Are you ever frustrated that your toilet just doesn’t work like it should?  Are you constantly facing clogged toilets?  Do you ever wonder why something like a toilet would work so poorly in the 21st century with our advanced technologies?

The lack of properly working toilets is not due to a lack of innovation in the toilet industry.  It is due to us living in something of a nanny state.

There is virtually nothing in our world today where the government does not interfere.  This includes our trips to the toilet.

In 1992, George H. W. Bush signed the Energy Policy Act into law.  Part of this law mandated that new toilets meet a standard maximum of 1.6 gallons per flush.  This ushered in the era of low-flush toilets.

The law went into effect on January 1, 1994 for residential buildings and January 1, 1997 for commercial buildings.

Just as with Obamacare, the federal mandate followed a similar law in Massachusetts that had passed a few years earlier.

If you live in a house with toilets from 1994 or later, then you probably understand the problem here.  My kids have even been capable of clogging the toilets, and that it without shoving huge wads of toilet paper in there.

So if you want to blame anyone for your lack of properly working toilets, you can point the finger to George H. W. Bush and the 1992 Congress.  Of course, any Congress and president could have easily repealed this since that time, but they have failed to do so.

One thing that libertarians quickly realize about government laws is that they almost never fulfill their stated objectives.  In fact, it is typical for laws, especially at the federal level, to accomplish the exact opposite of their stated purposes.

You can see this all around.  The government wages a war on poverty, and they end up creating more poverty.  They wage a war on drugs and now you have drug dealers pushing drugs on kids in school.  The government passes laws to make healthcare more affordable (the “Affordable” Care Act), only to make it more expensive.  The government subsidizes student loans to make college more affordable, which ends up making it more expensive.  The list goes on and on.

With the implementation of low-flush toilets, this is no exception.  Not only do your toilets not work, but the objectives of the law aren’t met either.  In fact, you end up with the opposite.

It was reported in 2011 that San Francisco’s sewers were backed up with waste sludge because of the low volume of water.  Then the city reportedly used chlorine bleach in the sewers, which then causes its own set of environmental issues.

Of course, the stated objective of the low-flush toilets was to save water.  For the more cynical, the actual objective was for politicians and bureaucrats to have more control over your life.

Congress ignores economics and supply and demand.  Water does cost money, which means that people pay more if they use more, at least typically.  This is an incentive for people to use less water.  If it were simply a matter of buying a toilet that saved water, then the marketplace would fulfill this demand.

However, this law in many ways accomplishes the exact opposite of its stated purpose.  When you have to flush before using toilet paper just to make sure it doesn’t clog, then the double or triple flush really defeats the whole purpose of using less water per flush.

It gets even worse if the toilet clogs.  What happens when you have to flush it several times to plunge it, or to hope everything goes down?  And then you may have to flush it a couple of more times to clean it.  If you end up flushing the toilet six times, it sure does defeat the purpose of the low-flush toilet.  You  may end up actually using more water as a result.  It is just one more example of a law doing the exact opposite of its stated purpose.

This legislation, like so much other, needs to be flushed down a toilet, and a strong one at that.

The next time you are griping about your toilets not working well, just think of Congress.  Whenever you think of sewer waste, Congress should come straight to your mind.

I have heard many complain about the terrible candidates in this year’s presidential election.  My response is, “Compared to what?”

Were the choices really that great when it was Romney against Obama?  How about McCain against Obama?  How about Kerry against Bush?

At least this year is mildly exciting with Donald Trump upsetting the establishment so much.

Let’s take a look at the candidates from a libertarian perspective.  I think we can safely skip over Hillary Clinton.

While I don’t support Trump, I have been sympathetic towards him on several occasions.  His economic proposals are abysmal, which just goes to show that being a businessman means nothing when it comes to politics.  However, his lack of political correctness at times is actually refreshing in our time of hyper-sensitivity.

Most of all, Trump has shown signs of being good on foreign policy, or at least better than any major nominee in a long time.  He suggests getting out of NATO.  He says he wants to talk to Putin (instead of going to war).  He says that the war in Iraq has been a disaster.  It is these stances that has got the establishment so worried.

Unfortunately, Trump just endorsed Paul Ryan (going against a Trump supporter in his primary).  Trump also essentially endorsed John McCain.  This, coupled with his VP pick of Mike Pence, shows that the Republican establishment has rattled him.  Trump thinks he needs to play ball with them.  For this reason, I simply cannot vote for Trump unless something dramatic changes.

If I thought Trump would end the wars overseas and return the U.S. to a non-interventionist foreign policy, then I might actually vote for him, despite my other disagreements.  Foreign policy is the biggest issue and it is the one issue where the president could actually make a difference.  But since I don’t trust Trump on this issue any longer, I cannot even vote for him as the lesser of two evils.

