The Vortex Strategy

The Vortex Strategy by Chuck Missler The Decline of the U.S. - Economic and Social Realities The failure of our public schools, a decimated military, a corrupt Executive branch, and an ever-increasing involvement in the United Nations globalist agenda do not bode well for America. Can we stop this downward trend before it's too late? Events over the past few years have caused many informed observers to be concerned over the increased precariousness of our strategic horizon. In addition to natural disasters-such as Hurricane Katrina-and the continuing terrorist threats promising a major sequel to “9/11,” and the probability of rogue nuclear attacks of various kinds, anyone who is relying on smooth waters over the next 12-18 months is simply among the ranks of the under-informed. To prepare for potentially volatile uncertainties, some years ago we published a series of suggestions, which we called “The Vortex Strategy,” and in view of our current horizon, it seems appropriate to review some of those ideas. The next major terrorist event could prove to be an even more impacting sequel than “9/11”whether it is an Al Qaeda plot of some kind, or an EMP attack which threatens to plunge the U.S. back into the 19th century. But without indulging in speculations regarding the challenges that Homeland Security presently faces, many experts are also anticipating a possible upheaval to emerge from the current debt debacle of the United States. What would be the consequences to you and your family if America’s economic foundation was ripped out from under you? We individually can’t change the probabilities of such an event, but what is your action plan to protect yourself and your family?

The Impending Monetary Crisis We need to understand the precariousness of the U.S. dollar and its role in the international monetary markets: two-thirds of world trade is conducted in dollars; over 70% of central banks’ reserves are held in the American currency; and, the U.S. dollar is the sole currency used by international institutions such as the International Monetary Fund (IMF). This has conferred on the U.S. a major economic advantage: the ability to run a trade deficit year after year. It can do this because foreign countries need dollars to repay their debts to the IMF, to conduct international trade, and to build up their own currency reserves. A move away from the dollar could have a disastrous effect on the U.S. economy as the U.S. would no longer be able to spend beyond its means. Worse still, the U.S. would become a net currency importer as foreigners would seek to spend back in the U.S. a large proportion of the estimated three trillion dollars which they currently own. The U.S. would also have to run a trade surplus-the first time in a century-providing the rest of the world with more goods and services than it was receiving in return.

The Oil Exporters Up until the early 1950s, the U.S. dominated world oil production, so sales of oil and natural gas on international markets had been exclusively denominated in dollars. The U.S. in those days accounted for half or more of the world’s annual oil production. That, of course, has drastically changed: we are entering a period in which we need to import almost 70% of our requirements! The tendency to price in dollars was additionally reinforced by the 1944 Bretton Woods agreement, which established the IMF and World Bank and adopted the dollar as the currency for international loans. The “gold exchange standard” was also established: the U.S. dollar was to be convertible to gold by foreign governments. However, by the 1970s foreign dollar holdings had grown to five times the available gold. So, in August 1971, President Nixon

suspended all gold payments. Today, depreciating paper dollars are backed only by the “reputation” of the U.S. Government

The Quiet Game While the denomination of oil sales is not a subject that is frequently discussed in the media, its importance is certainly well understood by governments. For example: when President Nixon took the U.S. off the gold exchange standard, OPEC considered moving away from dollar oil pricing, as dollars no longer had the guaranteed value they previously did. The U.S. response was various secret deals with Saudi Arabia in the 1970s to ensure that the world’s most important oil exporter would stick with the dollar. What the Saudis did, OPEC followed.

The Think Tanks Warn Countries switching to euro reserves from dollar reserves will bring down the value of the U.S. currency. Imports would start to cost Americans a lot more… As countries and businesses convert their dollar assets into euro assets, the U.S. property and stock market bubbles would, without doubt, burst… -The Foundation for the Economics of Sustainability The dollar’s position is already on the decline in many countries. -Federal Reserve Bank of San Francisco China has officially declared that it will diversify a part of its foreign exchange holdings into oil by building a strategic petroleum reserve. The construction of huge storage tanks has begun and will take several years until completion. On January 24, 2007, Kuwait announced that it is considering abandoning pegging its dinar to the dollar for fear of an anticipated slide in the value of the dollar. Last year, the central banks of Italy, Russia, Sweden, and the United Arab Emirates had announced similar shifts out of the dollar and into other currencies, or gold, citing the United States’ “twin deficits” (federal deficit and the trade deficit) as the reasons for the expected fall in the dollar’s value.

Our Trade Balance We buy more than we sell (we always have). We finance our purchases with debt currency and our current imbalance (deficit) grows $850 billion per year!

Our Federal Deficit Our government spends more than it raises (in taxes, etc.), so we finance our government programs with debt. The Bush administration is forecasting that the federal deficit for the 2007 budget year will total $244 billion (a slight improvement from the $248.2 billion actual deficit in 2006). However, the improvement this

year is likely to be short-lived as tax revenue growth slows and spending begins to rise to deal with increased Social Security and Medicare payments as the 78 million baby boomers start to retire. Thus, the U.S. Treasury must borrow: Federal deficit: $250 billion/year Trade deficit: $850 billion/year $1,100 billion/year That’s $3 billion per day! It’s going to be interesting to see who is willing to pick up those notes (and what interest and incentives we’ll have to offer)!

