Total Collapse

Coming Very Soon Now...

Friends, many top financial newsletter editors are advising that there will be a total collapse in everything when the stock market goes down.

Some are Robert Prechter, who writes The Elliott Wave Theorist; R.E. McMaster, Jr., editor of The Reaper; Don McAlvany's The McAlvany Intelligence Advisor; Richard Maybury's U.S. & World, Early Warning Report; The Wall Street Underground; and numerous others. See our Gold page for more, at "Menu."

Following are a few quotes from Steve Puetz's (pronounced "Pitts"), Total Collapse--The Financial Crash of the Millennium which can be ordered from:
  • Newsletter Systems
  • 5000 Green Lane
  • P.O. Box 11206
  • St. Paul, MN 55111-0206
  • Toll Free: 888-639-7587; or,
  • Ellen Petty at (toll free) 1-800-328-1860.

His definition of a Total Collapse supports other informed writers when he says,

"The accelerating bankruptcy rate (while economic activity expanded for five years during the 1990s) indicates the explosion of the credit-balloon. A financial system explosion brings about Total Collapse.

"Government functions break down, business activity grinds to a halt, credit markets cease to exist, and turmoil prevails.
"A Total Collapse is worse than an economic depression.  In a depression, government functions continue.  In a Total Collapse, government becomes ineffective."

What are the results of such an event?  He says to consider what happened in 1929 and you will get an idea of what it will be like in the Total Collapse---only far, far worse.  In the very near future, he says you will see:

  • The greatest financial collapse in history will soon devastate North America.
  • A stock market crash will usher in a business depression bad or worse than the 1930's.
  • A stock market drop will trigger a trading shutdown and trading liquidity will vanish.
  • Mutual fund investors will be trapped and ultimately panic.
  • The stock market will lose 50% on the first massive plunge and within two years slide to less than 500 on the Dow.
  • Pension plans will be devastated and retirees will get far less than expected.
  • Virtually all asset values will plunge by 80%.
  • The dollar will lose up to 90% of its current value against stable money,.
  • A stock market crash and a credit crunch will lead to severe domestic deflation. [Money will become worthless]
  • The Fed will become the most hated institution in America.
  • 25% or more of all Americans will be unemployed [Some say "50 %"].
  • Real estate will lose 80% of peak values.   Homeowners will face record foreclosures and mortgage lenders will go belly-up.
  • All government guarantees, insurance and retirement programs will be jeopardized.

Friends, in The Two-Fold Chastisement: Visions of The Coming Earth Changes, early Church saints predicted this and more.  They said,"There will be a world-wide financial crisis." They also pointed out that what is about to happen will be much worse than the deluge !

Saints from the early Church said there will be riots, revolutions, terror, panic, food shortages and famine.  People will live much differently than they are used to when this happens.

What will bring on the riots and revolution in America?  Steve Peutz gives the following scenario:

"Over the past 50 years the government has nurtured a growing underclass of dysfunctional citizens.   By giving people money they didn't earn the government provided incentives for welfare recipients to drop out of the work force.

"With nothing to do these people were far more prone to mischief. Alcoholism and drug addiction became the chief method to relieve the boredom from idleness.  The government became the chief enabler of a vast army of alcoholics and drug users.  [An excellent psycho-dynamic factual and proof of this is given in At the Crest of the Tidal Wave, by Robert R. Prechter, Jr.  Write: Elliott Wave International, Post Office Box 1618, Gainesville, Georgia 30503, U.S.A.]

"Families disintegrated and the offspring of chemically dependent mothers were prone to criminal activity.  Love and order were replaced by neglect and abuse.  Good character withered and the crime rate soared.  The government's trillion dollar attack on poverty turned into fertilizer for crime and addiction.

"They added to the welfare rolls and made poverty worse.  Approximately 30 million people get welfare and receive aid and assistance in housing, energy, health and food stamps. They have convinced themselves that it is their right to get other peoples money to pay for their worldly needs.

"The first time these doles get seriously pinched, they will go berserk. [other writers say "bonkers" or "bananas"] Nobody gets madder than someone who gets something taken away from them."

These people don't know how to work, don't want to work, don't care about work.  Studies have shown that the family unit deteriorates when people are on the "dole" and one or more of the adults resorts to alcoholism and/or drugs to relieve the boredom of not doing anything except watch tv, etc.

Michael Haga's book, After the Crash, Life In the New Great Depression puts it succinctly:

"During this coming economic depression, which has already begun, the quality of life in major cities throughout American [sic] will fall so far so fast it will take your breath away.

"As I said earlier, living in a major city will be like living in a war zone. No one will be safe. Crime will be rampant. Gangs will cause chaos and kill for fun. Public services, street repair, garbage collection, will become sporadic at best. Police will be non-existent"

For over 16 centuries, Church saints have said, "The cause of The Coming Chastisement is sin, and in those days man will have lost his sense of sin.  Prayer, penance, and sacrifice to the great offended God is the only way to lessen The Great Event.  It can't be stopped, for it has gone too far."

