Thursday, September 13, 2012

Putting on my Nostradamos Cap

On Economics/ Politics:

Well QE 3 is finally getting launched so we will see a fast meaningful recovery the lost decade will continue.

Unfortunately I do not think our economy is going to get better until we are really honest about our situation and take the steps to get back to an honest and stable place. This requires facing the pain of unraveling all the bad "assets" floating around and the massive empty inventory in the housing market gets unloaded at realistic prices. As this is not happening any time soon the pain will continue.

I saw an interesting article over at James Dakin's place (original Lew Rockwell article here) that basically says we will not have hyperinflation because it is not in the best interest of big banks and their whole crony network. I cannot say that I understand it fully but, not necessarily for any quantifiable reason, I agree that hyperinflation is not likely.

We do need to get onto the same page as to exactly what is considered hyperinflation. Let's pick the definition of hyperinflation as greater than 50% inflation in a month. It is as good as any. I do not see this happening. Yes we have a huge debt but we are too big and powerful with too many huge productive businesses for it to be likely IMO. (Also I think Arctic Patriot noted that huge powerful countries do not go broke, they go to war) I don't intend to argue this point, it is just my take on things.

Now I do think a period of painfully high inflation is quite possible. Maybe somebody gets some sense and cuts off the free money that has been subsidizing big businesses and poor decisions like dollar shot night at the local bar. Maybe our creditors start to get wise and demand an actual return on their money. Maybe the big banksters aim their destructive market powers at US. I don't know.

We could see 10-13% inflation which would probably leave the fed rate around 16%, prime mortgages around 20% and consumer debt in the area of 30%. This would drag down our economy like a guy trying to swim with an anvil tied to his waist. Several consecutive years of this would essentially destroy those on fixed incomes. Folks holding adjustable rate debt's would probably face default or ruin.

We may see rioting and disorder as welfare/ food aid/ etc that are chained to the ever more manipulated to give a happy story CPI get left behind. [Briefly touching on Matthew Bracken's When the Music Stops I do not see our government failing to send out welfare/ food stamps (now on cards)/ etc. I respect Matthew Bracken immensely but IMO this article misses the simple point that our government via it's cronies the Federal Reserve has a darn license to print money. It is like saying that Jack Daniels will run out of Whiskey or Tula will run out of .45 caliber bullets.

Seniors and moochers will get what they are "entitled" down to the exact penny. However that doesn't mean it will be worth the same as it is today. Somebody on food stamps or whatever will get the same dollars worth of hand out's but if a pound of rice costs $5 and a Digorno frozen pizza costs $10 it won't go very far. Not quite as sudden or whatever as envisioned in the scenario. It would more likely cause a slow upswing in problems than a sudden burst of angst. That is of course unless some sort of response was coordinated to meet a specific purpose in support of some agenda.]

I see this arguably intentionally orchestrated series of events potentially diminishing our status on the world stage with a wimper, not a bang. Think of the way Britain's role and power have changed from WWI to now. They went from being the biggest and arguably most powerful nation in the world to being publicly dissed by Argentina stealing their island (yeah they later took it back, barely).

On War:

The madness between Israel and Iran is out of control. All I hear in the media is war drum's. At this point I really would not mind if they get it over with and fight, at least that way it would get done and we could have  the news back. Except of course it would cause a lot of problems, likely embroil us in a nasty conflict, maybe cause nuclear war, blah, blah, blah.

On Gun Control:

I do not see a reinstatement of the Assault Weapons Ban or whatnot. The balance of public opinion is clearly against it. Unless the Dem's sweep the house and senate plus keep the presidency which is probably not likely I am not concerned. Even then I am not so sure for heavens sake Walmart sells AR-15's.

That being said ATF fiat and possibly executive orders might pop up with some fun new stuff. The play of the ATF arbitrarily usurping more of our rights changing some regulations which FFL's (and individuals) will then follow or face their lives being ruined and livelihoods destroyed is already in the playbook. Remember that your shotgun is a shotgun unless it is suddenly a pistol or maybe an evil assault weapon.

On Crime and Disorder:

In general I think crime is getting worse with the signs showing the trend is likely to continue. Maybe it is the economy. With everybody (well a lot of folks anyway) taking a step down the proverbial economic ladder some folks look to crime as the easy way out. Some of it is cultural/ environmental but that doesn't really matter. For reasons I am not entirely clear on criminals seem to be getting more and more violent. Home invasions seem to be becoming more and more prominent.

As discussed above there is a potential scenario (amongst others) where things could just go nuts like LA Riots times 1,000 all over the place.

