Inflation or deflation?

This is one of the big questions that I see people asking these days. Everyone knows that something really bad is going on but there's a lot of debate about what's really happening. First you have to understand how our financial system works. Credit is really the driving engine. It allows people to buy things that they can't normally afford. If you only make x amount of dollars then obviously it'll take a while to save up enough money for that house, new (or newer) car or that big screen tv. You might not be able to afford to buy it outright but if you can convince someone to loan you the money then you can get it now and make payments on it over a period of time. Someone with a huge surplus of cash can take their money that they don't need right now and get a monthly income by loaning it to someone who can afford to pay back slowly over time. By the time that loan is paid back they get a lot more money than they loaned out in the first place. You have things like credit scores and past credit records that allow people who have money to loan to feel confident that they'll actually be paid back if they loan it out. It allows people who don't have the cash on hand to get the "money" to buy things that they need or want right now. The system works great when everything is working as intended.

Unfortunately, in recent years the government has stepped in and implemented systems that take away risk from borrowers to make sure that people who probably won't be able to pay back their loans can make the biggest purchase in their lives whether they can pay back the money or not. By creating Fannie and Freddie and allowing borrowers to sell the risky loans that they made to them they essentially allowed people with the capital on hand to make loans to risky borrowers and then sell those loans to Freddie and Fannie and eliminate the risk that they'd default.

By now everyone knows that the housing crisis is what has caused the monumental mess that we're dealing with today. The government basically told everyone that it was OK to give anyone who wanted money to buy a home that they had nothing to worry about by loaning out that money. It was even OK to push that loan through by any means possible via temporary, artificially low interest rates or even outright fraud. After all, the economy was doing so well that it couldn't possibly start to get any worse. Meanwhile, while it was so easy to get a loan for hundreds of thousands of dollars to buy a new house because it would assuredly be worth double that in just a few years credit card companies were seizing the opportunity to extend people thousands of dollars in credit to buy whatever they wanted to furnish those houses. Even if the person doesn't own a house what's the big deal? After all, they're still making money and even if they loan out too much they'll still get SOMETHING back when the defaulters go to bankruptcy court and all the while they'd keep getting paid by the people in houses that would assuredly keep gaining value who could just keep pulling equity out of their houses to pay their bills.

It would be one hell of a deal if it could keep working like that. It's too bad that the guarantee that the government was making by backing those bad loans is tied to our dollar that the world uses as the defacto currency. As the rest of the world watches all of these home values that our dollar is essentially backing go in the toilet they're starting to lose some confidence. Now people with money don't want to make loans to people with less than stellar credit, anymore. So the government wants to loan those people (ie banks) money at a very low interest rate so that they can take that money and loan it out again. That doesn't do much good when no one thinks that anyone will be able to pay it back, though.

So now we've got banks that are afraid to loan people money because they know that they probably won't be able to pay it back. At the same time they've got the federal government shoving money down their throats thinking that they'll take that money and loan it out like they've been doing. Why would they? Even with the full faith of the United States Government behind them they're still losing a ton of money because of all of the easy money that they were giving everyone. Banks are failing left and right and the big banks are just using the money that the government gave them to buy up those smaller banks. Now all of a sudden the government wants to buy up stock in those big banks that will probably end up surviving all of this mess?

The good news is that all of this money that's being "printed" is only really replacing the money that the big banks have lost. The government just thinks that it'll be a wash. This won't result in massive inflation. It'll result in massive deflation where normal people can't just buy a $1000 big screen TV, anymore. It'll mean that someone with no money down or a car that they financed 2 years ago that they're now upside down in won't be able to buy a brand new $40,000 car without taking a big hit. You already see cars that were selling for $30k a year ago selling for thousands less now (to those that can actually get the credit to buy them or who have a big enough down payment IN CASH to finance them). When any Tom, Dick or Harry could walk into a dealership a year ago and walk out with a new car with a reasonable monthly payment the economy was doing great because companies could keep making their products, charging whatever they cost with a decent profit attached and they'd get their money because some lending institution was willing to give any Tom, Dick or Harry with so so credit the money to buy it. Now all of a sudden that aint happening. The only recourse that the companies selling these high end products (from houses, to cars, to big screen TVs) have is to keep lowering their price until they can get SOMETHING for what they made and still have enough left over at the end of the day to maybe break even. This is deflation.