You can order Michael Haga's book from:

    Acclaim Publishing Co., Inc.
    P.O. Box 1
    Wetmore, CO 81253-0001
    Toll Free: 1-800-323-3523
Why Diversification

"A pillar of the market's total confidence of six months ago, the blind faith in "diversification" to spread risk, is crumbling clean away.  At The Crest of the Tidal Wave cautioned that diversification was not the 'magic answer' it was trumpeted to be in all those books and brokerage industry brochures.

"On the contrary, 'extracting oneself from investments' in distant exchanges would be 'a nightmare in a bear market.'  Disappointment in the diversification doctrine was almost immediately apparent as these headlines from late October attest:

'So Much For Spreading Market Risk' and

'Fund Investors Feel Global Market Sting.'

"Investors are dumping their international funds because they "are really spooked by what's happening in world markets. Many domestic 'agressive growth funds' got 'crushed' in 1997. One that 'made mutual fund history' by attracting $1billion in 1996 lost 23.7% in 1997.

"You may have seen that fund's manager on that PBS special early last year; he was the one being chased down for autographs. The next time he gets chased, it may not be for autographs.

"Nor is he alone.  In the first eleven months of the year, 88% of mutual fund assets failed to keep pace with the S&P 500. That is up from 75% in 1996."

----Source: The Elliott Wave Theorist--January 2, 1998. We highly recommend this newsletter. Contact Elliott Wave International, Inc at: USA Phone: 770-536-0309

June 1929
Forbes Magazine

The following is what Forbes magazine wrote, just four months before the 1929 Stock Market crash:

"For the last five years we have been in a new industrial era in this country. We are making progress industrially and economically not even by leaps and bounds, but on a perfectly heroic scale.

Again, Forbes wrote in October 1968, the following just before a six-year slump began that saw share prices shoot down by 60% in actual terms.

"As the result of all that has been happening in the economy ... during the last decade, we are in a different - if not a new-era and traditional thinking, the standard approach to the market, is no longer in synchronization with the real world."

... have you noticed similar in the media recently ....

-- Fire Sale --
U.S. Treasuries

"Japan, the largest single holder of U.S. Treasuries at the end of 1997, has now turned into the largest seller.  On April 13th, Japan sold $12.1 billion worth of Treasuries in a single day !

"Interest rates in the U.S. shot up ten basis points overnight. Traders didn't know what to do.  A Salomon Brothers bond trader was quoted as saying,  'It was the first time we had ever seen anything like this before.  We hadn't seen the magnitude.'

"But Japan's record dumping of U.S. paper last month wasn't the first shot.  It was just the loudest in a barrage of U.S. Treasury selling that began late last year.  The bankrup countries of Southeast Asia, now holding nearly $100 billion of U.S. Treasuries, have been quietly selling over the last few months.  China and Hong Kong have largely held onto theirs, but they hold another $100 billion -- a good portion of which could also flood the market."

Source: The Fleet Street Letter; May 1998. For subscription: (800) 433 - 1528 (U.S); Outside U.S; (410) 783 - 8440. Fax (410) 783 - 8438.

Folks, if you have been keeping up with these pages, then you know this is very serious.  When foreign countries start selling off our debt, U.S. Securities (Treasury Notes), to raise much need capital; shore up their currency; and increase the value and exchange rate of their currency, then those securities come back to the U.S. and our central bank monitizes them.

This causes interest rates to skyrocket; your bonds/securities become practically worthless--in a word, it will set off the worst depression the United States has ever experienced.  One of the main reasons is because now our government has to raise the needed cash to pay off our Treasury Notes to foreign governments holding them.  It will desperately need liquidity.

Just remember !  When countries holding our debt start selling in the aggregrate of billions, we are in serious trouble.

Fifteen years ago, Japan was doing fine, now it is in serious trouble.   And their trouble threatens us, the same as Southeast Asia's.  The financial scene goes something like this:

Their (or another's) stock market plummets.  In 1990, Japan's was around 40,000; but currently, it has plummeted to about 16,000, in just about 8 years.  Japan's share prices fell;  they accumulated $600 billion in bad depts on various Japanese banks' books, their unemployment is soaring; goods are no longer moving because consumers are not are not buying--liquidity has dried up; all point to a country about to have a "Total Collapse."

Their economy has been in a recession for over eight years and with a "Total Collapse" looming in the not-to-distant future, this will not only be bad news for them, but us (America) too.  Singapore's recent prime minister said that if Japan doesn't come around soon, it will lead to a "worldwide economic collapse."

The U.S. is the first, Japan is the second world's largest economy and that is bad for all, with their present economic woes.  Their economy is larger than England and Germany's taken together.  What happens in Japan economically, is felt; the same if the U.S. falters, around the world.

Japan's way of doing business (real estate bubble, easy credit, etc.) brought them down; it also helped in bringing down the Southeast Asian Tigers.  But; here's the rub, their extremely low interest rates brought on their troubles, and have actually created a boom (bull market) here at home.

In order to raise money, they have little choice but to sell off our debt, spoken of earlier. This could be the trigger that starts a spiral-down of the stock market, ending in a "Total Collapse" for use.  As their stocks fell; investors sought new grounds for investing, and this helped create our bull market (more money poured into our market from overseas and home).