So what about a third-party candidate?

Let’s start with Jill Stein, the nominee of the Green Party.  She is probably the best on the war issue.  She is more anti-war than Bernie Sanders.  I realize this isn’t saying much, but I am not sure that Sanders supporters realize that he is not anti-war.  Sanders is just less hawkish than Hillary Clinton, which isn’t hard.  Sanders is nothing compared to Ron Paul on the war issue and interventionism.

If foreign policy were the only issue, maybe I would consider Jill Stein.  But it is terribly difficult to vote for someone who promotes hardcore socialism.  She can call herself the peace candidate, but the bedrock of socialism is government violence.  Her other policies require violence to the extreme.

Are the people of Venezuela happy that they supported Hugo Chavez because he kept them out of war?  If that person is a brutal thug dictator, then the lack of a foreign interventionist policy doesn’t help too much, except perhaps for those on the receiving end of drone bombings overseas.

Now let’s consider the non-libertarian Libertarian Gary Johnson.  This is the man who personally chose Bill Weld as his running mate.  I know that the Libertarian Party selects the VP candidate, but it was because Johnson pushed for him.

Weld is what some would call a liberal Republican.  He is a member of the Council on Foreign Relations.  He is as establishment as they come.  He is just about the opposite of libertarian when it comes to many issues.

Meanwhile, Johnson himself is terrible.  He was a little more tolerable 4 years ago when he ran.  Now he just sounds ridiculous.  He is campaigning on the fact that he is not Clinton or Trump.  He claims to be the reasonable person at the table.

On his latest appearance on CNN, he was asked about whether a baker should be forced to bake a cake for a gay couple’s wedding.  (He had previously stated that the baker should be forced to do so.)

Johnson responded that although  the baker has to sell him the cake, it doesn’t mean he has to frost it for the couple.

Is this guy serious?  This just makes him sound even dumber than before.  This is not only trying to play both sides of the fence and missing; it is falling between the cracks of the fence.  How could anyone sound any more ridiculous on this issue?

As Bob Murphy pointed out, most (or all) of these bakers are not refusing gay customers who want to buy pre-made items.  The bakers just aren’t specializing cakes for ceremonies that they do not agree with.

The libertarian position is that it is the baker’s business (his property) and he should be able to use it or not use it how he wants, so long as he doesn’t infringe on others.  People should be free to associate or not associate with whom they want.  This is part of a free society.  It doesn’t mean you have to agree with the bakers who make this choice not to serve certain customers.

I realize that probably 95% of the American population do not agree with the libertarian position on this.  That is why Johnson is trying to play both sides, instead of actually attempting to educate people on the issue.  And that is really the main problem with Johnson.

Some libertarians say that we should support Johnson even if he is not a pure libertarian.  They say it helps to get the libertarian name out there.  But I don’t want the name to get out there if it is being misrepresented.

And this isn’t on just one issue.  It is on virtually everything.  He does not take a hardcore principled stand on anything.  He wants to legalize marijuana, but he never says he wants to get rid of the federal war on drugs.  He wants to audit the Fed, not end it.  Even on foreign policy, he is weak and I do not trust him at all.

It is funny that many libertarians say that you shouldn’t vote for the lesser of two evils.  Yet, isn’t that essentially what they are asking us to do with Johnson?  In this case, it is the lesser of three evils (or more if you count other third-party candidates).

At this point, if I were forced to vote for somebody on the ballot (not a write-in), I would have to go with Darrell Castle.  Who?

Darrell Castle is the nominee for the Constitution Party.  The Constitution Party is not well-known, but it isn’t completely insignificant either.

Chuck Baldwin was the nominee in 2008, and there is no question that he was the most libertarian (small l) candidate in that race.

The Constitution Party tends to promote Christianity to a high degree.  Castle himself served as a deacon.  I have no issue with this except it shouldn’t really be part of a campaign platform.  I understand certain people will take certain positions because of their religious beliefs, and that is fine.  It is just that I believe promoting your own religion should not play a significant role in the campaign.

In an interview last month, Darrell Castle stated that he is the most libertarian candidate in the race.  And by looking at his stance on the issues, he is correct.

He wants to end the Fed.  He wants a non-interventionist foreign policy.  He wants to end the federal war on drugs, which is the proper constitutional position on this subject.

Some libertarians may disagree with Castle on abortion and border control.  Castle is pro-life and wants secure borders.  But libertarians will always disagree on these two issues.

Even though Castle is firm in his Christian faith, he does not believe the federal government should play a role in gambling, prostitution, or polygamy.  He says that states should be free to regulate these things, but he sees no Constitutional role.

