Hard Truth Weekly Reader – Shall We Panic?

February 13, 2010 by  
Filed under Economics

This is a week for considering not how things are in the world of personal finance, but how bad they can become. If you are inclined toward getting in a funk after reading negative predictions, you might want to skip this post. If you are willing to read some hard truth to guide your own money decisions, I’ve got some helpful stuff for you.

First up is Paul Farrell at MarketWatch who tells us how we should invest for a global debt-bomb explosion. The title is rather misleading, in that Farrell doesn’t really tell mainstream Americans how to invest to protect themselves against the debt-bomb. Instead, his message is simple: stockpile. Farrell may be an alarmist but preparing for an extended emergency is always a good idea. We did that several years ago when the bird flu worries were peaking. One of my favorite sites for learning about emergency preparedness is beprepared.com.

Next, well-known conservative Pat Buchanan writes about the national insolvency crises in several European countries, i.e., the “PIGS.” Pat thinks that these recent events in Europe are predictors of our own dismal future here in the States. Who can say for sure that Pat is wrong? If you can’t, check out that emergency preparedness stuff again.

For some “how to solve our problems” ideas, an economist I admire, Larry Kotlikoff, has some radical ideas for how to fix the financial system. Even though these ideas have gained some traction, the entrenched interests in the financial system probably have too much influence in Washington. If you agree, well ….. there’s that emergency preparedness thing again.

Finally, lest you believe that I rely too much on conservative alarmists in my readings, consider the views of the Special Inspector General of our government’s TARP program.  He warns in a report to Congress that the government’s response to the recent economic crisis has failed to address critical regulatory problems in the financial markets. The consequences are a repeat financial disaster, only worse. I wonder if the White House will get this guy fired for speaking too much hard truth?

I would love to hear some feedback from readers about these articles. Do you find them silly or illogical? Are they worth considering in guiding your own decisions? Have any of you made special emergency preparations for a possible worsening of the financial crisis?


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17 Responses to “Hard Truth Weekly Reader – Shall We Panic?”
  1. averagejoe says:

    I’ve been watching what is going on in Greece and had a revelation: the country defaults (is broke) and it affects all their government workers. Greece put a salary and hiring freeze on it’s government employees. The public sector is not affected by this. So what if the govt employees are shutting down the schools, the transit system and closing the doors on govt institutions? How does that affect the common man? Think about it. The govt can raise taxes, but you have to be earning money or buying products in order to pay the taxes.

    If it happens here in America, and I hope to God it does, I would love our government to shut the f**k down. I would love all those people who jumped on the govt bandwagon job train to be out of work. Police & firemen come out of state budgets. So, we have less cops. Buy a gun.

    The only necessity you have to worry about, in my world anyway, is water and food. America still grows it’s own food, livestock, chickens etc and the trucks and public sector will just keep rolling along. So what if imports or exports are stopped? We still get our gasoline from some oil production states down the New Orleans way. (will it be enough, no, so ration it)

    Once all those govt employees lose their jobs, they’ll be looking for work. Where? In the private sector. Can’t find a job? Maybe they’ll use their brain cells and become entrepreneurs again, like America used to be.

    What am I personally doing to prepare? First off, I live in the midst of farmland. My neighbors won’t be stopping anytime soon growing fruits, vegetables, wheat etc. In fact, word is that many hedge fund managers from NYC are coming up here buying up all the farmland. Geeze, I wonder why? I’ve got neighbors who raise cattle, chickens, goats (great cheese) and whatever. Many of the farms are organic. If for some strange reason I can’t get gas for my car, I can get a horse and ride the 6 miles to the main town. My home is heated with propane (which is a readily available byproduct of gas and is made right here in USA). I am on the verge of installing solar panels for my electricity. Hope I make the deadline (like, you know, when America collapses).

    I have an assortment of silver & gold coins which I intend to use to either buy seed or fuel or whatever. I live on 4 acres, so putting in a decent sized garden will be easy. I’ve got a shed to convert to a chicken coop and a barn to hold the horses, goats or whatever. Easy as pie to buy these animals since most of my neighbors already have them. Plus, I have the tools necessary.

    My basement is stockpiled with canned goods. I pump my own water and have enough trees to burn as firewood for the next 10 years. I’ve reconditioned my home to accommodate my transient offspring should they need to return to the nest.

    The only last thing I need to get is a gun, which I already started looking at. I’ll probably buy one this week.

