The Reckoning

 

Admittedly, I have been waiting for the great reckoning since I read "The Great Reckoning" in about 1990...  hasn't happened yet.  My enemy, the state, it seems, is more effective than I anticipated at dragging things out.  Although none of the credit for positive economic activity should go to the state.  Instead it rests squarely on the shoulders of those dam Capitalists, who are just too good at creating wealth, paying taxes, and circumventing those stupid regulations.  In any case, our economy keeps rolling along... like a smug Roman in a chariot... with a fat belly, a incline to debauchery, and a purse full of debased denarius... circa 300 CE.

 

In this article, I describe as best I can the specific effects that D2Z may have on people living inside of the United States, and will (perhaps irritatingly often) recommend moving outside of the United States.  The reader who is unprepared for d2z will find my predictions to be intolerably negative, and perhaps hopeless.  But one should view this impending episode in history as a challenge instead of a disaster.  If you change your attitude, you'll change everything...

 

Remember also, that even if all the possibilities I list below come true, America will survive D2Z.  This is because America is not a government, or even a piece of land.  America is an ideal inside the minds of the Americans.  Americans within, and also outside he boarders of the United States.  The idea which built America can not be destroyed by the bursting of a credit bubble, an atomic bomb, or by a concentration camp.  Ideas, are bullet proof.  And this American Idea I speak of, of course, is Individual Liberty.

 

 

Components and Countermeasures

 

Below I will list the probable components of the period leading up to, and the years following the D2Z event; sometimes known as the Great Reckoning. 

 

I am not predicting everything on this list will happen.  That is up to millions of other people to decide through billions of individual choices. 

 

I do however, list historical examples for each of these components, so you don't think I'm just making this crap up.  Indeed, it has all happened before.  The Past is Prolog.

 

In addition to the negative components of the Great Reckoning, I try to suggest a countermeasure for each.  This may be something an individual can do on her own, or it may need the volitional action of a group of people to accomplish.

 

It is important to note though, that the order of these components happening is hard to predict.  The D2Z event, the crash of the DOW, the burst of the housing bubble, and blood running in the streets.  I don't know in which order they will come.

 

 

1. Devaluation of the US Dollar to Zero

 

The obvious first component of the list is the dollar dropping to zero value.  Since I have covered this in depth already I need not go into detail here.  I do want to touch on a few examples of fiat currencies dropping to zero value in the modern era.

 

The Weimar Republic is the most infamous example where in 1923 one U.S. dollar was equal to 80 billion Marks!  In Greece, 1953, the inflation rate reached 8.5 billion percent!  Hungary in 1946, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×10²¹pengő!  Yugoslavia had hyperinflation from 1989 through to 1994 where the impact of this hyperinflation made 1 novi dinar = 1 × 10²⁷~1.3 × 10²⁷ pre 1990 dinars.  And Israel had an inflation rate of 111% in 1979. Source: Wikipedia

 

Countermeasure: Buy Gold and Silver bullion.  If you must have cash, convert it to other currencies such as the Yen or the Swiss Frank.

 

2. A Run On Banks

 

When a person gets worried enough about the safety of their money on deposit, they may head down to their local branch and attempt to withdraw that money.  If many people do this at once, it is known as a bank run. Only a small fraction is available for cash withdraw. 

 

The US Government 'guarantees' that bank deposits up to $100,000 can be covered if any particular bank fails.  Sounds so nice!  But this is analogous of a powerless genie guaranteeing you unlimited wishes.  Sure, the government can grant you any amount of USD in your bank account at anytime, but they can not give those wishes value.

 

In the event of a run on banks, I speculate that the government, due to the collective 'national crisis' (as opposed to your individual crisis) will change the law, and make good on only a smaller amount of deposits, say $50,000.  This will be a good political move as it will rob from a minority of cash hoarders and even things out a bit.  Voters love it when another guy gets robbed.  The excess currency will be seized by the state for their own purposes, pardon me, for the 'national interest'.

 

In 2001, during the Argentine economic crisis 1999-2002, a bank run and corralito was experienced in Argentina.  I expect an identical response by the United States Government when a run on banks happens here; limit withdraws, stop foreign exchange, freeze assets.

 

Do American's have something special to protect them from a financial crisis that the Argentinean's did not?  I suggest you read up on the Argentinean Economic Crisis in the history portion of this website.

 

Countermeasure: Use offshore banks if possible.  And buy gold.  Or failing these first two; Be first in line on the day of the bank run!

