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The Deflation Bogeyman
Based on the comments and emails I'm receiving lately, it appears more and more people are hopping on the deflation bandwagon. These correspondences have exposed to me an obvious misunderstanding of basic facts. While I suppose I am an "inflationist", I'm the first to admit that deflationists have some valid arguments to support their claims. But at the end of the day, their arguments are flawed; I just don't see deflation as a realistic threat moving forward.
There is a constant tug of war between deflation and inflation that hinges on factors such as money supply, credit, interest rates, and inflation expectations. While these variables push inflation in either direction, there is undoubtedly one variable that swings the odds decisively in either direction, and that is the dollar. There can be no sustainable deflationary trend with a falling dollar any more than there can be an inflationary trend with a rising dollar.
So let's get one thing out of the way. Deflationists are saying that the dollar will rise in value, and based on some of the doomsday asset collapse projections I'm hearing, quite dramatically. Now if this isn't already ridiculous to you, I'll examine some of the factors that will make a sustainable rise in the dollar unlikely. To do this, we must explore the last great deflationary period in the U.S, the Great Depression.
Most people think of the Great Depression as one continuous deflationary collapse- but it wasn't. Broadly speaking, we can break down the Great Depression into 3 stages: 1929-1932, 1933-1937, and 1938-1941. The key period is 1933-1937, for this is when we saw the initial inflationary effects of going off the gold standard.
Below I will present some things to take away from the Great Depression. These factors are critical to understanding why a deflationary collapse is unlikely to occur based on present-day conditions.
Agrarian-Based Society
During the Great Depression, farmers accounted for nearly half of labor. The maturation of the American economy from an agrarian to industrial economy created a staggering level of unemployment, which was deflationary. The Dust Bowl of 1933 obviously exacerbated the problem and put pressure on wages.
However, from 1933-1936, the second phase of the Great Depression, unemployment declined from 25% to 11%. Spending power reappeared, as evidenced by a spike in real final sales. Deflation? I don't think so.
Mass Defaults in Europe/Gold Standard
The 1930's were characterized by mass defaults across Europe stemming from a sovereign debt crisis. Defaults were directly correlated to debt to GDP ratios and the percentage rise in budget deficits in preceding years.
The psyche of Europeans was obviously scarred due to world wars, revolutions, and constant conflicts. As soon as sovereign nations started to default, capital sought safety. The U.S. was one of the few countries that remained on a gold standard, so capital flooded into the U.S. dollar, which for all intents and purposes was as good as gold. So the rise in European defaults activated a temporary flood into the U.S. dollar (aka gold) in 1930-1931, which created the sensation of deflation in America. In effect, the deflationary trend was accelerated by the concentration of capital in U.S. dollars.
1933-1937 Deflation?
As soon as FDR was inaugurated he took us off the gold standard, which immediately devalued the dollar and sparked an inflationary trend. This created a spike in asset values that was most notable in stocks. There was some semblance of a recovery, but it was short-lived because of flawed government intervention. But that's a story for another day.
Anyway, how many deflationists will tell you that CPI rose from 1933-1937? I'm guessing none. But sure, go ahead and listen to the deflationists who take a chart of the Dow in 1931 and plot it against a 2010 chart and predict a stock market collapse. Absolutely. Utterly. Ridiculous.
After collapsing in the early stages of the Great Depression, GDP exploded for the duration of the Great Depression. Now obviously this occurred because of massive government spending. But a good forecaster must account for government intervention; otherwise their analysis is seriously flawed. The fact remains that the government won't idly stand by if there is a massive deflationary episode in the U.S.
Debt Destruction
Deflationists constantly conflate debt destruction with deflation while forgetting one tiny fact: The government has a technology called the printing press. A determined government can easily fight deflation. We already got a glimpse of how the government can counteract the forces of deflation by handing out free money in the form of homebuyer tax credits. The spike in sales of homes spurred by tax credits confirms that you can manipulate behavior by giving out free money. This proves beyond a doubt that a determined government can create price distortions.
