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Holistic Survival Show #3 – Weathering Financial Armegeddon

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The term “Armageddon” is defined as “the scene of a final battle between the forces of good and evil, prophesied to occur at the end of the world.” In this episode of The Holistic Survival Show, host Jason Hartman interviews Michael Panzner on his financially relevant books, Financial Armageddon and When Giants Fall (http://holisticsurvival.com/podcast-with-holistic-survival.php). Panzner is an expert on the turbulent financial times ahead and has appeared on or been quoted by CNBC, Bloomberg, The Wall Street Journal, USA Today, Barron’s, Reuters, CNN, MarketWatch, BusinessWeek Online, TheStreet.com, Slate, CFO.com, and other print, radio and television outlets. Thankfully, Panzner lays out a road map to navigate these uncertain waters, and he argues convincingly that following his plan will help individuals maintain wealth and security during the troubled times ahead. He regularly speaks to a diverse range of audiences, from small groups of individuals with little specialized knowledge about money matters to gatherings of the world’s top money management professionals, on a variety of business, finance, and investment-related topics.

Listen in as Jason and Michael disclose the future’s financial forecast and the concrete ideas on how individuals can prepare themselves and their investments. Join us on future shows as we explore the best ways to “Protect the People, Places and Profits You Care About in Uncertain Times.”

Narrator: Welcome to the Holistic Survival Show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary to survive and prosper? The Holistic Survival Show is your family’s insurance for a better life. Jason will teach you to think independently, how to understand threats, and how to create the ultimate action plan. Sudden change or worst case scenario, you’ll be ready. Welcome to Holistic Survival, your key resource for protecting the people, places, and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.

Jason Hartman: Good afternoon, and thank you for joining us for another edition of the Holistic Survival Show. This is your host Jason Hartman and this is show number 3. So this is a fairly new series and probably many of you are listeners to my Creating Wealth show where we just published our 112th episode. And today we are going to talk on the Holistic Survival Show about financial Armageddon and how to weather the financial Armageddon ahead. We’ve got a fantastic guest, Michael Panzner, and he is a very popular financial expert who is the author of Financial Armageddon and also another book entitled When Giants Fall. He has been quoted on these turbulent financial times on CNBC, Bloomberg, The Wall Street Journal, USA Today, Barron’s, Reuters, CNN, MarketWatch, Businessweek Online, TheStreet.com, Slate, CFO.com, and many other print and radio publications. Thankfully, Panzner will help us lay out a map to navigate the uncertain waters ahead and if you’re really interested in the financial topic and you are not listening to the Creating Wealth show, please make sure you take advantage of that, more information, and that’s really what we discussed 100%, the financial aspect on Holistic Survival. It’s only a third of our content because we’re talking about the people, places, and profits that we need to protect in uncertain times. But for the Creating Wealth show, visit JasonHartman.com or search it on ITunes and let’s go to the interview with Michael Panzner and let’s talk about financial Armageddon. It’s my pleasure to welcome Michael Panzner to the show. He is the author of When Giants Fall, an Economic Roadmap for the End of the American Era. Michael, welcome to the show.

Michael Panzner: Glad to be here, thanks.

Jason Hartman: Tell us a little bit about your book. This is fascinating work and a fascinating roadmap I’ll say.

Michael Panzner: Well, fascinating but also disturbing. And I think that’s the part that people have some difficulty with, basically making the case that the life as we know it in the most general sense is set to change. Some of that is a result of what we’ve seen over the past couple of years or so, this economic unraveling that’s taken place. But some of it is also related to sort of more broader forces. And I think for Americans, it’s going to have an impact, not only in terms of their finances and their economic circumstances, but also in terms of their social conditions and really their world view. And that’s the thing to bear in mind. It’s a pretty broad based picture.

Jason Hartman: So what are the four big looming clouds on the horizon? I think we’re in the midst of some of them now actually. So I don’t know if it’s really on the horizon anymore. But what are the four big problems coming our way in the financial world?

