Getting Priorities Straight

Never allow the immediate and urgent to outweigh the permanent and imperative.

At present it is both immediate and urgent to work out which of the dominoes will fall first, and in what order the rest will follow. Where to start?

1. EUROPE. The anticipated mess with the PIIGS had to begin somewhere, and Greece was the obvious place, mired as it is in all the afflictions of the modern age: wages, pensions and perquisites which are too high, production, retirement ages, and hours “worked” per week which are far too low, little commerce other than olives, tourists, and the stray Greek shipping magnate, no intention of abiding by the promises made to the EU, and as splendid a case of entitlement mentality as there is to be found. Tourists are funny about not liking vacation spots known for riots in the street and “service workers” who go on strike as the whim hits them. I recall with pleasure a week spent camping in Rome when tourists in five star hotels had neither water, room service, nor running elevators while we had at least cold water and no stairs. A real vanity check is whether or not to shower and wash our hair under those circumstances. At the time I suffered; I am older and wiser, now, and would choose smelling like Europeans.

The real question is who will be next. Ireland is certainly a good prospect, but since it has long been fifty years behind the rest of the world with tourism being a major product (even Waterford is now made in Czechoslovakia) I’m not certain anyone would notice, and I don’t think Portugal would have much of an impact, other than exporting less alcohol and deserted beaches. Spain? Probably not a serious loss, either, other than tourism, naval traffic, and flamenco. Yes, the default of the rest of the little piggies might upset the French and Germans considerably, and I am astounded that Angela Merkel folded so easily and not even vaguely surprised it cost her the upper house. The result of the nearly trillion dollar bail-out of Greece is a foregone conclusion. It won’t work. The PIIGS may be speaking of “austerity measures,” but such a remedy is too little, too late, and will result in more riots, more unpayable debt, and increasingly frightened politicians lacking the resolve to tackle the problem with any seriousness. France and Germany are seething and a straight-out default would probably go over better for the next squealing porker.

2. THE MIDDLE EAST. Always a fun place politically, the stresses are building, starting with the vastly expensive “social” programs which keep the house of Saud on the throne, to the hatred between the Shi’ites and the Sunnis which has been simmering for over a thousand years and may break into open, if localized, warfare at any time, to the encouragement Iran is receiving to go nuclear, to the question of exactly how far Israel can be pushed before a few nuclear scientists head out to the Negev desert for a picnic and a bunch of the world’s finest pilots scramble. Israel cannot be pleased with the aggregate of deliberate insults and outrageous demands of our totally unqualified Secretary of State or Mr. Obama’s lavish gift of anti-missile missiles to all of Israel’s dear friends and close neighbors, to say little of the Obama administrations attempts to topple Netanyahu’s somewhat precarious government. For all that most American Jews appear to be strongly left-leaning (why, I have never been able to fathom) and there are still a fair number of what were once called “seife,” the German word for “soap” (and that is probably still a standard insult for the “peace on any terms” type), it ill behooves any of us to forget that this is the homeland of such as Golda Meir and Moshe Dyan. Masada was a very long time ago, and I don’t think the Jews will commit suicide without running out of armaments first–after striking the first blow. I am an admirer of columnist Caroline Glick, and surmise that she would agree with me if I were able to ask her privately. Dubai is a fine example of letting oil money and leverage go to one’s head.

3. THE FAR EAST. Someone ruminated and concluded that the next to go would be…Japan, followed by the USA. Japan is an interesting choice, despite a strongly anti-American new government and their twenty year depression. Their idea appears to be stronger ties to China, and I can see their point, considering the relative distances between our West coast and China, as well as rising nationalism. Given the wimp in the White House–supposing his motivation to be lack of courage, character, and willingness to support old allies–I would be rather nervous if I lived in Taiwan.

It is my “professional” opinion that China will go down, although it may take a while. The bulk of their wealth is held in shaky USD, although they have been buying gold enthusiastically recently, making a lot of advantageous trade agreements in Africa and South America, and are snapping up the physical wealth of Australia in a way that makes both Dan Denning and me more than a little cautious. Australia’s government has worsened matters by slapping a 40% tax on mining operations, which may turn out to be a good plan for reasons not intended by their tax-and-spend crowd. I cannot speak for Aussie mine owners, but I know what I would do in such circumstances: shut down and wait for sanity to return. If enough do so, that will decrease tax revenue severely, raise unemployment, and preserve Australia’s precious resources which are being sold for increasingly worthless currency at an alarming rate. (If you have never looked up the statistics for the ill-advised confiscation of all the firearms down under, other than those held by criminals and the 85-year-old grandmother who avenged her granddaughter’s rape by gelding the two assailants, I suggest you do so. “When guns are outlawed only outlaws will have guns” is more than a bumper sticker.)

