Jim’s Quote of the Day:

I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." – Thomas Jefferson

Note from JWR:

My sincere thanks to Mike in Michigan, who sent an unprecedented $150 contribution for our 10 Cent Challenge subscription program. That was very generous of you! My thanks to all of our subscribers. I greatly appreciate your support, folks. Subscriptions are entirely voluntary, and gratefully accepted.

Economic Climate Change: The Long Winter May Begin This Summer

I’ve had several consulting clients contact me in recent weeks, all with notes of fear in their voices. They realize that something is horribly wrong with the economy, but they cannot properly isolate and articulate the problem. I haven’t been able to calm them, however, because to an extent I share their anxiety. In my estimation, the “something wrong” that we sense is nothing short of a monumental shift in the economic climate.

America is clearly headed for a recession. Most economic recessions are simply a product of the business cycle. These recessions are relatively mild and they often last just 12 to 24 months. The economic engine just readjusts and everything soon gets back to normal. But this nascent recession in 2008 is something radically different, and it won’t be short-lived. The current slow down was triggered by a collapse in the global credit market. For decades, the global credit market grew and grew, in an enormous debt spiral.

Our neighbors to the south saw trouble coming decades ago, because their economies were at the time more debt-dependent than our own. As far back as the mid-1980s, their newspapers featured political cartoons that portrayed enormous, insatiable monsters that were invariably captioned “La Deuda“–“The Debt”. Our cousins in Latin America saw it coming first, but the dark side of the debt nemesis will soon be clear to everyone.

Because modern banking in the western world is based on interest charges that create continuously compounding debt, credit cannot continue to grow indefinitely. At some point the excesses of malinvestment become so great that the entire system collapses. This is what we are now witnessing: a banking panic that is spreading uncontrollably as wave after wave of ugly debt gets destroyed by margin calls and subsequent business failures.

Some economists are fixated on reading charted histories–and unrealistically expect that by doing so that the can reliably predict future market moves. (They can’t do that any more than I could predict the bends in the road ahead by keeping a chart of the preceding left and right turns of my car’s steering wheel. My apologies for any offense to my friend The Chartist Gnome, but you are fooling yourself.) Although they are working from a flawed premise at the micro level, the chartists do have some things right on the macro level: There are major economic “seasons” and even climate changes. The most vocal chartists like Robert Prechter hold to what is called the Elliot Wave Theory.

The big bad nasty in this school of thought is a Kondratieff Winter. This “K-Winter” is an economic depression phase that the world has not fully experienced since the 1930s. An economic winter does not end until after the foundations of industry and consumer demand are rebuilt. This can be a painful process, often culminating with war on a grand scale. (It was no coincidence that the Second World of the early 1940s was an outgrowth of the Great Depression of the 1930s.)

The US Federal Reserve and the other central banks are furiously pumping liquidity to the best of their ability, but in the long run they will not be successful. At best, dumping billions in cash on the economy will delay a depression by perhaps a year or two. But inevitably, a K-Winter depression will come. And the longer that it is delayed, then the worse the depression will be. Further inflating the debt bubble will only make matters worse. I think that veteran market analyst Jim Rogers had it right, in a recent interview. Take a few minutes to watch that video. Jim Rogers sees the big picture. I wouldn’t be surprised to hear that he has gone off somewhere to hunker in a bunker.

“Big Picture” Implications

As I’ve mentioned before, hedge funds are presently most at risk in the unfolding liquidity crisis, because they use lots of leverage in lending funds that they themselves have borrowed. They borrow short and lend lon, effectively use debt compounded upon debt. Many, many hedge funds will be bankrupted before the end of 2008.

Even more alarming is the scale of global derivatives trading, particularly for credit default swaps (CDS). Derivatives are a relatively new phenomenon, so derivatives contract holders have not yet experienced a major recession or a depression. Thus, it is difficult to predict what will happen in a genuine K-Winter phase. In a perfect world, derivatives are a nicely balanced mechanism, where there are parties and counterparties, and every derivatives contract equation balances out to have a neat “zero” at its conclusion. But we don’t live in a perfect world: Companies go bankrupt. Contracts get breached. Counterparties disappear and disappoint. We have not ever experienced a derivatives full scale “blow up”, but I predict that when it happens, it will be spectacular.

