REALITY CHECK Issue #38

Gary North May 5, 1999

STAYING AHEAD OF THE GREAT WEALTH REDISTRIBUTION

As March began, the initial Y2K fever, mild as it had been, subsided. This gives us some breathing room. But there isn't much.

Y2K is like syphilis: when the cankers disappear, the disease advances to the next stage. The final stage is dementia. Then the carrier dies.

When the cankers disappear, most victims think the disease has disappeared. They go back to their old ways, spreading it hither and yon. The illusion of safety spreads the disease. The public infection is made worse by the disappearance of the outward personal signs of sickness.

Ask yourself: What is the most compelling evidence you have seen that indicates that Y2K has been solved -- internationally, nationally, and locally? Has the evidence been verified by an independent third party? Ask yourself:

1. What industry is compliant today?

2. What electrical power generating plant is compliant?

3. What phone company is compliant?

It is May. We have no year for final testing. There are no compliant industries in the U.S. There are none internationally. What is the case for optimism?

There is no strong case. There is only the fact that human beings cannot live at a fever pitch for months on end. They either adjust to the bad conditions, or go mad, or go into denial.

Denial is easy. It is the normal reaction the first time someone hears about Y2K. Only a small percentage ever advance to "maybe it's a problem." Of these, a small percentage take some minimal preparations. Those who gear up on a full-scale basis are a remnant.

Today, the public is being told what it desperately wants to hear: We (whoever we are) have it licked. It used to be, "they'll solve it." Now "they" have become "we."

Y2K denial is based on the willingness to be deliberately deceived. The denialist is like the ugly heiress who is besieged by suitors, all unemployed. Her mother tells her to be very careful, to ignore the sweet words, and to run credit checks. But the girl doesn't want to hear this. She enjoys the attention.

I am the world's nagging mother on Y2K. I keep telling people to run credit checks on the reports of good news. Some of you believe me. But most people prefer to take at face value the soothing words of the government press releases.

Consider this: President Clinton hired John Koskinen, a lawyer, to run his Year 2000 Council, which has no authority to compel anyone to do anything. Koskinen keeps telling us that things will be OK for large companies and the U.S. government, but not so good for foreign nations and smaller companies and local governments. In short, he sounds like a spokesman for the Clinton Administration, which is what he is.

Then consider this: President Clinton hired Charles Rossotti, a computer specialist, to run the Internal Revenue Service, which has the power to compel Americans to fork over the money. This is the first time that a lawyer or a CPA has not run the IRS.

You tell me: Which evidence is more compelling regarding the seriousness of Y2K?

99% COMPLIANCE IS NOT GOOD ENOUGH -- GREENSPAN

I keep returning to this document, a November 4, 1997 statement by James Leach, Chairman of the House Banking Committee. I keep returning to it because it has been flushed down the memory hole:

I was intrigued by a statement Federal Reserve Chairman Alan Greenspan made a couple of weeks ago. He pointed out that 99 percent readiness for the Year 2000 will not be enough. It must be 100 percent. Thus, the message seems clear: all financial institutions must be ready; federal and state regulatory agencies must be ready; data processing service providers and other bank vendors must be ready; bank customers and borrowers must be ready; and international counterparties must be ready.

This document is still on Leach's Website:

http://www.house.gov/banking/11497lea.htm

I can think of no statement by a former mainframe programmer, which Greenspan is, that drives home the point so forcefully. There is no tolerance for error. The entire banking system, worldwide, must be compliant on 1/1/2000 if the system is to function at all. This, Leach says, includes the regulatory agencies. But banking does not stop at a nation's borders.

What more needs to be said? We are reduced to these choices:

1. The international banking system will not reach 100% compliance in the next seven months, and will therefore shut down or be crippled, creating international havoc.

2. Greenspan was wrong in late 1997.

3. Leach was lying or mistaken.

If Leach was lying or mistaken, why has he left the document on his site, as of May 5, 1999?

