So, tell me. Why do I need this Frigidaire?

Spare cash. How many of you have it right now? Raise your hand if you have some…boy, not a lot of hands. The period of time we are entering is something we shouldn’t fear, but we should be very cautious, concerned and level headed. If everything goes to hell and the powers that be flush the toilet, we will all sink. This power is in their hands, not ours. Keeping your head above the water while we circle the bowl is the key. Can we keep up with inflation and can we keep our heads about us? Can you do those things?

I’ve mentioned in many posts in the past that we all need to re-evaluate how we live and how we survive on a daily basis. The way we shop for the necessities of life such as food, and how we get from point A to point B are examples. Some of it is just simple frugal living and some of it is just common sense. The chances of more drastic and desperate changes are possible if you read the tealeaves.

Economists have been giving a lot of conflicting reports on the health of the economy over the past few months. The same economists who just 6 months ago were telling us the housing crisis had “bottomed out” are now saying they don’t understand why the American public is so “negative” toward the economy. Eleven months ago, the Chairman of the White House Council of Economic Advisors, Mr. Edward P. Lazear said, “We believe that the economy is back on track” and that the economy was “recovering and robust”. Just last week the Royal Bank of Scotland (RBS) warned investors that there is a 25% chance of a total crash of the stock, bond and commodity markets within the next 90 days.

The eggheads, waterheads, knuckleheads and greedheads that comment on the state of economic affairs we find ourselves in today, are the same people who led us to this point. None of them can tell us the truth of the matter since the truth is rarely factored into their equations. Get them all into a room and ask them if de-coupling has occurred. They don’t know who’s lying, who’s covering up and who’s hedging a bet or trying to cover a short.

If it weren’t apparent to you when New Orleans drowned, let me clue you in. We are all on our own. Big Daddy isn’t going to step in and save our collective hides. Big Daddy is taking care of himself and will be protected no matter which way the wind blows in the upcoming shit storm. The rest of us Joe 6 Packs will get by as long as we have clarity of thought, and put thoughts into action with a deliberate purpose.

If you have flour, beans, spices and seasonings in your pantry; if you can cook from scratch and don’t mind eating small portions where nutrition is the emphasis. You will survive the worst. If you don’t mind riding a bike, doing manual labor or fixing it yourself; foregoing career for a living wage and having multiple irons in the fire for earning money. You will survive the worst. If you can do those things and have the balls to run in the opposite direction that everyone else is running, you have an opportunity to create the foundation of wealth.

What I am saying is that we have not seen this sort of harsh economic outlook for generations. The prepared will not only survive, but will flourish. Too many people are desperately trying to maintain a lifestyle that they could not sustain in the first place. One by one those people are falling off the cliff into financial ruin. The rest of us are cutting corners, and using those proceeds to prepare ourselves for the upcoming months and years. Until cash as we know it is dissolved into some other form of currency, cash is still king. Those FRN’s will still buy goods and services. Fools are dropping cash into precious metals right now. The demand is high, the cost is high, they are paying with a devalued dollar and they don’t see that. The speculation for food and oil futures isn’t so much a cash cow of the wealthy, as it is a last ditch effort for the worlds financial houses to cover their losses right now.

Go back in history, find the people who made the foundations of their wealth in troubled financial times and you will see the path through this. When everyone is selling, you should buy. When everyone is running to the car lot to buy a hybrid, sit tight on your own car. When everyone is trying to dump their McMansion in the burbs, look at renting, renting to own or buying an unaltered, un-remodeled ranch house. When everyone is grabbing Bisquick and instant rice off the shelves, buy powdered milk, instant potatoes and dry beans. Go against the flow, you’ll pass a lot of scared herd occupants who have no clue of where they are heading.

If you are an “outsider” or have lived an alternative lifestyle for decades, the world is about to come to your level of existence. Be prepared for questions from the newbies. If you are an old hand at thrift stores and yard sales, be prepared for the former Saks Fifth Avenue buyers invading your territory. If you are about to enter our world, leave your attitude and upscale lifestyle stories at the door. We won’t help you with advice if you come to us acting like assholes. I’ve been seeing yuppies acting haughty in the very places they loathe but now rely on to survive.

I hit yard sales and thrift stores every week. I’ve been doing this since the 80’s. Over the years I have picked up antique and vintage furniture for pennies on the dollar. The only new pieces of furniture I have are the mattress I sleep on and the vintage styled La-Z-Boy in my living room. I pay for my gas, food and most of my utility payments every month by selling things I have bought over the years at these sales. I’m saving my best stuff for brighter days, just as I did in the 80’s and 90’s.

