Economics and Investing:

KAF found this one: Standard & Poor’s cuts ratings on 18 banks

Also from KAF comes this item from Foreign Policy: What Does the End of the Recession Look Like?

Another week, another three banks bite the dust: North Carolina, Georgia, Kansas Bank Seizures Cost $363 Million. (Thanks to Karen H. for the link.)

Dr. Gary North on Inflation Versus Deflation. (Thanks to OSOM for the link.)

Another from Karen H.: Port of Los Angeles Inbound Shipping Container Traffic Down 18%

Krys in Idaho sent this: Is this the death of the dollar?

Odds ‘n Sods:

Reader Jonathan B. and SurvivalBlog’s Editor at Large Mike Williamson both sent this video clip that displays utter stupidity. (I cannot believe that so many people on the firing line acquiesced to being part of this!)

   o o o

Ferdinand recommended a great piece of common sense journalism by Patrice Lewis, over at WND: Calling All Kooks.

   o o o

“Dim Tim” mentioned these YouTube videos: Solar Car and Tractor, and John Howe’s Solar Chainsaw.

   o o o

KAF flagged this: Absolutely prefabulous: Eco-living has never looked this good thanks to a new wave of prefabricated palaces

Jim’s Quote of the Day:

“He doubted whether they could survive the winter, even though they piled broken furniture into the fireplace. Some accident would quite likely overtake them, or pneumonia might strike them down. They were like the highly bred spaniels and pekinese who at the end of their leashes had once walked along the city streets. Milt and Ann, too, were city-dwellers, and when the city died, they would hardly survive without it. They would pay the penalty which in the history of the world, he knew, had always been inflicted upon organisms which specialized too highly.” – George Stewart Earth Abides , (1948), a classic pandemic novel

Note from JWR:

Please let your friends and relatives know that SurvivalBlog is available as an RSS feed. (Just click on the "RSS" button in the top bar.) Also, be sure to mention that the entirety of the SurvivalBlog Archives (almost 7,000 articles and letters, thusfar) are available free of charge.

Seven Letters Re: Advice on Deep Water Wells in a Grid-Down Era

Hi James,
There is a mission-oriented web site with a tutorial on making valve leathers at this site. There is other useful water well-related information on the site, too.

Where John C. is living, if the static level is 400 ft., then he will be looking at needing a fairly deep well. If he gets by with less than drilling a 500 foot well I’d be surprised. Water wells here locally have a 350-400 foot static level and run 700-800 feet deep. The depth, quantity, and quality of water you find all depends on the area you live in, the underlying geology, and hydrologic conditions within the aquifer.
I agree that the submersible pump is the best choice for a deep well. In a grid down situation, a wind mill is probably your best bet. It is possible to install both systems in one well. Basically, you set the submersible some distance below the wind mill’s pump cylinder. One thing you’d need to do is adjust the submersible pump so that the water level in the well is not drawn down past the top of the pump cylinder. One very important aspect to keep in mind when using a deep well with a sucker-rod type pump: use a open top pump cylinder (working barrel) where you can pull the rods, replace valve leathers and/or work on the pump valves, without pulling all of the tubing from the well.

As you mentioned, pulling up 400+ feet of 2-inch pipe from a well by hand is a challenge. It can, however, be done. Keep in mind that a 400+ ft. deep water well is actually much deeper than many early-day oil wells. Searching through old oil field related documents, photos, and museum displays can provide a wealth of very basic, mostly home built, technology that a water well owner can utilize.
Need a derrick to pull rods or pipe from your deep well? Check out what the Canadians used.

Tripod derricks were used in Canada and the U.S. in early oil fields. They were made from peeled trees, power poles, or pipe. Simple winches were used to hoist the rods and pipe from the hole.

Need a pumping jack to lift the rods in your deep well? You can’t get much simpler than these or these.

Once the jack is balanced, it doesn’t take a whole lot of power to lift the rods and pump the well. – Jeff B.

Hi Jim;
My wife and I are the founders of Woodhenge, an intentional community in the northern, rural part of New York State. We practice and teach self-reliance skills. One of the products that I’ve designed is a deep well hand pump that can be built from mostly off-the-shelf parts found in a hardware store. I sell the complete instructions for $20 and a pre-machined parts kit for $250. The kit contains all of the parts necessary for the 2″ PVC cylinder and the modified pitcher pump. One of the things that makes this pump unique is that it doesn’t use a rod to connect the piston in the lower part of the well to the handle but
a stainless steel cable and return spring. I do not include the cable or draw pipe…I don’t know the depth of the well. I do not know if my pump design could handle the static depth of 400′, but it easily handles depths of 150′. I recommend that the draw pipe diameter be reduced to keep the weight in the column of water to a manageable amount. I recommend that shallower deep wells (over 30′ to the static level of the water) use 1-1/4″ draw pipes, over 100′ dropping to 1″ diameter, etc. I will offer a big discount to the guy with the 400′ well if he wants to experiment with my kit. The frictional losses of water in a smaller diameter pipe are the only factor I don’t know how to calculate. My pump easily delivers about a cup of water per stroke. Further information on my pump as well as other things
we’re trying to do are available on our Woodhenge web site.

I am “the King of Scrounge” mentioned in your blog a few months ago. My book “The High Art and Subtle Science of Scrounging” is now available through me. Inquiries and information are available by contacting me at jsjuczak@gisco.net. Thank you for what you do. – James S. Juczak

 

James,
I’ve a reasonable amount of experience in electrical engineering and pumps in general so perhaps could give John C. some additional advice on deep wells.

