Unfortunately I don’t think you’re going to be able to stop working when you’re 60-years-old and then live off the fat of the land until you die. Please consider the following questions:

Will the dollar be seriously devalued in our lifetimes?

Will Social Security and Medicare survive?

Will the cost of health care continue to go up?

Will wages keep up with inflation?

Will corporations continue to outsource middle-class service jobs to other nations?

Will the stock market provide suitable returns to your 401k?

Will the government increase taxes to make up for their haphazard spending?

And most importantly…

Will you survive to the age of retirement?

What are you going to do when (and not if), the social netting holding our parents hand into retirement falls apart? Hell, even they are going to have a harder time retiring.

That said, here is a reasonable retirement plan:

1. Save $10,000 a year.

2. Put into CD’s, gold, and a basket of foreign currencies, and nothing into the stock market casino. Forget about hefty returns and focus more on retaining what you have earned. People go to great lengths to shop around and get a good deal on a laptop or digital camera but don’t mind “investing” thousands of dollars into companies and funds they know little about

3. Get a reitirement visa at age 60 to a country that has low cost and reasonable health care, like Ecuador, Colombia, or Argentina. Countries in Southeast Asia would also be suitable.

4. Die.

If you save $10,000 a year for 30 years during your prime earning years (30-60 years old), you’ll have $300,000. Assuming it holds its value in today’s dollars (ha!) or you invested wisely, you can live comfortable in a place like Cuenca, Ecuador for 25 years at a cost of $1,000 a month. That money would last you until you’re 85, without having to depend on your incompetent government.

I’ve been working at the same bar for about four months now. One of my shifts is lunch and during that time I get the occasional person who comes in to fill out a job application. My record for most applications I gave out in a day was five.

Well I go in on Monday night and there is a stack of paper by the bar. Turns out the day bartender collected over 15 job applications for server and bartender positions during her shift, and gave out half-a-dozen more. She said she felt like an HR person, answering questions and giving out pens. At one point six people were simultaneously filling out applications at the bar. Quite a few papers were actual resumes, with years of professional experience but no restaurant experience. Many graduated from very expensive private colleges (Duke, UVA).

And this is Washington DC we’re taking about, a city with supposedly the strongest job market in the country. It seemed like a giant factory closed down on Friday.

1 pair jeans
1 pair shorts
6 t-shirts, 6 pairs black socks, 6 pairs boxers
1 belt
1 long sleeves jumper
1 pair running shoes
1 pair casual Adidas shoes

That’s all I had for six months. I had to do laundry each week but I was covered for hiking on mountains, walking on the beach and drinking at bars and clubs. Everything I had matched everything else and I didn’t have to spend more than 10 seconds a day with my dress.

When a friend recently told me that all the pictures he has of me is in the same shirt, one my sister picked out for me in Macy’s that cost $25, all I could do was shrug. I’ve worn it at least a dozen times and will literally wear it out until it disintegrates, just like what happened to my last pair of jeans. It doesn’t bother me that a bartender at my favorite bar probably thinks I have no clothes. There’s no reason it should.

Guys have to be a little careful about what they choose to showcase. If it’s money then they will attract girls who like money. If it’s style then they will attract girls who like style. If it’s personality, then well, you get the idea. I can’t say any girls I’ve gone out with recently have been high-maintenance, and that’s just how I like it.

I think I will replace my old brown t-shirt next month. Let me gear up the budget for the $20 cost.

After a night at the theater, I posed a hypothetical scenario to Roissy…

“So the economy is going down the shitter,” I said. “Let’s say it’s worse than the Great Depression—absolute worst case scenario.”

“Alright,” he said.

“And retail dies, putting a lot of young girls out of work. And since there is no more credit student loans are history and a generation of girls are unable to go to college because they can’t find a job to pay for tuition. It’s just an ocean of poverty and joblessness. Okay, how much is the average first date?”

“$40 maybe.”

“Now because of the poverty you have millions of girls who would do anything for money. Imagine for only $20 very cute girls who are no more whores than the ones we sleep with would let you ravage them any way you see fit. Just a straight-up transaction. That $20 is less than a typical first date, which is no guarantee for sex. Would you?”

