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Economics and Investing:
Justin sent us a link to an excellent documentary on the chain of events in
the global credit collapse, with a bit of pro-interventionist coloring from
PBS: Inside
the Meltdown.
Heather sent us this: Volcker:
Crisis May be Even Worse than Depression
Jim Willie nails it: Russia's
Post U.S. New World Order Blueprint ( A hat tip to KT for the link.)
Luddite Jean in England sent us three bits of news of ill-portent: £2trillion
- the terrifying total of our national debt... that's £33,000 for every
man, woman and child in Britain. --
Car
industry in meltdown as plant faces 'imminent' closure with loss of 100,000
jobs and production plunges by 58%. -- Repossessions
soar by 54% in a year as 40,000 people lose their homes.
Items from The Economatrix:
Gold
Demand Surges by 1/3 to $100 Billion
Record
881 US Auto Dealers Closed in 2008
Wall Street Slumps as Dow Hovers Around Threee-Month Low
UK Public Finances Deteriorate Dramatically
Giants
Swiss Re and BNP Paribas Report Severe Losses
Ukraine Crumble Triggers Fear Through Europe
Foreign Firms, Investors Flee Ireland
Bank of Japan to Buy 1,000 Billion Yen of Corporate Bonds
Dow Ends Thursday at Lowest Close in More than Six Years
Sarkozy Announces $6 Billion in Aid to Avert Unrest
Rising Debt May Overwhelm Obama's Bailout
US Bank CEO: TARP Program is Lousy
GM, Chrysler Seek $21 Billion More
Newly Poor Swell Food Banks Nationwide
GM
Shares Hit 74-Year Low
Bank
Fears Hit Wall Street; Dow Down 6.2% for the Week, S&P off 6.9%
« Odds 'n Sods: |Main| The Winning Edge: Safe Dry Practice, by John Parker, Jr. »
Economics and Investing:
We'll start with a bit of levity, to temper all the recent bad news: The
Monster Crash. (Kudos to Richard at KT
Ordnance for sending the link.)
I've added 90-Day and 5-Year price charts for silver and gold to the bottom
of my Investing page.
Reader M.H. sent a reminder that anyone in the US that is expecting a tax
refund on their state income
tax should file their tax returns as early as
possible this year. As
states increasingly run into budget crises, some taxpayers that wait
until April 15th to send in their tax forms may end up out of luck--and end
up waiting for many extra months to get their tax refund checks.
Robert B. sent us this: New
Gulf currency 'Khaleeji' poised to be Gold backed to remove 'Riba'
From Ben H.: US
Federal 2008 deficit was really about $5 trillion
RSR spotted this: Beer No Longer Recession-Proof
Items from The Economatrix:
US Economy: Housing Starts, Factory Output Plunge
The Crash of 2009 is Coming to YOU!
1 in 5 California Public Workers to be Fired
BofE Seeks Power to Inject More Money into Economy to Fight Recession
Britain's
AAA Credit Rating Threatened by Scale of Bail-Out, Says S&P
Fed
Says Economy Even Worse than Thought
Growing Stocks of Unsold Cars
HUD: The Mortgage Crisis is a Jobs Crisis
Nearly 5 Million Americans Receiving Unemployment Benefits
California Legislators Finally Approve Budget
Public Fears about Troubled Economy Growing
Gold Primed to
be "Mania Asset"
It's Getting Ugly: Economist Says Hoard Gold and Scotch
The
Burning Platform Here is a quote:"When I see Senator Charles Schumer
of New York make a speech on the floor of the Senate saying, 'And let me say
this
to all
of
the chattering class
that so much focuses on those little, tiny, yes, porky amendments, the American
people really don't care', I want to throttle him."
It Will
Happen (The Mogambo Guru)
Investors Rush into Gold Coins
« Letter Re: It Looks Like the End is Beginning |Main| Note from JWR: »
Letter Re: Gun Show Report--The Full Capacity Magazine Feeding Frenzy Continues
Mr. Rawles:
I took your
advice you posted last year and have been investing in some high cap
magazines. I've bought about $2,000 worth since the [November 2008 presidential]
election,
and I haven't had any second thoughts. Thank you sir, your advice is making
me a tidy profit. The 75-round
Romanian [RPK]
drums that I bought for $135 each the day after the election are now going
for $250
each.
And the
31-round
Glock 9
milly magazines
that I paid $33.50 each for are now going for $65 each. Oh, I found +2 [magazine
floorplate extension]s for those, so now they are all 33 rounders. I figure
those mags will
be over $100 each in a couple of months.
My real coup de largesse was this past weekend, when I went to a
local gun show here in Texas. (There is a gun show just about every weekend,
somewhere
in Texas. Some just take a day of driving to get to!) The place was a mad house. It
took 30+ minutes to stand in line just to pay to get in the door. People were
buying mil surplus ammo and magazines like crazy.
Basically the ammo and mags were all sold out by noon on Saturday. And most
of the "black guns" were sold
out
buy
the
time they closed the doors Saturday night. Prices on magazines have basically
doubled since the election.
Anyway, just after the show opened,
I was scanning the tables, looking for high cap magazines--what else--when
I spied
a Mini-14 GB
stainless, with an original Ruger-made 30-round magazine tucked up next to
it. I was about to ask [the seller] if he'd sell the magazine separately, when I glanced
at
the
gun's
price
tag:
$400! I just about died of an infarction on the spot. That is a great price
on a fairly scarce model. (The "GB" is the LEO-sales
model, with factory-installed flash-hider.) The seller--a nice old gentleman
and
a Korean War vet--said that
he had put
less
than 500 rounds through it. The rifle's looks matched the story, so I whipped
out
four Franklins and a copy of my driver's license to show I was
"Free, white and 21". Anyway, we got all set (private party sale--my only way
to business) to get the gun out the door, and the old timer says, "Oh
wait, don't forget the [factory shipping] box, and the magazines, they come
with
it." He
reaches under the table and lifts up a shoe box full of original Ruger 20s
and 30s,
some of
them
still
in
the white boxes! I nearly had a second heart attack. There were
11 [magazines in the box, of which] six were 30 rounders. That's like $900
worth of magazines,
these days! Later at the show I also scored four 20 round Beretta M92 "Robocop"
mags, two [Steyr] AUG 42-rounders
for $30 each, five AR-10 mags
(for just $40 each--I've seen them advertised on Buddy's board for $80 apiece!),
a
half-dozen
"Okay
[Industries]" M16 mags,
and big box of nearly new [Austrian] STG[-58] FN/FAL magazines--which
for some weird reason are still around $15! I bought
23 of those. I talked the guy down to $12 per, since I cleaned
him out.
Speaking of FAL .308 mags, my next purchase (already agreed, by phone) will
be a DSA [FN/]FAL clone. I have to drive 115 miles each way to pick it up.
I found it private party, [listed] on GunsAmerica.com.
I'm now tapped out, but my dad
is
lending
me the cash. I explained the situation, and he says that it is wise to buy
it. [He said:] "We'll have a good chuckle about the price, in a year or two!"
Here is my strategy on mags: Buy what you can, while you can--while
prices are still halfway reasonable. I don't own a Beretta
92, an AR-10, or an AUG, but I figure I can always trade [for what I need] later.
And I practically had to buy that FAL, since I found all those magazines.
(What a great excuse to buy a gun.) My only regret is that I didn't have
the cash to buy more magazines
at the show.
At
the rate
prices
are zooming,
Beta [C-MAG]s will pretty soon be back to $750 apiece, just like during the
[1994 to 2004 Federal "Assault weapons" and 11+ round magazine]
ban. .
Thanks again for your advice, sir. Your were right about silver. You were
right about magazines. And for that matter you were right about derivatives,
too. The world seems more and more like the first chapter
of "Patriots"
every day. (What, were you psychic?) I'm taking [your novel] to heart. I got
all my "beans", and "bullets" in hand, now I just have to work on the "Band-aids".
Thank
You,
Sir!
- Matt
E. in Texas
(Soon to be a 10 Cent Challenger and an Appleseed qualified rifleman.)
JWR Replies: I'm glad to hear that you stocked up. You won't
regret it. Those extra magazines will make fine barter items, both before and
after a "Crunch." OBTW, I'm not the only that is one advocating investing in
magazines. The following is
from
a
recent
e-newsletter from firearms training guru Gabe
Suarez:, advocating preparedness: "...Then get as many magazines
as you can justify. Glock magazines are going for about $35 now. A year ago
they
were
under $20, and dealer price two years ago was about $12! At the height of the
assault on freedom known as the Crime Bill, they were selling for $125. Forget
Ameritrade, buy magazines."
« Letter Re: Survival Retreat vs. Neighborhood Survival -- Part Deux - Galt's Gulch vs. Idiocracy, by E.B. |Main| Letter Re: Gun Show Report--The Full Capacity Magazine Feeding Frenzy Continues »
Letter Re: It Looks Like the End is Beginning
James,
A few interesting things happened in the market [on Tuesday]. This wasn't in
the market, but is relevant. Hearing lots of chatter generally about things
moving
to "the
final phase".
"Gold is moving as the last phase of the crisis appears
to have started," said
Martin Hennecke, associate director with Tyche Group in Hong Kong.
I'm assuming that the last phase starts out with gold, silver, Treasury notes,
and the dollar all moving up, together. (It is quite unusual for the dollar
and gold to move together, even though that's been the case recently.) Then
at some point - like a tired marathon runner that can't keep up with the leader,
the dollar quits climbing but gold doesn't. That would be the real indication
of the beginning of the end.
The Dollar drops, Treasury bonds start to go unpurchased
causing yields to start soaring, tax collections come up short, States start
defaulting on their bonds, Uncle Sam follows suit, and it all takes one final
big swirl around the commode before collapsing.
In other metals trading, March copper tumbled 7.4% to $1.425 a pound, while
March silver rose 3.6% $14.11 an ounce. March palladium added 1.2% to $219
an ounce, and the April contract for sister metal platinum rose 2.9% to $1,091.70
an ounce. I'm not even going to comment about oil today. What's much more important
is that the copper market essentially collapsed today. Copper is the industrial
metal. It predicts manufacturing and production for the next 6 months to a
year. You don't build anything - certainly nothing electrical or electronic,
without it. It's used in chips, cars, houses, bridges, airplanes, tractors,
and dozens of other places - you can't even build roads without it.
A collapse of copper like this says that things are falling apart fast, and
the economy has no direction to go but down for at least the next six months..
Given the Dow closing under 7,800, we should soon see a flood of bank and other
financial institutions fail. It doesn't appear that things will be changing
direction any time in 2009.
Frankly, I don't have a good feeling about our prospects of making it through
the end of the year - it's looking worse every day. Y'all might want to start
thinking about moving to condition yellow. Double checking supplies, having
your vehicles serviced, buying stuff by the case next time you go to the store,
rather than by the can. - RSB
« Odds 'n Sods: |Main| Letter Re: Survival Retreat vs. Neighborhood Survival -- Part Deux - Galt's Gulch vs. Idiocracy, by E.B. »
Economics and Investing:
Brett forwarded this item: Depositors
turned away from Stanford banks
Garth S. sent this New York Times news story link: Laid-Off
Foreigners Flee as Dubai Spirals Down. Garth's comment: "At least
[in America] we don't have debtors prison."
From Todd S.: Swift, steep downturn crisscrosses globe
G.G. flagged this: Publishers See Red, Magazine Ad Pages Down 21.5% in Q1
Thanks to Robert B. for sending this: Sales Tax Time Bomb Explodes as Consumption
in Freefall
The Drifter sent us a link to this piece by Mish Shedlock: The
Nationalization
Train Has Left The Station
FloridaGuy flagged this: Gold
hits record against euro on fear of Zimbabwean-style
response to bank crisis (JWR Adds: The current "strength"
of the US Dollar is in actuality just a manifestation of the weakness of the
Euro, since European banks are in even deeper Schumer than American banks.
It
is
all
relative. All the paper currencies are on the same path, but some are just moving
more rapidly
down the path to destruction than others. For safety, buy silver and gold. Get
out of paper currencies and any investments denominated in those currencies.
This is the age of tangible investments!)
Items from The Economatrix:
Obama Unveils $75 Billion Mortgage Relief Plan
EU's Battle with Depression
Baby Boomers: Your Generation's Crisis Has Arrived
US, UK, Euro Banks Face Collapse: Global Banking System Insolvent
Eastern European Economies About to Explode in a Chain Reaction of Debt Default "An
economic crisis is quickly turning into a political crisis. Riots have broken
out in capitals across Eastern Europe. Mr. Geithner had better
be paying attention."
World Stocks Tumble as Bailout Confidence Fades
Fed Banker Warns of Deflation
In Times of Crisis, Never Forget the Value of Gold
The New Currency Trade: Gold vs. All Else
Brzezinski:
H*ll, There Could Even Be Riots
Bad News from America's Top Spy
Oil Slips Below $35 as Global Markets Tumble
Stocks End Day Flat After Obama's Housing Plan Unveiled
« Odds 'n Sods: |Main| Letter Re: Hardening a Home Against Small Arms Fire »
Economics and Investing:
In a recent edition of his Reality
Check e-newsletter,
my mentor Dr. Gary North mentioned this
alarming piece posted in the Not A Sheep blog: The
Disappearing £16.3-trillion.
In the age of the Internet, it has become difficult for the Powers That Be to
spike a news story!
Laura and Garth were the first of a dozen readers
to send this link: Kansas
suspends income tax refunds, may miss payroll
Ben H, sent this link to an interesting (and frightening) article at the Von
Mises Institute: Printing
Like
Mad
I noticed that spot
silver and gold prices
are solidly back on the bull market track, at seven month highs. To those
that were castigating mea few months ago, for "giving bad advice", all that
I can say is: "I have my doubts that your
stock portfolio is going to do as well as my silver for the next five
years." And to anyone that is dawdling, waiting to see "direction" in the
metals markets, you
are about to miss the boat. Buy on the
dip days.
Items from The Economatrix:
Obama
Signs Stimulus and Dow Plunges 300 "The Dow closed at 7552.60, only
a fraction of a point shy of the recent low of 7552.29 Nov. 20, just after
Obama was elected. The market now is down
more
than 2,000 points since Obama was elected, when it closed 9625.28 Nov. 4."
GM Seeking Up to $30 Billion More, Axing 47,000 Jobs
Worst is Yet to Come for Americans
Lloyds Facing More Write-Downs, HBOS Losses Mount
Nationalizing 401(k)s
Little-Known Agency that Insures Pensions of 44 Million Workers Braces for
Recession Fallout
Automaker Bankruptcy Looms
Eastern European Currencies Crumble as Fears of Debt Crisis Grows
America's Emptiest Cities
Feds
Provide $429 Million to 29 More Banks "The Treasury Department says
the capital infusions bring the total amount the government has invested in
banks to almost $200 billion."
« Odds 'n Sods: |Main| Letter Re: Gaining Situational Awareness and Old-Time Knowledge »
Economics and Investing:
The Old Yooper mentioned this FSU piece: Signposts
Towards the Inevitable.
The graph showing the upcoming second wave of ARM is
particularly alarming. There will be some real ARM-twisting then!
Thanks to G.G. for this piece: Irish
government faces growing fears of debt default
Steve S. recommended a video
of a lecture on the history and nature of debt-based modern currencies, and
their implications on
freedom.
DS spotted this: As
U.S. Borrowings Rise, Treasurys Begin to Pop. As I've mentioned before, look
for a big jump in Treasury yields as a key indicator that stagflation is ahead.
Items from The Economatrix:
America Has to Come to Grips that it is Bankrupt
Rich Chinese Buying Bargain US Homes
Roubini Tells Geithner to Nationalize US Banks
Pound Falls Further
UK Unemployment to Hit 3 Million
China is Right to Have Doubts About Who Will Buy American Debt
IMF Chief Warns Second Wave of Countries Will Need Bailout
Ireland Could Default on Debt
UN Lobbies for Share of Bank Bailout Funds
$60 Billion Loss at RBS Prompts Savage Job Cuts
Spain's New Jobless Crowd Soup Kitchens
Failure
to Save Eastern Europe Will Lead to Worldwide Meltdown
Cash Crisis Forces California to Free 55,000 Prisoners
How the Crash Will Reshape America
Severe Retail Downturn Forecast for 2009
« Economics and Investing: |Main| Letter Re: Hardening a Home Against Small Arms Fire »
Three Letters Re: Gold and Silver Coins as an Investment
Howdy James,
I hope you and yours are doing well. I recently came across the
Preparedness Podcast and in Episode 5 - Gold, Silver, and a look at what's
coming in 2009 is an excellent primer on investing in gold & silver.
Basically silver is your 'checking account' and gold is your 'savings account'.
A 20% silver and 80% gold ratio is suggested as good mix of spending power and
portability. A few gold coins take up a little space when you have to bug out,
but the same dollar amount in silver will weigh you down when you need to carry
other items. I do think silver is the better choice for a 'barter society', but
gold rules when you got to travel light! Later, - Mark in North Carolina
JWR:
Don’t even think about buying gold bars, unless you
are a multi-millionaire s already swimming in coins! To quote Gary
North, rather
loosely, “You
are now entering an area only gold dealers ever venture into”.
Gold bars do save a small amount of premium - initially - but this is “penny
wise, and pound foolish”. For a small premium for coins, 5% to 8% currently,
you get all these advantages:
1. Much easier to verify authenticity. How do you know that
you are getting real gold when you buy bars? How do you prove a
bar is gold when you sell? This is easily a deal killer. Even if you are not
a numismatic expert, common coins can be
verified with a scale and calipers to conform to the published weight and dimensions
for
the coin. It is extremely difficult for fakes to conform to specifications
- read the expert, Mr.
Fisch.
Even more conveniently you can use the Fisch
coin test kit. These are highly recommended, not just for assurance purchasing
today, but a great service to offer in post-TEOTWAWKI “Barter
Faires”
2. A wider market for coins means a better price, and much more liquidity.
You may take a nasty discount trying to get rid of a hard-to-verify bar that
more than negates the premium saved.
3. No need to assay. Forget the cost for a moment - what if assay services
are not available in a crisis?
4. Smaller units so you have a much more divisible means of payment. Bars are
only good for large transactions. To dollar cost average in or out of an asset
you need smaller units.
5. A small premium is not an expense, but part of the value inherent in the
coin - value you will recoup on resale. If you don’t overpay, you can
recoup much of the premium even upon resale to a reputable dealer, e.g., see Tulving’s buy versus sell prices.
You should be able to get most or all of the premium back from a private buyer
- if not even more premium in a bull market mania. Do you think a
newcomer to gold will even consider risking hard-earned cash on a unverifiable
lump
of gold? The only exception I can think of are some of the Credit
Suisse or Pamp Suisse “coin-like” bars that are well known
and minted like coins (not cast in a lump like ingots). Weight and dimensions
can be verified on these coin-like
bars, Fisch even has a verification tool for the 1 oz. Credit Suisse [bars].
Still, I prefer coins - why limit your market when you want to sell?
Leave the cast ingot bars to the big bullion banks that can document the chain
of custody from bullion foundry to bank.
An argument for silver bar investing can be made,
given the recent high premiums on silver. But, even here, why not have your
silver investment do double duty
to add to your barter junk silver?
Regards, - OSOM
JWR Replies: I'd just add that serialized 100-ounce
Engelhard and Johnson-Matthey silver bars are typically
re-purchased by coin dealers without any assay required. After you
have your barter silver coins squared away, silver 100-ounce silver bars are
the
the most cost-effective vehicle for silver investing, at least for the small
investor.
Mr. Rawles,
I have been reading your blog and others (like FerFAL
in Argentina, [also see FerFAL's
SurvivalBlog Profile]) and completely
believe that having some silver coins is a good thing to have when the SHTF.
However, someone asked me recently, “So how would you use them?
How many people know a “standard” [modern, debased] coin from a “silver” one?” Well,
I didn’t have a good answer for that. Can you help me explain the use
of silver coins in a SHTF scenario? Who would recognize their value other than
another prepper? Even all of them might not know. Thanks, - Coinless in the
Mountains
JWR Replies: I estimate that nearly half of the US population
is familiar with the fact that dimes, quarters, half dollars minted before
1965 are
silver. (Although most folks don't know that they are 90% silver,
with base metals added. for the hardness required for the rigors of circulation
as pocket
change.) Most of these same folks know to look for copper showing on the rims
of later (post-1964)
debased
coins, to distinguish them from the earlier, genuine article.
In
the
event
of
a monetary
collapse,
there
will
surely be
a rapid education for the rest of the populace. The
beauty of free market economics is that prices very quickly reach equilibrium.
I anticipate that within just
a few weeks, new prices denominated in pre-1965 silver coinage will be set
for most consumer products, and a daily trading ratio of silver coin-to paper
currency
will be pegged. (No doubt with a steadily-declining value for the fiat paper
currency.) Have faith: The marketplace will quickly adjust, and people will
quickly adapt to using silver coinage and practical tangibles in barter. (As
I've written
before, in the early stages of an economic collapse, ballistic
wampum,
i.e. common caliber ammunition will likely be even more sought-after
than silver.)
On a related note: Few Americans are familiar with
the 40% silver content half dollars minted between 1965
and 1970,
so
I do not recommend buying any of those for barter.
« Odds 'n Sods: |Main| Three Letters Re: Gold and Silver Coins as an Investment »
Economics and Investing:
Treasury Secretary Tim Geithner's planned "Son of TARP",
also dubbed "TARP 2.0" bank bailout is rumored to be more than
twice as expensive as the first round that was enacted in late Aught
Eight. This is more evidence that the Mother of All Bailouts (MOAB)
has no limits, and will not end until the the taxpayers are on the hook for decades of
substantially higher taxes and not before the value of the Dollar is reduced
to near fire-kindling status.
Thanks to Brandon S. for these two items that he spotted in the Alabama media:
"Here is what happens when counties make poor financial decisions. Special
Masters Recommend Non-User Fees to Pay Off Sewer Debt, and County
commissioners [in a bankrupt county] fear for their safety and ask for off
duty police officers
to watch over them."
JHB sent this: [US]
Federal obligations exceed world GDP: Does $65.5 trillion terrify
anyone yet?
G.G. sent us this one from The Financial Times: Eurozone
slump worst in 50
years
From D.D.: Ruined financiers committing desperate acts
Items from The Economatrix:
What
The Stimulus Bill Means to Us Here is a quote: "For the average
Joe Citizen, it doesn't look good: $13 per weekly paycheck (if you have
a job) and tax breaks that appear to be for
those
who
still have
money for cars, houses and education. There's a few extra dollars for food
stamps, some Medicaid prop-up, some jobs...amazingly ineffective and not
likely to
ease the situation. Whoever said "anything is better than nothing" is
totally wrong in this case, considering the bill the taxpayers will end up
with." JWR Adds: Lest anyone deceive themselves,
any transfer of wealth orchestrated by government requires both a
recipient and an individual who's earnings are being expropriated. (See today's
Quote of the Day, from Kenneth W. Sollitt.) The money can't come out of thin
air. and when you consider the inherent inefficiency of government, this is
even more
of
an
insult than direct theft. At least
when
a robber
sticks you up at gunpoint, there is the assurance that Mr. Badguy gets all
the money that you are handing over. But when the government gets involved
in the
"fairness" racket, only about
50% of the tax funds reach the intended recipients. The rest is consumed
in overhead.
1
in 9 US Homes Vacant
The Coming Crisis: White Collar Homelessness
US Stocks Fall Again
US Auto Parts Industry Wants $18.5 Billion Rescue
Why Geithner's Bailout Plan Got a Bronx Cheer
Trillions? Get Ready for Quadrillion!
Projected Jobs Numbers Don't Quite Add Up
Geithner Faces Tough Debut at G-7 Meeting in Rome
Stocks Sink on Uncertainty of Stimulus Plan
S&P Heads to First Ever Quarterly of Negative Earnings
How to Invest When Stocks Aren't Going Anywhere
$100 Bills as Toilet Tissue?
Chrysler in a Crunch
Some Banks May End Up Nationalized, Analysts Say
« Letter Re: Getting the Right Training and Preparing Methodically |Main| Note from JWR: »
Letter Re: Some Thoughts on Economic Stimulus, From a Macroeconomic Perspective
Jim:
I sent the following letter to my legislative representatives:
Here is macroeconomics
as I see it:
Wealth comes from commodities, manufacturing (improving commodities), and agriculture
(same principle).
Service industries do not create wealth, they distribute it. This includes
financial industries.
Government consumes wealth as it re-distributes it. Even in the admittedly
vital services such as protection of its citizens.
Fact:
There are already (pre-”stimulus”) more government employees
than there are employees in manufacturing and agriculture in the US.
Observation:
The aforementioned being true, increasing the size of government is like
a snake thinking it can sustain itself by eating its own tail. Three things
will
happen. 1)
It will taste bad. 2) It will hurt. 3) Ultimately the snake will die.
Another way to look at it is to acknowledge that if government spending produced
prosperity, the US would be at its most prosperous.
This proves the common wisdom of the advice to those who find themselves trapped
in a deep hole. The first thing to do is to stop digging.
Strategies:
Consume less. The only credit problem we have is that too many (individuals,
businesses, financial institutions, and governments) have used too much credit
and amassed too much debt. This means you. When you have to incur debt to
pay the interest on your prior debt, you are running a Ponzi scheme. Does
this sound familiar?
Reduce taxes and simplify laws to give incentives to wealth creation. 1)
Oil (or any energy production scheme that investors will back) will stem
the
flow
of hundreds
of billions of dollars out of our country. We have a lot of potential energy
sources. These dollars can be used for further investment and job creation
in our country. 2) Agriculture - Our country is blessed with the ability
to efficiently produce food for our people and others throughout the world.
Reform the financial industry. Their accounting books should have all their
assets and liabilities on them. Acknowledge that derivatives are a form of
gambling (though even in Las Vegas the house makes you buy chips up front to
show you are good for the debt).
Allow institutions that have made bad gambles to fail. If you want to finance
something, help small and solvent banks that have made prudent business decisions
to buy (or assume) the assets of the insolvent institutions at fire sale prices.
So what if we have to learn the names of the new big (only) players in finance.
Stop demonizing the rich who have come to their wealth honestly. There
are only three things they can do to prevent their wealth from helping
the economy.
1)
Burning it. 2) Burying it in the back yard in a (really big) cigar box. There
it cannot help finance jobs or investment. They are not likely to do this
anyway since this strategy cannot make them more money. 3) Investing
it in financial
instruments that are the (so far) legal equivalent of gambling. As noted
previously, regular gambling is safer for the economy.
Final thought:
Government did not make our country great. Our Constitution made it great
by freeing people from tyranny (be it from cheats, liars, bullies, or government)
to become the best they can be by depending upon themselves. Please read the
book “The
5,000 Year Leap” authored by Cleon Skousen.
Regards, - Kris N.
« Odds 'n Sods: |Main| An Invitation to the Baen's Bar Forums, by Michael Z. Williamson »
Economics and Investing:
G.G. sent this: Rogers
Renews Bets U.S. Stocks Will Slump on Rescue.
From Brian F.: 25
People to Blame for the Financial Crisis:
Bill N. set a link to a speech transcript where a US Senator has the guts
to point
out the pork in the Stimulus Bill. OBTW, it is no wonder that the omnibus
spending
package is now widely referred to as The
Porkulus Bill.
Items from The Economatrix:
FDIC
Shutters Four Banks in One Day
Home Prices in Record Plunge in Q4
Economic
and Financial Systems Deliberately Destabilized. A key quote: "There
probably won’t be bank runs as in the 1930s. You will wake
up one morning and find you are going to receive one new dollar for 10 old
dollars
and that new dollar will be for all nations, as they all devalue and default."
Bank
of England Says UK Economy Could Fall 6%--- just three months after Alistair
Darling predicted
a fall of 1.25%
Could
Obama Turn into a Zombie President? Here is a choice quote: "They
have a plan for
a plan, but they don't really have a plan. The whole proposal is so vague as
to create new uncertainty,
and maybe
the
problem
is
really so
bad that they haven't worked out how to solve it."
"People Really Hate You" US
Bankers Told
US
Retail Sales Unexpectedly Halt Six-Month Slide (JWR's comment: I
attribute this to all the ongoing frantic gun, ammunition, and full capacity magazine purchasing.
Have you been to a gun show recently?)
UK Bank Regulator Resigns Amid Furor
« Two Letters Re: Denominating in Time Versus Dollars |Main| Note from JWR: »
Letter Re: Gold and Silver Coins as an Investment
JWR:
Christopher W. asks a very good question, "should you buy gold and
silver coins as an investment?" I think this brings up the point that
there are really two uses for gold and silver, as an investment and store of
value and
as a barter/trade item to facilitate commerce. Unless you want to overpay for
an item, you will need change, which for every day purchases is provided by
smaller silver coin. A friend on Wall Street put it this way "what are
you going to do, chip a piece off a gold brick to buy some food?" Smaller
coins can also be a good investment, in the sense that they hold their value
better than paper money, but you will create more value faster with bars than
coins, if it is return on investment you are after.
Countries with very limited or dysfunctional banking systems have this problem
today. Any readers who have traveled to Third World countries know you have
to keep your big bills (over $5) hidden away, the smaller bills are what you
pull out to transact. Many vendors don't have change -- they are basically
living hand to mouth and whatever they make is immediately consumed to feed
their families. Also, in many of these countries, there is not a lot of coinage
in circulation, hence the need for change. I've been in many situations where
the item I want to buy costs the equivalent of $1, but I had to spend $5 to
get it because I had no change. Fortunately, this was a tourism-travel situation
and I viewed the extra cost as a kind of charity. In a SHTF scenario,
charity might be limited to donations of items you could easily reproduce,
like food
from a garden. Coins will become much more precious.
Using gold and silver (and possibly platinum and other rare metals) as a form
of investment implies a larger transaction size than those used for every day
commerce. Maximizing your return on investment is the goal, not facilitating
an efficient commercial transaction, so what is most important is to buy at
the lowest cost possible. As an example, if the premium for an American Eagle
[one ounce] silver coin is $4 per coin and the cost of silver is $13, you would
pay $17 per ounce, a 31% premium. If you bought a large silver bar on the COMEX and
paid for physical delivery, it would cost a little over $13, a few percentage
points over the actual silver cost. So if you bought 5,000 ounces of silver
in American Eagles, it would cost $85,000, while 5,000 ounces of silver in
bars would cost $65,000. You could own another 1,500 ounces of silver bars
for the same amount of money compared to coins, in this example. When it comes
time to sell, silver bullion coins can be counted quickly (assuming they are
still in their sealed U.S. Mint boxes, 500 per box), but they will not command
the same premium paid when they were purchased. Bars, even though most dealers
accept them as genuine as they are serialized by the manufacturer, could require
an assay in some circumstances (up to $300 per bar). . Most investment metal
traders will be set up for this occasion and in an investment scenario it shouldn't
be a big deal. In large
volumes, the coin premium is a significant cost that cuts into investment profits.
The bottom line is you should start with coins, junk silver is very good, as
well as some gold coins. If you are fortunate enough to have completed all
your other preps and have money left over for "investment", you will
want to go with bars. - CK
« Economics and Investing: |Main| Letter Re: Gold and Silver Coins as an Investment »
Two Letters Re: Denominating in Time Versus Dollars
Sir:
I bought a cross cut saw on eBay and was wondering how one might sharpen
and care for it. I was directed to a USDA Forest Service web site that has
a
30 page downloadable document all about cross-cut saws, their use and care. And
it is free! Supposedly it is one of the best resources around on this particular
topic.
Kind Regards, - Jay
Jim,
The note from SF in Hawaii about the cost of barley versus the work to produce
it made me think of one of my favorite tales from Laura
Ingalls-Wilder's book, "Farmer
Boy", about the boyhood experiences of her husband Almanzo. In this
scene, Almanzo has been double-dared to ask his father for a nickel to buy
lemonade.
When he asks, his father gives him a lesson in the value of money that I have
tried hard to instill in my children:
Father looked at him a long time. Then he took out his wallet and opened
it, and slowly he took out a round, big silver half-dollar. He asked: "Almanzo,
do you know what this is?"
"Half a dollar," Almanzo answered.
"Yes. But do you know what half a dollar is?"
Almanzo didn't know it was anything but half a dollar.
"It's work, son," Father said. "That's what money is; it's hard
work. You know how to raise potatoes, Almanzo?"
"Yes," Almanzo said.
"Say you have a seed potato in the spring, what do you do with it?"
"You cut it up," Almanzo said.
"Go on, son."
"Then you harrow - first you manure the field, and plow it. Then you harrow,
and mark the ground. And plant the potatoes, and plow them, and hoe them.
You plow and hoe them twice."
"That's right son, and then?"
"Then you dig them and put them down cellar."
"Yes. Then you pick them over all winter; you throw out all the little
ones and the rotten ones. Come spring, you load them up and haul them here
to Malone,
and you sell them. And if you get a good price, son, how much do you show
for all that work? How much do you get for half a bushel of potatoes?"
"Half a dollar," Almanzo said.
"Yes," said Father. "That's what's in this half-dollar, Almanzo.
The work that raised half a bushel of potatoes is in it."
Almanzo looked at the round piece of money that Father held up. It looked small,
compared with all that work.
"You can have it, Almanzo," Father said. Almanzo could hardly believe
his ears. Father gave him the heavy half-dollar.
"It's yours," said Father. "You could buy a suckling pig with
it, if you want to. You could raise it and it would raise a litter of pigs, worth
four, five dollars apiece. Or you can trade that half-dollar for lemonade,
and drink it up. You do as you want, it's your money."
Regards, - Jason R.
« Odds 'n Sods: |Main| Two Letters Re: Denominating in Time Versus Dollars »
Economics and Investing:
It is noteworthy that spot
silver and gold prices
have remained fairly solid near their six-month highs, despite the IMF's saber
rattling move of announcing
403 metric ton sale of gold.: This is evidence that wise
investors have not been fooled by all the governmental and bankster
blustering and that they will continue to shelter more of their assets in tangibles.
"The Other Jim R.": flagged this must
see: video link: 'Worst
economic collapse ever'. (Don't hold back, Mr. Celente, tell us how you
reallllly feel!) For those readers that don't have a fast Internet connection,
Matt B. mentioned that there is a
transcript of the interview at the Russia Today web site
Thanks to G.G. for sending this from Wall Street Journal - Europe: We're
Heading Toward a Global Weimar; Things are grim, but he who masters green tech
will
be a superpower. A key quote: "The global banking system is thus on
the brink of bankruptcy. So the worst-case scenario is the most likely
scenario: a collapse of the banking system followed by world-wide
inflation."
E.L. suggested listening to An
Interview with Ambrose Evans-Pritchard in
Don McAlvany's latest podcast.
MPS in Alabama flagged this New York Times editorial: The
Worst-Case Scenario. MPS had this droll comment: "The plot summary of your
novel
has
been
appropriated."
Courtesy of Jeff in Alaska: Large
U.S. banks on brink of insolvency, experts
say
Larry T. sent this: Revealed: The true horror of everyday life in Zimbabwe
Items from The Economatrix:
US Unemployment Climbs to 32-Year High
Where Do All the Gold ETFs Get Their Bullion?
A Pension Deficit Disorder
Banks Agree to Foreclosure Moratorium
Wave of Bad Debt Swamps Companies
Silence is Golden (The Mogambo Guru)
Doug Casey on 2009: Another Year of Shock and Awe
European Bank Bailout Could Push EU into Crisis
Ireland to Take Control of Banks, While Plans for Fortis are Rebuffed
As Vacant Office Space Grows, So Does Lender's Crisis
Stimulus Still Can't Help Wall Street
Stimulus Puts $13 in Weekly Paychecks
Caterpillar CEO Contradicts Obama on Stimulus
Europe's
Industrial Base May Never Recover from Crisis "European Commission
warns EU states running out of money for rescue packages"
US Family Net Worth Down 20%
Senator
Schumer's "Pork" Comment Draws Ire
« Letter Re: Denominating in Time Versus Dollars |Main| Notes from JWR: »
Letter Re: Gold and Silver Coins as an Investment
James Wesley,
I’d like your input regarding the purchase of gold and silver coins from
third party vendors. Instead of paying $1,000+ for a single gold coin of one
troy ounce. I’d like to buy ten 1/10th troy ounce gold (or silver) coins.
I feel smaller denominations of “hard” currency promote better
trade/purchase power. I have noticed in a multitude of Gun/Survival forums/magazines
various
companies that offer coins that are not directly from the U.S. mint but are
[in smaller fractional sizes] than what you normally purchase from the US Mint.
I can foresee having a handful of one troy ounce gold coins [when] all you
need is a
dozen chickens. Any thoughts? - Christopher W.
JWR Replies: The situation that you describe is precisely
what I showed in the Barter Faire ("For an Ounce of Gold") chapter
of my novel "Patriots". A
full ounce of gold is far too compact a form of wealth to be practical for
day-to-day barter transactions. That is why I recommend
that readers here in the US invest in small-denomination US pre-1965 silver
dimes, quarters, and half-dollars, for barter. (Or get their equivalents, if
you live
elsewhere, such
as pre-1948
(pre-decimal ) silver English coinage, or decimal
or pre-decimal 1964 or earlier silver coinage in Australia.) The
prospect of making "change" from gold coin transactions with a cold
chisel is neither
practical nor aesthetically appealing.
« Economics and Investing: |Main| Letter Re: Denominating in Time Versus Dollars »
Sending "Patriots" as a Form of Protest
Dear Jim,
I was incensed that one of my state's US Senators (Kay Hagan of North
Carolina) voted for the so-called "Stimulus Bill". I searched for ways to
register
my protest in
such a way that it would get her attention. Thanks to you and your novel
"Patriots", I
have a way. I just sent her a copy with a gift card from Amazon.com. The
gift card reads: "This
is to thank you for voting for the stimulus bill and making the resulting economic
collapse and hyperinflation profiled in this work of fiction a reality." I
just hope she gets the message, since it is a bit subtle especially for a politician.
I really like your book and am re-reading it. I hope you understand that
I mean no disrespect to you in my means of protesting Hagan's vote on the Stimulus
Bill.
All the best, - John R., Waynesville, North Carolina
« Odds 'n Sods: |Main| Sending "Patriots" as a Form of Protest »
Economics and Investing:
From the most recent issue of The Appenzell Daily Bell comes an
article that details both banking peril and some blatantly revisionist editing: European
Commission report says $25 trillion in toxic EU bank holdings
Reader "DD" sent us this: Thousands
losing jobs in housing crisis.
From reader H.D.: The
Great Awakening: Boomers,
Your Crisis Has Arrived (Part 1 of 3).