First just a general note:
The work an electrical pump or any other electrical device needs to do requires a certain amount of electrical power which is Voltage X Current measured in Watts. As James correctly points out, a 24 volt pump requires considerably larger wires than does a 240 volt pump (to deliver the same amount of work) since wire size is determined by current (amperage). In this case figure a 24 volt system would need roughly 10x the circumference of the wire that a 240 volt system would need. Note: It’s the circumference of the wire that’s at issue not the area since current flows mostly along the outside of the wire. A simple way to think of electricity is to compare it to a river. The speed of the river flow is the voltage. The size of the river bed is the amperage. Both together determine the power.

Now, regarding deep wells:
Most deep wells in the west have low infiltration rates so my advice is to use a fairly small size 110 or 220 volt AC submersible pump of good quality (Grundfos make the best). The water pumped out of the well goes directly into a cistern which can be most any tank of a few hundred gallons. Mine was a 1,000 gallon fiberglass tank in the basement, which I installed before the floor was put in. Anyplace is fine as long as freezing temps are taken into account.

A simple automatic fill system is installed in the tank to turn on the submersible when you use some part of the tank up. This system allows the well to refill and also allows the pump to work better and last longer by avoiding frequent starts.You also have a ready source of stored water, if needed. You have to know your well infill rate and the depth of water over the pump inlet to determine how much to pump at any given time. Never allow a submersible pump to run dry and always install protection in the pump start control.

Since the cistern tank is unpressurized [, unless you can position it up on a hillside] you’ll have to provide a centrifugal pump to charge the household lines. You can then either pump out of the cistern tank into a small pressure tank or use a demand system that turns on a small centrifugal pump every time you open a faucet. Either way works fine and all of it is cheap to buy and easy to get at to maintain.

If there are any bacterial contamination issues a small ozone generator can be installed in the cistern. They killed 100% of bacteria and spores such as Giardia when I used one to clean a Colorado stream water source. They add nothing to the water itself since the ozone turns back to oxygen within seconds of it’s being generated. An ozone system does need constant power, but it’s a very small amount. Essentially it’s just a small UV light in a box with a tube into the water. A venturi off of a tiny pump like those used in ornamental fountains pulls the ozone into the tank.

In this system the submersible pumps into the cistern tank at “zero head” and you can get away with a smaller pump motor than you would normally use for a pressurized system. That’s not only a cheaper pump, but it’s easier to pull if needed. Also, since a well pump is frequently the largest power requirement in a household if you go off grid a smaller pump means a smaller generator- or something like this http://www.solarpumps.com.au/category7_1.htm.
Don’t forget that a pump requires a larger starting amperage than its nominal rating. Again check with the supplier. It’s important to have the pump operating in it’s ideal range which is based on total lift (head ) and water (GPM) required, so check that yourself too. The charts are easy to read.

In John C’s case, the water is at 400′, so he’ll need a well that’s around 500′. Put the pump at the bottom and that’s a safe 50 gallons of water available to be pumped.
Based on a 5 minute Internet search, a Grundfos 10SQ 1/2 HP pump costing $600 retail would give around 6 GPM pumping into the cistern. A 1,200 watt generator could drive it. Add a 400 gallon tank, 1/4 HP centrifugal pump for pressure, controls and it’s a done deal. The well itself is going to cost around 10 grand, and hopefully you’ll find water down the bottom of it.
Kind Regards, – LRM, Perth, Western Australia

 

JWR,
I have some experience in this area in that our well has been solar powered for 5 years at our off the grid ranch.

We elected to put our well on top of a hill about 120 feet in elevation above the house. I did this because I did not want to pump my water twice and deal with a pressure tank in a separate building that I would have to heat and use additional solar power to keep up the pressure. Our four water tanks, 2,600 gallons each, are on a step, just below the well. A Pitless Adaptor allows water to be pumped into the water tanks at a depth of four feet underground for freeze protection. All pipe on the ranch is 3 feet underground, with freeze proof hydrants at key locations. There is enough thermal mass in the tanks that they do not freeze. There is 50 pounds of pressure at the house from gravity. Remember, it is always cheaper and easier to store water rather than electricity. Big water tanks are a good thing.

Our well is 300 feet deep and the pump is set at 240 feet. Static water level is 185 feet.

Having said that, a 400 feet deep well on solar power is no problem. There are two types of solar pumps I would recommend, www.lorentz.de/ and www.grundfos.com . I have a Lorentz pump. The Grundfos is also a very good pump. The Grundfos has the advantage in that besides solar power, you can hook up a wind turbine and have both wind and solar power going to the same pump. There are plenty of solar dealers selling these pumps. I have been served exceptionally wall by Dennis Austin at Solar Power and Pump Company. He always has time to help you out via phone with any questions. He does not publish his prices because they beat everyone else.

The controller on the Lorentz pump converts the DC power from the solar panels to AC power to go down the well to the pump. I am not sure how the Gurndfos system operates. Both these pumps are used extensively by aid organizations around the world to provide clean drinking water for less fortunate people in third world countries. They are pretty fool proof.

One additional consideration is that putting your solar panels on a dual axis solar tracker, will increase water output as much as 40% in the summer when you need water the most. We have a Wattsun dual axis tracker from www.wattsun.com . Their company has been around a long time and since they are active trackers with gears, they are not affected by wind like the Freon-balanced trackers.

