Category: Economics & Investing

From the SurvivalBlog Archives: Hedge Funds–A Disaster Story that Could Unfold in Quarterly Episodes

One of the consequences of the collapse of the credit bubble and the subprime lending fiasco in particular is with hedge funds. There is a substantial risk of uncontrollable instability in hedge funds that could potentially be disastrous for investors. This instability will likely be seen in waves of bad news that will come roughly once a quarter. First, let me provide a bit of background: 1.) Most hedge funds have rules that allow only quarterly redemptions (“cashing out”) by by their investors. (A few hedge funds even have only one annual redemption “window.”) Typically, the redemption requests must be …


Our Changing Times: The Advent of Rule 157 and Perhaps Rule 308

We are living in unprecedented times. The global economy is being asphyxiated for lack of credit, and we face the prospect of an economic depression that could be worse than the Great Depression of the1930s. The Advent of Rule 157 One of the contributing factors in the unfolding banking debacle was the advent of Financial Accounting Standards Board (FASB) Rule 157, that went partially into effect on November 15, 2007. This was a financial accounting rule change that yanked the bankers back from the Fantasyland games that they had been playing with Collateralized Debt Obligations (CDOs), Credit Default Swaps (CDSs), …


From FerFAL in Argentina: A US Crash that Will Parallel Argentina’s?

Hi James, These are hard times, indeed. The parallels between the days before our own economy [in Argentina] collapsed and what’s going on today in America today are very hard to ignore. Our local television seems to be getting some kind of sick kick out of all this. They showing the comparisons, even editing politicians and economists speeches showing how similar they were to the ones the American politicians and economists are using right now. In some cases, they even said the exact same line, the only difference being the language. About the article “Letter Re: What Are the Economic …


Letter Re: Expect Delays and Confusion During FDIC Settlements

Jim: If Michael A. in Seattle was surprised by his little run-in with the FDIC, I urge him and others to research what happened in Texas during the S&L crisis. That’s within fairly recent memory, just about 20 years ago, not like the Great Depression [which has faded from memory. And this was when the entire rest of the nation’s banking system was largely intact but the S&Ls in Texas (and a few surrounding states) caused all the fuss. Common problems included: 1. Inability to get at checking or savings accounts for months at a time. 2. Inability to get …


Letter Re: Investing in Foreign Currency CDs

James, Today the dollar posted its largest one-day decline against the euro since that currency was created. I am rebalancing my investment portfolio to account for the market’s recent gyrations – and the fact that our government is attempting to make the dollar even more worthless than it currently is. Several years ago I was in a similar mood and found EverBank, a bank that issues a number of CD products tied to foreign currencies (effectively getting your saving out of dollars into something that’s not dollar-denominated). I am not preparing for a complete meltdown or the end of civilization: …


Two Letters Re: Advice for City Folks on a Budget?

Dear Mr. Rawles, I am writing to ask for your advice and for your charity, and also because I think this subject may be of interest to many of your readers. I discovered your web site a week ago and have found it to be both very informative and also very alarming! It was major wake-up call for me. In my opinion, I am not at all prepared for the upheavals that are already underway and that lie ahead of us. I would very much like to change that situation, but it all (considered as a whole) seems so overwhelming. …


Letter Re: What Are the Economic Collapse Indicators to Watch For?

Jim, Some of us may be stuck within the city limits until ‘the last possible moment’ before an event such as WTSHTF. Can you suggest a day-to-day procedure or strategy to now follow for monitoring specific and reliable news outlets or information sources in determining when our G.O.O.D. action plan should be initiated? . Obviously, many people such as myself, have all the ‘other’ recommended Rawles preparations in place but are still at a disadvantage from those that were able to set up their retreat ahead of time and to have evacuated from a city. It’s the best that I …


