The Federal Open Market Committee (FOMC) released its latest statement on monetary policy.  As expected, the committee did not change the federal funds target rate, which is currently between 0.25% and 0.5%.  There were two dissenting votes, as the dissenters favored raising the target rate by a quarter of a percent.

There was almost no chance that the Fed was going to change its target rate, which hasn’t moved since its one hike in December of last year.  With the election happening next week, there was no possibility the Fed was going to rile up the markets this week.

When you read the statement, things sound rosy overall.  But if things are rosy, then why isn’t the Fed hiking its target rate?  Its only excuse right now is that growth was a little weaker than expected in the first half of the year and inflation (by its definition) is running below its 2 percent target.

The Fed is in no hurry to hike its target rate, which at this point, is really just the interest rate the Fed pays on bank reserves.  Since the banks have massive excess reserves built up from QE1, QE2, and QE3, they have little need for overnight borrowing.

The Fed is not about to sell off trillions of dollars in assets in order to drain its balance sheet in order to hike rates.  This would send the economy into a deep depression.

When the Fed hiked its target rate by one quarter of a percent last December, stocks had a terrible January.  I think Fed officials are scared of what might happen with the next one.  Maybe we will find out in December, but that is far from certain.

In a free society, there would be no central bank with monopoly powers over the money supply.  But given our current-day realities, the Fed is the biggest driver of the U.S. economy.  Money makes up half of virtually every transaction in the economy.  When the Fed tampers with the money supply and interest rates, it has a great impact.

Meanwhile, it is elections, especially presidential elections, that get all of the coverage.  The president really doesn’t have that much of an impact on the stock market, or even that much on the economy.  The president could have a great impact if he vetoed spending bills and drastically scaled back the military adventures overseas.  If government spending were to actually decrease significantly, this would have a positive long-term impact on the economy.

But if you look back at 2012, it really wouldn’t have made much difference if Mitt Romney had been elected instead of Obama.  The budget today would likely be about the same.

This month may be an exception to the general rule.  I think the election will have a bigger short-term impact on stocks and other financial markets than what we got out of the Fed.  I don’t know how much difference it will make in the long term, but there are likely to be some short-term gyrations in the markets based on the election results.

The FOMC will release its next policy statement on December 14.  That will be a bigger event than its November meeting.

Prior to that though, there is another important vote that may stir up the markets.  On December 4, Italians will vote on a constitutional referendum.  It is not clear, but this could potentially have a great impact on the banking system, especially with Italian banks showing major signs of distress.

The rest of 2016 will not lack excitement both politically and financially.  I am looking for gold to benefit in the short term due to the uncertainty.

When the FBI announced on Friday that it will reopen the case involving Hillary Clinton’s email scandal due to new evidence that has emerged, the stock market initially took a downturn.  Does this mean that stock investors want Hillary Clinton to be elected president?

After the initial downturn, stocks did somewhat recover.  This could be a foreshadowing of what is to come.

Stock investors like certainty.  Uncertainty can lead to falling stock prices.  But if it isn’t justified, then stocks will inevitably turn back up.

I think Hillary Clinton is the safe choice for Wall Street, especially since Clinton has benefitted so much from Wall Street despite any rhetoric otherwise.

Donald Trump is a complete wildcard who is hated by the establishment.  He is the epitome of uncertainty.  In addition, he has been somewhat critical of the Fed, which could be bearish for stocks.

If Trump pulls off a stunner and wins, I think it will resemble Brexit quite a bit.  The polls suggested that the Brexit vote would fail.  When it actually passed, stocks fell, including outside of Great Britain.  But after the dust settled a bit, stocks recovered.

There are a lot of parallels between Trump in the U.S. and Brexit in the U.K.  Although one is an individual and one is something of a secessionist movement, they are similar in their messages.  And those supporting them are similar.

If Trump wins, I would not be at all surprised if stocks tumble.  And if there is a major overreaction by the markets, it will probably be a good short-term speculation to actually buy and watch stocks recover from the overreaction.

