Not much action in the stock market on Friday. Gold didn’t do much either.
The big news was that Hosni Mubarak called it quits. After supporting him for 3 decades, the US threw him under a tank. Almost everywhere except the Mubarak household, people rejoiced. We were surprised they had an opinion, one way or the other.
We got emails from strangers telling us what a “hopeful” development this was…or how “free elections” might be coming next.
Typical was the report in The Washington Post:
“Mubarak became the second Arab leader in a month to succumb to his people’s powerful thirst for freedom.”
“Thirst for freedom?” If Egyptians were thirsty for freedom they must be like camels. They only need a drink of it once every 30 years. Mubarak ruled for three decades. Egyptians went without quenching their “powerful thirst for freedom” through the ’80s, the ’90s and the ’00s. Apparently, they only needed to bring the cup to their lips this year.
Many spoke of the “jubilant crowds” and the “idealistic youth” behind the peaceful revolution.
We were tempted to mention the jubilant crowds that attended the execution of Louis 16th…or the idealistic youth who gathered to jeer at Nicholas II when he and his family were shipped off to Yekaterinburg, where they would be murdered, along with their valet and even the cook.
Mubarak left office on Friday. The army took control on Saturday. On Sunday, the generals dissolved parliament.
Revolutions don’t always turn out well. The French Revolution was a good time to be in England. The Russian Revolution was a good time to be almost anywhere other than Russia. Even the American Revolution was a good time to be elsewhere too. And then, when Americans finally got their freedom from Britain they almost immediately began shackling one another. Tax rates had been only about 3% when the English ran the colonies. Now, the federal rate is 11 times as much. And for every injustice done to Americans by the English there must be 100 they have done to themselves.
But revolutions happen.
Where should you be now? We don’t know. But we suggest that you have a bolt hole somewhere. A refuge…a getaway…a family stronghold…
Many things could go wrong. Earthquakes. Plagues. Volcanic eruptions. Wars. Bankruptcies. Hyperinflations. And – we wouldn’t rule it out – invasions from space.
These events are hard to predict. Even something as obvious as the revolution in Egypt was unforeseen by almost everyone. We pay the CIA hundreds of billions to keep on top of things like this, but as one journal put it, sarcastically: “CIA Forecasts, like, Suck.”
Here at The Daily Reckoning, however, we take up for the CIA, just as we would stand up for any drunk or half-wit. The CIA’s work is at least on a par with the SEC or Amtrak. We have no doubt about it. It is at least as efficient as the Post Office. It is as necessary as the TSA. And it is as competent and effective as the Congressional Ethics Committee.
But we do not take up pen today to criticize America’s intelligence agencies. Instead, we merely point out that: bad stuff happens.
What kind of bad stuff? All kinds. Kinds you expect. And kinds you don’t.
The problem with bad stuff is that it often comes in drag…pretending to be something it is not. A “peaceful revolution,” for example, can turn bloody mighty fast. And no one gives you advance notice.
Real trouble comes unannounced. If you knew that the dollar would collapse on the 3rd of June, for example, you could switch your money into euros. If the Irish Prime Minister called you on the phone and tipped you off – “Hey, we’re going to default next Thursday,” – you’d know what to do. You’d short the euro and make a bundle. Or, if you intercepted a secret cable – “Nuclear Attack on Washington, DC, 4PM, October 13th…” you’d get out of town as soon as possible.
But black swans do not honk before they appear. They just appear.
We’ve spent a lot of time anticipating disaster. There will be a collapse of the international monetary system, for example. It is almost inevitable…but it is still unpredictable. We can’t say when or how it will come about.
Likewise, much higher inflation rates are coming…and a huge sell-off in government bond markets. Those things will provoke widespread financial disasters – possibly leading to riots, revolutions and other bad stuff.
It is possible that these financial calamities will cause a major economic disruption, like the collapse of the Roman Empire. In the chaos, trading networks could fall apart and take many decades to be rebuilt. GDP growth could turn negative and remain in the red for years. Developed regions could slide backward for generations. Emerging markets could explode. Who knows what would happen?
We see trouble coming…but we can’t tell you exactly what color wig it will be wearing…when it will get here…or what it will do when it arrives.
And then, there are the disasters that are impossible to see coming at all. For example, our old friend, Marc Faber, includes an essay on “cyber security” in his latest newsletter:
“Whether we acquiesce or not, our lives are determined by technology and computer systems. Our electric grids, nuclear systems, water supplies, financial institutions, fuel systems, communication systems, as well as our governments, are directed by technological systems, which are subject to attack or disruption.”