I don’t know if I will vote for Darrell Castle in November.  I may do some more research on him.  But there is no question that he is by far the most libertarian candidate in this race.  Perhaps I will not vote at all.  Perhaps I will write in someone’s name.  Or perhaps I will vote for Castle.

I am certain that I won’t be voting for the disastrous non-libertarian Libertarian Gary Johnson.

The Bank of England (BOE) just announced a cut in its benchmark rate from 0.5% to 0.25%.  The rate had been at 0.5% since March 2009, when the economy was still reeling from a recession.

Does this mean that the BOE thinks the economy is weaker now than it was in March 2009?

The BOE also said it will purchase an additional 60 billion pounds (about $80 billion) of U.K. government debt over the next 6 months.  It will also buy 10 billion pounds of corporate debt over the course of 18 months.

This isn’t quite on the level of the Federal Reserve during QE3 when it was purchasing $85 billion per month in new assets, but the U.S. is quite a bit bigger than the U.K. both economically and in terms of population.

Perhaps the most significant thing is that the BOE has indicated that there could be more rate cuts in the future.  This means it will likely go to zero or beyond.

And why not?  That is the world trend.  The European Central Bank and the Bank of Japan have engaged in massive monetary pumping and a policy of negative interest rates (NIRP).

The major central banks have done (or are doing) almost the exact opposite of what a libertarian/ free market proponent would recommend.  I would say it is straight Keynesian economics, but I am not even sure that Keynes would have supported this insanity.

On this news, the British pound fell in relation to the dollar and other major currencies.

Since the Fed does not want the dollar to strengthen too much, it makes it less likely now that the Fed will hike its own target rate.  Many think the Fed will not hike at all in 2016.

These central bankers have this goal of increasing price inflation.  It is an absurd goal, which only makes us poorer in the long run.  It is also rather ironic in that these moves just tend to increase fear amongst the public, which can oftentimes just leads to an increased demand for money, despite the monetary inflation.  This means a decline in velocity and lower price inflation, at least in the short run.

Despite the Fed not raising its target rate, other than 25 basis points back in December, it is the only major central bank that is anywhere close to a sane policy right now.  Sure, it approximately quintupled the monetary base from 2008 to 2014, but at least its monetary policy has been tight for almost two years now.

This is all a disaster that is just getting built up.  The more these central banks inflate, the more that resources are misallocated.  At some point, there is going to be a major correction.

And a correction is really what we need.  We need a return to sanity. We need for resources to properly align with consumer demand.  We need for the asset bubbles to pop so that prices are no longer distorted.

While a major correction will be painful, it is basically inevitable at this point.  This includes the U.S.  But the U.S. is in far better shape than Japan and parts of Western Europe.

The only thing worse than the correction itself is the possible responses from central banks and central governments.  It could bring more authoritarianism.  It could bring even more money creation and more debt, if that is even possible.

While the Brexit vote was a small positive step towards liberty, it doesn’t change the fact that the British people are just as much under the thumb of central bankers as everyone else.  And the BOE is doing virtually the opposite of what it should be doing.

Janet Yellen and company now have another excuse not to raise its target rate.  They probably don’t want to change anything right now anyway, at least until the election is over.  If the economy were to tank before November, it could mean a Trump victory, which they do not want.

This will all be entertaining in a sick kind of way.  It is important to watch Japan, as I see the Japanese getting hit the hardest of all when everything implodes.

There are pros and cons to having a workplace 401k plan.  It is an option people have to shelter some income, and options are always good.  And unlike Social Security, you are not forced to participate in it.

Still, 401k plans are widely touted as great investment vehicles, even by the establishment media.  Any time something is this widely praised, you should proceed with caution.

First, there is the issue of potential confiscation.  With ballooning government debts and unfunded liabilities, the U.S. government is going to be looking to get its hands on extra money more desperately than ever in the somewhat near future.

I don’t think outright confiscation is likely because of public opinion.  There are tens of millions of people with 401k plans now.  If there is any attempt at confiscation, it will be more indirect.  It will come in the form of higher marginal taxes, higher fees, bigger penalties for early withdrawals, and perhaps fewer choices.  The government may try to push people into “government-guaranteed bond funds” or something of the sort.  The only guarantee is that it will be a ripoff.

A second downside of 401k plans is that you are typically limited in your choices.  You generally can’t invest in individual stocks, ETFs, or options.  I will get to the other downsides later.

We know the advantages of 401k accounts.  They are a way to shelter income and capital gains from income taxes.  Sure, you will eventually have to pay, but there is no question there are strong benefits to this in choosing when to take your income.  You are also not getting hit with the taxes on the reinvested capital gains and dividends.

