By Michael Masterson

“I don’t dance,” Jane said to her cousin Ray as they watched an older couple dance at the wedding. “I’ve got two left feet. It’s just too embarrassing.”

“I used to be terrible,” Ray said. “But then I took some lessons.”

“I couldn’t even take lessons,” Jane said. “I’d be embarrassed to have the teacher see how bad I am.”

“I know what you mean,” Ray said. “I feel that way about golf.”

I used to feel that way about public speaking. I dreaded the thought of it. And when I was forced to make a speech, I did a terrible job - which only made me dread the next speech even more. It was a vicious cycle.

Then, in the early 1980s, I became editorial director of a newsletter business in South Florida. And suddenly, instead of just sitting behind a desk all day, I found myself in a position where I had to conduct meetings and give presentations at industry functions on a fairly regular basis - something I was ill-prepared to do. So I decided to enroll in a Dale Carnegie program for public speaking.

Somehow, I registered in the wrong course. Instead of focusing on speechmaking, it had a broader goal. And, as I’ve explained before in ETR, that program changed my life. It taught me the importance of goal setting and taking action. But it also, inadvertently, taught me to be more comfortable as a speaker.

My speechmaking skills improved almost accidentally. Every week, we had to read a chapter of Carnegie’s classic book, How to Win Friends and Influence People, and then come to class and make a two-minute presentation about how we were going to put the principle of that chapter to work in our lives.

On Thursday evenings after work, I would drive a half-hour to the place where we met. During that drive, I thought about what I was going to say. It was difficult in the beginning, but each week it got a little easier.

By the end of the 14-week course, I was performing at a near-professional level. I had won several awards in competition, and was routinely rated at the top of the class. The final session was a sort of commencement ceremony. Relatives and friends were allowed to attend, which tripled the size of the audience we had to speak to. Everyone did pretty well, as I remember. I gave the last speech. I was still a little nervous when I got up to the podium, but I had learned a lot by then. So I took a deep breath and did my thing.

I got a strong round of applause. Several people I didn’t even know came up to congratulate me, and one suggested I should become a comedian. I wasn’t foolish enough to take his advice to heart, but it did make me happy to think that I had made so much progress in so little time, starting from practically zero.

How did I conquer my fear of public speaking? The same way that you conquer the fear of anything else.

So… What Are You Afraid Of?

There are entire systems of psychotherapy devoted to curing people of their fears. The most effective are those that gradually expose the phobic person to whatever it is that they’re afraid of. If you feared snakes, for example, the treatment might begin with looking at photographs of snakes. Then, once you were comfortable with that, you might move on to watching videotapes of snakes. And then on to looking at snakes in cages… and then looking at them uncaged but at a distance… and then, gradually, getting closer until you could actually handle them without emotional discomfort.

Likewise, if you were afraid of public speaking the therapy would be to make a very short speech in front of a very small audience and then to gradually expose yourself to longer speeches and bigger audiences until you were comfortable speaking for an hour or more in front of a large number of people.

That was what happened to me. The Dale Carnegie course I took turned out to be a therapeutic program of graduated exposure therapy to public speaking.

Fears of specific things - snakes, public speaking, flying, etc. - can be overcome with gradual exposure. But what about more general fears… like the fear of failing?

To answer that question, we’ve got to figure out what, exactly, we are afraid of when we say we are afraid of failing.

Imagine that you are alone in a quiet room trying to solve a difficult crossword puzzle. You can’t do it.

How do you feel?

Now imagine yourself competing in a national crossword puzzle championship. It is down to four finalists - you and three others. The four of you are standing up on a stage in front of large puzzles with markers in your hand. Six hundred people in the audience and millions more on TV are watching you. The timekeeper gives the signal and you are off, filling out the answers as fast as you can. Before you have finished one-sixth of your puzzle, the first winner is declared. Before you have finished a quarter of it, the second winner is rung in. Now it is just you and one opponent. You are halfway done and feeling hopeful. Then you hear the buzzer. He has finished well ahead of you. You are standing there with your marker in your hand. The other three contestants are smiling.

How do you feel this time?

When I tried this little experiment, I had two distinctly different emotions. Imagining the first scenario made me feel a little angry. Imagining the second one made me feel embarrassed.

In the first scenario, I am just an ordinary puzzle player playing an ordinary game. I fail to accomplish my goal, but I am not embarrassed. In the second scenario, I am a national-caliber puzzle solver. I fail… but in front of a large audience. This adds shame to my anger. And that feels much worse.

So perhaps we can say this about the fear of failing: A big part of what we are afraid of is embarrassment - being shamed in front of other people.

Humiliation and Humility

When embarrassment is extreme, we call it humiliation. If you pass gas at a fancy dinner party, you feel embarrassed. If you spill wine on your hostess’s designer dress, you feel humiliated.