Here is where inflation will come into play. The only answer to this problem is to start giving money to the people. Obama has already made it perfectly clear that that's exactly what he wants to do. He wants to give "tax credits" to 95% of the "working class". That's funny, though, considering that 30% of that "working class" doesn't pay taxes in the first place. Another thing that I can see him doing is finding a way to make sure that anyone who wants a loan gets a loan. This will allow people to start making loans again. Unfortunately, in today's economic climate it will just empower people who can't pay back those loans in the first place to keep making loans that they can't afford in the first place. The government will just have to keep making money easier to get by giving handouts and by raising the minimum wage. This will destroy the middle class (honest, working class folks) who are just doing what they have to do to get by as it is because as the big "greedy" corporations who had to stretch themselves farther than they themselves could afford to be have to keep raising prices to keep up.

It's a vicious circle and a hole that keeps getting deeper the harder we try to dig it. This will be our ultimate downfall. We'll keep racing to keep up while other parts of the world who were already much worse off than we are see an opportunity to point the blame at us and earn credentials in the process. As the rest of the world loses confidence in us we'll continue on our decline and it won't be long before we have no other choice than to do things the way that other governments want us to do them.

Right now your best bet is to start to do the hard thing. Start scrimping and saving wherever you can (in tangibles). Make sure that your community is tight. Make sure that your food stash is squared away. Personally, I've been looking at foreign real estate but I don't make a whole lot of money and the good locations are relatively expensive (I REALLY like Costa Rica). Hopefully we'll pull an ace and still manage to stay on top despite all of the cards that are stacked against us right now. God knows that we have them with all of the natural resources that we still have and all of the rights that are granted to us via the constitution. I don't have a whole lot of faith in our "rights", though, since they're really just privileges that our government allows us until they decide that it's in our best interest to take them away. The only way to prove to them otherwise is with force and in that case we still actually have to beat them. If it ever comes to that then we're really screwed.

As far as our natural resources go it's not a far stretch to look at those as collateral. You know that foreign governments are looking at them that way. We're on top because we do have all of those natural resources. We've got the largest gold reserves in the world. We've got enough natural gas to power our country for generations if we make the necessary adjustments. We're still the bread basket of the world. Yep. Those things are all just collateral for all of the loans that the rest of the world has been making us via treasury bonds for years. When they decide that our dollar isn't worth enough to pay those back then they're going to come for our resources. Our government won't have any choice but to agree to those terms unless they want to incite a full scale war on our soil. When the world finally decides that they're sick of our shit and that they want what we've got then we're going to be hurting whether we try to fight them off or not.

Canning...old school style

Canning is something that I think any self respecting survivalist should be able to do. In most parts of the US it's impossible to grow crops year round. If things get so bad that the supply lines shut down then there will probably be several months out of the year where the grocery stores just don't have much produce on the shelf. The months when they DO have plenty on the shelf are the months when your gardens should be in full swing, anyway. The same goes for meat. Not everyone can raise their own meat animals thanks to ridiculous local laws and hunting ends up costing more than what it would cost to just buy the meat at the market at today's prices. With prices getting more and more expensive, canning is becoming all the more viable. A year ago you could fill up a pantry with canned meat and vegetables from the grocery store for half of what you can today. I went to Wal-Mart today and canned TUNA was $1 a can. A year ago it regularly went on sale for 3 for $1. This stuff is just going to keep getting more expensive.

So what can you do about it? Can it yourself! It costs a little bit to get things started but once you get things rolling most of the stuff is paid for and it becomes really cheap. A couple of months ago I decided that my garden was producing more than I'd be able to eat so I went ahead and invested in some canning jars and a water bath canner. My water bath canner was $20 and the jars were about $10 for a dozen. These are brand new prices. That was a pretty good start but it didn't take me long to realize that I'd need more. Luckily, the jars will last you forever as long as they don't break and new lids are only a couple of bucks for a dozen (stock up now). The biggest downside to water bath canning is that most recipes call for distilled vinegar which may be hard to come across during a major emergency. Luckily, it's ridiculously cheap and relatively easy to stock up on.

