The Big Picture on Gold, Silver, Real Estate, and the U.S. Dollar

I have come to the conclusion that the nascent implosion of the U.S. residential real estate bubble is going to have some far-reaching macroeconomic consequences. We are just starting to see the beginning of the real estate collapse. The adjustable rate mortgage (ARM) reset clock is ticking, and the home foreclosure rate is just starting to spike. I predict that in just three or four months, the housing market collapse will be just as big a news story as the Savings and Loan crisis of the 1980s. There will be plenty of hand wringing and finger pointing. The lenders that foolishly loaned billions of dollars to home buyers that weren’t actually credit worthy will get most of the blame. There will be congressional investigations. There will also probably be some Enron-esque collapses of banking and derivatives trading giants. Followed, of course, by some sort of bailout at taxpayer expense. (Some pieces of of American history keep repeating. I still remember the $1.2 Billion Chrysler bailout and the $481 Billion S&L bailout.)

In 1978, the total debt burden of households in the U.S. was less than $1 trillion. But as of 2007, it is more than $13 trillion! We drowning in debt. As house prices collapse, so much money will be lost (on paper) in such a short period of time that the debt merry-go-round will suddenly stop. There will be an enormous, collective gulp and an un-spoken: “Oh my Lord, what have we done?” For roughly the past five years, American homeowners have been using their houses like ATMs, “extracting” cash from them, usually through “home equity loans” or in a wad of extra cash when they re-financed their mortgages. These are called “Mortgage Equity Withdrawals” (MEWs), in banking circles. MEWs have pumped an extra two trillion dollars into the economy in the past five years. A lot of this money has been squandered on big screen televisions and other useless Schumer that folks have wheeled home from Wal-Mart. When the MEW money merry-go-round stops, the economy will surely go into a deep recession. (Since consumer spending is the biggest driver of the economy.) As the economy tanks, the Federal Reserve Open Market Committee (FOMC) will eventually have no choice but to cut short term interest rates. By doing so, they will be creating new money on a grand scale.

As the housing bust develops further, there is the real risk of a stagnant economy, even with very low interest rates. (A classic liquidity trap) If consumers still feel squeezed and if they still worry about lay-offs, they will curtail their spending. Ben Bernanke has publicly stated that he will drop greenbacks out of helicopters if he has to, so don’t be surprised if you see the Fed resort to some very unusual moves. This could include monetizing large chunks of the Federal debt. The combined effects of lower interest rates and debt monetization will constitute a massive shot of liquidity–perhaps the only way that “Helicopter Ben” can keep the economy afloat in the midst of the housing collapse. This does not bode well for the U.S. Dollar, which was already losing ground in the first quarter of Aught Seven against most other world currencies–most notably the British pound, the Euro and the Yen. (For example, it now costs more than $2 to buy one Pound Sterling.) So what does the “big picture” show us? For the next three years, there will likely be a bear market in real estate, stocks, and the US Dollar Index. Meanwhile, there will be a bull market in food prices, fuel prices, gold, and silver. The economy could very well turn stagnant, with high unemployment coincident with high inflation–similar to the “stagflation” economic conditions of the 1980s. Double digit currency inflation is likely. Plan accordingly. Protect yourself. Minimize your debt burden. Have plenty of cash on hand, in case you get laid off. And if you haven’t yet diversified your investments into precious metals, then I recommend that you do so immediately.

Speaking of impending crises, I highly recommend the book Financial Armageddon by Michael J. Panzner. In it, Panzner does a fine job of spelling out four impending crises that within the next decade will challenge our financial well-being and perhaps threaten our entire way of life. These four crises are: The debt bubble (public and private), pension plans, government guarantees, and derivatives.

Letter Re: Potential Range of Nuclear Weapon EMP?

Mr. Rawles:

I’m confused. Some things that I’ve read say that the maximum range of [nuclear weapon electromagnetic pulse] EMP is about 60 miles, but others say 200 or 250 miles. Which of them is right? Wouldn’t a terrorist bomb at ground level have shorter range EMP than a nuke touched off at high altitude or low orbit? (With a wider horizon.) Thanks, – Lance in Nebraska