    I count the days till America defaults. It’ll be the best day in my life.

    BTW, did you notice yesterday when Obama signed the additional $1.4 trillion debt ceiling China also raised the requirements to borrow money from them? Think it’s a coincidence? Nah. Counting the days. Counting the days. Counting the days. Technically, USA is broke, thus Obama had to raise the debt and all the economists say that as it stands now (and forever) USA will never be solvent ever again. It’s bankrupt. Did Obama do this on purpose? Did Chairman Mao starve his people to death in order to pass his agenda? Did Obama force many citizens onto welfare, UI benefits, food stamps, section 8 housing, COBRA medical, social security (early retirement @62 for older workers who can’t find jobs). If USA defaults it will be those people who will suffer when all those government entitlements come crashing down. Ah! hopey, changey things indeed.

  2. Holly says:

    Ah, good ‘ol Republican positivity. I still enjoy your posts, Mr. TML.

  3. averagejoe says:

    Greece is a socialist nation. As is the rest of the PIGS: Portugal, Italy, Greece and Spain (all the nations that are currently failing in Europe). I find it a bit odd that as the EU and their socialist nations are now falling, America is rushing to become a socialist nation. Stupidity at it’s best.

    So, what does TML have to do with the republican party, Holly?

    I’d like to know why most Americans still have the gall to think nothing bad is going to happen to them?

    The PIGS, Greece especially, have big socialist governments, and have pushed the people into more government jobs while equally raising their taxes. Sound familiar? The result? Failure.

    Coming to a good, ‘ol American town or city near you.

  4. MasterPo says:

    Joe,

    While I agree in principle, just to play Devil’s Advocate some points:

    – Not everyone can buy farms in the mid-west and learn how to grow food while still try to make ends meet with in the active system.

    – Don’t count on a gun. Before the gov colapses firearms confiscation will come. Maybe even before the shite hits the fan. Certainly afterwards.

    – Stockpiling food is time consuming and expensive. You also have to have a schedule to rotate stock as it approaches expiration.

    – Related to above, just how much food to stock pile? A week or two? A month or two? Years?! Keep in mind some people in the 70’s and 80’s had huge stockpiles of food and supplies expecting nuclear war with Russia that didn’t happen. And some people spend thousands on supplies etc for Y2K that didn’t happen.

    – While I agree things do look very bad, you can always find someone claiming the sky is about to fall. They are rarely correct.

    But the biggest point I think is this:

    Extreme (and violent!) social upheaval happens *FAST*!! It is very very rare to be a slow progression. Look at East/West Germany when the fall came down. Happened in a matter of days. The wall was gone and the USSR as we knew it was over.

    Back here, look at the LA riots after the Rodney King event. Or the Crown Heights riots in Brooklyn (NY) after a black kid was alledgedly run over by a white Jewish guy. These events happened in a *SNAP*, not slowly built up over weeks or months.

    My point is that when these things happen they happen fast. By the time it becomes obvious to you what is happening so it is with all your friends and neighbors. So your chances of getting away quickly and safely drop.

    By the same point you can’t just up and flee at every world event. That’s the stuff of real loonies. Consider 9/11. It could have been the start of a series of attacks on main land U.S. over the next several days and weeks. But (thankfully!) it wasn’t. Yet I’m sure some people ran out of NYC for the hills!

    Were they right? Probably in the short term. But eventually they had to come back.

    You raise many good points, items that I too have struggled with lately. I don’t have a good answer yet.

  5. wrc1000 says:

    Boy Scouts and Marines: Be prepared; improvise, adapt, and overcome.

  6. kitty says:

    Joe – regarding silver and gold coins. If things really get that bad as you predict, can you really be sure that there’ll not be gold confiscation? It’s not like it didn’t happen before…

    Farm living isn’t for me. So I think I’ll enjoy my not-far-from-NYC-location with the access to arts and culture and such it provides. Might as well enjoy what I can before the end of the world. Maybe my townhouse condo complex would allow us to grow food on the grounds if need be…

    • MasterPo says:

      Confiscated how?

      Physical ownership of gold is a cash transaction and unregistered.

      So unless the gov breaks into every safe deposit box and/or goes door-to-door searching there’s no way to find it.

      • kitty says:

        Read history, specifically Roosevelt gold confiscation in 1933. Based on what I read, they didn’t do a door-to-door search, but whenever you came to your safe deposit box someone came with you and “exchanged” your gold for the monetary value printed on the coin. I’d imagine most people would keep gold in safe deposit boxes and not home.