Consumer Debt Mortgage companies are knocking on doors, sending letters and making phone calls with a simple message for struggling homeowners: They’d rather modify your loan than foreclose. New foreclosures hit their highest ever level in the fourth quarter of 2006, according to the Mortgage Bankers Association. With home values falling in some parts of the country, none of the finance companies want to be stuck owning a house that has depreciated in value. Critics say lenders made loans to borrowers who weren’t credit worthy with terms that would be impossible for them to meet. Whether the current wave of workouts will merely postpone foreclosures-and delay bad loans hitting lenders’ books-is an open question…

David Walker David M. Walker, Comptroller General of the United States, has publicly expressed his professional opinion that the American public needs to tell Washington it’s time to steer the nation off the path to financial ruin. The “accountant-in-chief” spoke on a Fiscal Wake-Up Tour panel during a meeting at the LBJ School of Public Affairs in Austin, Texas, on September 28, 2006: What they don’t talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it. -David Walker His basic message is this: If the U.S. government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today. And every year that nothing is done about it, the problem

grows by $2 trillion to $3 trillion (yes, that’s with a “t”). It doesn’t take a genius to recognize that an economic upheaval is in the making. There are four traditional measures of the nation’s money supply: the M0, M1, M2, and-the most comprehensive-the M3. The M3 is the primary “report card” of the nation’s money management. However, the Fed is no longer publishing the M3, which economists have traditionally used to monitor the liquidity of the U.S. [Congressman Ron Paul introduced H.R. 4892 in an effort to reinstate publication of M3.]

U.S. Financial Report On December 15, 2006, the Treasury issued the Financial Report of the United States as released by the U.S. Department of Treasury. The 2006 federal budget deficit was $4.6 trillion, not a previously reported $248.2 billion. The difference is that the typical report of the federal budget deficit is on a cash basis, in which all tax receipts are applied to current liabilities when received. The Financial Report of the United States is calculated on a GAAP (“Generally Accepted Accounting Principles”) basis, which includes accruals made for current year changes in the net present value of unfunded liabilities in social insurance programs, such as Social Security and Medicare. This official report showed that the GAAP accounted negative net worth of the federal government has increased to $53.1 trillion, while the total federal obligations under GAAP accounting now total $54.6 trillion, taking into account the present value of future Social Security and Medicare liabilities. Put simply, this report shows that “arguments that the U.S. government is bankrupt have increasing merit...” (their words).

Hyperinflation Ahead? The threat of hyperinflation isn’t just theoretical. Germany, in 1920, saw food prices double every 49 hours (a loaf of bread in 1920 cost 1 mark; in 1923 a loaf of bread cost 726,000,000 marks). (My grandparents sold a restaurant which, when the escrow was opened was worth enough to retire on; yet, by the time escrow closed, the proceeds could only purchase a loaf of bread.) In the 1990s, Russia’s currency devalued from 100/rubles/dollar in 1994 to 30,000 rubles/dollar in 1999. The United States is now the largest debtor in the world ($48,000,000,000,000 in debt instruments). These obligations will ultimately have to be met with much cheaper dollars. The rich ruleth over the poor, and the borrower is servant to the lender. Proverbs 22:7

This cursory review hasn’t dealt with the leveraging effects of the substantial “financial derivatives” currently being employed, which would accelerate a potential crash even further! Your personal stewardship plans need to maintain surveillance on the likelihood of serious inflation ahead, and perhaps worse.

The Plot Thickens There are serious people attempting to engineer the creation of a “North American Union,” and the establishment of a consolidated North American currency called the “Amero.” Some of the milestones which have been published would have no feasibility except under conditions of extreme urgency; however, those specific extreme circumstances may be deliberately being positioned for just such a purpose! Is our current debt debacle simply mismanagement? Or is it being engineered with a stratagem in mind? “Stay tuned. Film at eleven.” Another Tremor The subprime mortgage mess metastasized into a full-blown global credit crisis last month, crushing stocks in Europe as well as the U.S. The meltdown began in France and forced the European Central Bank to inject more than $130 billion into the continental banking system so that it wouldn’t seize up entirely. Standard and Poor’s said that move was unprecedented. The Federal Reserve (which is neither federal nor a reserve) put more than $60 billion into the U.S. banking system. Unlike previous sell-offs, which were concentrated in specific sectors, this one cut across the entire stock market. Investors increasingly seem to fear that the problems among the big investment banks are proving bigger than expected. International investors now own $672 billion of the $835.4 billion worth of Treasuries due in 310 years.1 A record 80% of the Treasury notes due in 3-10 years are foreign owned. Not since the 19th century have foreigners held so much American debt.2 Another way to examine our reserves is to take a look at our checkbook and compare it with others: Rank

