Donald Trump has gotten in trouble for saying a lot of things.  He doesn’t get in trouble with his supporters, but the media pundits come out in full strength when they think they’ve got him on something.

One of the more recent things happened when Trump was interviewed on CNBC.  He said that, as a businessman, he is used to dealing with creditors.  He said that, as president, he could renegotiate the terms of the U.S. government’s debt.

Some were quick to jump on him, saying that he wants creditors to take a haircut.  Unfortunately, Trump backtracked on his statement and said that he wants to restructure new debt with lower interest rates, or something to that effect.  It doesn’t really make any sense because the government is going to issue new debt and roll over maturing debt at the lowest rate it can.

If Trump becomes president, I think there is almost no chance that he will allow a default on the national debt.  If anyone would, it would probably be him.  But I still see the chances as slim.

The popular and acceptable opinion is that the U.S. government just could not possibly default on the national debt, or even give creditors a haircut, meaning they would get back less than promised.  The whole notion is just supposed to be ridiculous and even childish to think such a thing.

But why is default such a ridiculous notion?  From a libertarian standpoint, default makes sense.  Of course, if we lived in a libertarian society, then there wouldn’t be a national debt in the first place.

The main objection is that it would not be right to break a contract.  Making interest payments and paying back the principal on the debt is a promise that was made to people who lent their money to the government.  People say it would be morally wrong for the government to go back on its word.

But why is it ok for people and businesses to declare bankruptcy?

People and businesses are not the same thing as the government.  However, if it is morally wrong for anyone to not pay back debt, it is businesses and individuals.  It is actually the opposite with government.

Murray Rothbard wrote an essay on this subject in 1992.  His view was that it is immoral for the government to keep paying on its debt at the expense of taxpayers (and holders of dollars).

When the government promises to pay back money that it borrows, it is not a valid contract.  It is because the government doesn’t have the money to pay it back except by extracting it from others with the use of force or the threat of force.

If I make a contract with Al to borrow his money and pay him back a certain amount with interest at a later date, there is no problem there.  I should fulfill the contract.

But what if I make a contract with Al to borrow his money.  In the contract, I state that the loan is backed by the full faith and credit of Bob.  Bob is my neighbor and I will steal his money in order to pay back Al.  If that is the only way I can pay back Al, then it is more morally sound to not steal from Bob and not pay back Al than it is to steal from Bob in order to pay back Al.

All of the people invested in U.S. government debt are no more entitled to the money than the taxpayers from whom the money will be taken.  If anything, it is the fault of the creditors for making such a deal with the devil.

I understand that there are many pensions and 401k plans invested in government bonds.  It is not just the Chinese and Japanese.  But again, why is that the responsibility of everyone?

One of the other major objections is that a default would wreck the credit rating of the U.S. government.  I see this as a great reason for default.  I want the credit rating to get wrecked so that nobody will lend money to the U.S. government ever again.  Aside from the central banking equation, this would force a balanced budget.

Such a default would obviously wreak havoc on the financial system. It would mean a redistribution of wealth, with those who have a stake in government bonds being the losers.

In the long term, most everyone would win, except the politicians and bureaucrats and those who depend heavily on government corporate welfare.  It would mean immediate relief of at least a couple hundred billion dollars per year in interest payments from the federal budget.  It would also essentially force a reduction in government spending in other areas.

The less that government spends, the more prosperity that we get.  It means fewer resources are being misallocated.

We could lessen the blow to creditors by treating this whole thing as a bankruptcy.  When a company goes bankrupt, its assets are sold off and the money collected is used to pay off creditors.  The shareholders usually end up with nothing.

In the case of the U.S. government, it could sell off millions of acres of land including forests and national parks.  It could also sell many of its government buildings.  Maybe the U.S. Treasury office could downsize significantly.

The sale of the assets could be used to partially pay off bond holders.  We would also get the benefit of privatizing more land and buildings.

I understand this is not going to happen.  I know Trump didn’t make a lot of sense and ended up backtracking or contradicting himself.  But at least he is bringing up issues that otherwise wouldn’t be touched.

Trump said that the debt can always be paid off because we can just print the money.  Hey, at least he is honest.

And that is really the big key here for anyone protesting a default on the debt.  This shouldn’t be breaking news, but the government is defaulting on its long-term debt almost all of the time.  People get paid back with currency that has depreciated.

If you buy a 30-year bond and the price levels double over that time, then you are only getting back half of your money in real terms upon maturity.  So everyone can cry and wail all they want about suggesting a default, but there is going to continue to be a default in some form one way or another.

It is virtually impossible for the U.S. government to fully make good on its promises to pay the debt without resorting to monetary inflation.  And the monetary inflation itself is a form of default.