From G.G. came this link: German
10-year Bund auction fails for second successive time.
Laura H. said
that liked
this Wall Street Journal editorial: Capitalism
Needs a Sound-Money Foundation.
Items from The Economatrix:
Martin
Weiss: Stock Market to Fall at Least Another 40%
Credit
Suisse Posts $5.2 Billion Loss
Pimco
[runs world's largest bond fund] Says World Crisis Faces "Second Wave"
Deluge
of Financial Calamities Looming by Mid-March
Gold Bullion and Crude
Oil Trading Analysis
Jobless Not Helpless: What to Do if You Lose Your Job
GM Offers Buyout to All 62,000 Hourly Workers
As
US Economy Tanks, No Limits to Make Ends Meet
Aetna
Net Income Hit By Investments; Shares Fall
As
Vacant Office Space Grows, So Does Lenders' Crisis
Shortage of Critical Commodities Already Seen
« Letter Re: Should You Invest in Real Estate? |Main| Note from JWR: »
Survival Retreat vs. Neighborhood Survival, by Dr. Richard
Earlier this month, I posted Etienne's guest post Seeking/Starting
a Survival Retreat in Virginia / Maryland / Pennsylvania / West Virginia.
Today, I had lunch with Etienne
de la Boetie and another prepper here in Loudoun County [, Virginia].
We had a long discussion about survival retreats vs neighborhood survival.
Etienne is a big fan of the survival retreat concept. He previously had a
retreat where he did not own the land but where he was able to store a travel
trailer recreational vehicle in which he pre-positioned various preps and
supplies. Unfortunately, his friend moved and sold the property. There are
four major flaws in the survival retreat separate from your home concept:
- There are significant liabilities and social problems with communal retreats
where one does not own the property - you are vulnerable to the actions of
the others, particularly the property owner.
- Property left at unattended retreats is vulnerable to theft and vandalism.
This is going to be a growing problem as the economic depression gets worse,
especially if we have economic collapse.
- Getting to the retreat would be problematic in the event that it is
actually needed - particularly in martial law scenarios where the military
and law
enforcement block traffic at key intersections or in cases where there are
fuel shortages.
- Relatively undeveloped retreats with a trailer and undeveloped
land may not be sufficiently developed for long-term survival and offer insufficient
space
for storage of the various preps and other items you need. Many of these
items would likely be at your day-to-day residence and you cannot assume
that you
can transport everything at the last minute.
My view is that survival retreats only work if you live there full-time. Furthermore,
although remote locations are further removed from the masses, they are also
further removed from jobs, markets, customers, hospitals, and many other useful
infrastructure and will be harder pressed to gather a sufficiently large group
to cover all of the tasks needed in a true long-term survival scenario. Even
the best special forces operator cannot defend his property 24 hours a day,
seven days a week. Unfortunately, we are rapidly running out of time and it
is probably already too late to relocate - especially if relocating means trying
to sell your existing home in this real estate environment -- in my neighborhood
we haven't had a sale in over eight months and anyone who bought in the last
four years and did the traditional 20% down payment fixed 30 year mortgage
now has negative equity.
I am a big proponent of the concept that your family, friends, neighbors, and
church are your survival group. Yes, I understand that many are unprepared
and clueless about both the threats and what they need to do to prepare for
them. However, your home is your survival retreat. Strengthen it to the extent
you can, but your odds improve exponentially if you can organize your neighborhood
and help everyone survive against the threat(s) you are facing in your survival
situation. You and those in the group who are better prepared or who have the
right skills are the cadre needed to get organized and do what is needed. The
rest of the neighborhood are your foot soldiers and do'ers. My philosophy is
to lead and organize but that charity starts with those who are willing to
help themselves and help the group in the survival situation. In a survival
situation, your first challenges are to assess the hazards/priorities/immediate
needs, organize the group, secure the neighborhood, and scrounge/barter/trade
for needed resources.
Be a leader. There are many things you can do to help develop your neighborhood
group of family, friends, neighbors, and fellow church members and increase
the odds of the neighborhood surviving:
- Get to know them.
- Have potluck dinners.
- Help them wake up and prepare.
- Start a garden club to help start victory
gardens.
- Start a community watch program for your neighborhood.
- Give them a copy
of Chris Martenson's
Crash Course on the economy DVD. I bought a case of
30 and gave them as 2008 Christmas gifts.
- Give copies of Holly Deyo's book
Dare to Prepare as gifts. I bought a case of 8 and gave them as 2008 Christmas
gifts to family and several neighbors
who got it and were starting to prep.
- Store extra preps for charity and be
prepared to give when it is needed for survival.
- Learn about their skills,
backgrounds, and interests - on my street we have a former Navy Corpsman/LEO/M16
Instructor/master scrounger/contractor/award
winning barbeque chef who "gets it" and is starting to prepare, two nurses,
a master gardener, an agricultural engineer / head of the 800-home neighborhood HOA,
a Mormon family that does food storage, and six members of the neighborhood
garden club run by our master gardener.
- Buy tools that would be useful that
could be shared like tillers.
- Buy extra seed such as a seven year supply of Survival
Seeds and be prepared to provide seeds for neighbors
- Build a survival library
of books and skills that you can use to train them when they need survival
skills.
- Buy several extra surplus rifles such as the Russian Mosin-Nagant
or SKS rifles and stock extra ammunition to equip your "community watch" patrols.
- Invite
them to go to a shooting range with you.
- Be prepared to give honest evaluations
of whether individuals should relocate once a survival situation begins
to relative's homes or even public shelters
if that is the best option for them.
You will be pleasantly surprised how many of your family, friends, neighbors,
and fellow church members that are starting to wake up and realize the reality
and danger of our current position. This number is increasing every week. Don't
simply assume that they are all clueless sheep - many simply need some education
and a leader to show them the way.
« Odds 'n Sods: |Main| Survival Retreat vs. Neighborhood Survival, by Dr. Richard »
Letter Re: Should You Invest in Real Estate?
To quote Robert Prechter, "Short Answer is: no. Long
Answer: The worst thing about real estate is its lack of liquidity during a
bear market. At least in
the stock market, when your stock is down
60 percent
and you realize you've made a horrendous mistake, you can call your broker
and get out (unless you're a mutual fund, insurance company or other institution
with millions of shares, in which case, you're stuck). With real estate, you
can't pick up the phone and sell. You need to find a buyer for your house in
order to sell it. In a depression, buyers just go away. Mom and Pop move in
with the kids, or the kids move in with Mom and Pop. People start living in
their offices or moving their offices into their living quarters. Businesses
close down. In time, there is a massive glut of real estate.”
This is entirely true if one looks back in history. However is buying a steak
for Friday night’s dinner an investment? Or is it part of survival? So,
we are caught on a cleft stick.
If we wait we will surely pay less [for a retreat property] as real
estate prices go down. But then we will be faced with a time problem. Can we
prepare
adequately
in
the time
available? Plants and other food supplies take time to grow, even if we do
it successfully the first time, and few have the experience for that. Can we
find the perfect location even when the price has gone down to more affordable
levels?
Another very important factor that people all too often forget is land taxes.
US states, by law cannot go bankrupt. That in turn means that taxes will not
decrease if the general level of income goes down, perhaps to say half of the
former level. If anything, taxes will increase. States still have
to pay their loans. Particularly in many urban jurisdictions land taxes are
near more modest
income rental rates. Do you think you own that property free and clear,
even if your mortgage is fully paid? Can you afford to pay sky high “rental
rates” (land taxes) for your fully-paid land if you are getting half
your previous income? Do you think that your income will remain at its current
lofty level as more and more become unemployed and start competing for your
job in an atmosphere where employers also are being squeezed?
It is time for some outside-of-the-box thinking here. Each jurisdiction is
different, but somewhere there is a loophole if one searches diligently. In
some jurisdictions,
one can find methods of freezing or even permanently reducing land taxes. In
one jurisdiction I know of, both are possible by registering your land as a
tree farm, resulting in reduced and fixed taxes for 30 years. In other jurisdictions,
it is possible to pay your taxes in advance, prorated according to the interest
rate. Even more, in some jurisdictions one can legally occupy land, pay no taxes
and no purchase price if you simply pay usage fees in advance, (usually quite
nominal) to use the land for specific purposes that politicians have
deemed as desirable. (Often in remote locations that politicians want to develop,
ideal for bug out purposes. This often has its own problems, usually surmountable,
but for illustration purposes it is adequate.)
It is time to analyze the situation determine our current strengths and weaknesses,
and plan to take advantage of our current strengths. They may disappear. In
the current situation, with government budgets all out of whack, negotiating
is possible in nearly every jurisdiction. While we still have a job and a bit
of spare money, we should be looking to cut deals. (and don’t say you
have no money. If the toilet breaks tonight, you will find a way of fixing
it tomorrow.) Today, we are not rushed, and government--however slow--is there,
and there to serve us. (Who knows what will come after TSHTF?)
We can ask questions and expect truthful answers when silly servants do not
guess which direction
our thoughts are trending. If things get tougher, they will surely guess. Find
that loophole wherever you want to be and exploit it. Find a way under, over,
around or through the problem.
Get started today. Tomorrow may be too late. And remember, the longest, or
shortest, journey starts with but one step. Stop theorizing and get off your
hind end. - Allen
« Two Letters Re: Alaska as a Retreat Locale |Main| Note from JWR: »
Letter Re: What Does the Drop in the Baltic Dry Index Really Mean?
Dear Jim:
I just read a
TEOTWAWKI warning
article [at Rense.com] stating that since the
Baltic Dry Index (BDI) was down
95%, [and that therefore] all shop shelves would be empty in short order. The
writer said that the BDI referred to the number of ships in transit. I thought
it only referred to the price charged for the transport of those ships and
that while the cost was indeed 95% lower, there were still a lot of ships in
transport. Can you clarify? - SF in Hawaii
JWR Replies:
I see plenty of scare pieces like that, mostly written by people that
aren't
looking at the whole picture. Here
is a videoblog clip, on the same topic.
You are correct that it is not the international shipping volume that
has dropped by 95%. It is just
the rates (shipping costs)
that have plummeted by 95%. Key
agricultural commodities like wheat and rice are still being transported in
quantity. But the balance sheets of the shipping companies are suffering because
orders for
imported consumer items like cars and plasma HDTVs have dropped to nearly
nil. Shipping
companies proactively raise or lower rates, as needed. During boom years, shipping
rates (bids) are high, but when orders decline, the BDI figure drops rapidly.
This is because the last
thing that any shipper wants is to set sail with a hold that is not nearly full.
The BDI is a useful indicator of global trade and global economic health.
It is indeed presently signaling economic depression. But it is not indicative
of imminent starvation in the US!
« Three Letters Re: The Community Retreat |Main| Notes from JWR: »
Preparedness Through Tapping in to the Craig's List Culture: Doing Well by Doing Good, by D.S.
I do not consider myself an expert on Craigslist.org.
However, I do cruise our local Craigslist several times a day as I am fascinated
with
what people are buying, looking for and selling. It helps me keep a pulse
on our local economy that I don't get through the Mainstream Media.
To that point, I have noticed a strong uptick, since the New Year, of people
selling anything of value that they can. This tells me people are really starting
to hurt from this incipient Economic Depression.
On items I have an interest in I call or e-mail to enquire. Lately, the conversation
has veered towards why folks are selling stuff. "I am getting rid of my
'stuff' as I don't know what the economy is going to do." "My husband
lost his job." "I have a small business but my clients are not paying
me what they owe me."
What has also started happening, at least from my perspective, is more and
more folks want to barter goods than simply accept cash. 120 bales of horse
hay sounds better to them than $1,200. Firewood has become huge as
a barter item as has quality hay and, of course, firearms. Quality reliable
cars for
less than $2,000 are very desirable. Items like Sterling silver tea sets and
Grandma's china are falling fast.
I am not sure when I began doing this, but in the past few months I started
offering folks alternatives to fiat money. 'Would you prefer payment in firewood,
Sir, or some other item, or is cash what you are looking for?' I had no set
protocol, I made it up as I went along, but pretty soon I started crystallizing
some thoughts on bartering on Craigslist. Here they are:
1. Say what you can do and do what you say.
2. "No, thank you." is a great response. Never be afraid to say "No" if
the deal does not work for you.
3. Craigslist is not a community in the sense that one seller does not (often)
hear directly from another on your reputation. But still, people can tell if
you are honest or are looking to skin them. Act Honorably always.
4. Get clear on what your natural assets are that you have to trade. One of
mine is firewood.
5. Timing can be everything - scan Craigslist frequently in your desired
categories since you want to be (to use an old Army Cav expression) 'the firstest
with the mostest!'
6. When I see a particularly nice item in the 'free' category I often inquire
if I might make a small charitable contribution to the charity of their choice
as appreciation of their item. I do this for one primary reason - it is the
right thing to do. It has had the ancillary benefit of having 'jumped me to
the front of the line' on some items. I offered my desire to donate to a Craigslister
for three free garage doors. He responded quickly that I was the only person
to do so, and that it touched his heart. He even delivered the doors to our
ranch (I can no longer drive as a Disabled Vet). I subsequently donated to
the local food-bank.
7. Always say please and thank you. Honest and sincere appreciation is a scarce
commodity today.
8. Never begrudge folks an honest profit. If someone makes great money from
an item you swapped or sold - congratulate them!
9. I use Ronald Reagan's motto: 'Trust, but verify.' I start off assuming I
can trust folks. But I always verify that what they are telling me is so.
10. Have fun! As long as you are helping others get what they want, you'll
likely always get what you want. That is satisfying from a
servant's heart perspective, and you meet a lot of nice people (not all though) while you are
building up your supplies and stores for your retreat.
The following are not a 'bragging' example. I hope you will simply see
these as examples of what is possible:
Four weeks ago I found a Mercedes 300TD wagon for sale ($3,000) or trade. I
enquired to see if it was still available, and to my happy surprise, it still
was. The young man (a survivalist) was moving to Belize with his wife and young
son and needed 'camping gear.' I asked what he really wanted and his reply
was 'a really good tent to live in while we build our house, and some nice
backpacks.' I have been a Boy Scout Leader for 20+ years and have way too
much camping gear. I offered him a Golite backpack (acquired from Craigslist
for
$40 - originally retailed at $190) and a [US Army surplus] GP Medium
Tent (like the tents one would see in the old television series MASH)
I paid nothing for the tent as I had bartered, through Craigslist, for two
of these GP medium tents for allowing a fellow to come hunt Elk on our property.
Very nice man, very generous, two amazing high quality canvas tents with all
the poles. As an aside, he never came to hunt though I wish he had.
As I type this, I am waiting for a fellow (a Senior NCO recently
returned from Iraq) to come over for three cords of firewood. He is giving
us two barely-used
Australian saddles and two snowmobiles. The snowmobiles may need a good cleaning
and rebuild, but I have 30 acres of dense woods that need to be cut back for
fire safety - I suspect I can find someone to help rebuild the snowmobiles
in trade for firewood.
Bear in mind, please, that I don't actually do the cutting of the firewood.
My left arm is pretty weak from nerve damage and holding a chain-saw really
hurts. So, again, I barter. If folks need wood I ask that they cut and split
a cord for me and they, may then, cut a cord for themselves. Sadly, I used
to offer firewood to folks if they'd come help me put some up. After they got
their firewood I never saw them again. So, now, I get 'paid' up front.
I may be close to closing a deal, today, for a beautiful Savage shotgun that
looks like a Browning A5. My cost? Giving the owner permission to come hunt
on our property for Elk. We both get something we really want and would be
tickled that the other loves what they get!
Reloading equipment 'grab bag' I had a gentleman over this past week looking
at antiques I had in our basement that had simply been gathering dust. He
mentioned, that right before he came over he had picked up a box of RCBS
dies (new in
the box) and three reloading presses. I swapped an antique table of my grandmother's
for the box of reloading gear. . After going through it I'll have several
dies I won't use (.243 Winchester, 7mm Mauser, etc.) that I can trade for
items
I do want (clean brass, Nosler or Barnes bullets, etc). I met the man by
looking through
Craigslist
collectibles to see who was selling items similar to what I had to sell.
Final example: A small herd of registered purebred Longhorn Cattle. A lady
listed four Longhorns for $1,300 on Craigslist. She was willing, according
to her listing, to barter for items other than cash. After talking with her
on
the phone I offered her any combination of hay, firewood, firearms,etc. The
two cows are bred and expected to calve this spring around May. So, with
items I have accumulated from others by bartering, and maybe $300 in cash,
God willing, I will own six purebred Longhorns.
I have helped others heat their house, hunt for meat for their family, feed
their livestock hay, and house their family while they build their home.
That is pretty cool! The satisfaction I receive from helping those folks
is immense.
Here is a tally of what I have received (or am about to) :
4 registered Longhorns (two due to calve)
An 1987 Mercedes 300 TD wagon
2 snowmobiles
A beautiful Savage shotgun
Reloading equipment
2 Australian saddles
Bartering is a very valuable skill to learn for a grid-down world. It is far
better to learn it now when the stakes are not nearly as high. Be
willing to make
mistakes and have fun. And please, if there are bartering skills that you
think should be mentioned to supplement those
that have already been discussed in SurvivalBlog, please e-mail them
to Jim.
Go out and barter now, and do well by doing good! - D.S.
« Odds 'n Sods: |Main| Letter Re: Mobs of Young Beggars on the Streets of Baghdad »
Letter Re: The Weekly Bank Failure Hit Parade
Greetings!
Three
more down, and waaaay too many more to go, most likely.
SurvivalBlog readers and everybody else ought to keep looking at The
Weiss Research
ratings regularly - - just to keep tabs on their
own bank, investments, insurance companies, etc. I've gone from checking once
a month, to once a week, to a couple times a week now -all in the span of a year!
- Bob
M.
JWR Replies: The situation in the banking world has become
so fluid that the ratings from Marty Weiss, et al may not be timely enough
to be of great
value. Their ratings are based on monthly and in some cases quarterly filings.
So, in addition to watching the TheSteet.com
ratings, I recommend that you watch
the stock price for your bank, assuming that it is publicly
traded.
« Odds 'n Sods: |Main| Letter Re: Advice on AR-10 Rifles (Updated) »
Four Letters Re: More Predictions for 2009, by Roger Wiegand
Mr. Rawles-
In response to "More predictions for 2009", reader Jeff K writes, "There
has never, ever been hyperinflation with deflating real estate prices.".
This is simply false, and a surprisingly common misperception. Zimbabwe is
hardly a 'red hot' market for residential (or commercial) real estate, yet
that country is an example of extreme hyperinflation. When Turkey went through
its period of massive inflation it too suffered declining real estate values.
South
America,
plagued with inflation during much of the past century was also a black hole
for real estate investment. Ditto for [much of] Africa. Weimar Germany, a famous
example of hyperinflation in a modern, western state was, similarly, anything
but an
appreciating property market.
What one may observe during a hyperinflationary event is the dramatically
increasing cost of assets denominated in the hyperinflating currency. The real
value of
the domestic assets (such as real estate), however, is not increasing but rather
decreasing as assets are constantly being revalued in terms of the inflating
currency's loss of value. This loss, counterintuitively, manifests as a "gain" in
the form of more zeros on the notes. Similarly, real estate deflates in periods
of hyperinflation even as its price "rises". This is why super- or
hyperinflation fails to attract real estate investors in states suffering such
economic mismanagement. - Steven L
Dear J.R.,
A recent article from Bloomberg "Attali
Warns of a' Worldwide Weimar' as Governments Print Money" will explain
to your readers of how inflation and even hyperinflation can develop from a
deflationary collapse.
As shortages of goods/supplies/services begin happening after manufacturing,
transportation and supply systems break down in deflation; and with the abnormally
increased money supply suddenly thrust into our economy working it's out into
the broader economy- the conditions for inflation begin. - M.M.
Hello Jim,
With regard to Jeff K.'s reply, calling Roger Wiegand a "huckster",
I'd like to point out some issues I have with his claims. Wiegand did correctly
call the crash of the US Equity Markets, as Jeff states, but I could not readily
locate anything about Wiegand being wrong on hyperinflation, since he isn't
calling for it until late 2009. As for a decoupling, Wiegand, again to the
best of my knowledge, has spoken only (or at least, primarily) of a decoupling
of gold from the Dow. No other decoupling mentioned. Foreign equities? Show
me where Wiegand has suffered a "big flop" here.
Same with commodities, where he continues to support gold, which is a long-term
position and one with which I wholeheartedly concur as having huge upside potential,
even more so for silver. And is Jeff K. investing in the S & P? He's a
braver soul than me, since I wouldn't touch the S & P with a
26 1/2 ft. pole, nor any other Dollar-denominated asset.
Jeff K. says "FYI, there has never, ever been hyperinflation with deflating
real estate prices. There has never, ever been hyperinflation when one's debt
is denominated in their own currency" Again,
Wiegand hasn't called for price hyperinflation until later and I think perhaps
Wiegand's timing could be off, but only the timing, not the inevitable event,
since there is no example in recorded human history of a continually successful
fiat currency, as they all eventually end, some catastrophically. Monetary
supply increases are [presently] in full swing.
How did Jeff K. determine that Rodgers, Schiff and Wiegand have been wrong
for thirty years? How can anyone be wrong for thirty years and maintain a growing
number of satisfied clients? (Sure, some got burned, no one is perfect).Is
he basing this on the fact that hyperinflation hasn't arrived yet? While it
may not be hyper, is a 98% loss in the purchasing power of the Dollar and Wiegand's
claim that it will get much worse, not enough to satisfy Jeff? Congressman
Ron Paul, probably the most educated Congressman on the economy, with several
related books written on the subject, also claims that inflation is all but
guaranteed in our future and I cannot rationally consider Paul a "huckster".
The [same] amount of money that the Fed created from 1913 to Sept.
2008 has been created in the last 16 weeks. This is off-the-hook,
unprecedented (at least in the US)
monetary inflation
and will potentially have a devastating effect on price inflation within 1-2
years' time. Worse, there are no plans to slow down and, in fact, the Fed continues
to smoke the bearings off the presses like there's no tomorrow. (And there
may not be, for the Dollar!).
The bottom line and the lesson I feel we should take away from these so-called "hucksters" is
that government intervention in the markets is the root of almost all our economic
woes. Inflation is real and growing, regardless of timing, and is likely to
get much worse. (The exact call on dates means very little to me) and that
bickering over these details of who is wrong and who is right is absurdly pointless
in light of what is unfolding. Understanding the degree of manipulation, the
vulnerability of our JIT infrastructure,
the fact that we import most of our food, fuel and goods...it doesn't take
a rocket scientist to realize the potential
for a very dangerous situation to unfold unnervingly quickly and for which
a staggering number are, sadly, completely unprepared, thanks to an ignorant
/ complicit mainstream media and a breathtakingly corrupt Fractional Reserve
Banking System.
Additional note: I contacted Euro Pacific Capital in the wake of the related
Shedlock article and received the following reply on Monday, January 26, 2009:
"Thanks for your e-mail. Yes we are aware of the Shedlock article,
and
we are disappointed that he would choose to market his firm by bashing ours.
On many
levels his critique is distortive and unfair. We will address this in upcoming
podcasts.
Thanks,
Andrew Schiff
Euro Pacific Capital, Inc."
Lastly, who does Jeff K. suggest we should entrust with economic insight?
Bernanke? Geithner? If he says Larry Kudlow, my opinion of his observations
will have been thoroughly confirmed. Some people will stand square in the
tracks and argue over a loose railroad spike, even as the speeding train
bears down on them. Sincerely and God Bless, - H.H.
Hi Jim,
Jeff K. slams Jim Rodgers, Peter Schiff, and Roger Wiegand in error as he does
not appreciate the long term and conservative (read safe) old fashioned investment
strategies, strategies safe enough for "widows and orphan" as they say. One
should keep their eyes on the big picture, the macro economics and think
in terms of years, and not in terms of a day trader and more nimble risk
taking 'investors' who can make money in the short term and yet loose in
the end. Few gamblers always call it right and most eventually loose. One
cannot compare these two very different classes of investing on the success
or failure of a chosen year or two.
This appears be the greatest financial meltdown in history, and as you say,
we are in "terra incognita". The fundamentals continue to justify
a conservative approach and playing the macro trends while ignoring the market
noise. While Schiff did missed this nasty deflationary phase, he may yet prove
to be a winner and Rodgers always mentions that he has the worst timing. Clearly
they have gotten the big picture right, it is now a matter of whether it becomes
be a deflationary scenario, some level of high inflation or the worst, hyper
inflationary. IMHO, hyper inflation is likely. Unfortunately I can't speak
about Wiegand. Fortunately I believe I've followed the best advice, the most
conservative of all and invested in tangibles, lots and lots of tangibles.
- E.L.
« Letter Re: A Handy Book for Boys |Main| Note from JWR: »
The New Washington, DC Paradigm Does Not Bode Well for Economic Recovery or Gun Ownership
Wednesday's news of passage of the "supplementary" TARP II
$900 billion stimulus and bailout legislative package in the House of Representatives
is noteworthy. The fact that it passed with hardly a whimper is evidence that
Congress cannot
be trusted to show any fiscal
restraint.
According
to
the Wall
Street Journal only about 12 cents of every dollar appropriated in that
legislation will go for something that can be considered a growth stimulus,
yet there was no
lengthy
or substantive
debate
on the bill. The floodgates of the Treasury have been opened! The Mother of
All
Bailouts
(MOAB) is
now sure to further expand, to heretofore unimagined proportions. Henceforth,
each time that there is a new "crisis" or "emergency",
or a "threat" to a vital industry, Uncle Sugar will dump veritable truckloads
of magically-created money on the problem. What will be deemed a "vital"
industry?
Car
makers have already been deemed
vital. So why not truck and heavy equipment manufacturers? And the steel mills?
And the airlines? And the aircraft makers? Ship builders? Why not yacht builders?
The newspapers? ("They're
really hurting, so let's just print more money!) Despite the
fact that every Republican
congressman voted against it, the bill was passed
by the Democratic majority.
The passage of this bill is an ominous sign, and it is a dangerous precedent,
especially when we consider the other legislation that the Obama-Reid-Pelosi
cabal
may have
in
mind. I suspect that they have plans for a panoply of socialist programs including
universal (taxpayer-funded) health coverage, the so-called Fairness
Doctrine, expatriation controls, enormous welfare and public works programs,
and, of course
new civilian disarmament ("gun control") legislation. Perhaps our
only
hope on the latter is expansion of the Heller and
Lopez Supreme Court precedents, in new court decisions that affirm
the Second Amendment as both and individual
right and a collective right, and that further constrain Federal jurisdiction
on firearms manufacture and sales. In light of Heller,
any law, agency directive (or "interpretation"), or executive order that infringes
on the Second Amendment
will quickly
be stricken
down. (But then there is the nagging issue of Federal court packing by the
BHO administration.
This is possible, depending
on how many SCOTUS justices
retire in the next four to eight years.)
Getting back to the economic morass, the key point again is that the floodgates
have been opened. There is
now no limit to the MOAB. Rather than allow the natural market cycle to work
malinvestment
out
of the
economy,
the
Federal
government
and the Federal Reserve banking cartel will do their best to reliquify
and and
re-inflate the Big Bubble. What will come of this is anyone's guess, since
this is truly Terra Incognita. A liquidity crisis this enormous is
without precedent. Will the deflationary spiral be unstoppable? Will mass inflation
emerge? Stay tuned. But don't look to me for answers. I didn't write the script.
Or then again, maybe
I did.
Business Week recently
reported: "New Treasury Secretary Timothy F. Geithner is exploring
the creation of a government-funded 'bad bank' to buy up mortgage-backed
securities and other troubled assets from banks in hopes of boosting their
capital levels..." This is all aimed at breaking banks out of their
fear of lending. Bankers are currently so petrified that the credit market
has essentially dried up. Even ostensibly credit-worthy companies can't get
loans. So the MOAB expands, yet again, using taxpayer dollars to buy up the
toxic debt.
Talk about a losing proposition! Only a government would embark
on such a venture. Of course, they'll be doing what governments do best:
spending other
people's money.
The government's response to the credit
collapse could best be described
as a "horrible spasm". (I mean that in the
McNamara sense of the term.) The Feds
and the Fed are flailing about, throwing money around in gargantuan quantities,
hoping that something, anything works to get credit flowing and the
economy jump started. They won't dare admit that they have no idea what they
are doing. Parenthetically, do you remember Jim
Cramer shouting "He has no idea!", back in August of '07? Perhaps
that public meltdown on CNBC was a foreshadowing that The Powers That Be still have no
idea. Again, we've entered Terra
Incognita. As I warned in
July of '07 and again
in
March of '08, things could get very, very bad before they ge any t better.
To monitor the economic situation, I recommend watching some key figures:
The first is the US
Dollar
Index. (After testing the critical 72 level, the Dollar has gained strength
in foreign exchange. (Not because of any inherent strength, but rather because
European
banking is even more badly broken than American banking, and the Euro and Pound
have taken a beating)
Next is the spot price
of gold. (Can you spell "suppression"?)
This
Adjusted Monetary Base chart released by the St. Louis regional Federal
Reserve Bank sheds further light on the "Big Picture". (Look closely:
Don't miss the
upright spike that
is hidden
behind the gray bar at the right end of the chart, showing the enormous growth
of the monetary base in 2008.)
And lets not forget the
bank reserves statistics published by the Federal Reserve.(These show a banking
system that was until recently starving for reserves, but is now gorged with
reserves
that the bankers refuse to lend, out of fear.)
For even greater detail, see Dr.
Gary North's "Charts to Monitor" links.
In conclusion, I must repeat my long-standing advice to SurvivalBlog readers:
Get prepared to ride out a lengthy economic depression with accompanying civil
strife, massive economic dislocation, and the destruction of the dollar as
a currency unit. Self-sufficiency, self-defense, and charity may very well
be the bywords of the coming decade.
« Odds 'n Sods: |Main| Letter Re: A Handy Book for Boys »
Two Letters Re: More Predictions for 2009, by Roger Wiegand
Good Morning, Jim!
This is a response to “More Predictions for 2009”:
We can't make other peoples' choices for them, but we can be affected by them.
We are our brothers’ keepers, but not their masters. Governments will
always do what they always do. You need to be concerned with your “mini
government” - your own household. Wherein the adults are the governing
body and are also constituents (along with any dependents). I choose to focus
on what I can control and not toil and spin about the stuff I can’t control.
My predictions for 2009?
- My wife and I will finally take an NRA rifle safety course (already in the
works).
- Depending on how our marksmanship and safety progresses, we might hunt for
food.
- We will evaluate how much wood we burned through winter and adjust accordingly.
- We will increase the size of our (tiny) gardens with knowledge from last
year.
- We continue to diversify our income streams and savings (between the two
of us we have five incomes: two main, one moderate, and two minor).
- We will reduce expense by finding cheap alternatives to everything and continuing
to make our house efficient.
- We will unashamedly get all we can for free. Fruit from public land, materials
from Craig's List, wood from a friend, etc.
- We review home security, vehicle capability, bug-out-bag readiness, and take
budget-appropriate actions
- We will finally repay the rest of college loan debt and live truly debt free!!
(remember: a mortgage is an investment in equity)
Our mindset is that being “in the world but not of the world” makes
a lot of sense for every aspect of our personal existence, not just religious
influence. While there are a lot of frightening and depressing aspects to be
aware of, we will not be frightened or depressed by our awareness of them.
I wrote not to criticize Mr. Wiegand’s excellent analysis, but to simply
reinforce focus on what we can do because of these signs.
- Carl H.
Jim,
I must say that Wiegand is another huckster that has had his hat handed
to him over the last two years: the S&P has done better than his
portfolio. He is another guy that can't make money in good times or bad. If
you followed this guy's advice, your account would be friggin' destroyed.
Here are the four theses of Jimmy Rodgers, Peter Schiff, Wiegand, and all the
other hyperinflation guys:
1.) US Equity Markets Will Crash.
2.) US Dollar Will Go to Near Zero (Hyperinflation).
3.) Decoupling (The rest of the world would be immune to a US slowdown.
4.) Buy foreign equities and commodities and hold them with no exit strategy.
They got #1 right, but their investments related to that were a disaster--
2, 3, and 4. Big flops. Why promote people who have been wrong for 30 years?
FYI, there has never, ever been hyperinflation with deflating real estate prices.
There has never, ever been hyperinflation when one's debt is denominated in
their own currency.
You may find this
article about [Peter Schiff] interesting: Regards, - Jeff K.
« Another SurvivalBlogger's Experiences at Front Sight |Main| Notes from JWR: »
More Predictions for 2009, by Roger Wiegand
Our new president was inaugurated and we wish him well for the sake of our
nation and others throughout the world. We do not want to be cynical but must
be realistic. We think this year will be the worst one of this longer recession-depression
cycle and our new leader, we suspect is going to take a merciless pounding
from a heap of troubles domestically first and foreign later.
Thankfully, the spending of TARP #2
and whatever billions-trillions are added for emphasis, should give us the
Obama Market Bounce lasting perhaps 90 days
or so. While this economics plan has no chance in our view, the herd psychology
of markets should give us a nice relief rally almost across the board. The
dollar is flat to down on the intermediate cycle and bonds are the same. We
forecast the balance of our favorites to rally along with shares in both the
mainstream and precious metals.
However, with spring flowers in April we are expecting a quintuple smash of:
Wave one of commercial real estate foreclosures and loan failures. Some
of the biggest of the big buildings will be foreclosed and those planned
but not
built will never see daylight. Meanwhile, vacancies skyrocket while budgets
are busted with dropping rents. One analyst estimated the New York City Financial
district buildings will see 66% occupancies with break even budgets being
much higher. You will see some major shopping malls shut down.
The second wave of residential foreclosures and loan failures arrives dragging
down all real estate values both commercial and residential. They will sink
like a rock in over-built states and within those regions previously hit the
worst. This is related to the next mortgage failure cycle. Some of those formerly
upscale, McMansion subdivisions will turn into ghost towns.
Wave one of auto loan failures containing billions in bank, credit union and
auto finance company loans will smash credit markets. The reaction will be
stunning and probably stop most vehicle lending temporarily for weeks paralyzing
automakers and those lenders still doing car and truck loans.
Wave one of several future waves of credit card failures estimated at $40 billion
by bank credit analysts will be an April smash. Normally card failures are
in the 1-2% range annually. This larger event opens doors for a historic new
number
of non-payers and delinquents. This cycle is mostly job loss related but most
of it is due to overspending by cardholders.
Wave one of the Credit Default Swaps (CDS) will hit markets like a Tsunami.
These failures will be so overpowering, those in charge will be stunned and
flabbergasted
by the numbers. The figures are so large we cannot even imagine the amounts.
One analyst said it was estimated between $500 and $750 Trillion dollars! There
is no margin or deposit money on these trades.
Most See A Crisis Of Liquidity. We See A Crisis Of Insolvency.
Here is the difference: For those in a crisis of liquidity they have a temporary
shortage of liquid cash but do have a positive balance sheet with a viable
longer term business plan. Insolvency is something entirely different. Those
personally or corporately insolvent have both a shortage of cash but worst
of all do not have a reasonable and viable plan to grow themselves out of trouble.
No matter how many billions are tossed to those insolvents, they will crash
anyway while taking billions in TARP and replacement cash down the tubes with
them.
An excellent example is the American auto industry. Even with enough cash to
get by for say three years, the overwhelming debts and their whacko budgets
eliminate any hope of recovery. The automakers are insolvent. When compared
with their European and Asian competition, the Big Three continue to operate
on the old paradigm with overly generous benefits, wages and perks. Further,
the work ethic in America is not the same as with most other auto manufacturers.
There are exceptions of course but the money deck is stacked against the Big
Three even having any chance. In addition to out of kilter budgets, the Big
Three has an extremely heavy load of legacy costs related to retirees. The
Asian companies do not have this burden for the most part. The Big Three are
paying big bucks for many more retired workers related to pensions and health
care.
A comparison might be the U.S. Social Security system. We already have too
many retired folks collecting benefits compared to those working and making
contributions. This relationship is going the wrong way very quickly. Real
worker contributions are not keeping-up with payment demands and further, those
worker contributions are deposited to the U.S. Treasury General Fund where
they are open to abusive spending for other things. Those contributions should
be in a segregated fund and not commingled. We suggest that when the younger
workers catch on they will rebel against this idea thinking they are tired
of feeding the oldsters and not keeping enough set aside for them selves.
Other Events Dragging Down World Economies
World trade is in a state of collapse as seen in tumbling Asian manufacturing
and export numbers along with ships parked to the extent global docks are nearly
silent. Historically when this happens, nations turn inward to save themselves.
Asia will stop buying and investing in our crappy paper meaning the U.S. is
no longer financed. Further, trade wars and protectionism will appear to protect
internal and domestic economies. Nasty tariffs are born and international trade
anger rises. Mutual cooperation so necessary to move all the global goods goes
very bad.
Unemployment is rising swiftly throughout the world. In the U.S. we see 500,000
jobs per month going down the drain. Those are the losses reported. We would
strongly suggest the actual monthly loss is near 1,000,000 per month. If this
is true, America will shed 12mm jobs this year as our new administration proudly
announces they will create 2-4mm new ones. They will be going backwards at
the rate of nearly -80%, which is astounding. Worse yet, any new ones will
be make-work government jobs creating a further drain on the treasury. We see
next to nothing for new private employment. Obviously with all the joblessness,
bills are not paid relative to autos, housing, miscellaneous loans, education,
health care, travel, taxes, entertainment,
etc. Lost jobs create a cascade of failures across the entire spending-investment
spectrum. Further, when fear sets in as in today’s situation, those still
working stop spending. Spending losses encourage a Catch-22 and the whole cycle-episode
feeds on itself in a downward spiral.
While we remain in a primary deflation mode world-wide, we think inflation
followed by hyperinflation is very real and possible in later 2009. The Federal
Reserve and U.S. Treasury are just about at the end of their rope. They are
out of rate cut running-room and those moves are mostly ineffectual now anyway.
All they have left is a phony game of printing dollars and bonds while moving
them around in a circle within our country. Foreign USA paper buyers take less
and less at new auctions. We know they are dumping dollars and other papers
assets at a furious pace paying bills and investing in honest-to-goodness hard
goods with real value. Watch out for big time inflation in the second half
of 2009.
As we write this on January 20th, England’s Pound Sterling is taking
a historic dive as their central bank has been printing recklessly to fund
illiquid-insolvent disasters. One analyst expects the Pound to fail and this
monetary crisis to go into a Trustee Receivership with the IMF and Euroland
authorities in charge.