I often hear, especially from the “experts”, that if your company matches your contributions, you shouldn’t throw away free money by not contributing.  If your company contributes 3% of your income when you contribute 6% of your income, then we are told that you get a guaranteed 50% return.

But I would like to make clear that this is a one-time return on your contribution.  You aren’t continuing to get that return on your money.  The only return is on new contributions.

While this seems to be an unbeatable return, you need to consider your own circumstances and opportunity costs.

One of the major downsides of a 401k plan is that you are tying up your money.  If you still work for the employer that sponsors your 401k plan, then you typically can’t withdraw that money if you are younger than 59 and a half.  You may be able to get a hardship withdrawal (difficult) and you may be able to get a loan.

If you have most of your money tied up in a 401k account, you won’t be able to access most of it.  Are you going to quit your job in order to gain access?  And if you do leave your employer, you are going to then pay income taxes plus a 10% penalty for early withdrawal, assuming you haven’t yet reached the government-designated age.

In other words, this is all part of the nanny state.  You aren’t allowed to access your own money and you have limited investment choices. We wouldn’t want you making the wrong decisions.

Imagine someone in 2011 who had $300,000 in a 401k account with little else in the way of financial assets.  That person wants to buy a house, plus an additional investment property.  This was at the bottom of the housing bust when prices were really low.  But he doesn’t have the money to do so.  He doesn’t have a down payment or money for closing costs and other expenses.

If he had been able to access some of this 401k money, he could have bought houses at the bottom of the bust.  His return at this point would be a lot higher than having invested in mutual funds.

Better yet, imagine someone who wants to start a business and needs some capital, but doesn’t want to take on risky debt.  If all of his money is tied up in a 401k, he is out of luck, unless he wants to quit his job and then pay a penalty for early withdrawal.

The point here is that you have to consider your opportunity costs.  For some people, maybe putting a lot of their money in their retirement account is the best option.  Still, I would recommend it only up to the employer match.

But for someone young and innovative, you might want to consider keeping some money outside of your retirement account where you can access it.  I understand that some people will squander it on luxury items or things they don’t really need.  But even here, who am I to judge?  Maybe it is something that brings them great pleasure.

I know there are people though who can use liquid capital to fund a venture that will eventually pay great dividends in the future.  This could be real estate, gaining a new skill, starting a business, or investing in a start-up.

You have to make this decision based on your own personality and circumstances, but I believe it is always a good idea to have at least some money sitting outside of retirement accounts.  And make sure you factor in the opportunity costs of tying up your money.

For the last couple of weeks, the media has mostly focused on the national conventions, at least when it comes to political stories.  And while there were some interesting stories within the conventions, there has been little talk of the release of the 28 pages from the 9/11 report.

If you get your news from the internet, then you may have seen this story.  If you get your news from the establishment  (sometimes called mainstream) media, then you probably don’t know about it.  If you rely on television, radio, and newspapers, then you are probably out of the loop on this.

There has been a push to release these secret (not anymore) 28 pages from the 9/11 Commission’s report.

We can assume that if there had been a direct smoking gun, then the government wouldn’t have released the pages.  The powers-that-be had to weigh their options of withstanding pressure of revealing the documents versus how much the release of the pages would change public opinion.  So far, it seems that the establishment has bet correctly on an apathetic American public.

Of course, the establishment media really does help direct the narrative.  If these 28 pages had been headline news, then Americans might be more outraged.  So while the internet has been wonderful in spreading messages that were previously untouched, we still have to acknowledge that the establishment media somewhat directs the narratives.

While there isn’t one particular direct smoking gun, there are a series of events that look really bad for the Saudis when put together.  It would be too coincidental for at least some Saudi officials to have not played a role in the 9/11 attacks.

You can check out 28pages.org for a summary and for the details.  There seems to be little question that Prince Bandar of Saudi Arabia was helping to fund the hijackers.

(Also, you can check out this informative podcast on the Tom Woods show.)

Some people might say, “Who cares?”  They might say that the victims of 9/11 are already gone and nothing can bring them back.  But if you had a loved one murdered, wouldn’t you want to know who was responsible for it?

Of course, if goes much deeper than this.  It is not just about justice, as important as that is.  It is also about the U.S. government and the entire premise of its foreign policy.

If Prince Bandar funded the 9/11 hijackers – which looks to be the case – then this all of a sudden implicates the Bush administration.  The Bush family is close friends with Bandar.  If Bandar has blood on his hands, then Bush and Cheney likely do too.

The entire foreign policy of the U.S. since 9/11 is a farce.  The hundreds of thousands (or millions) of people who have died are real.  But the American people have tolerated all of these wars that have all been based on lies, which includes Afghanistan.

