No pictures today. Today, I use words. Don't need any cute media image. I seriously recommend you actually read this and not skim it as more rambling in your inbox. As the title suggests, a word to the wise is worth something or other. What is that, a pound of cure? Saves nine? A bird in the hand?
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Two years ago, Glenn Beck pointed out the government stopped reporting how much money it prints. Yes, prints. That is how we keep going after idiocy like Fannie Mae, etc. (No, no analysis of a scandal 30 times bigger than Enron, here. Fait accompli, for sure. No more fixes.) At the time, we were told no one really needs to know the printing information. Not part of the matrix of data. No?
Beck suggested there was no reason for this other than they expect to print a great deal of money.
Today, on his radio show, he pointed out that he had his staff spend time (a week) to find out how much money was printed recently (undefined, unless I missed it). The answer was more than $3,000,000,000,000. To put this in perspective, divide by 300,000,000, the number of Americans in the country, and this is a new obligation of $30,000 on EVERY American. No, it won't help to get more illegal alients.
Considering there are roughly 150,000,000 tax payers, business and personal, that is a
new $60,000 debt on each taxpayer. Somehow, people seem to think these obligations are remote to their lives - they are not. But wait, there is more.
Then he pointed out that today's T Bill auction was the largest in history at $20,000,000,000, which you are liable to pay back. The paper commented today that the Treasury "still" had its lustre - as though it was an interesting phenomenon. You know, it is.
Only, it is not world investors, who are smart, are being tricked into U.S. obligations as much as there is no where else to go. The best of the worst? Word to the wise.
Oil prices are collapsing, making us feel better, like things are getting better. I had been predicting a fall to a rational price, one that wasn't controlled by fear. However, the rapid collapse of the prices, currently, is NOT a good sign, except in the very short term and to those who see the freight train coming. Consider the prices are collapsing because the smart money sees a dramatic collapse of demand. A bigger fear has taken over. In the future, if you have cash, you will be able to buy gas at a low price - a word to the wise.
A few weeks ago, I watched a C Span coverage of a symposium about the financial situation. An undersecretary of the Treasury, without fanfare, mentioned the government is planning for a deflation next year. A rapid deflation is a depression. I never saw that elsewhere on TV or in the paper, as we were in the Obama support game, at the time. There was no discussion of substance, only that the game was McCain going to Washington and Obama presenting himself as a more reflective, distant deep thinker. (As he said, Tell me what to do, I will sell it....)
The deflation should hit hard, the under secretary thinks, and last for the rest of year, plus. We all know how good the government is at projecting impact. However, I have no reason to doubt his overall analysis as this is classic economics, not government whimsy. Also, you can think of the gas prices as deflation, rather than a boon to buyers, as it appear. Don't fall for the superficial and stick to the word to the wise.
These are enough dots for me to shift to a prevent defense.
For my part, I am not as exposed as most, having been leveled by illness. Things can't get worse for me. In fact, I can switch to foreclosure law and use the downfall. So, I pass this along to those who feel motivated to prepare. If I am wrong, not a big deal, you will have lessened liabilities, have a basement filled with canned goods, some cash under the mattress, and may have an apartment in your house.
If I am right, you could easily lose your job or a major portion of income. Those around you will not be able to pay you. Prices will collapse, along with income, of course, but not your mortgage payments and government taxes. Not, government salaries which are now, what, 50% of the economy. Real estate taxes will not come down for some time as the government will be needing your money as its waste blows up in their faces. Governments universally don't understand revenue goes down as tax burden goes up. Just another junkie standing in the loser line.
Cash will be king. Get cash. Getting cash can also mean get out of debt. Now. That's the magic bullet. Shift debt to a form you could deal with. If you are over 65, get a reverse mortgage today.
This unrequested advice is not a general idea from a former blogger, it is a religious dogma to put into effect today, if you sense trouble. Don't put aside this info as as part of the mass of data that flows through life. As Bacon said of books (or something like it), some are to be tasted, others are to be carefully eaten and considered.
