survival

Small Town Destruction – Part II

In my first column addressing the demise of small towns I pinpointed three items I believe are consistent in the recipe for disaster: highway bypasses taking traffic around town, national retailers undermining local merchants, and outdated alcohol ordinances preventing thriving dining. Objective and specific, I believe the slow withering of communities can be avoided and in no way do I question the emotional appeal of charm or the fabric of the community. Expanding further on the recipe to create sustainability several more key strategies, in addition to the original three, can be implemented.

First, tax policy can drive business toward town center through a reverse property tax or by creating community redevelopment districts. Traditionally property taxes are lower in the suburbs, by reversing the millage rate growth is encouraged toward town and away from the outskirts. Continue reading…

July 16, 2011 by admin Economic Development Great Recession

Small Town Destruction

In my job I drive through small towns throughout the southeast U.S. It saddens me to see these former, vibrant communities withering away. Most people would find easy reasons for the local downfalls, like manufacturing plants closing. There is some truth to this, and of course the long-term trends in demographics point toward moves toward the suburbs, but I would argue the root cause is the locally self destructive historic actions of the communities themselves. I believe there are three distinct errors.

First, “we need a bypass.” One can follow US441, US301, or US1 in Georgia and Florida to see numerous examples. Beautiful towns are bypassed by high speed highways giving no reason to slow and take a look. The land on the bypass is commercialized by modern developers building look-a-like cheap structures found anywhere in America. The unique downtown charm of Main Street is then left to die. Ironically, my Garmin GPS has routed me through many towns, instead of the bypass, as the shorter faster route. I have enjoyed this scenic discovery and reminder of small town charm, and enjoy the scenery of the plantation homes, brick buildings, and unique architecture versus the lackluster Continue reading…

July 13, 2011 by admin Economic Development Great Recession

What lifestyle changes would you make?

Check out this house. Is it worth it? No mortgage, living happy without the fear of a bank taking everything. Depending on where you have been in the last two years financially you may not understand the changes taking place in America.

The Greatest Depression is continuing in a rapid downward spiral with the plummeting value of home prices. Too many Americans have tied their fate to the future of their home. Since 2008 home prices have fallen 33%.

What is a house? How many people thought they were living the dream of a McMansion – 4000 square feet and a $4000/month mortgage?

I will continue on my 1.6 acres of rural countryside – chickens, woods, space, and simplicity. Life is easy when you have less.

June 7, 2011 by admin Depression Great Recession Peak Oil preparedness

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

Dad’s Money

Dad’s Money (2/23/2011)

Nightly we are bombarded by incomprehensible numbers regarding Federal government spending: $14 trillion debt, $4 trillion budget, $1.5 trillion deficit and $180 billion interest payments. There are too many zeros on each number to print in this column, twelve each for the debt and deficit. Sadly, like gamblers in Las Vegas using colored poker chips we have lost sight of reality because no one touches the monies. As taxpayers our view of the government has become like a child’s view of Dad’s spending. A five-year-old watching his father has no idea where he gets money, but feels there is an endless supply. Sometimes Dad reaches in his pocket and uses green currency or coins like nickels and pennies. Other times Dad uses colorful plastic cards and swipes them in machines, and Dad has a book with checks where he illegibly scribbles names and amounts and declares the bills are paid. Of course, he also logs on his computer and banks via the web. Similarly, the government engages in a playful deception of payments, using computers, checks, and cash cards to move monies around.

Dad always seems to have money and as five-year olds we know he leaves each day and goes to work to make more. A connection between work and money seems obvious because doing chores sometimes brings allowance to children. As young children we always seem to have food, clothes, and toys. We don’t know how the lights operate or anything about mortgages and rent, insurance, gasoline, or car payments. However, we know dad takes care of us and most citizens view the government the same way with no understanding of tax income or expenditures

Right now we are enjoying historically low interest rates, easing interest payments on our $14 trillion debt. If interest rates return to historic norms of 6% the payments will increase to approximately $840 billion, nearly 23% of our current budget. Like a five -year-old trusting Dad to make money and spend money to care for the family we believe our elected trustees will do the same. However, re-election drives decision making, not the tough longevity of parenting and sadly our federal government is recklessly spending money. Congress must be held accountable for the deficit spending because they are bankrupting our country. Every parent and grandparent should know what is happening and encourage Congress to stop today’s fiscal negligence. Congress is punishing our future generations with inflation, high interest rates and more taxes. Sadly a five-year-old cannot stop Dad’s recklessness, but as a voter you can stop Congress.

February 23, 2011 by admin Big Government Great Recession taxes

Cairo – Do Americans Riot?

