Tag Archives: inflation

Precious metals will become currency as the dollar goes bad

(News & Editorial/ Precious metals will become currency as the dollar goes bad)

bad dollar currency

A. Recent headlines:
1. China-Russia currency agreement further threatens U.S. dollar:
http://www.ibtimes.com/china-russia-currency-agreement-further-threatens-us-dollar-248338#

2. Brazil, China Sign Trade Deal to Bypass Dollars:
http://silverdoctors.com/brazil-china-sign-trade-deal-to-bypass-dollars/

3. China-Australia to Ditch US Dollar…
http://www.stormfront.org/forum/t957807/

4. BRICS Nations (Brazil, Russia, India, China and South Africa) signed Local Currency agreement at Summit. They will not trade in U.S. dollars anymore. Agreements around the world between Countries to Drop U.S. dollar for trade (including Australia http://sherriequestioningall.blogspot.com/2012/03/bric-nations-brazil-russia-india-china.html

5. The Germans Want Their Gold Reserves Back In Germany:
http://www.forbes.com/sites/robertlenzner/2013/01/19/the-germans-want-their-gold-reserves-back-in-germany/

6. “Germany wants its gold back, Fed says…eventually, maybe“:
http://www.examiner.com/article/germany-wants-its-gold-back-fed-says-eventually-maybe

7. Texas Wants Its Gold Back From The Fed:
http://www.zerohedge.com/news/2013-03-23/texas-wants-its-gold-back-fed

With the world human population being 7.0 billion, so 30% of the world has moved away from the dollar.
China (1.3 billion population), Russia (143 million), Brazil (194 million), Australia (23 million), India (1.2 billion), South Africa (51 million) = total 2.91 billion population of listed countries.

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bad dollar historicB. Implications of the loss of the dollar’s reserve status
22 Mar 2009, MarketSkeptics.com, by Eric deCarbonnel
Excerpt pasted from: http://www.marketskeptics.com/2009/03/how-big-deal-is-loss-of-dollars-reserve.html

As the dollar loses its reserves status, at least half of the world’s $5,385 billion dollar reserves will be sold off and replaced with other currencies (yuan, euro, khaleeji, gold, rand, etc…). The US, with its $71 foreign reserves, will not be able to do anything to counteract this mass exodus from the dollar. With outflows of this magnitude, the dollar’s value will collapse to a fraction of where it is now. The process of foreign nations extracting themselves from the dollar is not going to be pretty. The likely impacts are:

1) The dollar’s value will plunge as investors see the writing on the wall and jump ship.

2) US credit markets will collapse. As the dollar fall, a mass exodus from credit market will begin. Investors sitting on toxic securities will sell at firesale prices to escape the currency depreciation.

3) The fed’s balance sheet will explode beyond all reason. In response to the mass exodus from credit markets, the fed will buy trillions worth debt in a desperate attempt to hold interest rates down. Unfortunately, the more debt the fed buys, the more quickly the dollar will fall, and the more panicked the credit selloff will become.

4) US interest rates will soar, despite (or because of) the fed’s efforts.

5) Countries around the world will be hurt badly by the dollar’s decline. These countries include:
_A)  Nations which are heavily dependent on US exports: Japan, Mexico, etc…
_B)  Nations with large dollar reserves: Japan, China, Gulf oil states, etc…
_C)  Nations which receive large amount of US foreign aid: Israel, Egypt, etc…
_D)  Nations which rely on remittances from citizens working in the US: Mexico, India, etc…
_E)  Nations which use dollars as their official currency: Liberia, Panama, etc…
_F)  Nations which have large amounts of dollars in circulation: Central and South America (especially Argentina), Eastern Europe, etc…

6) Some nations will see benefits from the dollar’s decline. These countries include:
_A)  Nations with large gold reserves: EU zone, Switzerland, etc…
_B)  Nations which owe dollar denominated debt will see that debt wiped out: Iceland, African nations, etc…
_C)  Nations who stable currencies: EU zone, Switzerland, China, etc…

7) World politics will be greatly altered. There will be considerable anger at the US from nations hurt by dollar’s fall. The US will lose influence to Asia (mainly China).

8) US retailers will get crushed. As the dollar falls, the cost of imports for retailers will increase, but the American consumer will be unable to afford to these higher prices. Competition between desperate retailers will force them the sell inventory at below cost, creating massive losses. Retailers most heavily dependent on imports (ie: Wal-Mart) will be the first to go under. Eventually as more and more retailers go bankrupt, the few survivors will be able to raise prices enough to cover costs, and the sector will stabilize at a fraction of its current size.

9) American lifestyles will change radically. The end of cheap oil, low interest rates, and deficit spending will mean a lower quality of life and higher taxes.

10) The price of gold and other precious metals will explode.

11) US will experience hyperinflation.

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C. WHAT IF?
29 May 2013, Gold-Eagle.com, an editorial by Larry LaBorde of http://www.silvertrading.net/ Pasted from: http://www.gold-eagle.com/editorials_12/laborde052913.html

What if the US lost its world reserve currency status?  What might it look like? I suppose the first question is; what does it mean that we have the “world’s reserve currency”?
At the end of WWII the allies met at Bretton Woods and decided to use the US dollar as the official world currency and that it would be backed by gold.  All worldwide trade would be priced in dollars and settled in dollars.  Food, energy (oil), etc from around the world would be priced and paid for in USD.  New York became the financial center for all world trade. Fast-forward to President Nixon in 1971 and the USD was cut loose from the gold standard due to OPEC oil imports and a growing imbalance of trade that was causing gold to flow out of the US in large amounts. Today goods from around the world flow to the US and newly created paper dollars flow out.  (Well not really paper dollars, just newly created electronic digits made up on a computer.)  In essence we create IOUs that everyone must accept due to the Bretton Woods agreement and they send us their stuff.
Once we completely figured this out we decided in the 1990’s that we would “think” and they would “work”.
The US was going to run as a clean “information society” and all that dirty industry would go somewhere else.  Our balance of trade kept getting worse and worse.  We imported way more than we exported.
We used to report our imbalance of trade numbers a couple of decades ago with great concern.  Now no one seems to care at all since it is so far out of balance that it can never be fixed.  (Sort of like an annoying knock in the engine that you fix by turning up the radio.)  Ocean going freight containers started to pile up over here because we didn’t have enough goods to send them back fully loaded.  For a while we sent hay overseas in freight containers because we had to send empties back to get them refilled so they greatly discounted the freight on the backhaul or return trip.
Many people have started to find creative uses for these freight containers that are building up over here.  They are the empty boxes on Christmas morning.  Who sends the empty boxes back to the store for more toys?  You just get new boxes.
Under the original Bretton Woods agreement if one country imported more goods than they exported the difference was settled up in gold.  After a while the lazy country sent so much gold overseas that its currency dropped in value and they could not import as many goods.  The lower priced currency made their exported goods more competitive so they began exporting more and the gold flowed back.
When the link to gold was cut this self-regulating mechanism was broken.  So now why should the US export anything?  Why not import everything and just pay for it all with USD made up from nothing?  Works great for the US but everyone else may have a problem with that system.  So why does the rest of the world still accept our USD electronic digits?

One reason is the rest of the world can still spend them at the Middle East gasoline station to tank up with oil.  In the late 1970’s and early 1980’s a deal was cut with the Saudis that so long as they priced their oil in USD and USD only, we would support their family rule with the full force of the US military.   So even though we did not export enough goods to soak up all of our exported USD, the Middle East did.  The OPEC countries then purchased our US bonds with their excess USD and earned a pretty good interest on their USDs – until now.  Whenever someone in North Africa or the Middle East failed to live up to the agreement they were “replaced” with someone who would. The whole system is now broken but still working somewhat.  The only reason the rest of the world has not thrown it out altogether is there is not anything else to easily take its place.  (Your thoroughbred now is old and swaybacked and stumbles along but it is still better than walking.)  The world thought the Euro might offer an alternative to the USD when it was first launched.  We all see where that is now leading.  Doug Casey famously said, “The dollar is an IOU nothing but the euro is a who owes you nothing.”  It seems that the euro is not going to offer the USD any serious competition.  The USD is still the prettiest horse at the glue factory. So what is next?

Well the BRICS (Brazil, Russia, India, China and South Africa) have started their own development bank.  This cuts the World Bank out of the picture in much of the world.  The G-20 is talking about alternative currencies to challenge the USD and perhaps replace it one day with something a bit more fair to everyone else.  China is cutting trade deals directly with Brazil and Australia outside of USDs.  India is cutting deals with Iran outside of USDs.  This is in direct violation of the Bretton Woods agreement.  However, these countries feel they are exchanging value for value in their trade with each other on a more fair and equitable arrangement.
What would make a new reserve currency attractive?  If the country that issued it had a trade surplus or at least balanced trade with the rest of the world a lot of the resentment would disappear.  If the new currency were backed by gold once again the self-regulating mechanism would be fixed causing no one country to benefit to the detriment of another.  If a basket of currencies were used from several strong countries with both of these attributes then even better. Rumor has it that Russia and China have both been working hard to build up their gold reserves and they are both about 5 times the US gold reserve at its peak.  Rumor also has it that the US gold reserve is maybe not as large as reported. What if instead of Greece (or another PIIGS country) pulling out of the European monetary union and reissuing its own currency that something more interesting happened?  What if the strong man with the 3rd largest gold reserves and a strong export economy pulled out and reissued its own currency – backed by gold!
What if Germany pulled out leaving the Euro to collapse?  Then what if Germany looked east and linked up with Russian and Chinese currencies that were also backed by gold?  A new reserve currency made up of a basket of these three currencies (all backed by gold) would be a Eurasian powerhouse. But where would this leave the USD?  So long as the Middle East Gasoline Station was still in business and accepting USD it would survive.  But what if the Muslim Brotherhood took over Saudi Arabia?  What if the house of Saud fell?  What if the Chinese would not loan us any more money to mount Gulf War III to save the house of Saud?
There are several “ifs” here but what might happen? If the rest of the world could not spend their USD reserves at the Middle East Gas Station and we are not able to ramp up our exports and sell them something they might want, then what exactly would they do with those USD?  Why would anyone else in the world want them?  And since 1971 we have been sending them all over the world and they have been piling up in every corner, there are a lot of them out there that suddenly find themselves unloved.  I believe that all at once there would be a race to spend them all at the only place where they must be accepted – to the only place where they are legal tender for all debts both public and private – right here within the US.  They would buy everything that was not nailed down.  Cranes, bulldozers, tractors, trucks, ships and entire factories all to be crated up and carted off.  The mad rush of so many dollars would cause these items to be bid up to very high prices in USD.  This of course would devalue the USD even further.
All of a sudden all those old ocean containers that have been piling up over here would be filled to capacity hauling assets off as fast as possible.  All of those IOUs would come home to roost at the same time.  Of course we could default or slap on export taxes of 1,000% or some sort of currency controls for repatriated USD.  They could even call all of those USD overseas illicit drug money and seize all of it!  But that might lead to a war or several wars.  Wars have been fought over issues far less trifling than that.  No one likes to get stiffed on an IOU.  Especially the largest pile of IOUs in the history of the world.

Assuming that we did the right thing and honored our debts.  What would the US look like after the smoke cleared?  What few factories remained would be largely owned by foreign interests.  With much of the means of production carted off we would have a hard time exporting more than we consumed.  Anything imported would be terribly expensive priced in USD.  A trip to Wal-Mart would be like going to Neiman Marcus.  Since we no longer grow enough food to feed ourselves our imported food would be very expensive.  If the welfare state continued the dollar would devalue even more and finally collapse.  Everyone would have to accept a much lower standard of living as we worked in factories owned by foreigners.  As our dollar finally devalued to a fraction of its former glory the US would become a cheap labor country.  Factories would move back to the US for the same reason many moved to Mexico in the 1980’s and 1990’s.
Slowly we would rebuild and in a few generations we could be a first world country again.
So what can you do now?  Where can you run?  When the War Between the States began and the first Battle of Bull Run was fought, Southern General P.T.G. Beauregard set up his headquarters in the home of Mr. Wilmer McLean.  Mr. McLean was too old to fight in the Southern army and sought to move his family to safety.  He glanced at the map and picked a nice safe place 120 miles further south  – in Appomattox.  You see the war started in his front yard and ended in his parlor as General Lee surrendered the Army of Virginia to General Grant several years later.  The first and last great battles of that war both found Mr. McLean.   Sometimes you can run from danger but in the wrong direction.  Take some time and carefully think things through for yourself.  Make sure you are not jumping out of the fire and into the frying pan.  A storm could be coming our way.  Build a good storm shelter just in case.  Years too early are better than seconds too late.

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D. Arizona lawmakers back gold, silver as currency
18 Mar 2013, Yahoo! News, by Cristina Silva/ Associated Press
Pasted from: http://news.yahoo.com/arizona-lawmakers-back-gold-silver-233837866.html

Arizona Republicans want to allow gold, silver to be used as currency

PHOENIX (AP) — Arizona lawmakers say the global economy is on the precipice of financial ruin and the U.S. dollar could soon be worth less than the paper used to make it.

These doomsayers are pushing forward legislation that would declare privately minted gold and silver coins legal tender, no different under state law than the U.S. dollar printed by the federal Department of Treasury.

The measure is Arizona’s latest jab at the federal government, which prohibits states from minting their own money. It also reflects a growing distrust of government-backed money.

“The public sees the value in it,” said Republican Rep. Steve Smith, of Maricopa. “This is the type of currency we have had over the history of mankind.”

The bill, which advanced in a 4-2 vote by a House committee Monday, states that gold and silver should be legal currency not subject to tax or regulation as property. The Republican-led Senate gave the bill its blessing in February in a 17-11 partisan vote.

The bill would let people use the precious metals as money as long as businesses agree to take them. If made law, it would take effect in 2014.

Democrats oppose the measure. They say it would be a bureaucratic nightmare because businesses don’t have the equipment to determine the value of gold and silver.

“This should be addressed by the Federal Reserve and not by the state,” said Democratic Rep. Rosanna Gabaldon, of Green Valley.

Keith Weiner, president of the Gold Standard Institute, which supports gold-backed currencies, said he envisions a system where people can pay for goods and services with debit and credit cards backed by gold and silver.

Paper money is a “recipe for worldwide bankruptcy,” Weiner told Arizona lawmakers Monday. “Everybody is going bankrupt on this system so we need a sound and honest money system, such as gold and silver.”

In 2011, Utah became the first state in the country to legalize gold and silver coins as currency. Lawmakers in Minnesota, North Carolina, Idaho, South Carolina, Colorado and other states have debated similar laws in recent years.

Many investors have invested their money in precious metals in recent years as a hedge against the declining value of the dollar. When the value of the dollar declines, gold prices rise.

Gold rose $12, nearly 1 percent, to $1,604.60 per ounce on Monday with news of Europe’s bailout plan for cash-strapped Cyprus. Silver inched slightly higher, up 2.3 cents to $28.874 per ounce.

The dollar was up against the euro, the currency used by 17 European countries, as well as the Japanese yen and the Canadian dollar in February.

Proponents of the switch to gold and silver argue paper money is too vulnerable to government manipulations. When central banks boost the amount of currency in circulation to drive down interest rates, the value of that currency relative to others can decline.

“It’s actually strange to me that we don’t have this already,” said Republican Rep. David Livingston, of Peoria.

Gold-backed money fell out of favor during World War I because the U.S. and many other countries needed to print more cash to pay for the war. In 1971, President Richard Nixon formally abandoned the gold standard.

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 E. Arizona’s Hard Currency: How Much Gold Might It Need?
27 Apr 2013, Gold-Eagle.com commentary, contributed by Miguel Perez-Santalla
Pasted from: http://www.gold-eagle.com/editorials_12/perez-santalla042713.html

How much gold & silver might Arizona, Utah and the other states now involved in hard-currency laws come to need…?
ARIZONA is moving to allow gold and silver coin to be used to pay debts, and – effectively – go shopping. This has already been approved in the state of Utah, and there is an assortment of other states that are moving in this direction as well. However, Utah’s gold currency law has been on the books for more than a year. But it has not yet made any headway into how to manage gold and silver being used as currency. Nor will payees be obliged to accept bullion as payment. As a result, many pundits are pooh-poohing Arizona’s gold idea, acting as obstacles to its possible success.
Though I don’t personally believe that physical gold and silver carried around by persons is the future of our country, I do believe that there will be some structural change to come. The small yet actively progressing action in many states is an indicator of the demand for better controls and justification of the value of our money. Concern that the ability to print money without measure will destroy this country is not only just, but is also warranted.

