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Image | Protecting Your Wealth
Protecting Your Wealth
 PREVIEW
by Chris Martenson

Executive Summary

  • Be early out the door before the Ponzi scheme collapses. How? Exchange paper investments for hard assets.
  • Build your financial base with diversified cash holdings and precious metals
  • Monitor the four key indicators most likely to presage a market collapse
  • Use time to your best advantage

If you have not yet read Part I: What to Do When Every Market Is Manipulated, available free to all readers, please click here to read it first.

One lesson here is that the system is now out of control – and sometimes lacking the necessary safeguards and trust required to have confidence that one’s wealth will not simply evaporate or be stolen with the tap of a keyboard at some dark point in the future.

Confidence happens to be one of the most important assets of a Ponzi system, and it is being steadily eroded by the cumulative failures of the Fed, the SEC, the European Central Bank (ECB), the Bank of England, the Bank of Japan, and every other government body that have recently tossed caution, rules and precedent to the wind in their efforts to preserve the status quo. I think this is an extraordinary mistake.

Unfortunately, as the brokerage accidents MF Global and Peregrine Financial taught us, knowing which type of firm you have your money with (e.g., prime broker vs. broker vs. fiduciary trust), as well as being confident in your specific firm's financial health and management practices are prudent financial practices. The financial advisory firms that we recommend to people know all about these differences and will be happy to explain them to you in detail. They are also exceptionally good at managing risk in these uncertain times.

We always advocate investing in yourself and your homestead as the first course of action. This quiet summer has been a real snooze-fest for those tracking the markets with the VIX volatility gauge plumbing multi-year lows. That’s the good news. Hopefully you’ve used this time to put in a garden or fine-tune your green thumb, practice one or more new skills, and/or install energy systems. This quiet period will not last…the news out of Europe should make that abundantly clear.

Protecting Your Wealth
 PREVIEW by Chris Martenson

Executive Summary

  • Be early out the door before the Ponzi scheme collapses. How? Exchange paper investments for hard assets.
  • Build your financial base with diversified cash holdings and precious metals
  • Monitor the four key indicators most likely to presage a market collapse
  • Use time to your best advantage

If you have not yet read Part I: What to Do When Every Market Is Manipulated, available free to all readers, please click here to read it first.

One lesson here is that the system is now out of control – and sometimes lacking the necessary safeguards and trust required to have confidence that one’s wealth will not simply evaporate or be stolen with the tap of a keyboard at some dark point in the future.

Confidence happens to be one of the most important assets of a Ponzi system, and it is being steadily eroded by the cumulative failures of the Fed, the SEC, the European Central Bank (ECB), the Bank of England, the Bank of Japan, and every other government body that have recently tossed caution, rules and precedent to the wind in their efforts to preserve the status quo. I think this is an extraordinary mistake.

Unfortunately, as the brokerage accidents MF Global and Peregrine Financial taught us, knowing which type of firm you have your money with (e.g., prime broker vs. broker vs. fiduciary trust), as well as being confident in your specific firm's financial health and management practices are prudent financial practices. The financial advisory firms that we recommend to people know all about these differences and will be happy to explain them to you in detail. They are also exceptionally good at managing risk in these uncertain times.

We always advocate investing in yourself and your homestead as the first course of action. This quiet summer has been a real snooze-fest for those tracking the markets with the VIX volatility gauge plumbing multi-year lows. That’s the good news. Hopefully you’ve used this time to put in a garden or fine-tune your green thumb, practice one or more new skills, and/or install energy systems. This quiet period will not last…the news out of Europe should make that abundantly clear.

Image | Fukushima, Lies, and What Comes Next
Fukushima, Lies, and What Comes Next
 PREVIEW
by Chris Martenson

Back when the Fukushima event was unfolding, we coordinated a group effort to figure out what was happening as best we could from the sparse video evidence that was available.  Certainly there were the dramatic videos of the hydrogen explosion of Reactor #1 and then the far more exothermic and dramatic explosion of Reactor #3.  Whatever happened to #3, it was not a hydrogen explosion as claimed at the time by TEPCO.

