Category: Economics & Investing

Guest Editorial: The Great Bust of ’08, by Mike Whitney

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor…..as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.” The implication is clear. The FDIC has begun the “death watch” on the many banks which are currently …


Finding Your Dream Retreat: It is Time to Watch the Foreclosure Listings

I often get e-mails from readers, complaining that the retreat properties that they see listed are too expensive. Typically is something like: “I found a couple of good places, but they are beyond my reach.” Here is one possible solution: Buy on the other guy’s weakness. There are lots of foreclosures now on the market, and the foreclosure rate is expected to increase as the real estate bubble continues to deflate, and as the US economy slides into recession. (In my estimation, here is the equation for the next four years: Recession equals lay-offs, and layoffs equals missed house payments, …


Letter Re: Comment on the Planned U.S. “Economic Stimulus” Tax Rebate

Jim, Not directly related to survival but more aligned with money management, please note that the Bush administration’s tax rebate is in fact an advance on 2008’s tax refund, and most or all of it will be deducted from taxpayers’ refund within a year. So if one spends it, plan to be short that amount next year. Be sure to thank most of your current crop of presidential candidates for supporting this fraud. – Bruce F.


Peering Over the Precipice: The Future of America’s Credit-Driven Bubble Economy

Here in the States, the newspaper headlines are full of bad economic news: “Credit Collapse”, “Housing Market Tailspin”, “Credit Rating Agency Scandal”, and “Three Trillion Dollar Federal Budget”. Most recently, the Federal Reserve (our central bank, operated by a private banking cartel) made a panic move, cutting interest rates in two jumps in just eight days, a whopping 125 basis points (1.25%). A drop that great, and that fast, was unprecedented. This maneuvering did little to calm the markets. If anything, the Fed’s actions confirmed the suspicion that the credit market is essentially broken and our economy is headed for …


Letter Re: Consumer Price Inflation is Upon Us

Dear JWR, I thought you’d like to pass this on if people want to save some of their hard earnings. Now is the last call to purchase before the commodity price increases. Shipping cost increases are to hit us again on February 19th. Here in North Carolina, we’re seeing an average of 20% increases in prices of staple shelf items like flour, corn milled products, honey, milk, eggs and canned goods within the last two weeks in the grocery stores. One bell pepper now costs a dollar. Other produce is following the same increases. Products made of plastics, paper and …


Letter Re: A Federal Reserve Balance Sheet Disaster

Dear Jim, I just read on a[nother] blog about an imminent Federal Reserve disaster. There’s no [mainstream] news coverage on it yet so this qualifies as a serious heads up. Note the second numeric column. $40 Billion, has been since 1913, by law. Then notice it suddenly drops to $198 million and then two days ago the report lists the banks as minus $8.7 Billion, something which has never happened before. How bad is it? Think Weimar Republic. The Fed can no longer stop inflation because the banks can’t secure new money with debt. People aren’t buying debt anymore. Ergo, …


Letter Re: Countrywide Turns Off the Home Equity Lines of Credit Tap

James, I just received an email from my Countrywide Account Executive that they are suspending further draws against Home Equity lines [of credit]. They have reportedly started mailing suspension letters last week to 122,000 borrowers. Who knows how many more could get those based on the markets and Countrywide’s present situation. If you know someone who has [a home equity line of credit] and is going to need the funds, they might want to draw out the money right away and put it somewhere safe. A lot of people use home equity lines as emergency funds. – MB in Boise …


Letter Re: “Forever” US Postage Stamps as an Inflation Hedge

Sir: Something occurred to me while addressing an envelope today that I thought might be of value to your readers. One small way to beat inflation is to purchase US First Class Liberty Bell “Forever” stamps that guarantees a mailed envelope in the USA forever. They may or may not be available at your post office so ask for them. I bought about $200 worth of stamps before the prices went up and plan to hold on to them for a while. I don’t know if these are still being sold but I think we may have yearly or bi-yearly …


Notes from JWR:

When I last checked, the spot price of silver was $16.75 per ounce, and gold was at $929.30. That’s an all-time high. There will be plenty of volatility and some very scary pull-backs, but the trend for the precious metals is still definitely upward. Meanwhile, the USD Index was at 75.56 and falling. The key number to watch for there is 72. Below that, watch out! BTW, I’m not like those television cheerleader/analysts that have suddenly jumped on the precious metals bandwagon. After a dismal two decade bear cycle, I fairly accurately called the bottom of the silver market seven …


Letter Re: Property Taxes and Hyperinflation

Dear Mr. Rawles, It’s been on my mind off-and-on since I read your novel “Patriots”, when the Grays sent in a property tax payment to avoid losing their retreat to tax delinquency. It’s always annoyed me that a landowner has to pay the government to keep land he has bought and paid for. That said, what would keep a local government, starved for cash in just such a situation as “The Crunch”, to raise the taxes on local properties until no-one could pay them? If a landowner pre-paid his taxes for, say, two years in advance, what would stop the …


Letter Re: I Told You So

Jim: My pessimistic mentor in preparedness frequently says: “I hate being so d*mn right all the time!” I can’t help but wonder if you share the sentiment. I’m beginning to do so! The more I read the current news about market volatility, Peak Oil, and CCD the more I am reminded of the pieces I wrote and you published on SurvivalBlog months ago! The full texts are still available in your archives and the advice is still valid! For new readers and to refresh the memory of others here are a few quotes pulled out of the late in 2006 …


Letter Re: Does Future Inflation Justify a Higher Level of Indebtedness?

Sir, In reading the recent economic commentary on your blog site I have to wonder – if one is convinced that we’re to see a significant increase in inflation, then why get out of debt? Take a mortgage for instance: with decent credit it is now possible to refinance (or purchase) and get a fixed rate mortgage under 5% and rates will likely go lower before we’re done. With tax breaks and even normal inflation this is essentially free money. In an inflationary environment (which I don’t argue we’re in) it would make sense to keep this debt and instead …


More Angst on Wall Street

The recent overseas stock sell-off inspired the White House and congress to start talking about manna from heaven, in the form of tax rebate checks. The same day, the Federal Reserve announced what can only be seen as a desperation measure–a one-day .75% interest rate cut on two key rates–has done little to reassure the traders on Wall Street. The market is starting to make some wild daily swings, mostly downward. This piece from The New York Times sums up the big picture nicely: Worries That the Good Times Were Mostly a Mirage. Meanwhile, we read: Plenty to chew on …


Letter Re: Stock Market Turmoil – Time To Make an Exit

Jim – I’ve been reading SurvivalBlog for a little over a year now and I enjoy the commentary immensely. As a long-time investor and at the risk of a “pile-on” situation, I’ve got to echo the sentiments of yourself and your pundits recommending exiting the markets now and the foreseeable future. I have sold my entire portfolio in the last week or so into a down market, which I normally would never do, due to a number of significant factors – first and foremost being the fragility of the derivatives market, second being the cryptic, embedded and out-of-control debt market …


Protecting Yourself From Coming Stock Market Declines

Last week, after Citigroup reported a net loss of nearly $10 billion for the quarter, the New York Stock Exchange had its biggest percentage drop for a January in 17 years. Between Monday and Friday, the DJIA dropped more than 670 points. The S&P and NASDAQ posted similar losses. This doesn’t look good. There is an old saying on Wall Street: “As goes January, so goes the rest of the year.” (And this has been borne out statistically.) My friend The Chartist Gnome is recommending that his clients get out of nearly all of their stocks–with just a few exceptions …