The Federal Reserve – which is not part of the government – is actively in charge of our currency. By injecting capital to the markets to support the banking sector, which irresponsibly lost billions of Dollars in their management of customers’ funds, they have instituted an invisible tax on all citizens of the United States of America. It is no surprise that many people who pay close attention to these matters are up in arms. Especially, since they don’t participate in the windfall of free capital given by the Federal Reserve to the banks as a safety net.
In essence, every time the government issues money freely and gives it to others it is a promissory note on the ability of the populace to pay, it puts us all more in debt. The people of the United States of America are becoming fed up with the free-flowing funds the government regularly gives away as gifts of supposedly humanitarian aid to foreign countries that are not even considered allies. These gifts in the billions of Dollars are on top of expenses needed to support our infrastructure. This creates a mountain of debt that essentially devalues the US Dollar. Our ability to pay is what the citizens are concerned with.
To avoid this many are turning to silver and gold bullion as a reliable asset or marker of value. Of course when you tie up your money in an asset like gold and silver you want the most easily accessible manner to extract that value whenever needed. This is where the effort to make gold and silver accepted as currency is coming from.
So let’s take a look at what would happen if one state such as Arizona were to convert to a precious metal economy. Arizona’s GDP (Gross Domestic Product) was roughly $258 billion at last count. As a proportion of the United States’ entire economy, that’s about 1.7%. Which if we apply that number to the total of currency in circulation and bank deposits (known as M2 by the economists) gives Arizona a money supply of somewhere around $180bn. Using today’s market prices, in gold that would represent 126,000 ounces which is nearly 143% of the current annual world production, and it would represent over 945% of the world’s annual silver production. But of course silver is an extremely bulky and difficult metal to handle. No one thinks the entire state of Arizona would go to 100% metal-backed currency. People will of course remain free to use fiat (backed only by faith) money, and most would likely choose the same fiat Dollars and bank-account credits we already have.
But it’s important to understand that – in the proposals as they stand – people could choose to use metal-based currency for all their in-state transactions. So the potential ceiling on the gold or silver needed is much nearer to 100% of that $180bn than it would be under a formal “Gold Standard”. There, with Dollars redeemable for gold, full gold-backing wasn’t necessary.
The Gold Standard instead used precious metals as a standard of value. The last US gold standard was a 25% basis of gold in fact, before it was repealed in 1968. Applying a classical Gold Standard, and using a 25% basis for gold or silver, Arizona’s cash and bank-deposit holdings would occupy 235% of the world’s annual silver production at current prices, or 36% of the world’s annual gold production.
A more logical decision may be a combination of the two, with a 5% silver and 25% gold funding which would represent 30% annual gold production and 39% silver production. This of course would drive the value of the precious metals much higher, as the market adjusted to accommodate Arizona’s impact on global demand. But as we just saw, Arizona’s proposals go far beyond a Gold Standard, making 100% metal-backed banking and currency a possibility, if highly unlikely. Note, this is only for one state – and one where barely 2% of the US population now live. The numbers involved are already stupendous.

You can imagine what would happen to gold and silver prices if all 18 states currently working on similar “hard currency” laws saw only 10% of their citizens move to holding precious-metals. But that being said, I do not believe at this very moment it is the goal of this legislation. The new legislation deems to allow transactions to be negotiable and settled in full using gold or silver if the parties involved agree to it. Hence you can sell your car for 4 ounces of gold or buy a house for 10,000 ounces of silver. But to do so without an official government structure you would have to in effect be your own central banker and invest your currency into your own private gold and silver reserves. Hence when you go to enter into a transaction the value of your asset should have been protected from any central banking or government debt fiascos. Are currencies backed by gold and silver to be the future? This is possible in some form. Had this system not been tried before? The answer to this is yes. But the methods that were used in the 20th century were complicated by the entry of the Federal Reserve System and other Central Bankers. It was prior to central bank machinations that gold and silver brought stability to the financial markets and the economy in general.

With the entry of the central bank models, including the Federal Reserve, free spending of the people’s money became a possibility and is what eroded the gold standard and derailed a more functional system. Unfortunately most of the spending was used to fund wars. Maybe if wars had to be paid in hard assets they may have ended sooner than later with less loss of human life. However, there are arguments on both sides of the fence. As I read and study more and more about our modern-day banking system it is a miracle that it has not failed sooner. Of course this is my personal belief. This is also what is driving the current activity in the states to bring in some correlation of currency to gold and silver as hard assets. The history of the Federal Reserve, which is not a bank, has the US economy since its inception riddled with negative GDP growth. It is peppered with financial calamities. Its primary function was said to be the stabilization of the economy.
It has failed and has not performed better than any other prior system. I don’t have the answers but I know it doesn’t lie in the Federal Reserve System. This is a centralization of power away from capitalism to a form of modern day socialist tendencies of spending without limits within our system. This indicates to me in the event of a serious economic downturn, which seems to be forthcoming since we already did kick the can down the road as far as we can, we will have serious troubles in the union of these United States of America. But for the time being the general public who are able, are happy buying their gold and silver and keeping it in a safe and secure place for when this situation rears its ugly head. Those that do and are in the states where they have legalized its use as currency stand to have a much more secure environment moving forward as the government is not allowed to take away your money without cause. At least, not at the moment.

bad dollar charts

[Today, we have a price buying opportunity in gold and silver bullion coins. When the SHTF, prices on retail items will rise, inflation will surge, precious metal prices will have risen steadily ahead of events as the global situation deteriorated in ways not understood by the public. When everyone realizes that they need a stable source in which store the value of their rapidly eroding currency (dollars), those precious metal commodities will already be exceptionally expensive in dollar terms. You have to buy the dips while the opportunity exists, as the ancient adage says, “By low. Sell high”. Mr. Larry]

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The coming chaos

(Survival Manual/2. Social issues/The coming chaos)

THE COMING CHAOS: PART I

Planning and puzzle solving
Trends, expectations, and the  daily events of life can be thought of like scattered colored pieces of a jigsaw puzzle. From your experience and the short historical perspective of your life, you form an idea of the current and probable security provided by your environment. You look at the assembled parts of the picture and develop a general idea of the completed future image and your place in it.

 In good times, there are fewer puzzle pieces and each seems big, so putting a few parts together allows you to easily imagine the larger-view of the future.
In harder times, when nations and huge international (food, banking, energy) industries have financial, political and military reasons for hiding their ‘game hand’, the important pieces of information become numerous and small.
As global and national economic times deteriorate and you continue about your daily life, you have an ever decreasing  intuitive  understanding of conditions and less accurate view of the big picture, resulting in a diminished capacity to carry about your long term life business effectively.  The ebb and flow of your stored money, your potential energy is generally: Where to store these hard-earned savings? How much to save over any given period of time?  What is the best long-term manner in which to spend or store large blocks of value when a given need is seen  arising?

During increasingly difficult economic times, you still put those pieces of the puzzle together in your mind, the same as you always have, but the scale and quality of the information you receive, has changed.
Think of this as somewhat related to inflation. When inflations first begins, no one sees it for what it is, but as prices creep up, inflation slowly becomes visible and irritating to everyone, only then do people individually begin to change their behavior in self-interest.
Meanwhile, the entities causing the inflation want to cover their tracks, so information given to the public is doctored, altered and diminished, official news bites are false, designed to keep the populace calm, to keep them from acting in their own best interest.

Because the normal indicators are not functioning in the accustomed way, you have to rely on other lagging indicators to replace the ones previously used. This requires work, so most people, being busy, go with the flow and in doing so no longer have that ‘more accurate’ larger-view of the future which they once held.

It’s all about money, and if not money, power. What can you lose by not adjusting your view of the future to fit the current cycle of economic reality? You can lose: the value of your 401K, value in your Treasury notes and bonds, long-term stock valuations, your home equity, interest from saving in bank instruments, while paying higher local-state-Federal tax rates, food, energy, maybe even a Value Added Tax.

In todays context, if you knew how these broad investments were falling out of favor, you’d have begun putting your savings into other assets, ie., certain foreign currencies, gold, silver, precious metals stocks, energy production and infrastructure, a little more food in the back of your cupboard before prices rose, maybe cash in the cookie jar.
Believing there would always be plentiful oil and gasoline, maybe you bought a large auto– without  the  knowledge that within a few years gasoline would be  much more expensive in real terms and there might even be rationing. By then, with the economy, still in a recession, with everyone seeing higher gas prices and few having cash to spend, you would have to take a major loss on trading in the ‘gas hog’ vehicle for a smaller more gas efficient model.
Perhaps, with  better information you might have bought a townhouse close to your local shopping district, instead of a stand alone house in the suburbs, ‘gas-miles’ from the shopping district.
Rather than buying a recreational vehicle, you might have bought a small parcel of rural property for camping or a cabin, and used a car top carrier or utility trailer to carry gear to your private bit of nature. The rural property could also be used if for a while, things grew unsafe in the city.

Money is also supposed to be a store of wealth and accountability.
It’s not that ‘prices are going up, the value of your money is going down.
Note: 50 years ago, in 1961, the price of one gallon of regular gasoline cost 31¢, that would be a quarter, a nickel and a penny, 31¢ . The quarter you would have paid for the gas with, was what we now call a ‘silver quarter’ containing 0.18084 ounces of silver. Real money-silver coinage was discontinued by 1965, where upon, nearly valueless copper clan coins were issued and which we still use today.
The current value of that common old 25¢ coin is now $7.05 (silver spot price= $39.01). Today, 10 August 2011, a gallon of local regular gasoline costs $3.59, so that silver quarter would buy practically 2 gallons of gas,  2 gallons x $3.59/gallon=$7.18, while the value of the silver quarter is $7.05.
And this is why during the last 70 years we’ve gone from a condition where one worker could support his family, to a time when it took both Mom and Dad to support the family, and now takes Mom and Dad, credit cards, and  maybe a 2nd home mortgage to provide the same.

At some levels of societal organization, it’s all about money or power; on lower levels it’s about not being robbed and left to face the economic winter (depression, unemployment or old age) with out the safety net provided by your savings–the product of your labor.
In the deep past, when men depended directly on the land for their livelihood, when a robber Prince took part of that property the peasant family had less resilience to survive. Today we don’t have ‘land’, per sae, we have money and investments, when the modern version of the robber Prince takes your property, they take your money or your future claim to the things money can buy, leaving you less resilient to survive.

If you prepare for a man-made crisis, you will be on the same path as some one preparing for natural disasters: hurricanes, power outages, etc. Man-made vs. Natural disasters differ mostly by scale and duration. [Mr Larry]

The Coming Chaos, will turn over a few pieces of the puzzle, ones that you may not have seen, ones that give you a somewhat larger view.  Be aware, that sometimes its better not seeing to your life’s horizon.

The world is in a state of constant flux and continuous change and there is nothing so certain in life as uncertainty. None of us know what the coming years will bring. One must be wary both of the innocent and rose-tinted view that the US and hence the global economy are just fine and the good times are about to roll again and of fear mongers and prognosticators of doom whose only message seems to be ‘resistance is futile’.
Meanwhile, with the evolution of electronics into computer, satellite, Internet, and digital information technologies, the recent decades have created a web of global interdependence, of ‘just-in-time’ supply, transportation, international banking, a layering of complex financial interactions and the immediate spread of information. Globally, human society has accumulated such complex interdependencies that it has affectively become like a spider’s web – where a disturbance of one strand shakes the entire web. Further, this intertwined body of global humanity has reached critical points in its equilibrium. It is at a point of dynamic, critical vulnerability; and at such moments the slightest of impacts in one sphere of global concern can set into motion an unpredictable chain of events across the interconnections.
It is only common sense, with the fragility of our system, to prepare for any disturbance with supplies. How long could you survive with what is on hand? Think about storing extra food, water, fuel, and whatever you think you need to get through. If one very large, or several moderate to large (Volcanic Explosivity Index) volcanoes go off, we may experience very muted daylight for several seasons to a year and unable to grow enough food for even the prosperous nations. Are you even prepared for the possibility that your communities electric power could go out for a week or more, during the summer, during the winter?

Why We Need Insurance
Many of us have never had to make a claim on our insurance. Therefore when we continue to write an insurance payment check month after month, we feel as if we are pouring money down the drain. Even though you’ve never had to make a claim on your insurance, there is a good reason that it’s there. Naturally, insurance is there to protect your you, your family and your investments, but let’s face it; many of us wouldn’t bother with insurance if it wasn’t required by law, or the bank.

How we buy insurance
First, we decide which threats to protect ourselves from, then we find a way of doing so at the lowest possible cost.
Survivalism is basically the same. I’ve created a list of survival threats at the side of the page. Some events are so destructive that they are not worth worrying about and have not been included, i.e., multiple impacts from a fragmented comet, or a ‘nearby’ star emitting a planetary sterilizing gamma ray burst.. There is no way of protecting yourself against Hollywood style events so there is no point in spending money on them. The best value for your money is to identify threats that you think are moderately likely and that may be dealt with easily. Most threats require the same core defensive measures with varying specifics.
Everyone should take some simple steps to protect themselves and their families from potential real risks that are on the horizon, but don’t take my word for it. Answer the following questions:
1. Is your job & income 100% secure?
2. Would you be able to have the basic necessities (shelter, food, water) if you lost your income for a prolonged period of time?
3. Would you be ok if your local grocery stores didn’t have an inventory resupply for a few weeks?
4. How would your finances hold up in a currency crisis where the dollar rapidly lost much of its value?
5. Would you be able to protect your family in the event of increased crime and decreased police presence?

Ready America
From the FEMA ‘Ready America’ website:
“…Each person’s needs and abilities are unique, but every individual can take important steps to prepare for all kinds of emergencies and put plans in place. By evaluating your own personal needs and making an emergency plan, you can be better prepared for any situation. A commitment to planning today will help you prepare for any emergency situation. Preparing makes sense. Get ready now.
• Consider how a disaster might affect your individual needs.
• Plan to make it on your own, at least for a period of time. It’s possible that you will not have access to a medical facility or even a drugstore.
• Have a week or longer supply of medications and medical supplies
• Identify what kind of resources you use on a daily basis and what you might do if they are limited or not available.
• Buy or make an emergency supply kit.
• Have copies of emergency documents
• Create a support network…”

Headline: “15 Million Americans Infected with Xyz- Flu”
“You just heard it on the evening news. It’s now a reality. Your city has been locked down. There are roadblocks on all arteries in and out of the city. No one can come in or go out of the area.
The grocery stores, the gas stations, and all other public facilities are closed. Everyone has been told to stay in their homes.
Your family has five days of food left. Seven days, if you and your wife eat much less, and give it to the kids. Water is only sporadically available when you turn on the faucet.
You realize you should have thought about the news, what it might mean, but you remained a spectator of the events unfolding around yourself and in the world. You wonder how you missed the signs. You feel guilty and powerless because you don’t know how you will feed your family.”

Things you should know
• Don’t rely on the government to help you. As big as they are, when disaster hits they’re both: 1) too big a bureaucracy, 2) with too few people on the ground, to help a large number of people in a reasonable amount of time.
• Don’t rely on utility companies to help you. They will have priorities and will be working almost around the clock, to get things restored, but, a) it won’t be fast enough no matter who you are, and b) you’re probably not a priority. Don’t complain about it – be prepared for it.
• Don’t rely on your Insurance company for anything more than a check. Insurance is about money, it’s not their job to repair your home or put your life back in order. While some might refer you to local contractors, many do not, and in times of overwhelming need, both adjusters and contractors are going to be hard to come by.
• Know what your area is at risk for (i.e. Seattle has a major earthquakes every 100 years or so, and moderately damaging windstorms every 10 years) and be prepared to take care of yourself for awhile.
• The government’s, ‘Three Days of Self Sufficiency’ campaign, is woefully inadequate.
• Mankind endures ‘an episode of great wealth destruction’ at least once every century. People should prepare to ride out a disaster, be it a tsunami, a market meltdown, an EMP grid down scenario, volcanic winter, deadly pandemic or Islamic terrorists with a dirty (radioactive materials) bomb.
• The rich (all of us in the Western world) get complacent, assuming we’ll have time “to extricate ourselves and our wealth” when trouble comes. The rich are mistaken, as ‘the Holocaust’ proved.
• People generally do not feel the unthinkable will happen to them. However, many times there are situations out of our control that affect us in a big way. Major events that affect the food supply are especially troubling.
• Events move much faster than anyone expects’ and the barbarians are on top of you before you can escape.

The times that we endure today will be the history that others will read tomorrow. History has shown us events that have destroyed some societies and created new ones to take their place. Those who rise to power often decide the fate of millions. And there have been times when a people rise up as a nation, united to achieve mutual goals of prosperity and hope for a better future.
Today as a nation, Americans must uphold their moral convictions and beliefs that a nation of people who stand united will not perish. There are events occurring in this country that could change the very existence of our nation as we know it. And no one person or political party can decide the best course of action to ensure our prosperity and hopes will not be taken away from us. The answer to our problems is right in front of us, and we must cling to it as if it is our only hope, because it is the only thing ‘We The People’ have left: The Constitution of the United States of America .

Our policy makers are in a Catch 22. It’s checkmate, and the only thing that we can do is delay… to a point.
We need austerity measures, much more severe than those of France, Greece and the rest of Europe, but mass cuts in entitlement programs that tens of millions of Americans have come to depend on will lead to serious problems, not just for our economy, but on a social level as well. What happens if 40 million people were to lose their food stamps, or 20 million people lose their unemployment benefits? Many are already at the breaking point, if the government were to stop the gravy train, as Chapman puts it, the system would get very chaotic, very quickly. Thus, we just don’t see something like that happening anytime soon. But make no mistake, the current entitlement system, driven mainly by US government borrowing, is unsustainable. So, whether we like it or not, the cut to entitlement programs is coming one way or the other.
Politicians are just not going to do it. For many, it would be political suicide.
The end result we foresee is, as Chapman points out, ‘a high inflationary environment that will make it impossible for the average food stamp, unemployment or welfare recipient to purchase essential goods like food, energy and shelter’.
We’re seeing it in Social Security already, albeit in limited form. The government has not re-adjusted social security payments higher because the CPI inflation index has not shown an increase over the last couple years. However, the CPI does not include calculations for food and energy because our government says those are highly volatile and should not be counted. Thus, Social Security recipients are now paying more for food than they were two years ago, but there has been no adjustment made in their benefits. They’ve essentially taken a mandated pay cut as the US dollar has lost value.
This is exactly what we will see in other entitlement programs. Now imagine for a minute what it will look like if/when inflation is running rampant at 10% – 15% per year, and entitlement adjustments only account for 1% to 3% increases.
A lot of people will go broke a whole lot faster.
We’re not talking about people not being able to buy iPads, new home decor, or Christmas presents for the kids. No, we’re talking about being able to put food on the table, paying the rent for shelter and putting gas in the car.
This can get very ugly. As Peter Schiff previously pointed out, ‘a great number of Americans will be impoverished’ and, according to Gerald Celente, ‘many may take to the streets in riots and protests circa 2011 and beyond’.

