Gary North's Reality Check #41

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My E-mail Inbox shows that Gary tried to send me his latest Reality Check (#41) but it didn't transmit- all I have is an empty screen. This happens every time....so frustrating. I always have to send him a reqest for a repeat transmission, but it usually takes about a week before that happens.

If someone else's got thru okay, would you be so kind as to put it on this board so we all could read it. I hate to miss seeing what he has to say. Much obliged. Jo Ann

-- Jo Ann (MaJo@Michiana.com), July 20, 1999

Answers

Jo Ann: Do you like to mudwrestle?

-- King of Spain (madrid@aol.com), July 20, 1999.

I'm assuming GN doesn't have a problem with this being posted.

=============

Gary North's REALITY CHECK Issue 41.. July 19, 1999

THE TYRANNY OF THE URGENT

The curse of reading this newsletter for some readers will be this: self-recrimination in 2000. The day that the supply of some item I have recommended dries up, those who procrastinated will become even more frantic than someone who heard about it late in the game. The panic will be greater because the information on which it is based is greater.

Procrastination is a way of life: surrendering to the tyranny of the urgent. The tyranny of the urgent is less tyrannical if you deal with it in advance. This takes a forecast. It takes a plan to deal with the forecast. It also takes discipline to apply the plan. Few people have such discipline.

Begin with a forecast. What will be your most urgent steps as Y2K fever at last spreads to the general population? You must begin with those supplies that depend on the narrowest pipelines. Generators are going to get scarce. So are Trace inverters and their support items. You will not be able to click through to

http://www.chinadiesel.com

and buy these items in the fall. Skilled installers are scarce now. Trojan L-16 batteries are already scarce. You must order them now. The deep-cycle marine batteries sold at Sam's or Costco are better than nothing and half the price of the Trojans, but with half the life expectancy. If you are even thinking about buying a power system, buy it this month.

The next step is to buy some of the pulse units that extend battery life by 4 to one. They cost $70, and you use one per half dozen batteries. Barry Hutchinson sells them. (Specify 12-volt or 24-volt systems.)

Then buy the EDTA powder that he sells. It can get rid of any sulfation that the pulse units leave. Better: it can remove sulfation from dead batteries, thereby resurrecting them. The stuff is cheap: $25/pound, and a tablespoon of it can restore a battery.

There will be a lot of dead 12-volt car batteries for sale next year. You can restore them. You will be able to put them to use in a simple home power system. They're going to be worth more to you than to the owners. Car batteries are not as good as deep-cycle marine batteries, but dead ones will be cheap.

He sells a pulse unit for 6 Trojan L-16s, a battery safety kit, and a bag of EDTA for $128. Address: Barry Hutchinson, P. O. Box 783, Deming, WA 98244.

Why buy new deep-cycle batteries today? Because you want better quality batteries that will not be available in a major crisis. You should buy any vital item that may disappear from your local market next year. In a depression, some item might be cheap if the banks stay up and you have electronic cash. But if the banks go down, taking your money with them, then the low price of some item 500 miles away will do you no good.

CASH IS LOCAL

Cash is used locally. That's the problem. The division of labor breaks down when you must buy with currency. You must trade with people you trust who live nearby. That will be relatively few people, and most of them have no reserves. Your circle of available traders shrinks from tens of thousands to tens. Take down the banks, and this is the result.

That is why you must buy this year those items that will not be for sale locally next year. You must make forecasts on what items you will need most, in which order of importance, and in which sequence of disappearance. Buy those items now that are most likely to disappear.

We have been through this drill already: generators got scarce. So did tenth-ounce gold coins. It will happen again.

In terms of vital products, food, soap, disposables, and pain killers are high on the list, but they will be around longer: larger pipelines. The panic buying will hit them last. It will take a higher percentage of panic- driven buyers to create shortages here. On these, you can wait. But not stored food programs. Beans and rice, yes. Dried fruits, no.