Thanks Jim for all your hard work in helping us all out. – PD

Sir:
My water has been off the grid for 12 years and while my well depth is shallower I offer my experience. The system described provides 5 GPM at 50 PSI for household laundry, bathing, and kitchen needs but I would not recommended for lawn or garden use.

I have 360 watts of solar panel and 340 amp hour of batteries [storage capacity]. The head of my well is 160 feet and I use a Sunpump SDS series well pump that draws 2 gallons per minute (at 0 pressure) to fill an 1,100 gallon cistern. The current draw is 2 amps at 24 volts. The current price for the pump is approximately $900.

The matching pump controller/current booster is a must. Note that the Sunpump SCS series is rated for 700 feet. The good news is the water pipe is ½” plastic roll pipe, bad news is the pump will need major service after about eight years.

The house is pressurized by a Dankoff Flowlight booster pump that draws from the cistern. Standard well system pressure tanks and switches complete a very reliable system. You can find the recommended 10 micron intake filters here.

The Cistern is a tank made of potable water grade plastic (made from the same mold used for septic tanks). This gives me 1,100 gallons of water that is not hot in the summer, freezing in the winter, safe from bullets, and was a fraction of the cost of an elevated water tank.

Extra battery power feeds a Magnum Energy inverter that saves some on the electric bill. – Jon in Texas

Hey Jim,
I would like to throw in my thoughts on pumping water in a power grid down situation.the wide variety of situations with water sources makes for a wide variety of solutions. I am a retired water well contractor, over twenty years residential, farm and public supply, doing both the well drilling and pumping equipment installations.

First off, if no one reads further, the best [short-term] solution is a generator powering your present system, it’s how it’s done, by the homeowner, farmer, by contractors, and small utilities. Larger utilities use a direct drive to the gear head on a line shaft turbine, but you won’t see that on smaller systems.

To get to the situation discussed in the article, a 400′ water table is considerably deep, so many times, folks think that the depth of the well is related to the depth of the water table, that’s just not so, I have drilled wells 300′ with static water levels 20 or more feet above the well head, hence, a naturally flowing well, and by contrast, 300′ wells with 150′ water tables, but generally, most levels in the 60′ range in deep wells in my neck of the woods. However, water wells are as varied as the land and aquifer you are looking to get the water out of.

So to go after the logistics of getting water out of the ground and then out of your faucet, you’ll have to start with the source, deep well, most common for private water systems, and the subject here, but don’t write off shallow wells, cisterns, lakes and rivers or rain catchment, it’s just that water out of a deep well will be free of organic compounds and safe to drink, but you should have it tested, another subject all together.

Well depth is part of it, but most important for using that well is the water table and capacity in gallons per minute. The diameter of the well will affect production to a certain extent, but mostly the diameter will determine what pumping equipment you can use, deep wells for private use will tend to be 4′ or 6′ steel or plastic casing, with open hole in the rock below that picking up water by capillary action and fissures, or even a screen for loose formations that produce water. A typical well install for me would be around a hundred foot of 4′ well casing, down to the bedrock, then open hole down into the floridan aquifer, ending up around 200′, to produce 20 gallons a minute or better with a water table about 50′ and a submersible pump set at least 10 feet below the water table, and another variable, if you pump more water than your well delivers, called “drawdown”, you’ll be setting your pump below that drawdown level of the water table.

Submersible pumps are a great way to get water out of your well, they “push” the water to the surface, and produce good “head” with their many impellers, “head” translating to how far up the pump is pushing the water from the water table, to theoretically how far above the point of use is, that’s your water “pressure”a pump that makes 300′ of head will pump from a 100 foot water table and be able to pump 200′ more feet above ground level, that would be more than enough to provide you with 50 or 60 pounds of pressure in your tank and at your faucet. Very efficient, generally run on AC current, and either filled with FDA-approved oil or sealed with epoxy and such to keep the electricity isolated from the water. I have heard of DC submersible motors, but never saw one, let alone installed one, something to research, I guess, may be as much to do with having an AC power grid as the the drawbacks inherit in DC motors in general. Last word on that is submersible pumps can pump from very deep water levels and are reliable, but replacement would be tough without specialized equipment,

Above-ground pumps are less efficient, but easier and cheaper to fix, especially for the do-it-yourselfers, which would be very important in a grid down economy. most common are jet pumps, one or two impellers and a jet either installed below the water table or on the face of the pump if the water level is within 30′ of the surface, very important distinction there, you can only lift water, “suction” 33 feet “‘one atmosphere”} vertically. Beyond that, the vacuum required will cause air bubbles to separate out of the water and you’ll lose the ability to pump the water. So, the “jet” a nozzle and venturi are placed in the well, with the pump cycling most of the water thru it, lifting an additional amount of water and producing the head pressure at the same time. I could envision a DC motor on a an above ground pump, imagine they’re available, if even to have one as a standby, but then again, do the math, if you’re wanting run a one horsepower DC motor that’ll turn the needed 3,400 rpm and to do it on twelve volts, you’ll soon see the cost and sizing differences are huge.but at least everything is right there where you can work it. again, a generator or a very large solar or wind system would work as well.

In a grid-down situation, a properly sized generator would run it, but to look to solar or wind power, just do the math, I did, by the time you size something that will start and run that pump, you’ve got a ten thousand dollar or more system, if you want to do your house or other uses, you could use the same system to power your pump when the need arises.

