October 05 2011.

In this newsletter, we're going to look at the collapse of the stock market, which could well happen before Christmas, and how that ties into the concept of being prepared – for anything.

I'll start with saying that I have been a research journalist since 1960, including a stint as Economics Correspondent for Television New Zealand. Then I read a book in the 1980s called “The Unseen Hand.” in which author Ralph Epperson “contends that the major events of the past, the wars, the depressions and the revolutions, have been planned years in advance by an international conspiracy.”

Like it or not, 25 years of research has confirmed that to be the way it is.

It was this among other things that eventually led to the opening of the Portland Preparedness Center, partly because it became very clear a few years ago that the world is heading for some major changes in a variety of ways.

Fortunately, while some say “everybody's asleep at the wheel,” there are, believe it or not, many people who are smart enough to prepare for hard times before they get here. (The fact that you've read this far is a good indication that you are one of those smart people.).

It is my opinion, and while you do not have to agree with it, it is an informed opinion, that the stock market could go belly up sometime in the next couple of months.

On one level, some people will see this as an engineered event. On another, it will appear to take most people by surprise because they have not done their own in-depth research. Instead, they have relied on the media pundits and spin doctors (reporters) to placate them with rhetoric that gives them the illusion that everything is going to be okay.

It isn't.

You only have to watch a few seconds of the action on the floor of the New York Stock Exchange to see that playing the market is akin to a feeding frenzy as traders shout and scream like gamblers throwing dice as if they just know that they are going to make a fortune on the next throw.

Most don't. And many go broke.

The difference here is that these people base their buy and sell decisions on the words of people like Ben Bernanke, or politicians, or company press releases that supposedly give them an honest look at future profitability – or not.

The companies and corporations that are listed on the stock exchange are all there for a reason – and this has escaped most people's attention and understanding.

They are there because they have in the past done well enough to “go public” - which simply means they have reached the point that they can promise investors a return on an investment (purchase of shares) in a viable business that will supposedly continue to grow, expand, and make a profit quarter after quarter and year after year.

This in turn assumes that there will always be customers for the products the companies produce, and that growth will continue unabated far into the future. Which is totally irrational.

Nevertheless the game goes on, fueled and sustained by the money that's thrown into the pot by individuals and fund managers seeking to make a few extra dollars on the next throw of the dice.

The aim of the game, for such players, is to not only stay ahead of inflation, but to make enough to provide themselves (or their trusting contributors) with enough to retire on and live happily ever after in their later years. There is no doubt that many people have been able to do this over the last few decades. But as you know times have changed. Dramatically.

To understand the inevitable collapse of the stock market, we have to look beyond the trading floor and ask “where does the money come from?”

It comes, in the final analysis from the man in the street.

True, there are a few individuals who seem to play and win all the time, but for the most part, the money that flows through the stock market comes out of the pockets of the middle class – those who either voluntarily or involuntarily have some of their income garnished and used to supposedly create a future retirement nest egg.

Financial advisers will tell you not to put all your eggs in one basket. “Diversify your portfolio” they will say. But this denies the fact that the stock market itself is the one basket that contains all the eggs.

Consequently, no matter how diversified your portfolio might be, there is a constant risk that you will lose everything when the basket itself becomes a basket case.

That's what's happening to the stock exchange right now.

The health of the stock market relies on the ability of the man in the street to continue to buy the goods that are produced by the companies listed on the stock exchange.

After the Second World War and its laser-like focus on producing things for the war machine in order to win that war, things changed dramatically. How were the corporations going to keep growing and making a profit? The eartheasy.com blog puts it in a nutshell.

“....retailing analyst Victor Lebow expressed the solution: “Our enormously productive economy … demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption…. we need things consumed, burned up, replaced, and discarded at an ever-accelerating rate.”

Subsequently, President Dwight D. Eisenhower's economic advisers would say... “The American economy’s ultimate purpose is to produce more consumer goods.” (When goods are well-made and durable, eventually markets are saturated. But an endless market can be created by introducing rapid obsolescence (think clothing, cars, laptop computers). And with disposability, where an article is used once and thrown away, the market will never be saturated.). It obviously seemed like a good idea at the time and over the next 50 years the United States became the most affluent country on the planet. But at a price.

In their drive for growth and their need to make throw-away goods at ever decreasing costs and ever increasing profits, corporations began shifting their business overseas, closing down US manufacturing companies, casually putting millions out of work, and relying on cheap labor in other countries to help them continue the illusion of exponential growth.

But if the man on the street has no money to spend on consumer goods, then this type of consumer-reliant economy must eventually fail. And that's what's happening right now.

The man on the street (the consumer) can no longer afford to buy the iPods and computers and cars and goodies that are the hallmark of an affluent throw-away society, so the producers of those non-essential goodies are running out of income, which in turn means no more profit, and suddenly shares in such companies become worthless because there is no way they can continue to pay a dividend to their shareholders.

On a more subtle level, there is an obvious relationship between stock market rises and falls from day to day and the pontifications and prognostications of people like the chairman of the Federal (Not) Reserve, Ben Bernanke.

He and his predecessors appear from time to time and make statements about the health of the economy, and depending on whether the outlook is good or not, there is an instant emotional reaction among investors and the Dow Jones goes up or down (or all over the place) in a sudden burst of trading – aka gambling.