We also have easy credit, "invest for the long-haul," "put your money where it makes more than the 'old' passbook savings" (and that is mutual funds), the 125 % home equity loan, etc...

The problem worsened for the Japanese, however.  In order to halt the falling economy and to stimulate growth, they cut interest rates.  That failed.  The economy took a further beating-- the YEN fell more.

Now, the Central bank of Japan has bought U.S. Treasuries (high-yields).   At the end of last year, the Japanese had purchased $300 billion plus. They are holding more of our debt than other countries.  For instance, Germany and England hold the sum total of $400 billion.

Recall earlier, we said that Southeast Asia is approximating $100 billion in our Treasury Securities.   China and Hong Kong $100 billion.

By buying our Securities, this pushes our interest rates down.  This in turn gives the American consumer and corporate giants more borrowing power, they can borrow money for less payback.  This easy credit gets larger and larger, as interest rates go even lower.  The unwary American consumer doesn't know the process, nor does he care.

He just sees an opportunity and goes for it.  Also, various financial advisors project larger and larger earnings, but when the credit bubble bursts (it can't sustain itself forever--Japan, and other countries start selling off our Securities to shore up their own), then the "House of Cards" we have built here comes tumbling down too, as Kurt Richebächer is fond of saying.  You are now in the Bear Market....and it ain't going to be pretty this time for sure !

Consider for instance the Home Equity Loan.  The Fleet Street Letter, May 1998 (for subscription (800) 433 - 1528) says,

" In California and elsewhere, you can now borrow up to 150 percent of the value of your home.  What happens to the money?  No one knows for sure, but it looks like a good deal of it ends up in stocks.  And why not, when you can borrow at 7 percent and deposit it in a mutual fund that makes a 20 percent annual gain? "

The problem, folks, is that when the mutual funds go, so goes your HOME !

Indicators For A Bear Market

"Martin Zweig, a one-time newsletter writer and now a professional money manager with a well-earned reputation as the best market timer in America.  Zweig is also perhaps the best scholar on the U.S. stock market today.   He says that at least one of three conditions have accompanied all major bear markets:

High P/E Ratios :

---Source: The Fleet Street Letter; June 1998. For subscription: (800) 433 - 1528 (U.S); Outside U.S; (410) 783 - 8440. Fax (410) 783 - 8438.

  • "In todays market there can be little doubt that we have excessive P/Es.  I understand the interest rate argument, that we have very high P/Es because of low interest rates. But you still can't ignore the fact that S&P 500 P/Es are the highest they've ever been and the NASDAQ is priced at 72 times earnings.

    "It also doesn't justify individual Dow com- ponents like Coke trading at 50 times earnings. We have had lower interest rates in our history, but never P/E ratios this high.  No matter how you try to hide it, stocks are ridiculously expensive and they have been that way for a long time."

The Wall Street Underground, Vol. 3, No. 8, October 1997, says it this way:

  • "... the mutual funds are promising they can turn all Americans into millionaires in a decade. This can happen. It's a great lie.  No one points out the one key problem with all this.  The companies these people are investing in are seeing their share prices double every two years.  But they are only making enough profits to justify doubling every 30 years or more.

  • "That's right. Based on earnings, it should take 30 years to create this new stock market wealth.  Wall Street is magically doing it in one year.  Think about it.  Wall Street has priced 30 years of earnings into one year of stock market gains."

    For subscription to The Wall Street Under- ground, call 612-890-3553.

    The crux of the matter is simple folks:

    1. Share price doubles every two years.

    2. Your profit shows you should double, justifiably every 30 years or more; but Wall Street or your money managers are telling you within a decade, you'll be millionaires.

      Note this:  The new, next instant millionaires will be those holding Gold and Silver. Call Ellen Petty, (toll free) 1-800-328-1860, at Investment Rareties Incorporated. She's a precious metal's expert broker.

Deflation :

---Source: The Fleet Street Letter; June 1998. For subscription: (800) 433 - 1528 (U.S); Outside U.S; (410) 783 - 8440. Fax (410) 783 - 8438.

  • A significant indicator is computers.  New computers now are selling "for 10 to 15% less..." than a 1 or 2 years ago.  The Web Masters of this Web Site also have degrees in electronics and computer interest and repair.  They have notice JDR Microdevices and others have lowered their prices practically across the board for parts; especially motherboards.  What we are telling you folks is extremely significant --the bellwether for the market recently has been the, up-to-now, technology stocks.  

  • "Compaq is actually giving away monitors--one of the most expensive components in a computer system.   Plus, with consumer demand being driven by credit, it should only take a small, sustained downtrend in the Dow to see prices on other assets really begin to fall.  After a seven-year spending spree, America is going to find itself with a lot of excess inventory once consumer confidence wears thin.

  • "And there is another sign of deflation--the decoupling of the bond market and the stock market.  Twice in the last six months, in October's panic and in late May, the bond market has rallied decisively at the same time as the stock market has fallen dramatically.  This only occurs with regularity during deflation periods.