 40 ways to lose your future
June 2009, TheAutomaticEarth.com
People have been asking how we see the future unfold. Here is a brief summary (in no particular order and not meant to be exhaustive) of the ground we have consistently covered here at TAE over the last year and a half, and before that elsewhere.
1.  Deflation is inevitable due to US financial Ponzi dynamics
2.  The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply
3.  Cash will be king for a long time
4.  Printing one’s way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)
5.  Debt will become a millstone around people’s necks and bankruptcy will no longer be possible at some point
6.  In the future the consequences of unpayable debt could include indentured servitude, debtor’s prison or being drummed into the military
7.  Early withdrawals from pension plans will be prevented and almost all pension plans will eventually default
8.  We will see a systemic banking crisis that will result in bank runs and the loss of savings
9.  Prices will fall across the board as purchasing power collapses
10.  Real estate prices are likely to fall by at least 90% on average (with local variation)
11.  The essentials will see relative price support as a much larger percentage of a much smaller money supply chases them
12.  We are headed eventually for a bond market dislocation where nominal interest rates will shoot up into the double digits
13.  Real interest rates will be even higher (the nominal rate minus negative inflation)
14.  This will cause a tsunami of debt default which is highly deflationary
15.  Government spending (all levels) will be slashed, with loss of entitlements and inability to maintain infrastructure
16.  Finance rules will be changed at will and changes applied retroactively (eg short selling will be banned, loans will be called in at some point)
17.  Centralized services (water, electricity, gas, education, garbage pick-up, snow-removal etc) will become unreliable and of much lower quality, or may be eliminated entirely
18.  Suburbia is a trap due to its dependence on these services and cheap energy for transport
19.  People with essentially no purchasing power will be living in a pay-as-you-go world
20.  Modern healthcare will be largely unavailable and informal care will generally be very basic
21.  Universities will go out of business as no one will be able to afford to attend
22.  Cash hoarding will continue to reduce the velocity of money, amplifying the effect of deflation
23.  The US dollar will continue to rise for quite a while on a flight to safety and as dollar-denominated debt deflates
24.  Eventually the dollar will collapse, but that time is not now (and a falling dollar does not mean an expanding money supply, i.e. inflation)
25.  Deflation and depression are mutually reinforcing in a positive feedback spiral, so both are likely to be protracted
26.  There should be no lasting market bottom until at least the middle of the next decade, and even then the depression won’t be over
27.  Much capital will be revealed as having been converted to waste during the cheap energy/cheap credit years
28.  Export markets will collapse with global trade and exporting countries will be hit very hard
29.  Herding behavior is the foundation of markets
30.  The flip side of the manic optimism we saw in the bubble years will be persistent pessimism, risk aversion, anger, scapegoating, recrimination, violence and the election of dangerous populist extremists
31.  A sense of common humanity will be lost as foreigners and those who are different are demonized
32.  There will be war in the labor markets as unemployment skyrockets and wages and benefits are slashed
33.  We are headed for resource wars, which will result in much resource and infrastructure destruction
34.  Energy prices are first affected by demand collapse, then supply collapse, so that prices first fall and then rise enormously
35.  Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years
36.  Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)
37.  Political structures exist to concentrate wealth at the centre at the expense of the periphery, and this happens at all scales simultaneously
38.  Taxation will rise substantially as the domestic population is squeezed in order for the elite to partially make up for the loss of the ability to pick the pockets of the whole world through globalization
39.  Depressive political structures will arise, with much greater use of police state methods and a drastic reduction of freedom
40. The rule of law will replaced by the politics of the personal and an economy of favors (i.e., endemic corruption)

We Have Some Hard Decisions Ahead
The economy has taken a dramatic turn for the worse for many Americans. While many individuals and households have had the financial resources and good fortune which will allow them to weather economic uncertainty, many will simply not be able to maintain their standard of living. Many two income households are now one income households and that income may have decreased due to companies cutting back on work hours. This situation has been occurring for many Americans for many, many months, forcing people to assess what is important and downgrade their lifestyle. The time to make hard decisions has arrived, and will dramatically alter the lives of many for years.
People who relied on spouses to pay the bills are now paying the bills. Those who have relied on savings and unemployment benefits to maintain their standard of living are now faced with the reality that those resources are exhausted. Bills are not being paid. Healthcare premiums are not being paid. Automobile and household maintenance is being neglected, which will create costlier repairs down the road. Simply put:
•  You might have to stop making your car payment and save those payments up to buy a used car. The car you currently have financed will be repossessed.
•  You might have to stop paying your mortgage and save those payments up to move into an apartment.
•  You might have to give up your healthcare, your magazine subscription, your club membership, your vacation plans, your charitable donations, your cell phone, your internet access or home phone service, your lawn care service, your financial support that you provide to friends and family who are having financial problems themselves, and many more expenditures not listed here.
•  You might have to contact an attorney to discuss bankruptcy.
•  You might have to sell off your possessions and assets.
•  You might have to move in with other families, friends, relatives, or shelters provided by the government or charitable organizations.
•  You may come to realize that what you thought was valuable and important to you has no value or significance at all.

Basic human needs will become the biggest priority in your life after you shed (lose the use of) the things that have merely brought comfort and convenience to you. You may be forced to downscale your lifestyle so dramatically that it will cause you to question your own intelligence and hindsight for not planning for such a life changing event.
The things that you have always taken for granted could become difficult to obtain now that there is no longer enough money to buy those things. Basic needs become vital issues that need to be addressed:
•  Food and ‘non-electric’–with the means both to prepare it and store it.
•  Portable water filtering devices and containers to store water for drinking, cooking, and bathing.
•  Over the counter medicines, vitamins, supplements, first aid supplies, and some basic health and first aid literature in book form. Individuals using prescription medications, or require medical attention, will need to determine their best course of action during a period of financial distress.
•  The need for shelter may require the purchase of a tent, camper trailer, and other camping equipment if you can no longer provide an actual roof over your head and have no one to turn to.
•  The need for personal protection will become more obvious as desperate people begin to take desperate actions to provide basic needs for themselves and their families. The level of security you choose will be determined by your location, your finances, and your personal views and beliefs. If chaotic conditions occur, lawless activity will surely follow. Past incidents of disaster and mayhem give much testimony to this.

A look at the civil unrest that can arise when a government just ‘proposes’ austerity measures
“French gov’t undercuts Senate on retirement bill
Oct 21, 11:40 AM (ET), By ANGELA CHARLTON
PARIS (AP) – The French government is short-circuiting a protracted debate in the Senate on a bill raising the retirement age to 62, brushing aside some 250 amendments.
Faced with widespread protests against the bill, the government is ordering Senators to vote on a package of its own design, using Article 44-3 of the Constitution that allows it to step into the parliamentary debate.
PARIS (AP) – Protesters blockaded Marseille’s airport, Lady Gaga canceled concerts in Paris and rioting youths attacked police in Lyon on Thursday ahead of a tense Senate vote on raising the retirement age to 62.
A quarter of the nation’s gas stations were out of fuel, despite President Nicolas Sarkozy’s orders to force open depots barricaded by striking workers. Gasoline shortages and violence on the margins of student protests have heightened the standoff between the government and labor unions that see retirement at 60 as a hard-earned right.
Shopping streets stood nearly empty Thursday in central Lyon. The Bistrot de Lyon didn’t put tables outside as usual out of fear of clashes. “We’ve seen a reduction of 30-35 percent of business overall, for the last few days with the rioting in town. Lunchtime, nothing is going on, we’ve no one. It’s more than calm,” said restaurant manager Philippe Husser.
In Nanterre, the scene of running street battles between masked and hooded youth and riot police in recent days, the scene Thursday morning was calm, said Mehdi Najar, one of a few dozen red-jacketed mediators organized by the city hall to try to keep the peace.
In Marseille, hundreds of workers blocked all access to the main airport for about three hours early Thursday. Passengers tugged suitcases along blocked roads as they hiked to the terminal, before police came in and the protesters dispersed.
Wildcat protests blocked train lines around Paris on Thursday. Protesters in cars and trucks blocked several highways around the country, from near Calais in the north to the Pyrenees in the south, according to the national road traffic center.”

Coming Chaos: No Banks, No Public Facilities, No Food and Rampaging Gangs of Desperate People
Bob Chapman, of The International Forecaster, says it’s time to prepare for the worst, comparing our impending economic crisis to that which was experienced at the onset of 1348 and the following century and a half.

Flashback to 1348:
The Black Death is estimated to have killed 30% to 60% of Europe’s population, reducing the world’s population from an estimated 450 million to between 350 and 375 million in 1400. This has been seen as creating a series of religious, social and economic upheavals which had profound effects on the course of European history. It took 150 years for Europe’s population to recover. The plague returned at various times, resulting in a larger number of deaths, until it left Europe in the 19th century.
While Chapman does not suggest we will experience our own black plague pandemic, he predicts that the consequences of our economic collapse may lead to total destabilization and wars, much like post-plague Europe.
As you are now well aware Fannie and Freddie are going to punish people who have stopped paying their mortgages, who can pay them, and who are paying other bills instead. This leaves lenders with foreclosures and much more inventory than they ever imagined. This additional problem will bring on the double dip that Wall Street and Washington so fear.
As a result of this and other failures we are about to experience the worst economic collapse since 1348. The stock market is topping out readying itself for its most disastrous fall in history. The fall will be followed by years of depression, all of which has been deliberately created to bring the world economically and financially to its knees in an attempt to bring about world government by Illuminists.
Some market analysts understand where the market is headed, but most who do understand, write and talk about the mundane observable trappings and not what the situation is really all about. We have several analysts talking about a market collapse. They do not talk about the real forces behind our misfortune.
There are always these lone voices in the wilderness, which at best – some 15% of the populace – listens too. You had better listen this time because it could well cost you not only your assets, but your life, especially when another war is being prepared for you to engage in. Nothing is really as it seems to be and there are no coincidences. You are about to enter a world of chaos from which few will survive unscathed. A world of no banks, no public facilities, no food and rampaging gangs of desperate people. Unemployment of 50% and little law and order. Violence will be rife. This is not a pretty picture, but we have spared you the details. The world had better wake up fast so they’ll be prepared to deal with what is to come. If you were not aware of it the dark side really exists.
We are now entering the next to last phase of our journey. The wanton creation of wealth, inflation and perhaps hyperinflation, which will rob you of your assets. A stealth attack on what you have left by the people who control your government. Such monetary creation is the only way these people can keep the game going. They know it won’t last, but they proceed anyway. For awhile they’ll keep the multitudes at bay with extended unemployment and food stamps, but that will fade in time for lack of financial control, as the system begins to break down.
You already see all fiat currencies under fire, as is sovereign debt. Can it get any worse? Of course it can, and it will. Implosion is the word everyone is going to discover and understand.
The picture Bob Chapman paints is one that may lead to an initial reaction of, “What? No way that can happen.” Perhaps it can’t happen. Perhaps, it really is different this time and our benevolent leaders and the powers that be are capable of managing this crisis. Perhaps they will restore jobs to pre-crash levels. Perhaps home prices will go back up to record 2006 levels because tens of thousands of buyers will appear in the market. Perhaps the Federal reserve will be able to sell of their toxic assets, not have to print more money to bail anyone out, and the world will demand that the dollar remain the reserve currency of choice. Perhaps all of these people in delinquency on their mortgages will be able to catch up on those late payments. Perhaps governments will stop spending more than they take in and all of their debts will be paid off. Perhaps the globe’s top financiers will figure out a way to deleverage the trillions of bad debt currently working its way through the system.

Or, perhaps they will not be able to reverse course. Let’s assume that they can’t reverse course. How bad can it really get? This is something that our elected officials and those at the Fed, Treasury and large institutions will not overtly discuss. But clues have been dropped throughout the last several years. And, you need to look no further than those very same officials.

President Obama, during the green shoots recovery of 2009 and 2010, told the American people
that a depression was avoided. Thus, we can assume that a depression is a strong possibility if we are in fact about to see another economic collapse. In 2008 and 2009, former Secretary of Treasury Henry Paulson said that we were “on the brink,” in fact, after he left his position with Treasury, he wrote a book with this very title. The brink, from what we can surmise, meant a complete collapse of our financial, economic and political systems. The result would have been martial law. Hard to believe? Yes. Impossible? No:

THE COMING CHAOS: PART II

Are some popular movie and television images from the end of the first decade of the 21st century, a harbinger of less severe, but rhyming themes to come? Movie entertainment themes are a fulfillment of consumer curiosity and expression of the sediment of the times.

Movie image, I Am Legend (left). Disease has almost eradicated mankind, only a few random survivors exits in decaying cities.
Movie, 2012. Earth crustal shifts with continents sinking into the ocean. Several thousand people escape drowning aboard huge ships.
Movie, The Road. A catastrophe has almost wiped out mankind. Survival is harsh in a barren land of armed scavengers.
Movie, The Book of Eli.  Most of Man destroyed by calamity, there are few survivors, much chaotic lawlessness is pervasive.
TV series, The Walking Dead. Brain disease reduces most of mankind to zombies, a few healthy survivors gather and try to eke out an existence without becoming infected.
TV series, Falling Skies. Aliens attack Earth; humans are slaughtered and small remnants driven from cities. Survivalist lifestyles develop as ragged groups try to feed themselves and resist the aliens.
Movie, Contagion. Earth population depleted by fast acting virulent disease. Chaotic conditions develop.

Real life images
Garbage lined streets (right) : During the (2011) snowstorms that hit the NYC, the Sanitation Department suspended garbage collection for days at a time in order to use trucks for snow removal, which meant about 11,000 tons of trash per day didn’t get collected. Granted, the mess has been caused by more than just missed collections. People have been tossing loose trash onto the bags, and it’s winding up on the sidewalks and streets. Plastic McDonald’s cups. Broken bottles of Budweiser and empty cans of Four Loko, cigarette butts, smashed umbrellas, sheet music, soggy gloves, old newspapers, and damp, dirty sofas — all left out in the open, as if they, too, will just melt away. And thanks to pet owners, who got a little lazy in the bad weather, many city streets are now shellacked with dog feces.  Crumbling Detroit, 2010.
In the late nineteenth century Detroit (left)emerged as a major transportation hub along the Great Lakes.  Gilded Age mansions and other grand buildings spawned the city’s nickname “Paris of the West.” The gasoline crises of the 1970s impacted heavily on the car industry, while racial tensions and increasing drug-fuelled crime spurred the beginning of the end for Detroit’s industrial supremacy.  As the city descended into high unemployment, many of its finest buildings, including theatres, hotels, offices and apartments, fell into ruin.

Our Jig Saw Puzzle:
The parts that go bump in the night, the parts that can trigger the coming chaos, are:

1.  Peak Oil
(Think broadly: ANY energy crisis.)
The world is rapidly approaching Peak Oil production and will be at an inflection point soon, if not already, after which, real prices will (or already have) begin a long rise. Price inflection is possible before the next economic recovery, but will certainly come with a recovery, which will then be short-lived, because rising energy prices will channel money away from other discretionary expenditures.
During the years, 2009-2010, the USA and Europe were in recession with lower oil requirements, which have skewered the associated 2007 chart by extending the plateau top and pushing the ‘decline in production slope’ (with subsequent increase in prices) into the future another couple of years past the original 2007 projection. Whether we are out of the recession or not by 2015, production declines and the resultant rise in petroleum prices will probably have become an unpleasant factor in our national and personal, financial lives.

