Apr 112016
 
The HP-12C - possibly the finest calculator ever.

The HP-12C – possibly the finest calculator ever and still being made by HP.

So, after TEOTWAWKI, what happens when we need to do ‘figuring’ – to do some sums, to calculate some values?  Our computers are dead, our notepads fried, and our calculators have run out of batteries.

We have several suggestions that will make your life easier.

Solar Powered Calculators

Our first suggestion is to stock up on calculators that use photo-electric cells to power them.  These can be expected to last for probably 15 – 25 years, maybe longer, and if you store them in a cool dryish sort of place that gets neither extremely hot nor cold, that will be a good environment for longest life.  Solar powered calculators are inexpensive, lightweight, and not very large (but note that larger ones are easier to operate and you’re less likely to make errors entering numbers, and have easier to read screens).  Amazon sells a broad selection, many at less than $10 each.  You want to choose display only calculators, not printing calculators – the printing calculators use a lot more power, plus you then need rolls of paper and ink ribbons too.

We recommend you store two or three solar-powered calculators in your Faraday Cages.  Take them out, one at a time, if you need to have one readily accessible.

HP-12C

The second is to get one of the brilliant Hewlett-Packard HP-12C calculators – in our opinion, the finest calculator ever made.  Not only can this calculate just about anything and everything you’d ever want to calculate, but its batteries last almost literally forever.  The record is currently an HP-12C with batteries that are now 22 years old, and it is still going strong.  In other words, the limit is more the storage life of the batteries than the power used by the calculator – we regularly get 10+ years of life out of each set of batteries we use (although with the new non-mercury type silver-oxide button batteries, we suspect their ‘shelf/storage life’ is not as lengthy as with the earlier mercury batteries – we’ve seen figures claiming five years for silver oxide in place of ten years for mercury batteries – yet another case where Congress has legislated a good product out of existence for the thinnest of reasons).

The HP-12C design is now over 30 years old, but it was so perfect when it first came out that customers have resisted every attempt by HP to modernize or replace it.  The closest to a replacement is the latest ‘Platinum edition’ version of the HP-12C, and you can interchangeably get a regular or a Platinum version; the differences are trivial and mainly ‘under the hood’.

The only thing to be aware of is that there’s something missing from the classic HP-12C calculators, and obscured on the Platinum edition versions.  The equals sign.  The calculator uses a different way of calculating – you key in the first number then hit the Enter key, then you key in the second number, then you press whichever function key you wish for adding, subtracting, multiplying and dividing, as well as very many other functions too.  This is called ‘RPN’ or Reverse Polish Notation; it takes a bit of getting used to but is actually surprisingly logical and simple.

We own several of these calculators; they are robustly built and never seem to break.  The best thing about the RPN keyboard is always seeing the puzzled look on other people’s faces.  ‘Can I borrow your calculator?’.  ‘Ummm, yes, sure’ we say, unenthusiastically, maybe adding ‘it is a bit complicated to use’.  But our disclaimer about it being complicated is always ignored.  Then, invariably, two things happen.  ‘How do you clear it’ and ‘Where is the equals sign’, followed, a minute later, by the borrower handing it back to us!  This means that we’ve never lost a calculator by someone ‘borrowing’ it and ‘forgetting’ to return it!  They cost $50 – $60 each these days (used to be more) so we’d rather not have them disappear.

You might also want to consider an HP-11C ‘scientific calculator’ – most of the extra functions on a 12C are financial; if you think you might need some trigonometry functions in particular (useful in surveying and building) then get an 11C too.

Again, keep your HP-12C in a Faraday cage until you need to deploy it.

This shows the stylus and the clearing bar that come with an Addiator adding/subtracting device.

This shows the stylus and the clearing bar that come with an Addiator adding/subtracting device.

Mechanical Adders

Now it is time to go lower tech.  There are two low tech solutions to consider, one being better than the other.

You should consider getting a hand-operated adding machine.  You might immediately think of some of the large boxy machines that used to sit on accountants’ desks – quite possibly with a roll of paper coming out the end as well, and a handle that the user would pull towards them to enter each number.

Those are great units, but you’re going to run out of rolls of paper and ink ribbons very quickly, so we don’t recommend them for a Level 3 type scenario.  However, there’s another more subtle challenge to them, too.  They have dozens, or even hundreds of moving parts, and that’s a lot of things to go out of adjustment, springs to break, or in some other way to have something fail.

Slightly simpler, and generally older, are machines that simply display the running total in a window rather than print on a piece of paper.  Some look like ‘regular’ adding machines, others are more complicated and can be used for multiplication as well as addition.

While it is a long time since machines such as the American Rapid Calculator Co pinwheel adding machines were made, the Soviet Union made similar machines called a Feliks brand Arithmometer.  I’ve seen them dated from the 1930s to the late 1970s – they stopped production in the early 1980s and one of those might be worth considering.  But be aware that although they look to be very solidly built, like much in the Soviet era, that is as much illusion as reality.  It is reported that the gears inside are made of low quality zinc.  As a bit of trivia however, the name ‘Feliks’ is the first name of Felix Dzerzinsky, the first head of what became the KGB, and were originally made in a factory in Moscow that subsequently became the KGB headquarters (on Lubyanka Square).

Some of the German machines (eg Thales up to the late 1960s and Brunsviga) are not all that old, either.  All these ones that look similar spring from the same design, originally by a Swedish-Russian man in St Petersburg.

Make sure you’re getting a non-electric machine, though.  There are lots of Monroe type adding machines that look manual but are electric, and can be trouble-prone and very difficult to repair.  If you’ve ever seen one of those working, you’ll immediately understand how the moving parts are considerably stressed as it crashes and clatters its way through to a solution.

There’s an even simpler solution that is as close to fail-proof and fool-proof as it gets.  An Addiator.  These units are tiny (about 2″ x 6″ x 0.5″), weigh only a couple of ounces, and are totally simplistic to use with almost nothing to break or go wrong.  They can easily be found on eBay and elsewhere, probably costing no more than $10 – $20 a piece.  Search for ‘Addiator’ or ‘Arithma’ on eBay – we just did and found 44 listings.  Make sure the unit comes with its stylus – other things can be used instead of course, but if it has its stylus to start with, so much the better.

Addometers are slightly less common and more expensive, and not quite as intuitively obvious to use.

Other similar products exist, for example, the Sterling Dial-a-matic.  Pick and choose whichever style you like, they’re all reasonably reliable and very easy to use.

Make sure that the unit you select has a lot of digits – ideally eight or more, so you can add up reasonably large numbers.  We’ve seen Dial-a-matics with as few as four, which is hardly worth the hassle of buying, owning and using.  Also make sure the machine can subtract as well as add (as best we can tell, the Resulta mini adding machines won’t subtract).

Slide Rules

Many people say the Faber Castell 2/83N slide rule is the best ever made.

Many people say the Faber Castell 2/83N slide rule is the best ever made.  Last produced in 1976, but still available on eBay and elsewhere.

So your Addiator will see you right for adding and subtracting.  But what say you need to multiply or divide – or, even worse, to work out square roots, or do trigonometry?

Until the early 1970s, everyone used slide rules for such things.  Sure, they don’t have eight glowing digits of instant and near perfect accuracy, but for a century or more, slide rules were used to calculate and build everything, even jet planes and rockets.  The happy reality is that most of the time, we don’t need eight significant digits, and rather than being ‘significant’, most of them are illusory because the measurements we are feeding in to our calculators are imprecise to start with.

Some slide rules might still be manufactured, new, in China perhaps.  But we suggest that the best approach is again to go to eBay and pick up one from there – they have an entire section dedicated to slide rules.  We’ve seen good slide rules sell for $20 – $40.  You want to get one that is 10″ in length, not the half sized ones, and not the double sized ones.  Make sure it isn’t missing its cursor (the clear plastic thing that slides along it), and the more scales it has, the merrier.  The very best slide rules have a pair of ‘folded’ scales that in effect give you the benefit of a 20″ rule without any of the attendant disadvantages – one scale set goes from about 1 – 3.2 and the second scale set goes from about 3.2 – 10, and easy set has more graduations to give you a bit more accuracy.  We know that some of the double-sided Faber Castell slide rules (ie the W scales on the 2/83 and 2/83N rules) have these folded scales, and some of the other brands have them on their high-end slide rules too.

Other than these considerations, you can’t really go wrong with any of the different brands or models.

Ideally if it comes with instructions (and in English – some of the slide rules are sold from other countries and their instructions aren’t always in English) that will save you from any need to buy a book on how to use a slide rule, too.

Giving you the best of both worlds, the German company Faber Castell bought the Addiator adding machine company and made combo units – slide rule on one side and Addiator on the other.  Some of them are still available.

The Ultimate in Low-Tech Calculating?

So, there you are with your Addiator and slide-rule (as well as a solar-powered calculator and perhaps even an HP-12C).  You’re all set to calculate whatever the future holds, right?

Yes, you probably are.  But if you wanted to regress back one further step in calculating, you could always get an abacus too.  A skilled user of an abacus can do calculations almost as quickly as a modern person with a calculator, but it does require skill and practice/training to become that proficient.

So you might decide to pass on that for now, but if you want to be totally prepared for everything, get a book on how abacuses work so you can simply build your own if needed in the future, and have the information you need for how they work.

May 062014
 
Sharecropping is often associated with poverty and exploitation as implied by this 1935 picture of cotton sharecroppers, but there's no reason why you can't create a fair and mutually beneficial agreement to allow third parties as tenants on your retreat acreage.

Sharecropping is often associated with poverty and exploitation as implied by this 1935 picture of cotton sharecroppers, but there’s no reason why you can’t create a fair and mutually beneficial agreement to allow third parties as tenants on your retreat acreage.

If you are fortunate, you have managed to secure a reasonably large lot for your retreat, and if you are very fortunate, the chances are your lot will be larger than what you could work yourself in terms of cultivating crops, grazing livestock, and so on, particularly in a future scenario where mechanical productivity aids like tractors are no longer available to help you in your work.

