Monday, August 13, 2007



SurvivalBlog is dedicated to family preparedness, survival, self-reliance, and self-sufficiency. Are you new to this blog? Be advised that you are jumping in to extant threads. Read "About" first. Then it is best to the start at the beginning of the archives and work your way up. Thanks! - JWR

Monday August 13 2007

Note from JWR:

To all of the new SurvivalBlog readers in Europe, welcome! (I've noticed quite a surge in readership throughout Europe, particularly in the Low Countries, in recent months.)

A Full Scale U.S. Dollar Panic Before November?

The news wires were abuzz last week about the global credit squeeze. Bankers are unwilling to make loans when they can't calculate risk. What risk? Here is a big one: Many of their clients have derivatives exposure, which means that lenders can no longer calculate their credit worthiness. In the banking world, the standard "safe" answer to any loan question in the absence of data is almost universally no. I surmise that if this situation gets any worse, governments may step in and make loan guarantees. (Meaning that the taxpayers would shoulder the risk instead of the bankers.) That may be the only thing that will get bankers to start making new loans to derivatives holders--which include nearly every major corporation, these days.

With the sub-prime contagion spreading, there is the potential for a sharp break in the U.S. stock market. That will surely push the Federal Reserve to lower interest rates. (With the hope that the increased liquidity will stave off a recession.) But lower interest rates will discourage foreign investment and may spell doom for the U.S. Dollar. The Chartist Gnome tells me that if the U.S. Dollar (USD) Index drops below 80 for more than one week, all bets are off for the dollar. In a recent commentary, Jim Sinclair sized up the massive liquidity injections by the Federal Reserve and the European Central Bank. His conclusion: These moves will badly tarnish the dollar and will likely push the USD Index down to around 72. I concur. In fact, I wouldn't be surprised to see a breakdown to the 65 level.

There could be a major devaluation of the dollar--whether formal or informal--within the next few week or months. If foreigners start dumping their dollar-denominated assets, watch out! This could even snowball into a full scale dollar panic. The Chinese have already threatened to jettison their U.S. Dollar holdings. If carried out, that alone could have huge implications. Economist Peter Schiff has an even gloomier prediction than mine. He predicts that the US Dollar will lose half its value.

What does all this mean for the average American? Already, the weaker dollar has made some imports painfully expensive. Does the next few months spell ruin just for the bankers and big stock traders, or does it spell ruin for most Americans? I think that inevitably everyone that holds dollars will suffer. Granted, bank accounts are insured by the FDIC to up to $100,000 per individual. But that won't mean much if our currency tips over into hyperinflation. That will make bank deposits effectively worthless in very short order. So how will this play out? I'm not entirely certain. Credit squeezes are traditionally deflationary. But government invention like last week's is highly inflationary. (To better understand deflation, see Bob Prechter explanation of credit squeezes, deflation, and economic depression.) I'll still predict an inflationary outcome. Governments love inflating their way out of monetary crises. It is much less painful for them that way. (Deflation is painful for everyone involved.) And since inflation is a hidden form of taxation, it will be the citizenry that ultimately bears the burden. (Just ask the average Zimbabwean how the past 10 years has treated his real net worth.)

My advice: Shift the majority of your investments out of anything dollar-denominated, right away. The only exception would be holding no more than 20% of your assets in short-term TIPS, which are automatically inflation adjusted. (Series I US savings bonds are also inflation protected, but I discourage investing in such long term bonds.) To be ready for mass inflation, you'll need your wealth primarily in tangibles. That way, if the dollar loses value, you'll be protected. I'm talking about silver, gold, productive farm land, and hard goods like tools, guns, and common caliber ammunition. The timing? Again, hard to predict, but look for some continuing large ripples in the financial waters for the next two months. Then, perhaps in October, be prepared for some massive wave action. Historically, major move in the US equities markets tend to happen in October. Be prepared.