Michael Panzner: As you noted, some of them are already starting to come home to roost. At the heart of it really was this tremendous build-up of debt. When I first wrote my second book back in March, 2007, there was this idea that we had taken on an extraordinary amount of obligations relative to the size of the economy. One statistic that I would like to make reference to was the fact that if you add it all up, total debt between corporate and individual and government, it was about 3 and a half times the size of the US economy. The last time we saw anything near those sorts of numbers was during the great depression. Other aspects that also are sort of being thrown into the mix are the government guarantees. People are seeing the failure of Fannie Mae and Freddie Mac. Well, there’s a number of different obligations that the government in both the state and federal level is on the hook for. There’s also the retirement system which again is really another form of obligation and in fact if you put all four together and say what do they represent, they’re obligations that we can’t afford as a nation and as a people I guess. But the retirement system, whether you’re talking about sort of social security and Medicare or whether you’re talking about at the state level, both for public employees for example, whether you’re talking about individuals, in essence what people think is gonna be there is probably not gonna be there. And what we’re already exposed to is way more than we can afford. Last but not least was the topic that originally was not really in the public’s eye but this idea of derivatives which essentially were paper promises that turned into one big house of cards. And I put that all together and suggested two years ago when things seemed pretty rosy that it was all gonna end in tears. And I think that’s what we see unfolding right now.

Jason Hartman: No question about it that you were correct. In fact, we have obligations just on the federal government level that are larger than the entire globe’s GDP. It’s almost too strange for fiction you know.

Michael Panzner: It’s extraordinary. And the problem is that people just assumed A, this was normal, and B, that that it could carry on forever, which anybody who had sort of picked up a history book and looked at that kind of mindset and that sort of hubris and that sense of a feeling like you’re invincible, well normally or at least historically it never had really turned out that way.

Jason Hartman: So I’m going to agree with you. I just want you know that first. I’m pessimist. I say to people I’m no longer an optimist, I’m an opportunist. I think opportunities are presented in a world like this, although it’s a very treacherous time no doubt. But the devil’s advocate would say, Michael, that the doom and gloomers have been around for years. I remember in the 70s the books, I remember picking up Ravi Batra’s book in, I don’t know, the late 80s, and it never happened. And it seemed like the reason to me was that the Greenspan bubble of just pumping more and more money into the economy, lasted to a certain point, and now the jig is really up.

Michael Panzner: Yeah. No, I think you answered your own question to a certain extent. The fact is that there was a whole bag full of magic tricks. One of them was the Federal Reserve. One of them was a government budget. At one point we were a creditor nation, now we’re sort of really reluctant. Now we’re unable to do anything but depend upon the kindness of foreigners to a certain extent in terms of our extraordinary borrowings. The manufacturing economy back then and right now it’s a shadow of its former self, you had a lot more positives in the old days. And in a sense, you’re right here. Our luck ran out and the jig is up. You know, I haven’t always been a bear. I got to this point…My very first book was written back in 2004 and it was an overview of how the stock market had changed through the years, wasn’t bearish, in fact wasn’t bullish either. It was just an observation. But from that, all of these things that were sort of unfolding over the past decade or so, this big move towards using lots of leverage and this move towards speculation and this idea that you could not have to worry about the future, you could only focus on today, they sort of came out of that first book and really led me down the path to thinking the world was gonna change for the worse.

Jason Hartman: So the devil’s advocate would say look, everything you say is absolutely true, but America has the reserve currency. It has a brand. It’s known as the land of opportunity. It has a fairly transparent and just legal system. Of course it has higher and higher tax as we see. It seems to be a lot of it really plays on having the reserve currency in being the customer for countries like China. China hasn’t been able to decouple, they haven’t been able to create their own consumer base. They really seem to need us. Like you said, the kindness of strangers, they’re buying our debt like crazy, and you would think that any sensible country or institution would stop doing that at some point, but I don’t know. It’s hard to predict what the future holds there. What do you say to those people that say that?

Michael Panzner: The game is changing there with the Chinese though. Don’t forget one of the reasons why they have been essentially supporting us financially was because they had this huge market. They were trying to develop their economy and build it up into sort of a manufacturing powerhouse. One way they were doing that was with exports. And in effect, they were engaging in what’s known as vendor financing. They were lending us the money to buy what we couldn’t afford in our own right. But that game is changing now in terms of the American consumer. It is retrenching. People are realizing that it doesn’t make a lot of sense to have nothing in the bank. They are starting to become aware of the fact that debt does have to get repaid, so some of them are shrinking those obligations, and as the real whole shift I guess you could say in this idea of consumerism almost as a kind of religion. So in a way, it takes away one reason for China to support the US, which in my mind actually creates a pretty vulnerable situation, but in terms of America as a brand, there’s a lot of reasons to question that. And in fact, I go into it quite deeply in my new book. But all you have to do is sort of step outside the US and look at, for example, the perceptions about how people think the US is and where people think the US standing is. There’s all sorts of little developments occurring in terms of the perception that we are the world leader. People are making arrangements amongst themselves, the Russians, the Chinese, the Iranians, the Venezuelans, really kind of excluding the US from the table. The view of the US used to be the sort of land of opportunity and the beacon of light. Outside this country is very poor. I mean foreigners think pretty poorly of the place. Part of it has to do with what we’ve done over in the Middle East in terms of Iraq and Afghanistan, essentially a complete debacle really. Part of it has to do with the fact that we walked around for a long time thinking that we’re exceptional and we don’t have to follow the rules that everybody else does. So I think we are a tarnished brand, and in my mind we are a decaying brand. And I lay out a pretty, I think, strong case for why that is likely to continue and deteriorate further.

