I attended a public meeting at a local Forest Service office today.  There were about 25 people in attendance including some of the federal higher ups.  At the beginning of the meeting they had a package of material for each attendee.  There were a couple of people speaking about different things the Forest Service has been doing.  

When the floor was open to comments I had a few things to say since I had knowledge of how some processes take place throughout the state.  The main speaker was polite with the “we appreciate your comments” b.s. but I could tell I wasn’t taken too seriously.  No problem, I won’t speak up anymore.   I really do know what works in other parts of the state and you could implement them here.  But do it your own stupid way.

After that go round, the speaker took a report that he had photocopied and started passing copies around.  He explained that this report was worth reading because of the expertise of the writer on this subject matter. Now I get it.  He already had made up his mind so he didn’t really want to hear any comments from the audience. 

He said he didn’t have enough for everyone so if more than one person was from the same group perhaps they didn’t need to take one for each of them.  He offered one to me.  No thank you… I don’t need one since I wrote it!  Yep, he was passing out a document that I wrote several years ago.  You should have seen his jaw drop.

I’ve been paying attention to the crop reports lately.  Less than 1/3 of the corn that should be planted by now has been planted.  Pretty soon the deadline will be upon farmers that if the crop doesn’t get put into the ground they won’t qualify for crop insurance.  If that happens the land will be planted with soybeans rather than corn. 

What does this mean to the consumer?  Anything with corn in the product is going to go up in price.  Corn meal, corn syrup, corn flour, corn flakes, corn bread, corn, corn starch, animal feed, and fuel. 

How will this affect me?  Everything on the list above we purchase.  Animal feed hasn’t gone down in price since the superspike from a couple years ago.  Hen scratch that was $ 8 a bag is now $ 14. What will it be after this next shortage?  Fortunately I have the space to grow as much food as I want.  My drawback is the time to water and weed.  With the new work schedule I have been doing a good job keeping up with the watering and weeding so this weekend I’m going to plant corn.  Lots of corn to keep my chickens happy for the next year.  I’ll plant enough to keep up happy too! 

I’m hoping to do more pressure canning this year and that will mean canning corn.  Last year I dried corn and that turned out well so if I don’t can it I can dry it once again.  To dry the corn for us to eat I took it off the cob, cooked it for about 1/2 the time of normal, then put it into the dehydrator.  For the chickens I just left it to dry on the cob and put the cobs into a trash can with a tight fitting lid. 

If you are looking for something to buy this week for your home food storage, you should think about adding more corn.   

ACCESS IT HERE: http://tinyurl.com/Urbansurvivalguide Get ready for any natural disaster by securing this survival food list! Learn how to make and use survi…
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Is the coming financial collapse going to be inflationary or deflationary?  Are we headed for rampant inflation or crippling deflation?  This is a subject that is hotly debated by economists all over the country.  Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation.  Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts.  So what is the truth?  Well, for the reasons listed below, I believe that we will see both.  The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis.  This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money.  We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first?  The following are some of the major deflationary forces that are affecting our economy right now…

The Velocity Of Money Is At A 50 Year Low

The rate at which money circulates in our economy is the lowest that it has been in more than 50 years.  It has been steadily falling since the late 1990s, and this is a clear sign that economic activity is slowing down.  The shaded areas in the chart represent recessions, and as you can see, the velocity of money always slows down during a recession.  But even though the government is telling us that we are not in a recession right now, the velocity of money continues to drop like a rock.  This is one of the factors that is putting a tremendous amount of deflationary pressure on our economy…

The Trade Deficit

Even single month, far more money leaves this country than comes into it.  In fact, the amount going out exceeds the amount coming in by about half a trillion dollars each year.  This is extremely deflationary.  Our system is constantly bleeding cash, and this is one of the reasons why the federal government has felt a need to run such huge budget deficits and why the Federal Reserve has felt a need to print so much money.  They are trying to pump money back into a system that is constantly bleeding massive amounts of cash.  Since 1975, the amount of money leaving the United States has exceeded the amount of money coming into the country by more than 8 trillion dollars.  The trade deficit is one of our biggest economic problems, and yet most Americans do not even understand what it is.  As you can see below, our trade deficit really started getting bad in the late 1990s…

Wages And Salaries As A Percentage Of GDP

One of the primary drivers of inflation is consumer spending.  But consumers cannot spend money if they do not have it.  And right now, wages and salaries as a percentage of GDP are near a record low.  This is a very deflationary state of affairs.  The percentage of low paying jobs in the U.S. economy continues to increase, and we have witnessed an explosion in the ranks of the “working poor” in recent years.  For consumer prices to rise significantly, more money is going to have to get into the hands of average American consumers first…

When The Debt Bubble Bursts

Right now, we are living in the greatest debt bubble in the history of the world.  When a debt bubble bursts, fear and panic typically cause the flow of money and the flow of credit to really tighten up.  We saw that happen at the beginning of the Great Depression of the 1930s, we saw that happen back in 2008, and we will see it happen again.  Deleveraging is deflationary by nature, and it can cause economic activity to grind to a standstill very rapidly.

During the next major wave of the economic collapse, there will be times when it will seem like hardly anyone has any money.  The “easy credit” of the past will be long gone, and large numbers of individuals and small businesses will find it very difficult to get loans.

When the debt bubble bursts, cash will be king – at least for a short period of time.  Those that do not have any savings at all will really be hurting.

And some of the financial elite seem to be positioning themselves for what is coming.  For example, even though he has been making public statements about how great stocks are right now, the truth is that Warren Buffett is currently sitting on $ 49 billion in cash.  That is the most that he has ever had sitting in cash.

Does he know something?

