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Successful Homesteading, Issue # 19, Financial Armageddon and how to prepare for it
October 16, 2009
Dear,

Issue #019, October 16, 2009

It's my hope this letter will help you survive in the coming months. I am convinced we are headed toward a financial Armageddon in the United States, a total collapse of our currency. You won't hear this from the mainstream media or the government because they know that the more you believe in our currency, the longer it will remain stable. But your blind faith could cost you in horrendous ways.

I recently ran across one of the best explanations about this that I've seen from John Williams with ShadowStats.com. Williams has been a consulting economist for 25 years. Although you can see the full version here, I have written a summary on why he believes - and I agree - that a financial Armageddon looms:

Less is More

The less there is of something, the more valuable it is. That's why gold and silver have always been desired and used as money for centuries. Not only are precious metals pretty, they're also limited and you can't make them. But gold and silver are heavy, and hard to carry around. Plus, if you get robbed, you're bankrupt. So everyone started putting their gold and silver pieces in the bank and got currency notes in their place. The notes were an easier and presumably safer way to buy things.

That's how our own currency came about. We had gold and silver at Fort Knox, and if you held an American dollar that meant you had the equivalent of an ounce of silver. If you had a twenty dollar bill that meant you owned the equivalent of a little less than an ounce of gold. Believe it or not, our currency retained that value (and prices of gold and silver remained basically the same with a few variations) for more than 140 years, from 1792 until 1935, as long as we stayed on the gold standard.

The Fiat System

Things changed with the Great Depression. No one had jobs, which meant no one had the money to buy anything, causing even less business and less jobs. So Franklin Roosevelt got us off the gold standard and into a Fiat system, which meant he just printed money without any gold or silver on hand to back it. Then he used that "money" to create a ton of jobs through the WPA program. It worked, at least back then. But the dollar lost value and prices shot up and have continued climbing ever since.

Using Fiat currency is a bit like writing a hot check and hoping the guy who gets it doesn't cash it until your next paycheck comes in. The money doesn't hold value unless people believe in it. A Fiat currency system is always dangerous because eventually, whoever is in charge gets greedy and starts printing a whole lot more currency than there is actual gold on hand for personal use. The more money they print up, the less valuable it becomes, and eventually, the currency becomes worthless.

Corruption in Congress

In our case, Congress was the greedy culprit. Washington lawmakers spent - and continue to spend - so much money on government programs that we are now buried in a pile of debt that couldn't be paid off even if Uncle Sam seized every penny we made in this country, including wages, salaries and corporate profits. And by the way, that total doesn't include Social Security and Medicare obligations. Those two programs alone cost more than our government brings in through taxes each year.

To pay for all this rampant spending, Congress has taken loans from other countries in the form of Treasury notes sold to foreign investors. They're not using that loan money to pay off the debt mind you; they're just using it to make the minimum interest payments. Unfortunately, foreign investors are going to wise up eventually and quit investing in the dollar. Asking foreign investors to pay our debt is a bit like that deadbeat cousin coming to you asking for a loan one too many times. Why waste good Euros on a dollar that is essentially worthless?

When that happens, our government will no longer have money to pay all that interest we owe on all those loans. They'll have to pay that debt by printing even more money and making the dollar far more worthless.

By the way, this is the same thing that happened in Germany during the thirties. By the time it was all over, the German mark was more useful as toilet paper than as currency.

Possible Here?

Not only is the same scenario possible here, but it has the potential to be far, far worse. For one thing, we've shipped most of our manufacturing overseas, meaning all those great jobs are going to foreigners. Plus, as I write this, our Congress is on the verge of passing a health reform bill we can't even begin to afford. The only way our government will be able to pay for all that is by - you guessed it - printing more money.

So What Will Happen?

First of all, we'll all run out of cash - literally. There's just not enough currency printed up to cover skyrocketing prices. Most of our currency is overseas. We only have about $200 billion in cash here for the 304 million people living in the U.S. That's $690 per person. Not a problem, as long as prices remain the same. But if in a short amount of time the price of a loaf of bread shoots up to $100 per loaf, it's going to be tough to buy enough groceries to feed a family of four for a week.

Big Deal! I Can Write a Check,
Can't I?

That's assuming you have enough in your checking account. Most people are barely making enough to pay for rising grocery costs now, let alone enough if prices skyrocket.

What About Credit Cards?

Think about it: Most of us have a credit limit of around $5,000. If weekly grocery costs shoot from $300 to $3,000 or more, we're going to be maxing out our cards in a red hot hurry.

Plus, Store Shelves
Will Empty Rapidly

Let's say I sell bacon and typically keep 100 pounds in my store. My cost is $1 a pound, so I sell it at a twenty percent markup, for $1.20 a pound. If I sell all 100 pounds, I get $120 for that bacon and keep $20 as my profit. Then suddenly inflation skyrockets, and my cost is now $20 per pound. I now have to pay $2,000 to buy that same 100 pounds, but I only have $120 in my account. If I don't have a large stash of cash on hand, I won't be able to purchase any more bacon to sell, even if I could find someone who could afford to buy it.

What About Buying Online?

I own a couple of online stores, and both demand a lot of time on the computer to maintain. For everything we sell, I have to apply for a code from Pay Pal and add it to my site. Should prices change, I have to get a code for every single item I sell. If I sell a lot of items, then it will take a lot time - sometimes days of work - to change all the corresponding codes. Now imagine the workload - and time it would require - if prices were to shoot up rapidly and continually for several months. There is no way I could keep up. Instead, I'd tell you to email me if you were interested in buying something. As a result, most of my sales would diminish, and you would have to wait for me to get through all my emails to get back to you.

Expect to run into similar problems buying gas from the pump and food and drinks from vending machines.

Financially Induced Famine

With no food in the stores and nothing to buy it with even if there were, expect to be unable to buy food for up to six months until our government leaders get this mess straightened out.

Thatís why I'm writing. Please, for the sake of your family, friends and loved ones, stock up now on foods and personal items such as diapers and toilet paper. Have enough water on hand to last you and your family for two weeks. Then buy bulk grains, dry beans and other foods that have a long shelf life. Not only will they keep you alive, but you'll also be able to barter with them. Hear John Williams talk about that here.

Should the miraculous occur and we don't get runaway inflation, the worse that could happen is you end up with some extra food on hand. The peace of mind will be well worth it, so please, stock up now.

Sue Merriam


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What's New...

One of the best ways to cut back and use that extra cash for stocking up on supplies is to cook more often at home. Learn important money-saving tips through budget cooking.

Two of the most nutritious and frugal foods out there are beans and potatoes. Learn how to cook pinto beans and add them to soups, salads or as a side dish. Potatoes are also a delicious and versatile food. Learn potato cooking tips here.

The next time youíre craving authentic Mexican food, stay home and try these Mexican cooking recipes.

And finally, the next time you have a viral infection, think about trying these antiviral herbs.

Stay safe out there, and God bless.

Sue


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