DEBKAfile Reports: Israel PM Olmert inspects preparedness of IDF northern command Tuesday following indications of Syrian plans to attack Golan

August 14, 2007, 7:48 PM (GMT+02:00)

Syrian army convoys moving at night

Syrian army convoys moving at night

With him were defense minister Ehud Barak and chief of staff Lt. Gen. Gaby Ashkenazi. According to DEBKAfile’s military sources, intelligence data and signs on the ground add up to the presumption that Syria is planning a campaign of hit-and-run cross-border attacks against Israeli border patrols and positions in Golan and attempts to take hostages. OC Northern Command Maj. Gen. Gad Eisenkott and senior officers briefed the prime minister on their preparations in anticipation of such attacks.

They discussed ways of taking Syrian forces by surprise without provoking a full-scale conflict. In particular, Israeli decision-makers want to avoid exposing the populations of northern and central regions to Syrian missiles. They are also intent on limiting any flare-up to the Golan front and leaving out of the action the Lebanese Hizballah and Hamas and allied Palestinian terrorist groups of the Gaza Strip.

In recent weeks, DEBKAfile’s military sources report, Washington updates point to the rising influence of the pro-war faction in Bashar Assad’s government. As we reported last week, this faction is led by the Syrian president’s brother-in-law commander of military intelligence, Gen. Assaf Shawqat. Since then, Syrian troop reinforcements have been moved forward to the front line, mostly by night. They include artillery contingents which have been kept well behind hitherto.

US and Israeli intelligence watchers believe Syrian leaders’ calculations are based on their expectation of a low-intensity Israel response, such as artillery crossfire, to their attacks. They are sure that both Israel and the US are determined to avoid a major conflagration. They expect the Israeli air force to be activated against strategic targets deep inside Syria only if their own persist.

DEBKAfile’s military sources say that whether Israeli bombers go after civilian infrastructure, like bridges, highways and power stations, or stick to military targets, such radar stations, bases and military command posts, will depend on the duration of the Syrian offensive, its violence and how much pain is inflicted on Israeli lives and property. The Israel reprisal spiral is likely to match the intensity of Syrian attacks.

The scenarios examined by Israeli policy-makers during the prime minister’s visit therefore postulated a war of attrition starting later this year and going on for months. Charting how this war will unfold is chancy because some unforeseen circumstance could potentially blow it up suddenly into a full-scale war.

Some officers in the northern command therefore advocate a short and sharp Israeli response to nip any Syrian action in the bud before it develops, instead of a temperate reaction that would leave the tactical initiative with Damascus. Furthermore, if a war of attrition is allowed to drag on into the winter months, weather conditions would seriously hamper Israeli air force operations. Having heard these arguments, the prime minister, defense minister and the chief of staff must decide in the next few days how to proceed.


Fatigue cripples US army in Iraq

Exhaustion and combat stress are besieging US troops in Iraq as they battle with a new type of warfare. Some even rely on Red Bull to get through the day. As desertions and absences increase, the military is struggling to cope with the crisis

Peter Beaumont in Baghdad
Sunday August 12, 2007
The Observer

US marines asleep at their base in Falluja, Iraq
US marines asleep at their base in Falluja, Iraq. Photograph: Nicolas Asfouri/AFP/Getty images

Lieutenant Clay Hanna looks sick and white. Like his colleagues he does not seem to sleep. Hanna says he catches up by napping on a cot between operations in the command centre, amid the noise of radio. He is up at 6am and tries to go to sleep by 2am or 3am. But there are operations to go on, planning to be done and after-action reports that need to be written. And war interposes its own deadly agenda that requires his attention and wakes him up.

When he emerges from his naps there is something old and paper-thin about his skin, something sketchy about his movements as the days go by.

The Americans he commands, like the other men at Sullivan - a combat outpost in Zafraniya, south east Baghdad - hit their cots when they get in from operations. But even when they wake up there is something tired and groggy about them. They are on duty for five days at a time and off for two days. When they get back to the forward operating base, they do their laundry and sleep and count the days until they will get home. It is an exhaustion that accumulates over the patrols and the rotations, over the multiple deployments, until it all joins up, wiping out any memory of leave or time at home. Until life is nothing but Iraq.

Hanna and his men are not alone in being tired most of the time. A whole army is exhausted and worn out. You see the young soldiers washed up like driftwood at Baghdad's international airport, waiting to go on leave or returning to their units, sleeping on their body armour on floors and in the dust.

