I'm going to be offline for a few days as I finish preparations for my move next Tuesday. Expect to see me online again possibly Wednesday or Thursday of next week.
In the meantime, be sure to check out the great websites featured on my blogroll on the right-hand side of your screen.
Friday, July 31, 2009
Thursday, July 30, 2009
Real Life SHTF: Bryan-College Station area evacuated; fertilizer plant on fire
Bryan-Area Warehouse Area Evacuated
POSTED: Thursday, July 30, 2009
UPDATED: 3:05 pm CDT July 30, 2009
BRYAN, Texas -- Officials are evacuating much of Brazos County to the north and west of Bryan because of a fire at a chemical plant believed to contain explosive ammonium nitrate.
The fire broke out about noon Thursday.
Bryan-College Station fire dispatcher Andy Throne says the plume of smoke from the El Dorado Chemical Co. plant extends up to 60 miles from the plant.
Throne says no injuries have been reported from the fire, where fertilizer and other chemicals are blended and packaged.
But he says an area up to six miles from the plant will be evacuated, including part of northwestern Bryan and a large part of northwestern Brazos County.
The plant is located about three-fourths of a mile west of Bryan.
POSTED: Thursday, July 30, 2009
UPDATED: 3:05 pm CDT July 30, 2009
BRYAN, Texas -- Officials are evacuating much of Brazos County to the north and west of Bryan because of a fire at a chemical plant believed to contain explosive ammonium nitrate.
The fire broke out about noon Thursday.
Bryan-College Station fire dispatcher Andy Throne says the plume of smoke from the El Dorado Chemical Co. plant extends up to 60 miles from the plant.
Throne says no injuries have been reported from the fire, where fertilizer and other chemicals are blended and packaged.
But he says an area up to six miles from the plant will be evacuated, including part of northwestern Bryan and a large part of northwestern Brazos County.
The plant is located about three-fourths of a mile west of Bryan.
Wednesday, July 29, 2009
Tuesday, July 28, 2009
Asteroid could impact Earth in 31 years; scientists urge action
Thanks to M. D. Creekmore at the Survivalist Blog for the link to this story:
Scientists discover asteroid that could hit Earth 31 years from now; scientists urge action now to discover ways to avert catastrophe
Scientists discover asteroid that could hit Earth 31 years from now; scientists urge action now to discover ways to avert catastrophe
Sunday, July 26, 2009
Saturday, July 25, 2009
Swine Flu Update: panic runs on UK pharmacies; 40% of Americans could become ill over next 2 years
WHO says swine flu could affect 40 percent of Americans over next 2 years; up to several hundred thousand could die nationwide
100,000 new cases in UK in just one week, double previous figure; pharmacies experiencing run on hand gel, respirators, thermometers, with no replacement stocks available
-- Which tells you what items you should stock up on now to avoid the rush this fall.
100,000 new cases in UK in just one week, double previous figure; pharmacies experiencing run on hand gel, respirators, thermometers, with no replacement stocks available
-- Which tells you what items you should stock up on now to avoid the rush this fall.
Friday, July 24, 2009
The Collapse of World Currencies, by FranchiseKid
Everyone, and I mean everyone, needs to head over to the Survivalist Boards and read this amazing, eloquent, informative post by FranchiseKid explaining how a collapse of the U.S. Dollar could occur and what the potential effects would be.
The original post is reproduced below, but the reader will need to click on the link above to see the full discussion and FranchiseKid's response to some questions posed by other Survivalist Board members.
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Okay, here is my "Ode to Squeak" who has asked me to expand on a currency collapse regarding the USD and how to prepare for it and the events that will unfold thereafter.
Disclaimer 1: There is no road map or playbook for what I am going to discuss. No third world debt default can compare to what a default of US debt and/or the collapse of a major world currency such as the USD, Euro, or Yen.
Disclaimer 2: Due to unprecedented levels of government hubris, intervention, complete disregard for law, and manipulation, any assumptions I make could be just as easily discarded as they could be true. Since the rules of the game change every Sunday night, it is very difficult to play. This is not a caveat for being wrong (as I am not afraid to be wrong) rather a caveat that history, education, and research go out the window when rules can be made and broken at will.
Disclaimer 3: Any assumptions made are my own. I will not take the time to post links to every piece of factual research that I post as that will take too long but if someone wants that information please PM me and I will provide it. Pretty much 99% of the information that I use or cite are easily found government stats that can be Googled.
Where We Are Now:
There has been much debate in the media and in some of these threads regarding whether we will sooner see inflation or deflation. There are many camps that are discussing this matter and you have probably heard them all by now. Heck, we cannot even agree on how to define inflation and deflation. For practical use purposes though, it is more helpful (IMO) to define them as they relate to the money supply in circulation. It is economic theory that if you create a bunch of money in the system and pump it into people's wallets, they will go out and buy things. This increases demand. An increase in demand, without a corresponding increase in supply, will create an increase in prices of "stuff". Deflation would work the opposite way. If you take money from people, they cannot spend and therefore demand will decrease and without a corresponding decrease in supply, prices fall.
Now, NOTHING in economics can be viewed in a vaccum for the ONE simple fact that economics involves the behavior of IRRATIONAL beings. This fact cannot be stated loudly enough. This fact is also a reason that econometric comparisons to the Great Depression ought to viewed as nonsense. It is like saying if the Patriots played the Bears in the SuperBowl this year the Bears would win by 36 points since that is what happened in SuperBowl XX. We all can see clearly why that assumption is nonsensical. Different this, different that... but those differences make a huge difference in outcome.
Economics is the same. Please keep that in mind as we go through this.
The only thing that the US has produced in the last decade plus is financial engineering defined more technically as velocity of money. Mathematically put, the output of a country can be simply defined as the aggregate money supply multiplied by the times that money supply moves through the economy. "High powered money" is the theory that $1 moves through the economy and changes hands multiple times. As I get paid from work, I pay the landscaper, he pays his employees, they pay their bills, etc etc. Since 72% of our economy (at the most recent peak) is measured by how much we, as consumers, spend, you can see very quickly how the "velocity" of money creates a HUGE impact in the final tally of our output.
But, as some of you may be saying now, how is that really "output". "We have not created anything" you say. And you are right. This goes back to a fundamental issue with our country's monetary & fiscal behavior. We have a fiat currency and a fractional reserve monetary system. In English, that means we have a currency that is backed by nothing, can be created at will, and when deposited by members of the Federal Reserve Banking system, can be leveraged 10-1 (at least). This is how the "money mechanism" works. The Fed prints $1 and puts it into the bank of choice. The bank puts $.10 on "reserve" with the Fed and lends out $.90. The bank makes money on that loan called "interest" (this is the trouble with "usury". If the Fed prints all the money needed, then who creates the money to pay the "interest".... and on and on we go). The bank loaned that $.9 to me so that I could buy a car from my neighbor. My neighbor takes that $.9 and puts it into his bank. Guess what his bank does? His bank takes 10% of that money and puts it on "reserve" with the Fed and loans out the rest. And so on...... you don't even want to get into the leverage amounts that the government afforded to JP Morgan, Bank of America, Goldman Sachs, Morgan Stanley, B. Stearns, and L. Brothers. What shock, three of them don't exist anymore and the other three only exist because they were the "chosen ones" to be bailed out.
So, what have we done over the last decade? Well, we had a complete "productivity miracle" occur with the advent and application of the internet. I cannot say how much this system has revolutionized global business and changed economics. This was real and tangible. This was measurable and legit. What it allowed us to do however, was to again manipulate our system for the worse. What increases in productivity do is to keep a lid on what is called "unit labor costs" or wages and other inputs that go into the cost of goods. Lower cost goods means that "inflation" (that pesky inflation again...) AND THIS IS IMPORTANT, "as measured by the Consumer Price Index", stays low. Again, in English, this means that we can make computers now for $500 instead of $5,000. That, according to the CPI is a huge move down in inflation, or the "costs of goods and services". The government's response to a move down in the costs of goods and services is to keep the pedal to metal in terms of monetary and fiscal policy. No inflation? No hikes in interest rates. Money is cheap and stays that way according to them.
Then the internet bubble bursts. Wealth is literally destroyed overnight. This is why an understanding of inflation and deflation is so important. When you remove the consumer's ability to buy, leverage, borrow = spend, you create a complete bottom out in demand. Our economy is built on debt, remember that is how money is created over and over again. If you remove that money, if you destroy that wealth, you handcuff the people's ability to spend.
Now, another key, CORE theme in economics is the theory of rate of change. Since economics is totally linked with behavior, the rate of change makes all the difference in the world. This can be most recently noted in either the default rate of mortgages or the US consumer savings rate (or if you want to get really scared look at the savings rate of change of Japan). A small uptick in the % of defaulted subprime mortgages caused massive waves through our system. Our savings rate went from negative to now at 6.5% in about 1.4 years. 6.5% for a savings rate is not high "by historical standards" but that does not matter AT ALL, it is the rate of change that matters.