The scale of derivatives trading is monumental, and the vast majority of the population is blissfully ignorant of both its scale and the implications of a derivatives crisis. There are presently about $500 trillion of derivatives contracts in play. That is many times the size of the gross product of the global economy, but the average man on he street has no idea what is going on. It won’t be until after the giant derivatives casino implodes that the Generally Dumb Public (GDP) awakens and asks, “What the heck happened?” Since the credit market began to collapse last summer, the number of new derivatives contracts has dropped precipitously. But whether the aggregate derivative market is $400 trillion versus $500 trillion, when a crisis occurs there will undoubtedly be some very deep drama.

The next decade will likely be characterized by successive waves of inflation and deflation, and perhaps some of both simultaneously, at different levels. Countless corporations, and perhaps a few currencies or even whole governments will go under as this tumult plays out. The current low interest rates will soon be replaced by double-digit rates, much like we saw in the late1970s. The dollar will lose value in foreign exchange, and may collapse completely. The Mother of All Bailouts (MOAB) will result in mass inflation. The bull markets in silver and gold will surge ahead, propelled by economic and currency instability. (Investors will be desperate to find a safe haven, when currencies and equities are falling apart.)

Risk Mitigation

Be ready to “winter over” the coming K Winter depression. That will require: 1.) Prayer. 2.) Friends that you can count on (a “retreat group”). 3.) A deep larder, and 4.) An effective means of self defense with proper training. (For each of those four factors, see the hundreds of archived articles and letters at SurvivalBlog.com for details.)

Since large-scale layoffs seem likely, it would also be wise to have a second income from a recession-proof home-based business.

In the event of a “worst case” (grid down) economic collapse, it would be prudent to have a self-sufficient retreat in a rural area that is well-removed from major population centers. Get the majority of your funds out of anything that is dollar-denominated, and into tangibles, as soon as possible. The very best tangible that you can buy is a stout house on a piece of productive farm land. It will not only preserve your wealth, but living there may very well save your life.

Weekly Survival Real Estate Market Update

We are presently heading into the spring selling market that should yield some of the best prices seen in years in rural America, especially in the Pacific Northwest region, in particular. At this point, especially in small towns in the region most folks have realized that their golden egg is about to hatch a goose and that they should have sold their property two years ago while there was still a chance to sell at reasonable prices. A lot of folks waited and kept their property prices too high and listened to others who spoke of the market “coming back soon” and “don’t worry.” Well, now they are scared. I moonlight as a gunsmith at a local gun shop and during the two weeks preceding Christmas last year we sold absolutely no firearms at all. What we did do and continue to do each week is pawn and redeem items for folks just to make it to their next paycheck.

Heading into the spring time here the tide has turned from pawns to folks selling what they can to buy battle rifles, a heavy weight of reality is starting to hang in the air in rural America, even people that are not true preppers like you and I just know something isn’t right. Recently, locals that would have never thought about owning battle rifles have been trading in their deer rifles for black rifles. We cannot keep .308 caliber semi-autos on the shelf, period. We have tons of AR-15’s but if an HK or FAL shows up it goes within a day or so. Farmers might be slow movers but they’re not dumb, they see what’s coming. All the .308 and related components are going as well. We went to order a few of Rock River Arms new LARs in .308 (the same as the Bushmaster BAR-10, they bought the rights from them last year), a great big brother of the AR-15 chambered in .308 and they said they had a two year backorder list! The point of my sidetrack here is that small towns are already getting hit hard economically just by what has happened in the past five months or so. They realize that they had better sell what they’re going to sell or they’ll need to wait along time to get a better price, if ever. This applies directly to real estate as well. Bargains abound, especially parcels that were split up over the last year or so that have not sold, like one I have reviewed and JWR has approved on SurvivalRealty.com, called the Ridgetop Retreat. It is part of a larger 104-acre parcel that as far as I know no parcels have sold so someone could buy the entire 104 acres in the range of $570,000 and then sell the divided parcels to fellow like minded individuals.

