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New Martenson Report (for subscribers)

Tuesday, September 23, 2008, 10:04 PM

In this report (link below), I delve into the bailout plan and why it is destined to
fail no matter how it is configured.  It is important that you at least
consider the possibility that it very well could fail, with disastrous
consequences for the dollar and the continued operation of the US
government in its current form.

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Note: This report is currently for subscribers only 

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14 Comments

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
AP - FBI investigating companies at heart of meltdown
just up on digg: http://biz.yahoo.com/ap/080923/financial_meltdown_investigation.html Sources: FBI investigating possible fraud by Fannie, Freddie, Lehman, AIG and their executives
blackrott's picture
blackrott
Status: Member (Offline)
Joined: Aug 2 2008
Posts: 20
Last week bank #12 failed
West Virginia’s Ameribank. That’s the 12th failure this year. This was last weeks news.
randallriggs's picture
randallriggs
Status: Member (Offline)
Joined: Apr 16 2008
Posts: 21
preparation
Chris: Thanks for the website. You provide a valuable tool for people to see thru the BS that is constant on MSM. I have a question about your comments about preparation: I currently hold some silver, have 2 months cash out of the bank, and have opened an account with a local credit union with another 1-2 months available there. I have a bullion vault account in Zurich that I'm considering buying gold in. Questions; 1. If things go really bad, won't the government confiscate all gold and silver? How will that effect my gold in Zurich? 2. will all my gold and silver ETF's that I own "go to zero" as you said in the most recent report?
crash_watcher's picture
crash_watcher
Status: Silver Member (Offline)
Joined: Aug 12 2008
Posts: 146
sense of community and developing community networks
Cris, You say, "Develop a sense of community, and get to know the people you can count on and who will count on you." And in your earlier report, "Charting a Course ...." you say, "Having strong, dependable community networks to help manage the transition period." I, and probably many, of your subscribers are living in BIG impersonal cities, where there is little sense of community. Also, I strongly suspect that most folks in my community don't have a clue about the kinds of changes you have been predicting. Frankly, they would probably think that I was some kind of "wacky-fringe-thinking doomsdayer," if I started to express these ideas to them. It is also improbable that we will all be able sell our houses, quit our jobs, and move to a small town or village within, oh say, the next 6 months. Perhaps this request anticipates Cp. 20, somewhat, but it would be helpful if you can give us some concrete examples of what steps we could take to develop a sense of community, and, develop community networks, for the hard times ahead.
NateLowrie's picture
NateLowrie
Status: Member (Offline)
Joined: Sep 3 2008
Posts: 14
Preperation
Remember that all paper assets will return to there intrinsic value...Zero. This includes all digital assets. In the end, digital assets are just ones and zeros and can be erased in an instant. Chris has already pointed out that you should move from these paper and digital assets to physical tangible assets as fast as possible. When this all blows over, we can move some back.

The first thing I would do is pay off any and all debt that you owe. Keep at least 1-2 months living expenses available as an emergency fund. Keep paying your minimum payments on all debt and put any extra cash you have toward the lowest one. When that is paid off, start on the next one. Since your minimum payment on the smallest one is now rolled into extra cash, debt payment snowballs and you will pay the bigger ones off faster. That said, probably the best thing you can do is pay your house off if you have a mortgage. It is a physical asset that holds equity, and why it may be devalued in the future, it is still an investment.

If you don't have a house, like the situation I am currently in, you will be better off waiting. The housing crisis is not over yet by far because from now till 3 years out Alt-A mortgages are resetting and we will see another wave of defaults as bad as subprime. That said, keep on the lookout for a nice piece of property you can pickup on the cheap from a foreclosure. Also, when you do look for a house, strongly consider a rural setting. Big cities and suburbia are going to turn into cesspools for crime and will be dilapidated from the fuel crisis that is coming.

Now, what to do after. Physical (meaning you have it in your possesion) gold and silver is a good store of value. I don't think that .gov will take it this time around because we are not moving from a gold to paper system.

Make sure you're set on the staples before buying gold though. Remember, thanks to Just-In-Time inventory systems, grocery stores only have a 3 day supply of food on hand for the mid-sized and major cities. Yes, you heard me right...3 days. If you don't believe me go to your grocery store and ask them how often they turn inventory over. If there is a sudden outage of fuel, the system is going to crash. Have at least 1 month or 2 of food. Also, no electricity, no running water.

That said, take step to mitigate your dependence on the current energy usage heavy economy. Grow a garden using the Square Foot Gardening method. Dry your clothes on a clothesline. Recycle rainwater. Buy local goods when possible (farmers market). Reuse and buy used good. Learn to make and fix things yourself.

Hope this helps.