Humiliation is what happens to embarrassment when it is mixed with pride. The prouder you are, the more failure hurts.

Which brings us to our cure for the fear of failure: humility.

I’m guilty of pride myself. I’m proud of my writing, for example, and the success I’ve had in business. So I have to keep reminding myself to be humble about those things. But I am not proud of everything I do. I take no pride in my ability to dance or to sing or to speak foreign languages because I do those things so badly. And because my ego isn’t involved, I am not embarrassed to ask stupid questions, to show myself as a beginner, and ultimately to fail again and again as I attempt to master those skills.

The truth is, when I started out in business I wasn’t very good at that either. Again, that made it possible for me to ask lots of questions, look stupid, and make mistakes… which accelerated my learning curve.

The Secret of Accelerated Failure

That last observation bring us to an important principle of success. At ETR, we call it “the secret of accelerated failure.”

The principle of accelerated failure is this: To develop any complex skill, you must be willing to make mistakes and endure failures. The faster you can make those mistakes and suffer those failures, the quicker you will master the skill.

We teach this secret to our managers. We encourage them to allow their employees to fail. Not to fail stupidly. Not to make the same mistakes over and over again. But to feel free to fail at something so long as it was done in the pursuit of knowledge.

If you play golf or practice Jiu Jitsu, you know this to be true. If you tense up and focus on not avoiding mistakes, you will learn very slowly. If you relax, let the mistakes happen, and learn from them, you will advance quickly.

It starts with being humble. Humble enough to accept the fact that when you begin anything new you are likely to do it poorly.

Humility Is Nature’s First Gift

Pride prevents us from admitting we are incompetent. But we are all incompetent when we’re learning.

Think of how a baby learns to walk. He begins by crawling and then advances to “forward falling” (as my brother calls it), and then to walking like a little drunk, and finally to walking masterfully. Babies don’t feel shame because they are not proud. There is a reason that pride does not invade the human psyche until six or seven years of age. There is simply too much to learn before then. If toddlers had pride, it would take them years or even decades to walk and talk properly.

Humility is a much underrated virtue. It provides us with at least three significant advantages:

* It makes us more endearing. Humble people - especially accomplished individuals who remain humble - are well liked.

* It makes it easier to get cooperation. Humble people get more cooperation from others because they don’t try to force strong-minded people to accept their ideas.

* It makes it easier and faster to learn. Humble people are able to ask questions, make mistakes, and experience failure without embarrassment. This attracts good people to them who want to help. Humble people get the best teachers and get the most from their teachers.

If Humility Is the Solution, How Does a Proud Person Become Humble?

Now we are coming to the most important part of this discussion - a practical plan for defeating the fear of failure. Here’s how you can do it:

1. Begin by accepting the truth. You are a good person, but that doesn’t mean you are naturally good at everything. Look in the mirror and think about the skill you want to accomplish. Say out loud, “I accept the fact that right now I am incompetent at (name the skill).” Repeat this exercise until it doesn’t hurt.

2. Admit your incompetence to an indifferent audience. Once you can say it in front of a mirror, say it in front of a living human being. Begin by admitting your incompetence to someone who doesn’t care. Admit to your Spanish teacher that you are incompetent at public speaking. Admit to your public speaking coach that you are incompetent at speaking Spanish. Repeat this exercise until you can do it with grace and good humor.
3. Admit your incompetence to a judgmental audience. Admit that you are no good at languages to your Spanish teacher. Admit that you have two left feet to your dance instructor. Do this not once, but every time you make a mistake or fail in some way. Do it with grace and good humor. As pop psychologists say, “own” the feeling.

4. Admit your incompetence to someone who can punish you. This is the ultimate test. The next time you volunteer for a difficult assignment at work, admit to your boss that you might fail before you succeed. Do it with grace and good humor and you will be amazed at the result. Your boss won’t can you on the spot. (Unless he is really incompetent.) Rather, he will admire you for your humility. After all, he knows you are not yet competent. All he wants is your commitment to carry on until you are.

At Agora Inc. and at ETR, our most productive and successful executives are very comfortable about saying, “I’m going to try such and such. I’ll probably screw it up completely. But if I eventually succeed… just think what good will come of it!”

That’s what you want for your company. That’s what you want for yourself. Defeat your fear of failure by being happy and even eager to try and fail until you finally succeed. That’s how Edison invented the light bulb. That’s how Michael Jordan, a very mediocre basketball player in high school, became the greatest hoops player of all time. They weren’t afraid of failure. You shouldn’t be either.

Dear Reader,

This week in the news:

“Red Cross seeks relief donations

Orlando Business Journal, Wednesday, June 18, 2008 - 9:22 AM EDT

The American Red Cross of Central Florida is seeking donations for disaster relief efforts for those parts of the U.S. experiencing severe weather.