 

3. Mass Unemployment

 

The notion of unemployment is not given much thought these days, because for the most part, anyone who really wants a job can find one.  But if you study the rates of unemployment through history, 10%, 15%, 20% and so on, and then connect those rates to the realization of what 25% of people without employ actual means; it means 25% of people without pay, and it means 25% of people without the ability to purchase food, and it mean 25% of the population, desperate enough to steal, to riot, or to vote to power, a political regime that will steal for them.  It sobers one up a bit.  The rate of unemployment is important.

 

Now Colonial America had zero percent unemployment, meaning all who could possibly work, worked.  It wasn't until government grew and (1) gave people the option to live off others, and (2) created the boom and bust cycle through monetary expansion, did we have this ridiculous concept called unemployment.

 

Although the highest rate of unemployment experienced in the United States was 25% during the last 'great' depression, this time, the 'greater' depression could score much higher numbers.  Will it get as bad as Liberia, which currently has an 85% unemployment rate?  I highly doubt it.  But it may exceed 25% for a time until the paper money is flushed out of the economy and Americans readjust to a more realistic living standard. 

 

It is important to note that this 25% unemployment rate was the average of the entire nation.  America has many diverse areas, some will fair much better than the median, some will fair much worse.

 

Also note that the current official rate of unemployment is far higher than the official rate.  Read this article on Shadow Government Statistics for more details.

 

Countermeasure: If you must stay within the territory of the United States, and must work for others, then move to a state with wide open spaces and a natural resource based economy.  Montana, Wyoming, Idaho, and so on .  But consider starting an independent enterprise that will be in demand.  Gold bullion dealer is one that comes to my mind.  Gold dealers have an appreciating inventory too.

 

4. Civil Unrest - Especially in the Larger Urban Areas

 

The Los Angeles riots of 1992 were a window to urban America post D2Z.  Nightly riots of poor, unemployed young males, may quickly spread into suburbia and render entire cities uninhabitable.  Without sounding glib, people riot because they are frustrated financially, hungry.  I fully expect to see scores of riots post D2Z and don't see much chance of the state being powerful enough to quash them without bringing in Martial Law.

 

5. A Crime Epidemic

 

The vast majority of people are more or less content when there is enough food to eat and the television set is working.  When Hurricane Katrina hit New Orleans, unprepared poor people looted the necessities they needed... and lots of stuff that they just wanted.  This picture clearly shows two New Orleans Police Officers looting Walmart. 

 

It has been said that the average city has a two weeks supply of food and gas.  Shipments of product stop when terms of exchange can not be agreed upon.  In an episode of  hyperinflation, the sellers of brown beans will turn on a dime and decide to be holders of brown beans, if they determine that the value of their beans exceeds the value of the paper that the grocery stores will pay for them.  The flow of basic necessities will temporarily stop along traditional supply lines.  It will not be a glitch in the mechanisms of the free market, as will surely be reported and exploited, it will be a direct result of the market lacking a medium of exchange with an objective value.  In other words, without money, a sophisticated economy can not function.

 

Once the stores are looted, the roaming gangs will go from house to house.  Needless to say, real-estate prices will continue to plummet; but by this time, you'll just be concerned with getting your family out alive.

 

Countermeasure: Do not live in large US cities.  Sell your house and other properties now and leave.  If you can't leave, fortify your home as best you can, as the easy targets are always looted first.  Get a tool of defense, and a good sized dog.  Don't look rich.  Sell your sports car.  Keep a low profile.  Consider buying a property outside of the United States.

 

6. A Major Housing Price Decline

 

As I write this, the prices of houses plunge in the 30 biggest cities across the United States.  Jim Rogers, author of Hot Commodities and Adventure Capitalist, is predicting a 40% to 50% decline in those same markets.  Couple this with a likely hike in interest rates on your variable rate mortgage, perhaps doubling your monthly payment, and you've got a recipe for unhappiness.  Even if rioting thugs don't overrun your neighborhood, your wife will likely leave you because of a shortage of cash flow due to increased mortgage payments.

 

The housing bubble was caused by the expansion of the money supply.  Now that the balloon is deflating, that same government that caused the problem, will look for 'solutions'.  God help us all. 

 

If I were a scum bag politician, I would get onto the side of all of the sub-prime borrowers who are now in default on their mortgages now that rates are adjusting higher.  You know, the people who put 5% or 0% down on a variable rate mortgage in order to buy a primary residence as an 'investment'.  They should have read Rich Dad Poor Dad.  So what's there big solution?  A Sub Prime Borrowers Bailout!  Instead of allowing people to loose their homes, and allowing the lenders to loose their shirts on falling property values, they are actually contemplating bailing out anyone who can not meet their monthly mortgage payment.  If they only knew how far the housing market has to fall, how high interest rates are about to climb, and how many trillions of dollars it would take to bailout every citizen who is about to have trouble making mortgage payments in the future.  Would they still pass such a bill?  Yes, there government, they have no accountability. 