Almost immediately after Brexit passed, the Bank of England loosened its monetary policy.  If Trump wins, does that mean that the Federal Reserve will loosen its policy?

We really can’t be certain, but it would be hard to imagine Janet Yellen and company going out of their way to help out Trump with some short-term stimulus.  Although a tight monetary policy is what we need for the long run, it can also serve to expose the previous malinvestments.

If Hillary Clinton wins the election, maybe stocks will hold steady or even rally the next day.  But don’t expect it to last.  Half of the country thinks Clinton is a criminal who belongs in jail.  She could be the equivalent of a lame duck president on the day she takes office.

In terms of liberty, this is positive.  The less respect that people have for the president – especially her – the better it is for liberty.

I think the next president, whomever it is, is going to have to deal with a bad economy.  The national debt will soon be over $20 trillion and more baby boomers are collecting Medicare and Social Security with each passing day.  Meanwhile, the malinvestments from 6 years of so-called quantitative easing (2008-2014) are going to catch up with us and be exposed.

If we hit a deep recession, it is possible we could be better off with Hillary Clinton, who will have trouble passing the blame on to Bush and the Republicans.  Maybe she can try to blame the Republican Congress, but most Americans blame the president.

Most of the blame should go to the Fed, but Yellen is an Obama appointee.  Again, it will be hard for Hillary to pass the buck.

I don’t think a Clinton victory is inevitable at this point.  She has been badly damaged and there may be more to come out in the next week.  Either way, I think you should be financially prepared for the day after the election.

I don’t recommend being heavy in stocks right now anyway, except as part of the permanent portfolio.   But I especially wouldn’t want to be heavy in stocks on November 9, 2016.

There was a recent article by Egon von Greyerz stating that gold is nearing its 2011 highs.  The article was linked to by LewRockwell.com.

Near the beginning of the article, the author states, “So to talk about a strong dollar is totally ridiculous.”

But towards the end of the article, the author states, “It is possible that we will see dollar strength for a while still but thereafter the world’s reserve currency will join the race to the bottom in earnest.”

So which is it?  Is calling the dollar strong totally ridiculous, or do we have a strong dollar?

The author contradicts his own words within the same article, unless he thinks of himself as totally ridiculous.  Still, I understand the point that he is trying to get at.

The U.S. dollar is strong right now against the other major currencies of the world, particularly the euro and the pound.  It is strong in relative terms as compared to many of the other fiat currencies.

To the author’s point, gold’s been stronger than any currencies if you take the last 15 or so years.  Of course, if you count most of the 1980s and 1990s, this wouldn’t be true.

Gold is very volatile, but it is important to recognize that its volatility is largely due to our monetary system.  There are certainly changes in supply and demand of the metal, but the supply and demand for money is the bigger driver of volatility in the gold price.

Gold has not been a good investment over the last 5 years if you are an American.  It is down over 30% from its highs in 2011.

The article itself is titled “Gold is Near the 2011 Highs”.  This is in reference to other currencies aside from the U.S. dollar.  For example, in the United Kingdom where the pound has lost significant value compared to the dollar, the gold price is only off 8% from its 2011 high.

This is an important point, as gold has not been as weak as what many perceive.  It has been weak in terms of U.S. dollars.  Since the dollar has been so strong over the last several years, it has hurt the gold price in dollar terms.

It might be more accurate to say that the other major currencies – especially the euro – have been really weak.  The dollar just looks strong in comparison.

But it is true that investors will seek out a relatively strong currency and make it stronger.  If you have your wealth in euros and you want to protect it, the U.S. dollar provides a good option for a liquid investment that can easily be converted back to euros.

The Federal Reserve has had a tight monetary policy for two years now.  QE3 ended in October 2014.  This has helped push up the dollar in relation to some of the other currencies.

The dollar strength (relatively speaking) may continue for a while, especially with the other major central banks engaging in massive monetary inflation.  The dollar ends up being one of the least bad and most liquid forms of money in our world dominated by central banking and fiat money.

