The Survivalist Pledge:

To help all that can be helped,
To defend all that can be defended,
To save all that can be saved,
To free all that seek freedom,
To stay alive as long as I can and stay free as long as I live.

The economies of the world are intertwined. Countries do business with other nations; companies do business with other businesses. When one goes bankrupt, it effects the others. This is what I call the "economic domino effect." Banks--particularly American banks--have loaned billions of dollars to Third World countries, which have no means to repay the banks. In pursuit of higher profits for the banks, their greed robbed America of working capital and bankrupt by loaning to bankrupt countries that couldn't pay their loans back. At the same time, savings and loan institutions diversifying into over-build and unprofitable commercial building loans are also in trouble. Because of a change in the 1986 tax reform law, these tax shelters that the banks financed are going bankrupt, dragging the loan institutions down with them. Forty-eight of all savings and loan institutions are insolvent according to recent reports!

The industrial base of the US is being undermined by plant closings, foreign goods, and leverage buy outs. American companies are becoming shells, producing more of their products overseas or in Mexico at slave-labor rates, while closing or curtailing their American plants. Levered buy-outs of healthy companies are making them sick with massive debt. In the past during an economic downturn, these companies have just not declared a dividend. But now, they could go bankrupt if they don't pay their interest on their junk bonds. Congress is looking right now at those interest deductions on junk bonds. With the stock market fueled not by economic growth or dividends, but by speculators, the crash of October 1987 could be only a minor correction by comparison to what's ahead. With a 20 percent real growth in the economy since 1982, the stock market today should be at only 950, not in the 2,000s. Who is investing in these buyouts? Primarily, other companies, purchasing from their pension funds. When these junk bonds they buy are worthless, they will have to (by US law) fund their losses when the least can afford to, creating more "domino effects." Japanese banks have invested also, creating the potential for a second wave of bank crises.

An economic downturn, fueled by higher inflation, would cause higher interest rates. With our country saddled by massive debt, oil prices going up to repay debts, junk bonds becoming worthless, and consumer debt at an all-time high, we could slide into a depression like we had in the 1930s. Japan, much of Europe, and many Third World countries would be hurt far greater than the US during such a depression since we can feed ourselves. Trade wars will develop to protect what's left of domestic industries, causing world tensions to grow and domino. Right now, the European Common Market has banned US beef, Japan has banned rice from the US, and we have put tariffs on their products. Where will it all end? Wars start because of economics, not because a mad man pressed a button.

(Recommended reading: SURVIVING THE GREAT DEPRESSION OF 1990 by Dr. Ravi Batra; Simon and Schuster)

 

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