Of course there will be a tremendous amount of pressure on the U.S. government and the Federal Reserve to do something once a financial crash happens.  The response by the federal government and the Federal Reserve will likely be extremely inflationary as they try to resuscitate the system.  It will probably be far more dramatic than anything we have seen so far.

So cash will not be king for long.  In fact, eventually cash will be trash.  The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term.  In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

In the coming years, we are going to experience both inflation and deflation, and neither one will be pleasant at all.

Get prepared while you still can, because time is running out.

Inquiring minds with extra time on their hands this morning are plodding through the Full Transcript of Bernanke’s Testimony To Joint Economic Committee, U.S. Congress looking for the usual collection of half-truths, distortions, and outright lies it usually contains.

Here are some point-by-point statements by Bernanke with my comments immediately following each set of statements.

Bernanke: Conditions in the job market have shown some improvement recently. The unemployment rate, at 7.5 percent in April, has declined more than 1/2 percentage point since last summer. Moreover, gains in total nonfarm payroll employment have averaged more than 200,000 jobs per month over the past six months, compared with average monthly gains of less than 140,000 during the prior six months.

Mish: What Bernanke failed to say is real wages are anemic and the Fed’s low interest rate policy is making it easy for corporations to borrow at excessively low rates and use the money to invest in hardware and software robots to fire workers. Excessively low rates also punish savers and those on fixed income.

Bernanke:  Payroll employment has now expanded by about 6 million jobs since its low point, and the unemployment rate has fallen 2-1/2 percentage points since its peak.

Mish: Even if those were all full-time jobs, this was a very anemic recovery by historic standards.

Bernanke: Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer-run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down. Moreover, nearly 8 million people are working part time even though they would prefer full-time work. High rates of unemployment and underemployment are extraordinarily costly: Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers’ skills and–particularly relevant during this commencement season–by preventing many young people from gaining workplace skills and experience in the first place.

Mish: That is a reasonably accurate set of statements but nowhere does the Fed admit its role in creating those conditions with its boom-bust, moral-hazard monetary policies.

Bernanke: The loss of output and earnings associated with high unemployment also reduces government revenues and increases spending on income-support programs, thereby leading to larger budget deficits and higher levels of public debt than would otherwise occur.

Mish: The fiscal deficit is high because of perpetual overspending by Congress on top of the Fed’s boom-bust, moral-hazard monetary policies.

Bernanke: Consumer price inflation has been low. The price index for personal consumption expenditures rose only 1 percent over the 12 months ending in March, down from about 2-1/4 percent during the previous 12 months. This slow rate of inflation partly reflects recent declines in consumer energy prices, but price inflation for other consumer goods and services has also been subdued. Nevertheless, measures of longer-term inflation expectations have remained stable and continue to run in the narrow ranges seen over the past several years. Over the next few years, inflation appears likely to run at or below the 2 percent rate that the Federal Open Market Committee (FOMC) judges to be most consistent with the Federal Reserve’s statutory mandate to foster maximum employment and stable prices.

Mish: The Fed has no idea what inflation is or why because the Fed ignores asset bubbles in stocks, in bonds, and in houses. It uses fatally flawed definitions of inflation, inaccurately measured at that.

Berrnanke: Over the nearly four years since the recovery began, the economy has been held back by a number of headwinds. Some of these headwinds have begun to dissipate recently, in part because of the Federal Reserve’s highly accommodative monetary policy. Notably, the housing market has strengthened over the past year, supported by low mortgage rates and improved sentiment on the part of potential buyers. Increased housing activity is fostering job creation in construction and related industries, such as real estate brokerage and home furnishings, while higher home prices are bolstering household finances, which helps support the growth of private consumption.

Mish: Housing sentiment has indeed improved, but that is of course what happens when central banks artificially suppress rates with the purposeful intention of creating asset bubbles, not to help consumers, but to bail out banks still stuck with housing inventory they need to unload.

Bernanke: Over the past four years, state and local governments have cut civilian government employment by roughly 700,000 jobs, and total government employment has fallen by more than 800,000 jobs over the same period. For comparison, over the four years following the trough of the 2001 recession, total government employment rose by more than 500,000 jobs.

Mish: At best, that’s a start. And it fails to address untenable union wages and benefits and absurd collective bargaining agreements of public workers.

Bernanke: At the same time, though, fiscal policy at the federal level has become significantly more restrictive. In particular, the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of the sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year. The Congressional Budget Office (CBO) estimates that the deficit reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points during 2013, relative to what it would have been otherwise. 

Mish: It is preposterous to whine about pissy cuts in spending when the cuts have all been back-end loaded, and there are no real cuts in the first place. Congress did not really cut anything. It decreased the amount of expected budget increases and called that a cut.

Bernanke: In present circumstances, with short-term interest rates already close to zero, monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.

Mish: Headwinds? From non-existent cuts? From a rollback of tax cuts that should never have happened in the first place?

Bernanke: Although near-term fiscal restraint has increased, much less has been done to address the federal government’s longer-term fiscal imbalances. Indeed, the CBO projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter, in large part reflecting the aging of our society and projected increases in health-care costs, along with mounting debt service payments. To promote economic growth and stability in the longer term, it will be essential for fiscal policymakers to put the federal budget on a sustainable long-run path.

Mish: Note the blatant hypocrisy of Bernanke whining about non-existent cuts and about tax rollbacks the country could not afford, while warning Congress that something must be done to put the federal budget on a sustainable long-run path.

Bernanke: Importantly, the objectives of effectively addressing longer-term fiscal imbalances and of minimizing the near-term fiscal headwinds facing the economic recovery are not incompatible. To achieve both goals simultaneously, the Congress and the Administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.

