Urban Survival Planning - Hyper-Inflation Predicted and Explained

This is part of an article by Gonzalo Lira, entitled "Hyperinflation, Part II: What It Will Look Like", the entire article can be read at: http://www.zerohedge.com/article/guest-post-hyperinflation-part-ii-what-it-will-look

My apologies to Gonzalo Lira, but I decided to post only a portion of it as it gets fairly technical and I think UrbanSurvivalSkills.com readers are more interested in the indicators and the effects of Hyperinflation, rather than the technical market reasons.

I argue that Treasury bonds are the New and Improved Toxic Assets. I argue that, if there was a run on Treasuries, the Federal Reserve—in its anti-deflationary zeal, and its efforts to prop up bond market prices—would over-react, and set off a run on commodities. This, I argue, would trigger hyperinflation.

There are two issues that many people have a hard time wrapping their minds around, with regards to a hyperinflationary event. These two issues are an greatly increased money supply, hence deflating it's value, and, a big increase in the price of commodities while equities, real estate and other assets fall:

“Where’s all the dough gonna come from?” After all, as we know from our history books, hyperinflation involves people hoisting bundles and bundles of high-denomination bills which aren’t worth a damn, and tossing them into the chimney cause the bundles of cash are cheaper than firewood. If the dollar were to crash, where would all these bundles of $100 bills come from?

The second issue was, Why will commodities rise, while equities, real estate and other assets fall? In other words, if there is an old fashioned run on a currency—in this case, the dollar, the world’s reserve currency—why would people get out of the dollar into commodities only, rather than into equities and real estate and other assets?

Apart from what happened with the Weimar Republic in the 1920’s, advanced Western economies have no experience with hyperinflation. (I actually think that the high inflation that struck the dollar in the 1970’s, and which was successfully choked off by Paul Volcker, was in fact an incipient bout of commodity-driven hyperinflation—but that’s for some other time.) Though there were plenty of hyperinflationary events in the XIX century and before, after the Weimar experience, the advanced economies learned their lesson—and learned it so well, in fact, that it’s been forgotten.

During the period 1970–’73, Chile experienced hyperinflation, brought about by the failed and corrupt policies of Salvador Allende and his Popular Unity Government. Though I was too young to experience it first hand, my family and some of my older friends have vivid memories of the Allende period—vivid memories that are actually closer to nightmares.

The causes of Chile’s hyperinflation forty years ago were vastly different from what I believe will cause American hyperinflation now. But a slight detour through this history is useful to our current predicament.

To begin: In 1970, Salvador Allende was elected president by roughly a third of the population. His (Allende’s) election was a fluke.

He wasn’t a centrist, no matter what the current hagiography might claim: Allende was a hard-core Socialist who took over the administration of the country, and quickly implemented several “reforms”, which were designed to “put Chile on the road to Socialism”.

Land was expropriated—often by force—and given to the workers. Companies and mines were also nationalized, and also given to the workers. Of course, the farms, companies and mines which were stripped from their owners weren’t inefficient or ineptly run—on the contrary, Allende and his Unidad Popular thugs stole farms, companies and mines from precisely the “blood-thirsty Capitalists” who best treated their workers, and who were the most fair towards them.

One of the key policy initiative Allende carried out was wage and price controls. In order to appease and co-opt the workers, Allende’s regime simultaneously froze prices of basic goods and services, and augmented wages by decree.

At first, this measure worked like a charm: Workers had more money, but goods and services still had the same old low prices. So workers were happy with Allende: They went on a shopping spree—and rapidly emptied stores and warehouses of consumer goods and basic products. Allende and the UP Government then claimed it was right-wing, anti-Revolutionary “acaparadores”—hoarders—who were keeping consumer goods from the workers. Right.

Meanwhile, private companies—forced to raise worker wages while maintaining their same price structures—quickly went bankrupt: So then, of course, they were taken over by the Allende government, “in the name of the people”. Key industries were put on the State dole, as it were, and made to continue their operations at a loss, so as to satisfy internal demand. If there was a cash shortfall, the Allende government would simply print more escudos and give them to the now State-controlled companies, which would then pay the workers.

