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Writing on the wall

Discussion in 'General Discussion' started by milhol, Sep 27, 2005.

  1. milhol

    milhol Monkey+++ Founding Member

    Ok folks. The writing is on the wall. We are headed for a major economic disaster. The government doesn't have enough money but is spending more of what it doesn't have. There are more people holding their hands out for money and other handouts the government doesn't have. The answers are the government raises taxes or the whole shebang collapses around your ears. Or both.
    Anyone read Patriots lately? I thought the mayhem that the book described was a bit over the top, but after seeing and reading about what happened one day after Katrina I realise just how wrong I was.
    Innocent people are going to be hurt. I'd hate it to be one of you guys. Which is why I'm posting this in it's entirety, advertisements and all;

    Gary North's REALITY CHECK

    Issue 482 September 16, 2005

    Free . . . but for this weekend only.

    I am posting back issues of this newsletter,
    which you can download for free. I post three
    issues each day. Then, every Monday morning, I
    will remove them from my website's FREE MATERIALS
    section: a clean slate for the upcoming week,
    repeated for 22 consecutive weeks. But you can
    get this information for free, briefly.
    "Download now, or forever hold your peace."

    To download them, "File>Save As..." Do NOT use
    "Favorites" or "Bookmarks." These links will die
    on Monday morning.

    Here are a few of the articles that are available
    for this weekend only . . . in "Reality Check
    Archives." (www.garynorth.com)

    Japan Leads the Way . . . Into Old Age,
    Fiscal Imbalance, and Social Security
    Deficits as Far as the Eye Can See.

    The Real Estate Boom: From Debt to More
    Debt . . . And Then Default.

    Why Buy and Hold Is a Loser's Strategy
    in an Age of Inflation.

    A Form Letter That Will Get Back a Big
    Chunk of Your Banking Privacy That the
    Government Stole from You in 2001.

    The Good Old Days: American Taxes in
    1776; Egyptian Taxes in Joseph's Day

    To Fight the 2001 Recession, the
    Federal Reserve System Put the Economy
    on the Equivalent of Methadone.
    Methadone Is Addictive.

    Job Protection Is the #1 Defensive
    Strategy During a Recession.

    How I Was Able to Call the 2001
    Recession in November, 2000: The Same
    Way I Called the 1990 Recession and
    1987's 508-Point Crash.

    Oil Really Is Running Out at a Rate of
    a Billion Barrels Every 12 Days: My
    Second Report on Hubbert's Peak

    Oil, Gold, and the Illusion of Paper
    Wealth: Hubbert's Peak, or Peak Oil

    I won't mention this again. A word to the wise
    is sufficient. Also, people who have decided "I
    don't care how much money I'm probably going to
    lose in this economy; I am just not interested"
    don't like to be nagged about things they have
    decided to ignore. I don't want to annoy these
    people. The materials are posted here:



    Hardly anyone ever admits it, but in Hollywood's "Gone
    With the Wind," there are no winners. That message is what
    the book's title conveys, yet Americans are so fascinated
    with the characters that they never draw the obvious
    conclusion: from start to finish, there are no winners in
    the movie version.

    My theory -- undocumented -- is that most Americans
    identify with one or another of the characters. They are
    so fascinated with the people on the South's Express that
    they don't see the train wreck coming. Yet the movie's
    introductory on-screen lines from the book make it clear
    that the train wreck was coming from the day that the South
    marched off to war against a better armed foe that had more
    men, more factories, and more lines of credit.

    The crucial scene in the movie takes place in the
    parlor, when the assembled gentlemen ask Rhett Butler what
    he thinks going to war. He tells them that the North has
    all the armaments factories. The South has none. This
    cuts no ice with his listeners. They ignored Christ's
    warning: count the cost.

    For which of you, intending to build a tower,
    sitteth not down first, and counteth the cost,
    whether he have sufficient to finish it? Lest
    haply, after he hath laid the foundation, and is
    not able to finish it, all that behold it begin
    to mock him, Saying, This man began to build, and
    was not able to finish. Or what king, going to
    make war against another king, sitteth not down
    first, and consulteth whether he be able with ten
    thousand to meet him that cometh against him with
    twenty thousand? Or else, while the other is yet
    a great way off, he sendeth an ambassage
    [ambassador], and desireth conditions of peace
    (Luke 14:28-32).