Mish: Yeah, right. Like what? Of course that’s not his problem. He just begs Congress to kick the can down the road, which of course is all the Fed ever does too, while ignoring every asset boom-bust cycle along the way.

Bernanke: With unemployment well above normal levels and inflation subdued, fostering our congressionally mandated objectives of maximum employment and price stability requires a highly accommodative monetary policy. Normally, the Committee would provide policy accommodation by reducing its target for the federal funds rate, thus putting downward pressure on interest rates generally. However, the federal funds rate and other short-term money market rates have been close to zero since late 2008, so the Committee has had to use other policy tools. The first of these alternative tools is “forward guidance” about the FOMC’s likely future target for the federal funds rate.

Mish: Got that? Forward guidance is supposedly a tool. In reality, the Fed is totally clueless about the economy, about housing housing, about jobs, and about where interest rates should be (as directly evidenced by it repeat bubble-blowing exercises).

Bernanke: The second policy tool now in use is large-scale purchases of longer-term Treasury securities and agency mortgage-backed securities (MBS). These purchases put downward pressure on longer-term interest rates, including mortgage rates. For some months, the FOMC has been buying longer-term Treasury securities at a pace of $ 45 billion per month and agency MBS at a pace of $ 40 billion per month. The Committee has said that it will continue its securities purchases until the outlook for the labor market has improved substantially in a context of price stability. The Committee also has stated that in determining the size, pace, and composition of its asset purchases, it will take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

Mish: Note the dual mandate nonsense of jobs and inflation. It is impossible for bureaucrats and central planners to target one factor of the economy accurately. Two is insane. Yet, price stability is easy enough to achieve. Simply get rid of the Fed and fractional reserve lending. Here are some links on the absurdity of dual mandates.

Bernanke: At its most recent meeting, the Committee made clear that it is prepared to increase or reduce the pace of its asset purchases to ensure that the stance of monetary policy remains appropriate as the outlook for the labor market or inflation changes.

Mish: That makes sense (in a perverse sort of way). The Fed has no idea what it is doing so it needs to be prepared to do anything. Also note the irony of being prepared to do anything while promoting “forward guidance” as a tool.

Bernanke: In the current economic environment, monetary policy is providing significant benefits. Low real interest rates have helped support spending on durable goods, such as automobiles, and also contributed significantly to the recovery in housing sales, construction, and prices. Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment. Importantly, accommodative monetary policy has also helped to offset incipient deflationary pressures and kept inflation from falling even further below the Committee’s 2 percent longer-run objective.

Mish: What a bunch of self-serving nonsense. Higher asset prices have primarily benefited the wealthy. For discussion, please see Who Won? the 93% or the 7%? Why?

Moreover, Bernanke does not understand the simple math of 2% inflation over time. When wage growth does not keep up, and it hasn’t, huge economic distortions arise along with dependency on food stamps, disability, and other programs. In short, 2% stability, is very destabilizing. I spoke about this at length in Fallacy of Inflation Targeting.

Here is the key chart.

Inflation Targeting at 2% a Year

Over time, prices rise, but wages for the masses do not. Worse yet, Bernanke’s cheap money philosophy makes matters worse because it encourages businesses to invest in hardware and software robots that will enable companies to fire more workers.

There are no benefits of artificially low rates, at least to the average worker.

Economist Steve Keen commented on that chart in Exponential Credit Petri Dish; Steve Keen Responds to “World Economic Forum Endorses Fraud” Post

Bernanke: That said, the Committee is aware that a long period of low interest rates has costs and risks. For example, even as low interest rates have helped create jobs and supported the prices of homes and other assets, savers who rely on interest income from savings accounts or government bonds are receiving very low returns. Another cost, one that we take very seriously, is the possibility that very low interest rates, if maintained too long, could undermine financial stability. For example, investors or portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage.

Mish: The committee would not recognize risk if it jumped up and spit in Bernanke’s face. Low interest rates have already undermined future financial stability bu encouraging “reach for yield” excessive credit risk, duration risk, and leverage.

Bernanke: Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve–consistent with its congressional mandate–to provide policy accommodation as needed to foster maximum employment and price stability. Of course, we will do so with due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook.

Mish: Bernanke took one last opportunity to hide behind a ridiculous dual mandate while turning a blind eye to the destabilizing asset bubbles it creates.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com 

I like to feed the python that is lovingly curled around my neck.  It’s not a problem that it keeps getting bigger, right?

Chairman Ben S. Bernanke
The Economic Outlook
Before the Joint Economic Committee, U.S. Congress, Washington, D.C.
May 22, 2013
Chairman Brady, Vice Chair Klobuchar, and other members of the Committee, I appreciate this opportunity to discuss the economic outlook and economic policy.

Current Economic Conditions
Economic growth has continued at a moderate pace so far this year. Real gross domestic product (GDP) is estimated to have risen at an annual rate of 2-1/2 percent in the first quarter after increasing 1-3/4 percent during 2012. Economic growth in the first quarter was supported by continued expansion in demand by U.S. households and businesses, which more than offset the drag from declines in government spending, especially defense spending.

So what was the growth rate in the real economy, subtracting back out your monetary debasement?  Oh wait — it wasn’t a “growth” rate at all, was it?

Conditions in the job market have shown some improvement recently. The unemployment rate, at 7.5 percent in April, has declined more than 1/2 percentage point since last summer. Moreover, gains in total nonfarm payroll employment have averaged more than 200,000 jobs per month over the past six months, compared with average monthly gains of less than 140,000 during the prior six months. In all, payroll employment has now expanded by about 6 million jobs since its low point, and the unemployment rate has fallen 2-1/2 percentage points since its peak.

Uh huh.

Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer-run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down. Moreover, nearly 8 million people are working part time even though they would prefer full-time work. High rates of unemployment and underemployment are extraordinarily costly: Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers’ skills and–particularly relevant during this commencement season–by preventing many young people from gaining workplace skills and experience in the first place. The loss of output and earnings associated with high unemployment also reduces government revenues and increases spending on income-support programs, thereby leading to larger budget deficits and higher levels of public debt than would otherwise occur.

Once again….

Consumer price inflation has been low. The price index for personal consumption expenditures rose only 1 percent over the 12 months ending in March, down from about 2-1/4 percent during the previous 12 months. This slow rate of inflation partly reflects recent declines in consumer energy prices, but price inflation for other consumer goods and services has also been subdued. Nevertheless, measures of longer-term inflation expectations have remained stable and continue to run in the narrow ranges seen over the past several years. Over the next few years, inflation appears likely to run at or below the 2 percent rate that the Federal Open Market Committee (FOMC) judges to be most consistent with the Federal Reserve’s statutory mandate to foster maximum employment and stable prices.

Consumer price inflation has been low?  Well, I suppose maybe it is if you exclude things that are non-discretionary such as food, medical insurance (now mandatory under Obamacare) and similar.  But if you do include those things the actual cost of living — that is, what you must spend just to live — has gone up a lot in the last five years.

That is definitely not “low.”

Over the nearly four years since the recovery began, the economy has been held back by a number of headwinds. Some of these headwinds have begun to dissipate recently, in part because of the Federal Reserve’s highly accommodative monetary policy. Notably, the housing market has strengthened over the past year, supported by low mortgage rates and improved sentiment on the part of potential buyers. Increased housing activity is fostering job creation in construction and related industries, such as real estate brokerage and home furnishings, while higher home prices are bolstering household finances, which helps support the growth of private consumption.

The “headwinds” are caused by The Fed through its QE games.  This has destroyed consumer purchasing power for the very necessities that form non-discretionary purchases.

Severe fiscal and financial strains in Europe, by weighing on U.S. exports and financial markets, have also restrained U.S. economic growth over the past couple of years. However, since last summer, financial conditions in the euro area have improved somewhat, which should help mitigate the economic slowdown there while also reducing the headwinds faced by the U.S. economy. Also, credit conditions in the United States have eased for some types of loans, as bank capital and asset quality have strengthened.

Fiscal Policy
Fiscal policy, at all levels of government, has been and continues to be an important determinant of the pace of economic growth. Federal fiscal policy, taking into account both discretionary actions and so-called automatic stabilizers, was, on net, quite expansionary during the recession and early in the recovery. However, a substantial part of this impetus was offset by spending cuts and tax increases by state and local governments, most of which are subject to balanced-budget requirements, and by subsequent fiscal tightening at the federal level. Notably, over the past four years, state and local governments have cut civilian government employment by roughly 700,000 jobs, and total government employment has fallen by more than 800,000 jobs over the same period. For comparison, over the four years following the trough of the 2001 recession, total government employment rose by more than 500,000 jobs.

Most recently, the strengthening economy has improved the budgetary outlooks of most state and local governments, leading them to reduce their pace of fiscal tightening. At the same time, though, fiscal policy at the federal level has become significantly more restrictive. In particular, the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of the sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year. The Congressional Budget Office (CBO) estimates that the deficit reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points during 2013, relative to what it would have been otherwise.1 In present circumstances, with short-term interest rates already close to zero, monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.

Expansionary?  Excuse me?  Government at all levels cannot “expand” the economy as it has to get the funds from somewhere.  There are only two choices: Tax people (taking their discretionary income) or debase through issuance of debt, whether taken up by the Fed or not (which also takes the people’s discretionary purchasing power.)

Government, especially entitlements and welfare, do not expand the economy.  That comes from innovation in the private sector.  All government does is steal from the private sector and redistribute those funds.

Now some amount of this is agreeable to virtually everyone.  Nearly all want a strong common defense, for example, although we might argue somewhat over exactly how we should deploy that defense.  Most want roads.  Most want a police force of some composition and most people also would like a jail system for those who initiate violence against others as the alternative is for society to degenerate into a “Hatfield and McCoy” sort of tit-for-tat shooting gallery.

But government entitlement programs, including food stamps, welfare, Medicare, Medicaid and similar do not expand the economy.  They shift the economy from investment and innovation into simple consumption spending and worse, they directly and indirectly promote dependency instead of innovation among the population.

Although near-term fiscal restraint has increased, much less has been done to address the federal government’s longer-term fiscal imbalances. Indeed, the CBO projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter, in large part reflecting the aging of our society and projected increases in health-care costs, along with mounting debt service payments. To promote economic growth and stability in the longer term, it will be essential for fiscal policymakers to put the federal budget on a sustainable long-run path. Importantly, the objectives of effectively addressing longer-term fiscal imbalances and of minimizing the near-term fiscal headwinds facing the economic recovery are not incompatible. To achieve both goals simultaneously, the Congress and the Administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.

That is simply not going to happen so long as The Fed continues to encourage huge deficits and outrageous entitlement spending.  That in turn shifts capital from those who would invest, innovate and produce to pure consumption spending by those sitting on their ass.  This pattern will not change until The Fed stops promoting non-productive consumption.  

Period.

Monetary Policy
With unemployment well above normal levels and inflation subdued, fostering our congressionally mandated objectives of maximum employment and price stability requires a highly accommodative monetary policy. Normally, the Committee would provide policy accommodation by reducing its target for the federal funds rate, thus putting downward pressure on interest rates generally. However, the federal funds rate and other short-term money market rates have been close to zero since late 2008, so the Committee has had to use other policy tools.

