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Did The Fed Handcuff The U.S. Economy To The Euro?

December 5, 2011 by  

Did The Fed Handcuff The U.S. Economy To The Euro?

Last Wednesday’s 490 point run-up of the Dow was a great day for many people. It gave the temporary sensation that things were actually alright with the economy. For others, it provided an opportunity to get out of risky positions at less of a loss, or even a gain. Still others saw it as an equivalent to nitrogen narcosis that divers experience at depth or the warm feeling that people suffering from the later stages of hypothermia feel that makes them remove their warm clothing: simply a short-term euphoric feeling before a predictable end.

One of the main factors credited with the jump in the Dow is the deal that was announced to prop up the euro by continuing to tie the euro to other currencies through low-interest loan guarantees. In many ways, this is like handcuffing yourself to someone getting ready to jump off of a bridge or hoping that the prospect of mutually assured destruction will prevent an enemy from attacking you.

The concept of mutually assured destruction was widely popularized during the Cold War when the United States and the Soviet Union had so many nuclear weapons pointed at each other that both sides knew that launching a single one would escalate to the point at which both sides would be completely destroyed.

At the same time as we were putting a system of physical mutually assured destruction into place, we were putting a system of economic mutually assured destruction into place with Breton Woods in 1944. Breton Woods was a huge nail in the coffin of a U.S. dollar backed by gold, as well as the start of the International Monetary Fund and World Bank. In short, Breton Woods put a framework into effect that would intertwine the world’s economies to the point that future economic failures would be global rather than national or regional.

There are several nefarious components to Breton Woods, but the mad one was that countries wouldn’t be able to attack each other without hurting themselves economically.

Fast-forward to late November 2011. The European Central Bank, the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland all agreed to open up “bilateral liquidity swaps” as needed through February 2013. They agreed to loan each other money at below-market rates. One way to look at this is that the agreement will continually pump money from the healthiest central banks to the sickest ones. There’s a slim chance that this will help make the sickest central banks healthier. More than likely, unless all of the countries involved agree to cut entitlement spending and balance their budgets by spending less than they take in, the measure will just serve to spread the sickness in their economies to the other central banks and ensure mutual destruction.

What will this destruction look like? When will it happen? All we can do is guess. Markets are not rational, as shown by the flight to U.S. dollars last Wednesday and the Dow Jones industrial average going up 490 points. Americans are lucky right now because, regardless of how sick our economy is, other economies are sicker; and their citizens, corporations and even governments are fleeing to U.S. dollars for relative safety.

What can you do? Prepare. The simplest and most powerful thing you can do is to stock up on the items you regularly use. Buy as much as your budget, space and expiration dates allow. Remember, when you buy the things you already use, you can always consume what you’ve stored instead of buying more when you need money. Many people have taken my advice and buy extra food, vitamins, paper products and other consumables from January through November. When December rolls around, they go to their storage instead of going to the store and spend the money they would have spent on supplies on Christmas gifts. It’s a little late to put that strategy into practice this year, but it’s definitely something that you can start doing when January rolls around.

One of the best aspects of taking this fundamental preparedness step is that it will help you regardless of what disaster or survival situation you find yourself in. It won’t matter if your survival situation happens because of economic collapse, pandemic quarantine, terrorist attack, natural disaster, medical emergency, short term breakdowns in the supply chain or the loss of a job. Having a basic stockpile of consumables that you already use is one of the best preparedness steps you can take.

Unique Considerations For Winter Driving Preparedness

Winter is upon us, and along with winter comes cold — or at least cooler weather and greater consequences in the event that you have an emergency while in your car.

Whether it’s hitting an animal, getting a flat, running out of gas, driving in a blizzard, having mechanical issues or experiencing something else, cold weather is a factor that can take any one of these situations from being a minor annoyance to being a life-or-death situation.

I’m not going to go into the details of what you want to have in your car preparedness kits and/or first aid kits in general, but I am going to talk about some items to consider keeping in your car during the winter.