However, this doesn’t stop Europeans, Japanese, Chinese, and others from buying into gold.  If things get bad enough in these places, some people may start turning to gold instead of other currencies.  I’m not saying it will happen, but just that it is certainly possible.

In that case, it doesn’t matter if the U.S. dollar remains strong.  If the demand for gold surges, the price will go up, even in dollar terms.

Gold is actually fairly stagnant these days.  It is not really in a bear market.  If anything, it is probably a lull in a greater bull market.

If the U.S. dollar does significantly weaken against other major currencies in the future, then gold could really skyrocket.  But it can still go up even with a relatively strong dollar.

Going forward, the economy and Federal Reserve policy will drive gold prices more than the U.S. dollar’s relative strength against other currencies.

There is little doubt that the Federal Reserve is a highly political organization.  The Fed Chair is nominated by the president and confirmed by the U.S. Senate.

Those who are critical of the Fed probably overestimate the degree to which the Fed tries to influence elections, particularly the presidential election.  There have been several times in history where the Fed has seemingly ignored presidential politics.

The best example is in 1979/ 1980, where Fed Chairman Paul Volcker allowed interest rates to rise and slammed on the monetary brakes.  I don’t know if it cost Jimmy Carter the election, but it almost certainly guaranteed his loss.  And Ronald Reagan was no favorite of the establishment.

The establishment came to accept Reagan, as he did not enact radical free market policies to reflect his rhetoric.  He did cut marginal income tax rates substantially, but he also hiked payroll taxes.  Spending continued to grow under his watch, and the debt spiked higher due to the spending (and not due to the tax cuts as some would have it).

Still, Volcker – who was appointed by Carter – enacted a tight monetary policy that led to recession.  Volcker and the Fed were not playing politics.  Their primary concern was saving the U.S. dollar, as price inflation was well into double digits at that time.

In 2006 through 2008, Ben Bernanke kept a relatively tight monetary policy until the major fall of 2008.  If he had kept monetary policy looser, it might have been enough to hold off the recession until after the 2008 election.  Of course, there is no way to know, and there is no way that Bernanke could have known the financial crisis would hit so hard.

We can doubt that McCain would have defeated Obama anyway, but the bad economy almost guaranteed an Obama victory.  Bernanke was appointed by Bush, but he did him no favors prior to the fall of 2008.  In fact, Bernanke did himself no favors, as Obama eventually replaced him with Yellen.

I think this election may really be different.  I don’t know if it has impacted the committee’s decisions not to hike rates since December 2015, but it would not be surprising.  Virtually the entire establishment is against Trump and they want to ensure a Hillary Clinton victory.  Any rate hike that could lead to a possible downturn in stocks would be bad news for Clinton, who is the status quo candidate.

The Fed has actually had a tight monetary policy for two years now.  It ended QE3 in October 2014.  In this sense, the federal funds rate does not mean as much as it has in the past.  Still, it is somewhat symbolic at this point.  The Fed stopped creating new money before Trump was even a serious candidate.  They couldn’t easily start up QE again, politically speaking.  They can, however, come up with excuses to hold off on hiking the target rate.

The FOMC’s next meeting and policy announcement is on November 2, less than a week before the election.  It is almost a certainty that the Fed will not touch anything or make any dramatic statements.

The big question at this point is the December 14th meeting.  If Trump is elected, then it seems more certain that the Fed will hike rates, not caring as much about what happens.  However, if they were really political, you would think they might wait until he actually takes office.

If Clinton is elected, I don’t think it is going to have a major impact on policy at that point.  She will be there for four years if she survives her bad health.  Either way, a Democrat will be in office for another 4 years.  The Fed can’t keep its policy the same forever in order to try to prevent a recession.

It is almost a guarantee that there will be a recession within the next 4 years.  The so-called recovery since 2009 has been weak, while the Fed pumped in massive amounts of money until 2014.  In the meantime, the debt has continued to grow at a staggering pace.

