crisis

Things you don’t know

It’s easy to watch the news and feel the economy is improving. Comically the performance of the Dow Jones is blasted at us each evening as the key indicator of economic success in America. It becomes more ironic when one thinks of Larry Kudlow shouting accolades of “Green Shoots” across the CNBC airwaves, but our neighbors are losing their jobs and homes. The Obama administration’s economic success is measured by the Dow, unemployment, and inflation. The numbers are reported as better than during the recession of the 1980s and especially better than the Great Depression. However, this is far from the truth.

Every evening the swings in the Dow are blasted across the airwaves as the measure of success of our country. However, the Dow has changed so dramatically no one should pay any attention to these numbers. The Dow is an index of 30 companies, originally started in 1896. In 1896 there were twelve companies in the Dow and only one remains existence today, General Electric. Since 1896 the “components,” or 30 companies composing the index, have changed 48 times. Thus, a more technology weighted or health services weighted Dow can look nothing like the Dow of bygone years. When one adds inflation, as the Dow is unadjusted, the numbers become completely meaningless.

The unemployment numbers are currently 9.1% and considered the holy grail of whether we are better off than the Great Depression. Most people don’t realize the methods of calculating the unemployment rate have changed. The most significant change came in 1994 when those out of work for more than a year were eliminated from the numbers, essentially reducing the count by 5 million and in 2003 the statistical models were changed. Using old methods brings the current U-6 rate to 23%, in line with the numbers of the 1930’s.

The consumer price index (CPI) is the measure of inflation and it too has changed. The market basket of goods is to measure pricing averages as this index impacts policy and more importantly government dole like Social Security and Medicaid. Alan Greenspan argued the historic methods were invalid because, for example, if the price of a steak increased then consumers would substitute with hamburger. A somewhat valid argument until one considers rent, heating oil, and gasoline where there are no substitutions. Changes were made by Carter, Reagan, and Clinton to ensure inflation was not “overstated.” Housing is indexed to “rent equivalents” and energy has been eliminated.

In essence, we are not comparing apples and apples to look at today versus yesterday. “There are three kinds of lies: lies, damned lies and statistics.” – Author Unknown

Collapse is Starting

President Obama promised “Hope and Change” when he was elected; he has definitely managed to deliver “Change,” and last week he was quoted saying “Hope” doesn’t happen overnight. Change has come at us like a freight train and repeatedly I have our covered loss of civil liberties, now our economic future has been stolen by Washington:
– The debt deal promised cuts, but the debt will increase by $8 trillion dollars to $23 trillion by 2021. “Why?” Because the government calls a “cut” less spending than was projected for the following year, not less than is spent now.
– The day after the deal passed the government spent $236 billion, or $750 per citizen, in a single day. For my family of six, the debt increased by $4500. I don’t have an extra $4500 lying around, do you?
– Standard and Poor’s downgraded the U.S. credit outlook for the first time in history on August 5, 2011. To claim this is a political move would underscore the objectivity of credit reporting.
– The official Chinese news agency commented, “China has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets.”
– Food stamp usage hit a new historic high last week, 45.5 million, up from 26 million in January 2007, and 32 million in January 2009 when Obama took office.
– According to the Census Bureau, homeownership fell to the lowest level since 1998, 65.9%, and if delinquencies are included the numbers match 1965’s level of 59.2%, according to Morgan Stanley.
– Housing prices have dipped 32% since they peaked in mid-2006, again for the 50th straight month realtors call a bottom to the decline.
– Weekly first time jobless claims continued their record setting levels above 400,000 for the 17th straight week.
– The average length of time to find a job has surged to a new record, 40.4 weeks.
– The labor force participation rate fell to a new low, 63.9% not seen since the early 1980s.
– Including those who quit looking but desire employment, the broader unemployment rate reached 16.1%.
– Gold topped historic numbers last week, closing above $1660/ounce.

I believe President Obama and Congress sealed their political fate last week and I am hopeful revolution will begin with the election of leaders, not self-serving politicians in 2012. A quick read of history will point to failed governments following the same path as the United States. We will not have societal Armageddon tomorrow, but our standard of living, and more importantly future generations’ standard of living, will continue to decline.