This is how hyperinflation started in Chile. Workers had plenty of cash in hand—but it was useless, because there were no goods to buy.

So Allende’s government quickly instituted the Juntas de Abastecimiento y Control de Precios (“Unions of Supply and Price Controls”, known as JAP). These were locally formed boards, composed of loyal Party members, who decided who in a given neighborhood received consumer products, and who did not. Naturally, other UP-loyalists had preference—these Allende backers received ration cards, with which to buy consumer goods and basic staples.

Of course, those people perceived as “unfriendly” to Allende and the UP Government either received insufficient rations for their families, or no rations at all, if they were vocally opposed to the Allende regime and its policies.

Very quickly, a black market in goods and staples arose. At first, these black markets accepted escudos. But with each passing month, more and more escudos were printed into circulation by the Allende government, until by late ’72, black marketeers were no longer accepting escudos. Their mantra became, “Sólo dólares”: Only dollars.

Hyperinflation had arrived in Chile. One of the effects of Chile’s hyperinflation was the collapse in asset prices.

This would seem counterintuitive. After all, if the prices of consumer goods and basic staples are rising in a hyperinflationary environment, then asset prices should rise as well—right? Equities should rise in price—since more money is chasing after the same number of stock. Real estate prices should rise also—and for the same reason. Right?

Actually, wrong—and for a simple reason: Once basic necessities are unmet, and remain unmet for a sustained period of time, any asset will be willingly and instantly sacrificed, in order to meet that basic need.

To put it in simple terms: If you were dying of thirst in the middle of the desert, would you give up your family heirloom diamonds, in exchange for a gallon of water? The answer is obvious—yes. You would sacrifice anything and everyting—instantly—in order to meet your basic needs, or those of your family.

So as the situation in Chile deteriorated in ’72 and into ’73, the stock market collapsed, the housing market collapsed—everything collapsed, as people either cashed out of their assets in order to buy basic goods and staples on the black market, or cashed out so as to leave the country altogether. No asset class was safe, from this sell-off—it was across-the-board, and total.

Now let’s return to the possibility of hyperinflation in the United States:

If there were a sudden collapse in the Treasury bond market, I argued that sellers would take their cash and put them into commodities. My reasoning was, they would seek a sure store of value. If Treasury bonds ceased to be that store of value, then people would invest in the next best thing, which would be commodities, especially precious and industrial metals, as well as oil—in other words, non-perishable commodities.

Some people argued this point with me. They argued many different approaches to the problem, but essentially, it all boiled down to the argument that commodities and precious metals have no intrinsic value.

Actually, I think they’re right. In a strict sense, only oxygen, food and water have intrinsic value to human beings—everything else is superfluous. Therefore the value of everything else is arbitrary.

Yet both gold and silver have, historically, been considered valuable. Setting aside a theoretical or mathematical construct that would justify the value of gold and silver, look at it from a practical standpoint: If I went to a farmer with five ounces of silver, would he give me a sack of grain? Probably. If I offered him an ounce of gold for two or three pigs, would he give them to me? Again, probably.

Where there is a human society, there is a need to exchange. Where there is a need to exchange, a medium of exchange will soon appear. Gold and silver (and copper and brass and other metals) have served that purpose for literally millennia, but then they were replaced by paper.

Right now, there are two forms of paper currency: Actual dollars, and Treasury bonds. One is a medium of exchange, the other a store of value.

If Treasuries—the store of value—were to collapse in price, people in a Treasury panic would buy commodities. This ballooning of non-perishable commodities would be as a means to store value. Because that’s what people do in a panic—they batten down the hatches, and go into what’s safest. And this rush to commodities, I argued, would trigger hyperinflation.

Now, I said I would answer two questions—one was why commodities would outpace all other asset classes in a Treasury panic and subsequent hyperinflation. The other question was, “Where’s all the dough to feed my fireplace gonna come from, in a hyperinflationary event?”

The first wave of dollars in a hyperinflationary event will come from people’s savings accounts.