Once you realize how easy it is it becomes obvious that a pressure canner is where it's at. I lucked out and found an old canner at a thrift store that cost me $20. It uses weights instead of a pressure gauge and it doesn't use any rubber seals. Everything I've read on the internet said DON'T USE IT OR IT'LL BLOW UP AND KILL YOU AND YOUR FAMILY. Me being me I went ahead and tried it out anyway. Interestingly enough it works perfectly. I've eaten jars of chili that sat on my shelf for a month after the canning process with no issues. The good thing about canners that have a good metal on metal seal and that use weights instead of gauges is that you should never have to replace anything. Obviously, you have to be very careful if you go this route. If you want to be safe then get a newer model All American Pressure Canner. They start at about $200 and you're sure to end up with a high quality pressure canner that will last you and your family several generations. Replacing the gauges is the only thing that you'll have to worry about but if you're really concerned with safety then this is very important. If you're lucky enough to find a flex-seal canner that's in good shape with all of the weights in tact (what I was lucky enough to find) then I'd have a hard time not recommending it. If it was abused then it could potentialy explode in your kitchen and cause some serious damage but if you're diligent about testing it before you use it then you should be just fine.

Canning has practically become a lost art. That's a little ironic because a $10 Ball Canning book that's available at any Wal-Mart will tell you everything that you need to know, whether you're water bath canning or pressure canning (yes I'm telling you to buy this book). We've become so dependent on our economy to keep us fed that, as far as I'm concerned, you'd be a fool not to learn ways to preserve food on your own to make sure that you can preserve some food in case the economy does actually fail.

The ATF

Let's look at the ATF for a moment. It's the Bureau of Alcohol, Tobacco and Firearms. These are the three things in the economy that aren't affected by recession. The people that smoke are going to keep smoking as long as tobacco is available. I was at a cigarette store the other day. The guy was obviously hurting but he was going to walk out with a carton of something. I walked out with a box of 200 filtered tubes for $1.70. He walked out with a carton of cigarettes for $35. A few months ago I bought a pound of tobacco that cost about $20. It's still about the same price and I still have enough for a lot left. Eventually these smokers are going to figure it out and get on the ball.

I've been brewing my own beer for years. I also make wine when the juice becomes available. I have the diagrams for a simple still and I know how easy it would be to go that route if I decided to. I will always have alcohol as long as farmers are growing and selling grain. Anyone can make more than enough alcohol to get drunk and stay drunk if they just do a little bit of research. My favorite beer is still cheaper to buy than it is to brew, though, so it'll be a while before I have to resort to that.

Firearms are still accessible by just about anyone. If you're not a monumental fuckup then you can still walk into a gun store, fill out a form and buy a gun. Even if you're a bonofied, monumental fuckup and you've got a criminal record you can still find someone who's willing to sell you a gun via private party if you have any internet savy or you know how to open a newspaper and you live in a free state. I can honestly say that any time I go into a private party gun sale I try to measure up the guy that I'm selling or buying the gun from. Do you really think that the gang bangers can just throw on a polo shirt and khakhis and suddenly start talking like a normal person when they decide that they want to buy a "legal gun"? Do you even think that they care if the gun is legal or not when they have intentions to use the gun that they're buying for illegal purposes? The "legal gun" will probably cost them more than an illegal gun from some jackass who smuggled a truckload of guns across the border, anyway.

So now we're looking at three of the major industries that will do well in a bad economy. People will smoke whether the economy is good or not. When things start to get worse people start looking for people that know how to make some booze. When things start to get so bad that the government doesn't even matter anymore then the firearms that are already in the hands of normal citizens will start to worry everyone who are still trying to figure out how the government lost power in the first place. With all of this in mind I can understand how the ATF got so much power in the first place. They have quite the monopoly on the three parts on the economy that don't actually care about the economy in the first place.

Inflation, deflation and printing presses

A lot of people seem to be confused lately by what's going on in the economy. I am most definitely among them. When you stop and take in the big picture, though, then some of the actions of the government start to make some sense. Obviously, we have a fiat money system as does the rest of the world. There are a lot of reasons for this which I don't really feel like getting into. Basically, though, we were forced to switch to a fiat system because, at the time, the rest of the world was moving towards doing the same and if we hadn't done it then the rest of the world would have been able to purchase our gold backed dollars with their fiat money and then cashed them in, thereby stealing all of our wealth. I read somewhere that South Africa has recently stopped production of krugerands. Do you really think that most of South Africa's krugerands are still in South Africa?

