Worse yet to come?

The comments we heard/saw varied from “No way!” to “We already knew that.”

It’s PrudentHomes’ view that the information/”signs” has value because:

A. They have been brought together in one place suitable for a quick copy (and then as a basis for further discussion) and

B. Whether any of the signs are of “… The Final Economic Plunge” or not they could have a profound/negative effect on the Prudent family. Here are three of the signs with some of their commentary:

1. “Price Inflation Of Oil: For a long time, oil has been traded on the world markets exclusively in U.S. dollars. Oil and the dollar are therefore intimately connected. Oil will be the first commodity to reveal any inflation (or hyperinflation) in the dollar breakdown.”

2. “Grocery Store Peculiarities: Wholesale prices of goods have recently been increasing far beyond what mainstream economists had predicted, hinting at the first steps towards inflation… Eventually, stores and manufacturers can no longer absorb the inflation, and either raise their prices, or diminish their volume. Keep careful note of your local grocery stores.”

3. “Terror Attack / New War: The world is on the brink as it is. If a terrorist attack (false flag attack), or a new war arises, it is time to collect your gear, your family, your friends, and make for the hills (if that’s where you plan to go). Any new and extended threat of conflict in 2010 will be used as an excuse to institute martial law and subjugation of civil liberties, not to mention trigger a financial meltdown…”

PrudentHome Comment: We have mentioned several times in this new year that NOW is a great time to raise you and your families’ awareness level as to events, situations and conditions. The foregoing three “signs” are examples of what we meant/mean. Please read the article and consider any of the “signs” mentioned as a trigger, at least, for immediate action to pull together any loose ends in your program of family preparedness.

Until next time; keep your eyes on the horizon as the weathers changing fast.

The Dollars Decline: Today’s post headline comes to us from the Financial Times (ft.com) of 11/29/09  via survivable.com of 12/01/09. The article is by Jeffrey Garten and is entitled “We must get ready for a weak-dollar world”.

Photo Credit: SqueakyMarmot

Here’s a portion of this important piece:

• “The roots of this situation are well known. The American budget deficit of this past fiscal year reached 10 per cent of gross domestic product, the largest since the aftermath of the second world war. Meanwhile, the net external debt of the US nearly tripled last year. To $3,500bn and it is projected to increase by nearly $1,000bn every year for the next decade. All this underestimates the problems of a country where unfunded liabilities for baby boomer entitlements are in the stratosphere, infrastructure deterioration is scandalous and many large states are out of money. To close the gaps. Taxes would have to be raised to sky-high levels and spending brutally slashed. It would take a miracle if America’s political system – one rife with vicious partisanship and riddled with well-financed special interests – could do either, let alone both.
• Washington will therefore have little choice but to take the time-honored course for big-time debtors: print more dollars, devalue the currency and service debt in ever cheaper greenbacks. In other words, the US will have to camouflage a slow-motion default because politically it is the easiest way out.”

U.S. Government Failure: To hand-in-glove the above piece, this observation from yesterday’s Of Two Minds blog (oftwominds.com) post by Charles Hugh Smith entitled “The Grand Failure of Government to Limit Concentration of Power”:

• “This, then, is the grand failure of government: due to the concentration of power accumulated by those with asymmetric stakes in the game, any attempt to limit a concentration of power is thwarted by status quo. All the issues which so worried Madison in “The Federalist Papers” have come to full flower: the power of the State has been legally channeled into Elites which have nothing to fear from any branch of the State because they are the State.”

PH Comment: So here we are. “We The People” are on our own. No one is coming to rescue us and the boats have all been taken or burned. We build from here.

Until next time; keep your eyes on the horizon as the weathers changing fast.

“A report by University of California, Berkley economics professor Emmanuel Saez concludes that income in the United States is at an all-time high, surpassing even levels seen during the great depression.

The report shows that:

• Income inequality is worse than it has been since at least 1917
• “The top 1 percent incomes captured half of the overall growth over the period 1993-2007”
• “In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth.”
• As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970’s. The minimum wage, adjusting for inflation, is lower than it was in the 1950’s. …”
• “Of the 535 members of Congress, over 44% – 237 to be exact – are millionaires. …”

U.S. Moving to 3^rd World Status?: On November 16^th, 2009, Mike Folkerth – King of Simple  (mikefolkerth.com) gave us this guest post by Greg Chadwick under Mr, Folkerth’s post title “A One-Way, Non-Stop Ticket to 3^rd World Status On A Slow Train”. It seemed to us insightful and at least as good a guess concerning an economic collapse coming to/in America as any we’ve read recently. Here are some of Mr. Chadwick’s views:

• “First, we need to understand that collapse isn’t coming, it’s already here. Large numbers of people are already unemployed, homeless, and hungry, for them, depression has already arrived. Virtually everyone in the US has experienced a significant erosion of purchasing power since the Seventies. But notice it didn’t happen overnight. We lost a little here and there; nothing sudden or dramatic.”
• “One day soon the dollar will no longer be the world’s reserve currency and we will need to pay for oil with something other than dollars. Our largely worthless dollars won’t give us a favorable exchange rate in the way of purchasing power so we will learn to drive and eat less and walk more. …”
• “The government and the mainstream media will acknowledge that we are going through a rough patch. However, they will assure us that recovery is just around the corner, just like nuclear fusion, which has been just around the corner for the past fifty year, and most will believe them. They will do their best to distract us with nonsense. …”
• If we expect to live well in the coming years, we need to take action now . This is no different than buying homeowners insurance. Anyone who waits until his house is on fire to buy a policy could find himself living under an overpass. …”
• “What does the future look like? Just like today, except that it will be a little worse. There will be relentless deterioration, mostly imperceptible, too slow to cause alarm, and certainly not enough to trigger a flight or fight response. For most people the alarm will never go off.”

PH Comment: Mr. Chadwick makes some solid points concerning our economic history – recently. What we feel he may not be considering are possible events along the lines of a war in the middle-east, civil unrest in the US, or terrorism here in America – another more deadly strike. Any of these, or other events, could produce rapid deterioration and/or worse.

For the prudent family, it would appear to us that a strong program of preparation (water, food, medicine, self-protection, etc.) for harder times is in order. This program would, as we have said in the past, center around faith, family friends, and neighbors. We need to get to work on this as the time may very well be short.

Until next time; keep your eyes on the horizon as the weathers changing fast.

“… There’s been a pretty significant development in regards to peak Oil that’s worth drawing particular attention to. From yesterday’s UK Guardian, …The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims [the agency] has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while      overplaying the chances of finding new reserves.”

A bit later in the article:

“Many inside the organization believe that maintaining oil supplies at even 90m To 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organization was that it was ‘imperative not to anger the Americans” but the fact was that there was not as much oil in the world as had been admitted. “We have [already] entered the ‘peak oil’ zone. I think that the situation is really bad,” he added.

PH Comment: It seems that all governments want important information skewed to meet their particular ends and it’s with this in mind that we continue to recommend having a number of reliable sources for your information.

Life After The Oil Crash has proven itself in this regard to PrudentHome.

Conversations With ‘Pop’ Smith: Question – ‘Pop’, in our last conversation you said that you thought that we were in the “Long Recovery” and that you were preparing for sustained hard times. Are you prepared?

‘Pop’ Smith’: No, I’m not prepared but I am continuing to prepare given our time and resources. To give you an idea of what we’re doing this winter;

1. We’re expanding and preparing our garden area to more than twice the small size we had this past spring
2. We’ve just finished an inventory of the over-the-counter drugs in our family medical kit and separated those that need to be replaced (old or expired) ASAP.
3. We’re changing out our oldest stored water for fresh and expanding our reserves by about 20%.

This past week we set up a jar for pocket change to help finance an expected and expanded seed purchase for our 2010 spring garden as soon as the catalogs begin to arrive. We plan on wiping down our garden tool handles (wood) and walking sticks with linseed oil for preservation and protection. And finally, we’ve changed out some of our more recently stored honey into mason jars from less reliable containers.

Our goal is to accomplish some three small jobs each week and three larger jobs each quarter at a minimum.

Thanks, Pop.

• “Nearly half of all U.S. children and 90 percent of black youngsters will be on food stamps at some point during childhood, and fallout from the current recession could push those numbers even higher.”
• “An editorial in the medical journal (the November issue of Archives of Pediatrics and Adolescent Medicine/PH) agreed.
• “The current recession is likely to generate for children in the United States the greatest level of material deprivation that we will see in our professional lifetimes,” Stanford pediatrician Dr. Paul Wise wrote.”
• “… other recent research suggesting that more than 40 percent of U.S. children will live in poverty or near-poverty by age 17; and that half will live at some point in a single-parent family. Also, other researchers have estimated that slightly more than half of adults will use food stamps at some point by age 65.”

PH Comment: What the above article and information suggests to us here at PrudentHome is that America is in rough shape economically and socially. A lot of the statistics used to develop just the numbers PrudentHome has presented have been based on several decades worth of research  with a clear implication that things are getting worse not better. This is something that the preparing family needs to keep in mind as it works toward greater independence. This situation looks like a long haul at best and a sustainable preparation program is going to be required.