“Hmm, I don’t know,” he said. “How about getting that thrill from the chase? The sense of accomplishment?”

“For $20 who cares?! Overnight guys would stop paying $1500 workshops to get laid. $20 sex with a ‘normal’ girl would make game obsolete. My book sales would plummet.”

I predict that in the next two years meeting girls in the cities hardest hit by the economy will be even more difficult for the average guy. With less disposable income girls are going to stay home more instead of going out. Empty bars and clubs mean guys will be more reliant on meeting girls through friends, family, Myspace, and work. There will be less pump and dumps as guys will want to keep what they managed to get, as they themselves are strapped for cash and meeting girls does cost money. The only guys immune will be those in college, who will graduate to a barren landscape—in more ways than one. More than ever it’s important to have a developed niche where your supply of poon remains uninterrupted in the face of economic uncertainty.

Take a look at this currency chart of the Brazilian Real versus the U.S. dollar. The Y-axis is how many reals you can get for $1:

It has lost almost 50% from its peak. If this holds then that means when I go to Brazil everything will be half off. Other Latin currencies are also struggling. As the Chinese would say: in every crisis there is opportunity. For American men everywhere this is incredible news. For the same budget you can double the amount of time you stay in Brazil.

Also, I hope you guys liquidated all stock holdings in your 401k’s. Otherwise you’re getting murdered. I wonder if one day we’ll look back and consider it crazy to put retirement money into company stock.

Postscript: I need to step away from the internet.

Roubini:

At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the US and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the US and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.

And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero.

At this point the risk of an imminent stock market crack – like the one-day collapse of 20% plus in US stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.

Denniger:

The selloff this afternoon is the “real deal.” It was not caused by the stock market getting “mad”, it was caused by the short-term credit market along with the Treasury market suddenly dislocating at a few minutes before the bond pit closed at 2:00 PM.

Worse is also the fact that institutional lending has essentially disappeared – both between banks and now it is choking off commercial short-term credit across the board.

It doesn’t get any more serious than this. To repeat: short-term commercial credit is threatening to completely disappear from the American scene.

Every action our government has taken thus far, including repealing mark-to-market requirements have made the situation worse by further destroying confidence.

In the overnight market the futures are imploding once again; the Osaka exchange was closed in Japan after hitting its “lock limit” within minutes prior to the Nikkei opening; the Nikkei is now down ANOTHER 10%, for a total loss of nearly 20% in just two days, with Japanese banks trading “offer only” – that is, NO BID. There are rumors of government bond market fails in parts of Europe, and Iceland has essentially been cut off from the rest of the world Interbank marketplace.

Mish:

The global economic dam has now cracked wide open. Water is pouring everywhere. The bursting of the dam is a fitting tribute to Paulson’s and Bush’s $700 billion boondoggle to add liquidity to banks.

The public was overwhelmingly against the plan (and rightly so) as were close to 200 economists. Paulson, Bush, Trichet, and Brown all goaded Congress to waste $700 billion of taxpayer money on grounds there would be a global meltdown if the plan was not passed. Congress had it right the first time. The $700 billion bailout helped bust the dam.

Neither the Bush administration nor the fools in Congress voting for the bailout bothered to figure out you cannot patch a failing dam by adding water.

Liquidity measures cannot and will not work, when the disease is the Fed, reckless Congressional spending, and fractional reserve lending carried to extreme.

Postscript 2: More Denniger

Oil will collapse in price to $20/bbl. Unfortunately nobody will have any money to buy gasoline, or a car, so it won’t matter. As in The Depression millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford.

As credit collapses distribution of food and other essentials will break down. Unable to access credit, trucking companies will be unable to get goods to market. The current distribution system for food requires travel of over 500 miles from production to consumption; this is untenable in a market where stable credit is unavailable. Food distribution will be severely impacted and in some areas may break down below critical levels.