JWR Replies: You aren’t the first SurvivalBlog reader to ask about the greatest potential effective range of an EMP-optimized nuclear detonation. I first discussed this in SurvivalBlog back in October of 2005. The answer is both easy and impossible to determine. Let me explain. First, the easy part. The basic line of sight (LOS) footprint range calculation is really simple. It is essentially the same as the calculation that is used to determine the maximum effective range for a VHF or UHF radio onboard an aircraft. Referring back to one of my unclassified notebooks from my Electronic Warfare (5M) course at Fort Huachuca, I find: Assuming level terrain, the maximum potential radius of LOS in nautical miles (nmi) = square root of the emitter’s altitude (in feet) x 1.056. Hence, that would be 149.3 nmi at 20,000 feet above sea level (ASL), or 191.8 nmi at 33,000 feet ASL. (A typical jet or C-130’s service ceiling.) SurvivalBlog reader “Flighter” mentioned: “…some of the larger business jets such as the Airbus ACJ, Gulfstream, Challenger, and Citation are certificated to fly at or above 41,000 feet. The Sino Swearingen SJ30, is perhaps the highest flyer with a certificated ceiling of 49,000 feet. Hypothetically, a dangerous parabolic flight profile could with supplemental oxygen for the flight crew and perhaps even supplemental JATO rockets might push apogee to 75,000 feet in a few aircraft models. (Hey, it would be a suicidal flight anyway.) That is probably the highest altitude that could be expected for a terrorist to touch off a nuke–at least in the near future. That would equate to a footprint with a 280 mile radius. Oh, yes, they might also get really creative and use an unmanned balloon. (The word’s record for those was 51.82 km (170,000 feet / 32.2 miles) But that is highly unlikely. What is likely? A ground level detonation. The EMP footprint of fission bomb detonated near ground level on dead level ground (plains country) might be no more than a 45 mile radius.

Now on to the part that is impossible to predict: long range linear coupling.  Because telephone lines, power lines, and railroad tracks will act as giant antennas for EMP, the EMP waveforms will be coupled through those structures for many, many miles beyond line of sight (BLOS). Just how many miles BLOS is not yet known. I believe that if it were not for the advent of the Partial Test Ban Treaty in 1963 (which banned atmospheric and space nuclear weapons tests), the DOD and AEC would have had the opportunity to conduct far more extensive tests to further characterize the panoply of potential EMP effects. But those test bans have kept us in the dark. In the absence of practical data, there is a lot guesswork, even among “applied physics” expert nuclear weapons physicists. We may not know the full extent of the EMP risk until after we see that bright flash on the horizon.

For planning purposes, you can probably safely assume that if you are living more than 280 miles from a major city, then your vehicle electronics will be safe from a terrorist  nuke’s EMP. (Since you will be BLOS to the EMP footprint of a nuke that is set off below 75,000 feet ASL.) Your home electronics, however, anywhere in CONUS might be at risk due to long range linear coupling–that is if your house is on grid power. This, BTW, is one more good reason for you to set up your own off-grid self sufficient photovoltaic (PV) power system. The folks at Ready Made Resources. offer free consulting on PV system sizing, site selection, and design.

Letter Re: The 1898 Threshold for “Antique” Gun Exemption in the U.S.

Mr. Rawles:

I have read your FAQ about Pre-1899 firearms being classified as antiques and exempt from some of the Federal regulations. The 1894 Winchester 30-30 serial number exempt at that time [that you wrote the FAQ] was below 147685. Mine carries serial # 165559. Would it now be exempt since it is [now] 2007? Thank you, – Eleanor

JWR Replies: Sorry, but the “antique” threshold has been frozen at Dec. 31, 1898, ever since passage of the U.S. Gun Control Act of 1968. That defies common sense, but that is the law in the United States. The frozen legal threshold means that with the passage of time, there will be fewer and fewer legally recognized “antiques” in circulation, as guns eventually wear out. This makes pre-1899 guns a great investment. Antique gun exemption laws vary considerably depending on where you live. For details on the “antique” thresholds for Australia, Canada, England, and Norway, see the Wikipedia page on Antique guns. I recommend that after they’ve acquired their basic battery of survival firearms, well-prepared families should acquire a few pre-1899 cartridge guns chambered for smokeless cartridges that are still factory produced. There may come a day in the U.S. when all firearms will be subject to registration. But pre-1899 guns will presumably still be exempt. Anyone interested in acquiring some pre-1899 cartridge guns should contact George at The Pre-1899 Specialist (one of our advertisers). He will be happy to share his knowledge on the subject.

Odds ‘n Sods:

From RBS: The history behind “political correctness”

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Survivalist.com has a fascinating links page on various disasters

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RCP sent us this, but it hardly comes as a surprise: Japan is considering selling some of its US Dollar reserves.

