Economics and Investing:

Items from KAF:

Gold Increases 2.3% as Greenback Drops

China Pushes Silver and Gold Investment to the Masses

Hong Kong Recalls Gold Reserves, Touts High-Security Vault

Retailers Report Sales Decline for August

More Americans than Anticipated File Jobless Claims

Sugar May Drop 24% as Demand Stalls, Supply Grows

Edinburgh Hedge Fund Feel Madoff Effect as Clients Get Pickier

HSBC Says Switzerland Luring More Rich Foreigners as Taxes Rise

And from HH:

The $531 Trillion Dollar Derivatives Time Bomb

The Nightmare of Contemplating Global Derivatives

Fed Secretive for Good Reason

Investors Rush into Gold Like 1849

Items from The Economatrix:

The Secret That Will Destroy the World’s Financial System

“We Spent $13 Trillion And These Banks Are STILL IN THE CR***ER!”

Racketeering 101: Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Information



Odds ‘n Sods:

America’s Breadbasket Drying Up (What the article doesn’t explain is that half of this drought is political–since California Aqueduct water has been diverted from many farmers. California’s water politics are Machiavellian.)

   o o o

When is a nickel not just five cents? By chance, I got a fine condition 1944-P War Nickel in change at the local US post office today. (These are 35% silver, with a current melt value of about 90.1 cents per coin, their numismatic value is a bit higher.)



Jim’s Quote of the Day:

"…if the debt should once more be swelled to a formidable size… we shall be committed to the English career of debt, corruption and rottenness, closing with revolution." – Thomas Jefferson



Note from JWR:

After the large response to SurvivalBlog’s July survey on non-fiction books, I’m starting a new one: What are Your Favorite Survivalist Fiction Books? Please e-mail us a list of your top 5-to-10 favorites, with the e-mail title “Books Survey Input”. If you’d like. you can also include another list of your favorite Survivalist Fiction Books for children and young adults. I’ll post the results in about three weeks. Thanks!



Letter Re: Thoughts on Shedding Bad Habits, and Developing Good Ones

Hi Mr. Rawles,
I was thinking today about a section I read either on the blog or in the book about getting rid of any habits you may have. I instantly thought, “thank God I quit smoking” and left it at that. Until yesterday. I thought of all the things I do that are my habits that would not be there in a melt down. I found some that I just had not even thought about as being a bad habit that needed to be curbed. I am keeping a written diary of my habits to see where I need to improve or eliminate.

Here is what my list consists of so far:
1. Gum chewing. This is what I replaced my smoking habit with. But in a melt down, where will I get gum to chew? Not to mention it’s not something you want in a compost pile!
2. Soda/Pop. I have quit drinking this and have replaced this with water as I am trying to get back into shape. But soda will be gone in the melt down unless you can make root beer.
3. Snacking. I have been known to eat snacks through out the day, hence why I am getting back into shape. My snacks are healthy as I eat fruit but thinking on this, we will need to control the amount of food we eat daily to preserve the stock. So I am eliminating snacking from my diet. My whole family is doing the same thing. We will have a better control on our food supply this way.
4. My glass of wine. I would drink this or cook with it. But in a melt down, it would not be practical. So we are using what we have and not buying anymore.
5. Mints. Just about everyone I know has some brand of mints in their pockets. This is another thing to eliminate. What are in your pockets?
6. Cooking from boxed “dinners”. We took a look at the box and decided we can make our own boxed goods with dehydrated goods just like the box does. This is cheaper and will last us longer as the packaging isn’t the greatest. We have a huge dehydrator and have made individual meals of spaghetti and meat with sauce. You simply put in one serving of noodles, a dehydrated meat patty, and some spaghetti sauce in the dry package that only needs water. Then you seal it with the kitchen saver and you have a meal on the go with protein that will last a while. (You can do this for most dishes you make).
7. Waste. We decided to look at the fridge and find out what we waste the most of. Waste is costly. We now reuse everything, even if it just to the compost pile. This way we have our habits of our retreat already started and will not be in such a shock when looking at the trash pile.
8. Television time. We have cancelled our cable and have not turned on the television in over 6 months. We don’t miss it and it gives us time to learn new skills and to be active and moving while accomplishing things on our list. I did not realize how much television time we used. I like you watch the colony via my computer. Actually you can watch anything via your computer, you just need a program installed. I wont as I just don’t want to replace this habit.
9. Watching my change. I have started my nickel pile and have gotten everyone I know in the habit of saving the nickels. My saying is it’s for my coin collection. I give no more details to that outside of my family at home. When buying anything with cash, I always ask for nickels instead of any other coin. I also keep pennies in my purse handy to ensure I can get a nickel back.
10. Dog walking. We have started our training of our team walking when we take the dog for his nightly walk. We space each other out and we carry sticks (must have them here with the wild animals attacking our dog). But it gives us the opportunity to fix what we didn’t do right while we have the ability to do it under less stress.