If Clinton is elected, she is going to have a tough time blaming a bad economy on Bush or even the Republican Congress.  Congress should be blamed to a certain degree, but the public tends to blame the president.  Actually, it is the Fed that should be blamed the most. The major malinvestments happened on Bernanke’s watch when he instituted QE1, QE2, and QE3.

At this point, I have no idea if the Fed will raise its target rate in December.  I am not even sure if it matters much, except perhaps symbolically.  But I don’t think a Clinton victory is going to change its decision one way or another.

If the economy shows signs of tanking in the next couple of months, then the Fed will delay hiking again.  If the downturn is bad enough, then we could see QE4 on the horizon.  That will change everything.

I have been seeing stories about China (the government, that is) selling off its holdings of U.S. Treasuries.  The problem is that I have seen these stories in the past without the data supporting them.

The U.S. Treasury puts out a monthly report on the major foreign holders of U.S. Treasury securities.  China and Japan have been the top two holders for a long time, and by a wide margin.

Japan and China each hold over $1.1 trillion in U.S. government debt.  The next closest is under $300 billion.

The latest report was released on October 18, 2016.  It shows China’s holdings in August 2016 at $1.185 trillion.  This is down from the month before at $1.219 trillion.  In one month, the holdings have been reduced by about $34 billion.

This isn’t insignificant, but it isn’t earth shattering either.  It certainly isn’t a massive selloff.  The Chinese, as with anyone, can just let their debt mature and not roll it over.  You can reduce your holdings without actually selling.

October 1st marked the beginning of the Chinese yuan being included in the IMF’s basket of currencies called the Special Drawing Rights, or SDRs.  The Chinese government is trying to be a major player on the world stage.

I don’t buy the speculation that the yuan is going to replace the U.S. dollar as the world’s reserve currency.  The yuan is not even a freely floating currency, not to mention that the economy in China is very shaky.

The dollar is not going to be replaced by anything, unless it is gold.  The dollar may slowly lose its status as the reserve currency of the world, but nothing but gold is likely to take its place.

In our digital world today, there really isn’t a need for a currency to serve as a reserve currency for the world.  Countries can trade their own currencies.  If the Russians wants to buy from the Chinese, there is no need for them to use dollars as a middleman, as long as there are foreign exchange markets.  This is why it is inevitable that the yuan will eventually be freely floating and openly traded.

In terms of central bank policy right now, the Federal Reserve is better than all of the other major central banks.  The Fed has had a tight money policy (despite the low interest rates) for about two years now.  The central banks of China, Japan, and Europe are all creating money out of thin air at a rather staggering pace.

This is one of the main reasons that the dollar is strong.  It is also a reason that the dollar will not be replaced on the world stage.

I usually don’t recommend that you buy foreign currencies (for Americans) unless you really know what you are doing.  In our current environment, I wouldn’t recommend it at all unless you are looking for pure speculation in smaller regions.

The U.S. dollar will likely remain strong as long as the Fed keeps its monetary policy tight.  Of course, this could change rather quickly with a downturn in the economy.

A strong dollar will make it difficult for gold to run a lot higher.  Gold has been down in recent weeks.  I am still bullish in the long run on gold, but we shouldn’t expect a major run at this time because of the strength of the U.S. dollar.

This was the third and final debate for the 2016 presidential election.  It was moderated by Chris Wallace of Fox News.  I didn’t care much for Chris Wallace, but he was probably the most fair as compared to the previous debate “moderators”, which isn’t saying much.

It started out with issues that weren’t personal.  They were actually policy issues.  It started with the Supreme Court.  I wish someone would point out that there is something wrong with our whole government when five out of nine justices are deciding policy for 325 million (or more) people.

On abortion, Trump took the proper constitutional stance that Roe v. Wade should be overturned and left to the states.  I doubt Roe v. Wade will be overturned even if Trump becomes president, but his position was essentially the correct one.  It is a position of decentralization and federalism.

When they were arguing over immigration, Hillary Clinton brought in the accusation that Russia has been hacking the U.S. government (which she nor anyone else has any proof of) and is responsible for the emails on Wikileaks.

