Blog Archives

Are You Ready For An Inflationary Depression?

By: Tom Chatham

We are heading into a new depression. It is not coming. It is already here but we are only in the beginning so it may not be easy for many people to see just yet. Once it is easy to see it will be too late for any meaningful actions to mitigate the effects. Just as you must prepare for a tornado ahead of time, you must prepare for economic conditions early.

We have 20 trillion in debt, over 200 trillion in unfunded liabilities and over a quadrillion in derivatives held by the banks. Our GDP is only about 17 trillion a year and world GDP is only about 60 trillion. It does not take a math wiz to realize that even if we are not paying any interest at all on this massive debt, there is no way to ever pay it all back short of some type of default.

That is what depressions do. They wipe out all of the misallocation of resources and bad debt and provide a reset for the economy. These resets can be relatively easy or they can be very destructive depending on the amount of misallocation that is present in the system. The amount of debt, brought on by decades of unrestricted credit creation, is the largest in history. That means we are in for a very bad ride in the near future.

Much of the money that people think they have is really only made up of digits in some computer somewhere. The banking industry has already taken this money for its own use. To eliminate the need to ever give it back to the rightful owners they must destroy these digits. That is what the new bail-ins are all about. They can at some point just wipe all of those digits out of existence and say tough luck suckers.

The depression of the 1930’s was a deflationary one in nature. People lost their jobs, prices fell and cash was king. People holding bonds did very well. In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse. Banks will enact bail-ins to stay solvent and people will go broke while holding piles of cash.

In the end the inflationary depression will end with the currency collapsing and people losing everything they have that is not fully owned. Eventually we will see deflation as prices fall due to the destruction of the monetary system. At this point most people will be financially devastated. Those that make it to this point with their wealth in tact will be the new wealthy class.

So how can a person survive something like this? You simply need to focus on the needs of your family over this period of time. If you can provide the needs of your family regardless of the prices at the time, you will make it through the worst of times, This means you need a plan to provide these items to your family whether prices are rising or falling. If you have a years supply of food, it does not matter what the current price is, you will have the means to feed them.

If your home is paid for, your car is paid for and you have a supply of energy or a way to produce it yourself, it will not matter to you how fast prices are changing or how much money you bring home every week. You will be able to live outside of the rapidly changing economy. The rapid changes that will destroy others will only provide you a glancing blow.

Those that survive on credit will be devastated as their access to credit is cut off and they become unable to continue making payments on their possessions. They will be devastated even if they still have a paying job. For those that expect to survive on their savings and pensions, they will find those accounts empty following any bail-ins.

Where you live will also play a major role in how well you survive the depression. What do you think will happen when those dependent multi generational families lose their welfare and food stamps following the breakdown of the credit system and prices rise faster than benefits? The ability to produce some items yourself will also depend on your location and the ability to stay safe.

The whole of the production and distribution system depends on 30 day credit. When the credit system ceases to function, goods will stop being produced and transported. This will lead to high prices and few goods to buy. So even if you have a bag full of money you may not be able to buy what you want at some point.

Just like a tornado that tears through a community, a depression can leave the people without the resources they need unless they have them hidden away safely for future use following the event. This is why having resources, real physical goods, put away now will allow you to thrive when the system fails. When the system resets, you will not get a second chance to do it right. You only have one shot and that requires you to finalize your preparations now while you still can make a difference.

The whole point of preparing for this type of upheaval is to maintain a standard of living that you find acceptable. Lack of preparation in this type of event will likely find you living much poorer than you would like. If you are successful in maintaining your standard of living and preserving your wealth throughout this event you will have won the battle and set yourself up for a better future when things stabilize.


Will Wealth Expropriation Stop At Bank Accounts?

By: Tom Chatham

It is becoming a foregone conclusion that Cyprus was just the beginning of the new bail-in plan taking root in the world of finance. The mentality of the banking industry is that they will continue with their machinations as long as people are dumb enough to go along. The majority of Americans still live under the assumption that their bank accounts are safe and any loss will be covered by FDIC. Like a thief in the night the banking industry has changed the rules allowing the theft of bank deposits in such a way that FDIC insurance will not kick in to reimburse depositors. Many banks have sent their customers revised banking agreements in the last several months knowing that most never read these statements and throw them away. These new policies will not become known to most people until it is too late for them to protect themselves.

The banking industry is setting the stage for massive wealth destruction brought on by their massive misappropriation of funds. The bankers will walk away with their golden parachutes and massive bonuses while the ordinary citizen pays for it all. Credit markets will be destroyed and massive wealth in the form of savings will be destroyed leaving people a bleak future with many unknowns.

Even massive wealth destruction might be a recoverable event and new prosperity assured as long as hard assets survive the collapse. If the coming destruction were an accident that might be possible but the approaching destruction is organized and well planned. If that is true is it impossible to think that complete destruction of privately held assets is not the ultimate goal. Paper assets are the most readily available wealth but far from the only significant wealth in private hands.

Private property is the foundation of much of the wealth in the U.S. and the recent real estate scandals by TBTF banks gives us a look at a possible future. Much of the property held in America has a mortgage on it and would be easily foreclosed on by banks if the financial sector locked up in response to bail-ins and triggered foreclosures.