Now is the time to swoop in and for someone that can pay cash or make easy financing terms, the real estate inventory is huge, and there are now some real bargains. There are many sellers that are on the brink of foreclosure and just want to get out with a few bucks and deals can be had. High end builders are sitting on finished product and have to refinance the homes out of the construction loans with cash out just to make the payments, and the banks are dong it, knowing that they are simply loaning them the money to do so, but what choice do they have? The high priced homes and land are simply overvalued and sinking everyday. Several parcels on SurvivalRealty.com have been dropped several hundred thousand dollars from last years listing prices with some more room to maneuver.

I’m working on several plans for groups in survival real estate. My preliminary thoughts are that it would require folks who have been humbled enough to be thankful just to have ‘something’ to go to in a time of peril and folks that have a sum of cash they need or want to invest in such a venture, but not enough to buy or build their retreat. I’m looking for ten investors that can put in $100,000 to $150,000 each to pool together $1 million to $1.5 million USD. This would be enough to purchase an amount of acreage and build one large building with ten separate living quarters with a large common area(s), something like a survival condo(s) complex, but complete with a communal basement bio-bunker, food storage, indoor range, indoor greenhouse, individual walk in safes in each unit and many other features. I have preliminary plans of the complex and should this move farther forward such plans will be available to those interested parties after consultation.

During good times the condo units could be used whenever the separate deeded owners wanted for vacations, family outings and holidays, et cetera. During times of peril the owners simply show up and start living, cooperating on security and other daily activities. To some this may seem absurd, but if this peaks your interest please contact me and we can discuss further. The location of such a property would in all likelihood be in the Palouse hills region of north central Idaho, due to the price per acre of land and more favorable weather and growing seasons. Remember, time is short and the buying power of your USD is falling. Every day you delay doing something towards getting to your retreat!

For further information, see my private Idaho pages on SurvivalRealty.com or contact me directly via e-mail. Remember, Idaho is what America was…Free!

Note from JWR:

You might have noticed that we’ve added a second advertisement for Front Sight in our scrolling ads. This ad is for their new “Get a Gun” training and gear package offer. See details on this incredibly generous offer, below.

The Hedges Get Trimmed

Just as I warned the readers of SurvivalBlog many months ago, hedge funds are vulnerable to rapid swings in interest rates. (My first warning was even before the pair of Bear Stearns hedge funds collapsed in the summer of 2007.) As the global liquidity crisis has expanded, other hedge funds have started to collapse en masse.

Here is an article is from England that is indicative of what is happening globally. (This is a global collapse, because again, as I warned, the current liquidity crisis is global in scale.) Hedge fund legends hit by financial crisis.

And here is an article from the American perspective: Debt Reckoning: U.S. Receives a Margin Call

With leverage ratios that average 26-to-1, hedge funds are very vulnerable to margin calls.

Check out this video clip on the hit to the finance houses, and this one on the plight of the hedge funds.

The Insider told me he expects that the majority of publicly-traded US hedge funds may be out of business by the end of 2008. Seventy down, 6,850 to go.

Front Sight’s New “Get a Gun” Training and Gear Offer

Front Sight has been a SurvivalBlog advertiser for nearly as long as I have been writing the blog. The Memsahib and I have both attended four-day courses at Front Sight, and we can attest that the training there is absolutely top notch. We were both very impressed with the world class quality of the instruction and the quiet professionalism of the instructors. The Front Sight experience is hard to put into words. You really need to experience it for yourself.

To be prepared for the potentially dark days ahead, I highly recommend that at least one member of your family attend Front Sight, and then come home and cross-train the rest of the family. Owning a gun doesn’t make you “shooter” any more than owning a surf board makes your a “surfer”. Training is crucial. When the Schumer hits the fan, you need to be confident and competent with firearms. That only comes with proper training and regular practice. The bottom line: Get the best training available. And that is exactly what you will receive at Front Sight.