Thanks to a relatively recent and massive furthering of technology our system has become increasingly globalized. With the advent of the computer, the internet, databases and information technology in general it's become easier and easier to separate the money supply from the credit supply. You can deposit your paycheck into a bank and the bank now gets to spend $10 for every $1 you deposit. Recently, you could spend $10 on a share of stock and watch with glee as the value skyrocketed in a few years. Even if the stock shot up to $500 that money was never added to the money supply until you decided to cash it in, though. When it suddenly dropped back down to $5 before you decided to cash it in then only $5 was added to the money supply.

So now we've got the MOAB (thanks Rawles) going on. Hundreds of billions of dollars are now being pumped into the economy. Where is that money going, though? It's not being printed. Physical dollar bills aren't being printed and handed to anyone. As wall street is collapsing and home values are plummeting the government is just trying to supplement the banks' balance sheets by giving them "money" that won't ever reach the hands of the average person. So while the value of your house goes from $200k to $150k the government is just trying to make up the difference so that the banks feel confident enough to loan some money to other banks. Money is the lifeblood of our economy. Once it stops flowing then the body dies. The idea is to stop the banks from losing money so that things get stimulated again and the values of homes and wall street once again start to increase. It aint working so good, though.

Inflation won't start hitting us until Obama decides to implement his stimulus packages. When every Tom, Dick and Harry on main street suddenly has a few extra grand to blow then we'll really start to see inflation rear it's ugly head. Do you really think that people are going to run out and buy a big screen TV or put a down payment down on a brand new car when they're not sure if they'll be able to feed their families in a few months? When consumer confidence is at the point that it's at now the last thing that you want to do is start handing people money. It'll only take a few stimulus packages until everyone in America has real cash that was literally printed and handed to them for us to be standing in bread lines with wheel barrows full of cash hoping that there will be enough left for us and our families when we finally get to the front. On a lighter note gold and silver are both pretty cheap right now. Spot silver is almost at the point where it was at before all of the economic turmoil started to show itself. Good luck finding someone willing to sell physical silver (or gold) at spot price right now, though. Expect to pay at least $15-$20 an ounce for silver and $1000 an ounce for gold.

A bailout rant

I don't post many rants but every once in a while I get annoyed enough with what's going on that I just can't help myself. I can't believe how lazy people are. This country is so well off and so successful that we can't imagine what we'd do if we actually had to TRY to get by. The poorest people in the country live better than the "well off" people living in third world countries. There's enough money floating around to support millions of workers who do nothing but sit on their ass all day and push buttons. Then they have the gall to bitch about how much their job sucks. They're also shocked when their job is shipped overseas or they're fired because of "budget cuts". This entitlement mentality is what's destroying this country. The politicians are certainly helping but you can't put all of the blame on them. There are most definitely some legitimate, hard workers that are swept up in all of this mess and are hurting because of what's going on but those are the people that will, 99% of the time, bounce back and recover.

My mother in law is a 60 something retiree. She skis damn near every day in the winter and hikes almost every day in the summer. She's in better shape than I am. She's got a masters degree. She owns her house outright and takes multiple vacations every year. One day we got on the subject of social security and when I suggested that we just get rid of it she looked at me like I'd just smacked her in the face and said that she'd never be able to get by without it. When my wife was growing up she remembers her taking the occasional substitute teaching job but otherwise she lived the same lifestyle. This is the mentality of the typical American. Everyone wants to live the easy life but no one wants to work for it. That's how it's been for half a century so why should we change anything now? They look to our politicians to make sure that this lifestyle is maintained.

Winston Churchill was right. The best argument against democracy is a 5 minute conversation with the average voter. Most people are retarded. Most of the people who aren't realize this and just do what they can to make sure that they and their's can live comfortably. The people who are in a position to actually make a difference and pretend to care about the average joe are already incredibly well off and will never "give till it hurts" to make sure that the people that they "care" about get a helping hand. Stop worrying about everyone else and start worrying about yourself. Educate yourself. Work hard. Make sure that YOU and YOURS are taken care of. Become exceptional at what you do. Be able to do something else if what you want to do doesn't work out for you. If everything goes to shit and your neighbor decides that he deserves what you've got more than you do then be willing and able to prove to him that he doesn't one way or another.