 

So what would happen without government intervention, if the tyrants just allowed things to run their natural course?  Some people would get foreclosed on.  If enough people were just handing in their keys, the banks would need to start cutting deals with defaulters for the bad loans they made.  Or the banks could even go bankrupt themselves.  But in the short term, housing prices would be allowed to fall.  Opportunistic investors would likely begin to start to buy properties at this point, perhaps for 1/4 of their inflated value.  They could rent them out to the very type of person who lost the house in the first place.  The free market works.  But we won't see the free market operating alone for quite some time.

 

Government solutions, such as the Sub Prime Borrowers Bailout, which is a bank bailout more than a home owner bailout, as the homeowner can walk away, hand in his keys and its the banks problem.  Anyway this proposed bailout will have, as Frederic Bassat wrote; "Unseen consequences".   The reverberations on the market will be felt for many years.  House prices will not go low enough, fast enough, it will cause a dead cat bounce which will fool many people into heading into the market at what they think are low prices.  It will cause more destruction of existing money because trillions will need to be printed to service these debts.  It will even encourage new buyers and bankers to agree to even more outragous loans, as the government guarantees payment anyway, what can we loose?  If such a bill is passed, American's are one step away from a National Public Housing Program.  And as Ian on Free Talk Live often remarks "Its disgusting!" 

 

So the housing market bubble could burst, or it could deflate a bit, then re-inflate for a bit, and then burst.  But it ultimately has one direction to go, down.  It will go down in value because people will not be able to afford them.  Even if the state will make your payments, you'll need to heat it and pay the property taxes too.  Through the great reckoning, even this will be a challenge.

 

Countermeasure: Sell your house if possible.  Lock in your mortgage rate for the longest term possible.  If you are in the house construction business, consider your exit strategy.

 

7. A Major Stock Market Crash

 

Lack of earnings, accounting scandals, and large corporate bankruptcies have not yet served as the trigger to drive stocks down to rational valuations.  The tech wreck of 1999 - 2000 did not expand into the broader market.  It was a crash stopped short, and re-inflated.  The Fed did their job flawlessly, calling for calm, telling investors to stay the course, and expanding the money supply to pump up the DOW again. Today they boast of the DOW being at record highs.  But if we adjust they new highs for inflation, the DOW is actually lower now than it was in the year 2000. 

 

Like the USD itself, the US stock markets are held up largely by hype.  Sure there are some good stocks of companies that make money.  But there are many stocks that deserve to be hit hard.  And will be. 

 

Contributing the the impending stock market crash is the fact that millions of small investors control their own trading accounts.  When those people need their cash, come d2z, they will pull it out, and the stock market will crash.

 

The correlation between a currency crisis and a stock market crash has been evident in other nations.  For instance, during the Asian Financial Crisis the Thai stock market dropped 75% in 1997, and in 1998, the baht (Thailand's currency) lost half of its value.

 

Countermeasure: Own stocks that will tend to rise as the US dollar falls.  If you do not know what stocks these are, subscribe to the International Speculator at Casey Research.

 

8. Shortages, Price Controls, and Profiteering

 

In the absence of force, goods flow freely between traders.  Post D2Z, there will be a period of adjustment, as inhabitants of the United States grasp the new paradigm; the currency that they thought had value, now has zero value.  Foreign goods will become excessively expensive for US dollar holders.  Imports will halt.  Domestic trade will falter as people seek out a more objective form of money.  Prices of food and gas will skyrocket overnight. 

 

To combat this government created problem, the stupid government will likely implement price controls, and seize the responsibility of rationing scarce goods.  Such political solutions will exasperate the problem by causing shortages. 

 

Many nations have tried to control prices after hyperinflation set in.  Even Rome tried it!  During World War II the US Gov, teetering on bankruptcy, printed the money it needed to beat Germany and Japan.  This caused rampant inflation, and by 19__ the state began controlling prices through the Office of Price Administration.  For a spell in the 1970's the so called 'oil shock' encouraged the demigods to rush in to control the market.  Many readers will remember the fuel shortages this intervention caused. 

 

Price controls cause immediate shortages, because they demand that the seller supply a specific good at a loss.  Thus sellers hold back product from the market, or sell the controlled goods underground for higher prices, or get out of the controlled business altogether. 

 

A majority of people think that oil companies have been ripping off consumers for years.  Calls for price controls on gasoline are shrill with every surge in the price of crude oil caused by government war and government inflation.  But honestly ask yourself, if you would show up to work and do the same job for half of your fair market wages?  No?  Why then would you ask another individual or group of individuals (like an oil company) to do the same?  Sooner or later authentic Americans need to stand up for the free market.