Where once the war in Iraq was defined in conversations with these men by untenable ideas - bringing democracy or defeating al-Qaeda - these days the war in Iraq is defined by different ways of expressing the idea of being weary. It is a theme that is endlessly reiterated as you travel around Iraq. 'The army is worn out. We are just keeping people in theatre who are exhausted,' says a soldier working for the US army public affairs office who is supposed to be telling me how well things have been going since the 'surge' in Baghdad began.

They are not supposed to talk like this. We are driving and another of the public affairs team adds bitterly: 'We should just be allowed to tell the media what is happening here. Let them know that people are worn out. So that their families know back home. But it's like we've become no more than numbers now.'

The first soldier starts in again. 'My husband was injured here. He hit an improvised explosive device. He already had a spinal injury. The blast shook out the plates. He's home now and has serious issues adapting. But I'm not allowed to go back home to see him. If I wanted to see him I'd have to take leave time (two weeks). And the army counts it.'

A week later, in the northern city of Mosul, an officer talks privately. 'We're plodding through this,' he says after another patrol and another ambush in the city centre. 'I don't know how much more plodding we've got left in us.'

When the soldiers talk like this there is resignation. There is a corrosive anger, too, that bubbles out, like the words pouring unbidden from a chaplain's assistant who has come to bless a patrol. 'Why don't you tell the truth? Why don't you journalists write that this army is exhausted?'

It is a weariness that has created its own culture of superstition. There are vehicle commanders who will not let the infantrymen in the back fall asleep on long operations - not because they want the men alert, but because, they say, bad things happen when people fall asleep. So the soldiers drink multiple cans of Rip It and Red Bull to stay alert and wired.

But the exhaustion of the US army emerges most powerfully in the details of these soldiers' frayed and worn-out lives. Everywhere you go you hear the same complaints: soldiers talk about divorces, or problems with the girlfriends that they don't see, or about the children who have been born and who are growing up largely without them.

'I counted it the other day,' says a major whose partner is also a soldier. 'We have been married for five years. We added up the days. Because of Iraq and Afghanistan we have been together for just seven months. Seven months ... We are in a bad place. I don't know whether this marriage can survive it.'

The anecdotal evidence on the ground confirms what others - prominent among them General Colin Powell, the former US Secretary of State - have been insisting for months now: that the US army is 'about broken'. Only a third of the regular army's brigades now qualify as combat-ready. Officers educated at the elite West Point academy are leaving at a rate not seen in 30 years, with the consequence that the US army has a shortfall of 3,000 commissioned officers - and the problem is expected to worsen.

And it is not only the soldiers that are worn out. The wars in Iraq and Afghanistan have led to the destruction, or wearing out, of 40 per cent of the US army's equipment, totalling at a recent count $212bn (£105bn).

But it is in the soldiers themselves - and in the ordinary stories they tell - that the exhaustion of the US military is most obvious, coming amid warnings that soldiers serving multiple Iraq deployments, now amounting to several years, are 50 per cent more likely than those with one tour to suffer from acute combat stress.

The army's exhaustion is reflected in problems such as the rate of desertion and unauthorised absences - a problem, it was revealed earlier this year, that had increased threefold on the period before the war in Afghanistan and had resulted in thousands of negative discharges.

'They are scraping to get people to go back and people are worn out,' said Thomas Grieger, a senior US navy psychiatrist, told the International Herald Tribune in April.

'Modern war is exhausting,' says Major Stacie Caswell, an occupational therapist with a combat stress unit attached to the military hospital in Mosul. Her unit runs long group sessions to help soldiers with emerging mental health and discipline problems: often they have seen friends killed and injured, or are having problems stemming from issues at home - responsible for 50 to 60 per cent of their cases. One of the most common problems in Iraq is sleep disorders.

'This is a different kind of war,' says Caswell. 'In World War II it was clear who the good guys and the bad guys were. You knew what you would go through on the battlefield.' Now she says the threat is all around. And soldiering has changed. 'Now we have so many things to do...'

'And the soldier in Vietnam,' interjects Sergeant John Valentine from the same unit, 'did not get to see the coverage from home that these soldiers do. We see what is going on at home on the political scene. They think the war is going to end. Then we have the frustration and confusion. That is fatiguing. Mentally tiring.'