You might have noticed that there are now two ads for Front Sight in our scrolling ads. The new ad is for their very generous “Get a Gun” training and gear package offer. This is their biggest promotion ever, and it includes so much free gear that you would be crazy to to not take advantage of it. This offer includes all of the following:

Four Day Defensive Handgun Course ($2,000 Value),
30 State (One Day) CCW course ($500 Value),
Seven Dry Practice Manuals ($280 Value),
Limited Edition Stainless Steel Folding Knife with Front Sight Logo ($300 Value),
Front Sight Armorer’s Bench Mat ($40 Value),
Front Sight “Any Gun Will Do– If You Will Do!” Shirt ($30 Value),
Front Sight logo hat ($20 Value),
Front Sight Instructor Belt, Holster, Mag Pouch, Flashlight Pouch and Flashlight ($230 Value),

and, your choice of a brand new in-the-box, Springfield Armory XD Pistol in 9mm, or .40 S&W or .45 ACP (a $600 value.) Needless to say, I suggest getting the .45 ACP variant.

I highly recommend Front Sight’s training. Again, it is truly world class. Their new “Get a Gun” offer is an amazing 4-to-1 “exchange in abundance.” If up ’til now you’ve been hesitating about taking a course at Front Sight, then by all means quit hesitating, and take advantage of this offer. It is a genuine bargain!

OBTW, if you have any questions about this offer, feel free to e-mail me. If I can’t answer one of your questions, then I will get a answer from Front Sight.

Two Letters Re: Homemade Alcohol Stoves

Mr. Rawles,
The recent article on alcohol stoves made me think of these ultra-lightweight, portable alcohol stoves made out of soda cans, See this Wikipedia article.

I have successfully built the original Pepsi-can version using epoxy glue, as well as the Heineken-can “penny” version. I have not tested them “in the field” but both work very well indoors, and they have impressive performance, boiling 2 cups of water in 5 minutes using only 2 tablespoons of alcohol. Those who have actually used them outdoors say they outperform other small stoves even in the most extreme of conditions. Even for indoor use, they are a compact, easily stored backup for cooking.

The stoves are easy to build, but expect to build a few to get the hang of it and make a well-burning version. Many web sites are available that cover different versions of the stove and various accessories to go along with it.

For fuel, you should only use methyl or ethyl alcohol. Don’t use isopropyl alcohol in these stoves, as it will cover the bottom of your pots and pans with soot. Methyl alcohol burns hot and clean, but it is poisonous. It is available, among other places, as HEET brand engine fuel line de-icer in auto parts stores in the red bottles. (Don’t get ISO-HEET, since that is isopropyl alcohol). Denatured ethyl alcohol is cheapest, and of course Everclear 190 proof grain alcohol works as well, but it is quite expensive. Sincerely, – Chris S.

JWR Adds: Denatured ethyl alcohol (“grain alcohol”) is much less expensive if bought in quarts or gallons. It is available at paint stores. Don’t buy methyl alcohol (Methanol or “wood” alcohol”), because of its toxicity. Long term exposure to the fumes or just brief contact with the skin can be toxic and can cause irreversible liver damage.

James,
LeAnne’s article today has some bad advice and some misstatements in it – potentially dangerous.
First of all, alcohol will produce Carbon dioxide (CO2) and water vapor (not carbon MONoxide, CO) only in a perfect (ideal) combustion, with exactly the correct proportion of oxygen – called the stoichiometric ratio. Any deviation from that will produce imperfect combustion and CO. Even a perfect combustion will result in CO2 being produced, the carbon atoms in the alcohol have to go somewhere. And perfect combustion only happens on chemistry examinations. A buildup of CO2 can be just as deadly as CO.

Secondly, 70% alcohol is 30% water….and before you get any heat out of burning the alcohol you need to heat up and boil off the water. Half of the energy of the alcohol (by volume) is wasted getting rid of the water The water vapor added to a shelter could be significant. A better choice would be 91% alcohol, if you had to use isopropyl alcohol. A better choice IMO would be alcohol available from paint stores, boating shops, etc.