Unemployment will reach 25% within two years. Median income will fall by 30% nationally. Foreclosures will reach 20 million homes. The government will step in with HOLC-style remediation but it won’t matter – the unemployed won’t be able to pay irrespective of the price.

House prices will fall to well under $100,000 nationally on a median basis but with lending all but non-existent you’ll need 50% down. A few people will make out like bandits near the bottom, being able to buy up homes for $10,000 each in blocks of 10 at a time – for cash. 60% of America will be renters; nearly half of all homeowners will ultimately lose their homes to foreclosure.

Civil unrest will break out in major cities when incomes fall but the cost of food and essential services fail to come down materially, leaving millions of Americans hungry, broke and homeless. Unlike in the 1930s America will not quietly stand in soup lines – instead they will riot, loot and burn. The National Guard will be called up but will find it impossible to exert meaningful control without shutting down all commerce in the affected areas. The decision will be made to cordon off the cities and deny entry to anyone who does not live in that specific neighborhood, essentially shutting down commercial activity. GDP will fall by 30%.

The Dark Knight, the worst movie of the year, broke a record for the fastest to reach $500 million in film history. Here’s why it means nothing…

1. Ticket prices go up every year. I don’t believe I let my friend pay $11 for me to see The Dark Knight. In college a ticket at the newest theater with stadium seating cost me $7. That’s an increase of 57% in 7 years. But…

2. Box office grosses are not inflation adjusted. Especially not when reported by the MPAA. That’s why each sequel of Spiderman and sorry Star Wars kept breaking records. And even if they were inflation adjusted…

3. The U.S. Governments CPI which is used to provide inflation adjusted figures is pure fantasy. Since the 90’s the CPI has been grossly under reporting inflation. It barely accounts for the things that are actually going up in price (food and gas) because they are too “unstable.” No shit.

Why aren’t box office numbers measured objectively with number of tickets sold? Because ticket sales are flat. No hype can be created in flat numbers and no records can be broken. The music industry uses objective numbers with album sales and look how far that has gotten them the past decade. (No music record involving physical CD’s will be broken ever again from this point on.)

Box off records are propaganda to get you excited about seeing increasingly bad movies that cater more and more to teenagers, a reliably bored audience that swallows tripe like The Dark Knight.

“The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.”
-Wall Street

On Saturday night at 2:40am outside a bar I got to talking with a group and it somehow led to the financial mess (this being DC and all). I expressed my staunch opposal to any bailout of the bankers and one of the girls in the group said the following: “So you want the next Great Depression?”

Bailing out big banks will not avert anything. Not a single foreclosure will be avoided. Not a single, honest middle class job will be saved. Not a single home will go up in price. The only job created will be the bureaucrat in the treasury writing checks to Washington Mutual, Wachovia, Goldman Sachs, Merryl Lynch, and so on. This bailout will only prop up bank’s paper mortgage security holdings so they can survive. They will be rewarded for speculation and fraud and you will be stuck with the bill. The dollar will fall and generations to come will be dealing with the mess. Don’t believe what Comrade Bush, Paulson, and Bernanke are telling you.

The U.S. debt obligations ($10-12.7 trillion, depending on who you ask) will never be paid. The faster it goes up the sooner we face end game—default or hyperinflation, maybe in our lifetimes. Congress will soon vote for a bill on this latest bailout. They will approve it and slap those in the face who are prudent with their money, save, and follow the rules.

Earlier in the night I talked to a friend who works for a Congressman. I asked her, “Does it really matter if I write to my Congressman?”

She said, “Well if a lot of people do, yeah.”

Take five minutes right now and write your representative, even if it’s just a two sentence message stating your opposition. Tell them to filibuster the thing if they have to. And then do it again tomorrow. You either believe in free markets and capitalism or you don’t.

For more on what you can do read the following by Mish:

Lies From Paulson Keep Stacking Up: What You Can Do About It

And here’s a no bullshit interview with Ron Paul describing why this bailout is a horrible idea.

“If it doesn’t pass, then heaven help us all.”

Allow me to teach you what a credit default swap is and why it’s so important to what is happening to the economy today.