Why beans and rice? Because they are cheap, readily available, filling, and will sustain life. These items are for your neighbors. Anything you can do to keep your neighbors friendly in 2000 should be planned for now. The cheapest form of insurance is food. I would list water, but if water is going to be a problem where you live, you had better have a swimming pool.

If you have been in s Sam's Club store lately, you have seen the 55-gallon plastic drums for $20. These are for water. The trouble is, a typical adult will use up one drum of water per day. Flush toilets are highly consuming.

What about nutrition? Dr. Arthur Robinson developed his bread recipe to provide full nutrition, a ratio of 40- 40-20: wheat, corn, and soy. It will keep you healthy. His family lived on it for years. You can buy these items today, but at a co-op, not at Sam's. Get moving on this now.

Then there are buckets. You need buckets for food storage. These are narrow-pipeline products. The shortages will appear here before they do with bulk food. The panic will dry up the supply. So, buy buckets before you buy the food if you plan to pack your own.

http://www.m-m-industries.com

Buy diatomaceous earth to kill bugs that get into your grain.

http://www.nitro n.com/html/insect_control.html

I am still looking for an outfit that sells 45-lb. buckets of non-iodized salt for canning. When I find it, I'll let you know.

Meanwhile, buy canning jars and 12 lids per jar. A year's supply of food for an adult will take 100 quart jars, minimum. Wal-Mart sells them. So do the Dollar General and Family Dollar stores.

LATER, LATER, LATER

John Mauldin spoke at a Y2K conference of professionals. He asked how many participants still owned stocks. Almost everyone did. He asked how many planned to own stocks in December. Nobody.

This is madness. These people are self-deluded. They will all own stocks in December. That's because they do not believe in Y2K now. They are waiting to see. What will persuade them? The stock market collapse that they say they plan to avoid. They do not plan to avoid it. They say they do, but it's a lie. No problem as large as Y2K could do anything but collapse the market. No one should still be in a market threatened by Y2K. This means that they don't really believe that Y2K will be bad.

They do not see Y2K as urgent. What is urgent? Avoiding the payment of capital gains, and the pre- retirement taxes, and the early withdrawal penalty. They are hypnotized by numbers. They still think of their wealth as digital. They don't believe in Y2K.

They do not understand how long it takes to get prepared. They have never thought about life without digital money. They have never thought about life without the division of labor. They used to watch "Little House on the Prairie," which was a TV world of perpetual spring and summer. In Minnesota, winter meant cold, hard times, cabin fever, and inventories -- or it meant death.

You have to got to start thinking, "Little House on the Prairie." What would a well-equipped farmer have had? First of all, extensive knowledge. We don't have time. But we do have money, which must be converted into larger inventories. We will make too many mistakes.

Second, he had a water source. Third, he had a fuel supply. Fourth, he had a wood stove. Fifth, he had food.

He also had neighbors who had skills and inventories. We don't. This, in my view, is the weakest link in most people's plans. They cannot trust their neighbors. They do not know their neighbors, yet they will be dependent on them after December.

If the infrastructure stays up, then our neighbors will remain digits. We will continue to trust digits and the supply lines based on digits. But the digits will also become unpredictable.

We face an enormous increase in uncertainty. Normally, a rise in uncertainty is dealt with by digits: money. But when the uncertainty applies to the digits, then we must search for other ways to reduce it. An inventory of usable consumer goods and tools is the answer. That, and currency.

RELIABLE SYSTEMS

This is what we lack. The systems are either impersonal, computerized, and digital, or else they are personal, unknown, and nonexistent today. Your neighborhood is not a neighborhood. It is a tract of houses where people cocoon. Take away electricity for a week, or water, and it will turn into the neighborhood in "The Trigger Effect."

We are in the final stages of a quest for reliable systems. I am awaiting the delivery of vinyl siding for two houses. I have waited for two weeks. The first time, the contractor ordered the wrong kind. So, we wait. Nothing is getting done. He was going to come buy today at 11 a.m. It is now 3:15 p.m. No show. And these are the good times.