Official Peak Oil reports
Saturday, 4 Sep 2010, FinancialSense.com weekly, ‘News Hour’ podcast, gave leads to the Peak Oil reports listed below. These articles (only the lead paragraphs have been re printed here) seem to be telling a story, a story which has not yet been shared to any degree with the American people by either the Government or the news media. Furthermore, there is not just one news item, but increasingly frequent, almost monthly reports issued by responsible, main stream institutions in Europe, the USA and the Middle East.
Europe is currently advancing on a continent wide program toward fossil fuel independence; its estimated that in 10 years, by 2020, 20% all of Europe’s energy, not just its electricity, will be derived from renewables. What is happening in the United States? Nothing that I’ve heard of or seen. Maybe the government is waiting for a ‘Peak Oil-Pearl Harbor’ type crisis to create a popular mandate for action—as opposed to making plans and choosing an intelligent path while there is more time and opportunity to implement and mass test renewable systems.
The energy transition from one type energy to an alternative, historically, only happens about once per century and does so with momentous consequences.  We will begin to move away from fossil fuels quite rapidly from here on forward. Business, families and individuals who can adapt to the charge and manage risk will gain an advantage with the shrinking energy pie. (See also ‘Survival Manual/1. Disasters/Peak oil and energy crisis’)

The reports:
a)  London, 10 February 2010: UK Industry Taskforce on Peak Oil and Energy Security (ITPOES) study on peak oil was released: “Business calls for urgent action on ‘oil crunch’ threat to UK economy”. A group of leading business people today call for urgent action to prepare the UK for Peak Oil. The second report of the UK Industry Taskforce on Peak Oil and Energy Security (ITPOES) finds that oil shortages, insecurity of supply and price volatility will destabilize economic, political and social activity potentially by 2015.
b)  March 2010: Telegraph.Co.UK, “Oil reserves ‘exaggerated by one third’. The world’s oil reserves have been exaggerated by up to a third, according to Sir David King, the Government’s former chief scientist, who has warned of shortages and price spikes within years. Published: 9:51PM GMT 22 Mar 2010, by Rowena Mason, City Reporter (Energy)
c) March 2010:  heatingoil.com, Kuwait University and Kuwait Oil Company’ Peak Oil report: “Kuwaiti Researchers Predict Peak Oil Production in 2014, Posted by Josh Garrett on March 10, 2010
d)  “A new study published in the Journal Energy & Fuels predicts that world conventional oil production will hit its peak in the year 2014.
e) April 2010: guardian.co.uk, “US military warns oil output may dip causing massive shortages by 2015” by Terry Macalister. The Shortfall could reach 10 million barrels a day, report says, while the cost of crude oil is predicted to top $100 a barrel.
“The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact. The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.
f) June 2010: Guardian.co.uk, news article posted 11 July 2010, “Lloyd’s adds its voice to dire ‘peak oil’ warnings”, by Terry Macalister. “Business underestimating catastrophic consequences of declining oil, says Lloyd’s of London/Chatham House report. One of the City’s most respected institutions has warned of “catastrophic consequences” for businesses that fail to prepare for a world of increasing oil scarcity and a lower carbon economy. The Lloyd’s insurance market and the highly regarded Royal Institute of International Affairs, known as Chatham House, says Britain needs to be ready for “peak oil” and disrupted energy supplies at a time of soaring fuel demand in China and India, constraints on production caused by the BP oil spill and political moves to cut CO2 to halt global warming. “Companies which are able to take advantage of this new energy reality will increase both their resilience and competitiveness. Failure to do so could lead to expensive and potentially catastrophic consequences,” says the Lloyd’s and Chatham House report “Sustainable energy security: strategic risks and opportunities for business”.
g) August 2010: Spiegal Online International, posted 4 September 2010, “German Military Study Warns of a Potentially Drastic Oil Crisis“, by Stefan Schultz “A study by a German military think tank has analyzed how “peak oil” might change the global economy. The internal draft document — leaked on the Internet — shows for the first time how carefully the German government has considered a potential energy crisis.
The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the “total collapse of the markets” and of serious political and economic crises.

The news report from Spiegal Online was specific about their study’s socio-economic findings, pointing out that:
•  “Shortages in the supply of vital goods could arise as a result, for example in food supplies.
•  Oil is used directly or indirectly in the production of 95 percent of all industrial goods.
•  Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain.
•  In the medium term the global economic system and every market-oriented national economy would collapse.…
•  (Relapse into planned economy) Since virtually all economic sectors rely heavily on oil, peak oil could lead to a partial or complete failure of markets. A conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis….
•  (Global chain reaction)  A restructuring of oil supplies will not be equally possible in all regions before the onset of peak oil. It is likely that a large number of states will not be in a position to make the necessary investments in time, or with sufficient magnitude.
•  If there were economic crashes in some regions of the world, Germany could be affected. Germany would not escape the crises of other countries, because it’s so tightly integrated into the global economy….”
•  The Bundeswehr study also raises fears for the survival of democracy itself. Parts of the population could perceive the upheaval triggered by peak oil “as a general systemic crisis.” This would create “room for ideological and extremist alternatives to existing forms of government….”

2.  Real Food Price Increases
Another sign of the times and portent for the near future burden of costs falling on household budgets is shown in the New York Times news article dated, 5 August 2010:
•  “MOSCOW — Prime Minister Vladimir V. Putin on Thursday banned all exports of grain after millions of acres of Russian wheat withered in a severe drought, driving up prices around the world and pushing them to their highest level in two years in the United States…Russia is suffering from the worst heat wave since record-keeping began here more than 130 years ago…Wheat prices have soared by about 90 percent since June because of the drought in Russia and parts of the European Union, as well as floods in Canada, and the ban pushed prices even higher. Exports from Ukraine, another major exporter, are down sharply this year…Before this year’s drought, yields had risen steadily, and Russian grain exports totaled 21.4 million metric tons last year, about 17 percent of the global grain trade.
But on Thursday, rail cars heaped with fresh grain came to a halt around Russia, stopped in mid-journey from the country’s fields to the main exporting ports on the Black Sea. The order covered a variety of grains, including barley and corn, but will have its greatest impact on wheat exports…”
Global food supplies will be tighter and more costly in the last half of 2010 and into 2011. Beyond fall 2011 prices may not return to lower levels, because energy input costs from gasoline, petroleum, fertilizer costs, harvest, packaging and shipping will be tightening with the approach of peak oil.
See at right, the 2007 U.S.A. ‘Grain Stock to Use Ratios’ chart, projected to 2016. Note, that during the decades when the country was at its wealthiest, we had twice the ‘Stock to Use Ratio’ as when the current recession began. Rather than build and maintain reserves during good times, we have depleted reserves.
•  Globally, 2008 saw record lows in global grain stocks. When commodity prices reached their peak, average global grain stocks reached 18.7% of annual global utilization, equivalent to 68 days worth of supply, well below the long-term average.

Where are food prices going?
When combining: 1) globally reduced food stock supply plus, 2) increasing demand from a growing world population; 3) increasingly demand from affluent Asian markets wanting higher quality foods; 4) higher priced agricultural fuel & fertilizer, 5) higher priced packaging, and 6) more expensive transportation costs,m 7) devaluation of the US dollar, it points toward an escalating Real Cost of food across the coming years.

3.  National energy grid at threat from EMP disruption
“Civilization is like a great web upon which all things are connected. Bop one strand of the web and the whole thing jiggles. Perhaps no other country on earth is more enslaved to conventional, fuel burning transportation than the United States. Transportation is the lifeblood of the economy, which would quickly collapse if the means for transporting needed supplies were disrupted in any way. With our just-in-time inventory management system, grocery stores commonly carry only a three-day supply of food. This statistical three-day supply would disappear within a few hours during an emergency situation; a panicked populace would make sure of that.”

EMPact America, Inc. Conference, 8-10 September 2009, Niagara, NY, conference speakers pointed out:
•  “An electromagnetic pulse, or EMP, is a super energetic radio wave that’s immediately harmless to people, but it’ll burn out all the critical electronic systems that sustain human economic activity and human life across vast areas, including the entire continental United States.” Dr. Peter Vincent Pry, President, EMPact America
•  “It’s not a secret. You can’t do anything about something that’s this broad in impact and still keep it a secret. So in order to get anything done you actually have to acknowledge we have a weakness. And, we worried about the fact that if we acknowledged that we had a weakness, how damaging will that be since we will inform our adversaries. We came to the conclusion that our adversaries are really quite well-informed already.”-Robert Hermann, Commissioner, Congressional EMP Commission
•  “I have believed for a long time that EMP or electromagnetic pulse may be the greatest strategic threat we face, because without adequate preparation its impact would be so horrifying that we would, in fact, basically lose our civilization in a matter of seconds.”-Newt Gingrich, Former Speaker of the US House of Representatives

A)  Solar Flare produced EMP
The magnetic pulses from solar flares can fry microchips and disrupt any electronic devices. A solar flare disrupted primitive electronics such as telegraphs in 1859 and another one occurred in 1989 as well. One of the most serious solar flares took place in 1921 and disrupted communications in the U.S. An EMP from the sun in the 21st century could be devastating and wipe out any system using electricity or microchips.”
In 2008, the National Academy of Sciences produced a report for NASA that confirmed the EMP Commission’s warning that a “great” geomagnetic storm could have catastrophic consequences for modern civilization.  According to the NAS report, if the 1859 Carrington event happened today, it could destroy nationwide the electric grid, collapse the critical infrastructures and take 4-10 years to recover – if recovery is possible at all. In June 2010, the Department of Energy and North American Electric Reliability Corporation released a joint report that, again, confirmed the EMP Commission’s warning about the catastrophic threat from a “great” geomagnetic storm.
So it is incomprehensible why the Senate Energy and Natural Resources Committee on Aug. 5 – just days after NOAA warned about the possibility of a severe geomagnetic storm actually striking our planet – would gut H.R. 5026, The Grid Reliability and Infrastructure Defense Act, that is designed to protect the United States from the effects of a geomagnetic storm.  H.R. 5026 would protect the national electric grid from “all hazards” – including EMP from geomagnetic storms, nuclear EMP from terrorists or rogue states, cyber threats, sabotage and natural disasters.  H.R. 5026 embodied the recommendations of the EMP Commission, the National Academy of Sciences and the Department of Energy.
The revised H.R. 5026 does nothing to protect the United States from EMP from geomagnetic storms, or nuclear EMP from rogue states and terrorists, from sabotage or from natural disasters.  The Senate gutted H.R. 5026 despite the EMP Commission’s recommendation that protecting the grid against “all hazards” is technologically the best and most cost-effective strategy.  For example, an “all hazards” strategy could mitigate the worst threats to the grid from natural and nuclear EMP and cyber threats for $100 million – and possibly save the lives of millions of Americans.
But the Senate Energy and Natural Resources Committee chose to ignore the EMP Commission, the National Academy of Sciences and the Department of Energy.  Every member of the Senate Energy and Natural Resources Committee received a personal appeal from the EMP Commission and other prominent experts to pass H.R. 5026 with its provisions for protecting against EMP and “all hazards” intact – but those appeals were ignored.
Fortunately, Earth dodged the bullet from the August 6, 2010 solar flare.  Fortunately, NOAA’s estimated 10 percent chance of a severe geomagnetic storm did not materialize – this time.  We may not be so lucky next time.

B)  Nuclear EMP attack against the US electrical grid
“Wednesday, 18 August 2010, TVC Special Report: Electromagnetic Pulse (EMP) weapons pose a serious and growing threat to our national security. Rogue nations and terrorists are working to develop EMP devices to attack the United States and other developed nations. These include North Korea, Iran and China. Once North Korea and Iran have missiles capable of reaching the U.S., they can use an EMP burst over our nation to destroy us.
1) A high altitude nuclear blast above middle America
A nuclear blast 200 miles above the U.S. could wipe out every electric grid in the country, plunging our nation into darkness. It would literally send our nation back to the 18th century. (A powerful X15+ class solar flare would have the same impact.) An EMP blast from a nuclear bomb would shut down devices, and our vehicles using microchips. Planes would stop flying; banks and hospitals would cease operation; trains would stop running; tractors, trucks and cars would cease working. Elevators would malfunction; subways would stop. All commerce would cease. A blast like this could not only wipe out the electric grid in the U.S., but in Canada and Mexico. The more technologically advanced a nation is, the more vulnerable it is to an EMP attack.
2)  What Can Be Done?
The United States must take seriously the threat posed by EMP attacks. The military has already taken measures to shield its systems from EMP attacks, but little has been done yet to shield our electric grid system from such an attack. This includes banks, water treatment plants, planes, hospitals, schools and any other facility that relies on computers. All of these must be shielded from the potential of an EMP attack or a solar flare.”
3)  If the power ever goes off for an extended period
• 
50% of the people will just sit down and wait for someone to come and help them, and if no one does, they’ll just die. 10% of the people know what to do and do what is needed in a logical way. 5% of the people become extremely dangerous almost immediately.  About 33% of the people  feel that they’re entitled to electric power and when they don’t get it they go nuts and will bring down the social system.
•   James Rawles interview by The Watchmen Radio Station, 3 Sep 2010:
“…If we were to have the onset of an EMP collapse in summertime we’d see a public health crisis very quickly. If it were to happen mid-winter we’d actually see more people dying of exposure, dying of the cold, than we would of dying of disease, especially in the Eastern United States and the North East. It doesn’t take too long a period before blankets are insufficient – people don’t have any alternate source of heat they’ll be freezing to death in large numbers. In a ‘grid down collapse’ that goes on for more than a year, we literally could see a 90% population loss in the big cities, and a 50% population loss in the suburbs and as much as a 40% loss in non-viable rural areas – I’m talking desert regions or other areas where there’s not a lot of agriculture that goes on.”

4.   US Debt:
As of this morning, ~ 4:05AM, Thursday, 9 September 2010, the Outstanding US National Debt is $14,278,946,101,012 dollars—that’s $14.2 trillion dollars and constitutes 93% of the national Gross Domestic Product. With the current US population of 310,383,941 the National Debt comes to $46,004 per person.
The Outstanding US National Debt is the sum of all outstanding debt owed by the Federal Government and includes: Social Security and Federal retirement programs, other trust funds, US Treasury Securities, and Savings Bonds.
Organizations loaning money to the US Government through US Treasuries include: state and local governments; individual investors, including brokers, public and private; pension funds; mutual funds; holders of US savings bonds; insurance companies; banks and credit unions; and foreign investors.

Add the GSE (Freddie/Fannie) debt to that and we are over 18 trillion.
Pile on the unfunded liabilities hidden on the government’s ‘off balance sheet ledgers’ and you will find these figures:  Social Security (14.6 trillion), Prescription Drugs (19.2 trillion), Medicare (76 trillion). You owe, your kids owe, all of us owe about $400,000 each.
Considering the median home price on the east-coast is $205,000.00, you now owe for two homes, in addition to anything that you may owe on your existing home, and it’s at a variable rate loan. In fact, principle and interest are subject to change. This debt is just like some toxic negative amortization pay-what-you-can-add-more-to-principle mortgage.”
http://www.financialsense.com/contributors/d-sherman-okst/mutant-rat-epidemic-spreading-economic-black-plague

Considering our economy (and the World’s too)
The annual US Budget Deficit is about $1.4 trillion. The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. In order to get an idea how much $1 trillion is, if you counted one dollar every second, you’d need to count for 31,000 years to go through the $1 trillion pile of dollars. About 31,000 years ago the Neanderthal died off across Europe. Our stone age ancestors were just beginning to make engravings on cave walls.
“The downside to increasing deficits and a rising national debt is that public sector spending “crowds out” more and more private sector investment spending. If you like the idea of Congress and the president playing a growing role in the nation’s allocation of resources, then I suppose that should be of little concern. On the other hand, if you think government leaders are far more likely to make bad investment decisions than are private decision-makers, then crowding out is of considerable concern.
The fallout will not be in the form of an unfair tax increase on our grandchildren when the associated debt is paid off because, it will never be paid off. The fallout will come in an increased drift toward an economy increasingly controlled by the federal government.”
“The debt merry-go-round cannot go on forever. When the average consumer runs out of credit, when the US Treasury itself is no longer considered creditworthy, and when the US dollar is recognized for what it really is, then things will get ugly. If you stop making payments on your car, the banks send a repo man to tow your car away. And when entire nations go in to default, it usually signals cataclysmic events. Be prepared.” James Wesley Rawles in How To Survive the End of the World As We Know It

China Syndrome
Today the United States has become so reliant on the largesse of foreigners that its needs are now larger than all the savings in the Western world. Someday soon, those foreigners will grow cautious about lending to a country with no self-discipline and demand instead higher interest rates to protect them from a depreciating dollar. Or they could, as hinted recently, insist on lending in Euros or Renminbi, currencies that the American government cannot print.
The unprecedented expansion of central bank liabilities, has made China nervous about holding more dollars and China has begun to dump dollars, driving up prices of dollar based hard assets. China is so concerned about America’s dollar inflation that it has reduced its treasury holdings to $776 billion from $801 billion in May. China has also bought more gold as a hedge against the debasement of the dollar.

5.  Then comes hyperinflation – spend it now!
“Hyperinflation is not just an increase in the money supply, after all the central bank increases the money supply all the time, a phenomenon we know as simple inflation and which we come to expect as a constant. Hyperinflation, however, happens when uncertainty in the future worth of the currency causes people to start trading it for things of actual utility and more reliable stores of value as soon as they can, as soon as they’re paid. The velocity of paper money moving through the system increases as people seek to get rid of it.
So hyperinflation isn’t just the expansion of the monetary base, though the expansion is at the root. The expansion is fuel, but the conflagration doesn’t start till the herd panics.
Hyperinflation takes off when the entire population gets wise. The money supply might have been growing in fits and spurts for decades, but the hyperinflationary storm happens when that money really starts to move around as people try to get rid of it. The prices of useful goods get bid up to mind boggling levels. The process accelerates when governments try to stabilize markets…often by adding more paper…because honestly, what else can a government do? Mismanagement and fraud are the only things governments really get right consistently. So, for the government, a problem that’s caused by the theft of inflation can only be solved by…more mismanagement and fraud. The entire process is self-reinforcing and results in the hyperinflationary death spiral to which all currency is heir.

Common threads during a Hyperinflation:
•   Early on, leaders see their popularity wilt when public anger over spending increased.
•   The banking system soon becomes an instrument of the government.
•   The printing of money becomes a priority, the hyperinflation may come in two waves   separated by a short, slower inflationary period.
•    The government may increase minimum wages by 75 percent.
•   Up to 80 percent of the population may become unemployed.
•   Living standards may fall 35-40 percent.
•   Some stores may sell goods in a reputable foreign currency.

When it’s all said and done, realize this:
Industrial society is built on, 1) a foundation of an organized social structure with feedback loops, 2) an  interdependent infrastructure of transportation, homes and utilities,  3) and a massive, energy driven commodity flow that processes materials from the mine, timber and field to operate; diminish any link and the size of the system must shrink, break any link and the system collapses.


