Why You Will Probably Lose Everything In The Coming Depression

(Updated October 12. 2008) Last week saw the worldwide rout of the financial markets and squarely placed the current bear market among the worst in history.

Here is RON PAUL on the global financial crisis, the potential for economic depression and where we’re headed. One of the few in Washington whose position on sound economics and the dangers of the Federal Reserve system have been remarkably consistent for decades.

(Appended to the appended post of September 14, 2008.)

Here’s a partial list of the entrance keywords from search engines, visitors typed to arrive at this site today (9/25/08).

* “coming depression” 2008

* depression investing

* gold value during the depression

* how much silver will i need to survive the coming depression

* how not to lose everything in this economy

* how to make it through the coming depression

* how to prepare for the coming depression

* prepare for coming depression economy

* second great depression criteria

* the coming depression 2008

* usa coming depression

* what will happen if we enter a depression?

* what will the coming depression be like?

* who made fortunes during the great depression?

Since this is a website about direct response advertising and marketing and NOT economics or investing, it’s interesting to note the FLOOD of searches by a rightfully nervous public.

Coincidentally, today, I entered my first protracted message board discussion (in years) about the present economic mess. If you can’t get passionate and incredibly proactive about this potential, worldwide, economic catastrophe, then about what can you?

Understand, I hope we can steer the ship through this perilous sea to safe harbor, but it may be wise to start considering your ‘PLAN B.’

My ‘flame war’ started by questioning the fundamental guarantee of the F.D.I.C. (Federal Deposit Insurance Corporation) of protecting depositors up to $100,000 at F.D.I.C institutions.

This was the worried (and actively thinking) original poster’s comment that inspired my reply:

“Do you feel that it is safe to have all our money in the bank? Can banks really shut the doors if the crisis gets worse? I know that our money is FDIC insured but is it really if the situation would get worse?

I also have some assets in a safety deposit box in my bank? Is it possible to be denied access the box if situation worsens.”

This was the gist of my reply:

“Did you see the half-mile long lines of customers waiting outside of Northern Rock Bank to WITHDRAW over a billion pounds Sterling last year?

What are your chances of getting by that kind of line to get to your box if there’s a RUN on your bank?

After what’s happened (so far) this year, I don’t think anyone would take poison on the fact that it’s impossible to occur at banks like JP Morgan Chase, Wells-Fargo, Bank of America, etc.

As far as FDIC ‘protection’ goes, that’s a 1930’s Depression-era creation that’s never been *tested* has it?

I mean, it’s only paper after all isn’t it? But everyone will be scrambling for that same paper at the same time *if* a worst case scenario happens.”

The website founder, who’s a very bright man, but likely influenced by political correctness and putting on a brave face for his membership site subscribers answered:

“Your money is safe. Banks have $100,000 insurance per account.”

This was several hours before the largest bank failure in U.S. history, Washington Mutual (WaMu), hit the wires, eclipsing the earlier failure this year of IndyMac by 1000%.

I replied:

“Yes, I know what the teller at the bank says about the FDIC.

And it did hold up under the S&L Crisis in the 80’s, but as far as I know, they’ve mostly bailed out Podung banks that’ve gone bust. There’s never been a *real* test of the fundamental guarantee.

Assuming under a worse case scenario than today that dollars are even worth anything, how would they insure payouts on a massive scale and on what schedule? How long would depositors have to wait for an insurance check from the FDIC?

One of the banks I use, Wachovia, acquired a $25 billion sub-prime asset two years ago. That’s all a write-down now and Wachovia’s cash reserves were the lowest they’ve been
even before declaring it.

Never say never.”

I have no pretension of being a financial luminary. Heck, I think even the greatest financial minds on the planet, including Warren Buffet and George Soros, have NO idea what might happen next.

The bottom line is:

We’re In Completely Uncharted Territory Now

So no one has any business making pronouncements about what will or won’t happen.

Likewise, no one with a family depending on them should think: “The government will save us, so everything will be fine.”