So what we had was a complete drain of wealth from the bursting of the internet bubble. We entered a recession as defined by negative growth, or GDP. A contraction, if you will. What causes contractions in a society that is based on debt? Less debt. Less money. Less purchasing power. OR, and we will get into this in a minute.... a paradigm shift of consumers from spending to savings. A jump from a negative savings rate, to a positive one, has catastrophic impacts on corproate earnings and profits. If the savings rate gets high enough you experience what is called the Paradox of Thrift. This is now occuring. Because I save money on landscaping, my landscaper cannot pay the people to wash his cars, and those people then cannot go out to eat as much which takes money from the waitress who then cannot get her hair done every other week, and so on and so on.....
In times of economic contraction the government and The Fed, will become the "Lender of Last Resort". This goes back to GDP and the money mechanism. If people have been using their homes as ATM's, and their housing values plummet taking away their ability to spend, the government wants to step in and create a supply of money to abate the crisis. When the government can create money from thin air, why not? Well, here is why not....
To pull us out of the recession of 2002 (which was mild at worst) and the devestating effects of 9/11 (don't want to get into CT here), The Fed pumped massive amounts of money into the system and regulations were relaxed for Wall Street lending. We created another bubble to solve the problems of a bubble bursting. We also spent billions and billions on war, the most profitable business model our government has ever known. Since money and credit is like a virus, it landed and infected assets such as real estate.
We inflated the real estate market and all the ancillary markets (construction, retail, furniture, autos) that go with it. That is a bit misleading because there were not specific instructions to inflate the real estate market but regulations were sidestepped and new rules put in place which made real estate the spot where the lending landed/credit expanded.
So, let's go back to economics. We had a contracting GDP so we did what we always do (the only tricks we have) on the other side of the equation, we pumped massive amounts of cheap money into the system to increase the depleted money supply and then we did something of EPIC proportions, that we had never done before, we literally created "financial weapons of mass destruction", as Buffett calls them, which is the alphabet soup of credit "derivatives" that we all hear about. Here is how it went down....
The orders came from Washington to open up the printing presses and issue massive amounts of government debt. The government debt went to transfer payments but more importantly, that that time, to funding the wars on military spending. The Fed essentially created no cost money which meant that banks could take that money from The Fed and lend it out and make huge money on the "spread". But that "huge spread", or net interest margin, was not enough. Since interest rates were held so low, and there was a "global savings glut" which kept bond yields very, very low, savers were being punished due to the increases in prices from the increase in demand. Banks started the process of syndication in the name of risk mitigation. And here is where it gets really, really bad. Syndications allowed banks to play a virtual game of hot potato. Since borrowers (hedge funds, pensions, you name it) could go out and borrow money (there is a carry trade aspect here with the Japanese that I am leaving out for sake of simplicity) in the global arena very, very cheaply, you could borrow money at 1% and buy a package of "insert mortgage product here" which was "said" to pay 5%. These events created a velocity of money that was unparalleled before. Speed of light, one trillion times. It was awesome to see. Buy something today, sell it by lunch. Do it again tomorrow. All cheap, all profit. No money down, no doc, no anything.... just get it done. "Castles to the sky". Credit cards, cars, boats, houses... The profits were obvious, the money cheap, the underwriting free, the game rigged.....
Fiat currency in a fractional reserve system works until it doesn't. And here is when it doesn't. We built up capacity (think auto dealerships, malls, schools, movie theaters, gyms, restaurants, etc.) for consumer spending that was probably in the range of 75% GDP going to 80% GDP. Our entire system was based on debt. Unlike equity, debt has to be paid back, or losses taken. It doesn't just go away and worse, unlike equity, has immediate residual consequences that create a cascade affect in economics.
What made the music stop? People. Behavior. Psyche. The system gets so bloated and overweight, that it collapses under its own weight. No one stands up on Capital Hill and waives a flag saying the game is over. You just wake up one day and the tone has changed. You "can" have events that do that... a comet, or drought, etc. But not in this case. The paradigm shift was underway. People smartened up and the scales tipped from those "getting in while the getting was good" to "getting out before it all crashes down".
It is that simple and resembles a snowflake at the top of a mountain that rolls into a snowball and then into an avalanche. Rates of change in a system built on debt where everything is connected.
We built up an empire of debt that has never before been seen in our nation's history. What's worse is that the same globalization that was borne in the wake of the productivity miracle of the 1990's made it so that no rock was left unturned. Credit infected every single aspect of our lives across the globe. People in Poland were issued mortgages that were priced in Swiss Francs but those people were paid in the local currency, the Zolty. When the Polish government became so overwhelemed as the credit stopped, the Zolty got hammered in the currency markets. The people that were paid in zolty's but paid their mortgage in Franc's saw their mortgage payments jump 40% overnight. Ouch. Everything is connected.... economics is pushing on a string.
Back to the US. When the weight of our system began to implode you had a rush to the exits. Owners became sellers overnight and buyers went away. From the end of the chain came the "no mas" signal. No more. The fund at the end buying everything was full. No more. All the way down the line to the bank that finally said, "No" to the mortgage applicant because the bank was now having trouble unloading the mortgages they currently had on their books.
See, what happens when you create all of this "stuff" with debt is that debt has to be paid back.... if you are creating increases in the prices of "things" faster than wages are increasing, you have a major issue coming. Relative to the price increases, wages were not moving an inch for the average person. And that average person was the couple buying the $500K house with the pool, the second home in FL, and filling the driveways with SUV's. The day that John Q. Public, or John Q. Speculator, called the bank and said, "I've got a problem paying this month"... the music stopped and stopped fast.
Velocity slowed, which means lending slowed, which means borrowing slowed, which means spending slowed, which decreases demand in a debt financed society, which collapses prices.... and the process starts again from the top until velocity crashes. Money, wealth, the ability to spend is stopped immediately. Prices crater and money/debt is evaporated into the thin air from which it was created...... deflation.
The Fed is powerless against deflation caused by a paradigm shift from consumerism to thift. The Fed can create all the money it wants, but if the public doesn't borrow it, velocity goes to zero and stays there. And this brings me to the collapse of the USD.....
If you go fishing in a swimming pool, you are not going to catch anything. You can have the best rod, the best lure, and 400 ft. of Spiderwire, but you are not going to catch a thing. You can cast and cast and cast, but nothing. Why? Because there are no fish....
There are no consumers in the US and the globe. The game of money from debt, that game created by the banks for the banks, only works if there is a consumer there to borrow. If people stop borrowing, it is very bad, if people start paying off their debt, it gets worse. A loan is an asset on the books of the banks. They do not want you to pay it off or else they face reloan risk and interest rate risk.
So what does the government do???!!!! Well, from the same playbook, they create a TON of money!! But just like our fisherman at the pool who let's out 100 ft of line, if there is no fish, you are going to end up with a big bird's nest of line on your reel.
The government's attempts to "stimulate" the economy includes pumping massive amounts of money into the banking system. What is so nuts though is that, for the first time in history I think, the Fed is paying banks interest on their deposits at the Fed. Talk about discouraging lending. Why lend money out to borrowers that may not pay it back when you can put it on reserve at the Fed and collect interest. Also, the borrowers just are not there. People do not want more debt. Who on earth needs another car or who on earth needs a new one? All of the buying and selling, for the next decade, was done in the last 3 years (prior to the crash). So now we are left with overcapacity and a shift to thrift. To bring it back to the inflation versus deflation debate, we have seen wealth destruction that far exceeds the amount of money being printed right now by the government. But what is more important than the money being printed is that there is ZERO willingness to borrow and spend which reduces that velocity to 0. Go back to rates of change and you will understand how dire it will get when you go from hypervelocity to nothing.... the Fed can print all it wants, but the money will just sit around, and here is how we get to the collapse of the USD.
The government is issuing massive amounts of debt to finance its spending and transfer payments. The US government is so far in debt that we now need to borrow $1.85 Trillion for 2009 and will need to borrow another $2 Trillion for 2010. This goes to pensions, wages, Medicaid, Medicare, SS, TARP, bailouts, wars, etc. All told, the global amount of government ONLY debt issuance for fiscal 2010 will be over $5 T. That does not count corporations, commerical mortgages, etc. Where will that money come from during a global deleveraging process? Well, the debt will be what is called "monetized". That is a not so fancy word for, inflated away. The government will sell bonds to itself and foreign central banks, the print the money needed to pay the interest. Rinse. Repeat.
The World Bank reported that 2008 global GDP was $60 T. This will be far less in 2009 and less in 2010. That means that global government debt issuance will be 10-11% of global GDP. That is a huge problem and here is why.
Governments are used to borrowing at very low rates. Uncle Sam pays us 3.5% to use our money for 10 years. In a time like this, a deflationary period of falling prices, that "real return", or adjusted for inflation, is large because inflation, as measured by price increases, is negative. But 2.5%? When I could take that money and payoff my credit card which charges me 20%...! What will happen is what is called the "crowding out effect". The cost of borrowing, or the interest rate paid, goes up to compete. Would you buy a GE bond paying the same rate as a government bond (default theories aside)? Of course not. So GE's cost of capital needs to go up to compete with all the government debt being issued. Bad for corporations, bad for workers, bad all around. This also works on a global level as governments must compete for dwindling capital. Japan's interest rates are going to skyrocket since they need to issue massive debt ( I could do a whole other post on this mess) and compete with the US for capital.
