Odds ‘n Sods:

Back in 2005, I began warning SurvivalBlog readers that derivatives were a much larger threat than the housing bubble. Now we read in the mainstream media: The $55 trillion question. The article begins: “The financial crisis has put a spotlight on the obscure world of credit default swaps – which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?”

   o o o

Safecastle just a started an unusual 25%-off Mountain House sale. The sale ends on October 14th. Get your order in immediately for the best selection!

   o o o

The latest slug of bad news from our Economic Editor, who is recovering from a recent surgery (please keep Cheryl in your prayers): USA 2008: The Great Depression — The Day Main Street Struck Back At Wall Street — Credit Markets Frozen As Banks Hoard Cash — Western World Will Become Significantly Less Wealthy — (“Corporate America has just lost a chunk of its value the size of the Indian economy.”) — Greenspan: “Gold Is The Ultimate Form of Payment In The World” — The Truth About The Bailout (“‘Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it, and the bill has been carefully written to make sure that can happen.” – Brad Sherman , D-California.’ That’s right folks. You are going to have $700 billion – about 25% of the total Federal budget – put on your personal credit card (via taxes forever) in order to bail out foreign investors.”) — Marc Faber: Bailout Won’t Stop Depression; Buy Gold (“A stock rally in the event that a [bailout] package is approved will be temporary and should be used as ‘an opportunity’ to sell, said [Marc] Faber.”) — Inflation In Stereo (The Mogambo Guru) — $1 Quadrillion of Unregulated Debt at Core of Coming Derivatives Crisis — Credit Cards To Implode 1Q 2009: Analyst — You Won’t Believe Where The $700bn Bailout Figure Came From (“Do you know where that very important $700-billion figure came from? Here’s a quote from that Forbes story: “It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.” They made it up to be sufficiently ginormous to frighten everyone into rapid action. And it worked.”) — Interbank Dollar Rate Hits 8% (“That high of around 8 percent is four times the Federal Reserve’s 2 percent target rate and more than double the cost of borrowing dollars for three months as indicated by Thursday’s London interbank offered rate (LIBOR) fixing.”) — Derivatives Deleveraging II, Debt Deflation, Gold & Bailout II — Bailout with ‘sweeteners’ heads toward Senate win — Bailout with ‘sweeteners’ heads toward Senate win — And to cap all that from Cheryl, here are two items that I found linked at The Drudge Report: Clinton: ‘It Sounds Dire, But Commerce Could Stop’ and Why propping up banks will not rescue a debauched financial system

   o o o

Josh H. mentioned that there is a compatibility glitch in the Internet Explorer 8 Beta 2 browser that prevents it from displaying some web pages, including SurvivalBlog. But Josh quickly found a “fix” for the problem. If you install I.E. 8 Beta 2, then follow-up the installation with these simple “fix” steps:

Go to “Tools”
Go to “Compatibility View Settings”
Check the box “Display all websites in Compatibility View”
Click “Close”

This setting should be a “global” setting that “sticks” so that SurvivalBlog will display properly during all subsequent visits.

Jim’s Quote of the Day:

“The money markets have completely broken down, with no trading taking place at all. There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.” – Christoph Rieger, fixed-income strategist with Dresdner Kleinwort.

Notes from JWR:

We had an amazing 17,945 unique visits yesterday, gobbling up almost 17 gigabytes of traffic. Those are both new records for SurvivalBlog. Thanks for continuing to spread the word about SurvivalBlog and making it such a success. It is not too late for your “head in the sand” relatives, friends, and co-workers to get themselves prepared. Spread the word! Even just a one line mention in your-e-mail footer would be a huge help. Here is what reader Paul G. uses in his footer: survivalblog.com — Bookmark it. It may save your life!