A president Trump would not likely default on the national debt in nominal terms.  But at least he has brought up the discussion about the debt.

President Obama is now likely to be the number one salesperson for homeschooling.  For the last 8 years, he has already been the number one salesman for guns and ammunition.

Every time Obama talks about guns or gives any hint of an executive order or any kind of legislation regarding guns, the sales go way up.  Sales of guns and ammunition have skyrocketed since before Obama even took office.  He speaks, and sales soar.

You almost have to wonder if Obama owns shares in gun companies. He is unable to actually implement anything significant, yet he keeps driving gun sales.

Now he is trying to do the same thing with homeschooling.  He will accomplish more than what the homeschool advocates have been able to do.

The Obama administration recently issued “guidance” to public schools.  The schools are being told to allow transgender students to use whichever facility matches their self-identified gender.

First, let’s discuss the issue of transgenders and bathrooms.  I believe that many believe oppose this policy not out of opposition to transgenders, but just out of opposition to the whole idea of people being able to self-identify.  Women aren’t worried about Bruce/ Caitlyn Jenner using the ladies’ room, at least in most cases.  They are worried about some pervert who decides he is going to self-identify as a woman that day so that he can access the ladies’ room.

This will be especially problematic with kids.  Imagine when the students get word of this.  It is not hard to imagine some middle school boys daring a friend to self-identify as a girl in order to use the girl facilities.  Are the adults at the school going to stop the boy, or will they be afraid of being accused as anti-transgender, or whatever the latest PC name is?

This whole issue of transgenders and bathrooms is all about political correctness and government control.  It is about setting up more group rights.  The problem is that when we talk about “rights” in this context, we are not talking about the right to life, liberty, and property.  It typically means rights in the sense of depriving others of their liberty.

In the case of the North Carolina law, the state government was not depriving rights.  It was the opposite.  They are saying that private owners may decide for themselves of the policies of their own property.  This is as it should be.  This was overriding certain local jurisdictions, so there is a libertarian argument for decentralization against the North Carolina law.  But other than that, it is completely compatible with liberty.  It is not depriving transgenders of any rights.

I think a majority of people do not agree with the politically correct position of the establishment.  Many will keep their mouths shut because they don’t want to be labeled as anti-transgender.  It may be a silent majority, although there are certainly some who are not silent.

Regardless of what you think of this whole issue, there is little question that Obama and his administration have completely overstepped their boundaries.  The entire Department of Education is unconstitutional in the first place.  Now he is pushing some kind of dictate from the White House, without even going through Congress.

It is still not clear if this “guidance” is enforceable at all.  It is basically a bribe, telling public schools they have to obey or else risk losing federal funding.  But isn’t it supposed to be Congress in charge of funding?

The governor of Texas said they would not submit based on bribes.  But that is what the entire Department of Education is, along with many other federal departments.  The states don’t have to adopt common core.  They really don’t have to follow any of the instructions of the federal government.  But they risk losing federal dollars.

If I were a state legislator, or even a local school board member, I would vote in favor of refusing federal money for education.  That frees up the system from the federal dictates.  It doesn’t take away from the fact that it is a state-run school that is run with taxpayer money, but at least it is an improvement.

What justification is there of taking taxpayer money and then not sending it back to one particular state or area because they refuse to follow the federal government’s instructions?

As a libertarian, I understand that taxing people is theft no matter what the money is spent on.  But I think a lot of non-libertarians will see things clearer if federal education money is not sent back to a particular area, despite those people having to still pay the same amount in taxes.

There is going to be a lot of rebellion over this latest Obama move.  We can only hope that some state will actually reject this and risk losing federal funding.

If Donald Trump were smart, he would come out and say that he is proposing to end the Department of Education and all of the crazy dictates that come with it.  He can propose a small tax reduction somewhere to offset this reduced expenditure.  I know that the budget is far from balanced and would still be far from balanced even with the elimination of this department.  But a commensurate tax reduction would be a great political ploy on his part.

It is ridiculous that these people in Washington DC are making policy for 320 million people.  One of the big focuses right now for libertarians should be on decentralization.  Who can argue with decentralization when it comes to something like this?

Overall, I am happy that Obama did this.  It will just outrage people.  I hope more parents hit their breaking point and pull their kids out of the public school system.  State-run schools deserve to die.  Taxpayers and our kids will be so much better off when the state does not control the thinking of our young minds.

Keep going Obama.  You have another 8 months to go for selling more guns and more homeschooling.

My blog is Libertarian Investments.  I discuss politics, economics, libertarian philosophy, investments, money management, and other related topics.  Sometimes I try to tie some of the different areas together.

I attempt to use my knowledge of libertarianism and Austrian school economics for the slightest advantage in investing, as well as living a more fulfilling life.