We will print money. Japan will print money. The Eurozone will print money. We will all lower interest rates but again, remember how this plays out in economics. It doesn't happen in a vaccum. All nations rely on exports and imports, buying and selling... it's commerce, right? Well, if one currency loses value because of monetary policy, it becomes more competetive in the export game against another currency that is stronger. You have a "race to devalue" all of a sudden. The feedback loop is vicious.
The US will print and print and print. And issue debt and issue debt and issue debt. Solving a massive leverage problem, with more leverage = not the answer. The real killer in this will be when the interest rates increase (this is why the US government has been buying so much of its own debt). If you are used to borrowing at 3.5%, and the rates jump to 4%, that may not seem like a lot at 50 bps, but the rate of change is large and the corresponding increase in interest cost is staggering! Think of Japan. They issue debt at 1%. What happens if that goes to a paltry 2%?
The feedback loops are enormous and will end when the race to devalue ends at 0. This is why you hear that the cost of everything we NEED will go UP but the price of everything we HAVE will go DOWN. The worst of both worlds. The value of my house, down. The value of my stocks, down. The price of milk, up. The price of gas, up.
How does that occur. Currency. The devaluation of currencies will be the reason that products we want will go up, and that which we have will go down. We, in the US, have enjoyed the ace in the hole because our currency is accepted world-wide as the "reserve currency" which means it is necessary for global trade. But that is changing, rapidly. US debt is now at 375% of GDP which is a post 1870 record. We leveraged more during a deleveraging process. That makes us clearly prone to deflation and complete stagnant growth. We are a debtor nation which removes any comparisons to Japan in the 1990's or the Great Depression.
We are in much worse shape now than ever. EVER. We may see temporary increases in GDP but GDP per capita, as the population grows, will decline and that will be reflected in the lower standard of living. We will see deflation take hold and run its course driving asset prices into the ground and creating massive losses for banks and lending institutions. Falling prices, unless spurred through increases in productivity, are death for corporations and therefore workers. Deflation is nasty, very nasty.
In an effort to be the lender of last resort world governments are issuing trillions in debt and printing trillions in new money. But it all falls on deaf wallets. When it does that it has the effect of our fisherman friend letting line out to catch a fish that isn't there.... a huge bird's nest. Our currency will become worthless as foreign countries get sick of being paid back with fiat currency that is being devalued by the day. Again, the only ace we have right now is that our currency is the "reserve currency". The IMF prices their loans in the USD. It should now be obvious as to why China wants more of a voice at the table and why we always push for more loans from the IMF to other nations. Everytime the IMF issues a loan to Poland or Iceland or Argentina, we have an immediate buyer of the USD.... Why do you think we invaded Iraq? Saddam would not price his oil in the USD.
The game will shift to one of resources. China is buying commodities is because they understand that at some point in the very near future, money will not mean a thing, but copper will, gold will, oil will. The game is about resources now. That is why we will not drill in ANWR. Why use our oil when we can invade a country, take its massive oil and natural gas supplies, and price it in our currency, and exploit it? We will use our oil when we need to.
The question of "how to prepare" should be an obvious one. As our currency falls in value, and confidence wanes in our currency, commodities will rise in price regardless of demand. Food especially. Europe is in even worse fiscal shape then the US and Japan is worse than that.
It is ugly. Really ugly. Contrary to our "microwave" way of thinking, this will not play out over the course of 1 minute. This will be a slow painful death for world banks and currencies but one that is almost impossible to reverse.
Prepare by coverting your paper wealth into tangible wealth. That is my advice and that is how I am preparing.
I am sure that I have missed themes but I tried to hit on the highlights of what shapes my thinking. I am certain that parts of my diatribe was remedial for some, but others may learn something new. I hope that you found it interesting and helpful and please remember that I am not saying that I am correct with my future assumptions since there is no playbook for where we are heading.
God Bless.
The original post is reproduced below, but the reader will need to click on the link above to see the full discussion and FranchiseKid's response to some questions posed by other Survivalist Board members.
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Okay, here is my "Ode to Squeak" who has asked me to expand on a currency collapse regarding the USD and how to prepare for it and the events that will unfold thereafter.
Disclaimer 1: There is no road map or playbook for what I am going to discuss. No third world debt default can compare to what a default of US debt and/or the collapse of a major world currency such as the USD, Euro, or Yen.
Disclaimer 2: Due to unprecedented levels of government hubris, intervention, complete disregard for law, and manipulation, any assumptions I make could be just as easily discarded as they could be true. Since the rules of the game change every Sunday night, it is very difficult to play. This is not a caveat for being wrong (as I am not afraid to be wrong) rather a caveat that history, education, and research go out the window when rules can be made and broken at will.
Disclaimer 3: Any assumptions made are my own. I will not take the time to post links to every piece of factual research that I post as that will take too long but if someone wants that information please PM me and I will provide it. Pretty much 99% of the information that I use or cite are easily found government stats that can be Googled.
Where We Are Now:
There has been much debate in the media and in some of these threads regarding whether we will sooner see inflation or deflation. There are many camps that are discussing this matter and you have probably heard them all by now. Heck, we cannot even agree on how to define inflation and deflation. For practical use purposes though, it is more helpful (IMO) to define them as they relate to the money supply in circulation. It is economic theory that if you create a bunch of money in the system and pump it into people's wallets, they will go out and buy things. This increases demand. An increase in demand, without a corresponding increase in supply, will create an increase in prices of "stuff". Deflation would work the opposite way. If you take money from people, they cannot spend and therefore demand will decrease and without a corresponding decrease in supply, prices fall.
Now, NOTHING in economics can be viewed in a vaccum for the ONE simple fact that economics involves the behavior of IRRATIONAL beings. This fact cannot be stated loudly enough. This fact is also a reason that econometric comparisons to the Great Depression ought to viewed as nonsense. It is like saying if the Patriots played the Bears in the SuperBowl this year the Bears would win by 36 points since that is what happened in SuperBowl XX. We all can see clearly why that assumption is nonsensical. Different this, different that... but those differences make a huge difference in outcome.
Economics is the same. Please keep that in mind as we go through this.
The only thing that the US has produced in the last decade plus is financial engineering defined more technically as velocity of money. Mathematically put, the output of a country can be simply defined as the aggregate money supply multiplied by the times that money supply moves through the economy. "High powered money" is the theory that $1 moves through the economy and changes hands multiple times. As I get paid from work, I pay the landscaper, he pays his employees, they pay their bills, etc etc. Since 72% of our economy (at the most recent peak) is measured by how much we, as consumers, spend, you can see very quickly how the "velocity" of money creates a HUGE impact in the final tally of our output.
But, as some of you may be saying now, how is that really "output". "We have not created anything" you say. And you are right. This goes back to a fundamental issue with our country's monetary & fiscal behavior. We have a fiat currency and a fractional reserve monetary system. In English, that means we have a currency that is backed by nothing, can be created at will, and when deposited by members of the Federal Reserve Banking system, can be leveraged 10-1 (at least). This is how the "money mechanism" works. The Fed prints $1 and puts it into the bank of choice. The bank puts $.10 on "reserve" with the Fed and lends out $.90. The bank makes money on that loan called "interest" (this is the trouble with "usury". If the Fed prints all the money needed, then who creates the money to pay the "interest".... and on and on we go). The bank loaned that $.9 to me so that I could buy a car from my neighbor. My neighbor takes that $.9 and puts it into his bank. Guess what his bank does? His bank takes 10% of that money and puts it on "reserve" with the Fed and loans out the rest. And so on...... you don't even want to get into the leverage amounts that the government afforded to JP Morgan, Bank of America, Goldman Sachs, Morgan Stanley, B. Stearns, and L. Brothers. What shock, three of them don't exist anymore and the other three only exist because they were the "chosen ones" to be bailed out.
So, what have we done over the last decade? Well, we had a complete "productivity miracle" occur with the advent and application of the internet. I cannot say how much this system has revolutionized global business and changed economics. This was real and tangible. This was measurable and legit. What it allowed us to do however, was to again manipulate our system for the worse. What increases in productivity do is to keep a lid on what is called "unit labor costs" or wages and other inputs that go into the cost of goods. Lower cost goods means that "inflation" (that pesky inflation again...) AND THIS IS IMPORTANT, "as measured by the Consumer Price Index", stays low. Again, in English, this means that we can make computers now for $500 instead of $5,000. That, according to the CPI is a huge move down in inflation, or the "costs of goods and services". The government's response to a move down in the costs of goods and services is to keep the pedal to metal in terms of monetary and fiscal policy. No inflation? No hikes in interest rates. Money is cheap and stays that way according to them.
Then the internet bubble bursts. Wealth is literally destroyed overnight. This is why an understanding of inflation and deflation is so important. When you remove the consumer's ability to buy, leverage, borrow = spend, you create a complete bottom out in demand. Our economy is built on debt, remember that is how money is created over and over again. If you remove that money, if you destroy that wealth, you handcuff the people's ability to spend.