The media seem unaware of Greenspan's statement. I have never seen it quoted in the mainstream press. It is as if the concerns of the Chairman of the Federal Reserve Board and the Chairman of the House Banking Committee were irrelevant to the debate over the Year 2000 problem. It is bizarre. But that's what Y2K is: bizarre.

We are treated to nonsense about keeping print-outs of our bank records, or even more implausibly, statements that they can run the banking system manually in 2000. In fact, the first statement is an implication of the second. Print-outs are manual records, good for a manual system.

I know: I keep saying this. That's because it just does not register. Test me. Do you still have money left in your pension fund? Do you still have most of your liquid assets in electronic promises to pay? Have you at least been systematically converting your pension fund money to bank accounts, and bank accounts to currency, gold coins, and survival items? If not, you've not been listening.

A MATTER OF EVIDENCE

Maybe you just don't believe me. That's not surprising. The news I bring is bad. But why don't you believe me? What evidence do you have that points to the error of mine?

I keep posting items on my site. Day after day, the evidence mounts: Y2K will not be fixed in the largest institutions. This is 100% contrary to the Party Line, i.e., that the big outfits will make it, but small ones will not. I am trying to marshall the evidence. People read it, but it does not register emotionally, where action takes place.

One more time: the banking system is the heart of the international division of labor, which keeps most of us alive. Without the banking system, there will be a vast contraction of the division of labor. I am saying that the bulk of the world's life-support social systems will be gone in a year. What will replace them? How fast? On what basis? Using what currency?

The debate today should be over the survival and replacement of social life-support systems. Instead, in the United States, it is over how many hours of food storage people should buy. 72 hours' worth? Well, most people have that in their refrigerators. But what if their refrigerators go off? No problem in January!

So, almost no one prepares, because there seems to be no need to prepare.

What about portable toilets? Nobody bothers to think about this. They think 72 hours is some sort of myth, that it really won't be that long. It's the 72-hour crisis in the next county.

What about heat? No problem, because. . . . Well, just because.

They may buy a few flashlight batteries. I guess they want to be able to see the inside thermostat at night when it goes below zero.

BATTERIES AND CHARGERS

This reminds me: Have you bought at least $150 worth of Ray-O-Vac rechargeable alkaline batteries and a $50 solar-powered battery recharger from Real Goods?

http://www.realgoods.com/products/batteries/50-194.html

The alkalines don't lose their charge; they are always ready to go. You should use nothing else in flashlights and emergency radios. Unlike other types of rechargeable batteries, which lose their charge, these should not be drained 100%. If you don't run them down to less than 60% of their charge, they can be recharged 100 times or more -- maybe 400 times; the company isn't sure. Charge them immediately after using them. You should let one set run down once in each application. Time this. Write it down in a notebook. You learn how long to use them from then on: 40% of the time it took to run them down in each application.

Don't forget rechargeable 9-volt batteries. Buy non- alkalines. These you want to run down all the way. They are used in smoke detectors, carbon monoxide detectors, and other continuous-run applications.

I suggest buying at least two D-cells and four AA- cells for each neighbor. This will cost you at least $12 per neighbor. You must determine what constitutes a neighbor. They need batteries for flashlights and radios. If you can recharge your neighbors' batteries in 2000, you will become important. People will be less likely to see you as a source to be tapped by force than as an ally against intruders.

Neighborhood communications are vital. Does everyone have in your community a CD radio that runs on a car battery? Find out. If not, go out and buy some in local pawn shops. Buy them at $20 each, and then hand them out in 2000 to people on the block who will take responsibility for monitoring strangers who drive into the neighborhood.

Buy a $500 solar panel to recharge car batteries. This is a major community service. Same deal: you will become the neighborhood power source. Give recharges for free in the worst of the crisis.

BECOMING A NEIGHBORHOOD ASSET

You need to position yourself as a person who is an asset in 2000. One way to do this is to provide services. Another way is to provide emergency food. If you store a bucket of rice and a bucket of pinto beans for, say, 10 neighbors, it will cost you about $300.