The difference between my past yard sale and thrifting experiences and today is that the best stuff is harder to come by than it once was. That will be changing very soon as the folks who paid outrageous money for some things 10 years ago, are trying to dump them in a down economy. I’m waiting for all those Deco armoires that people bought and made into home entertainment centers, to flood back on the market. They think they’ll get $600 for them, just like they paid for it in 1998, but they are in for a surprise when dealers tell them, “You ruined it when you cut a hole in the back to run electrical wires. I’ll give you $50 for it.”

I’m already seeing northside suburban women horrified to learn that the Jadite they bought in 2000, because Martha Stewart had it, is actually worth 1/10th what they paid for it originally. They have no concept that Anchor Hocking made a TON of Fire King and the Jadite line just isn’t rare. It’s actually a bit eye opening to see an educated and apparently intelligent person, look tight lipped and terse when someone walks away from a $160 Jadite compote. I actually saw that at a yard sale. Another dealer who was there with me told her she was being optimistic on her price and said he would give her $15. When she acted mortified the rude bugger told her she shouldn’t try to run an antique store from her garage as he walked back to his van. I wouldn’t have said it, but it was pretty darn funny to see and hear this exchange go on.

Just a few weeks ago I was digging through several boxes of records in someone’s driveway on a Saturday morning. I bought one record for $0.50 and passed up oodles of 1950’s Columbia Masterworks LPs priced at $5.00 each. I asked the owner why the other records were five bucks and the one I found was two bits, the guy said the others were old and you could sell them on eBay, the one I had was new and everyone had it. I gave him two quarters and walked away with a copy of the banned cover version of the “Some Girls” album by the Rolling Stones. How the dude missed the actual value of that album, and how it came into his possession are beyond me. At least it’s now in the collection of someone who knows what they have.

This is the new direction we are heading. Folks are getting desperate, think they can sell things they bought at an over-inflated price for the same price or better, and get pissed off when dealers clue them into reality. The new direction is that anger is building and we have an abundance of over-inflated egos and sense of self in a lot of our fellow travelers. A lot of people bought into the lie that the American Dream is owning stuff and moving up some ladder to more stuff in a bigger house every year or two.

The American Dream, in my mind, has always been the freedom to choose which direction you want to take in life. No guarantees, no promises and if you are willing to take the risk, no safety net. Success has been a greatly distorted word in American society. Success has become a word meaning riches and possessions. Success in my definition simply means raising yourself above your conditions or situation. A man or woman who tries to start and run an honest business, but fail, are successes in my book. They tried, they took the risk and they gave it a shot. The final outcome isn’t always as important as the actual act of trying to make a go of it.

By the end of summer as we feel the first cool winds of autumn arrive, the ladies who are selling some of their mementos of their days at Brown and a $160 compote, the man with the Columbia Masterworks LPs with split seams, the folks who had a condo foreclosed on and are trying to get rid of the damaged Armoire, will begin to sense that a cold winter and bills and upcoming holidays are looming. They will sell those possessions to pay the bills. The good stuff always gets sold first. The crap gets pulled out later. Unfortunately, the folks who had good money and spent it on crap are selling crap. They don’t even know what the “good stuff” is because they never knew in the first place.

All the while, we have been picking up their Mercury Living Presence and “Shaded Dog” S1 pressing RCA albums for a buck here and there, a quarter each on a good score. The folks with climate-controlled storage are snagging pieces of Heywood-Wakefield at used Broyhill and unfinished furniture prices. Now the pawnbrokers are changing their names and MO. They advertise on late night TV, rent commercial space in trendy zip codes and call themselves “Gold Services”.

Too many people, who are being dragged down in the depths of this economic upheaval, are doing so because they never understood the true value of education. What I mean is that for all of my life the value of education has been stressed to a point where it becomes a droning noise. The value of that education was earning a better living; at least that is what we were told. I agree with that statement but too many of us have ignored the true gift of education. That gift is the ability to learn and hone the skills necessary to research, study and evaluate data. Even some cat working the Starbucks cash register, who has an MFA in Drama should understand how to research and prepare for a part in a local theater. Those skills can port over to the “real world” but few people placed an emphasis on honing that skill. Now, we have a nation of highly educated people who don’t know the difference between propaganda and news, or the difference between fact and opinion.

It’s no wonder we spent so many billions of dollars on NASCAR collectables, DVDs sets of crappy TV shows and a plasma screen TV for kitchen viewing of the Today show. If we don’t know the difference between junk investments and investments into things with intrinsic value, how can we complain about the state of our economic affairs?

