Yesterday, reports circulated that the Arab oil sheiks were in conversation with major countries (China, Russia, etc) to stop using the dollar as the currency that is used for all oil purchases, and instead go to a ”basket of other currencies”…

Glenn Beck uses props and works through exactly why this would be very bad for the value of the American dollar… and he talks about Hyper-Inflation and why the politicians are hell-bent to go down this path…

The only thing that I think Glenn Beck missed of major importance is that when all those dollars are “given” back to the US, they will be getting STUFF in return— commodities, land, businesses…

All that money that is used for foreign exchange just cost us ink and paper- it is now about to be cashed in for real stuff that we’ll have to ship to them…

Gold is surging on this news, and the dollar is dropping fast. We need our politicians to wake up and smell the coffee… and the more informed we are as citizens the more likely we are to force our representatives to take the castor oil right now, rather than kill the patient through inaction.

I want to address a couple of comments on yesterday’s  post about the US economy NOT being in a recovery. 

First, one from Kevin Hogan and then another from Lisa M.

Kevin Hogan commented on the fact that Unemployment is likely worse than the 9.8% that is being reported.

The higher unemployment number Kevin was referring to is called U-6.  This is the broader measure of unemployment and this is the one that hit 25-30% during the Great Depression. Here are the various versions of unemployment that are used by the BLS (Bureau of Labor Statistics)…

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force

U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force

U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)  **This is the 9.8% figure***

U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

U-5 Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers

U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers  (this is the one that is at 17.0% currently seasonally adjusted)

Here is a link to these Alternative unemployment measures for the past ten years by month.  Thanks for the comment Kevin!

And yesterday Lisa M. stated… “Ok, so now that I am sufficiently depressed, scared out of my mind, and completely anxious, what next?”

My intent is not to depress anyone, or scare them out of their minds.  It is to make people aware that there are threats that might affect us all that require preparation.  Awareness of threat is the first stage to preparation. 

What next?  Keep reading this blog and I will try hard to answer that question.  A good first step is to start planning to have food and water on hand that would feed your family for at least a month.  We can build from there…

I might make this a regular Sunday thing where I address comments and questions from readers.  I have a lot of questions to answer already and I will be getting to them all in the months ahead.  This is a serious and complicated topic– preparation for survival.   I am learning along with you on some of these topics. 

Glad to have you reading and commenting…

For those of you who are thinking that the massive trillion dollar “Stimulus Package” is actually stimulating anything meaningful, there is no sign that the economy is recovering.  Hold onto your wallets– Son of Stimulus will be coming soon, and it might be enough to destroy what is left of our credit rating around the world…

U.S. September Job Cuts Exceeded Forecasts; Unemployment Rose to 9.8%

U.S. job losses unexpectedly accelerated last month and the unemployment rate reached the highest level since 1983, signaling any recovery in consumer spending and economic growth will be slow to develop….

The average work week shrank to 33 hours in September, matching a record low, while average weekly earnings fell to $616.11.

U.S. durable goods orders tumble 2.4% in August

The incipient recovery in the manufacturing sector stumbled in August, as a big decline in orders for new airplanes pushed total durable goods orders down 2.4%, the largest decline since January, the Commerce Department reported Friday…

US automobile sales crash in September
Sales of automobiles in the US were down 23 percent in September compared to last year, as the government-funded incentive programme “cash-for-clunkers” ended in August. Sales at General Motors and Chrysler, both still struggling after their recent bankruptcies, were down 45 percent and 42 percent respectively

Shcok Drop In Existing Home Sales
What housing comeback? After several months of an upward-sloping curve, the volume of existing home sales dropped more than expected in August. Even the normally sunny NAR warned of a fragile recovery if the government doesn’t subsidize home purchases by extending and expanding the first-time homebuyer tax credit.

Personal Bankruptcy Filings Soar
Consumer bankruptcies topped one million for the first nine months of this year, the highest point since the system was overhauled in 2005.

The number of personal bankruptcy filings for the nine months rose to 1,046,449 as of Sept. 30, the American Bankruptcy Institute, an organization made up of attorneys, accountants and other bankruptcy professionals, said Friday, using data from the National Bankruptcy Research Center. There were 773,810 personal bankruptcy filings for the same time period in 2008. September’s filings reached 124,790, 41% higher than the same month last year.

For everyone that thinks that the worst of the Real Estate crash is over, go read this article…

Housing Crash to Resume on 7 Million Foreclosures, Amherst Says

Each of these 7 Million foreclosures will have two effects:

1. increase the supply of available houses by 1;
2. decrease the number of households looking to buy a home by 1; (at least til their credit is repaired) 

These two things create higher supply and lower demand which will almost certainly result in lower real estate prices.

Lower real estate prices could in turn lead to MORE FORECLOSURES in an classic negative feedack loop…

And every foreclosure is a LOSS to a bank or investor somewhere.  And the threat of bank failure and credit market freeze is what caused the global panic in the Fall of 2009.  The government is NOT in a strong position to bail out these banks going forward, we are already spending way more than we are collecting and the rest of the world grows tired of propping up the dollar…

AND…
The federal tax credit, worth $8,000, is presently propping up the market and making it possible for people without a reasonable down payment to get into a new house. This idiotic government redistribution scheme is thankfully set to expire at the end of November. That will make housing $8,000 more expensive for first-time buyers further reducing demand.

And…
If interest rates for mortgages should somehow rise from historic lows that we are presently enjoying into the 7%, 8%, 9%, 10%, and higher range then the resulting higher monthly mortgage payments will be a huge block to people trying to buy these homes.  Because the amount of house someone can afford at 10% interest is HALF what they can afford at 5% interest…

We are not out of the woods…

This year, the Federal GOvernment is spending about $3 Trillion…

Since the Federal Government is just all of us US citizens all added together, and there are about 300 million of us this means that they are spending $10,000 for each man, woman and child in America.   So, for the average family of 4, the government has decided to spend $40,000…

Now the only way to collect this money is through taxes and even though we pay high taxes (at least the top 10% pays a lot of taxes) we are not paying enough to cover the spending that the government has decided is essential to spend on our behalf.  The amount of taxes collected is about $1.2 Trillion which is $4,000 for every man, woman and child in America ($16,000 for a family of four)

To recap, for a family of four:

They spend in our name $40,000
They collect in taxes from us $16,000
They borrow (deficit spending) from our future ability to spend $24,000…

So, even though Americans are getting rid of personal debts and credit cards at the fastest pace in history, the Federal government is borrowing on our behalf $24,000 each family THIS YEAR.  By the end of the next ten years, we will each be another $200,000 per family in further debt…

This is unsustainable. And the government has no good options to get out of the situation.  They can only confiscate so much wealth from the private sector– there is only so much productivity and income available.  If they try to cut back in any way on spending, interest groups howl because they want the money.  And they have the audacity to want to add even more huge bloated government programs on top of the ones that we already can’t afford.

We live in interesting times.

Most people who have read any financial planning books or magazine articles are familiar with the idea of an Emergency Fund.

An emergency fund is where you accumulate an amount of money in your bank account so that if you face a sudden job loss, short-term disability or other financial catastrophe, you will have the money to tide you over until you are back on your feet.

The recommended size of the fund is to start with at least one months living expenses, and increase that as quickly as possible to 6 months… and keep it in a fairly accessible place (not locked up in a 10 year CD for example)…

It is a good idea to have savings to self-insure against “normal” personal financial crises, but this is not enough.  An emergency fund doesn’t protect you from a loss of electricity, grocery stores shut down, and potentially hungry looters…

In the next few posts, we’ll discuss this further…