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I heard that J&G Sales in Arizona has some .303 British surplus ammo now in stock. It is POF surplus ammo, with a FMJ bullet, brass case, packed in 32 round boxes or 768 round cases.

Jim’s Quote of the Day:

"Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them, and these will continue till they have been resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they suppress."
– Frederick Douglass

Notes from JWR:

We recently traveled to California. I was shocked to see the exorbitant gas prices there. ($3.65 for a gallon.) After having lived in the hinterboonies for so long, I was also alarmed to see the prevailing high prices of other goods and services, like $24 for a haircut and $4.35 for a loaf of bread. A very minor repair on our SUV cost us $525. The dealership charged $125 per hour as their shop labor rate! Since we towed our a trailer down there, we were also aggravated by California’s strictly-enforced 55 mile-per-hour speed limit for vehicles towing trailers. Isn’t that just like a Nanny State to have that sort of law?

Hey! I just noticed that we’ve surpassed 1.3 million unique visits. Thanks for spreading the word, folks.

The Most Important Lesson, by Mr. Yankee

Like most, as a young hunter I longed for my first buck. I didn’t take a deer the first season despite numerous sightings. The deer were there. I just couldn’t seem to get a clear shot. I saw only tails, or running deer instead of still deer offering their shoulders to me. As the second season opened, I wondered if I should take shots that I was not 100% sure of. I had a tag for antlered deer only, so I would at least have to make sure that the deer was a buck before I pulled the trigger. I resolved that I would take the first shot at a buck I saw. No more waiting for the perfect broadside pose. If I could just be sure of antlers I would pull the trigger no matter what.
I had one glimpse of a departing tail opening day. My hunting companion bagged a nice six-point but after that I was on my own, pitting my wits and knowledge of the terrain against the wily bucks I knew were there. The next day I saw three does trotting across an open field, but could not legally take them. By the afternoon of the third day I had buck fever. I thought I could see antlers in every clump of brush. Every fallen log was a buck in his bed to my eyes. I still-hunted away from home all morning. Without much thought, I crossed onto the next farm about noon. I did not doubt that access would be granted if I had taken the time to ask for permission. We were on good terms with the neighbors and the area that I planned to hunt was cropland bordered by woods on one side and a brush-choked streambed well away from any livestock.
It was this stream that drew me over the fence line. I knew that any deer feeling pressured could duck into the gully to skirt the open field on one side and the open hardwoods on the other. I took a position overlooking where the gully ended. Any deer walking that brushy corridor would emerge into my view and either cross the field of corn stubble before me or work up the slope of open hardwoods on the far side. If a buck walked either of those routes, my investment in cold toes and fingers would be well worthwhile. I settled in for a long wait, watching the shadows grow as the afternoon wore on.
Just about the time I was thinking more of my damp seat and cold toes than watching the hedgerow, I became aware of something moving in the gully. A bird flew up at the far range of my vision. Then a moment later, the sound of a snapping twig reached me faintly over the gentle sound of running water. Long minutes passed without revealing the wary buck and I gradually became less alert, lulled by the gurgling stream and the motion of gently swaying saplings. The dappled leaves still holding to them occasionally drifted down to mingle with blackberry bushes separating the watercourse from me.
Minutes had passed without any sign of life when a crackle of breaking brush at the near end of the gully shot adrenaline through my veins. There was something unmistakably moving just out of sight and coming my way! I saw the top of a sapling move as something out of sight brushed against its trunk. The yellow poplar leaves drifted against the thick hedge of briars below. The form under the saplings moved closer. Yes, I could see it now. The unmistakable gray of deer hair glimpsed between silver saplings and the screen of red berry stalks. A sneaky old buck must have walked straight down the stream bed. The noise of his approach had been covered by the gentle sound of running water and muffled by the wall of brush.
My breathing became ragged. My heart pounded in my chest. I could feel every pulse in my shoulders and throat. My palms begin to sweat as my thumb reached for the safety on the rifle that lay heavily in my lap and the animal moved toward me. Oh if I could only see antlers!
I tightened my grip on the cold stock. I could see the shape of his body now. It was about 3 feet long, soft gray, 3 feet off the ground and moving slowly, and steadily my way. He was nearly free of the saplings, which at that point had a few low branches. We were only separated by the thick screen of berry bushes. I thought about the powerful cartridge in the chamber and knew that the briar stems could not sufficiently deflect the bullet from its intended target. I would click off the safety, throw the rifle to my shoulder, and fire the instant I saw antlers. I contemplated the devastation a shot raking from chest to tail would create. Without a doubt the buck would slump in his tracks and I would have to drag him up the stream bank and out of those thick thorn bushes. Perhaps I should let him step clear? He was coming the right way. I realized that I was holding my breath. Then I saw the antlers.
I could not help but pause at the sight of them. I had dreamed of this moment for so very long. This was going to be my first buck, and oh what antlers they were! Powerfully thrusting through the thick berry bushes, the antlers shoved through the briar screen and broke into the open. With raking motions the rack moved toward me. I saw three long tines on each side and thick brow tines sweeping ahead of a gray hulking body almost as tall as the low sapling branches. I heard the briar stems breaking. I could even hear his breath and began to raise the rifle.
I never fired. I never finished clicking off the safety. In fact, I never even raised the rifle from my lap. I sat stone still with the kind of chill in my soul that I hope I never feel again. Long minutes later I was quite alone at the edge of that field. For what I saw as that matched set of perfect antlers was thrust clear of the briars, was that they split apart and fell earthward when the man who held them stood up. This hunter, with rifle slung over his shoulder, had bent at the waist to move under the low branches and held his synthetic rattling antlers in either hand to push thorn bushes away from his face as he climbed the stream bank.
He never knew I was there. He never knew how close his tree bark camouflage had brought him to being a terrible statistic. As I look back now, more than a decade later, I do not recall seeing any red or blaze clothing at all. What I do recall is that my hands shook as I took them off the unused rifle and silently thanked God that I had learned the most valuable lesson of hunting without tragedy.
I’ve taken a dozen deer from that same area in upstate New York over the seasons that followed. But one other season I went home empty handed. I heard my buck working a rub, and caught glimpses of his gray hide moving away through the hardwoods in the last light of day on the last day of the season, but I let him walk into the shadows with my tag unfilled. I was 99% sure of my target. But 99% is not sure enough, because years before I had learned that safety is the most important lesson of all. – Mr. Yankee