If Treasuries tank, and the markets all barrel into commodities, then prices will rise for regular consumers—this should not be a controversial inference. What would consumers do, with suddenly much higher gas prices, and soon much higher food prices? Simple: They’ll bust open their piggy banks, whatsoever those piggy banks might happen to be: 401(k)s, whatever equities they might have, etc.

But if the higher consumer prices continue—or become worse—what will happen to the 320 million American consumers? They’ll start buying more gas now, rather than wait around for tomorrow—and the market will react to this. How? Two way: Prices of commodities will rise even further—and asset prices will fall even lower.

If American consumers are getting hit at the gas station and the supermarket, they’ll start selling everything so as to buy gas, heating oil (most especially) and foodstuffs. The Treasury panic will thus be transfered to the average consumer—from Wall Street to Main Street by way of $15 a gallon gas prices, and $10 a gallon heating oil prices.

All other consumer prices would soon follow the leads of gas, heating oil and food.

Would there be Federal government intervention of some sort? Most definitely—people would be screaming for it. Would food rationing be implemented? Probably, and probably by way of the current Food Stamps program. Troops on the streets, protecting gas stations and supermarkets? Curfews to prevent looting? Palliative dollar printing? Yes, yes, and very likely yes.

That last bit—palliative dollar-printing: That’s the key. When palliative dollar-printing happens, it will be the final stages of hyperinflation—it’s when sensible people ought to realize that the crisis is almost over, and that a new normal will soon appear. But this stage will be f@#$*^ awful.

Palliative dollar printing will take place when the Federal government simply runs out of options. The whole boatload of fools in Washington, on seeing this terrible commodity-driven crisis unfold, with consumer prices shooting the moon, will scream for dollars to be printed—and their rationale will be perfectly reasonable, I can practically hear it now: “We've got to get cash into the hands of the average American citizen, so he or she can buy food and heating oil for their families! We can’t let Americans starve and freeze to death!”

Now, this fairly Apocalyptic scenario is simply horrifying.

If Treasuries tank and commodities shoot up so high that they essentially break the dollar, civilization will not come crashing down into anarchy. At worst, there’ll be a three-four years of hell—economic hell. Financial hell. But then things will settle down into a new normal.

This new normal might well have unsavory characteristics. I tend to be a pessimist, and just glancing through history, I can see that just about every period of hyperinflation has been stabilized by some subsequent form of autocratic or totalitarian government. The United States currently has all the legal decisions and practical devices to quickly transition into an authoritarian or totalitarian regime, should a crisis befall the nation: The so-called PATRIOT Acts, the Department of Homeland Security Agency, the practical suspension of habeas corpus, etc., etc.

But as I said in my previous post, and reiterate here: Speculations about the new normal are pointless at this time. The future will happen soon enough.

What I do know is, One, a hyperinflationary event will happen, following the crash in Treasuries. Two, commodities will be the go-to medium for value storage. Three, all asset classes will collapse in short order. And Four—and most importantly—civil society will not collapse along with the dollar. Civil society will stumble about like a drunken sailor, but eventually right itself and carry on with a new normal.

UrbanSurvivalSkills.com disagrees somewhat with Lira,...there is a good possibility that the "new normal" won't happen, and if it does, it may take much longer than a few years.

Urban Survival Planning - Intelligence Prep 301: Electronic Intelligence Collection Devices Part I

UrbanSurvivalSkills.com is continuing on with Intelligence support for Survival. Previously I have talked about general Intelligence Preparation of the Battlefield and how it applies to Urban Survival; debriefing your own patrols; interviewing refugees and other people for intelligence information; and developing Situation Maps to maintain your intelligence perspective and situational awareness.

This post is Part I on using electronic devices to augment your intelligence collection. In my mind the two most effective electronic devices that are easy to use and can bring good intelligence and information benefits to your Survival Group in order to develop your situational awareness are Radio Scanners and Game Cameras. In this post, Electronic Intelligence Devices Part I, we will focus on Game Cameras.

Game Cameras are simply a combination of motion detector and digital camera. Which detect motion and will snap a photograph, a series of photographs or even a short video of the movement that triggered the motion detector.