Along the way we also uncovered some pretty compelling evidence that Reactors #1 and #2 had melted down, and we were certain that #3 had suffered the same fate.  At the time, though, the official pronouncements were still that meltdowns had not happened — and then 'partial' meltdowns were admitted, and every step of the way, quite confusingly low temperature readings, allegedly from the vessel cores, were being released.

We accepted none of that as fact, as neither the official statements nor the data comported with what we could see with our own eyes on the video evidence, nor from other tangential evidence, such as the US military preparing for full-scale evacuation of the island.

At the time, we urged our Japanese readers as far south as Tokyo to consider leaving, because if what we were seeing was true, and the winds shifted, then potentially dangerous levels of radiation could have drifted over Tokyo with no means in place to safely evacuate the city.
Fukushima, Lies, and What Comes Next
 PREVIEW by Chris Martenson

Back when the Fukushima event was unfolding, we coordinated a group effort to figure out what was happening as best we could from the sparse video evidence that was available.  Certainly there were the dramatic videos of the hydrogen explosion of Reactor #1 and then the far more exothermic and dramatic explosion of Reactor #3.  Whatever happened to #3, it was not a hydrogen explosion as claimed at the time by TEPCO.

Along the way we also uncovered some pretty compelling evidence that Reactors #1 and #2 had melted down, and we were certain that #3 had suffered the same fate.  At the time, though, the official pronouncements were still that meltdowns had not happened — and then 'partial' meltdowns were admitted, and every step of the way, quite confusingly low temperature readings, allegedly from the vessel cores, were being released.

We accepted none of that as fact, as neither the official statements nor the data comported with what we could see with our own eyes on the video evidence, nor from other tangential evidence, such as the US military preparing for full-scale evacuation of the island.

At the time, we urged our Japanese readers as far south as Tokyo to consider leaving, because if what we were seeing was true, and the winds shifted, then potentially dangerous levels of radiation could have drifted over Tokyo with no means in place to safely evacuate the city.
Image | What Radical Measures to Expect in the Post-QE Era
What Radical Measures to Expect in the Post-QE Era
 PREVIEW
by Gregor Macdonald

Executive Summary

  • Expect the 'benefits' of QE 3 to be short-lived (<9 months)
  • Expect more radical solutions to be rolled out by Capitol Hill (not the Federal Reserve) within 90 days after QE 3, including:
    • Infrastructure build-out on a massive scale
    • Military resource redeployment to civilian projects
    • Debt jubilees
    • Tax holidays
  • A weaker dollar will be pursued
  • Capitalism will be compromised for populist gain

If you have not yet read Part I: When Quantitative Easing Finally Fails, available free to all readers, please click here to read it first.

Had every US homeowner with a mortgage also held 100 ounces of gold through the rise and fall of the housing bubble, the balance sheet of US homeowners would already be repaired. Gold has at least tripled, if not quadrupled, through that time period.

We state this to illustrate a point. Quantitative easing (QE) and other reflationary policies benefit gold, global growth outside the United States, and the earnings of corporations — not US workers.

QE largely benefits the continued dollarization of the world, as the dollar has now fully joined the yen as a cheap funding currency. But QE does not improve wages and does not help the private sector deleverage. Indeed, despite the amount of deleveraging that has occurred in the private sector, the asset side of the private sector’s balance sheet has fallen. To put this in plainer terms, Americans have indeed been paying down their credit cards and mortgages. The problem is that their assets, primarily homes and other investments, have concurrently fallen in value. (The Federal Reserve’s Z1 Report is pretty clear in this regard; see the B.100 Table on page 120 of the 7 June, 2012 FED Flow of Funds PDF).

This lack of progress will eventually express itself in a kind of exhaustion. Either America is going to have to accept much lower levels of consumption and permanently low levels of labor participation, or the country will have to explore more innovative ways to shock its economy back to life.

Let’s take a look at a few of these possibilities:

What Radical Measures to Expect in the Post-QE Era
 PREVIEW by Gregor Macdonald

Executive Summary

  • Expect the 'benefits' of QE 3 to be short-lived (<9 months)
  • Expect more radical solutions to be rolled out by Capitol Hill (not the Federal Reserve) within 90 days after QE 3, including:
    • Infrastructure build-out on a massive scale
    • Military resource redeployment to civilian projects
    • Debt jubilees
    • Tax holidays
  • A weaker dollar will be pursued
  • Capitalism will be compromised for populist gain

If you have not yet read Part I: When Quantitative Easing Finally Fails, available free to all readers, please click here to read it first.