Things to keep in mind:
•   Where ever you live– the greater the population density of your community and surrounding communities, the greater the resource requirements are, and the faster the breakdown will occur when the supply infrastructure (money, food, water, electricity, auto gas, etc.) is stopped.
•   Once the Welfare and Medicare checks stop ‘the poor will take care of their own family’ by taking from the people with an apparent wealth of material goods, people who are perceived to be their oppressors anyway.
•   Once you lose that sense of community, it’s basically every man for himself.

Comments Off on The coming chaos

Filed under __2. Social Issues

Financial collapse

(Survival Manual/1. Disaster/Financial Collapse)

The great play

‘The Coming Liquidity Tsunami Into Something Real’
14 May 2011, Gold Eagle editorial, by Mark J Lundeen
<http://www.gold-eagle.com/editorials_08/lundeen051411.html> and <Mlundeen2@Comcast.net>
“I was once told, by someone who’s name I’ve long since forgotten, that the ancient Greeks once pondered death from a scientific perspective: One day Pericles was manning the walls of Athens against the Spartans. The next day a plague came and Pericles was gone, though his now room-temperature body was still in Athens.

Question: what changed?

Maybe warming his now cold body would cause Pericles to return; and then again, maybe not! But who can say until we try?

If I were to write a script for a play, using the Peloponnesian War as a motif of the current financial situation, the US financial system would certainly be Pericles: glorious and powerful one day, and somewhat else the next.

If asked, I’m sure the academics from our Ivy-League schools of social sciences would demand to play the part of the old Greek philosophers. But I see them more as the vectors of “policy” that has pulled our poor hero down to his lamentable state. That leaves us with what to do with the politicians?

Well no one would ever mistake these corrupt, baby-kissing sycophants for Greek philosophers! So, I guess the politicians will have to play the part of the vectors of “policy” and I’ll let Doctor Bernanke dress up like Socrates.

In the opening scene, Pericles lays still on a marble slab, at room temperature, when Doctor Bernanke orders members of the AMA (Athenian Medical Association) to warm poor Pericles’ human remains to that of the living. He steps back into the gloom of the Parthenon, as a Greek choir (played by the financial media) then lets loose a mournful chant, 3 times:
“Woe unto Athens! Though the philosophers have warmed worthy Pericles until his toes smoke, still neither does he move nor speak!”

A brilliant spot light cuts through the gloom of the scene, highlighting the noble presence of Socrates (played by Doctor Bernanke) as he brings the Greek Choir to silence with a sweep of his arm, and proclaims to the audience (played by everyone who still believes their pension fund and social security will be worth something ten years from now):
“Pericles needs not move nor speak to serve Athens well. A pulse he needs not. As long as the wise men of “policy” can maintain his body temperature above that of the marble slab on which he rests, all will be well!”
The spot light fades to black, the curtain closes, and all educated and respectable people are happy with the performance, and will continue to be until dear Pericles begins to reek more than “policy” predicted. This is as good a way of understanding the current state of the debt markets as any you’ll  see on TV or in the papers. Think of structured finance, using derivatives in the hundreds-of-trillions, as “policy’s” method of giving trillions of dollars in dead assets the appearance of being alive, though a closer inspection shows they are merely warm and motionless.

The secondary market in American mortgages stopped trading several years ago, so for what purpose are these dubious derivatives still serving? I suspect someday we will discover that this is the “policy makers” chosen method to enable trillions of dollars of worthless mortgage assets held by large banks, to continue generating income for the financial system.
[Image above right: Pericles,  495-429BC]

The show goes on
Derivatives are simply another form of margin, the nemesis which caused the last great market crash. This time though it’s “different enough from the last time so no one realizes what is happening.” Use this analogy: “…it is like the floor show in a seedy nightclub. A sequence of girls trots on the scene, first a collection of Apaches, then some ballerinas, then cowgirls and so forth. Only after a while does the bemused spectator realize that, in all cases, they were the same girls in slightly different costumes.” In other words, “the so-called hedge fund actually is an excuse for a margin account.”
Pasted from <http://www.usagold.com/derivativeschapman.html>
.

Act 1:  We go broke

 It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
4  Feb 2010, The Economic Collapse
<http://theeconomiccollapseblog.com/archives/it-is-now-mathematically-impossible-to-pay-off-the-u-s-national-debt>
A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don’t realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt. So why doesn’t the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?  Well, for one very simple reason. That is not the way our system works.
You see, for more dollars to enter the system, the U.S. government has to go into more debt.
The U.S. government does not issue U.S. currency – the Federal Reserve does.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers. If you will pull a dollar bill out and take a look at it, you will notice that it says “Federal Reserve Note” at the top. It belongs to the Federal Reserve.

The U.S. government cannot simply go out and create new money whenever it wants under our current system. Instead, it must get it from the Federal Reserve. So, when the U.S. government needs to  borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds  for themselves (which happens a lot these days).

So that is how the U.S. government gets more green pieces of paper called “U.S. dollars” to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on. Every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.
Are you starting to get the picture?

[Image at left: $1 trillion in $1 bills would fill the interior of the Empire State building.
The current $14.3 trillion debt (May 2011) would fill a 3/4 mile high block, 50% higher than the green block shown in  the picture at left.
Consider this: One hundred dollars in one dollar bills, pressed down, measures about ½ of an inch. One million, 100 dollar bills, measures four feet in height. One billion 100 dollar bills is 4,000 feet high, almost three Sears Tower buildings tall.
$1 trillion $100 dollar bills measures 789 miles, or one hundred and forty four Mt. Everests stacked on top of each other. Our national debt is more than 14 times THAT… ]

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure. So how much money actually exists in the United States today? Well, there are several ways to measure this.

The “M0” money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

The “M1” money supply includes all of the currency in the “M0” money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers’ checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually “exists” as we will see in a moment.

The “M2” money supply includes everything in the “M1” money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually “exists” as we will see in a moment.

The “M3” money supply includes everything in the “M2” money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of Eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this “money” actually “exists” either.
So why doesn’t it exist?
It is because our financial system is based on something called fractional reserve banking.

When you go over to your local bank and deposit $100, they do not keep your $100 in the bank.
Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of “money” quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time. [All going at the same time  is what a ‘bank run’ is]

According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way….”If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+…=$1,000).”
So much of the “money” out there today is basically made up out of thin air.
In fact, most banks have no reserve requirements at all on savings deposits, CDsand certain kinds of money market accounts. Primarily, reserve requirements apply only to “transactions deposits” – essentially checking accounts.

The truth is that banks are freer today to dramatically “multiply” the amounts deposited with them than ever before. But all of this “multiplied” money is only on paper – it doesn’t actually exist.
The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much “real money” actually exists in the system.

So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.

So the bottom line is this….
1)  If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.
2)  The only way to create more money is to go into even more debt which makes the problem even worse.
You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.

It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.
If you owe more money than ever was created you can never pay it back. hat means perpetual debt for as long as the system exists.
It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.
We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that. So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.
.

Act 2:  They go broke

What happens when Greece defaults?
25 May 2011, The Telegraph, By Andrew Lilico
http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/
It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.

What happens when Greece defaults. Here are a few things:
•  Every bank in Greece will instantly go insolvent.
•  The Greek government will nationalize every bank in Greece.
•  The Greek government will forbid withdrawals from Greek banks.
•  the Greek government will declare a curfew, perhaps even general martial law.
•  Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)
•  The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting on 50 per cent or more of all Greek euro-denominated debts.
•  The Irish will, within a few days, walk away from the debts of its banking system.
•  The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
•  A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
•  The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.
•  The French and German governments will meet to decide whether (a) to recapitalize the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter. On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)
•  They will recapitalize, and recapitalize their own banks, but declare an end to all bailouts.
•  There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.
•  This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalizing a number of banks via debt-equity swaps.
•  Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.
•  Attention will turn to the British banks.

Then we shall see…

Ilargi:
What I think is important is to connect the dots here. Greece is but a two-bit player relatively speaking, but the effects of a default in Athens, and the haircuts it would force upon financial institutions (and dare we even consider pensions funds?!), would -make that will- be felt across the world. For one thing, it would substantially weaken banks and economies pretty much around the globe. Just Greece alone.

It all comes back all the time to the dreaded mark-to-market theme. The last thing anyone wants is to let anyone else know what the paper they’re holding is truly worth. But it will be done.
.

Act 3: All go broke

Derivatives: The Quadrillion Dollar Financial Casino Completely Dominated By The Big International Banks
<http://theeconomiccollapseblog.com/archives/derivatives-the-quadrillion-dollar-financial-casino-completely-dominated-by-the-big-international-banks>

“If you took an opinion poll and asked Americans what they considered the biggest threat to the world economy to be, how many of them do you think would give “derivatives” as an answer? But the truth is that derivatives were at the heart of the financial crisis of 2007 and 2008, and whenever the next
financial crisis happens derivatives will undoubtedly play a huge role once again. So exactly what are “derivatives”?
Well, derivatives are basically financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its own. It is essentially a side bet.
Today, the world financial system has been turned into a giant casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from it. The system is largely unregulated (the new “Wall Street reform” law will only change this slightly) and it is totally dominated by the big international banks.

Nobody knows for certain how large the worldwide derivatives market is, but most estimates usually put the notional value of the worldwide derivatives market somewhere over a quadrillion dollars.
If that is accurate, that means that the worldwide derivatives market is 20 times larger than the GDP of the entire world. It is hard to even conceive of 1,000,000,000,000,000 dollars.
Counting at one dollar per second, it would take you 32 million years to count to one quadrillion.

So who controls this unbelievably gigantic financial casino? Would it surprise you to learn that it is the big international banks that control it? The New York Times has just published an article entitled A Secretive Banking Elite Rules Trading in Derivatives. Shockingly, the most important newspaper in the United States has exposed the steel-fisted control that the big Wall Street banks exert over the trading of derivatives. Just consider the following excerpt from the article….

“On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan. The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.”

Does that sound shady or what?
In fact, it wouldn’t be stretching things to say that these meetings sound very much like a “conspiracy”. The New York Times even named several of the Wall Street banks involved: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup. Why does it seem like all financial roads eventually lead back to these monolithic financial institutions?

The highly touted “Wall Street reform” law that was recently passed will implement some very small changes in how derivatives are traded, but these giant Wall Street banks are pushing back hard against even those very small changes as the article in The New York Times noted….

“The revenue these dealers make on derivatives is very large and so the incentive they have to protect those revenues is extremely large,” said Darrell Duffie, a professor at the Graduate School of Business at Stanford University, who studied the derivatives market earlier this year with Federal Reserve researchers. “It will be hard for the dealers to keep their market share if everybody who can prove their creditworthiness is allowed into the clearinghouses. So they are making arguments that others shouldn’t be allowed in.”

So why should we be so concerned about all of this?
Well, because the truth is that derivatives could end up crashing the entire global financial system.

In fact, the danger that we face from derivatives is so great that Warren Buffet once referred to them as “financial weapons of mass destruction”.

In a previous article, I described how derivatives played a central role in almost collapsing insurance giant AIG during the recent financial crisis….

Most Americans don’t realize it, but derivatives played a major role in the financial crisis of 2007 and 2008. Do you remember how AIG was constantly in the news for a while there? Well, they weren’t in financial trouble because they had written a bunch of bad insurance policies. What had happened is that a subsidiary of AIG had lost more than $18 billion on Credit Default Swaps (derivatives) it had written, and additional losses from derivatives were on the way which could have caused the complete collapse of the insurance giant. So the U.S. government stepped in and bailed them out – all at U.S. taxpayer expense of course.

As the recent debate over Wall Street reform demonstrated, the sad reality is that the U.S. Congress is never going to step in and seriously regulate derivatives. That means that a quadrillion dollar derivatives bubble is going to perpetually hang over the U.S. economy until the day that it inevitably bursts. Once it does, there will not be enough money in the entire world to fix it.

Meanwhile, the big international banks will continue to run the largest casino that the world has ever seen. Trillions of dollars will continue to spin around at an increasingly dizzying pace until the day when a disruption to the global economy comes along that is serious enough to crash the entire thing.

The worldwide derivatives market is based primarily on credit and it is approximately ten times larger than it was back in the late 90s. There has never been anything quite like it in the history of the world.

So what in the world is going to happen when this thing implodes? Are U.S. taxpayers going to be expected to pick up the pieces once again? Is the Federal Reserve just going to zap tens of trillions or hundreds of trillions of dollars into existence to bail everyone out?

If you want one sign to watch for that will indicate when an economic collapse is really starting to happen, then watch the derivatives market. When derivatives implode it will be time to duck and cover. A really bad derivatives crash would essentially be similar to dropping a nuke on the entire global financial system. Let us hope that it does not happen any time soon, but let us also be ready for when it does.”
.

Act 4:  The citizens speak


The Depression Of 2011?: 23 Economic Warning Signs From Financial Authorities All Over The Globe
28 May 2010, Daily Markets.com, by Michael Snyder
<http://www.dailymarkets.com/economy/2010/05/28/depression-in-2011-23-economic-warning-signs-from-financial-authorities-all-over-the-world/&gt;

“Could the world economy be headed for a depression in 2011? As inconceivable as that may seem to a lot of people, the truth is that top economists and governmental authorities all over the globe say that the economic warning signs are there and that we need to start paying attention to them. The two primary ingredients for a depression are debt and fear, and the reality is that we have both of them in abundance in the financial world today. In response to the global financial meltdown of 2007 and 2008, governments around the world spent unprecedented amounts of money and got into a ton of debt. All of that spending did help bail out the global banking system, but now that an increasing number of governments around the world are in need of bailouts themselves, what is going to happen? We have already seen the fear that is generated when one small little nation like Greece even hints at defaulting. When it becomes apparent that quite a few governments around the globe cannot handle their debt burdens, what kind of shockwave is that going to send through financial markets?

The truth is that we are facing the greatest sovereign debt crisis in modern history. There is no way out of this financial mess that does not include a significant amount of economic pain.

When you add mountains of debt to paralyzing fear to strict austerity measures, what do you get?
What you get is deflationary pressure and financial markets that seize up.

Some of the top financial authorities in the world are warning us that unless something substantial is done, that is exactly what we are going to be seeing as 2010 turns into 2011.

Of course some governments around the world could try to put these economic problems off for a while by printing and borrowing even more money, but we all know by now that only makes the long-term problems even worse.

For now, however, it seems as though most governments are opting for the austerity measures that the IMF seems determined to cram down the throats of everyone. So what will austerity measures mean for the global economy? Think “stimulus” in reverse.
Yes, things are going to get messy. It looks like there is going to be a great deal of economic fear and a great deal of economic pain in 2011 and the years beyond that.

So are we headed for “the depression of 2011”?
Well, let’s hear what some of the top financial experts in the world have to say….
1)  Economist Nouriel Roubini:
“We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don’t address the issues, you risk having a double-dip recession and one which is at least as severe as the first
one.”
2)  Bank of England Governor Mervyn King:
“Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop.”
3)  German Chancellor Angela Merkel:
“The current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957.”
4)  Paul Donovan, the Senior Economist at UBS:
“Now people are questioning if the euro will even exist in three years.”
5)  Michael Pento, Chief Economist at Delta Global Advisors:
“The crisis in Greece is going to spread to Spain and it’s going to be very difficult to deal with. They are bailing out debt with more debt and it isn’t sustainable. It’s a wonderful scenario for gold.”
6)  LEAP/E2020:
“LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009, and that the size of budget deficits preclude any significant new expenditures.”
7)  Telegraph Columnist Edmund Conway:
“Whatever yardstick you care to choose – share-price moves, the rates at which banks lend to each other, measures of volatility – we are now in a similar position to 2008.”
8)  Peter Morici, an Economics Professor at the University of Maryland:
“The next financial tsunami is emerging and will ripple to America.”
9)  Bob Chapman of the International Forecaster:
“The green shoots of recovery have now turned into poison ivy. The abyss has again been filled with more debt and more fiat currency. In the process the Fed and now the ECB have lost all credibility.”
10)  Telegraph Columnist Ambrose Evans-Pritchard:
“The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”
11) Professor Tim Congdon from International Monetary Research: “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly.”
12)  Reuters Columnist  Iliana Jonas:
“The default rate for commercial mortgages held by banks in the first quarter hit its highest level since at least 1992 and is expected to surpass that by year-end and peak in 2011, according to a study by Real Capital Analytics.”
13)  Paul Krugman, a Nobel Prize-winning Economist:
“It’s not hard to see Japan-style deflation emerging if the economy stays weak.”
14)  Stan Humphries, Chief Economist for Zillow.com:
“Anyone expecting a robust rebound in the housing market … will be sorely disappointed.”
15)  Fox News:
“As the national debt clock ticked past the ignominious $13 trillion mark overnight, Congress
pressed to pass a host of supplemental spending bills.”
16)  Bloomberg:
“The U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits, according to Moody’s Investors Service Inc.”
17)  Peter Schiff:
“When creditors ultimately decide to curtail loans to America, U.S. interest rates will finally  spike, and we will be confronted with even more difficult choices than those now facing Greece. Given the short maturity of our national debt, a jump in short-term rates would either result in default or massive austerity. If we choose neither, and opt to print money instead, the run-a-way inflation that will ensue will produce an even greater austerity than the one our leaders lacked the courage to impose. Those who believe rates will never rise as long as the Fed remains accommodative, or that inflation will not flare up as long as unemployment remains high, are just as foolish as those who assured us that the mortgage market was sound because national real estate prices could never
fall.”
18)   The National League of Cities
“City budget shortfalls will become more severe over the next two years as tax collections catch up with economic conditions. These will inevitably result in new rounds of layoffs, service cuts, and canceled projects and contracts.”
19)  Dan Domenech, Executive Director of the American Association of School Administrators:
“Faced with continued budgetary constraints, school leaders across the nation are forced to
consider an unprecedented level of layoffs that would negatively impact economic recovery and deal a devastating blow to public education.”
20)  Mike Whitney:
“Without another boost of stimulus, the economy will lapse back into recession sometime by the end of 2010.”
21) Kevin Giddis, Managing Director of Fixed Income at Morgan Keegan:
“There is big money making big bets that at a minimum we we’ll have a recession if not a depression that could last for years.”
22)  John P. Hussman, Ph.D.:
“In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle.”
23)    Richard Russell, the Famous Author of the Dow Theory Letters:
Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the
stock market told him.”