The most important point I am going to make is this: The coming inflation will result from a loss of confidence in government. A massive deflationary collapse can only occur if: a) our Federal government resorts to full-scale austerity measures (unlikely); b) Americans hoard dollars (unlikely); and c) there is a rise in the value in the dollar that evidences a rise in confidence in government (impossible).
I urge you to consider the aforementioned arguments and stop listening to deflationists. I will add the caveat that there will be huge moves in the dollar in both directions. In other words, we can experience temporary bouts of deflation. But to predict a drawn-out deflationary collapse is just ludicrous. A 90% decline in stocks is ludicrous. So is a 90% drop in real estate. The odds are heavily tilted against those things happening for the reasons I outlined above. The only real threat is inflation- about this I am sure.
From Expected Returns.
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Sounds like you are conflating deflation with dollar appreciation.
Any time you are urged not to listen to someone, you should ignore said urging.
Any time you are urged not to listen to someone, you should ignore said urging.
Okay, so I should ignore your urging to not listen to ExpectedReturns's urging to not listen to deflationistas?
I am so confused!!!!
The debate will never cease and we will likely have both deflation and inflation before this decade ends. Presenting the period from 1932 onward as proof positive that inflation is now the only outcome is a bit disingenuous. Frankly I would expect a bounce in prices after the Dow collapsed 90% from the peak. At this point we are no where near purging all the excess debt in the system which should result in deflation. The following chart shows how much more work needs to be done: http://1.bp.blogspot.com/_H2DePAZe2gA/TGygWq6cRcI/AAAAAAAAORU/OVaPksTdyFo/s1600/creditmarketdebtgdp.png
"Deflationists constantly conflate debt destruction with deflation while forgetting one tiny fact: The government has a technology called the printing press."
your little theory requires one thing..
That the government gets said money into the hands of consumers. Not one dollar has managed to do that so far.
A massive tax rebate of say 30K per family might do it.
Replacing defaulted debt with printed money at the bank level will not fix anything, because you cannot loan to a bankrupted consumer.
The government has run 1 trillion dollar deficits 2 years in a row. Did you see 1$ of that? nope.. neither did I.
But you'll pay for it.. not this year.. but you'll pay for it.
There will be no inflation. House prices will continue to fall, stocks will continue to fall, jobs will continue to disappear, until the system has been reset.
The dollar will rise as more and more huge amounts of debt is defaulted and then it will collapse as tax revenue in the US sinks to a level that makes swap spreads on US debt soar to over 1000 bps.
So in a way.. deflationists and inflationists are both right.. the dollar will soar and then collapse to toilet paper.
Bang your head against the wall for a moment. If that doesn't work, try a sharp corner. When you come to and have picked yourself up, then go back and reread the weeks of posts on this blog.
We are already seeing a bifurcation in play. Hard assets are falling (housing) but food and energy are increasing. This is not going away. But make no mistake about it, we'll see deflation, then inflation.
How's your head feeling?
no dumbass.
we are still in a period of disinflation. We have not rolled over yet into full blown deflation.
Energy prices will follow as soon as we do.
(remember oil prices were 25$ a barrel a little over a year ago)
While you were playing, China took our place as the #1 customer.
Our demise really won't matter that much to the Saudi's or South Americans, or Chinese for that matter.
Read about the fall of democracies. Apathy is the step right before collapse. We hit apathy a couple decades ago.
Shortly, when the Iranians and Chinese start to denominate oil in non USD, we;ll see where the price of oil is at. Current global GDP is down since 2008 but the price of oil is not at $25/barrel. Reach deeper into you hat buddy.
Do you have any idea how much corn now goes into the production of ethanol? What is that doing to prices? Look at food grains and cost of meat. Stop thinking pre 2008.
Try the corner of your desk if you can't find a sharp corner.
I think most deflationists are only deflationists in the short term, and become inflationists in the long term with a collapse of the dollar.
they will be on the wrong side of the deal.
The only reason we have had no hyperinflation is because we have had no hard core deflation.
If there was no bailout in late 08, the US dollar would have been toast by March of 09. Investors would have realized that there is no economy left to tax and service the bonds that everyone is holding.(bonds that back the dollar)
In a way, bernanke printed money to temporarily stop hyperinflation.
