Sustainable Investing and “The End of America”

2 November 2011, 12:07

Sam Townsend

150X150 Sam Townsend

“Successful Sustainable Investing and The  End of America”

 Collapse of the Dollar? . . . Runaway inflation? . . . The end of America?

 Possible? . . . Absolutely!

 Probable? . . . Perhaps! But what about timing?

 Many people today realize that society is in deep trouble, but the real questions are, “When?” and “What to Do?”.  In other words, what should we – our families and businesses – do about an unstable and unsustainable global financial system?”

For those of us who have investment assets to manage, the question might better be, “How should we manage our assets and our lives given the economic, financial system, political, security, food supply, and other serious  threats that society faces in these increasingly difficult times?”

We have grown accustomed to asset values either being crushed or seeing them gyrating with alarming volatility. The purchasing power of the dollar has been persistently evaporating, and both the global economy and its financial system are now on life support.  An unimaginably burdensome and unserviceable debt load and menaced critical energy and infrastructure threaten to pull the plug on life as we have known it.

“The End of America” and aftershocks of irrational exuberance provide bitter “morning after pills” following from speculations, schemes, and strategies gone bad. Concerns for the viability of our currency, economy, and our very livelihood are now being seen as prudent and rational. Alarm bells are sounding louder and more insistent. What to do? Who and in what to trust?

Those with capital and incomes typically fear continued and even accelerating inflation and risks of collapsing asset values and even outright confiscation by mobs who feel entitled to take what’s yours . . . or by governments increasingly desperate for funding who are convinced that what you have – and even your labor – are fair game for keeping them in power.

Hyperinflation leads to the collapse of the Dollar and of other intangible assets, which we have relied upon in the past for liquidity, for financial security, and to build value.  It now seem like endangered species that no environmentally friendly force on earth can protect.

However, first of all, each of us had better consider right now the likelihood and consequences of deflation – not inflation!

Ben Bernanke, Chairman of the Federal Reserve Board, as recently as September 28th 2011, said in a speech what he has said before, and which astute observers realize, is the real fear of bankers, politicians, and businesses. It is deflationnot inflation!

You see, the Federal Reserve System was actually formed almost a century ago to inflate the money supply and provide a funding source for government’s adventures. In that, they have succeeded. Unfortunately, beyond our expectations.

I realize that the cover story, then, and down through the years delivered through our media, schools and universities has been to protect the financial system from failures and the economy from depressions, but the Great Depression soon punctured that balloon – at least for those who were paying attention to its causes and effects.

Later financial panics and recessions have also demonstrated that “The Business Cycle” has hardly been legislated or “managed” out of existence. And the ever-darker storm clouds today suggest a Perfect Storm of historic proportions that makes our society even more vulnerable than the one that endured the “Crash of 1929” and the Great Depression and deflation of the 1930s and 1940s.

The Dollar today has lost more than 95 cents of the value it had in 1913 when we got the Federal Reserve and the Federal Income Tax that whipped up the turbulence of the Perfect Storm of threats we face today. As you have surely noticed, more of that lost dollar purchasing power has been lost more recently than during the first half of the last Century.

A major cause of accelerating inflation of the money supply has been the reducing, and then eliminating, our ability to hold the politicians, speculators, and the public fiscally accountable through the convertibility of the dollar into gold – which has served as “real money” for thousands of years.

So should we now follow all those ads on TV and run out and buy gold?  Or should we, as those who can remember only inflation urge us, to expect further inflation and to buy natural resource stocks, commodities, or investment real estate?

None of these currently popular investments, by my calculation, will serve investors well over at least the next few years.

I’ve taken profits on precious metals and have positioned myself to profit from declining stock prices and commodity values as the Global Financial Crisis re-intensifies and the global economy reaccelerates to the downside. I posted a Bulletin Alert (“The Silent Crash is Getting Noisier” – on 09/14/11) to that effect on my Blog at PreparedALHWays.com. I also explained there how I doubled my investment portfolio’s value during the worst ravages of the Global Financial Crisis and am positioning for even more severe volatility. I encourage you to check it out right away.

In my “The Silent Crash is Getting Noisier” Bulletin, I reference a really stunning graph showing the Dow Industrial Stocks Index priced in ounces of gold. Adjusted for inflation, the Dow stocks tumbled 84% in value and have done so persistently since 1999.

In other words, in terms of real money, stocks have steadily declined in a bear market that began its decline more than a decade ago. Throughout those years, precious metals and many other commodities, including food and energy, have rallied more strongly than have stock prices. The prices of all these assets, however, are now declining again, and they are largely declining together along with available liquidity that is again beginning to evaporate from the global economy.

In the first leg down of the Global Financial Crisis that began 4 years ago, global asset values contracted by roughly 50 trillion dollars. So did the monetary aggregates begin to shrink as most households, businesses, and local and state governments trimmed budgets and debts as they are trying  with increasing desperation to protect their imperiled finances and preserve funding for their services and programs. Those austerity efforts further fuel deflationary forces and contracting economies. That’s why the populations of Greece and throughout the Middle East are rioting and demonstrating. Look for similar demonstrations to come soon to cities near you.

Today consumer spending and business investment are trending down again because people everywhere value cash more than what they can buy or invest with it. Views of the future are souring. Governments, however, and especially the United States Federal Government desperately keep “pushing on the same string” hoping for better results that never come. We used to call that suspension of disbelief, “the definition of insanity”.

You see, the global money supply is “borrowed” into existence and is created out of thin air when banks make loans. Increasingly those loans have been made to governments who don’t produce economic value. They merely consume and redistribute it. And now, as I explain in my Bulletin Warning, people and businesses aren’t borrowing, and loans are also shrinking from repayment and default.