Current Account Balance3

1 China $179,100,000,000 2 Japan 174,400,000,000 3 Germany 134,800,000,000 4 Russia 105,300,000,000 5 Saudi Arabia 103,800,000,000 6 Norway 63,350,000,000 7 Switzerland 50,440,000,000 ........ 159 France -38,000,000,000 160 Austria -41,620,000,000 161 U.K. -57,680,000,000 162 Spain -96,600,000,000 163 United States -862,300,000,000

Out of 163 countries, we rank dead last. In fact, we are nine times worse off than the runner up-Spain-who is recognized as a near-bankrupt nation in the financial press. (I understand that Spain just sold off 80 of their remaining 90 tons of gold from their national treasury to “stay afloat” a little longer.)4

The Federal Government recorded a $1.3 trillion loss last year-far more than the official $248 billion deficit-when GAAP accounting standards are applied.5 “The gap between future U.S. receipts and future U.S. government obligations now totals $65.9 trillion, a sum that is impossible for the U.S. to reconcile, which means the U.S. is now technically bankrupt.”6 But it gets worse. In fact, our most disturbing predicament is being prepared “under the radar” and deliberately. The Deliberate Destruction of America That sounds like a conspiracy theory, doesn’t it? Well, it is. And it is really happening.7 There is no intention of our present administration to enforce our borders. There is a well-laid-out plan to merge the United States with Canada and Mexico. There are several dozen working groups laying out the administrative regulations. There are extensive construction projects preparing a “NAFTA Superhighway” to expedite goods from Lázaro Cárdenas, on the Pacific Coast of Mexico, through Laredo, Texas, to the Kansas City “SmartPort” (an electronic port of entry to be regarded as Mexican territory), on though Duluth, Minnesota to Canada. Most of these facilities are being built by foreign investors, so we will have to pay to use them. They are being designed to expedite goods from China to the entire North American Union. (China and Wal-Mart are investing $300 million just to upgrade the container handling facilities at Lázaro Cárdenas. China already controls facilities at Long Beach, California, and at both ends of the Panama Canal.) What is particularly disturbing is that this is all being done covertly, without the benefit of public discourse. It is being denied by the administration, and yet it would seem to be treasonous-the very disenfranchisement of the entire electorate and its assets. The primary whistle-blower on this is our dear friend, Jerry Corsi, whose blockbuster book, The Late Great U.S.A., just came out. It is a must read for any American. You and I aren’t likely to change the course of history, but we can exercise prudence in our personal and family preparations. A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished. Proverbs 22:3 What is your action plan to protect yourself and your family? Our times are uniquely uncertain and impossible to predict. Will we have a depression? Will we have hyperinflation? Will we experience logistic upheavals? The optimum strategy under conditions of uncertainty is mobility. In financial terms, that’s called liquidity. So that leads us to our basic four-step strategy, which we call “the Vortex Strategy.” It is disarmingly simple, but absolutely essential: The Vortex Strategy 1) Lower your cost of living 2) Get out of debt 3) Guard your liquidity

1. Lower Your Cost of Living Don’t count on increases in your income. Live beneath your means so that you have something extra at the end of each month. That will be your ticket to financial freedom. A useful hint: review the allocations of your time. Are there indulgences that are expensive and yet might not stand scrutiny from a cost/reward relationship? Often our most enjoyable involvements are not necessarily tied up with capitalized indulgences. Simplify in order to win what really counts. 2. Get Out of Debt Debt is a presumption on the future and is contrary to God’s plan for your life: the borrower is slave to the lender (Proverbs 22:7). Use the increments from Step 1 to refinance variable rate mortgages and eliminate credit card debt. Establish and control your budget as if your life depends upon it: it does! 3. Guard Your Liquidity Once debt is under control, use the margin from Step 1 to establish reserves. Diversify your holdings among different asset classes. Straddle industries, borders, and currencies. Strive to maintain liquidity, not maximize earnings. That’s for later when the horizon is more clearly in focus. Lastly, get your assets out of reach from your adversaries: know who they are and take precautionary steps before they’re needed. Some tactical alternatives for Step 3 will be the subject of our article next month, “The Vortex Strategy: Part 3.”

**NOTES** Notes: 1.

4.

9.

Lawrence Dyer, HSBC Securities USA, Inc. 2. Alan Taylor, UC Davis. 3. CIA Website. McAlvany Intelligence Advisor, P.O. Box 84904, Phoenix AZ, 85071. Excellent newsletter; Don is an old friend. 5. Dennis Cauchon, USA Today, May 31, 2007. 6. St. Louis Federal Reserve Bank, Official Report, Dec 2006. 7. Jerome Corsi’s book, The Late Great USA, WND Books, 2007. 8. Gen 28:19-22; Lev 27:30-32; 2 Chr 31:4-6; Neh 10:34-37; Mal 3:7-10. It also implied in the “Even so” of 1 Cor 9:13,14; the “lay by him in store” in 1 Cor 16:1,2 alludes to Mal 3:10; 2 Cor 8:14; Heb 7:5,6, etc. 10. Mal 3:10. 11. Gen 7:11, 1