Jason Hartman: So we’re the customer. We design. Everybody else sweats. China’s the world’s factory. India’s the world’s back office. The US is the world’s customer. I agree with you that the brand is definitely tarnished. I mean people around the world have got to be looking at the ugly American so to speak and thinking why do they have all that? Why does an auto worker in Detroit make $44 an hour, while someone doing factory work in China or Indonesia is making a whole heck of a lot less? But what really is their other choice? I mean for example China, what choice do they have but to not let this relationship go on the way it’s going? I mean it seems completely illogical to me. I agree with you. If I were China, I would not buy our debt. I would not do this. But who are they gonna sell their products to?

Michael Panzner: Well, they’re going to turn inward. And like most nations, the goal all along in China and other developing countries for that matter, has been to create enough momentum that it can become self-sustaining. The idea is that once you get to a certain level of activity, you can start to sell cars and air conditioners and high end products and meat, staples of life here which are not staples of life there, they are luxuries. All of these things they can say we’ve reached a critical mass as a developed country and we can sell those things back home. So that is the end game for many of these developing countries is to turn into sort of thriving, relatively self-contained versions of I guess the US in some ways. They want to be their own US. And that may not be at the point where that transition is easy. In fact my view is that it’s not there yet, but down the road there’s certainly a view that the Chinese will look to satisfy their own citizens going forward, partly for political reasons. There’s a great risk of social instability there with millions of people potentially out of jobs and really idle hands being the devil’s workshop, but also as a nation that that is ultimately the goal. It’s not just to sell things to other countries. It’s to be an economic power in your own right.

Jason Hartman: Absolutely. It’s just that they haven’t been able to achieve that goal. That’s really the decoupling argument. You know, they won’t need us anymore. That’s kind of the Peter Schiff line and it just didn’t work out so far.

Michael Panzner: So far is the operative word. In my view it will, and it may take time. It may take a decade, but certainly they have made progress towards that end goal.

Jason Hartman: Yeah. Well tell us about why globalization will shift into reverse.

Michael Panzner: Well there’s a couple of factors actually, but generally speaking, one of the reasons why globalization was allowed or it was facilitated so easily is because everybody was benefiting. And if you think about it, even at the school yard level or at the sort of town level when everybody’s making money, then it’s easier to cooperate, it’s easy to share. It’s easy to work things out in terms of whatever political or economic issues you might have, essentially to look past your differences. But you changed the game in terms of money, finance, economics, and suddenly everybody’s attitude about cooperation goes the other way. And I think that’s what we’re seeing in Europe and Asia and even in the US with the whole sort of buy American campaign that’s gaining some momentum, this idea that well now the times are hard. We need to sort of batten down the hatches and throw up the barriers and make sure that trade doesn’t take away jobs from the home market. The other side of it is the energy equation. I addressed that in the new book. I’m a believer in peak oil. I’m a believer that in many respects the resources that we have come to think are almost limitless like food and water, as well as energy and other commodities, aren’t limitless and that there’s going to be more conflict and more of a grab for people to make sure they have their share. Food security for example is going to be a big deal and part of food security is making sure that what you need is kept at home and others can’t get their hands on it. So all of these factors, this sort of resource related, this spirited cooperation, this economic boom that helped globalization are disappearing in a sense from what I can see. And as a result, the world is going to become less cooperative and less flat to use the expression from the bestseller.

Jason Hartman: The world is round.

Michael Panzner: Exactly. And not only that, I think the world going to become much more isolationist and much more localized. Both of those are related concepts, but people are going to focus on what’s near them and sort of networks of relationships, communities, the kinds of things that really sort of have been lost sight of in the era of the past two decades.