Bingo, people just don't get it. There will be deflation, but our currency isn't backed by gold anymore, its backed by bonds. If golds value in the 1930's was determined by tax payers (lack of) interest payments there would have been hyperinflation without velocity.
Over half our bonds, bills, and currency are held by foreigners, when the taxpayers can't make interest payments on those bonds (bc of rise in unemployment) our bonds and currency will sell off in mass.
Hyperinflation won't happen from the supply side, it will happen from the demand side. Foreigners could crush this country in a week. Sad but true.
i respect your bold prediction. you might be right, although i'm hedged both ways. meanwhile, my family of steak lovers and organic victuals is getting skinned at the moment with higher prices. i might have to resort to the greenspanonian philosophy of displacement. i hear dog food can be quite tasty once one acquires the taste for it.
My uber-spoiled Dachshund highly recommends a Cesar's cuisine entree, any flavor, and Pup-peroni original bacon flavored meatsticks for dessert.
On a scotch-fueled bet, I snacked on both. Not bad. Kind of grows on you.
Rainman
Cat food gets additional amino acids or vitamins, dog food doesn't.
Riddle me this oh wise and wonderful ZH denizens:
Say you inherit some money. After taxes and assorted sundry you end up with three million dollars.
What the fuck do you do with it? What bank to trust? Do you plan for Deflation, or Inflation, or Deflation followed by Inflation?
And don't give me the guns and Gold Mad Max future scenario.
Where the hell is anyone supposed to place their wealth where it will maintain value under either of the above scenarios? And even if you can find a safe place, where do you stash your savings without wondering if your bank is one of the next 2k+ to fall?
I understand the Endurable assets here,
FOFOA: Gold: The Ultimate Wealth Consolidator
I would imagine real estate, land for living/farming/renting is a good place to start.
Is there anyone out there with a realistic safe strategy to get us through these troubled times?
I read everyone bitch, but rarely do I see a solution.
Thank You
Gully,
If I had three million all of a sudden, this is what I would do:
One, place 15% in gold
Two, If I haven't already, buy a farm and enough equipment to work it- including fuel and storage for that fuel. I would also create a seed bank. The farm would be offgrid and have a well.
Three, I would invest in my local community with loans to good businesses to generate income. Include rental income and housing that can be used for charitable purposes.
Four, I would retain a percentage in cash for the buying of real assets as prices fall. This would include art and collectibles.
We will experience stagflation. The timing of purchases will become important as the dollar gains and loses purchasing power with the will of the wind. If history is any judge, nations as large as ours fall slowly over time. Sudden collapse is very unlikely. Further, the great depression was a traumatic time, yet we survived and prospered. So, the otherside might be brighter than many think.
The creation of fear and uncertainty encourages people to panic and make thoughtless decisions. While prudent planning is in everyone's best interest, there is no strong motivation for the destruction of society. People will accept less than ideal conditions if it means some measure of security- in fact, I think the elite are counting on it.
European society has weathered many undulations in their path to today, they have seen terrible tyrants and dictators, bloody kings and the depredations of the Catholic church, great disease and epidemics, currency destruction and famine. However, today there still remains the hopes and dreams of the present generation, the art and architecture of two thousand years and some of the most beautiful countryside in the world.
I would suggest the time tested financial advice for all people: save more than you spend, make good investments, there is no such thing as a free lunch and if it sounds too good to be true-it probably is. Love the ones most precious to you and care for their present and future as you fondly remember your past. For in life, it is the experience of life that yields the greatest satisfaction.
Sean7k
Thank you. That is probably the best solution I have seen so far.
Investing in the community is something no one else mentioned. Automatic Earth thinks everything will become local again.
I've considered offering the local food bank space to grow what they could.
My community at one point had a section of rich soil that was rented out allotment style, but that seemed to fade. It would be nice to have a growers coop with each member specializing then the group shares the various crops.
I asked a water question to one of the Guns and Gold crowd a few topics back. I wondered if they had a hand pump and what plans were made to repair the parts as they wear. The answer was a shallow well, probably with a bucket.