Inverted Yield Curve :

  • "When short-term rates are higher than long-term rates."  Two of the indicators have been satisfied; we are very, very close to the Inverted Yield Curve.

Dow Theory

"A rational and fundamental system like Zweig defines is fine for understanding the long-term implications of today's market.  But how can we know that the bear market has really started right now?  Well, throughout history there has only been one way to time the market, and New Era or not, Dow Theory is still the best way to know when it is time to step out of the market.  The Dow Theory is based on a series of Wall Street Journal editorials by market watcher Charles Dow.

"William Peter Hamilton first organized it as a theory in his book The Stock Market Barometer, published in 1922.  It is the oldest technically oriented trading system that is still in use today. The system is very simple and extremely accurate.

Dow Theory :

  • "Dow Theory predicts a bear market when both the Dow Jones Industrials and Dow Jones Transport bear market when both averages 'break down,' meaning that they both fall below established support levels at the same time.

  • "The system works like a switch. Either it is on, or it is off.  And it doesn't turn on or off very often, but it does so with great accuracy.... Note that as of this writing, both indexes are below their support levels, at the same time, triggering a Dow Theory sell signal.

"Recently two professors, William Goetzman of NYU and Alok Kumar of Yale, back-tested the theory rigorously and found, as will be reported in an upcoming issue of the Journal of Finance, that Dow Theory works--and they ignored the profits of selling short! In other words, in their modeling, they assumed that when the Dow Theory signaled a sell, investors went to cash. "

The whole point of this is it's better to be out of the market a year too early than a day too late.

---Source: The Fleet Street Letter; June 1998. For subscription: (800) 433 - 1528 (U.S); Outside U.S; (410) 783 - 8440. Fax (410) 783 - 8438.

Meteor Storm And The Stock Market Crash

"The world's economy is dependent on nearly 500 space satellites for telephone service, navigation, TV and weather observation.  In November the earth will be hit by the biggest meteror shower in 33 years.  The Leonid storm is expected to damage or destroy an unknown number of satellites.  Most of the meteors are the size of grains of sand but they move so fast they hit with the impact of .22 caliber bullets.

"Building and launching replacements could take months or years, so here's a warning.  If communications are seriously disrupted, it might trigger a stock crash."

This did not happen. But the heavens are again turbulent...

---Source: Last Days Journal, July 1998, a reprint of Richard Maybury's U.S. & World, Early Warning Report; June 1998 (for subscription: (800) 509 - 5400), as reprinted in the June 25 issue of The Reaper.

Food Shortages   

    Earlier, we spoke of food shortages. And with the economic problems coming soon and the now occurring world-wide drought, you need to get prepared. Dr. Gary North puts it all together succinctly in the following:

Gary North's Reality Check, Questions & Answers September 1, 2006


Age: 35; location: Columbia, MO; occupation: engineer; annual family income: $83,000; net worth: $40,000; #1 goal: build up savings/asset base.

Should one plan for asymetric changes in the economy/politics? Debt collapse/hyperinflation historically leads to rewriting the rules for real estate, taxation, etc.

Dr. North Responds:

    You have selected a good goal. Your family's income is double the national average. You live in a region of the U.S. where you can buy affordable housing.

    You are in a good job. You probably will not get fired. But there is probably a salary peak close to where you are now. You should not expect annual raises in the 10% range. So, you need to build wealth outside your occupation. Most people do.

    You should always have some assets that are geared to increase in value in times of disruption. My view is that the best such investment is a home outside of town in which you have a well, some ground with soil that is productive, a garden produced with non-hybrid seeds, and whatever it takes to defend this patch of turf. You buy a good lifestyle now, yet this lifestyle tends to persevere in a disruption.

    I will relate a story told to me by Prof. Hans Sennholz. In the 1940s, he was still living in Germany. He dated a woman whose father had been a philosophy teacher in a gymnasium in Essen, a comparatively well-off German city. He had a good education. When Hitler came into power in 1933, he saw the handwriting on the wall. He repositioned his career. He went into mathematics. This would keep him under the radar of politically correct Nazis. He then applied for jobs in rural areas. He finally got one in the late 1930s. He moved his family, bought a place in the country, bought some goats, and taught school. During the war, there was not a single military conflict in the area. Meanwhile, Essen got pulverized. Finally, after the war ended, he found himself several miles inside West Germany's boundaries. He survived the war with his wealth intact.

    This story has fascinated me for many years. Anyone who can do something like this, and not feel the loss of the good life, is in better shape than most others.

    Your first task in building wealth is a maniacal dedication to thrift. In the early 1950s, when Sennholz got his first teaching job, he saved 50% of his income. This is high, but it's the sort of attitude that will pay off.

    I of course recommend starting a business on the side. That's the best way to build wealth.

    Put your liquid savings into non-dollar-related investments. Right now, be in a foreign bond fund. Equities are too risky right now. A recession will hurt equities. But if your money is coming in the form of foreign currencies, mass inflation by the Federal Reserve will not harm you. Mass inflation by other central banks will harm you, but this is less likely in a mixed portfolio of currencies/bonds. You are hedging your income by moving out of dollars. Your salary is in dollars You need diversification.

