemies Trump has accumulated inside the establishment.  The worst of the worst characters are all against him.  He should realize that he shouldn’t even trust everyone who has supposedly supported him.  If I were Trump, I would not be trusting of the war hawks from the Bush era such as John Bolton.

It is good that Trump is realizing who is enemies are and just how dangerous they are.  He should fear the Bush family, John McCain, and Lindsey Graham just as much as the media and the Democratic establishment.

Trump’s biggest challenge is perhaps the spy/ intelligence agencies.  They are putting out these lies about Trump.  At least Trump is understanding that they are his enemies.

Trump is going to be the first president since Kennedy to boldly take on the CIA.  Of course, we all know how Kennedy’s presidency ended.  I know that Trump is keeping some of his personal security, but I really hope he knows how dangerous the situation is for him.

If the establishment insiders do try to assassinate Trump, it is possible it could ultimately work against them.  Think about when Obi Wan Kenobi allowed Darth Vader to strike him down.  He allows this only when he sees that Luke is watching.

Well, in this situation, the entire country is watching.  If they try to strike down Trump, only the most naive will believe a lone-nut theory.  You would really have to have your head in the sand to not understand that it was the establishment (the powers-that-be, the deep state, whatever you want to call it) responsible for it.

Trump is not a libertarian.  There are many positions he takes that are anti-libertarian.  Still, sometimes certain things have a way of taking shape.

Just the fact that Trump took on the establishment and won the presidency is a great accomplishment.  It means that the American people do have a say.  It means that we are not fully controlled by the establishment.

I think Trump serves a purpose of gaining long-term liberty for us.  He is throwing a wrench into the whole system.  His ideas on how to fix the problems aren’t as relevant as the fact that he is exposing the awful system.  While the insiders try to delegitimize Trump, he is helping to delegitimize them.

I’d like to make something of an analogy here.  Perhaps we can see certain similarities with Mikhail Gorbachev.  He was the head of the Communist Party of the Soviet Union from 1985 to 1991.  He became the head of state of the Soviet Union in 1988.  He also oversaw the dissolution of the Soviet Union.

Gorbachev had a lot of bad ideas.  He was a communist.  But in the end, he was a decent enough human being to not use violence in opposing the tearing down of the Berlin Wall and the breakup of the Soviet Union.  Maybe he just saw the writing on the wall, but it is easy to imagine many dictators not letting things go so easily without a violent fight.

Gorbachev was about the best we could have hoped for at that time in the Soviet Union.  There wasn’t going to be a libertarian head of state there, or anything close to that.  Gorbachev was just good enough that it allowed the state to collapse and for some liberty to find light.

Perhaps it is the same with Trump.  We all know he has his shortcomings.  But maybe he has just enough honesty and is principled enough to keep standing up against the evil establishment.  Maybe he will serve the simple purpose of exposing just how evil the establishment and all of the cronies are.

Trump has put himself in great danger.  For this, he has done a service to the American people, whether they know it or not.  He is exposing the media for the liars that they are.  He is exposing just how rotten the entire system is.

I don’t know if Trump will personally win his fight with the CIA, but either way the American people are the beneficiaries of this fight.  It is removing the legitimacy of this agency and the entire bureaucratic structure.  For this, we can thank Trump for his service so far, even before he has become president.

One chart that we have to pay particular attention to this year is the excess reserves held by banks.  You can find that here.

This is an important piece of economic data, coupled with the adjusted monetary base.  You can find the adjusted monetary base here.

The excess reserves have been falling.  There was a peak of $2.7 trillion in August 2014.  Just for some context, excess reserves were around $2 billion prior to September 2008.  Prior to the financial crisis, most banks did not hold any significant amounts of excess reserves.  This is why the federal funds rate (overnight borrowing rate) was so much more important back then.

Since the peak of about $2.7 trillion over 2 years ago, the total excess reserves now stand around $1.925 trillion.  We have seen a drop of nearly $800 billion.

In August 2014, the adjusted monetary base was just over $4.1 trillion. (It had been just over $800 billion prior to September 2008.) The monetary base is now around $3.4 trillion.

In other words, the excess reserves have dropped with the dropping monetary base.  The excess reserves have fallen slightly more.

If excess reserves were to drop without a corresponding drop in the monetary base, then this would be highly inflationary.

The Fed is supposed to be maintaining a tight money policy now.  QE3 ended in October 2014, but the Fed is still rolling over maturing debt.  There are some technicalities of why the monetary base may be gradually decreasing.

The important thing right now is the relationship between excess reserves and the monetary base.  If we see a divergence at some point, it is going to give us a good indication of the economic environment that is coming.

The Fed has raised its target federal funds rate, which means it is paying a higher interest rate on reserves.  This should keep banks from lending, but it hasn’t seemed to have done much up to this point.

If the monetary base continues to gradually decrease or flatten while the excess reserves start going back up, then this will indicate a greater chance of recession.

If the monetary base flattens while the excess reserves keep falling, then this will indicate a higher likelihood of increasing inflation in the near future.

We will continue to watch these two sets of data throughout 2017.

The next four years are going to be interesting. Trump has really split many libertarians on whether or not to support him.

Of course, the answer is simple. As libertarians, we should cheer him on when he is right, and we should oppose him when he is wrong. And when he is wrong, we should explain why he is incorrect and what the libertarian answer is.

Trump has been great in opposing much of the establishment. Most of the people I most loathe are enemies of Trump. Therefore, I conclude that Trump must have some good qualities.

For this piece though, I must oppose him. He is simply wrong on the issue of bringing jobs back to the United States.

Not long after being elected, Trump took credit for saving jobs that the company Carrier was going to move outside the country. This was an issue that divided many libertarians.

Libertarians are often divided on the subject of targeted tax deductions. Some will say that any tax deduction should be supported because it means less money for the government, and it is allowing someone to keep more of their own money.

Some libertarians oppose targeted tax deductions because it does not put everyone on a level playing field. They say if we are going to lower taxes, it should be done for everyone, or at least everyone paying that particular tax. In addition, when the government uses debt to finance some of its expenditures, the decreased taxes for one company or individual really can come at the expense of others.

I tend to side more with the first group, while still being sympathetic to the latter. Still, with this Trump/ Carrier story, I thought the libertarian critics might be on to something. And as it turns out, I now think they were on to something important.

Trump is already starting to act as something of an economic dictator. He should not be singling out individual companies unless those companies are getting specific government benefits in the first place.

After Trump was criticizing Ford and General Motors (two companies, particularly the latter, that we should not feel sorry for because of government favors), he is now going after car companies based outside of the United States. Trump recently went after Toyota, saying they could face a big border tax if the company built cars in Mexico and then sold them in the U.S. market.

As this article points out, Nissan could really be in trouble, as it produces more than 800,000 cars per year in Mexico, and it has been producing cars there for a long time now.

Many of these plants have been established for a long time, and it would be very costly to move them into the United States. In the case of Nissan, the inexpensive (relatively) Versa and Sentra are produced in Mexico. These are cars that are affordable to some Americans who otherwise wouldn’t be able to afford a new car at all. If Trump forces these companies to move operations to the U.S. or face a border tax, the price of these cars will rise significantly.

With all that said, here is the biggest problem with Trump on this issue. He is simply wrong in his economic analysis. It should not be his goal to create jobs. It should not be his goal to bring jobs into the United States from foreign countries.

This is a major economic fallacy than even many conservatives and libertarian-leaning people get wrong.

In order to increase our living standards, the key to success is increased productivity. We don’t want to create jobs for the sake of creating jobs. If it is being done through government interference, it is harming production and misallocating resources.

Trump needs to learn the concept of comparative advantage. Perhaps no cars should be built in the United States from an economic efficiency point of view. Some jobs are better left for others. Is Trump going to try to bring manufacturing back to his hometown of New York City? After all, New York City barely produces any manufactured goods. They are mostly dealing with digital services.

If cars can be made cheaper in Mexico, that is fine. There are plenty of jobs to be done as long as we live in a world with scarce resources. There is nothing wrong with Americans specializing in providing services. This should all be sorted out by the free market.

Now, it could be the case that some of these jobs in Mexico (or anywhere else) might not have gone there in the first place if the U.S. government did not impose high corporate taxes and a high regulatory burden. Of course, this should be corrected in the form of reduced regulations and lower corporate taxes (and even individual taxes). This is something that Trump could work towards fixing that would actually improve our economy and our living standards.

Placing tariffs on goods for the sake of punishing companies is counter productive. It just hurts American consumers, which is basically everyone living inside the United States.

Trump should stop trying to save jobs, other than freeing up the marketplace. If he continues with these threats – or worse, imposes tariffs – it is going to make the economy worse.

Creating jobs does not make us wealthier. Increased production that is in accordance with consumer demand makes us wealthier.

After nearly 8 years of an Obama presidency, and despite a major defeat for Democrats in the last election, Obama remains somewhat popular. While a lot of people aren’t necessarily happy with the state of the union, many still see Obama as a likeable guy.

If Obama really were just a nice guy who happened to oversee some bad policies, then maybe we could have some sympathy towards him. But, while I don’t think Obama is the sharpest tool in the shed, he isn’t naïve either. He has known that he has overseen evil over the last 8 years.

His administration has continually lied to the American people for 8 years, and Obama himself has helped in the lying and deceiving. Here is a list of 6 of the biggest lies of the Obama administration, many of which cost countless lives and impacted tens of millions of people.

1. When pushing for the Affordable Care Act (Obamacare), he stated over and over again that if you are happy with your doctor and your health insurance plan, then you can keep it. It was not long after the implementation of Obamacare that health insurance plans that were previously available were no longer available due to the changes and mandates in the law.
2. The Obama administration claimed that Assad (in Syria) used chemical weapons against his own people. There was no evidence of this at the time, and it was easy to see that it was a lie being told to justify war in Syria. Like so many things that high-level government officials say, it was likely the exact opposite. It was most likely the enemies of Assad (likely funded by the U.S. government) who used the chemical weapons.
3. Obama and company lied about Libya. He first said that regime change would be a mistake. He said that Qaddafi was a threat to the civilian population. It was another lie to justify war, which has caused massive death and destruction in the country. Libya is now far more dangerous and unstable than it was before. It is Obama who was a major threat to the civilian population of Libya.
4. The CIA and other elements within the U.S. government helped to overthrow the democratically elected leader in Ukraine. After this, the people of Crimea voted (with over 96% approval) to join Russia. The people there are mostly Russian speaking, and it is no surprise that they wanted to break away from the unstable Ukraine where living standards are far worse than in Russia. Then the U.S. government and its puppet media tell the lie that Putin invaded and annexed Crimea. Putin did not invade Crimea. He simply accepted their vote and will to join Russia.
5. When a Turkish airline was shot down over Ukraine, the Obama administration almost immediately blamed Russia with no evidence. Even if it was shot down by Russians, this does not automatically implicate the Russian state. Obama responded with sanctions against Russia. There is still no proof that the Russian state was responsible for this in any way.
6. In the lead up to the Iraq War, the Bush administration would make hints that Iraq played a role in the 9/11 attacks. They would not directly say that, but they allowed others to say it without correction. They steered the narrative that way without officially lying (although many other lies were told). This is what Obama is doing with the allegations of Russian hacking. As Julian Assange stated in an interview, Obama is playing a lawyer. He is being very careful with his words. There is absolutely no evidence that Russia was involved in the information turned over to Wikileaks or hacked the election in any way. I will take Assange’s word over Obama’s word any day. Are we really supposed to trust an anonymous CIA source? These are many of the same people and all of the same agencies that lied about weapons of mass destruction. If a high-level CIA person says something important, you should believe the opposite until you can prove otherwise. Obama is playing war games with Russia and joining the war hawk conservatives in trying to delegitimize Trump. Obama is knowingly lying and deceiving about this.

Obama may seem like a fun guy who likes to play basketball, but he is an apologist for the regime. He originally campaigned that he would have a transparent presidency. Now he seeks to punish anyone who dares to tell the truth about the government’s lies and all of its crimes.

Obama has major blood on his hands. It was reported recently that in 2016 alone, the U.S. government dropped 26,171 bombs on foreign countries.

Obama is not a nice guy. He is a killer. He is a liar. He has intentionally helped to commit these evil crimes.