'Not only that,' says Caswell, 'but because of the nature of what we do now, the number of tasks in comparison with previous generations - even as you are finishing your 15 months here you are immediately planning and training for your next tour.' Valentine adds: 'There is no decompression.'

The consequence is a deep-seated problem of retention and recruitment that in turn, says Caswell, has led the US army to reduce its standards for joining the military, particularly over the issue of no longer looking too hard at any previous history of mental illness. 'It is a question of honesty, and we are not investigating too deeply or we are issuing waivers. The consequence is that we are seeing people who do not have the same coping skills when they get here, and this can be difficult.

'We are also seeing older soldiers coming in - up to 41 years old - and that is causing its own problems. They have difficulty dealing with the physical impact of the war and also interacting with the younger men.'

Valentine says: 'We are not only watering down the quality of the soldiers but the leadership too. The good leaders get out. I've seen it. And right now we are on the down slope.'

'War tsar' calls for return of the draft to take the strain

America's 'war tsar' has called for the nation's political leaders to consider bringing back the draft to help a military exhausted by wars in Iraq and Afghanistan.

In a radio interview, Lieutenant General Douglas Lute said the option had always been open to boost America's all-volunteer army by drafting in young men in the same way as happened in Vietnam. 'I think it makes sense to consider it,' he said. Lute was appointed 'war tsar' earlier this year after President Bush decided a single figure was needed to oversee the nation's military efforts abroad.

Rumours of a return to the draft have long circulated in military circles as the pressure from fighting two large conflicts at the same time builds on America's forces. However, politically it would be extremely difficult to achieve, especially for any leader hoping to be elected in 2008. Bush has previously ruled out the suggestion as unnecessary.

Lute, however, said the war was causing stress to military families and, as a result, was having an impact on levels of re-enlistment. 'This kind of stress plays out across dinner tables and in living-room conversations within these families. Ultimately the health of the all-volunteer force is going to rest on those sorts of personal family decisions,' he said.

A draft would revive bad memories of the turmoil of the 1960s and early 1970s when tens of thousands of young men were drafted to fight and die in Vietnam. Few other policies proved as divisive in America and the memories of anti-war protesters burning their draft cards and fleeing to Canada are still vivid in the memory.


Price of ammo to shoot up

06:18 AM CDT on Thursday, August 9, 2007
By JAMES HOHMANN / The Dallas Morning News

The baby needs milk. The car needs gas. The gun needs bullets.

Rising dairy and oil prices grab the attention of shoppers and motorists. But the increasing price of ammunition – a consumer product the government considers when calculating the rate of inflation – has largely gone unnoticed.

The price increases began after the Sept. 11, 2001, terrorist attacks, then were compounded by a double whammy: the war in Iraq, which pushed up overall demand, and growing industrial powers such as China, which bid up the cost of needed raw materials.

The impact is widespread:

•Ammunition dealers complain of declining sales as they are forced to pass along rising costs to consumers.

•Hunters and gun enthusiasts, who initially stockpiled ammunition when prices spiked, are now making more of their own or shooting less.

•And police departments in the Dallas area are experiencing long delays in shipments and having to adjust training schedules accordingly.

"It's no good to have the gun without the ammunition," said Ken Mitchell, an ammunition dealer in Justin.

Manufacturers dramatically ramped up production after the U.S. invasion of Afghanistan in 2001, producing about 1.5 billion rounds last year – more than 3 ½ times the number manufactured in 2001, said Gale Smith, a spokeswoman for the Army's Joint Munitions Command Center in Rock Island, Ill.

But they struggle to keep up with the demand as troop deployments continue in the Middle East. Military spending on small-caliber ammunition increased from $242 million in 2001 to $688 million in 2006.

The ammunition business is also feeling the pinch because of the rising price of global commodities such as copper, brass, nickel, steel and lead.

For instance, China's torrent of construction has added to its manufacturing capacity. And the country is hungry for resources to feed its growth. The components needed to manufacture ammunition are also used for laying power lines and adding buildings to wider skylines.

