I live in Northeast Florida and just went through Hurricane Matthew.  Although the eye of the hurricane did not make a direct landfall on Florida, it was damaging nonetheless.

I know that some will say the media exaggerated the threat and hyped up the storm.  And certainly, there are some media outlets that did probably over exaggerate certain things.  Still, I would say overall that the coverage did not over exaggerate the situation.

The storm did not make a direct hit, but it was still quite devastating for some people, especially in terms of flooding.  When you have the ocean crashing against houses, it is not a good situation.

I live about 15 miles from the beach and did not have to worry about flooding.  We had friends who live right near the beach stay with us.  They were able to return to their homes rather quickly.  This is a better situation than I have heard from some cities from past storms where residents are prohibited from going back to their homes for days.

As a libertarian, I don’t like the term “mandatory evacuation”.  I understand that it is a safety issue of getting residents out of dangerous zones.  Still, couldn’t they call it a “highly recommended evacuation zone”?

Luckily I did not hear any reports of widespread looting, which can easily happen when the vast majority of residents evacuate.  The lesson from Hurricane Katrina is that the police don’t prevent crime. It is the presence of the general population that prevents it.

The thing that fascinated me the most is the economics of the situation.  In Florida, there are always warnings about so-called price gouging when a storm hits.  It doesn’t matter if the governor and attorney general and other politicians are Republicans or Democrats.

As an advocate of free markets, I hate these price gouging laws.  The politicians act as if they are being so caring, watching out for the people.  But they are an interference in the marketplace that harms individuals.

When there is a shortage of supplies, we need for the price mechanism to work more than ever.  Before and after a hurricane, there are typically shortages of many things including bottled water, gasoline, flashlights, batteries, canned food, bread, and hotel rooms.

If businesses were allowed to adjust their prices up, then consumers would conserve more when buying.  You may not buy as many bottles of water if they are double the price of what they normally sell for.  I saw this at the grocery store where all of the cheap loaves of bread were gone.  However, there were a few loaves left of high-end bread (if that is what you want to call it) that sell for almost four dollars.

In addition, when prices go up, it motivates sellers to provide more.  If the price of bottled water doubles in price, it could motivate someone from a hundred miles away to drive in a truck full of water to sell it.  He isn’t going to go to that trouble if there is no profit to be made.

In spite of the price gouging laws, it was still amazing to see the market process work.  We went out the next day and most restaurants were open and grocery stores were open, at least where power had been restored.  The grocery stores use generators to keep their refrigerated and frozen foods.  I really don’t know how the restaurants had good food, whether it was from delivery that day or from generators.

The gas stations with power were up and running again too.  They had mostly run out of gas just before the storm hit.  It didn’t take long to get replenished.

This just shows the great advantages of a high division of labor society with a large population.  Due to having a gas stove, we didn’t have a cold meal at home and we ate out about 24 hours after the height of the storm.

It is simply amazing how well off we are in our high division of labor society.  It is too bad that government at all levels inhibits our living standards as much as is the case.  We could be even better off if government spending and regulations were to shrink.

In conclusion, the hurricane showed just how much damage could be done, even without a direct hit.  But even with the damage, the marketplace is able to adjust very quickly and get people back on track to a normal life again.

This vice presidential debate was painful to watch.  Donald Trump gets criticized often for calling other people names, and sometimes he really does sound like a 3^rd grade child.  But this vice presidential debate was just completely childish.

They were both sent out as attack dogs.  Tim Kaine was there to attack Donald Trump.  Mike Pence was there to attack Hillary Clinton.  The “moderator”, Elaine Quijano, was there to attack Trump.

From a libertarian standpoint, I am not a fan of Mike Pence.  But I will get to him in a moment.

This guy Kaine though is a total hack and a total phony.  At least when Hillary Clinton lies, it could be somewhat believable if one didn’t actually investigate the facts.  But Kaine speaks to the audience as if everyone is a bunch of dumb children.  He reminded me of a male version of Debbie Wasserman Schultz at times – like a little gnat that won’t shut up.

