Here comes the hard landing. Have central banks finally dumped the USA?

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SHTF's picture
SHTF
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Here comes the hard landing. Have central banks finally dumped the USA?

Greetings everyone! Here is my first post...

I stumbled across a few stories that I felt tied in with what Chris Martenson has been warning us about. The first article is actually from 02/2005 and discusses how the Bretton Woods 2 regime likely would unravel soon. It is a rather long (54 page) paper that is a bit dry to read. I read all of it but if you skip to the conclusion on page 45 you'll get most of the paper. The link to the paper is here:

 http://pages.stern.nyu.edu/~nroubini/papers/BW2-Unraveling-Roubini-Setser.pdf

I also saw this current story which suggests that as of August 2008 international reserves have started falling. In putting 2+2 together I think perhaps the falling international reserves are signally central banks are no longer willing to finance our enormous debt. It was a no brainer that the point would come where the US debt could no longer be serviced. I thought I'd post this info here to see if anyone with an econ background could provide some comments. Here is the link talking about the falling international reserves:

 http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=89

Now that I am 99% certain we are coming down for a hard landing, I'm trying to figure out if there is any way to save my 401K and avoid ending up penny-less like an Icelander. I just subscribed here so I still have to read the reports for subscribers. Hope it can give me some guidance on what to do. So far I feel pretty helpless.

 TS

 

pinecarr's picture
pinecarr
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Re: Here comes the hard landing. Have central banks dumped USA?

SHTF, I have username and icon envy!

Also, have you seen the other forum topic asking for IRA advice?  I think some of the discussion there may be pertinent to your question about your 401k.

SHTF's picture
SHTF
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Re: Here comes the hard landing. Have central banks dumped USA?

LOL! Can you tell my mood when I set up my account and picked my avatar icon?

I've been spending most of my spare time this past couple weeks reading all I can on the deepening crisis. I anticipated a couple years ago that the stock market would tumble. As a result of that I preserved my 401K and even made close to a 20% return this year. But at my work we have very limited options as to what we can do with our 401K. (Basically the money can be put in a fixed money market type fund that pays 4-5% a year or it can be in about a dozen different stock funds, all of which have had pretty bad losses this year.) So I wonder, if I can't pull the money out, is there any way to save it???

I never anticipated a collapse of our monetary system. Like many people I was concerned about our crazy government debt but I figured when it got too high we'd have a small crash and a soft landing. The more I read the more I get a sense of urgency that I need to do something, and fast, to prepare for a major monetary collapse with a very hard landing. Actually, crash and burn comes more to mind than hard landing. So I have dozens of thoughts going through my head raging from, do I have enough ammo, to should I open a futures trading account to take positions in the market to try to capitalize on a crash to offset other loses I am likely to incur? But if it all comes crashing down, will money I make, if any, have any value? Etc... I have a headache just thinking about all the options. If I didn't have kids in high school and family here I'd sell my house in California and move out to the country in some other state. I planned on doing that in about 5 years to get out of this place. Unfortunately, I think the time horizon until SHTF is a matter of months, and not years. Hopefully the USA is such an integral part of the word economy that solutions outside the box will be found to rescue our sorry butts. In reading the Bretton Woods paper it looks like the central banks were already taking on more risk than they wanted 3 years ago, and our debt has continued to mushroom making their risk even greater. So I am not so confident they want to, or can, bail us out.

Sorry, I am ranting. But I'm pretty frustrated. Most people I talk too think I am nuts to think we are going to have some type of apocalyptic crash. I occasionally wonder if I'm coming across like Ricky Bobby in this classic scene:

http://www.youtube.com/watch?v=M2K6WgcpwmY

TS

 

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Here comes the hard landing. Have central banks finally dump

I have to tell this short story.....  because I always knew this system was totally unsustainable.

Way back in 1990 (and in Australia), when we had three year old twins and I had just moved into a brand spanking new photographic studio (I was a pro shooter in a previous life) a superannuation salesman walked through the door trying to sell me what you call 401K (what does it stand for BTW?  Do you get $401K when you retire!?) 