Letter Re: Gauging Bank and Thrift Safety

James, I wrote you a month or two ago regarding a post of yours that was concerned about failing banks. I commented that I thought the worries were overblown – there was no reason to think that FDIC wouldn’t pay off the claims, just as FSLIC paid off the claims in the 1980s. I still think that’s true, but I have had a personal cautionary experience that has moved me much closer to your way of thinking. I had a brokered Certificate of Deposit (CD) issued by IndyMac. (In case you post this, for readers unfamiliar with the term, “brokered” …


The MOAB Accelerates the Inevitable Destruction of the US Dollar

Back in March, I coined the acronym MOAB (for Mother Of All Bailouts), to describe the Federal government’s continuously-expanding response to the global credit collapse. My family has been getting great chuckles mentioning each time that commentators and legislators start using the term. These have included Michelle Malkin, Congressman Ron Paul, Senator Richard Shelby, and Joel Skousen. So now we are waiting for a pronouncement for Al Gore, that he invented both the term and the acronym. The government’s virtually uncontrolled bailout spree has now expanded to more than 1.5 trillion dollars, and there is no end in sight. At …


Even Chuck Schumer Thinks that We Might Be in Deep Schumer

A front page headline in The New York Times on Friday shouted: Congressional Leaders Stunned by Warnings. The article began: “It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.” Later in the piece, it mentions: “…the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.’” U.S. Senator Charles …


Letter Re: Comments on the 2008 Financial Collapse and the Mother of All Bailouts (MOAB)

Hi Jim, This [current economic news] is nauseating. Now, not only are we in the insurance business, but we the taxpayer are going to be forced to purchase all of the bad and recklessly created debt generated over the last eight years. We know it’s bad, it’s even been called “toxic debt”. We’re not going to be given a choice on whether or not we want to purchase it. It’s being purchased in our name and we have no say about it. I can think of no better definition of socialism. If this is not the end of the world …


Letter Re: Anticipating Another Federal Ban on Semi-Auto Rifles and Full Capacity Magazines

Hello Mr. Rawles, I am assuming that no matter who wins the presidency, we are probably looking at the next assault weapons ban in about a year (if TEOTWAWKI doesn’t happen first). I don’t recall exactly what the effect of the last ban was on pre-ban guns, but I assume the prices of pre-ban AR-15s rose dramatically? If that is the case, would it be wise to purchase several AR-15 lower receivers now, with the possibility of selling them at a profit after the ban is in place (since they will then be pre-ban)? The relatively low price of a …


Letter Re: Silver Canadian Leaf Bullion Coins

Jim, I’m getting ready to add to my collection of gold and silver coins and wanted to bring up a perhaps significant point: American Silver Eagles have a face value of $1, whereas the equivalent Canadian coin (the 1 ounce Maple Leaf) has a face value of $5 Canadian – about $4.65 USD at the current exchange rate. The face value represents a built-in stop-loss should silver prices fall through the floor for any reason. At current prices, the face value of the Canadian caps your potential loss at slightly higher than 50% whereas with the U.S. coin you could …


Dear Mr. Fuld: It’s The End of the World As We Know It

The recent news headlines about the investment banking crisis have answered the question that I often get from readers: “Why do you spend so much time talking about economics?” In my estimation, an economic crisis is the most likely trigger for a societal collapse, in the short term. The Lehman Brothers debacle is just a microcosmic preview of the global credit collapse. It is also a good illustration of the derivatives risk that I’ve been warning about for many years. How many times do I have to say this? The entire credit system is broken and it will be a …


A Quantum Leap Toward Socialism, by Michael Pento

Unfortunately, we Americans now realize that the decision by Ben Bernanke to slash the Fed Funds rate to 2% (a three hundred twenty five basis point reduction) was just the opening act in this Republican administration’s socialism play. At the time some wondered why the government didn’t just allow home prices fall to historical averages rather than seeking to lower the value of the U.S. dollar and send inflation to a 17-year high. Now we have learned just this past weekend that the Department of the Treasury has come up with a plan for conservatorship of the GSEs, enacting the …