The Euro has a 1 in 5 Chance of Survival

We've all heard of the chaos in Europe.  Several countries are in economic crisis and required cuts have citizens rioting in the streets.  The climate becomes very dangerous when the people demand the handouts they are accustomed to and yet the government can no longer afford to keep them up.

A December 31, 2010 Reuters article predicts that the Euro only has a 1 in 5 chance of surviving the next ten years.  It quotes CEBR Chief Executive Douglas McWilliams who says, “"I suspect that what will break up the euro will be the failure of most of the countries to take the tough medicine necessary to make their economies competitive over the longer term.”

It is not just the U.S. Dollar at risk here…

If You Have It - It Has Been on a Truck

If You Have It - It Has Been on a Truck. I heard that saying years ago and now found some information that actually shows some of the details that actually might support that claim. My research this week took me to the American Trucking Association website where I learned some very interesting facts that also made me go hmmm....

Did you know:

• That the The U.S. trucking industry is comprised of more than 214,000 for-hire carriers and more than 276,000 private carriers, 95.9 percent with fewer than 20 trucks?
• More than 80 percent of U.S. communities depend solely on trucking for delivery of their goods and commodities?
• In 2006, the trucking industry hauled 10.7 billion tons of freight, or over 69 percent of total U.S. freight tonnage. Rail was the next busiest mode moving 13.3 percent of the nation’s freight tonnage.

What would happen if the trucks in America are slowed down, or worse yet, stopped entirely even for a short span of a week or two? What if those small trucking businesses that represent a large percentage of the trucks, can't afford to stay in business? That would leave us with only a franction of our existing trucking companies bearing the brunt of ALL of the trucking requirements! Not so good.



The American Trucking Association website had  a file available called "When Trucks Stop, America Stops" (downloadable Adobe pdf file) that outlined some pretty amazing scenarios for our economy, food supply, manufacturing, banking, and even just plain retail, should a disaster, either economic or natural, disrupt the trucking industry.  I highly recommend reading it.  They state "The unimpeded flow of trucks is critical to the safety and well-being of all Americans. However, it is entirely possible that well-intended public officials may instinctively halt or severely restrict truck traffic in response to an incident of national or regional significance." 



I took it a step further.  What would happen when these small business owners can no longer afford the fuel to keep the trucks running? What happens if/when inflation hits and fuel prices rise to such an extent they can no longer operate?



In 2008 when fuel prices skyrocketed, there were wide-spread concerns about independent truckers going out of business because they simply couldn't operate when diesel was bumping $4.00 a gallon. (see WKRG article here). CBS reported that Truckers even converged on Washington D.C. to protest record high gas prices in April of 2008. A 2008 article in the Orlando Sentinel stated, "Consumers may not realize it, but the rising price of diesel is hitting their wallets, too, as the prices of groceries, clothes and other goods are tied to transportation costs. 



"Everything that you see in the supermarket has to travel by truck," said Clayton Boyce, spokesman for the American Trucking Associations. "Everything you see in the mall has to travel by truck."



We probably all remember the fuel surcharges that airlines began to impose on travelers, later to be exchanged for permanent baggage fees, in order to maintain profitability.



Did you know that even safe drinking water is at the mercy of the trucking industry? The American Trucking Association's article goes on to say, "According to the Chlorine Institute, most water treatment facilities receive chlorine in cylinders (150 pounds and one ton cylinders) that are delivered by motor carriers. On average, trucks deliver purification chemicals to water supply plants every seven to 14 days. Without

these chemicals, water cannot be purified and made safe for drinking. Without truck deliveries of purification chemicals, water supply plants will run out of drinkable water in 14 to 28 days." 



Also think about who will deliver:

• Fuel to the airlines what will also ship mail, manufactured good, and supplies
• Medical supplies, medicine to hospitals and pharmacies
• Waste removal - garbage
• ATM's - a typical bank replenishes its ATMs via armored truck delivery every two to three days

The conclusion of the American Trucking Association's report was that "As demonstrated by the analysis of just a few key industries, restricting or shutting down all truck operations in response to a natural disaster, elevated threat level, terrorist attack, or pandemic will have a swift and devastating impact on the food, health care, transportation, waste removal, retail, manufacturing, and financial sectors."  (I notice that they don't mention any kind of economic disaster, like inflationary fuel prices that potentially eliminate many small trucking businesses.)



