The Fog Ahead

Jim Kunstler once again nails it, with the post “State of Cringe” in his “Clusterf**k Nation” section of Kunstler.com.

Discussing the two forks in the road ahead, deflation or inflation, Kunstler agrees with those who suggest (like myself) that it’s not an either/or proposition:

Some of us see both outcomes in sequence: the deflationary “work out” of bad debt currently underway — of loans that will will never be paid back, of acronymic paper securities revealed as frauds, of “non-performing” contracts entering the swamps of foreclosure, of banks pretending to still exist, of hallucinated “wealth” rushing into the cosmic worm-hole of oblivion — can only go for so long before everyone who can go broke will go broke. Then, just as we find ourselves a nation of empty pockets, the tsunami of shoveled-in “money” designed to “reboot the consumer” (created not from productive activity but just printed recklessly), will start churning through the “economy,” chasing products and commodities that became scarce during the deflationary phase — and the result is hyper-inflation, the eraser of debt, destroyer of fortunes, and suicide pill of feckless governments.

Make no mistake about it. We will see a one-two punch that will level this economy, leaving our new President and his administration holding the bag. Did you notice that the Dow yesterday rose while Gold not only held its ground or rose a little, but in fact broke through $900? Sure, most technical analysts were calling $880 an important level, but $900 is a symbolic number that can’t be ignored.

Prices will continue to fall. The faltering demand that is killing retail and wholesale business is bringing prices down. Energy, durables, even food is some cases. But that’s a short-term situation. The TARP’s failure is a sobering glimpse into just how serious the situation is, because it gives us some sense of just how big the “black hole” we’re pouring this newly printed money into is. Eventually, our government will dump enough in to see the result, and that result will be devastating and unstoppable. Our economy and currency is doomed. The hyperinflation caused by this idiocy in Washington will inflate the dollar out of existence.

Many are drawing comparisons in what’s going on right now to the First Great Depression, and that’s a valid exercise. Our civilization’s timeline unfolds in cycles, to be sure, and in terms of human lifespans, those cycles are long. If we leave sufficient records, a civilization looking back on us in a thousand years will probably see these two depressions as one event, the second a direct result of the first. Since we humans live a lifespan of 70 to 100 years, and the last depression began over 70 years (a “lifetime”) ago, we see them as distinct events. We and our future observers are in truth, both right and wrong about it.

The “fog” that keeps us from seeing exactly what’s going on, and what we should individually do about it, is made thicker by the fact that our future isn’t unfolding exactly as our past did. But there are patterns that are important to look for.

As Ambrose Evans-Pritchard writes in the UK’s Telegraph, there’s a case to be made that we’re following a path similar to the 1930s, but the worst, by far, is yet to come.

Obama supporters see the President they elected as a new FDR. Sadly, students of economic and political history agree. So far, the new President is following Roosevelt’s path, a course that those who only concern themselves with slogans and icons believe is the path to salvation. Those who read, study and understand know that FDR’s path led to a longer than necessary depression, ended only by World War and over 400,000 American dead.

Given the weapons of today, a repeat of that sad history will yield far more flag-draped coffins, and will certainly this time,  include a horrifying number of American civilian dead.

Preparation Steps

Many things are cheap right now, but that’s a very short-term situation. Use your dollars’ spending power today to stock up on the things you will need when there are disruptions that make buying them impossible. But don’t just go to Sam’s Club or Costco. Make a list. Start here.

If you’re serious (and you should be), send George Ure of Urban Survival $40 and read (and print) his September 28, 2008 issue of Peoplenomics entitled “A Lifetime of Camping.” It’s the best place to start.

The Economic Meltdown

Is in progress.

Jim Sinclair at Jim Sinclair’s Mineset and his group are doing everything they can to wake as many readers of his site up to this fact, and giving straightforward advice about how to save your ASSets, and preserve your financial future.

In the words of Mr. Sinclair:

Dear Extended Family,

This situation is financially critical, having no practical strategy or plan to intercede in order to save us from witnessing a total systemic meltdown.