August 14, 2011 by admin Big Government Depression Great Recession Obama Peak Oil

Defending Yourself

Defending Yourself (06/22/2011)

I wrestled with the title and content of this column realizing I wanted to challenge thought processes. My context is asking, “When would you take up arms?” Recent Supreme Court rulings, at state level and the federal level have eroded 4th Amendment rights. These freedoms have been held sacred since the Bill of Rights passed and evolved from British tyranny and further back to feudal tyranny. Looking around I see this erosion becoming the norm, no longer the exception. Sadly, people who raise questions are now “domestic terrorists” or “troublemakers” harassed through detention, no-fly lists, and watch lists.

If you are pulled aside for additional screening at an airport and suddenly find yourself touched inappropriately by a TSA officer are you willing to yell “Stop!” Are you willing to kick and punch to defend your person? Are you willing to engage local law enforcement to file assault charges? What if you are an 18 year old girl attending your high school prom and security guards run a hand up your bare thigh under your dress? Would you be willing to complain, or more importantly Continue reading…

June 22, 2011 by admin Big Government Civil Rights Great Recession preparedness

Wealth Disparity

Wealth Disparity (5/11/2011)

A drive through New Smyrna Beach demonstrates the extreme wealth disparity that can be found anywhere in America or the world. From the mega-wealth of beachside to the barely surviving poor west of U.S. Highway 1 radical contrasts in daily life are found. It is impossible to look away in a small town and not acknowledge differences, to ignore them would be unconscionable. Like New Smyrna, America’s numbers are mind-blowing: the top 1% controls nearly 33% of the wealth in America whereas the bottom 50% has just 2.5% of the wealth.

Don’t misunderstand me. I love nice things, eating out, a beautiful home, new cars, and a big bank account. As a country even our poorest live far better than the middle class does overseas, but such argument is not cause for turning our backs on the needy. Similarly, the populist envy driven by our current President does not justify excessively taxing wage earners, or the ultra-wealthy. The current raging debate has disclosed the failures of our progressive tax system: envy that the “rich” pay much of their tax through a 15% dividend, and sadly uncovering through subsidies and support programs a single mother of three earning $14,000 per year has more disposable income than a similar mother earning $60,000.

We need the successful to succeed, creating jobs, opportunities, and capital for driving the economy. Simultaneously an understanding and empathy must exist for those who need help. I do not have solutions, but must argue the debate is lost in political rhetoric and desire to drive pet projects. Taxing the wealthy at 100% will not provide enough revenue to fix the government spending problem and it certainly will not lift those in need. Milton Friedman argues in the movie, “The One Percent” the increasing wealth gap is justified because it has also lifted the poorest of poor. In earlier lectures Friedman, in characteristic fashion, shows at least that government creates a perverse system starting with bad schools, limits opportunity through minimum wage laws, and creates dependency via welfare programs.

The political debate from both sides focuses on our tax system and protecting special interests, Republicans arguing to keep tax rates low on the rich, Democrats seeking more. Sadly, both sides view 67,000 pages of tax code as the holy grail of government purpose and fail to understand simplifying the tax system and cutting spending will allow market forces to work toward solutions benefitting both rich and poor.

May 26, 2011 by admin Capitalism Depression Great Recession

My two cents…

The fed is between a rock and a hard place:

– no more QE: the stock market will crash, no easy credit, brakes on economy
– continue QE: rising inflation, real wages dropping, angry voters.

Furthermore the Administration is not supposed to be part of the monetary policy but Obama will politically pay for the decision either way.

What should we do:
– keep your gas tanks full (I filled the RV in January, $2.90/gallon, today driving home it is $3.80/gallon — $60 savings
– keep your pantry full — anything you buy today is cheaper than tomorrow
– understand the stock market is like going to Vegas. Best trading option is probably futures contracts
– pay down debt that costs more than 6%-8% to improve cash flow. Anything else is about to become cheap money. Free up the expensive money to invest in CD’s, dividend paying accounts when interest rates go back to 10-12-14%
– Remember, as interest rates go up bond prices go down. why do you think PIMCO sold ALL of their treasury bonds?
– Remember the government has $4 trillion in short-term treasuries coming due in the next 18 months

April 17, 2011 by admin Capitalism Depression Great Recession preparedness

Destroying Futures

Imagine earning $30,000 (3 Trillion) per year but having bills and obligations of $42,000 (4.2 Trillion) per year. Additionally, let’s assume you have a spouse and two children with wants and desires. With your income falling short you would know radical changes in your lifestyle must be made and if you are a Dave Ramsey fan you know every expenditure would have to be considered and nearly one-fourth must be cut. However, the kids will complain if you cut their movies, food, school activities, clothes and even iTunes budget (government spending). Your spouse does not want to discuss the issue because she feels the problem will go away, as if by magic, and there is no reason to upset the kids (political debate).