I do not favor a war with Saudi Arabia, but if any country should have been attacked based on the 9/11 attacks, it should have been Saudi Arabia.  Meanwhile, almost 15 years later, the war and occupation of Afghanistan goes on.  The war and occupation of Iraq goes on.  And let’s not forget all of the other wars and drone bombings in countries such as Libya, Pakistan, Yemen, and Syria.

To top it off, the Saudis are still supported by the U.S. government, both militarily and financially.  The Saudis are our supposed allies.  With friends like these, who needs enemies?

When you examine these 28 pages and see that certain Saudi officials were helping to carry out the 9/11 attacks, it becomes clear that the Bush administration likely also played a role.  All of a sudden, the 9/11 conspiracy theorists shouldn’t seem so crazy.  It almost becomes crazy to think that no U.S. officials played a role in the attacks.

Unfortunately, most Americans don’t seem to know or don’t seem to care.  Yet, it is these people who blindly support whatever war is the flavor of the day.  They have been completely lied to and deceived.

If it was clear that the Bush administration played a role in the attacks, or at least knew about them beforehand, I wonder how the American people would react.  Unfortunately, all too many would still be happy to turn vast amounts of power over to the government.

Bush and Cheney should be in prison forever, but this isn’t just a couple of bad apples.  This is representative of the deep state.  We can be reasonably sure that Obama knows most of the truth of what happened as well.  This may be why the establishment is so scared of Trump.  They don’t want him to find out any deep secrets because he is a wildcard and can’t be depended on to carry on the secrets.

At this point, all we can do is let people know about these 28 pages and the implications.  Let’s hope that with the decentralization of information via the internet, that more will be found out as time goes on.  It took just a small minority of people to get to the point where the government felt compelled to release the 28 pages.

Public opinion matters.  The more people who find out about the implication of the Saudis in the 9/11 attacks, the better it is.  It means less consent for the U.S. government.  It means that perhaps, one day in the future, there will be a big enough movement that government powers are actually curtailed and our foreign policy changes.

The Federal Open Market Committee (FOMC) has released its latest statement on monetary policy.  The Federal Reserve will not be raising its target federal funds rate.

Compared to the last statement, there were a few changes in the language used in the first paragraph, but it is mostly just gibberish as usual.

There was one dissenting vote by Esther George, who wanted to raise the target rate.

Stocks ended the day mostly flat, although the Nasdaq was higher.  Gold went up, but not a lot.  The 10-year yield went down to almost the 1.5% level.  Overall, there was not a lot of market reaction.

With the Fed having so much power over the economy, things are often backwards when dealing with the financial markets.  For example, there are many times where bad economic news actually drives stocks up.  Stock investors see the bad news as a sign that the Fed will loosen (or keep loose) its monetary policy.  Therefore, they reason that it is beneficial for stocks.

Now things are starting to work the other way.  When the Fed doesn’t raise its key rate, investors start to wonder what they see that is wrong with the economy that is making them so fearful of raising it.

The official unemployment rate is now at 5.5%.  Stocks are hitting all-time highs.  There is supposed to be a recovery, albeit not as strong as previous recoveries.  If the Fed can’t raise its target rate above a half of a percent, when can it raise it?  What do Fed officials see?  What are they so worried about?

It wasn’t that long ago that the Fed was expected to raise its key rate 4 times in 2016.  Now it is questionable whether it will happen in September or December.  Will the Fed raise it at all in 2016?

The federal funds rate is not dictating monetary policy at this time.  Due to the huge pumping of money from 2008 to 2014, the huge pile of excess reserves is keeping the overnight lending rate low.  The Fed has kept a tight monetary policy since the end of QE3 in October 2014.

In order to raise the target federal funds rate, the Fed either has to sell trillions of dollars in reserves, or it has to increase the rate it pays on bank reserves.  Since the Fed isn’t going to be massively reducing its balance sheet any time soon, it is basically left with the second option.

Still, even if the Fed raises its key rate by paying banks not to lend, it is still a reflection of a tighter monetary policy on the margin.  It could mean even less bank lending than we currently have.  This has a deflationary effect.

I think the Fed officials know that the economy has been propped up by loose money.  This includes the stock market.  They are afraid of what will happen if they take on a slightly tighter stance.  The one time they raised rates (last December), stocks had a really rough ride for a little while after.

The stock market makes me really nervous right now.  It has for a while, but it is even more so now.  I don’t think the risk is worth the reward at this point, unless you are betting on specific individual stocks or specific industries.  Even there, there is danger.