Jason Hartman: Yeah. Part of that may actually lead to some good things in a way. When you say food security, are you referring to on a national basis or on a personal basis?

Michael Panzner: Both. I mean I think countries, certainly in those areas, I think that’s been an issue in Asia for example. A while ago, about a year or so ago we were having food riots because there wasn’t enough rice available for those various countries. I think there’ll be a greater focus on securing supplies and making sure that stuff does not get exported that’s going to be needed at home by the citizens of the countries that are producing them. So that’s gonna create something of a problem in some areas of the US. Obviously we have the bread basket of the country in the middle of the US, but there is going to be some differences. China for example is out there scouring places like South America for example, looking for land and looking for fresh food supplies just to feed their billion and a half people. But individually I think it will be a relevant issue as well in terms of where you live. I expect that as energy concerns become a greater threat, as food and water issues, droughts for example become more and more apparent, people will be forced to think about where they live on the basis of the essentials. Do they have access to clean water? Do they have access to food nearby? If energy is much more expensive or difficult to obtain, will they have to rely on these long international or even national transportation networks to get what they need to eat? Or should they be looking to live where they can get the food from the community nearby? All of this is very, very unlike the kind of America that people are familiar with, but in my mind, that is the future.

Jason Hartman: Yeah. I think Americans were really led to believe they were much more prosperous than they really were.

Michael Panzner: Yes. It was very much a fantasy in some respects, a lot of it fueled by play money.

Jason Hartman: Yeah. It really was. I mean it worked for a couple of decades in the Post-World War II world where we owned really the industrial revolution for quite a while and then we in the 70s went off the gold standard and then we owned the monetary revolution. I’m just sort of giving it that nickname.

Michael Panzner: Sure.

Jason Hartman: Not in a good way. Now it seems like that house of cards has really fallen. What do you mean when you talk about what to watch for in relationships with friends and employers and others? I find that to be an interesting bullet point on your book summary.

Michael Panzner: Well two things, there’s two angles to this. The first is that I think the world is going to become a lot more unstable, a lot more dangerous. Countries are going to be engaged in conflict. It’s a natural outcome of changing economic circumstances. In fact, most people point out the fact the last time we had this great boom in globalization was prior to World War I, when all of a sudden things fell apart and as a result we saw sort of a really dramatic change in the social mood. So in a sense, you needed to know who you could depend on and you also needed to know who you could not count on win the chips were down. But even more so, I think in an environment where there’s going to be less government support because the piggy bank is running dry where dates and governments just sort of at the federal level are going to be devoting resources to maintaining public order in some respects and don’t have the money to honor many of the obligations that they’ve promised, people are gonna have to look after their own. And in some ways, we’re going to have to sort of devolve to a kind of environment that you see in some poorer countries where there’s a big reliance on friends, your network of family, extended families and those who you can trust and those who you can’t. And so it’s really from both angles. Some might say that’s a good thing, returning to our roots as a community for example, in terms of appreciating those who are closest to us. But getting there might not be such a wonderful journey.

Jason Hartman: Yeah. And I agree with you that is one of the bright lights at the end of this dark tunnel because prosperity, general speaking, Michael, seems to be an isolating factor. People have all they need. They have an abundant financial life, and they sort of look at people as kind of secondary to that. And you look at third world countries, and I’ve traveled extensively, or developing countries I should say, and it seems like the family unit is much closer and the friendships are closer and it’s just sort of different than the more prosperous countries in the west.

Michael Panzner: Clearly. Obviously some of it is out of necessity, so it would probably better idea if people had sort of stuck to that perspective when things were good, but in a way you get lazy, in a way you get sort of greedy perhaps. You don’t appreciate things when they’re easy to come by and in some respects maybe it was inevitable that we had to be forced to go back there, but I don’t know, like I said there is perhaps a bit of a silver lining to my otherwise downbeat outlook on the future, but it certainly won’t offset all of the negatives, that’s for sure.

Jason Hartman: Can government or anyone else for that matter solve these problems? I know that might lead into the discussion of the monetary future we have in inflation/deflation discussion.