A sudden devaluation of currency could also cause default if debts were not indexed. An even sinister aspect of this is the fact that Fanny Mae and Freddie Mac underwrite most of the mortgage debt. A TBTF bank could easily foreclose and pass the property on to the government, after taking a sufficient handling fee of course. This would place much of the private property in the U.S. in government hands. Increased property taxes in the name of social justice would take care of the rest of the wholly owned properties.

In a world where there is rule of law this would be unthinkable but the rules are being rewritten almost daily now and it is only a matter of time before the unthinkable happens. Why would government want to deprive citizens of privately owned property?

Even with the destruction of wealth private property provides people the ability to be self sufficient and care for themselves. This places them outside of much of the governments control and control is the purpose of government today. Because of this private property must be eliminated along with private wealth. The nature of current events leads one in this direction and to ignore the potential of this possibility is to surrender any future prosperity sought by society.

He who controls money, controls commerce but he who controls property controls everything else including freedom.

Representation Without Taxation: The Coming Tax Revolt

By: Tom Chatham – Author of The American Dream Lost

Taxation has always been a way for governments to raise money and control the population. In a truly free society, the people volunteer or donate the necessary funds to provide for the communities needs. There is no need to forcibly extract money from citizens to accomplish those goals that the citizens deem necessary. This forced extraction of wealth always leads to graft, corruption and more poverty.

When someone takes money from their own pocket and gives it to someone in need, it is a noble thing, but when someone else takes money from your pocket and gives it to those that they think are deserving, it is a despicable act that must be challenged.

There are times when people need help to get back on their feet and society has already provided the means to help these people.
The first source of help comes from family and friends. These are the people closest to you that want to see you succeed and are willing to help even if it means some personal deprivation for them.
The second source is your church or religious organization. These people see it as their moral obligation to assist their congregation when they are in need.
The third source is the charity organizations that are found nationwide. These people take pride in helping those that have been unable to get the needed help from the first two groups and they regularly seek donations from the general population to render this assistance.
These sources have in the past provided the help the average person needed to correct their situation and this gave these organizations an incredible amount of power with the population. Over the years the government at all levels have done everything possible to harness this power from these organizations for their own machinations while attempting to destroy these sources of self help and replace them with tax money. There has been a war against family, churches and charity organizations for years to usurp this power and control it for political purposes.

When someone can arbitrarily decide what you should pay, it eventually devolves into a corrupt racket that is used as force to keep people in line. Today, the working class spends almost 5 months of their time and labor every year to provide for others through enforced taxation. This is not an exercise in nobility but theft in its purist form. One segment of society is forcibly taking from another segment in order to have an easier lifestyle. At some point in the future this will end. It will end because the working class is being taxed into poverty and at some point will decide not to continue working to support others.

Many will argue that taxes are necessary to build infrastructure for the masses. In a free society, the government presents the potential need to the people with the potential cost and the people decide whether it is worth the cost they must pay. Current government operates by taxing and then deciding what to spend the collected money on, in many cases wasting it on questionable projects that provide no benefit to the masses. Much of this money goes to selected groups in the form of grants, subsidies or benefits. Almost half of the people in the U.S. pay no taxes and most of these people pay little or no property tax because they own little or nothing. To someone that pays no property tax, it makes no difference to them if the tax rate is doubled or tripled on property just as long as they continue to receive their benefits. These people do not suffer the same as property owners who must produce more just to keep what they have.

State and local governments are spending more and collecting less in taxes which is putting them in a precarious situation. They must either spend less or tax more and the voting public is in large part receiving benefits that they do not want to decrease. The only option for politicians is to raise property taxes on land owners to make up the difference. At a time when property values are dropping and should provide some relief to taxpayers, governments are raising taxes to make up the shortfall. If a land owner fails to pay their taxes the government will simply take the property and sell it for taxes and the new owner will pay the new tax rates. It makes no difference to the government who owns the land as long as they pay for the government largesse.

At the national level an even more sinister plan is taking root. When the federal government gets to the end of its rope it will add more by seizing all retirement accounts which amount to trillions of dollars. These accounts will be converted into government annuities held in U.S. Treasury bonds. If the U.S Dollar crashes, these will become worthless and the taxpayers will lose their retirement savings. There is also talk that when these annuities are paid out, those that have more than their fair share of savings will have some of their annuity redistributed to the less fortunate. For those that think this will never happen, a recess hearing was held by Senate Democrats in October 2010 to discuss this very issue.

At some point there will be a tax revolt of epic proportions and it will likely start with the farming community. Farms can generate a high dollar volume of products but most of that money is eaten away by operating expenses which can be very high. Most farmers are left with just enough to provide a modest lifestyle for their family. Many of these farmers are working land handed down to them by their family. Farming is not something you go into to get rich, it is a lifestyle choice. These family farmers can accept losing their land because they failed at farming but they will not accept losing it as a result of inflated taxes just to keep the government solvent a little while longer. When this revolt finally comes it will likely be bloody because the only thing that government will respond to is force. The takers in society have been bleeding the producers for too long and it will soon come to an end, most likely in a violent way. Those receiving the government largesse will fight to keep it and those paying for it will fight to stop it. It is bound to happen. It always does at some point. Corruption and failure is guaranteed. It is the epitaph of all corrupt governments in history.

Our forefathers made one mistake. What they should have fought for was representation without taxation. –Fletcher Knebel, historian