Here’s what I suggest as an INSURANCE POLICY if the bottom completely falls out.

Do you remember Pascal’s wager?

A suggestion posed by the French philosopher Blaise Pascal, that even though the existence of God cannot be determined through reason, a person should “wager” as though God exists, because in so living has potentially everything to gain, and certainly nothing to lose.

This applies directly to the present world financial system crisis.

*IF* there is a PANIC and a run on your bank, you will NOT be able to get a hold of YOUR cash. Everybody will be scrambling for it at the same time. Your credit cards will be completely worthless. Depositors will be prevented from withdrawing any cash, just as I observed firsthand while in Argentina several years ago, when the peso collapsed.

Your insurance policy?

LOTs of greenbacks, fungolas, C-notes. The stuff we used to carry before credit cards.

Get to your bank a.s.a.p. and withdraw MORE cash than you feel comfortable withdrawing. Sure, the teller will look at you a little funny and call her manager over to approve the transaction, but they are there to serve at YOUR pleasure, not you at their’s.

If nothing occurs, you’ve lost a dollar or two in interest.

If the sky falls, you’ll have bountiful greenbacks to buy gas, food, water, clothing and all the wonderful things on the survivalists’ checklist, while your neighbors will be reduced to a Stone Age existence.

The upshot, if you hold a mortgage, is the lender holding your note may become extinct.

What a world!?

(Appended to original post from August 16, 2008.

It’s Sunday night 9/14/08 and Merrill-Lynch has already sold itself to Bank of America, Lehman Brothers will likely be de-listed tomorrow morning and insurance giant, A.I.G. is days away from collapse if it doesn’t get a $40 billion infusion from the Fed. My bedtime reading tonight is Gary North’s Last Train Out.

Where’s Howard Ruff when you need him?)

Original Post

The year was 1980.

Americans sat in their living rooms and watched the following stories unfold on their TV sets.

* Mount Saint Helens erupted causing $3 billion in damage.

* War broke out between Iran and Iraq.

* The price of an ounce of gold skyrocketed from a low of $474 to a high of $850 — a price not seen again until this year.

* And a “gloom-and-doom” space ad sprang up like wildfire in newspapers across the country.

Its right-brain-assaulting headline was: “Why You Will Probably Lose Everything In The Coming Depression.”

The ad was for Douglas R. Casey’s book, Crisis Investing, which sat on the New York TImes Best Seller List for 29 weeks.

Now, discounting the fact Casey predicted a depression for 1983 which would make the 1930’s seem like a “technical correction,” the author built a lucrative career in newsletter publishing and speaking.

Moreover, when reading this 28-year-old ad, it’s hard to ignore the economic similarities with today.

In fact, you could probably strip out the 1980 buzz words and replace them with our 2008 turmoils — sub-prime mortgages, liquidity crisis, real estate collapse, etc. — and have an immensely profitable ad.

There’s also something about this formula of apocalyptic prediction paired with visionary solutions which should be as instructive to copywriters and direct marketers as it is attractive to doomsday cults.

As marketers, people buy our products and services not based on how logical we make our arguments but on how well we push emotional hot buttons.

This ad not only provides a history lesson and the three-step scenario that precedes a collapse but fans the emotional fires.

Around this time, newsletter publishers like Howard Ruff and Gary North capitalized on the doomsday trend by advocating storage of dehydrated food, bottled water and gold coins in the event of civil breakdown and collapse of the financial system.

This opened the door to copywriters and marketing consultants like Clayton Makepeace and Jay Abraham, who made fortunes for themselves and their gold bug buddies and clients — not primarily through great copy, which they wrote — but by positioning themselves on a path with insatiable demand for gold, gold stocks and other precious metals. (Jay Abraham had an ad in the New York Times in 1984 with the headline: “Cayman Island 24-Hour Gold and Silver Hotline: The Most Expensive Phone Number in the World.”

The lesson is:

It’s more important to be in the right place at the right time with the right message…

then it is to write great advertising prose.

Here is a transcription of the ad. (If you’d like to see it in its original layout, click on the thumbnail above.)