My point is we are starting to think about all of our habits. Taking a really hard look at what you do daily will help you determine what habits are they good or bad and do you want to improve them or get rid of them? Will they hurt you or help you? We are creatures of habit. Will yours benefit your or not?

Thank you for all that you do! May God continue to Bless you and your family. Your family is my prayers. – Jane L.



Letter Re: A Nation of Improvisers–More About Everyday Life in Communist Cuba

First our prayers are with your family in these dire times.

The first thing about surviving in Cuba was that we did not see it as “surviving”, it was more like living, we did not know anything else, as the media in Cuba is tightly controlled.

I remember as a child we did not have glue so we made glue out of Styrofoam and gasoline, just mix them up in a glass container that you could close to preserve and that’s it (if you go a little crazy on the gas it would be too liquid and take forever to dry). Canning was done basically with pressure cookers because there was nothing else, so all the knowledge of our grandparents was very handy and since you can’t buy a new house we all live together, so it was very common to live in the same house with your parents and grandparents and sometimes your uncles and your cousins. You learn not
to throw away anything useful, screws, bolts, nuts, washers, you never know when you will need them and there is no hardware store available. Food scraps went either to the pigs or chickens or if you did not have any, you give to someone that has, that becomes a bartering tool you can say you will take care of the food and get some part in the profits when they are killed.

I know that a lot of people are amazed at how we kept old cars running, but trust me, it wasn’t that big of a deal, a little bit of ingenuity goes a long way. I’ll go later into more detail.

We were born with the system, so there was no getting ready like we are doing now, and believe me, no matter how ready you can get, if the S*** really hits the fan and it’s TEOTWAWKI, you will run out of things, and even if it doesn’t and we are stuck in the middle, then you need people because there is no way you can learn everything.

Your best bartering tool is your knowledge, if you have a trade, mechanic, electrician, construction, carpenter,… that is a life saver, the people that had a harder time were teachers, musicians, economists, etc.

They could not trade their work for nothing. For instance if you are good working with metals you will find someone to get the metals and that person will join with you and you can make parts for cars, if you are a welder you can also join in, remember that old cars were very simple, no hydraulic steering, no power nothing. It was basic carburetor, spark plugs, distribution and engine. An alternator is not that hard to fix, it basically a motor, the parts that wear down can be made again, maybe not the same quality as the originals but they will do. You can also adapt an alternator from another car (we had Russian cars coming in, including some WWII jeep-style Russian vehicles), they are mostly 12 VDC (some trucks are 24 VDC).

A good mechanic will make an adapter so you can use the transmission from a Russian built jeep and make it work with an old American car.

My trade was electronics (we use to call electronics to anything below that 24 volt and electrical anything above) so I will get in when they needed the electrical system of the car fixed, again it is very simple; remember no computers or anything like that in those cars. Here is a link of how a car alternator and a bicycle dynamo were used in the mountains to produce electricity, no means to store it so it was to use immediately, but when there is no power even a radio is an amazing thing. (See this YouTube segment: La Cuchufleta – Alternative Power Generating in Cuba.)

I also fixed radios and television, I used to buy old radios and television and use the parts to fix the other ones.