Stocks are at or near an all-time nominal high right now.  Maybe the Dow will go to 20,000.  Is a possible 8% gain (less fees and taxes) really worth the risk?  That question answers itself when you consider that a recession could easily mean a 50% downturn.

Even if you just think a 15% correction is in the cards, why would you stay in for just a little bit more in potential gains?

I am an advocate of a permanent portfolio.  In this context, I think stock holdings are acceptable right now.  But beyond that, it really is speculation with a lot of risk right now.

The Fed is sitting tight right now.  Of course, doing nothing is a choice.

I keep saying that if the economy gets rough and a recession appears, the Fed is likely to start ramping up monetary inflation again.  QE4 anyone?

That will be a time to look into more speculations in precious metals and mining stocks.  I like gold and mining stocks now, but there is still a threat of a downturn that could hurt these.  For this reason, I am far from being “all in”.

In a recession, cash is still king, especially as long as inflation is not seen as a serious threat.  Right now, inflation is not seen as a threat.  That is what the bond market is telling us with these low yields.

Now we can look forward to the FOMC’s next meeting in September to see what the next excuse will be for delaying another rate hike.

There is a report released by the Treasury that is updated once a month showing the U.S. Treasuries held by foreign countries.  As of this writing, it was last updated on July 18, 2016.

Despite previous reports of the Chinese dumping U.S. Treasuries, this isn’t really the case.  China is still the number one holder of Treasuries, with Japan coming in a close second.  Third place is nowhere close to Japan.

As of the end of May 2016, China held $1.244 trillion.  This is only a slight decrease from $1.271 trillion a year ago.  While $27 billion is a lot of money, it isn’t much of a drop from a year ago when put into context.

Japan has gone from owning about $1.197 trillion last year to $1.133 trillion.  This is a little more of a drop, but it is not as if the Japanese central bank is massively selling off Treasuries.  The Bank of Japan is busy buying up its own government’s debt (at negative yields), so perhaps it is not rolling over all of its maturing U.S. debt.

There is no reason to expect this situation to change in the short run.  The Chinese and Japanese officials in charge are a bunch of mercantilists.  They think they have to buy U.S. Treasuries in order to boost their export industries.  Meanwhile, they have no problem in depreciating the value of their currencies.

The massive U.S. debt held by foreigners (over $6 trillion) is somewhat of a subsidy to American consumers.  Unfortunately, it is also a subsidy to the U.S. Congress and the entire U.S. government.  It enables them to run up debt at lower interest rates than would otherwise be the case.

Right now, we see negative yields in Japan and many places in Europe.  This is mostly the result of central bank buying.

In the U.S., we have not seen negative yields.  The yields on short-term debt were at or near zero for a while, but these have gone up slightly.  Longer-term yields have fallen, as the 10-year yield has been around 1.5%.

The interesting thing is that long-term rates have fallen in the U.S. despite a tight monetary policy from the Fed.  The Fed has not been buying U.S. Treasuries since October 2014 (the end of QE3), except for rolling over its maturing debt.

This means that private investors have been buying U.S. Treasuries/ bonds, particularly longer-term debt.  Foreign holdings overall have remained relatively steady.

This indicates that there is some fear in the U.S., at least from bond investors.  Why would investors be locking in 10-year rates for around 1.5%?

The yield curve has been flattening, but it still has a way to go for inversion.  An inverted yield curve is a classic indicator of recession.

China and Japan have their own problems, but they continue to maintain most of their holdings of U.S. government debt.

But investors are signaling a weakening economy, at least from the bond market.  I trust the bond market over the stock market, at least in signaling an upcoming recession.

Keep an eye on long-term yields.  If they continue to fall without central bank buying, then a recession should be expected.

The Republican National Convention is wrapping up as I write this.  While most of it has been politics as usual, it hasn’t been completely boring.

It started out with Melania Trump giving a speech, part of which was a copy of Michelle Obama’s speech from 8 years ago.  It would be hard to believe that this wasn’t done deliberately.

My first thought was wondering whether it was done to sabotage the Trump campaign.  But then it was reported that the speech writer admitted to it, but that Trump wouldn’t fire the person.  I have also heard theories that the Trump campaign purposely did it in order to draw comparisons between Melania Trump and Michelle Obama to get people to subconsciously think of Melania as the first lady.

One thing we can be sure of is that Melania Trump didn’t write this part of the speech.  It seems she doesn’t want the spotlight as her husband does.  She gave her obligatory speech, but she would probably rather be home taking care of her child.

The other interesting part of the convention was Ted Cruz’s speech.  He essentially got booed off the stage.  He would not endorse Donald Trump.  He said people should vote their conscience.