Had every US homeowner with a mortgage also held 100 ounces of gold through the rise and fall of the housing bubble, the balance sheet of US homeowners would already be repaired. Gold has at least tripled, if not quadrupled, through that time period.

We state this to illustrate a point. Quantitative easing (QE) and other reflationary policies benefit gold, global growth outside the United States, and the earnings of corporations — not US workers.

QE largely benefits the continued dollarization of the world, as the dollar has now fully joined the yen as a cheap funding currency. But QE does not improve wages and does not help the private sector deleverage. Indeed, despite the amount of deleveraging that has occurred in the private sector, the asset side of the private sector’s balance sheet has fallen. To put this in plainer terms, Americans have indeed been paying down their credit cards and mortgages. The problem is that their assets, primarily homes and other investments, have concurrently fallen in value. (The Federal Reserve’s Z1 Report is pretty clear in this regard; see the B.100 Table on page 120 of the 7 June, 2012 FED Flow of Funds PDF).

This lack of progress will eventually express itself in a kind of exhaustion. Either America is going to have to accept much lower levels of consumption and permanently low levels of labor participation, or the country will have to explore more innovative ways to shock its economy back to life.

Let’s take a look at a few of these possibilities:

Image | Japan Is Struggling
Japan Is Struggling
 PREVIEW
by Chris Martenson

In a prior piece this year, I proclaimed Japan to be my favored candidate to be the black swan of 2012. By this I mean that a financial accident in Japan that would create massive havoc in the world markets seems even more likely to me than something originating in Europe.

The reason is precisely because all eyes (and efforts) are focused on Europe, leaving Japan out of focus and unattended, so to speak. This is practically a requirement for a crisis spot; crises never seem to arise in the place everybody is already watching. Japan is nicely out of focus and therefore a good place for us to keep our eyes trained upon.

In the most recent podcast with Mish, we discussed the fact that Japan had recently posted its largest first half trade deficit in history. Then Mish asked if Japan's current account had slipped into negative territory yet, as that event will accelerate the pace at which Japan's looming structural insolvency will arrive.

While discussing the current account, a normally obscure economic term, seems a bit wonkish, it is really quite important. So let's start there, with a definition as a refresher for myself and perhaps an introduction for others.
Japan Is Struggling
 PREVIEW by Chris Martenson

In a prior piece this year, I proclaimed Japan to be my favored candidate to be the black swan of 2012. By this I mean that a financial accident in Japan that would create massive havoc in the world markets seems even more likely to me than something originating in Europe.

The reason is precisely because all eyes (and efforts) are focused on Europe, leaving Japan out of focus and unattended, so to speak. This is practically a requirement for a crisis spot; crises never seem to arise in the place everybody is already watching. Japan is nicely out of focus and therefore a good place for us to keep our eyes trained upon.

In the most recent podcast with Mish, we discussed the fact that Japan had recently posted its largest first half trade deficit in history. Then Mish asked if Japan's current account had slipped into negative territory yet, as that event will accelerate the pace at which Japan's looming structural insolvency will arrive.

While discussing the current account, a normally obscure economic term, seems a bit wonkish, it is really quite important. So let's start there, with a definition as a refresher for myself and perhaps an introduction for others.
Image | California: The Bellwether for the Rest of America
California: The Bellwether for the Rest of America
 PREVIEW
by Gregor Macdonald

Executive Summary

  • Escalating energy costs (direct and indirect) create a vicious cycle in the economy that further hinders growth/recovery
  • Overspending and other poor capital allocation decisions by state governments are compounding the problem
  • California spends $1 on public transit vs. $10 on automobile-related investment, a gap that energy costs will soon painfully reverse
  • Solutions are hard to come by and harder to fund, but without investment, alternative systems won't ever achieve scale
  • California's future is increasingly easy to predict; individuals and other state governments better take notes or suffer the same fate

If you have not yet read Part I: Dawn of the Great California Energy Crash, available free to all readers, please click here to read it first.

