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Tuesday, June 29, 2010

Deep Sheep Dip

Is all of this financial garbage finally coming to a head?  I can't tell for sure, but it sure looks like we're at least creeping up on it.

The Dow is crashing, the euro, yen and pound sterling are tanking, and gold is still holding its own.  Even the government is having trouble pumping out the Happy Gas "economic" reports - no one believes them any more.

Some of this is almost surreal.  Joe "Did I Say That Out Loud?" Biden now tells us that the 8 million jobs lost on his watch (both as a Senator and VP) are lost forever.
Vice President Joe Biden gave a stark assessment of the economy today, telling an audience of supporters, "there's no possibility to restore 8 million jobs lost in the Great Recession."
Newsflash, Joe:  Most of us knew that.  It was your buddies in the Main Stream Media who weren't doing their jobs by keeping the lid on this for the past two years.  It was all puppies and rainbows.  Green shoots sprouting up everywhere!  Don't want to scare the proles.

Housing prices continue to crater.  People don't have jobs, so there's no demand.  Tent cities are popping up all over the place.  Hawaii?
Hunkin walked past a pit bull puppy and peered over a makeshift shelter of tents and tarp hidden by koa haole and elephant grass, then pointed toward the high school's athletic complex barely a football field away.

"The school is right over there," Hunkin said last week. "This isn't right."

The strip of land is bounded by Waipahu High School on one side and the calming waters of Pearl Harbor's Middle Loch on the other, where the Navy's mothball fleet sits idle. It's the most visible portion of an enormous homeless encampment that stretches five miles over approximately 50 acres of city, Navy and state land that serpentines around...
Yep, even paradise is taking its lumps. As the picture up top shows, they DO have their green shoots, though...

And speaking of surreal, I damn near stroked out when I saw that socialist Europe was telling our administration they weren't going to try and spend their way out of this mess.
In Britain, the new government reburied Keynes last week, choosing budget austerity over further stimulus. Germany rebuffed Obama’s requests to keep priming the pump. The European Union’s economic affairs chief wrote in a Wall Street Journal op-ed that he “cannot but disagree” with the push for more deficit spending.

Getting debt lectures from Europe, the continent that already has brought us the Greek bailout and riots? That’s like leaving it to Lindsay Lohan to tell you to lay off the sauce for a while.

Still, it's no surprise what the administration has planned for us.  The projections FROM THE WHITEHOUSE say that by 2085 our annual budget deficit will be equal to 62.3% of GDP.

What does that mean?  To put it into persective, right now, our GDP is about $14 trillion.  Our annual deficit spending is about $1.5 trillion (out of a total "budget" of $3.5 trillion).  This deficit is equal to 10.7% of GDP.

In today's dollars, that 62.3% of GDP would equate to ANNUAL deficit spending of $8.7 trillion!  Hell, our current bloated spending is only about $3.5 trillion right now.  THAT'S how bad this is becoming.

But no one bats an eye.  Spend, spend, spend.  Don't worry about our kids, their kids, and their kid's kids.  We'll all be dead by then, so who cares?

Accept The Challenge

Realistically, if the projections of the budget office come to fruition, there is nothing any of us can do to "soften the blow" of what's coming.  Deficit spending at those levels is unsustainable.

Financially, we need to look much more near-term.  As sad as it is to say, unless we see some "fundamental change" in how our federal government operates, I simply don't think that squirreling away nuts for the future will be worth a damn. 

Read up on Argentina and what happened to their private retirement funds.  Poof!  Our Congress is already studying the idea for Americans.  If your money isn't in a tangible form (read "precious metals") when TSHTF, your life's work will be gone and will be managed by a nice DMV-like bureaucrat.

I personally believe that to have any real chance of surviving what is coming our way will require land.  Arable land.  Land that will allow you to provide for yourself.

If the projections for 2085 do happen, even owning the land and precious metals won't do you any good.  They will have been long-ago "repatriated" by the government.

This is the path I'm taking - precious metals and dirt - and the means to preserve both.  Unless a fundamental change occurs that is 180 degrees different from the change the government is imposing on us, we're all in deep sheep dip.

Not a place I plan on being.

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GunRights4US said...

I love that italisized comment: "And the means to preserve both"!


MikeH. said...

I kinda think the prediction about 2085 is just a wee bit optimistic. If (IF) anyone or anything is left by 2020, it would make Mad Max look like Happy Gilmore.


Chief Instructor said...