        • kitty says:

          Additionally, gold ownership (except for collectibles and jewelry) was illegal 1933-1974. Even if you keep your gold coins in the freezer and nobody knows about them, you couldn’t easily sell it or show that you have it in such circumstances.

          Granted, now that no country is on gold standard, the repeat of 1933 gold confiscation is unlikely, but we are talking about end-of-the-world type of scenario here.

  7. dwhite2762 says:

    Should we prepare like we were told to do under Bush and buy some plastic and duct tape? Or should we prepare like we were told to do for 2000? Come ON, eveyone. Settle down.
    Our biggest concern should be the Chinese economy and how wrapped up we have become with them. China could bring down everything.

  8. dwhite2762 says:

    Under Bush (Feb 2003), the new Department of Homeland Security urged Americans to to buy duct tape and plastic sheeting to seal windows and doors in the event of a terrorist attack. Sorta like the old duck and cover advice from the 1950s. Tom Ridge held a press conference with this advice followed by Bush telling America it was a good idea.

  9. MasterPo says:

    Kitty – I would think in a real end-of-the-world scenario the gov would more likely try to confiscate guns and possible weapons than gold. But I do agree that they can pass laws (or more likely Executive Orders, esepcially with the current crop of bozos) that would make the purchase or redemption of gold illegal. NTL, I’m sure there would be a way around it. Probably an underground market. Much lower than spot but still cash-able.

    D – I stand corrected. NTL, a measure of preparation would be prudent. Not sure about stocking the pantry for an extended seige. But some extra supplies overall isn’t a bad idea. And lots of ready access to cash as well as cash on hand.

    FWIW, I told my wife the other day until further notice I don’t want her to let her car drop below half a tank. She thinks I’m nuts (for many other reasons too 😉 ) but at least I let her use my Amex for the gas so she figures while I’m paying…

  10. dwhite2762 says:

    It intrigues me that this site is getting scared NOW!! Was everyone this spooked in 2004 when the housing market started to tank? What steps did everyone take when the jobs lost in the recession got over 10% and 8.4 million people in the country lost their jobs? What stockpiles did you make when over 1 million people had their houses forclosed? I mean how much worse do you really think its going to get?
    It reminds me of the whole millenium scare that frightened people into buying generators and dried beans. What the article did was try to frighten without offering any really sensible solution. People in this country have to quit being frightened by the right and the left media and start acting like adults.

  11. MasterPo says:

    Dwhite – One important issue: We didn’t have Obama!

    Now before you leap on me, I do mean it in the deepest political sense.

    Whether or not it was successful or even the correct action, Bush did try several things to help like keep taxes low, interest rates low, and the nation safe from attack. That sets a positive tone for people. Psychology always plays a BIG factor in all this.

    By contrast, Obama *PROMISED* the Stimulus would save further job loss (do I have to post the link to his January 2009 Washington Post editorial again?). He promised real jobs, real leadership, real hope.

    Instead we got 10% unemployment, a handful of *temporary* make-work government projects for a few people, a QUADRUPLING of the annual deficit, an historic overall budget debt, several terrorist attacks, a healthcare bill being rammed down the throats of the people, and the *promise* that MAYBE in 10-15 years a few thousand “green jobs” will be created (please define “green job” specifically).

    What is most telling: CBS/NY Times poll shows only 6% of America believe the stimulus has worked. (By comparison 7% of American believe Elvis is still alive!)

    And what do we get? The Obama admin saying it’s just a lack of us understanding how great the Stimulus is working.

    My wallet understands all too well. :-(

  12. dwhite2762 says:

    Master Po, I just don’t understand how you can take that stance after Bush landed us in a war without reason and removing a budget surplus and landing us in the worst financial crisis is 70 years! I agree that most Americans are confused over the bailout (700million under Bush) and the Stimulus (under Obama). You seem to have forgotten as well. Its only been a year! The crisis was worse than we thought. Most economists think that the stimulus package was too small to promote real job growth. In my state, the green jobs are doing well. I’m all for it.

  13. MasterPo says:

    “Most economists think that the stimulus package was too small to promote real job growth”

    If $787 BILLION (or $850 BILLION by some estimates – odd that no one really knows the total cost don’t YOU think?!) was “too small” then Heaven help us all!!!

    Spoken like a true Obama worshiper.

    :-(

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