Michael Panzner: Having spent 25 years on Wall Street and knowing full well that anything can happen and learning the hard way in fact that anything can happen. I wouldn’t rule it out. But if you look at history, if you look at the forces that got us here, the excesses and the imbalances, if you look at the fact that empires, great powers like the US have come and gone, you know, before us it was Great Britain and way back when it was Rome and there’s been many in between, it suggests that we’ve seen the up phase of the pendulum swing and like the seasons we’re heading into winter, we’re heading into the down phase, and it would be pretty difficult to say we can stop winter, and I think you’ll look at this in the same way. So from my point of view, I don’t think these forces are stoppable whatever the government does. Unfortunately, government action may be setting the stage for a kind of a pain that wouldn’t necessarily be preferable to most people. Around the world, not just in The US, But around the world is this idea that people think they can rescue the system by printing currency. Virtually all currencies, major currencies at least, are not backed by anything except government promises, so the sky’s the limit in terms of what they can produce, and while it provides some short term benefit for cash starved economies, longer term it’s going to lead to a situation where people lose confidence and lose faith in both those currencies and the governments that are issuing them. And that creates a whole load of problems in and of itself.

Jason Hartman: The art that’s hard to understand though is why do we see with this huge crisis and these massive, just disgusting level of bailouts and new Obama social programs and stimulus and all of this, trillions of trillions of dollars just being created out of thin air, total feat money experience here, why do we see a strong dollar? It seems to be that they’re defying gravity at least temporarily.

Michael Panzner: Well actually, funny you mention that. It’s one of the things I anticipated in Financial Armageddon. In fact there were other people who rightly so saw a number of problems in how it was all going to add badly. But I was one of the few that actually forecast the dollar rally with the early stages of the financial crisis. And there’s a lot of technical reasons, but part of the background is the fact that there’s been so much dollar debt issued through the years that both within The US and around the globe that there’s suddenly a scramble for dollars. It’s really a shot term technical phenomenon, but bankers are calling in loans, companies are trying to pay down their obligations, so it creates a sort of a short term shortage for dollars. The other side of it is it comes down to markets. Like I said, I’ve been around a long time and markets tend to do what they can to make sure people can’t really benefit too much. And there’s been a lot of people who have been betting against the currency, so in a way I think it would be the irony, but many of those sort of people who perhaps in the long run will be right about the dollar are gonna end up being forced out because of their bad timing in terms of speculation. So those are some of the factors, but long term the prognosis is poor. I mean it’s bad for all paper currencies, but for the dollar which has been the reserve currency, which has a tremendous number of unnatural holders, people who hold it as part of their reserves, people who hold it for transaction reasons because oil for example is priced in dollars, there’s a lot of people who hold the dollar not because they need it necessarily as a citizen might, as someone who lives in America might, but because it’s of its status. And once it’s status changes, they have no real reason to hang on.

Jason Hartman: It just seems to me, Michael, like the status should have changed already though. There was news about a year and a half ago I want to say. OPAC really wanted to do business with euros rather than dollars. The supermodel Gisele said she doesn’t want to accept dollars, she wants all her pay in euros. I mean that was kind of funny. You saw a supermodel saying that. Amsterdam was not accepting dollars in exchange places. And then it sort of bounced back and so there’s this demand for dollars at the moment. When do you see that changing? When do you see inflation really rearing its head and how severe is that gonna be?

Michael Panzner: Well, it’s always kind of hard to get it pinned down to the exact point and time. It’s like saying when was the housing bubble gonna burst. I mean you know there was some since that it was coming close, but it was hard to pick it to the day. However, when asked this question before, I thought by the end of this year we would probably start to see the real sort of early warning signs of a change around from this sort of inflationary debt contraction that’s been taking place and this associated rally in the dollar, we’d start to see that turn around and the sort of pendulum swing the other way towards inflation, towards dollar devaluation, towards the kinds of events that are lurking on the horizon, but timing wise I thought maybe by the end of the year we’d start to see it. But who knows, maybe it happens tomorrow. But as far as the way things have played out so far, it’s never really one event. It’s always a process. It’s like turning around the tanker in the ocean. You don’t just say we’re gonna go left now and two minutes later you’re heading left. You’re talking about a few hours to turn the whole ship around. And you put that in the context of economies that are gigantic battleships so to speak, and it takes time for these forces to play out.

Jason Hartman: Yeah, it sure does. I wonder how severe the inflation will be. I mean I can certainly see 20% inflation coming down, in real numbers coming down the pike in a few years. But who knows, I mean maybe it’ll be a lot more severe than that. It’s just very difficult to know. And I think one of the hard parts about it is that you’ve seen so much credit contraction in the last year or so that some of that credit has to come back to the market because the aggregate supply of money versus credit is a negative number now compared to where it was in say 2007. So we’ve got to see some credit return probably. Do you agree with that?