Have you:

1. Taken delivery of paper shares of your investment companies of any nature?
2. Have you opted to become a direct registration book entry at the transfer agent of your investment where possible?
3. Have you protected your retirement accounts by doing number 1 or 2 with both your Trust’s name and your retirement account identification?
4. Is your retirement account held in true custodial-ship?

Plus, 8 more questions you must ask yourself about your investments.

Read and take heed.

Why Has the Price of Gold Fallen?

It’s been a tough week for gold bugs. Though I don’t give financial advice on this blog, I invest in gold and in the stock of companies that mine the stuff, and I repeat, it’s been a tough week. No, make that a tough month.

But, it hasn’t discouraged me. The bulk of my safely stored away in the hills of West Virginia treasury was purchased when the price of an ounce of gold was in the $220 range. So, I’m not worried. Even if you purchased gold closer to the $1000 price it was in the winter, you shouldn’t worry. Jim Sinclair is predicting a $1200/ounce price soon, and a $1650/ounce mark within the next 18 months. I believe him.

That being said, there’s a lot of speculation about what’s going on right now though. Sinclair linked to this excellent article.

Makes sense to me. The rest of the world has pulled ahead of the U.S. in the “race to the economic bottom,” so naturally, all things being relative, the Dollar looks better. But never fear, gold bugs…America will catch up. It’s an election year, and more trash is being swept under the rug than can be imagined.

Monday Morning Briefing

Welcome to a brand spankin’ new week!

Money on our minds this Monday, as the White House predicts a $490 Billion budget deficit next year. Given our government’s fondness for spin and general economic incompetence, I’d say the truth is probably somewhere north of that figure, between $490 and $1 Trillion. Add in bank and FDIC bailouts that will be necessary in the next 18 months, and the larger of those two numbers is probably a lowball.

Too many people today read that news, shrug and say “Well, that’s the government. They can handle it.” What will be an even bigger story in ’09 however, is starting to sneak up on us and seep into the mainstream media. Listen to this segment of the Diane Rehm show (launches a Windows Media file) and you’ll see that dozens of states are under water budget-wise for 2009. This will mean problems with education, health care, police/fire protection, highway and infrastructure maintenance and much more. The resources we need on a daily basis will be strained.

As I write this, the DOW has tumbled already, and even Reuters is reporting that the Gold Futures market suggests that the metal will trade at $1,200/ounce by the end of the year. So, it’s no longer just Jim Sinclair making this claim!

Meanwhile, Jim Kunstler has a terrifically dark piece about a drive through New York State (where he lives), with some pointed, vivid and very compelling observations about the state of our society:

Hopelessness infects this landscape like a miasma. Whatever young adults remain in these places are not thinking about a plausible future, only looking to complete their full array of tattoos and lose themselves in raptures of sex, methedrine, and video aggression.

And that’s the lighter bit Seriously though. Kunstler’s views ring so true, even though regularly reading him, you start to get the idea he really, really dislikes tattoos. I believe though, that Jim will one day be seen as one of many visionaries whose dark futures often hit closer to the eventual truth than most. God help us.

Finally, in the “can’t wait for the future” hit parade, George Ure at UrbanSurvival.com unhappily predicts an “October Surprise” that involves a hidden hand, false flag and an attempt to disguise (if not avoid) the Greater Depression bearing down on us right now. I remember similar predictions (not from George) about the last of the Clinton days, where an event causes the White House to declare Martial Law and cancel the elections. Looking at history though, I have to admit it would be more in character for this administration than the last to attempt something like this.

Time will tell. Have a great week. Be watchful.

The “Last Plane” Account

Just a quick post about an excellent article on DollarCollapse.com, entitled The Last Plane Account, which references the excellent work of Barton Biggs.

Last Plane Accounts are essential if you plan on hanging on to whatever wealth you have when things turn ugly. Biggs’ essential farm or ranch stocked to feed your family isn’t nearly as “wacko survivalist” as it once may have been. Very important.