“Why You Will Probably Lose Everything In The Coming Depression”

Of course, you could be the exception. Even in the Great Depression of the 1930s, there were a handful of people who not only did not lose everything, but actually made fortunes. These were the people who heeded the advice of economic realists like Bernard Baruch, the famed “Wizard of Wall Street.”

Baruch tried to warn the public of the economic disaster that lay ahead, but most people ignored his warnings. Instead, they chose to listen to the Pollyanna assurances of government bureaucrats and establishment economists. As a result, the majority of the population failed to escape the ravages of the Great Depression.

Why do the great majority of men and women insist on clinging to folly, notwithstanding the lessons of history? Throughout the centuries, a three-step scenario has unfolded over and over again.

First, government officials and establishment intellectuals assure the public that some imminent cataclysmic event “could never happen here” or “could never happen today.”

Second, the masses regurgitate these assurances until the phenomenon feeds on itself, the ultimate result being that anyone who calls attention to the obvious realities is simply dismissed as a “doomsayer.”

Third, the cataclysmic event comes to pass!

This scenario has been replayed in nation after nation with monotonous repetition. All three steps were clearly followed in ancient Rome, in pre-Napoleonic France in the 1790s, in Russia prior to the Bolshevik revolution in 1917, in Germany under Hitler’s early rule, and in the United States in the late 1920s.

And now, as the US economy continues to collapse under the weight of government regulation, taxation, and ever-accelerating welfare-state spending, bureaucrats and establishment economists once again seem almost frantic in their efforts to assure the public that there is no reason for concern. Which history tells us is a very bad sign; the third step is practically upon us!

In every age, in every country, intellectuals like Walter Heller and John Kenneth Galbraith have insisted, right up to the day of the final collapse, that it could never happen today and that all those who claim otherwise are irresponsible “prophets of doom.”

The “prophets of doom,” of course, are almost always the true prophets – and men who have the ability to properly combine knowledge, realism, and foresight. Unfortunately, these are the very men whom the “man on the streets” rarely hears about.

Truth has never been very popular with the masses, because truth is so often unpleasant. So it’s not surprising that the true prophets are almost always ignored, and that consequently the majority of men are caught totally unprepared when the inevitable crisis arrives.

Today there is a growing feeling among those prophets that Douglas R. Casey is perhaps the brightest new economic mind to enter their ranks in years. Like the late Bernard Baruch, Casey is endowed with the prodigious talent for forecasting economic events.

Never has a man so young been accorded so many accolades by the respected names within the “hard-money movement.” Savvy investors first began to take notice when Harry Brown and Harry D. Schultz, respectively, wrote the Preface and Foreword to Casey’s first book, The International Man.

Now, Robert J. Ringer has written the preface to Casey’s remarkable new book, Crisis Investing. Ringer states that “100 years from now, should mankind survive that long, Doug Casey may well be remembered as one of the great prophets of our time.”

Howard Ruff, another doomsayer who has developed an annoying habit of being right most of the time, says of Casey and Crisis Investing: “this is one of the most helpful books I’ve ever read. Its tone and power are cool, clear, and for the most part dead-on. Doug Casey, should by rights, be a major figure in the sometimes checkered world of investment advisors. He’s a very wise man.”

How has Casey earned this awesome reputation at so young an age? It is due not only to his genius, but to his unusual approach to domestic economic analysis – through first hand experience on the international scene.

Casey spends several months each year traveling abroad and regularly sponsors investment seminars in such locations as South Africa, Rhodesia, the Bahamas, Costa Rica, Switzerland, Argentina, and Hong Kong. His worldwide travels and contacts allow him to analyze the U.S. economy from a truly unique perspective.

And what does that perspective reveal? In crisis investing, Casey offers virtually irrefutable evidence that the United States will soon enter a depression — far greater in scope and dimension than that of the 1930s — probably by 1983 at the latest.