Michael Panzner: Well, not just credit. And I’ve had this discussion with others. It’s not so much credit per say. What also matters is people’s confidence in the government and competence in the currency.

Jason Hartman: On the demand side, yeah.

Michael Panzner: The truth is that if people lose confidence it tends to push up the velocity, in other words how quickly it turns over. And that in and of itself can create inflation, all else being equal. So you always have to put it in the context of a level of confidence in the government. And I think that confidence is waning. You can see it even now in terms of our administration, there’s a sense that it’s become almost corrupted, looking after the interest of Wall Street at the expense of taxpayers. Whether it’s literal corruption in the sense that people should be going to join I don’t know, but certainly there’s definitely not an interest in preserving, looking after taxpayers, that’s for sure. But ultimately it plays out in a way that I think your 20% number could be a good starting point.

Jason Hartman: Yeah. What do you think the best case scenario and the worst case scenarios are here for our future and are we talking the next decade, the next 10 years, the next 5? I mean some ideas to your timeframe here?

Michael Panzner: Well obviously what I’ve described, in both books really but certainly in the latest, is a process. I mean it’s not like you wake up one day and the sky is green. I mean it’s a gradual wearing away. It’s a gradual deterioration. It may come in some kind of lurching start. I have to say, although I anticipated a lot of what’s happened over the past 6 months in particular, it happened a lot more quickly than I ever imagined it would, that’s for sure. But I think the best case scenario is sort of a muddle through. Some people talk about what happened in Japan when they had their sort of bust, it was kind of the lost decade. It wasn’t such a great thing. But in some ways, I guess it is better than a full scale depression and the follow up after that. But the worst case I think is going to be a world that people are not very happy with and I don’t think it’s hyperbole to think about the idea that we could be seeing something on the same level with or even much greater than the depression of 80 years ago.

Jason Hartman: Maybe we really are in another depression now. I know there’s not really any agreed upon academic definition for that, but some people say four quarters of negative growth, recession being two, some people judge it by unemployment. There’s a lot of opinions on that, but it would look so different this time. I mean look at the changes in technology. Certainly even if we are a lot poorer, it seems like life will be a lot better in many ways than it was in the 30s, doesn’t it?

Michael Panzner: Well, I don’t think people will be selling apples on the street corner. I mean that was the classic image from the depression.

Jason Hartman: They might sell them on a website. I’m just joking with you.

Michael Panzner: I mean the problem is that as a culture and as a civilization if you like, to put it in broad terms, Americans have gotten used to a lot of things that the rest of the world doesn’t have. And you could very easily get to a situation for example where money for example where money becomes increasingly tight, so you start to see things break down, roads break down because they’re not being maintained. Water treatment systems break down and then you have electrical blackouts. And then slowly but surely is sort of deterioration, certain products aren’t in the market anymore because of trade wars and protectionism. The cost of energy’s become prohibitive. So certain parts of the southwest in particular become ghost towns. In total, it’s not gonna be a pretty picture. It’s not gonna look like the sort of tumble weeds of the depression necessarily, but from a modern day perspective, it’s gonna look like a pretty ugly place.

Jason Hartman: I just wanted to understand your quick statement on the southwest. Are you saying they will become ghost towns because of heat and lack of air conditioning?

Michael Panzner: Well I think water and energy. I think that it’s extremely dependent on both and I think both are in short supply or will be in short supply.

Jason Hartman: Yeah. So Arizona would definitely be a victim of that for sure.

Michael Panzner: Yeah. I mean clearly there’ll be some oases amongst them. I mean even in the deep south when it was really decades ago, there were towns and things like that. But the truth is it’s not gonna be like it is now. It’s going to be a shadow of its former self in my opinion.

Jason Hartman: Yeah, okay. What can listeners do to protect themselves? This is a pretty gloomy view. It’s like talking about the long emergency, James Kunstler’s book. What is the protection strategy here?

Michael Panzner: Well I think overall, and some people tend to sort of dismiss this, the most important thing is a mindset change. I mean the problem here, and we’ve seen tremendous denial going on in Washington. We’ve seen tremendous denial going on in Wall Street in the sense that it’s all gonna go back to normal. We just have to ride it out and it’s just a hiccup. But if you believe as I do that there are a number of structural forces, secular trends coming together all at the same time, if you at least accept that and say, okay, I have to rethink the way I’m living my life. I have to think about where I’m gonna live, think about where my job is, I have to think about my exposure, think about what resources I have available, how am I going to prepare. I mean that is half the battle and I think that’s the issue that a lot of people can’t get their arms around. In terms of more specifics, I think that my view on the world is going to become a lot more unstable. The currency is going to be vulnerable. There have traditionally been some safe havens like precious metals. It’s one of the few investments that I think make sense longer term. Short term, my backgrounds in Wall Street and trading goals probably overheated, but if you’re talking 5 to 10 years out, it’s gonna be a place that may just help you get by when the stuff hits the fan so to speak.