[To Help You Prepare: See Gun Page and When The Hell Breaks... ]

To Help You Additionally Prepare, Visit These WebSites:

    Some Highlights of the July 4, 2006, Article by Stephen Leahy, ipsnews on "...Near The Breaking Point.":
  • "There isn't much land left on the planet that can be converted into new food-producing areas, notes Lester Brown, president of the Earth Policy Institute, a Washington-based non-governmental organisation (sic). And what is left is generally poor quality or likely to turn into dust bowls if heavily exploited, Brown told IPS.

  • "Unlike the Green Revolution in the 1960s, when improved strains of wheat, rice, maize, and other cereals dramatically boosted global food production, there are no technological magic bullets waiting in the wings.

  • "'Biotechnology has made little difference so far, he said.'

  • "'There's not nearly enough discussion about how people will be fed 20 years from now,' he said.

  • Darrin Qualman, Canada's National Farmers Union (NFU) research director said,
    "'The food production system is designed to generate profits, not produce food or nutrition for people....It's a system that's perfectly happy to leave hundreds of millions of people unfed,' he said.

  • "Shifting from a global food production system to local food for local people would go a long way towards addressing inequity, Qualman believes.

  • "'The 100 mile diet, where people obtain their food from within a 100-mile radius of their homes, makes good sense for most of the world,' he said."

    Get prepared folks! It's right up on us. In a nutshell, protect your assets. This means you will need to do the basics as Dr. North proposes in his answer. This is basic to this WebPage and WebSite. When the chaos erupts the infrastructure will break and Total Collapse will occur.
Then, it will be too late to do anything.

More On The Drought from Chris Mayer, as reported
September 15, 2006, in The Daily Reckoning

    "...After a very dry summer, it's been raining in Baltimore pretty much nonstop for the last couple of weeks. But that's not the case for the majority of the country.

    "More than 60% of the United States is abnormally dry or experiencing drought conditions," reports Capital and Crisis' Chris Mayer. "Life-deadening heat blows its hot breath across the woodlands of Georgia to the suburbs of Arizona, from the 'Big Sky' country of Montana to the dairy farms of Wisconsin.

    "Paul Smokov, an 81-year-old South Dakota farmer, called conditions this summer 'the worst since the 1930s.' Climatologists speculate as to whether or not we should expect such higher temperatures as normal.

    "In any event, the recent weather affects many agricultural commodities. Consider:

"U.S. peanut farmers will produce their smallest crop since 1915.

"Oklahoma is having its worst drought in its history, which is taking a toll on crops and livestock. The USDA estimates half of the state's cotton crop and a third of its sorghum plantings are in poor or very poor condition. Livestock is mostly in fair or poor condition, with three-quarters of the state's pastures and ranges in poor to very poor condition.

    "Another headline reads,
'Drought Expected to Cut Minnesota Crop Yields.' Lower soybean harvests will cost Minnesota farmers about $300 million.

    "The USDA says we'll have the worst wheat harvest in 18 years - this has pushed up wheat prices to 10-year highs.

    "More than just drought go into these numbers, but it is a contributing factor in all cases.

    And as with Europe, the drought conditions simply highlight how poorly we manage our water resources. In some places, water supply is tight, and it should remain tight for decades - regardless of the disturbing predictions of climatologists."

and more from
The Daily Reckoning,
as reported from Chateau de Malesherbes, France
Tuesday, September 19, 2006
Water Scarcity

     "Every metropolitan community in the West is looking for water," John Carpenter, retired rancher and Nevada state assemblyman once said.

    "Las Vegas, Nevada, is the classic case," reports Capital and Crisis' Chris Mayer. "The city adds about 5,000 new residents per month. The Colorado River provides over 90% of Las Vegas's water. But as The Washington Post recently noted, Las Vegas 'lives on a diet, an allocation of water it was awarded decades ago, when Las Vegas was a whistle-stop.'

    "The city needs more water. Water officials are looking for new sources of water. Their plan is to cut into aquifers across the state, in a great swath. Some of these water sources are hundreds of miles away. A plan is already set for a 250-mile network of pipeline to bring fresh water from Nevada's valleys. This a $2 billion project.

    "The problem is what's on the top of aquifers: small towns and ranchers, who do not want to see their water tapped and don't want to risk turning their lands into a dust bowl. 'Nevada's valleys are majestic and arid,' the Post reports, 'sloping floors covered in greasewood bushes and fields of alfalfa irrigated with springs or wells the ranchers have dug themselves.' Wildlife - rabbits, coyotes, antelopes - gather at pools.

    "All of that could be at risk if they drain the valleys. People know what happened to California's Owens Valley, drained 100 years ago to provide water for Los Angeles. The once lush valley is now a wasteland.

    "This sets up tensions between the growing cities that want water and the rural areas that have it. So far, the cities are winning. Coastal California, Phoenix and Salt Lake City, for example, all draw water from distant sources."

