Saturday, June 30, 2012

Technology and Medicine

I have already discussed the big picture themes of the Supreme Court's ruling on Obamacare.  At the end of my last piece I said, "I think a combination of a new spirit of liberty in the American people and also advancing technology, can help to overcome this mess."

For this piece, I am going to discuss technology as it relates to healthcare and medicine.

First, the U.S. health system is already a complete disaster.  It is entrenched with bureaucracy and government at all levels.  Just as there is a military-industrial complex, there is also a healthcare-industrial complex where big insurance companies, doctors, hospitals, and pharmaceutical companies send lobbyists to Washington DC (as well as state capitals) to get legislation for protection from competition and for profit.

There are a lot of reasons that prices are so high for medicine.  It goes back at least a hundred years.  Reasons include licensure laws, requiring prescriptions for certain medications, Medicare, Medicaid, HMO Act, state laws requiring insurance companies to include certain coverage, state laws prohibiting the sale of health insurance across state lines, and the tax code that permits employers to deduct premium expenses but does not allow it for individuals.  These are just a few of the major things.

Believe it or not, there are actually some countries with more socialized healthcare than the U.S. which actually have a longer life expectancy.  This may seem like an argument for socialized healthcare, but the problem is that there is no major country with a capitalist healthcare system to compare it to.

While the U.S. life expectancy is quite high and continuing to rise, there are some factors to explain why countries with socialized healthcare might have an even higher life expectancy.  Most importantly, there are other factors that include crime rates and diet that can't be fully blamed on the healthcare system.

One other interesting factor to consider is that socialized healthcare may actually be a benefit at times because it keeps you away from the doctor.  If someone is not sure whether they should see a doctor, a person living in Canada is probably less likely to go.  Even though it is "free", it can take a long time in some places to get in, particularly for specialists.  In the U.S., people are more likely to see a doctor, particularly if they have a small out-of-pocket expense and they can get in quickly.  This is when the typical American doctor starts prescribing medications for every little problem, including things that the patient may not have even gone to the doctor for.  In many cases, it would have been more beneficial for the patient to have never seen a doctor (just my opinion).

In defense of the U.S. system (at least as compared to others), if you are a trauma patient or suffering a massive hearth attack, there is probably no place you would rather be than in a hospital in a major city inside the United States.

So what will happen to medicine now with Obamacare?  My hope is that technology makes it irrelevant over time.  Just as technology has started to make the Post Office less and less relevant with each passing day, we can hope for the same in medicine.

The internet has opened up a new world to people.  There are probably more people taking vitamins and supplements now than ever.  I attribute a large portion of this to the internet.  More people have started to take their health into their own hands.  They research diets that work, vitamins that work, and learn of alternative medicines that are not frequently mentioned by doctors.

I also see other possibilities.  I have heard of the possibility of having cruise ship doctors where there is a cruise ship clinic off the coast in international waters.  This would free the doctors and patients from the massive bureaucracy and legislation in the U.S.  If you need to see a doctor, just hop on a boat.  I suppose this could be a problem for someone living in Kansas.

If the medical industry ever becomes one-tenth of the electronic industry in terms of advancing technology, then the sky is the limit.  Maybe there will be special pills or machines that can cure people of their ailments.  Maybe these things can start making doctors less and less relevant.  I know many people think that the FDA would block this, but the FDA could not stop such technology if a person or company were determined enough.  With today's world, someone could take their machine off-shore.  They could find a country friendly to their invention.  They could market it to Americans via the internet.

I also see more possibility of having Walmart-type clinics where a patient with a sore throat can go get a quick appointment with little expense.  Again, there are a lot of different possibilities here too.

In conclusion, Obamacare is a disaster and the whole healthcare system in the U.S. is mostly a disaster. But with the internet and advancing technology, we can set ourselves free.  We can make the bureaucrats in DC less and less relevant with all of their schemes to control us.

Thursday, June 28, 2012

The Big Picture on the Supreme Court Ruling

The Supreme Court has mostly upheld the healthcare law, also known as Obamacare.  The major portion that everyone was paying attention to was the individual mandate that would force individuals to buy health insurance or else pay a penalty (a tax).

The most surprising thing is that the chief justice, John Roberts, actually sided with the "left judges" in upholding most of the law.  This is just another stain against the Bush presidency.  There are two things that conservatives think they can brag about when it comes to Bush.  They brag about the so-called Bush tax cuts, which are set to expire again.  And they brag about getting conservatives on the bench.  Well, so much for that one now.

I actually don't think this is necessarily the worst outcome.  As I have written before, if the court had struck down the individual mandate and upheld everything else, it may have actually led us down an even quicker path to fully socialized healthcare.

Roberts justified his decision by saying that the individual mandate is a tax (which Obama claimed wasn't a tax when he was promoting it).  Roberts basically said that since the Congress has the power to tax, then the individual mandate is constitutional since it can be considered a tax.

In other words, the federal government can do whatever it wants now.  I guess if Obama wants to make sure that the NDAA is upheld, he should just add a small tax to it.  That way Americans can directly pay for their own kidnapping and it will be constitutional.  If the government wants to force you to exercise, or eat vegetables, or have kids, then it can just tax you for it and then it will be all legal in the eyes of Roberts and the Supreme Court.

The 10th Amendment has been close to dead for many decades.  I think it is officially dead now.

There is one major big picture thing here that I have not heard mentioned by the so-called mainstream media.  How is it that the fate of over 300 million people lies in the hands of just 9 people?  Actually, this whole decision really came down to just one person.  So because Roberts thought a certain way, or maybe was convinced by a relative, or maybe was drinking a few shots of tequila when he was writing his opinion, there are now over 300 million people subject to this ruling.

That just shows that the whole system is a complete mess.  The federal government (or maybe national government would be a more appropriate term) has virtually no limits except as to not completely set off irate Americans.  The government can do virtually anything now, unless the American people decide to not take it anymore.

Americans must start paying attention and stop relying on government.  In fact, they must realize that their lives would be much better off with a drastically smaller government.  It isn't good enough just to complain about the way things are run.  They must withdraw their consent.  They must realize that government should not be involved in healthcare or education or agriculture or housing or any of the other thousands of things it messes up.

There will probably be some new enthusiasm for state nullification, now realizing that it is foolish to rely on the Supreme Court, a branch of the federal government, to reduce the power of the federal government.

Of course, Romney, practically the founder of Obamacare in Massachusetts, is not going to save us.  The Republican politicians in DC will not save us either.  Even if they could repeal Obamacare, they would come up with something just as bad, just as Bush passed his Medicare prescription drug program.

This whole thing is far from over.  I think a combination of a new spirit of liberty in the American people and also advancing technology, can help to overcome this mess.  As long as there are free minds speaking in favor of the libertarian position, then there is hope.

Wednesday, June 27, 2012

An Austrian Feud

There is a bit of a feud going on in the Austrian economics family.  It started with a really long article by Jesus Huerta de Soto entitled "An Austrian Defense of the Euro".  It was published on the Mises Institute's website.  Yes, you did read that correctly.  He actually somewhat defends the euro from an Austrian perspective.

Gary North published a long article (not quite as long though) as a rebuttal.  North blasts de Soto in so many areas, I wouldn't even know where to start.  Gary North does have an excellent understanding of economics and morality and he makes a lot of relevant points to refute de Soto.

