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Hey preppers and patriots, I hope you all are well and doing what you can to stay safe. I’ve been staying busy through the lockdown. I’ve got the garden started, recently put in some more fruit trees, and of course, I’ve been hammering away at the keyboard to get out the next installment of The Beginning of Sorrows.
As promised, I’m going to address some emails I’ve received since the beginning of the COVID crisis about what to expect on the economic level.
To start, I’m going to answer a letter I got from a reader. As a disclaimer, I’m not offering financial advice but simply stating what I would do in a given situation.
Ray writes,
What is your opinion on continuing to contribute to a 401k? I’m not cashing out but am not sure it makes sense to keep adding. I have a really good company match and some other prepper-minded people are saying now is the time to buy. But, I’m considering stopping or reducing my contribution and buying silver instead.
Dear Ray,
If I were in your shoes, I’d probably contribute up to the match and not a penny more. You’re essentially loosing part of your paycheck if you don’t participate. But, I’d park everything in the lowest risk vehicle available through my 401k program. With a one-to-one employer match, the market has to lose 50% of its value before you lose the first dime.
Thanks for writing!
In addition to my response to Ray, I’m going to expound a little bit on that and cover concerns from several other readers and podcast listeners.
The Fed has basically said they’ll do whatever is necessary to prop up the markets. With QE infinity, they could essentially purchase every available share of stock if they so choose. The total value of all 30 companies listed on the Dow Jones index comes to around $8 trillion.
Since March the government has pledged far beyond $6.5 trillion.
Congress has passed over $2.5 trillion in bailouts plus the Fed was at $4 trillion in COVID relief programs prior to Powell announcing on March 23rd that they would do whatever was necessary, basically saying that they would print an unlimited amount of money to keep the economy moving at full steam ahead—right over the edge of the cliff.
Through open market activities, the Fed is restricted to purchasing treasuries and certain other debt instruments to keep the party going. They’re not allowed to buy stocks and bonds of publicly traded companies. Of course, they see that rule as more of a suggestion than a law.
They’ve set up what the government likes to call a special purpose vehicle which allows them to shuffle money to a non-Federal-Reserve entity, which allows them to purchase High-Yield ETFs, AKA Junk Bonds. If the Fed was a drug dealer we’d call that special purpose vehicle a shell corporation and people would go to prison for money laundering. And even thought the Fed is not a government entity, they do enjoy all of the special privileges of being a member of the ruling class and are entitled to all the double standard benefits that the government receives.
So, the Fed is currently purchasing ETFs—only steps away from actually buying stocks. And as I’ve already stated, they could buy every share of stock on the Dow Jones index and it would still be in the ball park of what they’ve already committed in terms of monetary creation for COVID relief.
This is why all of my fiction works either focus directly on the economy or at least brushes over the government’s vain attempts to breathe life into the corpse which was once the US dollar. If you think the scenarios in my books are hyperbole, they’re not. If anything, they fail to portray the level of ignorance and desperation of government officials and central bankers. It’s impossible to envision the recklessness, stupidity, and suicidal moves these people make when faced with anything other than perfect economic conditions.
Back to the $6.5 trillion plus in bailout money. All that free cash is going to need a home. A large portion of it will inevitably end up in the market. Then, we’ll probably see astronomical levels in the market indexes never before imagined…until it all collapses into a heap of ash and rubble, revealing the US dollar as the disaster it really is. So be prepared for the crackup boom. Does that mean you should attempt to ride the wave? If you do, you better have a strong stomach and impeccable timing. Anything less and you could lose it all.
When the crackup boom comes we’re going to see the kinds of hyperinflation that so many other countries have faced. Venezuela, Russia, Argentina, Zimbabwe, and the Weimar Republic all saw rising inflation which left working class people unable to purchase basic supplies necessary for survival. The Downfall of Money by Frederick Taylor is an in-depth look at hyperinflation in the Weimar Republic. It makes a great non-fiction primer for what’s coming to America. During that period, the annual rates of inflation for the Weimar Republic were as follows: 4% in June of 1922, 22% in September, 68% in December of 1922, 285% in March of 1923, 765% in June, 1,500,000% in September. By December of 1923, the annual inflation rate for the mark was 152 trillion percent. Those numbers are hard to grasp, especially in percentage terms. So let’s look at the gold price. In January of 1919 it took 170 marks to purchase an ounce of gold. In November of 1923 it took 87 trillion to purchase an ounce of gold. But don’t think of it in terms of gold. Think about that same rate of increase applied to groceries. If $170 dollars’ worth of groceries fill up a cart now, under that economic environment it would cost $87 trillion to fill up the same cart four years from now.