There are plenty of good reasons why you should wish to have a larger-than-you-can-handle lot size.  For example, it allows you to expand the number of people you admit to your retreat, because extra people can productively be put to work to provide food for themselves and extra for everyone else.  It also gives you a geographical buffer against natural disasters and unexpected misfortunes, ranging from fires to floods, infestations, and who knows what all else.  It also gives you a ‘buffer zone’ and some added isolation and security.

If the commonly held views are correct, if/when a major crisis destroys our society, it is likely there’ll be some sort of exodus of people from the cities and from the towns, too.  These people will be looking for land to settle on and live on, and when they see your large spread, they’ll feel entitled to take some ‘fair’ (in their eyes) portion of it for themselves, especially if it is land that is lying fallow and not being actively in production by yourself.

This is not just conjecture or speculation.  We confidently assert that it will happen, because there is plenty of historical precedence for such things – you only have to look back 150 years in our history to see plenty of examples of such things as our own west was settled.

This is the point where some preppers start to mutter darkly about weapons and tactics and all that sort of stuff.  We’re not so sure that’s the best response because there may likely be some downside to you and your family members if you and the other people truly do start trading shots, and in this type of future, with diminished access to any type of healthcare, and the essential role of everyone in your community, such things are likely to be more impactful than they already are now.

If you do this, you’ll be reliving the range ‘wars’ and recreating the tensions between the cattle barons and the homesteaders in the late 1800s during our country’s ‘cowboy’ era, and such altercations seldom brought any good to any of the people involved.

There’s another consideration, as well.  If you choose to aggressively defend your land, it will be something you will need to do on an ongoing basis.  Some people will appear today, and after you beat them off, another group might appear tomorrow or next week.  You will need to win every one of these ‘battles’, and hopefully to do so bloodlessly too.  Sooner or later, you’ll find you’ll lose rather than win.  To be realistic rather than defeatist, you can’t fight against all 330 million of your fellow Americans (or even the massively smaller percentage who will actually come to your land).

If you have land that is not being used to best purpose at present, why not cooperate with such people and strive to create a win-win arrangement for you and them.  Why not encourage them to settle, and even help them get established.

If you do this, you populate your land and change the dynamic for future encounters – it is no longer a case of you being seen to be selfishly keeping to yourself more land than you can possibly need or use, but instead, it will be land that is being fully developed by people living on the land, which changes the moral equation from a dubious situation to one where you clearly hold the high ground, should other opportunists come along and seek to displace you and the people also sharing your land with you.

Now for the best part of all.  By bringing more people onto your land, you are creating a stronger, more robust and resilient community, and likely with a larger pool of talents and skills.  Furthermore, when you allow these people to start working parts of your land, you don’t just let them do this for free.  You of course charge them a ‘rental’ for the use of your land, and possibly for the use of your tools and other resources and facilities, and for seed, and so on.

Do we need to stress that any ‘rental’ that you charge must be fair, and must allow the people on your land to benefit as well as you.  If you get too greedy, you’ll change the dynamic from ‘win-win’ cooperation to a ‘win-lose’ confrontation that is counter-productive.  Think of it like a tax – we might grumble a bit, but we don’t mind paying a minimal tax when we can see fair value in return for it, but if we were to be slapped with a 90% tax, then many people in such cases feel completely justified in lying and cheating to avoid the tax, and/or will simply not work as hard because they see nearly all their earnings going to the government rather than flowing through to themselves.

Models for Sharing Your Land

There is nothing new about the concept of allowing other people to work part of your land.  For centuries, societies have had various arrangements, from feudal systems in the middle ages, through clan/crofting systems, to much more modern share-cropping, tenant farming, and farming cooperative arrangements.

Some people criticize some of these arrangements, and indeed, some can be validly criticized.  But the criticism should be understood as applying more to the specific allocations and shares rather than to the underlying methodology.  For example, something that might be fair on a 25/75 split might be grossly unfair if all the details were the same except for the split being changed to 75/25.

From your perspective, if you have land that you aren’t using and won’t be using, any sort of return on that land becomes a bonus, and apart from wanting to ensure you get a fair share, there is no need to drive too hard a bargain, particularly in view of the other benefits of growing your local support community.

The return you should expect also depends on what you are doing and how you are helping your new ‘tenants’.  If you simply allow them the use of your land and do nothing else, then a small share of whatever they produce is all you can fairly expect – maybe in the order of 10%.  But if you also provide housing, and if you give them a start by providing them some livestock or seed, and maybe you also provide them with tools and productivity enhancements, and perhaps you also provide some expertise and assistance in how to develop the land, and if you also provide them food until such time as they start to become self-supporting, then each of these value-adds on your part can be fairly reflected in a larger share of the outputs they create.

Needless to say, you should never create a scenario where it is impossible for your tenants to be self-supporting.  You don’t want to create too vast a wealth-inequality as between you and your tenants.  If you are enjoying huge feasts while they’re struggling to put any food on their table at all, that’s a recipe for a tenant uprising, and you truly don’t want that.

In centuries past, exploitive share-cropping arrangements survived because there was no precedent for other arrangements, and because all the power was controlled by the owners rather than by the tenants.  It took a very long time and much evolution of social values for the appallingly exploitive and unfair former arrangements to eventually die out.  We do not feel it would be easy or appropriate to seek a return to such times, because these days, everyone has much more egalitarian expectations for their personal wealth and well-being.

We urge you to be fair to the point of being generous with any such tenancy agreements you enter into.  There is truly not a lot of ‘cost’ to you in allowing your under-utilized land to be better utilized, and there’s an enormous amount of upside if you do so on a win-win basis that fairly rewards the tenant and encourages them to truly ‘treat the land as if it were their own’.

Some Suggested Issues to Record in an Agreement

We would suggest that you record your tenancy agreements formally, in writing, and in as rigorous and extensive a form as possible.  This is simply common sense and gives both you and your future tenant some certainty and protection.

We are not attorneys, and you probably should get a standard agreement blank formally drawn up by an attorney, in advance of any problems, and then use it for all tenancies that might come your way in the future, simply filling in the specific gaps and adjusting the provisions to suit each unique scenario.  So, not to give legal advice, but merely to provide some talking points and suggestions to consider when you discuss this with your attorney, an agreement should cover issues such as :

  • The area being let to your tenant, described both legally and in unambiguous terms that can be understood without recourse to district plans.
  • The term the tenant can have the land for, and on what basis the term can be extended subsequently, or ended prior to its scheduled expiration.
  • In what form should the land and anything else used by the tenant be returned to you at the expiry of the agreement.
  • What happens if the tenant dies or leaves prior to the expiry of the agreement – can the tenant pass the ‘lease’ on to someone else or does the land revert to you, and if the lease is being passed on (or sold) to someone else, who gets the proceeds of the sale.
  • What you are providing to the tenant over and above access to the land – initially and into the future.  How about things such as seed, fertilizer, water, tools and equipment, and storage?  Are there any buildings/sheds included?  What about energy – are you providing any energy in any form?
  • The tenant’s right to things that might come from or through your land such as water in particular, and similarly, your right to the same things that might come from or through the tenant’s land.
  • The tenant’s right of access to his land through your land and your obligations (if any) to maintain such accessways, and in turn, your right of access to your land through the tenant’s land, if applicable.
  • Fencing obligations between the tenant’s land, your land, and possibly other land – who is required to do what.
  • Liability for stray stock or other harm from other things kept on your land that intrudes on the tenant’s land and vice versa.  This might also extend to things like the possibly harmful effects of trees that shelter/shade the other person’s land, or the equally harmful effects if something on one party’s land is removed, causing impacts to the other party’s land (for example a wind break planting of trees, or vegetation that was stabilizing a hillside that once removed caused a landslide, and so on).
  • What the tenant’s obligations are to actually work the land following best practices and doing so full-time, and what the consequences would be if the tenant fails to meet these obligations.  The concept here is that if you are allowing someone to farm your land, you want to have that person do so sensibly and well, and fairly creating additional ‘wealth’ for both you and him.
  • What you will receive from the tenant in return for allowing the tenant to use your land (a share of whatever is produced, or money, or labor, or whatever else – and either a fixed amount or a varying amount, and how it is calculated).
  • If you are getting a share of a harvested crop, who gets to decide when the crop is harvested?  If you are getting a share of the proceeds after selling the crop, who gets to decide how and where it is sold – maybe something might be able to be sold for more money later on, but maybe the tenant (or you) needs the cash immediately – how is that resolved?
  • Will your share of whatever it is you are getting be delivered to you, or are you required to collect it from the field or from somewhere else, or will the tenant store it for you until you decide to collect it, or maybe, if it is something that will be sold on to other people, will the tenant deliver it to an appropriate market location?  For that matter, are you expected to participate in any crop harvesting, livestock slaughter, etc?
  • What aspects of the land use can the tenant independently decide and control and which aspects can you insist on being observed/followed/implemented – for example, can the tenant decide to switch crops from corn to potatoes, or to swap pigs for cows?  Or, for that matter, to swap from crops to animals (and of course, vice versa)?  Can the tenant decide to intensively farm land to the point where the soil fertility is harmed, or can you insist on rotating crops and leaving fields fallow some years?
  • What happens in a bad year if the tenant fails to get the yield he expects from the land, due to no fault of his own?  Maybe the tenant gets a larger share of the first amount of yield from the land, then a lesser share of the extra yield above that.
  • What happens in a good year if the tenant gets a better yield than anticipated?  Following on from the last question, maybe if the tenant gets a better than normal yield, he should get a larger share of the ‘bonus’ extra harvest, because you have now got all the return you fairly anticipated, and the tenant’s own hard labor and/or expertise should be fairly rewarded.
  • Any obligations the tenant has to source supplies from you or from designated suppliers?  On the one hand, you don’t want to play the trick of forcing tenants to buy from you at inflated prices, on the other hand, if you can combine your purchases of some items, maybe you can negotiate better prices for both you and your various tenants.  Also, maybe there are some issues with some suppliers that you are aware of that cause you to be wary of dealing with them and you want to ‘quality control’ your tenants’ actions to prevent them from buying bad product.
  • A process whereby any changes to any of the terms or shares/splits/payments can be negotiated or will be changed in the future.  No matter how diligently you, your attorneys, and also your tenant and his attorneys may work at creating a complete agreement to cover all future eventualities, for sure there will be unforeseen issues arise and assumptions that need to be corrected appearing from time to time, and you need a fair way to be able to negotiate changes that protects both you and the tenant.
  • Your rights of access and inspection to confirm and verify the tenant’s processes, procedures, and calculations of your entitled shares.
  • How you will resolve disputes and misunderstandings about the contents of the agreement (both if the formal legal system remains in place or if it fails) and who will pay the cost of such dispute adjudication.  The consequences and sanctions that either party can levy on the other in the event that one party is found not to be meeting their obligations under the agreement, and how they will be calculated.
  • A recitation of the overarching principles and laws under which the agreement is framed and the parties expect to be used to interpret the agreement in the case of any future disagreement.