Now, another key, CORE theme in economics is the theory of rate of change. Since economics is totally linked with behavior, the rate of change makes all the difference in the world. This can be most recently noted in either the default rate of mortgages or the US consumer savings rate (or if you want to get really scared look at the savings rate of change of Japan). A small uptick in the % of defaulted subprime mortgages caused massive waves through our system. Our savings rate went from negative to now at 6.5% in about 1.4 years. 6.5% for a savings rate is not high "by historical standards" but that does not matter AT ALL, it is the rate of change that matters.
So what we had was a complete drain of wealth from the bursting of the internet bubble. We entered a recession as defined by negative growth, or GDP. A contraction, if you will. What causes contractions in a society that is based on debt? Less debt. Less money. Less purchasing power. OR, and we will get into this in a minute.... a paradigm shift of consumers from spending to savings. A jump from a negative savings rate, to a positive one, has catastrophic impacts on corproate earnings and profits. If the savings rate gets high enough you experience what is called the Paradox of Thrift. This is now occuring. Because I save money on landscaping, my landscaper cannot pay the people to wash his cars, and those people then cannot go out to eat as much which takes money from the waitress who then cannot get her hair done every other week, and so on and so on.....
In times of economic contraction the government and The Fed, will become the "Lender of Last Resort". This goes back to GDP and the money mechanism. If people have been using their homes as ATM's, and their housing values plummet taking away their ability to spend, the government wants to step in and create a supply of money to abate the crisis. When the government can create money from thin air, why not? Well, here is why not....
To pull us out of the recession of 2002 (which was mild at worst) and the devestating effects of 9/11 (don't want to get into CT here), The Fed pumped massive amounts of money into the system and regulations were relaxed for Wall Street lending. We created another bubble to solve the problems of a bubble bursting. We also spent billions and billions on war, the most profitable business model our government has ever known. Since money and credit is like a virus, it landed and infected assets such as real estate.
We inflated the real estate market and all the ancillary markets (construction, retail, furniture, autos) that go with it. That is a bit misleading because there were not specific instructions to inflate the real estate market but regulations were sidestepped and new rules put in place which made real estate the spot where the lending landed/credit expanded.
So, let's go back to economics. We had a contracting GDP so we did what we always do (the only tricks we have) on the other side of the equation, we pumped massive amounts of cheap money into the system to increase the depleted money supply and then we did something of EPIC proportions, that we had never done before, we literally created "financial weapons of mass destruction", as Buffett calls them, which is the alphabet soup of credit "derivatives" that we all hear about. Here is how it went down....
The orders came from Washington to open up the printing presses and issue massive amounts of government debt. The government debt went to transfer payments but more importantly, that that time, to funding the wars on military spending. The Fed essentially created no cost money which meant that banks could take that money from The Fed and lend it out and make huge money on the "spread". But that "huge spread", or net interest margin, was not enough. Since interest rates were held so low, and there was a "global savings glut" which kept bond yields very, very low, savers were being punished due to the increases in prices from the increase in demand. Banks started the process of syndication in the name of risk mitigation. And here is where it gets really, really bad. Syndications allowed banks to play a virtual game of hot potato. Since borrowers (hedge funds, pensions, you name it) could go out and borrow money (there is a carry trade aspect here with the Japanese that I am leaving out for sake of simplicity) in the global arena very, very cheaply, you could borrow money at 1% and buy a package of "insert mortgage product here" which was "said" to pay 5%. These events created a velocity of money that was unparalleled before. Speed of light, one trillion times. It was awesome to see. Buy something today, sell it by lunch. Do it again tomorrow. All cheap, all profit. No money down, no doc, no anything.... just get it done. "Castles to the sky". Credit cards, cars, boats, houses... The profits were obvious, the money cheap, the underwriting free, the game rigged.....
Fiat currency in a fractional reserve system works until it doesn't. And here is when it doesn't. We built up capacity (think auto dealerships, malls, schools, movie theaters, gyms, restaurants, etc.) for consumer spending that was probably in the range of 75% GDP going to 80% GDP. Our entire system was based on debt. Unlike equity, debt has to be paid back, or losses taken. It doesn't just go away and worse, unlike equity, has immediate residual consequences that create a cascade affect in economics.
What made the music stop? People. Behavior. Psyche. The system gets so bloated and overweight, that it collapses under its own weight. No one stands up on Capital Hill and waives a flag saying the game is over. You just wake up one day and the tone has changed. You "can" have events that do that... a comet, or drought, etc. But not in this case. The paradigm shift was underway. People smartened up and the scales tipped from those "getting in while the getting was good" to "getting out before it all crashes down".
It is that simple and resembles a snowflake at the top of a mountain that rolls into a snowball and then into an avalanche. Rates of change in a system built on debt where everything is connected.
We built up an empire of debt that has never before been seen in our nation's history. What's worse is that the same globalization that was borne in the wake of the productivity miracle of the 1990's made it so that no rock was left unturned. Credit infected every single aspect of our lives across the globe. People in Poland were issued mortgages that were priced in Swiss Francs but those people were paid in the local currency, the Zolty. When the Polish government became so overwhelemed as the credit stopped, the Zolty got hammered in the currency markets. The people that were paid in zolty's but paid their mortgage in Franc's saw their mortgage payments jump 40% overnight. Ouch. Everything is connected.... economics is pushing on a string.
Back to the US. When the weight of our system began to implode you had a rush to the exits. Owners became sellers overnight and buyers went away. From the end of the chain came the "no mas" signal. No more. The fund at the end buying everything was full. No more. All the way down the line to the bank that finally said, "No" to the mortgage applicant because the bank was now having trouble unloading the mortgages they currently had on their books.
See, what happens when you create all of this "stuff" with debt is that debt has to be paid back.... if you are creating increases in the prices of "things" faster than wages are increasing, you have a major issue coming. Relative to the price increases, wages were not moving an inch for the average person. And that average person was the couple buying the $500K house with the pool, the second home in FL, and filling the driveways with SUV's. The day that John Q. Public, or John Q. Speculator, called the bank and said, "I've got a problem paying this month"... the music stopped and stopped fast.
Velocity slowed, which means lending slowed, which means borrowing slowed, which means spending slowed, which decreases demand in a debt financed society, which collapses prices.... and the process starts again from the top until velocity crashes. Money, wealth, the ability to spend is stopped immediately. Prices crater and money/debt is evaporated into the thin air from which it was created...... deflation.
The Fed is powerless against deflation caused by a paradigm shift from consumerism to thift. The Fed can create all the money it wants, but if the public doesn't borrow it, velocity goes to zero and stays there. And this brings me to the collapse of the USD.....
If you go fishing in a swimming pool, you are not going to catch anything. You can have the best rod, the best lure, and 400 ft. of Spiderwire, but you are not going to catch a thing. You can cast and cast and cast, but nothing. Why? Because there are no fish....
There are no consumers in the US and the globe. The game of money from debt, that game created by the banks for the banks, only works if there is a consumer there to borrow. If people stop borrowing, it is very bad, if people start paying off their debt, it gets worse. A loan is an asset on the books of the banks. They do not want you to pay it off or else they face reloan risk and interest rate risk.
So what does the government do???!!!! Well, from the same playbook, they create a TON of money!! But just like our fisherman at the pool who let's out 100 ft of line, if there is no fish, you are going to end up with a big bird's nest of line on your reel.
The government's attempts to "stimulate" the economy includes pumping massive amounts of money into the banking system. What is so nuts though is that, for the first time in history I think, the Fed is paying banks interest on their deposits at the Fed. Talk about discouraging lending. Why lend money out to borrowers that may not pay it back when you can put it on reserve at the Fed and collect interest. Also, the borrowers just are not there. People do not want more debt. Who on earth needs another car or who on earth needs a new one? All of the buying and selling, for the next decade, was done in the last 3 years (prior to the crash). So now we are left with overcapacity and a shift to thrift. To bring it back to the inflation versus deflation debate, we have seen wealth destruction that far exceeds the amount of money being printed right now by the government. But what is more important than the money being printed is that there is ZERO willingness to borrow and spend which reduces that velocity to 0. Go back to rates of change and you will understand how dire it will get when you go from hypervelocity to nothing.... the Fed can print all it wants, but the money will just sit around, and here is how we get to the collapse of the USD.
The government is issuing massive amounts of debt to finance its spending and transfer payments. The US government is so far in debt that we now need to borrow $1.85 Trillion for 2009 and will need to borrow another $2 Trillion for 2010. This goes to pensions, wages, Medicaid, Medicare, SS, TARP, bailouts, wars, etc. All told, the global amount of government ONLY debt issuance for fiscal 2010 will be over $5 T. That does not count corporations, commerical mortgages, etc. Where will that money come from during a global deleveraging process? Well, the debt will be what is called "monetized". That is a not so fancy word for, inflated away. The government will sell bonds to itself and foreign central banks, the print the money needed to pay the interest. Rinse. Repeat.
The World Bank reported that 2008 global GDP was $60 T. This will be far less in 2009 and less in 2010. That means that global government debt issuance will be 10-11% of global GDP. That is a huge problem and here is why.
