Financial Tsunami Still Unfolding

I wish I could report that it appears the worst is over for the economy. It is not. That bad news continues to unfold, with the summer of 2009 shaping up to fulfill "summer from hell" prediction of the time monks at HalfPastHuman.

As confirmation, the Global Europe Anticipation Bulletin (GEAB) has recently predicted that this summer would see Phase IV of the global systemic crisis with Breakdown of the Global Monetary System. A few weeks earlier, they forecast that the United States would default on it debt in the same time period. (Merrill Lynch reports America will soon lose its AAA credit rating.) Lest you wonder about the validity of their forecasts, in February 2008 they predicted that September would mark the breakdown of the US economy. Read all three of these summaries to to appreciate the magnitude of the worldwide financial crisis.

Gerald Celente, CEO of Trends Research Institute, is one of America's most famous trends forecasters. He predicted the stock market crash of 1987, the fall of the Soviet Union, gourmet coffees, etc. He "says that by 2012 America will become an undeveloped nation, that there will be a revolution marked by food riots, squatter rebellions, tax revolt and job marches, and that holidays will be more about obtaining food, not gifts." See his video here.

Paul Farrell, who predicted the Dot.com crash and the sub-prime meltdown, has listed 30 reasons why we will have a second Great Depression by 2011. (Ed Roubini lists only 20 reasons if you want a more optimistic assessment.) The US dollar is in a temporary rally that will not last. Soon it will collapse, along with the global credit markets. Three megatrends driving the collapse are: falling tax revenues, rapidly increasing US debt and liabilities, and a corresponding reluctance of foreign countries to buy US debt. Hyperstagflation will result.

Here's what it looks like in Zimbabwe. Present-day Iceland give us a preview. And we know what the German inflation of the 1930's led to. What might it become in America? The effects of depression in the US are likely to shake us to the core. The real economy will collapse.

Dmitry Orlov's Five Stages of Collapse is well worth the read. The progressive collapse is: financial, commercial, political, social and finally cultural. Sweet!

Worldwide economic contraction is occurring. I still predict the total dollar collapse or devaluation by 2013, the 100th anniversary of the founding of the Federal Reserve, which started the American phase of a 300 year-old central banking Ponzi scheme. When the general commodity de-leveraging finishes, expect gold to explode. Baby Boomers, pondering retirement options, need to take this into consideration.

Democrats have been holding hearings on various proposals to confiscate personal retirement accounts, including 401-Ks and IRAs to convert them to Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration. Based on his statements about "redistributing the wealth," Obama would not oppose this. Watch this closely and think about cashing in your retirement accounts early if this appears likely. If the Democrats get their filibuster-proof Senate, I'd bet on it happening.

Speaking of Obama, we see increasing likelihood that those who want a major change in US military intervention around the globe will be disappointed. Several (and here, here, and here) progressives observe that the early list of Obama's transition team and appointments indicate the War Party will continue unhindered. He's committed to expanding the unwinnable quagmire in Afghanistan. Gerald Celente says that "Going to Summers, Rubin, Reich, Tyson, Volker and the rest of them to fix the economy is like fighting the War on Crime by bringing in Al Capone, Meyer Lansky, Bugsy Seagal, and Machine Gun Kelly." The Clinton team played a big role in causing the crisis.

Another trend to take into consideration is the increasing mention of preparations for martial law in America. Congressmen were threatened with martial law if they did not vote for the Banker Bailout Bill (estimated at more than $3.5 Trillion now) in October. Democratic Rep. Brad Sherman reports it here. Republican Senator Jim Inhofe recently revealed that the threats were made directly by Treasury Secretary Hank Paulson. Drills for domestic martial occur yearly. NorthCom has now repositioned three combat units from Iraq into the US. Even MTV anticipates martial law. I saw several references in movie trailers before we watched the new James Bond movie last night.

Speaking of the Big Banker Bailout bill and it's associates, the total bill now is $3.5 Trillion and growing! Rep. Dennis Kucinich says it was sold as a "bait and switch" opeation, and that we're seeing "racketering on a scale this country has never seen before." Paulson's refusal to show the recipients of the loot is only fueling the movement to reconsider the Bailout.