Summary

Allowing third parties onto your land, and helping them work that land on a fair and mutually beneficial basis is, well, exactly that – fair and mutually beneficial.

Adding extra people, even at an arm’s length type of tenancy arrangement, can only help the viability of you and your immediate retreat family/community.  This type of tenancy arrangement is a useful midway point as between totally turning people away, at one extreme, and immediately welcoming them into your retreat as equal members at the other extreme.

It truly is a win-win, and so much so that you might choose to anticipate such an occurrence by adding some extra structures on parts of your land that would be suitable for such tenancies.

Jan 262014
 
The giant multi-national HSBC banking group doesn't want to give Britons their money back.

The giant multi-national HSBC banking group doesn’t want to allow Britons to withdraw cash from their accounts.

Here’s an interesting story, and don’t automatically say ‘That could never happen here’.  But first, the story.

A BBC report tells how customers of the HSBC bank in Britain (HSBC operates in the US and elsewhere in the world too) have had difficulties making cash withdrawals from their accounts.  The customers have had the money in their accounts, so that wasn’t the problem, and in most cases, have been good customers of the bank and branch for many years.

Their problem is that the bank has been asking them what they needed the cash for, and asking them to prove the validity of their need for cash, turning the customers away until they can return with satisfactory proof.

Of course, the thing about cash is that, almost by definition, and as a Catch-22, you don’t necessarily have formal proof about what you’re spending the cash on.

When asked about their actions, a bank spokesman said they were doing this for their customers’ own good – to ‘protect’ them (the customers) from possibly falling victim to some sort of fraud.  They also said they weren’t obliged to tell customers in advance of this new policy, because it wasn’t a notifiable change to their previous terms and conditions  Details here.

Imagine yourself in this situation.  You sense that things are about to get truly seriously bad, and decide to withdraw your cash while the banks are still operational, only to be told that you have to prove what you’re going to use the cash for.  ‘Storing it under my bed’ would not be an acceptable reply.

Think about this.  We’ve previously written about how in Greece the citizens there suddenly found themselves with an unexpected tax on the money they had deposited in their bank accounts.  If you owned shares, and probably if you owned bonds, and if you had assets or even cash-under-the-bed, you weren’t taxed, but if you were a ‘good citizen’ and had savings in a bank account, all of a sudden you had a new tax levied on your savings.

Meanwhile, in the US, if you get 0.5% a year interest on your savings deposits you’re doing well.  And your financial dealings are then a matter of official record exposed to all, and controlled by people other than yourself.

Note also our several articles that suggest how money and cash will become of little value WTSHTF (we have a large collection of articles about how the economy will change after TEOTWAWKI and how best to prepare for such things).  Assets and tangible things will be valuable, but not abstract depictions of wealth such as cash, and definitely not bank deposits which will quickly become impossible to access – not so much due to banks failing, but due to the failure of the bank computing systems and related support structures.

And now we have to look to a future where, the same as in Britain, cash is increasingly being looked upon with suspicion, and if we seek to withdraw cash, we draw attention to ourselves and may have to explain to our bank exactly why we are doing such a ‘bad’ thing as wishing to convert our abstract electronic deposits into a slightly more tangible form.

So, you really have to ask yourself the question – why keep money in a bank at all?

Jul 302013
 
Follow these six strategies to get more of this stuff in your pocket.

Follow these six strategies to get more of this stuff in your pocket.

Many of us feel a sense of anxious urgency about our prepping.  We know that if we suddenly find ourselves trapped in a Level 2 or 3 situation, we are not yet ready to be able to survive such a challenge; but what we don’t know is if/when a Level 2/3 situation might suddenly appear.

To put it as bluntly as possible, the biggest constraint we have is the lack of cash to invest in our preparing.

Well, we can’t give each and every one of you many thousands of dollars of cash, but we can equip you with the tools to cut down on your own monthly outgoings.  In this, the second part of our new series about prepping on a low budget (please also see part one), we look at how you can get out of debt more quickly, freeing up the money you currently spend on paying off what you owe, and enabling you to use it on more productive things instead.

Strategy 1 – Prioritize Paying Off Your Debts

So what is the first thing you should pay off?  Generally it will be the balance with the highest interest rate.  Look at all the debts you have, and understand what the APR is on each of them.  You might be amazed to see the difference in APRs.  For example, maybe you have a discounted car loan at 1.9%, a student loan at 5%, a revolving line of credit at 7%, and two credit card debts, one at 15% and one at 24%.

In such a case, you should make nothing more than the minimum payments due on everything except the 24% credit card debt, and you should do all you can to get that 24% balance reduced down.  At 24%, you are paying $20 a month on every $1000 you owe; if you can reduce the total owed by an extra $100 in payment this month, then next month that will give you a $2 reduction in interest you pay on the now lower total amount outstanding.  $2 might not sound like much after having paid off $100 extra the previous month, but if you are making payments over, maybe, two years, then in approximate terms, that $2 is a recurring benefit over the 24 months of the loan and will (sort of) save you $48 over the remaining period of the loan.  That’s a much more significant saving, isn’t it.

That is one of the key things about reducing your interest payments.  A trivial seeming $1 a month reduction in interest payments might seem of no value at all, but it is saving you $1 a month for every subsequent month, as long as the loan remains open, and over many years, that really adds up.

The other key thing is that if your interest bill is now lowered by $1, next month your payment is going more to paying off the balance and less to paying interest, so you are paying off more principal, which means that the following month, there will be even less interest to pay and even more principle paid off, and so on.

You might already know that if you start missing payments, your debts start to spiral out of control.  The flipside of that is that if you start paying more than your minimums each month, you quickly start to reduce your balances much more positively than you’d have thought possible.

After you’ve paid off the worst loan (in terms of interest rates) you’ll then successively move through everything else you owe money on.

Generally, the last thing to pay off would be your house mortgage, because that probably has the lowest interest rate associated with it.  Plus, for most of us, the interest is tax-deductible, reducing the real interest cost by as much as 30% or more (depending on whatever your top marginal tax rate is).

There’s no better way to control your outgoings without making any impacts on your lifestyle at all than by simply prioritizing how you pay off your debt, starting with the highest interest bearing debts first, and then working successively down to lower and lower interest bearing debts.

Exception – Prepayment Penalties

Some types of loan might have prepayment penalties associated with them.

Make sure that the loans you are focused on paying off as quickly as possible have no prepayment penalties associated with them.  If there are penalties, you are probably advised to concentrate on paying off other debts first.

Strategy 2 – Keep a Credit Card with No Carried Over Balance

Many credit cards have a deal whereby if you pay off your balance completely when it is due, then each month’s charges don’t incur any interest if you keep paying them off when the balance comes due.  Okay, we probably understand that already.

But did you know that if you don’t pay off your card entirely, then all charges immediately start accruing interest without the grace period you’d otherwise get if you were clearing the balance each month?

In other words, if you have to keep some balance on a credit card, have two credit cards.  One which you are paying off, but on which you add no new charges, and a second one which you keep current, so when you add new charges to it, you can pay them off when they come due, next month, without incurring any fees on those.

Strategy 3 – Consolidate Costly Credit

If you can, it is very helpful to consolidate your debts and to move them to the lowest cost source of money.

For some of us, this can best be done by getting a Home Equity Line of Credit (HELOC).  You’ll probably get an interest rate around 4% – 5%, and possibly might even be able to claim the interest as a mortgage/tax deduction on your 1040, depending on your circumstances and the nature of the amounts owed.

Let’s say you owe $5,000 at 12% and $5,000 at 18%, and you manage to get this transferred to a HELOC at 6%.  That means your monthly interest payment will instantly reduce by $75 every month – more if you can make your new interest payments tax-deductible.  That’s another $75 a month that you’ve suddenly created – and it is money you should then use to keep paying down your debt, at a new faster rate.

If you can’t get a HELOC, maybe you can still get some smaller loan from your bank or credit union, and if not at 6%, definitely still at much less than what you’re paying to the worst of the credit card and other lending sources.

Move the money you owe to the lowest cost lender.

Strategy 4 – Refinance Your House

We just spoke about rolling credit card balances to a HELOC.  But what if you have a home mortgage with a high interest rate on it?  Why not ‘kill two birds with one stone’ – refinance your home to a lower rate and also increase the amount you’ve borrowed to pay off other debt.

At the time of writing, there’s even a federal scheme that allows some home borrowers to get a federally subsidized new home loan with no origination fees and no qualification requirements.  Ask if you qualify for one of those.

Strategy 5 – Roll Balances to a New Card

Maybe you sometimes get offers in the mail giving you ‘pre-approved’ credit cards and allowing you to roll over a balance from another credit card, with an initial grace period of no interest charge applying.

Make sure there truly are no charges – no ‘cash advance’ type charges or anything else at all, and if it truly is a way of getting some months of free interest, then if the interest rate that commences at the end of the free period isn’t worse than what you’re paying now, why not cut up one credit card and start using the ‘free money’ offer on the new credit card?

We know some people who have done this repeatedly, each time getting a new grace period of some months before any interest starts being charged.

Needless to say, don’t go into debt initially with the plan to do this into the future, but if you are already in debt, this might help reduce the cost of paying off the money you owe.

Strategy 6 – Renegotiate Your Interest Rate

You mightn’t realize this, but many times you’ll find you are able to negotiate the interest rate you are charged on your credit card balances.  The credit card company doesn’t just have one interest rate that everyone, everywhere in the US, uniformly pays.  It sets interest rates more or less individually, based on your credit score, your history with the card issuer, your address, and many other factors.

