Saturday, March 07, 2009

It's getting a little strange out there

I always keep up with the news--it's just something I do. I don't care to be blindsided by something important. It takes a fair bit of my time, but I think it's worth it.

The current big story is the economy, both in the US and abroad. The only way to miss this story is to crawl under a rock. A big rock, probably on another planet. It's everywhere you look. People are talking about the economy everywhere you go. It's the subject that can not be escaped.

This is a Good Thing. It's good because people around the world are finding out that they have been lied to on an industrial scale for decades.

"No, Virginia, there is no Santa Claus--at least not one who gives you unlimited money to go buy things that you probably don't need in the first place. Young lady, you should have never used your house as a piggy bank."

"Yes, dear, I know that The Obama is trying to take his place. But you have to realize that he, like those who came before him, will fail. Just because he is willing to go further than any of his predecessors doesn't mean that what he is doing will work."


Our global economy is on life support. The central bank doctors, backed up by government printing specialists, are hanging bags of money and running IV lines into every vein on the global economy's body that they can find. Their theory is that if we just pump in enough money, the patient will return to health--or at least blow up like another bubble.

We're already seeing how that strategy is failing. Stock markets around the world are in a deep and prolonged slump, with no improvement in sight. The word "depression" hangs heavy in the air. Despair is becoming the new trendy emotion.

Some markets, such as firearms, ammunition and various sorts of emergency preparedness supplies, along with the precious metals markets, are going crazy. Tried to buy an AR-15 lately? How about ammo for it? Freeze-dried food (the kind suitable for long-term storage)? US Gold Eagles, Canadian Maple Leaves or South African Krugerrands? Everyone of these items is in short supply, and their prices reflect it.

Why are these markets so hot? Because these are the things people buy when they're scared--scared of their government, scared of inflation and scared of civil disorder. Go to a gun show--you can smell it in the air.

People are also growing angry. Rick Santelli and the Tea Party movement are evidence enough of that. If you want more, look no further than the level of outrage incurred by Obama's mortgage bailout plans. The pity of it is that they should be pissed at themselves, for acting like a bunch of drunken sailors on leave. They've had a hell of a consumer debt party, and the hangover is going to be a killer. And where the hell did that tatoo come from--the one that looks like the price tag for a big screen TV?

Retirement savings plans, such as 401(k)s and 403(b)s, have tanked along with the markets that they were invested in. Baby boomers, once in sight of their retirement goals, are now planning on working a lot longer--assuming that they can keep their jobs. Unemployment at the national level is 8.1% and expected to rise. Some pundits say we could see it hit 10%, perhaps more, before this is over. Some of the boomers may not be able to retire--ever.

People have rediscovered the concept of "saving" and they're doing it with a vengeance. The savings rate has went from a negative number to 3% in just months. Joe and Jane Consumer have closed their wallet, and as strange as it may seem, it's exacerbating the problems. In an economy that depends on consumer spending for its upward motion, the lack of spending causes big problems. Our government's attempts to replace consumer spending with government spending are working about as well as all of their other financial plans.

Many of those who are saving are saving in very liquid items, such as old-fashioned savings accounts. Others, fearful of the state of the banking system, are keeping the cash at home. Expect to see more home invasions in middle and upper income neighborhoods as a result.

Despite worries over deflation, food prices stubbornly refuse to drop. Once blamed on high oil prices, it now seems that it is, well, something else. There is no sure word on what it is, but I've heard everything from short supplies to hoarding by everyone from you and me to our government. Whatever it is, trips to the grocery store now hurt like trips to the gas station did 6 months ago.

Retail stores are going out of business because of bad business decisions, a lack of credit and a lack of customers. Circuit City? Dead. Sears? Closing stores. Store closings in 2008 were bad; 2009 looks equally bad if not worse. One of the few who are doing better is Wal-mart. People who are still shopping are shopping down-market.

What's left of our manufacturing base is hurting badly. GM is looking at bankruptcy. Cerberus Capital is surely ruing the day they bought Chrysler. Any company producing for the construction industry, from materials to tools to equipment, is in agonizing corporate pain. Any company producing anything outside of goods we want in a panic is hurting.

So, are we in the midst of a collapse? Is it Road Warrior time--do we all need to stock up on Dinky-Doo dog food? I honestly don't know. I'm taking every precaution I can (short of moving to a fortress in the high mountain fastness) for myself and my family.

John Mauldin, an economic pundit for who I have great respect, says there are some simple actions that could be taken that would turn things around in relatively short order. Others, like The Daily Reckoning, have hoisted the collapse flag and keeping track of our downfall, while calling on our governments to let the markets do their job (always good advice in my opinion). Whiskey and Gunpowder is doing much the same, while also pointing out ways that you can defend your personal wealth (assuming you have any left).

One thing for certain--our governments aren't going to be what get us through this, no matter what the left would prefer. Their meddling, good-intentioned or not, is killing us. The price tag for it will kill our children and grandchildren.

It's time to hunker down, and it's time for a gut-check. Despite the litany of bad news, don't fall into the twin traps despair and fear. Things will get better, even though there is no way of knowing when. Do what you can to prepare yourselves for riding this out.

Max hasn't came over the hill just yet. But keep an eye peeled, just in case.

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