The World Economy and You

Right now, this is the situation with the world economy:

The US economy is completely bankrupt. That is to say US debts waaaaay outstrip the government’s ability to repay them. They are now financing these repayments by, essentially, printing more money. This is not healthy. It is like using your Visa card to pay your MasterCard. In a normal household this will eventually result in foreclosure. In a national economy this means inflation and then collapse. What they are doing is devaluing their currency in order to retain the currencies value! Which is exactly as pointless as it sounds. The only viable reason for such an action is if you are "buying time" while you await a massive turnaround in the economy. If things were very soon going to get better then you might be willing bite the bullet of escalating inflation, job losses and revolting citizens in the short term (which is exactly what is happening in the US right now) while you wait to put it all to rights as things improve. But the bad news is there is no big financial turnaround coming. Things are not soon to get better. In fact the US economy is set to spiral through hyper-inflation into oblivion.

Unless there is someone to bail the US economy out.

Is there?

Well, no.  Not exactly. The Eurozone is just about to implode. The Greek economy is... well... it actually ISN'T!  Investors in Greek bonds have just agreed to take an unprecedented 50% loss on their bond holdings just to keep the Greek economy from defaulting. A Greek default would have ended the Euro. So they have momentarily managed to avoid that. But all they did was to "kick the can down the road," so to speak. The Greek economic woes will be returning with a vengeance because, at base, Greece is unable to generate anywhere near the income it needs to just keep the nation afloat... let alone service its debts. But the Eurozone pundits reasoned that this delay tactic would give them the opportunity to get the Eurozone house in financial order so that it will be able to better deal with a Greek default in, maybe, a year or two's time.

Bad news. Right now the Italian economy is doing exactly what the Greek economy was doing six months ago!  And Ireland is next. As is Spain and Portugal. In fact, the way things look right now, the only economy that actually looks healthy in the EU, really, is Germany. Can the German economy prop up the whole Eurozone? Clearly not.  And even if they could they wouldn't. They recently released a statement saying they were not willing to even look at propping Greece up. This is not on the cards for Germany.

There have been new developments since then and there will continue to be new twists and turns in the plot line. But the essential story-line is this: The system is in a state of critical failure. There are many trick cards that can be played to make it look as if things might recover but each one simply delays the inevitable. Of course many people desperately want to believe that it will all go back to “business as usual” so that they are willing to put their faith in these trick cards. Every bit of positive economic news results in a little rally of financial indices. But the rallies get smaller and the slumps get bigger as the world economic card-sharps run out of trick cards to play.

I can’t know exactly when they will finally run out of cards nor can I know what the remaining cards might be. But this is not important. What is important is the simple fact that a clear-eyed analysis puts the Euro firmly on the path to dissolution.

More than that. The way the world economy is deeply interwoven now, if one of the EU countries defaulted it would take a miracle for it not to pull the whole world into outright depression.

Unless there was someone to bail the Euro out?

How about the US?

Err... I guess not... let's look elsewhere.

China is pretty flush right now. What about them? Well, the truth about China is that its only real wealth is its people: many people that are willing to work cheaply. China buys resources from elsewhere (it has no real natural wealth to speak of) and manufactures products from them which it then sells, mostly, to America. If the US economy tanks, China goes down the flusher right with them.

Which explains why (up ‘till recently) China kept buying US debt way beyond the point of what was prudent. But even China has stopped buying US bonds now.

The point is, with no-one able to save it, the worlds economy is pretty much already dead. Sure, some very clever voodoo magic on the part of those fiendish (and I mean that) central bankers has allowed the dead monster to keep shambling on, pretending to be alive but this will soon come to an end. The zombie monster is starting to fall apart and its demise is becoming more and more apparent for those with eyes to see.

So what to do?

1. Keep some cash on hand. When banks fall they fall fast and hard. ATMs will shut off without a moments notice. And when they do credit-card machines will simply "decline" also. So keep cash tucked away safely somewhere so that you are still able to get what you need after the banks close their doors. For a little while, at least. At some point people will begin to realise that the paper money you are holding is actually worthless and that is when you will need something else of value with which to trade. Which brings me to the next point.

2. Invest only in "real" things. Stocks and bonds are not real. If the economy dies you will be left holding a fist full of nothing. Invest in something real. Gold, silver, land. These are good options. People sometimes say "you can't eat gold". But in every instance, when economies have tanked it has been those holding precious metals that did manage to keep eating. So, in fact, you CAN eat gold. :-)

And, no, paper shares in gold are not real gold. If it isn’t clinky, shiny metal and it isn’t physically in your hands then it isn’t real.

3. Have a "siege store". Like in medieval times when each castle would have a store of things that would last a siege... each household now needs such a store. Think carefully about foodstuffs that will really last and that you can make healthy food out of. Work on having a few months worth of food. If things crash, shops close. You don't want to be trading your "investment" from point 2 for basic necessities. Rice, lentils, dried beans, salt, sugar... these kinds of things will help see you through.

And think a bit broader than just food too. If systems crash and there is no electricity will you be okay? Do you have back-up lighting, heat and cooking sorted? Do you have enough readily available, clean, potable water? Do you have basic medical supplies and a reasonable stock of the medications that you use? Give it some thought and be sure that you will be okay for the first few months while the dust settles and new systems come into being.

4. Plant a veggie garden right now. This item speaks for itself. Think about planting a variety of things that will add a rich diversity of nutrients to your diet. Be sure to plant things that will do well where you are.

5. Build mutually supportive, co-operative communities. Build them with neighbours who can be counted on. People who themselves are self-reliant, “can-do” kind of folks, In times of trouble you can do without any of points 1 to 4 and be okay if you have this one sorted.

6. More important than any of the above. Don't give yourself over to fear. This looks like a disaster looming and when it all breaks there are going to be a lot of people doing a lot of very irrational and destructive things. Don't get sucked into it. Find your centre... find your own truth in your heart and just deal with what is presented to you moment-by-moment. What you are observing here is not YOUR doom. It is the doom of the current world financial system. A system based upon poverty and greed. A system in which money is literally made out of debt. Debt is slavery. So our current financial system is a system of slavery. This is what is dying. And while it isn't going peacefully, it IS going. And when it is dead we will still be here. And we'll be okay. And then we'll find other ways to trade and barter. We are not stupid, we'll figure it out.

As one option that you can already begin to use to reduce your cash dependence, check out Energy Exchange Cheques (read about them and download for free at www.zingdad.com/energyexchange.html). This is the cashless way to give what you want to give and to get what you need in return. If you begin right now and get yourself comfortable with them and build a community that uses them, the shock of the big crash can be greatly reduced.

Finally. While I have in the above used the metaphor of a dead and decaying zombie beast there is another metaphor I would like to offer you. It is a much nicer one. I very much do believe our collective planetary consciousness is right now undergoing a profound change. We are like a mother in travail. We are giving birth to something new. The process of giving birth is always painful, chaotic and scary. And we are in labour RIGHT NOW. But soon... soon... it will be over. Soon there will be relief and a whole new world... a whole new way of interacting with each other. A bright new dawn awaits. Hold firm!

I wish you love and peace,

Arn (Zingdad) Allingham