Governments are used to borrowing at very low rates. Uncle Sam pays us 3.5% to use our money for 10 years. In a time like this, a deflationary period of falling prices, that "real return", or adjusted for inflation, is large because inflation, as measured by price increases, is negative. But 2.5%? When I could take that money and payoff my credit card which charges me 20%...! What will happen is what is called the "crowding out effect". The cost of borrowing, or the interest rate paid, goes up to compete. Would you buy a GE bond paying the same rate as a government bond (default theories aside)? Of course not. So GE's cost of capital needs to go up to compete with all the government debt being issued. Bad for corporations, bad for workers, bad all around. This also works on a global level as governments must compete for dwindling capital. Japan's interest rates are going to skyrocket since they need to issue massive debt ( I could do a whole other post on this mess) and compete with the US for capital.
We will print money. Japan will print money. The Eurozone will print money. We will all lower interest rates but again, remember how this plays out in economics. It doesn't happen in a vaccum. All nations rely on exports and imports, buying and selling... it's commerce, right? Well, if one currency loses value because of monetary policy, it becomes more competetive in the export game against another currency that is stronger. You have a "race to devalue" all of a sudden. The feedback loop is vicious.
The US will print and print and print. And issue debt and issue debt and issue debt. Solving a massive leverage problem, with more leverage = not the answer. The real killer in this will be when the interest rates increase (this is why the US government has been buying so much of its own debt). If you are used to borrowing at 3.5%, and the rates jump to 4%, that may not seem like a lot at 50 bps, but the rate of change is large and the corresponding increase in interest cost is staggering! Think of Japan. They issue debt at 1%. What happens if that goes to a paltry 2%?
The feedback loops are enormous and will end when the race to devalue ends at 0. This is why you hear that the cost of everything we NEED will go UP but the price of everything we HAVE will go DOWN. The worst of both worlds. The value of my house, down. The value of my stocks, down. The price of milk, up. The price of gas, up.
How does that occur. Currency. The devaluation of currencies will be the reason that products we want will go up, and that which we have will go down. We, in the US, have enjoyed the ace in the hole because our currency is accepted world-wide as the "reserve currency" which means it is necessary for global trade. But that is changing, rapidly. US debt is now at 375% of GDP which is a post 1870 record. We leveraged more during a deleveraging process. That makes us clearly prone to deflation and complete stagnant growth. We are a debtor nation which removes any comparisons to Japan in the 1990's or the Great Depression.
We are in much worse shape now than ever. EVER. We may see temporary increases in GDP but GDP per capita, as the population grows, will decline and that will be reflected in the lower standard of living. We will see deflation take hold and run its course driving asset prices into the ground and creating massive losses for banks and lending institutions. Falling prices, unless spurred through increases in productivity, are death for corporations and therefore workers. Deflation is nasty, very nasty.
In an effort to be the lender of last resort world governments are issuing trillions in debt and printing trillions in new money. But it all falls on deaf wallets. When it does that it has the effect of our fisherman friend letting line out to catch a fish that isn't there.... a huge bird's nest. Our currency will become worthless as foreign countries get sick of being paid back with fiat currency that is being devalued by the day. Again, the only ace we have right now is that our currency is the "reserve currency". The IMF prices their loans in the USD. It should now be obvious as to why China wants more of a voice at the table and why we always push for more loans from the IMF to other nations. Everytime the IMF issues a loan to Poland or Iceland or Argentina, we have an immediate buyer of the USD.... Why do you think we invaded Iraq? Saddam would not price his oil in the USD.
The game will shift to one of resources. China is buying commodities is because they understand that at some point in the very near future, money will not mean a thing, but copper will, gold will, oil will. The game is about resources now. That is why we will not drill in ANWR. Why use our oil when we can invade a country, take its massive oil and natural gas supplies, and price it in our currency, and exploit it? We will use our oil when we need to.
The question of "how to prepare" should be an obvious one. As our currency falls in value, and confidence wanes in our currency, commodities will rise in price regardless of demand. Food especially. Europe is in even worse fiscal shape then the US and Japan is worse than that.
It is ugly. Really ugly. Contrary to our "microwave" way of thinking, this will not play out over the course of 1 minute. This will be a slow painful death for world banks and currencies but one that is almost impossible to reverse.
Prepare by coverting your paper wealth into tangible wealth. That is my advice and that is how I am preparing.
I am sure that I have missed themes but I tried to hit on the highlights of what shapes my thinking. I am certain that parts of my diatribe was remedial for some, but others may learn something new. I hope that you found it interesting and helpful and please remember that I am not saying that I am correct with my future assumptions since there is no playbook for where we are heading.
God Bless.
Charles Krauthammer: Why Obamacare Is Sinking
I have a shameless crush on Charles Krauthammer. He's my pundit boyfriend, although he may not know it. I'm disappointed whenever he does not appear as a panelist on Fox News Sunday. He needs his own show, dammit.
Krauthammer writes a column for the Washington Post. I can't link it on the blog roll for some technical reason I don't understand, so from now on I'm just going to post his articles as blog entries.
Enjoy.
Charles Krauthammer: Why Obamacare is Sinking
And a few prior editorials I particularly enjoyed:
The Moon We Left Behind
Obama's Israeli Settlements Canard
Krauthammer writes a column for the Washington Post. I can't link it on the blog roll for some technical reason I don't understand, so from now on I'm just going to post his articles as blog entries.
Enjoy.
Charles Krauthammer: Why Obamacare is Sinking
And a few prior editorials I particularly enjoyed:
The Moon We Left Behind
Obama's Israeli Settlements Canard
Tuesday, July 21, 2009
Real-life SHTF: Burning Vehicle
Milwaukee - a young mother with two young children in the car loses control of her vehicle and hits a tree. The car ends up on its side and bursts into flames.
The mother and one child make it out fairly quickly, but one child remains inside, strapped in by his seat belt, burning alive.
In this video you can hear the brave men, off-duty fire fighters, who rescued this young child calling desperately for a knife to cut the seatbelt. If you don't carry a knife, or a rescue tool (much less an emergency kit, c'mon people!), in your car please consider doing so. Here are a few examples:
ResQme
Boker Cop Tool
KnifeCenter: Rescue Knives
All passengers made it out alive, and the boy, although he suffered severe burns, is expected to make a full recovery. The rescuers did sustain burns in freeing the boy from the car.
Finally, note that the cops don't arrive until the end of the video -- long after the boy, and possibly the mother and other child, would have died.
The mother and one child make it out fairly quickly, but one child remains inside, strapped in by his seat belt, burning alive.
In this video you can hear the brave men, off-duty fire fighters, who rescued this young child calling desperately for a knife to cut the seatbelt. If you don't carry a knife, or a rescue tool (much less an emergency kit, c'mon people!), in your car please consider doing so. Here are a few examples:
ResQme
Boker Cop Tool
KnifeCenter: Rescue Knives
All passengers made it out alive, and the boy, although he suffered severe burns, is expected to make a full recovery. The rescuers did sustain burns in freeing the boy from the car.
Finally, note that the cops don't arrive until the end of the video -- long after the boy, and possibly the mother and other child, would have died.
Why Preppers Aren't Crazy
.... Because the government has already contemplated the possibility likelihood of a complete financial collapse and breakdown in the social order:
Former Treasury Sec. Paulson Reveals U. S. Concerns of Breakdown Prior to Passage of Bailout Bill (emphasis mine)
Former Treasury Sec. Paulson Reveals U. S. Concerns of Breakdown Prior to Passage of Bailout Bill (emphasis mine)
The Bush administration and Congress discussed the possibility of a breakdown in law and order and the logistics of feeding US citizens if commerce and banking collapsed as a result of last autumn's financial panic, it was disclosed yesterday.An exercise for the reader: Do you really think things are that much better now, fiscally speaking, than they were last November? Or have we just gotten used to how bad they are?
Making his first appearance on Capitol Hill since leaving office, the former Treasury secretary Hank Paulson said it was important at the time not to reveal the extent of officials' concerns, for fear it would "terrify the American people and lead to an even bigger problem".
Mr Paulson testified to the House Oversight Committee on the Bush administration's unpopular $700bn (£426bn) bailout of Wall Street, which was triggered by the failure of Lehman Brothers last September. In the days that followed, a run on some of the safest investment vehicles in the financial markets threatened to make it impossible for people to access their savings.
Paul Kanjorski, a Pennsylvania Democrat, asked Mr Paulson to reveal details of officials' concerns, which were relayed to Congress in hasty conference calls last year. The calls included discussion of law and order and whether it would be possible to feed the American people, and for how long, according to Mr Kanjorski.
"In a world where information can flow, money can move with the speed of light electronically, I looked at the ripple effect, and looked at when a financial system fails, a whole country's economic system can fail," Mr Paulson said. "I believe we could have gone back to the sorts of situations we saw in the Depression. I try not to use hyperbole. It's impossible to prove now since it didn't happen."
The Oversight committee is investigating the takeover of Merrill Lynch by Bank of America, a deal forged in the desperate weekend that Lehman Brothers failed, and which later required government support because of Merrill's spiralling losses.
Mr Paulson defended putting pressure on Bank of America when it had last-minute doubts about the deal in December. Not to have done so could have rekindled the "financial havoc" the bailout had calmed.