The organization has spent nearly $15 million responding to recent disasters, such as tornadoes in Indiana and floods in the Midwest.

After funding 32 disasters across the U.S., the organization’s Red Cross Disaster Relief fund is expected to reach its limits. Rising travel costs, such as fuel, have impacted the organization’s budget, say officials.”

Yet, Ben Bernanke was able to find another $75 Billion of your future income to lend to his banker friends.

Seems the people who control the money in this country can always find ways to bailout their greedy little friends who have created their own problems but can find no plausible reason to help people who are suffering from acts of nature, things they have no control over.

The priorities of the Empire, I guess.

Dear Reader,

A few weeks ago we witnessed a political act of such unimaginable stupidity, it is hard to not choke at the mention of it.

A cursory review of the details is worth a minute of your time. This compliments of The Oil & Gas Journal …

“WASHINGTON, DC, May 20 – The US House passed, by a vote of 324 to 84, a bill that would create a new oil antitrust task force within the Department of Justice. Supporters of HR 6074, which also would give DOJ authority to sue foreign oil cartels for violating US antitrust laws, included 103 Republicans, according to its sponsor Rep. Steve Kagen (D-Wis.).

“‘Until we finally have an energy policy other than drill-and-burn, this bill will begin to set things right for the American people. We cannot drill or grow our way out of this energy crisis. We must begin to think differently in America. That includes loosening the stranglehold other nations have on our economy and exploring new forms of energy,’ he said following the vote.

“The new ‘Petroleum Industry Antitrust Task Force’ would be charged with determining the existence and extent of gasoline price gouging, anticompetitive price discrimination by refiners, actions to inflate prices by constraining supplies, and possible oil price manipulation in futures markets, Kagen said.

“The bill, which would amend the Sherman Antitrust Act, also requests a Government Accountability Office study on the effects on competition of prior oil industry mergers and divestitures, he indicated.

“‘This legislation will address the loopholes and exemptions that oil companies exploit at the great expense of our citizens,’ Kagen said. ‘By passing the Gas Price Relief for Consumers Act, the House agrees that it is time to give US authorities the ability to prosecute the anticompetitive conduct committed by international cartels that restricts supply and drives up prices.’”

Now, unless you were informed upon entering your sixth year of grammar school at the age of 21 that you’d have to stay back another year, you’ll recognize this latest bit of pandering as stupidity so profound as to bring a sane man to his knees.

For one, oil is a global market and the members of OPEC include the world’s largest suppliers to that market. In a world of increasing demand bumping up against flattening global production, these are not the people one wants to alienate – that is, if we want to drive our cars and tractors and heat our houses with something other than broken bits of heirloom furniture.

Threatening to sue them, or worse, actually suing them, is unlikely to bring a warm response. Can you imagine the oil sheiks being made to present themselves in the docket in a U.S. Court? (If Homeland Security would let them through the airports, that is). Oh, what a fine media circus that would be! Frankly, if subpoenaed, I think they’ll just refuse to show. And what then?

Secondly, it also reinforces the fiction that the members of OPEC can actually do something to increase their production, as opposed to just talk about it. It reminds me of Saddam’s pledge to unleash the “Mother of All Wars” against the U.S. Forces… which turned out to be more like the “Mother of All Foot Races to the Rear”.

The way the OPEC quotas are assigned, the bigger the reserves a member state reports, the more production the member is allowed to sell. Which is why, since the upward reserve adjustments of the late 1980s – made in anticipation of the revision to the OPEC quota system – there have been virtually no reserve declines reported by OPEC members. It’s as if a magic oil genie resides under the ground, providing oil in unlimited quantities with a twitch of the nose or a nod of the head over crossed arms.

Put more directly, the current reserves are a fantasy, and the ability of OPEC to actually raise production is greatly constrained.

But there is more in this legislation to dislike. Much more. For one, it contains the implicit assumption that all levels of the energy business are corrupt, and the executives of all these firms spend long hours in cigar smoke-filled rooms plotting and scheming to take every advantage of hard-working Americans.

In other words, it declares legal open season on every layer of the energy distribution network. That, of course, means millions of dollars of legal fees, wasted time and, worst of all, more hand-tying regulation… the net result of which will be fewer, not more, energy resources being made available to North American markets.

Do I have a problem with the large energy companies making “obscene” profits?

Not at all. They are going to need all the money they can muster to replace their declining reserves and to fight off fierce competitors from the rest of the world. Competitors, it must be pointed out, unhindered by the perfect-worlders and political panderers that are now playing so effectively to democracy’s weak suit.

Twenty years ago, which was seven years after the link between the U.S. dollar and gold was severed in 1971, oil was selling, on average, for $13.38 per barrel. Adjusting for inflation – using the Shadow Stats and not the government’s laughable CPI – in today’s dollars that same barrel of oil would cost $124.