But it hasn’t worked Ben.  So now what?  More of what has failed?

The first of these alternative tools is “forward guidance” about the FOMC’s likely future target for the federal funds rate. Since December, the Committee’s postmeeting statement has indicated that its current target range for the federal funds rate, 0 to 1/4 percent, will be appropriate “at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.” This guidance underscores the Committee’s intention to maintain highly accommodative monetary policy as long as needed to support continued progress toward maximum employment and price stability.

The second policy tool now in use is large-scale purchases of longer-term Treasury securities and agency mortgage-backed securities (MBS). These purchases put downward pressure on longer-term interest rates, including mortgage rates. For some months, the FOMC has been buying longer-term Treasury securities at a pace of $ 45 billion per month and agency MBS at a pace of $ 40 billion per month. The Committee has said that it will continue its securities purchases until the outlook for the labor market has improved substantially in a context of price stability. The Committee also has stated that in determining the size, pace, and composition of its asset purchases, it will take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

This doesn’t work either.  Presuming that the “reasonable” rate for 30 year money is 6% (which is likely at the low end) yet today’s 30 year mortgage is 3.5%, today’s P&I on a 30 year mortgage for a $ 200,000 loan is $ 895.48.

That same payment, at the non-distorted price of money, only buys $ 150,104.94 worth of house!

This is an intentional inflation of asset prices well above the natural clearing price.  While this distortion can be maintained for quite some time, the fact that it exists is irrefutable.

This is how crashes happen — not natural forces but intentional distortions, whether through government policy or outright fraud by private actors through intentional misrepresentation.

At its most recent meeting, the Committee made clear that it is prepared to increase or reduce the pace of its asset purchases to ensure that the stance of monetary policy remains appropriate as the outlook for the labor market or inflation changes. Accordingly, in considering whether a recalibration of the pace of its purchases is warranted, the Committee will continue to assess the degree of progress made toward its objectives in light of incoming information. The Committee also reiterated, consistent with its forward guidance regarding the federal funds rate, that it expects a highly accommodative stance of monetary policy to remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.

In the current economic environment, monetary policy is providing significant benefits. Low real interest rates have helped support spending on durable goods, such as automobiles, and also contributed significantly to the recovery in housing sales, construction, and prices. Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment. Importantly, accommodative monetary policy has also helped to offset incipient deflationary pressures and kept inflation from falling even further below the Committee’s 2 percent longer-run objective.

See above.  Price is not necessarily value.  Price is just price.  When you promote distortions in price on purpose with the intent of sending false market signals due to the impact of compounding that is always present wherever there is a growth “rate”, that is, an exponential function, by definition you are making the ultimate correction back to value worse.

The Fed is intentionally creating a bubble that will crash.  It is only a matter of when, not if, such a consequence will occur.

That said, the Committee is aware that a long period of low interest rates has costs and risks. For example, even as low interest rates have helped create jobs and supported the prices of homes and other assets, savers who rely on interest income from savings accounts or government bonds are receiving very low returns. Another cost, one that we take very seriously, is the possibility that very low interest rates, if maintained too long, could undermine financial stability. For example, investors or portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage. The Federal Reserve is working to address financial stability concerns through increased monitoring, a more systemic approach to supervising financial firms, and the ongoing implementation of reforms to make the financial system more resilient.

See above.  Your “$ 200,000″ house is not worth that as maintenance of that price requires indefinite maintenance of below-market interest rates.  Since the latter is impossible without complete destruction of the currency what Bernanke has provided is an intentional false price in the markets, both in housing and other assets.

Intentional manipulation of markets is usually thought of as a crime, not a benefit, and should lead to indictments, not praise.

Recognizing the drawbacks of persistently low rates, the FOMC actively seeks economic conditions consistent with sustainably higher interest rates. Unfortunately, withdrawing policy accommodation at this juncture would be highly unlikely to produce such conditions. A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further. Such outcomes tend to be associated with extended periods of lower, not higher, interest rates, as well as poor returns on other assets. Moreover, renewed economic weakness would pose its own risks to financial stability.

Said current price is false.  

Because only a healthy economy can deliver sustainably high real rates of return to savers and investors, the best way to achieve higher returns in the medium term and beyond is for the Federal Reserve–consistent with its congressional mandate–to provide policy accommodation as needed to foster maximum employment and price stability. Of course, we will do so with due regard for the efficacy and costs of our policy actions and in a way that is responsive to the evolution of the economic outlook.

A healthy economy can only come about when the cost of borrowing accurately reflects the risk and reward of lending actual capital (not ethereal hot air) into the market for whatever purpose and at whatever credit profit the borrower and lender negotiate.

Such an environment has not existed since the first circumvention of Glass-Steagall.  Willful and intentional distortion of asset prices and markets by The Fed and Congress, both acting in concert, have now led to three serial bubbles that have decimated economic conditions for the common American.

Howdy everyone!

In response to your requests for more visual media in Jarhead’s Lifestraw giveaway post, I hustled out and made a quick video on shooting while moving, with me popping a couple 2-liter containers full of water with my AR while moving in the sandpit. I was pretty pleased with myself, especially since it took about 30 takes to even get to the shooting part, and so my disappointment was pretty extreme when I came home and popped in the SD card from my video camera into the ol’ laptop. Apparently my card had run out of memory about a third of the way through! D’oh! So I’ll have to redo it, but please rest assured that we’re listening!

