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!
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.
It seems a week doesn't go by when I don't hear of someone warning us that the U.S. debt is out of control and unmanageable, even for our "wealthy" country. I saw an article on CNBC's website that quoted an editorial from the Washington Post. Sheila Bair, the chair of the FDIC thinks the "Next Debt Crisis May Start in Washington".
The U.S. debt is now estimated at about 14 trillion dollars. How much is 14 trillion? According to website http://100777.com/node/455, "The U.S. government spends more than the entire Gross Domestic Product (GDP) of Australia, China and Spain combined. If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills."
There are several great videos out there, but attached is my favorite that helps put this into perspective. Keep in mind that 1 trillion is less than 1/10th of our nations debt!
The U.S. Dollar is the "world currency", and is the currency oil is traded with; has been for many many decades. It is estimated that China has about $1 Trillion dollars in reserves in order to purchase oil and other commodities that trade in U.S. Dollars. Russia is likely in a similar position. If these countries don't need the dollar to purchase oil and commodities, they will dump it, and fast. That potentially means a glut of dollars surging into circulation that lower it in value quickly.
Because the U.S. continues to print our money (fiat currency - not linked to any standard since the early 70's), China, Russia, and several other countries have threatened and even encouraged others to drop the dollar as the world currency. There has been talk of using a "basket" of currencies that include the Yuan (China), the Yen (Japan), and the Euro (though the Euro is also experiencing a lot of trouble due to several Euro-nations huge in huge debt crisis).
What does that mean? It means that the U.S. will no longer be able to sell our supply of U.S. treasuries to pay for our its deficit spending. Of course, QE2 had the Fed creating the money and then using that money to buy their own treasuries! I still haven't figured out the math on that one. Either way, we have no way of paying our debt or paying the interest on our debt.
So what does THAT mean? It means that they'll have to raise interest rates to gather the money back in. They'll also have to print even MORE money so they can make the interest payments on our national debt. Bottom line: INFLATION! Some experts believe it may even lead to hyperinflation.
What does THAT MEAN? That means we need to prepare so we can still function when bread costs $10 a loaf (or more?), gas is $10 a gallon, and your monthly grocery bill triples or quadruples.
So what am I suggesting? Stock up.
Why am I saying this now?
On November 23rd, in the China Daily News, there was an article that China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade. While it is not a wholesale quitting of the dollar from a world-wide perspective, it is two of the more powerful countries making their first HUGE step towards the eventual destruction of the U.S. Dollar, which I believe will have a domino effect on other countries holding U.S. dollars.
Here's just some examples of what I've noticed lately about rising prices. In some cases these increases haven't hit the consumer yet, but they will once the companies can no longer sustain the losses:
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.
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.
