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WED., AUG. 30, 1989    6:30 A.M.    YEAR 3, DAY 014


WED.,  AUG. 30,  1989


Let us move smartly along please.




Yesterday on your news(?) programs it was touted on ev­ery sta­tion.  GNP is up one and a half points from the month before—recession is off!”  Day before yester­day: “Stock market hit all time high!—recession off!”  Then yesterday, “Stock market fell BUT it was due to profit takers from yesterday’s all time high.—reces­sion off!”  YOUR RECESSION IS NOT `OFF’!  YOUR DE­PRESSION IS VERY MUCH `ON’!  YOU HAVE NOTH­ING UPON WHICH TO BASE YOUR PICTURED PAPER FLOW.  THE SYSTEM IS QUITE DEAD, JUST AS ARE THE ONES PICTURED ON YOUR PA­PERS.


Dharma, I realize you know naught of finance nor inter­national eco­nomics.  I care not, chela.  Please, I will make an effort to not move so rapidly.  I do not, how­ever, want you to even “think” about it as we move along here for it only slows us; you can come into un­derstanding elsetime.


These messages and suggestions are put forth for my people who are asking for assistance in order to main­tain working abil­ity for we are building a new business structure.  The only way you can do so and survive at the same time is to use clever strat­egy.  Because my vision is farther out front than is yours, I can as­sist.  I can also see “the trees within the forest”.


Let me give you some figures.  They are obsolete, of course, but you need a full year, in your counting, to form a picture.  To save time, which is the only way you are going to gain value from this dissertation, is to utilize some of your own published figures lest you spend all your time checking on the reality of one Ha­tonn.  I am going to quote a lot of things, selec­tively, so that I might give you reasoning to take ac­tion.




Firstly, what is money?  The paper money you spend has as collat­eral a U.S. Government Treasury Bond.  Remem­ber that, it is not gold, my friends.  Therefore, gov­ernment credit is money.  So, if the government’s credit is not good, neither is the money you spend.  Further, neither is the value of mortgages, CD’s, mu­tual funds, and any other “paper”, since they are all measured in “dollars”.  In a very short time the dollar will be worth­less.  It’s very much a form of suicide—intent and fulfill­ment.


Do you realize that approximately four banks in the U.S. fail in each of your weeks?  This does not count the ones being ab­sorbed by the grey man banking octopus (relative to the grey men lec­ture).  I state, “failing”.  This is because they are in the state of petri­fication.  Only a very small portion of most banks’ assets can be liquidated on short notice without very large losses.


Commercial banks rely on the Federal Reserve to replen­ish their re­serves—DAILY—good weather or bad.  But guess what—the Fed­eral Reserve Banks are not in much better shape: they con­sist of govern­ment securities.  In case of a bank run, the Federal Re­serve would be in no position to meet the demand for cash—re­member the mini­mum 20 to one lending ratio?  If a demand for cash through honest liquidation were allowed, it would abso­lutely break the bond mar­ket.  Therefore, the Federal Reserve System (FED) would have to do what it has al­ready begun to do—monetize by CREATING CREDITS—not PAPER MONEY; the bad assets of the banks needing aid only makes the FED’s own position in­credibly worse.  Therein lies great and magnificent danger, friends.


Most of you, the U.S. public, and, frankly, most of your experts live in a dreamworld.  You peer into your personal computers (experts) and the television screens (public) and eat up the pro­jections of paid projection­ists who tell you exactly that which is fed to them.  Most of you believe you are still a na­tion that you have been in the past times—one that furiously pro­duces goods and services so that everyone can have a won­drously high stan­dard of living.  You believe that it is your capitalistic system and its profit drive that makes it all pos­sible. (News flash: you haven’t had a true capitalistic system in such a long, long time.)  You be­lieve that you work for money, money is your main goal, and you get this money by hard work.  WRONG!