We’ve been saying for months the monster U.S. bond short just ahead will
be the mother of all bubbles. Others agree and we see more and more discussion
relative to this topic. Timing is difficult but more than one analyst suggests
using the ET’s for trading this longer term event.
One top analyst from Canada suggests this current economic cycle might resemble
the 1873-1896 depression in the U.S. Maybe, but with think its more like 1929-1939
as today is 1938-1939 with stronger negatives. After 1939 only war got the
global system on track again. Expect a repeat.
Remember Sir Alan delayed the 2000 event with low interest and free housing
money. He has only delayed the inevitable disaster giving it a bunch more nasty
power. The overshoot on the downside is already crazy and we have long, long
way to go headed down to the lower than low finish line.
Towns, Cities, States And Municipalities Losing Tax Income
Pensioners are a dominant investor group in municipal bonds for retirement
income. Real estate taxes are the primary driver of cash-in for these groups.
With tax values sinking and taxpayers defaulting, your local township, village,
county or city is not receiving enough income to pay bond interest. We think
there is a distinct possibility California goes bankrupt!
We see a series of rolling defaults. Look at California. The announced they
will be mailing income tax refunds late as they are broke. Further, some creditors
are either getting or, about to get payments from the State of California in
IOUs. This state is $40 Billion short on their budget and realistically
have no way to escape. Their lender of last resort will be Uncle Sam. This
means other states that behave themselves and pay their bills will have their
residents tapped to cover California messes.
In Michigan, the Cities of Highland Park and Flint went broke and Lansing (our
capitol) and Detroit are next. We cannot imagine what life will be like in
Wayne and Oakland counties in Southeastern, Michigan when our Big Three disappear
in bankruptcy. Hundreds of thousands of high pay jobs will vanish-suppliers
and associated employment constitute thousands more lost forever.
It has been said that whenever a nation’s debts exceed GDP by over +6%,
there is no recovery. The U.S. crossed that threshold last year and is headed
for +10% on debts over GDP. There is no turning back and the recovery could
be a decade or more away. We are going broke nationally for certain.
Being Poor Is A Hardship. Being Poor In The Middle Of Social Violence Is Untenable.
The U.S. has resources to provide enough food and shelter for the poor, and
newly jobless with little strain. They won’t do it because the government
is always a reactor not an initiator in solving problems. This means there
is a social upheaval ahead worse than ten Katrina’s. The sad part is
it could be avoided if the authorities would just get busy and get the aid
out and delivered. They won’t because they are too stupid and disorganized.
Watch the fallout from this mess!
Families, singles, children, and pensioners are going hungry for lack of adequate
nourishment many times trading food money for utilities or rent; not being
able to afford all necessities. Here we sit with millions of vacate homes and
more coming yet we lack adequate housing for the poor.
The food banks are overrun with demands while millions of others throw food
in the garbage. The food situation is one of transport and distribution rather
than a lack. Governments are not even close to being prepared for the crushing
demands of the cold and hungry we see in 2009-2012. Then, to make it all worse,
when the US weather warms-up and gets hotter this summer, heat drives out the
jobless and they go hunting on the streets. They will be on the prowl for free
food, food to steal and committing crimes for other necessary goods they cannot
afford.
The terrible, old Los Angeles and Detroit riots and those of other larger urban
areas will re-set new records for fires, destruction and mayhem. People read
of the billions stolen by crooked bankers and their sleazy associates and anger
is swiftly rising. We have no idea how crazy wild this can get but in our view
meeting violence with more violence is not the answer. For those with limited
resources it’s simply better to just get out of the way. For those with
money and an obviously good lifestyle in the city, we expect you will be a
daily robbery target. Better think about it.
Back in the 1930s depression, our population simply suffered in silence.
While I suppose there was some crime, it was modest compared to what we see
on the 2009 horizon. In this spoiled generation of me first-you last, there
will be no time for suffering in silence. When an unemployed father needs milk
for crying babies, he will get a weapon and go get the milk and food.
We get second-hand reports of huge gangs in South Central L.A., and Chicago
on both the north and south sides and others. California gangs are reported
to outnumber the police 3 to 1 and worst of all they have automatic and heavy
weapons. This is not going to be pretty.
Even in the rural parts of the country, there are steady reports of thieves
stealing farm equipment, robbing houses and taking fuel. Unattended property
is a target. We think living in a small quiet town with good neighbors, being
nondescript and blending in will provide a better life. If you can’t
move, better make provision for a spot to land if your neighborhood goes bad
overnight.
Another ugly part of depression life is a clash of cultures and religions.
The have-nots will turn on the haves perceiving them to be part of the reason
the poor are poor. Obviously this is ridiculous but that is an easy perception
to embrace. Look for new nastiness among those cultures most prone to argue
and pick-on each other and targets generally having a good life style with
plenty of money.
A new mindset is necessary to curtail higher, former lifestyles. I have friends
who spend like they did ten years ago but do not have ten years’ ago
resources. Inflation is insidious. It grinds away on your income with no raises
or increases being few and far between. It grinds away with taxes, as cost
increases constantly slide higher at a gradual but relentless pace. It takes
away little pleasures like eating out more often or taking nice vacations.
It tightens the belts of kids in high school who want more expensive stuff
while school systems offer less and charge more. It bites on us with repairs
and on things that break too often and cost too much. Once tiny, annual fees
like a dog license or, auto registration keep going higher and higher.
If most people took a real hard look at income and spending I think they would
make tighter budgets, curtail old pleasures and get rough with letting a nickel
go out the door. Most keep on keeping on, doing the same old stuff relative
to spending and wonder why they are broke. Americans probably have the worst
savings record in the world. They always spend far beyond their means, for
the most part; living from check-to-check. I see it in Michigan in upscale
neighborhoods where thirty-somethings living in McMansions have a husband-wife
income of $250,000-to-$300,000, being basically broke. They have multiple leased
cars and trucks, a house payment that would choke a horse and plenty of extras
including
private clubs, special training, fancy vacations, private schools, and overdone
holidays. Watch how this comes to a screeching halt!
The chickens (vultures) are coming home to roost. Bye-Bye $150,000 per year
auto engineer’s salaries, and here comes rising taxes as our esteemed
governor takes more and spends more even in these distressed times. She thinks
your earned money is her money. She never had a real job or met a payroll in
her life. Let them eat cake she says; all is well. Watch where that goes. Taxpayer
revolts are born of situations like this one.
I’ve got some bad news for her. The tax income is skidding, big painful
state lay-offs are just ahead and when schools begin to close, homeowners send
in house keys to the bank and leave our state. There is going to be lots of
jingle mail sent to the bankers this spring. Mark my words it’s going
to be beyond ugly. Maybe Michigan will revert to the forest emulating Detroit
where wildlife abounds and not the kind you think either.
The USA War Machine Will Shrink.
We Can’t Pay For It And Most Americans Are Tired Of Feeding Defense Companies
To Manufacture Stuff That’s Blown-Up And Wrecked.
Global economic calamities redistribute national power. The survivors have
independent energy sources or, they steal it from others. The Middle Eastern
struggles with Israel and the Arabs will continue we think until it heaven
forbid goes nuclear. NATO is going weaker in Europe as Putin closes in for
the kill. South America has several newly-bent left-leaning commie countries
courtesy of Hugo Chavez. His antics in his country and with neighbors, and
Cuba and Mexico tell us this dude is on a rampage to spread big trouble right
at the door-step of America in Mexico.
We sincerely hope our new president is a tough guy with the bad guys. They
will lend no quarter and are simply lying back in the weeds to take control
by force. We suggest if the truth be known, Mexico is far out on the stability
ledge as we speak. Our border guards and even the U.S.’s Border States’ National
Guard are no match for those criminals in Northern and Central Mexico. New
reports tell us they caused more deaths in Mexico last year than were counted
in Iraq. This is very serious, indeed.
New Currencies, Bretton Woods And T-Bonds
Our New York global trading and investment banks will require constant infusions
of new cash to stay afloat. The TARP funding and still more to come is tossing
cash into a bottomless pit. One of the world’s bigger banks is going
to fail this year and it will be a disaster.
Next, one of the larger insurance companies will go bankrupt and create another
shock to the core of our system and that of the world. This insurance company
crash will be matched by a monster blue chip American company failing and shocking
Wall Street.
The U.S. Bond bubble is the mother of all bubbles and has tragic consequences
for the entire world. These markets are 70 times larger than the shares markets
and form the lifeblood of capital for global finance. When this one breaks,
the reverberations slam the world’s financial systems to the bone.
The old Bretton Woods system of having our USA dollar as the backbone of the
world’s currency system could break down. The Asians and those in the
Middle East are already forming new currency and trade platforms based upon
brand new trading ideas. The U.S. Dollar is headed to .4600 on our forecasts;
roughly a -50% haircut. We are all entering a brand new world. The old world
is a goner and those who cannot change will wither and fail.
Get with a new program and be busy moving in the right direction. The time
is now and the time is short. We think after May, 2009, several chances to
implant new trades, investment ideas, personal events and other things will
be too late.
Imposition of government capital controls can impede moving your business,
cash, funds, and retirement in or, out of the U.S. It might be very expensive
and difficult; or impossible.
Survivors and Those Who Win Buy Gold And Silver
We think the secret to getting through this is to hunker down, eliminate debts,
keep a low profile, trade in gold and silver shares during this first quarter
along with futures, and then adjust in April when stocks sell off. Gold topped
out near $850 years ago right where our price is today. We forecast 80% of
the gold upside is still ahead in these markets. Silver is behind gold for
now but will catch-up. They never trade like twins most of the time. We think
the worst silver could do is $50; but expect much higher prices.
We look forward with anticipation to some great fun in these markets. If you
are not in a position now, hurry-up and get it done. The door is open for all
the shares’ markets including our precious metals. Futures traders in
gold and silver have been trading this past week in large size. It seems the
new trend is established and our long awaited rallies are underway.
In Trader Tracks, we provide weekly guidance and extra e-mail alerts to report
our best new trades and offer suggestions for trade management. Visit our web
site at WeBeatTheStreet.com for
more information on our spectacular futures and commodities trading record.
Whatever you do, make a concerted effort to stay with our trend and hang onto
your core holdings of favorite shares, cash, and coins. Physical gold should
never be sold or, traded but rather accumulated steadily on a monthly savings
plan.
Recent news says you cannot find any [bullion] coins or small bars. We see
delays and back-orders but some dealers have goods in hand right now. Go shopping.
Should
you have
difficulty buying physical metals, we suggest placing an order and being patient.
Big traders are always ready to buy the dips and normally never sell their
gold and silver. You would be amazed how quickly your physical gold and silver
will accumulate using this strategy.
Roger Wiegand
Editor, Trader Tracks
Newsletter & The Rog Blog at WeBeatTheStreet.com
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The Big Roller Coaster is Picking Up Speed
The following are few random observation on current events:
1. Economic News
1A. The recent turn for the worse for Great Britain's economy has sent shock
waves around the globe. I expect this bad news continue, and intensify in the
months to come, especially once the full implications of the Credit Default
Swap (CDS) derivatives fiasco become known.
1B. It is interesting to see that the COMEX
spot silver and spot
gold markets are breaking
out of their doldrums. Apparently, the big investors have come to realize that
there
are
simultaneous credit market-spawned economic problems in North America, Europe
and Asia. With the markets for currencies, bonds, equities and real estate all in
turmoil globally,
precious metals are rightly seen the only truly safe refuge for wealth preservation.
There will surely be some more scary pull-backs on rumors of central bank
metals
sales, but I think that this could be a major turning point for the metals
market. There is now a general sense of panic in the air, and the smart money
is heading for the exits.
2.) Gun Control on the Fast Track
2A. Ever since BHO was elected, gun, ammo, and
magazine buying in the US has been at an almost frenzied pace. People can
see what is coming. This is taking place even though there
is
not yet
a scheduled
congressional floor debate of the proposed re-vamped "Assault Weapons" and
"High Capacity"
magazine ban. This begs the question: What will the market be like once the
debate is in full swing? Methinks
that prices will at least double overnight. And then what will prices
be like if an when a bill is passed? (Needless to say, that would be a Very
Bad Thing. So please contact your Congresscritters, and do your best to stop
any and all gun legislation.)
2B. I do my best to avoid tenuous conspiracy theories, but the timing of last
weekend's Miami Viciousness with a ubiquitous Kalashnikov seems just
a tad suspicious:: "These
are weapons of war, and they don't belong on the streets of Miami or any
other
street in America," Mayor Manuel Diaz said. The Mayor and Miami's Chief
of Police "both
demanded immediate reinstatement of the ban on assault weapons. The Mayor
said [US Vice President] Biden has assured him the Federal
ban on assault weapons
will be reinstated in short order." [Emphasis added.]
2C. The BHO Administration has wasted no time rolling out a series
of Executive Orders (EOs). Both
my gut and my informants inside the Beltway tell me that another EO will
soon be added to the list with an importation ban on detachable-magazines
semi-auto rifles (and possibly pistols),
and for all magazines over 10 round capacity.
The
recent CBS Evening News piece on the gun-buying boom is evidence that
this trend is big. It is so big that not even the Katie Courics
of the world can ignore it. (Although they will do their best to soft-pedal
it, and
to deflect attention away from
the
BHO Administration's civilian disarmament agenda, which includes renewal
of the 1994-to-2004 Federal Ban, but with no sunset
clause.)
The two preceding data points are evidence that the "news velocity" in America
has increased and will continue to increase in the weeks to come. One could
compare
the economy
and politics for the next 8 to 15 years to a roller coaster ride. The ride
has already started. It is dark. Nobody can see the track ahead. There have
already been
some frightening
dips and turns. But we are now nearing the big Deep Drama point on the track--you
remember it--the one where everybody screams.
« Two Letters Re: Advice on Two-Way Radio Communications |Main| Note from JWR: »
Four Letters Re: The Gray Man in the Coming Storm
Jim:
"E's" Gray
Man concept is cowardly, standing idly by as evil men
corrupt this fine country. The Citizen, on the other hand, works to preserve
and protect
the
liberties that we now enjoy, in opposition to men and women who wish to do
those liberties harm.
The Citizen knows the power of government is kept in check only by the citizenry-at-large.
He (or She) is not afraid to oppose totalitarian policies, because he knows
to remain silent will surely result loss of his rights. He understands the
Constitution and respects the ideals of the fore-fathers. He knows they didn’t
hide at home when the call went out for help, and our great country was the
result.
He participates in activities like The
Appleseed Program where he can increase his skills
and knowledge. He is the first to write / call / e-mail his elected representatives.
He is the first to join with like-minded people in the NRA and
other organizations, knowing those organizations are not perfect but that there
is strength in numbers.
He not only teaches his children what is right, but he is an example to his
friends, neighbors and religious congregants. He is involved in leadership
activities like Scouting, so he can help mold the youth of tomorrow and preserve
great American traditions. He takes a kid hunting who has no other way to experience
a great American tradition. He helps out a neighbor women with two kids whose
husband is serving Afghanistan . He is not boastful or full-of-himself, but
is ready
to support liberty with a well-thought-out and logical argument.
This does not mean the Citizen is not prepared. This does not mean the Citizen
doesn’t keep his preparations under wraps and private. This does not
mean the Citizen does not put the safety of his family first and foremost.
It is precisely because he cares for his family that he refuses to allow tyranny
to become the law of the land.
The Citizen is not afraid to stand up and be counted against tyranny, as he
knows that both he and Gray Man are “on the list.” He, the Citizen,
refuses to go quietly into that long, dark night. The Gray Man, on the other
hand, will one day be hunted like a weasel in the wilderness: cold, wet and
alone, with no way to challenge the tyrants. - W-Squared
Mr. Rawles:
If our Founding Fathers had followed the "Gray Man" strategy, we
would still be British subjects. Regards, - Steven L.
Dear Mr. Rawles,
I read your blog regularly and appreciate the information deeply. I could not
resist replying to today’s post by "E." regarding the “Gray
Man’s” plans
for survival, because, of all the interesting posts I’ve read on your
site this one had a most unusual effect on me.
What I can’t understand is:
Where is “Gray Man” going to go after becoming a fugitive in a
police state? Especially with children? Is he going to walk there? How will
he trick the face/iris scanning cameras at every corner, or the heat signature
blimp hovering overhead, which are a certain part of the future he describes?
Where is “Gray Man” going to stick his [RFID] chip
when he also consents to being strip searched before thanking his oppressor?
How many of his friends, family members and co-workers will “Gray Man” surrender
to the authorities to maintain the appearance of loyalty to the system?
What good will it do “Gray Man” to teach his children of Liberty
after he has given their Liberties away?
Why didn’t the “Gray Man” do anything to help out the millions
of Americans who sacrificed their lives fortunes and sacred honor to preserve
Liberty for our posterity when we still had a fighting chance?
What sort of prayers will “Gray Man” whisper to his God after he
has rendered his soul and spirit useless in the face of evil?
The “Gray Man” is part of the problem. A typical American who so
desperately fears the consequences of saying ‘no’ that he has convinced
himself that consent to tyranny is somehow revolutionary. How can a man pretend
to
be free after relinquishing his rights? This is double think, and I find it
quite disappointing that many modern American males have such difficulty seeing
the value of rising in common defense against tyranny over shrinking away in
silent, lonely protest after having lost all.
Is a person truly being honest about the value of their life if they choose
to live it in bondage?
Thanks for all you do, Mr. Rawles. - D.H.
Mr. Rawles,
As a Christian, I would caution "E.," the "Gray Man," against
taking the chip and then removing it if he is also a Christian. If the RFID chip is the "mark of the beast" or if it merely could be, it is too
much of a risk for my soul. From everything that I have read in the Bible,
accepting the mark proves your allegiance to something other than God and it
is against His will. Personally, I do not want to be against
His will. If I am captured and forced to make a choice in those times, oil
up the guillotine
and I'll see you guys on the other side.
Always cynical, - Semper Cynicus
« Odds 'n Sods: |Main| Letter Re: Survival Gardening: Growing Food During a Second Great Depression »
Letter Re: The Real Threat is Deflation
Greetings Jim,
As always you have such great content on your site - I find myself constantly
looking for "tomorrow's" post today as I end my evening on the West Coast.
Regarding the post by David R: 'The Real Threat Is Deflation',
I'd like to mention a great article over on www.Mises.org called 'Falling
Prices Are The Antidote To Deflation'.
Thanks to your guiding me towards studying and understanding the Austrian School
of Economics, this web site has become, like yours, one that I seek out with
my morning coffee. Another great article recently posted on their web site,
and coincidentally written by Llewellyn Rockwell - the current president of
the Ludwig von Mises Institute, is: 'How
This Happened'.
Both of these articles may help many of your readers more clearly understand
why you are firm in your beliefs of the Austrian Economic system.
May God continue to bless you and your family! - Dennis in Northern California
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Letter Re: The Real Threat is Deflation
Mr. Rawles,
I greatly respect your advice and columns on most matters yet I continue to
see people like yourself claiming we are facing an inflationary holocaust.
People in the inflationary camp point to the size of the Mother of All Bailouts
(MOAB) or
the rate or printing as if that number alone meant something. You cannot
take that
number alone, sir, but must measure it against the value of assets that have
been destroyed by the deflation going on around you. The total inflationary
pulse from Europe, Japan, and the US thus far is approximately $7.5 trillion
as best I can estimate. On the other hand, the total value of assets destroyed
in 2008 alone was over $60 trillion dollars. In other words, deflation outweighs
inflation here by a factor of about 8 to 1. Even if we get another $50 trillion
in inflationary action, which I seriously doubt will occur, it would only
be an attempt to stand still against the massive wave of deflation going
on around us. And that doesn't count the losses that will come in 2009, 2010,
and beyond. It is my firm belief that we are in the midst of a deflationary
crash that is going to last 3-5 years and at the end of that crash is the
dissolution of the United States due to its incredible financial obligations.
What will come after that is similar to the breakup of the Soviet Union and
the emergence of new nations, each similar to but different from what preceded
it.
Given the above, I find it hard to take these warnings of impending inflationary
disaster seriously. The US cannot inflate without antagonizing its trading
partners who hold its bonds. Antagonizing them not only cuts off cash via lending
but likely cuts off trade, resulting in a lack of goods here in the US which
the US is no longer capable of filling by itself. Thus inflating is suicide.
Instead all the action I see appears to be an attempt by the very rich to "ride
the wave down" until it bottoms out. This bottoming out is the perfect
time to consolidate wealth in the hands of those that hold cash by picking
clean the pockets of the middle class who were heavily invested in the sucker's
stock market. Paulson is guiding the consolidation of financial institutions
into those few controlled by "friends of Hank" while people like
Ben Bernanke harp on bailing out the financial institutions (the very wealthy)
with hundreds of billions of dollars while disdaining to throw even breadcrumbs
(by comparison) to companies that employ the middle class of America.
In fact, the classic advice during an inflation is to be in debt up to your
eyeballs so you can pay the debt back with cheaper currency. Yet you give sound
deflationary advice - be out of debt - with which I agree. I truly enjoy your
column but wonder if it is time for you to prayerfully step back and really
examine the direction of the financial world rather than simply continue to
run based on old assumptions. If you stand back and simply examine the data,
rather than beginning with an assumption, the data appears to very strongly
point to deflation. Remember, Americans were told that the US would not allow
the deflationary mess of the 1930s to happen either, but it did. And if you
examine the Federal Reserve's role in that you see that they even inflated
the money supply to extremes. For starters, I recommend that you please consider
[Mish Shedlock's essay]
Humpty
Dumpty On Inflation. It's a well written article and certain graphs
in there are truly eye-openers. If you are not a regular reader of Mr. Shedlock's
column, you may wish to become one. He has been spot on the mark about everything
in terms of deflation or else he has been too conservative. For instance, he
said 2008 unemployment would exceed 6% clear back in 2007 when unemployment
was 4.9%. People said he was insane yet look at what happened. He also documents
the many ways wealth is being destroyed, such as the $10 trillion in household
wealth destroyed during the 15 months from the beginning of the 4th quarter
2007 to the end of the 4th quarter 2008. And that doesn't count pension losses,
or corporate and government losses plus it's only the US. Further, it's through
Mish's columns (Mish is his nickname) that I discovered that many large corporations
like HP and FedEx are freezing wages and suspending 401(k) contributions entirely.
Those are not inflationary actions!
I really do urge you to give the deflationary scenario a good second look.
The end of that road is just as horrible as the hyperinflationary one but the
way we get there may be different and it may cause you to prepare in a somewhat
different manner. Sincerely, - David R.
JWR Replies: You should be aware that I revised my predictions
for inflation considerably since the onset of the global credit collapse in
the third
quarter
of 2007. For more than a year, I have been predicting
that we'll experience at least 18 months (more likely 24+ months) of
sharp deflation, then followed by mass currency inflation.
I stand by that prediction. Once the "worm turns", and the Almighty
Dollar is
rightly
seen abroad as
the bird cage liner that it really is, there will be some spectacular failures
of US Treasury auctions. Then, in the great banana republic tradition,
the Treasury Department will have no choice but to offer higher and higher
rates of return in order to successfully peddle their paper. Meanwhile, the
multi-trillions in spending that cannot be covered by tax
revenues and borrowing will have to be covered by monetization, which
as I've mentioned before is highly inflationary. Once the
Treasury and Federal Reserve
take the turn down that path--and I'm fairly confident that they will--then
the fate of the dollar will be certain. From then on, it will be time to "warm
up the helicopters", as the Dollar heads into at least double digit
inflation--and possibly much higher rates.
« Letter Re: Waste Vegetable Oil for Fuel in Diesel Engines |Main| Note from JWR: »
Inflation, Taxes, and Self-Sufficiency
I recently received an e-mail from T.F. in Utah, who quipped: "They tell
us that inflation is now non-existent. Well, how many years of deflation will
it take to get prices back to where they once were? It is noteworthy that the
average annual property tax on a
house on a city lot now exceeds the entire land purchase price and construction
cost of a comparable square footage house, in 1890." Inflation is indeed
insidious. And its has implications that are far-reaching. For example, consider
the following:
Creeping tax increases one of the reasons that it is now nearly impossible
for someone to "live off the land" on small acreage.
Even if you own your house and land free and clear, property taxes are
inescapable. Thus, in "self-sufficient" mode, although you
can feed yourself, you still need a cash-earning job, just to pay the taxes.
I pray that at the far end of the coming depression, our debt money system--which
is the root of inflation--will be replaced by a system of sound currency that
is redeemable in specie. That is the only sure, long term solution
to creeping inflation, and corresponding creeping taxation.
I've mentioned this tale of woe before: Back in the 1930s,
my great grandparents lost a considerable portion of their 5,000+ acre sheep
ranch in northern California to back taxes. At the beginning of the Great
Depression they
were land rich but cash poor. But by the end of the Depression, that
had neither much money or land. (By 1942, the county had taken most of the
ranch
for back
taxes.) Although the chances of a long-lasting deflationary depression are fairly
small (since I think Helicopter
Ben will try to inflate his way out of this
mess), it is prudent to do your best to maintain a cash income to supplement
"the fat of the land", from your self-sufficient retreat. See the SurvivalBlog
Archives for some suggestions
on building up home-based businesses.
« Odds 'n Sods: |Main| Letter Re: The SurvivalistBooks.com Groups Match-Up Page is Back On-Line »
Letter Re: CNN to Air I.O.U.S.A. Today and Tomorrow
James,
This coming weekend, CNN will broadcast a program called I.O.U.S.A. It’s
a documentary about the United States debt – which is out of control,
an expose on just how bad our current economic crisis is. Karen and I believe
that becoming educated about what is possibly the biggest problem in our lifetimes – is
critical. So we write this email to you today hoping you’ll watch this
program and get involved. If we sit idly-by and watch from the sidelines as
our Federal Government continues to spend our hard earned tax dollars - in
an out of control fashion, well then we deserve what is coming. However, if
we can get our friends, families and loved ones educated about what’s
really happening with our money and hold our elected officials responsible
and accountable for conducting themselves as representatives of the people – we
might just make it out of this economic crisis. Someday.
This program will air on CNN on Saturday, January 10 at 2:00 p.m. EST
and on Sunday, January 11 at 3:00 p.m. EST. Please watch it. You will
be glad you did.- David D.
« Letter Re: The U.S. Expatriation Exit Tax |Main| Notes from JWR: »
Our 2009 Predictions, by Roger Wiegand
We think we now have enough data from both the fundamentals and technicals
to make some serious forecasts and predictions for 2009. While 2008 was a nasty
year when lots of things imploded, they are far from being repaired. Treasury
Secretary Paulson told us this week there are no more surprises, which tells
me we haven't even discovered but a small portion of this monster derivative
mess. His ripping-off of the taxpayers to the tune of $700 billion is only
a warm-up. However, the larger question for traders and investors is what could
happen next and when.
In the following report we take the key global economic points and suggest
the outcome for 2009.
The most important news for 2008 was the destruction of the big global banks'
net worth and their badly wounded ability to conduct normal business and make
market-moving loans. Ben & Hank's bailout only helped the bad-boy banks
reliquify themselves to remain somewhat solvent and stay in business. They
are doing nothing to extend credit to any business enhancing western or global
economies. The 2009 result will be no significant banker lending, taking more
bailout money and sweeping additional bad loans of all stripes under the banker's
rug and hiding the rest in back rooms.
The largest surprise in our view was the massive disaster at insurance giant
AIG. Despite numerous injections of bailout billions, AIG remains in very serious
trouble hanging on by their proverbial fingernails. The 2009 result will be
a surprise crash and failure of AIG frightening the world at large causing
ripples of failures throughout western and Asian nations unable to conduct
business without mandatory insurance policies. Most folks have no comprehension
as to the monster fallout this will create. It is in our view literally immeasurable,
and this is why Paulson handed them so much money.
Our new president is determined to hand out $860 Billion to One Trillion dollars
in a Herculean effort to literally buy a new economic recovery. While some
of his ideas are noble indeed the overall plan
will have little effect and Great Depression II shall take hold in 2009 with
crashing stock markets in May and September-October 2009. We think the worst
of the worst hits in later September 2009.
During the spring of next year we see:
(1) A second larger wave of residential housing mortgage failures; (2) The
first big wave of auto loan failures and repossessions; (3) Over $40 billion
in credit card defaults, smashing the bank lenders; (4) The first wave of commercial
mortgage failures and foreclosures on shopping malls, office buildings and
other commercials; (5) And finally, the grand smashing finale of Credit
Default Swaps (CDS) originated with no margin money or down payments! We heard
today the total is $500 trillion! I cannot even fathom that number. These five
converging
train wrecks could take the Dow from a dead cat bounce of 10400-10800 back
to 7250, or even 6600, or 5600.
Shares traders and investors have one more solid quarter, in our view to regain
some stock market losses on the forthcoming Obama Trillion Dollar handouts.
We think the rising share markets will help most all sectors gain some recovery
and provide the illusion the bottoms are in and new bases found. The stark
reality hits home after shares peak in April or early May taking an unprecedented
selling high dive scaring the wits out of Americans and the watching world.
Even with these events and rising unemployment and social problems, economic
observers and analysts could continue to plead the worst is over, the bottoms
are in and a fine, new, shiny world of trading and investing in our bright
economy lies just ahead for the fall of 2009. Then, in later September and
early October, the New York, London, Tokyo and Asian markets take a monster
crash. How low is low and how bad can it get? We think the Dow could end-up
on November 1st, 2009 anywhere from 5,600 to a low of 3,000 or even 1,500.
One guideline will be a falling overshoot of PE's on our largest, so-called
international corporations posting lows of 4 to7. Today, many of them are near
18. What does this tell us about the severity of our projections?
Unemployment nationally in the USA is now touching 16%. The officially posted
number is somewhere near half of that. By the fall of 2009, American REAL UNEMPLOYMENT
WILL BE NEAR THE ALLTIME 1930'S DEPRESSION HIGH OF 25% UNEMPLOYED. SADLY, THAT
IS NOT THE WORST AS IT GETS MORE DIRE. WE PREDICT REAL, USA UNEMPLOYMENT REACHES
30-40%. IN THE RUST BELT STATES OF MICHIGAN AND OHIO, WHILE 40% IS NOT UNREALISTIC.
Several European nations have larger, more established social safety nets for
the unemployed. In the USA, local, regional and national authorities are not
nearly as prepared. The American federal government departments for food stamps
and the job of providing welfare provisions will be overwhelmed. This will
be a Katrina event for the hungry citizens of the United States. Urban areas
will see skyrocketing crime and in parts of some cities, life could become
totally uninhabitable.
The last report we've seen on those receiving food handouts and related welfare
amounted to 11 million USA citizens with 700,000 children going hungry each
day. We suspect the true amount of those needing food help will rise to 35,000,000
with an untold tragic number of them being little, defenseless children. Governments
remain in denial and are not prepared for this national emergency whatsoever.
As things worsen, food riots and others with violence aimed at the "haves'
are common.
The number of bank failures over the next three years will be in the thousands.
In addition, the US Dollar's valuation could break recent lows near 70.00 on
the index, dropping to 46.00 by 2011 or 2012.
Inflation or potentially hyperinflation is quite real as the Federal Reserve
and US Treasury strain to print and circulate cash to prod our stalled economy.
It is simply not working even with the dramatically lower interest rates of
late. Benny Bernanke is out of rate cut running room.
Consumers are broke and going broker. Households of interrelated families are
doubling and tripling up even with several employed members being under one
roof. Basic costs of rent, mortgage payments, health care, food, utilities
and taxes are too much to bear on stagnant and in some cases falling wages.
In some areas of America, there are entire subdivisions of homes totally abandoned
or existing with only a hand full of occupants. The millions thrown at lenders
for new mortgages are not getting through to buyers, as there are fewer of
them. We are witnessing system breakdown.
Municipalities and states are sinking into a spending, debt-ridden morass.
It was reported today that 22 of 50 USA states are in serious budgetary trouble.
California is one of those in terrible condition and Michigan is already technically
broke as are many of her cities. Detroit will file bankruptcy in 2009 and there
will many other surprises as well. There will be a cascade of bond defaults
and the outcome will cap the ability of these cities, states and counties to
borrow ever more.
The shining light through all of this is the faster we find the bottom the
faster we can recover. Sadly, the recovery process will take years. Futures
and commodities traders should continue to earn steady profits as the stock
markets slide into oblivion for years. We see no recovery until 2015.
Roger Wiegand
Editor, Trader Tracks
Newsletter &
The Rog Blog at WeBeatTheStreet.com
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Letter Re: The U.S. Expatriation Exit Tax
Hi JWR,
Here's another one for your readers. I'd heard of this "exit tax" a
few months ago and it was completely ignored by the mainstream media (MSM).
At first blush, it doesn't appear to impact most people,
i.e. only those over $4 million USD net worth for couples who renounce U.S.
citizenship and leave. However, we all know how well the alternative minimum
tax (AMT)--the so-called millionaire's tax--worked out.
It was supposed to affect only several hundred tax "scofflaws", and
now because of inflation, millions of citizens are affected. A few years of
50% inflation will put most professional couples into the realm of exit tax
eligible.
I'm sure many of your readers will agree that it is making more and more sense
to go off the financial grid, as well as the electric grid. Rendering unto
Caesar is getting pretty darned expensive, even if you want to leave!
Take a look at this
post over at The Ron Paul Forums. Here is a snippet:
"Europe's Economist magazine refers to this new tax as, "America's
Berlin Wall." They also point out that, along with North Korea, the United
States is already one of the few countries in the world that taxes its citizens
on
their income regardless of the country they earn it in. As most already suspected,
the IRS is a hard master. A government that is bankrupt by any honest accounting
accounting standards will eventually be forced by its creditors to turn over
any real assets it
still has at its disposal. Unfortunately, in most courts of law, those assets
can include the full net worth of all U.S. citizens and residents. The ability
to tax this net worth, to extinction if necessary, is the ultimate backing
behind the guarantee U.S. debt holders know as"the full faith and credit
of the United States."
Yikes! - CK
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The MOAB Expands Yet Again: Five State Governors Seek $1 Trillion from Uncle Sugar
Back in November I reiterated my point that the Mother of All Bailouts (MOAB)
would know no limits. One of my specific warnings was: "The States - Some 29
of the 50 states are reporting budget crises. Lo an behold,
most of the hardest hit states are those with bloated Nanny
State bureaucracies.
No surprise there. The states that had the worst fiscal management, of course,
will get the biggest share of the taxpayer funds. Those that were fiscally
conservative will get nothing." A recent wire service headline confirmed
that prediction: U.S.
governors seek $1 trillion
federal assistance.The article begins: "Governors of five U.S. states
urged the federal government to provide $1 trillion in aid to the country's 50
states
to help pay for education, welfare and infrastructure as states struggle with
steep budget deficits amid a deepening recession. The governors of New York,
New Jersey, Massachusetts, Ohio and Wisconsin -- all Democrats -- said the initiative
for the two-year aid package was backed by other
governors and follows a meeting in December where governors called on President-elect
Barack Obama to help them maintain services in the face of slumping revenues."
This is affirmation of my long-standing assertion that the MOAB
will continue to expand, uncontrollably. According
to a published tally sent to me by SurvivalBlog reader Matt C., $7.2 trillion
of bailout money has been allocated, of which $2.6 trillion has already
been spent.
It is noteworthy that this figure does not include President-elect BHO's
proposed $1 trillion "stimulus
package",
nor does it include the $1 trillion sought by the state governors.But even
this
glut of Federal largesse (from your wallet, BTW), will be insufficient.
You will read of some spectacular state and municipal bond failures, more
derivatives fiascos,
state pension funds "in
crisis", and then there will be news of "special levies", "temporary'
or
"one time" taxes, and so forth. I anticipate that both state income
taxes and state
sales
taxes
will increase dramatically. There of course will also be news of "drastic"
cut-backs, but chances are that while some of the more extravagant programs
will be cut, few bureaucratic paper-pushing
jobs
will
be sacrificed.
(That, my friends is is the only truly "essential service" in the
eyes of a bureaucrat.) I also would not be surprised to see some of the
states
that have
never had
sales
taxes
start
to
implement
them.
The
bottom
line is
that
we can expect taxes to increase at the city, state, and
Federal
levels.
In an era of rising unemployment, the few
people
that
are still productive
and fully employed will be asked to shoulder the burden of the bailouts.
It will be wealth redistribution on a grand scale--Robin Hoodism run amok.
The only
genuine escape from all this would be expatriation, but few will take that
route. However, the one thing that
you can do with relative ease is
move internally to
a state with a smaller scale of government. Again, it is no coincidence
that the states that have he most bloated bureaucracies, the least fiscal
responsibility, and the most Nanny State
trappings
are
those that are having the biggest budget crises. If you stay in
any of those states, they are going to sock it to you. You can expect--with
utter certainty--that the tax rates in those states
to soon rise to painful levels. My advice is simple: Vote with your feet.
For any of SurvivalBlog readers that are self-employed, or that are retired
(or that are about to retire), or that have "portable" jobs that
are readily available with the same job security
in other states, my advice comes down to one word: move.
If you have been considering moving to a state with suitable retreat
areas,
take this as your cue. Given the
deteriorating real estate markets-both residential and commercial--this may
indeed be your
last chance to sell and move before you lose another 30% of your equity. Parenthetically,
I recently
had
some correspondence with a consulting client that owner of a small but prosperous
business in California. This man owns both a home and half a dozen pieces
of commercial
real estate.
He is someone
that has been "considering" moving to a state where hi family would
have better chance of avoiding violent crime. My advice to him was blunt:
"I recommend that
you seriously consider moving out of California, while you
still have the chance to sell your business as a profitable operation, and
sell your other
commercial
properties at a profit." And later, "I recommend moving out of
California and making your new [retreat] home your full-time residence. Sell
off most
or all of your
California properties. Perhaps leave one or two that are the most stable,
profitable, and recession proof in the hands of a trustworthy
commercial property management company. I realize that it is a major life
change that we are discussing, but recognize the real decisions have already
been made, and made by folks "above our pay grade". Presently,
99% of the population are deer in the headlights. They are petrified and
they are going to get squashed. You are in a good position at present,
and you should take full advantage of it by cashing out and moving as soon
as possible. If you wait until the recession (and then depression) sets in
in earnest, you will probably lose nearly everything. " And later in
the correspondence, after he mentioned how his business ventures were still
prospering,
I wrote:
" At the current rate, the prosperity you currently enjoy will evaporate
in less than two years. By then, all that you will have is un-sellable properties
and negative cash flows. Get out!" I then went on to
recommend to make some specific recommendations on potential retreat locales
(one of which was highlighted in my book "Rawles
on Retreat and Relocation".)