Later on when computer UPS [devices] became available, by available a mean people started to steal them from the government and sell them in the black market, then we can hook up a battery and get electricity when the power went off, which was very common. No deep cycle batteries, just whatever battery you could get.

Other people were real artisans; they would make shoes with leather and old tires, and let me tell you, they were super nice and expensive.

The hardest thing of all was to get food, because you need food to survive, you can live barefoot but not on an empty stomach, at least not for a long time.

When you were able to buy rice (the amount they give in rations, every family had a ration book, was minimal, so again black market) you would buy a good amount as much as you could afford because maybe next month the guy was in jail or it was impossible to get.

The rice you got was not stored properly so you always had to first put it on a table and go slowly through all the rice to search for small stones and foreign objects, then you put the rice in water and keep moving the rice with your hand and look for bugs, worms, they float and would come to the surface. I still remember as a child that grandma would call the children to “escoger el arroz” (that is what the cleaning process was called).

Milk was always boiled first, that way you could use the top which has more fat to make butter (you saved it till you had enough). If for some reason milk was spoiled and not drinkable you would make a dessert with it, I have to get you the recipe if you are interested.

After you ate the inside of oranges and grapefruits, you would use the rind and cook it in water with sugar and it was an excellent dessert.

To have some variety, you will get spaghetti, crush them and leave them in water, next day it was kind of a soft mix in the bottom, get rid of the excess water, add sugar and an egg and you could make pancakes.

Alcohol is consumed in Cuba in enormous quantities, I have no statistics, but it was relatively easy to make with a small homemade distillery (again quality is not a great concern), and I guess it’s a good way to forget the problems, although it brings another problems.

People would fight for the simplest of reasons, and there is no 911, and you better not be the weakest link because your family is in for a rough time because no one will respect you. Criminals would typically give you respect if they know you and you respect them and they knew it was not going to be easy to take on you or your family. If not you would be the target of thieves all the time.

Those are my experiences living in a country in permanent crisis, you would have times when power was on for whole days, and times when power was on for only 8 hours a day, times when it was relatively easy to get meat, or bread and times when it was almost impossible. There is no planning, everyday will bring a new challenge and you have to adapt, and only your knowledge, wits and Faith are going to help you through.

Unless we go down into total collapse – War, in which case all bets are off and nothing will ever prepare us for that because it would be the law of the jungle, whoever is stronger will survive and then you better have a strong group of family/friends or you will have to join a group, because alone you are pretty much gone.

Read the accounts of Somalia and Serbia so you have an idea. I know more of Somalia because my father served for two years (in the 1970s) in the wars between Ethiopia and Somalia, Cuba sent troops there to fight on the Ethiopian side.

I’d also like to respond to a misinformed comment in the article “Developing Our Family’s Survival Strategy, by FBP”. Cubans cannot grow 70% of their own food as a country, let alone in the cities. Cubans eat a lot of rice, beans and potatoes, there is no place in a city to grow enough of that to supply a family, much less a whole city.

The population density in Havana City, Cuba is 7,908.5/sq mi,

By comparison:
Detroit, Michigan – 6378.1/sq mi
Los Angeles, California – 7876.8/sq mi

So can those cities provide more than 70% of their own food? – ILR



Economics and Investing:

SEC’s Schapiro Calls Derivatives Data ‘Critical’ for Probe

Jeff C. spotted this: IndyMac’s mortgage struggle. How does modifying a “liar loan” somehow magically make a semi-employed borrower credit worthy?

From John in Ohio: Is America still depression-proof?

Reader MSB mentioned: The Shell Game – How the Federal Reserve is Monetizing Debt

Oldest Swiss Bank Tells Clients to Sell U.S. Assets or Leave (Thanks to DD for the link.)

Exit strategy? Fed’s Plosser: U.S. rate increases could be rapid. (A tip of the hat to Brenda C. for the link.) JWR’s comment: This is starting to remind me of the policies that created stagflation in the 1970s.

