Wednesday, May 19, 2010

Episode 8: The Rigged Global Economic Game

Welcome to the Be Prepared Channel. For some reason has managed to lose my episode 8 and it is nowhere to be found. So I am reposting it here now. Hopefully they get their technical issues sorted out and don't keep losing my blog posts....
Episode 8 - Be Prepared Channel - The Game is rigged:
Sorry for the delays in posting a new episode. As I reported in previous blog posts I have been between locations and things have been crazy busy. So now is a good time to catch up and talk about what is going on.

The Markets Rigged and Cooked Books....
Well folks the recent revelations that have come out over the last month about bullion banks being leveraged 100 to 1 and not actually having precious metals was a bombshell. Then we find out that the government in Greece has been lying through their teeth about how bad the debt problem is and now it looks like it is really out of control. Finally we hear that JP Morgan is being investigated for silver market manipulation after an insider/trader spills the beans a few weeks ago to federal regulators.

Sadly if you analyze the debt to GDP figures for these countries in Europe they are screaming about and they aren't as bad off financially as the US! This really is just a clear example of a financial hit that is taking place. If they can keep everyone focused on the small events someplace else other than the US government debt it appears that they are hoping some miracle will happen and this problem will not follow the bread crumbs home. You cannot fix a debt and spending problem by borrowing more money and still spending it on stuff you cannot afford. Greece will default... The handwriting is all over the wall and it will spread. If you look at the state of CA their debt crisis is worse than all of these countries in the headlines put together and the CA economy is bigger than all of them put together... Yet we don't see CA's budget crisis in the headlines. The rioting on the streets in Greece will spread as people wake up to the fraud perpetrated by their governments and banks and as people will finally say enough is enough. Everyone is so hot to blame the banks, but really it takes two to tango and there had to be willing counter parties to take out these loans, borrow money and invest it in CDO's and the alphabet soup of creative financial instruments. Many times voters didn't get a say, didn't get to vote, didn't have any idea what our local, state, and federal government is doing and how many ways they have leveraged all of our futures. People have a right to be mad, but at the same time lets be honest that we have take charge now that we know the level of corruption and debt that we live with and own up to the fact that we arrived at this place in time because of what we did or didn't do. The events last Thursday showed us even more examples of fraud and these days they are brazen and out in the open about it.

The Greek people are being told they have to give up half of their retirement accounts, and massive increases in taxes. This is a commonly repeated theme. It was done in Argentina as well. And once the politicians get the first half of the retirement fund/pensions they will be back for the rest shortly. This is coming to the US as well. It is only a matter of time at this point.

Levels of fraud:
1. Nasdaq announces that they are cancelling trades that took place between 2:40 and 3:00pm.
2. Mainstream media immediately went into overdrive blaming trading desk error, and computer software glitches(of course no evidence was found that either was the case).
3. No mention of the hedged funds in Europe selling and possibly setting off the price decline that pushed through levels of resistance that fired stops that set the plunge in motion.
4. Plunge protection team to the rescue... Any time the stock market isn't behaving itself the Treasury in conjunction with the Fed have setup a plunge protection team, so any time the market starts to fall out of bed the PTT jumps into action pouring billion and in some caes trillions of our dollars into the markets to push the markets back up. May 6th was a perfect example. The market was down almost 1000 points on the DOW and looked like it was going lower... and like someone flipped a switch the market reversed almost 700 points in a very very short time frame.
5. Who is doing the buying? Trimtabs who follows cash flows says the retail investor, you and I who make up the majority of the market is on the sidelines and not investing. Then who were/are the buyers in this market that have the power to muscle the major averages around like this?
6. Bullion vaults are leveraged 100 to 1 in public testimony, if your buying ETF's or bullion and allowing others to hold your metals you might be shocked when you attempt to retrieve or you need your investment to find that the banks/ETF's don't have and never did have your metals. Your buying paper, instead demand delivery and keep positive control of your investments.
7. Much of the so called recovery news is pure spin and propoganda... and what little growth and recovery there appears to be is fueled by trillions of dollars of stimulus money that the Fed and Treasury have been dumping into the banks and economy. It is a false recovery, so don't be fooled.

The game is rigged at every level at this point. Our local communities, counties, utilities, states have been played the fools and have used creative finance to offset declining revenue, shrinking population, and the massive waves of people retiring. Sadly most of us have been blissfully ignorant of these activities, but now the rooster has come home to roost. Many of these creative financed deals are falling apart. Income that was promised from these CDO's that our communities were talking into investing in have turned into trash so we are left with the bills, debts, but not the income.

Taxes are being raised across the board as all levels of government come to grips with the extravagant and foolish spending. In many cases they are still in denial and somehow think a tweak of the numbers here, and nip and a tuck there and she will be good as new. People don't know the level of greed/fraud/corruption/mismanagement/incompetence we are talking about because for the most part is is pretty difficult to imagine. Yet the debate still rages on over the stupid and mundane spending... over parks, street lights, funding for community centers, and programs. When we finally get past this level of understanding to the bare bones spending needed to keep government functioning we will know we finally are getting serious about how difficult the choice we have to make are. Until that time we are no where near the the bottom of this economic cycle.