If you have been making your payments regularly – or sometimes even if you haven’t – you might be able to negotiate a lower interest rate.  Even if you only get a 1% reduction in your interest rate, this could save you thousands of dollars.  Look at our table of interest costs in the middle of the previous article in this series, Seven Thoughts About Borrowing Money.  Say you had a $10,000 loan at 18% and were making payments over a 10 year period.  If you can reduce that to 17%, and if you keep your monthly payment much the same as it was before, that means you now pay your loan off over nine years instead of ten, and your total interest paid drops from $11,922 to $9,587.

You pay your debt off a year sooner, and you save yourself $2335 in interest, all as a result of getting ‘only’ a ‘small’ one percent reduction in interest charged.

That’s sure worth making a phone call and asking for, isn’t it!

Why would a credit card company/bank drop your interest rate?  Because it costs them a lot of money to get a new customer; and it costs them much less to keep you as a good customer than it does to lose you and buy in another customer – the marketing cost of getting each customer, and the promotional cost of a ‘no fee for the first year’ and/or a ‘100,000 mile frequent flier bonus if your sign up for our card’ and/or a ‘no interest on balances rolled over for six months’ or whatever other offer they are giving to new customers is massive.

Summary

There are sometimes good reasons and sometimes unavoidable reasons to go into debt (we discuss them here).  But there are almost never valid reasons to delay paying off the debt you’ve incurred.  The most compelling reason of all is that getting out of debt is just plain smart – your disposable income will skyrocket when you no longer have so much of your paycheck already committed to debt repayments.

The six steps above will help speed you towards a debt free future.  It will help, but you’ve still got to do some heavy lifting too – make paying off your debt a priority, and accept some lifestyle sacrifices while doing so.  In return, you’ll have a much healthier financial future.

Jul 292013
 
Borrowing money is nothing new, but the many ways of getting into debt these days make it easier to find yourself in financial trouble.

Borrowing money is nothing new, but the many ways of getting into debt these days make it easier to find yourself in financial trouble.

None of us have as much money to spend on prepping as we wish.  So we’re starting a new article series to help you become more financially free, and better able to invest in more complete prepping.

Our financial lives revolve around two main factors.  The income we generate each month, and the money we spend each month.  Hopefully we spend less than we earn, of course.

The issue isn’t so much the actual numbers as it is ensuring there’s a positive gap such that you are earning more than you are spending.  If you want to widen that gap, you can do either or both of two things, and only two things.  You either increase your income and/or reduce your expenses.

An exception to that rule seems to be if you’re managing a city, county, state or the entire federal budget.  Deficit spending seems to be something that these public bodies can do with impunity, but don’t you be tricked into believing that either you can safely spend money you don’t have, or that the public bodies can, either.  Detroit declared bankruptcy last week, other cities have already done so with less publicity, and some other cities similar in size to Detroit also have massive unfunded liabilities.

The only difference between us and a public body is that the speed of our crash would be quicker and harder, and that it is our own personal money and future at risk – the administrators of public bodies are seldom personally at risk when they spend their way into deficit oblivion.

So, how to reconcile the need to not spend more than you earn with the easy availability of money to borrow?  And how to borrow money as inexpensively as possible?

1.  Should You Ever Borrow Money?

Chances are you currently owe money, like most of us.  Maybe you have a house mortgage, a car payment, a balance on a credit card, a store card, a student loan, maybe payments on some furniture or something else you financed, and so on.

Some people say you should never borrow money.  We’re not saying that, and as we said, most of us do owe money.  But we will agree that many of us should probably borrow/owe less than we do.  There are times when it makes sense to borrow money – buying a house being the classic example of that.

Sometimes you might have no choice but to borrow money, it might be literally life or death.  Medical and dental bills would be an example of that.

A third category when it can make sense to borrow money up front is when the thing you are paying for is something that will provide an ongoing financial benefit to you – an educational qualification to advance your career, or a new tool that you can use to work more productively and more profitably (sometimes a new(er) car can be justified under this heading too).

A related category would be when you must spend money up front to save needing to spend more money later on.  For example, if your house needs repainting or your roof needs replacing, you are better advised to get that done in a timely manner, for fear of having much greater costs subsequently if you delay.

There is a final, fifth category where it makes sense to borrow money.  If you are in an unusual situation where an item is going up in price at a greater rate than the cost of borrowing money, maybe it is better to borrow so you can buy the item now, rather than save and buy the item later when you have saved enough money.  This has often been true of real estate, and can sometimes be true of other things too, although be very cautious when it seems you are being presented with any sort of ‘amazing short-term opportunity to save money’.  More often than not, the deal isn’t as amazing as it seems, and the short-term opportunity might be longer term than it seems to be.

It never makes any sense for any seller to sell anything for less than its fair normal market value; if someone is trying to tell you they are selling you something for less than it is worth, you have to wonder what sort of fool they are to do that.  If something is truly worth, say, $50,000, then why wouldn’t the seller ask $50,000 for the thing?  Why would he only ask $25,000?  Yes, there sometimes are valid reasons why real true bargains come along, but be very wary of deals that seem ‘too good to be true’.

So, there are five situations when it may make sense to borrow money.  On the other hand, there are also many times when it makes no sense to borrow money at all, because the ability to easily borrow money merely tempts us into buying something we didn’t and don’t need.  A bigger screen television, for example; a newer car, a hot tub, an extravagant vacation, or whatever else it is that is currently tempting you.

Manufacturers and retailers spend billions of dollars every year tempting us to buy as much as we can – and then to borrow more money to buy more things that we shouldn’t be buying – because if we all reduced our levels of spending and consumption, our economy, which has become ever more dependent on people spending more than they should, would implode.

But don’t worry about the national economy.  You should be ‘selfish’.  Never mind about the national or international economy, and don’t think about what the other 330 million people in the US are doing.  Think only of yourself, and what is best for you – our economy can probably withstand the effects of you reducing your own level of consumption slightly.  🙂

For the future, if an item doesn’t clearly fall within the five appropriate-to-borrow-money categories above, you should discipline yourself to not buy it until you have spare available cash in your bank account to pay for it.

This will save you much more money than you think, because not only are you saving on the interest costs of borrowing money, but you’ll find you end up buying fewer things, and those you do buy will be more sensible appropriate things.  You’ll have a better life style, you’ll own better things, and you’ll have more money in the bank and fewer monthly outgoings.

You’ll also discover the joys of being able to negotiate cash discounts, of being able to buy things when they are at the lowest price, and so on.  So let’s hurry your forward on your path to a much stronger financial situation.

2.  The Subtle But Massive Costs of Interest

Some of us go to ridiculous lengths to ‘save money’ – we know a person who proudly drives ten miles to fill their car up with gas at a cheaper gas station, but (by our calculations) the cost of driving there and back exceeds the money they save each time.  There are lots of examples of people who are ‘penny wise and pound foolish’, and hopefully you’re not guilty of any of these failings, yourself.

But there is one failing that many of us have.  We are sometimes so appreciative of any source of credit that we seldom stop to look at the cost of the credit, and to comparison shop when borrowing money.  The cost of credit – the interest rate we are charged – should be as important to us as the price of gasoline or the cost per pound of potatoes in the store.

Because interest ‘compounds’, there is a huge difference in total cost to you between a higher and lower interest rate, and between paying a loan off quickly or slowly.  The best thing to do is to get your interest rate down as low as you can, and to pay the loan off as quickly as you can.

Let’s look at several different scenarios to see how this works out, using a $10,000 loan amount every time.  If your loan is more, just multiply the amounts by how many times more it is to see the impact.

Interest % Years = Monthly Payment = Total Interest Paid
21% 10 $199.93 $13,992
21% 5 $270.53 $6,232
18% 10 $180.19 $11,622
18% 5 $253.93 $5,236
17% 10 $173.80 $10,856
17% 9 $181.36 $9,587
15% 10 $161.33 $9,360
15% 9 $169.24 $8,278
15% 8 $179.45 $7,228
15% 5 $237.90 $4,274
15% 4.5 $255.78 $3,812
10.5% 10 $134.93 $6,192
0% 10 $83.33 $0

 

You’ll notice several things here.  If you halve the time it takes you to pay off your loan, your monthly payments don’t double.  The increase by more like 50%.  As for the other 50% that doesn’t increase, most of that saving is due to you paying much less interest – half as much interest, sometimes even less.

The longer your loan, the massively greater your total payments will be.  Keep your loan periods as short as you can, and any time you have spare money, use it to pay the loan down still faster and further.  Remember that each extra dollar you pay, over and above your monthly minimum, is going entirely to paying off the principal amount owing, and that once you’ve reduced the principal, you no longer pay any more interest on it in any of the remaining months of the loan.

You can also see the huge difference in total interest payments at different interest rates.  Reducing your interest rate by only a few percentage points can save you thousands of dollars over the period of your loan.

Most of all though, hopefully you’ll vividly see the massive costs associated with borrowing money.  Say you’re thinking of going on a vacation – $5000 for the two of you.  Does it really make sense to borrow that money on your credit card, and to pay it off over 5 years at 21%, making the total cost of the $5000 vacation into $8100, and to be making payments for long years after you’re returned home and already forgotten about the great time you hopefully enjoyed?

Remember the five (and only five) scenarios for borrowing money, above.  If something isn’t clearly within one of those five scenarios, don’t be tricked into borrowing money to pay for it.

Now, talking about tricking, let’s look some more at issues to do with borrowing money.

3.  Avoid Unnecessary Fees

Lenders love late fees.  They massively increase the amount of profit they make from the money they’ve lent you.  So don’t be tricked into incurring them.  Plus every late payment – even by only a day – becomes a downcheck on your credit report.

Know when payments are due, and make sure your payments are always safely and surely received a couple of days before they are due.

Banks also love the fees they charge when you go into an unapproved overdraft, and/or the fees they charge if they bounce your checks.  Many times the bounce fee can be more than the check amount itself!  There’s no excuse for writing checks when you don’t have money in your account; make sure you never end up incurring these fees.