Conversations With ‘Pop’ Smith:

PH Question – “ ‘Pop’, we’ve been talking about a good general, in- depth family preparation program as being a base for dealing with almost any specific crisis-event coming down the road but do you see any problems on the near horizon that we might want to keep our eyes pealed for?

‘Pop’ Smith: While nobody can predict the future, all of us would want to be keenly aware of the direction our economy is taking. We’re at real unemployment at close to 20% with about 70% of our economy depending on near-full employment. Credit is tight and the people and the country owe more than they can pay back. This in a context of nervous creditors, national and international, wondering if we’re going to outright default on our debt or our country is going to print a lot more money with no backing and default that way. Either way things don’t look good.

Wages look like they’re going to hold steady at best for a while so with everything costing more (not just in the stores but in all your local and state taxes and “fees”), look for a lower standard of living for the average American in the short haul at best.

Also, you’re going to want to keep a sharp watch on the middle east. If Israel and Iran go at it, then all the bets are pretty much off the table. The bad now will seem good then

Don’t forget terrorism and civil unrest. Both of those are nearly sure bets pretty soon.

Bottom line: You’ve probably heard about the “Long Emergency” and the “Long War”, well I’d bet that you’re going to begin hearing about the “Long Recovery” pretty soon now. That’s what I’m preparing for: sustained hard times.

Until next time; keep your eyes on the horizon as the weathers changing fast.

• “ … the United States Government is on a trajectory to default on their obligations. In it’s current condition, it will not be able to fund its forecasted budget deficits and unfunded social security and medicare promises on top of its current debt obligations. … we don’t know when the market will react to it, but there is no longer any doubt about the extent of their trajectory. There simply isn’t enough taxing power, value creation or outside capital willing to support its egregious spending.”
• “From 2004 to 2009, US obligations increased by an average of almost 50% over this six year period under both calculation methods, while US government revenue increased by only 12%. No company or government can increase its liabilities by more than four times the rate of its revenue and stay solvent for an extended period of time.”

A Response?: We, (PH), wondered if this bit of information from the Financial Times (FT.com) on 11/03/09 could be a response, in part, to the information presented above in “Dead Government Walking”. See for yourself:

• “Gold prices continued to rise on Wednesday extending the all-time highs which followed India’s central bank bought 200 tonnes of the precious metal, swapping dollars for bullion as the country’s finance minister warned the economies of the US and EU had collapsed.”

Food – Stamps: From newsmax.com on 11/4/09 we get this headline, “A Record 36 Million in U.S. on Food Stamps”. Here’s the nut:

• “The number of Americans receiving food stamp assistance soared above 36 million for the first time in August, the eighth month in a row that enrollment set a record, the U.S. Department of agriculture said on Wednesday.
• USDA said 36,492 million people were receiving food stamps, also known as the Supplemental Nutrition Assistance Program. … At the current rate, an estimated one in eight Americans receive benefits.”

PH Comment: The above information are only a couple of snapshots of conditions in the US and the world at the current time. These snapshots along with the comments/observations from economic and social analysts like Prof. Nouriel Roubini, Martin Weiss, and Gerald Celente, would seem to demand the prudent family prepare for a darker future.

At PrudentHome we still advocate strong general preparation for very hard times in the future along with heavy investment in faith, family, friends and neighbors.

Until next week; keep your eyes on the horizon as the weathers changing fast.

“So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs, and who are also trying to get out from under a pile of debt, are not going to do a lot of shopping. And businesses that don’t have customers aren’t going to be doing a lot of new investing. And foreign nations also suffering from high unemployment aren’t going to buy a lot of our goods and services.

And without customers, companies won’t hire.  They’ll cut payrolls instead.

Which brings us to the obvious question: Who’s going to buy the stuff we make of the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.”

