Ten Steps to Safety

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steps2safety

(January 2013)

  1. The best time to start preparing was about a decade ago. The second best time is today. Make a plan and act. Start by reducing living expenses and eliminating credit card debt.
  2. Expect sweeping changes! I hope the inevitable currency collapse is slow and gentle, not rapid and destructive, but history suggests rapid and painful are more likely.
  3. Phase out of paper assets and into something real. Gold, silver, diamonds, farm land, rental property, and buildings come to mind.
  4. Perspective – Perspective – Perspective! It is better to be early than late. It is better to trust yourself than to depend upon a government agency for your food and shelter. To whatever extent you can, take charge of your own financial affairs, savings, and retirement.
  5. Plan on huge inflation in consumer prices for food, energy, transportation, medical costs, and more.
  6. The middle class will be hurt the most. Those who plan and prepare will, as always, survive and prosper. Make a plan!
  7. Government control over the economy will increase. Surveillance on individuals will increase; there will be much less personal and financial privacy. Act accordingly!
  8. Social change will follow a currency collapse. It might be violent. The government is preparing in many ways for social violence. Are you?
  9. Currency induced cost-push inflation appears inevitable. When? As a guess, well before 2016. Gasoline costing $8.99 or more per gallon is a distinct possibility. Don’t discount this just because it sounds extreme. It might be a low estimate.
  10. Economic manipulations, mal-investments, and unsustainable policies will self-correct. Plan on corrections and adjustments that will bring painful consequences. The bigger the bubble, the more catastrophic the collapse and the larger the collateral damage. The sovereign debt and paper money bubbles appear VERY large and ready to pop.

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Why are these ten steps necessary? Consider what I believe are facts:

  • Our financial system, as it currently operates, is unsustainable. Unproductive debt cannot exponentially increase forever. I assume this is obvious to almost everyone. Jim Sinclair says, “The financial system is simply FUBAR. It is that simple. The reason to own all things gold is that simple.” FUBAR has several meanings, but my interpretation of FUBAR is: “Fiscally Unbalanced Beyond Any Reconciliation.”
  • The U.S. government deficits are, on average, larger every year. This means that the total (official) national debt is not only increasing each year but also that the rate of increase is accelerating. Since 10/1/2000 the national debt has increased about 9.1% per year, but since 10/1/2007 it has increased 12.2% per year. Worse, this is only the official debt and does not even consider the net present value of unfunded Social Security, Medicare, Medicaid, and government employee pensions and liabilities. Depending on who is calculating the liabilities, the total unfunded liability is approximately $100 Trillion to $230 Trillion and the annual increase is perhaps $7 – $11 Trillion. (The entire U.S. GDP is about $15 Trillion per year – for comparison.) This will not end well.
  • In essence, the above two facts are incompatible – hence an economic train wreck is in process. What could happen? Follow the logic here.
  • When there is too much of something, it loses value. If we have too many eggs, the price drops. If too many autos are for sale, there will be lower prices for autos. Central banks around the world are currently producing amazing quantities of dollars, euros, yen, and most other unbacked paper currencies. Hence, their value will decrease against the commodities we need for survival – food, energy, and so forth.
  • There is too much debt in our financial system, whether measured in nominal value or as a percentage of GDP. Hence the value of that debt will decline. Some debts will default, bonds will decline in value as interest rates inevitably rise, and other debt will drop in value and purchasing power.
  • Politicians have made excessive guarantees for future benefits to Social Security recipients, Medicare recipients, government pensions, and others. Those guarantees cannot all be delivered as promised, hence they will decline in value and purchasing power, or the promises will not be fulfilled.

Summary

Unproductive government debt cannot increase forever, but our financial system currently depends upon ever increasing expenditures and debt. There are far too many dollars in circulation, more debt than can be repaid, and massive unfunded liabilities have been created by the promises made by politicians. The purchasing power of the dollar must decline, many debts will not be repaid, and many promises for future benefits will be reduced in value or will simply disappear. Hence, the FUTURE income stream from debt-based assets is increasingly risky. A few to consider are:

  • Social Security benefits. The government must borrow or print to pay current benefits. The value (purchasing power) of future benefits will almost certainly decline.
  • Municipal and state bonds and pension promises are increasingly risky. Will more cities and states default on their bonds? Why are their pension plans, on average, increasingly underfunded? Will your pension plan remain safe? Consider moving your IRA into physical gold and silver safely stored outside the banking system.
  • US government 30 year bonds and 10 year notes will decline in price as interest rates rise, and will also decline in purchasing power as the dollar devalues. Why would you lend money (long-term) to an insolvent government at less than 3% interest per year when that government has assured you it will debase the currency and reduce the value of the debt you bought? Is this a financial train wreck in process?
  • Mutual funds and money markets based on bonds and other debt are at risk. If the underlying debt defaults, the value of the mutual funds and money markets will decline. Counter-party risk is real.

Why is debt based future income increasingly risky? The payoff will be delayed, defaulted or executed in mini-dollars after inflation and counter-party defaults have ravaged the purchasing power of those paper debts. We have Been Warned!