However, there is an answer: debt. Of course, a loan to create a source of “income” can be created (deficit spending). For instance, a second mortgage on your home could fund the shortfall and maybe allow you to buy a new big-screen television or car, a hugely popular decision at home. But this only works for a while, quickly you discover the interest only payments add another $500 per month to your obligations, thus you are now using the debt taken on to pay for the original shortfall and the new debt (treasury auctions)! You have looked for ways to increase income, but the economy isn’t growing and no one is hiring (tax revenue). Your anxiety increases because you know this cannot keep going and bankruptcy may be the only way out.

One day however, your neighbor Fred (Federal Reserve) knocks on your door and explains his multi-level marketing business is doing well and as long as he keeps getting new people involved his success will grow and he would like to help you. Hesitantly you agree to his proposal: he will paper over your debt (purchase bonds), and you can repay him in 30-years. Thoughtfully you think his proposed near zero interest rate and 30-year offer has to work. At age 50 it is even unlikely you will be here in 30 years to deal with the repercussions. With a wink, Fred explains your children will assume the entire debt, with interest. After contemplation you feel it is better to risk your children’s future than to reign in your lifestyle today, and hurt their feelings, and since they do not get an opinion (can’t vote) they will never know. Like a deal with the devil, you know there is no way out.

March 4, 2011 by admin Capitalism Depression Great Recession preparedness taxes

Wisconsin

I debated whether to offer an opinion regarding Wisconsin, but knew I could not let go of this protest. I am impressed with the 65,000 plus protesters that believe in something strong enough to brave the cold. More important to see debate with such passion engaging on our own soil gives me hope toward future revolution against our government and the tyranny we face. It appears the press – from the left and right, have managed to blur the issue at hand as there only appears two possible opposing views when tapping MSNBC or Fox News. I hypothesize three parties are now at war in this country: Public Servants, the Ruling Elite (executive pay), and the Private Sector. Thus, a two pointed perspective does not work and furthermore the issue at hand is not about trimming union rights, but re-aligning public servant compensation.

Austerity measures will generate class warfare and in this Great Recession the compensation of the three parties has diverged greatly. Executive pay remained safe and increased greatly and Public Service payrolls have increased far greater than private payrolls. On the other hand, the Private Sector has suffered irreplaceable job losses, flat wages and lives in fear of a pink slip delivery tomorrow. At the same time the Private Sector is asked to pay more income tax, more sales tax, more property tax, and more fees to pay for the perpetuation of Public Service compensation programs and to bailout reckless executives who lost gambling bets against the masses during the debt fueled frenzy.

Ancient Rome succeeded through an ever expanding territorial economy fueling the wants and desires of Caesar. The masses found relief through entertainment at the Coliseum and a sense of safety, but yet traded liberty for trite compensation. Similarly, America is like Rome; rich Senators, a small ruling class, and wealth obtained for a few due to the destruction of others. Our masses are entertained by media and sports, not taking time to understand the reason behind the need for change. Like Rome our public servants are protected by a never ending spigot of tax dollars and turn against the working class and income earners for whom they supposedly serve.

It is forgotten that our children will ultimately pay the price. Something is happening in America right now, and it started with the bursting of the debt bubble three years ago. Denial has not worked and protests will become more common, maybe leading to revolution. I am concerned for my children’s future and cannot imagine the tax burden, inflation, and tyranny they will face if we do not stop opposing the protesters in Wisconsin.

March 4, 2011 by admin Big Government Depression Great Recession Health care taxes

Bob Cratchit

My Christmas week column

Without much thought most of us can recite the plot of Dicken’s “A Christmas Carol” and the various scenes of ghostly Jacob Marley torturing the soul of Ebenezer Scrooge. Dicken’s indictment of 19th century capitalism is just as accurate 167 years after publication. Although in denial, most Americans have more in common with the hurting Bob Cratchit and family than the wealthy, out of touch Ebenezer Scrooge this Christmas.