The Money Supply Is Contracting

From Frontline Thoughts newsletter by John Mauldin, September 8, 2006, he writes concerning money:

    "Fisher noted that about two thirds of US cash currency is overseas, with two thirds of the hundred dollar bills in Russia. And that brings to mind the US money supply. The one measure of money supply that the Fed actually has control of is M-1. M-1 is just one measure of the money supply that includes all coins, currency held by the public, traveler's checks, checking account balances, NOW accounts, automatic transfer service accounts, and balances in credit unions.

    "M-1 is not growing. In fact, it is actually contracting, as the charts above show. Further, the large majority of the additions to the money supply are physical cash, and cash is deflationary, and much of it ends offshore, effectively reducing our hown grown money supply.

    "...the money supply has not grown since the middle of 2005. ...the money supply has actually fallen over the last year. This, sports fans, is another example of the Fed hitting the brakes. You don't contract money supply unless you are worried about inflation. In tandem with the rate hikes, it is another reason why the Fed is taking a pause to see if their efforts will slow inflation.

    "Notice that in 2003, when everyone was worrying about deflation, the Fed was clearly and significantly growing M-1. Then when inflation started to rise, they started to back off and then in 2005 they started to hit the brakes.

    "(For the record, M-2, which includes money markets and other time deposits, is only growing around 5%, but the Fed does not have direct control of M-2, although they can influence it.)"

and more from
The Daily Reckoning,
as reported from Chateau de Malesherbes, France
Tuesday, September 19, 2006
Hard Times Ahead

    We turn to a recent piece by financial columnist, Robert Kiyosaki:

    "Most Americans live in la-la land. They're clueless about what's going on in the world of money, and still think we're the richest country in the world. In reality, we're the biggest debtor nation there is.

    "Most Americans also still think our government will protect them. The world is changing at an alarming rate, yet most people here waddle stubbornly through the crosswalk, so to speak, still believing that this country has the right of way and that our political institutions are still sound...

    "In the next five years, the United States and the world will go through some of the most financially disturbing times in the history of the world. Once again, the rich will become very, very, rich, and the unsuspecting will be left like the passengers on the S.S. Titanic, heading straight for an economic iceberg."

and more from
The Daily Reckoning,
as reported from Baltimore, Maryland
Thursday, April 20, 2006, 5:46 PM
The Last Great American Energy Boom
Short Fuse at

    "I don't look forward to enduring Great Depression 2 because I think it will be far more unpleasant than the episode of the 1930s.
I fear the level of violence most of all, as young people trained by movies, videos, and vicious 'music' notice the raunchy party is winding down and they must go out and take what they want to sustain themselves.

    "I remember the adults of the 1930s being very adept at growing food in the backyard and raising a few chickens to augment the vegetables. Clothes were repaired when necessary, and no one worried particularly about drifters coming through town looking for handouts. You either helped them if you could, or shrugged in sympathy if you couldn't. They usually understood and roamed on.

    "Not only will average people be less self-sufficient in Great Depression 2, but the new social phenomenon of huge numbers of old people must be faced. In the '30s, the over-65 crowd usually lived with family when they couldn't work any more. Now, they live apart from their families and science is keeping them alive longer. A preview of things to come can be found in the mailing piece of an upscale retirement center in our town, which asks for contributions to help certain residents who have 'outlived their reserve.' Imagine! These are people who thought they had provided for their future and plunked their money down to be taken care of until the Grim Reaper came to fetch them. And now, they have 'outlived their reserves!' (There's a book title there.)

    "There is no way to avoid this difficult economic setback, unless the laws of nature have been rescinded. No inflation has ever not ended amid pain and confusion. And no economic boom, funded mainly be {sic} (by) debt, ever led to anything but a depression. We've been very clever devising ways to postpone the grim payoff, but an awareness of the fictions is creeping across the land, and here and there people are saying, 'Wait a minute! Maybe all this debt is not such a good thing! Let's find the guy who told us we could borrow ourselves rich and hang him!

    "Arnold Toynbee remarked,
'The fall of a great nation is always a suicide.'
    "I have a vague understanding of why all the great empires of the past did themselves in, but I never expected to live long enough to witness this strand of history repeat itself in the United States.

    "However, it will only be another transition. It will be grossly painful for some, and a minor inconvenience for others. Life will continue. When the going gets tough I shall walk the streets with a sign that quotes Thomas Paine;
'We have it in our power to begin the world over again!'"

and more from
The Daily Reckoning,
as reported from London, England
Tuesday, October 10, 2006, 12:35 PM
False signals and Unrealistic Hopes
James Howard Kunstler
Editor's Note:

    "James Kunsler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine. In 1975, he dropped out to write books on a full-time basis.

    "His latest nonfiction book, The Long Emergency, describes the changes that American society faces in the 21 st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees:
    The progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in small places and eat locally grown food."

James Howard Kunstler's WebSite where you can order his books, including his artwork, and read his blogs.