We’ve completed the judging for Round 18 of the SurvivalBlog non-fiction writing contest. First prize goes to Terry B., for his article “How To Make Den-Type Game Traps” that was posted on August 27th. He’ll receive two valuable four day “gray” transferable Front Sight course certificates. (Together, they are worth up to $4,000!) Special thanks to Naish Piazza–Front Sight’s founder and director–for his generosity. Be sure to check out their web site and class calendar. The Memsahib and I can both vouch for the quality of their training, from personal experience. It is amazing!

Second prize goes to Woodsman, for his article “What Will You Do When Your Stored Food Runs Out?” He will receive a course certificate from OnPoint Tactical. This certificate will be for the prize winner’s choice of three-day civilian courses. (Excluding those restricted for military or government teams)

Third prize goes to E.I.D. for “On Rural Retreat Safety and Secrecy“. He will receive a copy of my “Rawles Gets You Ready” preparedness course, generously donated by Jake Stafford of Arbogast Publishing.

Honorable mention prize goes to Josh in Montana for “Survival Medicine and Ditch Medicine“. He will receive autographed copy of my novel “Patriots: Surviving the Coming Collapse”.

Note to the prize winners: Please e-mail us to let us know your snail mail addresses, so we can mail you the prizes.

Round 19 of the writing contest begins today, and will run for two months. It feature the same great prizes. So get busy writing and e-mail us your entries, folks! Remember that articles that relate practical “how to” skills for survival will have an advantage in the judging.

Letter Re: Some Practical Notes on Third World Living

Jim,
As this is not a competition entry, it has not been reviewed by an outside set of eyes yet, and I’m sure its kind of disorganized, but this is some info about third world life, as I can see it here, after things stabilize.

My wife is from Peru. She was born during the Peruvian hyperinflation and transition to its next fiat currency, the Nuevo Sol. (Yeah, we’re young whippersnappers) She recently started to help out in getting ready. What helped her was comparing the current economic climate here to Peru. This allowed her to correlate things that occur in her former patria with our situation. She is a source of info on the Third world medium sized city way of life.

In Third world Peru, everyone cooks with propane camp stoves, with big seven gallon bottles. There is no space built for an American style range, even in nice houses. All water is boiled before ingestion, except [commercially] bottled water. Trucks come with semi-clean water and people line up to fill up their buckets for washing and drinking. (after boiling) Hopefully you have a big tank on your roof to gravity feed it through your pipes, as the power goes out regularly, and your personal well and pump wont work.

Everyone had bars on every window and door. Houses not made of cement block are broken into through the walls. They’re also too cheap/poor to put enough steel in the buildings, so they fall down easily in earthquakes. Re-bar is [used] only in the corners. Nobody has an exposed to the street yard. A courtyard inside larger places is the norm, off street parking, if you can afford a vehicle, is a must, or you wont be parking anything soon. Inyokern told me this concept: When things go really sour, everyone steals everything so often that everyone ends up with the same trash that nobody wants to steal anymore. e.g. I have a nice bike, it gets stolen, I get a new bike but not as nice as the first, it gets stolen, I buy the worst looking bike I can find. It stays. This is very true. People with nice hats walk around with a hand on their head. Political corruption is the norm. Most any government official can be bought for a couple hundred nuevo sols. Farmers carry guns. People walk on your roof at night.

Just about everyone is self employed. Selling food in the streets, tricycle and moto-taxis, home based Liquor stores, etc. Often if you sell higher “dollar” stuff, your customers don’t even come in your building, money and product are exchanged though the door bars. Keyed locks on both sides. There is no such thing as a big box store. Even disposable diapers are bought one at a time.
People wear sandals called yanki. These are said to be made out of used car tires, but most tires I know of are steel belted, and you can’t cut that with a knife. My two pair are made from rubber mining belt I think, as the tread pattern is cut by hand. The poor wear them, and they supposedly last a loooooong time.

In Peru, the power goes out all the time. Candles are common. People don’t stock up there, the stores I guess have sufficient on hand to handle the outages and subsequent candle runs. The stores here are obviously not prepared for that.

Traffic in her small town is nearly non existent, but traffic in Lima is suicidal. Regards, – Tantalum Tom

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 Collapse Indicators to Watch For?” I’d like to make a few comments.
Some of the signs we could actually verify during our own 2001 crisis;
*Limits to withdraw amounts per day. This happened just one or two days before banks actually closed.
*Sudden inflation. A few weeks before, but careful, it only turned into hyper after banks closed.
*Rumors of default. Those had been going on for a while and that’s when we slowly started investing elsewhere and slowly moving the money out of the accounts.
*Limits to moving fund out of the country
*Limits to the transactions. At the end you could just withdraw like $250 per week, if you found an ATM with money. Otherwise you had to suffer the terrible lines at he bank.
It’s just impossible to know exactly when it will hit, when banks will say bye bye, but careful, timing is everything.
In my case, we had dropped by the French Bank and asked for $2,000 USD.
The employee talked to the manager and the manager came to us looking nervous and said they didn’t have that kind of money right now, to come back tomorrow.
“Wait a minute.. you’re telling me you don’t have 2,000 lousy dollars, in the entire bank?”
”No.”
That same day we went down town to other banks, closed the couple accounts left and one or two days later the crash hit and banks closed their doors.
Just a few days later, my wife’s father lost a 6 digit figure, their fallback life savings.
He was an elderly man, but the bank didn’t care at all of course. He died without seeing that money returned to him.
Do not expect any kind of mercy or sympathy from banks. You wont be getting any.
People needing medical treatment have died in this country before court orders came out demanding the bank to give the money to the person because of life or death situations.
Some people have died of heart attacks at the bank’s closed doors, hitting them with pans and fists.
Not trying to be dramatic here, but it did happen that way, and it’s important for people to understand how serious this is.
I know a run in the banks is something you’d like to avoid. But remember, that money is yours, and banks won’t be giving it back to you if they close, you’ll loose a rather big percentage, and if the economy goes down, it will only be returned to you after months, even years.
Maybe it would be a good idea to take another look at the Wikipedia page that summarizes our 2001 economic crisis.

People should try to remain clam, but take the necessary precautions given the circumstances.
Take care James. God bless you and all the readers, grant them the peace of mind needed in these trying times. – FerFAL

Letter Re: AVGAS as an Alternative Source of Gasoline During Spot Shortages

James,
I’m sort of reluctant to share this because, well, I might need to do it someday and its value is in the fact that most people don’t know it.

During Hurricane Ike my uncle, who lives in Houston, acquired use of a generator. That’s an interesting story in itself so I’ll divert for a second and elaborate: He didn’t own a generator but his next door neighbor did. Unfortunately, the neighbor had never run the generator and when they needed it, it wouldn’t start. My uncle is a trained mechanic (former career) and was able to fix it. In return for his help, the neighbor allowed my uncle to run an extension cord over to his house to keep the fridge and freezer going. This underscores the importance of having practical skills. Even if you can’t afford to store a lot of tangibles, having valuable skills can allow you to barter work for the things you need. I know you’ve said that a million times. Well there’s a shining example of the truth in it.

Back to the point I wanted to make: They didn’t have enough gas for the generator and quickly ran out. The stations were out, and even if they had gas, there was no power to pump it. So… My uncle is also a private pilot and flies out of a local general aviation airport. Almost all public airports sell AVGAS, [(aviation gasoline), one grade of] which is just highly refined 100 octane gasoline. It works fine in both cars and equipment [such as generators]. Nobody was flying in or out, which left the airport well stocked with gas and apparently, they also had a way to pump it. He drove up there and bought all he wanted. The only people who thought to buy avgas were other pilots. They bought all they could use. No lines, no competition, no fighting.

I’m not suggesting this as an alternative to keep a sufficient supply of fuel on hand. But it’s an additional resource if your supply runs out. As I read about the gas shortages in the southeast (right now), all I can think is that there are probably dozens if not hundreds of pilots gassing their cars up with avgas… and doing it very quietly. Best, – Matt R.