He will now retire from the presidency and make a lot of money giving speeches and live in a huge house with his family. Meanwhile, tens of millions of people and their countries lay in ruin because of his policies.

The government in Finland is starting an experiment, and it could make for an interesting story as it progresses.  The experiment involves giving 2,000 citizens of the country a guaranteed basic income.

The participants will receive 560 euros per month (about $590 currently), and they will get the money regardless of their changing circumstances.  The experiment will run for an initial period of two years.

The participants were selected at random, but to initially qualify, the person had to be receiving some form of unemployment benefits or income subsidy.  The participants will receive this basic income instead of the subsidies, but they are allowed to find work without losing the basic income.

I wrote about this previously when the Swiss voted down a referendum that would have implemented a basic guaranteed income for all the people of Switzerland.

This isn’t just a proposal amongst socialists.  There are actually libertarian leaning people who favor this idea.  While I think it is wrong, it is understandable based on the idea of incentives.

The reason the Finns are trying out this experiment is because it is easy to conclude that paying out unemployment benefits discourages people from getting work.  In a relatively free market economy, work is available for most anyone who is not severely disabled.  But if someone is getting paid unemployment, they aren’t going to find a low-paying job that barely exceeds the unemployment check.

The Finnish government officials think that giving a basic income will get people to find work and will actually be less of a drain on the welfare system.  If the people are working, from the government’s perspective, at least they are paying taxes.

But what if this experiment “works”?  What if it does incentivize more people to find work?  Does that mean the government will give a basic income to everyone, or just newly unemployed people?  You could see that it would result in a lot more people seeking to be fired from their job.  Therefore, you would have to conclude that every citizen would get the guaranteed basic income.

The next question is whether all of the rest of the welfare state can be repealed.  This is highly doubtful.  Even with a basic income, you will always have some people with extraordinary needs.

(Don’t get me wrong here.  From a libertarian perspective, there should be no basic income or government welfare.  Any welfare should be funded through voluntary charity.  I am just writing this based on the perspective of the welfare statists.)

This is why libertarians should not endorse a guaranteed basic income.  It is not the lesser of evils.  You will not get rid of the rest of the welfare state.  It would be naive to think so.

This is also the reason that this idea will probably not be expanded.  It is not coming to the United States.  Most Americans wouldn’t go for it.  But most politicians wouldn’t go for it either.  If you eliminate the rest of the welfare state, then that would eliminate the lobbyists and special interests if we are to believe that the rest of the welfare state would go away.  The politicians and bureaucrats thrive on the system of special interests.

I consider this idea of a basic guaranteed income as analogous to school vouchers.  I am against both ideas because it is still theft (a transfer of wealth).  But I can’t even support either one as the lesser of evils because things would evolve from what is originally promised.

In the case of school vouchers, any private school that accepted them would all of a sudden be subject to a lot of government rules that go with the vouchers.  The rules and curriculum requirements would get worse over time.  Private schooling would be destroyed.

In the case of a guaranteed basic income, maybe a lot of the rest of the welfare state would go away at first.  But then the lobbyists and special interest would be right back at it trying to get little handouts for the groups with extra special needs.

So while I don’t think this idea is going to take off in the United States, I also don’t think libertarians should encourage or promote the idea.  It may incentivize more people to work, but it will also ultimately expand the welfare state even bigger.

If you are relatively new to the libertarian movement, then you may not know just how much libertarianism has grown within the last decade.

If you think you are lonely now, other than seeking out your libertarian-minded friends and websites, try to imagine how lonely it was ten years ago or more.

If you filled a room with 100 adult Americans at random today, you would have a pretty good chance of finding at least a couple of libertarians in the crowd.  Perhaps they were supporters of Ron Paul.  You would probably find a few more who are libertarian leaning and sympathetic to your cause.

If you went back in time 10 years (January 2007) and filled a room with 100 random adult Americans, you would have been lucky to find one person who shared similar views.  You would have been lucky to find ten people who somewhat understood the term “libertarian”.  You probably wouldn’t have found five or more people who had ever heard of Ron Paul.

It was in early 2007 that Ron Paul was gearing up for his second presidential bid.  His first was in 1988 on the Libertarian Party ticket.  This would be his first run for president as a Republican.

