This CNN report says that banks are still not lending, and that the number of banks considered by the FDIC to be “problem banks” has risen to its highest level since 1993. Scroll down and watch the 2 minute video summary by Colin Barr.

In a recent post, Panzner cited a book by Fernando Ferfal Aguirre, titled, The Modern Survival Manual: Surviving the Economic Collapse, which is based on the actual experience of Argentina over the past 10 years. It’s not a Mad Max scenario, but it isn’t pretty. You can find a summary at Aguirre’s website.

“… the [Shorebank] bank, which was put on the ropes when the recession hit its lower-income borrowers especially hard, was unable to secure the funds it was seeking from the government’s Troubled Asset Relief Program, or TARP, it needed to match private-sector pledges.”

Read the full report here.

This seem to confirm my expectation that China would be diversifying its foreign reserve holdings away from dollar denominated securities.

The slack is being taken up by Japan and Britain so the immediate impact on the dollar in foreign exchange markets may continue to be minimal– for a while.

Central banks collude to advance their common objectives, but given the astronomical budget deficits and continued monetization of U.S. government debt by the banking system, it is unlikely that they will continue to support the dollar in the future as they have in the past. At some point, they will allow the dollar to slide into the void as they roll out their new plan for a global reserve currency. –t.h.g.

Investing in Uncertain Times

Thomas H. Greco, Jr.

Many people today are in a quandary about their personal savings and investments. The conventional advice has it that every family should have three to six months’ living expenses squirreled away. But that begs another question which is, in what form should that ‘nest egg’ be held?

Is it safe and prudent to leave it in a bank? Should I buy bonds, or stocks, or real estate, or commodity futures? How can I balance risk with income and capital appreciation? These are questions that are difficult to answer even in “normal” times, but the present situation seems especially uncertain. The near financial meltdown of a couple of years ago coupled with the ongoing stream of bad economic news leads one to wonder, along with billionaire George Soros, is this the end of an era?

I think it is. My view on the matter is that the era of economic growth is over, kaput, finished. If you stop for a minute to think about it, you must admit that we live on a finite planet, that we are rapidly using up the available resources, that we are adding ever more pollution to our air, water and land, and that the distance (in time) between the end of the production line and regional dump is growing ever shorter. This cannot continue. Nature shows us that nothing grows forever. What would it be like if children never stopped growing? What happens as insect or animal populations grow? They either level off or experience a catastrophic collapse.

So, if we cannot expect the economy to return to what has been “normal” in our past, what can we expect? I believe that we must, and in fact are right now transitioning toward a steady-state economy, one in which overall quantitative growth is supplanted by qualitative development, i.e., an improvement in the conditions of life that really matter,

This is a transition that I compare to the metamorphosis of the caterpillar into the butterfly. The caterpillar’s role is to eat and to grow, i.e., to accumulate the resources that will be used during the chrysalis stage by the emergent butterfly as it assembles itself into a new and different creature. The butterfly behavior contrasts sharply with that of the caterpillar. While the caterpillar can be very destructive as it devours plants, the butterfly helps to pollinate them as it sips nectar from their blossoms.

So, if this is an apt description of what is going on, we ought to withdraw our resources from Wall Street investments that perpetuate “the Caterpillar economy” of endless consumption and despoliation, and start investing in “the Butterfly economy,” which is more equitable, sustainable and restorative of the environment upon which our lives ultimately depend.

This can be achieved through

• the Localization of Production,
• on a Human Scale,
• for Local Consumption,
• using Locally Available Inputs.

As our communities become more self-reliant, we become more secure, providing for ourselves more of our food, energy, housing and other necessities of life.

Right now, the economy is in a depression because in the wake of the last bubble-bust cycle the private productive sector is being starved for credit while the wasteful government-military-industrial-financial sector is appropriating ever more resources to keep itself alive. There is not much we can do about that since the political power is mainly in the hands of those interests. But we can use our own resources in our own communities to secure a better future for ourselves and our descendants.

In a depression “cash is king” because many people don’t have enough of it to cover ordinary living expenses. At the same time, the money powers are inflating the currency at unheard of rates, so ultimately fixed-dollar securities, including bank deposits, will be eaten up by rising prices.

If savers and small investors can buy into local enterprises that provide returns as a share of their actual product, they can achieve some measure of security (in food and energy, for example) while transforming depreciating dollars into something (like food, or alcohol for fuel to replace gasoline) that will become increasingly valuable as time goes on. Use value is becoming more important than market value, and personal responsibility and local cooperation are becoming more important than reliance upon declining institutions and structures.

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Here are a few links to pertinent information:

• Cutting Edge Capital Raising “The place to talk about capital-raising for [and investing in] small community businesses.”
• The Peer-to-Peer Foundation is “Researching, documenting and promoting peer-to-peer practices,” including investing. Also, see their blog.
• Alcohol Can Be a Gas Alcohol is a fuel that can be produced locally with virtually no negative impact.
• The Slow Money Alliance is working to facilitate local investment.