Jason Hartman: Do you think that’ll be more from an investment perspective or will that be from literally a day to day perspective collapse of the currency, this is how I trade perspective.

Michael Panzner: Very conceivably. One of the things that’s kind of interesting is if you get the sort of levels of inflation that I think we could see, hyperinflation, you get to a point where people have to seek out all sorts of other alternatives, among them a barter and certainly, historically at least, hard assets like precious metals. I mean bullets may become the medium of choice in certain circles. I’m being somewhat facetious…

Jason Hartman: You may be very realistic there actually, you know? Some people say cigarettes and alcohol literally will be a good thing to trade.

Michael Panzner: Certain basic needs and traditionally have been kind of a joke, but I don’t think there’s such a joke. Let’s put it that way.

Jason Hartman: So I like the fact that you brought up as the first thing my inset because I guess the measure of someone’s disappointment or distress would be really a comparison to what they had or what their parents had versus what they have now. And getting one’s mind around that Michael is probably the first step, having some acceptance of that. But on the other side of that, we’ve heard all heard all this stuff about the power of positive thinking and the law of attraction and optimism and its literal translation to reality. Where do you come on that? Like there must be some happy medium or distinction maybe.

Michael Panzner: Well, the point I make and the point I’ve raised in the book is the fact that if you look at the course of our nation’s history or many other nations for that matter, I mean we’ve been through the Civil War which nearly tore the country apart, into the great depression which nearly destroyed large cross sections of the economy, the so called downtrodden. At the end of it, we got through it. And arguably the country perhaps was the better for it. I mean I don’t know whether that will remain the case going forward, but there’s a lot to be said for the sort of path and progress through the centuries in terms of the human race. So I think that’s a reason to remain optimistic. But then again, I can tell you if I was sitting on someone’s door step in 1929 and I’d be fortunate enough for someone to say here’s what’s coming, you better be prepared, then I know I would have come out of it a lot better than if I was completely blindsided. And I think that’s the sort of takeaway, is even if we’re gonna end up better down the road 5, 10 years, which I do think that sort of timeframe applies, wouldn’t it be better to sort of deal with the immediate reality in a way that you at least have a better shot of making it in the long run.

Jason Hartman: Yeah, very good point. You know, one thing I did mean to ask you earlier is in terms of the union of the US, about 40 states in the country are on the verge of serious financial problems, like California, my own state, literally bankrupt for all intents and purposes. Do you think we’ll see a situation where we’ll have states essentially declaring bankruptcy, getting federal bailouts, the feds printing money to do this, possible succession movements, gaining steam, any geopolitical thoughts there?

Michael Panzner: Absolutely. And in fact when I was originally kicking around the idea of this book, I thought of a title. The one I came up with was this notion of splintered states, in other words things splintering into smaller and smaller pieces. Not only is this sort of a cultural economic and political perspective, but literally in the sense of nations breaking apart. And I think there’s a real risk in the US. You have a serious cultural divide in some respects. On our Southern border you have Mexico, looks like it’s a Lebanon in the making. There’s a number of smart analysts arguing that you’re looking at a potential failed state there because of the narcoterrorism and some other issues which could create havoc in the southern portion or at least some parts of the southern portion of The US. You have the issues with California. You have some parts of the northeast saying that they don’t want to have…Vermont’s been a traditional hotbed for example of secessionist type leanings, not that they’ve actually followed through on it, but you get to an environment where people can no longer count on the union for “the benefits”, then they say well what do we need them for? Let’s just go our own way. And that’s, in my mind, not an unrealistic outcome.

Jason Hartman: I’ve always wondered. You know, you remember when you saw Russia fall apart, or the Soviet Union I should say fall apart, what will Washington’s reaction to that be? I mean will they roll tanks into these states? What will happen?

