"It’s better to have what you don’t need than to need what you don’t have."
The economic downturn continues to dominate the news as we enter the new year. And, since the new year is also bringing a new president, worries about the economy are compounded by worries over whether Obama will prove to be even more statist than Bush, and whether he will continue — or even accelerate — the current course to repeat the disastrous policies of Hoover and FDR.
The horrifying tragedy at a Long Island Wal-Mart on Black Friday, in which a 34-year-old employee of Wal-Mart was trampled to death by 2,000 people pouring into the store when it opened at 5 a.m. to take advantage of sales, offers a glimpse of what could be coming if the depression turns out to be worse than most expect; if some people will act like savages in response to sales on non-essentials, how might such people act if they were literally starving?
Living in an uncertain world
First, Harry Browne had two rules-of-thumb about life which are always wise to remember, but especially at a time like this, if you’re finding yourself greatly upset about any predictions you’re seeing:
- Anything can happen.
- Nothing has to happen.
No one is perfect; no matter how educated someone is, no matter how convincing his arguments, and no matter what his track record, anyone can be wrong. Neither is anyone omniscient; it’s not possible to see all of the factors that could affect one’s predictions, especially about something as complex as the economy. For a deeper understanding of this, read Butler Shaffer’s articles about Chaos Theory or his excellent book, Calculated Chaos. Several of the people predicting an imminent second Great Depression have made the same, equally-convincing predictions in previous decades — and have been wrong. Things may not turn out as bad as some are predicting.
Then again, they may turn out worse, which brings us to our second point: if you’re worried, don’t live with a vague sense of dread; identify specifically what you’re afraid of happening to you and your loved ones if things totally collapse. Are you afraid of not being able to pay your mortgage, car payment, etc? Your life savings being destroyed by runaway inflation? Stores running out of food? Riots? Next, identify the specific reasons for your fears. Where are you vulnerable? Finally, identify specifically what you can reasonably do to remove your vulnerabilities to the greatest possible extent.
What follows is a minimum checklist to get you started; we’ll address how to stock your home with provisions and secure them, as well as making plans for leaving your home due to civil unrest, and for leaving the country due to tyranny. I haven’t made all of these provisions yet myself because I don’t have the money to accomplish them all at once, and you probably don’t either. Everyone’s situation is different; more than anything, this list is intended to stimulate your thinking about what the minimum is you need to acquire to attain peace of mind.
But understand that I’m not an attorney, and I’m not advising anyone to break any law. If you have any legal questions about firearms, foreign bank accounts, or anything else pertaining to your particular situation, please consult an attorney.
Hopefully you’ll never have to use these crisis provisions. You also hope you’ll never need fire insurance — but that doesn’t stop you from buying it.
Anything can happen
1. Read Harry Browne’s book Fail-Safe Investing.
Before you do anything else, it’s a good idea to inventory and divide your assets. Fail-Safe Investing is a good start for managing your money. In the book, Harry explains his permanent portfolio, which is predicated on the fact that the future is uncertain; the portfolio divides savings into four equal parts, so they’re weighed against each other: stocks, bonds, gold, and cash. The only maintenance that’s needed is to readjust the proportions once per year. From 1970 to 2003, the portfolio only had four losing years, which were more than offset by gains in other years; the worst single year loss was 6.2%. The purpose isn’t aggressive growth, but keeping what you already have. (If you want to speculate, Harry advises only doing so with money you can afford to lose; he calls those funds the Variable Portfolio, which is separate.)
Now, where do you physically put those four equal parts, and what else do you need to do?
BEST-CASE SCENARIO: YOU’RE ABLE TO REMAIN IN YOUR HOME
Nothing has to happen
2. Have enough cash in your home, or somewhere else outside the banking system, to pay all of your expenses — including pocket money — for at least one month.