If you are lifting the water less than thirty feet, the possibilities wide and varied, a straight centrifugal pump or positive displacement pumps, such as diaphragm or piston, etc. which don’t need the rpm’s of the impeller pumps and can even be hooked up in multiples or series, depending on power source or what you want to do with the water. To have the ability to pump out of a shallow well, or even a surface water source, this would give you water, if only for irrigation or other uses, or to be purified and then used for drinking water, “potable water”.

The most viable pump system in a grid down situation, in my opinion, would be a sucker rod pump, or a pump jack, I worked on many of them, but generally just pulling them out and replacing them with submersible or jet pumps, or to abandon the well by pumping it full of grout. They are the pump systems you generally see under the old Aermotor windmills, the tall long levered hand pumps, and the much larger pump jacks used in the oil fields. The smaller sucker rod pumps are very simple, the up and down motion of the rod is transferred down the well and into [a pump cylinder under the static level of] the water, where it lifts the water one stroke at a time, very simple, with multiple power options, directly from the wind, human power, or motor driven electrically, or other, which could include about anything you could dream up as you only need to turn a pulley, the amount of power required would be widely varied as the rpm can be varied so much and it’ll still pump, less water, but water. One particular model I was looking for, but didn’t find is the old Crane Deeming pump jacks, a staple on the old farms, designed more for a power source other than the windmill or pump handle, although you could hook it up if the power was off. it would run on about any motor you hooked to it, as far as horsepower and rpm, “revolutions per minute” within reason, including electric, piston, or even the power take off (PTO) from your tractor. Also of consideration is that with a very low yield well, the ability to pump to a cistern or other holding device, and then to pressurize the water from there with another pump, old technology from when people made do, before our era of throwing technology and money at it till you’re happy.

Here’s a link to an article on building a pump jack. It drives the sucker rod that’s in the well, but depending upon where you’re at, the terms are kind used interchangeably. Go to the home page, browse around, or do your own search, lot’s of choices out there.

My thoughts on this, if I wasn’t going to use a generator if the power is down, is to have a separate well with a pump jack, or if you have a six inch well or larger, with a submersible pump in it, install a pump jack right beside it, no, I have never done that, and the easy way would be to call your local well driller or pump man, but dual pipe well heads are available, and the two systems shouldn’t interfere with each other, the two possible problems would be with the submersible pump itself, or the power wire to the pump, but then, I imagine I would set the submersible pump and then the sucker rod and pipe above it,
Anyway, if you’re wanting alternatives, they are out there, sounding complicated, but actually quite simple, especially if you prepare in advance, the simplest power alternative is still the generator, I know I said it again, but I also have six solar panels at 175 watts each, and a wind generator at 400 watts, with all the controllers, battery bank six by 120 Amp Hour 6 volt and a 2,400 watt inverter, which would not be adequate to run my 1hp 220 volt submersible, but a 1/4 horsepower motor on a pump jack would work, too bad I didn’t keep any of that old stuff, but anyway, short of the generator, or fuel for it, would have to go with the pump jack, or for shallow water, a positive displacement pump. Would be willing to continue this discussion, if you’d like. – Mickey

JWR,
I am a recent “convert” to the survival mentality. Thank you for this blog. All I can say is that it is excellent. On to my point: I too am grappling with this conundrum of how to pump water out of my deep well for my house water, although mine is more shallow (200ft). I currently have a 220 VAC 1/2 HP Gould deep well pump with a 33 gallon pressure tank to round out my water system. I’ve been researching the deep well pump made by Grundfos. The model is called the SQFLEX. According to the manufacturer, it can run on either AC or DC and will pump from depths of 650ft. Whole systems can be bought here http://solarwellpumps.com/solar.htm . I’m not sure if these are the real deal or not, but they have definitely piqued my interest. I spoke with one of the reps and she indicated that these pumps are used for residential use with a pressure tank (mine is 30gal). The pressure tank is also a problem. I would rather have an elevated storage tank like you recommend. The only problem with that is, for “flat-landers” such as myself, those who live in the midwest without hills. Then what do you do? Do you build a tower for all your neighbors to see (forget about OPSEC) or do you use a water storage tank and place it amongst your house rafters/trusses (which definitely won’t hold up because they are of 2×4 construction and once you cut a large “idiot hole” [for post-construction passage of a large tank] you lose the structural integrity). So there I am. Not sure what to do. I would like to hear some thoughts. “Patriots” was an excellent and fast read. Sincerely, – JJ

JWR Replies: My only brief comment on installing a water tank in an attic is: watch out! When you calculate the weight of just 55 gallons, at 8.33 pounds per gallon, that is 458.15 pounds, not counting the weight of the tank itself! Definitely consult an engineer before installing any tank of substantial capacity.

Economics and Investing:

Marc Faber: 10-20% Inflation Coming to US (Thanks to Mark H. for the link.)

HPD sent us a link to Mish Shedlock’s commentary: Flow of Funds Report Offers Hard Evidence of Deflation

Hawaiian K. spotted this in an Australian newspaper web site: Cash to become extinct as chips take off

Items from The Economatrix:

The Cumulative Impact of Three Rogue Waves

Why Deflation, Not Inflation, is the Order of the Day


US Banks Operating Without Reserve Requirement

China’s Got a New Currency…And it Sure AIN’T the Dollar “China has already begun moving into a new currency, one that is neither fiat nor flawed. And they did it in their usual manner: under the radar with great focus and determination. That new currency is natural resources.”