I say let the cards fall where they will. We'll see hard times one way or another. The question is what position do you want to be in when the cards are falling and after we start to pick up the pieces? The harder we try to prop things up the farther we'll fall when everything crashes. The last thing that I want to see is for us to stave off another crash just long enough for the politicians to make sure that honest people who are willing to protect themselves when the government can't do it for them have no means to. We need to be honest with what REALLY caused our biggest problems and have systems in place to make sure that it doesn't happen again when we start to rebuild. We need to stop relying on other people to do everything for us. Unfortunately, thanks to shit like political correctness and greedy assholes posing as philanthropists that always seem to gain a lot of steam when most of the population is well off I don't see how we can ever stay successful forever. Human nature is a bitch.

Silver and gold in SHTF

Sorry I haven't posted in a while. I've been busy with the garden, work, etc. It took a sprained foot to get me to sit down long enough to make a post. I was walking barefoot to the car last night, stepped on a rock and my foot slipped off of the sidewalk and rolled into the grass. It's not bad. I didn't even bother going to the doctor. Why bother when I had the same stuff to treat it that the doctor would have given me (minus the expensive x-rays of course)? It's just swollen and I can't put much weight on it. If it's still bad in a few days then I'll go get it checked out but it feels a lot better even since this morning. As far as real preps go I bought a canner a few days ago and have been experimenting with that. I canned some pickles the other day and I made some cucumber relish today. I'm probably going to can some green tomatoes pretty soon since it's going to freeze before all of my tomatoes get ripe enough to pick. I wish that more than one green bean plant would have survived and started producing. I was looking forward to canning up some of those. I found a dutch oven at a thrift store the other day for $4. The lid is too big for the pot but it does sit flush on top of it so it should work. I've been taking advantage of the silver and gold dip as much as I can which leads me to the post that I had in mind.

With all of the economic turmoil in the news there's been a lot buzz about gold and silver once again. I'm still trying to figure out why it hasn't shot up through the roof. Try and buy a gold eagle right now on ebay or at a local dealer and you'll probably pay 10-20% over spot at the very least. Since I don't have the money to spend on gold I've just been sticking to silver bars and junk silver. I have been thinking hard about buying some 1 gram gold bars and 1/10 ounce gold eagles since I can see gold being much more liquid in the case of an economic collapse. As far as I'm concerned silver is just "poor man's gold". It'll pay to have some but if you want to get serious about pms then you definitely need to have a good stash of gold. If you've got a ton of silver that you've been collecting over the years then it might be wise to trade some of it up to gold.

This leads me to another point that Ryan over at TSLRF mentioned a day or two ago. How much do you need for it to be worthwhile? Like any other prep some is better than none. You could spend $50 on a 50lb bag of rice and a 25lb bag of pinto beans that you just tuck away in your pantry and forget about and you'll be better off than 90% of the population. Even if all you do is save the junk silver that you find in change it might be enough to feed your family for an extra week or so when the credit card machines get shut off, the banks start closing and you have to wait for your FDIC check. In the case of hyperinflation, where a wheelbarrow full of cash barely buys a loaf of bread, you might be able to sell that handful of silver change for enough to feed your family for a week. Meanwhile, that stash of cash that you have on hand to pay your bills for a month might not even be enough to buy anything worthwhile. Rule #1 about precious metals investing: over time PMs hold their value. They're never worth nothing and they're not necessarily great investments (unless you started buying several years ago when they were horrendously undervalued...if only I'd known what I do now). So how much is enough?

It's hard to say how much is "enough". If you've got a lot of disposable income and your preps are otherwise squared away then right now is as good a time to buy as you'll see anytime soon. If things don't get better and the government doesn't find a way to fix the mess we're in then everyone is going to wish that they had more PMs. You've just got to hedge your bets and come up with a happy medium that ensures that you're not hung out to dry if things don't go the way that you thought they would. Keep in mind that the government doesn't really have to fix anything properly. They just have to convince the majority that they did and restore confidence. Confidence and energy are the two most important aspects of our economy. We've still got enough energy to get by and if they manage to restore confidence then it'll just mean that we have more time before we run out of energy and everything really does go to shit.