I concluded with an admonition: "There are quality of
like
issues at stake, but more importantly preservation of life issues.
Discuss this with your family and pray about it. In any case reduce your
commercial real estate holdings, as soon
as possible. That needs to be done, regardless
of where you
move. Do not hesitate."
I'm sure that there are many other
SurvivalBlog readers that are in comparable situations to that consulting
client. My advice to many of you would probably be much
the same. The only strong proviso in all this is: Do not abandon
a job that is good-paying and that has genuine job security. In
times like these, that would be foolish.
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From the SurvivalBlog Archives: Inflation--Past, Present, and Future
It has been said that nothing is inevitable except death and taxes. But personally,
I add inflation to that list. Inflation is an insidious hidden
form of taxation
We've been robbed! According to The
Inflation Calculator, what cost $100 in 1905 would cost $2052.36
in 2005. The U.S. dollar has lost 95% of its value in that time.
(If you were to buy exactly the same products in 2005 and 1905, they would
cost you $100 and $4.87 respectively.) The inflation rate jumped considerably
in the 1960s and 1970s. It is no coincidence that the U.S. Treasury stopped
minting real silver coins in 1964.
Even it this current era of supposedly"low" inflation, the depredations
of inflation are inexorable-- but just slower. It is like watching a 50 pound
ice block sitting in the sun. The real
rate of inflation is presently about 6.5%. Thus, you need to make at least
6.5% a year on your money just to keep pace with inflation. In the long term
the concept of "saving" for retirement is almost fallacious, especially
when you consider the bouts of inflation that are likely to occur in the next
20 years. The twin deficits--budget and trade--will inevitably lead to much
higher rates of inflation in the years to come. Perhaps we'll even experience
a full-blown hyperinflationary currency crisis that will wipe out the value
of all of our dollar-denominated investments in just a few months. I've said
it before, but I'll say it again: If you want to protect yourself from inflation,
then buy tangibles.
My late father used to be fond of saying: "There are three kinds of people
in the world: People who make things happen, people who watch things
happen, and [the majority of people,] the people who wonder, 'What
the heck happened?'" Inflation is a process that is so subtle that the
majority of people do not recognize it for what it is.
It is safe to assume that inflation will continue, and will only get worse,
especially with commodities. Oil will likely double in the next 18 months.
So that means corresponding increases in gas, diesel, and home heating oil.
Wheat, rice, and other commodities will also jump up in price. They too, may
double soon. Protect yourself from inflation. Stock up on tangibles. Not only
is it wise to be prepared physically, but you can also consider these tangibles
a prudent investment.
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Letter Re: The Best College Degrees for the Next Depression?
James,
longer this [economic death spiral] goes on, the more it looks like
this is going to be at least a decade before normality returns. So, if
you've got
a teenage
kid
you're probably
thinking, what kind of career (assuming we don't totally melt down at
a societal level) path he or she should take...
I was talking to someone the other day and he told me his kid was studying
art. "Oh, I asked, is he any good?" He replied "No, not really." This
family man is spending good money, money that could be put into preparations
into
a liberal arts education? Idiot.
Even if his son were Michelangelo reincarnated,
who is going to pay for artwork in a depression. It's not like he is going
to get a stipend from the
Medici
family and work on family portraits of the rich and famous.
I'd like to ask the collective survival mind as represented by SurvivalBlog
readers, what careers do you think are worth paying money to learn how to do
for the
next generation? - SF in Hawaii
JWR Replies: Off the top of my head, I think that any of
the medical professions would be good choices,
especially those related to geriatrics,
since we live
in an
aging society The only notable exception would be cosmetic surgery.
BTW, the Memsahib's
parents grew up during the Great Depression and consequently they told the
Memsahib
and
her
sister
that
they
would be willing
to pay for their
college education only if they wanted to be "teachers, nurses,
or dental assistants"--because there would always be some demand for them.
No fru-fru art degrees for their daughters!
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Two Letters Re: What Are the Best Magazines for Investment?
Jim
Here's my feeling on what pistol mags to obtain. Obviously, if you have a high
capacity handgun, it behooves you to have at least ten mags for it. I actually
have 30 Glock Model 19 mags since I already have one and contemplate picking
up another that a friend wishes to sell.
I'm also trying to pick up Glock 17 mags, even though they stick out the bottom
of my G19. I really want a Glock 34 long slide 9mm, and figure that the only
way I may be able to get mags for it down the road is to have them on hand.
They fit my [Model] 19, and stick out a little, but that's okay. [JWR
Adds: There
are
magazine "filler" sleeves made for the compact Glock pistols,
making them more
comfortable to hold when using full-size magazines--such as G17 mags in a G19,
G22 mags in a G23, and G21 mags in a G30.]
I want to warn you folks of one thing about Glock magazines. I am under the
impression that the company will be making the new Glock 21s, Glock 19s and
some others
in the "SF" [Short Frame] variation, which has a thinner frame, and
is more ergonomic. The problem is, while he new SF mags will fit the older
Glocks, the
old [pre-SF] Glock
mags won't work in the newer SF models. Apparently the mag body is cut for
the mag release in a different place. Thus, I'd recommend getting the older
version of the model you want, or just get the new SF mags. Right now, as I
said, I
think
only the Model 21 and 19 Glocks are made in the SF variation.
If you have an odd pistol, pay close attention to magazine availability. My
favorite carry gun is my Walther P-99 in 9mm. Mags were in the $50 range,
which made
them hard to afford. Every now and then, a company like CDNN gets trade-in
mags, which are priced affordably. CDNN were selling the trade in SW-99 mags
(which are the same gun essentially as the P99 for $28. I was able to pick
up two, but the company ran out the day after the election, and hasn't gotten
anymore. Since I like this handgun, I may have to bite the bullet and lay out
twice as much as what I give for Glock 19 mags to get a supply for this pistol.
I think the lesson is, if you have a Browning 9mm, or a Ruger P95, or a high
cap handgun
you
don't see every day, it would make sense to buy the mags while you can.
- Lawrence
K.
JWR Replies: I have been told that the SF mag catch notch
(on the front of
the magazine) can actually be cut by hand, with an X-Acto knife, to retrofit
older Glock magazines. BTW, I'm confident that some enterprising individual
is sure to soon produce cutting jigs,
to make this job easier .
Mr. Editor;
How can you tell people they should 'invest'
in magazines? That doesn't make sense. They are a commodity, that can be cranked
out
in huge numbers. - E.G.B., near Atlanta
JWR Replies: Magazines were until recently a commodity
but their status as a commodity
is is now dubious. As I described in this
article, Federal "bans" and "freezes" often spread
economic chaos. When governments interfere with free markets, prices can get
crazy. Just look at what happened to price of small containers of Freon, a
few years ago.
Based upon our knowledge of what happened during the last magazine
ban (circa 1994 to 2004, and thankfully terminated by a sunset clause), and
seeing a new presidential administration with hoplophobic tendencies
waiting in the wings, it is safe to assume that a new ban is fairly likely.
It is
therefore wise and prudent to stock up, in anticipation. My advice
is to buy all the full capacity magazines
that you and your children will ever need, plus a few more, as an investment.
In as little as six months, you may be very glad that you did! If a new ban
is enacted, it is very likely that the prices of most magazines will double,
and that some may triple or even quadruple.
« Odds 'n Sods: |Main| Four Letters Re: Long Haul Voice and Data Communications in a Post-Collapse Environment »
Letter Re: What Are the Best Magazines for Investment?
Dear JWR:
I took your wise advice
posted in the blog back in October and stocked up on magazines
for all my guns. I 've even
bought some mags [for other guns] that I just plan to buy, such as M14 magazines for my eventual super match M1A buy. But what I'm thinking is,
I should
also
do
is
by even more magazines just "on spec", knowing that
with Obama coming
in[to office,
that]
a
ban of
some sort is more likely that not. What types/model high capacity magazines
would
be
best
to
invest
in,
for
the most possible gain?
I love your blog. I read it almost every day. I recently "did the honest thing"
and became a Ten
Cent Challenge subscriber. (I'm the one that sent you a roll of silver
Mercury dimes.) Thx, -
Pat H.
JWR Replies: First, I must mention: I refuse to
use the term "high capacity" magazine. As our friend Boston
T. Party correctly
pointed out,
"High capacity" is a political term, designed to foster dislike and distrust
by the Generally Dumb Public (GDP).
The correct term should be "full
capacity". What is being foisted upon us by
the Barbara
Boxers
and
the Chuck
Schumers of the world are 10 round reduced capacity magazines.
A limitation to anything less that full capacity is a diminution of our full
and proper right to keep and bear arms. Further, from a practical standpoint,
speaking as
someone
that lives in grizzly
bear country, don't ask me to carry just a 10 round magazine
in my XD .45, when I could have 15 or more cartridges. It conceivably might
take more than 10 rounds of .45 ACP to stop a charging grizzly. And I have
serious doubts that
Mr. Ursus
A. Horibilis will
stop and wait patiently if I yell "Time out, while I reload!"
For investment, I recommend that you
concentrate on magazines for popular European
high capacity
pistols,
such
as
Beretta, Glock, SIG,
and HK.
The greatest
gains
will
be seen in magazine prices for models that have just recently been introduced
and for which there is now just a scant
supply in the country. Magazines for the new Springfield Armory XDM ("M"
as in Mega capacity--this
latest model holds 19 rounds!) would be another good choice. Although
Springfield Armory is an American
company, their XD series
pistols and magazines are imported from Croatia. If there is an import ban
enacted early in Obama's first term, I expect all XD
magazines to at least triple in price, and XDM magazines to perhaps
quintuple in price. I'm not kidding.
The SIG
P250 is another perfect example. Here is a gun that was only recently introduced.
Its magazines do not interchange with pistols from other makers. The majority
of new P250 owners presently have just one or two spare 9mm magazines, and
no spare .40 or .357 SIG magazines. (The pistol is modular,
allowing it to be quickly converted to other calibers.) If and when an importation
ban is enacted, these owners will be screaming
for
magazines.
I wouldn't be surprised to see the price of spares to jump to $125, or more.
If you think that P250
magazines are currently scarce and expensive, at $43 each, just wait a
year. If a ban is indeed enacted, these magazines could be a tremendous investment.
But even if there is no ban, even as a commodity these magazines will be a
good hedge on future inflation. (Under those circumstances, don't expect them
to gain value, but as a practical tangible they will at least hold their
value, even in the blistering heat of mass currency inflation.)
Another good example is the 31-round "Glockamole" magazine made
for the Glock Model 17, 18, 19, and 26. These magazines jumped from $30 each
to a whopping $150
each
during the 1994-to-2004 Federal magazine ban. Three months ago--when I bought
my pile for investment--they were $27 each. They've just recently jumped to
around
$50 each. I expect them to at least double again in price, if a
new ban is enacted. In fact, even standard magazines for Glock are likely to
at least double in price, and probably go even higher.As evidence, I can cite
that when the last ban was enacted,
the price of 17 round Glock Model 17 magazines jumped from $18 to $75 each.
Again, IMHO, at present your investing emphasis should be on imported full
capacity magazines, since an import ban could be put in place with nothing
more than an an executive order.
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Fear and Loathing in America's Age of ZIRP
You've surely heard by now that the
Federal Reserve has effectively lowered interest rates to zero.
Obviously having learned nothing from the mistakes of Japans's decades-long
recession, Ben Bernanke & Company have instituted
their own Zero Interest
Rate Policy
(ZIRP).
By artificially lowering interest rates, many economists predict that the Fed
will actually delay economic
recovery for many years. ZIRP was a failure for Japan, and I predict that it
will be a spectacular failure for the United States.
The Fed could, in fact, lower interest rates below zero,
to the so-called "Super Zero" range. Such absurdities are not impossible
in this wacky age. Just look at what is already happening (much
as I predicted): Using Trillions of taxpayer dollars, the Federal policy wonks and their bankster
buddies are
attempting to reanimate a collapsed
housing
marked,
defrost a
globally
frozen credit
market, and turn several Detroit
auto manufacturers that are bankrupt into corporate zombies. Any shred of fiscal
restraint has be thrown out the window. And if you are saying to yourself "super
zero rates will never
happen", then ponder
this: If you factor in the prevailing inflation
rate, then the ZIRP has already created super zero conditions, for
all intents and purposes.
Deflation, Then Inflation
We
will soon be living in some uncomfortably interesting times. As I've mentioned
before, we could see simultaneous
inflation and deflation. But, in general,
I predict that in the US 2009 and 2010 will be sharply deflationary,
but that the subsequent years will be distinctly inflationary. You
need to be watchful and ready for these sea change shifts. Don't hesitate
to restructure your investments accordingly,
once the changes becomes evident. Anyone that hesitates--the proverbial "deer
in the headlights"--will surely become investing road kill, wiped out by
the onset of rapid inflation.
Where does the Hunter Thompson style "Fear and :Loathing" come
in? The fear will
be an almost universal visceral reaction to declining stock prices, declining
real estate values, and monumental corporate layoffs, in the unfolding deflationary
short cycle. In the short term, cash will
be king. People will fear getting laid off, they will fear making
unnecessary expenditures, and they will consequently hoard their cash and try
to minimize
taking on new debt. This new mindset of deflation will soon become the norm.
Dollars will be systematically hoarded. But
not long after, to the surprise of many, cash will suddenly become trash. The
citizenry will soon learn to loathe the dollar, since its purchasing
power will wither with increasing rapidity as inflation escalates.
The Mass Inflation Trigger
The new mass
inflation will be triggered by foreign creditors coming to the recognition
that Federal spending for the
Mother
of All Bailouts (MOAB)
has gone out of control and that the US Dollar is doomed. Once they do,
it will start a cascade of events culminating
in the utter destruction of the US Dollar as a currency unit. The
first indicator will be the failure of US Treasury auctions. This will
be accompanied by a sharp drop of the Dollar in foreign exchange. (Watch the US
Dollar Index closely!) Then will come news of rapid
monetization of the Federal debt.
And last will be the rapid stair-stepping of consumer price inflation,
well into double digits, and possibly getting out of control into triple
digits, once the near hysterical psychology of inflation comes into
full swing. (The perception of inflation becomes self perpetuating. This
happened in dozens of countries in the last century.) The tidal shifts,
first to sharp deflation, and then to rapid inflation will overwhelm many
people. I can foresee that having the deflationary mentality suddenly inverted will be just too much for many people. It will be hard for them to mentally "switch gears", and their net worth will consequently suffer, once stagflation
begins.
In
times of rampant inflation, holding cash will be foolish. Pensioners
and anyone else on a fixed income will have their savings wiped out
very quickly. So just a couple of years after getting used to hoarding
cash,
people will suddenly
have to
learn to hate cash, in deference to tangibles. Much like the situation
I described in the opening chapter of my novel "Patriots:
Surviving the Coming Collapse", more and more
dollars will be chasing fewer and fewer available products. If the 20th
Century taught us anything, it is that these situations can quickly spin
out of control.
The Future for Precious Metals
The pendulum swings in manipulated markets
tend to be very wide, making wildly exaggerated moves.
Witness,
for example, the meteoric rise in crude oil prices for the past two years,
followed by a veritable crash in recent weeks. I predict that the precious
metals market will continue to be in the doldrums for perhaps the next 12 to
18 months, making just modest gains. But then once inflation kicks in as confidence
in the US Dollar vanishes, gold, platinum, and silver will skyrocket. My advice
follows a simple age-old adage: buy low and sell high. You should begin buying
precious metals now, while they are relatively low. If you wait until
inflation kicks in, then it will be too late to shelter your assets.
If and when you decide to liquidate part of your precious metals holdings
in the midst of a mass inflation, do not trade your
metals for greenbacks or other paper currencies--since they all inevitably
share the
same fate. Trade them only for
productive
tangibles. Buckle your seatbelt for what will surely seem like
a very bumpy roller coaster ride. For most Americans, it will be a ride to
financial
ruin. But for an astute and perspicacious small minority, it could very well
turn
out to be a ride to safety and perhaps even to financial independence. Be
ready.
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Letter Re: My Preparations are Fairly Complete, So What Next?
Dear Jim,
I have been saving money and selling some of my unnecessary items
and toys for a while now and have amassed $42,000. I have plenty of firearms
and ammunition, tools, a house that is semi-remote, and a stash of food (which
isn't enough I'm sure). I have paid off my credit cards and only have a house
payment left. My job is relatively secure I feel, as I work at a power plant;
though once the coal stops moving I wont be needed, I guess. I'm not sure what
iI should do with the money I have saved. It would seem there is nothing secure
anymore and with the government attacking its own money, the dollar wont be worth
anything soon. I'm going to look into gold and possibly some land, but might
I ask any recommendations you might have. Thank you in advance! - C.K.
JWR Replies: Your highest priority should be rounding out
your larder of long term storage food. I might be biased, but I believe that
my "Rawles
Gets You Ready" preparedness course preparedness
course is a good guide for that project. But after you
have deepened your larder, you should further depression-proof your life.
Even though you consider your job fairly secure, keep in mind that entering
some almost unprecedented perilous economic times. I expect massive layoffs
and
chronic
unemployment
in this nascent depression. As Sarah
Connor puts it so succinctly: "No
one is ever safe." Anyone
can get laid off. You can be an outstanding worker, in a presumably "safe"
industry, yet in a depression you can still get laid off or fired on a pretext,
for example just
to make room for a nepotistic replacement.
I recommend that you
take
part of your nest-egg and invest it in developing
a
second stream
of income. Ideally this would be a family-operated home-based business. Take a look at the community nearest to your
retreat, and see if you can determine what would be a
good "niche" business that would be depression proof. Part
of the savings that you mentioned could be used for education (to develop
a skill, trade,
or even a second profession), or for specialized manufacturing machinery,
tooling and/or raw materials, or for buying inventory to re-sell or barter.
The bottom
line
is that it takes money to make money.
Keep in mind that if you choose publishing or another mail order venture selling
something compact and lightweight, then you can take advantage of a national
or even global market. But if you are selling a service or a relatively bulky
or heavy handcrafted item, then your market will be essentially local.
So choose your venture wisely.
If, after you've expanded your food storage program and have developed a home-based
bushiness, you still have some remaining cash, Then it should be used to either
pay down your mortgage, or invest in precious metals. If you expect chronic
deflation, then apply it to your mortgage. But if you expect Uncle Sugar to
inflate his his way out of the current economic morass (as I do), then put it in precious
metals.
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Specialization and Decline, by J. R. Nyquist
Years ago, when the West entered onto a path of decadence, it became fashionable
to deny the historical consequences of permissiveness and bad behavior. As
the old standards fell away, new standards of “tolerance” and “acceptance” took
hold. With the fall of colonial empires and the upsurge of student radicalism
in the sixties, the notion of “barbarians at the gates” became
outdated. Heaven forbid that anyone should be described as a “barbarian” or
as “uncivilized.” The idea that some peoples were more advanced,
that some civilizations had more to offer, was no longer an acceptable way
to talk. The fall of the Roman Empire, therefore, had to be billed as a “transition.” The
barbarians were not the bad guys, civilization did not collapse, and the Romans
were hardly degenerate. One should not use words like “decline” or “fall.” Perhaps
such words hit too close to home. Better to deny the very history of decadence.
Consequently, Edward Gibbon’s magisterial History
of the Decline and Fall of the Roman Empire is no longer entirely
respectable. In James J. O’Donnell’s expertly crafted, politically
corrected version of the fifth and sixth centuries, The Ruin
of the Roman Empire, we find Gibbon’s work described as the “long
shadow of a short, fat man” darkening our understanding of the Roman
world. It is not the fall of Rome that is dark, but Gibbon himself!
The American Heritage Dictionary defines decadence as: “A process, condition,
or period of deterioration or decline, as in morals or art.” The fall
of the Roman Empire involved an across-the-board decline. This included, as
in our own time, a decline in population. Sizeable military defeats shrugged
off by the Roman Republic were crippling to the Roman Empire. In the centuries
between the battles of Cannae and Hadrianopolis there
occurred a loss of vitality. Sophisticated manufactures in the west Roman world
largely disappeared within a period of three lifetimes. Literacy, comfort and
trade also collapsed. This was the greatest economic downturn in the history
of mankind. According to the historian and archaeologist Bryan Ward-Perkins, “In
the post-Roman west, almost all this material sophistication [created by the
Roman civilization] disappeared. Specialized production … became rare,
unless for luxury goods; and the impressive range and quantity of high-quality
goods, which had characterized the Roman period, vanished, or, at the very
least, were drastically reduced.”
Civilization doesn’t always move in an upward direction. Decline and
fall is more than possible; such has actually happened. Over the last five
hundred years we have come to think of civilization as barreling forward, plowing
the ground for further progress. Nothing can stop the machine-like advance,
the steady rate of accumulation. Today we take civilization’s continuance
for granted. In this regard, the history of Rome is an irksome reminder.
But we’re smarter than the Romans, right?
The Roman economy began to move downhill around the fourth century. There was
widespread enervation, a loss of intellectual acuity within the elite. Effeminacy
had taken hold at a time when warfare was hand-to-hand. Incredible as it seems,
the Roman Empire became vulnerable to a relatively small number of barbarian
tribesmen. After penetrating the empire’s frontier, these tribesmen found
easy pickings within a defenseless interior. When the legions were lost or
decoyed, entire regional economies were plundered and ruined. In the fifth
century, when the western half of the Roman Empire was invaded by barbarians,
the city of Rome lost three quarters of its population. That is to say, Rome
lost 600,000 out of 800,000 inhabitants. Such was the magnitude of the massive
de-urbanization that occurred.
What led to Rome’s weakening? In describing the city of Rome in the middle
of the fourth century, Ammianus Marcellinus wrote of the vanity and materialism
of his contemporaries. Rome became great through virtue, he argued, and virtue
had given way to vice. Decades before the barbarians broke into the empire,
causing the economy to unravel, the Romans were focused on entertainment and
self-gratification. “In this state of things,” wrote Marcellinus, “the
few houses which once had the reputation of being centers of serious culture
are now given over to the trivial pursuits of passive idleness…. Men
put themselves to school to the singer instead of the philosopher, to the theatrical
producer rather than the teacher of oratory. The libraries are like tombs,
permanently shut; men manufacture water-organs and lutes the size of carriages
and flutes and heavy properties for theatrical performances.”
To borrow a phrase from Neil Postman, the Romans were “entertaining themselves
to death.” A great and prosperous civilization was about to disappear.
Who aside from Marcellinus was worried about it? From every indication, the
good citizen, the concerned citizen, was increasingly isolated and irrelevant.
The Roman Empire lost the ability, the willpower and the inner toughness to
confront the shabby little barbarian tribes that collapsed its delicate economic
mechanism. According to Ward-Perkins, “The dismembering of the Roman
state, and the ending of centuries of security, were the crucial factors in
destroying the sophisticated economy of ancient times….”
You do not need atomic bombs to depopulate cities or empires. A foreign enemy,
admitted inside an empire, can disrupt trade and stop the flow of revenue.
Legions cannot be paid, cities cannot be sustained, civilized life disappears.
The resulting economic downturn lasted for centuries. According to Ward-Perkins, “The
economic change that I have outlined was an extraordinary one. What we observe
at the end of the Roman world is not a ‘recession’ or – to
use a term that has already been suggested – an ‘abatement,’ with
an essentially similar economy continuing to work at a reduced pace. Instead
what we see is a remarkable qualitative change, with the disappearance of entire
industries and commercial networks.”
Civilization is fragile. Trade can be interrupted and peaceful industry can
be knocked out of operation. It doesn’t take as much interference as
you think. In his book, The
Fall of Rome and the End of Civilization, Ward-Perkins describes the
fragility of sophisticated economies: “to understand the full and unexpected
scale of the decline – turning sophisticated regions into underdeveloped
backwaters – we need to appreciate that economic sophistication has a
negative side. If the ancient economy had consisted of a series of simple and
essentially autonomous local units, with little specialization of labor within
them and very little exchange between them, then parts of it would certainly
have survived the troubles of post-Roman times…. However, because the
ancient economy was in fact a complicated and interlocked system, its very
sophistication rendered it fragile and less adaptable to change.”
Our modern economy is more complicated, more interlocked, and more fragile
than the economy of the Roman Empire. Specialization has made our society wealthy.
If the latter-day barbarians can accomplish what the Goths and Vandals accomplished
in the fifth century, the descent into darkness could be rapid and last many
centuries. “Comparison with the contemporary western world is obvious
and important,” noted Ward-Perkins. “We would be quite incapable
of meeting our needs locally, even in an emergency. The ancient world had not
come as far down the road of specialization and helplessness as we have….” J.R.
Nyquist Copyright 2008.
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Letter Re: A Company Layoff Underscores the Need to Be Well Prepared
Jim,
What a surprise my wife and I received at work yesterday. My wife and I work
for the same manufacturing company and after two banner years and a huge Christmas
bonus the company is reducing everyone to 20 hours a week. The company we work
for is a total "team oriented" place to work and if one person gets a bonus
we all get a bonus and the same is true when it comes to layoffs. While our
company
sets and exceeds the world standard for what we do many of the companies we
are dealing with are unable to now qualify for bank funding. What I find odd
is the fact that the companies we deal with are the ones that bring food to
tables around the world and are consistently profitable. I take pause when
the profitable companies aren’t able to do business.
So my true purpose for contacting you is to thank you for blog and the focus
it has toward preparation. My wife and I have been reading daily and are Ten
Cent Challenge subscribers. Additionally, I have your SurvivalBlog banner
on my MySpace page as well as all my outgoing (non-work) e-mail footers. I
read your "Patriots" novel and then started reading your blog
as well as the
Mental Militia
forums. Together, those have [motivated] us [to now be] sitting in a much
better place than we wouldn’t
be otherwise. We now have food supplies for ourselves and our children for
six months as well as weapons and ammo cache.
I want to close by saying that my wife or I ever seen this coming and we are
thankful to be as prepared as we are and hope that others step up while they
can. Sincerely, - "Sharp Shepherd"
« Letter Re: A Prescribed Burn in North Carolina to Find a Fugitive's Weapons and Ammo |Main| Notes from JWR: »
Call Me Delusional, by Edgar J. Steele
The following is an e-mail I sent three weeks ago to a small group of exceptionally-forgiving
friends of mine, in which I pre-announced my hunch that things have changed
fundamentally in the precious metals (PM)
markets:
There are lots of possible
reasons: options expiry last week, new administration coming, new econ[omic]
team (same as the Clinton econ team, which ran the [Plunge Protection Team]
PPT into overdrive), China going into recession, Motor City going BK, a need
to
devalue
the dollar in the face of global recession, shorter hem length, planetary alignment...
Fact is, though, it is just a hunch. An educated guess.
Both gold and silver were up smartly last Friday and this morning. This may
be a trend worth watching. If you have the ability and have not yet gotten
aboard
the train, this would be a good time. Silver is much more volatile than gold
and moves both quickly and over a larger amount of real estate than does gold.
Currently, silver is historically about as undervalued vis-a-vis gold as ever
has been seen. A quick march right through $20 per ounce is coming - of that
you can be certain - it's the timing that is fuzzy, is all.
eBay hasn't yet caught a whiff of the trend, if a trend it is, thus the premiums
for silver and gold still reflect last Thursday's prices. A good time to buy
on eBay but not to sell. I hear that Tulving has silver for sale.
Throughout this whole debacle during which physical and paper PMs parted company,
resulting in a true "Black Market," real, physical silver never has
gone below $15 per ounce. Recall that I said a while ago that you never again
will see silver below $15. If we see a sudden upsurge in the spot price of paper
silver, it will be interesting to see if the 40-60% physical premium carries
along - it probably will for a while, then decline.
My feeling isn't strong enough yet to go public to my list or web site with
my hunch. This missive goes out just to a handful of those who I know will
forgive
me for being wrong, as I so often seem to be regarding short-term PM price movements
(though my long-term trend forecasts have been right on the money).
I'm looking for serious and significant politico-social events during the next
90 days. All hell could break loose, in other words. This, perhaps, is the single
most important component of my hunch.
- - -
[Some follow-up commentary, also by Edgar Steele, added on December 15th:]
Though I have personally suffered tremendous losses as a result of the government's
months-long manipulation of the dollar, silver and gold, it has pained me even
more deeply to know that others have sustained such losses, at least partially
in reliance upon my outlook.
Fortunately, most have followed my recommendations to the letter and bought
only physical silver and taken personal delivery. They will be made whole and
then some. A whole lot more than "some," I firmly believe.
Some list members, like myself, have been foolish enough to ignore my fundamental
advice to hold only physical PMs, which is all that I continue to support publicly.
They and I took substantial positions in mining stocks on margin and we got
destroyed during the past few months. It was a calculated risk. I never imagined
that the government would drive down PM prices while the stock market crashed
and simultaneously inflate the dollar beyond the bounds of all reasonable foresight.
Our recent experience illustrates the folly of investing (gambling, actually)
with borrowed money.
Now I have no choice but to continue to gamble on the leverage inherent to
mining stocks, though I have been stopped out of all my margined positions.
As noted below, I believe that the fundamentals have shifted once again, more
in line with what existed a year ago.
I still like Pan American Silver (PAAS) and Gold Corp (GG), but am particularly
impressed with Coeur d'Alene Mines (CDE), which has declined well beyond the
average during the past few months (to less than 10% of its value a year ago,
becoming a true "penny stock" today) and which appears to have more
headroom than most, as a result. I have bought as much of CDE as I could with
what remains of my brokerage account balances (not much), though I continue
to hold modest positions in PAAS and GG, as well as a couple of small firms
that I cannot in good conscience suggest to others.
Do as you will. You know what I am doing. I can in good conscience recommend
only that you buy gold and silver and take physical possession. They are at
bargain levels today and are readily available if you are willing to pay the
premiums being commanded. Do not mistake spot price for market price.
Check eBay, which is the closest thing we have to a published market these
days. Here are links so that you easily can check on prevailing eBay silver
and gold prices.
Here are a few good sources for gold and silver bullion: Tulving,
Bullion Direct,
Gold and Silver
Now,
and Seek Bullion. (Yeah, well, I wish I got something for recommending these
sites - something beyond the knowledge that you almost certainly will be treated
fairly
and given
good prices, that is.)
I believe that the next sixty days or so are among the most dangerous ever
faced by America. We are in transition, with a do-nothing, lame-duck president
standing in the way of a nation still transfixed by the vision of another man
falsely promising change while that man (Obama) surrounds himself with the
very people who created the staggering problems, both economic and political,
now facing us.
Israel is whipping itself into a fever and virtually certain to strike out
at Iran. Pakistan and India are on the verge of nuclear war. Economic riots
have spread from Greece to other parts of Europe. Incredibly enough, pirates
actually roam the seas again. All hell could break loose at any time, folks.
Take care of the fundamentals first: location, protection, survival. Then,
and only then, should any of this financial stuff matter to you.
As bleak as this Christmas might seem to be shaping up, it well could be "the
good old days" when viewed from just a couple of years hence. Enjoy it
well and be particularly attentive to your family. In the long run, family
is all that you have. And friends, don't forget. I count you, particularly,
among my treasured friends.
Merry Christmas. - Edgar J. Steele
JWR Adds: Unless someone is very wealthy, I
concur with Mr. Steele thatthey buy only physical (read: tangible, in your
personal possession)
precious
metals. Those might prove useful for barter in the recovery phase of an economic
collapse, but not in the very depth of it. Here in the States, the easily-recognizable
pre-1965 circulated
silver
US dimes,
quarters, and/or half dollars will be ideal for barter.
Steele and I are are also in complete accord on this statement: "Take
care of the fundamentals first:
location,
protection,
survival.
Then,
and only
then,
should
any of this financial stuff matter to you." Or, as I put it,
"Get your beans, bullets, and Band-Aids squared away before 'investing'
anything extra."
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The Coming Great Depression, by Charles Hugh Smith
I have been
asked to address the coming Great Depression which is slowly but surely enveloping
the globe. The irony of doing so in Thanksgiving week is not lost
on me, and I want to preface my commentaries by saying that I do not tackle
the
subject cavalierly. There will be great suffering, on many levels, and the
entire point of analyzing the situation is to lay the groundwork for alleviating
the suffering by getting to the root causes of the financial, social and
environmental disasters which are unfolding globally.
Let's start with the view of the U.S. from orbit. The first thing you notice
from actual orbit (as opposed to "the long view" metaphor) at night
is all the bright lights. In the daytime, you would see thousands of contrails
from all the commercial airliners in the air.
The one key fact about all this energy usage is that about half comes from
overseas; it is purchased from other nations and shipped great distances. This
energy comes in the form of liquid petroleum, a highly energetic and easily
transportable form of energy of which the "cheap and easy to get" kinds
are now in permanent decline.
To those who don't believe in "Peak
Oil," please note that regardless
of all other conditions, estimates, theories, etc., the cheap-and-easy-to-get
oil will soon be consumed. Every other form of fossil fuel will be costly to
extract and refine.
Switching to a metaphorical "view from orbit," we see the primary
fact of the U.S. economy is that it no longer produces a surplus. The nation
consumes more than it produces, and has borrowed the difference for the past
27 years--more or less the time period of "The Great Bull Market" from
1982 through 2007.
These two facts are not unrelated; it was not mere coincidence that borrowing
at every level of the U.S. economy increased in that time frame until it reached
unimaginable quantities (and velocities) in the 2002-2007 timeframe.
From time immemorial, civilization has required a surplus to be earned
from the labor and harvest of a tribe or people. If you consume the entire fruits
of your collective labor, you have no surplus to trade with other peoples,
no surplus to invest in roads, ships, additional fields, waterworks, armies,
permanent structures (religious, communal or private), no "savings" for
lean times, and certainly no surplus to pay anyone in the tribe to practice
art or music.
An economy which creates no surplus cannot save any surplus to invest ("money" is
nothing but a means of exchange and a store of surplus labor/energy). That
economy is doomed to eating its seed corn, after which it collapses. Throughout
history, ecological/environmental changes (unremitting years of poor rainfall
and harvests) and/or regional conflict (unending wars which consume whatever
surplus remained) have led to the downfall of great civilizations.
Now an empire has certain advantages over a tribe or city-state or even a nation.
Through its power, both "hard" (military) and "soft" (financial,
cultural influence, diplomacy, threats, etc.), the empire can coerce vassal
states to sell their surplus goods and services at immense discounts to the
empire, which then consumes the goods or re-sells them at enormous profits.
The empire can also create and sustain markets in vassal states for its goods
and services, which it sells at a premium either directly or via the legerdemain
of currency manipulation/control.
But when the empire consumes more than it gathers in surplus, then
it too declines. It can mask the decline by stripping assets and surpluses from vassal states
for a time, but eventually this exploitation reaches extremes which power revolutions
and rebellions. With its surpluses gone and its populace weakened by decades
or centuries of living off the fat of the land, the empire loses its military
grip over the vassal states.
Once it has lost its ability to extract resources and goods at a discount and
its markets for its own overpriced goods, the empire declines to mere nationhood
or implodes into various political pieces (nation-states, client states, federations,
etc.)
At home, the empire's populace has grown accustomed to consuming the
surpluses of others. Creating surplus has been replaced with an obsession with consuming
surplus, in ever more extreme and outlandish fashions. Both the refinement
and brutality of human nature reach apogees in this blow-off of others' surplus;
violent bloodsport games are enacted (in stadiums or via computer screens),
absurd costuming and spectacles become commonplace, rare and exquisite foodstuffs
are imported, prepared and squandered, and every excess in religion, art and
sport is surpassed by an ever more outrageous waste of surplus.
Borrowing, either outright loans or via the legerdemain of depreciating currency,
grows to the point where everyone is indebted to someone somewhere. Entire
governments balance precariously on the high taxes extracted from the few remaining
productive enterprises in the home empire, and on funds borrowed to pay the
interest due on previous gargantuan loans. (See French and Spanish empires
for examples.)
"Rights" abound in the empire doomed to implosion/decline:
not just the right to free speech and the right not to be unduly harassed
by authority,
but the "right" to bread, shelter, entertainment, etc. When
the bread runs short, the ugly mobs demand their "rights;" ironically,
when bread becomes a "right" (a.k.a. an unearned entitlement), then
it suddenly becomes scarce.
And when it becomes scarce, then the quality plummets,
and those demanding their "rights to decent bread" ate issued weevil-riddled
biscuits. And since there is no surplus, and no incentive to create surplus
(whatever
surplus is created is quickly appropriated by the debt-burdened government),
then those lined up for their "rights" have to take the weevil-riddled
bread and like it. Or not.
And then the mobs have to be controlled with a "whiff of grapeshot" (Napoleon)
or they consume the crumbling bones of the empire piece by piece until nothing
remains except resentments, unanswered demands, and eventually, either ruin
or nostalgia.
That's how you get a global Depression.
Two totalitarian empires were attempted in the 20th century, both based on
an unparalleled propaganda machine, unparalleled state control of every aspect
of the economy and society, and the coercion offered by great military and
secret-police organizations.
Both empires failed. Complete expropriation of rights and property is exploitation
to such an extreme degree that it sparked resistance, and the old model of
empire, i.e. one built on and sustained by wealth creation via trade and "soft
power", had a great defender (the U.S.) Blessed with immense resources,
a large and active populace and popular political principles, the U.S. created
a "win-win" alliance which destroyed the Nazi empire militarily,
and ground down the Soviet empire, which was doomed from the moment it failed
to create any surplus on its own.
Now the U.S. empire faces unprecedented challenges, just at
the point in time it has succumbed to all the temptations of debt and consumption
of others'
surpluses which brought down previous empires. The home populace of the empire
is restive with demands for "rights" even as its own productivity
(as measured by the surplus of production over consumption) has declined into
deficits which require stupendous borrowing just to sustain current spending
on "bread and circuses."
Even worse, an illusion of "growth" and "wealth" has been
created by the FIRE (finance, insurance and real estate) economy in which
shuffling paper and bits of data pass for actual productive activities when
in fact they
created nothing.
The cost structures of the unproductive parts of the economy (government, medical
care, etc.) have skyrocketed at rates double or even triple the growth of the
economy as a whole; the total tax burden (property taxes, payroll taxes, junk
fees, permits, income taxes, business taxes, phone taxes, fuel taxes, sales
taxes, etc.) have outraced both income and the overall economy, channeling
whatever surpluses have been created into unproductive bureaucracies consumed
with paper shuffling.
Like the frog being boiled alive, we do not seem to be aware of the
heat rising. To take but one example: it now costs at least four year's
pay to go to a hospital in the U.S. and have a medium-scale operation. The
numbers are less important
than the ratio, but those of you "in the business" know that if we
take the median wage in the U.S. as $40,000, then a few days in the hospital
is one year's pay (not intensive care, mind you, just a "regular" stay),
the operation a year or two's pay, and another year for post-op care and medications.