"We were paying $1 a pound for copper two years ago. Now we're paying $3 per pound," said Brian Grace, a spokesman for Minnesota-based Alliant Techsystems, the military's biggest producer of small-caliber ammunition. "Not all the costs are being passed on. We've tried to soften the blow with supply chain management and improved efficiency."

Despite those efforts, dealers, hunters and law enforcement officers are feeling squeezed.


Mr. Mitchell estimates that the volume of his ammo sales, which make up about half of his business, has dropped by more than half in the past two years.

Certain rounds, such as .223-caliber, used in the Army's M-16 and law enforcement's AR-15, have become increasingly difficult to find in the civilian market. Supplies of the .308 cartridge, the standard round for NATO and a favorite of hunters for its deadly effectiveness, have also tightened.

Some calibers cost only 10 percent more than a year ago; other varieties have more than doubled in price.

When prices started to rise, savvy gun owners stockpiled all they could get, sending prices even higher. Now dealers say that as soon as new supplies come in, customers snap them up.

"It doesn't matter if it's 50 cents or $3, whatever's cheapest gets bought up quick," said Robby Rucker, a manager at Southwest Ammunition Supply in Mesquite.

He said his wholesalers raise their prices from 3 percent to 10 percent each quarter. He expects more price increases in September.

That's a problem for Karl Pifer of Granbury, who specializes in manufacturing designer ammunition that costs more but performs better.

"The market is moving toward lower-quality and lower-cost ammunition that gets mass produced," said Mr. Pifer, owner of KC Precision Ballistics. "I try to stick with the prices I've got, but when they go up, it's hard. It hits me before it hits the customers."

When Mr. Pifer received a catalog in the mail last month for materials, he rushed online to place orders on the good deals. But he was too late. An e-mail in his inbox alerted him that prices had gone up since the catalog was distributed. It was, he said, the fourth increase in eight months.

Prices of factory-produced ammunition – and increased surcharges for shipping and handling – have gotten so high that more hunters are making their own in a process called hand loading.

"Guys on a budget are going back to hand loading with the price of ammo doing what it is," said Dallas resident Noel Hutcheson, 71, a retired stockbroker who hunts quail and ducks.

Sales of ammunition components such as empty cartridges and primers have grown at Mr. Rucker's family-run store each time retail prices for ready-to-use ammunition have gone up.

But do-it-yourself ammunition production isn't cheap either. Someone making his own shotgun shells is going to spend roughly a third more than last year on supplies, said Don Snyder, executive director of the National Skeet Shooting Association and the National Sporting Clays Association.

"There are some people who are shooting less," said Mr. Snyder of San Antonio, whose two groups have about 3,000 members in Texas. "It's just an additional cost to compete and enjoy our sport. There are a lot of people that jump in and pay the tariff and do it."

Must-have item

No matter what the cost, the police need to pay. Law enforcement demand for ammunition grew after 9/11 as departments increased their officers' live fire training.

Several police officials said they are paying more for ammunition and experiencing delays for shipments.

But everyone from Fort Worth to Carrollton insists that public safety has not been compromised. Of eight departments surveyed, none has resorted to giving deputies fewer bullets or pulling guns out of service.

The Dallas Police Department, which spends roughly $500,000 annually on ammunition for about 3,000 officers, used to have orders filled in six weeks. Now it takes six to nine months, said Sgt. Paul Stanford, range master for the department.

The ammunition used in patrol rifles, identical to what the military needs, costs 35 percent more than two years ago, Sgt. Stanford said, rising from $84 a case to $114 a case.

And a case of 9 mm rounds, the standard for Dallas Police Department service weapons, costs 10 percent more than two years ago – going from $98.75 in 2005 to $108.15.

The impact on smaller departments, which often don't have a special relationship with wholesalers, can be even greater.

In Hurst, which has 72 officers, Assistant Chief Richard Winstanley needs to plan a year or more ahead for what his staff might need. He has to be especially proactive to keep .223 rounds in stock.

"We have to be patient," Chief Winstanley said. "Some training has to be put off until we receive the items."

While the police and other gun owners hope prices come down, they are adjusting to the reality of costlier ammunition.

"We're still buying bullets because we don't have any choice," Dallas' Sgt. Stanford said. "It's like gas. You have to absorb the cost."