I challenge you to consider how your Christmas four years ago compares to this year and what concerns are facing you, your family, friends, and our country. Christmas 2006 we had never heard of candidate Barak Obama, the national debt was 8.5 trillion versus 14 trillion today, 258 U.S. soldiers had died in Afghanistan versus 1437 total through today, and unemployment was 4.6% compared to the current 9.8% with over 8 million jobs lost in just the last two years. Personally, Christmas 2006 was incredible as my house was “worth” far more than I had paid, and I was a believer in the infinitely upward movement of American economic growth. Two years of unemployment wiped out my entire career’s worth of wealth building. Regardless of your opinion of the financial crisis, our political parties, or presidential administrations this Christmas is different.

Last week at Wal-Mart my wife spoke to a cashier who had her heat fail and was using space heaters to warm her home. With their 3-year old sharing a bed to stay warm she said the house dropped to the same temperature as outdoors, 15oF. I assert most of us are like Bob Cratchit, just surviving to stay warm and struggling to feed our families. The debt crazed, home equity financed Christmas is now the Ghost of Christmas Past. This year the Ghost of Christ Present has brought prudence, fear, and common sense upon America. State employees, teachers, and educated engineers and managers wonder if tomorrow will bring a pink slip or another week of toiling hours just to keep a job, unappreciated by the likes of Scrooge. Bankers however will bask with overgrown golden turkeys, excesses of food and thermostats set at 74 oF unlike 60 oF for the common folk. And what about the third specter? The Ghost of Christmas Yet to Come will more than likely deliver further pain and woe to already hurting families. “When people lose everything and they have nothing to lose, they lose it.” – Gerald Celente

December 27, 2010 by admin Depression Great Recession preparedness

It Will Get Worse -Be Prepared and Take Care of Yourself

It Will Get Worse -Be Prepared and Take Care of Yourself
12/28/2008 – by John Nelson (G8REngineer@yahoo.com)

I originally wrote this during the Christmas Holiday of 2008. Since I reference this paper in my blog, Economic Recovery? I wanted to post it here.————————–

My predictions for 2009 and 2010 are below. I felt compelled to put this together because I have shared these thoughts with my wife and many friends. I am bothered because I see a trend in daily newspapers and news programs to report with a degree of optimism, and then with surprise, when the news is worse than they had first reported. But, I keep finding the news is not worse than I expected.

As this year has gone by I have been concerned by current events as compared to history. Our government has bailed out defense contractors and other private companies before. In the 1930’s, the press and government denied what was taking place, but yet we have the benefit of history to know how bad things were. Today there is a certain level of optimism by many people and I hear comments like, “we are Americans and we always pull through.” While that statement may be true, I feel concern to blind acceptance that things are always going to be ok. Throughout this article I make references to natural disasters and other external events. I feel today’s economic issues are similar in that external forces are going to impact individual lives. If you ascertain nothing else from this writing I hope it is that the most significant economic changes in decades are currently occurring and preparing for the worst possible outcome will aid you in dealing with that possibility. Like all predictions or theories on trends, I may be wrong about the severity, it may be better or worse, or about the timing, events may come sooner or later. Regardless, I hope to convey concern and suggest preparation.

First, I want to provide some background information. I do not have cable television, I do not watch local news, and I do not read newspapers. On a daily and weekly basis I gather my news and opinions from the following sources:
Daily
• Bloomberg (http://www.bloomberg.com) – I first review world markets, particularly Asia and Europe just prior to going to bed and when I first wake. Second, the news wire provided here is far superior to any other source available
• Drudge Report (http://www.drudgereport.com) – a great link to numerous worldwide news articles
• Peak Oil (http://www.peakoil.com) – a link to various energy, climate change, policy, and other news articles
• Kirk Report (http://www.kirkreport.com) – Kirk is a day trader and offers stock information. But, he also links to a huge number of financial articles and opinions focusing on Fed and other central bank policies
• Economic Populist (http://www.economicpopulist.org) – Average people’s opinions about what is currently taking place. Of most interest are the specifics of research including graphs, data, charts and details to defend positions. Short articles, highly informative.
• Seeking Alpha (http://www.seekingalpha.com) – Similar to Economic Populist
• Yahoo Finance Home Page (http://finance.yahoo.com/) – What the average person sees for headlines
• NBC Nightly News (Podcast) – download video each day and watch following morning
• CNBC Fast Money (Podcast) – download video each day and watch the following morning
• BBC Global News (Podcast) – download and usually listen the next day
Weekly
• Kunstler Cast (Podcast) – James Howard Kunstler weekly podcast. Focus is on the end of suburbia due to changes with fossil fuels
• Bob’s Gold Price Column (http://goldprice.org/bob) – what the doom and gloomers think about gold and inflation
• Matt Simmons (http://www.simmons.com) – an energy expert