The great sloughing off of quick money has been going on in earnest for well over a year, we still have a long way to go before we hit bottom. Grab their crumbs as they fall to the way side as they will find their way back up again after things hit the cellar. Keep your head about you. Don’t fall for bullshit propaganda. Think about what service or goods you can provide to earn a living. Identify the things of real value in your life and learn to tell the difference between those things and the things that are truly valuable. Always remember that your loved ones are the most valuable part of your life.

Take the best advice I can give you as we move forward through and past this. If you want to follow trends and be fashionable, you are going to pay an inflated price for that fashion sense. Once the trend meets it’s apogee, values plummet till they find their perigee. Those fashionable things won’t rise in value until they begin their cycle to their next apogee; and if you factor in inflation and a lower sales base, that apogee will be smaller than the first. This applies not only the material things you buy; they also apply to the financial institutions we all depend on to operate efficiently in the background of our lives and they apply to the central components of our daily lives.

What I am saying is that we all need to think twice before we take drastic action in our daily lives. That gas guzzling SUV you bought in 2006 might drain a C note from you every week at the gas pump, but is it cheaper for you in the long run to ditch it for absolutely no resale value and take on another 5 year car payment, with a big maintenance expense for the battery around the time your car will be paid off? Is it worth dumping another $35K on a new car from now until 2013 when gas might reach $250 per barrel? If gas is $8 per gallon, how much is that damn hybrid still going to cost you at the pump? How much will groceries cost?

Pump and dump. The trendmakers are pumping the hybrid cars, the dump happens after they reach the end of the line with that meme. They did it with the land yacht SUVs. They did it with the McMansions. They did it when they sold us on re-education as an advantage of NAFTA. They did it with Reaganomics. They did it with winning the hearts and minds of the Vietnamese. They did it over and over and over and we always bite the hook with the big fat worm. We need to become the proverbial Eskimos and let the trendmakers become the refrigerator salesmen.

“So, tell me. Why do I need this Frigidaire?”

Where have all the good times gone?

Payday comes and you are thrilled the floater checks are covered and you hit the grocery store and gas pumps on the way home from work. You sit down and look at your checkbook and hardly anything is left. It’s going to be a hard two weeks until the next payday and a year ago it wasn’t like this.

It’s costing you $9 or maybe $18 per day to pay for gas to and from work, so you think this is to blame, but then you think about the few sacks of groceries you bought and those cost you $75 when a year or two ago they would have only cost you $45, so you think the food is to blame. Then it hits you.

Food is higher because gas is higher, and food is also higher because there is more demand for corn and rice and wheat and soybeans and now there is a shortage. Corn is more in demand for ethanol production, which was supposed to offset rising oil costs and make the fuel cleaner to burn but now it’s driven up the cost of food, food is in short supply and gas went through the roof anyway.

Fuel is higher because the dollar is far weaker than it was even 6 months ago and the people who have true wealth are moving their money into commodity speculation, so they are driving the cost of a barrel of oil higher and higher. Demand is still high for oil and refinery capacity has been decimated since the late 90’s when the big oil companies were given the green light to merge unabated.

Your monthly bill to pay for gas in the car has skyrocketed, the bill for natural gas in your home has skyrocketed, and the electric companies are chomping at the bit to sack your earnings too. Water bills are rising, food is getting expensive and in short supply, insurance keeps going up year after year.

How have your earnings looked over the past 8 years? If you charted it out in a graph you would most likely see two big dips and a flat or slowly rising line between the two dips. Earnings have not only failed to keep pace with inflation, the average and median incomes of US workers have actually fallen. Your spending power is not what it was in 2000.

No one in the government dares even say the truth; we are in a deep recession. Economist eggheads flutter around the subject without saying it but some brave souls in the ether world of economics have been saying we are in an immense recession. Slowly but surely, some are leaning their language toward the big “D” word, the word that no one dares write or say in such circles.

On April 1st of this year the stock market rallied like crazy. The cause was an email from a respected economist who’s opinion is regarded like God’s truth. His outlook was Rosy Jack and upbeat and the market responded. Then the truth got out, his email, all comments in the writing, were an April Fools joke. He was being a sarcastic fucker like your humble blogger and the moneybags on Wall Street took off on a wild spending spree.

So, I have to ask you this question. Who and what really controls our economy? It’s not wise and learned men and women, for if they did the April Fools rally would have never happened. The cyclic dependencies that have brought us to this precipice would not have been allowed to operate had wise people been at the helm. What really controls our economy? Is it optimism? Greed? Blind luck?