So what happens if truckers can't afford to stay in business? What if they can't afford to fill their trucks with fuel and deliver the 70% of America's goods? What if there is a disaster and trucks are forced to stop due to federal, state, or local edicts? Are you prepared for empty grocery shelves?  Or ATM's that don't have money to dispense?  Your prescriptions available at the pharmacy?  Or if gas stations that haven't been able to get a delivery of fuel in for days or even weeks?



Do you have your "insurance policy" of emergency preparedness in place?  Do you have a supply of food and water?  Have you thought of making sure you have enough cash on hand to last for several weeks? Have you considered what you would do if you couldn't buy anything at the store for weeks on end? Are you at the mercy of trucks?



Image: Bill Longshaw / FreeDigitalPhotos.net

Food Prices are Starting to Spike

From an article today in the Seattle P.I. (Syndicated from the San Francisco Chronicle)


Food prices rise sharply -- and there's more to come
By STACY FINZ
SAN FRANCISCO CHRONICLE
For the first time since 2008, inflation is hitting consumers in the stomach.
Grocery prices grew by more than 1 1/2 times the overall rate of inflation this year, outpaced only by costs of transportation and medical care, according to numbers released Wednesday by the U.S. Bureau of Labor Statistics.
Economists predict that this is only the beginning. Fueled by the higher costs of wheat, sugar, corn, soybeans and energy, shoppers could see as much as a 4 percent increase at the supermarket checkout next year.
"I noticed just this month that my grocery bill for the same old stuff - cereal, eggs, milk, orange juice, peanut butter, bread - spiked $25," said Sue Perry, deputy editor of ShopSmart magazine, a nonprofit publication from Consumer Reports. "It was a bit of sticker shock."
But it makes sense. Since November 2009, meat, poultry, fish and eggs have surged 5.8 percent in price. Dairy and related products have gone up 3.8 percent; fats and oils, 3 percent; and sugar and sweets, 1.2 percent.
While overall inflation nationwide was 1.1 percent, grocery prices went up 1.7 percent nationally and 1.3 percent in the Bay Area, said Todd Johnson, an economist for the Bureau of Labor Statistics office in San Francisco. "The largest effects on grocery prices here over the last month were tomatoes, followed by eggs, fish and seafood."
There's more.  Read the whole article here: http://www.seattlepi.com/food/431969_foodprices16.html

Buy Now!!

Just a quick heads up on things you should probably buy up now if you can because prices are going up:

• Food items made of sugar, wheat, corn, and soybeans. Articles here where experts are warning of rising food prices. San Francisco Chronicle states that "Grocery prices grew by more than 1 1/2 times the overall rate of inflation this year," and go on to say that experts predict that is only the beginning.  Here's another article specifically about sugar prices.  Bloomberg quoted the Wall Street Journal back in October that General Mills, Kraft and others are raising their prices on cereals due to rising prices in grain; another article talked about corn as the "other gold" that was going up.
• Clothing.  Cleveland.com reports on higher cotton prices.  The article states, "The problem is a classic supply and demand imbalance, with the price of cotton rising almost 80 percent since July and prices expected to remain high. "World cotton production is unlikely to catch up with consumption for at least two years," Sharon Johnson, senior cotton analyst with the First Capital Group, said in an e-mail."  Another article in CNNMoney says "Attention T-shirt fans: Bag those deep discounts now because come January, stores could have you paying more for your favorite clothing."  They say that Cotton prices have nearly doubled this year, and have hit almost 15-year high.  This as a result of multiple factors in the Asian cotton producers sector that has resulted in a problem with global supply.