Change is taking place around us. If you had told me ten years ago that I might find myself living in a situation where I would not have power for 5-10 days, not be able to go to the grocery store to buy food – especially refrigerated items, I would find lines at gas stations, or buildings around me would be boarded up taking on a third world look, I would have laughed! However, I have lived through that situation in the summer of 2004 in New Smyrna Beach due to the hurricanes Charley, Frances, and Jean. From that experience I re-evaluated what it meant to be prepared. I thought I had everything I needed to survive: a couple of gallons of water, a bow saw, candles and a few flashlights. I learned how naïve I was. Since then, I have added a generator, chain saw and spare chains, lanterns, camping gear, stockpiles of gasoline each June, regular testing of the generator, and many other items.

Am I crazy or am I prudently prepared? Any resident of the state of Florida who does not keep minimum supplies is living in a state of denial. Other disasters and events have struck in the last 25 years in the United States and elsewhere – how prepared would you be to take care of your family?
• Northridge Earthquake
• Hurricane’s Katrina, Charley, Andrew, Hugo, Floyd, etc
• Coal Ash Levee break in Tennessee
• Devastating tornadoes
• Mount St. Helen’s
• Christmas Tsunami in Indonesia
• Rogue wave – Daytona Beach 1996 (or so)
• Springtime flooding in the Midwest
• Terrorist attacks of 9/11/2001
• Rodney King riots
• Heat wave in Europe killing hundreds in France
• War in Sarajevo, a beautiful Olympic city
• Cholera outbreaks in Africa, 2008

My point is disasters and upheavals occur regularly, and without warning. Our ability to take care of ourselves is what matters in each case. One need only picture scenes from the news of how Hurricane Katrina victims responded versus the same, significant, devastation from Hurricane Charley in Punta Gorda, Florida and the importance of proper and prudent preparation becomes apparent. More importantly, self-sufficiency and the ability to survive without reliance on others or civil authorities is incredibly apparent.

Most citizens in the United States have lost the ability to think and be self-sufficient for themselves. Take an automobile owner’s manual from the 1960’s and compare it to today, 40 years later. My 1967 Mustang has details on lubricating the chassis, changing a tire, performing valve adjustments, and other maintenance. Today’s owners manual states the warranty will be voided if the work is not performed by an authorized service center. I would assert the average person, especially Generation X or Y, will call roadside assistance and wait 90 minutes to have a tire changed instead of taking 10 minutes and performing the work themselves. Furthermore, if food becomes an issue of concern I believe most citizens will be at a loss. They will not know how to grow or kill food due to the basic belief that food comes from the grocery store. I had a friend share his concerns about the differences today versus the Great Depression – in the 30’s he feels a person would have given his place in a food line to another out of kindness and sacrifice. Today, he feels your life is at risk due to the selfishness of most people and their inability to survive without assistance.

One problem society seems to face is forgetting our history. As recently as summer 2008 gasoline prices were over $4.00/gallon. Behaviors were changing: scooter and motorcycle riding was up, SUV’s purchases declined catastrophically, people moved closer to work or considered changing jobs to reduce commutes, trips were combined, leisure travel was eliminated, and overall there was a general trend toward conservation. In 1974, due to political events, Americans had to ration gasoline resulting in huge shortages. Odd and even days were used to determine purchases and none could be made on Sunday’s. An immediate move toward smaller cars was made. To a lesser extent, the same problems arose in the early 1980’s and panic over dependence on oil again ensued.

During 2008, many newsworthy events have taken place, but without the benefit of seeing them all at once it is hard to imagine the economic and societal decay taking place around us:
• Rice and flour shortages on the west coast as Asian populations understood shortages oversees
• Rising global food prices due to US policies on ethanol
• Gas shortages in the Southeast US due to supply problems after hurricanes
• Over a dozen airlines went into bankruptcy or out of business
• Major brand stores went bankrupt (Steak n Ale, Circuit City, Linens and Things, etc)
• More than 170 banks failed as of 12/1/2008
• Christmas holiday spending was the lowest in 40 years
• Year over year housing price decline of 13%
• Unemployment claims are at their highest in 25 years
• Diminishing new job opportunities, compounding unemployment problems
• Dow Jones high of 14,000 in October 2007, low of 7570 in November 2008 – 45% erasure of value
• 1 out of 10 mortgages is in default or behind on payments
• Rising defaults on credit cards and car loans

Throughout the year, news sources have reported events with an element of denial or ultimately surprise when the data become available. Just this week, on 12/26/08 I heard the following reported on Fox News Network:
“Retailers were surprised at the worse drop in holiday sales in over 40 years.”