Apparently, the cyber attackers are well funded, very sophisticated groups engaged in serious warfare all the time. For the moment, they are outgunned by the forces of law and order – led by the USA. But imagine what happens when the USA runs out of money? How long will it take the attackers to get ahead technologically? With all the billions and billions of dollars worth of capital in the world…and the millions of people with high-tech computer skills…it seems like a matter of time before a serious Black Swan event occurs.
One thing about cyber war makes it especially attractive to low budget terrorists – it costs relatively little to maintain a serious threat. No battleships necessary. No billion-dollar fighter jets. No nuclear deterrent. In fact, with the right team of software geniuses, it may be possible to turn a nation’s own nuclear capability against itself.
“The US Department of Defense classified military computer networks were attacked in 2008. At a military base in the Middle East, an infected flash drive was inserted into a US military laptop, presumably by a foreign intelligence agency. The code uploaded itself to a network run by the US Central Command, spreading undetected in classified and unclassified systems, creating a digital source from which data could be transferred to computer systems under foreign control.”
In other words, when it comes to bad stuff…the sky’s the limit. It’s gonna happen, eventually…one way or another. And it could be real bad.
And when bad stuff happens, you’re better off being somewhere else.
Generally, bad stuff seems to happen most often in cities. Why is that? Cities are where most people live. It is where governments are. And it is where the labor force is most specialized.
There are no subsistence farmers living in cities. Nor do urban populations “live off the land.” Instead, they depend on complex networks of commerce. The typical city dweller produces neither food nor energy. He sits all day in an office – completely dependent on others to provide power and food. Then, he goes home – still completely dependent on the division of labor for his most important needs.
Progress can be described as the elaboration of the division of labor. In man’s most primitive state, specialization is extremely limited. From what we’ve been told, the early man was the hunter. Early woman gathered…that’s about the extent of it.
As the tribe grows larger, specialization increases. One person might tend the fire. Another might be in charge of making clothes or arrows.
The advent of sedentary agriculture and towns caused a big leap forward in human progress and, not coincidentally, the division of labor. Some townspeople went out to tend the fields. Others began to focus on woodworking…or iron mongering…or making weapons…or clothes. Some played cards and hung around at bars. There was soon a homebuilding industry…and, not long after, merchants, prostitutes and bankers…and even shyster lawyers and tax collectors.
As the division of labor expanded, the average person became richer…and more dependent on others. In order to eat, someone else had to plant…and till…and harvest…and hunt…and gather. And then, when agriculture became mechanized, he depended on faraway people who produced oil and gasoline…and people who built tractors and combines…and bankers who financed industries and factories. And, of course, he was more dependent on money too. In the days when he bartered, money was no threat. Then, when he traded only with gold and silver coins, there were no monetary breakdowns…no hyperinflations…and no financial crises.
As the 20th century progressed, more and more people gave up agriculture, moved to cities and took part in other industries. Today, cities may have millions of residents – like Bombay with 14 million…or Sao Paulo with 20 million…or Mexico City with even more. All of these people are dependent on vast, stretched lines of communication and commerce.
Even the farmers themselves are now dependent on these sophisticated networks of commerce. They depend on money…and what it will buy. Agriculture has become monocultural. That is, a farmer is likely to produce only wheat. Or only rapeseed. Or only barley. Or only cattle. Gone are the chickens around the farmhouse and the pig in the back pen. If the system of transport and trade breaks down – or the money itself goes bad – thousands of farmers could go hungry too.
There are black swans all over the place, waiting to be discovered. And when a black swan appears, people in the cities seem to suffer most.
In the hyperinflation in Germany in 1923, for example, farmers had so much food they ran out of storage space. But they wouldn’t sell it to city slickers. The mark was losing value so fast, farmers preferred to hold their crops off the market, knowing that the price was soaring…and that if they sold, the money they got would soon be worthless.
People in the cities, meanwhile, were starving. Soon, gangs roved the countryside, raiding rural barns and houses…and occasionally killing farmers who tried to resist.
Plagues hit city dwellers hard too. Proximity seems to be a curse when an infectious disease appears.
And, of course, in time of war and revolution, cities tend to be the battlegrounds.
Advancing armies are rarely polite. But even if they are advancing through the countryside, they are usually advancing towards cities, which they attack. In the old days, cities were besieged, starved out, and then, when they were taken, the attacking soldiers were given 3 days in which to sack the cities. In other words, they had three days to commit whatever mischief and mayhem their imaginations suggested.
