Into The Grey Zone The future is always a grey zone, never black and white.

This week is going to be important for global markets and the effects may not be visible for weeks or months after. Specifically, the United States Treasury is about to try to borrow $235 billion dollars in one week. And it is reported that they are going for similar triple digit amounts in a number of weeks ahead as well.

I really do not see how this level of borrowing can be sustained for anything more than the briefest period of time. And even this level of borrowing, held to a short period of time, is going to set off shock waves in the international markets. How the market reacts to such borrowing though is not going to be easy to predict.

However, in response to this borrowing and the anticipation of a serious impact against the dollar, two rumors have been running the internet lately. The first rumor claims that embassies overseas are being sent dollars now to buy local currencies, enough to tide them over for one year of local operations. Such a decision would only be made if there was a serious expectation of a dollar devaluation. Now I have no actual data about such a devaluation or even about the allegations of instructions to embassies, but if true, this would mean that someone in government is expecting a serious fall in the value of the dollar.

The second rumor states that there will be a bank holiday this fall if another serious market crisis erupts. FDR did this in the 1930s and more recently people in Texas and the surrounding regions experienced similar effects during the S&L crisis of the late 1980s. The effect of such a bank holiday would be that your money is claimed to be "safe" via government decree but you cannot get at it. In Texas, families actually went bankrupt and lost homes while they had money in the bank which they could not access due to it being frozen by the FSLIC. The same thing happened in the 1930s with families being unable to access their savings.

Given these two issues, my recommendation therefore is to increase the amount of cash you hold at home, at least through this fall into winter. Right now Wall Street is giddy over financial numbers that don't make much sense. Profit statements that are "better than expected" when expectations were in the toilet and the profit was generated by cutting jobs and closing plants and stores are not profit statements that can be repeated very long. Cut enough stores, plants, and jobs, and pretty soon there is not only no profit but no company either. I expect Wall Street's eternal optimists to eventually "get this" but not for a few more months in all probability. Keeping cash at home should not hurt either, given that interest rates are depressingly low right now. The only risk in holding dollars is in a formal devaluation and there's nothing we can do about that even if our money is in the banks.

Some of my other warnings, which are warnings you've heard elsewhere, still stand. Keep a deep pantry, measured at least in weeks and preferably in months or even years. Stay armed and maintain a solid supply of ammunition, both for use and barter. Make sure your hand tools are up to snuff and that your vehicles are well maintained and topped off. There's more but you can find that information elsewhere.

The primary financial dangers this fall appear to be a bank holiday and a devaluation of the dollar. There are, of course, other dangers, such as Israel hitting Iran, Pakistan collapsing, a full bond market seizure, and a swine flu outbreak. But right now the biggest items on my horizon are the possible bank holiday and a possible devaluation of the dollar.