A key feature in the post-war industrial success of countries like South Korea and Japan, given that they had virtually no domestic energy supplies, was the ability to turn a profit from manufacturing powered by imported energy. This favorable equation relied on three key factors:

  • That imported energy remained a cheap input cost compared to the high margin value of exported goods
  • That energy producing countries had cheap energy to export
  • That purchasers of the exported goods were growing, and were running their own economies on cheap energy

These are the exact same assumptions still being made — and extrapolated into infinity — about California's economy.

Are we really to believe that California's GDP can forever deindustrialize, requiring fewer and fewer energy inputs, while growing in profitability, thus providing the capital to access/import energy — at any price?

California: The Bellwether for the Rest of America
 PREVIEW by Gregor Macdonald

Executive Summary

  • Escalating energy costs (direct and indirect) create a vicious cycle in the economy that further hinders growth/recovery
  • Overspending and other poor capital allocation decisions by state governments are compounding the problem
  • California spends $1 on public transit vs. $10 on automobile-related investment, a gap that energy costs will soon painfully reverse
  • Solutions are hard to come by and harder to fund, but without investment, alternative systems won't ever achieve scale
  • California's future is increasingly easy to predict; individuals and other state governments better take notes or suffer the same fate

If you have not yet read Part I: Dawn of the Great California Energy Crash, available free to all readers, please click here to read it first.

A key feature in the post-war industrial success of countries like South Korea and Japan, given that they had virtually no domestic energy supplies, was the ability to turn a profit from manufacturing powered by imported energy. This favorable equation relied on three key factors:

  • That imported energy remained a cheap input cost compared to the high margin value of exported goods
  • That energy producing countries had cheap energy to export
  • That purchasers of the exported goods were growing, and were running their own economies on cheap energy

These are the exact same assumptions still being made — and extrapolated into infinity — about California's economy.

Are we really to believe that California's GDP can forever deindustrialize, requiring fewer and fewer energy inputs, while growing in profitability, thus providing the capital to access/import energy — at any price?

Image | The Consequences of a Eurozone Breakup
The Consequences of a Eurozone Breakup
 PREVIEW
by Alasdair Macleod

Executive Summary

  • European banks have shifted their priority from supporting national governments to combating captial flight
  • Hollande's policies are accelerating France's path to insolvency, thus advancing the date of the Eurozone collapse
  • The euro can fall MUCH farther from here
  • We are currently at a stalemate being forced by Germany, but it will soon end and downward momentum will quickly build

If you have not yet read Part I, available free to all readers, please click here to read it first.

In Part I, we examined the economic pressures likely to blow the Eurozone apart and concluded that there is increasing disquiet in Germany over the cost of supporting stricken economies and her increasing reluctance to write open-ended cheques. The first creditor country to leave will probably be Finland, or perhaps one of the other smaller members less committed to the Eurozone project. Let's now explore how this might come about, along with the consequences for the rest of the world.

Sovereign Debt Markets

It is obviously not possible to anticipate tomorrow’s events with any certainly, but we can lay down some pointers, the most obvious of which is changing yield levels in sovereign debt markets. Let's focus on Spain because she currently causes the most concern.

Before mid-November last year, Spain’s ten-year bond yield had run up to 6.58%, up from the 4% level that prevailed before her debt crisis became an issue (see chart below). At end-November, the yield fell in anticipation of the ECB’s first long-term refinancing operation (LTRO), because Eurozone banks used some of the money to arbitrage between Spanish bond yields and the considerably lower cost of funding from the ECB. This way of making money is encouraged by Basel 3 rules, which define short-term sovereign debt as being the highest quality, so no haircut is applied. This regulatory quirk has been conspiratorially used by the ECB, commercial banks, and governments themselves to ignore fundamental lending realities…

The Consequences of a Eurozone Breakup
 PREVIEW by Alasdair Macleod

Executive Summary

  • European banks have shifted their priority from supporting national governments to combating captial flight
  • Hollande's policies are accelerating France's path to insolvency, thus advancing the date of the Eurozone collapse
  • The euro can fall MUCH farther from here
  • We are currently at a stalemate being forced by Germany, but it will soon end and downward momentum will quickly build

If you have not yet read Part I, available free to all readers, please click here to read it first.