Anyhow, I told him I was utterly convinced that by the time I would reach retirement age (I was 37 at the time) Capitalism would be totally broken, and there would be no money left for me. Or anyone else for that matter!

Now you would think a salesman would argue the point, tell me what a ridiculous concept such a crash was, etc etc.....  But no, he simply walked out the door.

This has stayed with me.  He knew too.  That's all I can put it down to. 

switters's picture
switters
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Re: Here comes the hard landing. Have central banks finally dump
[quote=Damnthematrix]

Now you would think a salesman would argue the point, tell me what a ridiculous concept such a crash was, etc etc.....  But no, he simply walked out the door.

This has stayed with me.  He knew too.  That's all I can put it down to. 

[/quote]

Funny.  I can't help wondering what that guy's doing now.  Maybe he's a member of this site!

Set's picture
Set
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Re: Here comes the hard landing.
 

       I am entertaining the idea of quitting my job so that I can get my 401K and salvage whatever is left after taxes and penalties.  I am not sure I would be able to get rehired and it's a decent job so this would be a tough decision.  Another less drastic option is just borrowing the maximum (only 1/2 of total) and making minimum payments and discontinuing any further contributions.  I've always been pretty conservative and a collapse of the monetary system is something that never used to even cross my mind until about a year ago.  If I buy gold, I'm concerned with the possibility of confiscation as well as storage.  I did buy some Canadian Dollars in my E*TRADE Global Account.  I live just 20 miles from downtown L.A. and I too would like to move out into some rural area.  I even went to Canada a few months back, but moving there might be too much of a culture shock and I don't know how I'd make a living in a rural setting.  The more I learn, the more I believe that this country and eventually the world has "crossed the Rubicon" for the worse.  I listen to and read Peter Schiff.  I've read "The Creature from Jekyll Island."  (Excellent read)  Taken the "Crash Course" several times and read all of the "Essential Articles."  My friends and family think I'm nuts.  I feel your pain SHTF. 

  
    
Damnthematrix's picture
Damnthematrix
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Re: Here comes the hard landing.

[quote=Set]

I live just 20 miles from downtown L.A. and I too would like to move out into some rural area. I even went to Canada a few months back, but moving there might be too much of a culture shock and I don't know how I'd make a living in a rural setting.

[/quote]

I can't and won't advise you on quitting your job.

We did this, and never looked back. We can't cash in our superannuation here unles you can prove dire hardship, like foreclosure (we're debt free - saw this coming a looooong time ago..)

Whether you need to "make a living, which I trust means working for 'wages', really depends on how much money you have to begin with and how you spend it when you change your lifestyle.

The real culture shock (been to Canada, LOVED it!) I think would be the living frugally bit. And the cold. To live frugally in a cold climate is more difficult than living frugally in sub-tropical Australia where we live.

Maybe you should join http://groups.yahoo.com/group/RunningOnEmpty2/?yguid=168288328

Good luck.

Set's picture
Set
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Posts: 112
Re: Here comes the hard landing.
Thanks for the feedback Damnthematrix.  I grew up in a cold climate so I know what you're saying.  That would definitely be a major downside.  I already live a rather frugal lifestyle so that doesn't concern me as much.  Australia sounds like a great place, but it's so far away.  I would have to sell almost everything I own.  I guess I just haven't suffered enough to make such a drastic decision yet.  Canada just seems like an easier move, but I suppose my main concern is all out anarchy in the middle of this city jungle where I don't think an average family can be adequately prepared to survive for an extended period of time. 
DavidP's picture
DavidP
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Re: Here comes the hard landing.

"I am entertaining the idea of quitting my job so that I can get my 401K and salvage whatever is left after taxes and penalties.  I am not sure.."

 Set - I did exactly that almost 3 years ago. At least 3/4 of my 401k was in company stock and after the Enron fiasco, they were allowing us to move small amounts to other investments but this was taking WAY to long for my concerns.