I considered digging ponds and stocking them with fish. Or Aquaponics.
And thank you for creating an opportunity for readers to share their thoughts.
What do you pay your taxes with? Dollars.
What do you pay your mortgage with? Dollars.
What currency is most 3rd world debt denominated in? Dollars.
If you live in the United States, what is the legal tender accepted at Walmart or elsewhere? Dollars.
What currency are commodities priced in, enforced by 13 aircraft carrier flotillas? Dollars.
In a cash crunch caused by asset sales...
when unemployment continues its horrible trend...
if there is a middle eastern conflict that disrupts oil flow...
if the persist world trade imbalances start to correct, and exporting nations have trouble servicing their dollar denominated debt, or they even default...
what will everyone be scrambling for, what will they NEED?
Dollars.
1. Pay off your debt. 2. Build a portfolio that is self-replicating, meaning you don't have to buy and sell it to get the dollars that you need, because it pays you a coupon. 3. Diversify the income streams to lessen portfolio variance while controlling default risk. 4. Hedge currency risk with some very small "lottery tickets" like gold or small cap stocks from India when nobody wants them.
If the dollar really does blow up, you have debt-free claim to all you have. As holder of top-self credits, you get recovery of the underlying assets, because they will surely default in the dollar collapse process.
If the world turns into doomsday wet dreams, then any act of investment was all pretty worthless anyway, so I'm not going to waste time concerning it.
jm
Thank you for an honest assessment.
I'm not really seeing doomsday, but we are in economic hard times.
Check this out. Video is at the link.
http://theeconomiccollapseblog.com/archives/even-tony-robbins-is-warning...
Even Tony Robbins Is Warning That An Economic Collapse Is ComingBy no means do I think things are great or will get better in the next 2 years. I just don't think the collapse will dissolve into chaos. If it does, I'm not a billionaire buying a ranch in Bolivia, and so there's nothing I can really do about it, and thus prepare for it.
I grew up on farm, and worked by ass off everyday starting 5am before I went to school. If you know how to work, you'll be fine.
Everybody's gotta do what they do, and that I respect. The race is often won by the lucky, not the clever, the quick, or the well-prepared.
Three Million is not a lot to work with. So I can only give you a silver solution. Now if it was 30 million, that would be different. I could give you a platinum solution.
All joking aside; you should convert your US fiat currency into hard assets in at least two countries (obviously outside the US). Perferably, with good financials and stable currency. To invest you have to really understand the best opportunities for basic needs and commerce. The key is to have controlling interest in your investments, not hold equity without control. The question of positive cash flow for investing depends on what you select as ports of call.
Important is to obtain a passport from one of your choosen countries (may be needed before you can own corporations in these countries). The biggest threat to keeping and passing on wealth in the future are oppresive US tax laws. I hate to say it, but if your are very successful, you may want to renounce your US citizenship.
To answer your questions;
Who do you trust (with your money)? Nobody but yourself.
Is there anyone out there with a realistic safe strategy to get us through these troubled times?
You are only as safe as you want to be. Safety comes from a plan of action based on events. To be safe you must take action, you must act soon and with purpose, and be mindful of the challenges along the way.
Anyway, thats the silver solution.
Mark Beck
Mark Beck
Thank you. That was well thought out.
If I understand it when you renounce your US citizenship and have money BIGOV grabs a fair percentage.
Right now they are tracking assets deposited in foriegn banks.
If they are going to do that anyway, I'm not seeing much of a win.
I'd be as well off raising Sheep and selling wool.
Honestly if there is an economic collapse, we would see Balkanization. The Jesusland scenario.
I would encourage you to read up on renouncing. The burden of US income tax for US citizens on money earned outside the US is oppresive, not just in the amount, but in its application, and likely to get 20% to 40% worse before Gov figure out that tax inhibits growth. The key is to minimize tax on income and profits, and pass on inheritance without taxation. This is not the US. The win here is you decide what to do with your wages.
In reading the green book, from what I can tell, the tracking of accounts does not extend to expats. There is no need to verify inccome that cannot be taxed.