Since the turn of your last century America has been trans­formed from a system of making goods to one of making money; that is, there is more money to be made by playing with and juggling money than by working to make goods.  Proof?  Always you want proof!  Let us go back to ancient times when the figures were inclusive, let us say 1986.  There was $2 tril­lion in goods traded internationally and $36 trillion in capital transfers.  Dharma cannot even spell the numbers of trillions transferred in ONE DAY presently.


It was, in the ancient past, that banks made money mak­ing small loans to the public.  Now they rake in leviathan fees for lend­ing in LEVERAGED BUY OUT deals.  They will lend to a merger deal for a very large fee;  i.e.: “Banks made $380 million on the Nabisco deal alone, and they will make close to $300 million in the Time-Warner debt-merger-insanity.


This appears crazy, does it not?  After all, all of this debt—these loans they are making—are going to have to be repaid some day, aren’t they?  If not, then Time-Warner goes down a deep hole and takes its large and very friendly New York City banks with them!  So be it—remember my lectures?  Exactly what is in­tended, public, exactly what is intended—with both parties knowing truth.  All moves right back into the plan and the mag­nificent banking “own the world” system.  They will never be re­paid—just as Third World country debt—it is not intended that it ever be repaid.  All par­ticipants are a part of the Trilat­eral Commission; Council on For­eign Relations and International Monetary Fund.  OH YES, BELOVED ONES, YOU ARE BE­ING LED DIRECTLY INTO THE DRAGON’S MOUTH AND IT IS PAST THE POINT OF NO RETURN.  WE HAVE TRIED TO TELL YOU THIS FOR YEARS BUT, “THERE ARE NO SPACE MEN OR UFOS”.


Let us speak briefly about the “quality” of credit.  The sole aim of government spending should be to keep the credit of the govern­ment at the highest possible level and above all suspi­cion.  (I don’t really have to go further, do I?)  That state­ment means that the gov­ernment must borrow only if it can see revenues in the years ahead which can be used to retire the debt.  If this should happen (and it happened in your ancient historical past), the rate of in­terest would be stable and quite low.  Now, there is NO WAY—NO CHANCE of ever retiring your gov­ernment debt, therefore, interest rate gyrations prove my point.  They move like runaway rock­ets—crazy, up—and a bit down—but never steady.  They are manip­ulated to “assist” the economy—or so you are told so you can be distracted from that which is really going on under the covers.


The quality of all outstanding credit in your America cannot be higher than that of the government, so the ongoing deterioration of the government’s credit ad­versely affects every single one of you.


I suggest you start, right now, looking into survival gear and sur­vival foods.  You think I chuckle—nay, I do, unfortu­nately, mean it.  I will at some point along here give you some pre­ferred places to seek out these resources.




I will take the explanation of your debts a bit further (and beloved ones, I do not even yet speak of your per­sonal debts, which comprise the major portion of the overall debt.  Remem­ber those credit cards?).  I will speak in generalities about na­tional debt in your coun­try.


The domestic debt in America is not without its magnif­icent dan­ger.  It can easily be compared to “nuclear” energy.  Controlled and con­strained it can be enor­mously beneficial.  Out of control it can be enormously destructive and further, just as with fis­sionable mat­ter, without any apparent bad effects.  Up to a point you appear to be fine—but once critical point is reached—WHAM—MELTDOWN AND CHAIN REACTION BEYOND RE­COVERY!


On October 20, 1987, your New York Stock Exchange came within five minutes of closing down.  Had that oc­curred, it would have taken at least five years to gain ability to reopen.  And that perturbation was minor compared to what is headed your way when the OIL KING­DOMS DUMP!  You do not even have a tightrope upon which to tread—your rope is wound so tightly and so tattered and frayed that it will reach critical point and snap, in the blink of an eye.


What is good debt vs. bad debt, you ask of me?  It is not arbi­trary—it is judged by its productivity.  This is the ratio of net gain in Gross National Product to the gain in debt (the net gain in GNP is the excess of additional GNP over additional debt).