It is funny how the whole Republican nomination shaped up.  If you remember back at the first debate, the candidates were asked if they pledged to support the eventual nominee.  Trump was the only one who didn’t raise his hand.  That was the beginning of the end for Rand Paul and his campaign when he focused on the fact that Trump wouldn’t make that pledge.

Trump received a lot of criticism for this, and he eventually pledged to support the eventual nominee.  But then he became the nominee and not all of the candidates endorsed him, including Ted Cruz and Jeb Bush.  It is total hypocrisy.  Rand Paul did endorse Trump, but without much enthusiasm.  He was absent at the convention.

There isn’t much to say about Mike Pence.  I have already analyzed his conservative views, which includes being pro war.

On the final night, Ivanka Trump spoke before introducing her father.  It was probably a wise political choice.  She is obviously attractive and well spoken.  From a libertarian standpoint, some of the things she said were horrendous.  It was particularly bad when she was talking about the gender pay gap and how her father would have stricter labor laws.  She could have been speaking at the Democratic convention.

As for Trump himself, it was a rather typical Trump speech.  He is all over the place.  There are some good things.  There are a lot of slogans.  His economics is mostly bad.  If he becomes president, it is not likely that anything significant will change.  There is still a glimmer of hope that he will implement a less interventionist foreign policy.

This is what I will be watching for the next several months.  Will Trump continue to talk about a more non-interventionist foreign policy?

It will also be entertaining when he attacks Hillary Clinton.  I think she is scared of him because of what he might say.  None of the other candidates would have attacked her on such a personal level.  Gary Johnson, the Libertarian Party nominee, is even saying nice things about Hillary Clinton, but he is a subject for another day.

Trump has made this whole election cycle far more interesting than it would have been otherwise.  He is still somewhat of a wildcard, but I am not delusional in thinking that he will change things significantly.  He could change things in the wrong direction too.

Again, the one hope is that he implements a better foreign policy.  His pick of Mike Pence makes that less likely.

Now we will move on to the Democratic National Convention.  I don’t know if I will be able to stomach watching more than 5 minutes of it.

CNBC recently ran an article titled “To the mattresses: Cash level highest in nearly 15 years”.

The article’s title does not actually explain its point.  It only does so in a metaphorical way.  It is not claiming that Americans are literally sticking wads of cash under their mattresses.

The article is talking about professional investors.  Professional investors now have cash levels at 5.8% in their collective portfolios, which is the highest since 2001.  This is according to a survey, so consider that there could be somewhat of a margin of error.

The article is interesting in the fact that it also states that 39 percent of fund managers now anticipate some kind of helicopter money.  Too bad that “Helicopter Ben” Bernanke isn’t still around at the Fed to implement it.

But while the article briefly discusses professional investors, it doesn’t address whether the general public is putting cash underneath their mattresses.

Most Americans are not investors, unless you count retirement accounts such as 401k plans.  But aside from investing, people still have a choice of what to do with their money.

At any given point of time, there is a set amount of money in circulation.  The only thing that changes the money supply is the central bank and its balance sheet.  Bank lending also has the equivalent impact, as fractional reserve lending increases the supply of money in the sense that more people are drawing upon some of the same money.

But it isn’t just the money supply that impacts overall price inflation. What also matters is how quickly money is changing hands.  The Fed could print up a lot of money, but it wouldn’t result in massive price inflation unless people actually spent the money.  If everyone just stuffs it under their mattress or in their bank account, then prices will stay down.

This is the demand for money.  When the demand for money is high, it means people are saving it.  It is the equivalent of stuffing it under a mattress.  In our world of digital banking, most people don’t actually stuff it under a mattress, although we can be sure it still happens.  But most money that is not outside of the country is not in physical cash.  It is digits in bank accounts.

If the demand for money is high, it means people are buying fewer things.  Stated another way, velocity is low.  Money is changing hands less frequently.  This has a deflationary effect on prices.

It is quite difficult to measure the demand for money though.  It is almost an intuitive sense.  During the artificial boom times of the mid-2000s, velocity was running higher.  People were spending money.  During the financial crisis, and perhaps even leading up to it, velocity dropped.  People became fearful and some actually tried to save a few bucks for a rainy day.

It is very hard to sense where the demand for money is now in the United States.  A lot of people have bought new cars.  Housing has somewhat recovered, depending on the area.  it is not 2009 any more.  But it also isn’t 2004.  There is still a sense of uneasiness, and probably rightly so.

Times are tight right now for middle class America.  It is not necessarily widely admitted, but I have heard and seen enough on the streets (not literally).  Even two-income households that should be doing well are struggling.

Price inflation has remained relatively low according to the CPI statistics.  They are probably understated, but it is nothing like the 1970s.  Still, wages are stagnant as compared to the cost of living.  Technology gets cheaper, but health insurance and other basics get more expensive.