  1. Hand, body and/or foot warmers: Buy pouches that heat up when exposed to air. You can put the small ones in your gloves or boots or the big ones in your coat or sleeping bag. I never truly appreciated these until I found myself in a situation in which my hands were too cold to start a fire. Jumping up and down and running around may help warm your hands, but the combination of activity and glove warmers do it a lot quicker. The larger pouches, called body warmers, are a much better option than using candles or other fuel-based heaters in a car. They will last 10-15 hours, and you can put them inside of your clothing so that you absorb as much of the heat as possible. While 100-hour candles don’t put out much carbon monoxide, I would feel much more comfortable going to sleep in a car being warmed by a body warmer or a couple of hand warmers than a candle.
  2. Blanket(s): I prefer wool, synthetic or one that has one side that’s waterproof or water resistant. The waterproof and water resistant ones are normally sold as picnic blankets. They are very handy for giving you a dry place to sit on wet grass, snow or pavement.
  3. Emergency reflective blankets: You can use the inexpensive, compact, Mylar® ones, but SOL™ has some great alternatives that are quieter, more flexible, less likely to rip and suitable for multiple people.
  4. Trash bags: Trash bags are almost, but not quite as multifaceted as duct tape. In a winter survival situation, you can use them as a moisture barrier to keep you dry when sitting or lying on snow. You can melt snow in them on a sunny day (although you will get a significant number of nasty chemicals in your water from the plastic that affect the taste and quality of the water.) You can use them to make improvised rain or snow gear. You can stuff them with leaves, crumpled paper or other debris to make an improvised sleeping bag. You can even boil water in plastic bags over indirect heat, although you have the same chemical-leaching problem that you have with melting snow. One other timely benefit: If you find yourself in a 60-100 mph sustained-wind storm, like what Utah had last week, a set of improvised trash bag clothes will protect you from the bone-chilling effects of cold wind.
  5. Warm clothes, coveralls, socks, gloves, hat and boots or shoes: This is especially important if you wear heels or dress shoes, drive to the gym in workout clothes or ever find yourself leaving the house during a warm time of day and expect to come back at a cold time of day.
  6. A way to make warm drinks: This means having a fire source, liquid and a container. Here’s why this is so important. Let’s say you have a gas camping stove and you have two options: Run it for one minute close to your body with your hands as close to it as possible to get warmed up or run it for one minute to heat up a cup of water that you’ll hold in your hands and put into your body. Heating, holding and drinking warm water will convert a much higher percentage of the fuel to perceived and actual body warmth than simply warming yourself by the fire for a minute.
  7. A standard shovel or camping shovel: Carrying a standard shovel has saved me from a long, cold walk more than once when I found myself trying to drive through a fresh snowdrift during or shortly after a blizzard. Speed and aggression are vital in this situation, as you’ve got an incredibly short window between when your vehicle starts compressing the snow, it melts and starts to re-freeze, perfectly forming to the contours of the bottom of your vehicle. In situations like this, a long, sturdy handle not only makes the job quicker, it also allows you to keep your arms out from under your vehicle, thus keeping you safer. Of course, there are less extreme reasons to have a shovel with you: excavating to make changing a tire simpler, digging a hole for a fire, using as a defensive tool, scooping gravel and/or rocks under or in front of your tire if you’re stuck.
  8. A sturdy snow scraper and brush: This isn’t much of an issue if you’re not in snow-and-ice country; but if you do run into ice and snow, the bigger and stronger your scraper and brush, the easier life will be.
  9. At least a half tank of gas at all times. There’s nothing like the sinking feeling of running out of gas and realizing that the only reason it happened was because of a series of bad choices to postpone filling up — except for running out of gas when it’s freezing cold outside. The combination of no fuel and cold weather is another case where a simple inconvenience can quickly turn into a survival situation.

You can also carry salt, sand, kitty litter or a number of other items with you to help with ice and snow. Because of the effect that cold weather has on batteries, we make sure our battery jump packs are charged and in our cars when the temperatures get below freezing.

What other winter-specific items do you carry in your vehicles? Please share your thoughts by commenting below.