They went on to report possible reasons such as: there were 6 less shopping days between Thanksgiving and Christmas, a holiday snowstorm that kept consumers away from malls. The comical reporting came next: some consumers may be concerned about job loss and not spending as much, credit cards are maxed out and no new credit is available. Last but not least, they reported that the economy of the United States is consumer based and that the total GDP – the production of all products and services – is 70% consumerism. Thus, without the citizens consuming the economy is grinding to a halt. ‘They’ need to force ‘us’ to start consuming.

Our problem as a country and with our current economic situation is we do not make anything that anyone else wants. We make money and recycle it within our own borders. Thus, growth is a fantasy based on a false reality. The best example is real estate over the last six years; the rapid growth had nothing to do with a true increase in value due to supply and demand. Instead, the easy availability of credit perpetuated a debt-based drive toward home ownership where prior lending standard required 20% down (leveraging of 5:1) now allowed 5% down (leveraging 20:1). Finally, these standards were reduced to 0% or even -5% down – the equivalent of infinite leveraging. This was a house of cards doomed to collapse. During this time, the media constantly reported that housing prices would recover within a three to six months. This took place throughout late 2007 and all through 2008.

I had to set the background for where we have been before I felt I could make predictions on where we are going. My synopsis is below with a predictive narrative and finally recommendations to plan for the next 2-3 years:
• Housing – there will be no recovery in housing before the end of 2010. Housing prices in some areas inflated as much as 2%/month (24% per annum). Historically, housing rise at a rate equal to or just above inflation. Thus, it will take 10-15 years to work back to the 2006 highs. This is compounded further by an inventory of 4 million homes for sale when historic inventories are between 2 and 2.5 million. Last but not least, lending is not available to purchase homes with debt.
• Credit – Consumers will not have credit readily available until late 2009 or early 2010. Our consumption based economy will remain frozen until the spending engine can restart.
• Equity Markets – The Dow and S&P500 remain over valued. Current estimates of average earnings for the S&P are about $55. Thus, the S&P is trading on a forward multiplier of about 18-20. Analysts have consistently overvalued earnings and multipliers throughout 2008. Many blue-chip, dividend paying stocks are trading closer to a multiplier of 7-10. Historic norms are 14-15. Thus, using a multiplier of 10, the S&P should be at 550.
• Currency – The Fed has printed huge sums of monies. Taxpayers generally pay about $1 trillion per year in federal income taxes. In the last 12 months Congress and the Fed have promised about $7 trillion in bail outs, stimulus, and balance sheet increases. As large as the numbers are, a huge deflationary move has taken place due to the erasure of debt, thus offsetting some of the severity of the inflationary monetary policies. If other governments reduce lending rates and increase currencies, the dollar will not be devalued. However, inflation is inevitable.
• Oil and Energy – Oil has plunged to the mid-$30s from a high of $147/bbl in July 2008. Commodity markets tend to overshoot both directions to the high side and the low side while supply and demand realign. The issue with oil is not one that we are going to have no oil. Instead, the marginal cost to produce each subsequent barrel of oil is higher than the preceding barrel. This is the root concept of Peak Oil; supply will not keep pace with demand. Hubbert’s peak in the early 1970’s in the United States is well-documented and the same will apply to world supply and demand. During the peak there will be wild oscillations in prices, supply, and demand. We are at the beginning of the peak and experiencing the swings.
• Climatic Change – the Green lobby is promoting huge expenditures due to perceived global warming. Regardless of political views, climatic change appears to be taking place. The summer Artic ice in 2008 melted at a rate that allowed transit across the polar ice cap from North America to Asia and Europe that had not been possible due to being previously frozen for the last thousand years. Plants not exposed for a thousand years appeared this summer. The Greenland Ice shelf is melting at an unprecedented rate and the risk of a significant piece sliding into the ocean is increasing daily. There is less snow and ice to reflect sunlight causing a possible natural exponential warming trend that can not be reduced. Salinity values in the North Atlantic are changing, thus impacting the flow of the gulf stream and the natural cooling process in the northern hemisphere. These changes may be normal on a geological time scale which we can not measure or they may be due to increases in carbon in the atmosphere driven by man made changes in the last 150 years. Regardless, they appear to be taking place at a significant rate. This climatic change will impact coast cities, farming communities, water supplies, and world hunger.
• Geopolitical Issues – The middle-east remains an area of concern with religious based hatred of western civilizations being a catalyst for terrorism and oil policy changes. Israel has ramped up hostilities in Gaza Strip and India and Pakistan are both nuclear powers with increasing hostilities. Russia is establishing herself again as a world power, particularly with an interest on controlling energy and pipelines feeding Europe.
• Politics in the United States – A new, inexperienced president will try to create policies to save the country as he promised during the campaigns. At the same time, the House Speaker, Nancy Pelosi, has a strong liberal agenda that she believes she can now accomplish including: union supported legislation, national health care, increased taxes and wealthy producers, and a general move to a more socialized country. President Obama will work to pass legislation to make owning firearms more difficult, most likely through taxation on ammunition or illegality of personally possessing ammunition like Switzerland successfully implemented in 2007. He will try to create 3 million jobs, but that will not impact the economy for 5-7 years. He will support another stimulus package and saving the auto makers, moves that will further add to our debts.