Karen H. sent us these three items:

Bond Market Eyeing 10% Jobless Rate Rejects Recovery

Oil drops nearly 4 percent on China Economy fears

Shanghai Index May Drop 25% on Economy, Xie says



Odds ‘n Sods:

Michael Z. Williamson, SurvivalBlog’s Editor at Large, sent this interesting article from The Atlantic: In Case of Emergency. The new FEMA Director wants American citizens to take charge when disaster strikes. Here is a key quote: “‘We need to change behavior in this country,’ he told about 400 emergency-management instructors at a conference in June, lambasting the ‘government-centric’ approach to disasters.”

   o o o

There is a great thread of discussion is in progress, over at TMM Forums: Use of antique or classic tractors for gulching

   o o o

A remake of Red Dawn? Reader B.H. sent us this: Cult classic remake set in Spokane, but not shot here.

   o o o

For anyone that doubts my assessment of Alaska as a retreat locale, please read this blog piece, suggested by Nancy Z.: Shopping day in Nunam Iqua. Also see this follow-up post: Life without running water in Nunam Iqua. The cost of living is quite high in Alaska, as necessities are often shipped in via air. If that flow of goods is ever interrupted, even if you are well-prepared, you’ll have a lot very hungry, desperate neighbors.



Jim’s Quote of the Day:

“If you’re not shootin’, you should be loadin’. If you’re not loadin’, you should be movin’, if you’re not movin’, someone’s gonna cut your head off and put it on a stick.” – Clint Smith, Director of Thunder Ranch



Notes from JWR:

There is some very significant news in today’s Economics and Investing section, so don’t overlook it.

Today we present guest article, some sage advice from veteran global affairs analyst by Don McAlvany, the editor of the highly-recommended McAlvany Intelligence Advisor. You’ll see that it synchs nicely with my own preparedness Precepts.



Guest Article: Disaster Preparedness–Principles of Self-Sufficiency, by Don McAlvany