Nate
NateLowrie's picture
NateLowrie
Status: Member (Offline)
Joined: Sep 3 2008
Posts: 14
community
The problem is, we can't do everything ourselves. Chris' comment on the community was meant that we are going to be much more dependent on other small knit groups of people. First, only approach people that you can trust. This would be close friends and people that you know. By establish a friendship with the person, you can tell whether or not they will buy in.

Try to focus on specializations. For instance, you might have a doctor in the group. The doctor would be responsible for keeping on hand medical supplies and if times change would be responsible for medical care. Try to gather people with different asset and knowledge bases. Any of the trades are good, especially carpentry as wood is renewable and generally found everywhere. Focus on your strengths, but have people teach each other skills.

Do this largely in a grey man approach. Society still isn't warmed up to the survivalist mantra, and many in the cities believe in the entitlement mentality (.gov will take care of me). Wean yourselves off the fossil fuel economy a little bit at a time and it'll be easier to stomach.
rogermh's picture
rogermh
Status: Member (Offline)
Joined: Jul 13 2008
Posts: 4
Climbing Interest Rates

In this report, Chris states:

"...this money will have to either be borrowed from overseas or printed out of thin air by the Federal Reserve. In either case, there is a very high probability that either/both of these actions will cause interest rates to climb, possibly quite steeply and suddenly."

I don't quite understand why interest rates would climb. Doesn't the Fed control interest rates? I'm an economics neophyte trying to understand all of this stuff so sorry if this is a dumb question.
Gaborzol's picture
Gaborzol
Status: Bronze Member (Offline)
Joined: Mar 24 2008
Posts: 38
Community Building
It takes time to build a community no matter what part of the country or what size settlement. And one doesn't have to do it perfect, any community is better than none at all. Getting to know your neighbors well, before mentioning the collapse scenario is a good idea. Go over, ask to borrow something little from them even if you don't really need it (a canning pot - everyone likes to be able to help to others, it feels good, and also gives one power/security), return it with a little gift (a loaf of local bread), or creating any face-to-face connection builds community. Even asking a question you suspect they may know the answer to is a good point. Offer a block party even if you only can afford a potluck. Or organize a presentation about something that is on people's mind, and offer finger-food as an incentive. Countless ideas to build a community, all of them takes time and thoughtfulness, because they are not taught in school, they are not in our blood, but many of them takes only time and not money. An email list of all your neighbors is an invaluable asset, when something fishy is going on in the community. Even if you plan to move ultimately, try these things where you are now, they work surprisingly well, all people want to belong, but we just don't know how to initiate it.
gauntlett's picture
gauntlett
Status: Martenson Brigade Member (Offline)
Joined: Aug 25 2008
Posts: 49
Places to live

On the notion of building community and perhaps moving to a more rural setting... I'm single and have no attachments at the moment, and live in Seattle. The housing bust doesn't seem to be hitting here as hard, but I'm not sure if this is a latent effect as we have Boeing, Microsoft, Amazon, and a few other large fairly stable employers.


I'm curious on everyones take about great places to live -- anywhere in the world be it the US or abroad. For sometime now I've been looking at Panama as it has the canal, friendly people, a great climate, and a financial hub like Switzerland.


Anyways, if you could live anywhere taking into considering everything Chris is talking about what Country/State/City would you live in and perhaps why?

rocketgirl's picture
rocketgirl
Status: Member (Offline)
Joined: Sep 15 2008
Posts: 2
More thoughts on preperations
Just a couple of things others may be interested in thinking about. If people are not able to get medical care or very limited care, one of the things that can take a person down in a hurry is an infection so I have started to set aside (with detailed instructions) antibiotics, both for my kids and adults. I'm not sure how long they last but I figure I can get a Dr. on the phone or Pharmacist who could help and I'd be glad I wasn't dependant on a Pharmacy being open, etc. Another thing is vitamins! Vitamins are relatively inexpensive right now and they could be priceless later on. As well as setting aside food and gold, etc. reserves, consider alcohol and cigaretts for trade later. Somehow I think alcohol and cigaretts will always be in demand (sadley). Another thing may not apply to too many people but I just have to say to all those people out there who are too skinny, you could be the first to go, I'm sorry but it's true. There's something to be said for staying healthy and just a little fat can go a long way when you are forced to cut calaries. I am 5'7 and weigh 145 lbs. and I jog and workout 5 times a week as well as play soccer, hike, Mt. Bike, etc. And not to make myself look good, I'm just saying, carry some weight, you'll be glad you did. Make sure you're up on dental and Dr. visits and your kids too. Just some thoughts. I'm open to comments and more interesting ideas.
kacanepa's picture
kacanepa
Status: Member (Offline)
Joined: Apr 21 2008
Posts: 2
Start with where you have connections
The easiest way to prepare is to do so where you already live but if you have few connections in that community, the next place to consider is where you have community connections. This can be family or friends. Some folks have strong family connections in a defined geographic location and if that's you, I'd go there first. You already have a support network in place. The caveat of that is to be mindful of climate issues. The southern part of the country has seen drought conditions for years and the population density is draining aquifers dry so water availability is a huge issue. Coastal areas could see serious flooding if polar ice continues to melt. So if your entire family lives in south Florida, you might want to try to talk them into moving to higher ground (and/or out of the path of future hurricanes).