Both candidates interrupted each other frequently, but it was especially ridiculous on Kaine’s part.  For the first 30 minutes of the debate, it seemed that Pence could not speak for 10 consecutive seconds without being interrupted.  And the so-called moderator would either allow it or actually side with Kaine and try to give him time.

Pence should have told him to shut up and to stop interrupting.  I blame him for allowing it to happen and not calling both of them out on it.  I don’t understand why Pence (and Trump in his first debate) allow these so-called moderators to be shills for the Democrats without pointing it out.  Most Americans, other than hardcore Democrats, no longer trust the establishment media, so Trump and Pence aren’t going to lose any points by politely pointing out that these people are in the tank for Hillary Clinton.

When Kaine wasn’t attacking Trump (and even sometimes when he was), he was constantly promoting the agenda of the left of ever-expanding government.  It is not a surprise, but it is just amazing that so many people can fall for this total propaganda.

Kaine is just horrible on everything from a libertarian perspective.  The few times he made sense, he was mostly lying.  He slipped in a few things about getting troops out of Iraq and about preventing Iran from getting nuclear weapons.  The best we can do here is to give Obama credit for not going to war with Iran.  He could have been even more violent than he has.  But if it is up to Hillary Clinton, she probably would go to war with Iran.  She is a bigger war hawk than Obama.

Kaine is just a total annoyance.  I don’t understand how anyone can believe the garbage coming out of his mouth.  He was talking about Trump calling women pigs, slobs, etc.  Then he said that it breaks his heart that he has to say that in front of his wife and other female family members.  Yes Tim – I’m sure your heart is just breaking for them having to hear those words.  What a complete phony.

One last thing on Kaine.  He mentioned that Trump had said Obama wasn’t born in the United States.  Then he brought it to race.  What is wrong with Trump and Pence?  Why don’t they respond to this?  They should say, “Why do you have to bring up race?  Can’t someone question where Obama was born without being a racist?  That is one of the problems in this country.  People feel like they can’t say anything anymore.  We are living in a world of political correctness.  You can’t even criticize the president without being called a racist.”

I guarantee you this won’t lose any votes.  Most people in the U.S. truly are fed up with feeling like they can’t say anything without risking being called a racist or having race brought up as an issue.  The people who wouldn’t like such a response are already in it for Hillary.

In terms of Mike Pence, I think he is a typical Republican conservative.  He sounds better than the Democrats on some economic issues.

I still think it was a mistake on Donald Trump’s part in picking him.  I wish he had picked someone who was less pro-war.  It makes it harder for Trump to defend a relatively non-interventionist foreign policy.

Pence is not similar to Trump, or at least the Trump from the Republican primaries.  Pence plays it safe.  He says the politically acceptable things.  He doesn’t leave the zone of acceptability.

Trump played that safe game in the first debate, at least for him.  He needs to get back to what won him the Republican nomination.  If he doesn’t, he may hand the election to Hillary Clinton.  I don’t think he will ultimately go down without a fight, but the fight didn’t start with Mike Pence.

I am glad there is only one vice presidential debate.  It was tough to watch.  Overall, I don’t think it is going to move a lot of people.  If anything, a few independents might move away from Hillary Clinton because Kaine was such an annoyance.

While I am somewhat pessimistic about the U.S. economy in the short run, I consider myself to be a long-term optimist.  I think there is still something of an entrepreneurial spirit in America that does not exist to the same degree elsewhere.

It is socially acceptable to make a lot of money in the United States.  In fact, it is something that many aspire towards.  Of course there is class warfare, but it is to a much lesser extent than in many other countries throughout the globe.

There is unquestionably an economic mess in the U.S.   The national debt is approaching $20 trillion, while the unfunded liabilities are likely in excess of $200 trillion.  At some point, the U.S. government is going to default on some of its promises.

In the more short run, there is also the issue of the Fed’s massive monetary inflation from 2008 to 2014, which likely created huge malinvestments that will eventually need to correct to reflect actual consumer demand.

This will all be self-correcting to a certain extent.  The Fed can only print so much money without risking massive price inflation, or even hyperinflation.  Even with money printing, there are limits.