If this ratio is positive, then the new debt can be serviced out of current income.  The greater the ratio, the higher the qual­ity of the debt—like consumers hav­ing enough income to easily pay what they owe.  BUT if the productivity of debt (meaning the income it pro­duces) becomes negative and interest can no longer be paid out of current income, then new debts have to be origi­nated to meet the maturing debt.  This negative ratio is a clear sign that bad debt is now breeding and multiplying more bad debt.  This feedback short-cir­cuits the economic process.


The debt-tower is then out of control and in due time must self-de­struct.  THAT IS WHERE YOU ARE, BROTHERS, AT CRITICAL POINT—RIGHT AT CORE MELTDOWN BLAST-OFF!  Hold to your seat belts:  You have a GNP of around $4 trillion AND DEBT OF ABOUT $12 TRILLION.  YOUR DEBT IS NOT PRODUCTIVE.  YOU PRODUCE DEBT, NOT WEALTH!  DEAR ONES, YOU WILL PAY THE PIPER IN THE FORM OF A LONG DEPRES­SION.  This is the only way to close the gap be­tween your GNP and debt. 




Now I will quote directly from your own statistics: (Credit to Dr. John King, Future Economic Trends, Au­gust, 1989.)  (Editor’s note: the quote is direct; if the numbers do not add properly it is not the error of the Author.)  “As of September 30, 1988, the formal debt of the Federal Government was $2.6 trillion, and this excludes their contingent liabilities which, to most Ameri­cans, are an ac­counting curiosity.  The gov­ernment debt matu­rity, on average, is just 4 1/2 years.  In the early 1930s it was 50 years and in 1947, 20 years.


“The Federal Government Contingent Liabilities are as follows:  DI­RECT GOVERNMENT LOANS: $222 BILLION, GUAR­ANTEES ON LOANS BY U.S.: $550 BILLION, LOANS BY GOVERN­MENT AGENCIES: $720 BILLION TOTAL: $1.5 TRILLION!


“To this must be added government deposit insurance guaran­tees: $1.5 trillion in S&Ls, $1.5 trillion in Commercial Banks, and $700 billion in Credit Unions (FSLIC, FDIC, Federal Credit Union Insur­ance)—a TOTAL OF OVER $3 TRILLION.  All government debts total over $8 TRILLION.  Uncle Sam  is strung out on a debt limb, more than most people can realize.


“The Thrift Crisis (S&Ls) has given all of us a taste of how fast these contingent liabilities can turn into real dollar losses.  Early on, the Thrift Crisis was estimated at $20 bil­lion, then $150 bil­lion, then $237 billion, and now $400 billion (Wall Street Jour­nal, Martin Mayer, May 14, 1989).  My own guess is that the thrift deposit total is $1 trillion.  Why so large?  Uncle Sam does not have the resources to save that size debt, and nei­ther do the tax­payers—consumers buried as they are in debt.  The coming Credit Meltdown will prove the accuracy of this ob­servation.





“When will this happen?  Actually, it has already started.  The `solution’ by Congress of the S&L crisis is another Band-aide.  Why don’t they do more?  A lack of funds—if the FED tried to borrow the kind of real money needed, the financial markets would be wrecked in the process.  Not far ahead we will all be witness to that terrible fiasco—meltdown.” 


Now comes a very formidable situation.  When your Trea­sury gets ready to refinance its debt, it is at the mercy of the financial markets.  In fiscal year 1990 (Which by the way, starts October first—ONE MONTH FROM TODAY!), the Treasury will have to refi­nance $670 billion in debt.  That, friends, is on top—above and beyond—any NEW borrowing.


Short-term rates are on the rise, and this makes re­funding more costly.  Also, lurking in the distance is the worry that the mar­kets will begin to worry about the “credit worthiness” (you know, your TRW credit re­port), of your Government, Uncle Sam.