Game Cameras can send pictures to a cell phone via wireless connectvity, or send the image or video to a computer terminal with a wirless radio signal. However these models of game cameras are fairly expensive.

I'm going to focus on Game Cameras less than or around $100, within the budget of most Survival Planners and Preppers. With these economy Game Cameras you will get the same range, pixel resolution however the images have to be downloaded from the cameras either using a USB cable or swithcing out SD Cards.

Not necessarily useful for monitoring six lane roads as the extended range required would be near the outer limits of the game camera, unless you used one camera on each side of the road, still these game cameras would certainly work on natural lines of drift, county roads, suburban streets or anyplace else you need electronic intelligence and surveillance devices to determine ectent of traffic...especially the two legged kind.

The series of segments depicted in the strung together videos below were taken with a game camera set up along the Arizona Border showing illegal aliens and drug smugglers - notice the burlap wrapped bundles of marijuana fashioned into back packs. This will give you an idea of the auaity of video these game cametras are capable of....as well as probable piss you off.



Moultrie D-40 Game Camera

With an infrared motion sensor with a range of 30 feet and 22 degrees, the camera delivers clear footage of moving game, day or night, with multiple operational modes. With an average battery life of 60 days, the Moultrie Game Spy D-40 gives you the ability to spy out the game even when you're away for days at a time. Adjustable elastic mounting cords make it easy to mount the camera in trees or other stationary locations. The camera responds rapidly with FDA Class 2 laser aiming and a passive infrared sensor that activates as soon as motion is detected. Pictures are clear and easy to read in full color day and night, with 4 megapixel images that can be shot in low, medium, or high resolution.

Auto mode activates the motion sensor, allowing you to leave the camera alone to capture images while you are not present. In automatic mode you have the ability to capture still images day and night with or without flash operation, 10-second AVI clips-video images during the daytime that will automatically switch to still photos with the flash in low light situations, and capture multi-shot images of up three shots. The camera is also equipped with a handheld-removable manual operation, and a setup mode that allows you to customize menu settings. The electronic flash can be set to automatic or in off-security mode. The flash range is from five to 45 feet.

Designed for multi-day, automatic use, the Game Spy D-40 has a built in memory of 16 MB of video and picture storage. Up to four GB of additional SD memory can be added. The camera images can be accessed via the 2-inch LCD display or output to a TV or a computer via USB. Imprints time, date and camera ID on every photo or video The camera imprints still and video images with date, time, and camera ID so that you always know exactly when the stand is active. Has an weather-resistant, airtight camera housing.

Moultrie D-55 Game Camera

Billed as high-end scouting equipment on a budget. Moultrie 's Game Spy D-55 flash scouting camera gives you a feature-rich game camera at an affordable price. Loaded with features including 5.0 megapixels, camouflage housing and much more. Possess rapid response time; a 50-ft flash; Infrared (IR) sensor for immediate game capture; Temperature, moon phase, time, date and camera ID on every photo; Color day and night pictures; Video clips during the day (5/15/30 seconds); Display showing battery life remaining, pictures taken and remaining, and delay timer; IR aim for quick and precise camera setup; Picture delay, set 1-60 minutes; Multi-shot pictures (up to 3 shots) with 5 seconds between multi-shots; Three picture resolutions to choose from; Two video resolutions; SD Memory Card Slot – up to 16GB; Includes weather-resistant casing, USB cable and mounting strap; External power port for optional Moultrie PowerPanel; Operates on 6 C-cell batteries.




Powering Game Cameras

You will have to have to ability to re-charge batteries or re-configure power supply to the game camera. Having the ability to recharge the larger D and C batteries wuld be important. Given the battery life on these Game Cameras, a modest supply of re-chargeable batteries would be needed. Please visit All-Battery.com for rechargers and rechargeable batteries options.

Urban Survival Book Review - One, by Conrad Williams

Since there are no real life Surviving the Collapse scenarios, other than short term disaster type situations and perhaps wilderness survival circumstances, we are regulated to reading fictional accounts of TEOTEAWKI/SHTF.