When price inflation finally shows up in a significant way, and interest rates go higher, then the Fed will finally be forced to keep a tight stance, as it did in the late 1970s.  Congress will essentially be forced to scale back and actually cut the budget.  I know this sounds hard to believe now because they have kept this game going for so long, but the day will come.

My biggest fear is that we will be like Japan.  I don’t think we will be, but that should be our biggest worry.

The story of Japan almost seems to practically refute all of economics, if such is possible.  They have had massive monetary inflation just in recent years, while the debt-to-GDP ratio is in the neighborhood of 250%.  Meanwhile, price inflation has actually remained low and interest rates are near zero, or even negative in some cases.  It almost doesn’t seem possible.

But if you study Austrian school economics, the most important thing to understand is that economics is really the study of human action.  And for this reason, the story of Japan doesn’t refute economics.

If anything, the story of Japan refutes Keynesianism.  The Japanese government and Bank of Japan have done exactly what the modern-day Keynesians (such as Paul Krugman) say is supposed to be done.  They have ran huge deficits and engaged in huge monetary inflation. Yet, the economy there continues to suffer dramatically.

The problem with Japan is that the people there apparently have way too much faith in their government and central bank.  They buy bonds at ultra low interest rates.  I don’t understand if they just don’t know better or if it is some kind of patriotic duty.  I guess the bond investors have been right in a sense up to this point, just as any investors in a bubble are right, as long as they aren’t still holding their investments when the bubble eventually bursts.

At some point, things are going to come crashing down in Japan.  The problem is that a correction should have happened a long time ago, and it should have been allowed to happen.  The massive government spending and debt and inflation is just making the problems worse, as resources are continued to be misallocated.

From 2008 to 2014, the Fed mostly got away with its huge monetary inflation.  Much of the new money went into bank reserves.  This, coupled with the increased demand for money, has kept consumer price inflation relatively low.

The problem is that resources are still being misallocated, as capital is diverted away from the private (voluntary) sector.  So even though there is low consumer price inflation (according to government statistics), the Fed’s inflation is still very damaging.

I don’t think it will be like Japan though.  I don’t think it could last as long.  The Fed has actually kept its monetary policy tight for two years now.  If the Fed goes through with another round of massive monetary inflation, I think Americans will be more likely to not hold their money for as long.

This will eventually happen in Japan too, but I think the population is too trusting of its government and its currency.  They are fearful, and rightfully so, but they have a high demand for money because of this.  The fear is more about the economy without consideration of the depreciating currency.  At some point, there will be fear that will include a fear of a bad currency.  That will lead to greater velocity, as money changes hands more frequently.  It will bid up prices.

I don’t want a scenario like Japan to happen in the U.S.  It just prolongs the pain.  We should hope for a correction that cleans out the bad investment.  If the Fed is going to print money (digitally speaking), we should actually hope for higher price inflation, so that at least the Fed will get blamed.

Americans should hope that their government and central bank will do the opposite of the Japanese.  But if that is not the case, then we can at least hope that Americans will not be as trusting, and that our fear will result in less desire to hold dollars in a bank account.

If the central bank is going to engage in monetary inflation, we are better off feeling the pain in terms of higher consumer prices, rather than have the misallocation of resources drag on for a long time.

Shares of Deutsche Bank have been getting hammered, and it is spreading to the overall markets.

Stocks were down big on Thursday – including U.S. stocks – as the news for the major German bank darkened.  It has been a rough couple of weeks for the bank.

The U.S. “Justice” Department announced a couple of weeks ago that Deutsche Bank would face $14 billion in fines, although it is expected that this will be negotiated down.  If there is major financial trouble for the bank that could cause major ripple effects throughout the global economy, then we can expect that this proposed fine will be reduced quite a bit.  Otherwise, it will just be another case of the central banks bailing out a company after it pays fines.  What’s the point?

I think the more significant news just came out that some hedge funds are reducing their business exposure in terms of trading derivatives related to the bank.

This is a modern-day version of a bank run.  The bank runs of today aren’t what they used to be, where you would see a line of customers outside on the street, waiting to hopefully withdraw their deposits.