Intensive operations cost ten year's pay, of course, if not more. Did an operation
and a few days in a hospital cost four year's pay in 1970 (the last gasp of
the 25-year postwar Bull market)? No.
Now that we all have the "right" to operations which cost 4 to 5
or even 10 years' pay, where are all those decades of pay going to come from?
The math is painfully simple. If we all get to have medical care which
consumes (costs) 5 year's pay, then collectively we each need to save $200,000
or pay "medical
care" taxes equivalent to $200,000 in order to pay for that consumption.
And if we also have the "right" to consume medications which cost
another year's pay or two, then we better make it $300,000 each, or maybe $500,000
because we also have the "right" to unlimited MRI tests, etc.
But we as an empire have chosen the "easy way out" just as previous
empires did: borrow the surpluses of others to consume, either directly via
selling Treasury bonds, state and local government bonds, mortgage-backed securities,
etc., or the appropriation of their wealth via management of our currency which
they are forced to use.
Ironically (or not), once this care becomes a "right" (i.e. nearly "free" to
consumers) it suddenly becomes scarce (expensive) and the quality goes down.
Any system set up on this model eventually implodes under its own weight: cost
structures with essentially no limit (no worker can be fired, no test denied
payment, etc.) skyrocket, demands for "rights" increase, and the
system collapses when there is no longer enough surplus wealth appropriated
from abroad to pay the rising costs.
That collapse of high cost structures no longer supported by surplus wealth
appropriated from trading partners is the essential cause of the coming Great
Depression. Once the U.S. has to face its vast deficit between its saved/invested
productive labor and its consumption, then the high cost structures will topple
one after the other: first the auto makers, and eventually the entire Medicare/Medicaid
industry.
The math is painfully simple: no cost structure can grow at two or three times
the rate of the overall economy forever. We're about to experience the breaking
point, and whether we in the home empire state like it or not, consumption
will have to realign to match production minus savings for investment. Borrowing
to fill the difference has worked for a long time, but it never works forever.
« Odds 'n Sods: |Main| Gardening and Seed Saving, by Carolyn W. »
Letter Re: Seeking Advice on Storing Guns and Magazines
Mr. Rawles,
I have taken your good advice and purchase a few rifles and a
number of full capacity magazines as an investment,. Now how do I store them
for the long term? Should I spray them with something first? Please continue
to help. - James B. (a "Ten
Cent Challenge" participant)
JWR Replies: The precautions that you need to take depend
a lot on where you live. If you live in a high humidity climate, then you need
to be particularly vigilant with your guns, magazines, and other tools. In
essence: the higher the humidity, the greater the degree of protection required,
and the greater the frequency of inspection for rust.
I generally recommend wearing lightweight cotton gloves when you do your gun
maintenance. This is particularly important if you have sweaty hands. My college
roommate was notorious for inducing rust on guns because of this, and he has
always had to take special precautions.
A light coat of gun oil such as Rem
Oil will suffice in dry climate. Although
exotic lubricants such as Break
Free CLP are great for lubricating, in my experience,
they leave so little residue that they are actually inferior to traditional
gun oils for preventing rust. In damp climates, I recommend Birchwood Casey
Barricade (formerly sold under the product name "Sheath".) Rem Oil
and Barricade are both available from a number of Internet vendors including Brownell's.
And even Amazon.com
now sells Barricade.
For long term storage all metal parts (inside and out) especially the bore,
chamber, and breech face should get a coating of grease. There is always the
tried-and-true USGI "Grease,
Rifle". (This product name was humorously spoken "Grease Comma Rifle" by
American soldiers for many years, before the advent of the M16). While it will
suffice,
I prefer Rust Inhibitive Grease (RIG),
which is available from a number of Internet vendors including Brownell's.
Even though you will know how the gun was treated before storage, someone else
in your family might not. I therefore strongly recommend attaching
a special warning note: "Warning: grease coating--bore, chamber
and bolt face! Remove grease before firing!!!"
Small quantities of magazines stored inside a humidity-controlled gun vault
(with a Golden
Rod or similar de-humidifier) or stored in sealed ammo cans
with a large packet of silica
gel desiccant probably won't need more than light
coat of oil and annual inspection. Any larger quantities of magazines that
are stored outside of your vault in non-airtight containers should probably
be rubbed down with RIG. In most cases this requires disassembling magazines,
to get at their innards. OBTW, even if a magazine is made of polymer and has
a plastic follower and floorplate, don't forget that its spring needs
rust protection!
« Two Letters Re: A Vehicular BoB |Main| Product Review: Ultramag .50 BMG Upper Kit for AR-15, by Michael Z. Williamson »
Letter Re: Give Your Kids $100 Billion for Christmas: An Economics Lesson
Hi Mr. Rawles,
Thanks for SurvivalBlog and for your novel "Patriots".
Both have been real eye-openers.
I have several nieces & nephews that I
(like many people, I'm sure) take care of on birthdays (and sometimes Christmas)
with a card and some money enclosed.
This year I thought it might be fun to send them 100
billion dollars along
with the card and note. I looked around, and lo and behold, several
people are selling Zimbabwean currency on eBay. Prices and denominations vary, and
of
course it costs millions (trillions?) percent more than it's actually worth,
but we're still talking a couple of bucks for a note. The novelty value alone
is worth
that, and it just might be a subtle way of giving them a glimpse of currencies
and inflation, and a gentle way of giving them some perspective on how good
we have it in America (and how bad things could become). And I'll probably
still throw in a twenty-dollar bill. Thanks, - Dave W.
« Letter Re: The Year Gift that Cards May Spell "Gotcha" |Main| Jim's Quote of the Day: »
The Time Has Come to Cache Some Cash
Looking at the escalating global credit collapse it now appears to be precipitating
global economic depression. I can foresee conditions in the United States getting
far worse in the months to come. There is now a fairly high likelihood of a
general banking panic, with a large number of bank failures.
The next few years will most likely be marked by significant deflation, followed
by a tremendous surge of consumer price inflation. (Much of the $7.7
Trillion in bailout money that Uncle Sugar has promised will be created
via highly inflationary monetization.) As the Mother of All Bailouts
(MOAB)
grows, so does the risk of inflation. In the immediate future, the US Federal
Reserve
is likely
to lower interest
rates
to absurdly
low levels,
in an attempt to re-ignite the sputtering economy. This probably won't work
any better here than it did when the Bank of Japan tried it a decade ago. Since
interest rates will probably remain low, the profit you would make by leaving
funds in passbook savings accounts is pitiful. Returns on stock have been
negative for many months, and will likely continue to be. So you won't be losing
much by setting aside cash.
My specific recommendations:
1.) If possible, set aside the equivalent of up to one-half of one
year's income in greenback cash or cash equivalents (including silver and gold
coins).
If this means divesting more of your dollar-denominated investments, then so
be it. You should be getting out of those, anyway. As I mentioned before, under
the current economic conditions, they wouldn't be gaining that much, anyway.
A fireproof hidden
wall or door cache would be best, but there is little muss
and fuss in burying
some cash. Perhaps you could use one
of those wide-mouthed Nalgene water bottles that are no longer consider safe
for use with drinking water.
Of course make
sure
that
you aren't
the only family member that knows the location of the cache-- just in case
for some reason you assume room temperature.
2.) Top off your fuel tanks--gas, diesel, and propane. This is a good time
to do so, for two reasons: The recent slump in crude oil prices to around $50
per barrel has made most petroleum-based fuels and lubricants less expensive.
Take advantage of this dip! Secondly, if you buy in the next few months, you
will be buying winter-formulated gasoline. Of course take the normal precautions
with PRI-G or STA-BIL type fuel stabilizer. If you heat your home with coal,
then
fill your coal bin to the brim.
3.) Catch up on any deferred yet nagging projects at your home and/or retreat.
The time for procrastination is over. This means everything from dental appointments
and car repairs to having your septic tank pumped.
4.) Take another look at your "list
of lists" and see if you've overlooked
any crucial tasks or acquisitions.
5.) As I've mentioned recently, one of your top priorities between now and
January 20th (when BHO will
be sworn in) should be purchasing semi-automatic firearms in common military
calibers, and a large supply of top quality full-capacity
magazines. After those are in hand, concentrate on buying bulk ammunition.
« Two Letters Re: A Vehicular BoB |Main| The Time Has Come to Cache Some Cash »
Letter Re: The Year Gift that Cards May Spell "Gotcha"
James,
I stumbled over this, earlier this week, and I feel it may be of interest to
you and your readers. Certainly, this warning needs to be passed around to
as many as possible, here in the US.
Many retail stores are planning on declaring bankruptcy after the holiday buying
season is over. Many more are planning on closing down stores, once the holiday
sales
have emptied inventory.
This means trouble for one of our newest 'gift choices', the Gift Card.
Gift cards are not actual money. They are treated as "Unsecured Loans" from
the purchaser, to the company who issued the gift card. Unsecured loans are
the last to be paid off in a Bankruptcy situation, and are usually just written
off the books. Gift cards from a Bankrupt/closed company will rarely be honored
or transferred. They become useless pieces of plastic.
Additionally, should you give a Gift Card to someone, they could find that
all the branches of the Company/Store in their area are closed. And you usually
can't use a Gift Card on their web site!
So, to be prepared this year, please try and avoid Gift Cards. But if you must,
then use these guidelines:
1.) Purchase Visa or Mastercard Pre-paid cards. Target and Wal-Mart gift cards
are also probably safe, as these companies have not announced major store closings.
2.) If you must buy a gift card, please check the
Snopes link for a list of stores that are closing down or declaring bankruptcy:
This list is semi-regularly updated. Also, putting the name of the store/chain
into "Google News" (news.google.com) will give up-to-date information.
Remember, restaurant gift cards are included! Bennigans declared bankruptcy
and folded hundreds of locations a few months ago. - Brian, in Austin, Texas
« Odds 'n Sods: |Main| Letter Re: Some Technologies for Retreat Security »
Letter Re: Determining the Best Pistol Ammo to Store for Barter
Mr. Rawles;
The Old Yooper's statistics on range brass may be somewhat skewed
in favor of automatic pistol cartridges because revolvers do not [involuntarily]
eject
spent
rounds.
Few cops are 'gun guys' but anyone who reloads saves their brass. This is easier
to do
if
you
don't have to chase them, so a higher percentage of auto pistol cartridges
are left behind. This having been said, I don't think anyone will go far
wrong stockpiling 9mm, . 40 S&W, and .45 ACP--both live rounds and spent brass.
The pocket pistol cartridges are less attractive to reloaders, but I would
not
overlook
.38 Special and .357 Magnum.
JWR Adds: And some revolver calibers that are favorites of
handloaders, such as .41 Magnum, probably won't be found at all, unless
someone accidentally drops a piece! Nor can I imagine anyone that owns a .454 Casull or one
of the new .500 S&W revolvers just walking away from their brass.
« Letter Re: Comments on Two of the Three Bs: Bullets and Band-Aids |Main| Note from JWR: »
Letter Re: Is the US Residential Real Estate Market Nearing the Bottom?
Hello Mr. Rawles:
Seeing that houses are pretty much dirt cheap right now, would it be a
good decision to buy one? what would happen to our debts (including the mortgage)
when/if the Amero comes? would they disappear like they claim the American
debt will? I hear radio advertisements about the IRS giving
you up to [a] $7,500 [interest-free loan] on your 2008 taxes if you buy a house in 2008.
So, again, would it be a good idea?
would
the Dollar amount be converted into Ameros?
Thanks in advance for your response. As always, congratulations on and thank
you for your blog, simply the best. - Luis S.
JWR Replies: The $7,500 incentive offered by the IRS must be paid back over the next 15 years. It is an interest-free loan, not a tax credit. People who claim this "credit" must pay it back at $500 per year for the next 15 years.
In my estimation, suburban houses have another
25% to fall nationwide, and another 40% to fall in the over-bought markets.
I recommend
that you wait for at least two years,
until the
market is closer to the bottom. And FWIW,
according to The
Chartist Gnome, the
absolute bottom may not be until around 2016. There will be
plenty
of pain
and angst ahead!
The widely-rumored advent of the Amero is far from a sure thing. I recommend
diversifying
out of dollar-denominated assets and into practical tangibles.
At present, my favorites are alloy,
steel, and polymer, and hold lots of cartridges. With well-chosen
tangibles, you will shelter yourself from the worst effects of any currency
swap or formalized devaluation. Yes, land is a tangible too, but the only real
estate that I would consider buying these days is productive farm or ranch
land. This should be land that could double
as
a survival
retreat, and that is located in a region that was not part
of the Big Bubble.
« Letter Re: Finding Abandoned Properties, Post-TEOTWAWKI? |Main| Note from JWR: »
The MOAB Keeps Growing, and Growing
Last Winter, when I first started writing about the Mother of All Bailouts
(MOAB),
I predicted that the cost of the bailout would grow inexorably. Sadly, I was
all
too right. In fact, the scope of the MOAB is now much larger than
I had predicted, early in 2008. The latest tally thusfar is an
almost incomprehensible $4.28 trillion US Dollars.
But wait, it gets worse. In addition to bailing out bankers and insurance
companies, more and more entities from outside the
financial sector are lining up to the Federal trough. The TARP bailout
set a dangerous precedent. There is now a big queue forming. It is the "economic
victims" queue.
It is a growing line of highly-paid whiners with sob stories. Here are some
examples:
Lets start with the "Big Three" Detroit automobile manufacturers (Chrysler,
Ford, and GM.) Consider these three articles: Detroit
automakers are begging for a big chunk and What
Will Happen if the US Auto
Industry Fails? and GM
Bailout Will Be Agony for Taxpayers.
Now, on to the airlines. We've already been warned that as many as 30
Airlines will go broke this year. I predict that passenger airlines in
the US will be next to get a big bailout. And if the Pentagon gets its way,
many of those carriers deemed "too big to fail" will be those that have a large
number of planes in the US Air Force CRAF fleet.
Nearly everyone, it seems, has a vested interest of some sort in the MOAB.
Insurance giant AIG is getting not one but two bailouts.
The
latest increment announced will be $40 billion. When will this end? I suspect
that lots of other big insurance firms will be lining up for their "fair share"
of the dough.
Here is a real stinker: Billions
of US taxpayer dollars will probably be used to bail out foreign investors.
Uncle Ben Bernanke must have warned: "We mustn't offend our creditors..."
The States - Some 29
of the 50 states are reporting budget crises. Lo an behold,
most of the hardest hit states are those with bloated Nanny
State bureaucracies.
No surprise there. The states that had the worst fiscal management, of course,
will get the biggest share of the taxpayer funds. Those that were fiscally
conservative will get nothing.
Municipalities - The Wall Street Journal reports: Cash
Strapped U.S. Cities Seek Emergency Bailouts
What will be "the next shoe to drop"? I suspect that it will be some
of the the larger public employee pension funds, such as CalPERS.
Not only have they made some spectacularly bad stock
investments,
but many of them have also been playing contrapreneur in
real estate investments (such as REITs)
and have even dabbled in derivatives, such as CDO paper.
Here, perhaps, is an early warning flag: Florida
pension fund loses a quarter its value.
Another likely recipient of a reserved spot at the feeding trough will be
"critical industries" in defense, bulk fuel, transportation, and telecommunications.
If any of these approach a crisis;
we'll surely be warned, "there could be dire consequences..." Can you see how
far this slippery slope extends, folks?
The Growing Queue of Beggars
Mark my words: The queue of banking, corporate, and government beggars will
continue to grow. Once organizations see how easy it is to get dump truck loads
of cash
from
Uncle Hank, many more sectors will join the queue. The American taxpayers will
be
thoroughly fleeced.
As I've noted before, these trillions
of
dollars
must
come
from somewhere.
Clearly, revenue from taxes, tariffs, and borrowing will not be sufficient.
This leaves only monetization--the magical creation dollars out
of thin air--as a solution. Experience has shown that monetization is highly
inflationary.
The bottom line: Be prepared for a MOAB that will balloon, and then amazingly
balloon still larger, in an orgy of bailout beneficence that is unprecedented
in
human
history. Following on its heels will surely come consumer price inflation.
The coming decade of economic depression will be marked by inflation will make
the stagflation of the 1970s seem mild, by comparison. What I've outlined here
is just about inevitable. William H. Macy, as "The
Shoveler" in the movie Mystery Men said it nicely: "We've got
a blind date with Destiny -- and it looks like she's ordered the lobster."
« Letter Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis |Main| The MOAB Keeps Growing, and Growing »
Letter Re: Finding Abandoned Properties, Post-TEOTWAWKI?
Dear Mr. Rawles,
I recently became a fan of your blog and wanted to commend
you for your work in educating the masses. While I don't have a retreat, I'm
using a different
strategy and hope for your input. I live in western Maryland. Historically
we are fairly disaster-proof from natural disasters enjoy all four seasons.
My plan is to prepare (as best we can here) and after a disaster, claim a better
vacant property.
Two other thoughts: I recently purchased David Blume's book "Alcohol
Can Be a Gas" and intend to fuel my own flex fuel vehicles and have
a barter tool. Secondly, I'm trying to rig some way to attach a bicycle to
a generator
and store energy and provide exercise for my family - Thanks, Mark W.
JWR Replies: I regularly get e-mails like yours, mostly from
preppers on tight budgets that have hopes of finding "abandoned" properties.
It would take an incredible "worst case" situation with massive de-population
before properties would be totally abandoned. A vacant property still has an
owner--or at least has heirs of a deceased owner. And unless government totally disappears
in some anarchic spasm (which is highly unlikely outside the Horn of Africa),
there would still be due process and the normal legalities of properties being
seized for property tax delinquency, and then being sold at auction to the
highest bidder. Science fiction novelist Robert A. Heinlein said it best: There
ain't no such thing as a free lunch (TANSTAAFL).
I recommend that you plan more realistically. You can prepare on a modest budget
by teaming
up with like-minded people in your area and buying contiguous parcels in
a covenant community to provide a local bartering base and mutual security.
Abandoned properties are more the stuff of daydreams than reality. But given
the continuing collapse of the United States real estate market, who knows?
There may be some very inexpensive foreclosed or even tax
delinquent parcels available at auction in rural areas in just a couple of
years.
There are several brand of bike generator stands on the market, including
the
U-Gen.
« Odds 'n Sods: |Main| Letter Re: Finding Abandoned Properties, Post-TEOTWAWKI? »
Letter Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis
Hi Jim,
I'm responding to Tuesday's article Letter
Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis in
which the general cause of the crisis was ascribed to too much economic freedom.
The following articles make the opposite case, that it was actually caused
by government interference in the markets:
The Government Did It
The Myth that
Laissez Faire Is Responsible for Our Financial Crisis
Alan Greenspan vs. Ayn Rand and Freedom
Stable Money is the Key to Recovery
As pointed out in the
article Stable Money is the Key to Recovery, "...some three-quarters of
the massive derivatives market, which has wreaked the most havoc across global
financial markets, derives its investment allure from the capricious monetary
policies of central banks and the chaotic movements of currencies."
Best Regards, - Tim L
« Letter Re: Where to Find the Funds for Your Preparations |Main| Note from JWR: »
Letter Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis
Hi,
Yesterday [Friday. November 14, 2008] I attended the Marschak Colloquium on
Mathematics in the Behavioral Sciences at UCLA {University of California, Los
Angeles] . This thing is attended by lots of UCLA
and
USC [University of Southern California]
economics professors, including many retired faculty members and other local
luminaries. (Two seats to my right was author Alvin Toffler of "Future
Shock" fame.)
The main speakers presented for an hour, and then the whole group asked questions
and discussed the topic. Here is the brief abstract that announced the
talk: "The current worldwide financial and economic crisis is the greatest
economic challenge we have faced since the Great Depression. The two speakers
will treat
the crisis in the light of historical experience, will identify some of its
causes, and will consider possible policy initiatives at the national and international
level to treat it."
The topic was "The Current Worldwide Financial and Economic Crisis." I
expected it to be an interesting, balanced, reasoned and academic view of the
current bumps in the road, with some modest suggestions for improving matters.
Wow! It was all very reasoned, and there was even a little bit of mathematical
modeling, but these people are very very concerned! The immense
set of interlocking derivative bets made by the big banks is now acknowledged
as a complete house
of cards, and one that is currently collapsing! (The second speaker made suggestions
about policy moves that could be taken "if officials somehow miraculously
stop the process in mid-collapse.")
The whole two hours was fascinating, but here are a few of the ideas and comments
that I came away with:
•
This is the first global crisis of the globalized world. Likely every country
will be affected and all at about the same time. (Very different from [the
economic crisis of] 1929-1937.)
•
The causes were many: lax regulation, lax credit reviews by rating agencies,
securitization of mortgages, insane(!) investment leverage, pressure for continuously
increasing financial profits, herd behavior, deregulation, ....
• Many financial institutions would be immediately bankrupt if
the were forced to value assets at current market prices. (Instead, everyone
has agreed to
claim that "certain markets are frozen." The regulators wink.)
•
Deleveraging is essential to the survival of these institutions. But most deleveraging
actions actually lower all institutions' capital bases. So it's a self-reinforcing
positive feedback cycle. Serious deflation is a genuinely possible outcome.
For the first time in our lives, money could become more valuable over time,
rather than less.
•
On the other hand, most Latin American currency crises began as fiscal crises.
Government frantically created money to prevent deflation, and eventually they
got hyperinflation. This, too, could happen here.
•
A former vice president of Citicorp was in the audience. He said that
the explosion in derivative instruments ran far ahead of infrastructure (markets
for trading
them, etc.) and far ahead of legal frameworks. He said we haven't even seen
the beginning of the counterparty problem.
•
An economist from USC in the audience said that we will soon have huge, massive
unemployment in the U.S.
•
What will happen next (even what could happen next) is unknown.
A Swedish economist in attendance said: "Dispense with the illusion that
you understand what is happening."
It was a very interesting couple of hours. - M.D.I. (by way of SurvivalBlog readers
Bill and Charley.)
« Two Letters Re: Procuring Reliable Workhorse Bikes -- Take Advantage of the Single Speed Fad |Main| Letter Re: UCLA's Eye-Opening Colloquium on the Worldwide Financial and Economic Crisis »
Letter Re: Where to Find the Funds for Your Preparations
Dear Jim,
So many people are struggling to find ways to make ends meet, much less have
any extra money to make purchases for their preparedness plan.
There are a lot of things people can do within their own means.
1. Make a budget. Income minus expenses. Is there anything left over? You are
ahead of the game. If not, now is the time to:
2. Trim the budget. Distinguish needs versus wants. Eliminate anything that
is not needed.
3. If after trimming the budget, you still cannot find extra money, get a second
job, have a yard sale, etc. www.daveramsey.com is a great site for
learning how to eliminate debt.
Some things that have worked for us:
We turned up the thermostat in the summer and used a fan to circulate the air,
started hanging clothes out instead of using the dryer, unplugged all electrical
cords that were not in use, [each of us] used the same drinking glass instead
of getting another, and shortened our allowed shower time. (With three teenagers in the
house, we struck gold with that one.) We turned all computers off at night. Our power bill was reduced just over $100 per month by making these changes.
We eliminated the cable television. That saved $70.
We started clipping coupons again. I have saved nearly $200 a month on our
grocery bill. CouponMom.com is
an awesome site.
I also milk our goats. I will not pay $4.00 a gallon per day at the store.
Instead of spending a lot on pre-packed snacks for the kids, I am baking a
lot more.
We cook outside a lot. On Sunday, we grill and smoke chicken, sausage, hamburgers,
hot dogs and goat meat. We then use this meat in whatever recipe we want to
use for the week. Some of it is then frozen for the latter part
of the week.
I make up a few batches of goat cheese to go with my husband's homemade pita
bread.
We have a garden in the summer and we can what isn't eaten fresh . Even if
you live in the city, you can still have a tomato plant or a bell pepper plant
etc. You can purchase a grow light at Wal-Mart.
We have consolidated our trips into town, instead of going whenever we want
to. This has saved at least $40 a month.
There are so many ways to stop wasting money.
Okay, some women really will think TEOTWAWKI with
this one: Buy your clothes second hand. I am not ashamed to accept hand me
downs from friends. My children
have all worn clothes given to them from other family members. I also shop
at Goodwill [thrift stores] or go to Yard Sales.
Start a business. I am a stay at home Mom with five children. We have nearly
four acres that we live on and have access to 20 acres next door and that we
run our 40 head of Boer goats on. We have chickens and rabbits. I also breed
and
train German Shepherds and board dogs. With my husband's income and the extra attention to detail, we do pretty well. The changes that we have made has allowed
us to purchase the needed extras.
Thanks for the wealth of knowledge that you share with us every day! - RH
in Alabama
« Letter Re: Michigan's Upper Peninsula as a Retreat Locale |Main| Note from JWR: »
Letter Re: Should We Currently Emphasize Storage Food or Gun Purchases?
Hello Jim,
I've finished reading your fine novel "Patriots" several
weeks ago, and have passed it on to another like-minded individual. I've also
been scouring your
web site
daily for the last several months, and gleaning extremely valuable information
not only from you, but the many fine individuals who add excellent links
to current events. I have forwarded your link to others, and have it saved
as "required reading" daily.
A brief background on our family; I had been one of the Y2K aficionados,
and had lived on the Big Island for many years. If it were still just my wife
and
myself, we would probably still be there. But having children changes everything.
I became involved in politics there as a fund raising chairman for a twice successful
Republican, who was seated in the State house on Oahu, hoping that we could make
a difference. But after 10 years there, (and the birth of our first daughter),
I determined it was time to relocate back to the mainland. China had also recently
bracketed Taiwan, and expressed they could now hit Los Angeles with their now-successful
missile launches. (Thanks to Loral Corporation and Bill Clinton). If the balloon
ever
goes up, I fear that Hawaii will be in deep kim chi.
I had done extensive research from Kona on the best place to settle on the mainland.
We had traveled to the mainland numerous times, and visited all of the locations
I deemed appropriate. We looked at Prescott, Arizona in the southern extreme,
Grand Junction and Estes Park in Colorado, Mazama, Twisp, and Sequim, Washington
(in
the
rain
shadow of the Olympic Peninsula), Driggs, Idaho, Whitefish and Missoula, Montana,
along
with several
others. I had multiple criteria as determining factors, such as growing season/weather,
local political mentality, and economic vitality. After visiting everyone of
these places, I had decided southern Oregon was an area that could conceivably
weather both a nuclear exchange and long term social upheaval. I did not believe
it was practical to "bug out" to a retreat locale, but would be "bugging
home" from a business trip in any "event". We learned in the restaurant
business that there are three things important for a successful endeavor, and
those are "location, location, location". I have second -guessed my
decision many times, but have sent a tap root down with the kids in school. So
I would advise your readers to seriously consider their location, and to relocate
to a desirable community, as I feel time is short.
With that segue Jim, I have a question for you, and would seek your council.
I have a dreaded sense of foreboding with the recent election results, as I'm
sure many of your readers do. After Y2K,
my preparations for long term unrest had lapsed, and I feel into a state of complacency.
I have slowly accumulated
a fair number of firearms to protect my family over the years, and have acquired
a couple of thousand rounds for each main battle rifle. The additional magazines
have arrived in the mail, (thanks for that great link to CDNN by
the way), and I feel I'm somewhat prepared in this regard. If only I could convince
my wife
to shoot.
At any rate, my question is this: I don't know if I should head to
the local gun show today, or to the local store for
sustenance for the family. I feel that if we are to buy ammo/firearms, it must
be now,
as Barack Obama could make us all felons with the stroke of a pen. All he has
to
do
is
to
sign a treaty with the U.N., or file an Executive Order. So what should we
do, buy guns/ammo, or additional food?
BTW, I continue to pray for the swift and complete recovery of The Memsahib.
God Bless. -
Steve
in SW Oregon
JWR Replies: First, do not neglect buying storage food for
your family. But in my opinion the outcome of the recent presidential and congressional
election
dictates
putting
a
higher
priority
on guns and accessories for the next few
months. We
are living in exceptional times, and that calls for temporarily re-sequencing
our
priorities.
If your State law law allows it, then buy your guns from private parties--not Federal
Firearms License (FFL)
holding dealers. Private party sales of modern (1899 and later) guns across
state lines (in "interstate commerce" ) are banned under Federal
law, but intrastate
sales are still legal in most states. (Be sure to consult your state
and local laws!)
Buying a gun through a licensed dealer leaves a prominent
and permanent paper trail. Here are some relatively low profile alternatives:
Private party (non-FFL) sellers that are fellow Citizens of your State,
at gun shows in your State.
Private party (non-FFL) sellers that are fellow Citizens of your State,
advertising in newspaper ads.
Estate sales, garage sales, and farm auctions operated by private party
(non-FFL) sellers that are fellow Citizens of your State.
Private party (non-FFL) sellers that are fellow Citizens of your State advertising
at GunBroker.com 
(Use
the "Smart Search" feature, and select "USA only - State where
item is located")
Private party (non-FFL) sellers that are fellow Citizens of your State advertising
at GunsAmerica.com (Use
the "Advanced Search" feature, and "LIMIT TO STATE". You can also select
a check box to exclude guns that were listed by FFL holders.)
Pre-1899-manufactured "antique" guns chambered for modern cartridges, either
in-state or out of state. (No FFL is required for Federally-exempt antiques.
See my Antique
Guns FAQ for details. Again, your State and local laws may vary, so do
your homework.)
One of president-almost-elect Obama's publicly
stated goals
is to "close
the gun show loophole." Clearly he wants to end private paperwork-free
firearms purchases. This leaves us just a brief window of of opportunity to
stock up what may need to be a decades-long supply. Be sure to buy
plenty of full capacity magazines, since it is very likely that there
will be an import ban
(via executive order) soon after BHO comes
to office, and a domestic production ban (via an act of Congress), soon after
that. These bans
will freeze the numbers
of "grandfathered" magazines in private hands and will likely triple the
market price of all magazines of 11+ round capacity.) Buy plenty of
extras for
barter--even for models that you don't own, but that will likely be in high
demand.
There
may come a day when owners won't be willing part with
magazines
for
anything but
astronomical prices, but they'll probably still be willing to barter on
a rational; "value for like value" basis.
Put an emphasis on gun and full
capacity magazine purchases for
the next three months, followed by some extensive ammunition purchases soon
after the presidential inauguration.
« Three Letters Re: Advice on Sources for Sandbags and Sandbag Filler |Main| Letter Re: Michigan's Upper Peninsula as a Retreat Locale »
Letter Re: More About the Derivatives Bubble
James:
It appears [corporate, hedge fund, and bank funds managers] have been playing
a modern day Enron game with the OTC (Over The Counter) derivatives
market.
They have been taking their bad debts, and credit default swaps (CDSs),
failed
commercial
loans,
and construction loans and moving them to this unregulated and unlisted market
to hide the true size of their toxic debts.
Half of the financial monstrosity is projected to be in this "hide the
bad debt" game. The [aggregate notional] number is so surreal, it is mind
boggling.
I may have missed you posting the recent article in The International
Forecaster,
but just in case it did not get mentioned, here it is: The
Quadrillion Dollar Powder Keg Waiting to Blow. Regards, - OSR
« Odds 'n Sods: |Main| Letter Re: HF/VHF/UHF Amateur Radio for Preppers »
Letter Re: Some Changes in American Wholesale Food Distribution
Hi James
You'll recall hat I wrote to you a while back, forewarning of increasing prices
for canned tuna, as I am in the import food business.
I read Buckskin's message with interest, as I sell to food distributors, of
the type that he is referring to. What many of your readers may or may not
know, is that a huge amount of our food
products are imported. I don't have exact figures on it, but there are certain
categories of food products that are almost exclusively imported, as they either
cannot be produced here at all or cannot be competitively produced here. An
example, is organic canned beans. While they are packed in the U.S., most of
the organic beans are actually grown in China, Peru and other countries. You
would never know this when buying a
can of beans that is packed by an American company. Another good example is
frozen vegetables. There are companies here that import frozen vegetables from
other
countries, then mix them in blends and sell them. They don't necessarily say
on the package that the vegetables are imported because they are further-processed
here in the U.S. In addition, many of the ingredients for foods produced domestically
are from imported sources. Chinese milk powder is used extensively by American
food producers.
My main point is that, while I am in a different part of the distribution
chain than Buckskin is referring to, I do sell a lot of imported products that
go to food service
(restaurants, prisons, hospitals, fast food, etc.). What I have been observing
over the last couple of months is that as demand slackens in the U.S., prices
have been going down. The U.S. is one of the largest food consumers in the
world and as a result of the economic implosion, people are eating out less
and while they are cooking at home more, they are trading down at the supermarket.
Chains like Whole Foods are suffering as a result of this, as well as the larger
supermarket chains.
Earlier in the year, a lot of my suppliers overseas started increasing prices
because of increased raw material costs, increased tinplate costs, increased
fuel and energy costs, etc., coupled with increased freight costs to the U.S.
However, as demand started waning here, my customers refused to accept the
price increases, as their sales volume has dropped off and in many cases, their
inventory started backing up. Now, prices are going down. Canned tuna, for
example, has dropped about 20% and will probably drop further. This is certainly
not happening to all products that we sell, but I expect to see more price
declines in the future. Another reason for this is that raw commodity prices
have collapsed and this has had an impact, too. Oil is way down and this has
reduced transportation costs. One more factor is the recent strengthening of the dollar against most other
currencies, which means that a dollar buys more overseas than it did earlier
in the year.
Although I expect this decline to continue for some time, it may or may not
have a big impact on food prices in the U.S. This depends on whether or not
the price decreases are passed
along down the distribution chain.
One thing to keep in mind is that in the long term, the dollar is toast. When
all of the bail-out money and other giveaways that the government has printed
money for, hit the economy,
the dollar is going down and all imported products are going to get a lot more
expensive. All the best, - Kurt
« Five Letters Re: Full Capacity Magazine Price Increases are Already Here |Main| Jim's Quote of the Day: »
Letter Re: Deflation Followed by Mass Inflation?
Dear Jim
I agree with Michael that deleveraging, the reduction in credit, means falling
price levels in the short run - but not for 4 or 5 years!
He wrote: “Credit can be destroyed. If the value of your house goes down
by $100,000, then that $100,000 is just gone. It doesn’t exist any more.
It is not in the money supply. This is deflationary”
Back to basic definitions - inflation is an increase in the money supply, deflation
is a decrease in the money supply. Generally inflation leads to rising prices,
and deflation to falling prices. The price of houses is the symptom of deflation,
but does not affect the money supply.
“Now there is dwindling credit, severe unwillingness to lend, and a Fed
that is contracting the ‘money’ supply.”
Whoa there! Check the latest M1
money supply chart which shows a ~45% increase in just two months! This is an exponential “hockey stick” chart
that Al Gore did not need to fudge the data on!
Bernanke and the Fed were keeping inflation low, 2% or less, (trying to clean
up Greenspan‘s irresponsible inflations). But now the massive bailouts
have blown that plan out of the water. Thanks to Gary
North to help us to “follow
the money”.
Unless this horrific, banana-republic-style inflation of the money supply is
corrected, inflation of prices will be back with a vengeance. Remember that
in the Great Depression the money supply was anchored to gold - not a good
comparison to today’s fiat money that can be created at will.
Of course the timing will be tough to predict as the velocity of money determines
prices, as well as just the supply of money. (I.e., how fast is money spent
- 10 times per year or 100). And Fed decisions are political and psychological
in nature, not just economic, and hence not easy to predict. But overall, in
the race between the deflationary effects of deleveraging, and the unlimited
ability of the Fed to succumb to political pressure and inflate, I’m
betting on Ben Bernanke‘s helicopters. Regards, - OSOM
« Odds 'n Sods: |Main| Letter Re: Deflation Followed by Mass Inflation? »
Five Letters Re: Full Capacity Magazine Price Increases are Already Here
Sir,
Be advised, Cabela's here in Fort Worth, Texas is sold out on all ammo
except 22 LR and shotgun shells. A friend who went there today was amazed to
find
all ammo shelves
emptied. The last time I went there (shortly before the election) the place
was a mad house. Standing room only, many people turned down on their background
checks (or delayed). I considered myself lucky to get in and out of there in
an hour. I got my new toy, no problem and plenty of ammo "at sale price".
Cheaper Than Dirt's prices have doubled or tripled. They
will not honor their printed catalog prices and I consider them as garbage
now. They have lost
my
business.
Thanks for your outstanding book. I am a Viet Nam veteran and have gained additional
insight in what is to come and preparations to make. I lent my original copy
to some younger Marines and it is still making the rounds. I bought two additional
copies later. I check your site almost daily
as do most of my friends who have awakened. Keep up the good work and God Bless
you Sir! - Robert A.
Jim:
Reader David B. may boycott Cheaper Than Dirt for raising prices on full capacity
magazines. But he has little understanding of basic economics. CTD would be
stupid not to charge what the market will bear. Thanks for your great blog. I check it
every day. - Ira W
Jim,
For many months, I have been imploring family and close friends to get prepared
by stocking up on items likely to be banned under and Obama Administration.
Folks like Diane Feinstein will be energized and empowered under an Obama
Administration to do what they tried to do but couldn't with the 1994 Assault
Weapons Ban.
The chickens have come home to roost and as you pointed out in your recent
post (11/7), supplies of ammo and magazines are drying up fast. I purchased
a few "top-off" items
late last week and even today. But what I'm seeing from some of the traditional
suppliers is truly frightening. For example:
AIM Surplus - 10-to-14 business days for them to process orders received today.
Who knows what will be left by the time they get around to the newest received
orders.
Natchez Shooters Supplies - Rationing Glock full/high capacity mags.
Several local friends have told me of long lines at traditional brick and mortar
stores that sell these items.
In order to help out fellow SurvivalBlog readers, may I suggest they and their
friends look at alternative source suppliers? For example, there is a goodly
supply of ammo being sold on forums such as AR15.com, GlockTalk.com and similar
forums. Find a nearby seller that has what you want and buy it. Similarly,
online suppliers like LA Police Gear, 44Mag.com and OMB's Express Police Supply
are excellent and dependable sources. I bought 10 Glock M18 33 round.mags for
under $27 each delivered from OMB today. That won't last long! On AR15.com,
there
are a number of reliable suppliers advertising in the Ammunition forum. For
past experience, I have found G2GTactical.com to be a fast, reliable supplier
with reasonable prices.
I could go on but you get the idea and I hope your readers will to. The clock
is ticking and some folks are way behind the power curve.
All the best! - Jay in Florida
James--
My gun show report for today is as follows.