Virgle Kent borrows $50 from me. I want to get insurance on his debt in case he goes broke. I go to Roissy and say, “Hey, Virgle Kent owes me $50. Can you insure that debt?”

“I’ll insure it if you pay me $4 a year,” Roissy says.

“Done!”

Roissy is betting that VK will pay me back, especially since he did his homework by looking at VK’s credit rating and saw it was superb. Roissy wrote me a credit default swap, an unregulated derivative invented in 1995 by JP Morgan.

Unfortunately Roissy has some problems with his business, and he no longer even has $50 to pay me in case VK goes broke. The premiums I gave him are long gone. Credit agencies notice this and tell Roissy to find some cash or his credit rating goes down. Roissy is fucked because if his credit rating goes down then he won’t be able to raise cash at good rates to keep his business open (today’s large businesses need a constant flow of credit to maintain operations). Sure enough his rating gets killed and Roissy goes bankrupt.

Now I’m in trouble. The debt I had on my books that was insured is now uninsured. The agencies look at my books and see I have this exposed debt and they downgrade my ass. I have no choice but to enter bankruptcy as well. But I happened to be knee deep in the CDS game too. I wrote a ton of them for Arjewtino, insuring the debt owed to him by other parties. When I go down it puts pressure on him. Like dominoes we fall.

In the carnage it turned out that the ratings we used to judge each other’s debt worthiness was bogus from the start. Essentially we all gambled like we would at a blackjack table, but we did it while drunk. And blind.

The insurance company AIG wrote $78 billion worth of swaps.

Ivy League MBA’s turned the CDS into an even more insidious device. In ways that I will not begin to understand, swaps were used not just to insure against debt but to speculate if companies would fail or not. It turned out that while VK only owed me $50, there were swaps written worth $500 between parties that VK didn’t even know about! The swaps became a means to make money instead of a simple insurance policy. This was enabled by a government run by politicians whose treasure chests were stocked full of kind donations from the big bankers. They did not hesitate to look the other way.

A lot of swaps were written by banks and businesses that are now very sick from making bad bets and possibly outright fraud in the housing boom. (Who would have thought that giving no money down / no-doc loans was a bad idea?)

Here’s the bad news:

…there are $45 trillion of credit default swaps out there. A default on a mere 10% would cause an economic disaster. Unfortunately, it’s guaranteed to happen.

Actually that was the good news. Here’s the real bad news:

The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars. How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want.

The quote up top was said by Henry Paulson.

If you are not scared of what’s happening in Wall Street then you are either broke or have your head up your ass. I’m afraid. I long for the days when my mom gave me a nighttime chocolate chip cookie and warm milk and then tucked me in and I didn’t have wealth that could be destroyed because of corrupt bankers and politicians.

All because of houses!

I have dollars in three banks insured by FDIC, which has a $53 billion fund to cover $6.84 trillion in bank deposits. Another way to put it: it has $0.053 trillion to cover $6.840 trillion in deposits. But when banks gives money to FDIC, it gets sent to the Treasury which spends that and then gives the FDIC an IOU. There is no FDIC fund. Now when banks go bust, guess where the money comes from? The taxpayer. We, along with our children and children’s children, get the bill. In effect you will bail yourself out.

The Fed has blown through at least $900 billion this year, but I’m not sure if it includes “loans” swept under the rug like $138 billion to Lehman this week. Who knows how much will be paid back. If you assume like I do that mere human beings who make decisions are not aware of unintended consequences, there is no reason to have faith in Bernanke and Paulson and what they’re doing. Like pro wrestling they are making it up as they go along. This is a simulation not unlike SimCity and no one can say with certainty that it will all work out in the end.

Your bank deposits are insured but all you have to do is look how other governments bought time to prevent a systemic banking crisis. They set up “bank holidays” where you are not allowed to withdraw more than a small amount for days, weeks, or longer. The announcement will sound something like this:

“The bank holiday was declared to preserve the stability of markets… In the past few days, there has been a great deal of speculative activity and we wanted to calm the market down.”