In today’s world of big banking, there is little threat of such a run.  There isn’t enough physical currency to matter that much.  The bank runs take place when other businesses withdraw their money.  They move their digits from one bank to another bank.  They move from a bank that they see as unstable to a bank that is seen as more stable.

This is essentially what happened to Lehman in 2008, which preceded the financial crisis.  Of course, this was part of the financial crisis, but people just didn’t know it yet.

If German officials or the European Central Bank is essentially forced to bail out Deutsche Bank, this isn’t going to look good.  It is also going to have a major impact on the economy.

And for all we know, maybe the Fed will help in the bailout process too.  Since the Fed basically keeps a lot of what it does hidden, we might not even know about it.

We already know that the Italian banks are shaky.  Now we are adding a behemoth German bank to the mix.  And who knows how many others could fall easily with another financial crisis.

I think the major U.S. banks are more stable at this point.  They should be, since the Fed has been bailing them out since 2008.  Not only did the Fed buy off their bad debt (mortgage-backed securities), but the Fed has been paying the banks interest on their reserves this whole time.  One would hope that the U.S. banks are more solvent today than they were 8 years ago.

Still, we know that the global economy is shaky with all of the easy money and low (sometimes negative) interest rates.  There is going to be some kind of a global correction at some point.  Perhaps the word correction is too light.

All it takes is one thing to tip the first domino over.  In a healthy economy, the story of Deutsche Bank wouldn’t matter as much.  But we can be rather certain that this trouble isn’t just confined to Deutsche Bank.

Donald Trump and Hillary Clinton faced off in their first debate with each other.  While Trump did well in the eyes of some people, he really could have devastated Clinton.

It is easy to look back and think of things after the fact when you’ve had time to reflect, but Trump really needs to be prepared for some of these opportunities in the next debates.

Here are 10 things that he could have said, and probably should have said, in response to the questions from the moderator and the comments by Clinton.

1. When Hillary Clinton was talking about Trump’s belief in trickle down economics, he should have responded, “You say I believe in trickle down economics. But it is you who thinks that people should hand over their money to government and that it will somehow trickle back down from the government to the people, instead of to the lobbyists. And you think my ideas are naïve?”
2. When she brought up Trump calling women names near the end of the debate, he should have said, “At least I have never raped anyone. And my spouse has never raped anyone either.”
3. When his tax returns were brought up, he should have said to Clinton, “Of course you can disclose your tax returns. Most of your money is filtered through the Clinton Foundation and kept well hidden.”
4. Another response for the issue of his tax returns could have been: “You want to see my tax returns, yet you don’t care about auditing the Fed and seeing the books of the entity that controls the money supply for the world’s reserve currency.”
5. When discussing the Iraq War, Trump should have said, “Not only did I not support the war, but I also did not support the foolish decision to invade Libya and then laugh about it as hundreds of thousands of lives were turned upside down.”
6. When Clinton was talking about raising taxes on the wealthy, Trump should have responded, “You want to bring wealthy people down, while I want to create more wealth and wealthy people to go with it.”
7. When talking about his temperament, Trump could have said, “Some people think I am brash, and perhaps sometimes I am, but that is only because I tell the truth. They just aren’t used to people running for political office who tell it as it is.”
8. When Hillary Clinton linked the birther issue with race, Trump should have responded, “That is one of the problems we have today. Is that your way of trying to silence people? I am not allowed to say anything negative about Obama without you calling me a racist.”
9. When Clinton said that too many African-American and Latino men are in prison for non-violent offenses, Trump should have responded, “Then stop helping to pass so many laws and regulations that land them there. What laws did you propose to repeal as a senator that would have helped keep non-violent people out of jail?”
10. When Clinton was defending her stamina by saying she traveled to 112 different countries and spent 11 hours testifying in from a congressional committee, Trump should have responded, “You wouldn’t have needed to testify for 11 hours if you had been honest. And out of those 112 countries you visited, how many of those trips were a mission to solicit money for your foundation?”

While Trump’s debate performance was not terrible, let’s hope that he can come up with some better material at the next one to expose the liar and criminal that Hillary Clinton really is.

I have suffered through another presidential debate.  This one was more like the Super Bowl.  In fact, the viewership compares only to that.