In 2009, I see a temporary stock market rally based on the euphoria of a new president and false confidence that he can implement programs that will save the country and the average person without significant ownership or pain on their part. The House will pass another stimulus package which will not stimulate the economy as consumers hoard cash out of fear of losing their jobs. The president will be tested by events in the middle-east that will ultimately result in him appearing weak as nothing can be done to prevent the hostilities that have brewed for thousands of years. Throughout first quarter 2009 unemployment will continue to rise at unprecedented rates, reaching 10% by April and 12% by July. Housing prices will continue to decline as lending is not available. As unemployment increases, consumers will further reduce spending worried about their own future and possible job losses. Those that have a job will be reluctant to consider moving and will not purchase existing or new homes.

Company earnings will decline as consumer spending slows and worldwide spending continues to decline. The stock market will test new lows at 7000, 6000, and finally 5000 before settling into a period of flat trading between 5000 and 6500 for three to five years. The media will begin to report, with surprise, a rise in consumer prices and producer prices in late 2009 as inflation begins to take hold due to the failed policies of the Fed and Congress. Housing again will not restart because lending rates will increase from 5% back to rates not seen since the early 1980’s of 12-14%. Oil prices will also increase for three reasons: a devaluation of the dollar against world currencies, reduction in supply from OPEC to gain a foothold back to the $80/bbl level they desire, and the previously discussed middle-east tensions causing further supply concerns. Hyperinflation will take hold in early 2010 causing President Obama to sign executive orders for price controls on basic staples such as milk, bread, flour, and sugar. Ensuing hoarding and shortages will occur as citizens try to stockpile supplies in anticipation of shortages. Riots and general unrest, particularly in New Orleans, Detroit, Washington DC, and Los Angeles will be reported. These riots will occur because the average population has not been taught how to survive or be self-sufficient. Instead, they have been raised as consumers with all of the requirements of civility readily available at a nearby Wal-Mart.