If Casey is correct, then prudent, thrifty Americans who have prepared for the future in traditional ways will soon be completely wiped out. He warns that “many people never plan properly for the future, simply because they are afraid they will discover they have built their hopes and dreams on foundations of quick sand.”

Don’t make the mistake of being caught unprepared just because those who “ought to know” keep insisting that “it could never happen today.”

Second Chance to Head Warnings of Bernard Baruch

Those who ignored the warnings of Bernard Baruch in the 1920s — which included some of the wealthiest and most sophisticated investors — lived to regret it. Now, investors of the 80’s have a chance to heed the warnings of Douglas Casey, who is rapidly emerging as “the new Bernard Baruch”.

In Crisis Investing, Casey provides specific advice on how to prepare for the coming economic collapse, advice which he says will actually produce profits for the prudent investor. In this, the ultimate investment book for the troubled years ahead, he makes practical use of his economic forecasting talent by examining, in a clear, precise manner:

Banks

• Why leaving large amounts of money in the bank, regardless of the bank size, is like playing Russian Roulette.
• Names and addresses of small to medium-sized Swiss Banks that exercise sound banking practices.

Bonds

• Why municipals are the worst kind of bonds to own.
• Why you need an absolute minimum return of 28% to consider investing in even the highest-quality corporate bonds.

Collectibles

• Five important rules to follow when buying collectibles.
• Two types of collectibles that maintain real value across time and space, but have not yet been discovered by the general public.

Foreign Countries (asset and personal protection)

• The best way to get assets out of the country.
• Four countries that offer the most safety for your assets.

Gold, Silver, and Gold and Silver Stocks

• Why the true price of Gold should be at least $3,300 an ounce.
• The right time to buy silver.
• Why penny, gold, and silver stocks in the United States are greatly under-priced and which ones to buy.
• 35 recommended South African gold stocks, many with yields ranging from 14% to 68%.

Inflation

• Why runaway inflation and the total destruction of the US dollar are now unavoidable.

Real Estate

• Five reasons why real estate prices must eventually nosedive to a small fraction of their present level.
• Countries where land is still a good buy.

Speculative Opportunities

• A once in a century speculative opportunity that you probably have never thought about.

Stocks

• Why the Dow Jones Average will fall to at least 300 in the not too distant future.
• Two factors that could cause the stock market to experience a phenomenal, temporary rise before plunging.
• 23 low-priced energy stocks that could take off at any time.
• The five criteria to look for when selling stocks short, and which kinds of stocks give you an almost sure profit through short sale.

… and much, much more.

If you either don’t believe that the United States is on the verge of a total economic collapse, or don’t know how to take proper measures to protect yourself when it occurs, you need to read Crisis Investing.

Do the following events seem “impossible” to you?

• Strict controls on wages, prices and profits, with jail sentences handed out to those who do not comply.
• Restrictions on traveling abroad.
• A ban on foreign bank accounts, with limitations on funds that can be sent out of the country.
• Inflation of well over 20% at first, then accelerating rapidly thereafter.
• Chaotic shortages resulting in rationing, black markets, searches, seizures, and confiscations.
• Unemployment rates in excess of those experienced during the Great Depression of the 1930s.
• Bankruptcy, on a massive scale of major corporations and local and state governments.
• The drawing up of capital markets, with no money at all available for stock or bond issues.
• Nationalization of major industries.
• The complete collapse of the Social Security system, as well as most, if not all, pension funds.
• Riots, protests, and general chaos, which will be brought under control by a national police force.
• Confiscation of gold from individuals.

If you either don’t believe the above events will occur over the next few years, or don’t know how to take proper measures to protect yourself when they do, you need to read Crisis Investing.”

The final waters, both here and abroad, are troubled now. I am convinced that gale force winds will soon hit us, followed by tidal waves of panic and collapse. Most investors will be stunned by their losses; many will be utterly destroyed; a canny few will not only survive, but prosper. “

“I intend to be safe and secure, on dry land, throughout the financial storms to come. In crisis investing, I have explained my goals and my own personal strategies. Hopefully, these words will enable you to travel safely as well.” Douglas R. Casey.