I will offer a libertarian perspective, but I also try to judge how a non-libertarian might judge the performance of the two candidates.

While there was certainly plenty of drama, it wasn’t as dramatic as what could have been.  We could have seen Hillary Clinton have a seizure or coughing fit on live television.

(By the way, I would not usually joke about someone’s ill health, but I view Clinton as vicious and evil.  Therefore, I have little sympathy.)

While Clinton held up on the debate stage, she looked rather shaky walking out there at the beginning.  I still believe she has some kind of a neurological disorder.

The debate started off with economics, which was just horrible to listen to.  Hillary Clinton’s answer is to hike taxes on the wealthy, to raise the minimum wage, to close the (non-existent) wage gap, and to spend more money.  She is the exact opposite of what a libertarian would want.

Donald Trump is bad on economics too.  He has been a successful businessman, but this doesn’t make him sound on economics.  I really don’t know if he doesn’t understand or he is just using rhetoric to appeal to voters.  When he talks about taxing imports, it makes me cringe.  Still, I think much of his rhetoric does appeal to middle America.

He is correct on jobs leaving the country.  But some of this should be done.  Some work is better done by non-Americans.  Trump needs to learn about comparative advantage in economics, among other thing.

Some companies send jobs overseas because of the tax and regulatory burdens in the U.S.  The answer isn’t to have import tariffs.  The answer is to dramatically reduce taxes and regulations.  To Trump’s credit, he did propose lowering the corporate tax rate from 35% to 15%.

Trump attacked Janet Yellen and the Federal Reserve, which was good to hear.  If he hadn’t said anything, you can be sure that the Fed would not have been brought up by Clinton or the moderator.

When they were talking about race relations, I found it rather hilarious that Clinton said that African-American and Latino males are going to jail for non-violent crimes.  Does this mean that she now favors getting rid of laws against tax evasion, all drugs, and prostitution?  It is a joke for someone who supports the federal drug war to make this statement.  Plus, other than actual crimes (murder, rape, theft, etc.), isn’t every crime a non-violent crime?  Every tax and regulation threatens to put people in jail if they don’t obey.

In terms of foreign policy, I think Trump could hit her much harder on the many disasters she has directly caused or contributed to in the Middle East.  It is unfortunate that Trump chose Pence has his running mate, as I believe it holds him back on this important issue.

In terms of style, I think the people who hate Trump will continue to do so.  The people who hate Clinton will continue to do so.  It will be interesting to see where the new polls come down, but I don’t think a lot is going to change.

Trump was aggressive.  Some will see this as toughness and a show of confidence and competence.  Others may see this as bullying.  I thought Trump made the mistake of interrupting too much at the beginning, but he got better as it went on.

Trump was more fun in the primaries when he was going against the entire Republican field and calling them names, but he was still a little entertaining in this debate nonetheless.

I understand that these are serious issues being discussed, but every major presidential candidate of the last several decades has been a complete disaster from a libertarian viewpoint.  So forgive me if I look for some entertainment within the disasters.

We’ll see what the next couple of months brings us.  There is still a lot that can happen.  There is Clinton’s health issues.  There is also the possibility that Wikileaks will release some damaging information.  And there is always the possibility of a major stock market crash or some other major financial or political event.

I am not voting for Donald Trump, but I am cheering against Hillary Clinton and everything she stands for.  With Hillary Clinton, we know it will mean more big government and war, although at least the Republican Congress will mostly oppose her.  Trump is a wildcard.  If he becomes president, I really don’t know what to expect.

I have been seeing more stories out there about the possibilities of some sort of deflationary depression, either in the United States or worldwide.  To be sure, it is not the so-called mainstream media saying this, but there is discussion out there on the web.  Even the United Nations recently had some grim things to say.

With the massive monetary inflation we have seen since 2008, along with the piling up of government debt, there is no question that we are going to see some rough waters ahead.

Western Europe is a mess.  The Italian banks are the latest story, but don’t for a minute believe that Italy is isolated in its problems.

Japan is a complete disaster waiting to happen.  The government debt-to-GDP ratio is around 250% now by some measures.  Meanwhile, the central bank there is creating money on an unprecedented scale.  In spite of all this, the economy is extremely weak.  They can’t even get an artificial boom out of their stimulus.