We know one person who regularly writes checks he doesn’t have money in his account to cover, and boasts that the bank always honors his checks.  That’s very kind of the bank, but he also confirmed the bank charges $30 every time.  A $30 fee for what is in effect a one or two day loan of $100 or $200?  Say it was a $200 check for two days.  That $30 fee is the same as a 2760% interest rate, and if I ever found myself paying that interest rate, I’d sure not boast about it.

We know another person who is often late paying his water bill.  He says he only really feels the pressure to pay it when he gets a notice of pending cut-off hung on his door handle at home, and then he pays it immediately.  He says it doesn’t matter, because it is not reported on his credit report.  But what he doesn’t say is that he is assessed a $20 late fee each time that happens.

A $20 late fee might not seem like a huge amount, but what a total waste of $20 for no benefit in return.  He still had to take the time to pay the bill, but by being slack, he wastes $20.  And one time, he was out-of-town, and returned home to no water, a late fee, a reconnection fee, and an emergency call-out fee.  Almost $100 in fees.

So pay your bills on time, even the ‘nasty’ ones you don’t like (like parking tickets, before they double) and the ‘unimportant’ ones like water bills.

In general, you should have a look and see how much each of your credit cards is costing you in annual membership fees, and how much your bank account is costing you too.

Do you really need three different Visa cards – especially if they each charge you $50/year?  Almost certainly not!  We generally have one Amex card, one Visa card, and one Mastercard in our wallet.  That way, if we have a problem with our Visa or Mastercard for whatever reason, we have an alternate to use, and we also have an Amex which we mainly use only at Costco (Costco has a deal on a combined Amex/Costco card membership).

Trim down the credit cards you possess.  And choose credit cards with no annual fee, or a low annual fee.  Some credit cards charge $100 or more a year, some are free.  Unless there’s some way you’re clearly getting the value from the annual fee (maybe it gives you a free companion airline ticket or something), don’t use that type of card.  If you do need that particular card, see if you can negotiate a lower annual fee with them – you’d be surprised how much you can negotiate with the credit card companies when they think you’ll otherwise leave them and go elsewhere.

You should also look at your monthly bank fees.  Banks change their fee structures all the time, and while they send out notices of changes to their terms and conditions, who has time to read through them all and try to work out what has actually changed?  Although you might have got the best deal at the time you opened your account, almost surely, over the years, it has changed and other deals have come along so you no longer have the most appropriate account type and fee structure.

Many banks have some type of ‘free checking’ account, or if not, they very probably have a lower cost account than the one you currently have.  If you’re paying more than $10/month, go ask for a better deal.

Many people report better experiences with smaller banks and local credit unions rather than with larger banks.  If you’re looking at changing banks, be sure to speak to a small bank or credit union as part of your shopping around.

If you sometimes need emergency loans, in small amounts and for short periods, make that part of your bank shopping too – find out what their policies are and what the fees will be.

4.  Negotiate Down the Fees You Pay

If you are borrowing money through an independent mortgage broker, ask them to split their fee with you.  The chances are they are getting 1%, 2%, or maybe even more of the money you are borrowing as their fee/commission, and just like realtors will generally give back some of their commission, so too will mortgage brokers give some of their fee back to you, too.

But be careful how you approach this matter.  If you ask the mortgage broker about the fee up front, he might say ‘sure, of course’ and then present you with loan rates that he has inflated the fee, so that he can then ‘reduce’ the fee and ‘give you back’ some money but still end up with as much money as he would have got anyway!

When borrowing money, it pays to shop around and compare, and when you’ve found the best two or three, then negotiate between them to see who will trim their own margin the most.

Even if you’re not negotiating by asking for a fee giveback, you can simply instead ask for a fee reduction.  We’d not recommend you ask a full-time bank employee to share their fee with you, but you can ask the bank employee for a reduction in the loan fee.  Remember these loan officers are in the business of making loans, not refusing loans, and they have some discretionary ability to vary the rates they first offer you.

If you make a mistake and the bank charges you a bunch of fees for bouncing a series of checks, and if this is not something you make a habit of doing, go into the bank, meet a banker in person, and ask for them to reverse out the fees.  If you discover that your ‘free checking’ account requires a minimum $5000 balance, and you dropped below that, ask for that fee to be waived too – but you can only do this once or twice.  However, if you’ve been with the bank for a while, you can simply say ‘I forgot’ or ‘I didn’t realize’ and they’ll probably cooperate with you.

You might be surprised to see how quickly many institutions will take their fees off again, but you have to ask them (politely!) first.

5.  How to Borrow Money Cheaply

Just as important as paying off your debt is avoiding incurring new debt as much as possible.  But sometimes there is no alternative to needing to borrow some money.  When you absolutely must borrow money, try to do so on the most favorable terms possible.

If you have a credit card, try to never take a cash advance from your available credit limit.  This is a very costly thing to do.  You will be charged an immediate cash advance fee (usually 2% – 3% of the amount withdrawn) and then the amount instantly starts accruing interest.  Worse still, many credit cards then make all the other current charges on your card start accruing interest, too.

One way around this, if you’re short of cash, is to simply pay for more things by credit card, and pay for fewer things with cash.  You’ll probably get a month or two of time, interest free, to pay for the new charges on your card if you’re keeping it current each month.  That’s a lot better than paying all the fees for a cash withdrawal.  You’d be amazed at how much you can buy with a credit card these days.

Payday loans and pawn shops are even more expensive than credit card loans.  As nasty as they are, it is probably better to make a cash withdrawal off a credit card than to enter into one of these transactions.

6.  Take Advantage of Special Deals

Maybe you have a chance to buy something on a ’90 days same as cash’ basis.  If you see such a deal, you should consider several things.  First, ask the store if they also have a cash discount offer at the same time – maybe you can get a 5% or greater discount for paying cash (because it probably costs them at least 5% to give a ’90 days same as cash’ deal).

If they don’t, then if you can afford to pay cash for the deal anyway, you could buy it on the ’90 days same as cash’ basis, and make sure you make the payments as is needed to avoid having interest kick in, including paying everything off the day before the 90 day point.

If you need something that is offering the 90 day deal, you should take it, and understand what happens on the 91st day.  Does that mean that suddenly all the past interest over the previous 90 days will then be billed to you?  Or do the 90 interest free days remain, no matter what?

Then at the end of the 90 days, you then use a credit union loan or something like that with a lower interest rate to then pay the balance, and make your payments on the credit union loan.

Maybe you are offered a deal on a new car with 1.9% financing.  You have already saved up the money for the car, so you don’t need it.  But here’s an idea – why not borrow the money for the car, and then with the money you’ve saved up, use it to pay down any other monies you owe – even your house mortgage.  If you have a house mortgage at (say) 6%, you’ve managed to suddenly replace perhaps $30,000 or more of it with money you borrowed at 1.9% as part of your car purchase.  That’s a good deal, even after allowing for the tax benefits on the house interest.

Be careful if you use the money to pay down your house mortgage though, because your monthly house mortgage payment will stay the same, and you’ll also then have to find more money to pay for the car payment.

7.  What to Do With the Money You Save

Each time you save yourself some money, don’t spend the money you’ve just freed up, and don’t let it just disappear into all the rest of your money.

Instead, take the money you’ve just now saved and either use it to pay down the money you owe on something, or use it to build up your preps.  Either which way, you end up with a lasting benefit, and at no extra cost to you.

Jul 132013
 
It is vastly preferable not to have to start farming your land from scratch after a disaster.  Better to have the farm already operating as a going concern.

It is vastly preferable not to have to start farming your land from scratch after a disaster. Better to have the farm already operating as a going concern.

This is the second part of a two-part article about issues to do with viably bugging out and transitioning to ongoing life in your retreat.  If you arrived here direct from a search engine or other website link, you might choose to first read the first part which sets out the four main problems associated with bugging out, and then return back here to read about the three solutions we propose.

Solving the Four Problems of Bugging Out

In the first part of this article, we explained the four main categories of problems with the typical concept of maintaining a bug-out retreat and moving there in a crisis :

  • It may be difficult to get to when you actually need to bug-out
  • The retreat or may not be available and in good condition when you get there
  • The retreat may quickly prove to have problems and limitations once you start to live there
  • The reality of starting to provide your own food may turn out to be much more difficult than you’d hoped for

There are solutions to all these problems, please now read on.

Solution 1 – Bugging Out Very Early

In its ultimate form this solution might seem extreme, and it might be massively life changing, but it is also the ideal answer.  Move to your retreat now and live there permanently.  That way, when – if – TSHTF, you are already in place, with a known quantity as your retreat, with all systems tested and functioning.  The only major impact will be you switch from enjoying the convenience of electricity from the national grid and local utility company, and you can no longer order in supplies of liquid/gaseous fuels as and when you need it.  Oh, and the local country store can no longer be counted on to have much of anything for sale, either.

But at least you are already in place, already set up, and your lifestyle changes are minor rather than major.

You might perceive it impossible to turn your back on your high paying jobs, your city lifestyle, and everything else.  That might be true (in which case, keep reading, for our second best solution), but maybe you should also revisit some of your assumptions about what you need and must have.

For example, you can live much more inexpensively in the country than in the city, and things which you formerly perceived as essential and necessary ($100+ meals several times a week when eating out, tickets to expensive shows, expensive business clothing, etc) can be replaced with much less expensive but still pleasant alternates (alternating between having friends for dinner and going to their place for a meal, or treating yourself to a meal at the local diner where dinner for two costs $20, enjoying the less sophisticated but more sincere amateur and high school productions, plays, musicals, and wearing comfortable unassuming clothing rather than name brand fashions).

Instead of needing to pay for both your residence in the city and your retreat, you now only need to pay for your retreat, which probably costs less than your in-city residence.  And maybe instead of an impressive 4,000+ sq ft mansion, you realize that for your family of four, you can live perfectly comfortably and conveniently in a still spacious 2,000 sq ft residence.  You no longer need to choose a property as much to impress and as a visible statement of your ‘success’ and affluence, instead, you can now choose a property for functionality, convenience, and appropriateness.  Instead of making payments on (eg) a million dollar home on a one-eighth of an acre lot, you’ll own, outright, (eg) a half million dollar home on a five acre lot.  Oh, you’ll also be saving money on property taxes and insurance, too.