When bad stuff happens, progress goes into reverse – so does the division of labor. When an economy goes backward, much of the specialization that developed during the boom years turns out to be uneconomic, or unaffordable, or unwanted. People may be willing to pay someone to park their car when they are flush. But when they are broke, they will park their own cars.
As the division of labor goes backward, people also find they need to tend to their own food and energy needs. Here is where it gets very tough for people who live in cities. They have no stores of mason jars with food from their own gardens that they have canned themselves. They have no hams hanging in the barn or stocked away in the larder. They have no animals on the hoof that they can slaughter. They get no eggs from the chickens they don’t have…and they can hardly go into the local park and shoot squirrels to make a pie.
Instead, they are out of luck.
Generally, when the black swans come out you are better off in the country – with country-boy skills and old-time farms supplies.
We once met a fellow who had a keen appreciation for apocalypse. He was sure it was coming. So, he moved to Arkansas where, he said, “I’m protected by 300 miles of armed hillbillies.”
That’s something else to think about. Not only do you have to worry about food and energy, you also have to worry about your neighbors. If you have a nice little vegetable garden next to a large apartment complex, for example, you might have a hard time protecting your crops. And don’t count on fattening a calf in Central Park during a famine.
You need to be somewhere else. Where?
Bill Bonnerfor The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
The history of humankind has been largely constant disaster and misery for the general population. It’s only since WWII that we in the USA have all grown accustomed to being fat, happy and delusional, so these scenarios you paint are really more the norm than an approaching apocalypse.
In fact I do live in the country on acreage and I can tell you that when the DSL service went down the other day it was bewildering and maddening. Even in the country we are greatly reliant on the general infrastructure. I have eaten squirrel before and I don’t look forward to it.
Bill has a lot on his mind today.
Lots of folks in AR waiting for the “end times” and the rapture they say will save them from disaster. I’m a Christian, but believe the world ends with a whimper and not a bang. I would tell you how it is all going to play out, but I broke my crystal ball last week.
The country will be the better place to be if all hell breaks loose. Those bands of roving gangs won’t like what awaits them in America’s countryside. These boys’ and many girls can shoot and are very well armed.
Lets all just hope for the best since that is all we can do. Look forward to meeting ya on the other side.
Thomas L. Friedman has come out of his book leave and is continuously reporting on Egypt @ http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/thomaslfriedman/index.html in articles such as “B.E., Before Egypt. A.E., After Egypt.”
In Unified Zombie Theory all revolutions are considered the moment of Big Bang (in the creation of zombies).
I have been thinking about these issues since the summer of 2007. I have started to prepare, come what may. At first, I thought about leaving the country. Then I realized, my support network is here. My family is here. And this is Our Country. I love the quote from Michael Ruppert, “Let’s suppose you go camping with a bunch of folks, and a bear attacks the camp. You don’t have to be the fastest camper, you just have to be faster than the slowest camper.” I like to think that I am at least faster than the slowest camper, at this point.
Bill wrote: We were tempted to mention the jubilant crowds that attended the execution of Louis 16th…
I wonder if Americans would be as jubilant if the day should come when Ben ‘Bernokio’ Bernanke were to suffer a similar fate.
Who is Thomas Friedman? Is he like an investment guru or something?
U.S. politicians, the mass media, and the educational establishment have been conflating “democracy” with “freedom” for considerably more than a century. Mubarak’s dictatorship is only the first casualty of the unfolding events in the region. Mubarak’s fall, plus the trajectory of other events in Iraq, Lebanon, Afghanistan, and across northern Africa should convince even the most obtuse that the result of “democracy” in Islamic countries will be regimes that support Islam. The American people were free, not because they could vote, but because the Constitution limited government’s power over them.
Is Bill going to say “Argentina”? : )
Coversely the cities are where any government aid would go: food, medicine, fuel, national guard. They’re more likely to have power routed to them and other utilities kept up and running.
Additionally, it is most certainly a losing strategy to try to ‘go it alone’ in a WROL (world without rule of law) situation. Survival almost demands that you link up with others. Joining some sort of a “gang” in the city or creating your own might be the way to go. Gang members look out for each other as long as you can ‘contribute’.
Finally, if you KNOW the city, it is almost certainly your best bet to maximize your city survival skills.
It is a completely different set of survival skills for a city slicker to learn how to survive in the country.
