Dark New Day

Chris Laird
www.PrudentSquirrel.com
Jul 31, 2006

This article is a partial excerpt of the PS newsletter.

If you are a person who is willing to entertain new ideas, such as a total collapse of our US way of life, total collapse of the usual forms of US wealth, and total collapse of your beloved retirement plans, read on. I'm going to write about a Dark New Day for the US.

Typical view of the USD situation

First of all, let us take a look at a typical US dollar argument VS gold. The usual argument is that the world will abandon the USD because the US has such deficits. This is the classic economic view, as if fair play in markets really exists. In other words, simple economic rules of fair play will initiate a decline or collapse of the USD, and consequently of the US way of life.

A more informed view would be otherwise. This view is that the collapse of the USD would remove the US from the forefront of world economic and military supremacy.
And, that our enemies and friends would never allow a collapse of the USD without these issues in mind.

But, what of the possibility that the coming USD collapse will be allowed to happen, or caused to happen in conjunction with devious and damaging agendas against the US?

Typically, in the press and in the 'public' financial viewpoints proffered, you will hear of the preeminence of simple fair minded economic reasons why the USD must eventually collapse- due to US indebtedness.

Of course, that would be the pretext, and a quite real one at that. Obviously, the US is already bankrupt, what with $50 trillion plus of liabilities coming online in the next 20 or so years for the Federal government alone. But, I think, one can ask, how did all these astronomical promises come to be?

I don't want to digress, but take the latest increase in promises of Medicare, the prescription drug benefit. That alone added several trillions of new liability to the already overtaxed Medicare program. Could it be that those liabilities were enjoined on us to haste a collapse of the US overall??? That is a good question.

In other words, the typical view of such an advance in US social liabilities is the insatiable demand of the population for more and more Federal largess. It sounds good as a driving theory, and does indeed help elect officials who proffer your financial future to their political constituencies. Or, in other words, 'it is a social disease as predictable as the flue, and it is a natural phenomenon for democracies to overspend public money.'

But, upon further reflection, such excess in the case of the US could have more sinister connotations. I think it would be reasonable to suspect the over promises of Federal largess to be a deliberate attempt-plan to destroy the USD and the US. As easy as pie to accomplish, if you want to wreck the US financially.

Which will now take me back to the point. The twin US deficits, trade and Federal, are placing the US in the position of real vulnerability to its financiers.

Now, I was never a conspiracy theorist. But, when one investigates money, and finds the economic deck stacked in such a way as to ensure the final collapse of the USD, one realizes that such deck stackings are not accidents by a long shot.

The USD situation is such now, that, the US is dependent upon financiers and central banks outside the US for its life blood - namely new credits.

A former US treasury secretary said that the US is putting its future in the hands of foreign nations who are financing our trade and federal deficits. (Secretary Snow as I recall.)

These new credits are now in the amount of $800 billion plus $400 billion yearly trade and Federal deficits. That comes to a cool $1.2 trillion per year, or, just about 10% of the entire US GDP a year.

If the financiers of these US deficits were to decide not to continue the credits, the US economy and the US Federal government would become immediately insolvent. How in the hell did the US ever allow itself to get into a financial situation that has national security implications, ie - if foreigners don't continue credits they can crash our currency and economy if they wished to?

It would be academic if hyperinflation of the USD were to precede or follow such an event, of a cease of further foreign lending to the US. It could be said that US inflation could stop the attractiveness of new lending to the US because the USD was falling in value due to inflation. And it could be said that ceasing new credits to the US would cause immediate inflation and hyperinflation of the USD because the Federal government would run out of money, and the Federal Reserve find it necessary to print new trillions of USD to make up the Federal and trade deficits.

In either case, catastrophic hyperinflation of the USD now follows, or leads, to an end of further financing of the US Federal and trade deficits.

OF course, such an event leads to the destruction of the USD and consequently economic collapse in the US and paralysis of the US nationally and internationally. And the total annihilation of your USD financial accounts!

And of course, such an event is all an 'economic accident'- at least publicly. The investing/financial community will all talk about the insatiable demand of the US consumer that led to overspending and bankruptcy. There is a lot of straw to bury the pernicious needle of conspiracy to destroy and paralyze the US in.

The economic think tanks will say that the US collapsed because of excessive promises to the voting masses, and, of course, 'such is always the fate of democracies'.

But a more sinister possibility rears its ugly head. That the US was led down a garden path to financial collapse deliberately, allowed to freely spend its way to oblivion, all with the acquiescence of knowing political and financial elites- who knew all along what would happen- the total economic and political collapse of the USA. And consequent paralysis of it internationally.