One of the things North discusses in his piece is 100% reserve banking.  He said that he has never seen the point made that Rothbard was an anarchist and yet he advocated for a law against fractional reserve banking.  He sees this as a contradiction.  I have commented on fractional reserve banking before.

If that wasn't enough, Walter Block chimed in at Lew Rockwell's blog.  North and Block have been at each other's throats ever since their live debate on the subject of getting a PhD in economics.

Block makes the point that even though someone is an anarchist, it doesn't mean he doesn't believe in laws.  He just doesn't believe in government laws.  They would be implemented by the market and private defense agencies.  Block is correct to point out that anarchists favor laws against murder, rape, etc.  It is just that they don't believe in having a government to enforce them.

Block goes on to say, "Murray opposed (again, as a libertarian, not Austrian) the free banking (of Selgin and White)."  This doesn't really make any sense.  If anything, you would be opposed to free banking as an Austrian, but not as a libertarian.  Austrian economics would study the pragmatism of a certain policy.  Libertarianism would study the morality of a certain policy.

There is another thing wrong with just that sentence.  Why does Block invoke the names of Selgin and White?  Why can't he just deal with free banking in general instead of just the arguments of two individuals?  Gary North mentioned nothing about Selgin and White in his piece.  Ok, so Rothbard opposed the free banking advocated by Selgin and White.  What about the free banking not advocated by Selgin and White?  Is Block just trying to confuse the issue here?

Block says that fractional reserve banking is fraud.  Does that mean he also wants to outlaw insurance agencies?  If everyone got into a car accident tomorrow, there is no way that the insurance companies could pay everyone the contracted amount.  Yet, even without government mandates, most individuals would continue to buy car insurance voluntarily.  If he were consistent here, then he should favor laws banning insurance.

And finally, and most important, Block says that anarchists are still in favor of laws.  They just shouldn't be government laws.  That is fine as far as I'm concerned.  But even if laws are enforced by private defense agencies, there are still guns involved.  I can understand an agency, or even an individual, using force on a murderer or rapist.  But Block wants to invoke violence regarding fractional reserve banking.  You can have consenting adults who agree to certain terms of a contract.  The bank customer can even be completely aware that the bank is not holding all deposits in reserve.  Yet Walter Block would use a gun or hire someone with a gun to break up the contract.

My question for Block is, who would you point the gun at?  Would you point the gun at the bank customers, the banker, or both?  If they did not cease and desist, would you kill them?  If you kill someone over lending, based on an agreed contract, how libertarian is that?

Tuesday, June 26, 2012

Performance Review of PRPFX

I am a big proponent of the permanent portfolio, as described in Harry Browne's book Fail-Safe Investing.  I believe it, or something similar to it, should be the rock of everyone's portfolio.  It should be your safety, even though nothing is entirely safe in this world.  It should be your home base.

The permanent portfolio is simple.  It is made up of gold, stocks, long-term government bonds, and cash (or something similar to cash, like a money market fund).  These should be weighted approximately equal at 25% each.  If one asset class strays too far outside of a range, then the portfolio should be rebalanced to get you back to an approximate 25% each.

An alternative to the permanent portfolio itself is a mutual fund.  The trading symbol is PRPFX.  It is designed similar to the permanent portfolio.  In fact, it is called the permanent portfolio fund.

I like PRPFX because it is simple and also because it keeps you disciplined.  It doesn't tempt you to speculate and favor one asset class over another.  That can be very tempting to do in today's environment.  My suggestion is that if you think we will see big inflation in the near future and you think gold and silver will do really well, then speculate in gold and silver investments outside of your permanent portfolio portion.

I also see a downside to PRPFX.  I have discussed this before.  I don't like that it strays from the originally suggested permanent portfolio, particularly with its investments in Swiss francs.  PRPFX has the following target percentages:

20% in gold
5% in silver
10% in Swiss franc assets
15% in stocks of U.S. and foreign real estate and natural resource companies
15% in aggressive growth stocks
35% in dollar assets

I have never really liked the portion in Swiss franc assets because the gold portion is already there to protect you from a depreciating U.S. dollar (assuming you are an American and investing dollars).  While the Swiss franc has historically been a strong currency, it is still a fiat currency.  This was shown last year when the Swiss central bank announced that it would peg the franc to the euro.  This has been part of the reason that PRPFX has struggled recently.

In 2011, PRPFX went up just 2.13%.  This was during a time of relatively low price inflation, but it is still a poor performance considering that the U.S. economy was not officially in a recession during that time.  PRPFX went down 8.36% in 2008.  It was the only down year in the last 10 years.  In some ways, this was its strongest year, at least relative to everything else.  Stocks and gold took a big fall in late 2008, although bonds did fairly well.  PRPFX did its job in 2008 in the face of a recession.  It followed with really strong years in 2009 and 2010, both up about 19%.

As of this writing, the year-to-date performance for PRPFX is flat.  This means you have actually lost a little bit of money to price inflation.  The 5-year average return is still almost 8%, which is considerably good in this economic environment.

In conclusion, I don't like the Swiss francs in PRPFX, and the mutual fund has not performed all that well in the last year.  However, unless you go through the trouble of setting up your own permanent portfolio (which I think you should), then PRPFX is still probably the next best alternative.  There is a lot of uncertainty in the economy right now and it is hard to say if we will go into a recession, depression, or inflation, or maybe all of the above.  Keep your money as safe and sound as you can.

Monday, June 25, 2012

Rand Paul's Political Career is Done

This whole situation is ironic.  In trying to advance his political career, Rand Paul has virtually ended his political career.  Rand Paul could have taken the torch from Ron Paul.  He seemed like the perfect candidate to many.  He has the same last name.  He is his son.  His first name is the last name of Ayn Rand.  He is a senator.  He could've been a contender.

If there is one thing that Rand Paul has made clear, it is that no two people are alike, even if you are related by blood.  Look at Warren Buffett.  He is a pure statist, yet he is the son of Howard Buffett who was a great libertarian congressman.

Rand Paul ended his political career when he endorsed Mitt Romney.  It doesn't necessarily mean that he will lose his next election, assuming it is for re-election in Kentucky.  He won't ever be president and he won't ever be vice-president.  I don't know if he'll run, but he will never have one-one hundreth of the influence that his father has had.

Rand Paul has completely blown it.  He did not understand why his dad was so successful.  As Tom Woods recently wrote, Ron Paul reached out to the remnant.  He did not play politician in order to please people.  Ron Paul is not charming and good looking enough to have ever won the presidency (at least during this era).  If he had played politician like his son is doing, he never would have amounted to much at all.

Rand Paul does not understand that his dad is really popular because he is radical.  Ron Paul followers don't want to hear another hack who pretends to be in favor of smaller government and offers half-measures that would never pass and do not motivate others to work for liberty.

Rand Paul's latest anti-libertarian rhetoric showed up in this interview on CNN.



He wants to get rid of some income tax deductions.  Unless you significantly lower rates across the board, then this is the equivalent of a tax hike.

He also talks about revenue neutrality.  This is my biggest criticism of the Fair Tax.

The best part comes when the interviewer says that when she talks to him (Rand Paul), she sometimes feels like she's talking to a Democrat.  She said that he isn't like others in his party who are obsessed with cutting spending.  Rand Paul is flattered by her comment.  I'm sorry, but if anybody said that to me during an interview, I would be very quick to correct them.  Maybe they could say I'm more like a Democrat because of my views on civil liberties or the drug war.  But if someone said I'm like a Democrat because I don't want to cut spending, the next thing I would say is that I do want to cut spending and I want to cut spending drastically.