From a non-interventionist point of view, Trump’s response was great.  He said he doesn’t know Putin, but just that he wants to get along with him.  He pointed out that there are thousands of nuclear warheads pointed at us and Hillary wants to play a game of chicken with them.

If I can find a reason to actually vote in this presidential election, it would be this.  If I thought that there would be a difference of having a major war versus not having a major war, then I would vote for Trump.

On the economy, Hillary Clinton brought out the Bernie Sanders plan of free college.  She even mentioned Sanders by name, probably trying to get and/ or keep some of his supporters.

Trump actually sounded better than in the past regarding trade.  He continues to say he doesn’t like the trade agreements, which libertarians can agree with.  But he did say he wants free trade, which is good to hear.  He continues to say that he wants tax cuts for individuals and businesses.  The major thing to criticize Trump on (and Clinton too) is that he proposes no major (if any) cuts to the federal government.

Hillary Clinton said she would not add one penny to the national debt.  The most recent annual deficit was over $600 billion.  So unless she proposes to reduce federal spending by $600 billion (and more for her free college), then it is a complete lie.  Even if she could get through tax hikes on the “rich”, it wouldn’t come anywhere close to closing the annual deficit.  It probably wouldn’t close it at all.

Overall, from a libertarian perspective, they are both bad on economics, but Trump gives a little bit of hope.

I don’t have much to say in terms of the personal stuff.  Some women have made accusations against Trump.  Maybe some of them are true.  Maybe some of them are half-truths.  Or maybe they were put out there by the Clinton campaign as Trump said, which wouldn’t be surprising.  My overall inclination is that Trump is “a player”, but he is not violent (unlike others).  This will upset a lot of people, but I think Trump is a lot like John F. Kennedy.  He may have his moral indiscretions, but I believe he means well for the country.  Let’s hope he doesn’t end up like Kennedy.

The last policy question of the debate was on entitlements.  This is a major issue in which neither candidate has an actual answer for.  The only answer will be for piecemeal defaults in the future, whether that means increasing the government retirement age and/ or fewer benefits for all.  That is just a statistical reality, but nobody wants to hear that, so they don’t answer the question.

I have no idea what will happen on November 8^th.  I know Hillary Clinton is the favorite to win, but Brexit was also supposed to lose.  There are a lot of silent people out there who will vote for Trump.  Actually, it won’t be so much of a vote for Trump as it is a middle finger to the establishment.  Stay tuned for the fireworks.

I have heard countless times over the last year that if Donald Trump is elected president, he could get us into World War 3.

I don’t know if these are talking points being repeated, or if people just think that because Trump is brash and gets into political fights, and that he will start a fight with the president or prime minister of another country.

We don’t really know what Donald Trump will do if he becomes president.  He continues to be a wildcard.  He sometimes contradicts himself, although that is not uncommon amongst political candidates.

It seems when Trump really studies an issue that he really gains knowledge and tries to hash out a reasonable and logical position.  In the eyes of the establishment, this just doesn’t work.

Trump has some terrible positions on economic issues, particularly his mercantilist attitude when it comes to trade.  He is right to criticize these managed trade deals, but he is wrong on protectionism.

On foreign policy, he sometimes says things that the war hawks would love.  He will casually talk about bombing others or taking their oil.  But then when he gets specific, he makes a lot more sense.  He takes a more non-interventionist approach.

It is possible that Trump could start a world war, but that is possible with anyone who gets into power with access to nuclear weapons that could blow the planet apart many times over.

The wars in the Middle East are horrible and dangerous.  Yet they still don’t compare to the possibility of war with another major power such as China or Russia.

Russia is the enemy du jour.  It seems that almost everything is blamed on Russia.  And if something doesn’t go right on the day of the election, then Russia is all ready to be blamed again.  When it comes to hacked emails and other things, there is absolutely no evidence that Russia is involved.

On the one hand, Trump critics will say that Trump will start World War 3.  Then on the other hand, they say he is in bed with Putin, or at least way too cozy with him.

This doesn’t really make sense.  Trump has said many times that he just wants to talk to Putin and to try to be on friendly terms with him.  What is so wrong with that?

If anything, Trump is the least likely person of all of the major candidates who have been in this race to start a war with Russia, or really anybody at all.

It is Hillary Clinton that has a track record of war.  She was the lead person in the war on Libya.  She voted for war in Iraq and she continued wars while Secretary of State.  She was also in office as Secretary of State when the Obama administration began its plans to overthrow Assad in Syria, which they are still working on.

And if there is any kind of war with Russia, it will probably start in Syria, where the Russian government is attempting to defeat the rebels (some might say terrorists) trying to overthrow Assad, with the help of the United States government.

This week, we have seen escalating tensions.  Joe Biden actually said that the U.S. will be conducting cyber attacks on Russia to send them a message.  This coming from the administration of the “peace prize” winner.

There is a story that Russian officials have been told to bring relatives home in preparation for war.  Regardless of whether this is propaganda and how true it is, it is still quite scary that it has come to this.

We had decades of a Cold War after World War 2, which should have ended with the fall of the Soviet Union.  Now U.S. officials keep poking a stick at the Russians, trying to instigate something.  We do not want this to turn into a hot war.

Even though Hillary Clinton (and Obama too) is a war hawk who sides with Goldman Sachs and the military industrial complex, I don’t think she wants a major hot war with Russia.  Nobody will benefit if there is a nuclear war.

But when tensions are running high and planes are flying around each other, accidents can happen.  There are stories from the Cold War where mistakes almost led to nuclear war.

If you are voting in the 2016 election strictly to avoid a major war, then Donald Trump should get your vote.  Actually, Jill Stein would be the most reliable, but we know she will not win.  Between Trump and Clinton, Trump is far less dangerous.  Hillary Clinton already has a track record of war.  She has blood on her hands from many different countries.

Again, we can’t be certain of what a President Trump would do.  But we can be fairly certain that a President Clinton will mean continued war and probably far more war.  With Trump, at least there is a chance for more peace.

This isn’t to tell anyone that they should vote for Trump.  That is each person’s individual decision.  But Trump is the least likely person to start a major war, and it is possible that we could even get some common sense out of him.

I recently watched part of a show on HGTV called My Lottery Dream Home.  I don’t do a lot of random television watching, but sometimes I enjoy the shows on HGTV.

I have written before on Tiny House Hunters and the whole tiny home phenomenon.  It is a reflection of people not wanting to be in debt and wanting to live a simpler (and less cluttered) life.

I also enjoy House Hunters, House Hunters International, and Flip or Flop.  The couple on Flip or Flop seem to be very genuine, and the show is intriguing.  I am afraid it is also symbolic of a new housing bubble, although more localized this time around.

This recent show I watched – My Lottery Dream Home – is almost an experiment in human psychology.  They find real life lottery winners who want to majorly upgrade their living quarters with their new-found money.

I have seen the winning amounts range anywhere from $1 million up to as much as $180 million in one case.  In the situation of someone winning $180 million, I can completely understand buying a house worth a million dollars or more at that point.

The episode I saw involved a couple who won $2 million.  I did not hear if this is the lump sum and if it is before or after taxes.  I am assuming it is before taxes.

This couple lived in a very small house, so it was understandable of them wanting an upgrade.  But they were looking at houses with a budget of $750,000.  This has disaster written all over it.  Why couldn’t they have upgraded to a $200,000 house instead of jumping straight to a mansion?  This wasn’t California real estate where $750,000 won’t get you much.

If that $2 million was before taxes, they may have been lucky to end up with $1.5 million.  That means that at least half of their winnings is going towards buying a house.  My guess is that they do not have high incomes based on the house they are moving out of, although you never know for sure.

When you buy a house for three-quarters of a million dollars, you also get all of the expenses that come with homeownership.  With the higher price tag comes a higher price tag for insurance and property taxes and utilities.  You can see the money flowing out the door rather quickly.

