Tuesday, September 21, 2010

Episode 37. Hope You're Paying Attention to What's Happening

My dear friends, we are living in the gloom of a swiftly gathering storm. Five articles summarize our plight from several perspectives:

- The US central role in the coming global economic meltdown: It's almost a scene from a bad B-movie, with Ben Bernanke's hands on the detonator, holding China, Europe, and other economies hostage to the fate of the value of U.S. Treasury bonds. "Keep buying our debt, or we'll repudiate it with inflation, and take you down with us!". Reminds me of the old joke: When you owe the bank a thousand dollars you're in trouble, but when you owe the bank a million dollars, the bank has a problem. (Link to this article)

- Inflation or deflation? That is the question. Is it possible we will have both? (Link to this article)

- Debunking the great myth of US consumers deleveraging. Everybody knows that people have quit spending, right? They've gotten the message on austerity, fiscal discipline, and all that, right? Wrong-o, according to this article.

- The Committee to Wreck the USA, or what is the real solution to the economic crisis? The committee proposing to wreck us, instead of them, comprises the big banks that made foolish mortgage loans. Erik Janszen proposes, as he has for a while, a mortgage cramdown on lenders as a way to wipe out the mortgage debt overhang acting as an anchor on the US economy. Interesting concept, but does it have a chance given the Washington connections of the big banks? (Link to this article.)

- Fort Worth Pension bubble will blow up in our faces. A local story, for me anyway, about how your average decent-size city, even in a conservative stronghold like Fort Worth, succumbed to the siren song of public sector unions, and will wind up bankrupt soon as a result. A model for hundreds, and potentially thousands of local, county and state governments all over the US in the coming months and years. (link to this article)

What is the lesson from all of these stories? It is to prepare, seriously, for the economic collapse that is coming. Denial is a powerful force, and you MUST leverage your love for your family and friends into the will to persuade the doubters among them to take steps now, immediately, to prepare. Everything we do these days is being done under the shadow of a looming financial (and societal) crash that will rival the one experienced by our forebears (but by none of us) during the Great Depression.

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