China is “investing” lavishly in useless infrastructure, ranging from at least three “cities” which are uninhabited, to a shopping mall of over a million square feet that is 98% empty, to thousands of kilometers of roads and railway in a nation where the talk of the neighborhood is that the Wong family got a bicycle. The commissars are being lured into the welfare trap, just as the USA, Europe, BRIC, and OPEC were. Their billions of “citizens” are starting to get a few of the good things of life, and while they certainly want automobiles, the first item on the agenda for any emerging nation is a more lavish diet. One of the things to keep our eyes on IS the food chain, which becomes more fragile from increased demand, disease, genetic engineering, weather, and deliberate diversion of water from crops to confiscation of land for “green” purposes by the EPA and anti-capitalistic forces. India is no longer exporting rice. Inflation in food stuffs is rampant in this country, disguised pitifully by not counting food or energy as COL. As I reported a couple of weeks ago, citrus fruit and much produce is up over fifty per cent., meat is up significantly–just as I told you months ago it would be, and for the reasons I gave you–and huge increases in flour are coming. The one good sign I see in this area is that an abnormally wet winter has most of the fields and pastures looking quite lush. We’ve had poor corn crops for two years, but it looks good thus far–bearing in mind that 30% of it will be sacrificed on the altar of ethanol, an adulterant for gasoline that produces less energy than it takes to produce and is very hard on engines. We went off to buy dried field peas, $.89/pound less than a year ago, now $2.57. Bought ’em anyway.

No, I think China has made a lot of poor decisions, in particular relying on foreign markets. It would be interesting (but not enough to Google at 5:24 a.m.) to know what the loss on the recent Olympics was. When the USD and the Euro go down, who, then, will buy China’s “goods?” Rule by committee does not work well–there or here.

4. LATIN AMERICA. The best I can say for assorted banana republics is that several of them will provide safe haven for those with at least a million and a half to invest (I am not, alas, among them) supposing they can get their money out of the USA without losing 40% of their capital and being subjected to income tax for ten years after they leave–things on the Obama agenda. Brazil has possibilities for those with enough to purchase land which can be developed for crops, and perhaps later this week Low Tech Linda will make a few suggestions on land management, a subject mankind has studied for at least 5,000 years, most of which knowledge has been ignored since the advent of commercial fertilizer. I cannot be sanguine about Mexico, the disaster which has been invading the USA all but unopposed for far too long–something you can see easily on the red-blue map. The only “easy” way to combat this problem is to legalize at least marijuana, and preferably all drugs. Horrors! What did I say?! I said that if we want to knock out most of organized crime, murder, and kidnapping along our Southern border, the simple solution is to stop pricing weeds as though they were worth their weight in saffron (or whatever it is. I don’t use “recreational” drugs, myself) and no, I don’t worry about the “social consequences,” since we have far more drug use now than we did before starting a “war” on an abstraction, something that never works. We should have learned that lesson from Prohibition.

5. CANADA. It isn’t that Canadians don’t like individual Americans, or vice versa, but that they can’t stand Washington or French or English speakers, depending upon which they are. Who can blame them? I can’t stand D.C. or people whose native tongue is French, either. Still, despite high prices (particularly over-priced housing) and their own looming housing bubble, I don’t think Canada is an immediate candidate for default or devaluation, or that it has the will or desire to go to war with us.

Let’s think about wars for a moment, because the traditional “solution” to economic problems is a rousing, good war. Again…if I were buying stocks, I’d be looking at munitions and other military stocks, although never Boeing. I’ve kept a casual eye on Boeing since 1986, and there was never a time when I thought it a good bet. Quick story…when John retired from the Army in ’86 he got a handsome offer and off we went to their HQ in Kansas, a state I cannot recommend. Three years later he come home and asked casually, “How would you like to live in Washington state?” Being far more young and naive, I replied agreeably that anyplace had to have better weather, let’s go. He explained that he had done the analysis and concluded that within a year his job would be gone. John was OR/SA, and such prognostication was his business. Boeing pleaded with him to stay and offered him a raise bigger than the 40% a private research foundation had offered him (which turned out to be cost of living!) John was adamant, and we moved, and sure enough, a year later his whole department had been fired. Too bad ultra-liberal WA is one of the five most expensive areas in the USA.

6. THE LAND OF THE SORT OF FREE AND HOME OF THE FREQUENTLY COWARDLY AND INCREASINGLY IGNORANT. Passing lightly over the fact that I don’t care much what happens to all those other places other than in terms of how the outcome affects me, the USA is going down. I can’t say when. I can’t tell you which of the various forces which threaten the dollar will prevail–the Chinese turning loose their butterflies, deliberate default, intentional devaluation, political events, or the incredible stupidity–that being the most kind way I can put it–of the current administration. How strongly do I believe that? Well…we just came back from two wonderful weeks in the Low Country, going to a submariners’ convention in Cha’leston and visiting Charles’ fabulous son and his wife. Around the best fried oysters I ever ate, marvelous company, and 2400 horrible miles that demonstrated clearly the dreadful shape I-20 is in, I spent $1500 buying the “kids” my idea of a good start on adequate supplies if we get TEOTWAWKI. I had a little trouble with Charlie, who is both proud and until the last couple of years cleared six figures with his business, but finally won him over by repeating frequently enough that no insult was intended to his ability to care for his family or make good financial decisions (he’s excellent at both) but a thoroughly selfish act on my part, which it was. Charles and I could not bear to worry about them not having enough to eat and some things to barter, because we know how unlikely it is they would both take my word for it that it was time to load up and head for Texas or be able to get here safely if they did. I expect things to fall apart very quickly when they go. Quadrupling the money supply in the last year, anticipated further hits in the housing market, the commercial real estate bubble, the bond market, the stock market, the effects of Obama “care,” Cap & Trade, the political ramifications of the oil spill in the gulf, guaranteed higher taxes, rising unemployment, the politics of envy, increasing bank failures and bail outs…the situation doesn’t look good to me.