What if The Fed Had a Sale and No One Came? “The Federal Reserve received no requests from investors for loans to buy new commercial mortgage-backed securities under an emergency program aimed at reducing borrowing costs and reviving U.S. economic growth.”

Stupidity Without Borders (The Mogambo Guru)

Jim’s Quote of the Day:

“[The fallout in subprime mortgages is] going to be painful to some lenders, but it is largely contained." – Treasury Secretary Henry Paulson, March 13, 2007

Notes from JWR:

Several readers mentioned the video clip available of Sean Hannity’s recent special report: Urban Survivalists. OBTW, you will note that just over three minutes into the YouTube clip that Neil Strauss (the author of the poplar book “Emergency” ) displays his survival bookshelf a copy of “Patriots”.

—

Today we present a guest article by Axel Merk. Be sure to check out his new blog.

U.S. Dollar: the Good, the Bad and the Ugly, by Axel Merk

Russian President Medvedev suggests the dollar is on its way out; Russian Finance minister Kudrin says there is no substitute for the dollar. The Chinese see a need to diversify out of the dollar; the Japanese say their trust in the dollar is unshakable. Let’s look at this puzzle and make some sense of it.

It’s usually more productive to look at what policy makers do rather than what they say. Having said that, this time around, the talk also speaks volumes. Notably, world leaders have expressed their concern about the U.S. dollar and a need to diversify, to reduce dependence on the U.S., to build new alliances as well as to strengthen domestic markets. This is the strategic perspective. Conversely, when a finance minister speaks, it is the realistic perspective. There is simply no substitute for the U.S. dollar today; no other market is as deep and liquid, or able to absorb the cash that needs to be deployed by central banks around the world. The eurozone is (a distant) second, with no clear third contender in line. When China announced it sharply increased its gold holdings, their gold holdings actually decreased as a percentage of total reserves. That’s because the gold market is tiny compared to the money markets (or even compared to most other economic sectors) and China has mostly been acquiring domestic gold production, to avoid causing disruptions in the world markets.

Does that mean the dollar is safe and one should forget about gold as some suggest? Before you exchange your hard money for freshly printed Federal Reserve Notes (the U.S. dollar), think about the dynamics: the CEO of a country says we need to change course; the CFO says we don’t have the tools to get from A to B today. Any CEO worth their salt (and arguably some might not be) will tell the CFO not to whine about the obstacles, but come up with a solution. If you don’t have the tools, get the tools! Turning a large ship around may take some time (in the case of General Motors it took too long), but the ship will eventually change course. Circling back to the greenback, its value is set by supply and demand; more importantly, the marginal buyer or seller sets the price of the day. If, on the margin, countries increase their non-dollar holdings, odds are high it may have a negative impact on the dollar. Everybody hopes this adjustment process will be slow and gradual; with due respect, however, hope is not a strategy.

To put substance behind the hope, we believe countries around the world are racing to put the “tools” in place to be less dependent on the U.S. dollar. In Asia, for example, after the 1997/1998 financial crisis, Asian countries realized they needed to bolster their countries’ reserves. In the latest crisis, they realized that holding almost exclusively U.S. dollar reserves was a risky strategy. The solution is all too obvious, namely to develop domestic markets. This isn’t just about developing domestic consumption to create a more “balanced” world economy, this is about creating domestic infrastructures, fixed income markets in particular. Currently, many global investors invest in Asian markets by buying U.S. dollar denominated securities plus derivatives. This makes Asian issuers – governments, supranational and corporate issuers alike highly dependent on the U.S. dollar. This will only change if global investors have confidence in the stability and maturity of the local markets. The message to “CEOs” of countries around the world is to show that they are open and ready for business. Such trust is not earned overnight. In Asia, Singapore is a leader; not surprisingly, Singapore has a healthy domestic fixed income market. China is on its way, but needs to do more to provide access to its domestic markets (also see our recent analysis Geithner & China: Who are You Fooling?).

Global imbalances typically refer to the fact that the U.S. is responsible for much of the world’s consumption and spending; whereas Asia focuses on production and saving; this is quantified in the current account deficit. Historically, when the current account deficit reaches too high a portion of Gross Domestic Product (GDP), the currency serves as a valve to help level the playing field. To understand the dynamics, one has to realize that global imbalances will always be with us – the world is not flat. However, dangerous imbalances can be built up if the valves are disabled. Of the smaller countries, New Zealand has shown that it is willing to keep its valves open – during the boom years, interest rates were raised in an effort to calm an overheating housing market as the current account deficit approached 10% of GDP; New Zealand suffered in the bust, but unlike most countries, allowed market forces to play out. The currency suffered substantially, but the country is now better positioned than most to participate as the world tries to reflate. At the other end of the globe, take Latvia, which has a current account deficit of about 26% of GDP while insisting on pegging its currency to the euro. Not only has the Latvian economy been wrecked, possibly for years to come, it may pull Sweden down with it, because Swedish banks have substantial exposure to the Baltic country. The International Monetary Fund (IMF) and others are rightfully concerned about what may happen to neighboring countries if and when Latvia devalues its currency. Ask anyone in New Zealand and the response is that the roller coaster of its currency has been no fun and painful to many businesses; however, these are rough economic times and New Zealand has swallowed its medicine. When countries resist, far greater harm can be caused.