I am not projecting some economic downturn that we can stumble through because of the kindness of others. We are possibly looking at a wipe out caused by the stupidity of others. Again, if I overstate this, there is no downside to paying off debt and saving money.
If things are terrible, having a lawn sale, so to speak, today will be very important.
I am not an economist, so I would not presume explain how to prepare fully for a deflation. We have not had one in our lifetimes, unless you are old and knew it was coming all along. Deflation will require study and, perhaps, this site could be a way to look into what to do. For example, it seems buying gold and silver is smart, after buying food and storing it away. (Is gold artificially being depressed? What happens when holders of futures decide they want delivery? Is this AIG in a vastly more massive scale, there being no inventory to meet the demand?)
I am, however, acting on common sense. The coming mess is something a private business would have dealt with and fixed or reorganized. The government just prints money. Now, it wants to bail out car companies, because the unions want it and don't want members hurt. That is a nice idea, but at some point mommy government does too many stupid fixes which can delay a collapse, but increase the severity, as they say about the FDR projects.
At some point, world investors, upon whom we are addicted, will say, "Enough...." This is already starting to be heard around the world. The U.S. dollar is losing its appeal, overnight. This means something to you - directly. It is not some abstruse concept passed along to those who watch financial networks.
We are used to the government gliding over its massive mistakes. Remember Enron and the massive media interest and convictions? Congressional outrage at those big bad business people? (That Bush put them in jail was not part of the propaganda.) That episode was what happens when there are those in charge who have no decency or care of the rules of the game. They screwed up and are in jail. People are hurt. We are told the government should control all this.
So, what happens when we put loose cannons in charge of Fannie May and Freddie Mac, who think other people's money is to be spread around to voters regardless of economics? The result is a financial fiasco for the history books of future generations, far overshadowing in size and all other disaster than an Enron episode. Everyone on the planet will be hurt.
We print $3,000,000,000,000, borrow $20,000,000,000, and McCain says, as president he may hire Cuomo, patient zero of financial collapse. Who are these dopes? Who? Why aren't people being arrested? Thrown from office? Who is responsible.
We are.
Indeed, Cuomo was voted into the insanity of NYS government, a perfect home. There really is no hope for NYS as long as NYC remains part of the country.
Anyway, just understand it is time to remove yourself from game. The game is not only on the cliff, it is sucking in more and more victims in an attempt to balance its position on the cliff. It is losing its stability, so is sucking in all of us. Sooner or later, down we go.
In the past, I told clients that "the bank is never your friend." Now, I will add, "The government is your enemy." Indeed, it is your pusher who needs more from you to protect itself. It has stopped being America's representatives and we went along with that. It is now Big Brother, the crazy one.
So, a word to the wise.
Ideas to consider, immediately, like now:
1. Reduce assets to protected cash, perhaps gold. (Stop spending)
2. Get out of debt asap. Even if all you can do is lower interest cost, do it. Shift things around.
3. Don't buy
anything that requires borrowing money. Indeed, sell your house if you are near the mortgage amount, or prepare to pay the mortgage with much less income....see below.....
4. Do a budget that assumes your income is reduced, one day, by 50%. Consider a plan that includes bankruptcy. Put assets in the right places.
5. Watch for the credit status of the U.S. being lowered - that's the writing on the wall that all hell is coming. Foreign money will vanish at a geometric rate. Followed by the collapse of the dollar. Socialist will say they need control, you can't let citizens run their own country. Game over.
Have a nice day.
The Arabs have a saying, "Trust in Allah, but, first, tie up your camel."
Final word to the wise: take Vitamin C. Especially, if you get the flu, take, at least, 5 grams a day. Forget the delusional vaccine which is just another way to get money from the government by drug companies. Flu victims die of scurvy - the absence of Vitamin C. How simple (aka cheap).
Gene
Good luck.
Labels: cash is king, deflation, financial collapse
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