I can’t answer those questions; I don’t have the foggiest clue.

Economics is a strange creature. Off and on for more than 20 years I have followed economics as an occasional, novice spectator. I’ve read various reports, books, journals and it’s all led me to a point where I see economics as a multi-headed Hydra. No precious gemstone could be cut with enough facets to equal the number found in economics.

Every now and then a small door will open and then shut just as abruptly that will lead me to a new realization of what is going on behind the scenes. The drive mechanisms of the economic bus are mysterious. These can be large or small revelations, some occur just by looking into the past.

If you sat down and read as many volumes as you can find regarding the touchstone moments of economics over the past 100 years you would have a heavy reading list and dear God, is it ever boring. It would take years to read the main books and journals, assessments and deconstructions, editorials and academic research. In the end you would be no closer to understanding the real foundation of economics. You would, however, keep seeing the same façade to the subject. Credit, payment of interest and control of resources. Those are the three subjects that maintain the façade.

Take the 1971 events where Nixon told the world to pack sand as an example. Credit in this case would be Federal Reserve notes and the valuation of currency. Interest on credits would have been the US gold reserves. Control of resources is the gold stockpile and the valuation of currency. It never changes. Credit. Payment of interest on credit. Control of resources. Thirty-seven years later and it’s still about those three subjects, only the players and the medium of credit and resources have changed.

Maybe the unrest in the economy is natural; perhaps it is not. I don’t know. I do know a few things. Level heads will prevail if and when things get messy. Level heads do not lie down on the floor and throw a tantrum. Level heads do not go out and try to assert some sort of flawed alpha type personality trait. Level heads do not wonder where the good times have gone and ask what they should do now.

Do you own a bicycle? If not, get one on the cheap through Craigslist or at a yard sale. Do it pronto. Get spare parts for it too. Do you own a small backpack or a large duffel or Navy sea bag? If not, get those items pronto. Do you know how to make a crystal radio? Download instructions on the web and try it out and commit it to memory. Do you own real work clothes, a real pair of work boots and the ability to snuff out your ego? If you say no to any of those things, get busy on them. You will need all three.

Did you ever talk to your older relatives about the Great Depression when they were alive? If you did, you better start plucking the wisdom from what they told you. If you have no idea what they did to survive that event, here is the short answer. Be prepared and ready to do whatever it takes to survive from day to day. I’m not talking about rioting and causing mayhem. I’m talking about being prepared to work for pennies and be so afraid of letting that money out of your hands that you are willing to go to bed hungry at night, for many nights, over many years.

Could you go to bed on an empty stomach after a hard day of manual labor and know you will do it again tomorrow if it means your child or elderly family member can have one small bowl full of mush? Would you be prepared to do that? Do you even know what mush is? Find out what it is and learn how to make it.

Are we heading down that path or am I just a crazy old paranoid fool? Maybe, maybe not. I do know this. We have not seen the bottom of the economic woes in this country; we are not even close to being able to see the bottom. We have only begun to start our fall into the hole.

In one regard money follows a rule in physics. Money, like water and electricity and high pressures, will follow the path of least resistance. In the case of money, the path of least resistance is the path that will yield the highest return on investment. i.e. the payment of interest on an investment. Water will not flow uphill, electricity will flow through copper wire instead of steel cables and a failed seal on a vacuum chamber will always allow a higher pressure to enter the chamber.

Real money, not like what you and I have, will always move along to the next area to speculate, causing a bubble. This bubble ratchets up demand for that ‘thing’ and drives the prices to un-naturally high levels for that ‘thing’. Credit and real estate were speculated upon and a bubble formed. Prices inflated well above the intrinsic value of those things and rose many times higher than historical prices and what inflation could provide. The bubble is leaking; the higher pressure is entering that chamber. The path of least resistance is taking the money to food stocks and other commodities like oil and precious metals. When those have once again been pillaged beyond the last drop of interest, the money will flow out to another speculative bubble like water from a broken dam.

30 years ago the purchase of a house was a safe bet. You could expect a nominal increase in value over time along with the rise of inflation to provide you with a decent profit when you sold ‘if’ you made a wise purchase and kept your home maintained. Take a look at your county tax commissioner’s website and look at the graded and assessed build quality for homes. Check out the number of new homes that are only graded as Good when compared to the number of homes 40 years ago that were built to a higher quality standard and get an Average rating. There is your value in a McMansion. Only a Good rating for quality of materials and construction on your McMansion with a mudroom and Jack and Jill bathroom while a ranch house in the same neighborhood, built in the 1960’s is better constructed with better materials. Yes, infill was a bright idea. Actually, it was a bright idea for the speculators who made a killing on the gullible and the folks who misinterpreted the “American Dream”.