That it is trading for slightly over that amount, at $133 per bbl, is entirely explainable based on supply/demand constraints, war in the Middle East and the fear of a widening conflict.

In other words, blaming evil-eyed Middle Eastern potentates or bloodless speculators is attributing blame in the wrong direction. If you want to hit the right target, start with the fiat currency system which has systematically reduced the purchasing power of the U.S. dollar and all of its similarly unbacked peers to the level of Monopoly money.

Unfortunately, I don’t see any new legislation on the horizon calling the Fed and the Treasury to account for their role in the higher prices now getting so much attention.

by David Galland

“The most erroneous stories are those we think we know best - and therefore never scrutinize or question.” — Stephen Jay Gould

“OCALA, Fla. — A federal judge on Thursday sentenced the actor Wesley Snipes to three years in prison for willfully failing to file tax returns.”

“Mr. Snipes, who was convicted in February, received one year for each count, to be served consecutively, and an additional year of probation. The sentence was handed down by Judge William Terrell Hodges of Federal District Court.”

The above is from an article in the New York Times.

When I heard of this verdict, I was saddened, but not surprised. Its just another example of how stupid or vengeful American jurors can be. Just how corrupt the Federal injustice system is.

Let me explain.

For someone to be found guilty of “willful failure” of anything, they must first be required to do something. Sound confusing?

Let’s use tax returns as an example. For Mr. Snipes to be guilty of willful failure to file, he first must be required by law to file a return. Most of you are probably saying to yourself: well, he is.

Before you jump to this erroneous conclusion, look at the facts.

When you file a tax return you are required to sign it at the bottom. Not only do you sign it, you must sign it under “penalty of perjury.” This is another way of saying you swear the facts are true and correct and this information can be used against you in a court of law.

Put another way, when you sign a tax return you are being a witness against yourself.

If any of you have heard of the Constitution for the United States of America, specifically Amendment 5, it states, quite clearly: “No person shall…; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law…”

This is why they used to call the filing of a tax return – voluntary. But, how can anything be called voluntary if they will throw you in jail for not doing it? That’s called being compelled.

This, dear reader, is why we used to live in a free, prosperous, “REPUBLIC” and now live in a bankrupt totalitarian empire on the verge of collapse.

Welcome to the Brave New World.

Dear Reader,

There is a looming problem for the renewable energy business. It affects the geothermal producers. As the expression goes, “We need to talk.”

I have argued over and over that in an energy-short future, geothermal power will play a key role in meeting power needs. Geothermal systems are well-known technology, at least to people who follow the technology. And some geothermal fields have been making power for many decades. So there’s a real track record for geothermal, unlike for many other alleged technological “solutions” to the energy problems of our time.

Geothermal offers some unique benefits. It is “clean,” emitting essentially no carbon dioxide (CO2). Plus, geothermal comes with its own fuel supply, namely the heat of the Earth. That is, once you drill the wells, you don’t have to buy coal or oil or natural gas over the decades of operation. In essence, when you set up a geothermal power system, you are “buying” not just the installation, but also the fuel upfront.

Keep that last point in mind. Geothermal has higher upfront capital costs. But it has far lower operational costs over the life of the project. It’s like buying a car and never having to buy any more gasoline.

So geothermal works. But like most good things in life, it requires a specific skill set up and down the industrial ladder.

And there is no geothermal fairy waving a magic wand and ZAP, you have electrons in the grid. From exploration to drilling to development to spinning turbines, you have to know what you are doing in the geothermal field. This includes accounting for the costs of operation and production.

OK, here is the issue. Under current U.S. tax law, a power producer gets an income tax credit (called a “production tax credit,” or PTC) for producing electricity using renewable energy resources. This includes geothermal, as well as wind, biomass, low-head hydropower, landfill gas and even trash combustion.

The PTC is a key part of the economics of geothermal. The prospect of the eventual PTC helps get projects funded and developed. The PTC helps overcome the higher upfront capital costs to drill into the Earth’s hot spots.

So the PTC offers some serious incentive for geothermal development. A taxpayer can claim the PTC for 10 years, beginning on the date the qualified facility is placed in service. But under current tax law, in order to qualify for the credit, the geothermal facilities must be placed in service by Dec. 31, 2008.

In the past, Congress has set the PTC to last for two years, and has renewed it periodically. When Congress has not renewed the PRC, investment in renewable energy systems has crashed the next year. See how in this graph (Page 19 of 29).

Do you see the pattern? Boom-crash. Boom-crash. Boom-crash. Then Congress extended the PTC in 2006, so the installed base of power systems began to take off in the past couple years. Renewable power is gaining traction.

But for some strange reason, Congress has not extended the PTC beyond Dec. 31 of this year. So starting Jan. 1, 2009, the tax incentive for renewable energy in the U.S. will expire and go away. Poof. Gone. Adios.