Several weeks ago uprisings in Tunisia dominated the evening news and daily papers. Most Americans are quick to dismiss such events, and why not? Steven Tyler’s performance on “American Idol” or the choosing of 20-something millionaires to play in the Super Bowl delude the masses; appearing far more important than citizens risking their lives for freedom. I too have felt the challenge to understand, but in college I watched Chinese students challenge communist regime and ultimately give their lives in Tiananmen Square to demonstrate the human rights violations of their government. Growing up I knew the communists of the U.S.S.R. regularly violated individual freedoms and imprisoned citizens behind the iron curtain. Through Hollywood movies I learned more about the fight after World War II and my history classes tried to explain the actions of authoritarianism and dictatorships.

Although many arguments about the cause may be made, the issues in Cairo this week are driven by 30 years of authoritarian rule under President Hosni Mubarak and a discontent youth rebelling against his authority. But the recent riots are not new, and by no means ultimately represent the underlying problems in a country desirous of democracy but operating with an ancient mentality. On November 24, 2010 a Christian was killed, 100 arrested and 3,000 demonstrators protested the razing of a new Christian church built without a permit. Under Ottoman law a permit is required to build a Christian church, in contrast Mosques are built easily and regularly without review of a state authority. Today many assertions are being made in the media that the riots are religious in nature, but local reporting and blogging, held an opposite view. Instead, the riots are the result of 30 years of oppression and dictatorship and inspired by the Jasmine Revolution in Tunisia.

As the World’s policeman the American citizenry believes our own government is above such actions and the riots we watch overseas could not occur here. My wife and I had a conversation this week about Americans and whether riots would take place here. Coincidentally I am reading a book, “The Emerging Police State” by William Kunstler and together we watched “Battle in Seattle,” chronicling protests against the World Trade Organization. Skeptically I listen to the outrageous conspiracy claims of Alex Jones and wonder if any truth inspires. As I learn more though I have discovered striking parallels between the radical claims of the left and the right; the common thread leading to a questioning of our government’s actions. Uprisings have occurred on our soil, and many are similar to Egypt: spurred by youth and ideological believers desperate for change and an opportunity to be heard. Sadly, like Egypt, death has come upon those who question the United States government or the corporations profiting and seeking protections through the rule of law.

Kunstler’s book is a compilation of speeches made through the years and inspired by his battles for justice. In my opinion it is easy to condemn the actions of those we do not like, but it is more important to defend the application of justice when we like it least. From a speech in 1971, with memories of Kent State fresh, long forgotten to the annals of time and unknown to anyone under age 40 today, he indicts the government for condoning the slaughter of unarmed students, using the law to fabricate evidence and justify its actions. In the most disgusting example, the Grand Jury which is supposed to provide protection from the law, but serves as an agency of the government, found the National Guard justified in shooting, although no student sniper existed and it was a Major’s discharge of his sidearm that prompted spraying the crowd with bullets. Furthermore, the Grand Jury recommended .22-caliber bullets should be used against future student demonstrators instead of the larger, more harmful caliber M-1.

Forty years later, in the summer of 2010, Pittsburg was shut down and noise suppression cannons were used to hold off G-20 demonstrators. No one was killed, but our government has mechanisms to slow and prevent demonstrations. Likewise, the movie “Battle in Seattle” shows the offensive measures police and National Guard took against WTO protesters in 1999. Since then “Exclusion Zones” have been created and are defined as “areas where protesters are legally prohibited.” A quick read of the Bill of Rights contradicts this as the Congress was prohibited from passing any law interfering with the right to peacefully assemble. Without protest though, we have sheepishly allowed court rulings to support the establishment of Exclusion Zones and Free Speech Zones, often located miles from the desired protest site and set behind concrete barriers, fencing, and razor wire.

Watching from a distance this past week I am concerned our government and media does not condemn Egypt’s actions to shut down the internet and communications. With bi-partisan support the Senate is prepared to again introduce legislation to create an “Internet Kill Switch.” In Egypt stopping communication has become necessary to thwart organizing by protesters. I believe many Americans view such actions as part of their perception of safety, but I counter it is another step in the incremental destruction of our freedoms. When challenged, a congressional white paper on the measure said the proposal prohibits the government from targeting websites for censorship “based solely on activities protected by the First Amendment of the United States Constitution.” Ironically, the same language is used in the Patriot Act.

Our country is radically changing, not in terms of Democrat versus Republican, but government and corporations versus citizenry. Each of the Amendments of the Bill of Rights has been usurped over the last 40 years to protect the state and corporation. Meanwhile we have sat idly by accepting, like children, the supposed safety created in exchange for liberty. We have watched legislation pass that punishes minorities and the indigent in greater numbers. Currently the mainstream populace finds itself victim to the banking, mortgage, and credit fraud perpetrated by the elite few and legitimized by Congress. I challenge you to understand why youth in Egypt are risking their lives against oppression, question why Icelandic people rioted to avoid the indebtedness of the banks, why 170,000 TSA employees have the freedom to ignore the Fourth Amendment, and why both sides of Congress support legislation to cut communications via the Internet. From the comfort of our homes it is safer to let others protest and not put ourselves at risk. I think the answer to my wife’s question about whether Americans riot is easy, “the passionate due, the idle don’t.”

