first majestic silver

One Year Later

January 25, 2002

Almost exactly a year ago, I wrote a column for GOLD-EAGLE, titled "Diary of a Depression." You can see it by clicking the title just mentioned, or on "also by Don Stott" at the bottom of the page, and accessing the other columns I have written. In "Diary of a Depression," I elucidated various conditions that existed a year ago. I just thought you might be interested in realizing how far down we have come in a single year!

I noted that the 1929 Crash was not even the beginning of the depression, but that it took a couple of years for it to really get into gear. A year later, we are more deeply mired in depression than a year ago, by anyone's standards. "Day traders" seem to have vanished, haven't they?

A year ago, I noted that the Heilig Meyers furniture store in Delta, 21 miles from me had closed, and the building's owners would be denied rent, employees fired, etc. The entire chain went bust, and I assume everyone was fired. How many furniture manufacturers lost huge amounts of accounts receivable from Heilig Meyers is unknown, but they no longer exist. How many building owners lost the Heilig Meyers rent is also unknown, but it is in the hundreds.

A year ago, I noted that a nearby Louisiana-Pacific strand board plant was not going to buy any more logs, and would make a decision in April as to whether to continue or not. The plant is shut tight, and probably will never re-open. All lost their jobs, including the truck driver-owners who delivered the logs, plant employees, sales force, repair crew, etc. The electricity and natural gas consumption of many tens of thousands of dollars per month, is zero now. The log and finished product delivery trucks are no longer in use, and the place is as quiet as a mouse.

A year ago, I noted that Ford had suffered a 14% decline in sales, and that Chrysler was worse off. Since then, Chrysler has mated with Mercedes, in a not too successful marriage, and Ford is discontinuing production of 5 models, along with a layoff of 35,000. All auto manufacturers, over the past year, have lain off tens of thousands. Auto manufacturers sold a lot of cars at virtually no profit, with zero finance charges, (which cut into bank profits) and it is my opinion that the buying public will not buy many cars in the future, without the zero finance deal continuing. They have hung themselves.

A year ago, I noted that a hundred million Americans had been severely clipped in the stock market crash, and that "Nothing Alan Greenspan can do will stop it," (the depression). Since then, Greenspan has cut interest rates 11 times, and the economic decline continues, as I predicted. I observed a year ago, that, "once a chain of financial losses happens, such as the stock market balloon bursting, people simply stop or slow, "not needed" buying…" This has happened all over the world, as company after company has closed its doors, gone bankrupt, and ceased operating. "K" Mart is only the latest.

A year ago, I pointed out that the Japanese stock market had gone from 39000 to 13000. Try barely holding 10000 now. Japanese banks are about to close their doors, with hundreds of trillions of yen in bad debts. Smart Japanese are now buying gold quickly, before the banks close. Zero interest didn't help the Japanese banks, and close to zero isn't doing much here in America. I pointed out a year ago, that when a chain of events such as a stock market crash occurs, a chain of events happens which cascades into severe depression, and that FDR, with all his gimmicks, couldn't stop it till he got us into WW II. Will the "war on terrorism" escalate into Sudan, or Iraq? We can hope not.

A year ago, no one could have imagined a terrorism attack such as happened with the World Trade Centers, bin Laden, Enron, a war on terrorism, and a host of major bankruptcies. A year ago, people flew to their destinations, and the tourism industry was healthy. No longer. Tourism is in terrible condition, and even Las Vegas has lain off tens of thousands. Who wants to fly, and especially when it takes hours to be searched, and passed through security? Bin laden says he wants to bankrupt our economy, and he has gone a long way towards it, with airlines lining up at the bankruptcy window, huge costs of the terrorism war, occupying Afghanistan, huge costs of security, and increased fear and expense in every sector of the American economy. Flight 587 and 800 were obviously terrorist acts, but government will not admit it, in spite of numerous witnesses who are highly credible. Government statistics continue to lie about inflation and unemployment rates, and government credibility continues to decrease. Now that the tax hearings have been cancelled, everyone knows that the IRS has no answers to questions, and in reality there is no law forcing Americans to file returns. Most will file anyway of course, because without fear, no government can stand, when it has grown far larger than was originally intended.

A year ago, no one could have imagined another bureaucracy titled "Homeland Security." A year ago, I sort of finished by saying that, "Unfortunately, once the chain leading to a depression begins, it self perpetuates, as more lose their jobs, more businesses fail; more corporations have no profits, and their stocks plunge." How true that has proven to be.

A year ago, most stock-brokers were saying that "the bottom has been reached," and it was time to begin buying, which ignored all the lessons of history. As usual, they were mainly interested in commissions, rather than being honest. A year later, the stock market is almost exactly where it was a year ago, or even a bit lower. With interest rates being cut over the past year, billions have been removed from bank savings accounts and CDs. Interest is so small, that saving is pointless. Not knowing where to put the dollars, more and more went into stocks, which simply means there will be double losses. Why didn't they buy gold and silver? I have a $50 bet with a stock broker in my Kiwanis Club. I bet him that the Dow will go to 5000 within a year, and he thinks I am crazy. A year from now, I'll photograph him handing over the $50, and publish it in GOLD-EAGLE. By then, $50 might not even buy a cheap meal, because the dollar supply continues to escalate, with no seeming limit.

Stott's Law: "The more of anything there is, the less they will be worth."

It is true with paper money, antiques, firewood, oil, or anything you can imagine. As dollar quantities go up, all prices in dollars go up. Gold is $20 higher than last year. How are your stocks doing? Protect yourself and yours, because depending on government for anything, is the utmost foolishness. Next week, we'll continue with, "When money dies"

Due primarily to the California Gold Rush, San Francisco’s population exploded from 1,000 to 100,000 in only two years.
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