Really, can you imagine anything more stupid than eliminating the PTC in the midst of the current round of skyrocketing energy costs? Oil hit $135 per barrel a couple weeks ago. Natural gas is in the midst of a stealth rally to over $12 per mcf. Coal is so expensive some producers are signing “open contracts,” meaning they promise to deliver, but won’t tell you the price until you take the coal in a couple years.

And while fossil fuel costs are shooting up, Congress, apparently, wants to put at risk any new investment in renewable energy systems after the end of this year.

Whoever is the next U.S. president – of either political party – do you want him immediately to confront a crash in investment in renewable power systems? What a way to tie the hands of the next president as he tackles the nation’s energy problems.

The good news is that the Senate has passed a bill called S. 2821, the bipartisan Cantwell-Ensign Clean Energy Tax Stimulus Act of 2008. S. 2821 has 43 co-sponsors. It provides for the limited continuation of the PTC for renewable energy. The Senate vote was 88-8 in favor.

There is a companion bill in the House, called H.R. 5984, with 70 co-sponsors. There is another version of this bill called H.R. 197, the “Pomeroy bill.” But both versions are being blocked by the “pay-as-you-go” (PAYGO) rule that prevents “tax cuts” without corresponding tax increases.

But wait a minute. Extending the PTC is not a “tax cut.” The PTC is already in effect. So extending it will just be continuing the status quo.

And does the government really think it will raise more revenue if the PTC goes away? C’mon. It’s more like how much revenue will the government LOSE if investment in renewable energy systems takes its characteristic plunge when the PTC goes away. How many jobs will go away? How much progress will we just toss?

The logic of PAYGO governance at work in Washington, D.C., has Congress believing that extending the PTC to promote renewable energy development – in the midst of soaring costs for fossil fuels – is something that the U.S. cannot afford to do. Actually, we cannot afford NOT to develop renewable energy systems.

This makes so little sense that we could all have a good chuckle if it were not such a serious issue of national energy policy. What does it take for Congress to figure this out? Do the lights really have to flicker and die before the issue gets some attention?

So I’m asking you to contact your member of Congress and confront him or her with this issue. The future of the renewable energy industry in the U.S. depends on this.

Action to take: Contact your representative and urge him or her to support H.R. 5984 or the alternative H.R. 197, called the “Pomeroy bill.”

Here is a link to find the contact information for your member of Congress.

Shoot me an e-mail (OI@agorafinancial.com ) to let me know what you hear. Thanks for your help on this one.

You’ll be helping yourself, and helping the country,

Byron W. King

 Dear Reader,

Accurate analysis of over 25,000 men and women who had experienced failure, disclosed the fact that lack of decision was near the head of the list of the 30 major causes of failure. This is no mere statement of a theory - it is a fact.

Procrastination, the opposite of decision, is a common enemy which practically every man must conquer.

You will have an opportunity to test your capacity to reach quick and definite decisions when you finish reading this lesson, and are ready to begin putting into action the principles which it describes.

Analysis of several hundred people who had accumulated fortunes well beyond the million dollar mark, disclosed the fact that every one of them had the habit of reaching decisions promptly, and of changing these decisions slowly, if, and when they were changed. People who fail to accumulate money, without exception, have the habit of reaching decisions, if at all, very slowly, and of changing these decisions quickly and often.

The majority of people who fail to accumulate money sufficient for their needs, are, generally, easily influenced by the “opinions” of others. They permit the newspapers and the “gossiping” neighbors to do their “thinking” for them. “Opinions” are the cheapest commodities on earth. Everyone has a flock of opinions ready to be wished upon anyone who will accept them. If you are influenced by “opinions” when you reach decisions, you will not succeed in any undertaking, much less in that of transmuting your own desire into money.

If you are influenced by the opinions of others, you will have no desire of your own.

Napoleon Hill
From Think and Grow Rich

How to Save Yourself from the Horror of Your Bank Going Belly Up

Dear Reader,

Imagine waking up on a sunny Saturday morning to find you can’t use your debit card to buy groceries or pay for gas any longer? You can’t withdraw a single dollar from the ATM. And your bank froze your credit cards.

Then you discover that every check you wrote in the past week has bounced. And, you receive a call saying that your retirement assets are frozen. The kicker is that you had over US$1 million dollars in your account.

You try to call your bank for answers, but they won’t help you.

I know this story sounds like I’ve pulled it right out of the Great Depression. I’ve got news for you…this story is very real. It all happened last month to a US$2.1 BILLION bank in a little community in Bentonville, Arkansas.

How a Bank “Suddenly” Goes Under in the 21st Century

It was a very organized attack. On May 9th, the accountants snuck in the back door that Friday night after 5:00pm once the bank’s doors had closed. Little did anyone know the doors were closing for good…

And under the cover of darkness, over a hundred FDIC accountants began to systematically dismantle ANB financial headquarters - the venerable US$2.1 Billion institution that had been in business just hours before.

