DDP Newsletter, May 2013, Vol. XXXI, No. 3
The world is not running out of oil or other fuels. But it is running out of money. Money is credit, and credit relies on confidence. “There is not enough confidence in the financial system to supply the world with the money it needs. Since the credit crash of 2008, “credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow,” writes “Numerian” on Jan 2, 2012 (http://tinyurl.com/8a6ougq).
“The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust each other and have stopped lending in the interbank market. As liquidity flows out from the system, the rottenness that has corrupted the foundations of global finance is now exposed for all to see.”
At the time of this writing in January 2014, the dire prediction of rapid collapse has not yet come to pass. The author stated that the Federal Reserve could forestall collapse for another year with QE3 (“quantitative easing” or money printing). But each successive round is less effective. The U.S. total debt-to-GDP ratio is approaching 300%, and “there is no occasion of any nation sustaining such a debt burden for more than a few years.”
The U.S. is deindustrializing, and its financial sector is also destroying itself through “shadow banking,” placing substantial assets in unregulated instruments such as derivatives. Losses in these positions could render “too big to fail” banks insolvent.
Cash used to be a risk-free asset. But “in the new paradigm of systemic risk, no asset is risk free if it is in the hands of a financial institution. Investor and depositors no longer have clear title to their own accounts.” Under current law, including Dodd Frank., custodial assets may “be swept into the bankruptcy estate and be subordinated to senior claims,” writes Simon Mikhailovich (James Cook Market Update, early January 2014).
The debt-backed U.S. dollar could be replaced as the world’s reserve currency by a gold-backed Chinese renminbi, writes Donald McAlvaney. He reports that massive amounts of gold are being transferred from the West to China. Since 2009, the Shanghai Gold Exchange, now larger than COMEX, has delivered more gold to China (8,655 tons) than is supposedly held in Fort Knox. The U.S. cannot even return 400 tons of gold that is being held for “safekeeping” in New York to Germany (MIA Special Report, 2014).
Facing an economic debacle, governments could panic and start a war.
SURVIVING THE ECONOMIC COLLAPSE
You may receive many ads for survival books by “preppers,” but the only book aside from Nuclear War Survival Skills that I have found to be worth close reading cover to cover is The Modern Survival Manual: Surviving the Economic Collapse by Fernando (“FerFAL”) Aguirre, reviewed at http://www.jpands.org/vol18no4/bookreviews.pdf. The style is blunt, even crude, but the information is priceless.
Aguirre, an architect, wrote the book in 2009, when he was 30 years old. He and his young family survived the 2001 economic collapse of Argentina—which was once one of the richest countries in the world. Inflation reached 3,000%, bank accounts were frozen, food riots broke out, unemployment reached 25%, and the standard of living plummeted.
Aguirre writes that much of the survivalist advice you read will get you killed. His hard-headed advice is based on real-world experience. The self-defense advice is not for the squeamish; and the material on “defensive driving” is not about avoiding wrecks during normal driving. Pay careful attention to pointers on how to avoid having to use these techniques—how to keep a low profile, and how to recognize potential threats such as people who are out of place or just aren’t acting normal.
Unlike many preppers, he does not think that bugging out to the countryside necessarily makes you safer. “My rule of thumb is, if you got there so can others, and if you got there with your car, you’re as good as a sitting duck.”
Stockpiling items that you think might be good for barter is unlikely to be helpful. You do need to have currency for when the ATMs are unavailable, and credit or debit cards are not accepted. Precious metals are indispensable, but how can you use them safely? One suggestion is a 14K gold chain with links that can be sold one at a time.
Food is the most important item, he writes. “Stock up on food now. The more, the better.” He recommends rice, lentils, tuna, dehydrated mashed potatoes, sweetened condensed milk, tomato sauce, and chocolate, among other things, with good advice on storage, cooking, and water purification. The section on “edible game found in the city” shows just how serious he is.
For hard times of any cause, there is plenty of good advice on home security, recession-proof work, and the art of haggling.
After the collapse, you will be living in a different world. You will need to learn to cope—and to take responsibility for what happens to yourself and your family. The most important preparedness is likely mental—Jeff Cooper’s “combat mind-set.”
In Argentina, time is divided into a before and after the “one-to-one.” For such as this, 9/11 was just a wake-up call.
To order the book and for current updates, go to www.ferfal.blogspot.com.
IT HAS HAPPENED BEFORE
Officials of the western Roman empire did many things to destroy civilization, writes Richard Maybury (Early Warning Report, November/December 2013)—including debilitating taxes, welfare, and war. But at the top of the list was the debasement of the currency. The silver denarius and the mill at Arles, France—the most grand concentration of industrial capacity in the ancient world—both died about the same time, at the end of the third century A.D. Over the next two centuries, the empire slid into the Dark Ages of poverty, ignorance, and war. The Rome of 100 A.D. had better paved streets, sewage disposal, water supplies, and fire protection than the capitals of civilized Europe in 1800 A.D. Living standards regressed by 10 centuries.
Without sound money providing reliable price signals, industrialization cannot survive. Nor can civilization itself, writes Maybury, except at very low, near-neolithic levels. The only large building in the western empire, in thousands of cities and towns, that remained intact was the Pantheon in Rome. Millions probably starved.
Recognizing the seriousness of debauching the currency, our Founding Fathers created the Coinage Act of 1782: debasing the dollar was a capital crime.
America’s ascent was faster than Rome’s, and so is our rate of decline. U.S. officials are “flirting with an industrial collapse and a new dark age” (see chart of U.S. monetary base, from the Federal Reserve Bank of St. Louis at www.chaostan.com).
The decline is not a forecast, but an observation, Maybury writes. He predicts a violent revolution. The question is how to direct events toward 1776, which led to unprecedented prosperity and liberty, rather than 1789, which brought the French Reign of Terror and the Napoleonic Wars.