Prepare for the worst, and don’t make any assumptions. Don’t keep all of your cash in a bank; don’t assume there won’t be a forced bank holiday like there was in 1933; don’t assume that, if there is a forced bank holiday, it will be over quickly; and don’t assume that the entire banking system can’t collapse. Fractional-reserve banking is inherently fraudulent, and the FDIC’s alleged deposit insurance is nothing but sticker insurance: people believe their bank accounts are insured by the government up to $100,000 because a sticker tells them so. The FDIC doesn’t have enough funds to bail out even a small fraction of all deposits up to $100,000; a panic causing widespread bank runs would quickly destroy any illusions to the contrary. Holding several weeks worth of cash outside the banking system means you’re not immediately vulnerable to bank runs or forced bank holidays.
Your first instinct to protect yourself from theft may be to hide all of your cash. But, in the April 2008 issue of his excellent newsletter, Global Changes and Opportunities Report, Jim Powell suggested leaving a relatively small amount of cash in an obvious place to deter further ransacking or discovery of your real stash.
What constitutes a small amount is relative, but it has to be an amount large enough for a thief to be satisfied with it and leave immediately; $300—500 is probably a good range. Burglarizing a house is dangerous, and the legal penalties are severe; if someone breaks into a house and almost immediately finds $500 in cash, the odds are he’ll very happily take that and leave.
The desire to not lose anything is understandable, but once someone has successfully made it into your home, that option no longer exists; the thief is unlikely to leave with nothing. If you have several thousand dollars hidden elsewhere in the house, you should be relieved to only lose $500.
Publicly giving specific advice for hiding the real stash would defeat the purpose of even addressing it, so use your imagination; think along the lines of really hiding it, such as by hollowing out walls or removing floorboards. If you have a lot of cash stored, it’s a good idea to break it up into several different places. Also consider getting a fire safe for each stash to address risks other than theft, such as natural disasters.
Anything can happen
3. Have enough silver and/or gold coins to pay your bills for at least one year.
Forced bank holidays that keep you from your cash for a while aren’t the only danger, nor is a collapse of the entire banking system; we could suffer a runaway inflation that would make everyone’s cash worthless. In the event of a currency destruction, gold coins are for more long-term wealth storage; with a one-ounce coin currently selling for about $850, a great deal of wealth can be stored in a small space; silver coins are for daily expenses.
Coins can be stored with your cash or separately; some or all of them can also be stored at your retreat (more on that later) if your emotional make-up is such that you can relax with them stored far away, because you’ll need the retreat in the same situation where you’ll need the coins.
Reputable companies that sell coins can be found by doing a Google search.
Nothing has to happen
4. Have at least a one-year supply of storable food for each member of your family, along with water filters and/or a year’s worth of purification tablets.
Don’t assume that supermarket shelves will always be full. Many websites sell freeze-dried food that’s storable for many years; do a Google search for storable food.
It’s impractical to store a year’s worth of bottled water; even if it weren’t, that wouldn’t address other water needs, such as bathing. Search Google for water filters and water purification tablets.
Anything can happen
5. Have enough firearms to protect yourself, your family and your property — and know how to use them competently and confidently.
LRC columnist Greg Perry knows far more about this than I do; reading his archived articles about guns will give you a good start.
Nothing has to happen
6. Secure your home to whatever extent you feel is necessary to give you peace of mind.
Once you have the minimum provisions in place at home, you must consider how to protect them — including your guns, since a theft could occur when no one is home. Look into obtaining better locks, timers for interior lights, more or better exterior lights, a security system, a dog, or whatever else you need to relax.
WORST-CASE SCENARIO: YOU MUST ABANDON YOUR HOME
But what if things get so bad that you no longer feel it’s safe to remain in your home due to things like riots and looting? Or if the government crosses whatever line you feel makes it no longer safe to even remain in the country?
Anything can happen
7. If you live in or near a city, consider getting a rural retreat, or at least have a getaway plan.
If things get so bad that you no longer feel safe in your home under any circumstances due to actions of fellow citizens — like chaos and riots in response to runaway inflation — it’d be nice to have somewhere else inside the country to go, somewhere that’s relatively isolated. Just like diversifying your savings, it’s also a good idea to diversify your locales.