Somehow, that scenario rings very true because the whole world is waiting with baited breath to see the demise of the last great superpower, indeed the only superpower on earth since World War 2. No one else could hold a candle to the US. People say Russia was a superpower after WW2, but that was all bluster. They were always way behind the US economically and militarily since WW2.

The status of the US post WW2 was that of the Roman Empire at its height, where it ruled the entire world for centuries, and taxed its provinces at will to finance ever more expensive military escapades.

Of course, the US did the world a good turn overthrowing the military dictatorships that tried to conquer the world in WW2.

Nevertheless, the US cannot go on being the policeman of the world for long now. And, somehow, I think that certain elites have already decided the US's fate, with the ever powerful weapon of finance-money.

So, to conclude this section of this paper, quite possibly the US was deliberately encouraged to dig itself into a great financial hole, only to have its finances become a great lever over which to create its coming downfall. That downfall will come with a very great crash, and will be of a greater effect on your lives that even the Great Depression of the 1930's.

It will be the onset of a Dark New Day for Americans.

Part two. Financial scenarios for the collapse of the USD and why paper investments are no good at all.

By my estimate, the US has no more than ten years left for financial viability. This is not only my view. Many preeminent economists and bankers have already said this, not the least of which is former chairman of the Federal Reserve Paul Volcker. In fact, we may have well less than 5 years. There are many reasons for this timeline, like the approach of a huge economic retraction due to world wide finance bubbles. I am not going to go into detail about the reasons for the coming US economic total collapse. That is not the scope of this paper. I am going to look at what is coming when the US finally loses the backing of its financiers.

I then am going to look at things you can do to mitigate the economic damages to yourselves. It goes without saying that 99% of people will never take the measures I am going to outline because they are benumbed by the lure of paper investments. By the time these people realize what is happening, they will be lucky to extract 10% of their present financial worth in paper. But never mind.

There is going to come a time soon when a consensus has developed that the USD is a mortally wounded currency. The US is so dependent upon foreign financing for its Federal and Trade deficits that, when that financing stops, the Federal government will become unable to pay its bills. And, the price of most goods that you buy at the store will rise by, at first double, and then rapidly become over ten times the present prices. This goes for everything you buy at Wal-Mart that comes from the foreign world, and to include your weekly grocery purchases, as well as gas and heating oil and even electricity. In short, the cost of living in the US will rise by at least ten times in USD terms.

If you do not have a paid off residence, and some savings that can survive a USD collapse you are going to have to work all day merely to eat, and be a vagabond-migrant worker on top of that!

Did I scare you? Well in the Great Depression this precise situation happened to AMERICANS only 70 years ago! Don't call me a fear monger for merely retelling the scary details.

At that point the, US will be effectively bankrupt. That will include the government and the people at large as well. The foreign nations and bankers will be asked for emergency assistance with the USD crisis at hand, and will try to extract incredible concessions by the US government and people. In all probability, the US Federal government will be faced with two choices: an outright forfeit of all remaining US assets they can attach as collateral for a financial bailout, or to refuse the conditions set for by the Foreign and Banking establishment for a rescue- and suffer the consequences of domestic chaos.

The US could decide to work things out internally, but that would mean ten years of great privation as many foreign and domestic products you use everyday would be so costly that the average man would be starving here. The US economy would collapse by over 50%. The Federal deficits would skyrocket because tax revenue would also drop by over 50% and Federal liabilities would skyrocket as the masses demanded to be fed. This scenario is the alternative the US will face if it does not make a deal with foreigners to mitigate the USD collapse.

Retirement funds in this scenario

In the outworking of this scenario, your retirement funds would become hit by a decline in the value of the USD combined with a massive raise in taxes by the Federal and State governments to deal with the financial emergency. In other words, in this scenario, all those years you put money away into 401k's will turn out to be the worst possible place to have put that money. You waited to withdraw that money so you could have a tax deferred withdrawal at a lower tax rate when you stopped working. Then, come to find out, that emergency tax measures have been implemented in the crisis to deal with the exploding Federal and State financial deficits, and you are facing massive taxes on your retirement nest egg.

In the other case, if the US makes massive financial concessions to foreign nations to stabilize the USD, the USD assets you have invested in are now handed over as collateral to foreign central banks and bankers, and you are disinherited of your financial claims you thought your USD stocks represented. On top of that, you find that the US has made a deal to sell outright all the remaining energy assets on this continent, like our incomparable coal reserves which are by far the largest in the world. All of this is illegal you claim, but you find out that any law can be overridden by the declaration of a state of emergency in the US by the President.

In this scenario, you will find that your US stock portfolios are worthless, because all the remaining real US assets are pledged by a panicking US congress and president to make a deal for a financial bail out by foreign central banks and bankers.