----------
I would also like to say that economic collapse has different meanings to different people. Some would say that the Great Depression mirrors economic collapse, where others may talk about Germany after WWI, or focus on a currency collapse.
To me economic collapse is the deliberate destruction of wealth as a matter of policy. Where I will not benefit from my labor paid in the form of tax. In other words, taxation does not produce a personal benefit.
What the Politicians do not realize is they have destroyed the notion of patriotism in the financial sense.
A good excersize is to pretend you are one of your federal tax dollars, which you labored to earn, that is real worth, and see where it goes once it enter the big machine we call Treasury. I think you will find out that the obligations of tax payers are not only impossible to reconcile with tax on wages, but your future labor has also been obligated, and done so without the chance of any net gain.
The recent CBO report is a good place to start.
Mark Beck
If I could go back in time several years and hand myself any amount of money to invest in something physical ... fuck gold, I'd buy as much .45, .380ACP and 5.56mm as I could get my hands on and make a killing.
As for land... c'mon man, it's not portable at all and it's damn near impossible in most places these days to actually own land. As in, for real, not just some bullshit made-up ownership where you're paying rent on it to the government every year. Sure, you got 3 mil to start in your "what-if" game, but if you don't have a steady cash flow, there is no point in dumping your money into land only to have it taken away, or have to sell it off bit by bit to pay your tax bills. I know of number of people who inherited land, money, or both in the last 3-4 years. All of them have lost the land they inherited, most of them have ended up in bankruptcy after losing nearly everything. I'm willing to bet they wished they inherited guns, ammo, and quality machine tools instead.
And local government tax shenannigans are only going to get worse as they get more desperate.
I learned to shoot at age 7, the guns I like best are the most common, 12 GA and 22 rifle. People like to say 22's are for pussies. Let me put a CCI hollow point in your ass and see how you like it. The guns that work will be the ones you can find ammo for. I know there are many nice center fire guns, but I can shoot a box of 50 for the price of a couple shells. To the guy that said ammo don't last, the USN used shells from WWI to shoot in the first Gulf War. Keep it cool and dry it lasts a very long time.
Yes you will be able to command a big price for odd ammo (if you can find someone that needs it)
minus dog
Nothing is usefull when it sits around.
Even ammo goes bad.
Inheriting land and making a profit from the land are two different things.
I see people who win the lottery and piss it all away.
Fly to Switzerland and put 500k of gold bullion in a private bank. This is your disaster insurance.
Come home and park your cash in short duration, high quality corporate bonds while you figure out what you want to own. Taxes don't matter since rates are so low.
Longer term you want your money out of this country. If the Feds are trying to make that ever more difficult, and they are, then that is all you need to know.
But what/where/how is something I have been thinking about all year.
Reese Bobby
Problem with that is you want to be within quick response time of your money.
Say maybe an hour or two tops. Even less if possible.
You want to be first in line at the bank run.
There is no solution because there is no asset on earth that is or can be protected from the corruption of money and government, not gold, land or anything else. Life is loaded with risk and you will not escape it on this planet.
There is only one enduring value, and that is what you can bring or do for your fellow men. If you have an enduring talent or skill (which won't include "investing") that is where your enduring value lies.
If protection is what you seek then you really are a socialist.
Noah Vail
Nice except for that last piece of shit dig at Socialists. Capitalists have been the ones seeking protection and favoritism from TPTB since the dawn of time.
And since you oobviously have not been paying attention to recent economic History the Capitalists ALL are getting bailed out while poor workers eat canned cat food and lose their homes. Meanwhile those damned Socialists in the world at least havehealth care for everyone, unlike say the US.
Fuck it I'm more of a Bakunin Anarchist.
Really?
I'm a capitalist (as in I own a company, work, don't get crap from no one and have to pay ALL my taxes or face 100% penalties) and I haven't got bailed out at all. As a matter of fact I had to cash out my retirement to pay the bank off and keep my business from their GOVERNMENT/aka "Socialist" owned hands.
Meanwhile, my sister gets $600 a month in food stamps, free rent ($725), free utilities, and a health care plan worth around $20k a year. She has barely worked 1/5th of her adult life.