In short, FDIC officials were there to pick up the pieces because ANB was about to become the third bank to FAIL here in the United States in just the last six months. The fourth-largest bank in Arkansas was about to become yet another sub-prime casualty that choked on their own bad loans and investments.

The unlucky customers of ANB received nothing more than a letter that stated nothing of the bank failure, but rather introduced the “new” bank - Pulaski Bank.

Yet, I am sure most customers figured out their bank had gone south long before the formal letter arrived. As of 5:01 PM on May 9th, every single account at ANB was frozen. Money market accounts to trust assets to basic checking accounts…

What FDIC Insurance Really Means If Your Bank Goes Under

When you hear your account is “FDIC insured,” do you really know what it means? In short, it means the Federal Deposit Insurance Corp. will reimburse you for up to US$100,000 for any one account you hold in your name.

If you have a joint account, then both account holders are insured up to US$100,000. You also can secure US$100,000 for each beneficiary in certain accounts (payable on death). (For full FDIC rules see FDIC’s Guide to Deposit Insurance Coverage.)

Does this insurance help? Absolutely. But when you have an account worth more than US$100,000…well, that’s how you can lose money if your bank goes under.

Also, these days most respectable businesses make well over US$100,000 a year, so that limit is fairly easy to reach. And when accountants poured over ANB’s books, they discovered 647 accounts that exceeded that limit. That equaled US$39.2 million in uninsured funds.

FDIC representatives, who I believe must hate their jobs on a regular basis, had to call these unfortunate account holders and tell them what they lost. One ANB client lost US$1.4 million. Overnight. With no warning. And as for the rest…well historically, uninsured deposits recoup 65 cents on the dollar. Plus, it can take years to get your money back.

A shocked ANB client said to me: “It’s like [your money] doesn’t belong to you anymore…it’s theirs.”

Make Sure this Doesn’t Happen to You

As we’ve often said over the last 10 years in this business, you can protect yourself from such massive faults in the U.S. banking system. And one of the easiest ways to do that is to spread out your wealth across several accounts - just in case a bank goes insolvent like ANB did.

Another valuable option is to diversify by moving a portion of your wealth offshore. By banking offshore, you gain an extra layer of protection because historically, offshore private banks have a higher liquidity than domestic banks. And in places like Switzerland and Austria, banks have stayed solvent for hundreds of years.

Jack Pugsley, a hard money advocate and our Chairman, has a few suggestions about how to protect yourself from the next banking calamity including:

1. Check out your bank’s credit rating. Check out the collateral backing up the loan. In the case of banks, you can do this by getting regular credit reports on any U.S. bank from Veribanc.

2. Understand the rules, so you know what you’re getting into. You can check out FDIC rules to find out what types of accounts are covered and how much. Click here for the rules.

3. If you decide to bank offshore, treat your offshore banker like a domestic banker. Check their credit rating and collateral. Sound foreign banks also protect against the possibility of the U.S. government declaring a bank holiday, or freezing bank deposits, as Roosevelt did in 1933. It could happen if economic conditions get really bad. Other countries (like Argentina) have done this more recently. So choose the strongest currencies and countries.

4. Above all, keep in mind that bank deposits are loans in a currency. Right now, U.S. banks are paying less than the inflation rate for deposits, and the interest is taxable. So depositors are losing purchasing power, and if price inflation heats up, which it will, the losses could be substantial.

5. Diversify, diversify, diversify…between banks, between currencies, between countries, and between assets (loans, equities, tangibles).

Above all, look at a bank deposit for what it is, a loan to the bank. Treat the banker like you would treat anyone who asks you for a loan. You want to know whether the borrower will be able to repay you if he gets into trouble.

You never want to wake up one day and find yourself without a bank. But if it happens, a few precautions can help you protect what’s yours.

ERIKA NOLAN, Managing Director

Here’s an article I found at:  HowToGetRidofStuff

It has some good information I thought our readers might find interesting.

You also had good credit. But that’s all gone now. Now you’re divorced and reduced to wearing a blue vest and advising Wal-Mart customers to have a nice day. Your only constant companion is debt. And lots of it. Want to get rid of it? Maybe you can.

If you’ve gone into debt, don’t take it as a personal failing. Today, given cycles of unemployment and chronic under-employment, it is more and more common for people to fall into debt. It hasn’t helped that the past few generations have determined it’s necessary to own a new car, a wealth of entertainment gadgets, the latest fashions, and generally live pretty high on the hog – even though they can only periodically afford it, if ever.

Debt: It’s the American Way!

Our leadership has provided no bright, shining beacon in this regard, either. The nation has run up such colossal debt that, in seven more generations at the rate we’re spending, all of the national budget will be going to pay off interest on the debt.