I was pretty much caught with my pants down for a post, especially since I’d already typed up an article for shooting while moving. So, I thought I’d have some opinionated fun this week. I know Ranger Man did a post (listed on the top of “Popular Posts”, no less.) on his personal Top 10 when TSHTF, so I thought I’d share my opinion too… but to combat the redundancy I’m gonna throw in my choice of worst guns as well.  Mind you, at this point, it’s pretty much all academic, and of course what I think would work best for me and mine, since the S hasn’t really HTF that I can tell, but anyway…

Let’s get started, shall we? Wherever possible, pictures will be taken from the manufacturer’s website.

TRW’s BEST guns

-RUGER 10/22 TAKEDOWN: The Ruger 10/22 has really endeared itself to the modern public as a classic, no-nonsense, easy to use, easy to shoot, reliable-as-hell .22 autoloader. And when Ruger introduced it as a takedown variant that can pull apart into two pieces less than 20 inches long, and be stowed in a small pouch, with magazines and ammo ready to go, and an assembled rifle ready in less than 30 seconds, they hit it out of the ballpark. These things are extremely accurate, and the aftermarket support for triggers, optics, and other snazzy goodies is bordering ridiculous. Too cool.

image taken from www.coltsmfg.com

-AR-15 VARIANTS: Bet you didn’t see this one coming, huh? The AR-15 and its family have become the media darlings of late, both in good and bad ways. However, the AR-15 has become the staple of the self-defense, prepper, combat shooting, Law Enforcement, and hunting schools-of-thought. The first models weren’t so snazzy, but the modern AR has a dazzling adaptability , excellent reliability, and breathtaking accuracy (in most) that really makes it a hugely practical arm. Toss in the fact that parts can be found/scrounged everywhere, you can change calibers from .22 LR to .223 to 7.62×39 to .300 Blackout, to .50 Beowulf and ohers, just by switching the upper receiver, and, of course, the CDI (Chicks Dig It) factor, and you have a great, and indeed practical, platform for when TSHTF.

-AK-47 VARIANTS: I really don’t like AKs, I’ll admit it, but I will begrudgingly acknowledge what everyone knows them for: Their insane reliability. This reliability is the reason you see them in pictures of troops ranging from Siberia to the Sudan to Guatemala to Iraq. They work, with minimal maintenance. ALL THE TIME. Fill it full of sand. It goes bang. Fill it full of muddy water and take it out in freezing weather. It goes bang. Let it rust to hell. It goes bang. You get the picture. The 7.62×39 cartridge is a great all-around caliber too, if not the most accurate in this platform. But ya gotta respect something that does its job so damn well!

-REMINGTON 870: I read an article once where a fella from Scattergun Technologies (I think it was) said, “870s don’t die; they just get handled to death.” And, having run the same one for about 15 years now, using it from everything from duck hunting to practical shotgun classes, I can vouch for the statement. The 870 is simply the most functional, simple, down-to-earth shotgun out there. My 13-year old son can pull mine apart, down to the major assemblies (trigger group, bolt, receiver, barrel, pump) and reassemble it. The barrels can be easily swapped, allowing you to go from a short deer hunting or home defense gun, to a great-swinging bird or sporting clays gun in seconds. You need one of these.

-(ALMOST) ANY SMITH & WESSON REVOLVER: Yeah, there are other revolver manufacturers out there, but S&W still is the Gold Standard. With great trigger pulls out of the box (buy a used one for a great deal and a more-worked in action), stellar accuracy, and easy-to-find accessories and parts, these workaholics do just that: work all the time. My S&W M65 pictured above has had thousands of rounds put downrange, and the only malfunctions have been ammo-related. With different frame sizes, caliber, sights, barrel length, finish, and grip sizes, it is almost impossible to not find one that will fit your needs nicely. For extra versatility, get a .357 Magnum (you can shoot .38 Specials in it.)

-GLOCK : The ubiquitous Glock has become synonymous with the terms “reliability” and “simplicity” How can you go wrong? Yeah, they’re blocky and kinda ugly, really no “soul” to them, but they do their job well…and it’s the reason why they have the lion’s share of the Law Enforcement and private market for autoloading handguns. I personally prefer the Smith & Wesson M&P series of guns, as it will go everything the Glock will do, but better.  HOWEVER – The Glock has a  really awesome thing going for it that pulls it above the pack: The Ciener .22 LR Conversion kit. In about 5 seconds, literally, you can change your 9mm (or whatever caliber) Glock into a very accurate .22 LR handgun for training and small game use. (the SIG P226 and others have  these kits available as well, but you can buy a Glock PLUS the conversion kit for the price of one SIG) Plus, the Glock doesn’t have safties or doo-dads all over it, making it very easy to learn on and use.

-WINCHESTER 94/92, .45 COLT: Yep, here’s an oddball one. This gun is light, easy to carry, very accurate, powerful enough for most big game at close ranges. However, where it really shines is its ability to still be effective with black powder. The .45 Colt was developed in the 1870′s as a black powder cartridge, where it served the US military for years and racked up quite a reputation as a manstopper…even with the archaic black powder loading. SO… Why not have something in your arsenal that you can MAKE gunpowder for? Seems like a good bet to hedge.

TRW’S WORST PICKS

-1911 VARIANTS: Heh heh heh…here we go. I think out of any of these, this will create the most controversy. Perhaps the most beloved gun in the US, the 1911 is an AWESOME gun. I’ve built a couple, and won IDPA matches with them. When you have a good one, it’s a good one, and usually will feed most ammo through it. But when they don’t want to play, 1911s are the most cantankerous hunks of metal on the planet. I love owning mine, I love shooting it…on the range. I don’t carry one with me to defend life, limb, and property…because there’s just that constant irk in the back of my mind that says, “will this thing work this time?” Yeah, you can spend a ton of money for a Wilson or Kimber or Les Baer, but for my money, a SIG P220 does the same thing better, and works all the time. Sorry, John Browning.

-KEL-TEC KSG: I’ll admit, this is a super-cool idea. Two magazines under the barrel, containing 6 rounds each of full-power 12-gauge ammo. Who wouldn’t want 13 rounds of 00 buck ready to go when the chips are down? Well, I’ll pass. This gun is ALL the rage right now in the tactical shotgun market (prices have SKYROCKETED…when you can find one!) , but I’ll stick with my Remington 870. The Kel-Tec is a neat, compact idea, but it’s a mishmash of mediocre ergonomics, magazine-changing levers in wierd spots…oh, and it’s HEAVY. 12 rounds of 12-gauge weighs quite a bit, especially when it’s in your gun. I’ll admit, part of me is just prejudiced against a new,  fad gun, but due to complexity and scarcity on the market (who knows where to kind parts?) I’ll look this one over then hand it back to the nice man behind the counter.

-ANYTHING .50 BMG: Hoo boy, are .50s cool! That HUGE carrot-sized cartridge, the ability to shoot miles away with pinpoint accuracy, the monstrous, mean-looking guns. Which are all weak points in my book. If, indeed, things go sour, the ability to only carry a few of the heavy bullets in their giant magazines, (did I mention ammo is really expensive and almost impossible to find? There’s that too. Even HANDLOADING for this beast is pricey, with special equipment needed), with the 20-plus pound rifle, is a big handicap in my book. If you’re engaging targets 1000+ yards out, you have the time to get the hell out of dodge and find someplace better to be that doesn’t involve the necessity of shooting at stuff that far away. Yes, they’re cool. Yes, they have a place. But I’ll leave it behind at that place, thanks. The logistics of supporting this mean bastid are just too much.

-HI-POINT HANDGUNS: ”Hey, remember that Hi-Point I had that was accurate, aesthetically pleasing, and reliable?” said no person ever. These things should be sold as six-packs. As paperweights. If you ever wanted to buy a gun that you could practice clearing jams and stoppages with, this is it. I’d rather throw it at a target…at least I’d know it worked that way. Also see: Jennings, Lorcin, etc.

-COLT SINGLE ACTION ARMY VARIANTS: Boy, are these guns beautiful. They handle well, point like your finger, they’re elegant, the finish is usually superb, bordering on breathtaking. They’re available in a lot of great calibers, too! But, there’s a reason you don’t see them in police and military holsters any more. They’re easy to break, parts will break the bank when you can find them, and it’s slow to shoot safely. Why handicap yourself when, for the price of a new Colt SAA, you can buy about 5 Glocks? Sorry, but we’re in this to win this, not trick shooting.

Well, what do you think? Did I piss anybody off, or validate anybody’s opinions? What’s on your loved and hated gun list?

Stay safe!

-TRW

Man, Yahoo is being a gold-plated PITA with these little server errors. If you come looking for me and get some wierd errors, check Yahoo’s System Status and see if they’re having a Chinese fire drill or something. I’m hoping that these errors the last week or so are just the result of Yahoo doing some upgrades or something. Usually things go along pretty smoothly, but when the road gets bumpy it gets bumpy in a big way.

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Still have a few of the Hardigg cases available. Additionally, some larger ones may be coming in here shortly so you might wanna keep an eye open for those.

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Been out in the yard planting the Choate Grow Buckets. Its been in the freakin’ 80-degree range the last few days so I figured we might(!) finally be past the frost threat. The Choate Grow Buckets seem to be living up to their expectations and I think theyre going to prove to be very useful.

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Speaking of growing things……I read quite a few preparedness/survival blogs. (And, to a degree, some of the ‘patriot’-style blogs) and it almost appears that you can break them all down into one of two camps. The first camp sees a collapse and everything is about living like the kids in Red Dawn. Military tactics, patrolling, OPSEC, improvised munitions, sniping, caching ammo and supplies, etc, etc. Second camp sees a collapse and everything is about woodstoves, biomass, greenhouses, food preservation, and what could only be described as Mother Earth News roleplay.

Personally (and your mileage may vary) I’m not seeing either camp really being 100% correct. I’m virtually certain that the UN (or anyone else for that matter) isn’t going to invade the US. I don’t see an armed revolution with heavily-armed people wearing armbands emblazoned with “III” running around shooting evil authoritarian black-helmeted .gov thugs. Nor do I see a likelihood of a nationwide catastrophic (although I suppose entropic is possible) failure of national infrastructure that leaves us needing to tear up our front lawns to grow vegetables, and filling the koi ponds with catfish and carp.

I do, however, imagine there could be some situations that are a blending of the two, to some degree. Certainly, any disaster is going to bring out the bad side of people as well as the good…so, yeah, lets stack the AR’s and Glocks as deep as possible. And, yes, things like the economy could go so far south that if you don’t start taing a more pro-active approach to your own food production you may wind up eating government cheese and learning the WIC-approved food schedule by heart.

But I’m having a hard time genuinely believing that within my lifetime the future of the US looks like what some of these folks are preparing against. It really doesnt hurt anything, I suppose, since anyone preparing for Civil War II wil sorta be de facto prepared for most other eventualities, but sometimes it just seems a little…I dunno…too fantastic.

Of course, I could be wrong. I’ve been wrong before, I’ll be wrong again. Maybe in a few years there’ll  be a genuine nationwide shooting war going on. Or maybe in a few years all the GM-Monsanto-’Big Agra’ conspiracies will actually turn out to be real and our food supply turns into something from Soylent Green. But I think that long before that happens we’ll have more ‘mundane’ ends-of-the-world. Job losses, earthquakes, civil disturbances, floods, etc, etc, seem far more likely (to me) than some of these dramatic and exciting scenarios that some folks seem certain are going to happen.

