Two Lines
The following graph is from St. Louis Federal Reserve Bank:
Blue line: ‘Total Borrowings of Depository Institutions from the Federal Reserve’
Red line: ‘Non-Borrowed Reserves of Depository Institutions’
From the red line we concluded that US banks are insolvent, from the blue we concluded that the Fed (Federal Reserve) has assumed their liabilities. The result will be a terminal decline of the dollar (to zero) causing hyperinflation.
No industrial base, no rural society, no educated professional class, no natural resources, no effective bureaucratic control, no social cohesion. In essence the US economy has declined below the critical threshold and revival is impossible (see: The Passenger Pigeon and the Coming Economic Crash).
The Coming Storm
I was surprised the other day when a financial article suddenly turned into an end-of-the-world survival guide:
Stock up on food. Fill the pantry with foodstuffs that have at least a 1-3 year life span. Fill the garage if you want. What will it hurt? If it’s business as usual over the next few years, your car gets a little oxidized and you have a bunch of food to eat. But seriously, I often hear advice that at least a six month supply is wise.
Plant a victory garden. There’s a novel idea. I remember moving into a new house in suburbia as a six year old, and noting that my parents went to great lengths to keep down the various vegetables that would sprout up through the backyard lawn each year - in a prior incarnation the back yard had been a vegetable garden. Everything old is new again.
It would also be wise to stock up on staples in general. Toilet paper, candles, soap, gasoline, propane, medicine, water. The stuff you take camping. Solar panels and solar battery charges are a great idea.
Also think for a moment about the security of your family. If there is an interruption of power and/or food for more than a few days, there are unprepared people who will begin to get desperate. Desperate people do desperate things. In the event of a disaster, the local authorities and rescue centers will be overwhelmed and can’t be counted on. And don’t assume you can get cash out of the ATM. Keep some on hand.
Finally, think about conducting a disaster preparedness test. Take a weekend home and see what it is like to go without power and transportation. Yeah, turn off the lights. The purpose of the test is to see if you have all the stuff you need to survive off the grid if need be. It’s seems weird to talk about power interruptions but the electrical power infrastructure is in a precarious state. The more self-sufficient you become, the better you will weather the coming storm.
James Macfarlane, The Thin Red White and Blue Line
James Macfarlane basically declares The End is Nigh and gives good advice to prepare for it, he also suggests buying gold (elsewhere in the article); all this might be helpful when the first stage of the collapse hits but as it starts to develop further very little will help (see: When Gold is Worthless). He gives one last advice at the end of his article:
The wisest words I heard lately are these: In the next few years it’s not going to be about where you live, but about whom you live with. Make friends with your neighbors.
James Macfarlane, The Thin Red White and Blue Line
This is indeed good advice, but as I noted above social cohesion and rural society have been lost. Those seeking refuge away from the cities might be heading into the wrong direction; the most dangerous parts of the cities might hold the key for future survival.
The chart of non borrowed reserves documents that the US banking system system is in much more trouble than the public knows; this graph is just some indication of it. The graph shows that the banks are overdrawn at the Federal Reserve, and when taken together with the on going Yahoo Finance chart of the banks, KBE, and investment bankers, KCE, it indicates that the financial institutions are capital depleted and really insolvent.
Comment by Richard — July 7, 2008 @ 2:52 pm