In his 1974 #1 New York Times Best-Seller, You Can Profit From a Monetary Crisis, Harry Browne wrote, “If the currency is destroyed through a runaway inflation, you may not want to stay where you are now. A modern community without a currency could be a dangerous place to be. Without means of paying wages, with no welfare checks, without the normal necessities of life coming into the city, the possibilities are pretty grim.
“I certainly hope this never happens. Much of what I’ve come to enjoy in life would be unavailable to me. However, if it should happen, I’m sure that I’d feel that life is still worth living — and worth living in safety.
“In addition to the runaway inflation possibilities, mob violence has already become a reality in the past few years. And I suspect that, as it becomes more difficult for most people to maintain their accustomed standards of living, such violence will increase.
“So you may consider it important to have a plan in mind for withdrawing from a vulnerable area if any type of civil crisis should occur. Such a plan is generally called a retreat.
“A retreat can be a specific place that’s been previously prepared as a place to live for a while. Or it may be only a well-stocked camper that represents mobility to you. Or it might be a boat that can take you to wherever safety is.
“Once you start thinking about the subject, you may come up with an endless number of questions and requirements. There’s no way I can answer all those questions for you; it’s the kind of program each person must think out for himself and prepare for himself. But there are a few general guidelines that can get you started. If the retreat is to be a safe place to go where you can remain for several months, or even years, here are some suggestions:
“1. It should be in an area only a few hours from where you live.
“2. It should be relatively inaccessible to others. Obviously, if you can get there, others can too. But you can pick a place, away from highways and normal streets, where no one is likely to come who isn’t looking for you.
“3. You should try to find an area in which any other nearby residents are relatively self-sufficient. It would be nice to live near people who would have little reason to turn to looting.
“4. You shouldn’t pick an area that requires that you live in a way you’re not sure you could manage. For example, don’t select a spot where the temperature is 30-degrees-below during the winter — unless you know you can handle such conditions.
“5. Within the area you choose, try to find a place that’s relatively unnoticeable, even to those living in the area.
“6. The residence should be stocked, in advance, with sufficient food to see you through at least a year (in the case of a currency destruction). In addition, the area should provide the means to survive beyond a year — the ability to hunt, fish, and/or grow food.
“7. In addition to food, the residence should be stocked with items essential to your survival: medicines, vitamins, winter clothing, provisions for heating (without normal gas and electricity service), cooking facilities, etc.
“8. You should store, in advance, at least part of your coin hoard — for that’s where you’ll probably need it most.
“9. If you can, stock the retreat with items you can trade to others for things you need. Pick manufactured items that are likely to be unavailable to others: extra canned foods, salt, sugar, aspirin, cigarettes, liquor, medicines, gasoline, tools. Choose items that aren’t likely to be readily available in that area, and are relatively easy for you to obtain now, and that will be easy to store.
“10. And, lastly, you must consider how you’ll defend yourself if it should become necessary. To me, the best defense is to create a situation that avoids all possible confrontations. But no matter how carefully you plan, you may be faced with the need to defend what’s yours.
"These are the basic requirements. Beyond that, there’s much that can be done to make the retreat more livable. Prepare it in such a way that you can enjoy it for vacations; that way you won’t need a disaster to amortize the cost.
"Once you have a structure stocked with food and other vital necessities, you can relax — assured that your minimum requirements have been satisfied. Then you can add to the retreat as you think of things and as money becomes available to spend on it.
"If it seems too ambitious a job to find and stock a hideaway, consider getting a camper or a microbus. Pack a trunk that will have the essential supplies you would need for a quick getaway. Then you can leave at a moment’s notice and you’ll at least have mobility.
"If that’s still too much to tackle, at least have a prearranged plan for getting away if it ever becomes necessary — and an area in mind to which you’ll go."
Nothing has to happen
8. Learn how to hunt, fish, or garden.
What if the crisis lasts long enough for your long-term food stores to run out? These skills would help keep you in your retreat as long as necessary, and keep you from starving while you’re there.
Anything can happen
9. Open a foreign bank account.
Just like it’s wise to keep some wealth out of the banking system, it’s wise to keep some outside your home country.
In Harry Browne’s Complete Guide to Swiss Banks, Harry wrote, "By 1934, Hans Lubich, a prosperous German businessman, understood what kind of future the Nazi government was preparing for him.