Little did we know that one year later we would find ourselves flooded with Ron Paul signs everywhere and online polls that put him as a frontrunner.  It was still a small minority supporting him, but the passion was overwhelming.

Since that run (and his 2012 bid), the libertarian movement has grown by leaps and bounds.  There are more radical libertarians today than at any other time in American history.

You might hear the objection, “Yeah, but you have nothing to show for it.  You can’t get libertarians elected to office, and government keeps growing.”

While there is a lot to be pessimistic about for sure, there are also many reasons for optimism.

First, it is now impossible to have this conversation without talking about Donald Trump.  Not only was Trump divisive to the country, but he was also divisive for libertarians.  Some libertarians love him and some hate him.  I have stayed in between these two groups, as have others, pointing out his strong points and his bad points.

But just the fact that Trump was elected should tell us something.  This would have been almost inconceivable four years ago with some of the positions he has taken.

I know the hardcore Democrats and the establishment media (mostly the same thing) will say that it just proves there are more racists and homophobes than what they originally thought.  But most of the people who voted for Trump aren’t racists or homophobes (and neither is Trump).  They voted for him for various reasons, but there was a general theme that he represented an anti-establishment stance.

Trump’s election, regardless of what you think of him, represents a repudiation of the establishment, which includes much of the media. They tried to do everything they could stop him, and it simply didn’t work.  And not only did Trump defeat Hillary Clinton and the Democrats, but let’s not forget that he defeated the Bush family and the entire Republican establishment as well.

Trump stood in a South Carolina debate and declared that we were lied into the war in Iraq.  And yet he still managed to win the Republican nomination.  Again, this would have seemed impossible four years ago when they were talking about how crazy Ron Paul was for his non-interventionist views.

No matter what Trump does in office, we should view his election optimistically.  It obviously was not an overwhelming victory, as he supposedly lost the popular vote.  Still, not many people were giving him a chance.

A second reason to be optimistic is the use of technology and free speech.  I understand there are attempts to silence people now, claiming that there is too much “fake news”.  Of course, the most fake news is coming from the people who are calling it fake news.  It is the establishment media that lies about weapons of mass destruction and about Assad using chemical weapons.  They are probably lying about Russia hacking the DNC computers too.  And they certainly had more than enough lies and placing things out of context with Donald Trump.

With the Internet and social media, we have open communications.  When the truth is allowed to be told, it tends to triumph over the long term.  We no longer have the gatekeepers of the so-called mainstream media.  And even for those who listen mostly just to the mainstream media, they still get the benefit of having the media’s hands forced to report stories that go viral that they otherwise wouldn’t have.

There are other reasons for optimism, particularly in the United States.  The majority of Americans do not believe that guns should be banned or heavily restricted.  Many states have loosened gun regulations.  And despite Obama’s attempts at further federal restrictions, they all failed.

Also, consider schooling as another thing to be optimistic about.  You can see the glass half empty and say that Common Core is a disaster and many of the colleges have turned into breeding grounds for the Social Justice Warriors.  But the hardcore left and the proponents of big government are over playing their hands.  They are making themselves look like fools, and they are delegitimizing the system they try to defend.

Parents see what a joke Common Core is.  Many people are opting for private schools or for homeschooling.  Homeschooling has grown exponentially over the last couple of decades.  It was almost unheard of 30 years ago.

One last area that needs mention is drugs.  While the war on drugs rages on, many states have legalized medical marijuana and some have mostly legalized recreational marijuana.  This has been a big turn in public opinion just within the last decade, and I don’t see it slowing down.  I don’t see that the federal government is going to be able to stop this wave from continuing.  The states have essentially nullified the federal drug laws, at least as they pertain to marijuana, and they are doing their own thing.  This decentralization is positive for liberty.

In conclusion, while there is still much to be pessimistic about in the short run, there is much reason for long-term optimism.  As Harry Browne used to say, human nature is on our side.

I am not into making financial predictions.  The whole basis of Austrian school economics is that humans act.  Unless you can predict the actions of 7 billion people on the planet, then you cannot make predictions with any certainty about economic activity.

Still, there are certain assumptions we can make, and we can also take reasonable guesses on how people will act and react based on certain policies.  So with that said, here are some possible scenarios for 2017.