But Rand Paul didn't say that.  He is playing politician.  He wants everyone to like him.  The problem is that the remnant is liking him less and less.  I'm guessing that a lot of hardcore Ron Paul supporters are just about done with Rand and will never contribute another dollar to any of his campaigns.

Rand is not Ron.  Rand is a conservative politician.  Ron is a libertarian.  Ron will continue to teach people and spread the message of liberty.  Rand will continue his political game.  Ron is probably the most influential congressman ever.  Rand will be forgotten in history.

Saturday, June 23, 2012

The Banks are the Biggest Threat

With the mess of the U.S. economy, the European economy, and many other economies worldwide, I believe the biggest problem and the biggest threat to our standard of living is the banking situation.  Of course, it is the governments of the world, working hand in hand with the major banks, that have created this problem.

There is no question that government debt, central bank inflation, government spending, and regulations are a huge detriment to the economy and our standard of living.  These things will continue to create massive problems going forward.  But I see the major banks as the hardest problem to solve.

I have written about the FDIC before here and here.  There has been moral hazard created on a grand scale.  The crazy thing to me is that few libertarians will address this issue.  I think the reason is because it is almost impossible to address it while still sounding like a libertarian.  The government has created such huge problems that it will probably take the government to get out of it.  (Already, I can't address this subject without sounding like I'm compromising my libertarian principles.)

If you became president and had a libertarian congress that would go along with you, what would you do to solve the banking problem from a libertarian perspective?

Moody's just recently downgraded the rating status of several major banks.  I'm convinced that one significant event could trigger another scenario like we saw in 2008.  Most of the major banks are on the verge of insolvency.

I believe that is why the Fed has been holding back on QE3.  It has kept the monetary base fairly steady since the end of QE2, almost one year ago.  The Fed is keeping its powder dry until it really needs it.  Bernanke and company are not going to start QE3 just because the Dow Jones went down a few hundred points.  They are going to save QE3 for a major downturn and for another bank bailout.

Of course, if the government were to do things right, we would be in a far better situation today.  Let's say that in 2008 the government and Fed bailed out the banks and other financial institutions just as they had.  But let's also say that they withdrew all of the troops from around the world, saving hundreds of billions per year.  Let's say they eliminated major departments like education and agriculture.  Let's say that raised the age of Medicare and Social Security.  Let's say they actually balanced the budget.  Let's say there was no stimulus plan and no Obamacare.  If all of that government cutting had been done in tandem with the bank bailouts in 2008, we would at least be in a much better situation today and be in a better position to handle another banking crisis.

The FDIC and the Fed have created a moral hazard on an unprecedented scale.  I am clueless as a libertarian on how to get out of this without compromising libertarian principles.  Maybe the bad banks do need to be nationalized one time and then be sold off in parts.  Maybe the Fed needs to create just enough money to get all of the banks to 100% reserves and then set a 100% reserve requirement, both of which I am against for a free market.  Again, none of these are good libertarian solutions, but it is hard to come up with something better.

I suppose a true libertarian solution is to let the banks fail and not have the Fed or FDIC step in.  But even libertarians understand that this would be a complete disaster, particularly with the U.S. dollar being the only form of money used in most situations in America.  That means your checking account at the bank would be wiped out if you don't get there in time.  I don't think this "solution" would sit well with most Americans.

The one very libertarian thing that I am in favor of that would help this problem in the long run is to repeal legal tender laws.  It would put a check on Bernanke and the Fed from inflating too much.  And if they did inflate too much, at least people would have the choice of using another form of money.  If there ever were a hyperinflation scenario, at least there might be some kind of an alternative at that point.  As far as banking goes, maybe some banks would actually deal in gold and silver and would be less susceptible to a banking crisis.

In conclusion, the banks are in bad shape and the Fed knows it.  The major banks will be bailed out again if necessary.  At this point, I can't even come up with a principled libertarian solution that will solve the problem without having a complete disaster.  If anyone has any suggestions, please let me know.

Thursday, June 21, 2012

Libertarian Independence

There is often this confusion between independence and libertarianism.  I find that even many libertarians have confusion here.  Libertarians tend to be individualistic and that is fine.  But there is a perception among many (again, libertarians included) that being libertarian means isolating yourself from others.

Libertarianism to me is quite the opposite.  I do not want to isolate myself from the rest of the world.  I want to interact with the people around me (although not all of them).  I want the benefits of mutual exchange, whether it is money being exchanged, products or services being exchanged, ideas being exchanged, friendship being exchanged, etc.

Human beings are only able to prosper through mutual cooperation and the division of labor.  Being a libertarian means that I do not advocate the initiation of force for political or social change.  I advocate peaceful interaction between individuals and groups of people.  However, if someone wishes to be left alone and even isolated from society, it is his right to do so, as long as he is not infringing on others.

Out of billions of people on the planet, there are only a few people who would actually be able to survive while completely isolated.  It would mean catching your own food, building your own shelter, and making your own clothes (if you have any).  While a few people could survive, it would be a miserable life, with little in the way of luxuries.

We have a relatively prosperous society today because we benefit from human cooperation.  The division of labor allows for high production and advanced trading.  We don't have to catch our own food or build our own shelter or make our own clothes.  We can buy these things with money, which we obtain through serving others.  We have so many luxuries that we take for granted and it is because of peaceful exchange and the high division of labor.

While I understand the sentiment of libertarians who say they would like to move to an isolated island or even an island with just other liberty-minded people, I'm not sure why they would consider themselves better off.  Perhaps they would be more free in their own mind, but their standard of living would be far lower, unless they continued to exchange with the rest of the world.

Libertarians are highly dependent on the people around them, just like everyone else.  There is a big difference between dependence on the government and dependence on individuals around you in which you exchange goods, services, ideas, etc.  Everyone is highly dependent on the free market.  Without the free marketplace in which we exchange things, we would all be living at a subsistence level, if living at all.

This is why libertarians should not run away from society.  I understand running away from a tyrannical country or a high-tax state, but you should not seek to isolate yourself from society as a whole.  You should still try to trade and interact with those around you, even if they are not as pro-liberty minded.  You can benefit from them and you may even show them the benefits of peaceful exchange.

Wednesday, June 20, 2012

Bernanke Offers More Twisting

The big news in the financial markets earlier today was the FOMC meeting and the Ben Bernanke news conference.  There was no major news.  The Fed is predicting lower growth than originally expected.  The biggest news is the announcement that "Operation Twist" will continue.  I have written about Operation Twist before.

The stock market did not do much on the news.  Neither did much of anything else.  Oil went down and gold went down a little.  Overall, there was not much excitement either way.

The Fed is grasping at straws with this operation twist business.  As I wrote back in February, this policy is not without its consequences.  Lower long-term rates have not done much for the housing market and who knows what will happen to those rates once the Fed stops buying longer-term bonds.

One thing I suspect is that the Fed is buying longer-term bonds so that there will be less rolling over of debt in the near future.  If interest rates and price inflation both go up, then there will be less shorter-term debt to roll over, which means that interest rate payments will not increase as much for the U.S. government.

Of course, as I mentioned, these longer-term bonds would also decline in value if interest rates go up.  This means that the value of the Fed's holdings would go down.  It would mean that selling these assets does not deflate the money supply as much.  So if there were a scenario where price inflation was soaring, the Fed would have less ability to slow it down.

