Happy Daze?
Happy Daze??
Over the past two weeks, the stock market has jumped up from nearly 6,000 to over 8,000. In the same time, gold has fallen about $90 an ounce. President Obama has returned from a reportedly successful G-20 meeting, and the world (including Queen Elizabeth) has fallen in love with the sleeveless Michelle Obama. The panic many of us felt in January and February has dissipated and the world appears, once again, to be a benign and soon prosperous place.
However, that appearance may be deceiving. In fact, the threat of social meltdown and chaos not only remains but is so great that a domestic law-enforcement arm of the U.S. military (referred to by The Army Times as the "Consequence Management Response Force") has been created to deal with what U.S. officials believe may be a coming: an unprecedented wave of massive social chaos. Outgoing Treasury Secretary Hank Paulson reportedly told Sen. James Inhofe and Rep. Brad Sherman that so much financial mayhem lies ahead U.S. troops may have to impose martial law to deal with social unrest.
A new report by the Army War College's Strategic Studies Institute warns that the U.S. military must prepare for "a violent, strategic dislocation inside the United States" that could be provoked by "unforeseen economic collapse" or "loss of functioning political and legal order." The idea that the looming "economic collapse" was or is "unforeseen" is absurd. Nevertheless, the gov-co is getting ready for the stuff to hit the fan.
Last December, The Washington Post predicted that the incoming Obama Administration would "earmark" at least 20,000 troops returning from Iraq to deal with "domestic emergencies." Since then, the Army Times reported that the domestic emergency army unit has been increased to 80,000 troops.
In fact, 80,000 "riot" troops are peanuts if there's a real economic and social meltdown. 160,000 American troops were just barely able to control Iraq—a nation of the approximate size and population of Texas. Thus, in the event of real American chaos, 80,000 troops might be enough to control half of Texas. Who's going to control the rest of the country?
Viewed from another perspective, 80,000 divided by 50 states = an extra 1,600 troops per state. That's a triviality in the event of a real calamity. Of course, these 80,000 troops would not be "equally divided" among the 50 states, but would be sent to whichever cities were in the greatest turmoil. But how many cities do you suppose 80,000 troops could successfully handle at any one time? Five? Ten? 80,000 troops is a little like the FDIC guarantee to insure all the funds deposited in all 5,000 American banks. Yes, the FDIC can guarantee deposits if up to five, maybe ten, large banks collapse. But if the whole banking system goes down, the FDIC's insurance funds will be quickly exhausted and the vast majority of depositors will simply lose their savings. The same thing with 80,000 troops. If there really is a national collapse in the economy and society, 80,000 soldiers won't be enough to make much difference except in a few places.
Although gov-co apparently expects big trouble ahead—they're not warning the general public. Stephen Flynn of the U.S. Commission on National Security has warned, "Too many officials believe telling the truth to Americans about the risk would set off a nationwide panic. Thus, they keep us sheep in the dark for our own good." Apparently, gov-co does not believe that "the truth will set you free," but instead subscribes to the notion that the truth will make you panic.
Of course, we don't know that a worst case scenario is going to happen, or is even likely to happen. But we do know that a worst case scenario could happen. We are in danger. We may yet skate past most of the danger, but government actions (preparing 80,000 troops; keeping the public in blissful ignorance) confirm that the danger is real.
In December, the IMF managing director Strauss-Kahn warned of riots and unrest sweeping through Western countries as lower-income households are beset with credit constraints and rampant unemployment. (Such riots have already caused the government of Iceland to fall and triggered riots in Greece.) Strauss-Kahn's warning was simply one more bit of evidence to lend credence to the possibility of a calamitous collapse of even the U.S. economy.
The fundamental U.S. economic problem is that our fiat monetary system—started with the onset of the Federal Reserve in A.D. 1912, magnified with loss of gold to back our domestic dollars in A.D. 1933 and the loss of silver by A.D. 1968, and brought to a head by the gov-co's consumer debt bubble over the past generation—is imploding. The total debt is now too great to ever be repaid and must be repudiated. Under normal circumstances, if most of our debts were repudiated, it might be cause for celebration.
However, in our "debt-based monetary system" one man's debt is another man's wealth. Because our principal form of paper wealth is debt instruments, when the debts are repudiated as unpayable, the value of the vast majority of our nation's paper wealth (stocks, bonds, pension funds, bank accounts, etc.) will also be lost. A nation without debt is a great thing. A nation without wealth is a calamity.
Gov-co is currently seeking to stave off financial collapse by using trillions of paper dollars to buy "toxic assets"—those paper debt instruments that can no longer be paid and are therefore totally or nearly worthless. The problem with this strategy is that the paper dollar (which has lost 96% of its purchasing power over the past 70 years) is, itself, technically a "toxic asset" (a promise to pay that can't and won't be kept). How anyone supposes that we can avoid an economic and social meltdown (precipitated by too many "toxic assets") by flooding the society with more "toxic assets" (paper dollars) is beyond me. Our federal "fire brigade" is essentially trying to quell the current economic fire by drowning it in gasoline. The strategy might postpone the fire, but it won't stop the ultimate conflagration.