What the Bernankes of the world do not reveal is the fact that none of this would be possible without the man in the street being able to go on buying all those goodies while at the same time contributing to his or her retirement fund – which money is more often than not siphoned into Wall Street in the hope that the nest egg will be there when needed.

Instead, Bernanke, aided and abetted by election-hungry politicians, prints more money (out of thin air) and assures us that this will keep people employed and boost the economy. Meaningless, utterly meaningless, phrases like “quantitative easing” or “QE3” become the jargon of the day to be repeated ad nauseum by the presstitutes of the MainStreamMedia.

No-one has the balls to tell it how it is. And that is that those who print the money are not only the owners of the central banks, they also “own” (as in, control) the casino.

They know very well that throwing more money into the pot only benefits those who have first access to the pot; think “bail outs” and how trillions of dollars were immediately given to banks that were “too big to fail” - and then went on to pay their staff millions of dollars in bonuses, while their depositors and those whose homes had been foreclosed on saw absolutely nothing in the way of “quantitative easing.” Instead, they got to live in a tent city somewhere.... One could be forgiven for coming to the conclusion that this whole scenario is being engineered for some ulterior purpose.

On the one hand, one could argue that the claim that “we'll see the collapse of the stock market before Christmas” is nothing but scaremongering; an impossibility; something that will never happen because the stock market is a self-correcting program that is just going through some bouncy times.

On the other hand, when you have seen enough or lived long enough to know that there is an unseen hand behind the curtain, pulling strings and manipulating all the players (manipulating the 99% for the benefit of the 1%) it is not such an outlandish proposition.

But what would be the purpose of letting the stock market go tits up? Well, it would mean that the 1% would again be able to buy real assets at pennies on the dollar. It would mean that the 99% would sadly become destitute – but what does that matter to a group of people who believe it is their destiny to control an entire planet?

In other words, if this scenario has any validity, the middle class is nothing more than a group of useful idiots who have been exploited for decades as both producers and consumers – but who have reached the end of their usefulness.

True, one could have expected some backlash, such as this Occupy Wall Street movement which is now spreading to cities throughout North America. But what if that too has been foreseen and possibly even instigated by the string-pullers? Would it not act as an emotional outlet for those who wish to vent their anger at being manipulated for so long? Indeed it would.

But it would also offer the “controllers” and their minions an excuse for cracking down on “civil unrest” - thereby imposing even more controls under the guise of a “national emergency.” Evidence of this can been seen in recent YouTube videos where the NYPD has arrested up to 700 people at a time including little girls.. Could this be staging for a national emergency and lock-down?

How this will play out remains to be seen. Let's just say that if this is the end game that is being played by the controllers, it is a risky game indeed, because 1% against 99% is not very good odds at all.

Having said all that, and if we accept the possibility that Wall Street and the NYSE are going under before Christmas, what is one to do?

The first thing would be to regain control of one's own money. How to do that would have to be an individual choice. It might mean bailing out of one's IRA or 401K (if such is an option).

It might mean selling one's portfolio, if one has one, at whatever one can get in the moment – and putting whatever one gets into real assets. This might include a storehouse or pantry full of food, perhaps a small plot of rural land that you could own outright, because in a Depression (which could happen overnight – and we're already in the beginnings of another Big One) food in the pantry is better than money in the bank. A house and land in the country is way better than a cheek-by-jowel hovel in the city.

Note however that the collapse of the stock market does not necessarily mean the immediate collapse of the banking system, or even commerce as a whole.

Although there is the risk of a run on the banks when the market does fall apart, local and community banks will not necessarily be at doom's door, unless everyone panics and wants to get whatever money they have left into their own pockets immediately. (You might want to think about doing that with at least some of your cash though, as a “just in case” precaution).

None of this is intended as financial advice. It is no more than a heads up on what might be expected in the weeks ahead. You may agree or disagree. This is not a competition about who is right and who is wrong.

When it happens there will be follow-on effects, such as company bankruptcies, massive unemployment, rising food prices, and inflation in all areas of consumer goods.

But one thing's for sure. Because we saw this coming, a business like the Portland Preparedness Center is in a far better long-term survival position than many others that provide non-essential goodies. It's possible that even the big supermarkets will suddenly disappear.

However, if this Big Depression does become a full-blown issue, we too will be caught in that spiral of rising prices, and we'll have to pass them on to our customers.

Therefore, we have followed our own advice – we have used what cash (not credit) we have available to stock up our warehouse ahead of the crash so we can hold prices down as long as possible.

Whether you're a single person or a bigger family (or foster home, nursing home, or required by the laws of your state to have emergency supplies on hand for those in your care) we have you covered in the four basics of preparedness – Food, Water, Medical, and Shelter.

Come and see us and get your emergency supplies before it hits the fan.

We're at the corner of 72nd and Glisan in Portland, Oregon. Or check our new web site, www.getreadyportland.com . We do ship to the 48 contiguous states. Or call us at 503 252 2525. We're open Tues – Sat 10 – 6 Pacific Time.

Merry Christmas all.

Be Prepared.

Michael Knight. Editor - Earth Change Report

Proprietor - The Portland Preparedness Center

email: news@portlandprepared.com