Food – Backyard Chickens: “Americans turn to backyard chickens for food, security” by  Laura Zuckerman (9/16/09) posted atYAHOO.NEWS via energybulletin.net on 10/1/09, gives us some insight as to what some Americans are doing to meet today’s hard times and some possible harder times in the future. Here’s some of the “doings“:

• “ (Cindy) Thomas is not a farmer and she was not raised on a farm. But the Salmon (Idaho) woman is one of a growing number of Americans who have turned to chickens in the face of a flagging economy, scares about food supply and a strengthening drive to acquire locally produced food.
• In Idaho and Washington state, poultry hatcheries and farm stores say sales of chicks are soaring, with some reporting a rise of 70 percent compared to last tear.
• “We’ve had a hard time filling orders,” said Annette Whitley of Dunlap Hatchery, a facility in southwest Idaho that supplies chickens for eggs and eating – layers and fryers – across the United States.”
• “ Cities are scrambling to keep pace with the outcropping of interest in backyard chickens. Many rules in residential areas restrict rooster-free flocks to manageable numbers – less than a dozen – and concentrate on minimizing noise and odors.”
• “In the underlying ethos is self-sufficiency as a buffer against an uncertain economy, then layer hens, or pullets, are a practical undertaking requiring little space, time and expense, said Jim Hermes, extension poultry specialist with the animal sciences department at Oregon State University.
• “Chickens are a good fit for suburban living,” he said.
• “I don’t know what the  economy is going to do but I do know where I’m going to get my food,” said Karen Mcllroy, who maintains 65 hens near Tacoma, Wash. “And I know if I lost my job I would still be able to eat.”

PH Reminder: On a similar tack, get your seeds (open pollinated/heirloom) for next years garden as soon as they become available and seriously consider getting extra to have two gardens worth on hand at all times. We have the feeling that seeds may be hard to come by if things keep going in this direction.

Until nest time; keep your eyes on the horizon as the weathers changing fast.

The above headlines paint a grim picture of American unemployment “ But wait!” as they say in the TV commercials, “There’s more!”

The more is structural unemployment.

Structural unemployment by one definition runs along the lines of “Unemployment caused by changes in the structure of occupational opportunities, such as when a steel factory closes …”

We might add: such as when they’re no longer making Pontiac’s or Saturn’s (in the context of reduced U.S. auto manufacturing as a whole) or closing the washing machine factory and shipping the jobs to Mexico. But maybe it’s the poet, as is often the case lately, that really has it nailed: “The steady jobs are leavin’ boys and they ain’t coming back – to your home town.”

We here at PrudentHome, wouldn’t be surprised to see “civil unrest” right here in “ …  you home town.” (or in a home town near you) by Christmas and almost certainly within the next year.

Conversations With ‘Pop’ Smith: continued from last week – We were talking about family preparation being geared to roughly four levels of challenge:

1. General Preparation for standard/short-term events such as bad seasonal weather
2. Medium-term events such as a “Hurricane Katrina” or a deep recession
3. Long-term events such as a hard depression or a long term oil embargo
4. War and/or social breakdown.

Again, none of these events are mutually exclusive.

All of the events discussed above require that you prepare to provide your family with shelter, water, food, medical care at some level, and security at a minimum.

This all sounds like quit a bit of effort, and it is, but if you prepare the basics for level one, you have then established a base upon which to build for the greater challenges level two will demand. This follows through using the new, expanded base for number two to prepare for the increased challenges demanded by level three, etc. etc.

We’ve now slipped into a new understanding of preparation: preparation isn’t a static condition but very much a dynamic process.

Just like owning a house or a boat, you have to maintain them and adjust you maintenance, and perhaps expansion, to changing conditions and your changing needs.

As you’ve probably guessed by now, you’re never going to be 100% prepared for any event; you’re going to have adjust to learning to adjust. It’s kind of like a retired Marine Corps (special ops) buddy of mine says: adapt, improvise, and overcome. Sound advice and sound attitude.

Oh, there’s one other thing along the line of adjusting; you might notice that with each increased level of challenge, comes an increased level of stored goods – both in quantity and quality. The very same thing can be said for your skill levels: e.g., while a very basic level of first-aid might get you by in level one or two, you’ll probably want something more for level three and as much as you can acquire for level four.

This is a real general overview of family preparedness but I hope it’s helped a little.

Until next time; keep your eyes on the horizon as the weathers changing fast.

Mexico Hurting: “Mexico’s economy taking hits from all directions”, by Arthur Brice, is the title of this CNN.com/world’s post on 8/23/09. It’s an important piece because not only is Mexico our close neighbor, it is one two countries (along with Pakistan) our security experts seem to believe is in the greatest danger of falling apart. Mexico is also one of America’s largest sources of oil and it’s with all this in mind that we present a few of the article’s highlights:

• “The Mexican economy went off a cliff in the second three months of 2009, with the gross domestic product dropping 10.3 percent from the same period last year according to government figures.
• “Analysts say the main cause of Mexico’s nosedive is that the nations economy is tied strongly to that of the United States, which is mired in the deepest economic downturn since the 1930’s.”
• “Other factors dragging the Mexican economy down include a tourism decline caused by H1N1 flu outbreak and fears over continuing violence, declining oil and tax revenues, and fewer Mexicans abroad sending money back home.”