What practically can we do?
None of this is pleasant to think about. Proverbs 27:12 says: "The prudent sees danger and hides himself, but the simple go on and suffer for it." Hiding means taking prudent preparations. In our case, prudence requires that we convert as many of our dollar-denominated assets to gold, silver, security measures, food storage (great Christmas idea), seeds, water filters, and whatever else we will need to prepare for hard times. See Robert Waldrop's excellent website on Permaculture for lots of good advice. I'm encouraging my neighborhood association to develop plans for neighborhood security and helping neighbors plant victory gardens to ease dependence on the food transportation system. I also recommend looking into joining the fastest growing movement in Christianity, the house church. You know, like the New Testament model.

FYI, even though I'm planning a later article on global cooling, I found this today cataloguing the failures of Global Warming theories with stories from just the last two weeks! Keep these in mind as Obama pushes for carbon taxes.

Financial Tsunami - Category 3 and Growing

The financial tsunami is hitting more quickly than I imagined. I've been warning about it since I started this blog a few months ago. Today I'd say the tsumani is at least a category 3, with category 5 staring us in the face. Nobel prize-winning economist Joseph Stiglitz today said things won't get better for at least two years, and I think he's optimistic. (He's the one whose recent book estimates the total cost of the Iraq war at $3 trillion or more!) I'm more inclined to agree with the estimate of a decade-long depression.

A friend just sent me a brief summary of current events: "In the space of roughly seven days you have just witnessed the near-simultaneous failure:
1. Fannie Mae
2. Freddie Mac
3. The FHLBs (Federal Home load Banks)
4. Lehman Bros
5. Merrill Lynch
...which, all totaled equals companies representing:
APPROXIMATELY SEVEN AND ONE HALF TRILLION DOLLARS
And we're not done yet.
Not even close.
On deck is AIG. "

Even in the turmoil, you can still make preparations to lessen the impact on you and your loved ones. Yes, choices are much more limited than they were even three months ago, but you don't have to be swept along like so much flotsam.

It is time to focus on your own liquidity. Cut your discretionary spending, pay off your credit cards, hang on to your job -- if you can. The ripple effects through the economy will leave many finances looking like the aftermath of hurricane Ike. Dave Ramsey has some excellent tools.

If you have savings, IRA's, etc., you need to protect them. Despite the large correction in the precious metals, it is very difficult to buy physical gold and silver. Worldwide investor demand for physical is up, while prices have fallen. It makes no sense. We are most likely headed for the worst of all financial worlds, a hyperinflationary depression, or hyperstagflation. The currency will be inflated to cover all the new obligations the Treasury takes on bailing out banks, investment firms, automakers, airlines, etc. Meanwhile, spiraling unemployment will bring economic activity to a crawl.

And please, invest in at least a 3-month supply of food for your family. Walton Feed has a 12-week backlog. But eFoodsDirect offers shipping in one week. Don't delay.

Make Jim Sinclair's excellent website regular reading. He will help you understand why there is no easy recovery from our predicament. If you have accounts with brokerage houses, you need to take delivery of any shares you want to keep. Here Sinclair tells you what you need to do to protect yourself. Better yet, get out of the stock market altogether. While the Plunge Protection Team is making the most massive cash infusions into the market to prop up the stock market, take advantage of this situation and get out now from anything vulnerable to the financial collapse. That's most everything. Forget about interest and dividends. Try to preserve what you have.

Watch this great video from MSNBC which explains what happened to Lehman Brothers. Now realize that Lehman was just a small part of this worldwide, interconnecting web. When the derivatives exposure of Long Term Capital Management almost toppled the financial markets in 1998, total derivative exposure to the world financial system was a small fraction of what it is today. Think of it as the puffed up egg whites topping a lemon meringue pie. Now squish all the air out of those egg whites. What is left of the egg whites? That's where our economy is headed.