I read them these Post Collapse - Survival books as they serve a good purpose to the Survival Preparing community to present us with situations and examples for us to think about, learn from, plan for, ultimately prepare for if they are good, valid lessons.

In that vein, I ordered and recently finished the post apocalypse book "One – by Conrad Williams".

This book starts with an event, left identified, but similar to a nuclear holocaust or maybe even a meteor strike which find the main character Richard Jane barely surviving his deep sea diving job and intent on getting to London to find his 5 year old son and estranged wife.

This novel about post apocalypse in England is more of a tale of human suffering, both physical and emotional, with very little lessons to be learned or to be wargamed by today’s Survivor Preppers, other than to just prepare.

I had to struggle to get through the book and half way through, without so much as a tag line or date, the novel shifts to 10 years in the future with Richard still searching for his son and people eating bits and scraps of what has been left....until a crop of Zombie like, flesh eating creatures (called Skinners) start to appear and become a large threat.

This may good a decent novel for those you who like to read Sci-Fi type Monster stories, but not for the serious Survival Prepper trying to embed himself into a survival situation for lessons learned and wargaming problems presented. This book is like The Road, where the only lesson is the lesson to prepare well in the first place....maybe that's the lesson and I just couldn't see.

Urban Survival Planning - Intelligence 201: The Situation Map

Following on the Urban Survival Planning – Intelligence Prep of the Battlefield 101 of 14 August 2010, this post concerns with developing an operational intelligence capability for your Urban Survival Group.

Simply, if you don’t utilize intelligence information to plan operations, then you are planning in an intelligence vacuum and will greatly decrease your chances of success.

You should consider intelligence for two geographical areas: the Area of Operations (AOR) , which is the immediate area around your Survival Base that you can direct power to or directly threatens you; and the Area of Influence (AI) which the area outside your AOR that events or actions occur in and can affect you in the near future. An example of an AOR would be your street and maybe one street parallel to you in each direction, or how far you could observe and engage with small arms. The AI would be an area outside of your AOR which may include many blocks away and even miles away. Again the AI is defined as th area outside your AOR that events can occur in that may threaten or impact on your AOR.

An example of an event in your AI could be gangs or mobs looting homes, which once finished it is likely they would move in your direction. Another example would be routes into your AOR that refugees would travel once the inner city unraveled.

This goes back to Survival being a team sport. You have got to be organized, even if loosely. If you don’t get it done pre-collapse, you’ll need to do it post collapse but it will be harder. You need to have some type of connectivity with any people or groups around your AOR and AI, for information and intelligence sharing. Not only for intelligence and information sharing, but for mutual support as well. Consider, if you have enough radios, providing a trusted neighbor with a radio for contact at selected times to pass off information or to coordinate movement or support.

Your Survival Group may assign one member as the Intelligence Officer, but in any case you will need to collect, collate/sort and store information of anything of value which may include: empty houses; houses that have been looted or intentionally burned; dead bodies; water sources and conditions; sign of any activity especially threat groups; covered and/or concealed routes; concentrations of refugees; locations of possible material of value; and, anything that pertains to your safety and continued survival.

One of the best ways to collect intelligence and information is to conduct debriefs on people passing by or people who are remaining in their homes. Debriefing your patrols is vitally important. You can annotate this information on a Situation Map (SITMAP) or a series of SITMAPS, so you can keep the area situation updated.

The below imagery shows the patrol that the Survivors conducted, see post on Opn’l Planning – The Patrol Order, after they returned to Base and were debriefed. The information they collected gave them a better picture of the AOR and AI around their base. In the absence of being able to access computers and print new images or maps, you can make sketches or even use chalk on a painted or a cement wall.

I have both blown up 36 inch x 36 inch charts, laminated so I can draw on them with dry erase markers. I have both maps and imagery, and multiple copies so I can provide other individual or groups with the same map or imagery for the purposes of being on the same sheet of music when talking about or reporting locations.

I can annotate events and other information using pieces of yellow stickies or plain paper and scotch tape and post them to my map or imagery creating a SITMAP or situational picture of my AOR and AI.

It is also useful for operational planning such as deciding where to put obstacles in place, or to establish LP/OP's, etc.