China is another story of massive debt.  The central government and central bank have misallocated resources on a massive scale.  The real estate bubble and its inevitable bust has not come to full fruition yet.

We know the problems in the U.S. are similar, although they don’t seem to be as bad as elsewhere.  While the Fed did major damage from 2008 to 2014 by quintupling the monetary base, the Fed has kept the monetary base steady for nearly two years now.  Still, the debt continues to grow, despite record tax receipts by the Treasury.

There is going to be some kind of a massive correction due to all of the malinvestment.  It will be mostly global too, because all of the major central banks have done damage.  I think the U.S. will fare better than China, Japan, and Western Europe, but that may not be saying much.

The place where I dissent from some of the stories out there is that I don’t think it will be a deflationary depression.

Prices for some assets will fall, especially where there is bubble activity.  I would expect U.S. stocks to fall quite a bit.  Real estate will likely fall too, but this will be more dependent on each area.  It won’t be like the housing collapse 8 years ago because the bubble has not been blown up as big.  Areas such as San Francisco, where there are major housing bubbles, will suffer.  All of Silicon Valley will probably suffer.

There may be a slight and temporary decline in consumer prices as measured by the CPI.  This will be a reflection of a higher demand for money.  It means that people will not be spending as much due to fear, and rightly so.

If there is deflation in prices, it won’t be a monetary phenomenon.  Much of the new money since 2008 went into bank reserves.  Perhaps there will be a reduction in lending, but it probably won’t be so dramatic that it will be hugely deflationary, which would be a reversal of the fractional reserve lending process.

If anything, if we hit a depression, we should expect the Fed to enact more monetary inflation.  This is unfortunate, as it does not allow a full liquidation of the malinvestment.  It does not allow resources to get fully redirected in accordance with consumer demand.

If there is any kind of price deflation with a depression, there should be no doubt that we will see massive quantitative easing.  It may top what we saw with QE3, where the Fed created about one trillion dollars out of thin air in 2013.

The Fed hasn’t even been able to raise its target rate in 2016 during a supposed recovery.  Does anyone think the Fed will just sit on its hands if we have some kind of a deflationary depression?

And we should not be fooled that the Fed is unable to produce positive price inflation.  This can always be done at some point.  Perhaps initially the fear will overwhelm the monetary inflation, but a determined Fed can reverse this.

Ben Bernanke himself said in a speech on deflation in 2002, prior to becoming Fed chair, that, “the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.  By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.  We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

We should listen to Bernanke on this one occasion.  He is absolutely correct in his assertion.

If the Fed announced QE4 for $3 trillion annually, is there any doubt that we would see prices jump quickly, even in the midst of a depression?

In conclusion, I can envision some sort of depression, but I don’t think it will be a deflationary depression.  It won’t be like the 1930s, especially prior to the FDIC when banks were failing.

The Fed will not let the banking system implode.  It will not allow for sustained price deflation, even though we would be better off in the long run if it allowed the proper correction.

We could see a temporary period of consumer price deflation, but it will not likely last.  We should plan for a major correction, but we should also plan for the Fed’s reaction to the correction, which will be more of the same – mainly monetary inflation.

The Federal Open Market Committee (FOMC) has released its latest statement on monetary policy.  The Federal Reserve will not raise interest rates, or more accurately, will not target a higher range for the federal funds rate.

Since the fall of 2008, when the target rate was pushed to near zero (between zero and 0.25%), the Fed has only raised its overnight borrowing rate once.  This happened in December 2015, when the target rate range was raised by one-quarter of a percent (25 basis points).

At the beginning of the year, analysts, and the market in general, were predicting that the Fed would raise its target rate 4 times in 2016.  Now that we are in September with no rate hikes, we will see one at best.

If the Fed ends up hiking by a quarter of a percent in December, it will have taken about a year from the last one.  But we don’t even know if this will happen.  Every time the “next time” comes around, there is always an excuse on why it just isn’t time yet to hike rates.

The FOMC has another meeting at the beginning of November, but there is almost no possible way we will see any major announcement from that meeting.  This is right before the election and they aren’t going to send stocks into a tailspin just days before voting.