 

If the politicians insist on attempting to control prices for an extended period of time an underground black market will establish itself.  Prices will be higher than official government prices and will include the added costs of bribes and less efficient trade routes. 

 

In order to counteract the underground traders I suspect an Anti-Profiteering Law will be enacted, and used to convict honest capitalists attempting to trade goods for market determined prices.  Yes, that is right out of Atlas Shrugged - and it sounds ridiculous to be predicting for the United States, but this is the trajectory in which are arrow has been flung.

 

In a climate of hyperinflation, real goods such as a can of beans have value, as they can feed you, where as paper has no value.  A Yugoslavian friend told me that as soon as she got paid, she would race to the shop and try to buy as many real goods with the paper as possible before it devalued further.

 

Price controls will surely be a component of the Great Reckoning.  Our experiences of 1945 and 1970 are not adequate enough to describe what it will be like.

 

2008, or whenever the storm comes, will be much more serious.  Only immigrants from war torn and economically devastated countries like Yugoslavia, Argentina, Hungary, Russia, Poland, Liberia, Ethiopia, and so on, have stories resembling what it may be like here.  You should seek these people out and learn from them.  First hand anecdotal evidence from friends and neighbours is far more convincing than any web presentation can be. 

 

Countermeasure:  Stock up in a little extra gas and food.  Buy the stuff that you'll use anyway so that it won't be a waste of money in the event that I'm full of shit and D2Z never happens.  If you want to go all out, you can buy a bunch of food now, that you can latter trade for a profit.  Toilet paper, toothpaste, and razor blades too.  Expand you personal network with honest people with whom you can trust and trade in tough times.  Stand up against stupid ideas like price controls wherever you hear them espoused.  Read Atlas Shrugged. 

 

 

9. Extremely High Interest Rates

 

What's a high interest rate?  7%?  17%?  27%?  Counter to popular thought, the state does not really control its interest rates.  Ultimately the market controls all interest rates in all nations.  That's because national governments like to borrow money, and those who lend money (individuals) can choose who to lend it to.  The lower your credit rating, the higher your interest rate.  Observe the interest rates in the following nation states, just moments before national bankruptcy, currency debasement, or bloody war.

 

Year - Nation - Interest Rate

 

At what point would you no longer be able to meet your mortgage payment? 

 

Countermeasure: If you must have debt, lock in your interest rate on your mortgage for as long as possible.  Variable rates will wallop you!  Only consider buying legitimate assets with borrowed money.  Personal houses or cars are not assets.  Pay off all credit cards first and then cut them up.  The less debt you have and the more gold, the better your options will be in the near future.

 

 

10. Bankruptcy of Some Major Corporations

 

In a major depression, average people will need to spend all of their disposable income on food and shelter.  There will be almost no market for new automobiles, houses, electronics, and vacations.  Beans and potatoes will be in great demand.  Auto makers, Airlines, and Mortgage corporations are among the prime candidates for bankruptcy.  Government bailouts are far less likely (but not ruled out) if the government itself has no money to use.

 

Countermeasure: Make as much money off their demise as possible by short selling these stocks!  But only if you can afford the risk.  If you work for one of these dinosaurs, don't depend on your pension, you won't be getting it.  Sorry.

 

This article will be expanded on at a later date, as I have identified several other components of the Great Reckoning which I would like to write in detail about.  In the mean time I will list them below in point form and then go into my closing statement for this essay.

 

11. A Rise in Personal Bankruptcies

12. The Bankruptcy of the Government

13. a rise in Nationalism

14. a rise in religious fundamentalism

15. a rise in racism, anti-immigration and segregation

16. a rise in Protectionism

17. a seizure of individual assets by the state

18. a law making it illegal to own gold

19. a radical shift in political system - such as democracy to fascism

20. a strong dictator ushered in to 'restore order'

21. a growth in numbers of bureaucrats and informants

22. a growing underground economy (actually a good thing)

23. less freedom for individuals / marshal law

24. foreign wars to distract the people from domestic issues like overthrowing the government

25. possible World War III

26. possible Civil War II

 

In Closing

 

And so the Great Reckoning will be a period of great choices.  Your first choice is to act now on the information presented here and the dozens of great sources I link to from www.d2z.org. Will it be as bad as I say it will?  Time will tell.  It may be worse than one can imagine.  The walls that the anti-immigration zealots propose building on the boarders, may serve just as well to keep you in; in the Orwellian society that your leaders are constructing with your economic and political support.  Your best choice is to escape from America now.  If you act now you can live outside of the gigantic concentration camp the United States is becoming.  If you do not act, you will have only two choices; to be a inmate, or a guard.  If neither of these vocations appeals to you, and I don't suppose that they do, then you have things to do.

 

 

 

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