JWR Replies: Thanks for that reminder. (Using AVGAS in ground vehicles has been mentioned a few times in the blog.) Just keep in mind that there could be road tax issues, at least in most English-speaking countries. Also, most AVGAS (such as 100LL), is made in leaded formulations and those are not compatible for use with many of the newer vehicles that have catalytic converters. (Since leaded formulations quickly degrade catalytic converters.)

Odds ‘n Sods:

I noticed that spot silver dropped a full dollar per ounce on Tuesday, and spot gold was down about $30 per ounce–both moved by short term gains by the US dollar in international trade. Buy on “dip” days like these! As I’ve said before, I think that gold will outperform silver in the next run-up. Get out of dollars and into tangibles. But remember what Doc Sweeny calls The Five Gs. (GGGGG.) Get right with God and then acquire your guns, groceries, and ground before you buy any gold. Be advised: You can’t eat gold, and Krugerrands make very expensive projectiles for a Wrist Rocket.

   o o o

We just got alarming news that the London Interbank Offered Rate (LIBOR) rate spiked this week, tripling to an all-time high of 6.875%. The LIBOR is the benchmark rate at which banks loan money to other banks. The spikes illustrates the absolute peril that the credit collapse has created, and the unprecedented level of distrust between banks. It will be interesting to see what this higher cost of inter-bank borrowing has as it trickles down to credit card interest rates and Adjustable Rate Mortgages (ARMs). It is conceivable that monthly ARM payments could double. The global credit market has just suffered the equivalent of a massive myocardial infraction. Dr. Bernanke is greasing up the defibrillator paddles now…

   o o o

Eric found this at The Globe and Mail: Credit cards to ‘implode:’ analyst

   o o o

Gary flagged this Time magazine op-ed piece: Let Risk-Taking Financial Institutions Fail. Gary’s comment: The derivative threat has finally hit the [mainstream] news. I thought that you wouldn’t be surprised, since you saw it coming.

   o o o

Reader “Stamps” mentioned a nonprofit organization that will send you free seeds with just a self addressed stamped envelope. They pick randomly from what they have available. Most are seeds that people harvest and donate to this project.

Jim’s Quote of the Day:

“The financial meltdown the economists of the Austrian School predicted has arrived. We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy – all the capital misallocation, all the malinvestment – and prevent the market’s attempt to re-establish rational pricing of houses and other assets.” – Congressman Ron Paul, My Answer to The President. (See also the short video clip of Ron Paul’s address before congress on corporatism and the destruction of the dollar.)

Notes from JWR:

I just got word that the US House of Representatives voted down the $700 billion USD Troubled Asset Relief Program (TARP) Bill. I’m glad to see that it was defeated. There is simply no proper substitute for allowing the credit market to correct itself, by working the bad debt out of the system. Propping up the system would have made the eventual reckoning day even worse. There will probably be some substitute or “bipartisan compromise” legislation offered, but don’t fall for it. If it extracts money from your wallet to bail out the banks from Credit Default Swap derivatives and other toxic debt, then it is bad legislation. Please contact your congresscritters to let them know your position on the legislation.

On news of the defeat of the TARP bill, the Dow Jones Industrial Average (DJIA) lost 555 points (more than 5% of its value) in just one day on Monday. I expect further declines in the DJIA this week, perhaps dropping below the psychological 10,000 threshold, regardless of the political posturing and promises on Capitol Hill. I hope that SurvivalBlog readers took my advice and long ago got out of stocks and other US Dollar-denominated investments. Buy productive farm land (that can double as a retreat), guns, tools, and other tangibles.

Our special thanks to Mike in Malaysia, who sent us a very generous 10 Cent Challenge subscription contribution via PayPal, with the note: “Thanks for your great service. This is a prepayment for the next four years and for the last year of knowledge!”

Letter Re: A Successful Search for a Survival Retreat Property

Hi Jim,
we wanted to share our story with your readers who may not have been able to acquire their retreats yet, and worry they never will. We hope our story will inspire them….