My recommendations are to prudently prepare. Just like an impending storm in a coastal Florida city, preparation will be the key to survival. Some of these changes will happen slowly, others rapidly. Preparation may be as simple as just thinking about what might happen. Regardless, good preparation may involve purchasing or stockpiling goods not normally kept.
• Investments should be made over the short term with sales into rallies and purchases in the troughs
• Short the S&P with the SDS if the symbol goes below 80 (or 85) and sell when above 110. You can repeat this strategy many times
• Reduce debt – do not take on new debt
• Refinance at historically low interest rates. They will be at 10-15% in the future. Refinance below 5.25%. You will not see this again in your lifetime.
• Do not make debt based purchases when rates are rising or above 9%. The monthly cost of cash flow is 30% minimum
• Hoard cash – it will diminish in value, but cash is king. Cash provides options.
• Make wise purchases – do not buy luxury or un-needed items
• Adequate preparation for 7-10 days of survival without power should be a minimum requirement regardless of where you live
• Tools for debris removal, house repair, and fixing and repairing household appliances should be available
• Basic first aid kits should be kept in all cars and at home
• Personal relationships should be made with local doctors and police to facilitate first priority care for you and your family
• Consideration should be given to a safe haven, a place to go
• A family plan should exist in the event of communication failures (no cell phones)
• Arming with a shotgun, rifle, and pistol should be done. Weapons can be used for protection, hunting, or trade if needed. They will last a lifetime and if political policy changes they may become very valuable
• Further preparation should be made in the face of inflation – spend an extra $20/week grocery shopping on staples and dry goods
• Ammunition, Gold, and Jack Daniels will be the currency of the future. Whether or not you own a gun, purchase one to two boxes of shotgun shells, 9 mm, or .38 cal ammunition monthly. Purchase a bottle of Jack Daniels monthly. All can be sold later.
• Learn basic first aid
• Consider solar power supply options and re-evaluate power tools owned to be rechargeable
• Explore basics of wind and solar electricity to charge power tools and items to maintain basic civility
• Inverters that convert 12-volt battery supplies to 110 to use with modern amenities
• Find outdoor solar lights at garage sales or store sale’s racks and use as indoor lighting by moving the solar panel outdoors and the lights inside
• Accumulate good camping gear – lanterns, sleeping bags, stove, and tent. Camp for a weekend or longer periods to understand what it is like to live without basics. Add to gear over time to improve survivability. Every time I camp it seems I want more flashlights, batteries, knives, propane, and lanterns to make my life easier. If it rains I want to stay dry – bags, containers, tarps, etc.
• Blankets, jackets, scarves, gloves
• Store all tools, gear, in organized easy to take with you containers
• Ensure tetanus and other immunizations are up to date
• Stockpile basic medicines such as Aspirin and Benadryl, iodine tablets for radiation exposure
• Keep Mylar, Duct Tape, chain saw blades, tarps, nails, screws, tie wraps for emergency repairs and protection against weather, gas hazards

All of the above can be part of your basic lifestyle and should help you feel prepared without feeling like a nutso preparing for the end of the world. Choose to consider living with the idea that Wal-Mart and the grocery store may not be there tomorrow.

Test your preparation with the following questions:
1) I live in a winter storm area; can I survive the cold and snow without power for 7 days?
2) A tree lands on my house during a rainstorm, can I make repairs on my own?
3) A train derails spilling chlorine gas, what would I do?
4) I am traveling and a terrorist attack occurs, communication is cut with my family. What would we do?
5) Price controls take place and bread costs $10/loaf. Can I cook and survive?
6) Social unrest is occurring and the National Guard has implemented curfews. Power is out and the grocery stores are closed. What would I do?
7) Gasoline is available in rations of 20 gallons per month, what would I do?
8) We are evacuating to another locale due to …….I find myself in tense situations while buying gasoline, what would I do?
9) A nearby levee breaks flooding our town and my neighborhood, what would I do?
10) An earthquake occurs, or the ground shifts resulting in the collapse of my home, what would I do?

Books and websites I recommend
• “The Long Emergency”, James Howard Kunstler – a rather prophetic view of what is currently happening written in 2004
• “World Made by Hand”, James Howard Kunstler – a fictional look at ‘life after’. After collapse of the government due to some event such as war or social disorder we are living like it is 1890 again
• “The Creature from Jekyll Island” – How the Federal Reserve was created and the control of banking over all decisions
• “Jericho” – The CBS Television series, two seasons. The writing/acting is horrible in the first few episodes but improves. It is too much like other CBS shows. However, it strengthens. You should take away from this the relationships that form, how people deal with crisis, and the warring tribal nature that develops between towns
• “Atlas Shrugged”, Ayn Rand – a fictional look at the world in a sense where producers choose to no longer be victimized by policies that take from those who make
• “Lucifer’s Hammer”, Larry Niven – a fictional book I read in 1979 about a meteor colliding with the earth. The hero is an engineer who prepares and survives through self-sufficiency
• Peak Oil, Life after the Crash (http://www.lifeaftertheoilcrash.net/) – Worth reviewing to gain education about possible changes in the future
• Build a Wind Turbine (http://www.mdpub.com/Wind_Turbine/index.html) – Want to build a practical windmill or solar panel – great site to see someone doing it

September 2, 2010 by admin Big Government Depression Great Recession