February 12, 2011 by admin Civil Rights Controversy Muslim Terrorists

1970s versus 201Xs

The kids wearing plaid pants and striped shirts with long hair watching the “Brady Bunch”, “Adam-12” and “Emergency” are the men and women running our government today. It seems these “kids” have no recollection of the politics or monetary policy of the 1970s, instead only remembering the Bicentennial, bell bottom jeans, and Nerf footballs. A careful examination will show a decade that suffered an energy crisis causing an immediate recession. The same happened in 2008 when oil prices rose rapidly to $147/bbl driving our economy over a cliff to financial Armageddon. Nixon removed the Gold standard in 1971, and the Federal Reserve enacted new monetary policies to bring recovery. No radical method helped Nixon or Ford, and a hopeless Democrat was elected; promising prosperity and unable to deliver as we added the word “stagflation” to our vocabulary. As America entered the 1980s, after seven years of lackluster growth interest rates rose rapidly crushing the housing recovery. I remember my own parents struggling with 18% rates, job loss, and our manufacturing shift overseas as Chrysler sought a bailout and American’s learned “Made in Japan” meant quality compared to our union produced assembly lines.

For ten years inflation was high, reaching 13.5% in 1980 and unemployment soared above 10%, but like today the same policies were held: Federal spending never slowed, and tax increases for the rich were proposed. Gold prices accelerated and fueled speculation the end was near and the economy would not survive. Talk of wind mills, solar panels, energy conservation, and self-sufficiency abounded. Reviewing newspapers from the early 1980’s it is easy to spot Tip O’Neill’s 100-plus Democrat majority was adding to federal spending faster than the revenues received, not unlike the recent Pelosi dynasty. I found one article stating for every 1% increase in unemployment Federal spending deficits increased by $25-40 billion during the 1982 recession because unemployment drives down revenue and causes government to spend more.

Many argue the cornucopianism of Ronald Reagan saved the economy through supply-side tax cuts. I would argue a direct correlation should be made between recovery and oil prices as the UK’s discoveries of North Sea oil increased supply and probably fueled the recovery of the 1980’s and 1990’s. The 1970’s are remembered for Disco and parties, instead we should truly understand the damage of failed economic policies. We are three years into the current economic decline and the kids I knew now run Congress; I would offer 1970’s history provides more answers than the academic speculation used today.

February 2, 2011 by admin Big Government Depression Great Recession Peak Oil taxes

Welcome 2011 (aka 1984)

Orwell’s 1984 is an unbelievable tale imagined in 1949 focusing on government surveillance and mind control. Since 9/11 Americans have followed the Orwellian path: trading liberty for the perception of safety. Like Sheep, there is no resistance stepping into body scanners, allowing our mothers, daughters, and wives submission to hands of questionable authority, and acceptance of cameras and data mining to predict actions. Our same ruling elite, like the “Inner Party” exempts itself from the rules and regulations put upon “We the People”.

My goal is not to pontificate doom and gloom, but raise awareness and challenge the status quo. I must wonder why a NFL football dominates television ratings when our society is collapsing around us. Much of the change thrust upon us was incrementally small and came slowly after 9/11. However, I believe there has been an acceleration of lost liberties in the last two years. For example: a pilot challenging TSA’s procedures last week had his home raided by Federal Authorities under administrative rules creating a warrantless search; TSA announced further silly rules scrutinizing Thermos bottles; passengers cannot take water through security as it may explode; Wired magazine detailed government collection and scrutiny of credit card and store loyalty card data; Google through StreetView and other data mining practices announced predictive behavioral searches; municipalities are investing in license plate readers to track all traffic in their communities; you cannot enter a store or public place without CCTV recording and forever storing your image; without warrants the NSA is listening to phone and email traffic; purchase of certain over-the-counter drugs requires logging your identity in a government database although no law is broken; Attorney General Eric Holder shared in an interview with Diane Sawyer last week American citizens require surveillance to stop homegrown terror; passage of Net Neutrality was the first step toward an ID requirement to access the web; and Janet Napolitano announced Wal-mart will install televisions nationwide to broadcast the “If you See Something, Say Something” campaign encouraging us to report on others.

I do not have confidence in the government, nor do I trust the government to maintain its integrity. By the government’s admission we need to question those who exercise First Amendment Rights, have certain political bumper stickers, belong to organizations like the NRA, and criticize the United Nations. As 2011 comes upon us I challenge you to watch the weekly announcements of new government “security” programs and ask, “Why?” Big Brother is watching you. – George Orwell.

December 29, 2010 by admin Big Government Civil Rights Stupid People

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