Aside from these points, operation twist does not mean much.  The Fed ended QE2 almost a year ago and the monetary base has been flat or even slightly down since that time.
http://research.stlouisfed.org/publications/usfd/page3.pdf

The Fed is in waiting mode right now.  It is trying to be Goldilocks.  Not too much inflation and not too much depression.  The problem is that the porridge is going to start being hot and cold at the same time.  It will be freezing on one side of the mouth and sizzling hot on the other.  In other words, we could end up like the 1970's where we have a recessionary environment with simultaneous price inflation.

When the time comes, I still believe the Fed will choose a depression over hyperinflation.  I'm not sure when that time will come, but the Fed is trying to hold it off for as long as possible.

Tuesday, June 19, 2012

Freedom of Association

As freedom seems to erode in America and government gets bigger, there are some positive aspects to look at.  There are two areas in particular where America is still strong in the liberty category.  They are freedom of speech and freedom to bear arms.  While these two areas do have some government interference, particularly in regards to gun control, America is still a relatively free place when considering these two subjects.  I don't think it is because they happen to be part of the 1st and 2nd Amendments.  I suppose freedom of religion could also be included in the relatively free category.

One area that puzzles me is freedom of association.  For some reason, many, if not most, Americans simply cannot grasp this concept.  It is easy in some circumstances for Americans to grasp, but then very difficult in other areas.

When Rand Paul was running for U.S. Senate, he came under fire from Rachel Maddow and others for suggesting that certain parts of the 1964 Civil Rights Act were harmful.  While Paul did not exactly do a stellar job of defending himself and his position, he was correct in his original assessment.  The problem with the 1964 act is that it was the major start of government interference in freedom of association.  Instead of just saying that state and local governments cannot discriminate based on race (ignoring the federalism argument), the law extended way beyond that and told individuals and companies outside of government that they couldn't discriminate.

That was really the major start of what has become our highly-litigious society.  It should not surprise anyone that something like the Americans for Disabilities Act would come decades later, which ironically probably hurts disabled people more than it helps them.

After the Maddow/ Paul interview (or debate), some people reversed it and asked the questions in a different way.  For example, some were asking, can a black restaurant owner prohibit a member of the KKK from entering his restaurant?  When the question was posed this way, then all of a sudden many more people understood freedom of association.  The majority of people said that it was his restaurant and his property, so he should have the right to refuse to serve the KKK member.

Many people do not understand libertarianism simply because they cannot differentiate between the law and social behavior.  When libertarians say they want to legalize drugs, some people take that as encouragement for others to use drugs.  When libertarians say that you shouldn't have to wear a seat belt, some people think that libertarians are against using seat belts.

When libertarians say that business owners, landlords, or anyone else should be free to discriminate, many people take that as libertarians advocating discrimination based on race, gender, sexual orientation, religion, or whatever.  It is not that libertarians advocate racial discrimination.  It is that libertarians believe in freedom and that includes property rights.  If you own a piece of property, you should be able to invite who you want on it and not invite who you want.  This would include a business owner telling potential employees and customers whether or not they are invited on the business owner's premises.

Of course, in a free market, most businessmen that discriminated purely on racial grounds (or some other grounds) would likely not do well in business.  It is also the right of people to boycott the business.  In addition, if the business owner were not hiring the best employees at the best available prices because of race, gender, etc., then he would only be hurting himself and the productivity of his business.  But if that is his business, he should be free to make that choice, even if it is not tasteful or outright disgusting, as long as he isn't initiating force against others.

Freedom of association is one topic where Americans really need to evolve.  We live in a politically correct world now and it is affecting our property rights.  There are a lot of unintended consequences when laws are made interfering with freedom of association.  Americans must see things differently on this topic if America is ever going to be close to free again.

Monday, June 18, 2012

Analysis of the Greek Elections

The elections in Greece were held over the weekend.  It seemed that everyone was holding their breath, waiting for the outcome of the elections, and in turn the future of Europe.  You can view the election results here.  As you can see, the first place party could not even break 30%.  Not only was there not a clear majority, nobody could even get a third of the votes.

According to this article, nearly 38% abstained from voting.  For such a seemingly important election, that is a rather high number.  This 38% can be translated into NOTA (none of the above).  It was really NOTA that won the election.

The mainstream media and the rest of the establishment seemed fairly pleased with the results.  Their dream of the European Union and a one-world government is not quite dead yet.  They are still holding out hope that Germany will continue to bail out Greece.

While mixed results in an election can mean different things, I don't think these Greek elections being so mixed (with seven candidates receiving at least 4%) is the same as what you would see in the U.S.  In the U.S., there are actually some proponents for smaller government, even if just on certain issues.  Some people like Obama and the Democrats for being less pro-war and better on civil liberties.  Some people like the Republicans for supposedly being better on lower taxes and less spending.  While these things aren't reality and there are many who support the parties for opposite reasons, there are at least some sentiments for smaller government.

In Greece, the voters are looking for a year-round Santa Claus.  They believe in a free lunch and they want it.  The problem at this point is that the chickens have come home to roost.  They can no longer live off of past savings and the current productivity is very weak.  It is a massive Keynesian experiment gone bad, even though it was predictable.  A country cannot expect to thrive with a massive welfare state and high taxes.  When there are people who are 50 years old and retired on a big government pension, you know there is something not right.

The Greek voters are really mad at the politicians right now.  They are not sure who to blame the most at this point.  But it is a large majority of Greek voters who are asking for a free lunch.  They are asking for the impossible.  The politicians can keep making promises, but when they fail to deliver anything, then the people get mad.  As Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money.  I suppose that can be applied to the Greek welfare mentality.

In the end, this election will mean nothing.  Perhaps the German government will fork out another bailout package one more time.  They are throwing resources down a drain.  Greece is going over a cliff, whether it is this month, next month, or next year.  It is inevitable that Greece will break apart from the euro zone and go back to printing its own money.

Saturday, June 16, 2012

Some Good News for the U.S. Economy

There really isn't that much good news for the American economy.  There is the small wave of believers in the free market, mostly followers of Ron Paul.  There is also technology, particularly in the electronics industry, that continues to grow by leaps and bounds.  Everything related to government though is bad news for the economy.

There is one other item that is a little bit of good news.  It would not be considered good news for Keynesians.  It is good news for Austrian school followers and those who have a good understanding of the free market.  The good news is that debt levels for Americans is stable or even slightly down.

As I said, this is bad news for Keynesians, who believe that prosperity comes from people spending money.  They can never seem to explain why people don't want to spend money in poor African countries.  If all you need for prosperity is for people to want to buy things, then the whole world should be wealthy.

For those who are not Keynesians and who believe in the workings of the free market, a reduction in personal debt is good news.  An economy grows and prospers from savings and investment.  If you didn't have savings and investment, it would be very difficult for the average standard of living to increase.

Part of the reduction in personal debt has come about because of people giving up their houses in short sales and foreclosures.  While this is not exactly the ideal way for personal debt reduction, I suppose it still counts in a sense.  But aside from that, credit card debt has actually gone down for the average American since the fall of 2008.  According to this website, outstanding revolving consumer debt went down from $989 billion in the 4th quarter of 2008 to $787 billion in the second quarter of 2011.  I'm not sure what the latest statistics are, but I don't believe they have changed much.  You can also read some interesting credit card statistics on this website.

