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posted 01-Mar-04
Reprinted from June 2002 EWR
WAR FORECAST, Part Two
This is Part Two of a two-part article. You will get more from this if you first review last month's Part One.
The federal government was invented by the state governments at the Constitutional Convention of 1787. The federal government replaced the Articles of Confederation.
It was a mistake. As explained last month, Patrick Henry and the other anti-federalists who tried to stop creation of the federal government were right, Washington has turned out to be a voracious, power-crazed juggernaut.
The states hired the federal government, and they can fire it, and return to the Articles of Confederation or something similar. This is what they should do, but they won't, so I believe there is an 85% probability one of the millions who have been harmed by the federal government's foreign meddling will do the job for the states. The war will continue until someone smuggles nuclear bombs into DC, and the federal government goes away.
On May 25th, the LOS ANGELES TIMES joined the chorus warning that stolen Russian suitcase nukes may be headed for the US.
What should you do to prepare for the big blast?
Coming: The Post-Federalist Period
This article is not about what I want to happen, but what I think will happen. If we begin with the premise that there is no way to keep a resourceful individual from smuggling suitcase nukes into DC, and millions have been given abundant incentive to do so, then this newsletter has an obligation to answer the question, what comes after and how do we prepare?
First, bear in mind that the government is not America, and a defeat for the government is not a defeat for America. When the federal government is gone, America will remain. I believe the states will simply return to the Articles of Confederation.
For a copy of the Articles, ask a librarian or go to http://www.usconstitution.net/articles.html
It helps to step back and take the long view, see the so-called Big Picture.
Historians divide America's political history into three eras, the Colonial Period, the Revolutionary Period, and the Federalist Period.
The Colonial Period ran for 168 years, from the founding of Jamestown in 1607 to the Battle of Lexington in 1775.
The Revolutionary Period was 1775 to the ratification of the Constitution in 1788.
For the 214 years since, we have been in the Federalist Period.
When the federal leviathan departs, America will enter its Post-Federalist Period.
When Rome transitioned from its Monarchist Period to its Republican Period, monarchists saw this as catastrophe. For them it was, but for the rest of the population, new freedoms brought great abundance and a level of technological advancement previously unheard of; Rome continued ten more centuries. I think something similar will happen in America.
In short, the coming Post-Federalist Period is not a problem, it is a solution. I wish the states would take the peaceful route to this solution, but they won't, so the transition to the Post-Federalist Period will be nasty - short, but nasty - and prudence requires a few precautions so you can ride through it in comfort.
Make No Major Changes
Make no major changes in your way of life. The government could be blown away in the next ten minutes, but maybe not for ten years, or perhaps not even a hundred, although that is unlikely. Nothing lasts forever, and governments generally last only years or decades, rarely centuries. This one has already been making enemies for 214 years, so as of September 11th, it has the proverbial one foot in the grave and the other on a banana peel.
In 1997, Russian security chief Alexander Lebed reported Russian suitcase nukes had been stolen. On April 28th, Lebed was killed in an aircraft "accident," leading me to wonder if he found out where the nukes are.
As long as you are not near Ground Zero, I don't think you have much to worry about. Washington does not produce anything except red tape and headaches, so these are the only things America will run short of.
The Agriculture Department produces no food. The Transportation Department transports nothing. The Education Department never taught anybody anything.1
After Washington is gone, farmers will continue growing corn, Detroit and Boeing will produce cars and planes, and teachers will arrive at your local school each morning.
Also, for those who like to have a lot of government in their lives, the state and local leviathans will still be here. State and local government in Ohio alone is larger than the whole federal government was, including all the armed forces, until 1915.2
Prepare for Fear and Panic
When a government controls the schools it does not need to control the press. Most Americans were raised in government-controlled schools. They have been taught that the federal government is the country, and it is as necessary as air and water. When Washington goes, millions will see their god dead, and they will think this is end of the world. For a few weeks, we could see a wave of fear and panic. You need to be prepared to get through this short crisis.
Disaster Preparedness Checklist
Basic Precautions
Life is uncertain, there is always the possibility of disaster, including floods, earthquakes, riots and tornadoes, so it is prudent to always have everything you need to live comfortably for at least a month. This includes
1. Food.
2. Water or a water purification device.
3. Firewood or campstove fuel.
4. Non-electric blankets.
5. Medications & first-aid items.
6. Cash (small bills and coins) to cover all living expenses.
7. Books, games, other non-electric entertainment.
8. Candles, lantern fuel, flashlight batteries.
9. Soap, toilet paper, Kleenex, detergent, toothpaste.
10. If you have pets, pet food.
11. High quality walking shoes, and perhaps a bicycle.
12. Radio and radio batteries.
13. Warm clothing.
14. Small denomination gold and silver bullion coins.
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I cannot see the need for anything more than the normal disaster preparedness you should have in place at all times. These are supplies you need to cope with possible earthquakes, tornadoes, hurricanes, riots, power shortages, floods, and so forth. Life is uncertain, we never know what is sneaking up on us.