Instead of buying or leasing a new premium brand vehicle every year or two, you buy an ‘old junker’ (that in truth is neither old nor junk) and keep it for ten years.  It has fewer electronics, but is much more reliable because of that, and both easier and cheaper to repair when it does give trouble.  A more modest older car can save you the better part of $1,000 a month right from the get go.

And instead of working a 50 hour week, plus another ten hours on commuting, you now have 60 hours free to farm your property or work in a local business/store in the nearby town.  Maybe you can even take advantage of tele-commuting and still do some of your previous work, but remotely from your retreat rather than in person in the office.

Instead of spending hundreds of dollars a month on a health club, and tens of hours doing artificial exercise in a gym, you instead spend time working in the fields, simultaneously getting exercise and instead of spending money, earning money and growing food.

When you actually start to pick apart the elements of your modern lifestyle and convert them to an alternate lifestyle, you might be astonished at how it proves possible to turn your back on many of the seductive traps of modern-day consumerism and end up with a truly relaxing, healthy, enjoyable lifestyle in the country.

We’d also suggest you consider not just the concept of moving to a solitary retreat where you live on your own.  Moving to become part of a prepping-focused self-sufficient community means you’re part of a group of like-minded people, with similar values and objectives.  You’ll quickly fit in with such people, and be able to benefit from the synergy that comes from being part of a larger community.  Our Code Green Community represents one such approach to this, but there are of course others too.

We discuss this concept from a slightly different perspective in an earlier article we published, ‘Bugging Out Very Early – a Lifestyle Choice‘.  It is for sure a massive change in lifestyle, but one we urge you to consider.

Solution 2 – A Fulltime Retreat/Farm Manager

The second solution is an interesting one to consider.  You should contract with someone to farm your retreat property, and to maintain its grounds and the security of your dwelling.  Maybe they even live on the property themselves (in a separate building).  This would be a farm manager type person.

If your retreat is going to be adequate to support you and your family and anyone else who would join you, then it should also be adequate, in normal times, to be farmed on a commercial basis such that the income from its farming activities is at least enough to pay the farm manager’s salary, and maybe even leaving you with some extra cash generated too to cover the costs of owning your retreat.  Maybe the income generated by actively working your retreat property will allow you to afford a larger, more productive and therefore more viable and life-sustaining property right from the get-go.

This means that if/when you need to evacuate to your retreat, you arrive at a self-supporting farm that is already in operation as a going concern, and even complete with skilled staff on-site.  Sure, you’ll need to adjust its operation – it will no longer be able to benefit from mechanized agriculture, but it is better to downsize an ongoing farm than to need to start one from scratch.

You and your farm manager will already know the most productive patches of land, what grows best and where, and how to succeed in spite of animals, disease, and other natural challenges.

This is of course also a feature of our Code Green Community – you can have your lands farmed in absence, and your dwelling reasonably secured and policed, but it is also something you could realistically arrange for your own ‘stand alone’ retreat property too.

The only thing to be slightly aware of is the possible danger that your farm manager comes to view your farm as his farm, and when you arrive to settle there, he may feel unwilling to relinquish control of it.  You’ll need to pick your manager carefully and be sure to positively assert and demonstrate your ownership/management/leadership at all times prior to arriving so as to ensure such problems don’t arise.

Solution 3 – Moving to an ‘Added Value’ Retreat Community

Maybe neither of these first two approaches are feasible.  There are some people, in some situations, where that is unavoidably the case.  That is unfortunate, but it is no reason to despair.

Instead, you can consider ‘added value’ retreat communities, where you’d be joining a community of like-minded people, with some of the community already living in place, thereby providing security for your retreat facility, and making it easier for you to join a going concern rather than starting everything, on your own, from scratch once you evacuate to your retreat.  Maybe you don’t even wish to live an agrarian lifestyle, working on a farm in the fields.  Maybe you wish to provide some type of services or do something else within a community – anything from being a storekeeper to a restaurant owner to a doctor or other professional service provider.  While we all focus first and foremost on the most essential things – shelter, water, and food – the reality is that an optimized life in a Level 2 or 3 situation will require a lot more than ‘just’ growing food and eating it.

Our Code Green Community would be one such solution, others may also exist, or you might create your own with a group of friends.

Not Solved – The Physical Act of Bugging Out

The preceding three solutions have been focused on ensuring you have a viable sustainable living situation after having transitioned/bugged out.

But if you are choosing to remain in place until a time when you need to bug out in response to an emergency situation, you still need to focus very clearly on the most certain and secure way to travel to your retreat in a crisis.

You need to be able to go to your retreat well in advance of problems growing to a point of social collapse, and/or you need to be able to quickly get to your retreat securely when problems become unmistakably and unavoidably present.  The latter solution seems to revolve around non-traditional means of transportation – either the extra flexibility of motorcycles or the freedom from infrastructure that an airplane provides.

We discuss these issues more in our section on bugging out.

Summary

By obvious definition and implication, when a crisis occurs, WTSHTF, it is then too late to discover weaknesses, shortcomings, problems, and overlooked forgotten essentials that are present in our retreat.  We need to have all these matters addressed and resolved well prior to any situation that tests their efficacy in ultimate measure.

In the first part of this article, we looked at some of the types of problems you might expect to encounter when activating your bug-out plan and hunkering down to survive a crisis.  In this second part, we suggest some solutions to minimize the possibility of such problems arising and interfering with your ability to safely and securely survive.

We’d wish you good luck, but luck should have nothing to do with your chance of succeeding in an adverse future.  You need to be well planned and well prepared.

Jun 052013
 
Prepping is open to all, no matter race, color or creed.

Prepping is open to all, no matter race, color or creed.

We received an interesting email from a reader – let’s call him Bill.  He writes :

My family and I are well aware of what is coming down the pike in terms of serious unrest due to a collapsed society.  However we are barely making it financially due to low paying jobs and we have no savings.

We would like to know how can we begin to prepare and most importantly how can we use what little resources to pool with other preppers or like-minded individual so that our family can at least have a chance to survive.

Also because we live in Billings MT, how can we navigate this area to get to people who won’t hold Our RACE (African-American) against us.

Please help us with this if you can.  Thanks, Bill.

Bill raises two very good points (thanks, Bill!).  Let’s look at Bill’s last point, first.

Preppers and Discrimination

Preppers are color blind.  We, perhaps more than any other group in the country, look at a man and first see who he is, what he can do, how he could contribute to our community, what talents and skills he has, and only after considering all these things, notice if he is white, yellow, brown, black or, for that matter, purple with blue stripes (okay, so we’d probably notice that up front!).

Preppers are least likely to be racist in either sense of the word.  They don’t automatically react negatively to any particular race, but also, neither do they automatically believe that any race deserves entitlements or special allowances or anything else.  We treat everyone the same – they are as good as they are.  They’re not any better, but they’re not any worse, either.

It is unfortunate that there is this vague fuzzy linkage that some people perceive between ‘prepping’ and being a ‘survivalist’ which then leads to being a ‘wild mountain man’ which ends up implying either that we are the Unabomber or an Aryan supremacist.

This is unfortunate nonsense.  We are of course nothing more than ordinary folks, added to which is having a responsible concern about our future and a desire to safeguard it.

So, when it comes to discrimination, we know all about it, because we are ourselves discriminated against.  We are sneered at, we are ridiculed, we are insulted, and we are typecast as something we’re not and never have been.

If anything, a typical prepper is probably less concerned about a person’s origins than is common for most other groups in society.  All that matters to us is that you’re not expecting special treatment, and that you’ll pull your own weight as an equal honest productive decent member of society.

This isn’t just me being idealistic.  It is a common thread running through most leading prepper sites and advocates.  I have to believe it is reflected among preppers in general, because it is rational and sensible, and surely preppers, more than anyone else, are the most rational and sensible of people!

So, Bill, hurry to find us and join us.  We understand the challenges you have when people are quick to judge you by applying inappropriate labels just because it is convenient for them to do so; rather than to challenge their prejudices.  But also beware – if you join with us, you might find yourself now doubly pre-judged, being now guilty of being both black and a prepper!  The only good thing is that such stupid people will struggle to also consider you a white supremacist.  🙂

Now for the specific question Bill raises, about how to prepare on a very low-income/budget.

Prepping on a Low Income

This is a huge topic that needs lengthy article series devoted to it (and we’ll doubtless publish some in the future).

But, as some quick commentary in timely reply to Bill’s question, the good news is he isn’t locked in to a high paying job where he currently is.  Maybe it is relatively easy for him to move west some, and to seek alternate employment in one of the small towns in NW Montana.  If he can do that, then he’s much of the way to where he needs to be, both literally and figuratively.

There’s a curious reality in Bill’s position (and that of the many other people in a similar situation).  By not earning a lot of money, he is actually freer to make lifestyle changes than would be the case if he had a job paying, say, $7,000 a month, but with a mortgage, car payments, and other commitments soaking up nearly all of the $7,000.  He has less to lose by changing jobs, and more to gain.

Moving to a safer more viable location is a huge plus, allowing Bill and his family to then consider a future strategy that involves surviving in place rather than needing to create a separate retreat.  That’s a huge plus.  As part of a surviving in place strategy, it is essential to integrate into your local community on as many levels and via as many paths as possible – we’ve several very relevant articles in our section on community related issues, in particular the article on becoming part of the solution rather than part of the problem when your community confronts the stresses arising from WTSHTF.

The next thing for Bill to consider is building up a stockpile of essentials to get him and his family through difficult times.

The first essential thing to possess, in a case where you don’t have a lot of cash, is (are) skill(s).  Indeed, if we had to choose between having a bank full of cash or an in-demand skill, we’d take the skill every time.  As we’ve written about at length, cash will quickly become valueless WTSHTF, whereas if you have an appropriate skill, it will become much more valuable.  That’s not to say that cash, now, isn’t a nice thing to have, but longer term, skills are more valuable.  They don’t run out, and they are more easily transported and converted into other things.

Ideally, you should learn a trade that you can simultaneously hopefully work at now, and also which will continue to be needed in the future.  There are very many such trades, and you’ll know if the work you do is a job that is likely to continue to be needed in the future or not.