Why are we preppers/survivalists, and why do we plan and prepare?
This last week really drove home the reasons why I prepare and plan for the events, environment, and circumstances in which we live. I was out trying to go grocery shopping in Nebraska as our home there is not setup in any way shape or form. I don't think we really anticipated being there this long so we have put off setting up preps and supplies and having a game plan. I have been mostly stuck in CO so NE has been on the back burner. So I head out to go get food and supplies. I get to the cash register and guess what? My debit card is not working! So here I am at the checkout with a debit card that isn't working. I contact the bank and I am informed that Mastercard flagged some sort of activity on the account that lead them to believe my account has been compromised. Specifically they saw a zero dollar charge coming in from a bank in the Netherlands. So they put the hammer down on it as soon as they saw it. Now I didn't lose a penny or even have to refute any charges which is the good side. The downsides are many especially when your on the road and your bank is a local bank in CO. So what is a lost guy in NE who is looking for a homestead and needing groceries to do? I am glad you asked!

Plan for the unexpected:
1. Have emergency cash with you
- In this crazy world of banks leveraged to the eyeballs, global economic crisis, and just plain old emergencies you don't know if your debit/credit/checks will be accepted
- What if FDIC suddenly decides to close your bank and funds will not be accessible for some period of time? Do you have the cash on hand to handle such an event?
- Think about the what if's, and what you would do in a situation where you suddenly cannot get to your bank accounts, or other savings
- Educate and prepare others around you also so that they too can be prepared and will have the cash on hand to help themselves and others if needed

So when I planned this trip to NE I decided I better have emergency cash on hand in case the truck broke down, or an emergency arises that only cash can save the day. I am glad I did. Now sadly I didn't have my emergency cash with me at the store at the time I discovered the debit card crisis so I was not able to complete my purchases and I had to explain my predicament to the cashier and left them with a basket full of stuff. It was embarrassing and reminded me that I should have thought about something like this being a possibility. So I wasn't out of cash and stranded because I had planned. My bank offered to Western Union cash to me if I needed it at no charge to me. I declined because I knew I was OK. Secondly I had already been preaching Be Prepared to my wife and she also had emergency cash on hand so that I could tap into those funds to get me back to CO until my replacement debit card arrives.

How does is all end?
Well the bank just sent me the card yesterday(May 5th) and the pin to activate it still had not arrived. My pin finally arrived in the mail today(May 10th) and I was able to get things back on track. But this could have very well been a long and difficult event had I not had a game plan and the cash on hand to address such a problem. This is where it starts to feel rewarding to be focused on being prepared, taking action, putting things in motion, and having that plan actually get used to address the problem.

Game plan:
1. Get your 72 hour kit together if you haven't done it yet... What are you waiting for? An emergency?
2. Break out(itemize) your bills and debts and figure out exactly what you owe and what your spending.
3. Pay off your debts as fast as possible, pick the smallest debt you have and take every extra penny you have and put it on that debt until it is paid
- Take the money freed up by paying off the smallest of your debts and apply that monthly amount to the next largest debt and repeat this process until your debt free.
4. Get your emergency cash fund together as fast as you can. You should have 90 days of operating expenses set aside to deal with whatever issues may arise. Set a goal and a timeline to get there... What if some of this 2012 horror story stuff is real and something does happen? Set a goal to have your basic emergency cash by 2012 just so you have a target to work toward
5. Do not keep your emergency cash in the banks! This is a rigged and corrupt system, these banks are under capitalized, leveraged to the eyeballs, and and part of a corrupt infrastructure of banks that are rotten to the core. Keep your cash on hand and available.

Homestead Search update:
The homestead search continues. We hoped to take advantage of the buyer tax credit, but sadly others had the same idea and anything that was worth making an offer on turned into a bidding war! Believe it or not the kind of land and homestead we are looking for is in demand. We didn't see the same kind of rush to buy other properties that we saw for land with acreage and a workable house. So we begged off when we found out the property we were interested in had turned into a bidding situation. It was just nuts. The land was great, the outbuildings were good. There was a need for fencing(existing fence was toast, and most of the property didn't appear to have any fence around the perimeter. The house however was a wreck. I needed to be gutted and just start from scratch it was so bad, but it had the bedrooms, baths, and workable space we wanted. However knowing the amount of work and money that was going to be needed in the house we felt it wasn't worth the asking price. I guess others were caught up in the tax credit mania and lost their minds... Only in an auction or bidding situation will seemingly sane people pay more for something than they would if they were to walk into a store and buy it new. In this case the price went up over $30k over what it should have sold for all in the name of trying to save $8k for first time buyers or $6500 for others who have owned property. So these people were willing to pay up in a fit of frenzy buying to get that credit. Well sadly we were watching a couple of different properties and they all sold this last day of the tax credit. Do we have any regrets? Yes and no. We regret not getting this place due to the great land and the way it was setup. It is very hard to find good land that is usable. The price was still affordable for us, but it was the principal of the thing that people were willing to throw away 30k that will be needed to make this place livable. That is the hard part, but the positive is that we know given enough time we will find what we are looking for and it just gives us more time to continue saving. Where there is one property like this there will be more. The other part that sticks in our minds is that property prices will now come under even more pressure as the buyers will have moved their purchases forward to take advantage of the credit. So we feel there is the real possibility that as prices continue to decline this will help us further. Now the challenge will be to find the right land for us.

My wife has brought up an idea that I hope might pan out and that is the option of buying a small affordable home in a small rural community that we could afford to pay for with cash. This way we avoid the debt is cancer discussion in the house and can make the repairs, upgrades, and preparations out of pocket while saving more cash for the land that we are looking for. So we are currently exploring this option and will be giving this some serious thought as the current state the economy really does not bode well for the future. Having your home paid for as meager and modest as it might be could be a better option for us in the long run. We will keep you posted.

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