If you are sympathetic to socialism, or one of its many variants, I don’t see how you can be rich, unless you are just putting on a show.

As an advocate of the free market, I understand that the way to become wealthy in a free market is by providing value to others.  It is only in a non-free market where people get ahead by cheating and colluding with big government, or just by understanding and playing the rigged game.

If you are not using big government for special favors (or at least not advocating for such favors), and if you are not defrauding or stealing from anyone, then you can only gain wealth by providing for others.  Therefore, the more money you make, the more it is a symbol that you are helping others.  You are making a wealthier society, and your money represents that.  Instead of feeling guilty for the money you have, you should feel proud of it.

Unfortunately, we don’t live in a free market environment.  Still, there is some semblance of a free market, so the above still generally holds true if you are not advocating for government favors.

Since we do have much interference from the government and central bank, I believe it actually provides a slight opportunity for an advantage for those who understand the system.

Don’t get me wrong here.  Almost all of us would be better off if we lived in a free market system with little or no interference from the state.  But since that is not reality, we can still find the advantages that are out there based on our knowledge.

Just understanding the workings of the Federal Reserve can help.  That is why most financial advisors won’t recommend gold, or at least any significant portion of it, for a portfolio.  They just don’t really understand or care to understand the real threat of a depreciating currency over time.  They say that stocks act as an inflation hedge and leave it at that.

I also find that a little knowledge can hurt people more than not having any.  I see many libertarians make mistakes with investing and money management.  They will go to the other extreme and invest everything in gold.  Or worse, they might stock up on bullets and other items in preparation for an apocalypse that may never come.

I have even seen a few libertarians justify going into high debt because they think the debts will just be inflated away.  I hate to break it to them that they are still going to be poor if they are paying debt back to a bank in depreciating currency, unless they used that debt to buy something with a really high return.

I won’t go into all of the ways I use my knowledge of economics to invest and manage my money.  It is not a get-rich-quick scheme.  It is more for wealth preservation if anything.  If you want to get rich quick, find a good business that will get you a high income.  Almost nobody gets rich just from investing itself.

As a student of Austrian school economics, I understand that human action is unpredictable in many ways.  We cannot predict the future with any certainty.  We may be able to guess at how humans will react to certain policies.  Taking these guesses and making good interpretations can give us an advantage at times.

Still, I would like to make the point that this is just part of my strategy.  Some other libertarians try to use their knowledge for an advantage too.  There are many non-libertarians who try to beat the market.

If I am wrong about my guesses, or if other libertarians are wrong about their predictions in the financial markets, don’t blame Austrian economics or free market ideas.

Some Austrian school economists may predict high gold prices.  Some may predict high interest rates in the near future.  Some already have and have been wrong so far.  But this isn’t an indictment of Austrian school economics.  It just means that some people got their guesses wrong.

Austrian school economics and other free market theories aren’t there to tell you how to invest.  It is the choice of some of us to attempt to use it that way at times.  Instead, it is there to tell us to have a free and voluntary market if we wish to have higher living standards.

If someone makes a prediction that is wrong, it doesn’t mean Austrian school economics is wrong unless we see a scenario where government gets dramatically smaller and our living standards decline over a significant period of time with it.  If we don’t see high price inflation or gold doesn’t go to $5,000 per ounce, it says nothing about Austrian school economics.  At most, it may tell us that someone is not using it correctly or is misinterpreting some data.

I will keep using my knowledge of free markets for any advantage I can get in terms of making money.  But this is a separate issue from advocating free markets for a more moral and prosperous society.

Maybe this question should be turned around.  Donald Trump is a big threat to Hillary Clinton’s character.  Clinton may be a threat to Trump’s life.

While there are a lot of political positions Trump has taken that I vehemently disagree with, he has also said some great things.

He has been inconsistent on foreign policy, but I have already pointed out that inconsistency in this area is better than the consistent war making of the others.  The most important thing Trump has said is that Bush lied us into war.  It made it that much better that he said it right before the South Carolina primary.

His bashing of Bush on the Iraq War and his less belligerent foreign policy have not hurt him.  Maybe Ron Paul, who does not like Trump, helped pave the way.  Maybe there has just been a sea change in public opinion.  Maybe Trump supporters don’t really care what he says, as long as he remains honest.

A year ago, this presidential race was shaping up to be Bush vs. Clinton.  Where have we seen that before?  It would have been almost too obvious that we live in an oligopoly.  But the Republican voters put an end, at least for now, to the Bush family.

While some Democrats did turn out for Bernie Sanders, they are still going to end up nominating Hillary Clinton, who is perhaps the most power-hungry person in the human race.  She has been planning her way to the presidency since the last time she occupied the White House.  Obama put a bump in the road in 2008.  Now we’ll see if Trump is a bump in the road.