The Global Financial Crisis is re-intensifying and the global economic decline and asset prices are resuming their decline in a way that should prove historic.

Yes, financial markets rallied for about 2 years since early 2009 into early May. But, you may have noticed that economic recovery in the developed countries has been muted to non-existent even as the markets have again begun to contract in a manner eerily reminiscent of 2008.

Only massive spending by governments with borrowed money has, so far, kept economies from cratering. That reality of stepping off into a very deep hole lies just ahead – after the music stops on the efforts of national governments and their banks in their desperate efforts to re-inflate their economies and financial systems and preserve their bureaucracies, welfare programs, and privileges of their friends.

This worsening Global Financial Crisis will be “too big to bail”. The bigger the bailouts . . . the bigger the declines ahead.

Governments trying to spend their economies into prosperity with borrowed money will inevitably fail. Any rational analyst knows it. It’s just a question of timing. And time is running out. Just look at Europe. Consider also the economies and markets of China, India, Brazil, and others who depend upon the so called developed countries like the United States and Europe buying what they produce. They will choke on their idle productive capacity and workers. Capital will flee their economies. Many will flee to dollars and Treasury debt seeking safety that may prove to be only temporary.

That brings us back to the dollar. Being the world’s Reserve Currency in which goods are traded and loans are funded, a serious decline in the global economy and the debt-servicing ability of nations and their businesses and people actually results in an increase in the Dollar’s value compared to other currencies like the Euro and the yen. The dollar gained during the Global Financial Crisis and the dollar has again started its upsurge.

Given that this current leg down in the global economic and financial crisis should be even more severe than the one that began 4 years ago—or 11 years ago in terms of real money – we should see the dollar’s purchasing power increase again substantially – and this at a time when the prices of goods and services, including wages, should be declining at historic rates. Cash would still be king. Perhaps for years.

Life for a huge portion of the people on Planet Earth is changing in largely unexpected and unpleasant ways. My goal is to help you and yours to enjoy positive change.

So how do we manage our lives and investments given the twin threats of both inflation and historic global deflationary depression under the ominous shadow of a global financial system on life support?

And for how long can we expect cash be king given oppressive debt burdens crushing the life out of households, businesses, and governments?

No one can know for sure, but for at least a year or two is probable, as the U.S. Dollar continues to hold the developed world hostage. Cash has consistently increased in value during historic deflations, and this one is shaping up to be no different – except for being larger in degree.

We are the biggest customer of most national economies, and if they refuse to acquire and hold dollars andU.S.debt, they lose our business and their own economies implode. Lately, however, we have found it necessary to deflect attention away from our own financial unsustainability by focusing upon the troubles ofEuropeand elsewhere. That is just one tactic to buy time.

How then to invest sustainably in order to protect asset values, produce acceptable returns, and meet our needs and those of others who depend upon us?

In these times of stressful living, traditional intangible investments like stocks, bonds, and annuities have become endangered species. Even tangible assets like investment real estate and typical investments in personal residences have suffered and hold little promise for optimism as either productive or sustainable investments over the foreseeable future.

Lifestyles to which we have long become accustomed – perhaps funded by retirement assets and pensions – have become suspect as well. Concerns have become epidemic for meeting daily living needs of families and friends. Those concerns extend beyond the economic. Healthfulness of our food and water supplies and other necessities are becoming as great a concern as to their availability and cost.

Sustainable Investing

Successful sustainable investing allows us and those who depend upon us to survive and even to thrive. However, those strategies require us to personally confront questions like:

  • “How will my lifestyle and/or my business or investment portfolio change in light of the changing realities that are emerging from our unsustainable society, culture, and its key institutions, systems, and other infrastructure?”
  •  “Since the lifestyle of each and every one of us will change also, will that change be to living more abundantly and sustainably . . . or will it be even painful and destructive for more people than we are currently experiencing in these unprecedented and perilous times?”

Wealth management in today’s perilous times requires that we take some of our liquidity and acquire sustainable living assets which are tangible – not intangible investments that depend upon promises to pay or perform by others far from our control. Those intangible assets in an unstable and unsustainable world can disappear like blips on a computer screen when their synthetic sources of power or programming flicker or fail.

“Sustainable investments” that support “Abundant Living in Harm’s Way” – what we refer to as ALHWays, for short – can preserve asset values and lives. They also have the capacity to provide acceptable returns even under diverse and perilous economic and social conditions. In local communities and economies, where people we care most about actually live and work, these “sustainable investments” help gain and retain healthy living economically into the foreseeable future. Then – even in perilous times – we with our families, friends, and neighbors can be prepared always and in every way

Successful sustainable investing and asset management “In Harm’s Way” requires:

  • Understanding what Abundant Sustainable Living is and how it applies in your local situation;
  • How Abundant Sustainable Living benefits you, your family, and your neighbors;
  • Why Abundant Sustainable Living is absolutely necessary and how Investing Sustainably can preserve and grow assets that become an abundant reality in your life

Wealth Management through being Prepared ALHWaysTM helps guide financial and investment planning and management decisions that formulate and implement sustainable living investment strategies in these “Harm’s Way” times as we face a “Perfect Storm of Threats” to our livelihood and finances. Time-tested ALHWaysTM strategies can preserve value, produce positive returns, and support abundant living in good times and bad.

At PreparedALHWaysTM we help people understand “What to do About the News” and to find and implement Abundant Sustainable Living solutions for the needs and challenges they face that suit them and their local circumstances.