    There is something inspiring about men who dearly
    believe that good intentions and courage will always save
    the day. Most of "Gone With the Wind" is about the
    consequences of such inspirational action: bad.

    The South could have won the war if it had fought the
    way that the American revolutionaries fought their war: as
    guerrillas and militia members, never letting the enemy get
    any peace, and never risking an event like Pickett's
    charge. But there is little glory for guerrillas. They
    are not inspirational.

    When it comes to investing your money and especially
    your time, you had better be a guerilla.


    Scarlett was ruthless during Reconstruction. But she
    did not get what she really wanted, except what she already
    had: Tara.

    Ashley was a beaten man mentally: in love and war and
    peace. He rolled with the punches, but he was always
    getting punched.

    Rhett saw his opportunities and took them.

    The typical American worker/taxpayer today is most
    like Prissy. He don't know nothin' about birthin' and not
    much about anything else outside his job. He assumes that
    someone -- the government, his employer, or the experts --
    is in charge and will keep the economy running smoothly.
    He is as confident in the wisdom of experts as Scarlett's
    father was about Confederate bonds in 1865. But Scarlett's
    father had an excuse. He was nuts.

    The economists are the trusted experts. They think
    that the free market will keep everything running smoothly,
    with help from the Federal Reserve's FOMC: Federal Open
    Market Committee, which is neither federal nor an open
    market. But it is surely a committee. We all know what
    they say about a committee: "A camel is a horse designed
    by a committee."

    Economist Ludwig von Mises did not literally say this,
    but taught that "a recession is prosperity designed by a
    central bank's committee."

    When you live in an economy that is stabilized by the
    FOMC, don't be Gerald O'Hara.


    The typical American worker is addicted to low-quality
    leisure. He watches prime time TV. He does not read. He
    does not subscribe to economic newsletters or spend time on
    financial websites. He does not think about the distant
    future, which he defines as anything beyond this month's

    This is not you.

    But anyone who takes no action in terms of what he
    knows is likely to happen is in pretty much the same
    condition as the typical American worker.

    A driver who hears a siren and refuses to pull over is
    not fundamentally different from a deaf driver who doesn't
    hear the siren and also doesn't pull over.

    It's unpleasant to hear someone say, "I told you so."
    It's worse when that person is you.

    Today, workers in Europe, North America, and Japan
    have heard about the looming fiscal crisis of the
    government-funded retirement programs and old age health
    care programs. What was dismissed as nonsense two decades
    ago is accepted as statistically inevitable by economists
    and politicians today. But they shrug their shoulders and
    say, "It won't happen for years." This is Scarlett O'Hara
    syndrome: "Well, fiddle-dee-dee. I'll think about it

    Actually, Scarlett was a cunning, ruthless person who
    was determined to avoid bad times. Bad times might happen
    to other people, but not her. "I'll never be hungry
    again." She was smart enough not to spend time worrying
    about the things she knew she could not control.

    The people around Scarlett really didn't think too
    much about tomorrow, which is why Scarlett got rich and
    they didn't. They were focused on today. She was focused
    on those aspects of tomorrow that she believed she could

    Who was wiser?

    Mammy. She instinctively did the right thing and
    worried only about the people she loved, not about money.
    She nagged people, but only for their own good. She rolled
    with the punches, but she did her best to help those around
    her to avoid getting punched.

    You and I have no control over the FOMC, the Federal
    Reserve Board, or Congress. We see the U.S. government's
    deficit rising at $300+ billion a year -- before Katrina.
    We see the balance of payments deficit rising at $700
    billion a year. We can do nothing about any of this. We
    are watching a train wreck in slow motion. Our task is to
    get out of the way.


    I always return to the career of Doc Holliday's
    father. He was a field-grade officer in the first year of
    the Civil War. He was wounded early and returned home.

    He sat down with a map. He concluded that the North
    would attack Atlanta by way of captured rail lines from

    His wife owned land in the region between Atlanta and
    the ocean. He told her to sell her property. She did.
    Then he moved as far south as he could and still remained in
    Georgia: Valdosta. Why? The town was so far away from
    anything of military value that he figured that Northern
    troops would not get there during the war.

    It all came true. His wife's property was in the
    pathway of Sherman's march to the Atlantic. Northern
    troops did not arrive in Valdosta until after the war. The
    Holliday family kept its capital intact in the form of a
    nice house in a safe place.