In case one and two above, your USD stocks and accounts are now worthless. They either taxed into oblivion and wiped out by a collapse of the USD, or in case 2, the USD is stabilized at the cost of all claims you have with USD assets- offered as collateral to foreign central banks and bankers to stabilize the USD. In either case, you, the investor-saver is screwed.

Let me tell you something. It aint a good thing to be a saver or investor in a country that has liabilities the size of the US. Meaning- your retirement accounts are at great risk as of this time forward!

Possible ways to avert total personal financial collapse

My newsletter, the Prudent Squirrel, discusses macro economics and gold. One of the themes has been that paper financial assets are not anywhere as good as paid off physical assets and precious metals bullion. The reasoning is simple. Paid off assets can't be taken by mortgage companies if you have trouble paying the mortgage. And gold and silver bullion is real cash that can be used to get through either a USD collapse or a great depression. You can live in the paid of real assets and have gold bullion to pay the essential bills like property taxes and food and utilities.

So, the name Prudent Squirrel is descriptive of the whole theme of the newsletter. I do not ever make stock recommendations, with the exception that I recommended Newmont mining one time, because lots of people have trouble getting tax deferred retirement money safely into gold bullion.

The newsletter has also made a number of timely predictions about the gold price based on macro economics. The latest was that gold would go below $600 soon after when I published the public article Gold Showing Weakness, and Monday, the next business day, it got to 601. That's pretty close. Of course, the Lebanon situation rocketed it right back up to 634.

But even though the NL does make occasional gold price predictions, its focus is really a discussion on what gold is doing and how paper investing is not a good idea in general. And that paid off real assets are the best financial survival strategy along with bullion.

So, though I occasionally make market predictions, the real emphasis is about financial survival. I had a 4 part special report out about metal ETFs for subscribers talking about how ETFs are really not quite as real as you might think. IE they are really paper claims on bullion- and compared to actually owning bullion yourself, they don't compare favorably - to me.

So, I have come up with a number of strategies to deal with the prospect of either a collapse of the USD or a severe US economic depression.

Some strategies to survive a real depression or USD crisis

First of all, to survive the coming USD collapse or US economic depression, you will need cash money for bills and property taxes, along with a roof over your head. Also you will be well advised to have a goodly store of consumables and food squirreled away. The longer period that you can provide for these consumables, the better off you will be.

Obviously, if there are national insurrections, you could be run out of your house by raging starving marauding packs. So, ultimately, these strategies are not a 100% solution for everyone in the US. On the other hand, the kind of things that I recommend can provide you with alternatives to survive if a real financial panic, USD collapse, or great depression were to come to pass.

It's all a matter of alternatives. If you find yourself having to live at home, in a paid off house, and if you have gold bullion, you are likely to be able to pay property taxes if there is an economic collapse and you lose your income. Also, if there is a USD collapse, the gold would protect your cash in that event.

But if you have the vast majority of your wealth in some 401k plan invested in stocks, then a USD collapse combined with drastic taxes could reduce that to next to nothing. And even if you have a paid off house, you might find that you could not even be able to pay the property taxes for long if all your wealth is in crashing stocks and a crashing USD.

This kind of situation with stocks and financial assets would not be so bad if the USD were stable in a coming economic depression or financial panic. The USD was relatively stable in the great depression of the 1930's. This is not the case today. The prospect of a USD collapse and a great economic depression are a one two knock out punch for paper oriented investors in the US.

So, my conclusion is that you have to have some kind of cash assets that can survive a USD crisis, and a paid off residence. Any investing in paper today is not worth the paper its printed on, if a USD crisis were to unfold.

Do you all remember the tech crash? That was only a couple of years ago, and the NASDAQ crashed about 70%! Compare this potential loss of capital to chasing 10 or so percent gains for a couple more years- all amidst one of the most dangerous US economic climates ever...

Do you know that insider selling is the highest since 2000?

Anyway, just some thoughts from the Prudent Squirrel.

The Prudent Squirrel newsletter is one of the very few macro economic gold newsletters. Although I don't seek to make gold forecasts per se, occasionally I do. My last three were:

Two weeks notice to newsletter readers of the $150 drop in gold several months ago. Several weeks notice before the $30 to $50 drop in gold right after the BOJ raised their interest rates .25%. One day's notice before gold dropped from 635 to 601 based on the article Gold Showing Weakness.

Even though these were short term gold bearish estimations, I am a 100% long term gold bull. The main focus of the Prudent Squirrel newsletter is financial survival if there should be a USD collapse or great depression. Stop by and have a look.

Chris Laird
Editor in Chief
website: www.PrudentSquirrel.com
email: editor@PrudentSquirrel.com

The Prudent Squirrel Newsletter is a big picture gold and economic commentary. Stop by and have a look.

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