If you give today's cheap food away in 2000, your neighbors may not invade your home to get all the other food you have. They will see you as the goose that lays golden eggs. They may not kill the goose. Each one will see you as an ally. This will raise the cost of organizing a conspiracy against you.

If you have assets that you can dole out a bit at a time, family by family, each family will hesitate before cutting others in on the deal by stealing what you have as a group. Who knows who will allocate the booty? Better to play it safe.

This also gets those in the neighborhood to see the benefits of defending you and your assets against invaders.

Of course, if you live in a dense neighborhood, the cost of providing such emergency services gets high. This is another reason for moving to a small town or rural area.

GATED COMMUNITIES

Recently, I visited a gated community. I have never seen anything like it. The place is 10 square miles. It has woods. It has paved roads and a municipal water system. It has a club house, a 9-hole golf course, and two lakes. A major river runs through it. The 1-acre lots cost only $6,500, or $85 a month. About 400 families live there now. Under any other circumstances but Y2K, I would have bought a lot or two. But I didn't. Here's why.

The agreement (called a covenant, which it isn't) specifies that no property owner may build a separate storage building. No property owner can have chickens, rabbits, or goats. No property owner can sink his own well.

They have built a gate around the community in a region where there is almost no crime and very low population density. Why? Social pretensions.

The residents today have more money than those in the region do. They live separated lives. They are cut off socially from the surrounding community. They probably have generated their share of envy already. They are urban people who live in what appears to be the country, but isn't.

These people will be desperate in a year. They will have to drive for miles to buy food. They will not have gardens or tools. They will not have reserves. In the country, they will be like people trapped in a city. If I lived in such a place, I would be fair game in 2000. My enemies would be my neighbors, not the folks outside the gates. I would be in a prison where the inmates are in charge. No thanks.

What looks safe there today will be a jungle in a year if the banks close and the trains stop running. You must look ahead to new conditions to determine what will be safe.

The man who went with me to see the property is in a different situation. There is no gate around his community. He lives down a dead-end road that is 10 minutes outside of a town of 10,000 that is noted for its low crime. There is no big city within 100 miles. He and his extended family have lived there since 1972: now a dozen households. They have barns full of food and hand tools. Every household has a water well. The neighbors -- good old boys, all -- are well armed. They always have been armed. The son of the sheriff lives nearby.

No pretensions here! Where would you rather live?

The point I'm trying to make is this: in a big city, an enclave's gate keeps out criminals. But a city is too dense to be safe in 2000. In the country, its gate keeps out people of lower social standing. But these kinds of people are more likely to have the skills necessary to survive a breakdown in the division of labor. Residents of a gated rural community have alienated the very people most likely to be able to help them in 2000 and beyond.

There will be gates in 2000. They will be created by cars that block streets. Blocked streets will create communities: "them against us." But in a city, you need deliveries of many goods. These will run out after the banks close. In the country, you may be able to do without deliveries if worse comes to worst.

There will be gates in rural communities, too. Cars will block access. But the threat of invaders will be far less. I'll tell you this: anyone who walks down a dirt road in Arkansas had better have his rifle slung across his back, not in his hand, in 2000. He had better have a good reason for carrying a rifle in that neighborhood. On an Arkansas dirt road, if you go looking for trouble, you will surely find it.

I don't like dirt roads. Nobody where I live does. Mud, dust, and more frequent car repairs are the price of living here. But a dirt road serves as a kind of gate. People don't drive down dirt roads for fun. They have a reason for being there. Those driving on a dirt road live along it or are delivering something to someone who does. A dirt road creates community, and not a rich community. A dirt road functions as a unobtrusive gate. It keeps big shots out. Big shots without banks will be a threat to themselves and those around them next year.

MOVING DOWN SOCIALLY

I live in a lower middle class neighborhood. On one side is an abandoned home. A poor woman lived there. She got Alzheimer's. She is gone. For decades, this family rarely spoke to others there in the neighborhood.