How can you teach people to become reliable? You can't. Only external circumstances can, maybe. But probably not. Habits are hard to break. The habit of "good enough" is a bad, bad habit, especially among today's would-be craftsmen. We have sent the best and the brightest off to college to become salaried bureaucrats. The less motivated ones stayed behind. You will not want to be in the market hiring today's unreliable people next year. They may steal you blind. You will need to be out of the markets in 2000 -- all of them. You will need to become invisible. That will take inventories.

Is Y2K a greater threat than the IRS penalty for early withdrawal of pension money? It's obvious what 99.9% of investors think. What do you think?

THE FINALITY OF ERROR

Most errors are temporary. That's because the division of labor offers us so many alternatives to recover. But if the division of labor disappears, our errors will become final. We assume, "there's more where that came from." There may not be.

The world is addicted to full pipelines. It has bet everything on full pipelines. Now that assumption is literally at risk. Pipelines are controlled by computers: SCADA systems. These computers may be simple, old, and noncompliant. Businesses rarely toss out computers. They sell them or give them away. Computers stay in use until they die.

If all the noncompliant computers were being replaced, you would hear about tens of millions of used computers coming onto the market for pennies on the dollar. I have heard of nothing like this. Every school would be deluged with donations. It isn't happening.

In an information economy, a cessation of accurate information produces massive, systemic error. That is what I think is coming. If Y2K is trivial, if programming is not central to the flow of information, then I will be proven wrong. But I cannot imagine that a world without a single compliant industry today will have lots of compliant industries, worldwide, six months from now.

What degree of error will you be able to tolerate next year? This year, you may think little about error. Next year, it will be on your mind continually. This year, you have digital reserves. There is no problem with supply lines. But this can turn in a few weeks. Then what?

A systemic error compounds rapidly if it isn't fixed. That's the great threat of Y2K. It's also the threat to every business's cash flow. Errors are cumulative, and it takes cash flow to keep them from overcoming any system. When cash flow stops next year, the errors will be like maggots in a carcass.

Write down the errors that could kill you. It's a grim exercise, but it's necessary. You need shelter, heat, water, food, and a way to keep them when the law enforcement system jams up, as it will -- a very narrow pipeline.

By abandoning flush toilets, you can cut your water needs down to two gallons a day. But, ultimately, water is your big problem. How will you get it? Melted snow or ice? Rainspouts? Cistern? You should assume that you will not have a municipal water system in 2000. Why? Because if that is the case, and you are not prepared, you'll die.

Shelter is a problem. By living in one room and draining your home's pipes, you can cut down on heating requirements. Buy a wood stove and seasoned wood. Buy them now. Buy a box of 50 butane lighters at Sam's for $10. Collect a lot of old newspapers and cardboard boxes. It's not easy to start a fire. Then get food.

As an exercise, work out from that main room. What would you like to have? What are you willing to pay? What would be the items after three weeks that you would pay for? This is a "Little House on the Prairie" exercise. Here are some of the luxuries I would want: (1) communications; (2) hygiene; (3) lighting; (4) learning;(5) entertainment.

But defense is no luxury. You will need communications. I bought several hand walkie-talkies recently for $40 each. They were on an auction at http://www.onsale.com I use the automatic bidding software they offer. I placed a bid of $60, but I got them for $40. They will broadcast for two miles in line of sight. I bought dozens of rechargeable AAA batteries. Nicads are better than alkalines for communications, since they can and should be drained completely. I have a solar battery charger. I'll supply them to patrol units in the neighborhood if things break down.

Neighborhoods will block off the streets in a crisis. That will reduce traffic. It will have to get really bad before a majority of a neighborhood will consent to this. It means that going out of the neighborhood is less valuable than keeping invaders out. That means a breakdown.

How will people eat in such a situation? If you have no clear answer, then you had better find one or else move.

I realize that most people shut down mentally at this point. Such a situation means the loss of almost everything that is familiar. It means the destruction of dreams. I can't help this. I made the mental break in 1996. I have lived with it.