So far the financial markets globally have been remark­ably compla­cent.  No one harbors the thought that the U.S. govern­ment might go broke—or do they?  The world bankers are “banking” on it!  The public truly believes that the government’s promise to pay thrift and bank and other bad debts is a fact.  BUT, THE GOV­ERNMENT TELLS YOU THAT GOD IS IN HIS HEAVEN, THEREFORE, ALL IS WELL WITH THE WORLD—WHY WORRY, AND BESIDES, THE WORLD SE­RIES IS COMING UP WITH OR WITHOUT PETE ROSE.




Evidence is growing that the government has very little overall ca­pacity to make good on its own debts. 


If the S&L (thrift) fiasco is not bad enough, in early June Brian Hyland, Inspector General for the Labor De­partment, said that more than $1.6 TRILLION in PENSION FUNDS is potentially at risk because of poor regula­tions and inept enforcement of fed­eral laws.  Mr. Hy­land added, “These are savings American work­ers have set aside for their future.  These workers trust that the government will protect these funds by holding man­agers and trustees of their pension funds accountable.”  (So what, do you know any trustees or managers who have $1.6 trillion?)  He con­tinued, “As has been demon­strated by the recent savings-and-loan crisis, govern­ment regulation of an in­dustry does not ensure that in­vested assets are protected.  “The $100 billion Congress estimates the rescue of the thrifts to cost will appear to be a `bargain’”  (Already obsolete, isn’t it—$200 billion and grow­ing!)  “should a similar cri­sis wrack a significant number of the nation’s 870,350 private pension funds.  The funds hold $1.6 trillion in assets.  The government insuring agency, the Pension Benefit Guarantee Corporation, is itself in financial trou­ble NOW.”  Oh my, the Labor Department has worked long into every night to discredit Mr. Hyland just as the government works at dis­crediting anyone who speaks truth.




All it will take to bring down the house of cards—THE FINANCIAL SYSTEM—is a change in perception of those that buy government debt.  If they become truly worried about the Treasury’s willing­ness and ability to honor its debts, the debt game is OVER-DONE-FI­NIS!  AND, BROTHERS, THE JAPANESE HAVE BEEN MOVING MORE AND MORE AWAY FROM SUPPORTING YOUR DEBT AND THEY HAVE BEEN CAR­RYING YOU FOR A LONG TIME!  THEY ARE BUYING LESS AND LESS OF YOUR DEBT WHILE BUY­ING MORE AND MORE OF YOUR REAL ES­TATE TO GET THE LAST BIT OF VALUE FROM YOUR DOL­LAR.


Keep in mind, also, that the contingent liabilities above are the items that might cause loss in confi­dence.  These are debts that the government has put its guarantee behind—BUT—are not part of the $2.6 tril­lion in formal debt.


Note how fast these contingent liabilities can turn into real dol­lar losses.  Look at the Thrift Crisis.  Add the potential Pension Crisis. (Worse, by tomorrow you will have additional crises.)  A part of the prob­lem is compounding interest, a most ridiculous spi­ral of disaster.


Currently, you (taxpayers) are servicing the public debt, and it will never be retired.  Taxation, given time, can only grow worse—it must.  Moreover, the creditworthiness of the govern­ment can sud­denly vanish if creditors lose faith (or decide against supporting you), in the ability of the government to eventually retire the public debt.  Do you also see why you can­not afford to give up the billions of dollars gleaned by the drug intercourse?


A great deal of the annual increase in debt now can be ac­counted for by the high rate of interest the govern­ment must pay.  The in­terest payment is far in excess of the productivity of labor and capital, and it is created out of thin air to keep the game of mu­sical chairs going.  But this merry-go-around must stop sooner or later, and when it does, it is CATASTROPHE FOR ALL OF YOU.




Please allow me to list a few things and then we can get down to some hard possibilities for saving your as­sets.  Just a few things your friendly Mr. Bush faces in the “GRAY NINETIES”:  (Again quot­ing Dr. King.)


