http://www.clairewolfe.com/wolfesblog/00002602.html
06/13/2007 Entry: “The Tsunami of Credit”
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Certainly my anecdotal evidence, gained from talking to friends and acquaintances, strangers I meet in my travels, and observing lots of closing businesses and neighbors losing jobs, suggests that times are hard, not good.
Surprise! The government figures regarding inflation and the economy are tissues of lies.
John Williams’ Shadow Government Statistics paint a far different picture. Mr. Williams generally reports economic figures the old fashioned way, avoiding the many gimmicks introduced since the Reagan robbery of social security.
His figures show GDP growth is -2%, and we have been in a recession since the burst of the Greenspan dot-com bubble at the end of 2000. Consumer price inflation is above 10% and rising. (Nixon imposed wage and price controls in 1971 when price inflation rose above 4%.) M3, the broadest measure of the money supply, is rising at over 13% year-over-year.
What’s that? The FED stopped reporting M3 in 2006, claiming it was too costly to produce. Mr. Williams, like all free market actors, is able to produce with very little effort what the bloated FED cannot, or does not want to do. Inflation of the supply of money is the root cause of price inflation, and the FED doesn’t want too many people to pay attention to the men behind the curtains.
I believe the huge increase in M3 explains a lot about why we don’t already have a full-blown, widely recognized depression. At the current rate of growth, an astonishing $1.4 trillion in new money is being created every year. The GDP is $13.6 trillion; adding 10% of that figure in brand new, created from thin air money to the economy increases GDP only 0.6%? Clearly we are losing ground.
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Well, if the fellow is right, and I suspect he is, perhaps we’re both wrong, but it certainly feels like “hard times”. I think my “turkey pen” is now full. (I counsel out of work execs as a hobby and constant reminder that I might be next.)
So how does one “action” this report.
(1) Closely monitor one’s personal “burn” rate. How much are you spending, committing to spend, agreeing to spend? Stolen from the venture capital world, the “burn rate” was probably stolen from the rocket launches where the amount of fuel being consumed was monitored. To a Venture Capitalist who’s invested with a start up, the burn rate is outgo minus income measured on an almost daily basis. To start a successful business one must invest in the future.
(2) Zero debt. Certainly at the very least zero short term debt. Even colateralized debt (i.e., your home mortgage) maybe “bad debt” if you don’t have a job. You must recognize the fact that you may not be able to sell for what you owe. If you can’t sell and can’t pay, then you’re foreclosed. For high net worth people, where a mortgage is more of a tax saving device (i.e., having a low-rate mortgage that is covered by assets for the purpose of being able to itemize deductions), one doesn’t have to go nuts. Everyone else should be “storing up” for long cold financial winter.
(3) Network in your white collar job. You only sure of your last paycheck that cashed.
(4) Develop a blue collar skill; never met a poor plumber.
(5) Explore entrepreneurial business on the inet. For under a grand, you can incorporate “Your Wild Ideas” as your personal incubator. Sell stuff for a profit. It’s the new wild west gold rush.
(6) Learn from the Amish and the Mormons about self-reliance.
Fasten your seat belts; there’s turbulence ahead.
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Reinke Faces Life 
Good point about the blue collar skill.
I was tossed out of my corporate job a few years ago. I never thought I would take off the white collar, but the bills came due.
I decided to face reality – took off and threw away the Armani pinstripes, cufflinks and silk tie, stepped out of the fancy Gucci wingtips, ditched the briefcase, grew a beard and became a trucker. It took some training and a change of attitude about myself. People respond differently to a truck driver in work boots than to an executive in Gucci shoes. But the pay is great and the job is stable.
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