As a friend and I pulled onto Highway 2 from 9 heading to the Monroe [, Washington]
fairgrounds we hit a terrible traffic stoppage. It took 35 minutes to travel
the last six miles. Every east bound car was pulling into the fairgrounds--all of
them. We get there and my friend who is not a club member has to wait to
pay
to get
in the gun show. It was a 45 minute wait line to get in. The membership
enrollment section was bang up packed.
I fought my way to the ammo department for X's AK ammo. It was all gone except
for some soft point. I called him to see if he wanted some and when
I went in to get it.But it had already sold. When I left the show, all
battle rifle
ammo was gone. It sold out in one hour.
I did not see many sporting rifles for sale for the first time in a
long time.[ The dealers brought] nearly all battle rifles and semi-auto
assault
style rifles.
Magazine prices have already climbed by about 7 bucks per magazine with the
average
price now around 25 bucks. They were $13.50 each in June of this year.
There was a general air of urgency. You could feel it and it was hard to resist.
It was soon evident that all the important stuff was going to be off the shelves
and into closets around
the
county. I suspect it will be more then a month before factories can make
up what has been sold around the nation in the last few days.
Even though magazines and ammunition was off the shelves and at inflated
prices the rifles themselves. They were not marked up at all. I was
happy to see that..
My friend C. bought an original late 1700s flintlock from middle eastern
origin. Looked like it was on a camel's back many times... It had an integral
folding
bayonet the length of a short sword. I told him the ATF would be grinding
that bayonet off next year because it makes the old musket an assault rifle
and the weird curving stock could be mistaken as
a pistol grip --another evil feature that will call for men in black
coming in the windows and doors next winter. He looked a bit like he was
having a stroke and I remembered I should not speak to men in there 80s in
so a casual and dry mouthed way. Think so?
he asked.
I said let's hope I really am joking and he sincerely agreed. So did
the 20 guys who stopped to listen to the quick exchange and admiration
of the
ancient piece of machinery.
It was still a good day even though I bought almost nothing because everything
I wanted was gone.
I found only two AK magazines made from steel, in acres of guns. I saw plenty
of plastic mags but X. did not want any of those for his AK.
All the PMAGs in the world must be sold out now.... If it said "Magpul",
then it was soon sold.
Got some good books from the Militia Of Montana (MOM) table
All in al, this
served as a first hand look at what is being reported on the news every
night. Every round of battle ammo is now gone. Thanks Mr. Obama:.
Look what you made us do! Think of the money being made. Let's all hope
our new supreme leader is busy messing with nationalizing the auto industry
rather
then dreaming
of
ways to pave streets with our liberty. - KT
Hi Jim,
While I completely agree that one should stock-up on full capacity magazines,
I don't think you should read too much into the "Cheaper Than Dirt" (CTD)
prices. The company is just poorly/inaccurately named. It may simply be a
coincidence, but MidwayUSA has many magazines on sale now.
Here are Midway's prices for the items you listed:
Glock Model 20, 21,
& 22 full capacity factory magazines: $23.99
Glock 33 rd. 9mm magazines: $34.99
I went directly to the Beta CMAG web site and found the Mini-14 drum for for
less than CTD's price--$260
directly from the manufacturer.
Deals can still be had if folks search around and act quickly. Regards, - James
S.
JWR Replies: There are still a few bargains out there, but
supplies are obviously getting spotty. The folks at CDNN mentioned that they
have sold out of all of their Springfield XD magazines, with the exception
of the .40 S&W magazines.
Adam at HKparts.net said
that they now have 200+ orders pending, yet they still have good quantities
of HK USP pistol magazines on hand. I heard that .44Mag.com has had a huge
volume
of sales, yet they have not yet noticeably increased their prices. (But I did
note they now have their CMI M14 magazines and all of their Saiga magazines
on
back-order.)
Supplies are definitely drying up! I hope that people took my advice back
October, 2007: The
Falling Dollar--Sheltering Your Assets in Steel and Alloy Tangibles. In
today's world, any top quality full capacity magazines are a fine investment.
« Odds 'n Sods: |Main| Letter Re: A Suggested Checklist for Preparedness Newbies »
Letter Re: Deflation Possibly Followed by Mass Inflation?
Jim,
I believe that we are in for deflation, not inflation.
A simple error that most people make when considering this topic is language
related: When discussing actions of the Fed they talk about ‘printing’ money.
Well, the Fed (actually the Treasury) hardly ‘prints’ any money
at all. In Zimbabwe they print money. Lots of money with lots of zeroes. Here,
they just increase the number of zeroes in a computer. The difference is profound.
When there is a lot of currency floating around then people use it to buy stuff.
More currency with higher values means more currency chasing the same amount
of goods and that means inflation. The currency does not go away. If fewer
goods are on the market, the same amount of currency is there chasing it and
prices go up. The currency doesn’t get destroyed.
In the US the amount of credit used is orders of magnitude more than the amount
of currency in circulation. Credit can be destroyed. If the value of your house
goes down by $100.000, that $100,000 is just gone. It doesn’t exist any
more. It is not in the money supply. This is deflationary. Further, if the
bank repossesses
your house and then sells it to someone else, the difference in sale price
has an effect on the banks ability to lend. If they lose $100,000 on your house
then they have effectively lost the ability to lend $1 Million because of the
fractional reserve system. That $1 Million is not in the money supply any longer.
That is deflation.
And, of course, the amount of money that will vanish in exactly the same way
as part of the derivative mess is orders of magnitude larger than the amount
to be lost due to housing.
As can be seen by looking at virtually anything in the last few years (gas,
oil, corn, gold, wheat, houses, cars, the Dow, etc.), prices for everything
have gone up while there was credit in the system and banks wanted to lend.
Now
there is dwindling credit, severe unwillingness to lend, and a Fed that is
contracting the ‘money’ supply. Value/dollars/money is vanishing
at an unprecedented rate. Prices on everything are coming down hard. This is
deflation. Your dollars are becoming more valuable, not less. Hold on to cash.
I know this is counterintuitive, and I am an abject Austrian regarding economics.
But, the majority of people (including many Austrians) are fooled by the difference
between an expansion of cash and an expansion of credit. Weimar Germany, Argentina,
Mexico, Zimbabwe – these places all created lots of currency and had
rampant inflation. We cannot use that as a model. In the Great Depression we
had deflation because the Fed contracted the money supply. This is well documented,
as are the effects. This is the model we need to use now. The effects this
time around will be much worse, they have the same genesis
and the same result. People will need/want/hoard cash.
Now, once we are near the bottom of a deflationary cycle (I predict 4-to-5
years from now), who knows what the government will do? At that time they may
crank
up the printing presses because everyone will want dollars and no one will
trust the banks. Then all bets are off. Then we could have inflation.
But for now, your dollars are getting more valuable not less. Get what you
need in
order to get through hard times, but, short of a societal collapse a la your
novel ["Patriots"].Some FRNs
in a fireproof box in your gun safe (and not in some bank that may fail) are
your best bet. - Michael W.
« Letter Re: Some Changes in American Wholesale Food Distribution |Main| Note from JWR: »
Full Capacity Magazine Price Increases are Already Here
Regarding my recommendation to stock up on full capacity magazines, reader
David B. noted this in an e-mail yesterday morning: "[The discount mail
order dealer] Cheaper
Than Dirt [is] already gouging us based on our fear of Obama being elected.
Overnight, their price for Mag-Pul [brand AR-15/M16] magazines went from $15.97
each to $29.97 each. Wow. They just lost my business forever." David's
note intrigued, me, so I just spent some time at the Cheaper
Than Dirt (CTD) web site and compared their new prices with their latest
hard copy
catalog (dated November, 2008). Here is a brief sampling:
Glock Model 20, 21, 22, 31, and 32 full capacity factory magazines were
all $19.97. Now some are $29.97 and others $39.97 Ouch!
Glock 33 rd. 9mm magazines were $44.97. Now $49.97 (Note: I bought a pile
of these for $26 each, about a year ago, and I'm glad that I did!)
Ruger factory 20 rd. Mini-14 magazines were $59.97. Now $69.97
Beta CMAG 100 rd. double snail drum for Mini-14 were $299.97. Now $399.97
LR .308 19 Round Blued Steel mags made by DPMS (for their flavor of AR-10
rifles) were $39.97. Now $49.97 (But out of stock)
M14 and M1A .308 20 Round Parkerized "Military Style" [commercial copy]
were $11.97. Now $29.97 (But out of stock)
AR-15 .223 30 Round, Bushmaster factory mags were $29.97. Now $49.97
FN P90/PS90 5.7x28mm
50 rd. magazines dropped from $69.97 to $59.81 (At least
a some good news!)
All in all, I have doubts that the aforementioned price increases were all
triggered by CTD's suppliers. But I wouldn't go so far as to call the increases "gouging". Pricing
is a function of supply and demand. In a free market, prices eventually
reach equilibrium. And I'm sure that the current demand is skyrocketing.
I certainly know that my personal demand is! For example, I just
placed a "top
off the inventory" order
with one of my favorite suppliers, CDNN
Sports. I was pleased to see that as of yesterday, none of their
prices had increased. I did notice however, that they are now sold
out of many
magazines, including quite a few SIG, HK, and Springfield Armory XD pistol
magazines. My advice: Stock
up
now, while magazines are still available at fairly reasonable prices. I
anticipate that there will be some significant shortages for the next few months.
But after BHO's
inauguration in early 2009 all bets are off. If, (as
I've predicted), an executive
order banning importation
of so-called "assault weapons" and "high capacity" magazines
is enacted, there could be some huge price increases!
« Odds 'n Sods: |Main| Letter Re: Some Changes in American Wholesale Food Distribution »
Letter Re: Did Western Civilization Actually Peak Around 1970?
Jim,
I wanted to comment on something that was mentioned near the end of the
Utah home break-in article: The author hit on the idea that TEOTWAWKI already
took place in the late 1960s. Possibly some gifted insight.
I'm a member of a regional Peak
Oil group. (I originally joined this group
a few years ago, in order to learn food-growing skills: You've always suggested
getting
with various groups, in order to learn skills), we've begun a spin off group
meeting--a 'meeting of the minds'
so to speak, involving predictive analysis, regarding
the collapse of the current civilization.
We were all encouraged to present our own theses, with the material to support
it. In my case, I presented the idea that our civilization actually peaked
sometime in the early 1970s, for the following reasons ( based on the "fusion" [an
MI term] of the open-source analysis of several theories, in addition to my
own historical observations):
- The last manned Apollo mission to the moon took place in 1972 (we have not
seriously entertained the thought of going back there since).
- Domestic US oil production peaked at roughly 9.5 mbl/d (million barrels per
day) in December, 1970, and has since gone into irreversible decline (without
going into detail, we now produce roughly what we once did during WWII.
In other
words, US energy independence is a fantasy). This includes the North
Slope of Alaska, which previously peaked in the late 1980s at roughly 2 mbl/d,
and
now produces roughly just over 700,000 bl/d.
- Nixon's decision to remove the last aspect of the US Dollar being tied to
anything tangible, in 1972 (DeGaulle wanted France's loans repaid in gold bullion.
This was in part a result of the Vietnam War).
- The Arab Oil Embargo of 1973, which permanently devalued the US Dollar.
- The US withdrawal from South Vietnam, with Saigon being overrun by 1975,
marking the US military's first "defeat" (For the real reasons as
to why the US got involved militarily in Vietnam, I suggest Googling 'Geneva
Conference': By international agreement in 1956, Vietnam was supposed to be
split in half for only two years, while the country took a popular vote.)
- A lower living wage for the average US worker, since the 1970s.
There are other examples. In my opinion the best author specializing in this
area of predictive analysis is John
Michael Greer in Oregon, who is critical
of Jared Diamond's research. (Diamond avoids the Roman Empire, and skims over
the Mayan civilization). Greer has concluded that a civilization takes roughly
150 years to collapse--something akin to Winnie the Pooh being dragged down
the stairs, hitting his rear end on each step, staying there a brief moment,
then hitting the next one
OBTW, I'm reading "Patriots:
Surviving the Coming Collapse" for a second time, this time
flagging it with Post-It notes. - CPT J.E. .(A prior service 96B)
« Five Letters Re: Prisons and Other Institutions Amidst a Societal Collapse? |Main| Note from JWR: »
From The Memsahib: Buyer Beware When Purchasing Livestock
While most of my livestock purchases over the years have been satisfactory,
I have found that buying livestock can be full of pitfalls. I will share
some of my mistakes in hopes
you can
learn
from
them.
I have
found
livestock
sellers
may not
outright
lie to buyers but they often do not volunteer important information.
So it is very important that you get a detailed book for each type of livestock
you
plan to purchase and do some research, so you'll know exactly what questions
to ask. Make certain the book has a chapter about choosing healthy stock.
The book
ought to
give
you
signs
of unhealthy or poorly conforming
animals
as well
as questions
to ask the sellers about the health of the animals.
The first time I bought sheep I did not know to ask if the yearling lambs I
was buying had been wormed. Unfortunately the five lambs I bought had not been
wormed.
Because of the parasite load they were carrying, they were not able to withstand
the stress of the transport, feed change, and new environment. They quickly
developed pneumonia despite all I did to try to keep them alive. Two out
of
the five died.
No, the seller would not refund any of my money.
I paid a premium price for the first dairy cow I bought because supposedly
she was "due to calve" in less than two months. I did not ask the seller
to have a veterinarian certify she was bred. (My mistake!) She never calved and
the seller
would
not
refund the extra that I paid for a "due to calve" cow. We drank store
bought
milk
for an extra year because of this mistake.
Then there was the pair of a angora rabbits I purchased. I assumed wrongly that
since I was buying a "breeding pair" that meant they would breed. I
did not think to ask the breeder to demonstrate that the male had all his necessary
parts.
He didn't. No, the seller would not refund my money.
Temperament is another important component of purchasing livestock. Animals with
bad temperaments can be difficult to work with or down right dangerous. Don't
take the seller's word for the temperament of the animals, insist on seeing a
demonstration. Even better arrive early, to see the animals before the
seller
has a chance to get the animal "ready".
I told the seller of my second cow, that I intended to show her at the Fair and
milk her. He kept expressing on the phone to me how wonderful that would be.
I neglected to ask for a demonstration of her being haltered, led, or being milked.
He neglected to tell me she was more feral than a March Hare. The only time I
was able to milk her was when she was immobilized in a squeeze chute!
Then there was the horse supposedly "gentle enough for a novice to ride
bareback. But the seller kept postponing our meeting and postponing until
it was getting quite late even though we had driven several hours to see the
horse.
When we finally were met by the sellers, the seller's daughter who supposedly
was the only person who knew how to ride never showed up. Because it was late
and getting dark and we had a long drive home, and they just seemed so honest
we bought the horse on the seller's word that I, a novice, could ride the horse
bareback with just a snaffle bit . Later when I rode this horse at our
ranch,
after he discovered that I could bring him under control when he tried running
away
with
me,
his next trick was balking--refusing to move at all. When I repeatedly urged
him forward he started rearing and bucking. No, the sellers would not take
the horse
back
and
refund
our
money.
Do your homework. Find out all the questions you should ask, find out what
parts you should inspect and what to look out for. Insist on seeing the
animals handled,
haltered, led, ridden, milked, as applicable. By the way, if the seller is
only able to manage the animals with well-trained stock dogs, then how are
you going
to
manage them? Do not let the seller's position as president of the breed association
or their religious affiliation cause you to believe they would not mislead
you or omit information in order to make a sale. Sadly I have found this out
the
hard
way, "Buyer
beware" should be your watch words as you purchase livestock--even from
the breed association president, and even more sadly sometimes from people
who claim
to be of the same religious beliefs as your own.
« Odds 'n Sods: |Main| Letter Re: The Least Expensive Way to Stock Up on Storage Food? »
Letter Re: Market Observations From The Trader Blog
Mr. Rawles -
Thank you for your recent mention of my site, TheTraderBlog.com.
I am a former Lehman Brothers employee, I worked in New York City on the FX
trading desk, but left in 2002, so I am glad to have missed all the recent
excitement.
I publish my blog in an effort to help me reason through my personal trading
strategies, and also like to share my opinion about the markets and related
events in general. I have not yet figured out how to make any money off of
the site, so for now it is just a great hobby for me. I currently work in an
unrelated field, so I have left my information anonymous on the site so as
to not risk anything with my current employer.
I have become a regular visitor to your site since August, and coincidentally
I have just finished your novel "Patriots" -
and frankly I am scared to death about recent developments. In addition to
the scenario you laid out, I
have also just finished The Fourth Turning by William Strauss and
Neil Howe, which describes the potential for an upcoming crisis - right about
now
- through
2025. Written in 1997, it is also very chilling. So, in addition to my own
work and analysis of the markets (I see the DJIA going to the 6000
level over the coming two quarters), the confluence of all these sources
really makes me ramp up my preparedness. It is like connecting the dots, and
I have
just come
to a very clear picture. I feel as if I found your site a bit late, and am
behind the curve. But better late than never. And thanks to the suggestions
in your [audio] CD [that is included with your "Rawles
Gets You Ready" preparedness course,] I now have my wife on board!
Thank you! Great stuff.
What just happened in Iceland is a microcosm of what can (will?) happen here
in the U.S., if in fact the U.S. Treasury bubble does implode. I think a government
debt default, USD devaluation and hyperinflation are very probable events into
2009 - 2010. Just how is the [US] Treasury going to finance an additional $2-to-3
trillion in 2009? As always I appreciate the information you publish. Best
Regards, - Editor, The Trader Blog
« Odds 'n Sods: |Main| Letter Re: Recommended Sources for Gardening Hand Tools? »
Letter Re: The Depression of the 1930s--Why No Societal Collapse?
Jim
I run a museum that covers, in part, the Great Depression. In a reply to Steve's
letter about how people may react to a "modern" 1930s type depression,
you listed a number of economic, social and cultural differences in America
in the two time periods. I might add, or expand on, a few.
In the 1930s, many more people lived on farms or gardened. Even in many towns
and cities, it was common to have a garden and raise a few animals including
chickens, rabbits, pigeons. An enormous difference, then and now, is that the
garden seeds then were "heritage" or open pollinated. That means
that a family could save their seed year after year, and always have a crop.
That is no longer possible with today's hybrids. If you save seed now, they,
(the hybrids), won't come back the next year. In a major economic breakdown,
there will be little distribution of anything, including seed. No seed, no
garden.
In the 1930s, most people had wells or cisterns for water. Today, if the electricity
goes off, no more "city" water. Formerly, most people had outhouses.
They didn't need flushing. Today, if you can't flush, you've got a biological
lab in your bathroom within three days. In the 1930s, there were more horses,
more donkeys, more mass transit and railroads, and more bikes. Today, no
gas means
no mobility. 80 years ago many more people preserved their own food. It was
common for most folks to dry, can, smoke, salt, pickle and cold cellar, food.
Today, many people consider food storage a discount card to a restaurant.
In the 1930s, most people heated with wood or coal. Now, it's almost entirely "on
demand" gas in a pipe, or electricity. Formerly, most people had treadle
sewing machines, grain grinders and meat grinders. Today, nada. In the 1930s,
far more people practiced folk medicine and used herbs. If you got cut, sew
it yourself. Got sick, chop a chicken and make soup. Today? You'd better have
a pill bottle and insurance.
In the 1930s, far more people were church goers. Families tended to live closer
to each other. People in general had a more self-reliant attitude. If someone
had a problem, they tended to try to solve it themselves. And if they couldn't,
their church family, or own their family, would help them. Society today includes
far more people who think the gov't should, and will, be their caretaker.
It's my belief, that if today we have a depression, if only as bad as the 1930s
Great Depression, that [the societal impact of] such a depression will be many
times worse. It's a somewhat real possibility that, today, in a severe enough
crisis,
there
would
be no
transport, little food or medicine, no heat, no sanitation, no water and very
little cohesion of society.
In the 1930s, people sold apples on street corners, and a popular song was "Brother
Can You Spare a Dime?" I'm afraid that today, it may be far more
common for people to try to take what they can, and consequences be d***ed.
A 1930s-type
Depression today ? Not pretty.
Jim Fry
Museum of Western Reserve Farms & Equipment
« Letter Re: How to Handle Real Estate Holdings in a Economic Depression |Main| Note from JWR: »
Letter Re: The Depression of the 1930s--Why No Societal Collapse?
Hi Jim,
I really enjoyed reading your novel "Patriots".
I've read a few other books also, like "Lucifer's Hammer" and
I have to admit that they spurred me to buy a 22 LR [rimfire rifle] as a starter.
I've been doing a lot of thinking of our current situation in this country
and it occurs to me that every generation has things going on that is very
concerning. But in particular was thinking the Great Depression should have
been a good example of things going to h*ll. Yet there was not this great meltdown
where people needed to go to retreats and such. So I'm writing this e-mail
to see if you've done any research to do comparisons with our [present-day]
situation and the Great Depression situation to determine why the country did
not collapse during that time period. Thanks, - Steve
JWR Replies: Thanks for raising that point. It is well worth
discussing. There are some substantial differences between our society in the
early 21st Century, and America in the 1930s. With these differences, our society
is now much more fragile and vulnerable to collapse. Here
are a few that come immediately to mind:
Consider the Attributes of America in the 1930s :
A largely agrarian and self-sufficient society. (Now, just 1% of
the population operating farms and ranches feed the other 99%.)
Not heavily dependent on computing and communications, technology, grid
power, and petroleum-based fuels.
Shorter chains of supply. Most food was grown within 100 miles of where
people lived.
A very small underclass that was dependent on charity or public welfare.
Lower property tax rates and lower (or nonexistent) license fees, vehicle
registration fees, et cetera.
The majority of workers lived near their work.
Most displaced workers were willing to accept lower-paying jobs--even
doing hard physical labor.
The entire nation was economically self-sufficient and could carry on
without many imports.
Far greater self-sufficiency at the household level (domestic water wells,
windmills, wood burning stoves, home vegetable gardens, home canning, and
so forth)
A much lower level of indebtedness (public and private). At the outset
of the Depression most families had cash savings. (We are now a nation
of debtors.)
A sound currency, still backed by specie. (Although FDR's
administration seized
most privately-held gold in 1933, the currency was at least still fully
redeemable in silver coinage until 1964.)
Lower percentage of corporate employment--so there were less risk of huge
layoffs that would devastate communities
A significantly more moral society that still had compunctions and a prevalently
law-abiding attitude.
A homogeneous population that largely shared common Judeo-Christian values.
A much larger portion of society attended church regularly
A simpler, less extravagant lifestyle, with tastes in cooking and entertainment
that did not require large outlays of cash.
Most families owned only one car (with proportionately lower registration
and insurance costs), and they lived in smaller homes that were less expensive
to heat.
In summary, in the 1930s it cost a lot less to live (as a percentage of income)
and people were willing, able, and accustomed to "making do" without.
When people lost their jobs, in many cases they didn't lose their homes because
they were paid for. Many folks could simply revert to a self-sufficient lifestyle
and earn enough with odd
jobs to pay their property taxes. What fraction of
The bottom line: If America were to experience a Second Great Depression,
given the high level of debt and systems dependence, there would be enormous rates
of dislocation and homelessness. And with modern-day immorality and the prevalent "me
first " attitude, I have no doubt that riots and looting would absolutely
explode.
« Letter Re: Salt and Other Key Items to Store for Barte |Main| Letter Re: The Depression of the 1930s--Why No Societal Collapse? »
Letter Re: How to Handle Real Estate Holdings in a Economic Depression
Sir:
If the global economy melts down and we experience a "greater depression" or
worse. What is the best strategy for real estate that is already owned? I own
a primary home and two rental properties in central Virginia but if the SHTF,
I'm going to retreat along with numerous family members, to our farm about
25-30 miles from the nearest city. (It has hundreds of acres for growing,
and has ample water, etc.)
I don't have substantial equity in any of my three houses and all mortgages
30 year fixed through Bank of America. Is it worth continuing to try to pay
on one or more of these? If the county is on the skids for several years and
job loss is substantial, do you think there would be bank/government lack of
mortgage payment forgiveness and allow people to resume payments if or when
things returned to relative normalcy?
I'm pretty certain that I would leave remaining credit card debt unpaid. If
the SHTF, a poor credit score would be least of my worries. Do you agree?
Any other thoughts on this topic would be greatly appreciated. I may be a little
naive is assuming the USA will return to a state of normalcy but it is a very
real part of my planning process. Or is there basically no chance of a return
to normalcy after such an event? Thanks in advance, - Joe
JWR Replies: Anyone that has vacation, rental, or "investment" properties
with mortgages attached should beware! A negative cash flow will be
disastrous in an era of widespread corporate layoffs. Face facts: It
is very likely that a recession or even a depression is just around the corner,
and the collapse of real estate prices is likely to continue for several years.
If you can break even or get out with a small loss, then I urgently recommend
that you start selling property and don't stop until until you have a solid positive cash
flow. If you try to juggle too many mortgages, you may lose everything.
As I've said before, a total wipeout is unlikely. Far more likely is a straightforward
Depression, perhaps inflationary, perhaps deflationary, but in any case nasty.
Banks and civil governments will still function in all but an absolute
worst case situation. That means that you will still have to meet your obligations
for mortgage and property tax payments. Be ready for such times by getting out of
debt!
If you are completely "upside down" in one or more mortgage, then
think twice about just walking away, and mailing your banker "jingle mail." Unless
you are self-employed, I recommend that you do so only as a last resort. Keep
in mind that credit scores are now part of the background checks that are now
standard practice in the hiring process for many corporations. It
would add insult to injury to ruin your chance of getting re-hired by wrecking
your credit
rating.
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The Financial Crisis Will Soon Abate, But The Real Crisis Will Soon Begin, by Steve Saville
In an essay first published in 1969 and recently re-published,
Murray Rothbard summarizes the causes and cures of economic depressions by
drawing on the Business Cycle theory developed by the great Austrian economist
Ludwig von Mises. Here's an excerpt from this essay:
"Mises, then, pinpoints the blame for the cycle on inflationary bank
credit expansion propelled by the intervention of government and its central
bank. What does Mises say should be done, say by government, once the depression
arrives? What is the governmental role in the cure of depression? In the
first place, government must cease inflating as soon as possible. It is true
that this will, inevitably, bring the inflationary boom abruptly to an end,
and commence the inevitable recession or depression. But the longer the government
waits for this, the worse the necessary readjustments will have to be. The
sooner the depression-readjustment is gotten over with, the better.
This means, also, that the government must never try to prop up unsound
business situations; it must never bail out or lend money to business firms
in trouble. Doing this will simply prolong the agony and convert a sharp
and quick depression phase into a lingering and chronic disease. The government
must never try to prop up wage rates or prices of producers' goods; doing
so will prolong and delay indefinitely the completion of the depression-adjustment
process; it will cause indefinite and prolonged depression and mass unemployment
in the vital capital goods industries. The government must not try to inflate
again, in order to get out of the depression. For even if this re-inflation
succeeds, it will only sow greater trouble later on. The government must
do nothing to encourage consumption, and it must not increase its own expenditures,
for this will further increase the social consumption/investment ratio. In
fact, cutting the government budget will improve the ratio. What the
economy needs is not more consumption spending but more saving, in order
to validate some of the excessive investments of the boom. [Emphasis
added]
Thus, what the government should do, according to the Misesian analysis
of the depression, is absolutely nothing. It should, from the point of view
of economic health and ending the depression as quickly as possible, maintain
a strict hands off, "laissez-faire" policy. Anything it does will
delay and obstruct the adjustment process of the market; the less it does,
the more rapidly will the market adjustment process do its work, and sound
economic recovery ensue."
Clearly, in response to the current financial crisis the US government --
and most other governments, for that matter -- is doing exactly what Mises
and other great economists of the "Austrian School" claim should not be done. Specifically, the US government is trying to prop up unsound business
situations; it is bailing out and lending money to business firms in trouble;
it is attempting to prop up prices; it is trying to inflate again in order
to boost the economy; and it is rapidly increasing its own expenditures.
The "Austrians" have considerable credibility because their basic
theories have never been logically refuted and have been validated, time and
time again, by real world occurrences. For example, in early 1929 the two leading
Austrian economists of the day, Mises and Hayek, predicted that a great crash
was about to occur. Mises, at the time, turned down a prestigious job with
a bank because he foresaw a global banking crisis and did not want his name
associated with any bank. After the crash the Austrians then warned that the
large increases in spending and the various other government interventions
implemented in order to stimulate the economy would turn a financial collapse
into a very lengthy depression. They were again proven right. As an aside,
it is often stated, as if it were a fact, that President Hoover employed a
hands-off approach in response to the financial collapse of 1929-1932, thus
sowing the seeds of the drawn-out depression that followed. However, nothing
could be further from the truth. The fact is that Hoover was not a true believer
in free markets and in response to the crash he ramped up the US Government's
involvement in the economy, so much so that during the 1932 Presidential election
campaign Hoover was labeled a "spendthrift" by FDR,
his opponent. Of course, the 16% increase in government indebtedness on Hoover's
watch during
1931-1932 now looks miserly compared to the 1,200% increase in Federal debt
presided over by Roosevelt during 1933-1945, but at the time it was one of
the largest peace-time increases ever.
There were many financial crises in the US prior to the 1930s. The main factor
that differentiated the 1930s from earlier periods of crisis -- the thing that
transformed a financial collapse into an economic depression lasting more than
a decade -- was the government's response to the crisis. Never before had the
government tried so hard to fight the contraction by ramping up its own spending,
and never before had the US economy performed so poorly. Strangely, most economists
seem incapable of linking the dismal economic performance with the large increase
in government intervention, and, as a result, most economists still think that
increased government intervention and spending is the answer (although they
often disagree on the details). The Japanese thought it was the answer during
the 1990s, and thus managed to transform what should have been a sharp 1-3
year adjustment into a 10-15 year period of economic stagnation. And now it's
widely considered to be the appropriate response to the current woes in the
US.
Given that it is being 'egged on' by high-profile economists, investors, hedge-fund
managers, businessmen, journalists, television personalities, politicians and
even newsletter writers of almost all stripes, it's a virtual certainty that
the
US government will continue to 'fight' the current crisis by implementing inflationary
policies and inserting itself ever-deeper into the fabric of the economy. In
fact, it is now rare for a week to go by without the announcement of some new
large-scale government intervention. This week's main intervention -- to date,
anyway, but there are still three days left in the week -- is the decision
of the Fed/Treasury combination to provide an unlimited amount of short-term
funding to non-financial companies via the Commercial Paper market.
The world's financial markets are embroiled in a crisis of epic proportions,
but with or without government 'help' the financial crisis will soon become
less intense. Perhaps the many actions being taken by the government in an
effort to 'soften the blow' will cause the immediate crisis to dissipate earlier
than would otherwise be the case, but these actions will certainly do longer-term
damage by siphoning real savings into non-productive endeavours. Always bear
in mind that the government doesn't have any real savings of its own, so the
only way the government can help an unhealthy corporation is to divert savings
away from healthy corporations. This diversion often occurs via inflation (increasing
the money supply), and is therefore unseen by most observers.
We can't say for certain that the actions being taken to counteract the financial
crisis will lead to a drawn-out economic depression, but we can say that the
actions greatly increase the risk of such an outcome. Furthermore, we can say
that similar policy moves have, in the past, been followed by drawn-out economic
depressions.
Further to the above, we think it makes sense to prepare for a very lengthy
period of slow, or no, economic growth. In general terms, this should involve
strengthening one's balance sheet. More specifically, it should involve
staying (or getting) out of debt and could involve building
up exposure to gold and income-producing investments other than bonds (energy
trusts, for instance). Fortunately, a good balance-sheet-strengthening opportunity
is likely to present itself over the next six months because the immediate
crisis will probably soon give way to a multi-month stock market rebound and
the illusion that
policy-makers have managed to ignite a sustainable recovery.
Regular financial market forecasts and analyses are provided at The
Speculative Investor (A paid subscription service. Free
samples are available.)
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Three Letters Re: The Savvy Barterer
Hi Jim:
That first paragraph touched a nerve, because it was so truthful
for me. My senior year in college everybody went to Ft. Liquordale. I
went to Marrakech. Amazing experience. And boy did I get burned on some of
the things I bought there. Some by as much as 1,000%. But the learning experience
I came away with was priceless.
The negotiation skills I learned there have
become by far my most valuable business tool. That experience really made me
think. On one hobby web site where I have collected much feedback my favorite
one of all is "He exhibited finely honed buying and selling skills: a pleasure
to do business with."
There is so much to bartering, selling, and buying skills. Part of it is even
some poker skills.
For the most part we in America consider haggling painful and want
it over with as quickly as possible. People over there (in Marrakech) have
all day to barter. I think to myself, "It's my money, I earned it. Why
don't I follow their example and try my very best to get something at the lowest
price and see what kind of game we can play to save some dough." Make it a
game and it naturally makes people interested because of
competition. But winning the game and letting them make a small profit
was the part that I enjoyed.
Yes, sometimes it is majoring in the minors. I don't have 15 minutes
to haggle over a half a kilo of dates, but knowing the real price something
should cost
hastens the process. I came back home a changed person and used my newfound
skills to make and save some real money here at home. When I buy a used item
off, say craigslist, I don't simply make an offer out of thin air.
I provide a rational, believable, supportable argument why I am offering
what I am offering and why the seller should accept my offer.
Cash is king
right
now. Not enough people have it, and many desire it more than they desire
their toys. One should remember that he who has the cash, now has what everybody
wants. If you
won't
sell
it to me
at
the
price
I am offering: I'll just keep
looking. And then they think you might just be the last guy who comes
offering them some cash and often you get what you are after.
People just need
to slow down the process. I personally like to get off topic. Ask some roundabout
personal background questions in friendly way. You can get some valuable insight
into whether someone is being truthful or not. Sometimes based upon those answers
I choose not to even bother to make an offer. But I am always polite, and respectful.
Barter and haggling need not be unfriendly or acrimonious. I usually have
more respect for someone who tries: much like respecting your adversary.
I
never
show too much interest, and make it known I am looking at other similar items
elsewhere. Make a point of examining faults quietly, not to annoy the
buyer but simply to show those faults are mutually acknowledged.
One of the most
valuable things I learned in Marrakech was never offer a price. Work your way
down, but don't offer a price unless you must, toward the end of the game. But,
offering a price there is something you must follow thru on. Walking away from
an offer you made is very bad form and considered shameful. Here in the
US you almost always offer a price on the low end: from a point where you can't
get hurt. Often times I will start negotiations on the phone. But I
always ask the seller for his price. Never make an offer before you ask the
seller
for his price. I have been amazed the few times in my life where I bit my lip
and asked the seller for a price, and got one that was far below what I
was going to offer for it. Pleasant surprise indeed, and then you can even
negotiate downwards from that point. You will get a better price from someone
who realizes
you are educated in their ways of haggling and you will get to that price quicker.
When
I have occasionally dealt with people here in the US who were from North Africa:
I usually sense they feel we are fools. Fools in the sense we spend
money too easily, to fast, on impulse. We rush one of the most important facets
of business. Haggling is a skill most our brethren need to brush up on. Who
says you have to spend your money today?
Hope the insight is of some value. I appreciate your
work very much. - John E.
Greetings from the Foothills of Maine:
Bartering
truly is the greatest sport and a New England
national pastime. I'd rather barter than eat. Most
folks I know would. I learned to bargain early from a farmer father who
was a rather fine trader.
Here's a tip for our new traders:
I've
never encountered a fellow who wouldn't take a
chance. You see, sometimes a fellow would have accepted my last offer
if it weren't for the "giving in." Everyone likes to
think they have the last word. So somebody pulls a
quarter out. If I win he takes my price. If he
wins the toss, I take his price. (Which I have already
decided I would pay, but I don't want to give in
either and let him have the last word.) It's all about the
dance. I know people who won't trade unless they
haggle-dance first. It's a contest, a game, a sport -- so to speak.
I call heads because a quarter goes heads more
times than tails. (It's slightly more likely than tails on a quarter.) I win,
he
frowns,
we
all
have
a
good
laugh. I pay him, load my goods, and leave. I'll be
welcome back to deal with him in the future, but
I'll won't be able to use the "flip" again. He won't
remember most of his customers, but he'll remember me
and the "flip." - CC in Maine
Dear Jim:
Great article on bartering. Here is an inexpensive
pocket weight scale I found. With this scale, some calipers, and a good
reference you can check coin weight, thickness and diameter to verify authenticity
to specifications
for coins not covered by
the Fisch Instruments gauges.
Regards, OSOM
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The Savvy Barterer--References, Skills, and Tools for TEOTWAWKI Barter
One of my long-standing Precepts is
that every prepared individual should be ready for both barter and dispensing
charity. Today, I'll be briefly discussing barter. Being ready to barter
is not just a
matter of having a pile
of "stuff" to barter. While barter and charity logistics are
important,
what
is
even more
important
is what is between
your
ears.
A Bazaar Experience
Bartering takes practice. Dickering is an acquired skill. Short of buying
yourself a plane ticket to Marrakech, I suggest that you start attending gun
shows,
garage sales, and
flea markets. Learn how to haggle.
One of my long standing Rawlesian Precepts is having the skills and material
acquired to conduct barter in a post-collapse society. Much has been written
about what
goods to keep on hand for bartering. But precious little
has been discussed in survivalist literature on the skills required to barter
effectively, and how to protect yourself from fraud.
I recommend that you practice bartering on a very small scale at first, to
sharpen your eye for value and your ability to dicker in a manner that will
result
in a
fair
trade.
(Mutually agreeable and mutually beneficial.) The
occasional transaction where you end up slighted is hardly cause for concern.
But unless you develop the proper bartering skills, you'll end up on the weaker
side of bargains
again and again, and thus fritter away your tangible working capital. The attributes
that will put you in a superior bartering position include specific knowledge
about what is being traded, knowledge about who's sitting on the the other
side of the table, and good old-fashioned "horse trading sense".
Knowledge and References
The more you know about the goods being exchanged the better you'll be able
to dicker. Armed with this knowledge, you'll be able to honestly, yet persuasively
talk up the virtues of your own goods, while politely talking down the defects
of your trading partner's goods. Hence, the the greater your technical knowledge
of the goods, the better. Take the time to study and develop an 'appraiser's
eye' for the condition of used merchandise, the relative value of goods from
one
maker
versus another, and knowledge of the overall market . With that knowledge you
can articulate the scarcity of any particular item in your barter stock. (After
all, as with
any other
free
market transaction, the key factor in determining value is the supply-demand
ratio.) If you are trading for a collectible item then knowing how scarce
they are can put you
at a tremendous advantage in negotiation. It is important to gather
as many references as possible about the items that you plan to barter.