On the property behind where I live is a retired businessman whose wife owns a mobile home park in town. I suppose they're millionaires or close to it. I have never met him. He is sort of a recluse. He owns 400 acres, and his home is on the far side of the property.

On the property on the other side of me lives a retired Marine. His wife grew up across the road in a shack not much larger than a chicken coop. Her family has been in the neighborhood for a hundred years. I live in a stone home that her uncle built 80 years ago.

In short, I am not a resident of Envied Estates.

I decided decades ago that if I ever made a lot of money, I would not live in a community where people with a lot of money, or at least a lot of debt, also lived. I never have.

If it were up to me, I'd live in a mobile home. That's good; in two weeks, I will. A fancy home scares off the kind of people I prefer to work with. It's a liability. A large, nice home in an upper middle class neighborhood is nice if times are good. I have owned two of them. I paid $59,000 for the first one in 1977. (It had been on the market for 45 minutes before I visited it, and I bought it two hours later.)

Urban wives don't like the thought of mobile homes. Mobile homes are somewhat impermanent, although a well- built one will surely outlast me. Mobile homes are associated with lower class people, former used-car salesmen, and Tobacco Road. OK, it's true. But there are advantages. They can be built in 12 weeks, or bought used at $12 a square food, and moved onto a safe property in a few days. If you put vinyl siding on one, put on a good roof with an overhang of 12 inches, keep it in repair, and get 2 x 6 construction with "northern built" insulation, it's better than what 90% of the world lives in.

My wife recently bought a 2,000 square foot one for $26,000. It's clean. It has a fireplace. It's good enough for me. And it fits into our present neighborhood. Here's what I told her. If and when we know that the power grid is up, I'll move back into Fayetteville. I will buy a home near the University of Arkansas. I will work with students. I will use the library. I will achieve what I have wanted ever since we left Durham, North Carolina: access to a good library. (Duke's is the best public walk- in, open stacks library I've ever been in.)

So, if things collapse, we'll maintain a middle class life style in a rural area, in a world where millions of urban people are starving, freezing, and generally losing everything they have. If things don't collapse, or rebound from a collapse, then we'll move back into town.

If the banks shut down, "upper class" will mean "self- sufficient." Western cities will become lower class overnight. Wealth will flow from the cities to the countryside. Urban people will become impoverished.

There will be a huge redistribution of wealth in 2000 and beyond. I am positioning myself and my four adult children to take advantage of this swing. To do this, I had to move to a lower middle class neighborhood. It will be a middle class neighborhood economically the day the banks close. It will be poorer than it is today, but far richer than urban neighborhoods.

Wives resist moving downward. Who doesn't? But this social move is temporary. It allows people to sell out of their upper class neighborhoods (or refinance their urban homes at low rates) in order to stay out of these neighborhoods in a breakdown, and then buy back in (or return to) if things don't break down or after recovery.

It's like staying ahead of a tidal wave. You can always move back if the wave doesn't hit, or if it hits and takes out all the homes. Post-tidal wave beachfront property will be mud cheap. You sell or refinance to avoid seeing your home's equity get washed away.

The move socially downward will become a move upward when upper class neighborhoods become unlivable or sealed off with used cars. When the division of labor breaks down, it will take with it today's comparative ratings. Everyone will be worse off, but some people will be worse off that others. In the universal sinkhole of Y2K, some people will find themselves on higher ground than others.

To be on higher ground in 2000, you must move to lower ground now.

Think it through. Where would you want to live temporarily if the banks shut down permanently in 2000? Avoid Envied Acres.

-- a (a@a.a), May 06, 1999

Answers

What's to say? He made his mind up years and years ago - and has been prophesying doom ever since.

-- Paul Davis (davisp1953@yahoo.com), May 06, 1999.

From an article dated "1998-11-17 22:31:20," posted in the Banking section of www.garynorth.com, Gary North had this to say about the Euro:

[European] bankers have refused to allocate programming resources to y2k because the software revisions demanded by the Euro could not be met if programmers worked on y2k.

Result: Europe will miss both deadlines.