For food, you can stash a supply in your basement or garage, but rotating it to keep it fresh is a hassle, and it occupies a lot of space. For convenience, I keep freeze-dried food. A 3-month supply for four people takes up 15 cubic feet - about half the space of a refrigerator - and costs $1,295 + shipping from Preparedness Management, 888-846-9028. It lasts 12 to 15 years, which works out to about $110 per year, cheap insurance. A 3-month supply for two is $713 + shipping.
Will We Be Invaded?
But, you might ask, who will keep the enemy from taking over America when the federal government is gone?
Washington is not fighting the Third Reich. The enemy does not have goose-stepping brigades of storm troopers, or battleships or B-52 bombers. They cannot invade and occupy us, there will be no soldier on every street corner.
They have only the ability to make Washington go away and leave them alone.
Once Washington is gone, the war is over, the enemy cannot impose a new government on us.
Few units of the US armed forces are based in Washington. Scattered all over the world, the rest will be unhurt by the big blast, and can, and should, be brought home to protect us, instead of foreign dictators. (For more, see "Will Attacks Continue?" on page 7 of the 5/02 EWR.)
After the big blast, America's fate will be entirely in the hands of Americans. The only constraint will be that whatever the states decide to do, it must not resemble the federal government. Any office or facility of any kind that looks federal will be a potential Ground Zero.
What Happens To U.S. Bonds and Social Security?
When the federal government goes, its legal tender laws go with it. Won't this create a huge international currency crisis with the dollar becoming worthless?
What happens to US bonds, the Federal Reserve, and other financial obligations and properties of the US government?
Not much. Or, at least not much in the long run.
A crisis yes. The dollar worthless, no, except perhaps (or probably) for a few weeks, during the panic.
The dollar is the world's chief "reserve" currency, which means the billions of individuals and hundreds of governments that own dollars want to do all they can to preserve its value.
Financial experts have known for a long time that federal disaster preparedness measures include banking facilities set up and ready to go in blast-proof underground bunkers. I am sure US officials have secret agreements with foreign governments saying the emergency underground Federal Reserve will be treated the same as the present Federal Reserve, including its currency and obligations.
As the European Central Bank has demonstrated, we can have a central bank and currency without a central government. Under the Articles of Confederation, I think the Federal Reserve will become a mirror image of the ECB, and the dollar a mirror image of the euro. The Fed will simply be a jointly-owned property of the fifty state governments, the way the ECB and euro are jointly owned by governments in Europe.
All the federal government's obligations and properties will become obligations and properties of the states. Probably, each state will be a partner in a consortium, on a per capita basis, or per capita times per capita income basis - some formula like that.
Social Security will be handled the same way. Each state will take over collecting and distributing the taxes within the state, or each state will collect the tax and send it to a central Social Security organization which will distribute it.
The federal government is not necessary and probably never was. State employees are every bit as intelligent as federal employees, and the states are, after all, where the federal government got the power to do all it does in the first place.
Profit From The Panic
The typical investor understands almost nothing about geopolitics or economics, so when the big blast happens, millions will sell their stocks and bonds, driving prices into the basement. They may also rush out and trade away their dollars for anything they can get their hands on. Velocity could temporarily go infinite. (For a quick and easy explanation of velocity, see my short Uncle Eric book THE MONEY MYSTERY. $9.95 + $3.90 shipping & handling from Henry Madison Research.)
The panic immediately after the big blast could be an opportunity to buy dollar-denominated assets at a few percent of what they will be worth a year or two after the smoke clears.
When things settle down and the Articles of Confederation are in place, the values of US bonds and other dollar-denominated assets will return to pre-crisis levels. If you had the foresight and courage to buy when everyone else was selling, you will earn a handsome profit.
The bonds and other federal obligations might even regain their pre-crisis credit ratings. Presently these obligations have the world's highest ratings because they are backed by the Federal Reserve, which always has the ability to pay them off because it can create dollars out of thin air. Like the ECB, the new American central bank will have the same ability, so the bonds will be equally secure.
During the panic, for a short while, a silver dime which costs 35¢ today could buy a wheelbarrow full of dollars. Then after the Articles of Confederation and new central bank have been set up, this wheelbarrow of cash will return to its former value.
What are the chances of this happening? I'd say 50% within ten years, so I consider it worth planning for, the risk-vs.-reward ratio is astronomical.
This is not to say you should convert all your assets into gold and silver. We don't know when the federal government will go, we know only that it will; nothing lasts forever.
If you like to speculate, have a small stash of gold and silver coins ready for when the opportunity arises. For a complete investment plan, see the 2/02 EWR, pages 5 to 7.
Also, you might keep a small amount of cash in your brokerage account at all times. And, near the phone keep a list of stocks or bonds you will buy quickly after the big blast.
For bonds, I'd buy standard US Treasuries. For stocks, the 30 Dow Industrials would work fine.
Exceptions to the crash may be defense stocks and raw materials. Few will realize the war is over. They will expect an accelerated military buildup and decline in dollar denominated assets, so they will sell their bonds and nearly all stocks, and buy weapons stocks and raw materials. If this happens, I will use the stampede to sell at least half my weapons stocks and half my raw materials at inflated prices.