This past weekend, finance ministers gave a pep talk for the dollar. They also assured the world that the focus is shifting from saving the world’s financial system from collapse to the “exit” strategy; German chancellor Merkel has been a leading voice in warning central banks that the current policies may lead to substantial inflation. Let us discuss the dynamics here briefly: a key driver of inflation is inflationary expectations – when inflation is a fear, employees will ask for higher wages; businesses will try to push for higher prices, amongst others. As a result, central banks seem to believe that printing money is no problem as long as the markets believe that central banks have an exit strategy; that central banks will mop up all the liquidity in time. To recap, why do central banks say they are working on an exit strategy? That’s what the market wants to hear. How likely is it that they are indeed going to get tough? In our assessment, it’s about as likely as a balanced budget from the U.S. administration.

We have had a lot of talk of “green shoots”, but once one looks deeper, most negative news one hears are facts, whereas most positive news appears to be subjective forecasts and expectations of policy makers. Dark clouds on the horizon include sharply rising mortgage rates (in progress); major trouble in the commercial real estate sector; a continued dislocation in the housing market where home prices cannot be sustained by income; a big wave of foreclosures yet to come as many of those who bought their houses at the peak of the market in 2007 are likely to see big challenges in the summer of 2010 as their mortgages begin to reset. In the banking sector, problems have been brushed away by easing accounting rules. In Europe, a catastrophe in Baltic countries may only be a matter of time; while the IMF and central banks around the world may ride to the rescue, does this sound like the beginning of the exit strategy? Not to us.

Add to that the amount of debt that needs to be raised by the U.S. government. According to our calculations, at least US$15 billion may need to be issued every single business day until the end of the year. This will require a substantial ramp up from the pace seen in recent weeks, a pace that saw bond prices plunge (long term interest rates rise) due to the increased supply of government bonds in the market. When considering that summer months tend to be slower months for governments to issue debt (it’s vacation time around the world), we believe long-term interest rates may have to rise substantially later this year to attract buyers. The U.S. government will be able to finance its deficits, the question will be at what cost. Interest rates are one issue; the other is whether government activities will crowd out private sector borrowers. Corporate America also needs to finance its operations, not just the government, and where is that money going to come from? What about all the other countries that are issuing record amounts of debt? Just ask Latvia – a recent government bond auction yielded zero bidders. But even established countries, say Ireland, have seen the cost of its borrowing surge.

That’s when the bad may turn to ugly: how will central banks, notably the Federal Reserve (Fed) in the U.S. react should interest rates soar? Will they allow it to happen as they currently posture? It looks to us that we risk a collapse of economic growth if the cost of financing soars. There is still too much leverage in the U.S. economy, at the consumer level in particular. At this stage, a broken system has been propped up; the housing market is seen as key to an economic recovery – and all that money printing will have been in vain if market forces overwhelm the Fed by pushing interest rates higher. Naturally, the Fed puts up a brave face. Ultimately, this may be a game of chicken where Fed talk aims to keep interest rates low. However, we believe the Fed may blink first, and increase its financing activities of the U.S. deficit; by printing the money to finance government debt, the Fed may jeopardize the U.S. dollar, in particular if the Fed, as we believe, will be “more efficient” at printing money than other central banks around the world.

Will events unfold as described here? We don’t know, but we believe the risk is real; and if investors agree this risk is real, they may want to consider doing something about it in their portfolio allocation. We have not exchanged our gold for Federal Reserves Notes.

– Axel Merk, Manager of the Merk Hard and Asian Currency Funds

Two Letters Re: Escape From (Fill in Your City Here), 2009

Dear Jim:,
All this recent discussion by SurvivalBlog readers about hot-wiring airplanes, and cutting fences and locks is missing some basic, well, let’s just say “applied ethics”.

Recall the Golden Rule “Do unto others as they have done unto you”. Flip the situation around and look at it from the property owner’s view: How would you feel if you saw someone stealing your airplane? (Your life savings in an aircraft.)

How would you feel upon noticing someone cutting the fence or gate that keeps your cattle off the road?

Granted, in a life-threatening emergency you may morally take liberties with other folk’s property that are not normally available. If a rancher saw someone drive through their fence because they were being hotly pursued by criminals – they would probably be understanding of the circumstances.

If a rancher or farmer saw someone with bolt cutters working on their fence – someone who has obviously premeditated trespassing – at the very least they are going to be confronted. In a really bad situation, perhaps after dark, it could easily end up in a situation where they will be shot.

The wise and honorable person will pre-plan ethical actions. The obvious macro solution is getting out of Dodge early. If you are going to pre-plan using an airplane, then preplan by becoming a trusted rental customer, know how to contact the owner on short notice and rent for cash, with a security deposit in gold coin.

The suggestion to cut a link and add a lock to a gate rather than cutting the lock makes sense so you have not destroyed the property owner’s lock. But be extremely cautious about planning on trespassing on other folk’s property… I wouldn’t imagine country folk are going to take trespassing lightly in an emergency – I can’t see how it could be done safely unless you can hail the farmhouse for permission. Any ranchers out there with an idea how this scenario could be handled ethically and safely? Regards, – OSOM

JWR Replies: I concur, wholeheartedly. It is just one small step from applied ethics to applied ballistics. It is of the utmost importance to respect the property of others. While utilizing BLM or or other public land in an emergency is a given, simply cutting across private farm or ranch land in the midst of a disaster is likely to get interlopers well-ventilated rather quickly. Put yourself in the position of a rancher. If in the midst of a societal collapse you saw someone breaking open your locked gate, what would you do? For many, the answer will be “shoot first and ask questions later.”