This week I've seen two references (one being the bubble enabler, Alan Greenspan) to our current economic crisis as being a "once in a century event." Remember, the Great Depression of the 1930's started with the stock market crash in 1929. That's 79 years ago. So this may be Great Depression II.

Some of the major differences that today could make our current unfolding depression worse are:

1. We still had a gold-backed currency. Today we have a fiate currency in its death-throes, with a dollar today worth about what 2 cents was when the Federal Reserve was founded in 1913.


2. Many more people were self-sufficient, living on farms, being self-employed, having gardens, etc.


3. Today we've sent offshore much of our manufacturing base and many of our better service jobs. Paul Craig Roberts says the "New Economy" (remember that?) is now based off shore, and as a result, there is not nearly enough money to finance day to day government operations. He expects the government will raid private pensions in an attempt to make ends meet.


4. America was a more unified nation, with a proud culture, undergirded by sound values. Today we have a massive welfare culture, great social fissures due to the culture wars, a flood of illegal immigrants will too little assimilation, etc.


5. We're overextended militarily with two ongoing wars, a worn out military, more than 800 military bases in more than 150 countries. The maniacs in Washington seem intent on starting a war with Iran, and have been pushing the Russian Bear into a corner by encircling them with missles and missile defenses based in their border countries. Russia has warned of a new world war if either the US or Israel attacks Iran. (Did you see today's revelation that former Rep. Dick Armey accuses Dick Cheney of puposely lying to him about Saddam Hussein and alQaeda to get his vote for the war?)


6. The US Constitution seems to be dead and buried. The President claims the powers of a "unitary executive" (doublespeak for "dictator" and seems to think he has the right to kill anybody he pleases. The Patriot Act and its companions has set up the mechanism for martial law and a police state. If the Muslims really hate us for our freedom, then maybe they will leave us alone now, since freedom is now an illusion. I read and hear reports daily about new encroachments on our privacy and Constitutional rights. The American police state lies like a trap waiting to be sprung with the right provocation. (I still plan to report on the police state preview I experienced two weeks ago as a delegate to the Republican National Convention in St. Paul.)


7. Our elected officials, especially Congress, are the worst that money can buy. With the few exceptions of statesmen like Ron Paul, most of our elected Federal officials are bought and paid for shills for the interest groups that brought them to Washington. They're masters at the spin game, and they won't take a principled stand for what is best for America.


8. There are no significant differences between the candidates for President. Both have given their allegiance to AIPAC, the Israeli lobby. Both staffs are riddled with advisors that assure the established powers that nothing substantial will change, regardless of the rhetoric. Both seem ready to maintain the total surveilance police state and to continue with our wars in the Middle East and Eurasia.


9. There are many more differences to be sure, but these come to mind most easily. The bottom line is that we are ill-prepared for what is coming.
   

All of this makes me more pessimistic about the prospects for withdrawing from our wars of aggression. The historical response to massive domestic economic problems by dictatorial regimes is war. War is a great distraction and excuse for economic hardtimes. It justifies the command economy and suppression of political opposition. A draft for national service or the military is a convenient way to sop up unemployed civilians and give them a paycheck. See Orwell's 1984.

We've just opened a new front in the current wars with attacks in Pakistan. Bush has just taken another step toward war with Iran by imposing new sanctions on Iran's shipping industry. Lord Stirling interprets recent events as Bush agreeing to war with Israel. (See here also.) Take the likely WMD escalation along with Putin's threat to see this as the start of World War III, and we're really in trouble. God help us!

A while back I predicted the death of the dollar by 2013, the hundreth anniversary of the Federal Reserve. The way the Treasury is nationalizing and funding financial firms, with more to come, and the Fed creating money to fund the process, we may not make it that long.

Ever since I read Harry Browne's classic "How You Can Profit from the Coming Devaluation" back in 1970, I've been expecting the financial collapse. I covered some of this ground previously, as well as in many of my other previous posts. The financial "Masters of the Universe" have finally reached the limits of their ability to manage the economy. At best, American imperialism of the last decade of the 20th century will end as reaches its financial limits. At worst, it will end in a world war.