Tell me again how the "capitalists" are getting bailed out and the "socialists" are eating cat food? Go to her house and she has soda and name brand convenience foods. I don't.
Do you think you could get your sister to come on here and tell us how does it? I need to get on that program.
TeresaE
So your sister is a Socialist?
My guess is you must be a shitty Capitalist, and not watching the Economic news. You missed those Capitalist banks and Automotive industry getting bailed out. You missed all those lovely subsidies to business and big farming.
But hey, if you paid attention then you couldn't play the victim card, right?
I also imagine when your business goes under and you need those " Socialist" programs you will not be refusing them on GP because they clash with your Capitalist ethics.
Finally, I think we should have your sister post the details about just how she wound up where she is. That way we could avoid all those nasty little family psychodramas which lead us to posting sob stories to total strangers for a bit of a sympathy buzz.
Don't get me wrong here, you may be the salt of the earth and the shining light of your family. But we don't know that, we have only your minimalist statements to go on. Kind of like a blind date.Assuming you are the wise and wonderful being you claim to be, what would you expect your sister to do without those Socialist benefites, sell matches on the street? Starve. Break into your home and kill you for your jewels?
Clearly that story could go a number of ways.
Personally I don't like to see people starve ion the streets, if I did I would volunteer my time and be in Africa. And I would rather see Socialists with full bellies and lazy from smoking from dope than Capitalists breaking into my home to steal my tv for resale at a much discounted price.
Oh, and have been on the receiving end of those Socialist benefits a few times, I thank BIGOV for social safety nets that kept me from robbing people like you at gun point so I could eat.
Apartments near colleges and army bases as an income generator/store of wealth. Make sure you are close enough to them to visit them yourself.
Farmland that can be sharecropped.
Some PM's/food/guns/bullets just in case.
$50,000 in cash in a safe. Small accounts sprinkled at some community banks.
traderjoe
The only problem with apartments is rents seem to be decreasing due to an overabundance of appartments/rental properties.
But houses on acreage, say five or so. Even if you can't rent the house you can always farm the land.
Someone mentioned turning their ten acres into u-pick fruit lots.
Or even have someone work the acreage in trade for Milk/Cheese/Fish, whatever you ain't got. Pasturage, and I see people with relatively small lots raising horses.
Biggest problem is what bank to trust?
Say you buy the property outright, three million buys a lot of land, you still need someplace other than under the bed to keep your revenue from the rentals until tax time.
US banks are pretty shitty now, but what about Canadian or HSBC/International banks.
You all forget the other shit storm headed our way.
TAXES.
Once cash is decimated and working is slowed (more), the government (all of them) will come after our land.
Especially our investment income land.
Too much property held in these United States is soon going to be pretty pricey to the local tax man.
And, since Washington "helped" the poor homeowners, I won't doubt for a minute that a federal tax is going to be levied on land/property.
After all, if I held all the cards and had played out this "I saved you" bullshit, I would do the exact same thing.
And so would most of you.
Beware the ides of Summer & Winter taxes.
The excellent question of the day. And I also have no solution. But I'm not bitching, yet.
For me, I just wait and watch what's going on. If this baby goes down hard, it's going to be have to be pieced together on a local level. And which pieces we need will depend on which pieces are more or less intact without the macro infrastructure.
Those of us with an entrepreneurial bent are going to have big challenges and opportunities all around us. It seems that after the big unwinding, we're going to need to keep going without those things that global credit systems make so simple right now. So opportunities will be found for those who can keep trade running without Visa cards.
We need to create ways people can do business with each other. Local bank letters of credit or bank notes? Money changers at the remaining malls? Maybe local fiat money that's an extension of the plans being pushed now by various chambers of commerce.
Somebody has to step up to the plate and make it possible for those of us who want to keep doing business to keep getting paid for it. If the current money becomes worthless, the people who figure out a day-to-day replacement for it will become indispensable.
So my very vague strategy is to keep the fungible wealth near, then figure out how to leverage it when the current money sputters to a halt. Those who can troubleshoot their local economy with a little liquidity of their own will find ways to their own endurable assets, whether it's ag, rentals or whiskey.