Friday, July 17, 2009
Unpredictable Swine Flu Worries Officials, but Media Bored with the Story
From FoxNews, by Marrecca Fiore (I have emphasized some portions) --
Swine flu is spreading faster than ever — so much so that the World Health Organization has decided to stop tracking cases.
In the U.S., the H1N1 virus has sickened tens of thousands and closed summer camps at a time when there should be little or no flu activity.
Even as the WHO and the U.S. Centers for Disease Control and Prevention continue to raise awareness of this potentially deadly disease, which appears to be killing both sick and healthy individuals, the topic has virtually disappeared from the headlines.
“Complacency is a major concern,” said Dr. Anne Schuchat, director for National Center for Immunization and Respiratory Diseases at the CDC.
“This virus is a new one, and on top of that, we really still don’t know how it’s going to behave,” Schuchat said during a media conference call Friday. “There are special efforts that have been undertaken by health agencies, but individuals also need to be ready, to be thinking ahead and have steps in place should a family member get sick or a workplace close down or a situation arise that requires working from home.”
Over the next six to 12 weeks, there are several concerns that national health officials are preparing for:
1. Figuring out how the virus will react and spread once students return to schools, especially inner city schools, which typically struggle with overcrowding issues.
2. Overseeing the completion of a vaccine and getting it to the individuals who need it most.
3. Determining how the virus will behave as it spreads and mutates.
Schools
School districts across the U.S. struggle every fall with outbreaks of typically non-flu respiratory viruses, which are easily spread through germs on surfaces and doorknobs, as well as passed from student to student through sneezing, coughing, and sharing drinks and food.
Seasonal influenza usually begins to spread through schools in the late fall and early winter, but this probably will not be the case with swine flu, which behaves differently than seasonal influenza – by oddly thriving in warm and humid conditions.
“This year we’re seeing the H1N1 virus circulating through summer camps and military units, so I’m expecting we may see an increase in cases once school starts, but we don’t definitely know that,” Schuchat said. “We are concerned that there will be challenges in the fall. It is the kind of thing we want to be ready for and not surprised by.”
Schuchat said national and state health officials are working closely together on updating their guidance for schools and similar institutions with regard to swine flu outbreaks.
“We still believe that the best place for kids is in schools, where they can be nourished receiving a healthy breakfast and lunch and learning,” she said. “But we also believe the best place for a sick kid is at home being cared for. So we’re working on putting strong plans in place on communication and preparedness on the local and state levels.”
Click here to read the CDC’s advice for parents for educating and protecting children from swine flu.
Vaccine
Companies such as Baxter, GlaxoSmithKline and Novartis are working to ready a swine flu vaccine for October. Earlier this week, concerns were raised that the U.S. may not receive all the vaccine it needs because it only manufactures about 20 percent of its own supply. The other 80 percent is produced in foreign countries, which will also need ample supplies of the vaccine.
But Schuchat downplayed those concerns, saying the U.S. has contracts in place with manufacturers around the world that guarantee it will receive adequate vaccine.
But, will the vaccine be effective?
In a typical year, the seasonal flu vaccine is about 70 to 90 percent effective, depending on how closely the vaccine matches the strains circulating and on the population the vaccine is used in.
In other words, a vaccine is not going to be as effective in a person with a compromised immune system or someone who is considered at high risk for the virus.
Scientists typically spend months researching the strains of seasonal flu virus that are circulating the globe in order to pick out the three strains that it puts into the annual vaccine.
Because swine flu is new and mutating – for example, in Argentina the virus appears to have mutated to where it can now easily spread from humans to pigs – scientists have their work cut out for them when it comes to determining what strains of the H1N1 swine flu virus to include in the vaccine.
“Unfortunately, right now, we do not know how effective it will be in different populations,” Schuchat said. “We will be looking back at how well it worked, taking into account whether it worked as well as expected, better than expected or worse than expected. Unfortunately, that’s something we’re not able to do until after the fact.”
Virus Behavior
World and U.S. health officials have already determined that swine flu behaves differently than seasonal flu in a number of ways. First, it’s able to spread in hot and humid weather, which is not usually the case for the seasonal flu virus.
Second, the infection appears to be more severe in young people and less severe in the elderly than the typical seasonal flu. Schuchat said in some countries, elderly people, usually at high-risk for influenza, appear to be immune to swine flu – possibly because of the similarities between swine flu and the 1918 flu pandemic, which some of the world’s elderly survived and may be resistant to.
“We are particularly concerned about pregnant women; we’re seeing fatalities and life-threatening illnesses that have occurred in pregnant women in the Southern Hemisphere,” Schuchat said. “We are expecting pregnant women to get a recommendation to get the H1N1 vaccine to reduce the risk of complications from influenza. We know many pregnant women don’t like to take any drugs, but this is one instance we’re you need to be much more concerned about your health than the baby’s health.”
“We’re in a very active stage of preparing for the [coming months],” she continued. “We’re working with the private sector. We want individuals and families to be preparing. Influenza in general is unpredictable, and we don’t know what to expect in the weeks and months ahead.”
Swine flu is spreading faster than ever — so much so that the World Health Organization has decided to stop tracking cases.
In the U.S., the H1N1 virus has sickened tens of thousands and closed summer camps at a time when there should be little or no flu activity.
Even as the WHO and the U.S. Centers for Disease Control and Prevention continue to raise awareness of this potentially deadly disease, which appears to be killing both sick and healthy individuals, the topic has virtually disappeared from the headlines.
“Complacency is a major concern,” said Dr. Anne Schuchat, director for National Center for Immunization and Respiratory Diseases at the CDC.
“This virus is a new one, and on top of that, we really still don’t know how it’s going to behave,” Schuchat said during a media conference call Friday. “There are special efforts that have been undertaken by health agencies, but individuals also need to be ready, to be thinking ahead and have steps in place should a family member get sick or a workplace close down or a situation arise that requires working from home.”
Over the next six to 12 weeks, there are several concerns that national health officials are preparing for:
1. Figuring out how the virus will react and spread once students return to schools, especially inner city schools, which typically struggle with overcrowding issues.
2. Overseeing the completion of a vaccine and getting it to the individuals who need it most.
3. Determining how the virus will behave as it spreads and mutates.
Schools
School districts across the U.S. struggle every fall with outbreaks of typically non-flu respiratory viruses, which are easily spread through germs on surfaces and doorknobs, as well as passed from student to student through sneezing, coughing, and sharing drinks and food.
Seasonal influenza usually begins to spread through schools in the late fall and early winter, but this probably will not be the case with swine flu, which behaves differently than seasonal influenza – by oddly thriving in warm and humid conditions.
“This year we’re seeing the H1N1 virus circulating through summer camps and military units, so I’m expecting we may see an increase in cases once school starts, but we don’t definitely know that,” Schuchat said. “We are concerned that there will be challenges in the fall. It is the kind of thing we want to be ready for and not surprised by.”
Schuchat said national and state health officials are working closely together on updating their guidance for schools and similar institutions with regard to swine flu outbreaks.
“We still believe that the best place for kids is in schools, where they can be nourished receiving a healthy breakfast and lunch and learning,” she said. “But we also believe the best place for a sick kid is at home being cared for. So we’re working on putting strong plans in place on communication and preparedness on the local and state levels.”
Click here to read the CDC’s advice for parents for educating and protecting children from swine flu.
Vaccine
Companies such as Baxter, GlaxoSmithKline and Novartis are working to ready a swine flu vaccine for October. Earlier this week, concerns were raised that the U.S. may not receive all the vaccine it needs because it only manufactures about 20 percent of its own supply. The other 80 percent is produced in foreign countries, which will also need ample supplies of the vaccine.
But Schuchat downplayed those concerns, saying the U.S. has contracts in place with manufacturers around the world that guarantee it will receive adequate vaccine.
But, will the vaccine be effective?
In a typical year, the seasonal flu vaccine is about 70 to 90 percent effective, depending on how closely the vaccine matches the strains circulating and on the population the vaccine is used in.
In other words, a vaccine is not going to be as effective in a person with a compromised immune system or someone who is considered at high risk for the virus.
Scientists typically spend months researching the strains of seasonal flu virus that are circulating the globe in order to pick out the three strains that it puts into the annual vaccine.
Because swine flu is new and mutating – for example, in Argentina the virus appears to have mutated to where it can now easily spread from humans to pigs – scientists have their work cut out for them when it comes to determining what strains of the H1N1 swine flu virus to include in the vaccine.
“Unfortunately, right now, we do not know how effective it will be in different populations,” Schuchat said. “We will be looking back at how well it worked, taking into account whether it worked as well as expected, better than expected or worse than expected. Unfortunately, that’s something we’re not able to do until after the fact.”
Virus Behavior
World and U.S. health officials have already determined that swine flu behaves differently than seasonal flu in a number of ways. First, it’s able to spread in hot and humid weather, which is not usually the case for the seasonal flu virus.
Second, the infection appears to be more severe in young people and less severe in the elderly than the typical seasonal flu. Schuchat said in some countries, elderly people, usually at high-risk for influenza, appear to be immune to swine flu – possibly because of the similarities between swine flu and the 1918 flu pandemic, which some of the world’s elderly survived and may be resistant to.