There’s no easy answer to preparing for disaster – particularly when trying to accommodate alien invasion – other than generally stocking up, networking with the like-minded, and continuing to upgrade a diverse skill-set.
Great Article. Must say Bill Bonner is very articulate and I very much enjoy his writing style. Can’t argue with the content either; more than likely there will be multiple black swans in quick succession if not simultaneously; how does the saying go – when it rains….
As I grew wiser I realized you can’t “prepare” for a black swan. That’s why it IS a black swan in the first place. Countryside? How about that meteor hitting your location good and hard, or those aliens landing there? How about a flood/earthquake/tornado that strikes that part of the land the hardest? How about a plague that kills most people, even in the countryside? How about a blizzard that destroys all crops? Ever thought about being surrounded by HUNGRY, DESPERATE armed hillbillies? If push really comes to shove, the only safe place to be is already dead.
There is a good blog from a guy who went through the Argentina collapse. You still have to live your life, the country sounds more dangerous than a city, you are too isolated usually. Plus you still have to make a living. I garden, but the only self sufficient people I know are Amish.
Bill I absolutely love , Mobs, Messiahs and Markets. I have read it twice and laugh and laugh each time. You and Lila Rajiva really have a humdinger.
But shameless plug aside, why not write a history of the government from babylon to present day.
I would love to hear your take on the foolish exploits of the imbeciles who insist on grabbing the reigns of power, throughout history.
Just a thought, and its not that I did not enjoy your other books because I have read them all and I did learn something from each one.
Just sayin Mobs makes my chuckle and boy could I use more laughs these days!
This is all great. Bill has a whole tribe to worry about, and if he told them he wanted them in Baltimore for the next two years, they would probably take HIS scalp, because it’s just sooo scary not to be… sheep. You making too much money going along to try to fight?
Black swans doodoo on different folks differently. City mice may face other issues from country country mice. The ‘city’ I chose has only one building higher than 4 stories, and green zones around it~~a semi rural city.
Panic isn’t fun, even if it’s a needed market exit and a move to cash, no plastic, and fifty cent money orders where the company collects rent on float, not fractional banking. I don’t see anyone here too “overexposed” to that. My preference is to force it, counter-attack, let the digital-info military-industrial fascist control freaks know we haven’t rolled over. Give em a good bloody nose via the strong arm of The People. Let them back up, IF we can force them to do so, but at least draw a line and try to hold it, and stop running, ourselves. I want to do this. If that’s not ok with you, leave, or play your hand your hand your own way. If people don’t want to exercise their birthright, enjoy the pottage. But i don’t see this the way you do.
Here’s what I think you overlooked, ok?
1) the internet. oh, we hear every day about a “kill” and we ARE getting read, and listened to, yet we’re still communicating, and no one here is too “subversive”.
2) if we are getting waxed by digital money, let’s fight with the same, unreal wealth! See how they like it. This isn’t 1971, any more, and we’re not in Kansas. We’re online. People need to get their “wealth” OUT of the system and get into cash, PM’s and food, for STARTERS.
People want to have Uncle Sugar as a partner? at this point? Well, that is their choice, but please don’t try to sell it to me. I’m just not buying it.
So far, I hear you advising defense. If law & order breaks down, &tc.
If you can get a money order for less than fitycents @ WalMart and the company operates on float, rather than fractional, and you’re not giving banks rent on cards, either, where’s the hitch?
If the system needs a flush and we try to flush it on them rather than waiting for them to flush it on us, as the mega-heist continues, how this is bad?
How, exactly, does this lead to famine in NYC?
Or, gunfights in Kokomo?
I don’t want to wait for a black swan, I want to BE a black swan, non-violently, intelligently, and legally.
Maybe i’m wrong, but i think you’re blowing smoke, here, Bill, and a) i don’t like it, and b) i REALLY don’t like you blowing it at me.
No 2 snowflakes are the same; yet they are all snowflakes. I heart snowflakes.
What the HELL did confused_4_life just say?
I can’t say, exactly…
But Bill and most folks here seem to be constantly reminding me of what I already know I need to do before I can afford to do it.
As far as this time, hopefully the price of a sustainable homestead will continue to fall awhile longer.
May I humbly suggest you all take a look at the Yucatan peninsula in Mexico. It’s large, empty, cheap, warm, there’s fresh water everywhere due to the world’s largest underground river system, it’s close to the US but not too close, the government leaves you alone, there’s virtually no crime, the only threat from a natural disaster is a hurricane every decade or so, crops grow easily and the locals are friendly. If you ever fancy a visit Bill, just let me know.