Which brings us to the “permanent and imperative,” those being to arrange our futures so that we don’t just prepare to survive, we have prepared to thrive, and having most of our “excess” funds tied up in tangible goods which are consumable or good for bartering. Did I blow $1500? I don’t think so; that’s $1500 I’m not going to awaken one morning and find is worth 30%–sanguine estimate–of what it was the night before. If the worst happens our dear ones have what it will take to survive at least for six months if we are under martial law and the grocery store shelves are empty, supposing they can protect it from gangs and the government. They have enough sense to start rationing immediately if cities are in flames, rioting is rampant, and gangs roam first the cities, then the suburbs, then farther out in search of lood. The Sam’s receipts give Angie a good start on an inventory; they were pretty proud that they had 30 or 40 days’ worth of food in the house. Shudder. The average, I read recently, is ten days–and that means ten days you could feed your family period, not ten days of complete, balanced meals to the familes’ tastes.

When we expect hard times the first priorities must be food and protection, followed by converting any serious “money” into items we expect to preserve current value. While I remain convinced that the metals market has at least one (probably several) heavy thumbs on the scale, the fact remains that I finished putting what I thought could be spared into primarily silver, some gold, last July. The most I paid for physical silver was $13 (spot, at the time, and my archived works will tell you how I did it) and it is above $18 now–and not an ounce of it is for sale at any price. Signature chuckle…good luck to anyone with larceny in his heart figuring out where we hid valuables on several hundred acres. Metal is for the future, because no matter how bad times things get, eventually they will be better. My silver will be swapped only for land, and at my price, which won’t be generous, probably a decade from now. What are we buying this week? Another tractor and implements and a couple of more horses because we like them, may need them, and prices are going up since pastures are good. Still, we found a five-year-old registered Arabian for five hundred dollars. Similar equines cost four times that two years ago.

That is the name of the game: what can you find of value and utility that you expect to be worth more once we have worked our way through the bad times which are coming–and during that period? My recommendations continue to be food, a motor home/towable trailer, weapons and ammunition, yeast, pet food, coffee, beans, rice, flour, sugar, salt, lard/oil, dried potato products, toilet paper/kleenexes, condiments and spices, diesel/gasoline with stabilizers, EAS protein powder, vitamins, batteries, a large water purifier, seeds, tools, and a flyer in stocks which may be worth something afterwards, such as phosphates and emerging methods of extracting oil from sand/tar. Put some money into research in terms of the most nutrition and taste. Try house brands, take advantage of loss leaders, and have a backup plan for dealing with the meat in your freezer if rolling brownouts become more prevalent. We’re great believers in having a couple of generators and fuel for them, preferably diesel or propane, obviously. Have an emergency destination and a rendevous well out of the city.

I could be wrong, of course, and none of our preparations will be needed. In my favorite phrase, “the worst that can happen is…” we will be able to avoid grocery stores for a long time and the ranch is worth more because of additional livestock and machinery. Being a prepper is a form of insurance, something we all buy against probable hazards and the unlikely but possible. It is something we need to do now “in case,” not anything you will be able to handle when stores are stripped in three days, banks and ATM’s are closed, and no one will sell food and gasoline for devalued currency.

We can hope my vision does not come to be, but now is when you can take precautions.

One more illustration of the principle. Provisions for the future must remain just that. An acquaintance bought into the theory that the best form of gold is “name” coins in superb condition, which was idiotic enough. He lives on the giant truck farm where he works, housing, utilities, produce and pasture for his four milk goats–producing lavishly–provided. He is not married and his truck is paid for. Instead of tightening his belt for whatever reason has him wanting cash he just offered me a St. Gauden’s because I’ll pay him Spot. He’s throwing away historical and grade value because I’m his best means of getting the most he can immediately. Do I feel guilty? Not at all. He must have seen the need, whatever he thinks it is, coming and should have made arrangements to sell to a rare coin dealer, if at all. He named the price when I bought the first of several coins from him. He still hasn’t learned that we never, ever sell our toys (jewels, furs, metal, motor homes, land, luxury cars, and so forth) because it is rare to get stored value back, particularly in economic times like these. I’d have eaten cornbread and milk and vegetable soup for the duration before I’d have turned loose of the Saint Gaudy.

Economic sins pay minimum wage.

Linda Brady Traynham
Whiskey & Gunpowder

June 1, 2010

The Daily Reckoning