“We are particularly concerned about pregnant women; we’re seeing fatalities and life-threatening illnesses that have occurred in pregnant women in the Southern Hemisphere,” Schuchat said. “We are expecting pregnant women to get a recommendation to get the H1N1 vaccine to reduce the risk of complications from influenza. We know many pregnant women don’t like to take any drugs, but this is one instance we’re you need to be much more concerned about your health than the baby’s health.”
“We’re in a very active stage of preparing for the [coming months],” she continued. “We’re working with the private sector. We want individuals and families to be preparing. Influenza in general is unpredictable, and we don’t know what to expect in the weeks and months ahead.”
Thursday, July 16, 2009
Benjamin Netanyahu's Date with Destiny
Here is an excellent article from James Lewis at the American Thinker on Benjamin ("Bibi") Netanyahu's impending date with destiny -- to pre-emptively strike Iran before Ahmadinejad can fulfill his promises of wiping Israel from the map:
American Thinker: Sophie's Choice, and Bibi's
American Thinker: Sophie's Choice, and Bibi's
"...Today the moment for which Israel was founded has arrived. Sophie's choice is here again -- but not as sadistic and cruel as the SS version, because this time there is a genuine choice. Not an easy one, but a choice. Israel has prepared itself for this moment for half a century and more.
Bibi's Choice is almost universally understood by all Israelis across the political spectrum. Labour Defense Minister Ehud Barak may disagree on a hundred questions, but not on this one. Barak's background is almost the same as Bibi's.
Bibi's Choice is either to annihilate the danger from Ahmadinejad and his suicide cult before they get a nuclear bomb, or to hide his head in the sand, in the hope that every screamed threat from Tehran for the last thirty years was a bluff. ..."
Wednesday, July 15, 2009
Longing for the Good Old Days...
... When Civil Defense was actually taken seriously.
Bayou City History: 1955 H-Bomb Drill Evacuates Downtown
Bayou City History: 1955 H-Bomb Drill Evacuates Downtown
It was Wednesday, June 15, 1955. The time was 5:15 p.m.
Air raid sirens blared throughout downtown. An "attack" on Houston was imminent.
At that moment, residents were directed to stop what they were doing and leave the area.
As the above headlines indicate, the 30-minute Civil Defense drill -- dubbed "Operation Alert" and conducted in various cities across the nation -- tested Houston's response to a nuclear attack. It wasn't a complete surprise to most Houstonians. Residents back then didn't have to wait for a siren to tell them to leave downtown. . . .
For those who want to bring back those days, I really recommend Utah Shelter Systems' website. Not only does it have information on their "All-Hazard Shelters," but there's also great general information on what to expect in the event of an actual nuclear strike, and what to do (if you have a shelter, that is).
Tuesday, July 14, 2009
Houston Billboard Claims MLK Was a Republican; Black Community Leaders Mysteriously Offended
From FoxNews:
A billboard proclaiming that the Rev. Dr. Martin Luther King Jr. was a Republican has stirred a religious and political hornets' nest in Houston, where a church leader is trying to draw black voters into the Republican Party.
The jumbo-sized roadside ad made its contentious claim for about a week -- until a local black activist charged that the sign unjustly politicized King's legacy and was hurting his community by telling a "blatant lie."
"Martin Luther King may have very well believed in some of the Christian principles of the Republican Party, but Dr. Martin Luther King was not a Republican or a Democrat," said Quanell X, who heads the New Black Panther Party in Houston.
"Dr. King was bigger than a political party -- he was a humanitarian, and so to attach him exclusively to any party is to devalue his humanitarian global status," he said. "We were insulted ... by the billboard because it was a blatant lie."
King held great sway over black voters and carefully courted both Republicans and Democrats. He never officially endorsed a party or candidate.
But the founder of RagingRepublicans.org, the black conservative group that sponsored the sign, told FOXNews.com that the sign was designed to get blacks to rethink their political affiliation -- about 95 percent of blacks voted for Barack Obama in the 2008 presidential elections -- and that this is just the beginning. He said a radio campaign that focuses on "the destructive nature of liberalism" is forthcoming.
"We think it's imperative that [the GOP] try and attract more people from the communities of color to vote their values -- to vote conservative," said Claver Kamau-Imani, who heads the Corinthian Christian Empowerment Church, a small house church in Houston.
What's more, he said, the sign is accurate.
Kimau-Imani told FOXNews.com that King's niece, the Rev. Alveda King, has long argued that her uncle was a Republican, though he acknowledged there was no documentation or voting record to prove it.
Those claims enraged Quanell X, who held a press conference late last week to rally against the sign and ended up in a shouting match over the legacy of the murdered civil rights icon.
The billboard, which Kamau-Imani says cost $3,000 to display for a month, came down shortly after Friday's press conference -- about 20 days ahead of schedule, a move Kamau-Imani attributed to the "spineless" response of the billboard company, SignAd.
"The simple fact is that the leader of the Black Panther Party here in Houston called a news conference and they spooked," he said.
Representatives for SignAd did not return requests for comment.
Quanell X told FOXNews.com he was pleased that he had succeeded in getting the billboard removed. He added that King would never have embraced the present-day GOP, which he said had "racist elements."
"Dr. Martin Luther King Jr. would not be with the party of Newt Gingrich, he would not be with the party of Sarah Palin, he would not be with the party of Rush Limbaugh, Michael Savage or Sean Hannity," he said.
Representatives for the King family did not return requests for comment.
What went little noticed in the fray was the subtext on the billboard, which said that the Raging Republicans are committed to "leading America's 2nd emancipation."
Kamau-Imani told FOXNews.com that black voters feel that "your blackness, your street cred is tied up with whether you are a Democrat or not" -- a notion he said amounted to a kind of mental slavery that keeps blacks from speaking freely.
The president of the Houston branch of the NAACP said that the civil rights group does not wade into partisan politics, but seemed pleased that the sign had come down.
"The community has prevailed," said Carol Galloway, president of the organization's Houston branch.
Despite losing some of his investment in the billboard, Kimau-Imani told FOXNews.com he was happy with the effect of the sign.
"The billboard was simply something to get a conversation started, to make people think about their political affiliations," he said. "It appears we have achieved our goal."
A billboard proclaiming that the Rev. Dr. Martin Luther King Jr. was a Republican has stirred a religious and political hornets' nest in Houston, where a church leader is trying to draw black voters into the Republican Party.
The jumbo-sized roadside ad made its contentious claim for about a week -- until a local black activist charged that the sign unjustly politicized King's legacy and was hurting his community by telling a "blatant lie."
"Martin Luther King may have very well believed in some of the Christian principles of the Republican Party, but Dr. Martin Luther King was not a Republican or a Democrat," said Quanell X, who heads the New Black Panther Party in Houston.
"Dr. King was bigger than a political party -- he was a humanitarian, and so to attach him exclusively to any party is to devalue his humanitarian global status," he said. "We were insulted ... by the billboard because it was a blatant lie."
King held great sway over black voters and carefully courted both Republicans and Democrats. He never officially endorsed a party or candidate.
But the founder of RagingRepublicans.org, the black conservative group that sponsored the sign, told FOXNews.com that the sign was designed to get blacks to rethink their political affiliation -- about 95 percent of blacks voted for Barack Obama in the 2008 presidential elections -- and that this is just the beginning. He said a radio campaign that focuses on "the destructive nature of liberalism" is forthcoming.
"We think it's imperative that [the GOP] try and attract more people from the communities of color to vote their values -- to vote conservative," said Claver Kamau-Imani, who heads the Corinthian Christian Empowerment Church, a small house church in Houston.
What's more, he said, the sign is accurate.
Kimau-Imani told FOXNews.com that King's niece, the Rev. Alveda King, has long argued that her uncle was a Republican, though he acknowledged there was no documentation or voting record to prove it.
Those claims enraged Quanell X, who held a press conference late last week to rally against the sign and ended up in a shouting match over the legacy of the murdered civil rights icon.
The billboard, which Kamau-Imani says cost $3,000 to display for a month, came down shortly after Friday's press conference -- about 20 days ahead of schedule, a move Kamau-Imani attributed to the "spineless" response of the billboard company, SignAd.
"The simple fact is that the leader of the Black Panther Party here in Houston called a news conference and they spooked," he said.
Representatives for SignAd did not return requests for comment.
Quanell X told FOXNews.com he was pleased that he had succeeded in getting the billboard removed. He added that King would never have embraced the present-day GOP, which he said had "racist elements."
"Dr. Martin Luther King Jr. would not be with the party of Newt Gingrich, he would not be with the party of Sarah Palin, he would not be with the party of Rush Limbaugh, Michael Savage or Sean Hannity," he said.
Representatives for the King family did not return requests for comment.
What went little noticed in the fray was the subtext on the billboard, which said that the Raging Republicans are committed to "leading America's 2nd emancipation."
Kamau-Imani told FOXNews.com that black voters feel that "your blackness, your street cred is tied up with whether you are a Democrat or not" -- a notion he said amounted to a kind of mental slavery that keeps blacks from speaking freely.
The president of the Houston branch of the NAACP said that the civil rights group does not wade into partisan politics, but seemed pleased that the sign had come down.