"He decided to take his family to Switzerland for a u2018vacation.’ But before leaving, he converted some of his savings into the largest banknotes available. Since Hans was a shoemaker, he hid the banknotes in the soles of his family’s shoes.
"So, despite the severe penalties for taking money out of the country, he smuggled $20,000 German marks (roughly equivalent of $126,000 in 2007) into Switzerland.
"After they arrived in Switzerland, Hans’ children went skiing while Hans went to a bank.
"The Lubich family returned to Germany after the vacation, but the oppression of Jews continued to worsen. When Hans was given the opportunity to leave the country again, he took it — but he was not allowed to take any property out of Germany with him. He booked himself and his family aboard a cruise ship to Hong Kong — buying first-class passage and every available extra, using up as much money from his German bank account as possible.
"Hans and his family made it to Hong Kong, and, eventually, to the United States. After he arrived in the U.S., he cabled his Swiss bank, instructing it to send his money to America. The money enabled him to buy a business and to begin his new life without financial hardship. Within a few years, his family was living as prosperously as it had been prior to the Nazi regime in Germany."
That’s a true story, and it illustrates the value of having assets outside one’s home country. Make no assumptions about what can or can’t happen here. As Robert Higgs thoroughly documented in his book Crisis and Leviathan, governments often exploit crises to expand their powers. None of us have ever seen as pervasive a crisis as runaway inflation, which was exactly what preceded Hitler’s rise to power; if we have such a crisis here, you can bet our government will grant itself sweeping new powers, the extent of which we can’t foresee — and you can also bet that many people will be cheering to be "saved" by tyranny.
Nothing has to happen
10. Get a passport.
Like Hans Lubich, if that tyranny comes, you may decide that it’s time to leave the country. That would be a last resort for me, but it can’t be repeated too often that anything can happen. I’d like to think, for example, that if I had lived in Germany in 1933, I also would have had the foresight to see the Nazis for what they were, and to get out of the country while I still could — and I’m not even Jewish. And, much like the Nazis exploited the fear and anger over the burning of the Reichstag to seize dictatorial powers, our federal government has given itself tyrannical new powers since 9/11. In a story that should have been covered ad nauseum by the mainstream media, but instead was barely covered at all, according to Rep. Michael Burgess (R-TX), Congress was told that President Bush would declare martial law if they didn’t pass the bank bailout package.
U.S. passports can be obtained at some — if not all — Post Office locations. To obtain a passport, you basically just need to submit a form, pay a $100 fee, and provide your birth certificate and two identical color, two inch square headshot photos of yourself taken in the last six months (many photographers offer passport photos). Google U.S. passport for more information.
Anything can happen; nothing has to happen
This advice is nothing but good, common sense. If any of it seems ridiculous, it’s as ridiculous as buying insurance. The nice thing about this list is some of them require little money, and the ones that do won’t be wasted if they’re never needed for a crisis: the storable food can still be eaten, the cash can still be spent or saved if its value isn’t destroyed; the gold and silver will still be valuable, and can continue to be saved, or can be spent or traded for paper dollars; the retreat can be used for vacations or sold; the firearms will still provide protection in an uncertain world, and the skill to use them will remain valuable; and the skill to hunt, fish, or grow food will remain valuable; and all of these preparations should provide some peace of mind and confidence — even if the original reasons for learning them never materialize.
As Harry Browne wrote in his all-time classic, How I Found Freedom in an Unfree World, "Insecurity comes from vulnerability. The insecure person relies upon protectors — institutions and people who will guarantee results for him. Because he knows intuitively that his interests can’t possibly be the paramount interests in someone else’s life, he’s vulnerable and he knows it.
"He depends on his u2018rights’ to protect him, he hopes for safety and durability from his ability to make others understand him, he clings to situations that are no longer right for him, and the constant frustrations of these situations only heighten his insecurity. He has good reason to be afraid of the world.
"Security comes from your ability to deal with the world, not from a guarantee by someone else. When you know that you’re capable of dealing with whatever comes, you have the only security the world has to offer."