What do you do?  Buy up some food items in bulk now before the prices shoot up too high.  Store them in your cupboards so your grocery bill doesn't get out of hand later.  Focus on things like sugar So go buy up the t-shirts, jeans, socks, and underwear now.  It looks like we'll see those prices start to shoot up right after the first of the year.  If you have children, buy jeans and shirts in several sizes so you're good to go for the year.  Hit those after-Christmas sales hard and you'll be able to keep your budget in line even though these prices shoot up. Happy shopping! Image: renjith krishnan / FreeDigitalPhotos.net

CNBC in 2006 - No One Believed

on CNBC Peter Schiff predicted our economic woes back in 2006 and even talked of the mortgage meltdown.  Again he talked in December 2006 on Fox News.  On each show other guests, who were experts, disagreed with him, argued with him, and one even made a bet with him!  Peter, I hope you collected on your bet. 

Ben Stein, you remember him (he's on lots of commercials) said that the sub-prime mortgage issue was only a "tiny" problem.  Peter Schiff fired back saying that "this will be an enormous credit crunch."  The others continued to argue.

Guess who was right? If you can't see the video below click here: http://www.youtube.com/watch?v=2I0QN-FYkpw

The Weather Outside is Frightful...Let it Snow, Let it Snow, Let it Snow!

The Puget Sound area has been warned.  The Seattle Times had an article on December 3rd: "Prepare for a cold, windy La Niña winter, officials warn".  The article states "Seattle and the Pacific Northwest should brace for a colder and wetter than average winter due to the the effect of La Niña."  That's only one of several similar articles I have read in the last several months with the warning.  Well we have seen both the snow and tons of rain so far.  There are flood warnings for the Puget Sound for this second weekend in December.  And, we were lucky to also have our first snow storm before Thanksgiving this year.  That was a rare and beautiful occurrence.  Our temperatures even dropped to the teens. 

Well, I absolutely LOVE snow.  I find myself in the minority among my co-workers.  Most of my colleagues shudder when our highly-paid-and-frequently-inaccurate meteorologists predict snow in our area.  People go nuts.  Our freeways turn into parking lots and TV reporters stand on street corners all over the area showing snow in the lamp light and showing how deep it is in Monroe, North Bend, Washougal, or Olalla.  The schools close, libraries close, furniture stores close, and people rush to leave work early.   The radio and TV become minute-by-minute relayers of the closures.  I don't know if the insanity comes from the fact we don't get enough of the white stuff in a typical year for anyone to keep snow gear in their cars and learn how to drive in the stuff, or if it is because the terrain is so hilly and our DOT doesn't have a lot of snow removal equipment (so very rarely needed).  Regardless, the situation gets dire around here. 

But I love it.  I love the quiet sound of the snow falling at night.  Sometimes you can almost hear it.  I love the crisp crunch of snow under my feet.  I love the sound of kids, off of school, playing in the snow; laughing, shouting, throwing snowballs and making forts and snowmen.  It's a spectacular.

I'm also very glad we have prepared for the accompanying power outages and inability to make it to the store when the roads freeze over or they are closed due to flooding issues. 

Here's some ideas of things to do to prepare for the wintery weather we're predicted to have (compiled from a variety of sources (East Pierce Fire & Rescue Newsletter, Seattle Times, and Red Cross).  I won't re-create the must-have lists that you can find all over the internet, but here's a few other things to keep in mind:

1.  Keep your car fueled up.  There were many stories of cars running out of gas during the November snow storm as they sat in their cars in traffic.  Keep blankets and some snack bars in your car in case you get stuck.
2. If using a generator or other heat source make sure it is properly vented so fumes don't build up.
3.  Keep food, water and cash on hand to last at least 3 days minimum (FEMA and Red Cross recommendation).  However, I don't think 3 days is enough for around here. I would recommend that everyone have 7 to 10 days minimum given that there are times when power outages last much longer than 3 days.  If you are in an area with widespread outages, the cash machines and cash registers may not work, so having cash on hand is important to purchase items as you run out.
4. Keep a first aid kit fully stocked.
5.  I heard suggested that those little headlamp LED lights are very useful for power outages so you can still use your hands instead of holding bulky flashlights or lanterns.
6. Make sure you have your prescriptions and other medications on hand to last for the duration of an outage.