If Y2K produces only a depression, fine. I will be ready. If it produces a social breakdown, I will be more ready than most, but surely not ready.

FIRE

This is the topic that is never discussed in relation to Y2K. It should be.

In January, 1998, the power failed in Montreal. The ice storm did it. Quebec Power notified the water treatment facility that power might not be restored that day. The facility was running on standby generators. Fuel was running low. In six hours, it would run out. The head of the facility told the mayor to tell the public that in six hours, there might not be unpolluted water to drink.

The fire marshall intervened. Do that, he said, and everyone will fill his bathtub. That would reduce water pressure. A fire might become a conflagration. Again, it was a pipeline problem.

The mayor refused to warn the public. With phones out and no power for radios, most people would not have gotten the message anyway. Power was restored in time, so the water crisis was averted. But it was close.

We have been told to expect power blackouts. Most cities are heated with electricity. It will get very cold very fast inside homes that are no longer heated. A few people will light fires in stupid places. Some of these fires are likely to spread. How far? That depends on water pressure.

We have not seen roaring urban fires in our lifetimes. They were a regular feature of colonial American life, except in Philadelphia, which was mostly brick. But every few decades, Boston, New York City, and Charleston, S.C. would burn down. Think of London in the blitz. Without water, the city would have burned to the ground.

If the water system in your city were to shut down for two weeks, fires would become a major threat. The longer Y2K shuts off water, the more likely a conflagration becomes. There will be no insurance companies that will be solvent enough to deal with this. Supply lines for rebuilding will be broken. There will be no 30-year mortgage money. Burned out areas will stay burned out.

It was no accident that the New York ghetto police precinct known as Fort Apache in the 1960's became known as Little House on the Prairie in the 1970's. Buildings around it burned down, and they were not rebuilt.

People do not understand how vulnerable urban areas are to fire. They pay little attention to fire hydrants. The fire hydrant is part of the infrastructure that makes urban life possible. We assume that pressurized water is on tap at all times. It has been in the past. It will not be next year.

In making your plans, think about this scenario. You can see the glow of a fire two or three miles away. The wind is blowing in your direction. You hear no fire trucks. There is no water coming out of your tap. What would you do? Where would you go? Would you be able to go there? Will highways be open to civilian traffic? Will gas stations still be pumping? What is your fall-back position -- and ten thousand others who have been burned out?

What will the military do with these homeless people? I think it's obvious. They will be assigned to motels and hotels. Then they will be assigned to college dormitories. Finally, they will be assigned to private homes.

When it comes time to go down and sign up for ration coupons, don't. Don't be put on any list. Stay off all lists.

We are back to the question of your personal inventory.

CONCLUSION

We are getting down to the wire. Your daily routines are on the front burner. What will it take to get them to the back burner? Panic. When 1% of the population turns of the TV and goes onto the Web in search of wood stoves, the supply will dry up overnight. So will insulated pipe.

When people can't buy what they want, when they want it, Y2K will start moving to the front burners of millions of people who know the story today but who cannot cope with it emotionally.

When a million wives ask a million husbands, "What are we going to do?" the panic will begin. The husbands will not know.

The tyranny of the urgent will be a harsh tyranny indeed when there are fewer than 100 days to go It will become progressively more tyrannical as the pipelines dry up, one by one.

END

Gary North's REALITY CHECK Issue 41 July 19, 1999

-- Linda (lwmb@psln.com), July 20, 1999.


Newbies: The above is called a ten scenario.

Think I'll go get a milkshake and take a leisurely nostalgic stroll through Acme.

-- BB (peace2u@bellatlantic.net), July 20, 1999.


Actually BB, as North frequently refers to some form of continuity of government, I would put his scenario at an 8 or 9, and leave 10 for Infomagic, which is basically not just TEOTWAWKI, but TEOTWFCM (for Civilized Man).