–David Morris

Dr. David Eifrig Jr.

is the editor of two of Stansberry's best advisory services. One of his advisories, Retirement Millionaire, is a monthly letter showing readers how to live a millionaire lifestyle on less than you'd imagine possible. He travels around the U.S. looking for bargains, deals and great investment ideas. Already his average reader has saved $2,793 since 2008 (documented in each Retirement Millionaire issue). He also writes Retirement Trader, a bi-monthly advisory that explains simple techniques to make large, but very safe, gains in the stock and bond markets. This is a pure finance play and the reason Porter Stansberry loves having "Doc" on the team. Doc holds an MBA from Kellogg and has worked in arbitrage and trading groups with major Wall Street investment banks (Goldman Sachs). In 1995, he retired from the "Street," went to UNC-Chapel Hill for medical school and became an ophthalmologist. Now, in his latest "retirement," he joined Stansberry & Associates full-time to share with readers his experiences and ideas.

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  • s c

    David, I think you’re close enough to the truth to say you’re right. I look at it in terms of of an economic warfare decision. Instead of sucking America in via foreign military intervention, we’re being sucked in via an economic version of foreign intervention.
    Remember, we’re ALWAYS dealing with a private corporation that’s gone stark, raving mad. Little Bennie Bernanke and his international, central banker bunkies are trying to give America the same
    central banking-style monstrosity that Churchill and FDR gave us before our involvement in WWII.
    It amounts to another Atlantic Charter. What it says and what it does are two different things.
    The prostitute media will eat it up and sell it, too. It might give some temporary relief, but it will later seem more like a Pandora’s Box or a ticking time bomb. As FDR said, “in politics, NOTHING happens by accident.” It was one of the FEW things he said that was consistently true.

    • Sirian

      Yes, I agree, things are moving in the wrong direction. Shoot, another Breton Woods planning took place but no more than a month past. Only this one was, shall we say, supervised by Soros – need anymore be said? The only problem that remains is that day to day people don’t understand what’s taking place and unfortunately the same, in to many instances, don’t really care right now. Once the bottom falls out of everything, which it will undoubtedly do, then if you aren’t prepared, be it winter or otherwise, stand by, the unwitting cornered animals will attack.

      • wandamurline

        Lock and load…you will need to have a few guns, know how to use them, and put up some amno, not only for hunting for food for yourself, but to protect yourself from the ones that want to take what you have…Occupy Wallstreet on sterioids.

  • home boy

    move south and youn won’t have to deal with the cold.

    • Lastmanstanding

      Keep in mind that if your moving anywhere, you should also consider an area where good people are heavily armed.

      • Al Sieber

        Yeah, like Arizona.

      • Sirian

        This is something the bankers don’t fully understand. They assure themselves that their safety is secure but they may run up against an uncontrollable – very heavily armed – clientele in the not so distant future. I’d prefer it not come to that but the way they are playing with everyone, eventually, somewhere, sometime, they will be brutally confronted. Got any spare ammo?. . . ;) Just kiddin’

  • Raye

    Some of the items I missed is toilet paper, extra spare pair of eye glasses & sun glasses, a knife, can opener, a pack of matches in a water proof baggie or a full propane lighter. Many automobiles have glove boxes plenty big enough to contain these items especially if they are not full of unesential like old bills and papers that serve better if kept in a drawer at home.

  • JB

    Continuous “thinking” (as compared to oblivious day to day living) & preparation review on a regular basis is the only effective process.
    Hoarding is useless in the event of a tornado or tsunami – - -
    What works in Minnesota might not be of any value in Florida – -

  • peter

    We can also remember that when the brightest end the best feed us with nonsense that things are better than expected they are lying and when they remark that things are not as bad as we think, they are still lying. They know what to expect and it’s not too good so they have to keep on lying to protect their own lying backsides. They have lied so much that it has become the norm. Telling the truth is quite beyond them. They are cursed by their lies and will weave a web that will certainly be their demise. Bet on it.

    • Old Henry

      If they told the truth peter, they would have long ago met teir demise.

  • http://google Sandra Henley

    David: Thanks for keeping us updated on the banking cartel. Not much we can do to eliminate this stage 4 cancer. However, I appreciate your tips on surviving whatever. It’s just me and my dog. I have been getting food, water, blankets etc. Now I am going to invest in a six shooter. Planning to check out your web site. Best of all, keep praying, sometimes God will intervene and help us.