If you don't have community connections, look around for places that have the type of communities that appeal to you. If you're in the US, it's easier to stay in the country than to become an ex-pat in another one - unless you have enough money on hand to live there or have family/friend connections in that country. I'm ambivalent about the urban/rural decision because as far as I'm concerned, it's a draw. If you live in a rural area you'll have to be much more self sufficient than you think and you're a lot farther away from resources you can't produce but if you live in an urban area you'll have to be more mindful of desperate people and inconsistent resource availability. Rock and a hard place. No good answer there.

I would strongly argue against you moving someplace where you have no connections even if you get a sweet deal with ample arable land. Trying to be self sufficient all by yourself in a very short period of time is a ticket to crisis. I'd actually suggest the other extreme - move in with people you know. You're more likely to handle all the changes coming along when you're in a group tackling those changes together than by yourself. The group you move in with should be where community connections already exist (could be your immediate family or friends - see the first paragraph). This is not the time to decide to move to Alaska and live off the land. Unless you've got family there.

Hope you're seeing a trend here - community, community, community. It's true there's safety in numbers. Scout around for the community connections you have before deciding to stay or move. In the meantime, start a container garden, take knitting lessons and learn to play a musical instrument. Then evaluate what skills you do have that you can offer to whatever community you have.

Good luck!

Kerri in AK (in Anchorage)
bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 8 2008
Posts: 153
Why interest rates rise ...

Read these:

http://research.stlouisfed.org/wp/2000/2000-032.pdf

http://www.bundesbank.de/download/volkswirtschaft/dkp/2000/200009dkp.pdf

The yield (interest earned) on short term (3-month) T-bills follows the overnight Fed Funds rate. Typically yield on long term like 10-year bonds will also go up when the 3-month bill yield goes up. The treasury yields are determined by the market demand to buy them. Lately the 3-month T-bills have near zero yield because everyone wants them. Gov't needs more money and printing it weakens the dollar and drives up inflation. It may also drive down the USD -vs- foreign currency exchange rates. Return on US dollar investments will be lost when the Fed prints money! If the Gov't wants to borrow more money the foreign investors won't want the bonds because they know US inflation washes out any earnings. Therefore, the yield on the treasuries will have to be increased to make them attractive to foreigners to buy them. A Fed fund's rate increase will increase the yield on the bonds.

The Fed funds rate are not set by the fed. The target is, and the fed will inject/remove cash/treasuries from the system to regulate the actual day-to-day rate around its target. The fed fund overnight rate is determined by demand/willingness for banks to lend to each other. If banks want to hord their cash for capital then the overnight rate sky-rockets, forcing the fed to print new money and inject into the system for banks to loosen up their money and lend to each other. For more on this do a google search on LIBOR and TED-spread.

birdie's picture
birdie
Status: Member (Offline)
Joined: Sep 14 2008
Posts: 1
If Paulson's plan is the answer, what was the question?
Paulson’s plan was not a true solution to the crisis [quote]Now turn to the criteria to be used in judging the intervention. First, it would deal with the systemic threat. Second, it would minimise damage to incentives. Third, it would come at minimum cost and risk to the taxpayer. Not least, it would be consistent with ideas of social justice. The fundamental problem with the Paulson scheme, as proposed, is then that it is neither a necessary nor an efficient solution.[/quote] There are other possibilities to help solve the crisis, says Financial Times! http://www.ft.com/cms/s/0/a09b317e-898d-11dd-8371-0000779fd18c.html?nclick_check=1
blackrott's picture
blackrott
Status: Member (Offline)
Joined: Aug 2 2008
Posts: 20
Community cont...
In the worse case, we may have to go tribal. Who will be the chief and who will be the Indians. Some religious groups are fairly organized and have been teaching preparedness for years. One of the problems we have in the USA is that we don't live by or with family. We do not like public transportation. We don't save money. etc. When its time for the economy to contract no is prepared. I can see some people scrambling right now. As more signs appear there will be more scrambling. My biggest concern is food. Starvation and hunger some how lead to civil wars.

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