I was pleasantly surprised that Trump brought up the allegations that Ted Cruz’s father may have been working with Lee Harvey Oswald not long before the Kennedy assassination.  Is there Cruz ties to the CIA?

Maybe it is just coincidence that Cruz dropped out of the race shortly after this.  He did get crushed in Indiana.  Still, for Trump to say something like this makes him unique amongst presidential candidates.  Even Ron Paul wasn’t talking conspiratorial type stuff in his campaigns.

This is why Trump vs. Clinton could be such entertainment.  Will Trump bring up the Clintons’ past?  I am not just talking about infidelities.

John Kennedy Jr. was killed in a plane crash in 1999.  It was reported that he was getting set to announce his run for the Senate in New York.  But that seat was for Hillary Clinton.  It was her stepping stone to the presidency.  This was part of her plan.  JFK Jr. was probably the one person who could beat Hillary Clinton for that seat.  Did the Clinton’s play a role in the Kennedy plane crash?

It is amazing how many Clinton associates died from “accidents” or “suicides”.  It is almost statistically impossible.  Sure, they do know a lot of people, but some of these people were rather close associates. The most famous one is Vince Foster.

The big question is, will Donald Trump bring this up at any time during his campaign against Clinton, assuming that Trump is the nominee?  If he brings up these suspicious deaths, this could open up new investigations.

I absolutely despise the Clintons.  I despise the Bush family too, but that is in more recent history (the last 13 years).  I despised the Clintons back in the early 1990s when I was still a teenager.  I always knew there was something phony about Bill Clinton.  He seemed like a shyster to me then.  I couldn’t understand why people couldn’t see through him.

To be fair, I didn’t see through the Bush family.  It wasn’t until after George W. Bush became president and started the Iraq War that I came to despise him and his family.  That was the time I became more anti-war and a hardcore libertarian.  I fell for the lies of George H. W. Bush, and even the second Bush presidency a little bit at the beginning.

As far as Hillary Clinton, I really don’t think there is anyone worse.  The only good thing about her is that we may have some opposition to her in Congress if she is president.  At least there may be some gridlock, or about as much as we could expect.

Hillary Clinton is bad on virtually every single issue.  She is bad on war, on civil liberties, and economics.  She is a complete statist.  And then she is a liar and a criminal on top of all of this.

She is also very intelligent.  I don’t underestimate her.  At that same time, she doesn’t have the ability to charm people to the same degree as her husband once did.  So luckily she is not really charismatic.  That would be an even worse combination.

It is my hope that Donald Trump takes down Hillary Clinton.  I want her behind bars, but not just because of the email scandal.  I want her reputation ruined.  I hope much of her agenda gets ruined with it.

I can at least hope.  Meanwhile, if I were Donald Trump, I would be very careful.  He has already gone after the Bush family and now he is taking on the Clinton family.  These are two of the most dangerous families in existence.

Tom Woods – on his wonderful podcast – recently had Joe Salerno and Jonathan Newman on to discuss the Austrian Business Cycle Theory (ABCT).

Specifically, the three of them were responding to an article by Steve Horwitz that they saw as a criticism against the Austrian Business Cycle Theory.  I am not certain if the article was supposed to be an outright criticism of the ABCT, or if it was just to show its limitations.  There were parts of Horwitz’s article I agreed with, and parts I didn’t agree with.

A little before the halfway mark of the podcast, they discussed one particular claim from the article.  In discussing the Great Depression, Horwitz writes, “The theory’s adherents have argued that the recession that began in 1929 was the result of an unsustainable boom initiated by an excess supply of money at some point in the 1920s.”

On the podcast, Salerno was quick to disagree with this point.  He said that the excess supply of money doesn’t cause the business cycle.  He said that it is how the increase in the money supply is injected through the financial system, and thus lowering interest rates, that causes the business cycle.

Specifically, Salerno stated that an increase in the money supply that was used directly for war spending would not cause a business cycle.  He said, “That only causes a simple inflation.  It causes prices to rise.  It does not cause a business cycle.”

I believe Salerno gets this wrong.  An increase in the money supply to finance war spending (or anything else) is not just a simple rise in prices.  It is a misallocation of capital.  It is also a redistribution of wealth.

A correction – which is the bust phase – occurs when those misallocated resources get realigned.  So if you create new money to finance the military industrial complex and then that flow of new money comes to an end, there is going to be something of a bust with the war industry.  The makers of weapons will see higher unemployment.  Stock prices will probably fall.

The biggest bust of the recession in 2008 was housing.  And yes, this was largely due to the artificially low interest rates, also coupled with easy money.  But we can’t completely discount the government’s incentives of encouraging banks to lend and supporting the mortgage market through its government enterprises (Fannie Mae and Freddie Mac).