You know, I’ve still got my Y2K hidey-hole in the countryside with all the stuff Gary North recommended way back then. Y2K turned out to be a non-event, but I have totally enjoyed having a place in the country, and it has been a great place to raise my boys. None of those expenditures have been a waste in my case.
I still have power from the grid, and all that, but I can switch to the solar, wind and backup diesel generator in a pinch. The well water is good, and the year round stream flowing through the property gives me all the water I need to irrigate the pasture and the orchards of fruit and nut trees. Nothing shows from the road. We all know how to hunt and fish and raise goats, etc. There is abundant wildlife, and the woods give us all the firewood for the woodstoves that we could ever want.
Still, I would hate for the worst of Bill’s possible scenarios to come to pass. I enjoy the modern conveniences and pleasures of civilization. No matter how well you prepare for a calamity, there will always be things you forgot, or surprises you didn’t expect.
Black swans? I think I can hit one at 500 yards with my .300 Win Mag. The AK has a lesser range. Zombies are a bigger target.
In the end we’re all dead, but I’ll bag a few squirrels before I go.
Relying on gov “aid” is what will probably cause the black swan events. If we have been paying attention to Bill and others like him, govs the world over have been making many promises to the masses. They promise security, prosperity, jobs, hell you name it and they have promised it. But gov only takes care of the elite and well-connected and they all want more of the resources. Now they have more, but it is still not enough.
People the world over are catching on to this and they don’t like it. When the economy crashes it is the gov and elites that will become the target of their rage. So aid to the cities will not be there.
Most gov employees are incompetent, lazy and lack courage. They will not know how, or will be to scared to venture into the cities to face hungry, angry people in order to provide them with aid.
The National Guard members, most of which probably live in the country and suburbs will do as the NO police dept. did when disaster struck. Leave their post, or simply fail to show-up and look out for their own.
In a sense, I look forward to some major “adjustment” since it should lay the groundwork for states or large areas of like-minded people to once again establish freedom and responsibility like we used to have.
There are towns that would be completely civil with each other if the power were turned off, but there are towns that currently lack civility with it.
Let’s be honest, in the inevitable future civil conflicts, your skin will be your uniform, so it’s safe to assume that nature will sort birds of a feather with each other.
Helen Keller could see where not to live after some collapse.
I’m ready. I don’t like squirrel, but I have 17 cats and that’s, like, the other white meat~~~
Just take the government-recommended flu shot and none of this will matter. BTW, who’s on Dancing With The Stars tonight? How ’bout that Lindsay Lohan, huh? Wish my couch had a built-in toilet so I’d never have to get up….
How about 300 miles of HUNGRY, DESPERATE armed hillbillies coming off a three-year meth habit?
The Yucatan Peninsula has already been hit by a giant meteor, 65 million years ago. The chances of the next big one hitting the exact same spot are remote, indeed. My wife and I are looking to buy some acreage in the middle of Missouri. We’ve decided we like living with red state rednecks better than in the cities.
Since the invention of the "shareholder rights plan" (i.e. the "poison pill"), most companies are relatively immune to hostile takeovers. But according to Dave Gonigam that could all change thanks to one activist investor. And if you're savvy enough, you may just be able to follow his lead for big gains. Read on...
As the markets have continued to rally over the last several years, more and more people have touted the problem of "income inequality" in the US. But as Jim Mosquera explains, this perceived problem will likely sort itself out with the arrival of one specific market event. Read on...
Almost one year ago, substation telephone cables were maliciously cut in San Jose, CA. In 20 minutes, 17 transformers were knocked out. A year on, similar threats have cropped up. Today, Addison Wiggin explains why these threats are so serious for the safety of the global economy... and shows you one way to play it...
The big problem with declaring bubbles is that it really does you no good. Unless you're attempting to measure and time market moves, you're also blowing hot air. But if you keep watch for negative divergences, you have a much better shot at figuring out big market moves than the latest bubble-busters. Greg Guenthner explains...
Too often investments are made in a vacuum. But as Byron King demonstrates, the global economic crash... easy money... and technological advancements are all interdependent. In particular, that connection has changed the investment calculus in the resource market. Read on to learn how...
Oil isn't the only resource to experience "peaks." Due to a major contraction in gold exploration over the past few years, the mining sector is no longer mining gold at its replacement rate. In other words, the amount of gold above ground is running out. And according to Henry Bonner, it will get worse before it gets better...