Other useful sites:

• Check out the Red Cross site here
• Disaster Preparedness Fact Sheet (from King County) - great source of what to do when disaster strikes for things like: how to find drinking water, what to do in the event of an earthquake, how to deal with hypothermia, etc.

Stay safe!  Stay warm!  Be full! Have fun!

A B C D QE2

A B C D QE2

In my recent weeks of researching what is happening to our economy I heard the term QE2 bandied about.  My first thoughts were that they were talking about the luxury liner Queen Elizabeth 2. But clearly that wasn't the case - it's too old to garner that much attention.  In my cluelessness I decided to check it out. I also asked a few people at work and was surprised at how little we all knew about it. What is QE and what is QE2?  Since it is a #2, obviously it has been done before.  Well, here's what I found out.

QE is an acronym for "Quantitative Easing".  What in the heck is that?  According to the Wikipedia, one of my favorite sites, "Quantitative easing (QE) is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system, generally through buying of the central government's own bonds to stabilize or raise their prices and thereby lower long-term interest rates. This policy is usually invoked when the normal methods to control the money supply have failed, e.g. the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero." 

Well that's alarming.  It sounds like it is a "Hail Mary" kind of move to me.

Wikipedia goes on to say ""Quantitative" refers to the fact that a specific quantity of money is being created; "easing" refers to reducing the pressure on banks."

A September 28, 2010 article in the BBC News website says "Lower interest rates encourage people to spend, not save. But when interest rates can go no lower, a central bank's only option is to pump money into the economy directly. That is quantitative easing (QE)."  Later in the article it states, "The way the central bank does this is by buying assets - usually financial assets such as government and corporate bonds - using money it has simply created out of thin air."  We sometimes hear this being referred to as "printing money" which of course in this digital age is not actually necessary.  No actual printing presses, ink or paper are harmed during this delicate process.

The underlying premise is that with more money out there the banks will be more likely to lend, credit easier to get and people and businesses more likely to spend with the end result of stimulating the economy.

Hmmm...I wish I could just add a couple of zeros to my bank account and use it to pay off my house, buy a new car, or lavish Christmas gifts!  Oh wait.  I can't. That would be fraud; or theft.  Too bad, so sad.

Well QE2 was announced a few weeks ago, so that means there must have been a QE1.  I had a harder time finding definitive info on that but it looks like that occurred in late 2008 and into 2009. I guess that didn't work, so they decided to try again.  which will be done over the next six months and put about $600 billion more dollars into play.

Many countries were not happy about the Federal Reserve Bank announcement.  Weeks before it was official, there were a flurry of warnings that this would cause a currency war (I'll blog on that another time) and started loud international murmurings. (UK, Brazil, China, France, Germany, China).

I've even been reading articles by economic experts who don't think this will work.  I've attached links to a few for your reading enjoyment.

• Keith McCullough in CNN article
• Campbell Harvey in The Street
• Jeff Nielsen in The Street
• Paul Farrell in MarketWatch 

What do you think?

Image: jscreationzs / FreeDigitalPhotos.net

Could We Lose Our Private Retirement Plans?

This has not widely been reported on, but Bloomberg has an article by Zolton Simon reporting on an ultimatum that Hungary has given its citizens: move your private-pension fund assets to the state or lose your state pension.

That's a huge deal for citizens in Hungary.  They either let the state take it or they lose 70% of their own retirement funds!

Argentina also confiscated pension funds in 2001 to help cover its massive debt. 

Did you know that there are those in the U.S. Congress that have actually had discussions on our private 401k plans?  CNBC reported in 2008 titled "Will Democrats Tinker With Mutual Funds, 401k Plans?" The topic has been on the table even before President Obama took office!

Remember that 401k's defer taxes that our government needs so very badly.

Look at the Gold Rush by China!

An interesting article in the Financial Times website pointed out that China has been buying up gold.  The article by Leslie Hook states, "Gold imports into China have soared this year, turning the country, already the largest bullion miner, into a major overseas buyer for the first time in recent memory.

"The surge, which comes as Chinese investors look for insurance against rising inflation and currency appreciation, puts Beijing on track to overtake India as the world’s largest consumer of gold and a significant force in global gold prices." (My emphasis.)