I spent about 6 months and finally found a comperable job in my existing field, took the job and quit my old one. I cashed out enough of my 401k to pay off the remainder of my mortgage and rolled the rest over to an IRA. Very easy to do. Oh, I also cashed out enough to pay the hefty tax bill I anticipated for the coming year. This year, I'm fairly square on the excess taxes from the cash-out portion of my 401k.

Not having a house payment allowed me to save at an incredible rate and I'm close to having the same amount in my IRA that was previously in my 401k account. I'm actually making more money at my present job and it is MUCH more fulfilling than working for a corporate behemoth.

This may not be the best diversification of my IRA but most of the investments are in money markets (US) and foreign currency ETF's, like FXE and CYB, Canadian mutual funds and (recently) gold and silver mining companies. I also have some natural gas stocks (xto). I also have a percentage in hard gold & silver (small denominations). BEARX has been my best performing stock.

I recently checked my original employers stock (Ingersoll Rand) and it had fallen from a 52 week high of 54 down to 15!! I was very lucky I made the above moves when I did.

One other thing I have to mention. I live right on top of the Barnett Shale and got a nice signing bonus with XTO last year. I took the bonus and had a nice, 3kw Outback PV system with battery backup installed. I own the stock mainly for leverage in the future, if needed.

mpelchat's picture
mpelchat
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Posts: 214
Re: Here comes the hard landing.

[quote=Set] Canada just seems like an easier move, but I suppose my main concern is all out anarchy in the middle of this city jungle where I don't think an average family can be adequately prepared to survive for an extended period of time.  [/quote]

 Set you have it right. Look what happened to New Orleans in the matter of days.  It became a 3rd world country protected by the media.  Best information I was able to receive on that was out of Australia and it was not pretty.

pov56's picture
pov56
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Re: Here comes the hard landing.

Before buying a lot of ammo and heading off to the hills you might take a look at it from another angle...

http://www.oftwominds.com/blogjun08/survival6-08.html
 
 

 

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Here comes the hard landing.
[quote=DavidP]

"I am entertaining the idea of quitting my job so that I can get my 401K and salvage whatever is left after taxes and penalties.  I am not sure.."

 Set - I did exactly that almost 3 years ago. At least 3/4 of my 401k was in company stock and after the Enron fiasco, they were allowing us to move small amounts to other investments but this was taking WAY to long for my concerns...

I spent about 6 months and finally found a comperable job in my existing field, took the job and quit my old one. I cashed out enough of my 401k to pay off the remainder of my mortgage and rolled the rest over to an IRA. Very easy to do. Oh, I also cashed out enough to pay the hefty tax bill I anticipated for the coming year. This year, I'm fairly square on the excess taxes from the cash-out portion of my 401k...

 

[/quote]

 

Congratulations on an entire sequence of smart moves.  Thanks for sharing your experience. 

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Here comes the hard landing.
[quote=mpelchat] 

 Set you have it right. Look what happened to New Orleans in the matter of days.  It became a 3rd world country protected by the media.  Best information I was able to receive on that was out of Australia and it was not pretty.

[/quote]

 

Very good point mpelchat.  New Orleans was just one city and it still hasn't recovered.  I appreciate your input.

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Here comes the hard landing.
[quote=mikej303]

Before buying a lot of ammo and heading off to the hills you might take a look at it from another angle...

http://www.oftwominds.com/blogjun08/survival6-08.html
 
 

 

[/quote]

 

Thanks for the link mikej303.  I read it and it makes a lot of good points.  I agree with the assertion that people will need each other in order to survive a worst case scenario.  I actually wasn't thinking of buying a cabin in the mountains and stocking it full of survival gear only to leave it vacant until a real crises forced me out of the city.  I was thinking more about moving out and making a permanant residence.  That's been in the back of my mind for nearly my entire adult life.  I'd like to find a place in a rural community and become an active community member, but still remain self sufficient.  I almost wish I'd grown up on a farm.  Skills of a farmer seem a lot more valuable at this point in time.  One of my biggest problems is the need for medicine for conditions that members of my family as well as myself suffer from.

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