The Economy-Bernanke Says Up: For an observation/comment on the Bernanke view of the economy we turn to James Howard Kunstlers 8/24/09 post on his blogkunstler.com/blog entitled “Financial Crisis Called Off”. Here’s a portion:

“What a relief! Everybody from Ben Bernanke and a Who’s Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at THE NEW YORK TIMES, toiling in their McEscher hall of mirrors, to poor dim James Suroweicki over at THE NEW YORKER, to – wonder of wonders! – Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factorums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund – every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world’s capital finance system survived what turned put to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries are over, If you believe their bull—- [deletions/PH] Which I don’t.”

Roubini Says Down: The Nouriel Roubini article in the Financial Times (ft.com) of 8/24/09 was entitled  “The risk of a double-dip recession is rising”. Among other things it gave seven solid reasons Professor Roubini thinks the economy may be headed into a double-dip recession but for us regular folks he gave this:

“Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant and could be driven higher by excessive liquidity chasing assets and by speculative demand. … The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.”

PrudentHome Says Caution: We are certainly NOT economists here at PrudentHome but we are observers  and listeners.

We observe that the American economy purportedly depends on the American consumer for 70% of it’s energy and that one in nine American’s is currently on food stamps while all are entertaining an unemployment level of about 16.3%-U6.

This in the context of continuing reduction in home values and equity, no pay increases (please include Social Security here for 2010 at least!), rising state and local taxes and fees, and finally; our local Salvation Army is requesting, via radio, donations of used clothing as they’re running out.

Mr. Bernanke, things may be looking up in your economy but in ours, not so much.

Until next time; keep your eyes on the horizon as the weathers changing fast.

It’s Not The Same As ‘29’: Charles Hugh Smith’s “Of Two Minds” blog (oftwominds.com) on 6/26/09 produced a piece (excellent as usual) entitled, “Domino Devolutions: Credit, Spending, Taxes, Jobs”. In it, he included a some comments from James Howard Kunstler (author and essayist) on the Great Depression and how it’s different today. Here are those comments:

“Many commentators refer back to the Great Depression as a historical guide or template to our present situation. But our current predicaments are far deeper, as commentators such as James Howard Kunstler have shown. (“The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-first Century”) To mention a few of Kunstler’s observations:

• In 1929, the U.S. was the equivalent of Saudi Arabia today: the world’s largest oil producer. Now we have to import fossil fuels on a gigantic basis.
• In 1929, the U.S. had a fully functioning rail system for passenger transportation. This has shrunk to a shadow of its former capacity.
• As extreme as debt loads were in 1929, our current level of indebtedness (as measured by GDP) is far higher for all sectors: government, business and households.
• In 1929, millions of jobless citizens could return to the family farm or a family home in the countryside or small town. Now that U.S. is heavily urbanized, this “Plan B” is no longer available for most unemployed.
• In 1929, the U.S. was a major manufacturing/exporting power which actually ran trade surpluses for much of the previous 50 years.
• In 1929, the government sector extracted a much smaller percentage of national income than it does today.”

Note: From conversations with family and others that lived through the Great Depression, the fabric of family was much stronger then also.

Because It’s Worse: From LATOC (lifeaftertheoilcrash.net) on 6/26/09 we get this Jeff Nielson’s Instablog take on unemployment via this piece, “U.S. “mass lay-offs” at Record high”. Here are some of Mr. Nielson’s comments and observations:

• “Large scale lay-offs in the U.S. (defined as lay-offs of 50 or greater at one time) hit the highest level since this statistic was created in 1995, …”
• “Jobs are being lost in the U.S. at least as fast as during the Great Depression — if not faster.”
• “Combine these employment numbers with falling wages, no access to (further) credit, and a belated desire by Americans to save a little money, and this is nothing short of catastrophic for U.S. retailers.”
• “The moment that the debt-dependent U.S. is cut off of foreign credit, then the choice is either “Zimbabwe” or immediate, national default.”
• “U.S. housing prices are falling more than three times as fast as during the worst of the Great Depression, while debt levels are at least ten times greater (for both individuals and governments).”
• “The United States currently has more than $57 Trillion in public and private debt …more than every country in the world combined.”
• “There is no U.S. “economic recovery”. There will be no U.S. “economic recovery … , and protect yourself from what lies ahead.”

Stay aware of what’s going on here in the U.S. and abroad. Be aware and prepare, prepare. Until next time,  keep your eyes on the horizon as the weather’s changing fast.