I wondered why gold had gone up and actually hit over $1400 an ounce today!

Image: Salvatore Vuono / FreeDigitalPhotos.net

Why Prepare?

I love to travel.  I got the bug back in 2001 when my mother, sister and I visited Italy.  While it wasn't my first international trip, it was my first real glimpse at how other people live.  Up to that time, my only other international travels had been to Canada and touristy Caribbean hot-spots via a cruise which really didn't give me the true flavor of a different culture.  One thing that I noticed is that, here in the U.S, everything is super sized.  Huge grocery stores, huge refrigerators, big houses, big yards, big cars, and generally just lots of stuff.  The Europeans go to the market multiple times a week, many even on a daily basis.  The majority don't have big homes. They do not have the Costco to stock up in mass quantities, at least that I saw. 

Gone are the days where much of our population was more self-sufficient: growing our own food, cooking, canning, hunting, building, and sewing.  For most of us those only stories from the days of our grandparents and great-grandparents.

Let me pose to you a question: what would you do if you could not get groceries at the grocery store for a week?  What about if you couldn't get groceries for two weeks?  Four?  What if you couldn't afford the food once you got there? 

What types of situations might make this an issue?

1.  Natural Disasters - the Red Cross, FEMA, and other entities all recommend having a minimum of three days supply of food, first aid, water, light, and more.  We never know when an earthquake, flood, storm, or other disaster might deprive us of the ability to head to the store. In my opinion 3 days is very short sighted.  Just days ago we had a uncharacteric snow storm here in the Puget Sound, with temperatures hitting the low teens.  People all over the area had power outages lasting more than 3 days!  I remember the "Inaugural Day Storm" on January 20, 1993, where over 600,000 people lost power; some in outlying areas didn't get power back for weeks. (My boss at the time lived out past Black Diamond and didn't get her power back on for nearly 2 weeks.)

2.  Inflation/hyperinflation - I won't pick Zimbabwe or even Germany's Weimar republic as examples of hyperinflation.  Germany's situation occurred after WWI, and Zimbabwe is a third world country.  I'll pick a country with more relevance: Argentina.  Argentina is not a third world country; at the beginning of the 20th century it was one of the richest countries in the world. It is one of the G-20 major economies and is currently considered an upper-income country. In 2001 Argentina's economy melted down (not for the first time either).  Government statistics show their current inflation rate at over 10% but many private analysts tag it more than 15% .    According to an article in the BBC News, "A deep recession foreshadowed economic collapse in 2001. This left more than half the population living in poverty and triggered unrest."  Internet site http://www.tradingeconomics.com/ has a charting tool that spans multiple years.  It shows that in 2001 inflation spiked to over 40%! (See attached chart). Can you afford even a year with everything 40% higher? I can't.

3.  Food Shortages - http://www.dailyfinance.com/ has an article, that is not even a year old, by Bruce Watson where he quotes popular investor Jim Rogers.  Jim says "a severe food shortage is on its way." Jim spoke with CNBC in an article by Antonia Oprita, and said "Sometimes [sic] in the next few years we're going to have very serious shortages of food everywhere in the world and prices are going to go through the roof."  WorldNetDaily's website has an article that states there may even be a government cover-up of a world food shortage.  The article goes on to say that, "Stores have only an average of 72 hours of inventory on hand and very few families are capable of producing their own food, so even a temporary shortage of food supplies could be catastrophic."  This statement recalls to me news footage of empty grocery store shelves hours before a hurricane or storm is scheduled to hit the gulf coast region.  We've seen the footage where everyone heads for the store for food, water, batteries, beer, and whatever else they can grab that is left.

Below is a 6+ minute video from the National Inflation Association (http://www.inflation.us/) that outlines some of their theories on food shortages in our grocery stores.  They believe that not only are food shortages an issue, but firmly believe we will see hyperinflation within a few short years due to the U.S. economic condition. 

On the bright side, we CAN do things to prepare and be ready.  If nothing happens and life goes on, same-old-same-old, then we simply use up the resources we've gathered.  Nothing lost; peace of mind gained.