Even though it is likely that your plight is, at best, only partly due to your financial habits, the first thing to do is create a budget. How much do you presently have coming in? How much is going out? What are the sources of your debt? Where can expenses be cut? Can the debt eventually be paid down out of your income?

While you’re studying your budget, it would probably be a good idea to cut up those credit cards. If you need something for making necessary purchases over the internet, get a debit card which immediately deducts spending from your bank account.

Can you reduce your monthly credit payments? Call your creditors and see whether you can work out some deals. For the most part, they would rather get a little something from you than get nothing. This is equally true for secured debts as unsecured debts. Call you mortgage holder to avoid foreclosure. If the lender is unwilling to work with you and the loan in insured (e.g., by FHA or a private carrier), call the insurer.

Bicycles Are Cheap and Provide Good Exercise

Should you sell your car? It’s a big expense, but if you commute to work, haul kids around, or use it to get groceries, you’ve got to keep a car. Not necessarily that car, of course. You could sell the car and buy a cheaper used car. Your monthly cost might go down, but you will certainly lose a lot of money on the sale because of new-car depreciation. You’ll have to think that one over along with the idea of maybe selling your house for something cheaper.

If you have difficulty in working with figures and coming up with a budget, consider using a credit counseling agency. Be sure, however, to ask ahead about their fees. Some are quite expensive, and you don’t want to take on any more debt. The agency may recommend a debt management plan through which creditors may lower interest rates or eliminate fees in return for the guarantee of a monthly payment. Repayment terms may be stretched out to four years or more.

Should you have sufficient equity in your home, and the value of it has increased since your purchase, you might re-finance it for a higher amount and use the overage to pay down your other debts. Similarly, you might obtain a second mortgage on the home to apply the proceeds to paying off the debt. Be forewarned it is risky business - you jeopardize your home if you have no intention of keeping your spending under control. Your goal should be to have no home mortgage by the time you retire.

Bankruptcy: a Whole New Ball Game

Declaring bankruptcy under Chapter 7 of the Bankruptcy Act used to allow you to wipe out your unsecured debts and get a new start every seven years. (Creditors are allowed to repossess their property or foreclose your mortgage and evict you; federal taxes owned can never be written off.) Spurred on by the credit card companies, who were, naturally enough, not too happy about that state of things, Congress changed the law in 2005. Now the period before you can again declare bankruptcy under Chapter 7 has been extended to eight years. (It can be as little as two years under Chapter 13.) You must go through a government-approved program of credit counseling, and you must now meet a means test; if your family income is over the median for a given state (less allowable personal expenses), you may not file: allowable income for a family of two ranges from $38,143 in Mississippi to a high of $62,953 in Alaska.

Debtors are encouraged to file Chapter 13 bankruptcy rather than Chapter 7. Under this procedure, the court sets up a payment schedule whereby the debtor has up to 48 months to pay what he or she is able – in the court’s opinion – to pay off. So long as the payments are met, the remaining debts are discharged at the end of the court-specified period.

Two alternatives to bankruptcy, which will negatively affect your credit rating for years, are debt consolidation and debt negotiation. Both are handled by private companies for a fee. When you sign up with a debt consolidation company you are offered a lower overall monthly payment based on a lower interest rate the company has arranged with creditors. Generally, there will be at least one credit card company among the creditors, and you will be blocked from using that card during the pay-back period.

Debt negotiation, sometimes referred to as debt settlement, is for those who cannot afford the minimum payments of debt consolidation. The company settles your debts with your creditors, paying them a smaller percentage of the amount owed. You then set up a payment schedule with the debt negotiation company. The company generally requires that the creditor state for credit reporting purposes that your debt was paid-in-full.

Debt Consolidation, Renegotiation – Step Carefully

This sounds ideal, doesn’t it? It’s not. The Federal Trade Commission recently filed a complaint against a number of such companies, reporting that the defendants often “would not begin negotiating a consumer’s debts for six months or longer, and that creditors’ collection efforts not only do not stop, but often become more aggressive.” Consumer accounts, unknown to them, became delinquent, with late fees, penalties, and interest accruing on their debt. Creditors were suing to collect on debts, sometimes garnishing wages. After paying these companies to negotiate payments, the debtors were not informed when some companies refused to settle a debt. When some debts were negotiated, the creditor reported “settled for less than full amount” to credit reporting agencies rather than “paid-in-full.” Before using a credit negotiator or debt consolidator, the FTC advises that you check the company out with your state’s Attorney General’s office.

What would you do if you received a summons?

Would you end up like this lady?