PEARL HARBOR NO. 2.  The Japanese Investor Army has gobbled up the best parts of Hawaii for breakfast.  They are now having lunch on California and lunch dessert of Washington D.C.  Dinner hour is ar­riving fast, and this time Mr. Bush won’t get a quick rescue!


NATIONAL DEBT.  $2.6 TRILLION AND CLIMBING LIKE A ROCKET.  Inter­est is a miserly 15% of the national bud­get at present.  But, by the end of 1989, it will likely be doubled.  How far is it from that point to bankrupt-city?


“TRADE DEFICIT.  At $160 billion, this is actually more pressing than the national debt.  Your trading partners are really get­ting miffed off at you.


“CORPORATE DEBT.  This is worse than the government debt.  It is a million wobbly dominoes on a shaky table—all lined up.  Leveraged buy-outs have wreaked havoc on debt.


“PRIVATE DEBT.  The credit card mentality is pandemic, and no­body seems to care.  Just offer more and more and you take and spend more and more.  Over half your coun­try lives from paycheck to pay­check and saves naught.  Worse, much of that paycheck goes to pay­ing off “old” purchases and interest.  You believe a re­ally up­scale lifestyle is now your birthright.  Well, you are taking VCRs, computer clones, Suzukis and Hondas in trade for all that Hawaii and California real estate.


SAVINGS AND LOANS.  The charade is over.  Your FDIC is a total mi­rage and the FSLIC is some $17 billion in the debit hole.  both are being kept alive on life support systems in the form of an intra­venous continuous drip line running from the Treasury Department.  BROTHERS, THE `QUIET’ BANK RUNS HAVE ALREADY BEGUN!


INFLATION.  It is back!  In fact, it never went any­where.  Pri­vate studies of true inflation (you know, those NOT done by your govern­ment), have put it, and keep it, well above 10%.


“THE BUREAUCRACY.  Ah yes, the government apparatus has become bloated and incredibly expensive.  (Please see SPACE-GATE, THE VEIL REMOVED.)  Portions of it are legally IMPERVIOUS to change, like your State Depart­ment which tends to crucify your friends and aids your enemies.


“THE HOUSE OF CONGRESS.  The ultimate problem is en­trenched lib­eral congressmen.  They have taken the richest economy in the world and driven it to its knees.  Further, today the reelection rate for those financial morons is 99%!!  Now, who votes for the `PUBLIC SERVANTS’”?






I can go on and on pointing out all the mess.  But you ask, “What do we do?”  You take a good confronting look at the truth of it; take off the blinders and really SEE.  Then, I am going to make some suggestions for handling your money and your busi­ness (from now on they will be inseparable).  You must utilize all tools left at your disposal—before they are ap­propriated.  There are no good solutions.  It is much like being in a nuclear war—there is no good place to be—only, perhaps, a place where you might some­how survive until the lifeboat ar­rives.


The mess is not reversible, it must play itself out—right on through the debit card enslavement for it is too late to do more than try to survive and do as well as you can through it.


You will have a series of expected sequence of events.  First you will need to protect your current money as­sets as much as possible and protect your currently “owned” property.  S&Ls and banks will not be a good place to keep anything.  Then you will need to get yourself into a tax shelter (the government will ap­propriate all your funds in the form of taxes until there are no funds left to garner).  There is only one shelter that I find on my scanners and that is in in­corporation and good corporation man­agement—bunches of small corporations—quite frankly, set up in your State of Nevada.  Nevada is the only one of your states within the union that can give you any protection at all.


Dharma, I wish to give you a break, chela, before we continue fur­ther. 


I trust I have given you enough example that you will at least lis­ten to me.  I can give you a history of how you have cycled, re­leased control and historically come to this point—BUT—I per­ceive you need help, not lec­tures on how, why, what, when and where—you already know WHO!    SALU