If it’s a short holiday then who cares but if it’s long then during that time the central bank prints prints prints and all you do is helplessly watch as the purchasing power of your savings diminish. If you’re unlucky a new currency is introduced with depressing exchange rates and in effect you’re tossed halfway down the mountain and told to start up again. Don’t believe it will happen here? I wish I had your optimism. Even now if you want to withdraw more than a few thousand from a weak bank like WaMu or Wachovia, good luck.

To get away from the upcoming FDIC boondoggle that doesn’t involve your crusty mattress, an option is to plug your money directly into the US Treasury with their TreasuryDirect program. You won’t earn any interest (unless you purchase a treasury) but at least you don’t have to worry about dealing with banks. Your money is safe with the government!

Or is it? What happens if China or Petrol nations that are purchasing up dollars every day decides that they no longer what currency from a sick country? Either outright default or we’ll get the United States of Zimbabwe. The reason China is purchasing dollars instead of investing on its own infrastructure is to limit the standard of living for their citizens (easier to control the populace, read 1984) and to control inflation. But if the American economy tanks and lawn chairs and plastic doohickeys stop selling at Walmart then there is little incentive for them return that money back here in the form or treasury purchases to sustain mind-boggling current account deficits for our wars and shopping. That’s one thing I admire about the Chinese: while all we have to show the past five years is plasma televisions and sunglasses (consumption), they have factories (production). Assuming they can get their environmental problems under control, who do you think will see more economic growth in the next 20 years?

What the Fed doing is trying to preserve the system, and I’m sure they will at least partially succeed with printers running full steam, but mathematically something has to suffer from this. It will be the dollar, and it’s already struggling.

Bank executives cried deregulation on the way up but now their hands are in our pockets to fix their frauds. Yet they will keep their house in the Hamptons and fancy cars (and even severance packages irregardless of the smoldering ruin they left behind), while you are I are rewarded with a worthless currency. You better believe that every struggling bank worth a damn is in private meetings right now trying to figure out the best way to present to the Fed that their failure will lead to the collapse of the world so they also get a bailout. Or they will merge with another bank so they are now “too big to fail.” Wages have been on the decline for years (but productivity is up!) and keep in mind that every time you read a rosy news article about bike ridership increasing or frugality being the new hot trend it’s just proof that our living standards are decreasing. Do you think bicycle ridership is increasing today in a place like Brazil or China?

For savers who have worked hard and been prudent, there are a couple options. Accumulate gold and silver from coin dealers (easier said that done), stick them in a bolted safe in your basement and leave them there. If the currency collapses you don’t have to line up at a soup kitchen, otherwise you can sell, possibly for a profit.

My solution has been foreign currencies. Slowly I’ve been moving my money into Swiss Francs, Japanese Yen, Norwegian Krohne, and Australian Dollar via an FDIC insured bank that does the exchange. With currencies it’s all relative so even if there will be a worldwide depression, which currency will do the worst? Unfortunately I think it’s my own. I did something because it’s no one’s responsibility but my own to protect my savings. (Currency trading has huge risks—do your own research.)

There’s a few commentators that I trust to lay it out there straight without any bullshit. Of course I read everything with my brain turned on.

Mish Shedlock

Noriel Roubini (register to view full posts—it’s worth it)

Karl Denninger

Charles Hugh Smith

Jim Sinclair

Ultimately we are at fault for this. During the housing boom no one wanted to stop and question the fraud of big business and even with these bailouts I don’t hear much concern among my peers. I’ve not protested, sent faxes, emails, letters, or organized in any way. I’ve been silent just like everyone else, and only when my savings is threatened do my ears perk up. Too little too late. Now it’s a salvage operation to cover my ass because of the colossal failure of the U.S. Government to protect its currency and financial system. I would no longer count on them to guard what you have earned. If you don’t take the steps yourself then you deserve what happens.

Postscript: You know what… I’ll step up to lead you all. Is a Sunday afternoon good?

How To Get A Protest Permit In Washington DC

Exercising Your Rights Of Political Protest In Washington DC