You could have an increase in the money supply that goes directly to the government, which then uses the money to help people make down payments on houses.  This would likely result in more demand for purchases of houses and a bidding up of prices.  It would likely cause a bubble in housing.  You don’t have to have an artificially low interest rate for the government to cause a bubble.  It certainly helps, and it certainly can exaggerate the situation, but it isn’t an absolute necessity.

Maybe Salerno would argue that an increase in the money supply would just cause misallocations in certain industries, limited to those areas where the government spends its money.  In his eyes, maybe this doesn’t constitute the business cycle because it is not widespread.

But in any bust phase, there are always certain industries that get hit harder than others.  Some industries are virtually untouched.  The housing bust was devastating because it is such a major asset and also because it impacted the banking system from all of the bad loans.

I know many Austrian school economists will disagree with me on this point, but I believe that an increase in the money supply can cause artificial booms and busts.

Usually the easy money and low interest rates go hand in hand.  So in today’s system, this internal debate may be somewhat moot.  But I hope that Salerno at least recognizes the fact that an increasing money supply misallocates resources.  And unless those resources continue to be misallocated forever, there is going to be some kind of bust.

That is one of the most devastating effects of an increasing money supply.  It distorts savings and investment and it misallocates resources.  This misallocation makes everyone poorer, except for the few beneficiaries who see the money first.

Donald Trump recently gave a speech on foreign policy.  It has received a little bit of praise and a lot of criticism.  But the criticism has been coming from both ends.

The entire establishment – which is made up entirely of war hawks – has been extremely critical of Trump.  They absolutely hate him.  It is for many reasons.  He can’t be bought, and he doesn’t go along with the rigged game.  But most of all, he has dared to question the U.S. empire overseas.

Knowing that the establishment hates him this much, it should tell us that he can’t be all that bad.  At worst, he would be as bad as the establishment.

There is much debate within the libertarian community on Trump.  I have already written that I am rooting Trump on, but not endorsing him.  If he does become president, I will probably oppose most of what he does, yet remain hopeful that some sanity returns in the realm of foreign policy.

Justin Raimondo wrote about Trump’s foreign policy speech.  While there were certainly parts he didn’t care for, he was optimistic overall.

Scott Horton, whom I also respect, was interviewed by Tom Woods on Woods’ podcast.  Scott Horton absolutely blasted Trump.

Also on the anti-Trump side is Ron Paul.  You can just tell that he can’t stand Trump.  I haven’t disagreed with Ron Paul much in terms of his criticisms of Trump.  It is just that he hasn’t pointed out the positive things that Trump has said, especially when it comes to getting along with Russia and criticizing the wars.

Ron Paul may just dislike Trump because Trump squashed his son, Rand Paul, like a little bug.  Rand Paul was supposed to be the anti-establishment candidate, but he blew it.  Trump criticized the Iraq War while Rand was too busy trying to appease both sides of the fence.

Even if Rand Paul weren’t a factor, I can still see where Ron Paul would dislike Trump.  Trump has an alpha male personality.  He talks tough and he isn’t afraid to get down in the mud and throw punches.  Ron Paul is far more conservative (personality wise).  He probably doesn’t care too much for Trump’s brashness.

I don’t think we have to take a hard stand one way or the other in terms of Trump’s views on foreign policy.  He gets some things right.  He gets some things wrong.  He is unclear on some things.  He is inconsistent on many things.

The thing is, I will take Trump’s inconsistency on foreign policy.  It is better than the consistency of Ted Cruz and Hillary Clinton, who both have a proven track record of supporting war and intervention. It is their default position.  They are absolutely horrible people.  At least with Trump, there is some hope for sanity.

Trump may be exactly what this country needs to get back to a sane and non-interventionist foreign policy.  Ron Paul was consistent and principled, but he was criticized for coming across too weak.  Trump talks a tough game, while still presenting a less interventionist policy.

This is in no way a criticism of Ron Paul.  It is a criticism of the American people for not following his lead.  They couldn’t just accept a new policy that is more rational.  They need things wrapped up with a bow on them.  Trump maintains that we are tough and strong, but at the same time manages to criticize the war making.

On the other hand, I wouldn’t be completely surprised if Trump won the presidency and then ended up just as bad as the most recent presidents.  It will depend a lot on his pick for running mate and who he surrounds himself with.

Most politicians running for office end up being worse than how they campaigned.  Bush ran on bringing a more humble foreign policy in 2000.  Obama ran as the peace candidate in 2008.  Once in office, the worst usually comes out in people.

This was part of Scott Horton’s point.  He thinks Trump will not do all of the good things he says, but he will follow through on all of the bad things he says.

