The Federal Reserve has sabotaged the economy since 1913 with its socialistic interventions. Every single boom created via its artificial credit expansion has resulted in disaster, which includes the Great Depression, which was caused by nearly a decade of inflation that begun as an effort to help finance the government’s involvement in World War I.
The Federal Reserve’s efforts appear akin to a blind infant performing a piano concerto but the truth is far worse. No one can possibly know the correct interest rate. When not manipulated by the Federal Reserve, interest rates are determined by the ratio between savings and consumption among all the people, a ratio economists call time preference. Manipulating the interest rate lower merely pushes it out of step with the people’s time preference and plants the seeds of an inevitable crash.
By creating trillions of new dollars and thereby artificially lowering the interest rate, the Federal Reserve has created an “everything bubble.” Every asset class is ripe for a massive crash. Resist attempts to blame anyone else for rising prices. Government didn’t suddenly start running deficits and businesses didn’t suddenly become greedy or acquire the power to dictate market prices. The new dollars created by the Federal Reserve must go somewhere, and where they go, they bid up prices.
Further, as the new dollars are created, they’re almost always distributed to the rich and powerful before “trickling down” to the poor and middle class and bidding up the prices of the things they buy most. Thus, the rich and powerful are granted increased purchasing power, often for high-sounding causes. This explains increasing wealth inequality. This is also why inflation causes prices to rise faster when the new dollars are sent to the masses, for then those dollars don’t have to trickle down before they are spent and bid up the prices of what the recipients purchase.
Artificially lowered interest rates also “stimulate” people to take on projects and make purchases they otherwise wouldn’t, and many or most of these are inevitably unmasked as unprofitable when the interest rates inevitably rise. The boom was a binge that led to record levels of debt, including automobile, corporate, credit card, mortgage, small business, student loan, local government, state government, and the national government’s $30 trillion debt (with its unfunded mandates an order of magnitude greater).
Further, inflation’s unpredictable impact on the price structure causes a significant increase in business errors, which leads to a surge in businesses overextending themselves and going bankrupt, as well as shortages and surpluses. Finally, inflation causes a redistribution of wealth from those on fixed incomes, those unaware of the changes in the price structure, and those unable to raise their prices and wages early in the cycle to those who can and do raise their prices and wages early in the cycle.
So much of the economy is now addicted to the artificial credit expansion that even a small reduction in the injections is bringing on severe withdrawal symptoms. These symptoms are the beginning of a depression, a time when the people and government must pay off or liquidate their debt and accumulate new savings before reinvesting. This is where the Federal Reserve finds itself against a rock. If it stops inflating and raises interest rates significantly to encourage savings and end the binge, the national government won’t be able to make the interest payments on its debt with current tax funds. It’s also unlikely that enough taxes could be raised without triggering widespread unrest.
The national government, along with many businesses, local, and state governments, will go bankrupt if rates are raised significantly. However, this is where the Federal Reserve finds itself against a hard place: if it doesn’t raise rates significantly and cease inflating, prices will continue to soar. Contributing to this crisis is the precipitous decline in the use of the dollar internationally, primarily caused by the US government’s attempt to weaponize the dollar via sanctions and by the inflation’s reduction of the dollar’s purchasing power. Those dollars formerly circulating internationally are coming home to bid up prices even more.
Thus, the rock is default on the national debt and a widespread credit and debt crisis, while the hard place is ever-increasing prices until the dollar is drastically lowered in value or worthless. The latter is very likely the choice the Federal Reserve will make without massive political pressure against it because it would inflate away its debt. In short, the government will likely try to pay its debts by printing tons of dollars, but those dollars will be worthless or close to worthless, like your savings.
Can anything be done? Yes, the federal government can abolish regulations, all of which are pure waste, radically reduce its spending, and end its numerous expensive wars that also increase prices by obstructing trade and destroying resources. Finally, taxes can be drastically cut so people can pay off their debts and reinvest more quickly.
Further, every American can consume less and save more. This will help your personal finances, given the inevitable rise in interest rates on savings accounts, CDs, etc., that will be coming, by helping you pay the higher prices caused by the Federal Reserve’s inflation, preparing you to buy cheap assets in the coming crash, and readying you to reinvest more quickly. It will help the overall economy in the same way, by cleansing the system of debt.
The national government could also intentionally default. This has many of the same disadvantages as a default caused by failure to make interest payments, but it also has some things going for it. It would initiate a recession, since holders of the debt would take those losses, but openly admitting the government’s inability to pay has the advantage of discouraging future lending to the US government. Finally, some preparations could be made ahead of a planned default in comparison to an unplanned one.
It’s also important to understand that the US government is only bankrupt in monetary terms. Its debt is catastrophic, but its assets are astronomical. It has vast landholdings outside the continental US, tons of land in the western sections of the country, a great deal of admittedly obsolete weapons, and long lists of other assets that could be liquidated.
There is, therefore, a way out of the trap the Federal Reserve has set for us. The US government can disgorge itself of assets so that it doesn’t have to print dollars to pay its bills. Will the US government be willing to do such a thing? Rulers rarely if ever give up power voluntarily, but the people’s reaction to the coming crisis will likely force more pliability. Keep in mind that Americans own at least three hundred million guns and the ruling class are few while the people are many.
As people’s savings are wiped out, they’re likely to get scared and angry. Understanding these truths, the politicians are likely to change course under increasing political pressure and allow rates to rise to belatedly rescue the dollar. The system is far more vulnerable to revolution than people generally understand, but fear and anger are hardly conducive to a rational discussion of the problems, let alone a systemic improvement. We needed a great deal of wisdom a long time ago, before starting down this disastrous road.
Image by Tim Evanson via Flickr, CC BY-SA 2.0. Article cross-posted from Mises.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