A computer programmer?  Probably not.  An investment banker?  Also probably not.  And – gulp – an internet writer?  Hmmm…..  But if you are a basic service provider of some sort, with a skill/trade, and if the things you do/work on are things that will continue to be relevant in the future WTSHTF, then you’re well on your way to successfully surviving.

Note that the skill/trade you develop needs to be one that not only will be relevant in a lower-tech, grid-down, fuel and energy scarce economy, but also needs to be one which can be performed using low-tech tools and equipment.  Furthermore, if it is a type of service or activity which requires consumables, you’ll need to stockpile up on those consumables now, with the assumption being any and all supplies you’ll need to continue your work in a Level 2/3 situation will become essentially unavailable.

So the most valuable asset to accumulate is a productive skill.  That will be most beneficial in the medium and longer terms.  But, short-term, there will definitely be challenges as the local economy goes through an upheaval, so you do need to build up an inventory of essential things to live on/with/from, too.  It is very likely that there’ll be a period of some days, weeks, possibly even months as things adjust to the new reality where very little work and income will be available to anyone, no matter how essential their skills and services.  An economist would say this is due to the market becoming very inefficient, we’ll simply say ‘trust us on this’.  🙂

One way to stockpile food and other supplies on a very limited budget is to build a ‘food coop’ with other local families and work it so you buy a bulk and cheaper supply of food items than you’d normally buy yourself, splitting each purchase up between the members of your coop.  Instead of buying food, one meal sized portion at a time, from the local supermarket, you buy food ten or twenty meal sized portions at a time, and buy from Costco or the local wholesale grocery supply store.  Spread that between several different families, and then you’ll discover some magic.  The money you were previously spending to buy one meal is now stretching to buy you two.

Now for the important part.  Put the extra food that you got with your money into your preparedness store, meaning you paid what you’d normally pay for one unit of food, you received the one unit you need, and you also got some extra bonus which you’re now using to grow your food supply.  If you continue that way, you’ll find your store of extra food is slowly growing, and at no cost.

As you start to grow a food supply, the next thing to do is to now start shifting the money you’re saving by buying food in bulk and instead of using it to accumulate food, use the savings to start accumulating other essential items you need.

As for water, the key constraint with water is not the cost of the water, but means to store it.  What we do ourselves is to keep all the empty glass and some of the empty plastic containers we use, thoroughly clean them out, then fill them to the absolute top with boiled water and store them in a cool dark place.

We fill them with boiled water, all the way to the top, so as to keep as little oxygen mixed in with the water as possible, thereby discouraging the growth of whatever nasty things there are that might otherwise start to grow in the water.  We have these stored in date order, and every few years, we’ll empty and refill them again in sequence, on a rolling basis, so we always have a mix of ‘new’ and ‘old’ water.

We also have water purification equipment so that we can ‘make’ our own clean water from whatever other sources come to hand.

We’re not saying any of this is easy, and for sure, we all wish we could win the lottery and be able to prep free of financial constraints.

Don’t expect to instantly create a ten-year supply of everything.  But start off building up a 24 hour reserve, then grow it as best you can, and if you consistently keep doing this, before you know it, you’ll find yourself massively better prepared than you are today.

It is amazing also how some life-style changes can make major differences in the amount of disposable cash remaining out of each paycheck.  We know some people with fairly high incomes who are poor, living from paycheck to paycheck, because they waste so much of their money.  And we know some people with low incomes but who have surplus discretionary cash as a result of living carefully.

Don’t eat out so much.  Cook food from basics, rather than heat up prepared foods.  Eat more vegetables and fruit and less steak.  We’re not saying you should give up smoking and drinking if those are (two of) your vices, but maybe smoke/drink a little less, and choose a slightly cheaper brand.  Downgrade your cable tv package.  Don’t go to movies as often.  Plan your travels in your car so instead of making two separate trips, you do everything in one trip.

Pay down high interest debt, and don’t fall into the careless trap of running up late and overdraft fees.

Stop buying Starbucks coffees, and instead make yourself a coffee at home to take with you.  Even make a box lunch rather than buy take-out each lunchtime.  And so on.

The most important suggestion we have is to remember the old saying about how a successful journey is made not in a single leap, but by a consistent ongoing series of small steps, all in hopefully the correct direction.

It is amazing the difference that small tweaks change.  We estimate that by planning our driving, we save probably $30/week in gas for our vehicle alone, and if you use a rule of thumb that other costs for a vehicle are about the same as the gas cost, that means we’re saving $60 – plus, by better managing our travels, we have more free time and waste less of it stuck in traffic.  More money, and more time to spend it – oooops.  Nope, that’s not right.  More money, and more time to develop new skills.  🙂

Don’t go looking for easy answers.  They don’t exist.  But don’t despair.  Simply dedicate yourself to a slow steady series of steps moving you closer and closer to your goal.

Summary

Although it is true that many very wealthy people do invest heavily into prepping for their future, being a prepper is not something exclusively reserved to members of the unofficial ‘rich white boy’ club alone.

Preppers span the entire spectrum of age, race, income, occupation, education, and every other demographic you can consider.

Prepping is an inclusionary concept – we who currently prep always welcome more people to join us and become preppers too, because the better prepped our neighbors are, the more likely they are to positively ‘add value’ and help us mutually survive in a future adverse scenario, and the less likely they are to become a problem.

So, Bill, please take heart and in good cheer move your own prepping forward as best you can.

May 152013
 
You probably didn't think you'd need to study Economics as part of your prepping.  You don't need to, but there are some things you should understand and anticipate.

You probably didn’t think you’d need to study Economics as part of your prepping. You don’t need to, but there are some things you should understand and anticipate.

So there you are, planning how many tins of food you can store and how long it will last you in a Level 3 or Level 2 situation.  You’re counting up the bullets for your guns, and preparing to hunker down for a desperate and challenging time where life will be tough and uncertain, and you’ll be living hand to mouth with few creature comforts and no luxuries.

Your bookshelf is full of items on how to can your own food, how to grow your own vegetables, self-sufficiency, self-defense, and so on.

Probably the last thing on your mind is to now read through some fifteen thousand words of economic theory.  You can’t fight off attackers with economics.  You can’t eat economics.  Who needs economics when you’re in a daily desperate struggle for survival?

We understand your perceptions, and that’s why we’re starting off this long series on apparently abstract economic issues with an introduction, to explain to you why economics is a vitally important subject that you need to consider and factor into your prepping.  A good grasp of economics will truly help you fight off attackers and will truly help put food on your table.  Economics is not abstract, it is immediate and important.

The reason economics is important is because your ability to not just survive, but to thrive, will be directly related to your ability to interact appropriately with other people.  To engage in mutual support activities, to help each other out, and to trade between you, exchanges surpluses of things you have or have grown/created for surpluses of things other people have.

As soon as you start trading with other people, economic factors come into play.

If you factor economic issues into your preparing, and subsequently into your surviving, you’ll find yourself with a better and more valuable store of supplies for if/when TSHTF, giving you a more advantaged starting point to respond to the new crisis situation you find yourself in.

By understanding how representations of value will change and evolve during the crisis and the subsequent slow recovery, you’ll be able to trade better and smarter with your neighbors, helping you all to be more efficient and therefore to live better and more prosperous lives.

As for fighting off attackers, well, you could say that the pen is mightier than the sword, and you could also say that war is merely an alternative form of applied economics.  But it is simpler to say that a prospering society should also be a strong society, and better prepared to protect itself against outward threats, whether they are economic in form, semi-random such as weather, or man-made such as marauders.

A better understanding of the issues in this article series, and of the other articles we occasionally publish about the form of a future economy and how to prepare for it, will truly help you prepare better now, and survive better, subsequently.  That’s why we’ve taken the time to research and write this extensive series of articles.  We urge you to take a lesser amount of time to read through them, and – of course – feel free to comment or question as you wish.

Unfortunately, one of the most distinctive things about the ‘science’ of economics is that it isn’t a science at all.  It is instead a series of theories, biased by personal beliefs and values, and while our commentaries are hopefully sensible and our predictions may possibly be close to correct, no-one truly knows what to expect WTSHTF.  So we are layering imprecise economic ‘theory’ on top of uncertain guesses about the future.

As part of your prepping research, you always need to clearly distinguish opinion from fact.  Even simple seeming things may be as much opinion as fact – for example, the storage life of any given product.  Do you really think that the companies selling extended shelf life food that they say is good for 25 years have really conducted 25 year tests on their products?

Another example – the frequency tuning range of a radio might be a fact (but we’ve seen people even get something as simple as this wrong).  On the other hand, its ability to work well for your communication needs is an opinion.

You are always best advised to consider all information from all sources with an open but skeptical mind and to weigh up differing opinions (and conflicting ‘facts’) before settling on your own personal plan.

We have six articles in the series.  Ideally, you should read them in sequence, but of course, browse through them any way you wish.  We hope they are of value to you.

Part 0 :  Introduction – Why Economics is Practical and Important to Preppers
Part 1 :  International Reasons Why the Dollar Will Fail
Part 2 :  Domestic Reasons Why the Dollar Will Fail
Part 3 :  Why Bartering Is Not A Useful Way of Trading
Part 4 :  The Unavoidable Need for Money
Part 5 :  A Probable Currency Evolution Post TEOTWAWKI
Part 6 :  How to Prepare for the Future Economy

May 152013
 
Our imbalance of trade and our economy's reliance on foreign nations makes us increasingly vulnerable to economic problems imposed on us by other countries.

Our imbalance of trade and our economy’s reliance on foreign nations makes us increasingly vulnerable to economic problems imposed on us by other countries.

Many preppers perceive that after TEOTWAWKI (ie a Level 2 or 3 situation) the present US currency will become of little value.  Their view of the future possibly revolves around using precious metals for currency and/or a currency-less situation that involves bartering.

This six part series moves sequentially through the reasons why our current US dollar will cease to be of value if society should collapse, and then looks at the value and effectiveness of bartering as a replacement, the role of precious metals in the creation of a new currency, and finally comes up with some predictions for a future currency and how you can best prepare for this.

We suggest you read these articles in sequence, starting of course with this article first.  But they are each independent of the other, so help yourself in whatever form you like.  Please also see other articles in our general series on Economic Issues After TEOTWAWKI.