One thing that was a little different this time around is that there were 3 dissenting votes on the committee.  I think this is a way to signal that they might actually follow through next time.  Typically, the committee votes unanimously or with one dissenting vote.

Still, a lot can happen in just under three months.  It was around this time in 2008 that things fell apart.  We know there will be a new president coming and the markets don’t like uncertainty.  There are plenty of other problems out there too that could spark a downturn.

When the FOMC made its announcement, investors were generally happy.  Almost everything went up except the dollar.  The Nasdaq is hitting new all-time nominal highs.

Therefore, should we assume that markets are going to tank if and when the Fed does hike its target rate again?

Meanwhile, the Fed wasn’t the only major central bank in action.  The Bank of Japan (BOJ) made its own announcement.  This is interesting just from the standpoint that Japan is an absolute Keynesian mess.  Japanese officials are fulfilling Paul Krugman’s dream of massive government spending, massive debt, and massive monetary inflation.

Unfortunately for the Japanese, they are stuck in a weak economy that is only being made worse through all of the interventions.  So the BOJ decided to change things up a bit, or at least give that appearance.

The BOJ says it isn’t going to focus on monetary stimulus as much, and instead will target interest rates more.  The policy now is to target the 10-year yield at a zero percent rate.  Since the 10-year yield has been negative in Japan for the last several months, I’m not sure if we should be happy that this is an improvement, or depressed that things have come to this.

The BOJ has been engaged in monetary inflation that is unprecedented for a modern, supposedly first-world, nation.  It has been buying up assets (creating money) to the tune of 80 trillion yen per year, which is almost $800 billion.  In order to achieve its objective of targeting interest rates, we shouldn’t expect this massive monetary inflation to stop.

When you compare the BOJ and the Fed, the Fed is looking pretty good these days.  Sure, the Fed approximately quintupled (five times) the monetary base from 2008 to 2014, but at least it has stopped for now.

For the BOJ, it is almost as if there is some kind of a bet going on amongst the elite, or perhaps an experiment, to see just how far they can push this outrageousness.  I know consumer price inflation has been low in Japan (probably due to major fear), but this can turn on a dime.  If people see no end in sight to the monetary inflation, trust in the currency can turn quickly, especially when looking at the extent of the monetary inflation and the government debt.

There is going to be some kind of a major global correction.  It will be global because all of the world’s major central banks have made similar errors.

Luckily for Americans, the errors seem to be less damaging at this point when compared to Japan, China, and Europe.  Still, it doesn’t mean there won’t be pain here.

The term “money” is generally defined as a medium of exchange. Sometimes you will see “store of wealth” added to the definition of money. One trait of money should be that it can be used as a store of wealth. But just because something is a good store of wealth doesn’t make it a good form of money.

In the United States, the U.S. dollar is the primary form of money. In fact, it is really the only money that is used.

Gold bugs often make the mistake of saying that gold is money, but this lacks accuracy. Gold has a long history of serving as money, and gold would likely still serve as money if not for the monopoly powers of the central government and central bank.

In a few countries, gold may serve as a secondary form of money. It has been used in Zimbabwe since the hyperinflation there, but so have dollars and euros.

In the U.S., the dollar is money because it is widely sought and widely accepted. You can walk into any store and use your dollars, whether in actual currency form or digital. You cannot walk into your local grocery store and pay with gold. They would look at you as if you were nuts. The same can be said for Bitcoin.

But just because the U.S. dollar reigns supreme right now, it doesn’t mean it will always be this way. It also doesn’t mean that it is the best investment.

When comparing the U.S. dollar with gold and Bitcoin, they all have their unique characteristics. You can invest accordingly.

Rosland Capital has put out a chart comparing these three assets based on 10 different traits. Partly based on this gold-backed IRA page, it shows how each asset rates according to each trait.

It is actually gold that dominates the comparison. This is why the marketplace has favored gold as a form of money for thousands of years. It is only in very recent history that central banks and fiat currencies have dominated.

The most important trait where the U.S. dollar dominates is spendability, as mentioned above. This is why the dollar is money and why it is in such high demand.