I need some serious advice…. I had a attorney send me information regarding a credit card debt that was nearly 4 years old. I replied to this summons, sent a certified letter asking for more information, and they disregarded my letter and sent me another stack of papers and a long list of items they required of me, I send another certified letter demanding to see the general ledger and my signature on any customer agreement… again they disregarded it and today just garnished my bank accounts for $2819.73 in fees, interest, and whatever else they wanted to…. The really disturbing part of this is my name is on 3 of my families bank accounts because I help them (my father 85 years old, my disabled brother, and my daughter) and they cleared their accounts as well as my personal account. Is there any way you can help me… because seriously, I need help….. any advice would be GREATLY appreciated!!!

This is nothing more than a lack of knowledge.  She doesn’t know how our legal system works.

This lack of knowledge is what these bottom feeding collection attorneys rely on.  Its unfortunate, but this happens thousands of times a week all across America.  It shouldn’t.

Let us teach you how the system works - so this won’t nappen to you.

Dear Reader,

As you may remember we put in a Country Hotline Service here at the Daily Reckoning headquarters. We offered to give advice to central bankers and heads of state – for free.

Well, we’re still waiting for the phone to ring. But if the phone ever rings, we’re ready. We can imagine the call:

Ben: “Gosh Bill, I’m in a bit of a jamb. I’ve got rising consumer prices on the one side…and a falling housing market on the other. I should raise rates to head off inflation, on the one hand, but if I do that, I risk sending the economy into a recession. Then, I’ll get blamed for everything. The Republicans will lose the White House – and blame me, of course. The economy will sink – just like Japan in the ’90s – and I’ll get blamed for that too. It isn’t fair…”

DR : “Well…you…

Ben: “Wait…it’s actually worse that I made it sound. Because either way I go, I’m screwed. If I cut rates, the dollar will go down and the “crude oil cowboys” are going to push the price up to $200 – and the whole world economy could go into some kind of crisis. If I raise rates, on the other hand, I’m almost certainly dooming all those marginal homeowners to bankruptcy. They all live on credit. And if the cost of credit goes up…they’re going to be squeezed hard. What’s really happening is that we’re on the downside of the credit cycle. So the cost of credit is going up…no matter what I do.

“And don’t even think about mentioning Paul Volcker. I’m sick of hearing his name. Let’s face it, he wasn’t a genius; he was just lucky to be on the right side of the credit cycle. Lending rates peaked out early in his term at the Fed…he could coast the rest of the way. I’ve got the opposite situation. Lending rates are bottoming out…just as I get started. It’s going to be uphill from here on…and I’m left holding the bag.

“Did you see what happened in the bond market recently? The 10-year note yield went over 4%…and it didn’t come back down until speculators started to bet on a rate increase.

“What can I do? Sit tight? But if I do nothing…and sit pat…I’ll get even more criticism. People will forgive you if you do the wrong thing; but they’ll never forgive you for doing nothing. Doing nothing is not an option.”

DR : “Well…what we’re seeing is pretty much what you could have expected, isn’t it? Isn’t this what happens when…”

Ben: “Look…I don’t need any of your lectures…I just want to know what lever to pull on. The one marked ‘fight inflation’ or the one marked ‘fight recession’?”

DR : “Sorry, Benny…it’s not that easy.”

Ben: “What do you mean? There are only two levers. I just wan to know which one to pull.”

DR : “It doesn’t really matter, does it?”

Ben: “What do you mean by that?”

DR : “Just as you said; you’re in a jamb. If you raise rates, while house prices are falling and GDP is nearly flat, you’re almost surely going to have a recession. But if you cut rates, oil is going up…inflation will rise…bonds will fall, and interest rates will go up anyway. Either way, the economy goes into a slump.”

Ben: “Yeah…so what do I do?”

DR : “Well…you’ve got to think about it in a whole different way. People made mistakes. They built too many houses. They paid too much for those CDOs and MBSs and all the rest of it. They bought businesses for more than they were worth. You can’t do anything about those bad mistakes…except help people correct them as soon as possible.

“You’re not doing any favors by offering more credit to a guy who is too deep in debt. And you’re not doing anything good for an economy that is living on borrowed time and borrowed money. What the whole system really needs is a correction. Why not give it one? Raise rates – a lot. That’ll send a message. That’s what Vol….never mind. Give people a reason to save again. And give the speculators a good spanking. Liquidate housing. Liquidate the banks. Liquidate the farmers. Liquidate the stock market. Liquidate the consumer. Liquidate the whole damned bunch. And while you’re at it, go on TV and tell the public the truth; that modern central banking is as fraudulent as Freudianism…and that from now on, you won’t be putting out any more funny money.

Ben: “Hold on…you know I can’t do that…

DR : “Then get out while the getting is good. Maybe you could fake a heart attack or something, and announce your retirement…that would give you some public sympathy…while you leave the next guy holding the bag.”

The phone is still silent.

Until tomorrow,

Bill Bonner
The Daily Reckoning