It’s All Greek to Me

Greece’s economy has been floundering for quite some time and as the government scrambles to stay afloat, the citizens are protesting those moves in sometimes violent uprisings.  What’s scary is the impact this all has outside of Greece.  In a Reuters article (6/24/2011), “European banks and insurers are scrambling” and “stocks continued to decline and credit default swaps for Greece, Italy and Portugal widened on the renewed concerns about a potential default. The Euro also declined against the US dollar for the third straight day.”

James Neuger (6/22/2011) of Bloomberg writes that,  “…European leaders’ failure to tame a crisis that is entering its 21st month and has world leaders growing anxious over the prospect of a new financial tsunami as they shake off the effects of the last one.”  He quotes Andrew Balls, the head of Pacific Investment Management Company European portfolio management, “The 256 billion euros in aid committed to Greece, Ireland and Portugal have done little more than buy time against a looming default.”  He goes on to say, “If you quarantine Greece, Ireland, and Portugal, take these countries out of the market, have them do their adjustments, then you can buy time for Spain, buy time for banks to recapitalize.”

Greece’s Papandreou and his new government is trying hard to restructure the spending and bring in austerity measures. The people don’t like it.  Protesters line the streets and police are called out to break up the mobs with tear gas.  Neuger writes about “Reform Fatigue” that is now in the streets; support of these floundering economies is fading as well. Some see a split coming for the euro.  The split is between the wealthier northern countries and the poorer ones of the south.  It is now being reported that Italy is facing serious financial difficulties after supposedly healing up from economic wounds in 2009 and 2010.  Moody’s is threatening to downgrade Italy’s credit rating.  A USA Today article (6/24/2011)  says that this “Italy’s  financial system has come under further scrutiny on fears of contagion from the Greek crisis.” The article states that, “The move comes after Moody’s put Italy’s public debt on review for possible downgrade over concerns about low growth and high public debt, which is around 120% of GDP is one of the biggest in Europe.”

It seems that, in today’s global economy, the impacts of one country stumbling are significant.  The investments of banks all over the world which hold the debt of these governments become unstable.  Countries that are stronger and hold investments in many of these powerful banks have to throw their good money after bad. Everyone suffers. An article from TheTrumpet.com (6/22/2011) noted Jean-Claude Juncker, head of Eurogroup – the eurozone’s finance minister, said, “…that the Greece crisis could affect Italy and Belgium, saying that “We’re playing with fire.”” The article went on to state that “The crisis could now be spreading beyond Europe’s most vulnerable nations.  If it continues, even France’s credit worthiness could be in danger.”

So what does this upheaval in European economies mean to us? The U.S. is not far behind.  We’ve been warned about our credit rating.  We have no money left.  We spend more than we bring in.  Our debt is unsustainable.  When (and I do hope it happens) they do initiate the necessary spending cuts needed to get our budget under control, I suspect we’ll see protesters, not unlike what is happening in Europe, hit the streets.  People like the idea of fixing our budget woes but hate it when those cuts hit them.  The alarming thing is that many cities have had to cut police and fire in order to meet their budgets.  That means the cities may have trouble keeping up with the potential issues that could arise.
What do you do?  Here are just a few things to think about:

• Pay off your own personal debt so you don’t get caught up in any interest rate hikes that are likely to come.  Live within your means.
• Become independent: don’t rely on government hand outs in any way shape or form – they likely will go away
• Be prepared for higher taxes, even on your 401k’s (yes, our government has even talked of that)
• Be prepared for angry citizens who don’t like the cuts that will be required

I know I haven’t even come close to covering everything you should do to steel yourself for the economic upheaval I believe is coming our way.  These are just a few things to think about.
Feel free to comment on other good ideas.

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

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

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.

Where is the U.S. Dollar Headed?

 Things have really changed in the U.S. economy since 2007.  The real estate we've held has dropped dramatically, cutting into our networth in the hundreds of thousands. I am thankful for a good job that pays me well, but I don't even begin to assume that I'll have that forever.  I've seen some amazingly talented workers get laid off in the last 2 years.  I've watched them struggle to find jobs, make mortgage payments, and many have filed bankruptcy or simply lost their homes.  We've all heard the stories.  The lines at the food banks get longer each week while our country's leaders borrow more in a misguided effort to stimulate the economy.  Most of us know that with our own household budgets, you cut spending when you can't meet your bills; borrowing more simply leads to a bigger fall in the end.

So what do we do?  Do we sit back and passively wait to see what the Federal Reserve and the White House comes up with to try to save our economy?  Or, do we do some legwork of our own to find out what history can tell us about other countries that have struggled similarly?  How did the people survive when their monetary system crashed?  How can we personally avoid adding to the problem and actually become part of the solution?

Just some questions and thoughts that have been on my mind lately.  I'll post more with links to some research I've done of late.  I know that this is not a popular subject.  We all would like life to go on as it has for decades.  I just really don't think that is going to be the case.  I think the next 10 years is going to look dramatically different than the last 10 and I want to be as ready for it as I can possibly be.

Image: Salvatore Vuono / FreeDigitalPhotos.net