For people travelling (backpacking, etc) a higher energy density fuel (gasoline versus alcohol, with roughly twice as much BTU value per pound of fuel carried) makes more sense. Alcohol stoves have their niche but LeAnne’s reliance on them can lead one to dangerous reliance on them in inappropriate conditions. – Flighter

Letter Re: Reloading for 7.5 Swiss

Dear Jim,
Regarding East Tennessee Hillbilly’s otherwise excellent summary of reloading: In the back of the Arsenal of Democracy I keep a case of each caliber I shoot. The 7.5 Swiss cartridge has a wider case, thicker base and thicker rim than .308. I don’t believe it’s possible to fabricate 7.5 Swiss cartridges from .308. – Michael Z. Williamson

JWR Replies: I have read that .284 Winchester brass can be re-formed to 7.5 Swiss without much difficultly. The same thread mentions that Graf & Sons sells virgin Boxer-primed 7.5 Swiss brass that they had made up with their own head stamp.

Odds ‘n Sods:

Hawaiian K mentioned a Gizmodo blog piece that has some interesting metrics on oil versus biofuel production.

   o o o

Bill S. flagged this: A Grim Tradition, and a Long Struggle to End It. Bills’ comment: “Another excellent reason to avoid border areas when selecting retreat locations.”

   o o o

Reader KAF found this piece that shows that the Mother of All Bailouts (MOAB) will undoubtedly grow, and grow, and grow: Senate Leaders Unveil Bipartisan Plan to Slow Home Foreclosures

   o o o

Perennial Odds ‘n Sods contributor RBS forwarded this: Some homes worth less than their pipes–Thieves now stealing valuable metals from foreclosed homes

Note from JWR:

Today we present the first article for Round 16 of the SurvivalBlog non-fiction writing contest. The writer of the best non-fiction article will win a valuable four day “gray” transferable Front Sight course certificate. (Worth up to $2,000!) Second prize is a copy of my “Rawles Gets You Ready” preparedness course, generously donated by Jake Stafford of Arbogast Publishing. Round 16 ends on May 31st, so get busy writing and e-mail us your entries. Remember that articles that relate practical “how to” skills for survival will have an advantage in the judging.

The Homemade Alcohol Stove and The Wonder Box, by LeAnne

In any situation, small electricity outage, or large-scale grid-down disaster, a simple homemade alcohol stove and a Wonder Box slow cooker can simplify your life and add the comfort of cooking and warmth.

Why alcohol?
Alcohol is the one fuel that can be burned indoors without any chimney or any objectionable fumes. The only byproduct is water. [JWR Adds: Keep in mind that for safety, even with an alcohol stove, some ventilation is needed, sine the combustion will consume available oxygen.]

Isopropyl alcohol (70%) is cheap. A couple of quarts can be purchased for about $3.00 at Costco or Sam’s Club.
The small alcohol stove burns about a pint of alcohol in eight hours. It can be used to cook food. It can also bring the temperature of a small room up to reasonable levels without any fumes. In a larger room, you might want to use three of them.

How to make one?
You need a larger can, such as a clean empty steel one gallon paint can; and a smaller can, such as a clean empty quart paint can. These can be purchased clean and unused from a paint store, or a store like Home Depot, for $1.00 to $4.00 each. You also need a roll of cheap (not quality) toilet tissue and your alcohol. The reason you don’t want quality toilet tissue is that it won’t fit into the can. However, you can overcome that problem by just removing some of the tissue.
First, you remove the cardboard tube from the inside of the tissue with a knife. Then scrunch up the roll of tissue and stuff it into the smaller can. Then take the larger can and punch holes all over the side of the can, so that air can flow through it. You can do this with a hammer and nails. You can draw designs on the can with a dry-erase marker and pound holes along the lines, if you wish. If you fill it with water and freeze it before punching the holes in it, you won’t smash it while you are making the holes. If you need it “right now,” you can fill it with ice pieces and snow, tamped down, before pounding, or just find a way to make holes without smashing it.
Fill the smaller can with 1-1/2 cups of alcohol, so that you can see the alcohol at the top of the tissue. Put this can into the larger one, and light the alcohol. You can put a pan on the top of it to cook your food. I would be careful to put it somewhere where nobody will knock it over accidentally while it is cooking.
One pint of alcohol will burn about eight hours. However, if you extinguish the flame, before you can light it again, you have to pour in more alcohol to bring the level up to the top of the toilet tissue again before you light it.
You should not plan to store the alcohol stove with the alcohol in the can, since it could rust.
It isn’t an extremely hot flame. It may take a bit longer to cook your food. We took quite a while one day to cook pancakes for four hungry people using alcohol. But it is easy, cheap and safe. And it requires materials that you probably have on hand.