Maybe it just seems that way when it finally happens. The news has been so fast and furious that there is hardly time to assimilate it. One thing is sure: America is becoming more overtly fascist. We're are moving into one of the most difficult periods in American history. Pray that we come through it with our freedom intact.

Grace and Courage and Peace Be with You!
Porter

Treacherous Economic Signposts

In earlier posts I mentioned the rash of bad reports I've been seeing. I mention them because I believe realism is better than unfounded optimism. When I was a Boy Scout, our motto was: "Be Prepared." Here are a few more ominous signs:

Billionaire real estate investor Eli Broad (age 75) said yesterday "This is worse than any recession since World War II." On the brighter note, he thinks the Federal Reserve and other "mechanisms" will keep things from getting as bad as the 1930's. However, Wall Street just had its worst June since 1930, so Broad's optimism might be unfounded.

Money Week thinks that the floods in the midwest US "could bring America to its knees." Most Iowans who lost their homes in floods did not have flood insurance. The author predicts "a wet version of the 1930's Dust Bowl" with families who lost everything migrating because they have nowhere else to go. With world grain reserves at record lows, crop losses will only aggravate the situation. Check out these flood photos to get an idea how bad it is.

As countless truckers go out of business because they can't afford the losses from high fuel prices, the three-day supply of food on supermarket shelves is looking pretty thin. Might be time to buy some food storage as basic insurance. eFoodsDirect has a nice-looking line of storable foods, too. Think how nice it would be to have two month's supply of food on hand -- just in case you can't get gas to go to the supermarket. You might want to check out this list of 100 items that disappear first in a disaster.

Next time you're at the store, notice the shrinking size of packages for many of your favorite foods and snacks. They're not really increasing prices, just decreasing the amount of food you get for the same price. Maybe that will help our obesity epidemic. Actually, prices for most foods are way up over last year.

USA Today reports that high gas prices threaten to shut down rural towns. Wait, isn't that where a lot of our farming is done? King Abdullah of Saudi Arabia urges us to get used to high oil prices.

Fortis Bank in the Netherlands and Belgium predicts a US financial market meltdown within weeks. What do those alarmist Europeans know anyway? In a related story, Citigroup goes out on a limb and predicts the gold price to get back to $1,000 before the year ends. It could easily double or triple they say due to "global policy prescriptions for the credit crunch [that] remain powerfully and uniformly re-flationary."

The Bank of International Settlements says a "disorderly decline in the dollar can't be ruled out." They like it nice and orderly like the smooth 14 percent decline last year. Sensing that the dollar is not falling in value quickly enough, the Fed pumped another $75 billion into the banking system to help squeezed banks "overcome credit problems," promising a fresh batch of loans later this month. Where do I sign up?

The Fed is really in a bind. As Michael Swanson puts it so well: "In essence the Fed is playing a game of poker. It is bluffing when it says it is fighting inflation. It has no chips left and has bet everything on the slim chance that the economy has already bottomed. If something happens to make the Fed intervene again then it will be faced with a choice of fighting inflation by raising rates, which would have the effect of blowing up the banking system, or intervening to save the banking system, the economy, and the stock market, which of course would mean more inflation, a falling dollar, and falling bond prices. The Fed has proven that if it gets trapped into such a corner it will side to help the banks and the stock market a stable currency be damned."

For a detailed analysis of increasing international systemic financial risks, and the possible "End Game" envisioned by the Money Masters, check out this article. He repeats Warren Buffet's now famous characterization of derivatives as "financial weapons of mass destruction."

This podcast with David McAlvaney with Ambrose Evans-Pritchard, while highlighting many of the dangers to the international economy, actually has some positive things to say about the underlying strength of the US economy. Be sure to sign up for McAlvaney's weekly email for new interviews.

Why are these Missouri National Guardsmen training for riot control?

Have you seen this video about police confiscation of citizen's guns during the Katrina aftermath? Why would they disarm law-abiding citizens and leave them at the mercy of looters?