Michael Panzner: Well it’s interesting. I mean I do think there will be and in fact I warned in Financial Armageddon about the risk of martial law in this country as a response to a complete economic collapse and the company in social unrest. Most people you say that to and they say what are you talking about? America, that’s not gonna happen here. Well I think there’s already been sort of a creeping disintegration in terms of civil rights in this country, all sorts of rule changes have been made that make people less secure than they used to be as Americans.

Jason Hartman: I agree whole-heartedly by the way.

Michael Panzner: Yeah. And that’s a real concern. The state, in a sense one of the reasons we’re here is because government has become a beast. It feeds on the taxpayer’s money so to speak, and like most beasts it will defend itself if it comes under threat. And that is a genuine risk. There’s also the possibility that in general terms people are or have been used to the idea that they’re free to make those kinds of choices, but suddenly somebody comes in and says you know what, we don’t like that idea anymore, and as a matter of “national security” we need to change the rules. So all of this is out there. I mean I sound alarmist I’m sure, but if you look at history and the way that social conditions and social attitudes and really the overall social moods can shift, following abrupt and an economic downturn as we’ve seen and other circumstances like the resource related constraints, it’s not out of the question for a lot of angry people to be running around and battling each other over the spoils.

Jason Hartman: Yeah, no question about it. That’s a very good point. You know, a lot of this boils down to, in terms of a personal action plan, Michael, to this question, where should someone live? A lot of life is dictated by your geography and the resources you have. Do you have any thoughts? Have you addressed the issue of advice to the listener of should they move to a certain location? Not to the southwest probably. Is there sort of an ideal location that won’t be ass affected as others?

Michael Panzner: Well, I thought about this. And I think you brought up James Kunstler before who has also addressed the issue somewhat, but clearly you are going to have to take certain things into account that you didn’t used to. I don’t think it’s any more the case where you say my parents live there, so that’s where I’m gonna live, or my friends live there, that’s where I’m gonna live. You’re going to have to take into account where are the jobs going? Where is there access to water? Where is there access to transportation? I think towns and smaller sized cities could be attractive, especially those located near waterways for example, the areas that have climates that are a little bit more temperate and aren’t sort of totally dependent on having a constant supply of energy to keep them cool or keep them hot. You know, that leaves open a lot of possibilities, but on the other side of it, you have to think this through. And certain locations might be more difficult if they are too populated, even if they’re seen as being somewhat dependent now. But they could become targets. So there’s gonna be sort of lots of crazies running around and government’s looking to sort of capitalize on the point which The US has gotten. It’s less of a power than it was. And there will be more terrorists running around, criminals running around, so very large cities could be vulnerable in a way that smaller cities might not be. So those are the kinds of issues you have to think about. In terms of a specific city, I don’t have my top 10 list because, you know what, I think it’s gonna evolve over time.

Jason Hartman: Yeah, good point. Well this has been fascinating talking with you, although gloomy, no question. What would you like to say in closing just to sort of wrap up this subject and give us your website and tell us where they can get your books?

Michael Panzner: Sure. I mean the thing to remember here is that I have a family. I don’t want any of this to happen. I mean when I wrote the second book, it’s where the data took me. When I wrote this book, it’s where the data took me. As far as I’m concerned, I hope I’m absolutely totally wrong. That said, there’s something to be said for being prepared for the worst as opposed to being blindsided by it, so I think that’s the perspective you want to take away. Right now, as part of my mission to both stay informed myself but also to keep others informed, I run a couple of blogs. One’s FinancialArmageddon.com, one is called EconomicRoadmap.com. They have slightly different perspective. One’s much more domestic. One’s more of the kind of global picture. But both are meant to say here’s what’s really going on and it’s a little different than you’re hearing from the mainstream and, as far as I’m concerned, if people get something out of it, then that’s great.

Jason Hartman: Excellent. Michael, thanks so much for joining us on the show and we will hope that your predictions are wrong, although I hate to say I think at least many of them will be very, very true. Thank you for joining us today.

Michael Panzner: Thank you for having me. Take care.

Narrator: Thank you for joining us today with the Holistic Survival Show, protecting the people, places, and profits you care about in uncertain times. Be sure to listen to our Creating Wealth show which focuses on exploiting the financial and wealth creation opportunities in today’s economy. Learn more at www.JasonHartman.com or search Jason Hartman on ITunes. This show is produced by the Hartman Media Company, offering very general guidelines and information. Opinions of guests are their own and none of the content should be considered individual advice. If you require personalized advice, please consult an appropriate professional, information deemed reliable, but not guaranteed.

The Holistic Survival Team


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