Would you prefer hard assets with no counter-party risk? Reread the Ten Steps To Safety, and then take charge of your financial life to whatever extent you can.

GE Christenson
aka Deviant Investor

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17 Responses to “Ten Steps to Safety”

  1. Don says:

    How does a person sell gold if the dollar becomes worthless?

  2. [...] Would you rather trust gold & silver coins in a safe place or paper money and political promises? Most people will do nothing to protect their financial future. Will you? Read now Ten Steps to Safety. [...]

  3. [...] Would you rather trust gold & silver coins in a safe place or paper money and political promises? Most people will do nothing to protect their financial future. Will you? Read now Ten Steps to Safety. [...]

  4. Iman says:

    Thanks for the much needed information. You are very precise and accurate. I am in the process of purchasing both metals. Any suggestions on where I can purchase would be appreciated.

    • I have a list of suggested dealers on the “Home” page of the website: Gold/Silver dealers – underneath “Links”

      Also, there are ads for two dealers on the “Home” page.

      GE Christenson
      aka Deviant Investor

  5. [...] Maintain perspective and remember that investing in silver is not easy if you listen to Wall Street or the media or if you become discouraged on the 40% of the days when the price of silver goes down, even during bull markets. Read Ten Steps to Safety. [...]

  6. [...] Would you prefer your savings in gold, silver, or a savings account? Read Ten Steps to Safety. [...]

  7. angelo says:

    hello , im very impressed with the knowledge im reading here , but i have a different situation that alot of govt workers like myself are involved in. we are enrolled in the FERS system ( federal employees retirement system) , is there any way to move our retirement money out of the system and buy physical metal with it instead ? pleas let me know , there are lots of concerned employees like myself who feel , that wre too young to retire , but want to have a nest egg for the day when the s..t hits the fan . thanks agian look forward to hearing from you
    Angelo…..

    • First, I can only offer an opinion, not investment advice.

      Second, I am not even slightly familiar with FERA so for the most part, I simply do not know what you can and can’t do.

      Third: The best I can suggest is find someone with excellent knowledge and obtain their opinion.

      Fourth: IF FERA operates like many other retirement plans – and I don’t know if it does or does not – then the only way I know to remove money from the plan is to move to another job not covered by FERA and then rollover your retirement funds into a self-directed IRA. This may not be relevant to your circumstances – I simply do not know.

      I’m sorry that I was not able to address your question with specific and detailed knowledge of FERA.

      GE Christenson
      aka Deviant Investor

  8. Mike says:

    Help! With the coming BOnd Bubble … does that effect the government paying out on (matrued 18-yr) EE BONDS? Should I cashs them in immediately or over some period of time.
    My problem is if I cash them in it puts me in a higher tax bracket …. but I can not afford to loose the cash. Thx!

    • Difficult question. First, I am not a certified as a financial planner, so I am only offering opinions, not investment advice. Second, if I understand your question, you are concerned that the US government will not repay on the bonds, and you are concerned about the timing for cashing in those bonds, and you are concerned about taxes on the earned interest.

      1) I think bonds are in a bubble – but that does not mean they will NOT be paid off. Their pre-maturity value will decrease (particularly 30 year bonds) when interest rates rise. But I think the govt is a long way from NOT paying on those bonds.

      2) But you must ask yourself, what will the money be worth when they do repay the bond? If inflation is 10% per year and the bond is paying 2% per year, the bond is declining in value and purchasing power every year. That process might accelerate in the next few years.

      3) Would the money be put to a better use elsewhere – say in gold coins in your possession – than in bonds which do not keep up with inflation?

      4) Your taxes are between you and your tax professional, but you still need to consider if the tax hit today is worth the future return. Example: Maybe you cash some bonds, pay the taxes, put the money in gold, silver, land, whatever, and then watch that physical asset appreciate each year, instead of watching the bond lose purchasing power each year. Is it worth the exchange? It might be.

      I hope this helps. Bottom line: take care of yourself and consider moving money out of bonds that are losing value each day and into something which will preserve your purchasing power.

      GE Christenson
      aka Deviant Investor

  9. Bob says:

    Another great article. Regarding debt -the only item I have debt on is my house. I struggle every month, do I pay extra on the mortgage or do I buy a little gold/silver. I am sure there is no one correct answer, but in your opinion should I try to get the mortgage paid down/off or continue trying to get silver while I can. Thanks and blessings.

    • Thank you for your question. You are correct, there is, in my opinion, no simple answer. My suggestion is to consider it in two ways. First, does the existence of your mortgage cause you much anxiety? If so, then work to pay it off. Second, does NOT investing in silver/gold cause you anxiety? If so, which anxiety is worse?

      From my personal perspective, you can buy silver and gold with dollars today that will become worth much less in the future, so the gold and silver will be worth much more in the future. They are an excellent investment, in my opinion. The mortgage will be paid off with continually less valuable dollars, so paying it now is not a good investment, unless it causes you major anxiety just to keep paying it every month.

      Clearly, I am in favor of not paying off the mortgage early, but that may not work well for your emotional state. I’m happy with a mortgage.

      GE Christenson
      aka Deviant Investor

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