Guns, it is rapidly becoming impossible to place our trust in "institutions" as a whole. The concept is all but destroyed. Gotta look out for our own.

Mike, Joint Chiefs Chairman Adm. Mullen made a comment about how the amount we pay in interest on our debt will soon exceed the amount we spend on our defense budget. That is mind-boggling. They've already got projections for when our interest payments will exceed all other expenditures, and it's not that far in the future.

But no one is widely reporting this or putting pressure on our government to change its ways. The "watch dog" press is asleep at the switch. Just keep the gravy train running, and worry about paying for it all at some time in the future.

suek said...

Apparently they're planning to cut what they spend on the Defense budget. If they succeed, we'll _out_ spend the Defense budget.

Ok...I just ran across another goodie you might want to have in your stockpile...a mercury thermometer. You know - the kind you take your temp with if you feel sick. The reason it occurred to me was that I was cleaning out drawers and ran across a digital thermometer. It's dead. No battery life, I'd guess - but also no way to change it. Even if there were a way to change it, where would you get a battery? Now...I like the digitals as well as the next mom, but lets face it - if life gets tough, will one work? Can you still buy mercury thermometers? I don't recall seeing any recently. In fact, I saw an article about a Hazmat team called to clean up a "mercury spill" that was apparently about the size of a broken thermometer. Crazy. Anyway...if you can find one, you might want to put it away safely. And don't let it get exposed to really high temps - the mercury thread will break, and it will be useless. (left an animal thermometer in my glove compartment - glass was intact, but it was impossible to rejoin the mercury threads) If it's necessary to get down to real basics, you need a thermometer in your kit.

suek said...

By the way...

Precious metals - the physical stuff or the stocks? If the former, how would you expect to use it? I can just imagine me and my little bar of gold with my potato peeler to shave off a small peel for groceries...!!

If the latter, then precious metal investment companies, or the mines themselves?

Anonymous said...

Don't be fooled by the current cost of interest on our debt. The interest rates are being kept artificially low. When inflation comes, and it will, the interest on our current national debt will exceed $1 trillion and approach $2 trillion. It cannot be paid when it happens we will be bankrupt. It will happen! Interest rates will rise, most likely in excess of 12% and probably in excess of 16%. Figure it out yourself; 12% X $13 trillion dollars!! Or 16% X $13 trillion. As sure as we are alive on earth today it will happen and we will either print money to pay for it (yes, I know we already do) or we will go bankrupt and renege on our debts. Either choice is disaster. My best guess is after the next election (regardless of who wins and loses). Of course the Democrats will claim they can fix it if they just tax us enough. It cannot be fixed and higher taxes will just push us further into depression. It is later then you think...

Chief Instructor said...

suek, I have a couple of analog thermometers (I assume they're mercury filled) that we use for deep frying. I've also got a couple of the thermometers you use in a fridge or oven - they're some sort of wound wire, I believe. My best is one of the little Instant Temp thermometers we use for testing roasts, etc. Very accurate.

Regarding precious metals: This is not investment advice!

Physical gold and silver. If there's an economic crash, you'll never see your money back from most ETF's or mutual funds.

Gold and silver (small denominations or jewelry) is converted back into cash when it's needed, at current inflated values. It can be done at coin shops, jewelry stores, etc.

Ferfal ("Surviving In Argentina" blog) has a lot of information on how it works. Argentina is currently experiencing what I think we're going to experience in the coming years.

I currently only buy them as inflation hedges, so only a moderate percentage of our cash is in them. I can say, that percentage will be increasing in the near future.

Anon, your point is well taken. A huge percentage of our Treasuries are short-term. For instance, this year, we must "roll over" $4.5 trillion. No one will buy the long-term stuff because they pay so low. When rates spike, we'll then be required to roll these 3% (or lower) bonds into whatever the market says.

We'll be screwed, as we need the cash. If no one will buy the T-bills, the Federal Reserve will simply engage in "quantitative easing" - printing money out of thin air - to eventually pay our bills.

See, "monetizing debt" for more information.

Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public.

Out of one pocket, into another...

suek said...

>>My best is one of the little Instant Temp thermometers we use for testing roasts, etc. Very accurate.>>

Hmmm. No doubt. How would it be to stick under your tongue to see just _how_ sick you are???

Chief Instructor said...

suek, you presume it would go under the tongue... ;-)

suek said...

I presume that under the tongue would be the lesser of two evils...!!