The average American, even those who are working, realizes that the economy is not strong.  People have cut back, whether it is not taking a big vacation or simply cutting back on the daily Starbucks.  While people are probably not saving as much as they like, paying down credit card debt is almost the equivalent to saving.  This is actually what the economy needs.

The major problem of course is government, particularly the federal government.  It is offsetting the work and newly found frugality (relatively speaking) of the average American.  While the average American has stopped accumulating debt and is even paying it down a little, the federal government continues to accumulate massive debt and higher spending.

I think Americans are actually smarter with their finances than what many people think.  There is a certain intuition.  While Americans may get sucked into Fed-induced bubbles, like what happened in housing, they have enough sense not to get too bogged down in credit card debt.  Of course, some people are absolutely terrible with their money, but I am just talking about the average or median person.

In conclusion, an economy grows and standards of living increase due to prior savings and investment. Consumer demand only drives an economy in the short run.  You can't consume what isn't produced.  The key to wealth and prosperity is production and you can only get increased production through savings.  The average American is helping the economy in the long run by saving more and paying down debt.  The federal government is hurting the economy by spending more and increasing the debt.

Thursday, June 14, 2012

Immigration and Libertarianism

Immigration is one of those few issues that libertarians can reasonably disagree.  It is kind of like the issue of abortion in that regard.  There are some good libertarian arguments to be made for both sides of the debate.  In fact, with immigration, there is even middle ground that might be reasonable for a libertarian.

I have never really understood those who are really anti-immigration.  It is really the heart of America.  I'm not sure if these people are racists or just scared of people who might look a little different or speak differently.

Some of the reasons for people being anti-immigration, that may sound somewhat reasonable, are actually reflections of big government that is already in place.  There are two primary examples here.

First, some say we can't have open immigration because of the threat of terrorists.  Some might even argue against most or all immigration, particularly from specific countries.  Many of the terrorists on 9/11 were actually in the U.S. legally, so the current policy didn't stop them anyway.  But even if closing the borders were effective (which it wouldn't be), the only reason there are so many people wanting to cause terror in the U.S. is because of the U.S. government.  If there were no bombings of other countries, and no blockades, and no coups, and no military bases, and no propping up of dictators, then there would be few people who would ever even care about America.  They would certainly have little incentive to hurt Americans.

Second, some say we can't have open borders or any immigration at all because they will collect welfare.  Again, this is a symptom of big government.  If we didn't have a welfare state, then we wouldn't have to worry about immigrants coming to America to collect free goodies.  The only people that would move to the U.S. would be those looking for work (or perhaps vacation).

I have never understood the welfare argument.  Welfare does far more harm than good in the long run for most people.  Yet, if it actually worked, I would probably feel more sorry for the poor Mexican immigrant who had little opportunity who is just looking for work.  Why would I think that some bum in America is more entitled to welfare, just because he happened to be born in a certain area?  I'm not saying that all welfare recipients are bums, but my point should be well taken.

It is hard to believe what has happened to America.  The land of the free is now the land of taxes, wars, and passports.  It used to be that almost anyone could go to America in search of a better life.  You had the responsibility of taking care of yourself and your family, but you were free to search for opportunity.  It came to a point where immigrants would go through New York Harbor, but even then, they were just checked to make sure they weren't carrying any strange disease.  Aside from that, most could enter almost immediately.

I hope we can one day see an America where Americans are not worried about immigrants because of terrorism or welfare, because there will be little of it.  Maybe we wouldn't have to worry about drugs either if they are actually legalized.  If America becomes free again, then immigration will become a moot point for most people.  And if other countries follow suit, then maybe there won't be so many people trying to flee their homeland.

If America stays on its current path, then I don't think Americans will have to worry about immigration anyway.  Who will want to come here?

Wednesday, June 13, 2012

North Dakota Residents Like Big Government

North Dakota Residents Like Big Government: at least that is the conclusion that can be drawn from Tuesday's election.  There was a ballot initiative - Measure 2 - which would have banned all property taxes in the state.  It would have made North Dakota the only state to have no property taxes.

It didn't surprise me that the measure failed.  What did surprise me is by how much it lost.  Less than one quarter of the people voting actually voted to support the measure.  Over three quarters said no to the measure and yes to big government.  You can see the results here.

According to this article, eliminating the property tax in North Dakota would have meant a cut of 23% from the state and local taxes.  North Dakota has somewhat high property taxes.  It also has state income taxes and a sales tax.  Of course, it has the thousands of other taxes that other states have like gas taxes, car registration fees, etc.

North Dakota has seen a substantial increase in tax collections recently, due to the oil boom in the western part of the state.  It is also one of the most solvent states, with low unemployment.  There was never much of a property boom there during the housing bubble that so many other areas in the U.S. had.  This means that there also wasn't a big bust there, so the budget stayed balanced with no big cuts being necessary, as tax collections did not dry up for the state government.

This would have been the perfect time to eliminate the property taxes.  With the big boom from the oil discoveries, the residents there could have done away with all property taxes and still not have had to cut much from the budget.

According to this story, the opponents of the measure (the advocates of big government) outspent those who favored abolishing the tax almost $600,000 to $22,000.  It should be no surprise that the National Education Association made a significant contribution against the measure.

I can just imagine the commercials being run and the things being said on television.  They were probably telling people that if the measure passed that firefighters wouldn't have the funding to show up to houses burning down.  The police wouldn't be able to respond to 911 calls.  The athletic and arts programs would be shut down in the public schools.  Or worse, the schools would have to shut down.  While I might be exaggerating a little on those comments, they are probably not too far off.

I suppose there is one libertarian argument against the measure and that is that it takes away local control, just as someone was cited in this article.  However, I doubt many people voted against the measure thinking this way.  Also, I would have had no trouble voting for the measure because it wasn't dictating any kind of replacement tax.  It would really be up to local governments to find other ways to tax if they chose to do so.  Also, this local argument doesn't fly when it is usually the state governments that mandate government education be provided.

It really is shocking that less than one quarter voted to support this measure.  This is in a supposedly red state.  It just shows that Republicans love big government too.

In Massachusetts, which is thought of as a liberal high-tax state, the two ballot initiatives there to end the state income tax received higher percentages than this North Dakota initiative.  In fact, the first drive to end the state income tax in Massachusetts actually came close to winning.

I would think it would be harder to repeal a state income tax than property taxes.  In most states, half the residents pay little to no state income taxes, so it is hard to make the case for them.  For property taxes, the case should be a little easier.  I know that renters won't directly benefit immediately, but it should be easy enough to explain that if all landlords have their expenses reduced significantly, it will probably mean lower rents.  While cost does not automatically dictate price, it can and does affect it.

If the vote in North Dakota is at all representative of the country, then I guess most Americans are still not ready to give up their slave status to the state.  This was a perfect opportunity where there was no voting for the lesser of two evils.  It was an up or down vote and North Dakota residents decided overwhelmingly that they like their big government.

Tuesday, June 12, 2012

Why a Repeat of the 1970's is a Good Possibility

The economy, particularly in the U.S., continues to hang in the balance.  Unemployment is still high and the official numbers are not all that accurate because they don't include part-time workers and people who stopped looking for work.  The stock market has been a bit of a roller coaster ride.  Meanwhile, price inflation has stayed relatively low, while interest rates are at or near all-time lows.