The Current International Vulnerability Of Our Fiat Currency

We agree it is likely our present ‘fiat’ currency will cease to be of value after a collapse in our society.  But there’s another factor to consider as well – a collapse in our society might be precipitated by a collapse in our currency, rather than happening the other way around.  And a currency collapse could occur either as a result of internal problems within our society and its economy, or as a result of outside forces from other nations and our external creditors.

Our fiat currency’s only value at present is the US government saying ‘This dollar bill is worth a dollar because we say it is’ – a statement that survives due to it being supported by a near unanimity of opinion among US citizens domestically, and by those other people/organizations/governments around the world that accept US currency, and who agree the value is indeed as it is claimed to be.

If the credibility of the US government guarantee/edict weakens, so too does the strength of our currency.  At present the government does as much as it can to gently encourage us – some might say to brutally force us – to conduct our financial transactions in dollars.  Of course, the more we do that, the more visible our trading becomes, and the easier it is for the government to effectively assess our economic activity and tax us, so the government benefits both by keeping the dollar as the prime basis of our economy, thereby implying its reliable value, and also by keeping our trading easily measured and therefore easily regulated and taxed.

There’s nothing new about fiat currencies.  Most countries have a fiat based currency, because it gives the government issuing the currency a huge amount of economic flexibility – quite literally, the ability to print money.

The value of any country’s fiat currency therefore goes up and down as a result of many things, every day, including how people perceive the strength and prudence of the country’s government and its economy.  The country’s balance of payments is another factor, as is the interest rates payable on investments in that country, and the relationship between the country’s economic activity and the amount of fiat currency in circulation.

These various factors point to the problems with the unified Euro currency – different governments, different economies, different strengths, different interest rates, but one shared currency.  These forces, all pulling in different uncoordinated directions for each of the different countries in the Eurozone, threaten to tear the Euro apart.

A common currency must be supported by a common set of economic conditions and policies.  That is why the Eurozone is seeking ever greater power over its member nations, so as to buttress the varying strengths and weaknesses of individual national governments with an overarching claim/promise of Euro value made by a central government, and with a consistent economic underpinning of the currency.

So, the first point is simply this.  If there is a collapse in our government, our economy, and our society in general, then it is very likely that there’ll be a collapse in the dollar, too, because it is a fiat currency with no real underlying value.  We are probably all agreed on this.

But this collapse in value will be in two different parts – internationally and domestically.  We’ll consider the domestic issues in the next part of this series, and now concentrate on the international issues.

International Impacts of Dollar Problems and Devaluation

Domestically it is probable that our currency will retain its integrity unless some society-destroying crisis comes along or the government acts extraordinarily foolishly.  Mild inflation or deflation may impact on its value, but other than that, the currency should remain reasonably linked to economic activity and real values.

But internationally, our currency’s integrity relies not just on us, but also on the actions of other nations which we have little control over.  As other countries become increasingly larger and more economically powerful, and as international groupings of countries have more control over the global economy, our ability to dictate (and, more recently, to even influence) the world’s economy is weakening.  Rather than setting the economic ‘rules’ for the world, increasingly we are having to follow those created by others.

For example, if ‘investor nations’ such as China stop buying our debt on the basis of, as at present ‘We’ll excuse you 6.15 yuan of debt that you owe us for every dollar you give us’ and instead say ‘We don’t think your currency is worth as much, so we now want two dollars from you for every 6.15 yuan you owe us’, that would see our currency’s value halved – it would be devalued.

Similarly, if other countries said to each other ‘We’re not so comfortable doing our trade between ourselves in dollars any more.  Let’s instead start trading in a different currency’ then all the stockpiles of US currency being used by other countries and individuals for trading would be released and returned back to us to be changed into whatever other currencies they preferred.  Any time there’s a flood of any product into any market, its value drops, and the same is as true of currency as it is of food and other goods/services.  This is not just a hypothetical speculation – read this article about the sleeping giant that is starting to wake – the Chinese Yuan/RMB and its potential to become a major global currency.

It is believed that there is a great deal more US cash used in the rest of the world by other countries as part of their economies than there is actually in the US itself (perhaps 70% – 80% of all currency is held in other countries – here’s a somewhat dated but interesting article).  If all those other countries started returning their dollars back to us and said ‘Here’s your money back, we don’t want it any more, please give us euros instead’ our currency would again rapidly and massively devalue.

People often assume that a government can control the value of its currency compared to other currencies in the world, but that is not entirely true.

A currency’s exchange rate is something that can be determined to a greater or lesser extent by how other countries act and respond.  A simple analogy – say you are selling apples.  You can set the price at 10c each or $10 each, but the only thing that really matters is not the price you put on the apples, but how many you actually sell.  It is the same with currencies – a government can say its currency is worth whatever they wish to say, but if the government’s valuation is out of line with the real value of the currency, you’ll get a ‘black market’ with unofficial currency trading at the real rate and little or no activity at the official rate.

Is Devaluation Good or Bad?

What happens to us if our currency is devalued?  The most immediately obvious would be imported goods going up in price – there’d be no more cheap Chinese imports.  But is that a bad thing or a good thing?

It would be a shame to go to Wal-Mart and see the price of everything had doubled, for sure.  But if the price of imported goods skyrockets, maybe that helps us to then start to rebuild some local manufacturing.  In addition, our own exports become more competitive on world markets, because with the dollar now worth less, our goods, still bringing the same dollar price to the US sellers, cost other people in other countries less in their own currencies.

Think of the US automobile industry.  If our currency was devalued, that would mean that foreign cars become more expensive in the US, and more people would start buying American cars again.  Meantime, in other countries, foreign cars would remain the same price, but US cars would drop in price.  People in other countries would start buying US cars, too.  (To the pedants out there, yes, we know this is and much else in this series a simplification – ‘foreign’ cars often have significant US content, and ‘domestic’ cars have huge amounts of foreign content, but we’re talking concepts here rather than exact specifics, and the essential concepts remain accurate.)

Not only would this put more people back into work in Detroit, but it would mean that our balance of trade would improve – our imports would drop and our exports would grow.  We would have more money coming in to the country and less going out.  Money would become more plentiful, interest rates would drop, and so on.  One source of pressure on our currency would be reduced.

So from that perspective, devaluation would be good.  But remember – at the same time, everything we import would go up in price, and so we’d spend more of our weekly wages buying essential (imported) things – which these days is just about everything, including even basic food and produce.  That’s a bad thing.

This duality of costs and benefits is why the Chinese government in particular is happy to maintain an artificially high value of the US dollar.  The artificially weak Chinese yuan boosts their manufacturing economy.  They don’t care that their weak yuan makes imported goods more expensive, because their economy is primarily a domestic driven economy.  They don’t import much, so who cares if imported goods go up.  It is more beneficial to be selling their exports for more money, because they have a positive balance of trade.

Devaluation is one of those things that has good and bad features associated with it.  In a room full of economists, you’ll find some who strongly recommend it, and others who strongly hate it.  Economics is far from an exact science!

Devaluation might be bad, and might be good, but is unlikely to precipitate a sudden collapse in our economy and our society.  Yes, depending on the speed and extent of a devaluation, it certainly would impact on our economy, but it is unlikely to cause it to colossally collapse.

Other External Risks and Factors

There are other potential pressures on our currency too.  If foreign nations become reluctant to lend us money (which we need to finance the government’s ever-increasing annual deficits) we’d have to increase the interest rates we offered them to entice them to give us money, and that would increase business costs across the board, reducing domestic expenditures, shifting more of our GDP into interest payments to foreign countries, and hurting the economy.

It is entirely possible that foreign investors could get ‘spooked’ – investors are crowd loving and crowd following animals who like to do what everyone else is doing.  That’s why we see things like the dot-com boom, when everyone wanted to invest in internet businesses, and then the dot-com bomb when everyone realized that most of such investments were nonsensical.  The same surprisingly irrational and emotional factors can apply to the perception of entire nations, too.

It is also entirely possible that a large enough grouping of countries who hate us could group together to bring economic pressures to bear on us.  After all, that’s what we do as a matter of course against nations we don’t like – we impose ‘economic sanctions’ on them.

It was easy for us to impose economic sanctions when between us and a few of our strongly supportive allies, we controlled the largest part of the global economy.  But our share of the world economy is now very much smaller than it was, and we have fewer allies, who are in turn also getting smaller.

The demographics point to the new economic super-powers being, in the short-term, countries such as China, India, and lesserly Brazil and maybe Russia.  Those countries range from ambiguously neutral to actively hostile to our interests.

Add to that the growing Muslim activist movement in the Middle East, Asia and Africa, and the continued huge money flows going to OPEC nations (who are seldom friends of ours) and we are becoming increasingly vulnerable to orchestrated pressures by hostile nations to weaken our currency and therefore our economy.

This is not just idle speculation.  The Euro has already displaced the dollar in many countries as being the preferred international currency to trade in, and there are regular moves by OPEC to move oil costs away from being dollar denominated and to instead to use some other non-US currency measure.

Implications for Preppers

An economic collapse could occur for reasons outside our country’s control.  Other nations could act to diminish the value of our currency and to harm our ability to trade internationally.

What does that mean for us?  You should store your assets not in dollar denominated funds, but in the form of real assets.  Property and long-lived prepping supplies are two obvious choices.  Firearms and ammunition are another – both seem to be going steadily up in price, even before the current panic buying and leap in prices (but don’t buy at the top of the market pricing).

Gold and silver might also be a consideration.  If you invest in companies, try to choose companies who will have a viable business plan even if our currency shifts massively in value.

Article Series Continues….

This was the first part of our six part series on prepper economics.  Please do read on through the balance of the series :

Part 0 :  Introduction – Why Economics is Practical and Important to Preppers
Part 1 :  International Reasons Why the Dollar Will Fail
Part 2 :  Domestic Reasons Why the Dollar Will Fail
Part 3 :  Why Bartering Is Not A Useful Way of Trading
Part 4 :  The Unavoidable Need for Money
Part 5 :  A Probable Currency Evolution Post TEOTWAWKI
Part 6 :  How to Prepare for the Future Economy