1. Change the way you look at everything. Rethink your entire lifestyle.
2. Develop discernment about people.
3. When you invest, invest first in the right people.
4. Honesty, look at yourself, your strengths and your weaknesses.
5. Seek the counsel of others you trust.
6. Find like-minded people who can be part of a mutual support group and who you can cooperate with.
7. Find alternate methods for doing everything.
8. Develop an instinct for what doesn’t feel right. No matter how good something looks or sounds on the surface, go with your gut feeling, with your instinct, with your intuition.
9. Eliminate non-essentials from your life. Eliminate all time wasters and money wasters, and things you don’t need – i.e. clothes, furniture, junk, etc. Eliminate television from your life.
10. Simplify your lifestyle – learn to say ‘no’ to things or activities which do not make you self-sufficient. Learn to place
God and yourself, and not other people.
11. Develop physical, mental and spiritual disciplines.
12. Learn to treat everything as if it were irreplaceable.
13. Buy things that will last, even if they cost more.
14. Acquire tools that do not depend upon electric power.
15. Learn to spend time alone with yourself in total silence – think, reflect, reminisce, and plan [or strategize] in silence.
16. Learn to spend time alone with yourself and your family, apart from superficial entertainment and distractions.
17. Learn something from every situation you are in everything you hear, see, touch, or feel has a lesson in it. Learn a principle from every mistake you make, from everyday life situations.
18. Make sure your trust is in the Lord and not your own preparedness. Pattern your preparedness according to the guidance of the Lord. Listen to what the Lord puts in your heart – don’t use only your
reasoning power.
19. Learn to enjoy simple pleasures from the smallest things – have measure of joy and happiness that doesn’t come from creature comforts or entertainment.
20. Store up memories for times of isolation or separation from your loved ones.
21. Establish priorities for all of life [i.e. relationship, needs, present needs, future needs.] Set goals for areas you’ll be proficient or self-sufficient in. Set a schedule or time line based on money and time you can invest in self-sufficiency.
22. Examine the concept of civil disobedience [from the Bible and history.] At what point should the people of Egypt have said ‘no’ to killing the male babies in Moses’ day? At what point should the
people of colonial America have said ‘no’ to King George? At what point should the people of Germany have said ‘no’ to Hitler? At what point do we say ‘no’ to despots in our day – when they take
over money, our property, our guns, our children, our freedom? Decide what is your choke point – when do you move to civil disobedience? [For many throughout history – it was when evil
leaders handed down edicts that were directly contrary o God’s Word or commands.] Don’t set your choke point too early or too quickly, nor too late, nor never. Think through or calculate a
strategy – then never look back.
23. Learn to ask the right questions in every situation. [In ‘Operation Waco,’ nobody asked the right questions.]
24. Bring orderliness into your life. If you live in disorder it will pull you down, it will break your focus. Think focus versus distraction. Eliminate the distractions from your life.
25. Self-sufficiency [or survival] principles are learned on a day-to-day basis and must be practical.
26. Always have more than one way to escape, more than one way to do something. Have a plan B and a plan C.
27. Everyday life [and especially crisis] requires ‘up-front systems’ and ‘back-up systems’ if the first line of defense or ‘up-front systems fails.
28. Real education [or learning] only takes place when change occurs in our attitudes, actions, and way of life.
29. Wisdom is making practical applications of what you know. It is not enough to know everything you need to know. It will only serve you and others if practical application is made of that knowledge.
30. Fix in your own mind the truth about your capabilities. In a crisis situation this principle will keep you from cockiness [or overconfidence] and will provide you with confidence.
31. Decide ahead of time before a crisis arrives, how you will react in a given situation so that you are not swayed by the circumstances, the situation, or your emotions.
32. Beware of being spread too thin in your life. Decide on the few things in life that you must do and do them well. Think focus versus distraction. Make sure that unimportant, non-essential distractions don’t keep you from achieving your important objectives.
33. Learn to quit wasting things. Be a good steward of all that God provides.
34. Buy an extra one of everything you use regularly and set the extra one aside for the time when such items may be difficult or impossible to obtain.
35. In every situation, train yourself to look for what doesn’t fit, for what’s out of place, for what doesn’t look right.
36. Teach your children [and yourself] that they are not obligated to give information to a stranger. You don’t have to answer questions [not even to a government official] that are none of their business.
37. Sell or give away things you do not use or need. Consider giving away or selling 50% of your ‘stuff,’ [i.e. the non-essentials.] Simplify and streamline your life, lifestyle and possessions.
38. Find someone who lived through the Great Depression and learn from them how they were self-sufficient, how they made do with little, and how they found joy and contentment in the midst of hard times. An excellent book on this subject is We Had Everything But Money: Priceless Memories of the Great Depression.

– Don McAlvany, Editor, The McAlvany Intelligence Advisor



Letter Re: A Practical Use for Post-1982 US Zinc Pennies

Sir:
I just discovered your site this afternoon and look forward to perusing it in depth. I noted your response to the question about hoarding dimes and your reference to the metal content dollar value. Let me pass on a tip: hoard up a several pounds of pennies. Here’s why.

As you know, pennies are roughly 97% zinc and 3% copper. To that mixture, one may add a few aluminum cans and minor amount of copper wire to bring the mix to 93% zinc, 3% copper, and 4% aluminum. This alloy melts at relatively low temperatures and is called “Zamak”. Zamak is a light, strong, easily castable alloy that because of its “campfire” range melting temperature is just the ticket for replacing small metal parts in a pinch.

I keep a bucket of pennies next to the lathe just for this purpose. Although from a “coin melt” perspective this [stockpiling of recently-minted pennies] may look like a loser, it’s a huge bargain when you consider the cost of having the [UPS] boys-in-brown deliver you copper, zinc, and aluminum ingots. – J.W.G.

JWR Replies: I had never fully considered the casting possibilities of zinc pennies with a home sand-casting foundry. I’m a tinkerer art heart, so henceforth, I’m going to save all of the pennies that I get in pocket change. I’ll simply leave them all unsorted for now. I suppose that I’ll eventually have my kids build us an inexpensive low-volume penny sorting machine, to divide the sheep from the goats. That is, sorting the early 95% copper pennies from the newer (and now more-common) copper-flashed 97.5% zinc pennies.) Thanks for that suggestion, and welcome aboard!



