Sunday, March 29, 2009

Christian Simplicity #2

I've been a follower of the Voluntary Simplicity Movement for years. I'm not saying I've actually got it all down, but the principles of voluntary simplicity are important to me and I try (with intermittent success) to put them into practice. I am convinced that the Christian faith has much to say on this issue, though I find that I am often making common cause with unbelievers or all stripes on this particular issue. I try to cull commonsense articles without an anti-Christian bias to bring to you. This one comes from this month's issue of Simple Living News, which can be found at here.



Recession-Proof
Voluntary Simplicity As The Key To Living Well Even In A Recession
By Gordon Morrow
Copyright © 2009

Congratulations to everyone who has joined the Voluntary Simplicity movement! You have put yourself in the enviable position of living with abundance even in bad times.

The world's economies are clearly in a recession that promises to be deep and prolonged, despite governmental attempts to control the outcome by lowering borrowing costs to near zero, providing huge bailouts to financial institutions and the auto sector, and enacting massive and unaffordable spending. These measures will not work, and they seem to be tied to the need for continued growth as a measure of prosperity.

It is this need for continued growth that has led to the financial crisis facing the world today. Dr Wayne Dyer in his book Change Your Thoughts - Change Your Life says, "Analysts might tell us the economy is failing if it is not continuously growing, but we can realize that excessive growth, like cancer, will ultimately destroy us." Since the governments of the world seem to believe the analysts, it is up to us individuals to realize that excessive growth can destroy us, and do something about it for ourselves.

So, what can the world as a whole learn from the voluntary simplicity movement?

For those of us who follow the guiding principles of voluntary simplicity or Simple Living, we all have some common rules we live by. It is these common-sense rules that help to create recession-proof lives for us.

So, what are some of these common-sense rules to live by that makes us recession-proof?

1. Spend less than you earn. This is the key to financial security in good times, but it's especially so in bad times. With spending said to be in the range of 125% of annual income for many in Canada and the U.S., it is little wonder that when faced with job loss or reduced income, people find themselves in financial crisis.

2. Live debt-free. Debt is the modern-day form of slavery that takes away freedom of choice and makes us stay chained to jobs we no longer enjoy. Though there is no debtors' prison in the literal terms, figuratively, debtors' prison is alive and the bars are stronger than ever.

3. Take control of your financial life by controlling spending. Too often people feel that the source of their financial problems is that they do not earn enough. "If I had a better paying job, all would be OK." Making more money is not the answer. First, study after study shows that when people make more money, they just spend more. Second, few people have control over how much they earn. Yes, you can take another job, maybe work more hours, if there are extra jobs to be had. You can't control what jobs are available, and working more just makes you more of a wage slave and reduces your freedom of choice even more. Spending however, is fully within your control. Everyone with some effort can find ways to stop spending or spend less in all areas of life. Yes, it takes a little planning and some work, but once you have spending under control, you now control your financial life. Keep track of your spending and review it to find ways to reduce or eliminate areas of spending that do not fall in line with what is important to you.

4. Establish an emergency fund. Next to reducing debts to zero, having money set aside for unexpected events is key to financial freedom. Since you have already taken control of spending, there will not likely be many surprises here, but an unexpected reduction in income due to job loss is not within your control. Have enough set aside to pay for several months of basic living expenses (food shelter, transportation and clothing). It used to be thought that three to six months' worth of basic living expenses was enough, perhaps now six to nine months may be more appropriate.

5. Save for the future, but save with a purpose. Saving without knowing for what purpose will not work. Plus you will never know when you have enough. Some savings will be for future expenses: replacing an automobile if you still feel the need for one, replacing the roof on your home, travel, and various other expenses require savings to finance them. After all, you are not going to use debt to pay these types of expenses. You need to save money to invest, and create an income for when you choose not to work for pay, or reduce hours at work. This is necessary for the next step.

6. Have multiple streams of income. Most people have very limited sources of income, usually a paycheck, or perhaps two if both spouses work. The more sources of income you have, the more control you have over your life. It is better to have two smaller paychecks for two different people than one large paycheck. If you were to lose that large paycheck, you would be in trouble. Just look at families who have multiple family members working at one of the auto companies. They all risk losing their jobs. Try to have family members work in different industries to diversify income. Having savings invested to generate interest is another source of income. Be creative: write articles, have a small business, sell handcrafted jewelry, or grow and sell vegetables. The bottom line is that the more streams of income you have, the better position you are in to weather any downturn, as you will not lose all your income at once.

7. Live your life consciously. Do not be influenced by what others have or do not have. Whatever you buy, make sure it is what you want. Do not get talked into buying a house bigger than you need or buying a new car to keep up with the latest trends.

For those who want more information on how to put this common sense into practice, there is no better resource than what I call the "Bible of Simple Living", Your Money or Your Life: Transforming Your Relationship With Money And Achieving Financial Independence, by Joe Dominguez and Vicki Robin.

If you can live by these guidelines, you too can be recession-proof. I think Henry David Thoreau summed up the key to living recession-proof when he said, "A man is rich in proportion to the number of things he can afford to let alone."

About The Author

Gordon Morrow has a BA in Economics and a Certificate in Financial Planning. Gord and his lovely wife Maureen retired 10 year ago at age 42.He was able to do so because he lived by some old rules: spend less than you make, save for the future, and stay out of debt. Gord and Maureen have worked on and off over the past 10 years, but it has always been by choice rather than by necessity. Gord has published articles and presented workshops on various topics related to Financial Independence. He is a strong believer in life balance and living life according to one's values. Gord can be reached by email at gord.morrow@gmail.com.

Related Resources

* Your Money Or Your Life - 2nd Edition
* Your Money Or Your Life - 3rd Edition
* Transforming Your Relationship With Money
* Getting A Life
* Your Money Or Your Life Study Guides
* How To Get Out Of Debt, Stay Out Of Debt, & Live Prosperously
* I'm In Debt, Over 40, With No Retirement Savings, HELP!
* My Job Sucks & I Can't Take It Anymore! Help!
* Handmade For Profit

Wednesday, March 25, 2009

This Rally

Well, this stock rally has caused me to rethink where we are in the cycle. I now think that all of the movement since the late November lows is a large Wave IV in Elliott Wave terms, with the last two weeks being the "C" part of the wave.

For those of you who don't understand Elliott Wave Theory, and to whom this seems like mumbo jumbo, here's the picture in plain man's speech.

The minimum conditions have been fulfilled, and this rally could peter out at any time. We are now due for a relatively large pullback in any event. However, I believe this rally most likely has further to go, perhaps 9500 on the Dow or potentially even a little above. It will probably last into late April or early May. Then we will turn around and head south again through the summer and fall, falling to new lows. Then we will have the furious and extended rally that lasts a year or more.

If you remember my post on the idea that mass sentiment drives the stock markets and the economy, and that it flip-flops back and forth between optimism and pessimism, then you weren't surprised at all that in the midst of a nice stock market rally we get some good news about real estate sales and some more good news about durable goods orders. No bear or bull market proceeds in a linear fashion. There are always smaller countertrend moves. We've been way, way overdue for these countertrend moves we're seeing now.

What are the practical implications? If you want to sell a house or sell a car or something expensive, this will be a good window of opportunity. If you own a business, especially one that sells large, expensive goods, this is an opportunity for a short term boost in sales. Increase your advertising and cut your prices to attractive levels and get rid of inventory, especially inventory you've had to borrow money to purchase. Don't look on this as the time to add more permanent employees. If you don't have sufficient staff for the increase in business, then hire temp workers. If you are a missionary or someone who operates on a budget that's raised by charitable giving, this is a golden time to make your appeal for funds. In my mind it's better to aim for one-time lump sum gifts rather than some sort of smaller monthly giving which might be difficult for donors to follow through on in 6 months. It may also be an excellent time to refinance your house. The Fed is targeting a 30 year fixed mortgage rate of 3-4%. You can save several hundred dollars a month this way.

Any boost in income should be seen as a temporary gift from God that you set aside and save. Do not let your own shift to positive sentiment change your behavior. This is not the time to encumber long term debts that you are unlikely to be able to service when things head south again. It's not the time to run up your credit card. It's not the time to let the reins down on the horse's neck as far as frugality and self-discipline are concerned. It's not the time to presume upon a certain level of future income.

As a matter of habit, you want to be doing the opposite of what everyone else is doing. When times are good, sell and save. When times are bad, buy and spend. Last year the morons who don't know how to use a calculator went out and bid up the prices of small, fuel efficient cars to the point where unreasonable amounts of money were being spent on the cars. The fuel savings did not justify the huge increase in prices, but people paid anyhow. Pickup trucks and SUV's tanked in value, to the point that you could have spent less money buying a Suburban and paying for the extra fuel than you could have buying a Chevy Aveo and saving money on gas. Now the price of fuel is down and the Aveo drivers are stuck with even less savings on fuel than they had originally planned, and a huge car payment for a roller skate. Be wiser than that. Think, don't emote. Reason, don't crave. Use your renewed mind to discern what is good and right, not your deceitful heart.

Thursday, March 19, 2009

Global Trade Collapsing

Global trade collapsing
Commentary: U.S. exports falling at 49% pace as customers fade away
By MarketWatch
Last update: 12:37 p.m. EDT March 13, 2009
WASHINGTON (MarketWatch) -- For a while, some analysts held out hope that the rest of the world would be spared the devastation of the collapse of the great American credit bubble. The global economy had de-coupled, they said. America's problems were her own.
No one is saying that any more.
In fact, the latest evidence shows that global trade flows are plunging at an alarming rate.
The Commerce Department reported that the volume of U.S. imports from abroad fell 4.6% in January while exports declined 8.6%, the most since the monthly trade figures were first collected in 1992. See full story.
Over the past five months since the credit crunch intensified, real exports have plunged at a 49% annual rate, while real imports have fallen at a 30% pace.
The pace of the decline is unprecedented in modern times, economists say. "We doubt even during the Great Depression that trade collapsed with such ferocity," said David Greenlaw, an economist for Morgan Stanley.
The Great Recession, as the IMF calls it, has severed a crucial link in the global economy. U.S. consumer spending has been the main engine of growth for the whole world, but that spending was based largely on phantom gains in asset prices that were inflated by that cheap money from abroad that has now been disrupted.
The profits that foreign producers made from selling to America, in turn, created millions of jobs in places such as China, Southeast Asia and the Persian Gulf. That was then: China reported its exports plunged 25% in February compared with a year earlier.
Those jobs are disappearing, sparking a great reverse migration back to rural China, the Philippines and South Asia. In China, an estimated 20 million workers have lost their jobs. It's not just the American economy that needs to adjust to the new reality. The rest of the world will have to re-examine just where growth comes from.
Ultimately, the global economy may find a road to more balanced growth. Economies from Germany to China may need to rely less on U.S. consumers and more on their own.
Wherever the road leads, the process will be wrenching and drawn out.
-- Rex Nutting, Washington bureau chief End of Story

Wednesday, March 18, 2009

Animal Spirits

"By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ... The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint." -- Mark Twain

What really drives our economy and all of our social activity? Of course, the ultimate answer is the Providence of God, but what is His instrument? There is a new field called Socionomics that has some interesting, and I think, accurate observations.

We human beings are herd creatures. I'm not speaking of Darwinianism. I'm just speaking of things you observe every day. Watch the teenagers at your local high school. Watch your friends and neighbors. Watch the fashion industry. We all want to be doing the same things our friends and neighbors are doing. Marketing professionals know this and have the personality types broken down into how quickly a new fad is adopted. There are the innovators, which are a very small group, around 2.5% of the population. Then the early adopters, the early majority, the late majority, and the laggards. They make money by identifying the next trend early and positioning their companies to profit from it as it goes mainstream.

We are all basically bipolar. We cycle between optimism and pessimism, and do so on an individual and a collective basis. These observations form the foundation, in socionomic theory, of all sound observation of human social behavior "under the sun."

Before I discovered Socionomics, my wife and I came to these same sorts of conclusions ourselves. She has a marketing degree and was working for AC Nielsen, which quantifies sales data of all sorts. We were discussing the Michigan Sentiment numbers and she said, "It's all a confidence game, isn't it? The economy is good when people have confidence and bad when they don't." This is true. Long ago Wall Street types developed what's called the "hemline indicator." When the hemlines of women's skirts went up, times were good on Wall Street. When they went down, it was a bear market. Keynes tried to explain this phenomenon by labeling it "animal spirits."

Traditional economic theory posits that external events make us either optimistic or pessimistic... that the news drives the markets. Socionomics says that's exactly backwards. Our collective mass sentiment drives both the markets and the news.

People are optimistic and take risks during times of positive social sentiment. During the last phases of an extreme in positive sentiment, they take really stupid risks and become manic. They collectively bid up the price of an asset they've fixed their attention on until it reaches ridiculous extremes. Beanie Babies suddenly become worth hundreds or thousands of dollars. Or oil. Or tech stocks. Or houses.

People "act up" more in times of dark social sentiment. Crime increases. Violence increases. Our favorite movies are horror movies. Our music grows angrier and more discordant. We become more conservative in our clothing (i.e. longer hemlines) and cover more skin. The colors we prefer grow more conservative and traditional. People become more religiously observant. They let even good business opportunities pass them by.

Put another way, the news isn't making us depressed. We're depressed, so we listen to the bad news. In times of manic optimism, we simply ignore the bad news. The media is simply a mirror of what we're collectively feeling at any given time.

Alan Greenspan admitted this cycling of human mass sentiment was the basic force behind all markets in a rather interesting interview with John Stewart on the Daily Show.

The Daily Show With Jon StewartM - Th 11p / 10c
Alan Greenspan
comedycentral.com
Daily Show Full EpisodesImportant Things w/ Demetri MartinPolitical Humor


Now, here's the kicker. This pattern of cycles is more ore less regular and more or less predictable at several degrees of trend, from days and weeks all the way to decades. These patterns can be charted. They can be analyzed using the tools given to us by fractal geometry. They can be applied to any human social activity. The stock markets happen to be an excellent indicator of mass social mood, and have the benefit of being one with lots of data on them which is easily available. When I say that a large rally is coming, I say it for that reason. It's almost time. We have one more good downdraft in the stock market, culminating in a panic washout, by my reckoning. This little rally we've had for the last 10 days or so carried farther than I thought it would, but it's almost done. Then we'll have a rally that will probably last a year and carry the averages quite high. After that, I think we head down to new lows, and then a bottom.

The pattern also tends to be symmetrical. Periods of very manic optimism are followed by an equal and opposite period of manic pessimism. We are coming down from the largest manic high in perhaps all of human history. Certainly it is the greatest one in the history of the United States. The levels of debt that we undertook because of our collective euphoria are simply staggering. We overbuilt and over invested in every conceivable area because of it. Then, one day, the euphoria began to wear off. We will have an economic contraction that's roughly equal and opposite to the manic high. And probably another world war before it's over, to boot.

There is a positive side to this, however. It will not go on forever. It will seem like it before it ends, but it will not go on forever. Recovery will happen. Prudent measures taken now, prudent investments made at the bottom, will pay huge dividends later on. The people who invested even modest amounts of money in the stock markets at the 1933 bottom, or the 1937 "Roosevelt Recession" made fortunes later in life. So it will be again.

But the time to invest will be when everybody thinks is absolutely crazy to invest, not when they're itching for the bottom so they can dive back in and make a buck. Magazine covers are useful indicators for timing. The magazine article which predicted, to the month, the start of the Great Bull Market we've just lived through was the August 1979 edition of Business Week. The cover story was, "The Death of Equities: How Inflation is Destroying the Stock Market." The magazine cover that predicted the housing bust to the month was Time's "Why We're Going GaGa Over Real Estate" complete with a picture of a levitating house.

When you see a cover story on a major magazine that basically says "This terrible situation is now permanent. Abandon all hope." then it's time to buy and hold the stock market. But not until. When you see a cover story that says we're gaga over gold, sell your gold and silver. But not until.

Tuesday, March 17, 2009

A Real Life Example of Frugality and Self-Reliance

As I've mentioned before, I'm a jack of all trades and master of none. One of my more lucrative and useful trades has been in the automotive repair industry. I'm a self-taught mechanic. I learned from reading, and watching others who knew what they were doing, and most of all, trying stuff out for myself. I have always been fearless about dismantling other people's stuff. Not because I don't care about their stuff. Exactly the opposite. I care so much I know I can't abandon the job until I've completed it. One time I was helping my Dad get his 1936 Alice Chalmers tractor started. It wasn't making much spark. It had a magneto ignition system. That's old, old school. I'd never worked on one before.

I dismantled it on the spot and then asked, "Have you ever gotten it apart to this point before? I have a question." He hadn't.

Ruh-roh Rastro! Guess what I learned all about right then and there? We had the tractor running better than it had run in years, and did so inside of 15 minutes.

You can (and should) familiarize yourself with how your car works. With a few simple tools, a little bit of time, and a little bit of bravery, you can save yourself hundreds of dollars.

Let me give you a real life example. My 94 Chevy S10 Blazer crapped out on me a couple of months ago. A four wheel drive is a definite plus in this area in the winter. I fiddled with it long enough to eliminate some things as the cause of the problem, but I couldn't pinpoint the problem. It would run, but very poorly. When I pulled a spark plug out, you could smell raw fuel. That means it was putting too much fuel into the combustion chambers. I ran it around the block until I got it to pop a hard code. That means I got the "check engine" light to come on. That little light is your best friend. If you understand how things work, that little light will tell you how to fix your car.

I pulled the codes out of the computer with a bent paperclip. Since the Blazer is older than 1996, it's computer controls are what's called OBD I. That stands for "OnBoard Diagnostic I." Those are more primitive computer controls and give you a more limited set of data about what's wrong. After 1996, most vehicles are OBD II, which is standardized. You can't pull the codes on an OBD II vehicle without a special tool, which can be had for around $35 or so. Mine is called "The Creader." Look it up on ebay. They're anywhere from $9.95 on up. That little tool is a must if you own a 1996 or later car with OBD II. If you have a question about what your car is, and how to pull the codes, email me and I'll find you the info. In OBD I, every manufacturer had different procedures. Nissan, for instance, required you to dig the computer out of its place and turn a knob on the side of it with a screwdriver before it would give you the codes. Ford and BMW required you to hit the accelerator pedal in a defined sequence with the key in the "on" position. GM's can be pulled with a paperclip bridging two terminals under the steering wheel. I don't think I've ever had to pull the codes on a Toyota or a Honda, so I don't know how to do it off the top of my head. That should tell yous something right there.

The trouble code present on the Blazer was a 32. I looked the code up on the internet. A 32 is the code for EGR system failure. The EGR valve is the Exhaust Gas Recirculation valve. It opens to let a little bit of exhaust into the fuel/air mixture to improve combustion and help control pollution.

I priced a new EGR valve on the internet. They run anywhere from $193 to $280 dollars. Ouch. So I decided to take the old one apart and see if I could fix it. I located it, removed it, and inspected it. The thing had been in there for 15 years and 127,000 miles. It was crudded up with carbon and products of combustion. The little plunger that opened and closed the valve was sticky. I soaked it with WD-40, then scraped the softened carbon out with a dental pick, then degreased it with some carburetor cleaner. I went to the auto parts store and bought a new gasket and some high temperature silicon sealant, then I put the whole thing back together and fired up the truck. Problem solved. Cost: $8.00 and 1 hour of work.

Will it crud up again? Probably. In a year or two. Big deal. I bet it takes half an hour to do it next time, since you always do the job faster the second time.

Now if I had simply taken it to a mechanic, I'd have been charged somewhere in the area of $300 for that same procedure. At least. If they really wanted to stick it to me, they'd have charged an hour for the diagnostic scan (i.e. sticking a paperclip in the terminals) and then charged me to remove and reinstall the EGR valve (probably a half our of labor in the standard book) and then the cost of the part with their markup. You figure they mark up the part by 25-30%, and charge you $60-$80 per hour of labor.

If I had simply bought a new EGR valve myself and put it in, I'd have been out $200 at least.

But because I took the thing apart and cleaned it up myself, I'm out a gasket and a little bit of silicone.

Many things can be done yourself. A brake job with replacement of the rotors is $300. You can do it yourself for $75. A tuneup is quick and easy on today's cars. You can change your own oil for about $10. Belts and hoses are a snap. Timing belts are a little tricky and you might need some guidance, but I saved myself about $800 by doing the timing belt and water pump on my minivan myself. My brother just called with a question about his Saturn. I said it was either the CV joints or a wheel bearing. It ended up being the wheel bearing. It's costing him $500. I can do the same job in an hour (maybe two if it's a press-out/press-in type of bearing) for about $30. The same is true of worn out CV joints. Not hard. Common problem. You can save hundreds of dollars.

You'll need to spend about $200 on a starter kit of tools, and some books. Here are some recommended resources:

As an introduction to how your car works, the best book I've found is an old textbook from a high school or tech school introductory automotive shop class called "Modern Automotive Technology." You can pick it up used for $7.00 here.

Then, to get more detailed, I recommend the Haynes Techbook series. It covers each subsystem in more detail. I went for years without these, they're more about the theory behind the systems, and not a specific system for a specific car.

I'd also recommend either getting a printed repair manual for your specific vehicle, either from Haynes or from Chiltons, or better yet, buy a subscription to AllData DIY for your specific vehicle. This is the database that professional mechanics use.

As for tools, Sam's Club has a really nice little starter set made by Channellock. I have one that I keep in the truck for emergencies. It's a decent set, and will do a lot for you, and is available for around $75. It's also available at other places.

Crescent makes a larger set of 442 piece set. The cheapest I found it is on ebay for $271.

The combination wrench sizes are a little minimalistic in these sets, so I recommend a set of cheap Chinese combination wrenches like this one here.

A couple of other things are helpful. I have a pair of giant channellocks (groove joint pliers) which are one of the most useful tools I own. Mine are 24", but these would do. I use them for everything, even squeezing the pistons back into the brake calipers on a front brake job.

A good hammer is a must.

A cotter pin puller is a tool with more than one use.

A good set of swivel sockets is very useful.

A lot of times, stores like Autozone and Advance Auto Parts have loan-a-tool programs for the expensive specialty tools it wouldn't pay to purchase.

A good jack and some jackstands are also recommended.

Be aware that German cars in particular and European cars in general often require special tools. The manufacturers like it that way. Then you have to use the dealerships for service and repair. For instance, I have a special tool for turning off the "oil service" and "inspection" lights for BMW's. And when I worked at the BMW repair shop in Cincinnati, we would install certain new parts, like a power window motor. Then we'd have to take the car down to the dealer and have them put it on their computer and tell the computer it was okay to let that part function. They claim it cuts down on the market for stolen parts. What it does is pad the dealership's bottom line. You might end up fixing your own car and then taking it to the dealer to "turn on" the new part. It's still cheaper than letting the dealer do it. It's also possible to get by without the special tools sometimes. I've found this especially with BMW's.

Don't be afraid to ask to borrow or ask for help. You'll find that often people with skills are quite willing to impart those skills to those with an interest. I consider it a Christian duty myself.

NY Times Steals My Idea

Kudos to the New York Times. They've started a new video series called "The New Hard Times" that consists of video conversations between young people of today's generation and oldsters who survived the First Great Depression. This is exactly the sort of thing I said I wanted to see in my first post.

The fact that frugality is back, and "Depression Cooking With Clara" is such a hit, and the NY Times created this series tells me that people are starting to get it. Our situation is beginning to seep into the mass consciousness. People are adjusting their behavior to conform to the new reality. This is very good. This helps us not only to cope, but to thrive and become stronger. The two videos that are up so far are an excellent study in contrasts.

The first video, a grandmother talking to her granddaughter about her experiences illustrates the wrong way to go through this thing, if you ask my opinion. All her grandmother remembers is the bad times. Ask her what her happiest memory is, and she tells the story about not getting any Christmas or birthday presents. She spoiled her grandchildren (and presumably her children as well) so they wouldn't have the sorts of difficult times she went through. The woman and her daughter profess to be running out of money, and joke that the granddaughter must soon take care of them. But the minivan has is the top of the line version with leather upholstry, and the house is a cluttered mess and breathes despair. These are not women bent on helping themselves and making do or doing without. A 2 liter of coke sits on the chairside table, apparently for frequent refills in the disposable cups. The grandmother says that she would have been satisfied with a little house with some flowers. But the granddaughter wants "a lot." Of course we must end on an optimistic note. "She'll probably get a lot." Not the way she's going, she won't.

I think the best lessons I've seen in the NY Times videos comes from the 96 year old Professor of Statistics.

After asking the girl interviewing him what his classmates are talking about and how they're behaving, he notes that his peers were much like that in 1929. The major changes happened later. This jibes with what I've said before. Comparisons between the situation right now and the depths of the Great Depression are slight of hand. We are right now where they were in early 1930.

He also says he was ashamed that he, as a man with a Master's Degree in Finance, was only able to get a job as a shipping clerk. Then he went to the factory floor and saw all his classmates working there. "I realized that was just how the world was now."

He made his peace with being poor. There is no shame in being poor. You do what you can with what you have. You stay clean. You stay disciplined. You stay optimistic. You work hard. You trust God. Families move in together and make do. That's respectable poverty. There is no shame in that.

Monday, March 16, 2009

Explosive Boom in Garden Seed Sales

It's kind of sad when we have to go to the Australian press for information about what's happening in our own country. It just shows how the U.S. Media is trying to spin the crisis and make everyone happy and optimistic.

Crop 'til you drop: a growth spurt at last in patchy times


Gillian Flaccu in Long Beach, California
March 17, 2009 - 12:00AM

WITH the recession in full swing, many Americans are returning to their roots - literally - cultivating vegetables in their backyards to squeeze every penny out of their food budget.

Industry surveys show double-digit growth in the number of home gardeners, and mail order companies report such huge demand that some have run out of seeds for onions, tomatoes and capsicum.

"People's home grocery budgets got absolutely shredded and now we've seen just this dramatic increase in the demand for our vegetable seeds. We're selling out," said George Ball, chief executive of Burpee Seeds, the largest mail order seed company in the US. "I've never seen anything like it."

Gardening advocates have called the newly planted tracts "recession gardens" and hope to shape the interest into a movement similar to the victory gardens of World War II.

Those gardens, modelled after a White House patch planted by Eleanor Roosevelt, were intended to inspire self-sufficiency, and at their peak supplied 40 per cent of the nation's fresh produce.

Roger Doiron, director of Kitchen Gardeners International, is petitioning Barack Obama to plant a similar garden at the White House - 75,000 signatures have been collected on an online petition.

For many Americans, the appeal of backyard gardening isn't in its history - it's in the savings. The National Gardening Association estimates a well-maintained vegetable garden yields a $US500 ($760) average return a year.

Adriana Martinez, an accountant who reduced her weekly grocery bill to $US40 by gardening, said she has peace of mind knowing where her food came from. And it had fostered a sense of community through a neighbourhood vegie co-op. "We're helping to feed each other and what better time than now?"

Community gardens around the country have also come into their own. The waiting list at the 312-plot Long Beach Community Garden has nearly quadrupled, but no one is leaving, said Lonnie Brundage, who runs the garden's membership list.

Associated Press

This story was found at: http://www.smh.com.au/world/crop-til-you-drop-a-growth-spurt-at-last-in-patchy-times-20090316-8zz3.html

How Do I know If I Love Money?

"But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs."
-1 Timothy 6:6-10


Here are eight signs to tell if you love money too much:

1. Do thoughts of money consume my day?
2. Does the financial success of others make me jealous?
3. Do I define my success in terms of what I have instead of what I am in Christ?
4. Is my family neglected in the pursuit of stuff?
5. Am I able to close my eyes to the genuine needs of others.
6. Do I live with a paralyzing fear of losing whatever money I may have?
7. Am I prepared to borrow myself into bondage?
8. Does God receive my leftovers rather than my firstfruits?

Friday, March 13, 2009

Creepy, Isn't It?

I went on another blog that used the Feedjit device at the right of the screen here, and decided I needed to have one on my own blog temporarily.

Creepy, isn't it? It doesn't tell everyone exactly where you are, only your town. But I bet the information about exactly where you are is available to the "right" people. I bet Google and the internet marketers and the U.S. Government know exactly where you are. I bet they know every site you've ever visited.

This morning I visited a website with a document that is purported to be a scan of a "law enforcement sensitive" document that was sent to the site's owner by an anonymous, concerned law enforcement official. It was generated by a law enforcement organization called "The Missouri Information Analysis Center." It concerns the so-called Patriot/White Supremacist/Skinhead/Anti-New-World-Order crowd. Your basic Waco and Ruby Ridge types, among others.

The interesting thing was that they also mentioned that these sorts are usually supporters for Ron Paul, Bob Barr, Chuck Baldwin, and the Libertarian Party, and that they view the Federal Reserve in a very negative light.

Therefore, it's reasonable to assume that if you've
a. Visibly supported Ron Paul, and
b. Written or said negative things publicly about the Federal Reserve, and
c. Remarked on the unconstitutionality and thus illegality of our existing financial regime and currency, and
d. Visited websites run by oddballs who specialize in the sort of information we're talking about here, and
e. Own guns and have purchased ammo, especially with a credit or debit card

that you are a person of interest of some sort. You are probably on a list. Probably a low priority list, but a list nonetheless.

Of course, I've done all those things. And I have the privilege of knowing that I'm also on some sort of TSA list concerning air travel, because when I went to perform my Grandfather's funeral I was not allowed to board the plane until the airline representatives made a phone call. When I asked if I was on some sort of list, they said "Yes." When I asked what sort of list they said, "We don't know." When I asked how I could find out what sort of list and why they said, "We don't know."

Therefore I take it for granted that the government is watching me at some level. It's a reasonable assumption based on my experience.

And of course, as an American I don't like any of this. It feels very much like preparations for an authoritarian regime are being made. I don't like it when Federal officials say things like American citizens are entitled to privacy but not to anonymity. Those used to be the same thing. Now the government is deciding that it has a compelling interest to pry into your innocent business if it sees fit. You are considered guilty until you are investigated and found innocent, simply for wanting to mind your own business and wanting others to mind theirs. It's the sort of logic that says "the Unabomber lived alone in a remote cabin. You live alone in a cabin. Therefore you must be another Unabomber."

As a Christian, however, I recognize that my civil rights are a separate issue from my biblical duties. I will fight for my civil rights in the civil realm, of course, but my civil rights are not the same thing as my Christian faith. Most Christians throughout history have had to function in an environment where they do not have U.S. style civil rights, and they've lived more or less fine under those sorts of regimes much of the time. The Christian's duty is to obey the legitimate orders of the magistrate, even if the magistrate is an insane emperor named Nero. We may only legitimately resist the government on Christian grounds if they command something God has forbidden or forbid something that God has commanded. If they do that, then they must be resisted, even unto death.

Now, I mention all of that in order to say this.

1. Times of economic stress are also times of potential social upheaval and even revolution. Government and Law Enforcement know this. They've been preparing for it. Part of the reason they're lying about how bad things are is that they hope to buy time to make preparations. I'm sure at least some of those preparations are legitimate and prudent. For instance, Obama is considering sending troops to the U.S./Mexico border right now because Mexico's economy is in the tank, and it is very close to an all-out civil war as drug gangs and other criminal enterprises fight for control. I have read rumors (with photos) of prepositioned, secure camps being erected in the Arizona desert and other places. Naturally the conspiracy theory crowd is going bananas speculating on who is to be interned in those camps. Some are even predicting that they are a kind of new Auschwitz for those who the Obama administration thinks are politically undesirable. I think the camps are probably intended for a bunch of Mexican refugees, for there is the great possibility of a wave of refugees washing over the border if things get worse down there.

2. I'm counseling you to take prudent measures to protect yourself and your family, including storing up a reasonable amount of food and emergency supplies in case of civil disorder, owning some gold and silver, and although I haven't specifically advocated firearm ownership on this blog, I'm in favor of it for self-defense purposes and for the ability that guns provide to secure food in the form of wild game. These are the same sorts of activities that persons of interest to law enforcement are also doing.

3. Government responses like the one I mentioned from Missouri law enforcement will undoubtedly serve to pour gasoline on the fire and make the anti-government paranoia worse. Perhaps government will even provoke the sort response they fear with this kind of behavior.

4. It's possible that you and I might be lumped in with the nutjobs and revolutionaries, and will probably get at least some law enforcement attention in the case of national emergency. Don't be weirded out by it. Don't be hostile to them if you get pulled over basically because you have a Ron Paul sticker on your car and forgot to turn off your blinker for a mile or so. Don't do anything wrong. Don't break any laws. Don't go to websites that you would be embarrassed about if others found out.

5. If you want to keep any secrets, like how much gold you have, assume they will not be kept secret if information about your secrets goes over the internet.

Once again I say trust God. This world is not your home. You are just passing through. It matters very little whether your stay in this temporary lodging called The World is passed in luxury or under more spartan circumstances. The comfort or discomfort are only for a short night, and soon it will be morning and you will be home in your Father's house.

Thursday, March 12, 2009

Finally, Good Advice From Newsweek!

Newsweek had two pretty good stories this week. One was on gold. When they bothered to cover gold in the past, it was along the lines of "this is what crazy people do." Now the tone is more, "This is what crazy people do, but lots of uncrazy people are doing it now." This is progress in the Bull market psychology. Soon it will be, "Why we like gold now."

The other good article is reprinted below.

The Frugal Family Guide

Be like my mom and dad: buy stuff you can afford.
Steve Tuttle
NEWSWEEK
From the magazine issue dated Mar 16, 2009

Last summer I was at my parents' cabin in rural Virginia and I noticed a dead mouse in a rusty old trap. I tossed it in the trash. Later that day I told my dad about the mouse, and he asked, "Where's the trap?" I told him it looked as though it were falling apart, and I'd thrown it out with the mouse still attached. He looked at me as if I'd punched him in the face. My mom chimed in: "We've had that trap since we got married!" I wasn't sure she was joking, and they got married almost 50 years ago. I sheepishly dug it out of the garbage and loaded it up with cheese again. Now it's become one of those perennial things they bring up every time I go home: "Remember when Steve threw out the mousetrap, mouse and all!?" This is followed by shuddering and head shaking, as they silently wonder where it all went wrong.

In today's cratering economy, my parents are looking pretty smart all of a sudden. President Obama talks a lot about personal sacrifice, and we all need to look for ways to cut costs these days. Maybe he ought to consider Bill and Joyce Tuttle as the nation's first thrift czars, because when it comes to pinching pennies and saving for the future, my parents are extreme.

Here are some real and true examples: my mom does not use a clothes dryer. "Why would I ever need that as long as we have the outdoors?" she says. (I'd like to answer that: there's nothing like pulling on a pair of frozen Fruit of the Looms straight off the line on a sleeting January morning. Thanks, Mom.) They don't own a credit card. They buy a new car only when they've saved up enough cash to pay for it in full, about every 10 years or so. They have never had cable or satellite TV, even though where they live they get only a handful of channels over the air.

They heat the house with wood from trees that my dad cuts down himself. They don't have air conditioning. They buy almost all their clothes at thrift stores. Mom was angry last week because Dr. Phil did a show about shopping at consignment stores. "Oh, no. They'll be all over the Goodwill now," she lamented.

My parents definitely don't have the Internet or a computer, and caved on a cell phone only recently. They of course bought the throwaway pay-as-you-go kind for $15 at Wal-Mart so they're not locked into a monthly bill. (When I reached my mom on their cell phone recently, I could hear my dad shouting in the background. "Hurry up. Don't use all the minutes!")

During my sophomore year at college, my dad made a special trip down to William & Mary to see me. I thought he was coming to help me buy my first car. I had my eye on a little red Volkswagen. When he left town two days later, I was the proud owner of a blue five-speed bicycle. He persuaded my brother, Chris, not to waste his money on a color TV. Black and white was just as good. We learned not to take him shopping after that.

Now this might make them sound cheap, but they are most definitely not. They are thrifty. Know the difference. Last year they treated seven members of our family to a full week at Disney World. They give very generous gifts and collect expensive antiques. But my dad would rather gouge out his own eyes than spend $4 on a latte at Starbucks. Or say the word "latte," for that matter.

Our family built the house I grew up in, one section at a time, as my parents saved up enough money. I was about 10 years old when they bought those five acres. After school we'd clear brush and burn it in piles. When it started to get dark, we'd sit on a log in front of the crackling fire and celebrate with little green bottles of Coke and Tastykakes, the chocolate-├ęclair kind. That has nothing to do with my story, but man, were they good.

My mom, who is in her 60s, has been a hairdresser most of her life, and my dad, 72, was a game warden for 38 years. Neither of them ever made giant salaries, yet they've amassed a shocking pile of savings. I would ask exactly how much, but my dad would refuse to answer, and instead would offer to kick my ass for asking. And he could, because he's so ripped from chopping all that wood.

They put two kids through college, and they don't have much in the way of expenses now. Groceries cost less because a lot of what they eat is homegrown vegetables and game my father kills.

Come to think of it, maybe my parents shouldn't start packing their bags to join the Obama administration just yet. The truth is, you couldn't do a lot of these things unless you live in the mountains, and you like hard work and lots of it.

But there are still valuable lessons to be gleaned from their example, which boils down to this: the people who have been living the thrifty life all along, doing the right thing—crazy stuff like buying houses they can afford and saving up money for things they want to buy—are the smart ones now. And they'll be the ones who adjust most easily to a leaner time. While the rest of us watch and worry, my parents, with their paid-for house and their old rusty mousetraps, have peace of mind to spare. It reminds me of the line from "Sharecropper's Son," a bluegrass song I knew growing up: "Landlord told me that hard times were near/Didn't mean a thing 'cause they're already here."

Tuesday, March 10, 2009

We Have Been Here Before

We got our 3-400 point Dow rally that I promised yesterday. It might have a little more to run. I wish to be clear. I do not think this is the bottom. I'm still projecting Dow 5,500.

We also saw yesterday with the John Stewart video that the commentators and opinion makers in the financial media have been wrong, wrong, wrong. What most of us don't realize is that there is a long and dishonorable history of bad guessing, manipulating public opinion, and outright lying. Here are some quotes and newspaper headlines from the first Great Depression. See if they sound familiar.

“There is no cause to worry. The high tide of prosperity will continue”
- Andrew W. Mellon, Secretary of the Treasury. September 1929

“Stock Prices Will Stay at High Level For Years to Come, Says Ohio Economist.”
-Dr. Charles Amos Dice, professor of business organization at Ohio State October 13, 1929

“FISHER SEES STOCKS PERMANENTLY HIGH”
-Irving Fisher, Yale economist, October 16h, 1929

“BROKERS IN MEETING PREDICT RECOVERY; Partners in 35 Wire Houses at Conference Agree Selling Has Been Overdone.” October 25, 1929

NEW AID IS PLEDGED TO BANK COALITION; G.F. Baker Jr. Joins Parley at Morgan Offices and Many Other Offers Are Made. SUPPORT EASES ANXIETY
-October 26, 1929

Brokers Believe Worst Is Over and Recommend Buying of Real Bargains
– New York Herald Tribune, October 27, 1929
October 29, 1929 - Stock Market Crashes!

BROKERS BELIEVE BOTTOM IS REACHED; Others Say a Sharp. Recovery Is in Order.
-October 30, 1929

“FISHER SAYS PRICES OF STOCKS ARE LOW; Quotations Have Not Caught Up With Real Values as Yet, He Declares. SEES NO CAUSE FOR SLUMP”
-October 22, 1929

“Time to Buy Stocks” John J. Raskob, one of the country’s leading industrial and political leaders
-October 30, 1929

Headline “INSURANCE HEADS URGE TO BUY STOCKS”
-October 30, 1929

ROCKEFELLER BUYS, ALLAYING ANXIETY; Elder Financier Says Business Status Does Not Warrant the Destruction of Values. October 31, 1929

Stocks Up in Strong Rally; Rockefellers Big Buyers; Exchanges Close 2-1/2 Days
– New York Herald Tribune, October 31, 1929

SEES NEW BULL MARKET.; President of Philadelphia Stock Exchange Makes Predictions.
-November 22, 1929
BANKING CIRCLES SEE TURN FOR THE BETTER; Several Developments Cited as Presaging Recovery of the Stock Market. -November 15, 1929

HOOVER CALLS LEADERS OF NATION TO CONFER ON WAYS TO SPUR BUSINESS;
-November 16, 1929

Headline: The Quieting-Down of Wall Street–Aspects of Government’s Relief Projects.
-November 25, 1929

“The Government’s business is in sound condition.”
Andrew W. Mellon, Secretary of the Treasury
-December 5, 1929

RESERVE BANK AREAS FORECAST NEW YEAR
Despite the obvious slackening of the pace of business at the close of the year, leaders in banking and industry throughout the country maintain an optimistic attitude toward the prospects for 1930.
-January 1, 1930

MORTGAGE MONEY SCARCE
-February 23, 1930

“The worst is over without a doubt.”
James J. Davis, Secretary of Labor.
- June 1930

‘BUSINESS CYCLE’ SEEN AT NEW PHASE; Bankers Hold Downward Trend in Markets Indicates Recovery Is Near. DENY ANALOGY TO 1920-21 Economists Point to Superior Credit Conditions Now, Holding Easy Money Points to Revival.
-July 6, 1930

BIG BANKERS PUT UP $100,000 SAFEGUARD; House of Morgan Among Those Required to Provide Protection for Investors. -August 3, 1930
“We have hit bottom and are on the upswing.”
James J. Davis, Secretary of Labor.
-September 12, 1930

BIG FIRM SUSPENDED; Prince & Whitely, 51-Year-Old House, Is Unable to Meet Its Obligations
In the midst of the severest market reaction in two months, the New York Stock Exchange announced yesterday that the 51-year-old firm of Prince Whitely, one of the largest and best known houses in Wall Street, had been suspended on its own admission that it was unable to meet its obligations.
-October 10, 1930

SCHWAB FORESEES RECORD PROSPERITY;
-October 25, 1930

“30% OF STOCKS SELL UNDER BOOK VALUES; Capital Is Above Market Price.”
-December 14, 1930

NEW YORK JOINING IN BRITISH CREDIT; Federal Reserve Bank Agrees, if Requested, to Buy Prime Commercial Bills.
-August 2, 1931

REDISCOUNT RATE CUT TO 1 % RECORD LOW; Federal Reserve Bank Here Takes Drastic Action
-May 8, 1931

RELIEF FUND URGED MEMBER BANKS
Out of the experiences of the depression, resulting in the necessity for organization of the $500,000,000 corporation to relieve banks temporarily in distress, may come a remodeled Federal Reserve System that will be so constituted as to meet the requirements of present-day commerce and industry.
-October 9, 1931

BANKERS OF NATION BACK HOOVER PLAN; October 8, 1931

HOOVER’S BANK PLAN GETS WIDE SUPPORT; November 15, 1931

$2,000,000,000 POOL FOR BANK AID URGED; October 26, 1931

URGES BUILDERS’ AID IN HOME FINANCING; Bank Official Says Industry Could Help More With Second Mortgages.
-August 30, 1931

REAL ESTATE MEN ON THE HOOVER PLAN; Some Skepticism Is Voiced, but the General Belief Is That Good Will Result.
-October 11, 1931

HOOVER PLAN HAILED IN HOLIDAY SERMONS;
-November 29, 1929

“The depression has ended.”
Dr. Julius Klein, Assistant Secretary of Commerce.
- June 9, 1931 (Stock market did bottom one year and 50% later)

5-YEAR MORATORIUM PROPOSED BY KEYNES; Hoover Plan Is a “Stop-Gap” Device
-July 1, 1931

WORLD COOPERATION: A NEW STEP AHEAD; The Hoover Plan Has Focused Attention on the Problem of Economic Unity THE NEW WORLD COOPERATION
-July 12, 1931

As you can see, we've been here before. It didn't work then, and it won't work now. As for the stimulus package, well, that's been tried before too. I suppose it's theoretically possible to print enough money to slingshot us out of this mudpit, but it's not likely. Not for a long time. Below is a quote from Treasury Secretary Henry Morgenthau when he testified before Congress in 1939:

"We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot."

Monday, March 9, 2009

Now It Begins to Dawn on Them

John Stewart completely eviscerated CNBC and the Wall Street Bubblevision Cheerleading Machine last week. I embed this video clip for your amusement. It's 100% true. These guys weren't giving you information to help you make sound decisions, they were part of the progaganda machine that kept the bubbles blowing.




Now, on to other things. Just in case you still think I'm a whackjob alarmist, the following article was on Bloomberg today. This last few months has been "tracking with 1929-1930" says a professor of economics from Berkeley. Note a few things:

1. There's no official definition of a depression. Isn't that convenient? Then we don't have to declare that we're in one, even when we are.

2. There's the slow recognition that we're still in the beginning stages of this thing. When it's done doing its work our psyches will have been scarred and we will take a radically different view of borrowing and consumption.

3. There's still plenty of denial to go around.

4. There are certain industries, like the automotive and housing industries that are in a depression now, and this is now admitted to be true.

5. It's now admitted that we might be in a depression, but not a "great" one. Just a little depression, really. Tiny, actually. You'd hardly notice unless you were looking for it.

Last week I wrote that the downleg which might well be the final downleg of the bear market began. It's shaping up that way. By my analysis of the charts, we will have a 3-400 point Dow rally pretty soon, and then the final collapse.

I'm hoping for a panic bottom and a sharp reversal, but by some measures of sentiment there's actually still quite a bit of complacency out there. This would be bad for the sharp rally scenario. Instead we could just bump along the bottom for quite awhile. At any rate, many of the great bear market traders are saying that at least an intermediate term bottom is very near and they are closing their short positions.


Depression Dynamic Takes Hold as Markets, Banks Revisit 1930s

By Rich Miller

March 9 (Bloomberg) -- The U.S. economy’s vital signs may not confirm a diagnosis of depression. The symptoms increasingly point to one.

As in the Great Depression, world trade is collapsing, wealth is evaporating and the banking system is broken. Deflation is a growing threat as companies slash production, pay and prices. And leaders worldwide are having difficulty making headway in halting the self-perpetuating decline.

“We are tracking 1929-1930,” says Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley.

The result: This contraction may leave a lasting imprint on the economy and society, just as the Depression did. In the wake of the devastation of the 1930s, Americans swore off stocks, husbanded their own resources and looked to the government for help. Now, another generation might draw some of the same lessons from the deepest economic collapse of their lifetime.

“This is going to scar the collective psyche,” says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. “People will become much more conservative in borrowing, lending and investing.”

There’s no official definition of what qualifies as a depression. In the 1930s, the unemployment rate rose to 25 percent and the economy shrank by more than a quarter.

No economist forecasts a return to the breadlines and shantytowns of that era, even as the economy gets closer to some of the metrics academics cite as constituting a depression, if not a “great” one.

Little Likelihood

Nobel Prize-winning economist Robert Barro defines a depression as a 10 percent fall in per-capita gross domestic product and consumption. The Harvard University professor sees roughly a 30 percent chance of that occurring now.

The economy contracted at a 6.2 percent annual rate in the last quarter of 2008 and will shrink at a 7 percent rate in the first three months of 2009, projects Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York.

Bradford DeLong, a former Treasury official who is now a professor at Berkeley, says a depression is a two-year period with unemployment at 10 percent or above. He says that’s possible, though not likely. The jobless rate rose to 8.1 percent in February, a 25-year high.

Some industries are already in a depression, led by housing, where the decline accelerated in recent months as the credit crisis intensified. During the last four years, residential investment is down by 37 percent. That compares with an 80 percent drop in spending on home building from 1929 to 1932.

‘Most Difficult’

“The past five months have been among the most difficult in U.S. economic history,” Robert Toll, chief executive of Horsham, Pennsylvania-based Toll Brothers Inc., said Feb. 11, after the largest U.S. luxury homebuilder reported a 51 percent sales drop.

In the auto industry, U.S. sales have fallen 55 percent from their July 2005 peak. Production of cars and trucks plunged in January to an annual rate of 3.9 million, the lowest since the Federal Reserve began keeping records in 1967, and 67 percent below the January 2005 level.

Things are so bad that auditors have questioned the ability of General Motors Corp., the biggest U.S. automaker, to continue as a going concern.

U.S. motor vehicle output slumped 75 percent from 1929 to 1932, according to statistics in the book “American Automobile Workers 1900-1933,” by Joyce Shaw Peterson.

‘Automotive Depression’

“We are in an automotive depression,” said Efraim Levy, an equity analyst for Standard & Poor’s in New York.

The financial-services industry has also been decimated. Since the crisis began in the middle of 2007, institutions worldwide have racked up $1.2 trillion in credit losses and writedowns. Announced job cuts have topped 280,000.

“You’ve had a major disruption of the financial system, just like the 1930s,” says Mark Gertler, a New York University professor who collaborated on research about the Depression with Fed Chairman Ben S. Bernanke. In the 30s, more than 10,000 banks went bust.

That disruption is making it hard for Bernanke and his fellow policy makers to get much traction in their efforts to stop the economic decline. Strapped with losses, banks are hoarding capital rather than lending.

This type of breakdown happens only two or three times a century and can lead to a “downward vortex” in which weaknesses in the economy and the financial industry feed on each other and are difficult to break, Lawrence Summers, director of the White House’s National Economic Council, said Feb. 26. “It’s the kind of vicious cycle Franklin Roosevelt talked about,” he told a forum in Arlington, Virginia.

Collapse of Jobs Market

Particularly worrying, says Stanford University professor Robert Hall, is the collapse of the jobs market. Over the past four months, payrolls have plunged 2.6 million.

Summers has also voiced concern about a return of deflation, which wreaked havoc on the economy during the Great Depression. As wages fell back then, workers had a harder time paying their debts, aggravating the banking industry’s woes.

In an echo of those troubles, GM, FedEx Corp. and casino company Wynn Resorts Ltd. are among businesses slashing pay for more than 100,000 workers as they cut costs to counter declining demand.

There are other echoes. Since hitting a peak in October 2007, the Dow Jones Industrial Average has fallen 54 percent. Over a similar length of time -- from 1929 to 1931 -- the average fell 55 percent. It ultimately dropped 89 percent from its 1929 high before beginning to recover in mid-1932.

Stock Market Free-Fall

Combined with collapsing house prices, the free-fall in the stock market will destroy $23 trillion worth of U.S. wealth, reckons Lawrence Lindsey, a former senior White House official who now heads his own consulting company in Arlington, Virginia.

Like the Great Depression, the current economic decline is global. The International Monetary Fund says this will be the first time since World War II that the U.S. and other industrial nations will suffer a simultaneous decline in their economies.

Worldwide trade is falling fast as the credit crunch curbs financing for exporters and importers. The volume of merchandise trade plunged at an annual rate of 22 percent in the fourth quarter from the third, according to the CPB Netherlands Bureau for Economic Policy Analysis. The peak-to-trough decline from 1929 to 1932 was 35 percent, as countries slapped big tariffs on imports.

“We’re in a depression, and we need policy makers to make the right decisions to ensure that it does not become great,” says Kevin H. O’Rourke, a professor at Trinity College in Dublin, who has studied the trade issue.

Quicker Response

Government officials, especially in the U.S., are moving more rapidly to tackle the turmoil than their counterparts did during the early years of the Great Depression. Bernanke has cut the benchmark interest rate to as low as zero, while President Barack Obama won congressional approval of a $787 billion stimulus package.

Massachusetts Institute of Technology professor Peter Temin says the trouble is that the economy seems to be collapsing faster than policy makers are reacting. “They’ve only done enough to cushion the downturn,” says Temin, author of the book “Lessons from the Great Depression.”

That leaves the U.S. -- and the rest of the world economy - -in danger of being mired in an extended period of little or no growth, much like that which afflicted Japan during the 1990s. Eichengreen says such an outcome would be equivalent to a depression.

Enduring Marks

Whatever it’s called, the economy’s continuing deterioration will likely leave enduring marks. U.S. households are already rebuilding savings in response to the crisis. The savings rate rose to 5 percent in January, the highest in almost 14 years.

“They’re buying what they need, and they’re being very smart about how they spend their money,” Myron Ullman, chief executive officer of Plano, Texas-based J.C. Penney Co., said on Feb. 20, after the third largest U.S. department-store chain forecast its first quarterly loss in almost five years.

In a Feb. 27 memo, “The Return of the Frugal Consumer,” Goldman Sachs economist Andrew Tilton projected a savings rate exceeding 8 percent by the end of 2010.

Americans may also turn more conservative about where they keep their money. Merrill Lynch & Co. says U.S. bonds owned by individuals likely will account for 2 percent of households’ financial assets by 2013, up from 0.2 percent now.

“We’re in the midst of a massive economic and financial crisis,” former Fed Chairman Paul Volcker said at a Columbia University conference on Feb. 20. “We’re going to hear reverberations about this for a long time.”

Saturday, March 7, 2009

My Own Experience With God's Provision

Note: In analyzing my statistics I have noticed that someone in Cadillac, MI is reading this post every day. Given where you are and what you're going through with the economy in Michigan, I can well imagine why you keep coming back to this post. If you will email me at bouletheou@hotmail.com, I will be glad to correspond with you, pray for you, and send you some things which will encourage your heart and strengthen your faith in the midst of difficult times. These things will, of course, be free of charge. May the Lord bless you, whoever you are.

Sincerely,
Rev. Brian Carpenter



I worked my way through college. I didn't take your typical fast-food or grocery store or bookstore type jobs. I found that real labor paid more and was more satisfying. I have been, in turns, a welder in a shipyard making barges, a truck driver, a concrete worker, a siding and window installer, a mechanic, and a wrecker driver, maintenance man in an air filter factory, and a pressroom worker at a local newspaper. All of those jobs, with the exception of siding and window installer, I held as I went to college full time. I'm a jack of all trades and master of none.

In the summer of 1990 I was working two jobs. I would pour concrete and work other construction jobs for Smarr Construction in Columbia, MO. At 5 PM I would leave that job and go to work for Norman Dietzel at I-70 Shell until 10:30 or 11 PM, doing the odd mechanic job, driving the wrecker on calls, and minding the pumps.

One hot June day, after finishing a grueling day of pouring basement walls in the heat, humidity and gumbo mud, I came into the Shell station. It was really busy, and one of the guys said, "Hey Brian, go see if that Cadillac has a stuck thermostat."

The way you tell if a thermostat is stuck closed is to open the radiator cap, and start the car. If it's stuck shut, the car will begin belching antifreeze out of the radiator in copious quantities.

I knew the car was hot. You could feel that much. But there is a hillbilly trick for taking the cap off and relieving the pressure. Most of the time it works fine. This time it didn't. I opened the cap the first click and the pressure blew the cap off, flinging it across two service bays. The right side of my face and head were bathed in hot antifreeze and I immediately suffered second and third degree burns on my face, head, and neck.

The recovery procedure was long and somewhat painful, and I was prohibited from going out in the sun for extended periods of time for basically a year. I went from two jobs to no jobs in the blink of an eye.

Of course, the expenses didn't go away. It was over a year before I saw any workmen's comp money for my injuries. By the middle of July I was running very low on money. By the beginning of August I was afraid. Rent was due in a couple of days, and I didn't have enough to pay it all. I was $50 short. The tension built day by day. Sleep began to flee from my eyes. I began spending a great deal of time in prayer and scripture reading. One morning, everything seemed to come to a head. I poured out my heart and my fears to my Heavenly Father, and simply was still before Him in silence and tears.

And then I had an almost overwhelming conviction that I ought to get up and go to the pantry and open the door. I did so, and I saw the same sorts of things you see in your own pantry, even when it's a little bare. There was a can of peas. Potted meat. Crackers. Slightly stale bread. Some other things like that. There was food enough, even though it was stuff I wouldn't have preferred to eat. My roommate even had squirrel in the freezer. He was an even bigger hillbilly than me.

It was as though the Lord was saying, "I have provided for you thus far. You have enough for today, even if it's not your favorite. Trust me."

A sense of relief swept over me and I almost wept with joy. I went back to bed for a nap, the first good sleep I'd had in days.

The phone woke me up. I rolled over and looked at the clock. It was 1 PM. I'd been asleep for about three hours. I answered the phone. It was a friend who I had worked with at I-70 Shell. He had gone to work for Ryder heavy trucks. He had a trucker in the office whose rig had broken down in Rolla the week before. It was going to be a lengthy repair process, so he had rented a tractor from Ryder in Columbia. He had delivered his load and then brought the tractor back. But he needed a ride to Rolla, a couple of hours to the south. Ryan was asking if I could take him back. He would pay my gas and give me $60 in cash.

$60. That was $50 for rent. $6 for a tithe. $4 for an extra value meal at McDonalds for my supper on the way back. I even got an extra half a tank of gas out of the deal because the trucker just filled up my car when we left, and I didn't use it all for the journey.

Somehow the crisis was over after that. I went back to school in September and the bills all got paid. I don't even remember how. It ceased to be important after that. I'll never forget the lesson God granted me that day.

George Mueller said that he welcomed the times when his faith was tested and tried. Though it was a sore trial at the time, it always produced a strengthening effect, and multiplied peace. It puts me in mind of a hymn we've learned in the last twelve months at the church I pastor:

He giveth more grace as our burdens grow greater,
He sendeth more strength as our labors increase;
To added afflictions He addeth His mercy,
To multiplied trials he multiplies peace.

When we have exhausted our store of endurance,
When our strength has failed ere the day is half done,
When we reach the end of our hoarded resources
Our Father’s full giving is only begun.

His love has no limits, His grace has no measure,
His power no boundary known unto men;
For out of His infinite riches in Jesus
He giveth, and giveth, and giveth again.

Friday, March 6, 2009

Depression Cooking With Clara

About a year ago I stumbled on to a YouTube series of interviews with delightful 91 (now 93) year old Clara, reminiscing about life in the First Great Depression and cooking dishes that she grew up on as a little girl in a working-class family. The dishes are simple, they are tasty, and they are inexpensive. Note the emphasis on "fillers." Pasta. Potatoes. Flour. Bread. Canned peas. Hot dogs. Other, more expensive ingredients are used sparingly to add flavor and nutrition. Nothing is wasted. Even stale bread is made into something tasty, instead of being thrown away. This is how the poor used to eat before the days of WIC and foodstamps allowed them simply to buy giant bags of Doritos and frozen pizzas and microwave burritos for their supper. This is how many of us will be eating in the near future. Learn now to cook and eat like Clara.

I instantly fell in love with Clara. She spoke to my heart in some strange way. Food is so central to human survival and wellbeing. Jesus named our deepest and most basic anxieties, didn't he? "What shall we eat? What shall we drink? What shall we wear?" Jesus tells us that we ought not worry about these things. Seek first His Kingdom and His righteousness and all these things will be added unto us. (Matt 6:31=32)

When we experience a layoff, or things get tight and scary, we stress and obsess over these things at a deep, deep level. Clara reminds us that tough times have been survived before, and more than survived. They can be lived out with joy and good humor.

My wife mentioned last week that this woman and her great grandsons were on Good Morning America, and the videos are showing up on several blogs. You should visit YouTube and read all the comments on these videos. She is striking a deep chord with the American public. People know at a deep level that the storm clouds on the horizon are very close and very threatening. They are looking backward and inward. They are trying to find strength wherever they can. Clara's generation has much wisdom, but we are losing them very quickly. We need their stories.

I was saving this one for a future blog post, but everyone else will "steal my thunder" if I wait any longer. So, without further adeiu, may I present you with a representative sample of "Depression Cooking With Clara" Other videos are available at YouTube, and I encourage you to watch them all.











Thursday, March 5, 2009

Where Do You Keep Your Gold?

Friends,

Gold and silver are taking a much needed breather after bouncing off old highs. We will probably correct to the $850-$900 level for gold and then resume our climb in a week or two. This is an excellent buying opportunity. Below is an article I found that will be relevant to all physical gold holders.

Where Do You Keep Your Gold?
by Doug Casey

by the editors of BIG GOLD, Casey Research

You've bought some physical gold - congratulations! We think you've made a wise decision. And yes, we're referring to physical gold that you've taken possession of - not electronic gold, ETFs, Perth Mint Certificates, etc. Those are all good choices, but your portfolio is incomplete until you have some coins or bars under your direct, physical control.

Personal possession of real gold adds to your security by giving you privacy and portability. It's gold that no one has to know about, and you can carry $50,000 worth of it in one hand.

But where do you keep this best-of-all type of gold without undermining the advantages?

Let's assume that you've bought the gold over the counter, for cash, from a coin dealer, probably in a nearby town, who doesn't know you. So you are starting out with absolute privacy - no credit card charges, no canceled checks, no shipping records.

1. Safe deposit box

The easiest, simplest way to store gold is in a safe deposit box at your local bank. That's not necessarily a bad idea, but consider the disadvantages:

A safe deposit box restricts your access. You can only get to the gold during regular banking hours.

Safe deposit boxes are not insured against robbery.

A safe deposit box compromises your privacy. It provides a generous clue for the government, in case it ever decides to repeat FDR's 1933 confiscation of gold.

If you do decide to use a safe deposit box, go to a local bank. You want to be able to get to the gold in an emergency, which is one of the reasons you own it in the first place. So don't keep it in a different state or a distant city. Keep it close.

2. Bury it

This is where the term "midnight gardening" comes from; people bury their gold at night, when others won't notice the digging. The alternative is to find a separate reason for the excavation, such as fixing a pipe or removing a stump, and work in the daylight.

Either way, before those of you who are used to clean fingernails pass on this method, consider its advantages... you don't have to worry about losing your gold to a burglar or having it damaged in a fire. A lot can happen in the world that won't disturb buried gold.

A few practicalities, if you decide to go the shovel route. First, use the right container, something airtight and waterproof. This is especially important if you are storing numismatics or if you are burying silver in any form. We've been told those water bottles that hikers use work pretty well, but choose one heavy enough to stand up to years of erosion and persistent insects. Another choice is a small section of PVC pipe from your local hardware store; cap the ends and then bury it in a shallow puddle of cement. Don't use a coffee can, since the color on the metal can bleed.

To protect from scratching, put each coin in a plastic baggie or something similar.

So where do you bury it? Your location should be neither too easy nor too difficult to find. Not too easy, so that the gold won't be found by a thief. But not so difficult that years later, you or your heirs have trouble locating it. Complicated instructions (including treasure maps) can get muddled with time and create the risk your gold will never be dug up.

Find a place, on property you own, that you'll always remember but that isn't obvious if someone learns that you've buried something valuable.

Keep in mind that modern metal detectors can operate to a depth of about 4 feet. There's also ground-penetrating radar, used primarily by forensic investigators, that can detect where digging has occurred, as well as satellites that can pinpoint where ground has been disturbed.

3. Hide it in your house and/or use a home safe.

Indoor storage is particularly attractive for smaller quantities. You can probably think of dozens of places in your home where no one would think to look. Avoid any place obvious, such as a jewelry box or cookie jar. The disadvantage of this method is the exposure to fire and flood.

Consider using a safe, ideally one secured to the floor. As one dealer told us, "A safe can be brought in on a two-wheeler and taken out on a two-wheeler if it hasn't been attached to a building or at least hidden."

To research safes, talk to a bonded safe company. Or look for safes online with tags like "floor safe" or "personal safe" or "home safe." Sentry is probably the leading brand, but there are dozens of options. And they don't have to be expensive; prices start at around $150.

If you choose a floor safe, locations for it include the garage, under a refrigerator, or anywhere you can place something over it. We recommend installing it yourself, and some of the kits make it easier than you it might expect. We wouldn't hire a contractor.

Leave the Right Trail

However you store your gold, let exactly one person know the details. It needs to be someone in whose honesty and discretion you have complete confidence. It will be that person's job to access the gold if you are incapacitated or die. If you are using a safe deposit box, his or her name should be included in the box registration, and they should know where to go to get the key.

Tell one person, but only one. No one else should know. This is especially important if you are using home storage. You don't want to come home someday to find your house turned upside down because someone heard you're living in a treasure chest. Even worse would be to come home and find your friendly local looter waiting to have a chat with you.

There's just no other way to say it: keep quiet about your gold.

Unless you've reached a point in life where you are depending on your children for help with your affairs, a child is not a good choice as your gold storage confidant. Kids talk, and you don't know whom they might tell or how far the story might travel.

But you do need to tell someone, regardless of your storage method. We've heard of an old miner who - no kidding - left a treasure map for his kids, to help them figure out where he'd hidden his gold. But someone else found the map - and his kids never got their inheritance. And what if the kids had received the map but weren't very good treasure hunters? We've read similar stories about descendants who knew that gold had been left for them but had no idea where it was.

Multiple Locations

The choices boil down to three: store your gold in a safe deposit box; bury it; or hide it indoors. Each method has pluses and minuses, so you'll need to decide for yourself which is best for you. While you're deciding, don't overlook the possibility of using more than one method.


It is no accident that gold is currently trading at around $980 again. Physical gold is a hedge for troubled times - in an economic crisis, the gold price is bound to go up dramatically and so are, by extension, stocks of major gold producers and near-producers. If you want to preserve, and multiply your assets, BIG GOLD is the go-to advisory for all things gold-related. Click here to learn more.

Monday, March 2, 2009

Crash This Week

It's 6:30 A.M. Mountain Time on Monday, March 2. The markets will open in an hour. The futures markets look grim, with the Dow below 7,000 and the S&P 500 below 720. All decisive levels of technical support have been thoroughly violated by every index but the NASDAQ.

What that most likely means, for those of you who don't follow technical analysis, is that we are very likely to begin a crash today, and perhaps over the next few days. In Elliott Wave terms, we've completing five waves down in a small degree of trend, so we are due for a down-up-down pattern over today and tomorrow. But we may well culminate in a thousand point down day on the Dow this week or next, and even trip the "circuit breakers" which will cause a temporary halt in trading.

This is not all bad. When you're feeling nauseous, sometimes you feel better if you just go ahead and puke. The markets have been nauseous for weeks. Today, I think they start puking.

If they do, this will lead to an intermediate term panic-bottom and then a very sharp rally. It will give those of you who desire to get out of the markets a chance to get out of the markets with more of your wealth intact.

If you have decided already that the best thing is to get out of the markets, when the rally comes don't be fooled by it. You will begin to feel optimistic and complacent. It will cause you to be dissuaded from your chosen course of action. The rule of thumb is that you pretty much ought to buy when you feel afraid and everyone else around you does too, and sell when you feel really confident and everyone else around you does too.

If you are not fully invested and you have some cash in your account, this may be a good time to buy something to offset your losses. Don't be afraid to sell it when it produces gain for you, and don't chase every single percentage point of gain.

Trust God. Be wise.

Sunday, March 1, 2009

The Message of Habbakuk

Habbakuk wrote on a time of moral and spiritual decay, when the great worldly powers were clashing and empires were crumbling all around him. The wicked seemed to prosper, God's people were being chastised by the hand of the Chaldeans, who were even more violent and less righteous than the backslidden Jews. Habbakuk understood it all as God's judgment, but questioned how it all made sense. How could he square what he saw with the concept of a good, omnipotent God?

Rather than answer him, God simply asserted his overarching plan. He will judge the wicked. The just will live by faith. God is overseeing all of this in his mysterious ways. Let the disasters come as He decrees. Trust in the midst of chaos is what is required.

And then, at the end of chapter three, the last sentences in the book ring with an unsurpassed beauty and clarity. These are not only words for 2500 years ago. They are words for today.

When I heard, my body trembled;
My lips quivered at the voice;
Rottenness entered my bones;
And I trembled in myself,
That I might rest in the day of trouble...

Though the fig tree may not blossom,
Nor fruit be on the vines;
Though the labor of the olive may fail,
And the fields yield no food;
Though the flock may be cut off from the fold,
And there be no herd in the stalls-
Yet I will rejoice in the LORD,
I will joy in the God of my salvation.
The LORD God is my strength;
He will make my feet like deer’s feet,
And He will make me walk on my high hills.


Though all of the things which we rely on for ordinary life seem to be lacking. Though our economic life has shrunken and atrophied. Though the old job has been lost and the new ones seem very hard to come by, yet we will rejoice in the Lord.

He is your strength. It was he who provided for you, even when you thought you were providing for yourself. Fear not, little child. Your Father is pleased to give you the Kingdom. Will he withhold from you any lesser good thing?