"The community has prevailed," said Carol Galloway, president of the organization's Houston branch.
Despite losing some of his investment in the billboard, Kimau-Imani told FOXNews.com he was happy with the effect of the sign.
"The billboard was simply something to get a conversation started, to make people think about their political affiliations," he said. "It appears we have achieved our goal."
Monday, July 13, 2009
Study: Swine Flu Resembles 1918 Spanish Flu Virus
From FoxNews/Reuters:
WASHINGTON — The new H1N1 influenza virus bears a disturbing resemblance to the virus strain that caused the 1918 flu pandemic, with a greater ability to infect the lungs than common seasonal flu viruses, researchers reported on Monday.
Tests in several animals confirmed other studies that have shown the new swine flu strain can spread beyond the upper respiratory tract to go deep into the lungs — making it more likely to cause pneumonia, the international team said.
In addition, they found that people who survived the 1918 pandemic seem to have extra immune protection against the virus, again confirming the work of other researchers.
"When we conducted the experiments in ferrets and monkeys, the seasonal virus did not replicate in the lungs," said Yoshihiro Kawaoka of the University of Wisconsin, who led the study. "The H1N1 virus replicates significantly better in the lungs."
The new swine flu virus has caused the first pandemic of the 21st century, infecting more than a million people, according to estimates, and killing at least 500. The World Health Organization says it is causing mostly moderate disease but Kawaoka said that does not mean it is like seasonal flu.
"There is a misunderstanding about this virus," he said in a statement. "There is clear evidence the virus is different than seasonal influenza."
Writing in the journal Nature, Kawaoka and colleagues noted that the ability to infect the lungs is a characteristic of other pandemic viruses, especially the 1918 virus, which is estimated to have killed between 40 million and 100 million people.
Old Protection
They tested the virus in blood samples taken from nursing home residents and workers in 1999 in California, Wisconsin, the Netherlands and Japan.
People born before 1920 had a strong antibody response to the new H1N1 virus, meaning their body "remembered" it from infection early in life. This finding supports a study published in Nature in August that also found people who survived the 1918 pandemic still had immune protection against that virus.
Flu viruses change constantly, which is why people can be re-infected and why the vaccine must be changed regularly. Current seasonal strains of H1N1 are distant cousins of both the 1918 pandemic strain and the new H1N1 strain.
"Our findings are a reminder that swine-origin influenza viruses have not yet garnered a place in history, but may still do so, as the pandemic caused by these viruses has the potential to produce a significant impact on human health and the global economy," the researchers wrote.
Other tests showed the virus could be controlled by the antiviral drugs Relenza, made by GlaxoSmithKline, and Tamiflu, made by Roche AG, the researchers said.
The World Health Organization said on Monday that vaccine makers should start making immunizations against H1N1 and that healthcare workers should be first in line to get them.
Companies working on an H1N1 vaccine include Sanofi-Aventis, Novartis AG, Baxter International Inc, GlaxoSmithKline, Solvay and nasal spray maker MedImmune, now part of AstraZeneca.
WASHINGTON — The new H1N1 influenza virus bears a disturbing resemblance to the virus strain that caused the 1918 flu pandemic, with a greater ability to infect the lungs than common seasonal flu viruses, researchers reported on Monday.
Tests in several animals confirmed other studies that have shown the new swine flu strain can spread beyond the upper respiratory tract to go deep into the lungs — making it more likely to cause pneumonia, the international team said.
In addition, they found that people who survived the 1918 pandemic seem to have extra immune protection against the virus, again confirming the work of other researchers.
"When we conducted the experiments in ferrets and monkeys, the seasonal virus did not replicate in the lungs," said Yoshihiro Kawaoka of the University of Wisconsin, who led the study. "The H1N1 virus replicates significantly better in the lungs."
The new swine flu virus has caused the first pandemic of the 21st century, infecting more than a million people, according to estimates, and killing at least 500. The World Health Organization says it is causing mostly moderate disease but Kawaoka said that does not mean it is like seasonal flu.
"There is a misunderstanding about this virus," he said in a statement. "There is clear evidence the virus is different than seasonal influenza."
Writing in the journal Nature, Kawaoka and colleagues noted that the ability to infect the lungs is a characteristic of other pandemic viruses, especially the 1918 virus, which is estimated to have killed between 40 million and 100 million people.
Old Protection
They tested the virus in blood samples taken from nursing home residents and workers in 1999 in California, Wisconsin, the Netherlands and Japan.
People born before 1920 had a strong antibody response to the new H1N1 virus, meaning their body "remembered" it from infection early in life. This finding supports a study published in Nature in August that also found people who survived the 1918 pandemic still had immune protection against that virus.
Flu viruses change constantly, which is why people can be re-infected and why the vaccine must be changed regularly. Current seasonal strains of H1N1 are distant cousins of both the 1918 pandemic strain and the new H1N1 strain.
"Our findings are a reminder that swine-origin influenza viruses have not yet garnered a place in history, but may still do so, as the pandemic caused by these viruses has the potential to produce a significant impact on human health and the global economy," the researchers wrote.
Other tests showed the virus could be controlled by the antiviral drugs Relenza, made by GlaxoSmithKline, and Tamiflu, made by Roche AG, the researchers said.
The World Health Organization said on Monday that vaccine makers should start making immunizations against H1N1 and that healthcare workers should be first in line to get them.
Companies working on an H1N1 vaccine include Sanofi-Aventis, Novartis AG, Baxter International Inc, GlaxoSmithKline, Solvay and nasal spray maker MedImmune, now part of AstraZeneca.
Friday, July 10, 2009
Thursday, July 9, 2009
Top Five Items to Survive the First Five Minutes
Here's a great article from respected former law-enforcement officer and founder of Modern Combative Systems George Matheis, aka "mercop":
Five to Survive the First Five
Five to Survive the First Five
Wednesday, July 8, 2009
H1N1 Virus Becoming Resistant to Tamiflu
A new strain of the swine flu that is resistant to the antiviral drug Tamiflu has been found in Denmark, Hong Kong, Japan, and now, here in the U.S.
Most troublesome, the patient in Hong Kong had not previously been treated with Tamiflu, meaning that the strain had already evolved to be resistant and then was transmitted to him. Thankfully the reports indicate that the resistant strain does still respond to treatment with Relenza.
Most troublesome, the patient in Hong Kong had not previously been treated with Tamiflu, meaning that the strain had already evolved to be resistant and then was transmitted to him. Thankfully the reports indicate that the resistant strain does still respond to treatment with Relenza.
Monday, July 6, 2009
Hard Decisions
I've been rather quiet lately -- there's a lot going on here. Specifically, I'm moving to a new apartment in the first week of August. I'm not looking forward to burning a week of vacation moving all my earthly possessions in the sweltering, 100-degree, 100% humidity Texas summer.
Part of preparedness means living within your means, and that sometimes involves making hard decisions. When you are looking at your budget, wondering what you can cut so that you can increase your savings or free up funds to purchase preps with, sometimes the only choice is to look at your "fixed" or "hard" expenses -- the ones that are not easily varied. For me, that meant acknowledging that my apartment, while once affordable for me, is not within my means at present.
The circumstances precipitating the move may be familiar to many of you. Last fall, I experienced a forced job change, and was on an involuntary vacation for two months while I lined up new (and much improved) employment. While the time off work was wonderful, it consumed nearly all my savings -- and when I did find a new job, the pay was 2/3 of my former salary.
Ouch.
Consequently, I opted not to renew my lease and found a less expensive place to live. It's slightly smaller but, I hope, not lacking in most of the amenities that I've grown used to. I should be able to save several hundred dollars a month on rent, and that will free me up to rebuild my savings and eliminate more debt. The move is also providing sufficient motivation for me to finally throw out, donate, or sell all those useless items that have been cluttering my home for years now.
So, as much as I hate the stress and disruption of moving, I hope that it will pay dividends both financially and preparedness-wise. If you find yourself contemplating similar decisions, know that you are not alone.
Part of preparedness means living within your means, and that sometimes involves making hard decisions. When you are looking at your budget, wondering what you can cut so that you can increase your savings or free up funds to purchase preps with, sometimes the only choice is to look at your "fixed" or "hard" expenses -- the ones that are not easily varied. For me, that meant acknowledging that my apartment, while once affordable for me, is not within my means at present.
The circumstances precipitating the move may be familiar to many of you. Last fall, I experienced a forced job change, and was on an involuntary vacation for two months while I lined up new (and much improved) employment. While the time off work was wonderful, it consumed nearly all my savings -- and when I did find a new job, the pay was 2/3 of my former salary.
Ouch.
Consequently, I opted not to renew my lease and found a less expensive place to live. It's slightly smaller but, I hope, not lacking in most of the amenities that I've grown used to. I should be able to save several hundred dollars a month on rent, and that will free me up to rebuild my savings and eliminate more debt. The move is also providing sufficient motivation for me to finally throw out, donate, or sell all those useless items that have been cluttering my home for years now.
So, as much as I hate the stress and disruption of moving, I hope that it will pay dividends both financially and preparedness-wise. If you find yourself contemplating similar decisions, know that you are not alone.
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