The Federal Reserve is walking on a tight rope.  On one side, there is inflation.  On the other side, there is recession or depression.  The problem is, as time goes on, the rope gets thinner and thinner.

If the Fed leans too far to one side, it might fall over.  Or perhaps it will try to overcompensate going the other way and fall to the other side.  Or maybe the rope will end and a fall into a combination of both pits will occur.

I think the low interest rates and the recently downtrending stock market indicate that another recession is likely.  The problem is that there was not a correction allowed to happen from the last recession.  The problems are much worse now because of all of the debt and money creation.

I think a likely scenario at this point is for another recession to appear.  Then, Helicopter Ben and the Fed will react with more quantitative easing (money creation).  The next round of QE will probably not be as generous in terms of results.  I think we are likely to see higher price inflation, unless the Fed is timid by its own standards, in which case the next recession will be deep.

I see a scenario similar to the 1970's as more likely than a scenario like the Great Depression.  I am not necessarily talking about severity, but the characteristics.  I think it is likely that we will eventually hit a point of seeing high price inflation and a weak economy at the same time.

If things became anywhere near the Great Depression, then the Fed would open up the flood gates of money and would trigger severe price inflation.  Bernanke has been critical of the Fed during the period of the Great Depression for not being aggressive enough.

Another thing to consider is that there was no FDIC during the Great Depression (at least in the beginning of it).  There were a lot of bank failures, which reversed the fractional reserve lending process.  This was essentially a deflation of the money supply.  So even though the Fed actually did try to create some monetary inflation, it was not enough to offset the bank failures and the average person's desire to spend less.

Hopefully, if we do see a scenario like the 70's, the Fed will act in much the same way.  Paul Volcker, as Fed chairman, slammed on the monetary creation brakes.  The U.S. had a good hard recession, but it also set the stage for a nice recovery.  That was probably the last time in American history that a recession was allowed to play out and a great deal of the malinvestment was able to be corrected and reallocated more in accordance with the free market.

It is still possible that we could have a Japan-like scenario where we see low price inflation and an economy that just kind of sputters along.  However, I don't see it happening for a couple of decades like it has happened in Japan.  The U.S. central bank is more aggressive than the Bank of Japan and Americans are unlikely to buy U.S. government debt to the same extent that the Japanese have bought Japanese government debt.

Let's just hope that if we hit a 1970's America scenario that the Fed will act in much the same way now as it did then.  While it would cause a severe recession, it is better than the alternative of hyperinflation.

Monday, June 11, 2012

More Loans Won't Help Europe

There was news over the weekend that the euro zone has agreed to lend Spain up to 100 billion euros.  That is about 125 billion U.S. dollars.  Spain has been the latest country to follow Greece in its solvency troubles.

While this may help "save" Spain in the short run, it is just more kicking of the can down the road.  The problem is, whenever they kick the can further down the road, it makes the final day of reckoning that much worse.

While comparing a government to an individual or family is not a very good comparison in most cases (because governments rely on their monopoly of the use of force in a given territory), it can actually provide a pretty good analogy in this case.

Let's say that someone makes $50,000 per year in income.  For the sake of this discussion, let's pretend there are no taxes.  Let's say that this person spends $60,000 per year.  He is running a deficit each year of about $10,000.  In addition, his total accumulated debt is $100,000 (and growing by $10,000 per year).  Let's say this debt is in the form of credit card debt.

What is the solution for this person?  He could declare bankruptcy, which would wipe out the $100,000 in credit card debt.  However, his credit card companies would shut down his accounts and would no longer be willing to lend him money, especially without collateral.  So the person would be forced to cut his spending by at least $10,000 per year, assuming he can't earn more.

Another solution is to cut spending drastically.  Not only does the person need to stop running up more debt, but it would probably be a good idea to start paying down the credit card debt, as the interest payments alone are high.  This would mean the person would have to cut spending each year by a far greater amount than the $10,000.

Another option is for the person to get another loan.  He could get a loan (from a fool) for another $20,000 and this would allow him to continue his spending for the next 2 years.  The problem is that the total debt goes up to $120,000, or more if you include interest on the debt.  By getting another loan, this person is just that much further in the hole.  It means it will be that much more difficult to get out of this situation in the future or else the bankruptcy will be that much bigger.

By Spain getting a loan from the euro zone, it just means they will be that much further in the hole.  The Spanish government will never be able to get out of the hole unless there is a big direct bailout (not a loan) or else bankruptcy.

It makes it easy to see how all of this will end.  By giving Spain a loan, it just encourages a continuance of reckless spending.  It means that things will be that much worse in the near future.

The only solution is a dramatic cut in government spending.  It will come eventually, either way.  The government can try to raise taxes, but this will not do anything.  Art Laffer had it right with his curve.  If you raise taxes high enough, it just discourages further production and can actually lead to a decrease in total tax collections for the government.

It started with Greece.  Now it is Spain.  This will be a pattern throughout the world.  It will happen in many western European countries.  It will probably happen in China, Japan, and the U.S., among others.  At some point, governments will be forced to cut back on spending.  The longer they wait, the more painful it will be in the future.

Saturday, June 9, 2012

Rand Paul Endorses Romney

The big political news this week in the libertarian world, and I suppose maybe the Republican world, is that Senator Rand Paul announced his support for Mitt Romney in his presidential run.  Ron Paul (Rand's father) sent out an email to his supporters saying that he would most likely come up short in the delegate count at the Republican convention in Tampa.  While Ron Paul hasn't officially withdrawn, he is basically acknowledging that Romney will be the nominee.

Not long after Ron Paul's message to supporters, Rand Paul appeared on Sean Hannity's television show. He said that while his father is his first choice, he would support Romney as the nominee.  You can watch it here:



Many libertarians (particularly Ron Paul supporters) see this as a sellout.  They see it as a slap in the face. Rand Paul gained much of his financial support in his senate run from his father's supporters.

As I have said before, Rand Paul is the best senator in the U.S. Senate.  Until Ron Paul retires from the House, Rand Paul is not the best congressional member (from a libertarian perspective).  Actually, even when Ron retires, Rand may still not be the best congressional member.  While he will remain the best senator, there are probably others in the House (like Justin Amash) who are probably better than Rand (but still not as good as Ron).

I have had my hesitations about Rand Paul from the beginning.  He is much more of a politician than his dad.  He is not a principled libertarian.  He is somewhat acceptable to some of the establishment.  People like Sean Hannity like Rand Paul.  That makes me more skeptical of him.

I don't think this is a black or white issue (and I'm not talking about race).  It isn't that Rand Paul is on our side (the pro-liberty side) or the other sided (the statist side).  He really is in between.  He is decent on economics, but not as good as his dad.  He is half-decent on foreign policy.  He is much better than Romney or Obama, but he is much worse than his dad.  The same can be said for civil liberties.

Overall, I think it is good that many Ron Paul supporters are giving Rand a hard time about his support for Romney.  They see it as a political move, which it is.  The only thing I would say is that you should try to stay somewhat respectful, as Rand can still be a good ally moving forward on many issues.

People are now trying to speculate on whether Ron will follow in his son's footsteps and throw his support behind Romney and be a good little Republican.  I highly doubt this will happen.  Romney, for the most part, stands for almost everything that Ron is against, and vice versa.  If Ron Paul endorses Romney, it really will be a sellout.  He will have gone against everything he has stood for, for the last 35 plus years.