    He could read a map. He could draw conclusions. Most
    people did not have ready access to a map in 1862. Few
    could have read a map. Most people could not have drawn
    accurate conclusions from what they saw.

    So, most people in Atlanta just sat there. Most
    people in the West today are just sitting there. Most
    people in Atlanta hoped for the best. Most people in the
    West today are hoping for the best.

    We have seen what just sitting there did in New
    Orleans. Most people got out. Most people took the
    warnings seriously. Those who failed to leave got trapped.

    When no one can get out because everyone is trying to
    get out at the same time on the handful of exit routes, the
    only ones who do get out are the ones who got onto the
    highway early.


    There are a lot of maps out there. Too many of them
    are treasure maps.

    You don't need a treasure map. You need an escape

    You can't read all the maps. You have to decide which
    maps make sense and which maps you can understand. Then
    you have to decide to take action in terms of what the maps
    seem to indicate.

    Some maps are clear. The map governing the fiscal
    reality of Social Security/Medicare is crystal clear. The
    financial well will start running dry in 2011, when the
    post-World War II baby boomers start retiring by the
    millions. That is six years away. Social Security will
    still produce a surplus until 2017, but Medicare won't.
    The two programs are linked at the hip politically.

    The Federal government's red ink is already flowing.
    It will get steadily worse six years from now. Then it
    will become a flood.

    The financial Katrina has been spotted. It is a
    category-5 hurricane. It is moving straight for the coast.

    How many feet below sea level do you live? The more
    dependent you expect to be on Federal money, the lower your

    Six years: the time it takes between the birth of a
    child and his first day in school. For new parents, this
    seems like a long time. For grandparents, it doesn't.

    It has been five years since the stock market peaked.
    The NASDAQ is down 60%. The S&P 500 is down 40%. Yet the
    financial media are oblivious to this. All the way down
    and then back up (part way), the media said, "Now is the
    time to buy."

    The retirement fund managers are buyers on behalf of
    the investors. So are the index fund managers.

    The boom is on in real estate. But the problem with
    real estate is the same as the problem in equities: it
    takes economic growth after price inflation and taxes to
    sustain any market boom, and there is no growth after price
    inflation and taxes. There was, slightly, but Katrina has
    killed this.

    So, which maps should you believe? I read the "maps"
    published by the Federal Reserve Bank of St. Louis.


    I realize that not many readers who started this
    report have actually come this far. Of those who have,
    only a few will click through. Then hardly anyone will
    check back at least once a month.

    Then this handful of people must interpret the maps.
    This procedure is not intuitive.

    The point is, the maps are out there, and you must
    pick the right ones to read. Then you must interpret them.

    Being as prescient as Doc Holliday's father isn't
    easy. But at least we can all give it a try.

    Watching the next installment of "Survivor" is no
    substitute for map reading.



    The New War Waged in the Heartland of Kansas - SUBURBISTAN!
    Americans are headed for a whole new war...with EACH OTHER!
    Young versus old, rich versus poor, boomers versus Generation X...
    and every penny you've ever saved, borrowed, or invested is in
    danger. Brace yourself as income taxes triple...real estate implodes...
    Wall Street plummets...and Washington slashes Social Security and
    Medicare payouts in HALF...
    I'll show how to protect yourself...even how to triple your money
    at the height of this crisis...with a single investment that's
    never been available to private investors before.




    The maps that count most are the maps that estimate
    the future of Social Security/Medicare. One map is
    demographic. The people are here. One map is political:
    the political promises have been made. The taxes have been
    imposed. The domestic economic growth rate is mythical
    after price inflation and taxes. The main social security
    maps are here:


    You even get commentary that will help you interpret them.

    The general economic maps are here:


    It is clear what the maps say: economic growth cannot
    possibly sustain the political promises made. We are
    therefore watching a slow-motion train wreck.

    When you think "Social Security/Medicare," think
    "Confederate bonds in 1866."

    If you sit there, hoping for the best, your personal
    solvency will be gone with the wind.


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  2. melbo

    melbo Hunter Gatherer Administrator Founding Member

    thanks milhol. I followed Norths Blogs, (Before they were called that) in pre Y2K days. Good stuff there
  3. E.L.

    E.L. Moderator of Lead Moderator Emeritus Founding Member

    Glad to see you hear Milhol.
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