We sold our home in record time recently (big shock) and then went on a major hunt to find our “perfect spot”…we have been preparing and stocking up and looking to find the area we wanted to buy retreat in and start in earnest to live self-sufficiently, hoping and praying when the time came it would all come together.

We had very specific parameters: minimum of 40 acres, very private and secluded but yet close to a small community, a year round creek or spring fed pond was of high importance, and of course our house had to sell in this terrible market and for a good price to reduce debts and leave enough money for a new location…not too much to ask for eh?
well, this is what we wanted to share: We found a place that had been in a farmers family for multiple generations, had numerous barns, fencing, a well, and a year round creek, everything we were looking for already there and in great working order! It was off the beaten path by about seven miles, but visible from the country road that led to it. Still a beautiful property and reasonably priced for the 40 acres.

We made an offer on it and since I felt very uneasy with the level of exposure from the road (probably wouldn’t bother most folks, but I am extremely private.) I went and sat on the porch and prayed, asking God that if this was not where we were supposed to be to please, please, let me know quick and give me a big sign my husband will recognize, LOL, he loved the property as it met all our parameters, (except my extreme privacy need) and would be upset to know I was still shopping in my mind.

Well, the phone rang shortly thereafter and our offer was being hijacked by a family member [of the seller] who knew we just sold a home in a desirable area, so the price that they gave us was now a lot higher, among other demands and (this in a major “buyers market”!). We were running out of options and needed to move asap so I worried we may have to end up taking the offer if nothing else came along very quickly.

the next morning a cousin called at 6 a.m. and said that she had woke up for no reason at 4 a.m. and had [remembered] the perfect place for us, though it wasn’t on the market and it was only a rundown house on three acres, but tucked away perfectly. He made a couple phone calls on our behalf and later that afternoon we went to view and talk to the owners…just so happened that they had just talked of selling to move closer to a city due to high fuel costs of commuting, we made a deal with them on the spot and closed a few days later!….well….we knew that even with just a few well set up acres we could do just fine when the SHTF. The second phone call on our behalf was to the owner of 80+ acres adjoining our ‘new’ place. These are multigenerational family properties and rarely get sold outside of family….the timing was perfect…she also had just decided to sell off those acres….she told us she knew it was God’s will for us to buy it when the phone rang that morning with a request to buy “a couple extra acres” to go with the old farm house adjoining her property. That was the second sign from God. Then we went to view her acres which has a very old falling apart barn on it and as we walked inside there were numerous cans of storage food (from a company often mentioned in SurvivalBlog, in great shape) laying around. We were told there is a “whole gully full of the stuff, cause the old guy thought the world was gonna come to an end every morning.” How wild is that? Sign #3 that we were definitely in the right place!

We met with owner and her attorney and although were hoping for extra five acres but walked out with an agreement on 80 acres and an option for more. We are grateful and amazed. We wanted to share our good fortune so that others know it can happen for them, even with odds against them. You gotta have faith!

We relish the idea of putting together a wonderful place to live for the rest of our lives and to be able to offer sanctuary for our family and select friends in good times and bad, and and hope we have enough time to teach our grown children and grandchildren self-sufficiency of a different sort in this unstable world. Thank you for all the work you do and the information you share with the rest of us! God Bless, – KW

Letter Re: Storing Multipurpose Castile Soaps

Jim,
Thanks for your warnings and all the help your novel and blog are to us.