As I have emphasized time and time again in my writings, the very best approach is to live at your retreat year-round. That is great for retirees and the self-employed. But for many folks that is impossible, because or work and family obligations. So the next best approach is to have a very well-stocked, very secure retreat, and maintaining your readiness to get there on very short notice. Nearly all of your key logistics should be pre-positioned at your retreat. Do not think in terms of finessing your gear into the cubic feet available in your vehicle. If you take the time to shoehorn things in, you are probably wasting precious time that should be spent on the road, getting out of town in advance of the Golden Horde. Just a one hour delay could mean the difference between smooth sail and ending up in a a monumental traffic jam that soon becomes a linear parking lot. You should simply keep one Bug Out Bag (typically a backpack) and a supplementary duffle bag ready at all times. Be ready to grab them and go. Pre-positioning your gear eliminates much of the worry and confusion of a Get Out of Dodge situation.

Needless to say, you’ll need a Plan B and a Plan C. You may end up on a bicycle, or on foot.

Think things through, plan ahead, and act morally. If and when things fall apart, you want to be part of the solution, rather than contributing to the problem.

 

James,
In response to our reader’s suggestion of using a Cessna172 for escaping. That is probably one of the poorest choices I could imagine. It has many faults and I’ll list them FWIW.
First of all I have over 2,500+ hours flying Air Charter and Air Taxi under Part 135 FAA Regs. I took the same tests flying single and twin engine aircraft as any airline pilot did with the only exception was that I was not required to have a first class medical as they did. So I am twin engine, Commercial and Instrument rated.

Problems with a Cessna 172:

It does not have a big payload especially when fully-fueled and the tendency to overload it would be great and dangerous. Automotive fuel should not be used, i.e. I would not fly one filled with automotive fuel. Tests were done with using it years ago and many problems were found.

Aircraft weather [data] would most likely be unavailable.

VOR and other navigation aids would probably also be unavailable. Okay, If you had a GPS unit you might be able to navigate.

Our lifeblood, gasoline would most likely by unavailable, especially aviation gas since it can be used in automobiles and would be subject to being stolen if the electricity to pump it out was available. I used to run a tank of 100 low lead aviation gas through my motorcycle about once a month.

Runways could and most likely would be obstructed or otherwise cluttered from looting, fuel, oil theft, etc., etc..

Without weather information what would be your chances of finding a suitable landing strip or even an open highway strip if you found yourself approaching thunder storms, icing conditions fog, or a large [weather] front. If you could or did land, especially under power, would attract the looters for the fuel and whatever else you have in the plane.

ILS, VOR or even ADF stations could or would be off the air making a bad weather approach deadly.

You could, literally, be shot out of the air by angry looters thinking the plane may contain supplies they want or just by some idiot with sufficient ammo angry at their situation. I know of a glider pilot shot through the arm by a guy who lived by the airport.

The preceding is just a drop in the bucket. I could go on.

I did consider “borrowing” an aircraft to get home should the SHTF while I was far from home but it would be just to get home and all conditions would be carefully considered and near perfect. It would not be a bug-out option should I need to bug out.

IMHO an aircraft might be an option very early on in a SHTF situation but again conditions would have to be very favorable. – Larry in Pennsylvania

Economics and Investing:

KAF sent this from Newsweek: Making Sense of Stimulus Spending; How accurate is Obama’s claim of 150,000 jobs “saved or created”?

Thanks to Douglas S. for sending the link to a lengthy speech by Dimitri Orlov: Definancialisation, Deglobalisation, Relocalisation. It is was a good and well-intentioned speech, overall, but there were elements that showed that Orlov still has a bit of residual Soviet Era collectivism that he needs to work out of his psyche. Oh, and by the way, I’m not giving up my well-provisioned bunker in an undisclosed location. (The Memsahib still jokes about doing a needlepoint that reads “Bunker, Sweet Bunker.”)

From HPD: Why I Expect Serious Stagflation

Items from The Economatrix:

Fiat (“Fix It Again Tim) Money In Death Throes “He is also mistaken when he assumes that Bernanke & Co. still has one more chance. The chance they just blew was the last. We are witnessing the closing of the regime of irredeemable currency and irredeemable debt. We may not know how long its death throes will take, but there will be no other chance… …Once the government makes the currency irredeemable, it puts itself in the position to curtail the rights and freedoms of the people as it sees fit. Constitutional government is effectively overthrown. Once the government usurps the public purse, its power becomes uncontrollable. Budget debate in Parliament or in Congress becomes an annual farce. Nothing stands in the way of unscrupulous politicians to undermine constitutional government.”

How Much of Bank Earnings are Real? Two key quotes: “The best award for accounting abuse, however, goes to Goldman Sachs. By switching to calendar year from a fiscal year ending November, suddenly the credit losses of $780 million disappeared from both 2008 report and Q1 2009 report, nowhere to be seen in the future. Of course, this has driven the stock price way up, a perfect timing to dump more shares to the public as far as there are suckers out there.” and, “I indicated how banks have used CDS to book fake earnings, now they have found another way to use CDS, even better than the accounting trick of negative basis trading. The unwinding of CDS contracts related to AIG led to huge gains for the major banks for Q1…. Most [of] these “profits” are actually coming from AIG, or our bailout money given by government to AIG, now being funneled through and then recorded as “earnings” by major banks during the unwinding process of CDS wild bets between AIG and major banks in past years. This is really a special time for capitalism; public taxpayer’s money suddenly becoming private earnings for banks. It is again time to pay more bonuses out to bankers for such a great creativity.”