I think the velocity of money will likely drop in the near future.  It will be part of the correction process if it is allowed to happen.  Unfortunately, those fund managers anticipating helicopter money may be correct.  If the Fed starts with another round of money creation, then velocity will likely increase.  Velocity can pick up quickly if people think their money will depreciate rapidly.

A lot of libertarians/ Austrian school economists wrongly predicted high price inflation when the Fed was creating money like crazy from 2008 to 2014.  They did not account for the lack of bank lending.  They also didn’t account for the demand for money remaining relatively high.

This does not in any way make libertarianism or Austrian economics wrong.  Maybe it made some of those people wrong on this subject.  But monetary inflation is damaging because it enables increased government spending and misallocates resources.  Higher prices is just one potential consequence.

I expect more Americans to stuff more money under their mattresses, literally and metaphorically, if they can find enough to actually save.  If and when the Fed starts another round of quantitative easing or whatever you want to call it, then all bets are off.

In the U.S. (and elsewhere I’m sure), there are constant arguments about little things dealing with the economy.  There are arguments over what the marginal tax rate should be for high-income earners.  It is typically an argument over 35% vs. 40% (maybe higher for Bernie supporters).

There are arguments over certain budget items.  There are arguments over “sequestration” and non-existent cuts to the military.  There are arguments over funding Planned Parenthood, which the Republicans aren’t even capable of ending.

It mostly adds up to insignificant amounts, and usually there aren’t any actual cuts anyway.  Sometimes it is good to take a step back and look at the big picture.  If you wonder why middle class America is feeling poorer these days, this might help answer your question.

Instead of looking at taxation, let’s look at government spending.  While taxation itself isn’t unimportant, government spending gives us a better idea of how much capital is being spent by government.  When the government spends money, it misallocates resources.

This has to be the case.  Unless the government is spending your money exactly the same way you would have spent it if you had been allowed to keep it, then it is a misallocation.  It is being spent according to politics and bureaucracy and not according to consumer demand.

When looking at government spending, we can’t just look at the federal government.  We have to look at everything.  For the United States, the total government spending is approximately $6.7 trillion.

The federal government spends about $4 trillion, but some of it is funneled to state and local spending.  If you account for intergovernmental spending, it drops to $3.3 trillion, but then you have to count it at the state and local level.  The total state spending is $1.6 trillion and the total local spending is $1.8 trillion.  That is a grand total of $6.7 trillion, give or take a hundred billion.  That is about 36% of GDP.

By using total government spending, we are accounting for the resources being sucked away from us via debt and inflation.  This is the main reason it is more appropriate to use total government spending as opposed to total tax receipts.

In the U.S., there are approximately 125 million households.  If you divide $6.7 trillion by 125 million, that comes out to $53,600 per household.

You may not think you pay that much, but that is the average for each household.  It is being paid for in some form, whether it is through lower wages, higher product prices, depreciating money, various taxes, etc.

Imagine if all of government stuck to basic functions of infrastructure, defense, a court system, and the police.  As a side note, I am not saying that these things can’t be done outside of government, but that is not the point of this piece.  It is a big picture piece on the economy.

Imagine if that basic government spent $13,600 per household instead of $53,600.  I understand that it would mean no more Social Security, Medicare, Medicaid, state school system, and a lot of other things.  (As another side note, we would actually gain even more wealth by not having so many of the alphabet agencies that regulate us.)

Still, what would your family do with an extra $40,000 per year?  If there were still any poor people left, don’t you think they could be easily helped by people with so much more disposable income?

The total government spending is approximately equal to the median household income.  If you can’t figure out how this is possible, give it some thought.  You never see some of the money in the form of income that the government spends (employer taxes, corporate taxes, debt).

You already get by with your income as it is.  If the major government programs went away, maybe your expenses would increase for certain things, such as school if you have children.  If you have a government pension, then you could initially lose out if all pensions went away.  (I understand this is not politically realistic right now.)

Even if your expenses increased by $20,000, you would still have an extra $20,000 remaining, and we aren’t even accounting for the possible windfall from fewer government regulations.  If you had this much extra, you could donate generously to charity, save for retirement, and live a better lifestyle.  Now imagine 100 million other households doing the same.  Imagine this wealth compounding over time.

The reason we are feeling so poor right now (relatively speaking) is because the government is sucking capital away from us.  It is hurting savings and capital investment.  This makes us poorer than we otherwise would have been.

If the economy can keep chugging along with so much government spending and regulation, imagine how rich we would be if the total size were reduced to a fraction of what it is now.  Our living standards would be beyond our current comprehension.