Doug Casey likes to say that in a dollar crisis, raw materials and especially precious metals will go to the moon, but I think this is an exaggeration. I'm looking for them to go only into a high geosynchronous orbit.
We had a small but revealing test of this on Monday, May 20th. Over the weekend, vice president Cheney and other top officials had warned repeatedly that more big attacks were "almost certain." It was the headline of newspapers and chief topic of talk shows coast to coast. Monday, the dollar fell, the Dow dropped 124 and the Nasdaq 40, while oil rose 15¢, silver rose 11¢, gold $5.10 and platinum $6.50.
When the big blast happens, will you be able to buy and sell before the markets close?
Maybe, maybe not. The way to maximize your chances is to work with a broker who is already set up to deal on foreign exchanges. These exchanges may not shut their doors as quickly as those in the US.
Global Resource Investments (800-477-7853) and Euro Pacific Capital (800-727-7922) deal routinely on foreign exchanges.
Again, I am not saying you should change your way of life (unless you live near Ground Zero) or drastically alter your investment portfolio.
Just be aware that a lot of people are now working very hard to cause the federal government to go away, and the technology exists to make it likely one of them will succeed. Take a few precautions, and perhaps set a small amount of money aside to take advantage of investment opportunities that may arise during the temporary panic.
We Can Make A Fresh Start
Am I a Pollyanna? I don't think so, but I'm not infallible. As explained last month, I think these events have an 85% probability, not 100%.
Interesting sidelight: the name United States of America was created not by the 1787 Constitution but by the Articles of Confederation. Article One says the name of "this confederacy shall be The United States of America." So, after the big blast, we will still be the USA, we just won't have a central government.
The key point I keep coming back to is that the federal government is not necessary. Look at Europe. The Soviet empire was the united states of east Europe. Hitler's empire - the united states of west Europe - ended in 1945, and west Europeans have been intelligent enough to prosper for more than a half century without a central government. I am sure Americans can be intelligent enough, too.
I would not be surprised if America's political and economic structure became a copy of the European Union in 1993, after Europe's 1992 economic integration. Not that I necessarily favor this, I just think it is a 70% probability.
The bottom line in all of this is that when the federal leviathan has gotten itself blown away, this will be America's chance to make a fresh start.
What kind of start?
Toward liberty? Or toward tyranny?
I first realized this war was coming in 1981, explaining it in my 24-page special report THE THOUSAND YEAR WAR. Eighteen years later, that report was expanded into the book by the same name.
TYW was the ninth in the Uncle Eric series of books. This series is my attempt to help teach Americans what they need to know to choose the road to liberty. I hope you will help spread the word by lending your copies to others.
Summary: The Disaster Won't Amount To Much
Summarizing, the states should fire the federal government and dismantle its global empire peacefully, but they won't, so one of the millions of victims of the empire will find a way to do it unpeacefully.
To get ready, do nothing drastic, just take all the normal disaster preparedness precautions we should all take anyway.
If you are a speculator, you might keep some ready cash in your brokerage account and some small denomination gold and silver coins so that you can be a buyer when everyone else is a seller.
You might also keep your passport current so that you can take a quick two-month vacation in New Zealand when the big blast happens. This would be a comfortable way to ride out the crisis.
I can assure you that when the explosion happens, I will feel as much fear as anyone else, it will be inescapable. But I am equally sure my fears will be groundless. The corn in Iowa will continue to grow, Detroit and Boeing will continue making cars and planes, and school children will not forget 2+2 = 4.
The government is not the producer, we the people are, and we are not going to lay down and die just because the giant red-tape factory in DC has gone out of business.
I am highly confident America's Post-Federalist Period can be better in every way than its Federalist Period, once we get past the few weeks or months of turmoil during the transition.
This is not to say I am looking forward to it. The big blast will be awful for those who are caught in it, and I will find it painful to watch on TV.
But, in the grand scheme of things, it will not amount to much. For centuries, France was a superpower. Who remembers the fall of the first French republic? Can you say the year it happened? Number of casualties? How long it took for Paris to rebuild, or for the second French republic to be erected?
Did the corn in French fields stop growing?
I expect the fall of the first American republic to be equally important.
Teach the principles of liberty to everyone who will listen, so that when the crisis hits, Americans make the right choices, and we quickly regain the road that leads to peace, liberty and abundance.
Most importantly, we do not know when the crisis will happen, so enjoy life, it is too short to let it be fouled by politics. Go new places and do interesting things. Be adventurous, kind and gentle; tell jokes, laugh, and make new friends._
END
Part 1, May 2002 EWR
1 This is a slight exaggeration. The Agriculture Department, for instance, probably operates a few research farms. It is certainly safe to say the federal government does nothing that cannot be done by the state governments or the private sector.
2 Measured by number of employees. Sources: HISTORICAL STATISTICS OF THE US, and STATISTICAL ABSTRACT OF THE US.
All Back Isses are availabe in printable, searchable PDF in the EWR Archive.
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