Here's how I see the great seers stack up:

1-2   Bump          Koskinen
3-4   Recession     Yardeni 
5-6   Depression    Yourdon
7-8   Collapse      Milne/North
9-10  Devolution    Infomagic

Note that according to the recent poll, the majority on this forum expect a 5-6.

-- a (a@a.a), July 20, 1999.


*******< When it comes time to go down and sign up for ration coupons, don't. Don't be put on any list. Stay off all lists >*********

WRONG,

If you are NOT on the list for food and water then

A)your emergency stock will be depleded faster.

B)It is obvious that the person in the neigborhood that doesn't get water when everyone else is getting it or doesn't gets food when everyone else is getting it -has a stash and is prepared-. Do NOT and I repeat do NOT give away that you are prepared by doing something so foolish. Blend in roll with the flow. Your only way to survival...

This of course does NOT apply to people that moved out from the urban and suburban areas to the middle of no-where-ville like Gary.

All others blend in, blend in, blend in.............

-- Rickjohn (rickjohn1@yahoo.com), July 20, 1999.



1-2 Bump Koskinen 3-4 Recession Yardeni 5-6 Depression Yourdon 7-8 Collapse Milne/North 9-10 Devolution Infomagic

--a.. where do you suppose Bennett and Dodd are? I would guess they might be averaging... oh.. about 6 to 7. Bennet occassionally regresses to a 1-2, but this lastest GAO report seems to have him a little... *concerned*. What do you think?

-- Linda (lwmb@psln.com), July 21, 1999.


Linda,

Even when Bennet used the 'Bump in the road back in Feb- March, his immediate next remark was to caution that he was not specifing the size of the bump. Most reports left that out.

Most vendors date the slowdown in preps to that time. I agree with you about his current attitude.

I live in one of Dodd's "Fantasy Land" cities in the middle of one of the world's more forbiddidn deserts. Our mayor has time for 'politics as usual', but the water and sewer systems won't be fixed until mid December. I have to plan it like an 8 or 9

-- K. Stevens (kstevens@it's ALL going away in January.com), July 21, 1999.


I was thinking of Russ Kellys standard where North is officially listed as a ten. I forgot about the 'a' standard so stand corrected. How about a slight change and make North/Milne a 7-9 and Infomagic a ten. It doesn't feel right to me to give North only an 8.

-- BB (peace2u@bellatlantic.net), July 21, 1999.

It just almost takes your breath away to contemplate. It's like living in the midst of a science fiction novel, with a predictable bad ending. I bought a generator today (before reading North's Reality Check, now I'm doubly glad). Not a very big one, but enough of one for my situation. The closets are bulging. I find myself collecting all sorts of odd stuff. (I grew up on a farm, so the pack rat instinct runs strong, and always has.)

Another favorite commentator of mine about y2k is Douglas Carmichael, who has been sending out a weekly email commentary about y2k for several months. The last one was in June, I hope he hasn't given it up, because it is a valuable resource.

-- robert waldrop (rmwj@soonernet.com), July 21, 1999.


K Stevens - good point about the size of the bump. Wasn't it Yourdon who said that from far enough away even an elephant looks like a bump? Or was that Bennett himself?

And regarding REALITY CHECK. Someone just sent me on a merry chase trying to find out how to subscribe. -bg-

So.. since I finally retraced my steps, here's the link on GN's site:

http://garynorth.com/ y2k/detail_.cfm/3242

Look on that page for "Subscribe"

I won't guarantee that this still works.. he posted this after an appearance on Art Bell. Hopefully he is still open to new subscriptions.

-- Linda (lwmb@psln.com), July 21, 1999.



"I live in one of Dodd's "Fantasy Land" cities in the middle of one of the world's more forbiddidn deserts."

K. Stevens: That certainly describes Las Vegas. It that where you live, or does that description fit some other place as well?

I can't imagine anyone living in Vegas w/o electricity, water, & the constant influx of willing suckers to fill the slot machines.

-- not that (big@a.gambler), July 22, 1999.


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