In terms of investing, the dollar rates at the bottom when it comes to scarcity. There is no technical limit on the number of dollars (or digits) in circulation. The Federal Reserve could decide tomorrow to create another one trillion dollars out of thin air. This is why the dollar has lost over 95% of its value over the last one hundred years.

So while the dollar is still highly desired for its spendability and its liquidity, it has actually not served as a good store of value over time. And the only reason it has ever been highly desired is because it has essentially been forced on us by legal tender laws and other laws.

Bitcoin scores better than the dollar in several categories, but it is certainly not money. Sure, there may be a very small number of online stores that will accept Bitcoin, but it is not widely accepted. In fact, you can randomly ask people on the street, and many will not have even heard of the digital currency. Also, when bitcoins are spent on a purchase, they are often converted back into dollars.

As an advocate of liberty, I can certainly appreciate Bitcoin and the whole idea of digital currencies. Any competition for the central banks is a positive development. However, most people do not understand Bitcoin if they even know what it is. And Bitcoin does not have the history or reliability that gold does.

While gold does not rank high in a few categories, some of these would be solved with widespread use, coupled with today’s technology. For example, gold does not rate high in security, portability, and divisibility, but this could easily be resolved in the marketplace. It is not hard to imagine having credit and debit cards with gold payments. It is not hard to imagine a currency that is backed by gold. It is not hard to imagine mixing small amounts of gold with cheaper metals for lower value coins. There are any number of possibilities with today’s technology.

The one area where gold still loses out to the dollar is in actually using it as money (referred to as spendability in the chart). This is a result of the government and central bank taking over and controlling the money we use. The Fed has only been around for just over a hundred years. The last link the dollar had to gold was cut off 45 years ago. Since that time, inflation has been horrendous.

It may seem that the price of gold is quite volatile, and it is when pricing it in dollars or any other fiat currency. But this is more of a reflection of the volatility of the currencies. The price of gold jumps around due to announcements from the Fed and other central banks, or from speculation from investors trying to guess what the Fed will do next. And like any other asset class, gold is subject to booms and busts induced by the Fed’s monetary policies.

In conclusion, gold is not in high demand for it to serve as money. If it is in high demand at all, it is because it serves as a good store of wealth. It is an insurance policy against a depreciating currency.

Gold may yet again serve as money for our society as people realize that central banks have destroyed their currencies. Until that time, it is still smart to hold some gold and gold-related investments, as the destruction of the dollar and other currencies will not stop.

The latest consumer price index (CPI) numbers were released, showing a slight uptick in August.  The CPI was up 0.2% in August, and it is up 1.1% from last year.

However, the all-important median CPI, which does not get a lot of attention, came in at 2.6% from last year.  This was the second month in a row at 2.6%.

To be sure, these are not big changes.  But the government’s statistics here are indicating a slight uptick.  And it is the trend we are looking for, because we know the overall rates are inaccurate.

The Fed ended its last round of monetary inflation (QE3) in October 2014.  It has been almost two years of a relatively flat monetary base.  Yet, consumer prices continue to move upwards, even if slightly.  This means that some of the Fed’s huge monetary inflation from 2008 to 2014 is still leaking out.

We have seen the price of oil come crashing down in the last couple of years, but that is the only major asset bubble that has crashed.  I don’t count the precious metals in here (silver and gold in particular) because they moved down several years ago, when the Fed was still inflating rapidly.

Is it possible that not everything will come crashing down at once?  Maybe it is possible that we could have a major correction in stocks without seeing the whole economy implode.  I don’t think this is likely, but it is possible.

The Fed likes its position right now because the consequences of its previous monetary inflation are not evident.  There are severe consequences in the form of misallocated resources, but they are not apparent in significantly higher consumer prices.

I have no idea what the Fed will do in its upcoming meeting on Wednesday.  The market really has no idea either.  It is almost a 50/50 bet at this point, which is rare going into a meeting.

If I had to guess, I don’t think the Fed will raise its target rate.  Call it an insurance policy against a Donald Trump presidency.  But we really can’t be sure.  You will want to pay attention on Wednesday afternoon.