Francis Bacon said it best: "Knowledge is power." You need to authoritatively
know which maker, model, variation, grade,
year of production, etc. to look for. Product expertise helps makes you a
savvy buyer or
seller.
There are dozens
of references on specific types of tool, guns, and collectibles that are valuable
to keep on hand. For example, two of the most important ones that I 've found
for
firearms
are: "The
Blue Book of Gun Values" and "Flayderman's
Guide to Antique Firearms and Their Values."
Similarly, knowing exactly
how to properly gauge the condition of a used item is quite important. For
example, with
firearms, the percentage of original bluing remaining, cracks or wear to a
gun's stock, bore condition, chamber condition, bolt face erosion, action tightness,
headspace, and so forth all make a huge difference in the value of a used gun.
Detailed knowledge is also crucial when determining the value of a rare coin.
(For most
of us, that knowledge is too specialized. It can take many years to develop
coin
grading skills, so a novice can get in over his head very easily. The difference
between an MS-66 coin and an MS-68 coin is very subtle, yet that difference
can mean thousands of
dollars difference in a coin's price. I therefore recommend that novices
only trade professionally graded coins that have been graded
and sealed (or "slabbed") by either PCGS or NGC.
A coin dealer Blue
Sheet is a crucial reference for measuring the
current
value of coins with particular mint marks and dates, in any given grade on
the Sheldon Scale. Even having an out-of-date Blue Sheet is better than nothing,
since it will
show relative values of coins, which change fairly
gradually. Again, this is not for a novice, or part-time
dabbler. (FWIW, even though I have been buying rare coins for more than
20 years, I still consider myself effectively a "novice" level since I don't
ge frequent coin grading practice. Hence, I only buy slabs. ("A man has got
to know his limitations.")
Tools
To be ready to barter with bullion gold cons or scrap
gold it is important to have a
touchstone, an acid test kit, test needles, a very accurate scale, and a set of Fisch
coin authenticity dimensional gauges.
When bartering for canned goods it's
important to have a Julian
Calendar (since some packers use Julian dates) and a hard copy of this
chart showing how to decipher date of pack codes from various canners and packers.
For liquid fuel it's
important to know if the fuel has been contaminated or adulterated. (Coincidentally,
one of our newest advertisers, UR-2B-Prepared.com sells
water test strips.
For batteries, it's important to have
a voltmeter. (For the greatest versatility,
buy a Volt-Ohm meter with test probes on leads, rather than a typical tray-type
home battery
tester. )
For examining the the fine details of just about anything--such
reading hallmarks--a jeweler's loupe (magnifying glass) is
a must.
For evaluating firearms,
as a minimum buy a 6 foot tape measure and a fiber optic bore inspection
light.
Dickering Tactics
Above and beyond getting technical knowledge is the hard to quantify "people
skill" of
dickering. Dickering skills can take years to develop. Part of this is learning
how to "read" the face and body language of the gent on the other
side of the table. How anxious is he to unload something that he has, or to
acquire something that you have? How quick they are to make or accept an offer
is a key indicator. And if there is a savvy trader sizing you up,
you have to learn to keep a "poker face", not revealing how excited
you are to see a particular item being offered.
Take your time in carefully
examining
any
item offered to you. This accomplishes two things. Firstly, it gives you the
opportunity to spot any flaws, defects or signs of wear on the item being offered.
Secondly, the more time that you spend examining the item will lead the seller
to subconsciously start to doubt the value of what he is offering. If you're
in a flea market or gun show situation once you have an item in your hands
you are essentially free to examine it without fear of someone else buying
it.
Take your time!
If you make an offer for an item, and it is rejected or the
counter offer made is ridiculously low than the very best thing you can do
is put the
item
back
down on the table. This psychologically distances you from the item, and again,
makes the seller begin to doubt it's value. In the dickering process one of
the most valuable phrases that you can use is "Is that the best
you can do?" If the seller won't budge, and you are close to
an acceptable price, the next best thing to do is to offer to sweeten the
deal with additional goods
offered on your side of the bargain. If you still can't reach an agreement
it probably wouldn't hurt to subtly talk down the value of what's being offered
to you, and talk up the value of what you are offering. "This is a mighty
fine widget it's too bad about this crack and this wear...
If it weren't
for that, I think your asking price would be fair."
The next most valuable
thing you can learn to say is to say nothing. After making
an offer and receiving a counter
offer, silently start counting to twenty. There is something about a long
pause that causes all but the most stalwart dickerer to want to fill that
silence And nine times out of ten, they will fill that silence with another
offer, usually one that is more agreeable.
As a last resort, if you are still
at an impasse in
reaching an mutually-agreeable trade, your tool of last resort is to thank
the seller and start to walk away from the table. This will be your final gauge
of just
how anxious the seller is to move his merchandise. If you hear "Wait,
wait, wait, come back here...", then you know that the seller still has
room to negotiate on price or quantities. Keep in mind however, that this is
a dangerous
tactic. Once you walk away from a table without he seller voicing
objection, but return later, you have subconsciously boxed yourself into the
previously-offered
price.
If
you come back later for the same item, the seller will know that you are
anxious to purchase it, and did not find a better deal for a comparable item
elsewhere, so they'll probably hold to the same price.
When selling, keep in mind that
you can negotiate downwards, but not upwards. Always make your initial asking
price
somewhat higher than what you really want out of it. Some people will not agree
to even
a good deal, unless they can extract at least one price concession from you.
So, set a fairly high price, and then negotiate downward.
If your counterpart brings an item to offer to you, but that item is of
no interest to you, always thank him for his time: 'Thanks, but
I'm not
interested in that right now. Do you have any X available?", describing
what you are looking for in trade. Remember, a sales venue is an opportunity
to gather information about other items a seller may have available, but may
not physically have with them. It may not hurt to make arrangements to see
them at the next
event, reminding them to bring those items so you can make a deal next time.
Image
When going to attend a flea market, gun show, or horse trading session,
it is important to "dress down". If you wear a fancy Rolex watch,
or fancy designer clothes, consciously or unconsciously your counterpart will
size
you up as being made of money. So dress very casually, including your shoes.
Leave your jewelry, pens, and nice watch at home. Wear your cheap plastic-cased
digital watch for these excursions.
You also need to learn to be observant about your counterpart. Is he a collector,
that happens to sell on the side, or is he a journeyman salesman, who makes
a livelihood at the business. Is he retiring and selling off inventory? Is
he someone selling merchandise on behalf of a friend or relative? The bottom
line is: just how anxious is your counterpart in making a deal?
Timing and Rapport
When approaching a vendors booth or table for the first time it is important
to first wait until the vendor has finished dealing with any previous customers.
Don't interrupt a man when he's making a deal! Smile and make eye contact,
and if appropriate for the venue, introduce yourself and shake hands. If you
are
a fellow vendor, it's important to wear your badge, or otherwise make it known
that you also have a table or booth. This lets the seller know that he is talking
to a wholesale rather than retail customer. This can make a tremendous
difference when negotiating price. Even if the vendor appears to have a pile
of worthless
junk on his table (with perhaps a few nice items of interest) make a point
of expressing your admiration for his merchandise. Say something like "You've
got a real nice inventory here" or "I can see that you have good
taste in widgets". This is an important step in developing rapport
with you counterpart. While it doesn't hurt to point out a defect on an individual
item
while negotiating for it, do not "run down" the
quality or condition of everything that you see. Doing so could skunk the entire
deal-making
process. OBTW, don't be shy about pointing out defects in your own merchandise.
"Oh, in case didn't noticed, there is one dent here..." That lets your customer
know that you are reputable.
Another key aspect of understanding buying and selling psychology is the "stage
of the game". At the beginning of a show or sale most journeymen sellers arrive
inventory rich, and cash poor. Near the end of the show, they will likely have
more cash (or precious metals) on hand and then will be in a better position
to make offers. Although some of the best items may have already been sold,
one
of the
best
times to make a purchase or trade is near the end of a show, when some sellers
have had a "slow show" At flea markets and gun show wait until just
before the vendor's "tear down" and pack-up time begins. Depending on
their situation they might feel desperate to make a good sale or a couple
of
good
swaps so that
they can feel that they've made the show worthwhile. So, if you saw an item
earlier in the show, and could not negotiate an agreeable price, wait for
the end of the sales event. This, BTW, is particularly valuable tactic if the
item in question is particularly bulky
or
heavy. It is
the unspoken goal of every seller to "go home light".
If you encounter a seller that has the sort of merchandise that you
think would be of future interest, then it's important to get that seller's
particulars so that you can contact him later. Take copious notes. The same
applies when you encounter a seller that has a particularly valuable area of
expertise
or a rare stock of items--especially spare parts. These are people well worth "networking" with.
Never Trade Hard for Soft
When negotiating a trade, keep in mind the absolutely fundamental rule: "never
trade hard for soft". This means, if what you are offering in
a trade is a compact, valuable, durable, tangible item, that is in short supply,
or highly valued,
the don't make
the mistake of trading it away for items that are less durable or desirable.
Otherwise, at the end of the day, your counterpart will be going home with
the better goods than you.
The only exception to this rule would be if your counterpart is willing to
trade a much greater quantity of his items and that you know that
you have a ready market for them. A corollary to this rule is, that it
is better to trade
your bulky for his compact. (Or as one aging gun
show vendor I met in put it, "Don't never trade away handguns for rifles or
shotguns."
That is simple yet sage advice.) This is particularly important in venues where
space is at a premium, and you are paying for the use of that space.
In closing, barter takes time to learn. Invest that time. Also invest in
the proper references. Lastly, invest in a stock of top quality barter goods
that you predict will be sought-after in a post collapse world. With the right
goods and the requisite knowledge, you and your family will never starve.
« Odds 'n Sods: |Main| The Savvy Barterer--References, Skills, and Tools for TEOTWAWKI Barter »
Four Letters Re: Currency Inflation Expectations for the US
James:
The letter [from reader PNG] has severe mistakes and is fundamentally misleading
- your readers deserve even more refutation before anyone is lulled into a
false
sense
of
security. To quote: “Let's say the Treasury just invents another
two trillion dollars by printing currency and forgiving loans. Let's say
they
do that
every year
for the next five years. How much inflation would that create? The absolute
maximum inflation rate from this example is about 20%, because there's ten
trillion dollars in circulation already.”
- These numbers are incredibly
far off the mark. Actually M1 is the narrow definition of money - the core
money supply that the Fed controls. It
just spiked from ~ 850 billion to ~1,010 billion ($1.01 trillion) in one
month.
So he's off by a factor of 10 here. If the Fed printed (or created digitally)
the hypothetical two trillion $ this would triple the M1 money supply. Three
times as much money chasing goods would ignite hyperinflation very quickly…
- And
let's not forget about the multiplier effect of fractional reserve banking!
Even much smaller amounts of money creation are going to create serious
inflation because we live with the fundamentally dishonest and unstable fractional
reserve banking system. $10 deposited in a bank is used as “reserves” to
loan out more than $100. (Banks are only obligated to keep
less than 10% in reserves to pay depositors). Off by another factor of 10!
Two
trillion
in new
money becomes more than twenty trillion dollars in loans.
Quoting again: “But in practice, the additional money dilutes the much
larger pool of value represented by goods and services. This must be true
because the entire money supply isn't enough to buy everything that is for
sale.”
- Actually money has velocity - it is spent, or changes hands, several
times per year. The money supply multiplied by the velocity determines the
amount
of dollars bidding for the total supply of goods. E.g., $100 times a velocity,
or turnover, of 10 times a year = $1,000 spent in one year. This $1,000
bids for the supply of goods, NOT just the $100.
In the US (right now) velocity is moderate. In Zimbabwe it is incredibly
fast. So looking at just the supply of money is only half of the equation
when you
look at the $ bidding up prices for goods.
- There are lots of other mistakes
here, but one last note is in order “That kind of inflation is literally
unprecedented in otherwise functional economies” Crack open
an encyclopedia, and look under W, for Weimar Germany! And don't confuse
cause with effect
- economies become dysfunctional because of inflation - Argentina is a good
place
to start reading...
An aside - thanks to Dr. Gary North for making the link above freely available
on the public section of his web site. Sign up for his free Reality
Check newsletter if you’d like advance notice of economic trends
based on real numbers. (BTW, I have no relation to Gary North, other than gratitude
for giving me far more education than I paid for as a subscriber.) Yours truly,
- OSOM
Jim:
Here are
a couple of facts about inflation I'd like to share:
FACT: The US Federal Reserve is issuing loaned money at its discount window
at the rate of $100 Billion per day which is $36 Trillion, annualized. The
$100 billion daily
rate
is actually increasing each week. These quantities of money will never be paid
back because the national debt is 10T$ which it took 95 years to accumulate.
This is highly inflationary.
FACT: Every bank account has been guaranteed to $250,000 [more than twice
the old limit] with unlimited funds to back up FDIC insurance. This will be
highly
inflationary, if banks
fail. - J.K.
Jim:
Referring to the letter by PNG, “currency inflation expectations” and
your response. I would like to quibble a great deal with PNG, and a little
with you.
First, for reader PNG,
Week before last, the Fed increased the money supply
by nearly 23% in one week. They have been increasing the supply by huge amounts
weekly, but that
one took the cake. Disregarding Jim's accurate argument that there are other
things to inflation, (e.g. velocity of money) simply multiplying 22% times
52 weeks gives a minimum annual inflation number of 1144%. The way the Fed
has
been “printing” money since Aug 17 this year, triple digit inflation
is almost a given. (Not that the Fed can really “Print” money,
but it can sure “Create”.)
The government is constantly changing the way it calculates inflation. Now
they talk about “core” inflation, leaving out the “volatile” food
and energy, etc. costs. Since when do we not need food and energy to survive?
If one calculates inflation using exactly the same methods used during the
Clinton administration, (as they do over at the “shadow stats” web
site) you will note inflation is running well over 10% NOW, and it takes some
time
for newly “printed” money to work its way through the system to
become inflation.
And for you, Jim,
I certainly agree with your observations about debt and derivatives. The world
bank and others are coming up with estimates that the notional
amounts of derivatives run in the order of 1.31 Quadrillion dollars. No one
knows for sure. If any
one of the three counterparties to a derivative default, then the notional
amount owed becomes a real amount owed. To put that in perspective, the GNP of the entire world economy doesn’t run over $50 trillion.
A bailout of $700 billion is peeing in the ocean because there are a lot more
zeros in
a
quadrillion
than in a billion. A quadrillion is a million billions. Parts of this house
of cards are failing now, (your comment about Lehman’s explosion date
of Oct. 21 is spot on) and the numbers are so huge that undoubtedly one will
take down others in a row of dominoes effect. Lehman may be that first domino.
My quibble with you regards another possibility to inflation. In our fractional
reserve banking system, every dollar “printed” by the Fed is normally
multiplied by about 10 by the banking system (Theoretically it can be much
more than 10) So to inaccurately describe in economic terms, the dollar bills “printed” by
the Fed might be called M1. By the time that one M1 dollar makes its way through
the banking system an additional 9 have been created via loans for any purpose
to the average guy or company. That might be called M3. The commercial banks
get one dollar but loan out ten. And there is no way of telling whether what
you are spending is created by a commercial bank loan or was “printed” by
the Fed, and in practice, normally it doesn’t matter. There are, however
rules as to how much the banks can loan out based on reserves, which are normally
the capital and accumulated profit. (Equity)
However, in special circumstances such as we now face, it does matter
whether dollars are Fed created or commercial bank created. Normally, to make
as much
profit as possible, commercial banks will try to lend out every dollar they
can. In the current situation there are two things that stop the commercial
banks from lending. The first is they are scared silly, and rightly so. They
have gone from worrying about the return on money to worrying
about the return of money. No one can tell whether a bank is bankrupt or not,
because IF they
hold derivatives, those derivatives may suddenly become a giant liability.
As well, all the major companies used derivatives freely, and they are suspect
too. Ergo we have a credit crunch where the banks are afraid to lend, even
to each other. The fractional bank multiplier (one in, ten out) is not working,
contracting the M3, or money on the street. Very deflationary.
All these billions the banks are “writing off” come directly from
their equity, or reserves. Since they can only lend out a certain multiple
of their ‘reserves’, those reserves, or accumulated profit, are
dropping like a rock because of the writeoffs. They must contract their lending
to remain within the rules. So, it becomes an issue of the commercial banks
being neither willing, nor able to lend.
The government allows certain borrowings from the central bank to be counted
as reserves in time of turmoil, which hasn’t been a problem within the
life span of most alive today. During 2007, and prior, US bank reserves ran
in the order of $43 billion. The latest US figures I saw shows “non borrowed” reserves
at minus $403 billion. The rest is government loans “counted” as
reserves. Every bank in the US, and most of the rest of the world, is bankrupt.
Well, there will be one or two prudent exceptions, but they will also likely
be taken down too, if only because of the number of checks in circulation.
Suddenly those nine dollars of commercial bank created dollars are shrinking,
and they can shrink even faster than the government can print. All this is
highly deflationary, as the world found to its dismay in 1929. Why do you think
Paulson has opted to buy equity in banks with a significant part of his $700
billion? It pumps their reserves, so they have the ability to lend. No one
has mentioned how they can cause banks to have a willingness to lend.
My point is that so many assets are being destroyed, as they were in 1929,
that a deflationary scenario is entirely possible. And deflation is a much
meaner beast than inflation. I have previously forecast elsewhere an inflation
followed by deflation until it is all Fed created money. Then it is Zimbabwe[-like
situation for America], if the system holds together that long.
Like you, I much prefer a world of sleeping well at night, hot showers and
lights that turn on at the flick of a switch. - Allen
Mr. Rawles;
In response to he recent post where another reader thought that triple digit
inflation could only happen with $10 trillion per year increases in the money
supply I would
like to provide some further economic insight for your readers.
- Prices are
determined by supply and demand; therefore, a drop in demand for dollars
can have a far greater effect than a increase in supply. Many people
do not realize that in Germany the inflation rate was many times the rate
of the increase in the money supply.
- If the dollar loses its reserve currency
status (currently being discussed) then international demand could fall
off a cliff forcing half of the dollar supply
back to the United States (100% inflation).
- There is a time-lag for inflation.
In the early days people expect price stability and so inflation is much
lower in than the actual increase in supply. Over time
people expect more and more inflation until it spirals out of control.
It is a geometric function where most of the action takes place in a very
short period
of time. In other words, the huge increase in the money supply that resulted
in home prices going up has not yet fully been priced into other goods
and services.
- A decrease in production (due to recession) decreases the supply of goods
competing with existing money causing inflation.
- Ever dollar FDIC pays out
is inflationary; therefore, with the government backing almost everything
these days every deflationary "force" is
countered by inflationary government action. Ultimately, interest on the
national debt will exceed the ability to tax... this is the end game for
the dollar.
When
you factor in these things, triple digit inflation does not take much time
to get rolling. In fact, it can go from 10% (current) to 100% inflation in
just a few weeks. I hope this material is useful for your readers. - Dan
in Virginia
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Letter Re: Advice on Silver Coins for Barter
Mr. Rawles,
I have only a small amount of silver American coins but I constantly look for
more. I find your advice to buy pre-1964 dimes, quarters and half-dollars
difficult to realize as coin collectors are not selling junk silver in my
area (Dallas/Fort Worth). To be frank the silver coins that are available
are being sold at crazy prices (two or more times spot)
over priced right now as everyone is freaking out about the economy. Reasonably
priced coins, though significantly delayed, are available online and my collection
has mainly been purchased this way.
On the other hand, silver dollars are
frequently for sale at local coin stores. I purchase these when the market
is favorable. They are especially easy to store in rolls. You never mention
these coins though so I have some trepidation about making this the foundation
of my bullion stash. Could you comment on this as well as 99% silver American
Eagles as a survival monetary reserve? Thanks, - Neal
JWR: Replies: The premium is generally much higher for silver dollars (than
dimes, quarters and halves), because even noticeably-worn dollars are in constant
demand for
the jewelry trade. (Belt buckles, etc.) A dollar coin also has a hair more
silver content, than four quarters, but that is only significant for large
quantities. (765 ounces versus 715 ounces, per $1,000 face value, if I recall
correctly. That info is in my FAQ.)
Therefore, if your goal is accumulating a stock of coins for barter,
then unless
you
can get silver dollars at nearly the same price as smaller silver, then
buy
only the
smaller
denomination silver
coins.
One ounce silver American Eagles also command a higher premium than generic trade
dollars. Although they are vaguely more recognizable than generics for barter purposes, I don't think that
they are worth paying the premium. The type of trade "dollars" that
I look for are the commercially made (not from a the U.S. Mint)
"US Assay Silver
--
.999
Fine
--
Trade
Unit"
one-ounce
rounds. (To see an example, here
is one that recently sold on eBay.) These are quite recognizable and hence
will be trusted for barter--perhaps even more so than even American Eagles from
the
US
Mint.
Sadly,
the average man
on
the
street
is ignorant about precious metals has
probably
never held an American Eagle coin in his hand. If you can find some these
rounds (with the current scarcity), they sell for about 20% less that American Eagles or Canadian Maple Leafs.
But
of
course
in
today's
incredibly scant
market,
beggars
can't
be
choosers.
« Odds 'n Sods: |Main| Letter Re: Advice on Silver Coins for Barter »
Letter Re: Recreational Vehicles and Investing in Tangibles
Jim,
Thank you for the blog and all the great info you put out. I have a couple
of questions that I would like to ask you, but first a little info about
myself. I am a 40 year old male with a wife and two kids. I live in Kansas,
I work
at a large manufacturing plant and my wife works for a insurance company.
We have a mortgage and other dept. I would like to buy some land out of town
and build a retreat for my family and myself for when TSHTF but
can not afford it right now. My grandfather though does own land about a
hour north of here. I was wondering what you thought about buying a RV,
stocking it with supplies and when the time comes bugging out in that. Also
you are always saying to invest in tangibles, What do you recommend ? Thirty
round magazines? Ammunition? Barter items? Right now I have about $1,000
to invest but I am lost as to what to buy. I already have my protection squared
away so that is not an issue. Once again thank you for all you do and I wish
your wife a full and speedy recovery. - Mike in the Great Plains
JWR Replies: I'm fairly certain that you are suggesting an RV strictly as
a one-way "Get
Out of Dodge" (G.O.O.D.)
vehicle to get to your grandfather's farm, rather than as a vague concept for
retreating. For any readers that might consider wandering aimlessly in an RV,
see this narrative that I wrote in the early days of SurvivalBlog:
“Land mobile” retreating in a recreational vehicle (RV) is another
invitation to disaster. In a TEOTWAWKI situation,
a fixed location retreat is vastly superior to going mobile. In my opinion the
myth of ”Road Warrior” mobility and firepower is in actuality
just an expanded opportunity to wander into ambush after
ambush. No vehicle short of a $70,000+ Cadillac
Gage V100 wheeled armored personnel carrier (APC) would have both the
cargo capacity and the ballistic protection required. (A little Ferret
scout car just doesn't have the capacity. I speak from personal experience
on that!) Also, consider that you would need a pair of APCs to provide
mutually supporting defensive fire. And then of course you will probably
want a belt-fed for each. With spares, ammo, and accessories that is an additional
$3,000 per vehicle.
If by chance you already have a fully stocked retreat established
and have $150,000 in cash laying around for a couple of ultimate G.O.O.D.
vehicles, see: Dave Uhrig’s
web site and then click on “Armor”. (I should mention that
I have done business with Dave Uhrig on two occasions. He is quite reputable.)
Here is a dose of reality for you: If you choose to go entirely vehicle mobile
then you will eventually lose a battle--most likely in a roadblock ambush--or
your RV will break down. Or it will run out of fuel--with some likelihood
that it will be on exposed terrain in an untenable situation. Also, since
the logistics that you could carry would be limited, you will start out with
an inherent disadvantage to fixed location retreats. This also creates the
prospect that once your food supplies are depleted you will be tempted to
take what you need from others. To paraphrase John Dibari (my high school
chemistry instructor) when he described troublemakers: “If you aren’t
part of the solution--you’re the precipitate.” (That is, someone
who precipitates trouble--part of the problem, not the solution.) Scratch
that idea!
Since you have a definite destination (your grandfather's
house), then you are better off just storing ("pre-positioning")
what you will need there, rather than trying cram what you will need into an
RV for an 11th Hour trip outta Dodge. Odds are that those items will be more
secure there, than if they were stored at your house in the Big City, anyway.
If his house lacks the requisite storage space perhaps he would be agreeable
to you buying a 20 foot CONEX for
your gear, and storing it there
In answer to your other question: See this
SurvivalBlog post from 2007 for my recommendations on buying full capacity
firearms magazines, for barter.
« Odds 'n Sods: |Main| Two Letters Re: Preparing for Survival Retreat Perimeter Defense »
Letter Re: Currency Inflation Expectations for the US
Jim,
You recently wrote: "The Treasury will undoubtedly be forced to
monetize a good portion of the National Debt. This is effectively creating
money out
of thin air. Each new dollar so created will dilute the purchasing power of
the dollars that are already in circulation (Both paper and electronic "dollars".)
This wholesale dollar fabrication will be outrageously inflationary. Be prepared
for double digit and then triple digit inflation in the next few years."
Let's say the Treasury just invents another two trillion dollars by printing
currency and forgiving loans. Let's say they do that every year for
the next five years. How much inflation would that create?
The absolute maximum inflation rate from this example is about 20%, because
there's ten trillion dollars in circulation already. But in practice, the additional
money dilutes the much larger pool of value represented by goods and services.
This must be true because the entire money supply isn't enough to buy everything
that is for sale.
So the two trillion would get divided into that pool, which is several times
larger than the money supply (I can't find a reliable figure), and therefore
the potential for inflation here is actually several times smaller than 20%.
Your prediction of triple-digit inflation is simply impossible unless the government
starts printing tens of trillions of dollars worth of currency, every
year.
You've led yourself astray here for (at least) two reasons:
You think that what's happening in Zimbabwe can happen here. It can't. Almost
all of Zimbabwe's economy is channeled through its government. The vast majority
of the population is unemployed. The value of goods and real property in the
Zimbabwean economy is small, and much of that value isn't even really participating
in the local economy. So the government's injection of money into the economy
is very large with respect to the total value of the economy, and high inflation
results. None of these conditions exists in the US, and none is even remotely
possible in the next several years. The worst case here is that US per-capita
productivity and property values decline by, say, 50% over several years--
roughly what happened in the Great Depression-- which could potentially result
in several years of 10%-to-20% inflation.
But that worst case doesn't have much to do with the government expanding the
money supply. That influence, as I described earlier, can be only in the range
of 4% to 5%. The larger numbers are only possible in a Great Depression-type
event if the underlying value of property declines dramatically.
Your other mistake is that you [over-estimate] the true magnitude
of the current economic problems. Only two parts of the national economy is
in trouble-- banking and home construction. Between them, they don't account
for a large part of the total economy. They aren't destroyed, either, merely
depressed by some significant fraction. People still need banks and houses.
So, bottom line, we're looking at nothing more than a several-percent decline
in the true value of the economy.
Stop [over-stating the inflation risk]. Tell people how to prepare for 10%
to 15% inflation if you must. But stop these outrageous predictions of 100%+
inflation.
That
kind
of
inflation
is literally unprecedented in otherwise functional economies, and there is
no reason to suppose the United States economy will become dysfunctional to
that level. Thanks, - PNG
JWR Replies: I really do wish that today's economic problems
were restricted just to financial institutions and home construction. But the
great unraveling that I'm
talking about involves so much more. It involves the derivatives casino that
now exists in every major industry and service field. Most of this has built
up in just the last 10 years.
Look back at what I wrote about "disappearing counterparties" in
the derivatives articles
that I've been posting for the past two years. This
seems to be starting to happen, here and now, right before our eyes. Our friend
Tom over at The
Contrary Investor's Cafe alerted me to this
brief news item from England, which I will take the liberty of quoting
in full:
D-Day Looms for Lehman Contracts
A fresh shockwave from the collapse of US investment bank Lehman Brothers
could hit home on Tuesday when complex insurance contracts worth hundreds
of billions are settled, it was reported.
Around 360 billion US dollars (£208bn) in so-called credit default
swap (CDS) contracts are due to be paid off following the company's failure.
A CDS essentially acts like an insurance policy against defaults on corporate
bonds or loans.
It is a form of derivative contract, gaining a "derived" value
from the performance of the bond it is based on.
But because Lehman went bust, those selling CDSs to insure against default
on its corporate bonds will be forced to stump up the cash to buyers.
Tuesday is the D-Day for the complex web of transactions. A City source told
the Sunday Telegraph: "Everyone will be watching the situation and wondering
what's going to happen."
AIG, the insurance giant which was one of the biggest sellers of CDS products,
is thought to have large exposure to Lehman Brothers and was bailed out by
the US Government last month.
The Treasury has pumped in more than 120 billion US dollars (£70bn)
into the stricken firm so far.
Other insurers of Lehman's debt are thought to be hedge funds, who created
and sold CDSs as a lucrative revenue-raising exercise in better times.
Although CDSs were originally designed as insurance products to allow investors
to hedge against the risk of default, traders have also used them as speculative
tools.
Thankfully, the derivatives market is very orderly and every risk has a very
tidy counterbalance. So when all is said and done those really big notional
numbers don't mean a lot in the real world. They are just bookkeepers digits
tallied at the end of a derivative play. And unless a counterparty does something
very odd or downright stupid (a la LTCM),
or vanishes, via bankruptcy (a la Bear
Stearns) then
all of those contracts end up with a very tidy zero sum gain at the conclusion.
But the $64 Trillion question is this: What if a lot of major corporations
holding derivatives contracts start to go under? Like GM, Monsanto,
BP, or United Airlines. How many derivatives contracts are currently in play?
Hundreds of
trillions of dollars. One estimate was $190,000
USD for every person on the planet. ("The value of the derivatives market
is 22 times the GDP of
the entire world.") What happens if and when big corporations go under, leaving
their counterparties
twisting in the breeze? Nobody knows. This is an imponderable
because the derivatives universe was just a fly speck by comparison the last
time there was a major recession, and hedging on this scale didn't even
exist the last time there was a global depression.
I'm talking about widespread corporate and municipal bankruptcies causing an
avalanche of derivatives contract defaults and subsequent ripples through all
the world stock, bond, commodity, real property, lending, currency, and insurance
markets.Some might call this inconceivable, but I don't.
All that I can say is that if things do start to unravel on a more
grandiose scale, then I hope that someone is going to have the supreme courage
to declare "Jubilee", and start the entire financial
system over from scratch. ("Every seventh year you shall grant a remission
of debts" - Deuteronomy 15: 1). Because without a Jubilee,
even Gideon
Gono couldn't come up with the cash needed to settle the mountain of debts
and derivatives.
What is at the core of the current financial mess? The heart of man is desperately
wicked. (See Jeremiah
17:9, and Mark
7:20-23.)
In our generation, there are some people that have built a new Tower of Babel.
It
is a Tower
of Debt.
And being greedy, they didn't limit themselves to tangibles. They heaped up
impossibly large conceptuals on top of it all. But unfortunately the derivative
contract conceptuals have a tangible bottom line.
On Tuesday October 21, 2008 (or soon after), we'll get to see how much the
value of the Lehmans contracts will get marked down, and whether Uncle Sugar
will step in wit a fresh dump truck full of money to "calm the markets." If
the net settlement on those CDS contracts (backed by very dubious CDO "assets" of still
declining value) exceeds $30 Billion USD, then every
financial stock around the world might plummet. Ditto for every large insurance
company involved
in the CDS follies. It may be one of those "emperor
sans cullottes" moments, or one of those Minsky moments. Helicopter
Ben Bernanke will need a whole fleet of helicopters to tidy this up.
I really hope that I'm wrong in pronouncing this warning, because I really
like sleeping soundly at night, and hot showers and lights that turn on with the flick of a switch.
« Odds 'n Sods: |Main| Letter Re: Cemeteries as G.O.O.D. Overnight Bivouacs? »
Don't Confuse the COMEX Spot Prices with Retail Reality--Bullion Coin Supplies are Tight!
I was recently chided by one of my readers for
being "dead wrong" about the
direction in the spot price of silver. I had to laugh about that. The COMEX
spot price of both silver and gold have indeed been pushed down in recent
weeks. But this is an artifice. This
has
been
attributed
to some massive and well-orchestrated short selling in the futures market.
The spot market typically echoes moves in the futures market. This
short selling has distorted the COMEX spot price significantly. This distortion
has become so pronounced
that at this
point the official COMEX prices do not reflect
reality.
I am
getting reports
from
SurvivalBlog readers
throughout the US, Canada, several nations in Europe, Argentina, Taiwan,
and Japan that the consumer level supply of silver bullion coins--both 1 ounce
.999 fine
trade
dollar
"rounds" and circulated national mint coinage--is so tight that
dealers are now paying as much as 60 cents per ounce over spot and
selling for as
much as $11 per ounce
over spot! That is twice the spot price.
This is amazing news when you consider that traditionally dealers have paid
just below spot,
when they buy coins. Here are just a couple of those reports. First, from
reader
O.E.:
"...I read with wonder the letter from the gentleman asking if you
are going to apologize for recommending silver. Has he tried to buy any
physical silver recently?
We are seeing
fairly widespread shortages of retail investment silver. What we have now
is a two tier price system. One that harks back to more sinister times.
You have
the "spot" or official price, at which it is nearly impossible
to find silver at, then you have the "physical" or market price
which if you look on eBay, or the few bullion dealers who get stock is in
a range
of $15-$20 per ounce! Its a shame that eBay is one of the few remaining examples
of a more or less free market. These major bullion dealers are now paying
over spot to buy metals from individuals. Ditto for gold,
gold is going for well over
$1,000 per ounce in the "physical" market! So I recommend that
people read between the lines and not believe everything "they" [in
the mainstream media] say is so. It is my belief that market manipulators
are using metals prices in
a
way that
will flush out the weaker holders..."
The next report comes from reader Jonathan X.,:
"I noticed a swift change end of July into August - When the Dollar
found this freakish footing. The Dollar had been trading to the Euro around
$1.55-$1.59. But then almost overnight strengthened 10% and it was back to
$1.40-$1.45. (Making US Exports more expensive and less attractive).
What changed was that suddenly I could sell a single 1 oz round for a $0.35
profit [over spot] for a single round. Since I started tracking the market
I would take $0.60 loss to sell a single 1 oz round. (Which is where the
dealer makes most of his profit.) But suddenly the law of supply and demand
got throw out the window. The [COMEX spot] silver price dropped but they
were selling at first for $1.25 over spot, then $1.50 over spot, and now
$2.00 over spot and still paying a premium [at the purchase end].
I called several dealers the other day, but I found just one dealer who
had any actual Silver [physically] on hand. He said that he had only about
50 generic 1 oz rounds. These are just Holiday silver rounds stamped .999,
with Christmas tress and Santas. He wanted $6 over spot.
Physical silver is hard to find - dealers are selling on order cash up front
and [you can expect to wait] 4-6 weeks for delivery."
It is noteworthy that he mentioned "Holiday" coin
issues. These are one ounce ingots and rounds that are minted for use as
Christmas
gifts.
These have heretofore been treated with such utter disdain by coin dealers
that when buying them on the secondary market they pay only the scrap price
of silver for them --not nearly the coin or ingot price. (The latter has always
been much closer to spot.) Presently, Canadian Maple Leaf and American Eagle
silver 1 ounce coins are selling
for as much as $12 over the "official" spot price of silver.
Talk
about market price distortion!
The bottom line: Do not believe the mass media propaganda that has been generated
by current spot prices of silver and gold. In relation to the consumer bullion
market, the COMEX spot price fixes are illusory. Silver
and
gold are presently both bargains if you can find
anyone willing to sell their coins. I predict that the retail bullion prices
of precious metals will be sharply higher in the next few months and then even
higher still
when
the
full inflationary impact of the Mother of All Bailouts (MOAB)
is felt in the macro marketplace. Buy every bit of silver and gold that you
can lay your hands
on if they are being sold anywhere near the artificially low "official" spot
prices. Silver dipped to under $9.60 per ounce on Thursday. Buy! (Again, if you can find any.)
« Letter Re: An Apology About Recommending Silver? |Main| Letter Re: Hope and Preparedness--A Budget Prepper's Observations »
Letter Re: What Happened, and What Should We Watch For?
Jim,
Thanks for the awesome blog. I consider it essential reading every day,
especially now considering the terrible situation we find ourselves in. You keep
speaking
of mass inflation yet we see oil and other commodities falling in price along
with, sadly, our home values. In a recent post you also mentioned being able
to buy classic cars at rock bottom prices, closely followed by hyperinflation.
Can you explain for all of us how this can come to pass and some of the warning
signs? Thanks, - DZ in Louisiana.
JWR Replies: To clarify, I mentioned buying older, fuel-inefficient
vehicles at the depth of the upcoming recession in then-current dollars.
The bottom of the market for vehicles may come before or just after mass inflation
begins. Once inflation is in full swing there will surely be a mad rush to
convert cash into anything tangible that will be a store of value--regardless
of what happens to the currency.
The economic
problems that America faces are structural and systemic. They built
up because
of fractional
reserve
banking
and the consequent
growth
of mountains of debt, both public and private. Read my background piece: Are
Simultaneous Inflation and Deflation Possible?, and this
piece on
Derivatives. And if you have the time,
skim through through my
archived economics articles, starting in 2006.
As for the "warning
signs" to watch for, you might have missed my
reply to a letter in SurvivalBlog post on September 25th: Letter
Re: What Are the Economic Collapse Indicators to Watch For?
« Odds 'n Sods: |Main| Letter Re: What Happened, and What Should We Watch For? »
Letter Re: An Apology About Recommending Silver?
JWR::
Your repeated bullish calls on silver have been dead wrong. Do you plan
on
apologizing to your readers? - Jim G.
Jim:
An apology for what? For making people money? You aren't looking at the big
picture if you are only looking at the past few months. If you had invested
in silver back in February of 2001 when
I went on record and accurately called the
bottom
of the silver market, then you would have more than
doubled your
money, even with the recent sag in the market. I made that call within 36
cents of the absolute bottom of the
market. I
was a few months early,
but consider that this was at the tail end of a 20 year-long dreadful
bear market in
silver. And even if you had bought silver when I first started SurvivalBlog
in early September of 2005 (when spot silver was roughly
$7
per ounce), then you'd still be substantially ahead. Spot
silver is currently just over $10 per ounce, and in recent weeks has
been over $13 per ounce. (Since it is a "thin" market, it is always volatile.)