When Rand Paul was running for Senate 6 years ago, I was told by some libertarians that he just had to say certain things to get elected.  But once he was elected, he would be a libertarian.

I then heard the same thing in 2015 when he was running for president.  He just had to say certain things to be electable.  Of course, that didn’t work out too well.  But even if Rand Paul had been elected president, his foreign policy would have been terrible.  Almost nobody is more liberty-oriented once they get into office.

So we really don’t know what a President Trump would bring.  He could be terrible.  But it is almost guaranteed that he would be no more terrible than Clinton or Cruz.  At least with Trump, there is some hope for peace.

There is this widespread myth that deflation – particularly price deflation – is bad for the economy.  It is a result of bad economics and a misunderstanding of history.

In the 19th century, there was price deflation in the United States.  Generally speaking, there was a gradual decline in prices.  There were periods where this didn’t hold true, such as the Civil War.  But this exception just helps make the case, because war is marked by inflation and a reduction in living standards, especially when the war is on your own soil.

Throughout most of the 1800s, it was generally a time of peace.  There was something of a gold and silver standard, although admittedly not pure.  It was not a purely free market in terms of money, but it was a lot closer than what we have now.

As technology improved and capital investment and savings built up, production of goods and services increased at a substantial pace.  It was really probably the greatest increase in growth in recorded history.  Since the money supply was generally stable, at least compared to now, people’s purchasing power increased.  When you have the same amount of money chasing an increasing supply of goods and services, then the prices of those goods and services fall.

The one event that causes a lot of confusion is the Great Depression.  It was the worst economy in the history of the country.  This is in relative terms.  I’m sure someone living in 1833 would have gladly traded places with someone living 1933.

That is similar to today’s story.  Our economy is bad in relative terms as compared to the 1950s, but I don’t think a lot of people would trade in their smartphones, microwave ovens, and high-speed computers for an era of the 1950s.

The Great Depression is linked with deflation.  While the central bank was not deflating the money supply, there was a widespread failure of banks.  This reversed the fractional reserve lending process.  This is the equivalent of deflating the money supply available in the economy.

Of course, it was the monetary inflation of the 1920s that was partially responsible for setting up this problem in the first place.  And again, the banking system was far from being a free system, even back then.

The problem with linking depression and deflation is that it is confusing cause and effect.  When it rains, you get wet sidewalks.  But you don’t make it stop raining by drying the sidewalks.

You don’t stop a depression by ending the deflation.

A price deflationary scenario is a necessary correction process of the previously misallocated resources.  In today’s world of the FDIC, this is especially true.  We know we are not experiencing price deflation or a lack of price inflation because of bank failures.  Most depositors are made whole, and the biggest of the banks are not allowed to fail.

A lack of price inflation today can be the result of a lack of bank lending, and to some extent this is the case.  Since 2008, much of the increase in the money supply went into excess reserves with the banks.  This new money has not multiplied through the system.  But given some semblance of a free market, there is generally a reason why banks are not lending.  It is because it is too risky or because people don’t want to borrow.

Price deflation, or a lack of price inflation, can also be the result of an increased demand for money.  I believe this is the case now in the U.S., as well as places such as Japan and Western Europe.

When there is fear in the economy, people want to save some money for a rainy day.  If they fear a job loss, or even a reduction in income, it makes sense to take on less debt and put away some money for savings.  This has a deflationary effect.  It is a reduction of velocity.  Money is changing hands less frequently, which means prices are not bid up.

But this increase in money demand is necessary.  It is an attempt to correct for past errors.  It is an attempt by market forces to reallocate resources in accordance with consumer demand.  It is generally the prior monetary inflation that caused these misallocations in the first place.

There is not general price deflation in the U.S. right now.  Anyone who pays for health insurance and shops for groceries probably knows this.  There may be some mild price deflation in some sectors, such as the computer industry.  The price deflation would likely be greater if not for the Fed’s massive monetary inflation from 2008 to 2014.

The Fed says it wants 2% price inflation, but there is nothing magical about this number.  It just means a decrease in purchasing power.  Wages will eventually adjust, but they tend to lag behind.  You will already be paying higher prices at the store before you see a wage increase, at least in most cases.  This may not be true if you are one of the lucky few who is one of the first receivers of the new money.

The U.S. economy – while seemingly better than Japan and Western Europe – needs a major correction.  This means a widespread adjustment in prices.  If the Fed were to allow it to happen, which it should, it would likely mean lower prices for most things.

While a major correction would be painful for the American people, it will be even more painful in the future if the misallocations are allowed to continue.  While a major correction would be painful in terms of short-term unemployment, it would also provide a huge relief in lowering prices, especially for those things that are considered basic needs.