In Part I, we examined the economic pressures likely to blow the Eurozone apart and concluded that there is increasing disquiet in Germany over the cost of supporting stricken economies and her increasing reluctance to write open-ended cheques. The first creditor country to leave will probably be Finland, or perhaps one of the other smaller members less committed to the Eurozone project. Let's now explore how this might come about, along with the consequences for the rest of the world.

Sovereign Debt Markets

It is obviously not possible to anticipate tomorrow’s events with any certainly, but we can lay down some pointers, the most obvious of which is changing yield levels in sovereign debt markets. Let's focus on Spain because she currently causes the most concern.

Before mid-November last year, Spain’s ten-year bond yield had run up to 6.58%, up from the 4% level that prevailed before her debt crisis became an issue (see chart below). At end-November, the yield fell in anticipation of the ECB’s first long-term refinancing operation (LTRO), because Eurozone banks used some of the money to arbitrage between Spanish bond yields and the considerably lower cost of funding from the ECB. This way of making money is encouraged by Basel 3 rules, which define short-term sovereign debt as being the highest quality, so no haircut is applied. This regulatory quirk has been conspiratorially used by the ECB, commercial banks, and governments themselves to ignore fundamental lending realities…

Image | The Middle-Class Survival Guide
The Middle-Class Survival Guide
 PREVIEW
by charleshughsmith

Executive Summary

  • Recognize the signs of serfdom
  • Calculate your income's vulnerability to the system
  • Don't count on high inflation to inflate away your debt obligations
  • 10 strategies you can start implementing right now to defend against the forces trying to sap your quality of life

If you have not yet read Part I: Middle Class? Here's What's Destroying Your Future, available free to all readers, please click here to read it first.

In Part I, we surveyed the key dynamics that have eroded middle-class wealth and income over the past 30 years.  Some of these were conventional (higher energy costs) and some were unconventional/politically unacceptable (financialization; neofeudalism).

Regardless of what you identify as the primary cause, that the middle class (and labor in general) has lost ground since the early 1980s is undeniable, as is the ultimate failure of debt-dependent “growth.”

What can we do about it? It seems to me there are two responses:

  1. Avoid becoming a serf in the new financialized feudalism
  2. Avoid becoming dependent on the Status Quo and avoid collaborating/supporting those elements of the Status Quo that subsidize and protect the parasitic, inefficient, and unproductive sectors of the economy.

Getting Real About Serfdom

I am going to cut to the chase here, and I expect many of you to disagree. Debt is serfdom, period.

I often illustrate this point by asking two simple questions…

The Middle-Class Survival Guide
 PREVIEW by charleshughsmith

Executive Summary

  • Recognize the signs of serfdom
  • Calculate your income's vulnerability to the system
  • Don't count on high inflation to inflate away your debt obligations
  • 10 strategies you can start implementing right now to defend against the forces trying to sap your quality of life

If you have not yet read Part I: Middle Class? Here's What's Destroying Your Future, available free to all readers, please click here to read it first.

In Part I, we surveyed the key dynamics that have eroded middle-class wealth and income over the past 30 years.  Some of these were conventional (higher energy costs) and some were unconventional/politically unacceptable (financialization; neofeudalism).

Regardless of what you identify as the primary cause, that the middle class (and labor in general) has lost ground since the early 1980s is undeniable, as is the ultimate failure of debt-dependent “growth.”

What can we do about it? It seems to me there are two responses:

  1. Avoid becoming a serf in the new financialized feudalism
  2. Avoid becoming dependent on the Status Quo and avoid collaborating/supporting those elements of the Status Quo that subsidize and protect the parasitic, inefficient, and unproductive sectors of the economy.

Getting Real About Serfdom

I am going to cut to the chase here, and I expect many of you to disagree. Debt is serfdom, period.

I often illustrate this point by asking two simple questions…

Image | Heatwaves, Harvests, and Food Price Shocks
Heatwaves, Harvests, and Food Price Shocks
 PREVIEW
by Chris Martensen

The persistent drought coupled with a record heatwave is seriously denting farm harvest forecasts across the US and grain futures have already been sent soaring.