Hypothetically, if Ron Paul did endorse Romney, it wouldn't make that much of a difference (at least as far as the election goes).  Ron Paul supporters will not fall in line, at least for the most part.  They will do their own thing.  They are not going to vote for Romney or Obama, unless they were planning to already.

I don't think we have to worry about that scenario.  I am quite confident that Ron Paul will not endorse anyone, particularly Romney or Obama.  I also don't think Ron will have a problem staying out of it.  The only problem would be if Rand becomes Romney's running mate.  While I doubt that Rand will get the VP nod, it sure would make it interesting as far as Ron's support.  Even in that scenario, I still think Ron might stay out of it and plead the fifth.  He is that principled that he might not endorse his own son if he were paired with Romney.

Thursday, June 7, 2012

Rothbard and Withdrawing Consent

Many Ron Paul followers and Austrian school followers are big fans of Murray Rothbard.  I suppose most of the new and young Ron Paul followers are not as familiar with Rothbard, but many of them turn to Rothbard to expand their knowledge from what they've learned from Ron Paul.

I can't say that Rothbard has been a big influence on me directly.  The people who have been a big influence on me (Harry Browne, Lew Rockwell, Richard Maybury, Ron Paul, just to name a few) were influenced by Rothbard (some more than others).

I have actually had a few disagreements in Rothbard's writings.  I differ on his position of fractional reserve banking, just to name one.  But I still find it hard to believe that Rothbard would have advocated a law against consenting adults engaging in fractional reserve lending and borrowing.

I have not fully immersed myself in Rothbard.  I have read a couple of his shorter books and I have read many of his articles.  I always find his articles discussing politics informative and interesting.  His writings on Reagan and Clinton are really fascinating.  I also agreed with his writings on being involved in politics (endorsing candidates, forming coalitions, voting, etc.).  Some people think it is a contradiction for an anarcho-capitalist to be involved in politics at all.  I think Rothbard showed the benefits of political alliances and he was right that it wasn't a contradiction.

It really is too bad that Rothbard passed away at a relatively young age (68 years old) in 1995.  It definitely would have been interesting to get his take on September 11, 2001 and the Bush Junior presidency.

If there is one thing in particular that I can say I really learned from Rothbard, it is his writings on consent.  He expounded on what de la Boetie said over 400 years ago.  He pointed out that a government does not have to be overthrown using violence.  All that has to happen is for a large percentage of the population to withdraw their consent.  When the government no longer has the consent of a large portion of the populace, it will collapse from its own weight.

The Soviet Union collapsed and there was virtually no bloodshed.  It is not because Gorbachev was a really great guy when he was in charge.  It is because he no longer had consent from the people.  The whole system was a joke and it was unsustainable.  The system collapsed without violence.

The message we can take here is that this is an intellectual battle.  We don't need to elect the right politicians.  We don't need to pass the right laws.  We don't need term limits on politicians.  We don't need to convince the politicians who are currently in office.  All we need to do is educate others on the benefits of liberty.  When a large portion of the populace no longer consents to government force, then that in itself will reduce the power of the politicians.

Ron Paul has had virtually no success in passing legislation.  His success has been one of education.  He has spread the word to millions of people.  He has changed hearts and minds.

It is too bad that some great libertarians like Rothbard and Harry Browne are not alive today to see the success that Ron Paul has had in educating millions of people.  These men were quite optimistic about the future, but I think even they would be surprised at how far we've come so fast.

Wednesday, June 6, 2012

The Retirement Age

There is a story linked from Drudge that says France has cut the retirement age from age 62 to age 60 for those who entered employment at 18.  Earlier in the week, Drudge linked to a story, quoting someone who said that the retirement age (in the U.S. I believe) might have to be raised as high as 80.

Of course, the first thing a libertarian might ask is, why is the government determining a retirement age?  It is up to each individual to decide what age he will retire.  The reason that the government talks about the retirement age is because of Social Security and Medicare (or their equivalents in other countries).

It is crazy that the French government would actually cut the retirement age, given the current economy and the massive budgetary problems that countries in Europe are having.  If anything, the age should be going up so that the government can stay solvent.  The new French government is admittedly socialist, which means they believe in free lunches and fairy tales.

As far as the U.S. goes, I think the retirement age (referring to Medicare and Social Security) will go up eventually.  The public sector unions lost in Wisconsin yesterday.  Next, the senior citizens will lose in the whole country.  Some think I'm crazy for saying this because seniors make a powerful voting block.  But when young people have their backs against a wall, they will vote to cut grandma's Social Security check before they have to pay even more in the way of taxes.

This is why I don't really worry about the unfunded liabilities too much.  They certainly are an issue, but it is an issue that can be quickly fixed by raising the retirement age.  A portion of the federal debt is also made up of intra-governmental debt, which is simply debt that the government owes itself.  Intra-governmental debt is almost $5 trillion of the total national debt of almost $16 trillion.  About $2.7 trillion alone is owed to the Social Security Trust Fund.  Just raise the eligibility age to collect Social Security to 80 and this would wipe that debt off of the books.

The squeeze is on.  The governments of the world keep trying to kick the can down the road, but things are coming to end.  They are really close for Greece.

In the U.S., things may chug along for a little while longer.  Eventually, Congress will be forced to cut back, assuming that the Fed doesn't go into hyperinflation mode.  I think Americans will reject large tax increases.  We will eventually see spending cuts.  Since Medicare, Social Security, and the military make up the majority of the federal budget, those things will not be left alone.

I don't think Social Security and Medicare will go away entirely any time soon.  But it is quite reasonable to think that changes will be coming in the form of reduced benefits and a higher age for eligibility.

Tuesday, June 5, 2012

Wisconsin Recall Election and Unions

As I write this, the results are being tallied in the recall election in Wisconsin.  The governor, Scott Walker, is on the hot seat because he dared to take on the public sector unions.  I wrote about this situation last year and the libertarian position on unions.

As a libertarian, I am not a big fan of Scott Walker.  He is not a libertarian.  However, this recall election has been symbolic.  A politician dared to take on the unions and they are trying to make him pay the price.  This is a symbolic issue of the unions vs. the average working American.  While Walker is not an average working American, his position on this issue is symbolic in the defense of the average working American.

The good news for libertarians (and maybe conservatives) is that unions are dying.  The free market (at least what is left of it) is destroying the unions.

In the case of Wisconsin, it is really government vs. the people.  I don't think most government workers are bad people.  I'm sure most of them are just trying to make a decent living to support themselves and their families like most other Americans do.  The problem is two-fold here.

First, government in general is quite inefficient.  The more government workers you have, particularly with generous benefits, the less efficient it is.  It means that resources are being misallocated.  It means that production suffers and that nearly everyone's standard of living is worse off because of it.

The second problem is the one that the average American is starting to understand, particularly in this economy.  These government workers with their nice salaries and nice benefits are being subsidized at the expense of the average taxpayer.  These government workers are not being paid a market wage.  They are being paid a government wage, determined by politicians.  Americans are struggling to find work and those who do have work are finding little in the way of pay increases.  Meanwhile, government workers are making out really well and leaving budgets in the red while they are at it.

The Occupy Wall Street groups like to talk about the top 1%.  But the conflict is not really between rich and poor.  It is about government privilege vs. the non-privileged.  While class warfare is still prevalent, the majority of Americans probably don't care if Mark Zuckerberg gets rich.  The reason is because it was done in the marketplace, without coercing others to use his product.  The government unions cause conflict because they are obtaining their money by using the threat of government force to extract money from the taxpayers.