I have never recommended buying precious metals at interim high points. You
should buy at interim lows (so-called "dip" weeks.) I'm
also an advocate of dollar
cost averaging (buying in increments), on successive dip weeks. If you
bought all of your silver at an interim high point (such as in
March of 2008) then shame on you, not me!
In my estimation, the current dip in the silver market is a pause in what
is otherwise still a secular bull market. If you sell your
silver now (at a loss), then you'll probably be crying about
it
in a
couple
of years,
when
inflation
kicks in, in earnest. In my opinion the current dip is a good buying
opportunity.
OBTW, my current recommendation is that after buying barter silver
for your family ($1,000 face value per family member in pre-1965 dimes,
quarters, or half
dollars), that you then invest anything more in gold rather than silver.
In the coming depression gold is likely to outperform silver, since gold is
perceived
as
a monetary
safe haven, whereas silver is seen as more of an industrial metal. Both will
do well versus nearly any
dollar-denominated investments, but of the two, gold will likely gain
more than silver.
« Letter Re: Advice on Storage Food--Quantities, Shelf Lives, and Sources |Main| Note from JWR: »
Letter Re: Some Observations on Registered Class 3 Guns and Suppressors
Mr. Rawles:
To suppress or not to suppress: there is no question. (A hat tip to The Bard.)
Many in the preparedness community are apprehensive about the acquisition of ["Class
3"] National Firearms Act (NFA)
items. [These include machineguns, short-barreled rifles (SBRs),
short-barreled
shotguns (SBSs),
and
sound
suppressors.
There
is
a background check, fingerprinting, paperwork required, and a $200 tax per
transfer.]
There
are
reams
of
writings
about "remaining
under
the
radar".
I do not share those misgivings. Neither do tens of thousands of other legitimate
gun owners. A caveat: under no circumstances should anyone build/construct/
any NFA style weapon or device. The penalties, legal and hazard to shooters
are
not
worth the effort. If you want the right to inventory said items and you live
in a state which prohibits the same, then move. Follow the legal steps
required
to
obtain them.
Sleep better. Enjoy!
First a few facts.
There are the following weapons, devices, the predominant number in civilian
hands. The information is derived from Small Arms Review magazine,
May 2008. Some of the numbers are civilian police, manufacturers and private
security agencies.
Again, the overwhelming number is in civilian hands. A grand display of this
fact is the Knob Creek shoot and the hundreds (thousands?) of auto weapons
matches all over the nation.
National statistics. (from the BATFE)
158,671 suppressors. 36,536 short barreled rifles. 97,903 short barreled
shotguns. 49,052 AOW (Any
other weapons). 400,739 automatic
weapons. Remarkable. Again, most of these are in private collections.
There has been only one prosecution of a licensed
owned or a Class 3 for misuse since the 1934 act that established the NFA regimen.
A police officer used a
department
registered
sub-gun
to kill
his wife.
There exists no other case law according to a close friend who defends many
gun related cases. There are no statistics on destructive devices (DDs)
.
My home state. 2,427 suppressors. 485 short barreled rifles. 1,038 short barreled
shotguns. 691 AOWs, and 5,489 automatic weapons.
My first acquisition of NFA interest was in the late 1970s. It has continued
ever since.
Another fact. Any small arm up to the .50 BMG can
be suppressed, including shotguns. Except revolvers. I refer to Small Arms
Review again. In my opinion the best
monthly reference on small arms within most budgets.
There are number of auto weapons in my inventory. My passion is suppression.
This post will concern suppressors otherwise known as "cans".
My first acquisition was an Ingram gun in .45 ACP.
Cost? $150 [, in the late 1970s.]. They are now listing near $3,500. (Investment
is a great excuse for acquisition) A MAC-10
without a can is a contradiction. I acquired a RPB can with plastic wipes.
Replaced the wipes (they add noise and add inaccuracy) with a convex muzzle
wipe. There
are
10,000 rounds through that combo, without a malfunction. Ken
Hacakthorn, in the 1980s said that this combo is "good for a gunfight
in a phone booth". I find
it good
to 25 yards or less. Hmmmmm....Would you prefer a slab side [M1911]
with 8-to-10 rounds or the MAC combo with 30 rounds?
Next came the SSG in .308. I sent off to Ciener for a can. Mine was the first
suppressed [Steyr] SSG 69
in the nation. Reduces report to a dull thud when heard downrange.
Adds
accuracy
as almost all muzzle cans do. If you acquire such, match projectile to twist.
Use full power loads, ball or whatever. Most subsonic ammo uses 200 grain projectiles.
In the usual 1/10 twist .30 caliber weapons this could result in a baffle strike
(internal) and ruin the can or the weapon. Same goes for light projectiles.
Match projo with twist. Enjoy.
Then a Ciener can for the .223 788 Remington. Death to varmints. In the ensuing
years there has been added; a Ciener Ruger MKI with integral suppression. Also
a Johns Guns 10/22,
again integral.
A note on integral suppression. All integrally
suppressed cans are meant to be shot with high velocity ammunition. These manufacturers
port (drill holes) in the barrel close to the chamber. Usually the barrels
are shortened in handguns. It is critical to use the right ammunition. Do not use
the Mexican Aguila .22 60 grain ammo. Remember, match twist with projectiles!
Baffle strikes [very bad things] are most common in .22 rimfires. The suppression
quality
is
astonishing
in .22s. Some makers build their products to be easy to self maintain/clean.
Ciener did not. Johns guns and others do. Inquire before purchase.
For quiet elimination of pests I have a Ruger 77/22 with a can from Gary's
Guns Inc. of Waukesha, Wisconsin. Cheap and effective. There is also a Marlin
.17HMR
with a Gemtech can. I spoke with Dr. Phil Dater about this one. He enjoyed
prairie dogging so much with his .17 he had to invent a can for idid.
Other cans are Gemtech on an M16. There are significant reports of serious
hearing damage to troops in Iraq due to shooting inside buildings or vehicles.
Cans prevent
this. The downside, cans superheat in full auto fire and are best employed
in semi-auto. Cans also blowback lots of fouling due to their gas entrapment.
Malfunctions
increase with the use of cans on auto weapons. Its a tradeoff most preppers
could accept. I do.
The M92 Beretta, the Walther.22, the Marlin Camp Carbines in .45 ACP and 9mm,
and other do nicely with cans.
Ciener made a nice can for one of the bolt guns.from Old State Arms Company
(They make .50
caliber rifles)
There is also a Gemtech can which I can transfer between either of my two
Bushmaster .308s.
There are a total of 17 cans in my inventory. I have also fired cans on the
HK MP5
(integral), The MK2 STEN (integral) Both ran well. (I am a certified instructor
with HK).
Needless to say further acquisitions are planned.
Preferences. Many states, mine own included, have no law or administrative
code on using cans for hunting. Be sure to check your state laws and fish &
game regulations!
I prefer muzzle cans with the Gemtech Bi-lock mounting systems. Threaded muzzle
cans should come with a thread protector when the can is dismounted. My MK1
Ruger from Ciener had to be disassembled after 5,000 rounds or so. I had to
take it
to a gunsmith to dismount due to sealants which Superglued the assembly shut.The
lesson here: If you require repairs/maintenance that you cannot do yourself,
Make sure that your repair point is in possession of the proper Federal License.
Ordinary gunsmithies cannot take in such work. you hand over a
NFA weapon or device for
repair, and you are not present [in the shop from beginning to end] for said
work, then that is an illegal transfer. Illegal. 'Nuff said?
There is a plethora of can makers in the market. I have cans from Ciener (no
longer manufacturing cans) Gemtech is among the best. RPG is defunct. AWC makes
good stuff, as does Special Ops Shop and others.
Cans are cheap. Most running
$200-to-$900 depending on integral (you pay for the gun too)...Bi-locks and
muzzle boosters add to costs.
Wet versus dry cans. I have hundreds of rounds through "wet" cans.
Some require filling with water. Others require grease packing. Water (wet)
cans
require refilling
to maintain efficacy. A pain in the gunfight. I have one grease pack can. Effective
on the Marlin Camp Carbine. Leaves a smoke signature after rapid fire, which
is not good. Without a booster, it causes malfunctions on the Glock 21.
Lesson, stick to dry cans.
Cost to register [each item in the U.S.]? $200. - Mr. X
« Odds 'n Sods: |Main| Letter Re: Advice on Storage Food--Quantities, Shelf Lives, and Sources »
Letter Re: A SurvivalBlog Reader's Relocation to the Interior of Alaska
Dear Jim -
Thank you for the note and I think its the least we can do to support such
a worthy web information source. I've learned a great deal reading your archives
and I'm doing my best to try and promote a self-sufficient lifestyle for
our family.
We have chosen to live in interior Alaska for a variety of reasons, not the
least of which is a steady job, but not without serious consideration. We are
very well aware that we're at the end of the food chain up here and things
are a bit more expensive (and can become much more if the chain breaks), but
those are trade-offs. While things are still manageable we live in a place
that has no property taxes, no sales taxes, very little government to speak
of, no building codes except those we chose to apply, and folks that still
value personal liberty with minimal social intervention by "do-gooders." Those
attributes of locale were very attractive to us and led to our ultimate decision.
We previously lived in the "nanny state" of Western Washington. There
is no comparison. Free men and women who still value their freedom should vote
with
their feet and immediately exit the Socialist workers' paradises where they
are currently incarcerated. The change in their lifestyles and outlooks will
be
profound
and remarkable. We have lived and moved all over the world.
For those who are hesitant for whatever reason - just jump in and figure it
out from day to day. The Lord will help those who help themselves and you won't
fail if you follow your heart. Truer words have never been spoken.
As a retired military officer who specialized in counter-terrorism and
security work for the past 28 years, I'm acutely aware of and a student of
geopolitics and macroeconomics. I have to be honest - I took your advice seriously
and literally back at the beginning of this year and completely divested all
our assets from the stock market. Obviously now I'm very, very glad we did
so. My broker thought I was insane - but he now calls and emails me for advice.
True story. I just pointed him to your blog site and told him about the Von
Mises Institute, for his education. I am a true
convert
to the Austrian School.
There are truly dark clouds on the horizon and we all must prepare. I'm not
an alarmist, but a pragmatist, and I have a fairly good perspective (and information)
on which to base my beliefs. Again, thank you very much for what you and what
you and your family have provided us. You have been instrumental in positive
life changes for many people. The
Lord has guided your hand - it is very obvious to us and has made a big difference
in how we live. My Best Regards, - J. in Alaska
« Letter Re: Pre-Paying Utility Companies in Anticipation of Worsening Banking Disruptions? |Main| Note from JWR: »
Letter Re: Selecting and Storing Bargain Barter Items
As Mr. Haney (Pat Buttram) from the television show Green Acres would
say, “Have
I got a deal for you!” In
the spirit of Mr. Haney, I’ve come up with some good barter items. To
make the list, the items have to be fairly light, extremely useful, practical,
and cheap to buy, now! The items have to fit, and be able to be stored in six
gallon plastic pails with a water proof seal. The items also must be available
in large quantities now, to get the most for my money and be easily accessible
now, at a low cost – yet become very valuable when the Schumer hits
the fan. Few barter items can fit Mr. Haney’s criteria, but some items
will pass the test.
#1 Matches. Most boxes [of paper matches] contain 50 books with 20 matches
per booklet, at about 200 per box. That’s 1,000 lights, right? Wrong!
It’s
actually double that at 2,000 because with a little care, each match can be
split in
two. It
takes about 4-5 seconds to split a paper match, and I haven’t ruined
any in my scores of attempts. During the war in Bosnia, matches were on the
list
of
things that disappeared first. One six gallon pail holds 24 boxes, if left in
packages. That’s 48,000 lights!
#2 Seeds. I would fill the second pail with seeds. The type of seeds is a personal
preference, but heirlooms seeds are preferred, though more costly. You can
give your customer 2 choices: some seeds in packets that are heirloom seeds,
and some that are from any store. Over a million seeds can fit in a six gallon
pail, and seeds may very well become just as valuable as ammo, but are a lot
lighter with a higher quantity able to fit in the same size pail.
#3 Sugar. For your own stock, just pour 25 pound bags into six gallon buckets.
For [incremental] barter though, large wholesale food stores like COSTCO have
sugar packets with a quantity of 2,000 per box. A six gallon pail holds more
than two boxes;
and sugar keeps a long, long time. That’s approximately 5,000 individual
servings that are pre-packaged, and will last a very long time.
#4 Magnifying glasses. Magnifying glasses are very cheap if you shop around.
They are easy to store and are a great reading tool for fine print or serial
numbers, can be used as a fire starter and can be used for medical purposes
and close examination such as, to aid in splinter removal or to see a mote
in someone's eye. When buying in quantity, you should pay between $1 and $1.50
per pair.
This barter item will be excellent in the worse case scenario.
$5 Can Openers. A can-opener
will come in very handy for those who can no longer use their electricity.
Using a knife as a substitute is not worth the risk of injury to group members
which can create another problem (stitches, infections, etc.). Can openers
are cheap
and can
be purchased
for as low as .39 cents for a military P-38 style, or $1.99 for a more elaborate
one.
There are many other items one could focus on to establish the beginning of
your trading post. But Mr. Haney’s five items listed above will wind
up being the most popular and meeting some very important needs for his friends
and community. The items I’ve listed are light, cheap, easy to store,
easily obtainable now in large quantities and will be in high demand later.
I’ve left out ammo on purpose because it is more expensive and heavier,
and most likely (hopefully) you should already have ammo as a priority.
« Letter Re: Life Imitates Art--Moscow, Idaho Style |Main| Letter Re: Selecting and Storing Bargain Barter Items »
Letter Re: Pre-Paying Utility Companies in Anticipation of Worsening Banking Disruptions?
Dear Mr. and Mrs. Rawles,
Thank you for your excellent blog. My husband and I are benefiting tremendously
from the hard work you have put in to this valuable resource.
My question: With banking integrity a growing uncertainty, would it be prudent
to devote our rather limited capital to build up a credit balance with our
utility providers (water, electric and natural gas) in anticipation of possible
interruptions in bank transactions? We do have modest contingency back-up systems
for all three supplies but as long as the grid holds up we will use the utilities.
Sincerely, - Mrs. T. from Idaho
JWR Replies: I do not recommend pre-paying utilities, at
least not under the current circumstances. By pre-paying the utilities, you
are effectively
giving them an interest-free loan. For the sake of flexibility, you are far
better off setting aside an equivalent amount in greenback cash. This is what
is commonly called "mattress money". (But you'll need a much
safer place for it. (See my "Through
the Looking Glass" wall cache
post from August, 2007 for detailed recommendations
on constructing hidden caches in your home.)
With greenback cash on hand,
you will still be able to make payments directly at the utility offices,
or of course simply mail them money orders. Even in the event of a major banking
crisis (complete with bank closures or perhaps even a national "banking
holiday"),
money orders will likely still be available from the US Postal Service and
from
drugs
stores
or
convenience
stores, and will still be accepted in payment.
If the economic situation deteriorates--for example if inflation jumps to
double digits (or more), and the postal service becomes unreliable, then that
is the time to consider pre-paying your utility bills and perhaps even
pre-paying your property taxes.
« Odds 'n Sods: |Main| Letter Re: Water Storage and Crash Course Advice »
Letter Re: Cheap is Good, But Free is Better
Mr. Rawles,
I've noticed there have been several letters lately about getting
prepped on a budget, and several people have suggested watching Craig's
List for good
bargains. I'm surprised that no one has recommended Freecycle as
a place to find good deals, because everything listed is free.
I'm sure it's been
mentioned a few times in Survivalblog over the years, but I think it deserves
as much emphasis as Craig's List, if not more.
I think there may be some misconceptions about what is found on Freecycle.
There can be a lot more than just old baby clothes and blenders. It will depend
on your area of course.
In the past 6 months, I have gotten through Freecycle:
* Enough wood framed windows to build a good-sized greenhouse
* Several car loads of firewood (I don't have a truck)
* About 150 – 200 canning jars in various sizes
* Spare blankets and linens
* A small plate steel wood stove
* Window screening
* Chicken wire, several rolls
* Rolls of woven wire fence, with T-posts
* Loads of scrap wood, good for burning or building tables or shelving
* Lengths of garden hose
* Sleeping bags
* Air mattresses
* Many rolls of carpet (for garden and indoor use)
And my treasure from yesterday (which prompted me to write this), a used 30-quart
canner. An All-American model #930. It's filthy but appears to be in good shape.
To buy this new would be over $200, plus some serious shipping costs due to
its
weight.
I have seen every possible kind of furniture and appliance being given away,
as well as garbage bags full of clothing.
My point here is to illustrated that many very useful things can be found on
Freecycle, if you take the time to watch your local sites. It may not be a frequent
find, but worth a minute or two each day to check. I rarely post any "wanted" items,
I just sit and wait to see what is offered.
The main site is Freecycle.org, and you can find local groups from there.
Each site is run by volunteers, and certain areas may have more groups than others.
I am member to several, even though they do overlap a bit.
Rather than take up more space here, I would refer you to a
short article I wrote
about using Freecycle.
It's not written from a prepping perspective, but does explain the posting process.
I'm a single mom thankfully just moved to a 5-acre mini farm. I can't afford
anywhere near all the "stuff" that I need around here, and Freecycle
has really given me the chance to pick up some great things I would otherwise
not have been able to get my hands on... like my beautiful new canner. :)
I hope these ideas are helpful to someone. Keep up the good work with the blog
site. Thanks, - Terri, in Canada
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Like Something Out of a Novel--Some Predictions for 2009-to-2019
The economic headlines in the past couple of weeks have sounded like
something out of a disaster novel that I once read wrote. The international
financial and equities markets are spinning out of control, with seemingly
wider and
wider gyrations with each passing day. Since there are so many variables,
the end
result is
difficult to firmly predict, but one thing is clear: It will be neither
easy nor pleasant. My
current
prediction
is that
the governments of the English-speaking nations and Europe will co-conspire
with
the banksters to concoct the most grandiose Mother of All Bailouts (MOABs)
yet. This will be even bigger than the
MOAB that I predicted, early in 2008.
The multi-trillion dollar multinational MOAB will inject liquidity--in the
form of magically-created Dollars, Pounds, and Euros--in such enormous quantities
that it will calm the markets, at least for a while. But the by-product will
be consumer price inflation that has never been witnessed in modern times except
in the region north of the Limpopo river and south of the Zambezi river.
In the long run, the fractional
reserve banking and fiat
currency regimes
used today are doomed to failure. Both are lovely fictions that can only persist
in expanding markets and when guided by the most altruistic managers. Any
serious contraction
of the underlying economy will inevitably bring both to a crashing halt. Perhaps,
in the aftermath of te ongoing credit collapse, wiser heads will prevail,
and private
credit clearing circles will develop, instead of re-creating the
same
government-sanctioned
fractional banking scheme that created the current crisis.
What Happened?
The
last few years have been an anomaly. Led by Ben Bernanke and his predecessor "Easy
Al" Greenspan, the Masters of the Universe that headed many of the central
banks in the First World attempted to forestall a recession
by
artificially
reducing
interest rates,
thereby creating bubbles in both real estate and equities valuations. All
their meddling has made matters worse. They have formed mountains of debt that
is classic malinvestment of the worst sort.
This debt creation was like winding up an enormous clock spring. Debts
were taken on by unworthy borrowers that never had a hope of repaying them,
and
then those
same
dodgy
debts were
re-packaged and re-sold to unwitting dupes--like pension funds in Denmark.
This explains
the
umpteen foreclosed
and
abandoned
tract homes that stretch from around
the DC Beltway to the
heartland of Ohio, to southern
California.
Inevitably all debt--whether good or bad--must be un-wound. And
the more malinvestment there is, the uglier and protracted this unwinding
process
gets. Instead of a recession, we will probably
witness the worst economic depression since
the 1930s.
That is the big picture. Now for some predictions on the next 10 years with
some possible implications for prepared families. Note: I
don't claim to be a prophet. These are just logical
extrapolations of trends, based on previous swings of the macro scale market
pendulum. So don't gather up stones for the event that things don't play out
exactly as I predict:
Simultaneous Deflation, and Inflation
As I've previously posited,
we are likely to see a wave of asset deflation at the same time that we have
consumer price inflation. How is this possible? See
the article that I posted back in February for an explanation. The bottom
line is that leverage
works both ways. The multiplier effect on fractional deposits works
in reverse whenever bank deposits decrease.
Derivatives
I've been warning SurvivalBlog readers about derivatives,
since late 2005. The multi-trillion dollar derivatives "casino" may soon be
in crisis. Thursday
Is D-Day: For Derivatives, as billions of dollars worth of contracts
on defaulted Credit Default Swap (CDS)
derivatives from Fannie Mae, Freddie Mac, Lehman Brothers and
Washington Mutual (WaMu) are settled. On Thursday, we'll find out what a
CDS derivative contract is
worth in the real world! Something tells me that these
once-touted "assets" are
going to suffer quite a haircut.
Bank Failures and Bank Runs .
As I've said before, more bank failures seem inevitable. There may also be
more bank runs--most likely invisible ones, where banks get cleaned out
by their creditors via margin calls by large depositors via wire transfers,
and by small
depositors via electronic banking. There may not be a a line of customers in
front of the banks doors. If you wait for that as an indicator, then you will
probably be too late. I've written this before, but it bears repeating: Be
sure to check
your bank or S&L's safety rating at least once a week. If
it drops below a "C" rating, then transfer your funds to a safer
bank, ASAP.
And, needless to say, never keep more than the FDIC limit in any one institution.
Thankfully, the
FDIC just raised the deposit insurance limits substantially, as did
their
counterparts in much of Europe.
Hedge Funds
I've discussed hedge funds at length in SurvivalBlog articles for
more than a year. Suffice it to say, the risk with hedge funds is huge.
I expect large quarterly waves of hedge fund redemptions--and
redemption suspensions in the next few months.
Real Estate
The real estate market--both residential and commercial--will very likely
continue to decline in the US for several years. The market will be flooded
with more and more foreclosed properties, in a downward spiral. One downside
to consider is
that the thousands of abandoned houses will become nests
for criminals.
In my estimation,
the only thing that will stop te decline in nominal dollar figure declines
will be
the eventual mass
inflation
of the US Dollar. Hence, it will appear that real estate prices have "stabilized",
and then "turned around" in a couple of years. By in real terms
(adjusted for inflation), the genuine bottom of the market probably won't
be for another
five years. By that time, American homeowners will have lost an average of
60% of the "coulda-woulda" value of their homes. I expect he declines to
continue
as
long as the credit
drought persist, and until the massive glut of inventory is purchased.
For the next few years it will be a buyer's market, and cash will
be king.
Anyone sitting on cash will be able
to
buy
up
assets
at
ridiculously
low prices--as
the economic
pendulum
swings
beyond the point of logical price neutrality. Sit tight, watch the listings
closely, and buy at the bottom. You can find distressed properties--including
some good rural survival retreat properties--at Foreclosures.com. If
you plan to do some "bottom fishing", a subscription to this service is money
well spent.
Unemployment and Dislocation
Large corporate layoffs are a fact of life in any recession. Be ready for
them, by minimizing your debts. A family food reserve is insurance for unemployment
just as well as it is for natural disasters. If the recession turns into a
depression, we can expect some huge layoffs. This will mean lots of families
will be moving--either to seek work elsewhere or because they can no longer
meet their monthly house payments. This however, might create some opportunities.
Storage companies, estate auction firms, relocation
services,
rental property managers,
home security companies, locksmiths, relocation
specialists, and contractors that specialize in
home renovation might all prosper. (After all, someone has to refurbish all
those abandoned houses for the bankers.)
Stocks
It has been said that "a rising tide lifts all ships." Sadly, the inverse
is true, as well. I expect substantial further declines in stock prices. Price-to-Earnings
(P/E) ratios might drop to as low as 7-to-1. (Where many manufacturing stocks
have traditionally bottomed in major recessions.) In my estimation most of
the current P/E ratios are still much too high for these troubled times. When
I
last checked
(after the
recent 800+ point two-day drop in the DJIA), I found the following P/Es quoted,
in a quick, quasi-random sampling of big names that jumped out at me:
Amazon -- 42.56-to-1
Apple Computer -- 17.43-to-1
Caterpillar Inc. -- 7.78-to-1
Coca-Cola -- 19.95-to-1
eBay -- 43.31-to-1
Google -- 22.73-to-1
Lockheed Martin -- 13.06-to-1
Microsoft -- 12.44-to-1
QQQ (which is like buying the entire NASDAQ) -- 19.79-to-1
Real Networks -- 81.73-to-1
Unilever -- 14.24-to-1
Xerox -- 13.17-to-1
Do the math. It isn't a pretty prospect, but many stock prices have a lot
farther to fall. My advice is to sell on the market
rallies, and buy tangibles with the proceeds.
Cars and Trucks
Again, like real estate, you'll have the opportunity to
buy at the bottom of the market, perhaps in five of six years.
Have you ever wanted to own a classic car? This may be your chance, especially
if it is a gas-guzzling big block classic car. I predict that in
2015 you'll be able to buy a fully-restored late-1960s Muscle Car for perhaps
1/8th
of its current
price.
(Well, in dollars adjusted for inflation, that is.) But of course to make
that a practical tangible
investment, you should instead get a classic military
vehicle, such as a Dodge Power Wagon. (Or, for our european readers
with a retreat in North Karelia, make that a Unimog
DOKA.)
Cash Will Be King, and then Cash Will Be Trash
Once inflation starts to kick in, it will be absolutely essential for you
to parlay all of your remaining dollar-denominated investments
into durable and liquid tangibles. Do do before the dollar evaporates. If you
haven't done so already, now would
be a good time to start.
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Replace Your FUD with Preparedness Action--a Pre-Crash "D" List
All of the recent economic news may be overwhelming to some. This
has left many people virtually petrified by Fear, Uncertainty, and
Doubt (FUD). Don't
be a proverbial "deer in the headlights." I strongly
encourage you get past your anxiety uncertainty and instead of sitting around
glued to CNN, wringing your hands and saying "ain't it awful". Replace that
angst with action. Get
busy preparing. Here is my suggested Crash Countdown "D"
List, for folks that are already fairly well-prepared:
1.) De-Hummelize
Sell off any collectibles that are not family heirlooms. The worst offenders
here are the mass produced "limited edition" Hummel figurines, Beanie
Babies and those collector plates from umpteen artists. Because I've mentioned
this, please don't think that I'm a misogynist.
Men can
be just as bad about acquiring trinkets! They are just manly trinkets.
Far too many men have gun vaults chock full of
"commemorative edition" guns with engraving and gold inlay that
they would never dream of shOoting, for fear that their collector value would
be diminished.
I most strongly recommend that you sell off those guns and replace them with
truly practical ones .These days, I lean toward stainless steel guns with synthetic
stocks, because of their tremendous longevity.and resistance to corrosion.
By selling off your toys and trinkets, you will be A.) clearing
space for important logistics, and B.) generating
cash to help purchase those same logistics. Trinket items have a ready market
with eBay, especially this time of year, as people are shopping for Christmas
gifts. Take nice crisp photos, start most of your items at a penny, and make
sure that you charge enough to cover your postage and tracking costs.
2.) Dumpster Dive
Watch your local Craig's
List like a hawk. It is not unusual to find people giving away or selling
a ridiculously low prices dozens of heavy duty canning jars, hand-crank meat
grinders, chest freezers, shelving,
and poultry brooder, horse tack, and so forth. I've even found running generators
available free for the asking. (You haul.)
Mark your calendar for both community yard sales and the next time that your
garbage collection service offers an "unlimited curbside pickup" day.
Hook up your trailer the evening before, and see what you can find that is
free for the taking. (Consult your local ordinances first, of course.) We've
found lots of practical items that were still perfectly serviceable, such as
rabbit cages, brooms, canes, geriatric walkers, and galvanized wash tubs ("gut
buckets") set out on the curb. It would be a shame to see useful item
send up in a landfill.
3.) De-Procrastinate.
If you have been putting off any dental work, elective
surgery, vehicle repairs, or getting new lenses for your eyeglasses, then start making
appointments!
4.) Dump Your Dollars
Roll over your 401(k) and/or IRA into a gold IRA, available
from through Swiss
America Trading Company.
5.) Double-Up Your Staple Goods Shopping
Double up your staple groceries shopping. By doing so consistently, you will
rapidly build up a supply of canned good. Make sure you mark the date of purchase
on the top of each can with a permanent marker (such as a Sharpie pen), and
put the most recently purchased cans at the back of the shelf . These are the
essential points of "first-in, first-out" (FIFO) rotation.
6.) Divert Your Expenses
Cut
out needless expenses, so that you can divert that cash into preparedness.
Pare down your expenditures on movies and eating out. But don't go overboard
and make yourself (or your spouse and kids) miserable. OBTW, here is an example:
The Memsahib's sister found that she could skip Starbucks, and make herself
an
awesome Vanilla
Latte
at a 7-11 store, for less than half the price. Do comparison pricing. Is
a NetFlix subscription less expensive than a cable movie package? Do you
really have
the time to watch that much television, anyway? I'm not say to do without
life's little pleasures. I'm just saying that there are some less expensive
alternatives.
7.) Door-to-Door Introductions
Get to know your neighbors. Go door to door, if need be. Remind folks who
you are. Connect names to faces. Make a list of phone numbers and e-mail addresses.
Without being too pushy, quiz them a bit if they are "ready fort he next big
storm". Find out if any of them have
prior
military
experience,
or
advanced
medical
skills.
But
of course don't volunteer too much information about yourself. It is not wise
to brand yourself at he neighborhood Whackamo.
8.) Drums, Cans, and Fuel Tanks
Top off your supplies of gasoline, diesel, and kerosene. Add fuel stabilizer
and antibacterials (such as Pri-G and Pri-D), as needed.
9.) Detailed Contingency Plans and Packing Lists
Contact family and friends, and agree on contingency plans that you'll follow,
even if the telephone system and e-mail become inoperative. If any relatives
are planning to join you at your retreat when TSHTF, then
make sure they know exactly what
they will need to pack. They may be able to make only one trip there, so they'll
have to make it
count. (they need to have appropriate winter clothing, gloves, boots, gardening
tools, bedding, and so forth to be productive at your retreat.
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From the SurvivalBlog Archives: Hedge Funds--A Disaster Story that Could Unfold in Quarterly Episodes
One of the consequences of the collapse of the credit bubble and the subprime
lending fiasco in particular is with hedge funds. There is a substantial risk
of uncontrollable instability in hedge funds that could potentially be disastrous
for investors. This instability will likely be seen in waves of bad news that
will come roughly once a quarter.
First, let me provide a bit of background:
1.) Most hedge funds have rules that allow only quarterly redemptions ("cashing
out") by by their investors. (A few hedge funds even have only one annual redemption "window.")
Typically, the redemption requests must be filed 45 days before the end of
any given quarter.
2.) Most hedge funds have rules that allow them to suspend redemptions, at
the discretion of the fund manager or their board of directors. This is just
what Bear Stearns did with their funds that went under. United Capital Asset
Management did the same back in July, for their Horizon Fund L.P., Horizon
ABS Fund L.P., Horizon ABS Fund Ltd. and Horizon ABS Master Fund Ltd. ("Horizon").
3.) Hedge fund portfolios can change radically, almost overnight. This can
be either good or bad. If back in the middle of the year a fund manager was
wise, he would have minimized or eliminated his Collateralized Debt Obligation
(CDO)
positions. But, on the other hand, if he was willing to take a risk, to increase
yields he might have have increased his CDO holdings in chosen tranches
that didn't have exposure to sub-prime real estate lending.
My personal prediction is that for at least the next year, there will
be successive quarterly waves of hedge fund redemption suspensions and perhaps
some spectacular hedge fund collapses, with the news breaking in the first
two weeks of each quarter. (The first two weeks of November, the
first two weeks of January, the first two weeks of April, and so on.)
Fear, Uncertainty, and Doubt (FUD)
The investors in hedge funds place a tremendous amount of trust in
the fund managers. This is because the fund managers are generally given free
rein to regularly re-invest all of the fund's assets in the most profitable
investments. Sometimes a hedge fund can be almost totally re-invested in a
different venture very quickly. For example, investors might assume (based
on the previous quarter's report and the manager's newsletter) that the fund's
portfolio is heavily in European bond derivatives and
the Yen Carry trade. But then then when the next newsletter issue is released,
they may learn that 80% of the fund portfolio was shifted into corporate stock
derivatives, during a leveraged buyout (LBO).
The current economic and finance climate is so darkly clouded with Fear, Uncertainty,
and Doubt (FUD),
that it is likely that a substantial number of hedge fund investors will make
a hasty exit, while the exit door is still open. I suspect that news of these
redemptions will inspire additional investors to also cash out, in a cascading
effect.
I cannot say with certainty that there will be a hedge fund panic, but ever
since the Bear Stearns meltdown, the likelihood has definitely increased.
For any SurvivalBlog readers that hold hedge fund investments with any CDO
exposure: If you aren't sure about your hedge fund's exposure, then you are
better off getting out, pronto. (You probably should have submitted your cash
out order in before August 15th.) If you wait for a quarterly report, it will
probably be too late, since your quarterly redemption window will probably
close before you see the report. And before the next redemption window
opens the fund might suspend redemptions.
Update: October, 2008: The number of hedge
fund redemption suspensions is now definitely increasing. Outright failures
are also continuing: Carlyle Capital defaulted following failed margin
calls.This was followed by the failure of Focus Capital, a $1 billion hedge
fund. But more ominously, the
failure of Lehman Brothers in September portends some very bad news for the
hedge funds.
I expect this situation to get far worse in the upcoming quarters. Consider
this your last warning: Get out of hedge funds, while you
still can!
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Our Changing Times: The Advent of Rule 157 and Perhaps Rule 308
We are living in unprecedented times. The global economy is being asphyxiated
for lack of credit, and we face the prospect of an economic depression that
could
be worse than the Great Depression of the1930s.
The Advent of Rule 157
One of the contributing factors in the unfolding banking debacle was
the advent of Financial Accounting Standards Board (FASB) Rule
157, that went partially into effect on November 15, 2007. This was a financial
accounting rule change that yanked the bankers back from the Fantasyland games
that they had been playing with Collateralized Debt Obligations (CDOs), Credit
Default Swaps (CDSs), Structured Investment Vehicles (SIVs), and others. Under
Rule 157, banks got a strong,
painful dose of reality. With Rule
157, balance sheets had to be "carried
at fair value on a recurring basis in financial statements." The end result
was that Level
3 assets could no longer be concealed. After some foot-dragging deferments,
the banksters were finally required to mark
any illiquid
investments to the most recent market
price
("marked to market") of a comparable
security
that actually traded. Pushed from what I called the "Marked to Mystery" realm
into the light of day in "Marked
to Market", the accounting rule change has resulted in
the banks writing off more than half a trillion dollars.
The
eventual
writeoff total
is expected
to
be
as much
as $1.5
trillion.
(It is difficult to predict the eventual size of the writeoffs since real estate
prices are still falling. This is the classic "moving
target" dilemma. The writeoffs will continue to grow with each drop in
real estate prices. As the writeoffs continue, the bankers will beg for more
bailouts.
The current debate about the proposed $700 Billion Troubled Asset Relief Program
(TARP)--also known as the Emergency Economic Stabilization Act of 2008 (EESA)--ignores
two huge Troubles to come. You'll note that those are Troubles with capital
Ts, as in Trillions.
The first Trouble is that--at least as
I heard about one currently drafted version--the bailout
bill will "cap" the
Treasuries holdings of bad debt at $700 at any
given time.
But
there
is
nothing
to stop Treasury officials from marking down the value of those instruments
to 30 cents on the dollars and re-selling them, and then buying
hundreds
of billions of additional toxic debt paper. This could go on and on until the
total cost of the bailout runs into multiple trillion dollars!
Note that the proposed bailout bill started out as a simple three page
document that gave the Treasury Department carte blanche. But the
bill blossomed to 130+ pages as the congressional debate continued. This first
TARP bill was voted down, and a
new bill with different terms is now in the works. The terms of the new
bill have not yet been announced.
The second Trouble is that while the "contentious debate" is going
on, on Capitol Hill, the Federal Reserve is busy handing out cash (electronically)
by the dump truck
load,
to "pump" liquidity
back into the banking system. In just the last 10 days, they've made "emergency
loans" to American banks that
have
exceeded $1.2
Trillion, and there is no end in sight. The end result of all of this "bailing" and "pumping" will
be the inevitable monetization of mountains of public debt. There is no way
to generate tax revenues to cover
even a fraction
of it, so, the requisite "dollars" are being created out of thin
air. (Read: monetization.)
This will of course dilute the value of the dollars already in circulation.
So,
sooner or later, mass currency inflation will be the end result. I predict
that if this monetization goes on unchecked for long enough, it will result
in a
hyperinflationary death spiral for the US Dollar. In our modern,
technologically complex, and fragile society, hyperinflation will first result
in a tragedy for pensioners and anyone else living on a fixed income. Then
as time goes on, it will wipe out any and all holders of paper currency dollars
and then the holders of virtually all investments that at denominated in dollars.
The utter destruction of the US Dollar will at some point result in mass chaos
in the streets. We can expect huge protests, riots, looting, arson, and a breakdown
of law and order. It will be The End of the World as We Know It. (TEOTWAWKI).
The banks are under such duress from the "unprecedented market conditions"
that they
are now strongly pressuring the FASB to "temporarily" suspend Rule
157, so that their Level 3 trash paper can again escape being marked
to market. (Effectively, this will be official sanction to cook their books.)
We'll stay
tuned and see what happens.
The Possible Advent of Rule 308
So, let's assume that hyperinflation does kick in sometime in the
next few years, the economy falls apart, and there is anarchy in the streets.
What will
you do when
there
are
not enough
police to stem the swelling crowds of looters? What will you do when the power
grid is down, burglar alarm systems no longer function, and even the telephone
networks are down? Who will you call for help? How can you call for
help, without phones? The simple answers are: nobody and no way. It will be "You're
On Your Own" (YOYO) time. In these circumstances your only logical choice
will be to implement Rule 308. It will be up to you--just
you and perhaps a group of trusted friends and neighbors--to provide for your
own safety, security,
and defense
of
life of property.
Think of it as a neighborhood watch on steroids. The difference between life
and death may come down to this: The rifle in your hands.
This is why it's called Rule 308--as in .308 Winchester. (Or, for our cousins
in
the
British
Commonwealth, it
was originally called Rule 303. (As in, the .303 British caliber.)
Political action is great. It would be wonderful if legislation were to fix
the economy and prevent an economic catastrophe. That is what I'm praying
for. I strongly encourage people to write letters to the editor,
write letters to your e