I sure wish I knew how this frog was going to jump so I could be more ready. But for me, it's silver and gold where I can grab it, and waiting until I know more about how the landscape will look.
There is no "Road Warrior" scenario in my future. My family and I are neither psychotic enough nor tough enough to last very long going toe to toe with Mad Max. So there's no point in preparing for THAT scenario. A couple of shotguns to keep the porch clear is about as far as we can logically go in that direction.
My gut feeling is that neighbors will team up with like-minded neighbors to pool their strengths and resources and make the best of things as we put the pieces back together. So we're slowly getting to know the neighbors better, beyond just waving when we see them in the yard. But even WAVING is a good start. At least if we know each others faces, we're halfway to creating some kind of social contract.
Ultimately, the answer is PEOPLE. Without them, all the other stuff has minimal value unless one is a total hermit. So whatever long term safety any of us find will be within a social structure that we have a part of creating.
Okay, not much of a strategy, I admit. But having to steer into the future using just the rear view mirror makes it tricky at best.
Thank You
Land/Farming/Metal Work, live near the ocean or river, near Fishermen.
Maybe check into putting some money in a Canadian bank, or international.
Only metal I'm interested in is Iron or Steel.
Everybody will need a Blacksmith.
Why will everyone need a blacksmith? Do you foresee total disintegration, to a kind of Mad Max world? In late 1930 and early 1931 there were indeed some food riots (hunger was not unusual as a result of the droughts in the South), but for the most part social order was maintained.
Bohica
Doesn't have to be a total breakdown. Even just a lowering in income makes people repair things more than purchase, as long as the price is less.
Lot's of shit gets welded. Lot's of things can be cast or forged. As long as you can do it for less with better quality.
That's a pretty fair question to which I have no answer.
But farmable land and other income producing property would be a good way to gobble up a hefty chunk of that $3 Million
A few bank accounts for keeping some cash handy
I'd definitely buy some bullion
I like to fish, so the rest would buy a used sportfish and keep enough $$ for fuel to fish/maintain.
schoolsout
Thank you.
Not into the whole Gold thing.
I aimed my son at Welding, and when I can find someone to teach him I'll get him into Blacksmithing. With any luck the old Charcoal/Coke forges. Gas forges are relatively inexpensive, but rely on gas. No natural gas, no forge.
Between land and the ability to work metal that should cover some ground.
Everyone goes into furniture/woodworking. If someone can't afford new tools, or even pots and pans (remember Tinkers? Not the conmen ones related to Irish Travellers) will need iether repaired or remade.
He learns he can teach me.
Maybe get some draught Horses to pull a plow.
One can use charcoal, plenty of info on the web. I'm learning to cast medallions.
First, read everything you can so that you learn. At some point you are the one who has to make the decision as to what\where to place your eggs, and the only one who cares what the result is, is you (no one cares as much about your money as you do, follow?).
Second, income producing things are always good to own - paid for 100% income producing assets are superb things to own. Don’t leverage that which is already paid for and generating income...
Have some cash & have some metals or other “hard” assets – it isn’t about how many $$’s you have, but what the relative value\purchasing power of that which you own has. If you are “all in” on precious metals you will likely be burned at some level, but at the same time if you ignore them and have nothing in you are just as likely to get burned (maybe even more so). Look at them like “insurance” and purchase was much as you see prudent as a ratio of total investments (if it all goes to sh*t the metals are all that are likely to retain value in a “money” sense...).
Think long term (years) rather than short term (months or a couple years...). Once everyone knows it’s likely to late to do what should have already been done (being a follower is a good way to get trampled), and there isn’t any reason you can or shouldn’t plan for both as we will likely have periods of each as all this plays itself out...
And if you don't understand the game or it seems obviously rigged - stay the hell out...
Close 2 the Edge
"If you are “all in” on precious metals you will likely be burned at some level, but at the same time if you ignore them and have nothing in you are just as likely to get burned (maybe even more so). Look at them like “insurance” and purchase was much as you see prudent as a ratio of total investments (if it all goes to sh*t the metals are all that are likely to retain value in a “money” sense...)."
http://www.thepowerhour.com/news/items_disappearfirst.htm
From a Sarajevo War Survivor:
Experiencing horrible things that can happen in a war - death of parents and
friends, hunger and malnutrition, endless freezing cold, fear, sniper attacks.