The deadline is fixed: Jan. 1, 1999. It has been trumpeted for years. It has been fundamental to one of the great public relations campaigns of all time. But Europe will not make this deadline. The world will know on Jan. 4.

What you must pay attention to after January 4 is the back-peddling, the excuses for failure, the redoubled efforts to impose the new software, and the delay of y2k repairs in the name of the Euro, which will be dead on arrival. All of these excuses will be applied to that other missed deadline, namely, "compliance on December 31, 1998, with a full year for testing."

Sure, Gary North is a certified Prophet. :)

-- Stephen M. Poole, CET (smpoole7@bellsouth.net), May 06, 1999.

All of these excuses will be applied to that other missed deadline, namely, "compliance on December 31, 1998, with a full year for testing."

Sounds about right to me. <:)=

-- Sysman (y2kboard@yahoo.com), May 06, 1999.

Paul .... What is your major malajustment ?? On the surface, it seems one of your many minor maladjustments is that you don't absorb facts very well. Or is it that you think BIG government and your liberal friends MUST be RIGHT , because this situation Mr. North describes can not happen, if you just wiil it so ? READ THE WRITTING ON THE WALL !!! YOUR GOING DOWN WITH THE REST OF YOUR KIND !!! I have hoes, spades, seeds to plant and signs I printed years ago, that read : " IF you don't work, you don't eat ; WORK COMES FIRST !" Stockbrokers,bankers, politicians , etc. get one tool each . They also get guard duty every night, NO GUN ! Then they WILL understand what fear is , and NEVER vote to ban guns from honest, hardworking Americans again ! You make my stomach turn . A Wise Man

-- A. Wiseman (Wiseman@proginy.com), May 06, 1999.

Wiseman, I know a stockbroker who's one hell of a shot with his Bulgarian AK clone... Does HE get to keep it when on guard duty ?

-- Blue Himalayan (bh@k2.y), May 06, 1999.

"a", I for one really appreciate all that you contribute to this forum. You keep us on top of things that we otherwise would have missed, and more than cut through the ridiculous happy-faced crap that the Pollyannas continually spout. A royal thank you, sir!

-- King of Spain (madrid@aol.com), May 06, 1999.

Now look here, if anyone on this forum is so far out of touch with reality that they do not know how long Gary North has been in the doom business, then consider yourself notified. He has been doing this since before the first time I saw his name, in one of Howard Ruffs books published in 1976. And he sure wasn't talking about Y2K then! Among other gripes, mostly relating to his dislike of other peoples personal behaviour, one that sticks in my mind was that we were doomed because the stock market was so low. He claimed that even if the market returned to its historic highs of the mid 60's, it would still be too low because of inflation - that a healthy market would be at least at the 6000 range. He said that was not possible.

Now we have a market which, when adjusted for inflation, is a bit above the level that GARY HIMSELF SAID WOULD BE A SIGN OF A HEALTHY ECONOMY. HE NOW CLAIMS THIS IS ANOTHER SIGN OF DOOM. Do you get my point here? Read some of his older stuff, then read his stuff now. The very things he said would be needed to improve matters, he now calls signs of the end! Now that kind of thing just does not impress me at all.

I am perfectly willing to argue technical matters relating to computers till the cows come home, if you want to know something about keeping bees or farming or whatever - just ask, if I have done it, I'll tell you how I did it. But don't give me Scary Gary as a source for anything - I saw through his con game a couple of decades ago.

Calling me a liberal - I ought to print that out and pass it around to my friends. On second thought, no, I don't want anyone to die laughing.

-- Paul Davis (davisp1953@yahoo.com), May 07, 1999.

Paul,

Let's keep in mind that there's a flow of newcomers to this forum, many of whom may _not_ know about Gary North's background and desire for societal upheaval to suit his religious purposes. In view of North's prominence in the Y2k spectrum, I think it's important to keep posting reminders of North's ulterior motives.

-- No Spam Please (No_Spam_Please@anon_ymous.com), May 08, 1999.