Letter Re: Privacy from Google’s Prying Eyes

Dear Jim:
You don’t have to be a “Secret Squirrel” to be concerned about Google tracking your online searching.
Here is a quick and easy way to use Google but not get tracked: http://www.scroogle.org/cgi-bin/scraper.htm
The following is a quote from their site: “Not only does Google scrape much of the web, but they keep records of who searches for what. If information about your searching is accessible by cookie ID or by your IP address, it is subject to subpoena. This is a violation of your privacy. Someday Google’s data retention practices will be regulated, because Google is too arrogant to do the right thing voluntarily. In the meantime, you should not be leaving your fingerprints in Google’s databases.”
“There are other proxies that can protect your privacy on the web. Almost all are general-purpose proxies that cloak all of your web activity behind an IP address that is not easily traced to your service provider. One is Anonymizer.com. A possible problem with this one is that the founder, Lance Cottrell, has connections with the FBI and the Voice of America. It also costs money for a reasonable level of service. Another is Tor [“The Onion Router”], which is much more secure. But it is also slow, because Tor is a complicated system that needs networks of volunteers to run server software. Juvenile surfers from video pirates to rogue Wikipedia editors tend to clog free services such as Tor, which slows them down even more.” Regards, OSOM – “Out of Sight, Out of Mind”

Odds ‘n Sods:

Simon M. noticed a cool “Bulletproof Urban Assault Vehicle on Commander Zero’s blog. The Commander ‘s wry comment: “Try not to think what a vehicle made out of 3/16″ sheet steel weighs and what it’ll do to your engine and suspension. Especially your suspension of disbelief since this thing wouldn’t stop a .223. Points for style though.”

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Jay in Florida mentioned a fascinating thread over at the S&W Forums on what happens to bullet hit bodies by a LEO Medical Morgue examiner. Quite valuable information.

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Its no wonder that the liberal do-gooders have such successful petition drives! Watch this brief video on Banning Water, from Penn & Teller.

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InyoKern sent us this piece: Ethanol plants come with hidden cost: Water. His comment: “This is a little eerie. Right about when the Midwest needs to bring back small non-mechanized (family) farming to deal with Peak Oil food production (which won’t work at Agricorp scale). Ethanol requires 3 gallons of water to make 1 gallon of ethanol. And the very best (most efficient) methods of production only yield 1.3 units of energy for each unit of energy put into the system to make it. So you’re not getting much bang for your buck.”