Letter Re: Advice on Camouflage Covers for LP/OPs

JWR,
The arrival of my Cabela’s catalog today reminded me of how useful a layout blind might be for observation post (OP) duty. Your advice? Regards, ,- K. in Texas

JWR Replies: Semi-permanent OPs should be custom-built, to as closely match the local vegetation, as possible. Any store-bought camouflage is a compromise, at best. Ideally, you should grow local vegetation over the top of an excavated position, for the ultimate in undetectable camouflage. Nothing mimics nature like nature itself. (Anything else that you use won’t look quite right, and of course it won’t gradually change colors to match, seasonally.) See “Patriots: A Novel of Survival in the Coming Collapse”, for details on LP/OP construction.

For truly temporary OPs 48 hours or less), I prefer using an oversized poncho of very rough-textured ghillie-type camo materials. Again, try to get materials that match the local vegetation colors as closely as possible.



Influenza Pandemic Update:

UN warns over swine flu in birds; The discovery of swine flu in turkeys in Chile raises concerns about the spread of the virus, a UN agency warns. How many recombinations will we see?

New York Mayor To Announce Plans To Combat H1N1 In Schools

Colombian President Uribe Ill With H1N1 Flu

Hands-Off Plan: Schools Ban Touching to Fight H1N1

Advice on when flu needs TLC or a doctor’s care

She’s walking the tightrope on flu; Minnesota’s top flu fighter balances the worst-case scenario with plans and hopes for avoiding it.



Economics and Investing:

This may be one of the most important pieces of economic news in many months, yet is did not receive much mainstream news coverage when the wire story was circulated yesterday: Beijing’s derivative default stance rattles market. This implications of state-owned Chinese industries being given carte blanche to nullify derivatives contracts are enormous. You’ll probably recall that I have been warning about derivatives counterparty risk for almost three years. And it was there that I specifically warned about the risk of “disappearing counterparties”. This new turn of events will likely shake the very foundations of the global derivatives markets. If the derivative contract holders fail to call the bluff of the Chinese (or if their respective national governments don’t back then up), then the entire derivatives market may disintegrate into chaos-or perhaps fracture into regional subsets. But if they do call their bluff, and the Chinese then decide to play hard ball (read: non-participation in US Treasury Note auctions, for starters), then it is impossible to predict how this might spin out of control. Entire currencies and even governments may topple. Expect to see some votes of no confidence in some of the parliamentarian states, and perhaps even rumors of war. Do you remember my analogy of “kingdom towing” that I posited back in 2007? Such events are starting to look even more likely.

And, speaking of derivatives… Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

I found this linked over at TotalInvestor.com (one of my favorite news aggregation sites): Lefrak: Commercial Real Estate Will Kill 500 Small Banks

This Reuters article was linked over at Total Investor: Cerberus clients overwhelmingly want out: report. The troubled times for hedge funds that I predicted back in Aught Seven are far from over. As long as the global credit markets remain in turmoil, anyone that borrows short and lends long will will continue to be in deep trouble.

Bradley recommended a “must see” videotaped interview posted over at the Lew Rockwell site: Faber: Central Banks Blowing New Bubble. JWR’s comment: Faber’s predictions are quite possibly right, although he is a bit fuzzy on timeframes. He said: “One stimulus package will lead to the next one, and more money printing, and so in five to ten years time the real crisis will break out, when the whole system collapses — that will be the end.” Faber reiterated his earlier advice to the same Aussie journalist, that goes beyond economics and gets down to quasi-Rawlesian survivalism: “Buy a farm and a gun…”

Odds ‘n Sods:

Several readers sent this: The Farmer’s Almanac’s Frigid 2010 Forecast. Have you cut and stacked plenty of firewood?

   o o o

LJ in England sent this: Blackout Britain warning as Government predicts severe power shortages within a year

   o o o

Steve S. recommended these two Lifehacker articles: Boost Your Map Skills for when GPS Fails You and, Get to Know Your Edible Berries with a Simple Mnemonic

   o o o

Tom B. mentioned this: ‘Preppers’ get ready for the worst; Movement to stockpile for emergency at all-time high