Click Back To Return To Chembio For More Interesting Things To Help You Survive.

and from
The Wisdom of Ludwig Von Mises,
as reported in Whiskey and Gunpowder
Wednesday, October 11, 2006; 2:43 PM

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

and from
'Paper and Promise, Part I',
as reported in The Daily Reckoning
London, England
Tuesday, October 17, 2006
By James Boric
More On Water Supplies and Problems

    "The world's water supplies are in dire straits. Severe water shortages currently affect 400 million people all over the globe. That number is predicted to swell to 4 billion people by 2050.And if you think these shortages will only affect places like Africa, India and China, think again.

    "Southwestern states like Arizona will face severe fresh water shortages by 2025. And as my collegue Dan Denning reported a year ago:
"'In mid-December, the premiers of Quebec and Ontario, along with the governors of eight U.S. states, signed a pact that will ban all large-scale water diversions from the Great Lakes basin. That will prevent fully 20% of the total fresh surface water of the Earth being exported by pipeline to thirsty states like California, Arizona or Nevada. The eight states that border the Great Lakes---Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and Wisconsin---have seen the future. And the future is that fresh surface water is going to be more and more valuable as it gets more and more scarce.'

    "There is literally a war for fresh water going on all over the world. Right now, the war is being hashed out in offices and treatment facilities. But I wouldn't be surprised if it turns violent as our scarcest resource becomes even more scarce. Those who lose will either have to move...or face death. And those who win will survive and prosper."

and from
'Rollover: The Anatomy Of The Accelerating U.S. Real Estate Bust'
as reported in
The McAlvany Intelligence Advisor
October, 2006

    "Ultimately, many prices (especially in condos) are likely to fall 40-60% (or more) from the peak - especially in the most over-inflated markets. Foreclosures and bankruptcies will ultimately be in the millions.

The Panic is coming!"

and more from
The Daily Reckoning,
as reported from The Gold Coast Australia
Saturday, January 6, 2007, 10:28 AM
The Rude Awakening
Let It Rain:
By Joel Bowman

    Australia was not immune to the perils of drought when the antipodean lads from rock band, Gangajang, penned these lyrics back in 1985...and we are certainly not immune to them now.

    Farmers Down Under are currently experiencing the worst drought in over 100-years. The continent's arterial rivers, the Murray-Darling, are drying up and, as the Melbourne Age reports, "...if things continue this way much longer, it's not water for crops that will be insufficient, but water for towns."

    Here on the Gold Coast, water restrictions are now just a part of life for residents. All over this beach city of the Great South East fountains run dry, locals watch the evening news for updates on the Hinze Dam's water level and heavy penalties are dealt out to those caught disobeying strict water conservation laws.

    A thirst for water is not a problem unique to Australia. Worldwide the crisis is growing. As one of the largest population migrations in history takes place in China, immense pressures are being placed on the booming nation's supply of clean water. Throughout the African continent our most precious resource is in critically low supply. All over this parched orb of ours farmers are feeling the weight of imminent shortages.

and from
Mike "Mish" Shedlock,
as reported in Whiskey and Gunpowder
Wednesday, January 3, 2007; 3:35 PM
Illinois, U.S.A.

    “‘November 2006 marked the single worst month for for-hire truck tonnage since the last recession,’ said ATA chief economist Bob Costello. ‘Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8% contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.’

    “Trucking serves as a barometer of the U.S. economy because it represents nearly 70% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.”

and more from
The Daily Reckoning,
as reported from
Laguna Beach, California
from the desk of Eric Fry
Tuesday, January 16, 2007, 3:58 PM
By Chris Mayer
The Rude Awakening

News of record-high temperatures and severe droughts are grabbing headlines worldwide. The earth has just logged its warmest year in recorded history.

The “why” behind these remarkable meteorological phenomena is debatable. But the “what” is not. Simply put, it’s getting pretty darn hot and dry all around this big orb of ours…whatever the cause might be.

If this trend continues – we say, “if” – water will continue to become an increasingly precious commodity worldwide. Chris Mayer examined this very issue in the Rude Awakening edition of January 9. (If you missed this column the first time around, you should take a look now.) In today’s edition of the Rude Awakening, Chris Mayer returns to ask the question, “What if?”

What if hot, dry and dusty conditions persist around the globe?

Chris does not merely pose this question, of course, he also provides a couple of answers…

The Return of the Dust Bowl

By Chris Mayer

A darkness blacker than night is how it was often described. At least one could pierce the black veil of night. Not so with this kind of darkness. It was opaque. People were afraid. It was only midmorning. They had never seen anything like it.

If you ventured outside into the cold and biting wind, sand would get in your nose and mouth and ears. You would hurry back inside and cough up black. While inside, people soaked sheets and towels. They would try to stuff them around windowsills and doorframes. But it didn’t help much. Choking dust still filtered in. It spread out in little ripples on the floor and seeped through windowsills.

It was Nov. 11, 1933, Armistice Day, South Dakota.

When it was finally over, families would stumble out of their farmhouses and peer out at a new surrealist landscape. The fields were gone. The trees were no more. Just mounds of sand and eddies of dust swirling in the light autumn breeze. There were no roads. No tractors or machinery, no fences. All of it laid buried in sand. As one observer said, “The roofs of sheds stuck out through drifts deeper than a man is tall.”