Other words of wisdom and woe…
1)  Jean-Claude Juncker,  Chairman of the Eurozone finance ministers and the currency union’s key spokesmen, 7 May 2011: “When it becomes serious, you have to lie”.
2)  George Orwell: “During times of universal deceit, telling the truth becomes a revolutionary act”
3)  Mark Twain: “There are three types of lies: Lies, Damned Lies, and Statistics.”

≈ Intermission ≈ 

 

Why The U.S. Economy Is Not Recovering
21 May 2011, Economic Crisis Writings, by Dick Kazan
http://economiccrisiswritings.blogspot.com/2011/05/why-us-economy-is-not-recovering.html
“20 million people unemployed, underemployed or no longer counted because they have been unemployed too long.
Falling home prices with no bottom in sight and foreclosures and notices of default mounting, as half of all home sales are now foreclosures or short sales in which owners lose their equity and lenders forgive some of the mortgage amount.

This is today’s American economy. Add to that young people also having trouble finding jobs including recent college graduates. And many people are defaulting on their credit cards, student loans and other financing. This is not what economists and pundits predicted. Why is this happening? What’s gone wrong? The answer is simple: 

1)  We are now a military industrial economy.
Coast to coast we produce weapons of mass destruction and delivery systems, including jet fighters, and for the 1st time in our history, we are now fighting perpetual wars. Before World War II, we had about 14 military bases and today we have well over a thousand all over the world. We spend as much on our military as the rest of the planet combined spends on theirs, and all of what we spend is at tax payers expense. It is draining the life out of our economy.
2)  Including its military expenses, and its refusal to tax the people to pay for it, the U.S. brings in only 59 cents for every dollar it spends. This in itself is a formula for financial disaster.
3)  Our finances are so dire, we are willing to slash our Medicare, Medicaid, Educational System (our children’s future) and Social Security (whose funds are now mostly a government IOU) and police and
fire protection in order to support our military industrial complex. Why?
Because they are a massive source of jobs. “Defense” is the one part of our economy that is booming [which includes Homeland Security].
4)  Wall Street and the stock markets are doing well because giant companies have shipped much of their manufacturing overseas and their profits are up. And stocks trade on profits, not on American jobs.
5)  Speaking of being up, gas prices are up as are food prices, clothing prices, doctor and hospital prices, college tuition and the cost of most everything else, as inflation is beginning to take hold. This
is a result of the Fed’s stimulus plans in which they print and circulate large sums of money in the vain hope we can spend our way out of this mess.

No my friend, we cannot solve a debt crisis by spending our way out of it. We will have to confront our problems and solve them, starting with ending our three wars. Then we must slash our military spending, which will bring hardship but hardship is coming anyway as we are going broke. Clearly the two political party monopoly under the control of lobbyists is failing us and it is long past time we
Americans raised our voices and got involved. This was a great nation and it can be great again. We must restore it for ourselves, for our children and for the world.

≈ The show resumes ≈

Act 5:  Consulting the Oracle

Predicting date of economic collapse (TSHTF)
2 Feb 2010, Gold Eagle editorial,  by Ray Elliott
<http://www.gold-eagle.com/editorials_08/elliott020210.html>
“The event that many would like advance warning on is economic collapse. It is an event that most informed economists say is inevitable due to U.S. deficits that are too large to be paid back. Yet, those of us that must work and pay our bills cannot stop what we are doing and dig a hole to hide in every time a new event happens that appears to be the beginning of the Economic Collapse.

We must first make assumptions on what Economic Collapse is. History tells us. All paper money falls into one of two categories, those that have failed and those that are going to fail. They failed in the past (including United States currency) in a spiral of constantly losing value. The federal government continually increases the obligations that it must pay for.
Buyers of federal debt slowly back away from buying long term debt and later will not purchase even short term debt. The government begins buying its own debt by issuing new paper money. As more paper money is issued it loses more and more of its value. When the public becomes aware that the issuance of paper money is out of control, and that holding it weeks or days will result in a loss of
value, they attempt to convert the paper money that they have into assets that retains some value. To do this, they have to remove any cash they have from banks and other institutions and convert it to something else. What ensues is a run on the banks.

When will this happen? We have some clues because of the process that will take place prior to
the event.

The Main Stream Media (MSM) generally is in favor of big government spending and supports the
socialistic policies of the Obama administration. The problem with socialism is that eventually you run out of other people’s money.  At the point that MSM begins to see the hazards of the uncontrolled printing of money, the beginning of the end is near. Then the Main Stream Media will begin to report the REAL MONEY CRISIS. For those that ask, “When will the SHTF?” That is when.

The events that follow this are events that you will not want to be a part of.
•  Long lines will appear at banks for those trying to get their money out while it still has some value.
•  Paper money will be issued in greater and greater denominations.
•  Food and other necessities of life will skyrocket in price.
•  Soon a bank holiday will be declared while the government attempts to control the panic.
•  Rules will be enforced that restrict how much money may be withdrawn at a time.
•  Attempts will be made to “freeze” food prices.
•  Payment for all goods and services will be turned upside down.
•  Everything will rapidly increase in price. Soon, the paper money you have will not buy the things that you need. At some point, $1,000 will not buy a pair of shoes.

The events that follow this are also predictable because they have happened before.
•  Gold and silver become extremely valuable. Pre 1965 silver coins (they still have some silver in them) will become a known standard of value that is accepted by those that still have something to sell.
•  The barter system for goods and services will return.
•  People that want to eat will grow gardens.
•  Most people who have had life savings in 401Ks will be poor again.
•  The winners are the ones that have planned in advance and the ones that still have outstanding loans or mortgages. The mortgages will no longer have any value. Homeowners will be able to send a million dollar note to a mortgage holder and tell them to keep the change. The change will not buy a loaf of bread.
•  Large cities will become dangerous places to be.
•  Those that plan ahead can avoid the most severe aspects of this scenario. It is up to each individual to plan ahead early enough to survive. A following article will outline some suggested courses of actions that any individual can implement.

.

Act 6:  The Public makes sacrifice

Personal Actions You Should Take Before the TSHTF!
Ray Elliott
<http://www.silverbearcafe.com/private/03.11/actions.html>
“In a previous article I discussed when the financial collapse will occur. This report will review some steps each individual should take in advance of the difficult days that are coming. Before going into the details, it is important for you to judge the necessity of following these steps. If you follow them and no collapse occurs, you have lost very little. If you follow them and the collapse occurs, these steps may save your life. If this discussion seems unreal, think about how unreal the world will be when the U.S. cannot pay its bills. Treasury Notes are no longer being purchased by China or Japan. Both are now selling (just like PIMCO). The Fed’s printing press is becoming the sole buyer.

Think about what your days are going to be like when paper money has no value. People that depend on government jobs, Social Security, food stamps, welfare, retirement checks or unemployment checks will no longer receive them. As the system winds down, some checks may be mailed, however; they will have little or no purchasing power. A new method of exchange will begin taking place.

Money in 401K’s will be gone. Money in banks will be worthless. Some people will benefit from the
collapse. Some that have mortgages will find that they now own the property, but no longer have a burdensome loan payment. Larger and larger denomination currency bills will drive out smaller denominations. You will be able to wipe out your mortgage by simply sending your mortgage company a million dollar bill and tell them to keep the change. The change will not buy a loaf of bread. The
banks know this and are making very few loans while foreclosing on others before TSHTF.

Silver coins (pre 1965 have silver in them) will be valuable for purchasing necessities. Gold coins will have great value, but will not be useful for small purchases. One or two ounces of gold may purchase a
home. Other basic necessities will be used for bartering to acquire goods that you need. In Russia, after 1989 or in Argentina, in the late 90’s, liquor was used as money to acquire goods. Producing alcohol requires having a small, home still (for distilling alcohol). Food items that you have stored or produce from your garden, sometimes gets too old for consumption (such as potatoes) and can be converted into alcohol with a still. Alcohol can be used for trading, for powering your generator or even fueling your vehicle. In post World War II Germany (during the German Occupation), poverty was widespread. A pack of cigarettes would purchase several hours of labor. Five gallons of gasoline was
worth a week’s supply of food. These days, medicines will be in demand (even outdated ones). Storing a quantity of aspirin will be useful for trading. Salt will also be used for money (as it was thousands of years ago).

Many have reviewed the need for storing sufficient food supplies. The amount depends on you and how many you need to sustain. Canned goods can be kept for two or more years. Rice and pasta in large bags can be kept in plastic storage boxes in a cool location. A water source and a method of sterilizing water are essential. Water disinfectants cost about one half cent per quart of water. Having a small garden will help feed your family. Storing good quality seeds is essential.

Finding a safe place for your family is more difficult to solve. Large population centers will not be safe. Those that have not prepared will begin taking from those that have prepared. Law and order will be sporadic because few in law enforcement will be paid. You should keep your survival supplies in or near the vehicle you plan on using when you leave. Getting out of town before TSHTF will be much easier than trying to leave later. Quickly relocating to a small town in a farming community will be much safer than remaining in a suburban home near a large city. Visit a small community near you now and set up a safe haven. See if you can arrange a garden and/or camping site. Small rural towns have lots for sale that can be acquired for very little. A small deposit can secure an option to purchase a lot in a small town that will give you a place to park your vehicle (a small motor home would be ideal) and a place for a garden. One quarter acre is more than you will need. Be careful about locating in a more remote location because it can be dangerous. In Argentina, roving bands of thieves routinely raided remote ranches and homes, inflicting both financial and physical harm. A small community is safer and may have an organized defense.

Last, but certainly not least is personal defense. Weapons are required. They can be used for both hunting and defense. Using the same caliber for both hand guns and long guns will save on the types
of ammunition needed to be stored. Nine millimeter is a good choice. A shotgun is both a good hunting weapon and a defense weapon. A 22 rifle is a good weapon to harvest small game for your family. A compound bow also serves both purposes. Having a plan of action when strangers appear is a necessity. In the meantime, you may ask yourself, can you defend your current home? Do you have a safe room? Do you have a guard dog? Do you have a warning system? Do you have friends nearby that would help you? How do you contact them?

As I stated in the beginning, you may never need to use any of these tactics. I pray that you do not. However; if and when TSHTF, you and your family will have a far better chance to survive than those that do not prepare.”

.

Act 7:  and with the Ides of March, the winds blew cold…

The Coming U.S. Depression of 2011/2012: Full of  homelessness, hunger, street  and the emergence of a 3rd party
7 Feb 2011, PBT Consulting
<http://tommytoy.typepad.com/tommy-toy-pbt-consultin/2011/02/the-coming-us-depression-of-20112012-full-of-homelessness-hunger-street-violence-and-the-emergence-o.html&gt;

“The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting a revolution in America, food riots and tax rebellions – all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.

Gerald Celente, the CEO of Trends Research Institute, is publisher of the Trends Journal which forecasts and analyzes business, socioeconomic, political, and other trends, and is renowned for his accuracy in predicting future world and economic events which can send a chill down your spine.

Celente says that by 2012 America will become an underdeveloped nation, that there will be a revolution marked by food riots, squatter rebellions, tax revolts and job marches, and that holidays will be more about obtaining food, not gifts.

“We’re going to see the end of the retail Christmas… we’re going to see a fundamental shift take place… putting food on the table is going to be more important than putting gifts under the Christmas tree,” said Celente, adding that the situation would be “worse than the great depression.”

“America’s going to go through a transition the likes of which no one is prepared for,”said Celente, noting that people’s refusal to acknowledge that America was even in a recession highlights how big a problem denial is in being ready for the true scale of the crisis.

Celente, who successfully predicted the 1997 Asian Currency Crisis, the sub-prime mortgage collapse and the massive devaluation of the U.S. dollar, told UPI in November last year that the following year would be known as “The Panic of 2008,” adding that “giants (would) tumble to their deaths,” which is exactly what we have witnessed with the collapse of Lehman Brothers, Bear Stearns and others.

He also said that the dollar would eventually be devalued by as much as 90 per cent. The consequence of  what we have seen unfold this year would lead to a lowering in living standards, Celente predicted a year ago, which is also being borne out by plummeting retail sales figures.

[Movie image above: Bartertown where futureworld power structures fought over ‘pig shit- methane energy’; a time and condition which brought about roving, mobile gangs that killed and plundered their way across  the land.   This is the view of ‘collapse’ at the grass roots, an image from the movies.]

The prospect of revolution was a concept echoed by a British Ministry of Defense report last year, which predicted that within 30 years, the growing gap between the super-rich and the middle class, along with an urban underclass threatening social order would mean, “The world’s middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest,” and that, “The middle classes could become a revolutionary class.”

In a separate recent interview, Celente went further on the subject of revolution in America.There will be a revolution in this country,” he said. “It’s not going to come yet, but it’s going to come down the line and we ‘re going to see a third party and this was the catalyst for it: the takeover of Washington, D.C., in broad daylight by Wall Street in this bloodless coup. And it will happen as conditions continue to worsen.”
Internet image: This is how marginal people are affected – before the ‘main event’ unfolds; its what we see at the grass roots, this is reality.]

“The first thing to do is organize with tax revolts. That’s going to be the big one because people can’t afford to pay more school tax, property tax, any kind of tax. You’re going to start seeing those kinds of protests start to develop.”
“It’s going to be very bleak. Very sad. And there is going to be a lot of homeless, the likes of which we have never seen before. Tent cities are already sprouting up around the country and we’re going to see many more.”
“We’re going to start seeing huge areas of vacant real estate and squatters living in them as well. It’s going to be a picture the likes of which Americans are not going to be used to.
It’s going to come as a shock and with it, there’s going to be a lot of crime. And the crime is going to be a lot worse than it was before because in the last 1929 Depression, people’s minds weren’t wrecked on all these modern drugs, over-the-counter drugs, or crystal meth or whatever it might be..

So, you have a huge underclass of very desperate people with their minds chemically blown beyond anybody’s comprehension.
Above left, territorial boss ‘Humongous’ from movies. Right: territorial bosses- the Council on Foreign Relations.
Below left, citizen Mad Max, just struggling to stay alive from the movies. Below right, a suburban family with short term survival supplies. Reality.

The George Washington blog has compiled a list of quotes attesting to Celente’s accuracy as a trend
forecaster.
•  “When CNN wants to know about the Top Trends, we ask Gerald Celente.” – CNN Headline News
•  “Gerald Celente has a knack for getting the zeitgeist right.” – USA Today
•  “There’s not a better trend forecaster than Gerald Celente. The man knows what he’s talking about.” – CNBC
•  “Those who take their predictions seriously …consider. Gerald Celente and the Trends Research Institute.” – The Wall Street Journal
•  “Gerald Celente is always ahead of the curve on trends and uncannily on the mark … he’s one of the most accurate forecasters around.” – The Atlanta Journal-Constitution
•  “Mr. Celente tracks the world’s social, economic and business trends for corporate clients.” – The New York Times
•  “Mr. Celente is a very intelligent guy. We are able to learn about trends from an authority.” – 48 Hours, CBS News
•  “Gerald Celente has a solid track record. He has predicted everything from the 1987 stock market crash and the demise of the Soviet Union to green marketing and corporate downsizing.” – The Detroit New
•  “Gerald Celente forecast the 1987 stock market crash, ‘green marketing,’ and the boom in gourmet coffees.” – Chicago Tribune
•  “The Trends Research Institute is the Standard and Poor’s of Popular Culture.” – The Los Angeles Times
•  “If Nostradamus were alive today, he’d have a hard time keeping up with Gerald Celente.” – New York Post
So there you have it – hardly a nut job conspiracy theorist blowhard now is he? The price of not heeding his warnings will be far greater than the cost of preparing for the future now. Storable food and
gold are two good places to make a start.”

≈≈≈  ≈  ≈≈≈
While the future seldom unfolds the way we imagine, it may come in a  flavor that is not surprising. We may not know the exact height a tide may rise to on the beach, but we can certainly tell the direction the water is flowing; similarly, without seeing the wind, we can feel its pressure and see its effects. Even within a decade, the U.S.A may not experience literal secession as predicted by the Russian professor, but several regions may suffer patchy, severe economic depression, areas within other regions  may become wracked by moderate scale social/racial upheaval requiring federal military support…
.

“Dark clouds gather on the global horizon, the wind direction is changin’.
 Flashing light in the darkening sky, promise storms gale soon rising ”.
5-29-2011 Mr. Larry]

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Quietland: Does the future begin here?

(News & Editorial/ Quietland: Does the future begin here?)

It’s not the way “we” live, but it is out there and like a deadly pandemic germ held in bay by modern medicine and communications, it is a threat. Once we fall, once civilization has taken a hit and our social structures become fragmented, the shocking images of “underground poverty” and waste accumulation will spring into our daily visual lives across the environment. Today these seeds lie quiet and dormant,  seemingly non existant or at least remote from our city or neighborhood. But, given life by the circumstances discussed often in this blog, they can spring to live in days.