You definitely don't want to buy more than you can afford. PMs are the LAST thing that you want to concentrate on in regards to preps. Once you're reasonably comfortable with the rest of your preps then it's time to start buying PMs. Things are uncertain right now. If you save a certain amount of money every month then right now would be a good time to spend that money on silver or gold rather than putting it in the bank or investing in the stock market. I've considered taking all of my money out of the stock market and turning it into gold. The dividends on the stock that I have left are very good and the company that I'm vested in is rock solid, though. I even toyed with the idea of liquidating my 401k to buy some gold and silver. Things haven't gotten bad enough for me to consider that a wise move yet, though, because of all of the penalties involved. I could take it all out and buy a bunch of gold but what if things do turn around? I'll tell you what will happen. Gold will once again make a correction and be worth a lot less than what I spent my savings paying for and at the same time the stock that I used to have will shoot right back up. I'm not a gambling man. If things don't get fixed then you can bet that gold and silver will go through the roof. If the government does figure out a way to fix everything then they'll probably drop right back down to "normal" levels. Then I'll just wait patiently until I see another downturn coming and I'll dump my stock when it's high and buy a ton of PM while it's still low. At this point I'm just watching the market closely. I'm prepared to act fast to dump my stock and run to the coin store or ebay asap if I see something that I deem as bad enough to act happen.

So the government doesn't come through. The stock market crashes. Inflation goes through the roof. While everyone else stands in the checkout lines begging for a gallon of milk or a box of cereal that they can't afford you confidently walk the aisles picking up what you need with a pocket full of silver that everyone is obviously desperate to get since it's shot up to $200 an ounce. The cashier finishes ringing you up and tells you what you owe. You smugly reach into your pocket and count out what you owe based on the spot price of silver. When you try to hand it to the cashier she just gives you a stupid look and refuses to sell you anything. Outraged you fight with the cashier and demand to see the manager. That doesn't go any better so you angrily storm out of the store with none of the products that you need. This is probably going to be the scene if you ever try to walk into a store and buy anything with PMs no matter how bad things get. If the stores are still open then cash is still king. Before you go running to the store you'll have to take your PMs to the local dealer and get cash for them before you can expect to do business with the average person. Eventually some enterprising individuals might start accepting PMs as payment but you can't expect that to be the norm. Also, it'll get to the point where how much you get for what you're trying to sell will be based more on what you and the person buying deems it to be worth than how much the "spot price" happens to be that day.

If the stores are still open then it's not a complete collapse. If things get so bad that the country is a warzone, the stores are shut down and people are raiding their neighbors for what they need to survive then having PMs won't do you a bit of good. Eventually society will start to reestablish itself, though, and if you manage to survive that long then gold and silver will be the first store of wealth that people start accepting as payment (besides practical trade items like food, ammo or comfort items). Do you really want to lug all of those cans of coffee or bags of beans to the local trading post? Ammo might be worth a lot but you never know when the guy that you just traded it to might decide to give it back to you from the barrel of his gun because he thinks that he'll be able to get everything else that you have.

More on Loose Change

Several months ago I did an article about saving your change. You remember the one. Don't spend your pennies or nickels. Keep a lookout for silver dimes and quarters. Yeah, that one. One thing that I neglected to mention was how to easily identify silver coins. Once you've got all of your coins separated there's a quick and easy way to find the silver coins without checking each individual date. Newer coins have brown edges because the middle is made up of copper. Silver coins are all silver on the edges. Just take a bunch of them and look at the edges like so.



The silver ones will stand out like a sore thumb. Sorry for the crappy pic but it's pretty obvious which coins are silver and it's very easy to see how dramatic the brown is on the newer coins. Every once in a while you'll get a dirty silver coin that looks like it's brown or a brand new one that looks silver. Just check the dates on the coins that seem suspect.

Ever since silver went through the roof a couple of years ago I haven't been finding silver coins in change nearly as frequently. Just a few years ago I'd go through my change pile once every couple of months and pull out at least a couple of quarters and a small stack of dimes. It's been over a year since I've even found a silver coin in change. I don't let change pile up like I used to, though. If you've got an old change jar that you've been filling up since you were a kid or a relative dies and there's a change jar sitting in their bedroom then it would definitely be worthwhile to go through it. Even with your chances of finding silver being so low this method is so quick and easy that it takes away all of the hassle.