During the Great Depression, unemployment rates reached an historic rate of 25%. Today, our gov-co warns that if the current financial crisis continues, we might one day see 9% unemployment in this country—well below the Great Depression high. However, John Williams of Shadow Government Statistics notes that un-manipulated government statistics suggests a current civilian unemployment rate is already 17%—with a projected high of over 30%.
If Williams is right, we are already in the next "Great Depression". Some people might suppose that we couldn't yet be in another Depression since most people don't know that to be true. But it's important to recall that during the first Great Depression (reportedly started with the stock market crash in A.D. 1929), that the American people did not generally agree we were in a Depression until about A.D. 1933. Just as Americans of the 1930s were three or four years into the last Depression before they all realized their condition, something similar could be true today. Just because the public does not yet know or agree that we're already in an economic depression does not such depression does not already exist.
With so many American families already on the margins of survival, the speed of the downward unemployment spiral is ominous (and unprecedented). America "eased" into our first "Great Depression". If a second "Great Depression" is upon us, American may sink two or three times faster than they did in the 1930s. If so, our second Depression's "velocity" may precipitate panics of the sort never before seen in this country.
Congressional Quarterly notes that pension fund losses are about to spill out onto the front pages—with nearly as much financial exposure as that which brought down America's banking giants.
Pension funds of millions of retirees are already down by a $1.9 trillion. This is why cities such as Philadelphia are quietly seeking federal money to bolster pension funds which CQ notes are 60% invested in the stock market—which itself has collapsed by a catastrophic 50% in just the last 18 months.
Before he resigned, former head of the U.S. Comptroller General Office, David Walker, warned Congress that the Social Security "Trust Fund" is a vault of IOUs; and Medicare will soon be effectively bankrupt. Worse, Walker agreed with John William's estimate that the federal gov-co is actually in debt for about $55 trillion—not the $9 trillion currently claimed by the federales. If Walker and Williams are right (and I believe they are), that debt is unpayable and must be largely repudiated. When that happens, tens of trillions of dollars will disappear from the American (and world) economy. When the wealth disappears, the economy will collapse.
The American Association of Architects' construction index has plunged 34.7%—a grim indication the commercial real estate market may be the next shoe to drop, which some believe may lead to an "unstoppable chain reaction of bankruptcies" not only among private persons, but among the state governments as well. Why? Local and state governments depend on taxes from U.S. commercial real estate to fund fire, police and social services. Even without a collapse in commercial real estate prices, 46 states are already experiencing serious financial shortfalls. With a commercial real estate collapse, many of those state (and local) governments will be driven into virtual bankruptcy.
The Washington Post reports that two out of three large police departments in U.S. cities are already implementing budget cuts and hiring freezes. Meanwhile, cash-strapped states unable to continue funding prisons are granting early releases to convicts. Result? Fewer cops, more criminals in a society where unemployment is already significant and rising. Gee, do you suppose we might see an increase in the crime rate? As gov-co becomes increasingly impoverished, do you suppose that each of us will have to become increasingly self-reliant when it comes to protecting ourselves, our property and our families?
If you find the idea of increasing crime rates and a need to become more self-reliant improbable, try to recall what happened in New Orleans after Hurricane Katrina caused the social order and emergency services to collapse. God help you if you're trapped in another "super dome" (big city) if a similar catastrophe afflicts our national economy.
Some Americans already recognize that despite the current “happy daze,” our current economic condition 1) has not yet bottomed out; and 2) could still result in catastrophe rather than mere inconvenience. The fact that we might have a catastrophe does not mean that we will have a catastrophe. Nevertheless, an ounce of prevention—or at least prudent preparation—may be worth a pound of cure.
We have to give President Obama credit. We haven't had a collapse yet. If we're going to have a collapse, it appears that it may be several months, even quarters, away. Obama seems to have slowed our slide into chaos and we may yet avoid the catastrophe. Even if we don't avoid a very serious problem, Obama seems to have bought us some additional weeks or even months to prepare.
Take advantage of this opportunity. The fundamentals haven't changed. Our economic system is still so deep in debt that (in my opinion, at least) as much as 80 to 90% of the debts (and associated wealth) may ultimately be repudiated. If even half the remaining paper wealth is "disappeared," every major city in the U.S. may come to resemble the post-Katrina Super Dome.
The worst case scenario may not happen, but it could. Prudent people will prepare. In a worst case scenario, you'll need food, water, guns, ammo, gold and silver coins—enough to last 90 days, perhaps even six months. Take advantage of the "Obama respite" and stock up now. If things go well and the economy revives, next year you'll still be able to sell all of today's "emergency supplies"—and probably at a profit. If things go badly, you'll thank God you bought those supplies.