.
A. Buried Alive in Sin City: Underground Living in Las Vegas
dornob.com
Pasted from: http://dornob.com/buried-alive-in-sin-city-underground-living-in-las-vegas/

QL1

Buried beneath the exuberant excesses of the most infamous 24-hour party town on the planet lies a second, semi-secret city with hundreds (if not thousands) of full-time inhabitants. Its shadow population occupy spaces in the over 200 miles of infrastructural support and storm drains – all constructed to support the over-the-top luxury resort and casino complex on the surface above. This is the flip-side of Sin City (photographed by Austin Hargrave) you will not see on the casino-sponsored maps or in the company of smiling tour guides.

B.  Garbage City: An Unbelievable Real-Life Urban Wasteland
dornob.com
Pasted from: http://dornob.com/garbage-city-an-unbelievable-real-life-urban-wasteland/

QL2

No, it is not just trash talk or slang for some city slum – this place really is known as Garbage City with good reason: its denizens live in a surreal urban landscape with waste stuffed in every spare corner, stacked on the sidewalks and surrounding every structure – captured above by photographer Bas Princen.

QL3

More amazing than the trash-strewn architecture and garbage-stuffed city streets is the strange fact that this place is fully occupied and abuzz with activity. People live, work, eat and sleep within this object graveyard outside the city center of Cairo, Egypt. Spaces not occupied by people are given over to livestock (fed with trash scraps) and guerrilla urban gardens.

QL4

Officially known as Manshiyat Naser, this district has shops and apartments like any other, but its residents earn their keep by specializing in collecting, sorting and recycling specific types of trashed materials. A group of children can be found sifting for plastic bottles while an organized team of women scours the remnants for cans or glass. Other items are burned locally as fuel.

QL5

While it might not meet any health standards on Earth, the unique urban phenomena is arguably sustainable in a certain sense – even ‘green’ in a some ways. Working in the area does provide some basic necessities for its inhabitants, though water, sewage and (perhaps ironically) even official garbage collection services are not available to those living within its trash-cluttered walls.

QL6

Anyone who has visited Las Vegas and taken the monorail has seen the incredible parking structures required to accommodate travelers – just imagine those same huge stacks of unused space laid out beneath the grid of the city, so many dark subterranean corners ready to be turned into ersatz dwellings. Some of these places have been turned into virtual homes, complete with running water (for DIY showers and sinks), furnished living rooms and real (salvaged) beds with mattresses and blankets – most likely leftovers from the hotels above.

QL7

A city of abundant means, Las Vegas celebrates opulence and waste from the tourist-oriented service industries abounds (from trashed food to furniture objects). As such, it is in some ways an easy place to live homeless – or in a relatively comfortable, cool and semi-safe underground squat. Between begging and swiping forgotten winnings left behind by drunks, there is also cold cash and hard credit to be had. Some denizens cobble together impressive collections of objects and elaborately decorate their dwelling spaces.

QL8

None of this need glamorous the lifestyles of those living below the streets of Sin City. This second population faces dangers from disease, animals, flash floods and of course one another as well. Some look on the bright side: a relatively temperature-controlled and autonomous space to call home. Others have fallen victim to vices (including alcohol, drugs and gambling – all offered in abundance on the streets above) that drove them quite literally underground.

[Given the right set of not so remote circumstances, places such as these could become the brave new world from which future survivors leave, to salvage parts from a collapsed social environment  above ground. Alternatively, we could live in an environment where utility services have failed or are overwhelmed, such dystopian lands already exists in 3rd world abundance.
Anyone for a global economic collapse, major volcanic eruption or USA centric EMP to expand this premise to your neighborhood?   lfp]

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Everything Won’t Be Alright

(Survival Manual/ Prepper articles/ Everything Won’t Be Alright)

Everything Won’t Be Alright
4 September 2012, The Automatic Earth, Ashvin Pandurangi
Pasted from: http://theautomaticearth.com/Earth/everything-isnt-alright.html

“Looking around at those… around me – family, friends, acquaintances and random faces in the crowd of apathy – the level of complacency is so concentrated I can taste it, yet I can’t even describe how bad it tastes. I’m not really talking about the understanding people lack about the numerous predicaments we face as a species – that’s definitely there too… but what I’m talking about is even worse. It’s the assumption that we can just go about our day-to-day lives, doing our day-to-day work, having our day-to-day fun… and humanity will eventually heal itself, no matter how bad the injuries sustained.

This is a cultural phenomenon that has infested the Western world, and refuses to be eradicated. It is where many of us ultimately place our hope and stake our lives, sometimes without even realizing we are doing it. We previously discussed the entertainment enemas that have penetrated modern culture (and the lives of deluded teenagers) in Culturally Programmed Myths of Omnipotence. They have given us the vision that we can always become bigger, “better” and stronger as individuals and nations, evolving towards God-like glory, no matter what obstacles are in our way – all of the stories about superheroes, vampires, werewolves, wizards, robots and aliens – it’s all about the propaganda of pernicious power.

We even see this mentality taking root in academia and scientific research through the field of “transhumanism” (very well portrayed in the documentary, TechnoCalyps). As you can probably guess from the name, transhumanism tells us that we are on the way to becoming something more, something other, than human beings. Forget random mutation and natural selection, the transhumanist says – we can circumvent all of the slow evolutionary nonsense that we only theorized about a century ago. Now we can transform ourselves into a new species over the course of a few decades with the help of modern technology and “intelligent designers”. Just a little bit ironic, don’t you think?

Ironic, yet frighteningly appealing to the broader public. Yet another aspect of this cultural programming is the idea that all troubling stories have a happy ending – that all good things come to those who [sit on their ass and] wait. We have obviously been fed this diet of propaganda by movies and television on a consistent basis over the course of decades. You sit through one and a half hours of action-packed plots with drama, romance, suspense, twists and turns mixed in… and then the whole thing comes together and the heroes prevail in the last 20 minutes. That’s truly how many people view the world now – an epic movie that is approaching its glorious credits, just so the sequel can come out next year.

This virulent mentality is not only quarantined to the mainstream materialistic culture, but is also evident in many alternative spheres of cultural milieu, even penetrating its way into the so-called “Doomer” crowds. Many people who are otherwise extremely pessimistic about the current world-system and its effects on human civilization have found refuge in the idea that we are entering a “New Age” of human existence. It may be initially characterized by pockets of chaos and upheaval, but it will end with a radical spiritual transformation that results from the natural evolution of human consciousness.

The Universe will re-balance itself and bring the blessings of peace and harmony to ALL of its inhabitants – “all” being those who are mentally programmed to properly decode its gifts. There is really nothing “new” about these concepts, though – they borrow many of their underlying tenets from the ancient religions of Hinduism and Buddhism. For example, a prominent prophecy within sects of the latter is the arrival of the Maitreya Buddha at a time when humans have completely lost touch with their true nature as immaterial and interconnected parts of the divine whole (a time like now, perhaps?).

The Maitreya may not be a majority view in “New Age” circles, but it reflects a general mentality that has submerged itself in both the mainstream and alternative streams of modern culture, presenting itself to us in many different forms. There is an entire industry based around the concept of self-help gurus teaching people [much too] simple ways to become “happy, healthy and successful”, no matter what is going on in the world around them. Yet we all know that there is no money to be made from a product that truly helps its patients (customers).

They’re selling us exactly what we want to hear – that the reality of human suffering in the world is not actually as bad as it appears to be; that there is more truth in the fictional movies we have seen than in our real lives. Maybe if we can just find that slick-looking guy in the black leather jacket and cool shades, snatch the red pill and wash it down with a bottle of Absinthe, the truth will be revealed to us and everything will be alright in the end. Or maybe the blue pill will give us a better high…? Either way, I’m here to say that we should be really careful what we wish for, because there is only a razor thin line between the truth and fiction these days.

Most importantly, though, I am here to make clear that no one is immune from the mentality that “everything is alright” or “everything can be alright”, including me. I have my own personal beliefs about how humanity can be preserved and even perfected, and I don’t believe there is anything inherently wrong with that. What’s wrong is when I forget to remind myself where those beliefs come from and where they are truly leading me. Do they simply make me feel good and comfortable and “enlightened”? Am I simply willing to swallow the red pill because someone slick tells me it will “open my eyes”?

Or is there something more fundamentally true about why I have deep concerns and why I have ultimate hope. What sacrifices are really required of myself and others to reach our maximum human potentials? I believe these are questions we must repeatedly ask ourselves, because the moment we become too comfortable and too uncritical of our beliefs, or the beliefs of others around us, is the moment that we become apathetic and willing to go wherever the world takes us. It is only when we confront the uncomfortable truths of our situation in this world that we will be able to become the best we can possibly be.”

Current News headlines (the list is growing) (Mr. Larry)
The middle class is being destroyed
Private Debt Is Crippling the Economy
Average Credit Card Interest Rates Are Way Too High
Too Big To Fail Banks Get Bigger, American Dream Turns Nightmare
Does shadow banking require regulation?
A Cartel of Big Banks Is Hurting the World Economy By Manipulating Derivatives
JPMorgan’s Big Loss: Why Banks Still Haven’t Learned Their Lesson
Despite a Negative Fund Balance the FDIC is Insuring $6.1T in Deposits
 Gas prices shouldn’t be high, but are: What gives?
France Interior Ministry threatens to expel Muslims
EU Police to Patrol Internet for Political Enemies Opposed to “European Integration”
Hypocrisy Alert: The Obama ‘Royal Family’ Continues Spending Spree with Lavish Vacations
China Challenges Obama’s Asia Pivot With Rapid Military Buildup
Russia, China seal major gas deal, bypass US dollar
Russia’s secret weapon: crashing US economy by collapsing petrodollar

Democracy and the bathroom metaphor
Two people live in an apartment and there are two bathrooms, then both have the freedom of the bathroom. You can go to the bathroom anytime you want, and stay as long as you want, for whatever you need. Everyone believes in the freedom of the bathroom. It should be right there in the Constitution. But if you have 20 people in the apartment and two bathrooms, no matter how much every person believes in the freedom of the bathroom, there is no such thing. You have to set up times for each person, you have to bang at the door, “Aren’t you through yet?” and so on.

The same way democracy cannot survive overpopulation. Human dignity cannot survive it. Convenience and decency cannot survive it. As you put more and more people into the world, the value of life not only declines, it disappears. It doesn’t matter if someone dies. The more people there are the less one individual matters. …………………….Issac Asimov

US Population, no one is talking about it! Could it be the root of our problems? Ya think?
1775 – the founding of our nation, and at about the time the Constitution was written, this country had a population of 2,500,000.
7 September 2012: Now, a mere 237 years later,  we have a population of 313,459,820, which is 125 times larger than in 1775 when our Constitution was drawn up.
We need to stop immigration and reduce the US population about 15% so that there is no unemployment and we are eating within our means. In the coming 20 years or less, when the downside from Peak Oil becomes manifest, that 15% reduction may need be stretched to…..ummmm 47%. Mr. Larry.

The graphic below depicts the power and money flow trickling down through the US and global economy, its pathway into the not to distant future; of course with different named, but substantially similarly sub categories. We all share the common end point, one of deep concern. Mr. Larry.

In the meanwhile, as our train hurdles down the track, while everyone is metaphorically comfortable in their seat watching life pass by, unaware that historically, “global”‘ debt scenarios do not end well for the public at large, you should:
1.  Keep a minimal amount of cash in the bank, keep the balance in a safe place that only your family knows about. (make sure you have a lot of smaller bills, $1, $5, $10 and rolls of change; you might have to pay exact cash for groceries.
2.  Obtain a few hundred ounces of silver coin (Silver Eagles and US pre 1965 silver change). Buy the silver only after you have some cash set aside.
3.  Have a few ounces of gold coin (Gold Eagles), figure that 1 ounce equals a month’s living expenses. Buy gold only after you have the silver coins.
4.  Have  some food (3+ months) in nitrogen packed cans in long term storage, and use bulk rotation in your well stocked cupboards.
5.  Have various household supplies in storage.
6.  Be prepared to protect your home from  invasion. Everyone approaching their mid teens should be part of your home security plan.
[Photo: Smith & Wesson Military & Police 9mm (S&W M&P9) Barrel Length 5″, Capacity 17 + 1]

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Bank your own

Bank safe(News & Editorial/ Bank your own)

1, 2, 3 your storage of value for the next several decades
1)  Maintain your own bank of value,  store your long term and retirement savings  in useable, exchangeable commodities, ie.,  government stamped and milled precious metal  coins.
2)  Don’t hold debt as “wealth” =  fiat national paper currency, continued death by inflation.
3)  Don’t hold or trust any more paper “money” to your bank than needed for monthly  transactions.
Mr. Larry

A.  Whom To Believe On Gold: Central Banks Or Bloomberg?
26 Mar 2013, Gold-Eagle.com, by Jeff Clark
Pasted from: http://www.gold-eagle.com/editorials_12/jclark032613.html

Bloomberg reported recently that Russia is now the world’s biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that’s $30.1 billion worth of gold.

Russia isn’t alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records.

The following table lists the countries that have added to their gold reserves this year, while the second one tallies those that have been selling. You’ll see how recently each country has reported, along with its percentage increase.

Changes in Central Bank Gold Reserves in 2012   (Million Troy Ounces)
Year-End 2011 YTD 2012 Last Reported Net Change Percent Change
Countries Increasing Reserves
Turkey 6.28 11.56 Dec 5.283 84.1%
Russia 28.39 30.79 Dec 2.405 8.5%
Bank for   International Settlements 15.6 16.71 Dec 1.114 7.1%
Brazil 1.08 2.16 Dec 1.08 100.0%
Philippines 5.12 6.2 Nov 1.079 21.1%
Kazakhstan 2.64 3.71 Dec 1.07 40.5%
South Korea 1.75 2.71 Nov 0.965 54.9%
Iraq 0.19 0.96 Nov 0.773 405.3%
México 3.41 4 Dec 0.596 17.3%
Paraguay 0.021 0.263 Sept 0.242 1152.4%
Ukraine 0.9 1.14 Dec 0.239 26.7%
Belarus 1.21 1.37 Dec 0.164 13.2%
Tajikistan 0.15 0.2 Dec 0.05 33.3%
Brunei 0.06 0.09 Oct 0.031 50.0%
Mozambique 0.08 0.11 Oct 0.025 37.5%
Serbia 0.46 0.48 Nov 0.022 4.3%
Jordan 0.41 0.43 May 0.02 4.9%
Kyrgyz Republic 0.08 0.1 Dec 0.014 25.0%
Greece 3.59 3.6 Dec 0.008 0.3%
Mongolia 0.11 0.12 Nov 0.004 9.1%
Suriname 0.071 0.074 Dec 0.003 4.2%
South Africa 4.02 4.02 Nov 0.003 0.0%
Moldova 0 0.002 Dec 0.002
Bulgaria 1.28 1.28 Dec 0.001 0.0%
Pakistan 2.071 2.072 Dec 0.001 0.0%
Subtotal Gross Increases 15.2
Changes in Central Bank Gold Reserves in 2012   (Million Troy Ounces)
Year-End 2011 YTD 2012 Last Reported Net Change Percent Change
Countries Decreasing Reserves
Sri Lanka 0.32 0.12 Sept -0.204 -62.5%
Germany 109.19 109.04 Dec -0.159 -0.1%
Czech Republic 0.4 0.37 Dec -0.028 -7.5%
Macedonia 0.22 0.22 Dec -0.001 0.0%
France 78.3 78.3 Dec -0.001 0.0%
Malta 0.01 0.01 Dec -0.001 0.0%
Subtotal Gross Decreases -0.39
Total Net Change 14.8
Sources: IMF, CPM Group. Data as of 1-31-13.

Based on current data, the net increase in central bank gold buying for 2012 was 14.8 million troy ounces – and that’s before the final 2012 figures are in for all countries.

This is a dramatic increase, one bigger than most investors probably realize. To put it in perspective, on a net basis, central banks added more to their reserves last year than since 1964. The net increase – so far – is 17% greater than what was added in 2011, which was itself a year of record buying.

Here’s a picture of total central bank reserves since the financial crisis hit.

Bank buy gold

Whatever gold’s price movements, positive or negative, central bank officials have continued adding a lot of ounces to their reserves.

But this understates the case, because most of the data exclude China, as well as a few other small countries. China last officially reported gold reserves in 2009, so the totals in the chart since then exclude whatever its purchases might have been.

Here’s where it gets interesting: Bloomberg claimed that Russia has been a bigger buyer of gold over the past decade than China – by a full 25%. Based on data about gold imports through Hong Kong and the fact that, for the most part, Chinese production doesn’t leave the country, it seemed to me that this could not be right.

The Chinese central bank holds an official 1,054 tonnes of gold in its reserves. Bloomberg states, based on IMF data, that China has added somewhere around 425 tonnes over the past decade.

I can’t say exactly what the correct number is, but the Bloomberg number almost has to be wrong. Here’s why:

  • Gold imports through Hong Kong in December alone hit a record high of 109.8 tonnes.
  • Imports for 2012 also hit a record high of 572.5 tonnes.
  • If you add 2012 mine production – remember that China is now the world’s largest gold producer – roughly 970 tonnes of gold was delivered to various entities within the country last year.
  • Cumulative imports since 2001 have reached 1,352 tonnes.
  • Since 2001, imports plus production total a whopping 4,793 tonnes.

So Bloomberg is essentially saying that roughly 10% of the total gold available inside the country during that period was added to China’s reserves. While it’s true that Chinese citizens are buying a lot of gold (though perhaps more silver), it’s highly doubtful that private parties bought 90% of all the gold brought to the Chinese market during this period. I think – but can’t prove – that China’s central bank is buying more gold and at a faster pace than its Russian counterpart.

