I knew 2008 was going to be interesting in the very worst sense of the word. I didn't think it would start so soon but for me, the timing was the only real question.
The drastic emergency off-schedule massive rate reduction by the Fed Monday was one signal I've been watching for.
The announcement of a stimulus package is the next. They are talking about it and it will happen.
The next thing will be a surprise collapse of major banks and financial institutions that the surprised folks now believe to be separate and insulated from the 'subprime' problem.
These events signal very bad things. When the federal government and the federal reserve are both shower ing the public with cash in an attempt to stave off recession, it is already way to late.
No one knows what will really happen, in detail; how long it will last or how bad it will be. Here are a few things that I'm pretty sure about.
1. Inflation will soar. It has already been bad. The Government keeps changing the way they calculate it in order to keep it within their acceptable range. When inflation is measured the way it was back in the 1980's, we are running a 10-12% annual inflation rate.
I expect this to steadily worsen and lurch worse with every new drastic measure.
2. Jobs will dry up. Again, the government calculates the joblessness rather than counting jobs. They do this with the 'birth/death' model that provides statistical values for how many jobs are created versus how many are ended. This is fine in a growing economy because it lags the real data by several months. In a recession, it lags the decline by several months, meaning that the 'birth/death' program will report jobs being created for several months after jobs start declining.
3. Dollars will be worthless paper. This is the only possible result of the Fed's actions. At this point they know there is no way to rescue the dollar and restore its value. Their only other option is to kill it and replace it with another currency. This is the path they have taken with the interest rate reductions and 'stimulus package'. The demise of the dollar is the only thing effots of this nature can stimulate.
4. There will be ups and downs but mostly downs for years to come. (2?, 5?, 10?, no one knows) Some would say I'm a naive optimist on this point because there are a lot of economists who think the downs will more like falling off a cliff than riding a roller coaster.
What does this mean to me? Hope for the roller coaster, prepare for the cliff. Better safe than sorry, especially when sorry is such a ridiculous understatement.
1. Food will never be cheaper than it is today. Today is the best day to stock up on non-perishables. We placed an order today for $700 of dried beans, canned tomatoes and assorted other staples. By comparison, I didn't even take an extra $20 from the ATM for Y2K because I knew it was a scam. Today's scam is that things will get better again soon. They will not. We have seen the best times this country will ever experience. Our empire is in decline. No empire has ever recovered from this death spiral, ever.
The ethanol disaster has caused vast acres of farmland to be diverted from producing food, to producing inedible corn. That means that more and more of our food comes from foreign countries. As inflation climbs, Americans will be unable to afford food grown half way around the world. The best hedge against this in the short term is to join a local produce co-op and go meet local farmers.
In the long run we will have to dismantle the beef industry and remove the crushing policy that forces small farms out of business in favor of the giant agri-industry. We will either return to producing our own food or we will starve. Unfortunately I think it will take a lot of the latter to cause the former to happen.
2. The world is getting more dangerous. We're quite safe from attack, of course. We'll have terrorists occasionally but no country will attack us because we have defenses that will hold for a long time. However, the rest of the world is not safe from us.
Our leaders are not above starting a war in order for them to rev up a military economy and put people back to work. After the banking collapse phase, the remaining banks will join in readily providing cash for the build-out of the new military economy.
3. Use dollars today for durable goods. Acquire or maintain stuff that will last not things to consume, entertainment or travel. It is time to be the ant, not the grasshopper. My advice is to become a very efficient, motivated ant today because tomorrow may be too late. If you already have food, water, bullets and hand-powered tools it is time to stock up on gold and silver bullion coins, things you can trade for fresh produce. If you have a 4X4, invest in some heavy-duty tire chains. Roads aren't going to be great in the future.
4. If Ron Paul's economic policy and foreign policy are not implemented we have no future besides a forever war. No matter who is elected in November these policies must be implemented. Since nothing lasts forever and since our industrial capability is waning while other countries are investing heavily in modern industrial capability, we will eventually lose the 'forever' war that are deliberately starting.
I hope nothing bad happens. I'm comfortable and very happy with my humble lifestyle. I hope people laugh at me for the next decade because I have to eat chili every day. Life is too short to wait until you're certain before making decisions that involve preparation for a tomorrow that is nothing like today.
I also hope this article didn't scare anyone. If you aren't scared already, I have nothing to gain by stirring you up now. For those of you who were scared on your own, this article is only meant to provide incentive to act now, fret later.
Jahfre Fire EaterTweet
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