Be Prepared Channel: June 2010

Welcome to another episode of the Be Prepared Channel. Sorry for the big gap since I posted last. I have a podcast I will upload this weekend so stay tuned. Well today the news is just full of great and wonderful things. The word of the day is FinReg(for the Financial Regulation Bill). This was pushed through last night as our "wonderful" politicians think that doing something makes it look like they are actually getting "something" done. What a horrible piece of legislation this appears to be. But before we get too far down into this post maybe a quick backtrack on what this was suppose to be about.

FinReg was suppose to be the bill that was going to be the most serious attempt since the Great Depression to put the brakes on the banks, financial institutions, and even put a leash on the Federal Reserve. They piled in various smaller pieces of legislation that would have been meaningful to accomplish things like the Audit the Fed bill and made is just a component of this massive FinReg bill. From there the bankers and lobbyists have basically gutted and watered down anything of value in the bill. It was meant to eliminate the "To Big to Fail" so that taxpayers wouldn't be on the hook for any more massive banking institutions bailouts(they failed and we will be on the hook for unwinding these institutions). It was suppose to require capital in the banks to back up loans and prevent possible runs on the banks from wiping out the banks(very little was actually in the bill to address capital requirements). It was suppose to spin off the derivatives products to a separate trading platform and provide visibility, transparency, and accountability for these financial weapons of mass destruction. It was suppose to separate out the risky off balance sheet transactions from the banks(again they failed). This bill in short was suppose to push for the de-leveraging and de-risking of the financial system today. Sadly it has failed on all accounts.

What does this mean for us as preppers and modern survivalists? It means that the banks and financial system today is more leveraged and have more risk than when the panic started a couple of years ago. It means that instead of taking drastic action to head this off at the pass and try to rectify what we know is broken they have basically given these banks a pass and the global casino called the economy is now set to be run off a cliff(with congresses approval and regulatory body oversight). Our politicians think "they have done something" and now will pat themselves on the back and congratulate themselves as the rate of financial decline globally accelerates. Don't worry, they always have the "We could never have seen this coming" line sitting in their back pockets as they pretend they didn't understand or blame some "deer in the headlights" bureaucratic regulator as we listen to weeks of news reports that the new agency responsible for monitoring and fixing the system was too busy surfing porn and signing off on cooked books and accounting tricks. Anyone with half a brain tied behind their backs can see what is happening.

So this means we need to prepare for this train wreck to continue and to expect it to be far worse than what we may expect. Over the last couple of weeks I have heard some interesting commentary coming from the few talking heads and analysts that act like they have at least half a brain discussing the states and cities that are bankrupt. Today the topic came up in the context of the US government and spending. The topic that posed an interesting idea was the concept of bankruptcy. States by law cannot declare bankruptcy as I understand it. There is no provision for such a thing. However cities, municipalities, and other government entities can default and declare bankruptcy. At first one would think this would be the worst possible outcome, but then someone said something that was most interesting and possibly the silver lining to an event like this. If a city were to declare bankruptcy their lines of credit are wiped out. They cannot borrow any more money! They are forced to a pay as you go as they have not lines of credit. They also have the ability in the bankruptcy proceedings to renegotiate pensions, union contracts, and other huge financial obligations that they have and possibly if sane and rational people are involved maybe get these budgets back to something that can be covered with the revenues the city takes in.

Now we all know the idea of bankruptcy is a painful one and will come with a lot of pain and suffering, but I have to ask if it wouldn't be better to push these cities into bankruptcy so that they are cut off from all this spending? These politicians apparently don't have the self control or will to stop spending on their own. Today on CNBC Rick Santelli made the statement that when talking about governments today it isn't the governments that seem to have the backbone to make the hard choices it is typically the creditors that force those choices upon these governments such as the "austerity" measures they are dealing with in Europe. I would have to say that statement really just reinforces the idea that the sooner states, counties, cities, municipalities are force to default and cannot pay the bills the sooner they will be cut off from the credit taps and maybe, just maybe we can force our government to live within it's means before they saddle us all with so much debt and taxes that it just doesn't pay to have a job that earns "income".

I am not one to make statements like this and take it lightly. I believe in the handshake deal, that your word is your bond, and that you do what is right and you keep your promises. We wouldn't be keeping our promises if we defaulted on our debts. But one has to ask if promises weren't already broken by our politicians when they chose this path of debt, reckless spending, and ever expanding government roles into our lives far beyond what is reasonable or sustainable? I know some of us have been ranting and raving, and foaming at the mouth for decades now trying to get people to wake up, to stop the insane wars, the ever expanding socialist/communist state, and the clear disregard for our Constitution and the Rule of Law. So I have felt betrayed for many years, but I know for many folks who might be just waking up to this nightmare that this might all seem new to you. It might really be the first time you were aware that it wasn't just the ravings of some lunatics, but that we really were financially broke and that things really were bad. Yes you have been lied to, and yes they are still spinning tall tales to put off the day of reckoning. If this is all a new revelation to you I am sorry to inform you that it is true that things really are far worse off than they appear. So now is the time to start moving with a purpose because the time we have may actually be quite short at this point to get our own personal affairs in order and make sure we do all that we can to be prepared.

So here is your action plan:

1. Get out of debt.

2. Build up an emergency cash fund immediately with at least 3 months of living expenses.

3. Begin copy canning, and building up a emergency kit with your food, medical, water, equipment, and tools to get you through 3 months minimum.

4. Start moving your assets into tangible things like precious metals(physical not some ETF or certificate where someone else holds the metals for you)

Book recommendation:

Making the best of basics - Family Preperedness Handbook by James Talmage Stevens

I found this book informative, and it lays things out in simple charts to help you sort out the things you will need. I am still looking through this book, but I feel it is an excellent place to start. While I don't agree with all of the ideas and suggestions put forth I think you will find that with time and experience you too will see where you can improve upon or modify the suggestions offered in this book. This is like your Scout Handbook. Pick one up!

Summary:

Regardless if we push for bankruptcy today or if they keep kicking the can down the road all of these governments will default. Mathematically I believe they have already crossed that point at the national level that we cannot recover from the debt and massive piles of IOU's from unfunded liabilities like Social Security, Medicare, Medicaid. So one way or another they will default, and we will see massive corrections on the horizon. The further down the road they kick the can the worse the correction is going to be.

Don't be fooled into thinking that they accomplished anything other than give the too big to fail banks a free pass and handed even more control of our economy to the Federal Reserve who actually created this nightmare.

Bankruptcy might not just be an option, but it may be preferred to what they are doing today. The sooner governments at all levels are force to pay for things with revenues they actually receive and live within their means will be the day that maybe we can finally start to see what a real recovery looks like. One can only hope.

Are we falling like over ripened fruit?: