Freedomain Radio

So I think it's pretty obvious that the US dollar will inevitably crash in about 10 years or less. What should I do to ensure that my money doesn't just become pieces of paper with ink on them? Should I invest in gold/silver/platinum?

JacobSpinney:

So I think it's pretty obvious that the US dollar will inevitably crash in about 10 years or less. What should I do to ensure that my money doesn't just become pieces of paper with ink on them? Should I invest in gold/silver/platinum?

Personally - and I say this as someone who has only an amateurish interest in markets - I do not see any fundamental reason as to why precious metals are a useful hedge against anything. The amount of crank material written about these metals alone makes me uneasy about them as investments. The only positive thing about precious metals is that they have relatively high liquidity and have a history of being used as a store of value.

Even in hyperinflationary environments, good companies survive. Krupp still pumps out high quality products. Volkswagon still produces cars.

It seems kind of goofy in this environment to say that equities make sense to me as investments more than precious metals do, but when you think about it, it's not that crazy. Gold is just some yellow stuff that sits around and looks pretty. Companies are established organizations that provide goods and services that people actually want. There's plenty of historical precedent for companies surviving and thriving despite major currency dislocations.

I still think the first thing people will run to when money dies is that which worked best in the past, which was gold and silver for thousands of years in many independent cultures. It would surprise me if a reliable alternative can be put forward, certainly not by the people that messed up the previous money. The thing with gold however is that it's a compact way to store value and run from danger (just last week someone found a gold treasure of someone running from Caesar, who later killed the whole peoples). I don't think there will be a place to run to this time as there will likely be competetive devaluations.

I would put equities second, but I would wait until DOG=1 again

http://home.earthlink.net/~intelligentbear/com-dow-au.htm

Yeah, I know that it seems silly to talk positively about equities after two of some of the most murderous days ever and the S&P down over 50% from the high... but even so, it seems bizarrely negative to view gold as a better investment than any company in the entire world in the long term.

The mentality just strikes me as alien. It would require me to believe that there are no companies anywhere that would be better investments than a dead lump of metal. It strikes me as bizarrely pessimistic about human capabilities - and indicative of a lack of self-confidence, because by investing in gold and excluding other ones you communicate implicitly that you don't think that you're capable of evaluating companies and stocks accurately.

Granted, in this environment, everything is so totally retarded that investing in stocks in the short term is pretty close to gambling or putting faith into dodgy technical models.

I'm sorry if this seemed directed at you, Peter, I didn't mean for it to be... this came out more aggressive than was really warranted.

JC Hewitt:

It would require me to believe that there are no companies anywhere that would be better investments than a dead lump of metal.

Metals are just a well understood method of storing value.  Stocks are pretty messy.  You can absolutely make more money investing in a stock.  But you will never be able to buy lunch with a share of Dillard Grape Co. or something.  It would require everyone to have total knowledge of all the companies traded on the market and to be aware of their business outlooks and future value. 

Metals are traded because they are desirable not just asthetically, but also as an industrial commodity and there is a fixed amount of metal on earth.  It is stable and consistant.  It cant fluctuate.  If you are a Rothschild, you can horde gold to try and deflate the value, but you cant inflate it over its stable rate of about 1.5% (how much is extracted out of the earth each year ... which gets more and more difficult i should add)

At some point, the US will have to do one of two things I think.  They will either need to move to a hard backed currency that allows people to regain confidence in US currency, or they will need to pull some kind of Zimbabwe trick where they consolodate and print new kinds of money and hope the government wont print those units until they are worthless too.

So the government either restrains its printing magic money policy (hasnt happened yet in history) to curb inflation, or force the government to curb inflation by linking the fake money to hard money.

JC,

I did not feel aggression, I quiet like to speculate on what is the best way to protect yourself and certainly with someone with a well founded opinion like yourself. Indeed with equities you own a real piece of company that produces something of value and gold is nothing more than a otherwise useless metal. In Zimbabwe Mugabe printed a ton of money and besides the value of money going down, you saw the Zimbabwen stock market going up (in the beginning even in real terms, measured in euros or dollars), as people preferred to store value in the (free market) paper of stock certificates and take it out of the non free market of Zimbabwen paper dollars. Since the stocks were in mutual free competition, they were not printed in great numbers. At some point that stopped working however, since the chaos became bigger, workers fled the country, international companies and trade took a hit and companies can also be confiscated by the president. In Argentina the president confiscated the pension funds. We all know here, that the booms and busts are created by government violence (money supply medling), but the nineties boom was in dot com stocks, the next boom was bricks and morter, after that food and oil. The place the new money (meant to repair the old bust) goes into seem to get more and more tangeble, more and more directly usable stuff under your direct control for our direct consumption. The body never lies and is immune for propaganda, it needs food, shelter and heat. I think that the commodities boom is not over yet. But I could be wrong, my portfolio has recently been slaughtered, which does not support my insights.

JacobSpinney:

So I think it's pretty obvious that the US dollar will inevitably crash in about 10 years or less. What should I do to ensure that my money doesn't just become pieces of paper with ink on them? Should I invest in gold/silver/platinum?

As a store of wealth, gold works pretty well.  But for transactions, I believe junk 90% silver is the way to go.  There is minot precedent for this too.  During the gas shortages of the 70s I have heard stories that those who paid for their gas with pre-1965 coins (where the silver content of the coin, 'ceptin' nickels of course, was 90%) got gas easier during the first oil embargo where there were gas lines than those paying in dollars. People using junk silver got head of the line privilidges because they paid with superior money.  Also, junk silver is divisible into small amounts, whereas an ounce of gold today will fetch about 810 dollars.  A 90% dime is worth about 92 cents in today's market.  (A 1000 dollars face value junk silver bag needs about 9200 bucks of today's current fiat dollars to buy it, that is if you can locate it without excessive premiums. The gold/silver markets are so screwed up that while silver has taken a 50 percent haircut from it's highs this year, you are hard pressed to find it without paying 20 to 70 percent premiums over the spot price of the metal.  Using the comex futures exchange they have decreased the price (because you can sell naked) while drying up supply.    If you go to tulving.com, golddealer.com or kitco.com you'll notice there's very little product available.)

Finally,  I think you're right about the dollar crashing, but I don't see that as 10 years out.  12 to 36 months (or less?) seems far more likely to me.  No more than 3 years out.  So make sure you keep your cash levels low and got lots of stuff, especially cigarettes,  booze,  great for barter.  Food too and clothes, toothpaste, all the staples of life.  If the dollar crashed these will not be readily available like they are now.  Why?  Because so much of what we buy comes from overseas and they may not take our money anymore.

  For a precident on how this will probably occurr do a search on the Argintina Peso Collapse circa 2001.  All the banks closed one Friday and Monday they didn't open.  A few weeks later, all the money in the people's accounts was devalued by 80 percent (10k in purchasing power became 2K in purchasing power) and even then, people were limited to withdrawals of no more than the equivalent of 400 bucks a month). The only cash people had was limited to what they had in their hands or at home.

The conservative approach is to not try to grow/expand your wealth, but rather to preserve the buying power of the wealth you have.

The best approach for that is precious metals. Specifically silver and gold, with the emphasis on silver.

A good use for your time would be to investigate Ted Butler's massive collection of articles on the COMEX manipulation of the silver (and gold) spot prices. The evidence is overwhelming that both have been suppressed for years and years, not by people wishing to maximize profits, but rather by people (The Federal Reserve and the US government itself) who wish to continue the lie that paper dollars have value.

In order to convince people to continue trusting dollars, there are two options. Make the dollar intrinsically strong (by limiting supply), or make any competitors to the dollar weaker. The Fed + US government has opted for the second approach. They intentionally beat down silver + gold, and indeed all commodities (copper, wheat, sugar, etc.) in order to continue the illusion the dollar has purchasing power. This price manipulation creates an unwanted problem where suppliers are harmed, being unable to sell their products for healthy profit. Think farmers. So the US government then creates all sorts of benefits to give to farmers in order to keep them solvent. In a free market they of course wouldn't need such help, because the market would set a fair price for their products. COMEX + other price manipulation arenas function because the government can throw unlimited amounts of paper (fiat) dollars at them, and they don't care about profit. It is far cheaper to manipulate commodity prices and reap the benefits of wanton printing of free money.

Now all this is collapsing. It's only possible so long as the world accepts US dollars as the reserve currency. Once that faith is broken, the dollar collapses. The price manipulation of silver + gold + commodities and resources and things of real value will end. And their price will skyrocket.

Stocks? As Stefan says in some of his podcasts, stock markets, particularly in the US, are wildly inflated due to the vast amounts of ignorant investors pouring 401K + other IRA/tax dodge money into them. The fundamentals of stocks are swamped out by momentum traders, ones who look only at the charts and attempt to predict which way a stock will move. This is speculation, not investing. Equities outside the US are not so inflated.

A good resource is http://www.europac.net and a good book to read is Peter Schiff's "Crash Proof: How to Profit in the Coming Economic Collapse".

So my theory is:

#1 buy physical silver and hide it around your property

#2 buy durable foodstuffs, like rice + beans. Canned goods. Vitamins. Stuff so you can last for months without having to acquire more food.

#3 buy a gun or two, plus plenty of ammunition.

#4 Decide whether you have a chance at paying off your aggrigate debt. If your house is seriously underwater (meaning you owe more than you can get by selling it) and the situation is getting worse, consider just stopping making payments. Save the money, invest it in #1-3 above. Don't use it to consume toys + entertainments! The goal is survival. Home prices are headed down, way down. They might go up in nominal terms (because the dollar's value can fall faster than real estate values). But in real terms home prices in the US have a long way to fall. Credit cards? Good time to consider maxing them out, buying #1-3 above, and just defaulting. The system is hopelessly corrupt. Normal concepts of morality cannot apply today, when the US government is taxing future generations (your kids and mine) in order to bail out corrupt Wall Street firms. Look out for yourself.

#5 Learn how to garden, on any scale. Start growing vegetables. Start a compost pile. If there is vacant land nearby, say unworked farms, perhaps get to know the owners and try to work out some arrangement where you can use their land for growing food crops.

#6 Get and read a book called, "Alcohol Can Be a Gas!" by David Blume. It's a real eye opener. It's a viable approach to energy independence (using alcohol instead of oil/gasoline for our energy needs) and will create huge numbers of jobs. It's manual labor, farming, but people will be happy to get the work, I think.

#7 Face reality. Life as we know it is coming to an end. Massive changes are afoot. The US will be forced to return to a productive economy. All the businesses that left because foreign labor was much cheaper than US labor -- they'll all become viable again in the face of a collapsed US dollar. Imports will be ridiculously expensive. Entrepreneurs will naturally getting the idea, "Hey, we can make clothing and shoes in America again!"

#8 Add on to #3 about guns. Arm yourself. The danger you face probably isn't your fellow citizens, but a corrupt government bent on survival. If the citizenry is well armed, there won't be any hanky panky. I'm not a conspiracy theorist. All the talk of the New World Order, the Amero currency (Canada, US + Mexico in a united economic entity), world government, FEMA camps, gold confiscation -- all these become meaningless threats in the face of a well armed citizenry. It is simply not viable to impose tyranny on a population that is rife with firearms. The bully has no real power over people that offer even the most basic resistance.

#9 Avoid IRS taxes as much as possible. Consider downsizing. Earn less, and you may find when you do your taxes you get a refund larger than all the money withheld. Earned Income Credit and all. It amounts to a negative income tax. You get free money from the government. Not free, of course, the money detracts from the value of all dollars outstanding. But at least you can be absolutely sure your labor is not being stolen. If they're going to penalize productivity, make sure you're not _that_ productive. Another approach is to simply not pay your IRS taxes. If enough people refused to pay, they couldn't enforce payment. Of course there are risks involved. As Stefan clearly states, the IRS is backed by government guns + agents who will happily put you in jail and steal your property if you don't voluntarily give it to them. But there is safety in numbers.

#10 Do not mourn the death of the US federal government or the US empire. It is a vile, corrupt abomination. It deserves death. It has been perverted beyond all hope of recognition away from what the founding fathers intended. Moreover, I buy into Stefan's thesis that even on day #1 of the US of A the government was a living sin against freedom -- as good as it was compared to other governments throughout history. Do not fear a dark ages after the US government collapses. Remember, there are still state + local governments. Sure, they've got a lot of debt, but it's dollar denominated. Hyperinflation will wipe out all that debt. The fact is the federal government is really not necessary for _anything_, in the grand scheme of things. The roads will still exist, people will still work, stuff will get built, food will be available. We won't degenerate into The Road Warrior. The US federal government will simply cease to be a factor in people's lives, and that will be an undeniable good. It won't have the power to push people around anymore.

#11 I was sorry to hear Stefan say in an interview on a December 2008 podcast that even though he writes about a stateless society (anarchy) he fully realizes it is something that will never come about within his own lifetime. ....Eh, what? Why be so pessimistic? With that attitude it surely won't come into existence. But there is no physical reason why it _couldn't_ come about in a short timeframe -- years, not decades. If enough people buy into the idea, why not? Meanwhile, the utter collapse of the US empire will create a vacuum to be filled. Let's all remember to push for "No government" instead of "World government".

In short never hold more dollars than you'll need to live on for the next few months. And for heaven's sake don't store your wealth as dollars in a bank account! You could be wiped out very quickly once hyperinflation starts. Move it into real things. The US economy is like a huge dance hall filled with people. The dance hall is being doused in gasoline from the outside. Some people near the exits can smell the gasoline, and they're leaving the building. They know some horrible disaster is in the making, and they're shouting at the people still in the building that they'd better get out of the building, fast. But the people inside are having too much fun! They don't want to hear these stories of impending doom. They don't smell the gasoline or see any flames. So just one more dance...

Now, once people start seeing flames and start a mad dash to the exits, it's too late. There no, absolutely no way, all the people are going to be saved. But a few can save their wealth, and even grow it, if they get out of the building first. Yes, the very act of their exiting the dollar death spiral will hasten the collapse of the dollar. But it's coming, no matter what. At best you can save yourself, as an individual. But not everyone can be saved.

There will be massive poverty. Retiring baby boomers counting on social security will be wiped out -- forced onto the streets and likely subsisting on cat food. They'll be in a poor position to compete for scarce jobs. Too bad! There is no other outcome possible. Thinking there is is just irrational. Obama will not solve anything. The situation is as it is. The titanic is headed to the bottom of the sea, most of the people are going to drown, and it's just a question of time. This is reality. Embrace it.

Oh, to be 20 again, with no responsibilities. So many opportunities will be available in the years to come. Such an interesting time to be alive. We should all count ourselves lucky. Our kids will have great stories to pass on to their children. Fun stuff!

Now, in the midst of all this, comes the ruling ring of power. Just kidding. But there is a possibility. Fundamental advances in technology could completely reshape the economic situation of the world -- like a massive trump card that renders meaningless all financial debts, losses and obligations. The one I favor is...the creation of true Machine Intelligence. Imagine an economy built on top of robotic labor -- they're the willing slaves that do all the grunt work. All humans become masters. Robots can build more robots. They can double their numbers in a matter of months or perhaps even weeks -- unlike decades for humans. I think we're on the verge of major breakthroughs in understanding of how the brain works.

Another possibility is cheap fusion power. Forget the DOE + government funded research, giant donut shaped structures -- Superconducting cathedrals, as Dr. Robert Bussard called them -- they'll never be economic. Rather, some tiny grass roots approach will have a far better chance at success. The late Dr. Robert Bussard has an approach that he believed had already been proven out -- Polywell Fusion. It just needs a few hundred million dollars to make a full scale prototype. That effort seems to be ongoing. And Eric Lerner's approach, called Focus Fusion, could work -- it's even simpler than Polywell Fusion, and needs even _less_ money to prove out. Cheap and plentiful fusion power, with no filthy byproducts (like fission + oil/coal/tar sands, etc) would transform the world economy. Desalinating sea water would turn deserts into gardens. Penty of land to reclaim, just need water and a bit of time...

Gosh this has grown into a long post. Sorry all + thanks for reading to the end.

-Dave

Dash

Can you explain what you said about credit cards a bit more?

Also, what are your thoughts about mortgages.   Peter Schift says that if you have a house you should borrow as much as you can against it and buy silver, gold, or overseas stocks.

What do you think?

Thanks, Dave

Why not just take a loan on a house and when housing prices go down 50% or so, just refinance?

The general theme is that the USA is going to experience hyperinflation. That means the dollar's value goes to zero. If you have a job, your salary will have to be rising _very_fast_ to suit the rising cost of...basically everything, in terms of dollars. In such an environment, if you owe a debt that incurs interest at a fixed rate, you are in a very good position. Soon the dollar amount you owe will be irrelevant. What used to buy a nice sports car, for example, now only buys a loaf of bread.

Credit card debt: Suppose you're paying a 14% annual rate on your credit card debt. And the USA enters hyperinflation. Will the credit card companies be able to increase their interest rates to 5,000%, 100,000%, 1,000,000% so the debt you owe will always overwhelm you? I sincerely doubt it. Because if they do, everyone will give up trying to pay it off anyway.

I haven't studied but I suspect in periods of hyperinflation essentially all debt vanishes. The debt does not grow even faster than the loss of value of the dollars, in general, I believe. If you owe debt in some foreign currency that isn't hyperinflating, you're screwed. But credit card debt is payable in US dollars, for Americans, and I think it will be hyperinflated away.

What that means is that right now you can buy things of real value, tapping into your credit card debt, and then just bide your time until the dollar collapses. And I think that's going to happen very soon. See below. As an example, one of my credit cards kept sending me offers of zero interest cash advances -- just a 3% up front fee, added onto the balance. OK, I took an $8500 advance, used $7145 to buy 500 ounces of Canadian Maple Leaf silver coins, 99.99% pure, from http://www.golddealer.com, and I'll just make minimum payments until June, 2009. I expect an explosion of the silver price before then. I can sell a bit of the silver and pay off the debt, if I care to maintain my good credit rating. Or I can simply forego paying the CC company, and let them destroy my credit rating. Credit card debt is no recourse debt, at least mine are. Meaning if I stop paying my bills, they are SOL and can only seek to trash my credit card rating.

Now in my case I don't need credit. My wife and I own our house outright. The masters of society (bankers, wall street, government, etc) have a massive propaganda campaign that says you need to protect your credit rating at all costs. Heaven forbid you don't pay down your credit cards! They convince the people that it is a moral issue, when you ran up debt on your credit card you promised you were going to pay it down.

I've come to look at it differently. I see credit card debt as something that need not be associated with a question of morals. I see it as a simple business transaction. Suppose you run up 10's of thousands of dollars in credit card debt. And suppose you just decide not to pay it. The CC companies will trash your credit card rating. Also they will nag you to get you to pay. But if you think of your good credit card rating as an asset associated with you, that you own, you can see the default on your CC debt as a simple business transaction. You sold your good credit rating in exchange for real spending money. After the default, you no longer have your good credit rating. The CC companies no longer have the money they loaned you. Even trade.

Now with the economic collapse, it's pretty clear to me that there will be large numbers of people that will default on CC debt, and it won't be an option. They won't have work, and won't have an income. So lots of people will lose their good credit rating. So many, in fact, that if you ride along with that group and _intentionally_ default on your credit card debt, you will be safely hidden in the herd. Soon populist laws will be on the books that prevent employers from discriminating on employees based on their credit rating. That's the way the wind is blowing.

Meanwhile in this era of rewarding the most corrupt enterprises, the ones most guilty of fraud and poor investment decisions, the ones most worthy of bankruptcy, there is nothing left of the concept of "fairness". If it were a question of fairness, the government wouldn't be taking the productive in order to rescue the incompetent. So join the bandwagon! If corruption is en vogue these days, embrace it. Hasten this system's destruction. Load yourself up with massive debt that you never intend to repay, and default! And demand a government bailout to boot. The faster the government enters its hyperinflationary spiral the better for the world. We want to kill this beast quickly, so we can get to the other side and rebuild a better economy.

Now, I agree 100% with Peter Schiff in his advice to pull out as much money possible from your home equity, and invest it in silver, gold, or his high dividend paying foreign stocks. Now is a fantastic time for doing just that. My wife and I have a fully paid off house, but to be completely honest we are not actually _doing_ what Peter Schiff advises. There _is_ some real risk involved with that approach. You could lose the house. It's been said markets can remain irrational longer than you can remain solvent. We have two kids that are going to a nearby school they like, we're sort of invested in this community and I'm not in a mood to leave, and I love the house and environs. So for us the possible benefits do not justify the risks.

But for someone else who has some equity in a house, but has no dependents (kids), or perhaps just a wife (or husband), and is young and mobile (willing to move where the jobs are), it might make a great deal of sense. If you're probably going to be losing your house anyway, due to economic depression combined with falling home values where the debt owed exceeds the market value of the property, it's a good idea to think about how you can capitalize on the situation. If you're going to default _anyway_, it makes no difference how _deep_ the default is. So cash out if you can, buy things of real value, and tuck 'em away somewhere they can't be attached.

Peter Schiff talks about a couple that bought a house in California, perhaps San Diego. They kept refinancing and getting cash out, all during the insane runup in housing prices. They bought two expensive luxury cars for themselves. They took enough cash out to actually buy a house in Texas outright -- no debt at all. Finally when housing prices turned around, they just walked away from the situation. The bank foreclosed and now owns the house. But they own all their goodies, free and clear, and can make a good life in Texas. That's the kind of young ingenuity America needs, because that will help kill the debt based society.

I'm more conservative, I've got a family. I'm not looking to make a killing on investments. I'm interested more in preserving wealth than in massively growing it. The house isn't the only asset we own. We're very diversified. _Something_ will retain/grow in value so we'll be ok.

I think in the coming months and years the most important thing the individual can do is rethink all established norms as regards moral, economic behaviour. In this environment the moral person is going to be left to twist in the wind. You need to adapt! Be creative. And don't worry that you are contributing to this debt based economy collapsing. It's going to collapse anyway even without your help. All your efforts to preserve the system, through being a good slave (and I can think of another word starting with "N" that fits the concept I'm trying to convey better, but it's an ugly word), will be wasted, and in fact will only serve to help the very corrupt leeches that are responsible for the USA becoming what it has become anyway.

I hope I've elaborated on my position better. Thanks for reading!

-Dave

I have a tonne of credit available now because I refinanced my rental property and now I just have empty cards with massive credit limits and very low rates.  I am also getting those teaser cheques in the mail a lot. I was thinking about getting some gold with those cheques.  Maybe silver too. If i keep using those transfer thing, i would never have to pay more than 3.9 on any debt. 

I actually lied to them about how much money I make so I could buy property in the past, so now I have really high limits on my cards, considering I am just a teacher-on-call.  Maybe this could work out okay for me. 

However, I am in Canada, and I wonder if the effects will be nearly as bad here.

What do you think I should do?

The general theme is that the USA is going to experience hyperinflation.

Oops, sorry, I forgot to elaborate on this.

I want to demonstrate that hyperinflation is inescapable for the USA. Ok, here goes:

The US Federal government is in charge of the printing of dollars (via the Federal Reserve, a quasi-government agency. Basically there is no distinction between the Federal Reserve, JP Morgan, and the US government -- they're all the same den of thieves and members circulate amongst all three groups without any problems). The US Federal government has been running growing budget deficits for decades now, and the level of the deficit is growing (monstrously, actually, in recent months.) The accumulated debt is growing it an accelerating rate as well.

The US Federal government (USFG) has been able to finance operations by selling US Treasuries. That's where the USFG says, "Give us some money today, and we'll give it back to you sometime in the future. Meanwhile, every so often we'll pay you some money". The USFG never actually pays off this debt. Rather, it issues more debt (IOU's) in order to pay off existing debt. Rolling over the debt and all. The accumulated debt is beyond 10 trillion dollars. It more than doubled during the Bush Administration. And it's growing at an ever increasing rate.

Who buys the treasuries? Foreign nations, mostly. Ones that have trade surplusses and want to store their accumulated wealth somewhere. Hmmm. We've got all these dollars, what to do with them? I know, loan them back to the USA and they'll be worth even more later! The whole thing is based on the premise that the USA will somehow pay off this debt. That somehow the USA will return to actually producing things and stuff again. And all those dollars the foreigners have built up can then be used to buy wonderful things and stuff produced in the USA. But it's not going to happen. Sorry folks, you've been hoodwinked!

OK, so the USFG is spending more than it takes in in taxes. The endless wars, military occupations of 100's of countries and bases throughout the world, the endless entitlement programs and pork barrel politics -- all this costs money. The USFG gets money through 3 routes (not including selling drugs, ala the CIA). The routes are: 1) Taxes -- as in the IRS. 2) Borrowing, as in the issuance of US Treasuries, and 3) Direct printing of money.

The US economy is something like 72% based on consumption and services. People borrow in order to consume products produced outside the USA, or to purchases services within the USA (like restaurants, manicures, lawyers, doctors, etc). The US economy is especially vulnerable to downturn. If people can't borrow anymore or are unwilling to borrow, the whole thing crashes down. Layoffs, unemployment, less money being spent, leading to downsing, layoffs, more unemployment. All this means tax revenues will plummet. Raise taxes? No way! The people wouldn't stand for it. And additional tax burdens would simply hasten the bankruptcies and lead to more layoffs + unemployment.

So #1 is not realistically an option. The taxes than can be levied on the producers in the USA, an ever dwindling subgroup, cannot be enough to cover the money spent by the USFG. If they try to raise taxes too much, they'll find they're voted out of office.

#2 - borrowing. The world is waking up to the fact that the USFG is never going to pay off its debts. Even if it wanted to. And it doesn't. I don't want my kids sadled with onerous taxes to pay for all the debt the corrupt USFG ran up! I'd just as soon see the USFG default. So the rest of the world isn't going to be buying more US debt. Rather, they'll be selling their accumulated treasuries, in order to get _something_ of value, _now_ for them, while the dollar still has purchasing power. This new flood of US Treasuries on the market will either cause a collapse in the price of US Treasuries, or the Fed will go into manic overdrive printing dollars in order to buy them up. A collapse in the US Treasury/Bond prices would feed on itself, and the Fed and US Treasury must at all costs avoid such an outcome. Because when that happens, the only thing possible is option #3

#3 - printing the money. This is the only viable "solution". This is called "Monetizing the debt". It's where the Federal Reserve just starts pumping out dollars and they buy up US Treasuries until they own them all. And they keep going. They'll be the only buyer. But the USFG will still be operating at a deficit, so the Fed will have to keep printing more dollars. Meanwhile people will realize it is very unwise to hold their dollars, as their value will be constantly evaporating, so they'll start getting rid of them and buying real stuff like silver, gold, stocks, commodities, land -- anything _real_. People will demand more dollars for their labor as well. The USFG will have to pay more and more dollars to finance its ongoing operations. So the Fed will be called upon to print ever increasing amounts of money. The inevitable result of all this is hyperinflation. And indeed in hyperinflation the drop in the value of the currency actually exceeds the rate the money is printed. It's more a case of lack of faith in the currency than anything else. Eric deCarbonnel has a very good article on his blog, here: http://www.marketskeptics.com/2008/12/what-is-hyperinflation.html

Now one might argue that the government could simply cut its spending and live within its means. I assert this will never happen. Cut where? The politicians owe their position to having bribed voters with government money. If they cut the handouts, they'll lose votes. Unthinkable! Also the US military machine, a vast sink for money, is the only thing propping up the US empire. It's the fear this military machine instills in the rest of the world that convinces them to play the game by US rules. Cut military spending and the rest of the world escapes US control. Also the US military industrial complex has a vast lobbying arm, probably the strongest one of all, and it will make sure politicians cut everything _else_ first before they even lose one thin dime.

But all recipients of government handouts will cry they _their_ funding can't be cut -- it's simply too important! In the end no cutting at all of any significance will occur. End then there will come a moment, and I honestly think we're already beyond that point, that no amount of budget cutting will be able to stop the dollar collapse. It'll be too late. The game will be over. The USFG will be dead, crippled, and good riddance I say. I doubt very much whether many of the 50 states will mourn its passing. The whole world sees the USFG as a bully, leech and tyrant. They won't shed a tear for its demise.

Hope this discussion of hyperinflation helped.

-Dave

What are your thoughts on purchasing a mobile home park in the US using 80% owner financing?  The owner would be holding the debts, meanwhile you could be renting out the spaces and hopefully adjusting them for the inflation.

>I have a tonne of credit available now because I refinanced my rental property

>However, I am in Canada, and I wonder if the effects will be nearly as bad here.

>What do you think I should do?

I will parrot Peter Schiff's opinion in that Canada will fare relatively well compared to the US. Canada has lots of natural resources. The emerging markets are going to be demanding a lot of those as their own populations turn from savers to consumers -- which will occur very quickly as the dollar collapses and they find their local currencies buy a whole lot more stuff in the world now. And at the same time Americans will be able to buy a whole lot less.

From what you've said, I think if I were you I'd get as much money as possible from the credit cards, buy mostly silver (plus a bit of gold).

Silver vs gold: Ted Butler goes into this a lot. So does Jason Hommel. I like the stance that silver is for men, gold is for kings. The silver price has been pushed down far more than gold. It is selling at 1/77th the price of gold these days. Historically the ratio is closer to 1/15th. When people start escaping fiat currencies, a whole lot of small investors are going to see gold as too expensive, and they'll want to buy silver instead -- so they can get more for their money. Silver and gold will both explode in price (in terms of all the fiat currencies), but they'll also explode in real terms relative to other real stuff like real estate, food, human labor because they've been artificially suppressed for so long. They'll revert to their true market value. And then they'll overshoot like crazy as vast amounts of wealth get thrown at them by people in a panic, billionaires seeking to preserve their wealth. That'll be the time to start selling and buying other stuff cheap, like land + whatnot. These things always overcorrect. There will be a bubble in precious metals. Be prepared for it.

So I like silver better than gold. Physical in your posession is the only certain way of knowing you actually own metal. Don't buy the ETF's or paper silver, they're rife with fraud. Morgan Stanly got nailed for selling "silver" certificates but in reality they didn't own any silver at all. They took the money investors gave them and bought derivatives with it. So people doing their due diligance, seeking to buy silver because they think it's going to go up, find that their money wasn't actually buying silver at all. Keep in mind that if their money had actually gone to purchase real silver, that silver bought would have been removed from the market, and as such the silver price would _have_ to rise. But it didn't it was just a paper game. It had no effect whatsoever on the price of silver. So you need to be aware of this and remember the only true silver is that which you hold in your hands, all else is uncertain and holds counterparty risk or the risk of outright fraud.

Anyway as I said if I were you I'd load up on debt, buy silver + gold (mostly silver) and make minimum payments. When silver explodes in price sell a bit and payoff the debt, and it'll be like you've created silver out of nowhere. I can't imagine the system holding together for many months longer. I'm surprised it's lasted this long!

In your case since you're in Canada I recommend trying to protect your credit rating. If you were in the US I'd recommend not even concerning yourself with protecting your credit rating. The economic disintigration will fall most heavily on the US. I expect the UK will fare just about as badly. But life will go on.

Good luck!

-Dave