First, there is the Trump factor.  If we can survive three more weeks of Obama and his propaganda against Russia, then hopefully we will get someone who is at least somewhat honest and may actually have the American people’s interests in mind.

Not only can we not predict what 7 billion people will do, we can’t even predict what this one man will do.  He is a total wildcard.  From a liberty perspective, we should expect the good, the bad, and the ugly.  But at least there is hope that there will be more good than we have seen in a long time.

On economics, Trump is mostly bad.  Still, he is better than what we have had.  If he tries to ram through “stimulus” spending on infrastructure projects, it will just be more Keynesianism.  It will be more wasting of resources, although not as wasteful (or deadly) as war.  These bursts in spending can give a temporary illusion that the economy is getting better, but it is actually causing damage by misallocating resources.

Our biggest hope from Trump on the economic front is that he repeals some regulations.  Obviously repealing Obamacare would be great, but we can’t be sure that is going to happen.  If he could get a repeal of Dodd-Frank, that would be helpful for business.

The second major factor (but perhaps the most important) is the Federal Reserve.  We shouldn’t expect a lot from the Fed, but the damage has already been done.  From 2008 to 2014, the Fed increased the monetary base by a factor of almost five.  Although a good portion of this new money has been held as excess reserves by the banks, it has still done its damage.  It has misallocated resources.  It has impacted interest rates and savings.

The Fed has had a tight monetary policy for over 2 years now.  The federal funds rate has stayed near zero, with only two hikes (December 2015 and December 2016) since being brought to near zero in late 2008.  But this rate is over played and over exaggerated as to its effects.  The federal funds rate is not impacting the monetary base.  It is only impacting the incentives for banks to lend money because the Fed has to pay a higher interest rate on bank reserves in order to raise the federal funds rate.

If anything is having an impact right now, it is the excess reserves held by banks.  After the huge build up since 2008, the excess reserves have been reduced over the last couple of years from $2.8 trillion to about $2 trillion today.  I think this is playing a large role in holding off a recession.

This chart of the excess reserves is perhaps the most important thing to watch in 2017.  This, coupled with the adjusted monetary base, will tell us how much money is floating around out there.

While we have seen 8 years of slow growth under the Obama administration, it is surprising that Obama was able to escape a recession on his watch (not counting the 2008/ 2009 financial crisis that was already happening when he entered office).  With the very mild growth we have had, it is hard to say how much of it is real and how much is illusory.

While we have seen the oil bubble pop, there hasn’t been a lot else that has popped.  Precious metals have been a tough investment for Americans, but some of that is due to the incredibly strong U.S. dollar.

I think we have not seen everything play out from the previous monetary inflation from the Fed.  There are still asset bubbles (particularly stocks) that have not corrected yet.  Therefore, given the Fed’s relatively tight monetary policy now, it is likely we will see a recession during Trump’s four-year term.  For his sake, it is better if it happens sooner rather than later.

Until there is a major economic downturn and a Fed reaction of more monetary inflation, we should expect continued strength in the U.S. dollar.  This will make it tough for gold investors to see big gains.  However, I still recommend holding gold as part of a permanent portfolio.

Regarding stocks, we should expect to see Dow 20,000, and maybe more.  But again, this is a bubble waiting to pop.  Maybe it will last for another year, but I think the downside risk is far greater than the upside at this point.

Regarding bonds, I am contrarian to many libertarians on this.  I know rates have gone up lately.  But if we hit another recession, I expect long-term rates to decline again and to possibly test their all-time lows.  To a libertarian, investing in government bonds seems like a stupid idea.  But if most everyone else thinks it’s a good idea, then it doesn’t matter.  If there is relatively low price inflation and people are seeking safety, then they will see long-term government bonds as a safe investment vehicle.

Overall, you should prepare for a recession more heavily than you should prepare for high price inflation or a booming economy.  The high price inflation may come later when the Fed fires up its digital printing press again.  You shouldn’t expect high consumer price inflation (as measured by the CPI) in 2017.

For now, it is important to diversify and to keep your investments relatively safe, unless you have a business venture that offers greater opportunities.  Now is a good time to rebalance your portfolio and to make any achievable resolutions for a productive 2017.