Over the last year and a half, I guess I’ve joined the “doomers” in terms of economic outlook. If you want a primer on why I believe we’re headed into an abyss, look at the massive “bubbles” in our economy like real estate and derivatives, massive government budget deficits, and the rising tide of entitlement costs (i.e. social security, which a generation of folks have been paying into, whose monies have been funding government largesse in other areas, which will soon be coming due)- you’ll realize that for many years the American people (and others around the world) have been living a dream that is far from reality. If you want a primer that is pretty much in line with what I believe is coming down the road, take half an hour and watch this (link).
Now, those of us who are tuned into this would be made to look like we’re crazy (much like the media-generated perception of tea partiers and Ron Paul supporters), and I’ll admit to being extremely late onto the band-wagon. I’m making preparations in several areas, because I believe that the end-game is economic collapse. Maybe not today or tomorrow (hopefully), but if/when it occurs, I want to be ready. I’ve discussed it in separate posts, but the 4 B’s of preparation for this (which, even if we’re completely wrong, can be factored into your life and be useful) are Beans (food), Bullets (protection), Band-aids (medical supplies and hygiene), and Bullion (precious metals for trade and retained value of money).
I believe that those of us who are tuned-in are like the animals who sense a tsunami or other natural disaster. Others would say “gosh, I wish I knew what they knew” but the signs are all there. And it’s not like we’ll be living high on the hog if/when this does happen, but we’ll be in better shape to survive. Hopefully, when rebuilding/recalibration begins, we’ll be the ones who are heard- though I don’t have much hope for that.
The tectonic plates of this potential calamity are shifting and drifting far below the crust that is conventional wisdom. In one aspect, I consider this good because it offers time to those preparing. If I could have 10 years, I’d really feel like my preps were solid. But I think it’s coming sooner than that.
Via ZeroHedge (link), there are two waypoints worth noting at this juncture. First, the economic woes facing California (too big to fail?) will be seen elsewhere shortly (link):
By Jim Christie
SAN FRANCISCO (Reuters) – Los Angeles must take dramatic steps in coming months to bring its budget back into balance, including measures to slim the size of its government and reduce how much it spends on pensions for retired employees, the city’s top budget official said on Wednesday.
Los Angeles, California’s biggest city, is seeing a steep drop in revenues fueled by the state’s 12.5 percent unemployment rate, a slump in consumer spending, an uncertain housing market and a weakening commercial real estate sector.
Fitch Ratings has grown so concerned about Los Angeles’ budget woes that on Tuesday it downgraded the city’s general obligation debt to AA-minus from AA.
Fitch said it expects the city’s economic decline to impede financial recovery. Among problems it cited were high unemployment, sales tax weakness, assessed value losses, high home foreclosure and negative amortization mortgage exposure.
Miguel Santana, the city’s administrative officer, said he was not surprised by the downgrade. He is intimately aware of how the city’s finances are faring, and they’re in dire shape, he told Reuters in a telephone interview after briefing the city council on options for balancing the city’s books.
Officials must close a nearly $100 million gap in the city’s current-year budget, and are likely to use reserve funds to do so, Santana said.
“Next year we’re expecting a $400 million deficit,” he said.
Also, watch Dubai (and Spain, California, Michigan, New York) (link):
Fears of a dangerous new phase in the economic crisis swept around the globe yesterday as traders responded to the shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill.
Shares plunged, weak currencies were battered and more than £14 billion was wiped from the value of British banks on fears that they would be left nursing new losses.
Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.
Although the scale of Dubai’s debts is comparatively modest at $80 billion (£48 billion), the uncertainty spooked the markets, with no one sure who its creditors are. Several banks rushed out statements to reassure investors that their exposure was small.
The FTSE 100 plunged by 171 points to 5,194 – its biggest one-day fall in eight months in one of the most jittery days in the financial markets since the depths of the banking crisis.
Those of us who’ve repeatedly decried government waste spending will be proven right, but we’ll all still feel the pain.