This is really a lower class attitude.  Your class isn’t dependent so much on the amount of wealth or the level of income that you have.  It is more of a mentality.  Upper class people are future oriented.  Lower class people are very present oriented.

Being future oriented does not mean that you can’t be happy today.  You can enjoy the present.  It is just that future orientation considers the future.  In fact, I would venture to say that many future oriented people are far happier in the present than are present oriented people.  Present oriented people are trying to always gain satisfaction in the present at the expense of the future, but the stimulus quickly wears off.  It is like someone addicted to drugs where he needs an ever higher dose to get high again.

When someone wins the lottery, it does not change their class.  It changes their bank account, but it doesn’t change their mentality.  If someone has a lower class mentality, they won’t know how to handle the money and they will see it squandered quickly.  This is why you see so many disaster stories of lives that are wrecked after winning the lottery.

The whole idea of playing the lottery is one of present orientation.  Still, there are middle and upper class people who do sometimes win the lottery.  They know how to handle the new-found wealth and they treat it with care.  They make it last, whether they want to quit their job or not.

If you won $1.5 million after taxes, what would you do?  Would you quit your job?  Would you buy a house worth $750,000 to live in?  How much would you spend within the first year?

In today’s world, $1.5 million won’t last all that long if you are not relatively frugal.  It would be life changing for most people, but not always in a positive way.

If you ever win the lottery or come across any new-found wealth, I hope that you have an upper class mentality, or at least an upper middle class mentality.  If you don’t, you will probably find yourself in the same situation (or worse) in 10 years as where you were right before your new-found winnings.

I fear that the lottery dream home will turn into a nightmare for some.

Tom Woods recently held a debate on his podcast about whether fractional reserve banking is economically benign.  John Tamny argued that it is essentially harmless, while Jeffrey Herbener argued that it is.

First off, both men were gentlemen.  It is good to hear a civil debate where the two sides aren’t just looking to score cheap shots.  It was meant to be an intelligent debate for intelligent people.

Second, both men took the position that fractional reserve banking should be legal in a free market system, as long as the depositor has the understanding that his money may not be there upon request if a lot of other people show up before him.

I think this is the correct libertarian position.  It amazes me that there are so many anarcho-capitalists who say that fractional reserve banking should be illegal.  Who is going to make it illegal?  And who are they going to point the gun at?

If it is clear to depositors that their money will be used in this way, then it is a voluntary contract between consenting parties.  It is not fraud any more than insurance is a fraud.  Insurance companies rely on the fact that not everyone is going to make a claim at the same time, if at all.

The important thing to note is that fractional reserve lending would likely be far more limited without the existence of a central bank (the Fed) and without government deposit insurance (FDIC).  This was Mises’ view as well.

And speaking of Mises, it was funny that Tamny kept saying how much he admires Mises, yet Tamny himself basically denies the Austrian Business Cycle Theory.  This is rather peculiar given that it is one of the cornerstones of Mises’ writings on economics.

I think Jeff Herbener is one of the smartest guys in existence when it comes to economics.  The one drawback is that I am not sure that he always makes a good connection with the layperson.  If you have a group of economists at an Austrian Scholar’s conference, there is probably nobody better to listen to than Herbener.  I am just not sure he connects with people who do not specialize in economics, as sometimes he gets too technical.

Tamny made a decent analogy with leasing jets.  He also made a really bad analogy with lending money.

He compared fractional reserve banking to person A lending $3,000 to person B, and then person B lending that $3,000 to person C.  But this analogy falls flat because person A and person B cannot spend this money when it is in the hands of person C.

Compare this to fractional reserve lending, where person A deposits money in a bank, which is then loaned out to person B and person C.  All three people can spend this money at the same time.  It can be used to bid up prices.

Another issue that I don’t believe was mentioned (or at least not emphasized) is just the very existence of the Federal Reserve and how this magnifies the harm of fractional reserve lending.  If the money supply were relatively stable, then even a large degree of fractional reserve lending would have a minimal impact.

If banks have already lent out 90% of the bank deposits (assuming a 10% reserve requirement), then it is already a done deal.  If there is no monetary inflation, then there will be no more inflation from fractional reserve lending.  The problem comes in the fact that whenever the Fed increases its monetary base by buying assets, it is magnified by 10 times if the banks do not hold the new money as excess reserves.

(As a side note, this is part of the reason that price inflation has remained relatively low since 2008, despite an explosion in the adjusted monetary base.  Much of the new money went into excess reserves instead of being lent out.)

One other point in response to Tamny is in regards to his claim that demand deposits make up a small fraction of the total money that is lent out, which makes the whole issue insignificant.  I can’t verify his claims, but it still misses the point.  This money is being multiplied by as much as 10 times over, which then does make it very significant.

In conclusion, it actually doesn’t matter in terms of policy of who is right here.  The key is that we need to eliminate the FDIC, central banking, and all of the other government regulations.  We need a free market in money.  If that ever becomes a reality, then fractional reserve banking will be relatively harmless at that point, and the banks that abuse it will quickly find themselves out of business.

I expected fireworks in this debate and it did not disappoint.  After those tapes were released of Donald Trump making crude remarks about women, it was obvious that things were going to get ugly.

The first half hour of the debate really got down into the dirt.  It was mostly personal.  I am not even sure that they shook hands at the beginning.

I won’t go over the political issues much.  We all know that neither one of them is a libertarian or even close to it.  Hillary Clinton is the opposite of libertarianism in almost every way.  Trump is more of a wildcard.  He says a lot of bad things, but he at least shows some honesty and gives us a little hope of a less interventionist foreign policy.

I don’t understand why Clinton attacked Trump personally at the beginning (or at all).  She has most of the entire establishment media on her side doing her dirty work.  Anyone paying attention knows about the recent Trump comments from 11 years ago.  But as soon as Clinton attacks him on this, it opens her up to being attacked for her decades of criminality.

I knew Trump was not going to go down easy.  He didn’t go as far as, “Your husband is a rapist, and what happened to Vince Foster?”, but he did go after her pretty hard.  I know some people will like him even less, if that is possible, but he had to attack her.  He can be crude and brash, yet is probably honest for the most part.  She is a criminal in many aspects, both politically and personally.

In terms of foreign policy, especially with Syria, there was a lot to like from a libertarian perspective.  Syria is a disaster and much of it is due to Obama and Clinton.  They were already trying to overthrow Assad when Clinton was still Secretary of State.  It is ridiculous that they are trying to overthrow a guy who has kept relative peace and allowed religious freedom, unlike Saudi Arabia (the Clinton Foundation donors).

Trump was asked for his comments on what Mike Pence had said about Syria and Russia.  Trump said he hadn’t spoken to him and disagreed with those comments.  I know a lot of people laugh at this, but it made me like Trump a little bit more.  I knew Pence was a mistake, and it was done to appease the Republican establishment.  Pence was not a good life insurance policy for Trump.

At this point, I don’t know how the undecideds will react to this debate.  Perhaps these attacks will convince some people to not vote at all, which is just as important.  Believe it or not, there might be some people who do not know a lot about Clinton’s emails and her other lies.  I don’t know if Trump damaged her enough to convince any significant number of people to not vote for her, but I highly doubt that anything Clinton said did anything because the establishment media has already said everything bad there is to say about Trump.

Also, I thought it was smart for Trump to criticize the “moderators”, who are so obviously in bed with Clinton and out to get Trump.

This is only going to get uglier and we still don’t know if Wikileaks has anything good.

From a libertarian perspective, it is encouraging that Trump is bringing up some of these valid questions of the U.S. government’s interventionist foreign policy.

On the other hand, the fact that everything is so personal (and about personalities) is not all that positive.  It actually is something of a distraction from the big issues of war, the Federal Reserve, massive debt, massive unfunded liabilities, and big government in general.  But regardless, at least it isn’t boring.