In some cases, the prices are approaching the old 2008 highs, which saw food riots spring up around the globe and contribute to several rather dramatic regime changes.

It looks like the same dynamic is in play again…
Heatwaves, Harvests, and Food Price Shocks
 PREVIEW by Chris Martensen

The persistent drought coupled with a record heatwave is seriously denting farm harvest forecasts across the US and grain futures have already been sent soaring.

In some cases, the prices are approaching the old 2008 highs, which saw food riots spring up around the globe and contribute to several rather dramatic regime changes.

It looks like the same dynamic is in play again…
Image | Positioning Yourself for When Our Money Dies
Positioning Yourself for When Our Money Dies
 PREVIEW
by Chris Martenson

Executive Summary

  • Sustaining through a prolonged currency decline is challenging. How to best invest your capital through the speculative whipsaws that will buffet asset prices.
  • Why important-dependent countries (like the US) are particularly vulnerable.
  • What the stages of a US currency crisis will be.
  • What the lessons from the currency destruction in the Weimar Republic and modern Iran have to teach us about wealth preservation.

If you have not yet read Part I: Our Money Is Dying, available free to all readers, please click here to read it first.

A Process, Not an Event

An important observation is that even the most destructive of these episodes are multi-year processes and are not events that transpire over a matter of days.  This means that you will most likely have to plan on navigating the waters for at least several years, possibly as many as ten, which raises issues around the depth of your mental and emotional resilience, and the durability of your physical and financial preparations. 

Sure, nearly everybody can coast through the first few weeks and months of a monetary crisis. But very few will truly thrive through the entire process until a final capitulation is reached from which a new beginning can emerge. 

Is such resilience even a reasonable goal, or something that can be consciously manifested? 

Yes, of course it is.  That's why we at Peak Prosperity are here doing what we do…

Positioning Yourself for When Our Money Dies
 PREVIEW by Chris Martenson

Executive Summary

  • Sustaining through a prolonged currency decline is challenging. How to best invest your capital through the speculative whipsaws that will buffet asset prices.
  • Why important-dependent countries (like the US) are particularly vulnerable.
  • What the stages of a US currency crisis will be.
  • What the lessons from the currency destruction in the Weimar Republic and modern Iran have to teach us about wealth preservation.

If you have not yet read Part I: Our Money Is Dying, available free to all readers, please click here to read it first.

A Process, Not an Event

An important observation is that even the most destructive of these episodes are multi-year processes and are not events that transpire over a matter of days.  This means that you will most likely have to plan on navigating the waters for at least several years, possibly as many as ten, which raises issues around the depth of your mental and emotional resilience, and the durability of your physical and financial preparations. 

Sure, nearly everybody can coast through the first few weeks and months of a monetary crisis. But very few will truly thrive through the entire process until a final capitulation is reached from which a new beginning can emerge. 

Is such resilience even a reasonable goal, or something that can be consciously manifested? 

Yes, of course it is.  That's why we at Peak Prosperity are here doing what we do…

Image | Coal is the Fuel for a World in Decline
Coal is the Fuel for a World in Decline
 PREVIEW
by Gregor Macdonald

Executive Summary Coal is priced very attractively on a BTU output basis Developing countries, where energy demand is growing greatest, are much more dependent on the power grid to run their economies Coal is on track to reclaim its position as the world's top energy source (possibly as early as this year) What are the…
Coal is the Fuel for a World in Decline
 PREVIEW by Gregor Macdonald

Executive Summary Coal is priced very attractively on a BTU output basis Developing countries, where energy demand is growing greatest, are much more dependent on the power grid to run their economies Coal is on track to reclaim its position as the world's top energy source (possibly as early as this year) What are the…
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 Prep Now for the Coming Winter Challenges
I’ve been doing a lot of thinking about the needs and sustainability of our family. We have six young children, our oldest just turned 12 and our youngest just turned 3 months old. I love the considerations that the article had above and thought I would add a few things that I have considered for our situation. My...
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eQRP: Self-Directed Retirement

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