* * * *

The Wonder Box
Ideally, if you have an alcohol stove, you have a Wonder Box insulated slow cooker to go with it.
If you bring your stew to a boil over your alcohol stove and then put it into a Wonder Box and cover it carefully with its lid–six hours later, it will still be so hot that you will have to use hot pads to take it out. It has been cooking all of that time, and saving you fuel.
If the food has been hot and cooking all of that time, it did not need to be refrigerated. So you could cook your stew and eat it hot for lunch, then put it boiling hot, nestled down into the Wonder Box, and take it out still hot for dinner. No refrigerator needed.
The fabric must be 100% cotton to prevent it from melting from the heat of the pan. The pan must be one that has small handles on each side and it must have a lid. A pan with one long handle extending out from under the Wonder Box lid, will lose too much heat through the handle, and it will not work as well.
The Wonder Box is much like two small bean bag chairs, one being the lid for the other. You can get the pattern in a fabric store. The larger one is 24” in diameter and the smaller one about 16”. You make it in sections, like orange sections, just the peeling part, made out of 100% cotton. Denim is a good fabric. Even old jeans stitched together would work. You stitch it together, leaving an 8” hole for turning. Turn it right side out and fill with seven gallons of Styrofoam beads. Make the lid in the same way, using four gallons of beads. Don’t let the static electricity of the beads bother you. Pin your seam, then try nestling a pan down inside to see if you have enough or too many beads. Sew up the seams, and you have a Wonder Box.

The Styrofoam beads can be purchased at stores such as Smith’s grocery stores. They come in a four-foot long tube that holds enough for two Wonder Boxes, for about $15.00.
Nestle a covered pot of boiling food down into the Wonder Box bottom, and carefully cover with the insulating Wonder Box top. It is a good idea to put a layer of aluminum foil between the pan and the Wonder Box just to keep the Wonder Box clean. Let it sit for up to seven hours, and it will cook with no additional heat.
Whatever method you use to bring your food to a rolling boil before you put it into the Wonder Box, it can save valuable fuel in a time of no electricity or other services. * * * *

Variations on The Alcohol Stove:

What if you need an alcohol stove “right now,” and you don’t have clean empty paint cans?
Some people have used #10 cans like the ones that food storage wheat or rice or beans, etc. come in. They have also used a “church key” type can opener to make the holes in these cans, since they are lighter. I would prefer the gallon paint can if possible, because it is heavier and therefore more stable with a pot of boiling food on top of it. Also, it has a lid and a handle for carrying.
You can also use the #1 cans that come with the larger size canned peaches and hold about a quart, for the inside of the stove. The problem with these is that it is harder to extinguish the flame down inside the can, because you don’t have a lid to put on it. This can be overcome, of course. Just don’t singe your arm while doing it.

You could also use something like the “Pirouettes” cookie cans. The problem with these is that you have an extra inch of can. Not a terrible problem.
If you need more room heat, you could use three #303 cans like you get with canned vegetables, and put all three down inside one of those large $5.00 popcorn cans that you get at Christmas. Don’t forget to put the holes in the sides of the can. You would have to take off more toilet tissue from the roll, and you would have to use a sharp knife to slice off about 1/2 inch of the end of the roll of tissue, so that it would not extend past the top of the smaller can. But it can be done. You then have a nice little warming “furnace” with a lid on the top.

When terrible things happen, people need something simple, dependable and comforting. They need something easy to use and fast. After they have had time to adjust, they can get on with more complex tools and equipment. But for that first little while, an alcohol stove is easy, simple, lightweight and comforting, as well as safe, and it won’t make any harmful fumes.