Anyway that is what I think may be coming. Now to what we might be able to do about it:

Economics:

Some folks argue that having a lot of debt is fine because hyperinflation or at least inflation will let them pay it back in cheaper (or basically free) dollars. The first issue with that plan is that if you haven't figured it out yet banks are going to get taken care of at the expense of common folks, not the other way around. The second issue is that you it will be hard to pay back cheaper dollars if you lose your income/ job because the economy tanks.

If you listen to nothing else that I say get out of any debts that have an adjustable interest rate. The only exception would be if you have the cash to pay the debt off immediately (like in the next payment) but choose to keep it at a low adjustable rate so you can stay a bit more liquid. Rates are very low right now with almost a guarantee that they will go up. As we saw with various European countries a bad auction or two can jack up rates in a hurry.

The basics still apply here. Minimize debt and live below your means. Save in various forms against an uncertain future.

Gun Control:

In this quadrennial 'OMG the evil gun haters might ban everything' period I have spent a bit of money but that was just bumping up some purchases I planned to make anyway by a bit. Sort of hedging my bets if you will. That being said I have been getting squared away in this area for awhile and while things aren't perfect (are they ever?) most of our bases are covered. If you do not own something, especially if it is likely to be targeted in a ban, that you want and can afford then consider getting it.

Crime and Disorder:

Things are getting more and more dangerous. Carry a weapon if it is legal and practical for your lifestyle. Get the training to know what you are doing. Make yourself a hard target. If you live someplace that is sucky and dangerous with a high percentage of unhappy urban folks and welfare types consider moving if you can figure out how to afford it.

Note that most of the things I have recommended are the same things I have been talking about for awhile. Preparing for every situation is not the same. You do not need a dozen assault rifles to survive an economic collapse. Having half your net worth in PM's will not be ideal if things go all mad max. That being said a whole lot of the commonalities are the same. Live below your means saving (in various forms) for emergencies and the future. Store food, fuel and other various things you will need. Have the skills and weapons to protect yourself and your stuff.

Anyway that is what I have been thinking about. Thoughts or input are of course welcome. 








6 comments:

Arctic Patriot said...

Thanks for the link!

QEinfinity has now been officially launched in both Europe and in the US.

This is not going to go very well...

AP

Craig Cavanaugh said...

War is coming (continuing) and the pillaging of the Amerikan economy is accelerating. We may not hit Zimbabwe prices, but just look at gasoline. And food. One is rising due to the falling dollar, and the other is rising due to drought. It's the financial "perfect storm", at least for those who are on the edge, making "too much money" for assistance, but not enough to get by on. Folks are leaving the banking system (and none too soon in my opinion), turning more and more to the underground economy. Physical FRNs are required more and more in daily transactions. Hell, I won't work for anything but cash anymore. In sufficient amount. Soon I will be barter only. Simple math shows that our economy is on the verge of collapse. Default and bankruptcy. It's not rocket science, no matter what the fed would like us to believe. 1+1 still equals 2 no matter what they try to sell us...

Ryan said...

AP, I am stealing the phrase QEinfinity.

Craig, Not sure about you but we need to eat and put gas in our SUV so food and fuel are part of our budget. The CPI is utterly and I believe intentionally flawed. Do consider the wedge ie the gap between over vs under the table. We will see what happens.

Anonymous said...

"Let's pick the definition of hyperinflation as greater than 50% inflation in a month. It is as good as any. I do not see this happening."

Ryan, I sincerely mean this with no disrespect or hidden sarcasm. The reason most people can't or don't "see this happening", is because they retain faith in the system. The many trillions of dollars in debt instruments that would otherwise cause hyperinflation, are not doing so, precisely *because* they remain "static" in the form of bonds, mortgage-backed securities, default swaps, etc. Those dollars aren't 'sloshing-around' in the economy, buying & selling products & disrupting price stability.
All that money has no "velocity" in the economy because we all still assign value to it, conditioned to expect it to retain or grow in value over time.
And this will remain true until that unknowable day, when all of us who use dollars cross the invisible line from 'faith in the system' to 'loss of faith'. "Panic" is a force unto itself.

When that day/week/month comes, all of those financial instruments will become liquid (consider a melting ice berg), flooding markets with cash that no one wants anymore.

Just because all that money isn't "moving" now, doesn't mean it's no longer 'out there' anymore, or that nothing will ever change. It may not happen for years, but that day *will* come, and when it does it will 'move' faster than anyone can react.

I got to witness this phenomenon first-hand in Russia in the 90's. It's a compelling thing to witness.

Snoop-Diggity-DANG-Dawg

Commander_Zero said...

Interestingly, I have a buddy who is going in the opposite direction. He bought his house on an interest only mortgage because he believes that the economy will tank to the point that he'll easily be able to pay it off with tremendously deflated dollars and precious metals.

Anonymous said...

"...bought his house on an interest only mortgage..."

'Fixed-rate', I hope...

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