The Essence of Money or Tools for Trade

I know. I know. What does this have to do with prepping?

After the survival phase of any catastrophe comes the rebuilding. What I mean is in the prepping world lots of time and energy is devoted to BOB’s, food storage, defense, shelter, water purifiers, etc. What’s not discussed is after everything comes apart, how do we put it back together, especially if the banks are closed and the dollar is worthless.

Even though we focus on getting ourselves prepared there will be many things we need or have forgotten in our quest to prepare for the worst. Our little group here in Montana has started looking ahead to how do we conduct commerce after TEOTWAWKI (to borrow a popular acronym). There are several ways in which we can obtain that badly needed roll of toilet paper after supply chains are broken and weeks have turned into months. I want to discuss a few:

Make it yourself. 

We can all make some improvements in this area. Just realize that no one person is an “Island unto Himself”. Many of the items we use and need are made with specialized skill and equipment. So until we’re back to riding horses and hunting with bows and arrows many items we need will be made by those who have developed those trades and abilities. Even then there will be limitations on raw materials. It’s not very practical to think we can do it all ourselves (especially the TP above).

That does lead me to another point. My belief is that producers (those that make important things or provide valuable service) will do best in a grid down situation. We won’t need as many attorneys, city workers, or welfare users. People will need to pull their weight to make it. That’s not to say the elderly or infirm will be abandoned. As a Christian, it is a duty to help those in need. I’m talking about able-bodied individuals who can’t or won’t produce something someone else wants or needs.

Barter. 

This works but not as well as you might think. If I have a cow, how do I get a few loaves of bread? If someone has a rifle I need, how much garden produce is that? Bartering will be severely limiting when everyone has different needs. For commerce to grow and prosper items must be bought and sold with relative ease.

Please don’t take this as discouragement against stocking up on barter items. Get as much and as wide a variety as you can.  That may be the best way to gain needed supplies in a pinch.

Metals. 

Now we could be talking about steel, brass, or lead. Or we could be talking about gold and silver. Now I would encourage all readers to get some metals after some of your basics are handled. With the prices down it’s a good time to buy.

There are some differing schools of thought on the need for metals. They meet the criteria for money in that they are durable, not consumable, transportable, etc. Metals are also a great hedge against inflation. They do rise and fall in price but they are never worth zero. 

The second issue is metals are just a place holder until you can trade for what you need. You can’t build shelter out of silver, heat with gold, or eat either one. If someone offered me 1000 oz of silver or a 20’x20’ room of food storage that would be a no brainer.  I’d take the food!

Alternative/Local Currency. 

Now I know in the ashes of Bitcoin this can be a touchy subject. I’m not talking about anything online or digital. In the event of EMP or power outage you couldn’t access it anyway.

I’m talking about creating something that works for your community. It could be bottle caps or baseball cards. We have been experimenting with trade notes that have local landmarks and denominations similar to other currencies. Around the country there are many local trade co-ops that have had varying degrees of success. The bigger ones are Berkshares, Ithaca Hours, Tucson… Just to name a few.

A few of the issues to consider are:

~Faith- the only thing that keeps the dollar going is enough people believe in it.  Same is true about local currency.

~Backing- For all pieces of paper to be worth anything they must be backed by metals, goods, or services.

~Use outside the area- How do you buy from people who don’t recognize your money.

~Counterfeiting- Easy to make trade notes, are easy to copy trade notes.

~Management- Who runs it? Compensation? Interest?

 ~Loans- It’s a way to get money into circulation as long as they’re producing something of value.

 ~Honesty of the members. What happens to the liars and cheaters?

~Historical Pricing- A $ 20 gold piece in 1900 could buy a good suit. 1 oz. gold or $ 1500 today could buy the same quality suit.

Like I said above we have had varying degrees of success in trading amongst our members. I have come to think that the development of a plan is the most valuable part. We realize that when dollars have replaced the above-mentioned toilet paper that another medium of exchange will be welcome by everyone. We’ve overcome a few basic hurdles but being prepared with special paper, color printer, some way to emboss or security measures, may be invaluable after the SHTF.

There’s a lot of left leaning info on the web (Berkshares/Ithaca Hours) and in books like Local Money. Nothing beats Mises, Hayek, or even Adam Smith for true free market solutions. If more info is needed maybe a part II could be in order. Let Rourke know.

Reuben W.

Western Montana

The above post was an entry into the ModernSurvivalOnline Preparedness Guest Post Writing Contest.

First Place winner will receive:

• SafeGuardArmor.com is providing body armor – a Stealth Vest (White) B2 S1  vest
  
• a Deadwood Cook Stove from Deadwood Stove Company
• A Paladin Go Bag provided by SurvivalGearBags.com
• CampingSurvival.com is providing the following:
  • Lifestraw Portable Water Filter Straw
  • Medical Corps Potassium Iodide Pills - bottle of 90 pills
  • Alone in the Wilderness DVD
  • Foliage Green Paracord - 1000 foot spool

Second Place will receive:

• Cube Stove w/ 3 Month Fuel Supply from Directive21.com
• From Prepper Press - 5 preparedness books of your choice
• Old West Lawman’s Forgotten Memoir courtesy of http://www.oldwestlawmansforgottenmemoir.com/
• A TrustFire XML C8-T6 5-Mode CREE LED 1000 Lumen Flashlight along:
  • UltraFire 18650 3000mAh 3.7V Rechargeable Li-Ion Battery (Pair) + Charger Combo and
  • Ultrafire 2pcs 3.7v 18650 3000mah Rechargeable Battery

Third Place will receive:

• One Solo Stove provided by SoloStove.com
• The excellent book….Going Home by A. American
• The digital eBook manual “Sold Out After Crisis“

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