Note from JWR:

A reminder for those of you that already have copies of my recent non-fiction books printed before early April. Please update them with our new mail forwarding address. See page 207 of Rawles on Retreats and Relocation (Appendix B) and page 239 of SurvivalBlog: The Best of the Blog – Volume 1 (Appendix A)–they should both get penned with this new mail forwarding address:
James Wesley, Rawles
c/o Elk Creek Company
P.O. Box 303
Moyie Springs, Idaho 83845 USA

I have already updated the electronic master copies at Cafe Press, (the print-on-demand publisher), so any copies that were ordered after April 6th have the address corrections already made.

Note that our e-mail address is still: rawles@usa.net

Letter Re: Question on Sizing a New Garden

Sir:
How much square footage should I fence off (to protect from deer) for a [self-sufficiency] vegetable garden for my family of five? Thank You Sir, – P.L., near Eugene, Oregon

JWR Replies: As a scant minimum, I’d recommend a 25′ x 30′ garden plot. By using French Intensive (double dug) or Square Foot Gardening techniques, you can get a huge yield out of that much garden space. But if you have the acreage available and can afford the extra fencing material, then by all means make your fenced garden plot two or three times that size. This has several advantages. First, you will have room to maneuver a tractor. Using a tractor disc will save you a tremendous amount of labor, especially the first year that you develop the garden. Secondly, the extra garden space can be used to grow extra crops for barter and charity. You never know how many relatives will show up on your doorstep on TEOTWAWKI+1.

Even if you don’t have the time or the inclination to build and oversize garden fence now, at least buy the materials for fencing a big garden in the future–when such supplies may be difficult to obtain.

Letter Re: Holster Recommendations

Hi Jim:
I plan to open carry in my new county here in Colorado, and I’m looking for a vendor that sells attractive leather shooter’s belts and nice leather holsters for M1911s and Glocks. Do you have any preferred vendors/manufacturers you can recommend? I’ve only ever carried [pistols] on [military] Load Bearing Equipment (LBE) so this semi-casual leather belt open carry thing is very new to me, as is the civilian gun culture 🙂 – Eric

JWR Replies: We mainly carry Kydex Blade-Tech brand holsters and mag pouches here at the Rawles Ranch. And for the most part we use modestly-priced Uncle Mike’s black nylon/velcro belts. (they are “Plain Jane”, but sturdy and functional.) We do have a couple of leather holsters made by Milt Sparks Holsters. Their belts and holsters are highly recommended. I’ve been doing business with them for more than 20 years. They don’t skimp on quality. The Milt Sparks belts and holsters range in style and price from utilitarian (like the rough-side out “Summer Special”) to some that are downright stylish. (And priced accordingly.)

Letter Re: Advice on Where to Learn Practical, Tactical Skills

Sir:
USRSOG conducts a civilian S.E.R.E. (Search Evasion Rescue & Escape) class once a year. They teach primitive fire-building, Evasion techniques, field camouflage techniques, some plant identification, hand-to-hand [fighting] techniques, natural cordage making, [flint] knapping and a bunch of other things like primitive shelter making. These guys are hardcore and I’m blessed to have known them and took their class last year. This year’s class is April 27-28-29 and I think there is still time for any last minute sign-ups but your readers will need to contact them right away. Students also need proof that they are right with the law by producing a CCW license or letter from their sheriff stating that they have no outstanding warrants. They don’t want to teach bad people [potentially] bad things. The cadre are all made up of retired [U.S. Army] Special Forces, Rangers, SWAT, so the stories they tell are worth the price of admission alone, which is $250. Not a bad deal for the knowledge you get in return. – A Reader

Letter Re: Advice on Storing E85 Ethanol Fuel

Jim:
I’m sorry, but that Wikipedia article gave you bad information. It’s describing the situation for E10, not E85. You’ll note it doesn’t give you a reference to a study backing up this analysis. On the other hand, this Wikipedia.page does: Ethanol Fuel Mixtures
The key graph is on page 32 of that reference
Similar graphs and conclusions agreeing that the sensitivity to phase separation declines as the percentage of ethanol increases are available elsewhere:
From the US EPA
From Cim-tek

Regards, – PNG

JWR Replies: Thanks for correcting my error. My humble apologies for not researching my reply more thoroughly. One of the things that I love about SurvivalBlog is the breadth and depth of knowledge that is possessed by the readership. If I err, I don’t hesitate in posting a correction.