If the Fed and the government did not significantly interfere, then the pain should be short term.  Once everything adjusted, it would lay the foundation for an actual recovery based on savings and investment, and not some artificial recovery based on government spending and monetary inflation.

This is what our economy needs.  Price deflation may be associated with a bad economy, but the deflation is actually part of the medicine.  This is what we need to get back on a path of sustainable growth.  The central bank and the government need to allow it to happen without trying to produce positive price inflation.

If deflation is bad, it is only because of the prior inflation from the central bank.  But the price deflation is only trying to correct the previous errors.  Don’t blame the wet sidewalk for the rain pouring down.

For gold (and silver) investors, it has been a tough few years.  The metals have been in a bear market since around 2011.  This was after a historic run up.

We have to remember that silver topped out close to $50 per ounce and gold near $1,900 per ounce.  But around the turn of the century, gold was around $300, and silver was around $5.

Silver briefly went parabolic in 2011, so a pullback was inevitable at the time.  We just didn’t know how long it would last.

I don’t know what makes a bear market.  Maybe the last 5 years have been a small bear market within a larger bull market.  Still, 5 years is a lot of time, and investors have gotten hammered, especially if they bought anywhere near the top.

Overall, gold has still fared reasonably well.  That is why it is my top choice for holding a precious metal.  It is more stable than silver.  Silver is far more volatile.  It makes owning silver fun in a bull market, but quite devastating in a bear market.

Nothing has compared to owning mining stocks though.  They have been beat down so hard over the last several years, one could easily be down 80% or more.

They say that when there is blood in the streets, that is the time to buy.  Well, mining stocks have been a disaster over the last several years, so perhaps it was time to buy.

With gold and silver prices inching up in 2016, mining stocks have done well.  If the rising metal prices continue, we should expect continuing price increases in the mining sector.

Just as silver is more volatile than gold, mining stocks are more volatile than gold as well.  Mining stocks are usually more volatile than silver.

I recommend a permanent portfolio that includes gold holdings.  This does not include gold stocks.  Gold and other mining stocks should be left for your speculative portfolio.

I don’t know if there will be another major pullback in mining stocks. If we hit a recession, it could happen.  Ultimately, I am bullish on mining stocks because even if we hit a recession, the Fed won’t be far behind with another round of quantitative easing.

My strategy right now is to own a small percentage in mining stocks. If the Fed hints at more monetary inflation, maybe I will go higher.  Although I say I favor a “small percentage”, it should still be significant enough that it is worth it to you.

Just for example, if your financial net worth is $100,000, I don’t see much point in putting just $1,000 in mining stocks.  First, you will probably need a few percentage points in gains just to offset your trading fees.  And even if your stock or fund triples in price – which is an incredible success as an investor – it is hard to get excited about a $2,000 gain.

So for speculation, I am comfortable recommending 5% towards this speculation, as long as you are comfortable risking this amount.

You don’t have to buy individual stocks.  There are mutual funds and ETFs available.  I don’t see a problem with GDX, GDXJ, or TGLDX.

GDXJ is made up of junior miners, so they are even riskier, but they also offer a bigger potential reward if just a few of the stocks in the fund were to break out.

Again, don’t be surprised if a recession puts a damper on the mining stocks.  But even here, I am encouraged that gold prices have held up, or even gone up, in the face of a falling stock market.  We saw this take place in January.

If you want some risk, dip your toe in the mining sector.  I will buy more when I think the time is right.

As I write this, it looks as though Donald Trump and Hillary Clinton will sweep a bunch of states.  This essentially locks up the nomination for Clinton, barring an FBI indictment.  Even then, it may not stop her.

On the other hand, Trump has earned the venom of the establishment, so his fate is yet to be determined.  If he ends up with a majority of delegates heading into the convention, it is going to be tough for the Republican establishment to stop him.  If they do try to deny him the nomination, we will get to see the reactions of tens of millions of angry people.  Even some people who don’t fully support him will be mad.

If Trump does have a majority heading into the convention, then I think the Republican establishment will give up, at least on denying him the nomination.  They will put all of their hope behind Hillary.  Some will outright endorse her, and others will work behind the scenes in continuing to try to sabotage the Trump campaign.

The big question is what will happen if Trump falls just short of a majority of delegates.  I think the establishment will definitely try to deny him the nomination.  I don’t know if it will be Cruz and Kasich teaming up, or if some other outside person will come into play.

For libertarians, they are obviously all bad, but some are perhaps worse than others.  Trump is the only one who holds out any hope for some real change.  Of course, change can be bad too.

The best a libertarian can hope for is that Trump is elected and he actually starts withdrawing troops from around the world.  It would be the best deficit reduction plan there is.  It would obviously be a big step towards more peace in the world as well.