As it looks like Scott Walker will win this latest election, it symbolizes a loss for the government unions.  I'm sure they were out in full force to vote.  The silent majority really is speaking here.

This should prove that it is not political suicide to fight unions and government workers.  The reason most Republicans don't do it is because they have no interest in doing it.  They will talk a good game, but they usually do what is necessary to hand out favors to their own special interests once they are in office.  They see nothing to gain in fighting a hot political battle when they don't really have any serious principles.

In conclusion, while Scott Walker is no libertarian, I think libertarians should be happy with the results in Wisconsin.  It is possible to beat back the beast of big government.

Monday, June 4, 2012

Some Thoughts on Gary Johnson

Gary Johnson, the former two-term governor of New Mexico, is the Libertarian Party's presidential nominee for 2012.  He was recently interviewed by Robert Wenzel of the Economic Policy Journal.  You can listen to the interview here:




After the interview, Wenzel posted a short piece comparing him to Ron Paul.  The amusing thing in that post is reading all of the comments below.

Wenzel really tore into Johnson, in a respectful kind of way.  He challenged him on his libertarian credentials.  It is funny because the one thing that has always worried me the most about Johnson is whether he would really withdraw the troops and end the wars if he became president.  If I was 100% sure that he would do that, then I would probably vote for him, regardless of his economic positions.

He is obviously much better on foreign policy than Obama or Romney.  Johnson is also much better on economics than Obama or Romney.  But when I listened to this interview, I think Johnson may be closer to Romney and Obama than Ron Paul when it comes to economics.  I'm not sure if that is a fair assessment, but I really came away feeling like Johnson doesn't understand economics very well.

Gary Johnson seems like a nice and decent guy.  Of course, the same could be said for Mitt Romney.  And I do agree with Wenzel that it seems that Johnson has some good instincts.  But he really doesn't understand the free market, libertarian position on economics.

Johnson said that we have to go through recessions and that recessions are good.  But I have to say that no Austrian school person who really understands what he is talking about would phrase something like that.  The Austrian position is that recessions are generally necessary after a central bank-induced boom.  But the way Johnson said it, he makes it sound like we would still be going through recessions frequently in a free market environment.  While he was somewhat correct in his assessment that recessions are a signal that there has been too much consumption, he misses the point that consumers and entrepreneurs miscalculated, probably due to central bank inflation.

Johnson cites Milton Friedman as a libertarian having influence on him.  Wenzel is quick to point out Friedman's flaws.  While there is a lot to like about Friedman from a libertarian standpoint, school choice is not one of them.  Unfortunately, that was one of the two things that Johnson pointed out about Friedman (the other being drug legalization).  I suppose we should be thankful that Johnson didn't praise Friedman for his monetary policy.

Johnson also cited Cato and Reason as good resources that he likes to read.  This pretty much shows where Johnson is on the spectrum of libertarianism.  He doesn't understand Austrian economics.  He is from the Chicago school.  The Chicago school of Milton Friedman is better than the Keynesians, but not so much when it comes to monetary policy.

One thing I have noticed about Gary Johnson is that he usually uses utilitarian arguments.  He does not argue the position of morality often, if at all.  He will say we need to legalize marijuana, but his reasons are pragmatic.  He does not say that it is because people should be free to put anything they want in their bodies as long as they are not encroaching on other people's rights.  He would never say that taxation is theft.  He would say that we need to reduce taxation so that we can create more jobs and have a strong economy.

Ron Paul, on the other hand, uses both types of arguments.  He argues from a pragmatic standpoint sometimes and he also argues based on morality.  I think it is important to use both.  There are some libertarians like Stefan Molyneux who tend to argue the moral position more frequently.

If Johnson is going to use utilitarian arguments most of the time, it would be nice if he understood them.  He has little grasp of Austrian economics, which means his utilitarian arguments are not even that good.

In the interview, Wenzel tripped up Johnson by asking him about libertarian books.  It has reminded some people of Sarah Palin when she was interviewed by Katie Couric.  Johnson said that he had read Rothbard at the beginning of the interview, but then later recanted.

I don't think there is anything wrong with Johnson just because he hasn't read Rothbard, or Mises, or Hayek.  In Johnson's defense, Mises is tough to read.  It would be one of the last things I would recommend to someone new to libertarianism.  I am partial to Harry Browne or Richard Maybury.  If you want to teach someone economics, you don't hand him a copy of Human Action.  That will put him to sleep and turn him off of the subject.

As I have written before, I wish that Lee Wrights would have won the Libertarian Party's nomination.  He is a principled libertarian who understands the issue.  Gary Johnson would not even come out and say that he favors legalization (at least from a federal standpoint) of all drugs.

Radical libertarians have been spoiled by Ron Paul.  We start to take it for granted that other libertarians understand economics.  Ron Paul looks highly articulate next to Johnson, only because Paul understands the issues with great depth and he believes in what he is saying.  It will be interesting to see if Johnson's views evolve at all through the campaign and which way they evolve.

Saturday, June 2, 2012

Speculating and Investing

Today, I am going to talk about myself a bit and my experience in investing.  I have been doing at least a little bit of investing for 15 years.  It has consisted of stocks, mutual funds, commodities, options, money market funds, and probably other things that I can't think of right now.

When I look back at the big picture, there are really only two investment strategies that have paid off.  One is in the permanent portfolio (mutual fund or otherwise) that was advocated in Harry Browne's book Fail Safe Investing.  The other investment that has done well is commodities.  This would be mostly gold and silver related investments, but also a little bit in energy.

When it comes to options or just trading individual stocks, I can't really say that I've done that well.  I've certainly had some winners, but I've also had some losers.  When I consider that these things almost offset each other over time, I probably would have been better off paying down my mortgage or putting more into the permanent portfolio setup.

I am guessing that I am not alone in this analysis.  There are very few people who make it big in investing.  Even most people who spend a significant amount of time studying the investment markets do not make out big, unless they are trading other people's money for a fee.  In that case, it is really their job or career.

The problem is that many people feel they need to spend a lot of time doing their homework and watching CNBC for the latest stock tips.  If they only understood the monetary system and understood the power of the permanent portfolio, it would save them a lot of time and headache.  They could spend just a few minutes setting up their portfolio and then basically forget about it, except for rebalancing.

When it comes to speculating on stocks or any other investments, I am probably slightly better than average.  Yet, I still acknowledge that it is usually a crap shoot and that it is impossible to time the markets.  I cannot compete with Warren Buffett at his own game.  Overall, playing the stock market is almost equivalent to playing blackjack in Las Vegas.  In the case of the stock market, the big financial institutions and the government are the "house".  They collect the most money in trading fees and taxes.

It can be fun to speculate in stocks, just like it is fun to play the lottery.  But it really isn't that fun once you realize that you've lost.  So my recommendation to most people is to save their money and be conservative with it.  Pay down your debts.  Invest in something similar to the permanent portfolio.  Then take some money and pay down your mortgage.  If you want to get ambitious, then buy an inexpensive investment property that will generate positive cash flow.  After many years, you will be thankful that you were conservative with your money.  You work hard for it, so you should watch over it carefully.  If you want to speculate, then just set aside a small percentage of your savings as "play money".