Of course, everyone would be trillionaires, thanks to constant money printing, assuming we can get the rest of the world to keep accepting the dollar. But when they won’t, it all comes crashing down and no one will sell anything for dollars.
Within weeks of the corona virus outbreak, we saw pictures of food banks all over America with cars stretched out for miles waiting for handouts. This shows us the state of preparedness in the US. Many of these cars were new, several were BMWs, Mercedes, and other luxury models. This is indicative of a nation full of people living beyond their means. They didn’t have enough savings to make it even one month without assistance.
The bailouts are helping these people in the short run, but only because of the false confidence still placed in the US dollar. Once the rest of the world refuses to take our funny money as payment for goods and services, bailouts will come to an abrupt end.
Whatever the expiration date on the dollar was prior to the COVID crisis, it’s now much closer. The people who live hand-to-mouth have been taught that the government will take care of them no matter what. So, most will change none of their current budgeting habits. When the dollar collapses, these same people will have nothing in their pantry, nothing in their refrigerator, and the Fed won’t be able to bail them out. Then, they’ll get desperate. Think about what you would do if your child was crying, begging you for food. And you’re a nice person. Now, think about what someone not quite as civilized as yourself might do if their kids were starving to death. My vision of the future isn’t a very rosy picture, is it? Trust me, it’s euphoric compared to what reality has in store.
Next is unemployment. The official number now stands at 14.7%. Of course, many people still haven’t been able to file due to overwhelmed state systems which are struggling to catch up. The president of the Minneapolis Fed, Neel Kashkari said the actual unemployment number is closer to 24%. To put those numbers into historical perspective, at the height of the 2008 crisis, unemployment was at 10%. In the great depression, it was 25%.
Of course if an official at the Fed is claiming unemployment is at 24%, we know it’s actually much worse. John Williams at Shaddowstats has the U3 unemployment number at 35.4%. The CBO expects the official unemployment rate to stay above 10% for the next year or two. We’re in for a long, painful period.
What can you do to prepare? Keep doing what you’re doing. Invest in self-sufficiency. Pay down debt. Build a cash reserve of 9 to 12 months’ worth of total expenses. Build up your pantry—all the stuff I talk about in the Seven Step Survival Plan.
If you’re considering investing in gold and silver to hedge against the coming inflation, make sure all your other bases are covered first. I think we’re in for a prolonged period of erratic instability. We could see periods of deep deflation as people scramble for cash to survive the immediate future before hyperinflation ultimately takes hold and collapses our economy. During that initial phase of deflation, we could see prices of hard assets like gold and real-estate take a beating. But in the end, they’ll be some of the only safe havens for protecting wealth long term.
On the constitutional front, freedom is hardly worth talking about anymore. We’ve seen far more egregious abuses of power as a result of COVID 19 than we ever saw from the 9/11 panic. In our modern age, we’ve seen a father arrested for playing ball with his daughter in New York, a newlywed couple who spent their honeymoon in jail because they had a home wedding, a beautician thrown in prison for cutting hair, all the while marijuana dispensaries and abortion clinics remained open as essential businesses. Only in America do murders and drug dealers get classified as essential workers while people go to jail for cutting hair, getting married, or playing ball with their child.
I often hear this fantasy that people believe the police and military are going to draw a line in the sand, that they’ll refuse to take unconstitutional orders. No doubt, many will indeed. I applaud the work of Oathkeepers, which reminds soldiers and law enforcement of their oath to uphold the US constitution. I think many men and women in those professions who are confronted with what that means will determine ahead of time not to go along with unjust and unlawful orders. However, I fear they will be in the minority.
During the COVID crisis, Andrew Cuomo issued an executive order for the National Guard to seize ventilators and protective gear from private hospitals, a blatant infraction against the 4th amendment. But, I heard of no mass refusals by the National Guard to carry out this terrible crime.
In Dare County, North Carolina, the Sheriff’s Department banned non-resident homeowners from accessing their own houses. The very people who pay these deputies salaries through property taxes were denied being able to go to their own homes. And once again, I heard nothing about any major protests by the deputies in that department. Neither did I hear about any law enforcement officers in Texas who refused to arrest Shelly Luther for cutting hair.
I know I have a lot of readers and listeners who are in law enforcement. I know it’s a tough line to toe and I appreciate your service. But, if you’re not already involved with Oathkeepers, I’d encourage you to take the time today to look into getting involved. If you’re already involved, start having some conversations with your co-workers in your department. Try to get them to take a look at Oathkeepers as well. I believe we are getting perilously close to the end of the American experiment and this country won’t survive in its intended form without your support.
Until next month, God bless and happy prepping!
Mark