In reference to the recent mention of Dr. Bronner’s soaps, I just wanted to pass along some tips on Kirk’s Castile coconut soap. It doesn’t have a lot of added chemicals. I can purchase it at Woodman’s for 79 cents a bar.[JWR Adds: It is also available at reasonable prices from several Internet vendors if bought in full cases.] It can be used as shampoo as well as to brush your teeth. People don’t believe me when I tell them it’s been my shampoo for years. It’s better for your teeth than any toothpaste that has glycerin. It can be used as dish soap also. Why buy many products to store when this one is inexpensive and has many uses? Staying clean is so important to our health. Praying for God’s mercy, – Deb in Wisconsin

Letter Re: Recommendation for Water BOB Bathtub Water Storage Bladder

Dear Mr. Rawles,
All the stories recently about power failure and storing water in bathtubs have encouraged me to write to you about the WaterBOB. It’s a heavy duty plastic bladder that you put in your bathtub and then fill with clean water from the tap. It comes with a siphon so that removing the water is easy. IMO, The greatest advantage of this product is that the water remains potable, even though a bathtub is generally not suitable for storing drinking water. The WaterBOB holds 100 gallons.

Prices have increased substantially since I first bought mine a year or so ago, but if purchased in quantities of 20+, the price drops significantly and shipping is minimal. A group could order together, or someone might want extras for gifts.

I recently ordered a quantity shipment for family birthdays, Christmas gifts, some upcoming anniversaries, and wedding/housewarming gifts. It’s a pretty sure thing that most folks don’t already have one!

Thanks so much for all you do. And our prayers continue for your Memsahib’s complete recovery. Sincerely, – SaddleTramp

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 employers to immediately turn off Direct Deposit, resulting in some paychecks simply vanishing forever.
3. Inability to pay bills even though technically you had money, at least according to the FDIC. (This caused numerous foreclosures despite the person never having missed a payment before and having the cash but unable to access it.)
One common result of #2 above in Texas is a higher than usual refusals to take Direct Deposit. I don’t take it because of what I saw happen then. Recently on a trip to my local bank, a manager walked by as the teller was servicing my request and saw that it was a real check. She immediately suggested I get Direct Deposit. I replied “The S&L debacle left many scars.” She looked at me then smiled, nodded, and went on her way. She knew that arguing with me about it was pointless.
On another point, a fellow I know was recently cleaning out his grandmother’s house after her death. Everywhere they looked they found cash ranging from ones to fives to tens to twenties. It was in drawers, hidden in seat cushions, etc. He knew she did this and he always thought she was off her rocker but in the last year he’s changed his attitude. Now he says “I think I understand why she didn’t trust the banks.”
There’s a sea change coming in American attitudes. That sea change is going to worsen the economy as people decide spending is not the sole purpose in life. And no bailout is going to change this. Life in these United States is about to become far more frugal, one way or another. – Dave R.

Letter Re: Making Alternatives to Commercial Chemical Light Sticks

Hi Jim,
I’m a long time reader of the blog and I liked your novel. I have been amazed at your ability to acutely foresee coming events. More and more yours is the first site that I read every day. I noticed your article on glow sticks and I have an excellent upgrade for your readers.

Forget using glow sticks and graduate to Krill lights. Now glow sticks still have their place, but 98% of the time this will be a better item to use. I have purchased several of these over the years and have always been impressed. They work like giant [electro-luminescent] Indiglo watches. They run for what seems like forever on AA batteries, comes in different colors including infrared (IR), they have 360 and 180 degree models, flashing models are available, all at greatly reduced cost verses equivalent glow sticks. I am rough on equipment and have yet to destroy one of these tough little lights. Your friend, – Kevin S.

Odds ‘n Sods:

Some more newspaper gleanings, most coming from our Economic editor: Citigroup to buy Wachovia banking operations — Bailout Failure Will Cause US To Crash (For full disclosure, I would append the headline with: “But Bailout Success Will Cause Dollar to Crash”) — UK Banker Leaps To Death In Front Of Express Train — Fed Pumps Further $630 Billion Into Financial System — House defeats $700 Billion financial markets bailout

   o o o

Hawaiian K. suggested an article over at Treehugger on aquaponics

   o o o

Reader FFF spotted this: How China has created a new slave empire

   o o o

Mister DC sent this: What if disaster struck? Counties, schools update responses. (“How many corpses can fit in your local ice rink?”)

   o o o

Meanwhile, across the Atlantic, the BBC reports: Bradford & Bingley bank facing nationalisation