Black Swan Event Risks, 2011
What is a black swan event?
“The disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology”
What black swan event could possibly interrupt 2011?
In no particular order,
In the U.S., the Federal Reserve (a private bank organization) has loaned to the U.S government (and other world entities) trillions of dollars in an attempt to keep the U.S. Dollar afloat. The U.S. is essentially bankrupt, and its only hope is to devalue the existing currency (the dollar), or in another word, inflation.
You can bet your bottom dollar that the U.S. government prefers inflation (they hope for ‘controlled’ inflation) for any chance to ease the real cost of today’s federal debt and deficit. This will surely be our future reality.
Food Price Shock
The United Nation’s Food and Agricultural Organization is warning of ‘food price shock’. Rising food prices have provoked riots in Algeria and elsewhere, while massive world food crops have recently failed due to extreme weather events in Russia, India, Pakistan, Australia, Brazil, and beyond. Food prices will also be affected by currency inflation and rising energy costs. The trifecta, weather – inflation – energy costs, may very well bring on Food Price Shock in 2011.
Oil Price Shock
Faith Birol of the International Energy Agency is warning “The stability of the global economy is under threat due to oil prices entering a “dangerous zone”. Common sense tells us that as oil prices rise, so do the costs of nearly every other thing in our modern lives. The ripple effects are more severe than most people realize.
Weather effects on food prices or shortages. La Nina, the cooling of the equatorial Pacific ocean surface waters, is the strongest it has been in quite some time, and will surely affect the weather well into 2011 (generally colder than normal with localized effects out of the normal – affecting food crops and way-of-life)
More homeowners are ‘under water’. Foreclosures could reach a tipping point. Although the Fed is doing everything it can to prop up banks by purchasing their ‘bad’ assets (by the way – it’s you and I that are purchasing these bad assets – not them – every Fed loaned dollar to the U.S. has interest attached), the risk is very real that home prices could continue to fall despite the trillions of dollars pumped in. Foreclosures during 2011 are estimated to hit 1.2 million, topping last year’s record high.
Europe’s debt crisis
Europe’s sovereign debt crisis could spin out of control. The U.S. itself is within the ‘house of cards’ at risk of toppling over… Portugal, Italy, Greece, Spain, etc… who’s next? The powers-that-be are running out of ammunition in their fight to keep the phony system afloat.
The Middle East
Existing tensions could explode into disaster. Israel, Iran, and nearly all middle east countries are intertwined in tensions of war while the super-power puppet masters near the end of this chess game. The ongoing social unrest there is like a tinder box ready to ignite.
Kim Jong il, although seemingly under the control of puppet-master China, is capable of selling their nuclear weaponry to others, and could potentially start a chain reaction WWIII if launching any of their own nukes, as they have threatened to do upon S. Korea.
Many US states, cities and counties are running huge financial deficits. What will happen if many of these begin to topple over or be forced to cut deeply… those who have been financially benefiting will feel the pain – social unrest.
A massive earthquake (e.g. Japan), or very large volcanic eruption (VEI-6 or greater), or a massive solar flare ‘Carrington event’, could greatly effect our modern way of life as we know it.
As crazy as it may sound, it is not all that far fetched to imagine a new world war, given that so many nations are under financial and social stress at this time. Many believe that major wars often follow periods of financial depression.
How can we protect ourselves from these black swan event risks?
Minimize your risks on Wall Street (get out?)
Buy commodities that hold value through inflation (physical Gold, Silver, …)
Buy tangible things that are and will be useful to you in the future
Keep some cash on hand to get you through a short-term disaster
Buy food supplies now (beat inflation)
Become more self-reliant (reduce your debt to ‘the system’)
Plant a small garden (or as big as you dare)
Own physical assets without debt (land, assets of practical value)
Learn practical skills
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