If you think a 20% or 30% drop in home values is the bottom, think again. This market has another 30% in it at the least. Look at the historical values of homes before the speculation began and you will see a modest increase yearly to compensate for inflation and demand and that is all. The ‘value’ of homes over the last 30 years has been driven by speculation and when there was no driving force to raise speculation the financiers created a credit bubble to facilitate a house speculation bubble.

We are still waiting for the Alt-A bubble to begin crumbling, we are waiting for the Put Option ARMs to begin resetting, we are still waiting for the credit markets to shrug off the excess credit load with write offs. We are still waiting for the fall out from lack of cash flow that will affect commercial real estate and retail far more than the credit collapse. Remember, right now we are seeing only the early effects of a so-called credit crunch. The credit was based on ether. It was money that never existed in the first place and a massive block of the economy was being driven by this credit. When credit is gone only cash is left.

When the cash is devalued like we are seeing now, inflation really sticks it to those who have cash. When credit is gone only those with cash can maintain the economy and when uncertainty and fear permeate the economy you won’t let a penny out of your hands unless you really have to. This is the direction we are heading toward. Cash did not keep the failed and failing companies alive, credit kept them afloat. Cash did not put people in million dollar McMansions, credit put them there. The credit is going away and the speculators are looking for cash only resources such as oil and gold and corn and wheat and soybeans.

I’m not saying the end is nigh, I am saying that we all need to be prepared and we all need a plan. I’ve got a bike, work clothes, some food socked away, some cash and no qualms about letting my ego take a kicking just to make enough money to eat a bowl of rice and beans or some sort of pancake concoction. Are you willing to do the same thing?

Fat cat mating call -- "Shut up and give me your money."

I’m looking at a news report that Earthlink is slashing its workforce in half. Over 900 jobs are about to be shed and the concerns that yet another ISP could go by the wayside. Ten years ago you had a choice between using a local mom and pop style ISP, a larger regional ISP or one of the major national/international ISPs. Those days have been gone for quite some time. However, as a person who moved away from the horrible mess that ATT created when they slurped BellSouth into their clutches, I will be pretty much at the mercy of the mega-corporations if Earthlink sells out or is forced to close it’s doors.

This is another of those bad signs of what this nation has become. If Earthlink goes away, one way or the other, my choices are slim. I can go with Comcast, AOL or ATT. That’s about it. I have no other choice than to use Comcast for cable, unless I want to stick one of those stupid dishes on my balcony. I refuse to go back to AOLhell or give ATT a penny more than I have to because they will stick it up my ass with a complete disregard for my privacy.

This, ladies and gentlemen, is why a “business friendly” government is bad for its citizens. This is why big business is NOT a good neighbor under any circumstance and this my friends is why the corporate lackeys in Washington, Republican and Democrat, need to be chased back into the private sector, post haste. They have allowed the large corporations to play ball in any way they choose and we, the consumer, are left with fewer choices, higher rates, sloppier service and a complete disregard for what is best for the consumer. The market does not weed out the weak; the market is a bloodbath where only the deepest coffers and least civility survive.

It’s not just the TelCos where this is found. It is the same in the financial sector, the health care sector, manufacturing, it is the same across the board and from what was once a wide variety of choices we are left with whatever they decide to throw at us. 10 years ago I had many choices for even the act of grocery shopping. From the corporate stores I could choose from Publix, Kroger, A&P, Harris Teeter, Winn Dixie, Sav-A-Lot, Cub Foods or Ingals. These stores were all located within 15 minutes of my apartment in Atlanta. Now that same 15-minute radius gives me Publix, Kroger and Wal-Mart.

Those are my only choices for typical grocery stores within that radius and even a small locally owned and operated store is no where to be seen. I shop for most of my groceries at one of the 2 farmer’s markets that I live between. Both are 20 to 25 minutes drives but they are well worth the trip even if it is out of my to get to either store. I would be spending approximately $100 to $150 per month in the corporate stores if I did all my shopping there, but instead I spend between $75 and $100 per month for the same food in those farmer’s markets. The money is much better spent there and it is one of my ways of saying no to big business.

I can’t really do that with Internet access, phone service, banking, health needs or when I need clothing. In the big war being waged against us by the big conglomerates we eventually loose the war but the consumer can win the small battles against their unethical practices.