I recently listened to an interview of Lew Rockwell by Alex Jones.  They were talking about Trump, and Alex Jones said that Trump has become familiar with the issues over the years and that he is essentially a libertarian.  This I don’t believe.

Maybe Trump is just saying some things in order to be popular and to get votes.  But it would be very difficult for any libertarian, or even a libertarian-leaning person, to look at a crowd or into a camera and talk about tariffs on China and raising taxes on the rich.

I think Trump is a lot like Pat Buchanan in his philosophy.  He is level-headed, but not all that good on free trade and some other economic issues.  Still, I will take Trump’s honesty over the sneakiness of Ted Cruz and the corruption of Hillary Clinton.

I wonder though, would a contested GOP convention be good for the cause of liberty?

There are arguments to be made either way.  I just laid out some good possibilities of a Trump presidency, but of course there are no guarantees.

Maybe it would be a benefit to see the nomination stolen away from Trump.  It would probably hand the election over to Hillary, but at least there would remain a Republican-controlled Congress in all likelihood.

If Trump has the nomination snatched away, I think a lot more people are going to realize just how rigged the system is.  That is why so many people are supporting Trump to begin with.  I don’t think they love Trump.  Their support for Trump is a middle finger to the establishment and the whole rigged system.

If Trump loses the nomination at the hands of the Republican establishment, it will be a good opportunity for libertarians to attract some of the more level-headed Trump supporters.  Libertarians can point to the fact that we have been calling it a rigged game for a long time now.

There is hope.  It seems that more and more people are waking up to the fact that something is very wrong.  That is the first step for many towards becoming a libertarian.

I recently wrote an article for Wealth Daily on the threat of the Saudi government to dump U.S. assets if legislation is passed that would enable Saudi officials to be held liable for the 9/11 attacks.

This article focused on the fact that the House of Saud has far more to lose than does the U.S.  While I think the U.S. dollar will slowly lose its status as the world’s reserve currency, it isn’t the Saudis who will do it.

If any foreign governments can take down the dollar, it is the Chinese and Japanese, but it isn’t really in their perceived best interest to do so right now.  If anything, it will be the market participants in global trade slowly realizing that they don’t need to use the U.S. dollar as a middleman.

Now I want to get a little deeper into the political ramifications of possible Saudi funding of the 9/11 attackers.  This is already an interesting story in which the Saudis are being implicated.  It is an interesting story just because it is a story.

This has actually received coverage on 60 Minutes, as well as some cable news.  Of all people, Rudy Giuliani has been discussing it, and he isn’t dismissing it as a crazy conspiracy.

But if the Saudi government (or any other Saudis) really were involved in the 9/11 attacks, it all of a sudden calls Bush and Obama and others at high levels in the U.S. government into question.

The 28 pages from the 9/11 Commission Report have been hidden this whole time.  Obviously Bush (and subsequently Obama) knew what was in there.  If the 28 pages directly implicate the Saudi government in helping to fund or plan the 9/11 attacks, then why didn’t they allow this information to be released?  And even better, why have they continued to fund and support the Saudis?

The absolute best-case scenario is that they didn’t want to damage relations with the Saudis in order to maintain their support for the U.S. government’s ongoing interactions in the Middle East.  And that best-case scenario is pretty bad.

The main justification for starting wars and occupations in the Middle East is terrorism, and the 9/11 attacks in particular.  So why is the government going after Afghanistan and Iraq (and others) when the Saudis actually did help commit the atrocities of 9/11?

It would be bad enough that the families of the 9/11 victims don’t get justice by having the perpetrators who are still alive be held responsible.  It becomes even worse knowing that the White House knew the Saudis were partially responsible and then used this to start wars in other countries.

All of a sudden, the 9/11 conspiracy theorists aren’t looking so crazy after all.  If the White House knew that the Saudis helped fund (and possibly plan) 9/11, and then actually helped them evade being held liable, then it isn’t much of a step further to think that elements within the U.S. government knew the attacks were going to happen.  Then it isn’t much of a step further to think that elements within the U.S. government helped with the attacks.

We can’t conclude anything with certainty at this time, but you can see where this is going.  If those 28 missing pages from the report implicate the Saudi government (or others) in helping with the 9/11 attacks, it leads to a lot of other obvious questions.  I don’t know if these questions will eventually be asked outside of websites and social media.

If the U.S. government is ever implicated in the 9/11 attacks and it is widely believed by the American people, this should really change public opinion.  There will still be militarists who believe that we need to run the world, but a lot of people who are more ambiguous will turn against the government, at least on foreign policy.

Americans will still trust the government for their Medicare and their Social Security checks, but overseas wars and occupations will lose legitimacy quickly.

This gives us several reasons to hope that the full truth comes out in this matter.