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The lovely Miss Puddy accompanied me to the movies a few weeks
ago for a viewing of “Unstoppable” with Denzel Washington.
In the movie Washington, a 30-year veteran locomotive engineer saves the day
by not listening to the bureaucracy and trusting his instinct honed by years
on the job. It is the story of a simple journeyman veteran who knows
his trade well from 30 years on the job who saves the day. Washington
represents the typical workingman who is fast disappearing in this
country. He plays a blue-collar professional who has dedicated his
entire working life to his career. I read the other day that the
average young person entering the workforce today will have three different
careers throughout his working life – not 3 different jobs but 3
different vocations. How can anyone obtain proficiency in 3 different
careers in one lifetime? I feel that if this country’s manufacturing/mining/farming
economy is to be saved it will be by people like Washington’s
character. Even the ordinary newspaper delivery guy can take pride in
his job. Google David Bond’s short article, “The Dog
Biscuit Miracle” and see how any job can be done with dignity and
pride.
Unfortunately everyone seems to be looking for Uncle Sam to be
the hero and to rush in and save the day. Our old uncle is
in poor shape and is hardly able to help anyone these days.
“The nation is badly insolvent and lacks legitimate income
sources, something economists fail to grasp.” Jim Willie
“The US has lost 42,400 factories since 2001. The US
has lost 32% of its manufacturing jobs since 2000.” Peter
Grandich
We have allowed multi-national corporations to move our
factories offshore and left our markets wide open. We were sold the
idea that “we” could “think” and “they”
could “work”. The idea that factories and mines were dirty
and should be moved offshore while we could operate clean financial services,
distribution and other service industry jobs was sold to us. We were
taught that our economy was based on consumption. The federal reserve
drove down interest rates and encouraged everyone to mine the equity out of
their homes and to spend our accumulated wealth on new cars, vacations and
other mindless consumer goods.
And don’t just blame the democrats. Phil
Gram’s wife worked hard to repeal the Glass-Stengel act that allowed
banks to operate in other financial markets. You would have thought we
learned something from the 1930’s. All through the last 30 years
our local banks have been gutted and monster national and international banks
have taken over the local bank branch in your neighborhood. There was a
reason that the very special business of banking with all its special
privileges was only allowed to operate locally on a county basis just a few
decades ago. A banker from 1980 looking at today’s mess would be
astounded at what has happened. The gradual changes in banking over the
past decades have been a travesty.
The Federal Reserve is now printing money with QE I (just
creating money out of thin air; counterfeiting), QE II and QE to
infinity. There will be no end to monetizing the debt. Stock
outflows by investors have been high over the past year. Now bond
outflows are alarming. The fed is quickly becoming the buyer of last
resort for US bonds.
David Stockman says that our $800 billion defense and homeland
security establishment will be forced to de-mobilize by the world bond
market.
Bond vigilantes will force the US to finally balance their
budget. The US cannot afford higher interest rates. The only
other option is default. The fed cannot monetize the debt forever
without the dollar falling apart (a default on the dollar itself).
“Any bartender could explain the situation. Bernanke
is watering down the whiskey.” Bill Bonner
We are now facing a deadline with the debt ceiling. Tim
Geithner says if the debt ceiling is not raised soon the US will begin to default
on its obligations. Of course they have to raise the debt
ceiling. Otherwise they have to cut spending by 1/3rd
and balance the budget immediately. Congress doesn’t have the
will to cut that deeply – YET. I predict there will be much
posturing and many fine speeches but in the end they will raise the debt
ceiling.
Many government agencies (BLS in particular) claim that the
economy is recovering and things will be better soon. I am afraid they
are deluded (probably just lying but I will give them the benefit of the
doubt and politely say they are crazy). Inflation is coming in things
we must import, which is a long list these days. We used to feed the
world and now we must import some of our own food. Inflation in food,
energy and commodities are here now and will get worse. The BLS
(bureau of labor statistics, Dept of Labor) claims inflation is in the low
single digits but ask anyone who is writing checks to support a family.
They will tell you their cost of living is up over 10% a year. Retail
sales appear to be better but a deeper look at the market numbers show high
end goods purchased by the rich are doing well while Wal-Mart sales
languish. The middle class is getting squeezed. Howard Davidowitz
says there is 21 SF of retail space for every man, woman and child in the
US. This is twice the usual amount. Internet sales will make the
usual amount too high. Those retail malls that are marginal now will
not make it far into the future. Avoid REITs (real estate investment
trusts) for retail commercial real estate.
This is not just a depression like the 1930’s it is a debt
collapse AND a currency collapse (our currency is now a monetized debt
unit). Think more 1781 and 1865 when the continental dollar collapsed
in the 13 colonies and when the CSA notes collapsed in the South at the end
of the War Between the States. Until the debt is washed out, written
down or forgiven the economy will remain anemic and will not recover.
Transferring the debt from the banks to the government will not fix the
problem. The debt is still too great. We must either cast off the
debt or be slaves to it for the next several generations.
So what should the average citizen of these great United States
do at this point? Avoid municipal bonds like the plague. They
will default first. Avoid long term US bonds as well. Short term
US notes (6 months or less) are probably OK for now but keep your finger on
the sell trigger. Cut back on all expenses and raise cash. Live
BELOW your means. Save cash and hedge that cash with precious
metals. Keep your cash in local credit unions or locally owned
banks. Check their ratings and make sure you are saving in the safest
institutions in your area. Cut up those credit cards and quit using
them. Pay cash for your purchases. Keep 2 months of cash on hand
in an emergency fund. Invest your precious metals 50% in gold and 50%
in silver. Invest in physical precious metals when possible. For
small investors a good investment is to simply purchase 6 months of
non-perishable supplies that they normally use every day. They will
probably cost 5 to 10% more in 6 months (not a bad return). Plant
a garden or support a local farmer (or both).
“We live in an awkward time, too late to change course but
too early to line up and shoot those responsible.” Doug Casey
I will close with another movie. “The Voyage of the
Dawn Treader” by C.S. Lewis is billed as a children’s story but
it is much more than that. In the movie the magician tells the
characters, “You’re going to be tempted, and you’ve got to
defeat the darkness within before you are able to defeat the darkness
without.” Bob Beltz of Walden Media says, “Lewis tells us
in his story that God exists and evil exists and there’s great conflict
between the forces of good and evil, and ultimately God wins.”
Greed has caused most of our financial problems we now
face. We must overcome our own internal demons first. We must
prepare for a great conflict. Like C.S. Lewis, I have no doubt of the
eventual outcome.
“We have met the enemy and he is us.” Pogo
Larry Laborde
Silver
Trading Company
www.silvertrading.net
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