1. Stockpiling helps. but you never no how long trouble will last, so locate
near renewable food sources.
2. Living near a well with a manual pump is like being in Eden.
3. After awhile, even gold can lose its luster. But there is no luxury in war
quite like toilet paper. Its surplus value is greater than gold's.
4. If you had to go without one utility, lose electricity - it's the easiest to
do without (unless you're in a very nice climate with no need for heat.)
5. Canned foods are awesome, especially if their contents are tasty without
heating. One of the best things to stockpile is canned gravy - it makes a lot of
the dry unappetizing things you find to eat in war somewhat edible. Only needs
enough heat to "warm", not to cook. It's cheap too, especially if you buy it in
bulk.
6. Bring some books - escapist ones like romance or mysteries become more
valuable as the war continues. Sure, it's great to have a lot of survival
guides, but you'll figure most of that out on your own anyway - trust me, you'll
have a lot of time on your hands.
7. The feeling that you're human can fade pretty fast. I can't tell you how many
people I knew who would have traded a much needed meal for just a little bit of
toothpaste, rouge, soap or cologne. Not much point in fighting if you have to
lose your humanity. These things are morale-builders like nothing else.
8. Slow burning candles and matches, matches, matches
http://www.survivalblog.com/2009/12/letter_re_the_bosnian_experien.html
I would advise that you don’t keep everything that you have in one location. I was forced to leave my house and take off with just my backpack and weapon. If you can, keep a bug out bag [cached] a few miles away from your house so that you could go to it, if you are forced to abandon your residence. Be prepared to not return to your home for years and try to have another place to live in another part of the country or even some other country. I was not able to go back to my home until years later. Stash as much ammo in different locations as you can. I did not have enough ammo in the first place and whatever I had was used or traded within first month of me leaving my home. Ammo was good trading currency and could get you a meal at any time. Local paper currency was basically worthless but if you had foreign currency, then you were in better shape. At that time German Mark was most popular currency in Europe and could get you anything in former Yugoslavia during the war. The Gold and Silver were good to have but it was harder to find someone that would accept gold and silver as form of payment .
Pasture farming Gully, great father and son endeavor. Here is the Guru:
http://www.polyfacefarms.com/
His books are excellent, both for business model and practical examples. We have been doing this for several years now and we can't keep product in stock. Folks are very health conscious now and are well aware that their food is crap and lethal. Don't forget a healthy dose of PM's (as a minimum for paying property taxes) , AR10's (springfield M1A, RRA LAR 8) and a couple of 12 gauge shotguns. Get yourselves some decent training on those weapons. Hire a couple of Marines to help out around the farm and make sure they are well armed. You will find out that if you use your head, the farm life is quite pleasant. Not drudgery at all....and quite profitable.
(get yourself 640 acres, thats a square mile. mixed woodland and pasture.make sure it has year round water and puts some ponds on it.http://www.landandfarm.com/)
Amen. My grandad had 360 acres on Muddy Creek. It was a kind of paradise.
one of our neighbors teaches other neighbors how to weld...and drink liquor drinks on Tuesday nights. We are in a perfect location where the neighbors pretty much stick together. Tight, private community on the Atlantic ICW far enough outside of yuppieville, yet close enough.
I wish I knew what to do...I'm 28. All of my savings that would have been in a bank have been in bullion and mining stocks since the end of '06....and I keep adding. Mining stocks somewhat hurt me, but I've come back to about break even + a small increase since then. Bullion has treated me well. Not a lot of money, but so far, it is about 25% of the price range of the house/condo I would like to soon purchase.
schoolsout I am the chief accountant for an auto dealer/ conglomerate. Some of the techs in our body shops make 90 to 100k a year consistently. Welding and other jobs you have to do with your hands which require some skill are the future. As for accountants, I'm just hoping I can hold on for a few more years before that field is totally outsourced overseas.