  • Suze649

    We need someone who will do away with “the Fed” and let America be free again.

    • Old Henry

      Two word answer for that Suze: Ron Paul.

  • Buck

    If there was EVER a time for a little isolation this is it . Elect RON PAUL for PRESIDENT !!

  • Wyrdwolf

    I plan on voting for Ron Paul myself, but he is just one man and we need so many more just like him in all parts of our Government to get this mess straightened out. The big problem is that the Psychopaths have taken over taken our banks,corporations,and all aspects of government. We stand on the brink of outright Holy War with Islam, and the rest of the world wants us to give up our guns and our last few remaining civil rights.
    If Ron Paul doesn’t become Prez then we can quite working go on welfare and get some extra time to prepare for the worst, drive up the cost of government and be ready when it all falls apart.

  • RWT001

    All of the bravado about getting a gun to defend against upcoming anarchy is false security. It won’t provide individuals with protection against mass uprisings.

  • wildmann

    At least if yer Armed, you can take some o’ the Leech-Recipients With Ya when you finally get Bum-Rushed!!

  • Old Henry


    Your statement of healthy banks loaning to sickly banks is, in my mind, akin to going to your neighbor’s house when they are all deathly sick with the flu and the purpose of your visit is to catch their flu to make them well.

    In the end EVERYONE gets sick as the perverbial dog and the only “cure” is to let it all run its course. The same should happen with the banks. However, that is the way of liberalism – bring down the fit (producers) by making them contribute to the sickly (non-producers). In the end WE ALL LOOSE.

    Your advice about the long-hankdled shovel brought to mind an incident my dad had in January ’65. He traveled for a living and drove Ford station wagons to carry product. He had a brand new 1964 Ford Country Sedan and got caught in a storm as he headed home at the end of the week. He was coming up a very long, fairly straight stretch of IL 29 south of Peoria. The highway was badly drifted, but they were some distance apart. He was able to hit about 70 mph between drifts and blast thru them due to approximately 2,000 lb of merchandise he had in the wagon behind the front seat. He told me that as he exited each drift he was down to about 30 mph and he would floor the 352 4v to 70 again. When he approched the tee intersection with IL 136 he had to stop and make a right turn. He said it took him about 10 minutes as he could only turn the front wheels left / right about 1/8 turn and had to back up / go forward over and over plus dealing with the snow drift at the intersection. Once he got to Pekin (outside of Peoria) he pulled into a gas station and had them put the car up on the lift. (Remember those?) The front wheel wells were completely packed solid with snow as were the rear ones. They popped the hood and the entire engine bay was packed tight with snow. As I remember Dad told me the guy charged him $5.00. To make things worse most of the trip was after dark as he did not head for home after his last call until about 4:00 pm.

    Even if he had had a long-handled shouvel I don’t think he would have used it. The normal car / station wagon / driver would not have gotten thru those snow drifts. Dad was very late getting home as he still had about 90 miles to go after Pekin / Peoria, but he got home okay and it was a good story for a 13 year old kid to hear from his dad.

    It wasn’t too many years until I was trying the same thing with mom’s 64 Galaxie – and getting stuck – but that was part of the fun. and then doing the same thing with my old Fairlane. I never carried a shovel either.

    Sheesh, I’m startin’ to tell stories like my grandad did…

  • ROGER, Canadian Libertarian

    SUPPORT for the Euro is just another move towards a “One Western currency”.Originally the concept was a “One World Currency” but China and Russia may be “monkey wrenches” in the TOTAL “ONE AUTHORITARIAN Government” Regime!

    Ironic that our “saviours” NOW were once considered ( and still are?)
    Western ENEMIES..of course that was when U.S. propaganda convinced MOST AMERICANS ( and others of the Western world)that the U.S. can do no wrong :-)..what a joke, eh!!!
    …..Damn those Pinkoes,Lefties, bleeding hearts..if only they had spoken “AMURRICAN”…why can’t they have Socialism the American way:-)


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