The great Black Blizzard of 1933 destroyed acres of farmland stretching from the Texas Panhandle all through the Great Plains and clear to the Canadian border. The following day, the skies darkened over Chicago. A steady stream of filth fell on the city like snow. Even people as far east as Albany, N.Y., could see the menacing dark clouds roll their way across the horizon. That winter, red snow fell softly on New England.

Yet 1933 was “only a prelude to disaster,” as Frederick Lewis Allen wrote in his panorama of the 1930s, Since Yesterday. In 1934 and 1935, the dust storms destroyed thousands and thousands of acres of farmland. The lives of more than half a million Americans changed forever. Many hit the road, forced to wander like refugees in their own land. Most headed west, looking for a new start.

The Dust Bowl was a seminal event in American history. Unlike a natural disaster such as a hurricane, “There was a long story of human error behind it,” as Allen wrote. After World War I, there was a great demand for wheat. Mechanized farming also became common. Farmers tore up the sod that covered the plains and farms expanded. Production soared.

The Plains were a region of high winds and light rainfall. Yet the 1920s were pretty forgiving in terms of drought. There were warnings, though, such as stories of topsoil blowing in Kansas after a stretch of dry hot weather. But in the 1930s, we had some real drought in these places. The combination of drought and desiccated farmland would create the epic dust storms. “Retribution for the very human error of breaking the sod of the Plains had come in full measure,” Allen wrote.

I recently spent some time looking over pictures of the aftermath of these blizzards. They are incredible and simply hard to believe. Yet I see how something like this could happen again. Except this time, it will be bigger. And it will happen in China. But don’t think it won’t affect what happens in America. Plumes of dust emanating from northern China have already hit the U.S. mainland.

As Lester Brown, author of Outgrowing the Earth, explains: “With little vegetation remaining in parts of northern and western China, the strong winds of late winter and early spring can remove literally millions of tons of topsoil in a single day — soil that can take centuries to replace.” These dust storms are so strong that they can peel the paint off cars. They often force the closure of schools, airports and stores — even in places as far away as South Korea and Japan.

As with the Great Plains, northern China is dry and farmed intensely. Already, China’s farmland is turning to desert at an alarming rate. Estimates peg the loss at more than 900 square miles per year. Chinese farmers struggle to meet the demands of the Chinese people. Meat production, for example, has grown at an 8% clip since 1980. That’s the biggest increase of any major meat-producing country in the world, yet it still falls short of demand.

It’s not so much the basic demand for food as it is a change in the mix of what people eat. Clearly, in poor countries, cereals and grains make up the vast majority of a person’s diet. But in richer countries, people eat more meat, as well as fruits and vegetables.

Meat is incredibly expensive to produce, because raising the necessary livestock requires large amounts of grain. According to The Silk Road to Riches, the average cow consumes 2.5–3% of its body weight in grains every day. “A typical 1,200-pound beef steer could consume about 35 pounds of feed per day,” the authors write, “or more than 13,000 pounds annually. That’s enough grain to feed more than 10 average-sized adults for an entire year.” It’s also very water intensive. It takes about 6,600 gallons of water to produce just 8 ounces of beef. As you can imagine, this puts meat beyond the pale of many poor countries.

There is limited arable land in northern China. So the Chinese rely more on fertilizers to boost yield. Currently, fertilizer use in China is more than three times the global average.

China’s ability to produce the fertilizers it needs — in particular, potassium and phosphate — is limited. As a result, China is one of the largest importers of these fertilizers. This is one of the reasons companies such as Agrium (AGU: NYSE) thrive today.

So you have chunks of Chinese farmland turning into desert every year. You’ve got limited water resources in a dry region. Already you’ve got dust storms that kick up plumes of dust that travel thousands of miles. All of this is reminiscent of the U.S. in the 1930s.

We all have a stake in what happens in China. If China relied on the rest of the world for even 20% of its grain needs, there would be an incredible strain on the world’s grain producers.

Many of the challenges China faces exist in the world at large already. Grain production per person is falling worldwide. So is cropland acreage per person. We are also approaching the limits of what fertilizers can do in terms of boosting crop yields. Plus, strong demand for biofuels — like ethanol — now competes with food demand.

By some estimates, we’ll need to produce about 136 million tons of grain in 2007 to prevent grain stocks from falling again (they fell in 2006). Yet annual increases in grain production have averaged only about 20 million tons since 2000. That gives you something of a snapshot of the hurdle in front of us.

The investment conclusion from all this seems to be that we are in a long bull market for grains. Expect the prices of corn and wheat to keep rising. Expect the price of meat to rise. It also seems that fertilizer producers, such as Agrium, should continue to do well. Other ancillary ideas also come to mind — shippers of dry goods (i.e., grains) and manufacturers of farm equipment. If you followed along with my Mayer’s Special Situations letter, for example, you’re up 40% since June on irrigation equipment maker Lindsay Co.

The potential for another 1930s-style Dust Bowl only adds to the power and durability of these trends.

    Folks, your WebMasters of this site say...Get Prepared! It's shortages.

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