Schoon: Death Watch A couple of quotes: “We live in extraordinary times. Poised between the past and the future, never has the present been so uncertain. But, when certainty comes, it will be in the form of a scythe and ducking will be the only option.” and, “No matter how respectable their appearance, the greatest enemies of society and freedom today are central banking and centralized government—the twin towers of monetary Mordor.”

From John Galt in Fla.: The Four Horsemen of the Bond Market Apocalypse
JR Nyquist: Holding It Together “Today’s economic troubles are part of a larger unraveling. We do not hear much talk – in newspapers or TV – about this unraveling. People are still trying to be optimistic. … What else can they do? They dare not admit that nuclear proliferation is ongoing, that war is inevitable. They dare not admit that time is running out, that our enemy is at the gates.”

Odds ‘n Sods:

North Korea May Fire a Missile at Hawaii “…the South Korean government is bracing for ‘all possible scenarios’ regarding the nuclear standoff. The independent International Crisis Group think tank, meanwhile, said the North’s massive stockpile of chemical weapons is no less serious a threat to the region than its nuclear arsenal. It said the North is believed to have between 2,500 and 5,000 tons of chemical weapons, including mustard gas, phosgene, blood agents and sarin. These weapons can be delivered with ballistic missiles and long-range artillery and are ‘sufficient to inflict massive civilian casualties on South Korea.'”

   o o o

Obama Lights North Korea’s Fuse

   o o o

Officials: US Tracking Suspicious Ship From North Korea

   o o o

Analysts Say North Korea’s Chemical Weapons Pose As Grave A Threat As Their Nukes

Jim’s Quote of the Day:

‘There is an old song which asserts ‘the best things in life are free.’ Not true! Utterly false! This was the tragic fallacy which brought on the decadence and collapse of the democracies of the twentieth century; those noble experiments failed because the people had been led to believe that they could simply vote for whatever they wanted . . . and get it, without toil, without sweat, without tears.” – Robert A. Heinlein, Starship Troopers

Letter Re: Advice on Deep Water Wells in a Grid-Down Era

James,
I know that I have seen posts about deep water wells, but when I search I really don’t see that many applicable posts. I am looking at a property where water [static level] is about 400 feet down. In a “grid-up” scenario, this isn’t really a problem, but I am looking for “grid-down” options for using a well at this depth. Not knowing much about the specifics of wells, I am not having much luck searching with Google, either. Would you be able to cover some deep well basics and some options for grid down/solar/backup pumping, specifically for deep wells?

Thanks so much for the blog. I have been an avid reader (pretty much daily) for two years and have several copies of your book to loan out to friends. – John C.

JWR Replies: As per your request, here are a few deep well basics:

Solar and wind power are the best solutions for deep wells in a grid-down collapse. If you live in an area with reliable winds, a windmill used in conjunction with a large gravity-fed tank or cistern, is relatively inexpensive and trouble-free. Photovoltaics are getting less expensive with each passing year, but system complexity is an issue, especially with systems that use a battery bank. (To maintain water pressure during hours of darkness, you will either need to store water in a gravity-fed cistern, or you will need a battery bank, so that you can operate your well pump. )

Deep wells can be pumped with submersible AC pumps, but not submersible DC pumps. This is because the “line loss” (voltage drop) in DC cabling is tremendous. Even with fat, heavy gauge DC cables, if you start out with 24 Volts DC (VDC) at your battery bank, you will likely be down to just two or three volts at 400 feet! Given that sad fact, there are two good solutions:

1.) Use a DC-to-AC inverter top-side, and run AC cabling down the well shaft to an AC well pump. (Note: Many of these pumps require 220 VAC, so you will either have to use a much more expensive 220-capable inverter, or replace the pump with a 120 VAC model. (You may be an electrical neophyte, and asking “What type of pump do I have?” Take a quick look at your AC circuit breaker box. If the breaker labeled “Well Pump” is a pair of breakers that are ganged-together with a wire loop so that they’ll be actuated simultaneously, then the chances are 99% that you have a 220 VAC pump.)

or,

2.) Install a jack (“cricket”) type pump or a windmill to actuate the sucker rod pump cylinder. Traditionally, sucker rods were made from hardwoods such as white ash. More recently they’ve been made with metal or fiberglass. Even with ash wood, their service life is measured in decades. The pump cylinders are made of brass and will last many decades. However, the pump leathers will eventually wear out, so you should consider buying a couple of spare sets and storing them someplace safe from mice and moisture/mold. Unfortunately changing all of the leathers on a down-hole sucker-rod actuated pump means yanking the entire sucker rod and then the weight of all 400 feet of your service line. That is a lot of weight, requiring a heavy duty hoist and of course all the usual “mind your head, fingers and toes” safety precautions and protective gear. Lifting a 1-1/2″ or 2″ diameter 400 foot long pipe is no problem for a pump company, but it would be a challenge for a typical rural family working with an improvised hoist. I recommend that you watch your pump company man carefully as he installs the pump in your well for the first time. You will notice that the crucial piece required is the flange that catches the pipe unions on each 20+ foot long section of service line pipe as they are raised or lowered in the well casing.

I’ve previously owned a jack type pump, and in my experience I found them problematic. I would much rather use an AC submersible pump.

Shallow wells (say, 50 feet or less) can be pumped with a DC submersible pump. I generally advise my consulting clients to “hang” both an AC pump and and a DC pump, one above the other in the same well casing, for the sake of versatility an redundancy.