Jonathan Campbell
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Community Alert
August 26, 2010

The Dow dropped another 74 points today, and it's down below the 10,000 mark. Just a few days ago, the real estate market indicators for the country (existing home sales, new home sales) plummeted, and a week ago the labor department announced a half million people had filed initial claims for unemployment. Until then - despite other indications that things were not so great, the major news media and the great economists all over the country were predicting that recovery was just around the corner. Suddenly they are surprised.

If you have been reading anything other than the blabber of mainstream media, you should not be surprised. But almost no one, not even the contrarian economists, has been saying anything about the root cause of this so-called "recession."

So I thought I'd give you a short synopsis, in case you haven't read articles by Paul Craig Roberts or Thom Hartmann.

It's actually very simple, but, as I said, almost no one is talking about it, and the mainstream economists just seem to be stupid.

It all started in the 1960s, but it accelerated in the 1980s and 1990s. Industry in the US was simply moved offshore, and once the Internet became popular worldwide and the international telephone network was deregulated, companies could outsource their back office white collar jobs.

Why? All for the bottom line - cheaper wages being paid to people in India, China, the Phillipines, Indonesia, Jordan, Mexico, wherever. 50c per hour, 35 cents per hour, a dollar a day some places for factory jobs. A little more for white collar jobs - customer service, even computer programming.

So what happened here? Millions of unemployed factory workers. Millions of unemployed service workers. There are literally no jobs for them.

Eventually, this wrecks the entire economy, because there are fewer people able to spend any money on anything. They are either just barely making ends meet on one person's salary, or living on unemployment, or homeless.

But Alan Greenspan claimed we were making a transition to a "service economy" and he made it easier to get credit and enabled people owning homes to take second mortgages on their homes and keeping up their lifestyle, waiting for "recovery" to happen, instead of finding alternatives, saving, and cutting back their expenses.

Meanwhile, companies like Countrywide and Wells Fargo were selling homes to people who really couldn't afford them long term. They told people not to worry about the adjustable rates, that if they couldn't afford it later they could sell their home at a profit. And these companies and the big banks packaged up the mortgages as "Collateralized Debt Obligations" (CDOs), got the ratings agencies to rate them as valuable securities, and sold them as high-quality investments to other banks.

Guess what? It was all a fraud. Service jobs were being outsourced faster than the remaining industrial jobs. Just type the word "outsourcing" to google, and you'll find listings of DOZENS of companies that are helping other companies eliminate jobs here and ship them abroad, everything from accounting to engineering to book publishing to graphic design.

When people had maxed out their credit cards and credit lines, and millions of people were unemployed, people stopping buying or upgrading their homes, and the housing market tanked. Housing prices dropped, the people who bought subprime mortgages defaulted, and the packaged investments became worthless paper. That was the 2008-2009 crash. Bush and Obama injected a trillion dollars into the system to "jump-start" the economy, but this didn't make any structural changes. The Federal Reserve has injected ten times that into the banking system.

Offshoring and outsourcing have continued. Close to a half million people get added to the unemployed rolls each month. The real unemployment rate (including people who are no longer looking for work) is more than 20%. Nothing has changed. The economy hasn't recovered because, as Paul Craig Roberts (former assistant Secretary of the Treasury) has said, "There is no economy left to recover."

And that's where we are today. What can we do about it?

If you have a job that is likely to be outsourced or offshored, think about training for one that can't in case you lose your current one. If you have a narrow skill set, broaden it now. Save as much money as you can. Prepare for the worst. If it doesn't come to pass, then you have extra money to spend. If it does, then that extra money may be the difference between living in your home instead of a tent.

If you have stocks or pensions in the stock market, I suggest you move them to money market, and think about finding a contrarian financial analyst such as Martin Weiss (moneyandmarkets.com) or Stansberry and Associates or you might consider investing it in gold. You can buy it in metal form and have it deposited for you at Kitco.com, or you can buy an easily-convertible certificate at goldmoney.com.

If you have a pension plan where there are no flexible options for investment, you can probably roll it over into a self-directed IRA, such as Sterling Trust, where you can invest it in whatever you want, including precious metals. However, I must say this, dealing with Sterling can be time-consuming and frustrating at times, because the demand of their services is increasing daily, so just be patient and persistent. Don't invest in anything volatile. Get good advice about a long-term investment. Before I spent my small pension fund on a house addition, I had it invested in gold at Sterling, and in just over a year it had gained more than 10% in value. That was just a year ago, I sold it for $975 per ounce. Today it closed at $1236 per ounce!!!

Prepare your body for a stressful time. Download and read and use my natural health regimen from http://www.cqs.com/naturalhealthguide.pdf. It will help you stay healthy under stress. And - as a side effect - it will prevent heart disease! A healthy body is worth more to you than all of the gold in Fort Knox.

Find out about meetings and self-help organizations in your community. This is a time when communities must come together and help those in need.

I'll keep you posted with anything new on the economic front.

Regards
Jonathan

References:

Paul Craig Roberts. What Economy? There's Nothing Left to Recover. http://www.counterpunch.org/roberts07162009.html

Thom Hartmann. Globalization is Killing the Globe: Return to Local Economies. http://www.huffingtonpost.com/thom-hartmann/globalization-is-killing_b_454091.html

John Williams' Shadow Government Statistics. http://www.shadowstats.com

Standard Disclaimer: Any economic or financial information above, in Community Alert and Bulletin, Economic and Health Alerts, and the Economic and Health Survival Guide do not constitute financial advice, but are condensations and distillations of the work of others and a few words of what I believe to be common sense. The assistance and advice I may provide for you in setting up in setting up an IRA does not guarantee returns, which are dependent on market conditions, and you are taking full responsibility for financial decisions you make based on my advice. Please seek out an independent licensed accountant or financial advisor to review any information and references I have provided as well as their own expert knowledge, in order to tailor a financial plan to your circumstances. I cannot be held responsible for the consequences of decisions made based on the information and advice that I provide.

I am a health, environment, and economics researcher and consultant. I am not a physician, and the health information, suggestions, and recommendations that I provide are not prescriptions. When you pursue alternative remedies, you are taking full responsibility for your own health decisions, and it is recommended that you consult with a qualified physician to monitor your progress. This is especially the case if you currently take pharmaceutical drugs, as your dosage requirements will likely change as your body heals.

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