Jim Rickards, a highly respected author and hedge fund manager, said last month that China has probably already accumulated between 2,000 and 3,000 tonnes of additional gold reserves. If he’s right, that would be roughly double or triple the 1,054 tonnes it reported in 2009 – not the 40% increase Bloomberg’s numbers suggest.

At the very least, we can say that the Bloomberg report left consideration of China’s imports and production out of its report naming Russia the top gold buyer of 2012. Okay…but so what?

Well, Jim thinks the next big catalyst for gold will be an announcement from China about its reserve position. Here’s what he told me in late December:

“The catalyst for a spike into the $2,500 to $3,000 price range for gold will be an announcement by China, probably in late 2013 or 2014, that they have acquired 4,000 tonnes or more in their official reserve position. This will put China on an equal footing with the US in terms of a gold-to-GDP ratio, and validate gold as the real foundation of the international monetary system. Once that position is validated, gold will move to the $7,000 range in 2015 and beyond.”
Even if Jim’s estimate is high or China doesn’t make an announcement until later, it’s clear that central banks around the world are buying gold in record quantities.

It almost makes you wonder… do they know something we don’t?

The Russians gave us some hints.

Evgeny Fedorov, a lawmaker for Putin’s United Russia Party, said last week, “The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound, or any other reserve currency.”

President Vladimir Putin told his central bank not to “shy away” from the metal, adding “After all, they’re called gold and currency reserves for a reason.”
The Chinese have been quiet on this topic recently, after being very vocal a few years ago. Here’s a recent quote.

The current international currency system is the product of the past,” said Hu Jintao, General Secretary of the Communist Party of China.
Others have provided clues as well.

“We’re in the midst of an international currency war,” said Guido Mantega, finance minister of Brazil.

“Quantitative easing also works through exchange rates… The Fed could engage in much more aggressive quantitative easing, to further lower the dollar,” said Christina Romer, former chair of the Council of Economic Advisors.

Economist Kyle Bass recently spoke to a senior member of the Obama administration about its planned solutions for fixing the US economy and trade deficit. When he asked, “How are we going to grow exports if we won’t allow nominal wage deflation?”, the answer he got was, “We’re just going to kill the dollar.”
Yes, we’re talking about the US dollar. Perhaps some investors have gotten complacent about the risks to the world’s reserve currency – but not central bankers. It’s not hard to see why: whether they admit it or not, central bankers must know what it means to run the printing presses the way the US has since 2008, even if price inflation is not immediately obvious. It’s no surprise they want to hedge their bets, moving more reserves into something with actual value… something that can’t be debased by a few computer keystrokes by an increasingly unfriendly government.

The US dollar has been the world’s reserve currency since WWII. That’s beginning to change, and the movement into gold is just one facet of that change. The buying by central banks is exactly what one would expect to see as we approach the end of the dollar hegemony.

The message from central banks is clear: they expect the dollar to move inexorably lower. It doesn’t matter that it’s been holding up against other currencies or that the economy might be getting better. They’re buying gold in record amounts because they see a significant shift coming with the status of the dollar, and they need to protect themselves against that risk.

This leads to a second message: gold is not overpriced, in spite of the 500%+ increase since 2001. Indeed, with the recent correction, central banks are likely buying more, even as you read this.

Central bank gold buying will continue, of that we’re certain. Even after Putin’s binge, gold accounts for only 9.5% of Russia’s total reserves. China’s 1,054 tonnes is roughly 2% of its reserves. It’s clear that both countries, along with others, have decided to accumulate as much gold as they can, as quickly as they can, before the dollar’s decline becomes more pronounced… and permanent. This could explain why some central banks don’t publicize their purchases. It also means that Bloomberg and other mainstream media outlets could be caught off guard when China announces higher gold reserves than expected – perhaps much higher.

Clearly we should take notice. If central banks are preparing for a major change in the value of the dollar, shouldn’t we? The fact remains that the US dollar cannot and will not survive the ongoing abuse heaped upon it by government planners and federal officials. That not only means the gold price will rise, but that many, if not most currencies, will lose a significant amount of purchasing power. This has direct implications for all of us.

Embrace the messages central bankers are telling us – the ones they tell with their actions, not their words. Buy gold. Your financial future may very well depend upon it.

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B.  Guest Post: The US Debt Crisis – How High Will It Go?
01/05/2013, Zerohedge.com, submitted by Tyler Durden
Pasted from: http://www.zerohedge.com/news/2013-01-05/guest-post-us-debt-crisis-how-high-will-it-go
Authored by Chris Ferreira, originally posted at Economic Reason blog,

The implications of the US debt crisis are not well understood in most circles, and it is not widely spoken about in the media and during important political debates. The irony is that the US debt is so significant that it plays a monumental role in finance and modern political strategy. The debt poses great risks moving forward, and yet it is referred to in only the vaguest of terms.

bank how much is it

Here is why the US debt must grow every year and why it is mathematically impossible for it to continue forever.

Before we can understand why the debt must grow every year, here is a visual representation, to scale, of how much the current debt is standing at. Each tall uniform column in the background of the picture below refers to a pile of $100 bills stacked one on top of another. Each “tower of debt” consists of 10 x 10 fork-lift palettes that reach out into the sky and are higher than the old World Trade Center buildings. These towers of debt represent $US 16.394 trillion. However, by the time you wake up to read this, it will be larger than that. DemonOcracy does great work on visual representation of the US debt levels.

Why did the US debt grow to these proportions?

Short answer: the US government spends more than what it receives in revenue. In 2012, the US federal government expects to receive $2.5 trillion in revenue, while the total spending carried out by the federal government is $3.8 trillion. The difference ($1.3 trillion) is debt piled onto of the previous debt.

To put $1.3 trillion into context, it is approximately $3.56 billion a day. To make matters worse, the current debt does not take into consideration federal obligations such as social security, Medicare, pension, and retiree health promises. According to David Walker, former controller of the US, when these unfunded programs are added to the enormous debt, it stands at $70 trillion and growing–that is $10 million per minute!

Seventy trillion dollars is over four times the debt in the picture on your left, dwarfing the current US GDP; in fact, it is approximately the world’s annual GDP in 2011.

The government allows for the debt to continue to grow by adding new debt on top of old debt plus compounded interest. Instead of paying back the debt, the government just borrows more to cover previous interest. The interest payments on the debt is over $1 billion a day. When “Uncle Sam” takes out a loan, it is called a bond (I.O.U.). These bonds are purchased by investors, banks, and foreigners. These bonds are a promise to pay capital plus interest. What “Uncle Sam” does, essentially, is pay his investors with his credit card and create new loans to cover interest.

Talk about short-sighted finances with no discipline.

Compounded interest has allowed the debt to grow exponentially, and has reached, in my opinion, unsustainable levels where the debt is reaching at the vertical portion of the “hockey stick” formation.

bank debt ceiling

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.
……….Albert Einstein

How does the US government allow the US debt to grow?
Doing the “right thing” is usually political suicide for politicians. Cutting expenditure to pay its bills to pay down the debt will make the economy implode. Instead, the government in power continues its daily activities and promotes new social programs to promote reelection. Almost half of the spending done by the US government goes to entitlements (Medicare, Medicaid, social security) [Oops! I have to disagree here. My Social Security check is NOT an “entitlement”. This money was taken from my paycheck for over 40 years, not because I couldn’t save, but by a Federal law that forced my employers to extract the income. They took the money and instead of saving and investing the dollars in profitable pursuits, spent the dollars as fast as they took it in. Social Security has always been broke, there was NEVER an account with we Employees funds saved. Now that MY RETIREMENT SAVINGS have been squandered by those who “knew better” and took the money, the dysfunctional group purporting to “lead” us are weaseling out of paying us back by falsifying inflation rates and berating Social Security benefit recipients as “entitlements” – similar in status to Food stamps, WIC, Obama phones, union bailouts, etc. Mr. Larry] . If any cuts are carried out in this sector, you can expect riots on the street (approximately 28% of the US population are baby boomers and 80% of investments and laws are carried out by this powerful demographic.) Cuts to entitlements are highly unlikely!

bank gov spending

The continuous debate on raising the debt ceiling is all about a government mismanaging its money and not being able to control it–much like a child with no discipline. Since debt is being mismanaged, it has caused many distortions in the markets, and yet the debt is allowed to grow because of the US Congress. The debt ceiling has been increased 10 times since 2001. If the debt ceiling were actually a ceiling, the market and debt distortions would have imploded the economy–an implosion necessary for the economy to restore its equilibrium and liquidate all inefficiencies.

“Too big to fail” is absolute nonsense.

Paying back investors, costly wars, entitlements and bailing out the “financial terrorists” (who caused the crisis) all add to the national debt and to the dysfunctional economy that continues to operate until its debt will cease to grow. The problem with this system is that it created significantly more credit (someone is the creditor to all the debt) than “cash” money (money in your wallet). Every time debt expands, the credit supply also expands.

According to the FED, the Total Credit Market Debt Owed (TCMDO) is approximately 53$ trillion and 2.4$ trillion in the true money supply (M1). In other words, cash money is approximately 4.5% of credit (TCMDO/M1).

The result to our economy is that “boom” periods are hardly driven by cash money, as cash money is insignificant in relation to credit. Credit is what drives the markets, and it is this same credit that “busts” the markets as well, in times of credit contraction. In order for debt to expand, someone must be lending the US this money. At the moment, the lenders are China, Japan, and the OPEC countries.

But why do they continue to buy this debt?
Because they have too.
The US Dollar is the reserve currency of the world. You need it to buy oil, a vital component of any economy. Since other countries like China cannot print US dollars at their leisure, they have to get it from somewhere. They get it from trade with the US. The US buys products in Asia and the rest of the world with US dollars, and in turn these same dollar surpluses are used to buy oil and US bonds, creating a much needed artificial demand for US dollars.

This is also how the enormous US $558 billion trade deficit in 2011 was financed. The US has been in a trade deficit since the 1980′s and it continues the grow as jobs and manufacturing are being lost to more competitive nations. The trade deficit also accounts for the national debt. The financing of the debt creates artificial demand for US bonds which helps lower the interest rate and coincidentally helps to raise the debt levels even higher.

The table below shows the leading foreign holders of US debt, which are China and Japan, followed by the OPEC countries. These are the main financiers of the US trade deficit.

bank treasury holders

But here is the Achilles’s heel for the US debt scheme:
In order to maintain and continually expand the debt, the US dollar needs to remain the reserve currency. In order for there to be continuous demand for these dollars and debt instruments, the US dollar needs to maintain a hegemony over competing currencies. Any threat to the dollar needs to corrected immediately. or else confidence in the US dollar will be quickly eroded and the subsequent tsunami of US dollars abroad rushing into the US will cause hyperinflation as never seen before.

William R. Clark’s excellent book, Petrodollar Warfare, treats this issue precisely, going in depth into the Petrodollar collapse and how the US maintains its dollar supremacy with its current imperialistic foreign policy. This gem of a book is a definite read for anyone wanting to know how the US truly maintains its power on the world stage.

Undoubtedly, the extent of US debt would never have been possible had the US dollar not been the reserve currency and had there been less favourable global trade policies to provide a channel for the distribution of dollars.

Why must the debt grow every year?
To keep the debt-servitude paradigm going. To increase economic activity in a country operating in this type of system, you need to increase the level of credit and thus debt grows in tandem. This is self serving: if debt is the “fuel” to increase economic activity, interest payments will become larger and larger, until eventually it reaches a point where debt can no longer be increased. This point is known as the Minsky moment–when there is no net benefit to extra debt.

Adding debt, both public and private, creates an environment of servitude among the population while the banks are generating extra profits. Through their lobbyist groups, the financial terrorists create favourable laws to keep people enslaved with debt.

Real estate, for instance, is a heavily subsidized investment; such subsidies entice people to purchase real estate and as a result, people are unwittingly working for the banks. In a real free market, people save money for a purchase.

The word “save” is becoming archaic in this debt servitude paradigm, a paradigm that was build on sand and cards and that can and will eventually collapse. The foundation, of course, is confidence in the US dollar.

So there we have it, in our “creditopia” world, if debt does not expand, the economy cannot grow and jobs cannot be created. In order to increase debt, foreigners have to continually finance the ever growing debt by purchasing government bonds and selling consumer products to the US. In turn, the US must increase the level of consumption, decrease savings, and eliminate the threat of any nation posing a risk to the US dollar hegemony. Is this a symbiotic or a parasitic relationship? Is is certainly a relationship that cannot grow forever. It poses an economic risk for ALL nations due to the interconnectedness of the global economy.

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The end of the Euro? Global markets destabilizing.

Market Threats for 2011 and into 2012
[√]  #1  The European Union (Euro down – in progress. ‘Union’ – soon to follow)
[  ]  #2  The Municipal Bond Market
[  ]  #3  The US Foreclosure Pipeline
[  ]  #4  US Unemployment (give this a month or two to begin the next leg up)
[  ]  #5   China (tic, tic, tic…)

[Internet image: Somewhere in China  Hmmm. Lots of decently attired working aged folks. People walking, going about their business;  getting their exercise. No McDonald’s in sight. No apparent obesity problems either. L.]
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Krugman: Did the euro just enter its death throes
9/11/2011, America blog, by Gaius Publius
http://www.americablog.com/2011/09/krugman-did-euro-just-enter-its-death.html

“Friday we wrote about the striking down-move in the euro. (Here’s a short-term chart; here’s a longer-term one.

Above: LONG TERM CHART showing lower highs and lower lows. [L]

Above: SHORT TERM CHART, 2011. The ‘top is in and a downleg is occurring. [L]

The up-move that started in mid-2010, from $1.20 to $1.45(ish) is the eurozone trying to fix its problems by making sure troubled economies are able to make debt repayments to bankers.

Those attempts included (1) austerity (lots of it); then (2) preventing defaults by offering lower-interest loans to troubled governments; then (3) an attempt to create “Eurobonds” as a source of funds to help these same governments. Only debt restructuring and debt forgiveness are off the table (because bankers would then take some of the losses; can’t have that).

That long up-move in the euro, which shows optimism, may be ending. I took my cue from the market. Here’s Paul Krugman on the same subject. His key point:

[T]he fact that European nations no longer have their own currencies leaves them vulnerable to self-fulfilling debt crises – in effect bank runs on governments rather than banks (although those too).
Think about that for a second — a bank-run on a government instead of on a bank. In other words, instead of people racing to be the first to get their money out of a bank, they race to get their money out of a government.

Why? Because the usual way for a government in debt trouble to get out is to deflate [CORR: devalue; this commenter is correct and my brain is made of butter] their currency. This creates a run on the currency until it finds a bottom and the economy recovers (usually via an export boom; if your currency is cheap, your exports are cheap). But it leaves the government free to still borrow.

But what if you can’t devalue your currency to fix your debts? In that case, there’s a run on the debt itself, on your bonds. As your ability to repay appears to be less and less, people sell off your bonds to get the highest available price in a rapidly falling market, and that panic selling acts like a bank run. Eventually, those government bonds go to junk.

Then what happens? That government goes broke — (1) If the economy’s in trouble, its tax revenues fall. And (2) if its bonds are junk, it can’t borrow. Just like a bank run breaks the bank, a bank-run-type sell-off of government bonds breaks the government.

All because they can’t devalue the currency first.

For Krugman and others, the solution to fixing the euro and the eurozone is to create a “lender of last resort,” since the market won’t lend. And this week’s news on that front is bad (my emphasis):
To head off this risk, somebody – the EFSF, the ECB, whatever – has to be ready to act as lender of last resort; Eurobonds would have served much the same purpose.

By resigning from the ECB, Juergen Stark has conveyed, deliberately or not, the message that there will be no such lender of last resort, that there isn’t enough political cohesion in the eurozone to stand behind countries under market attack. And this translates directly into soaring spreads for Spain and Italy; the self-fulfilling crisis is on.
“Self-fulfilling crisis” is another name for a bank run. People panic because everyone else is panicking, and the race is on.

Krugman’s not the only one who sees the death of the euro (or at least its shrinkage to the supposedly “strong core” countries, like Germany). As the Professor notes, Barry Eichengreen sees the same. (I may have more to say about Eichengreen later. He appears to want both backstopping the banks and debt relief. He also thinks “domestic public opinion” is what’s constraining the core governments. I guess that’s why he’s considered a conservative.)

My question is: Assuming the worst, what’s the outcome? I see three scenarii (plural of scenario):
■ The eurozone could shrink to the “strong core” (and northern) countries, like Germany, France, and a few others. The result would be a stronger euro, after the dust cleared. (That dust would include incredibly cheap drachmas, lira and pesatas — plus the collapse of governments.)

■ The core northern countries could try to hold the whole project together against all the market forces allied against it. This could kill the euro for all of them (Eichengreen’s scenario).

■ The core northern countries are secretly weaker than anyone thinks. That kills the euro, puts the EU at risk as well (since everyone’s grabbing for the same shrinking pie, they become competitors instead of partners), and adds another boat-anchor to the American economy (since a continental market for American goods shrinks, instead of just a few national ones). Watch the euro this week and next. As I read this chart, there’s support at $1.34 and $1.30. If it drops below $1.20, it’s trouble indeed, and you won’t need a chart to know it.

If a balanced and effective solution doesn’t emerge soon, scenario 2 or 3 above looks more and more likely. (Sorry for the length; hope this helps you make sense of this topic.)”

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