February 26, 2017

A Practical Look at the Economy and What You Can Do To Prepare

I was recently sent an email from fellow Prepared Christian Jeff, asking if I would give my thoughts on the economy, debt and how scripture may tie into it. First, thanks Jeff for the email! Second, I’ll say that I am, by no means, an economics expert. I could only give a novices explanation to the workings of the stock market, or how the economy of a country works. I am, however an expert at threat analysis and troubleshooting in general. While I do think I could do wonders to fix the economy, nothing I say will have any impact on a national level. But I also have some ideas that could help you and your family get out of debt, put more money into your pockets, and build an emergency fund.
 
 
At a National Level

The truth is that nothing I say in this segment matters to the extent that we can do anything about it. It is important to understand how and why things will trickle down to the point where you will feel it.

I don’t want to get to political, but we can’t discuss our national economy and our debt without wading into politics. I used to be someone who thought the person we voted for would have some impact on the economy; no longer. I have used this analogy before; our economy lies in a coffin, one party is pounding in nails slowly but steadily with a hammer. The other is frantically putting them in with a pneumatic nail gun. While one might be doing the job slower, they’re still putting nails in the coffin.

President Bush increased the national debt a huge amount with the start to the wars in Afghanistan and Iraq, and the creation of DHS. This was made to look like child’s play by the staggering amount of debt the Obama administration has created. From the continuation and eventual withdrawal of the war in Iraq, to the ongoing war in Afghanistan, the various militaristic involvements, to the untold number of social programs and on and on and on. Not to mention QE 1, 2 and 3, and Obama care. We have more American’s on welfare and disability than ever before; there are 20 million people that cannot feed themselves without some form of government aid. Some could argue that this was done on purpose, research the Cloward Piven strategy.

I could go on and on, but the point is that in the last fifteen years the value of the dollar has decreased significantly. The country has taken on debt that, if we stopped spending today, would probably still take my great grandchildren to pay off. But that won’t happen. I believe each President for the last fifty years has spent more than his predecessor. Instead, we’ll keep digging the hole deeper and ask China and other nations to help remove some of the dirt from time to time.
 
 
At a Local Level

How can this affect you? I’m not one who believes in the impending economic collapse that will see societal collapse and WROL (Without Rule Of Law) overnight. Instead, I think it will be a slow boil. I believe it is only a matter of time until we see another recession. I think that this one will be harsher than that of 2008. Federal dollars will have to stretch further due to the above mentioned incurred debt, so cuts will need to be made.

These cuts will be to federally funded programs, some in terms of money given to states, and others in forms of cuts to social programs. If less federal dollars are coming into the states, the states need to make cuts, thusly will the cities.

When we see a recession, we obviously see unemployment rise. We’re not in a recession now, and I am seeing more local businesses fold then I am seeing open. When we do see a recession, this number will rise. If you would like a few ways to judge the health of your local economy, I wrote an article called Signs of a Slowing Local Economy.

In the last five years I have seen some reports that cities are no longer having street lights on after certain hours. Police have said they won’t respond to certain crimes and won’t ticket or arrest for others.

We’re also seeing more and more young adults living with their parents. I think the main reason for this is that the jobs they are able to find aren’t paying enough for them to afford living on their own. I have read that the unemployment rate for people in this age group is nearly three times what it is for older workers.

These items might seem unrelated, but let me tie them together. We’re not currently in a recession, and there are several municipalities making cuts to basic safety features. Many small businesses are closing their doors and we have many college-age people living with their parents because they are either unemployed or underemployed. All of this is occurring during a “stable” economy.
 
 
The College Bubble

Here is an article that will explain the College Bubble better and in more detail than I. Here is my quick and dirty explanation; federally backed student loans are handed out to just about anyone. Colleges are continually raising the tuition costs; I wish someone could explain to me why it costs more not to teach someone about a topic like computer programming than it did ten years ago. Student loan debt is over 1 trillion dollars and, according to the linked article, has surpassed credit card debt.

I see enough similarities to the housing bubble to believe it will pop. When it does, enrollment will drastically decrease, causing schools to lower tuition or close. In both cases, cuts to staff and salaries will be made. I also agree with the article that it will be much harder to get a student loan.
 
 
Debt

I hate debt. In fact, I think it steals from ones future; and you should too. This isn’t to say I don’t use it, I just avoid it at all costs. I saw statistics that say the average household has from $7,000-$12,000 in credit card debt alone. If you could pay $100 toward your credit card debt each month, it would take almost six years to pay off $7,000. Unfortunately many of us who use credit cards can only afford to pay the minimum payments. I bought into this trap in my early twenties. I bought a computer for $2,500 and made the minimum payments. It took me seven years to pay that off.

The Bible lists the word debt in less than ten verses. My favorite is this one from Romans 13:8:

“Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.”

Biblical times didn’t look at debt like we do. Back then, if you had a debt and you couldn’t pay when the debtor wanted to collect, you could be sold into slavery until the debt was paid. Now this isn’t the kind of slavery we had in America. It was more like indentured servitude. An indentured slave would work until their debt was paid off. I don’t know this for sure, but I would imagine that the cost for room and board would be added to their debt, increasing the amount of time they might need to work. Keep in mind, it was Jewish custom to forgive the debts of fellow Jews (I believe) every seven years.

If you’re currently living a lifestyle where you use your credit cards frequently and are sporting hefty debt, you might not see it as slavery. But I bet as soon as you decide you want to be debt free you will be.
 
 
What Do I Suggest?

It’s not my place to tell you what to do. Instead, I’ll offer my suggestions. First, you have to want to get out of debt and decide to only spend what you have, as does your spouse if you have one. Along with this, Tithe. If you don’t have a church you want to give to, find a Christian organization to give to. Give God what is His, and let Him bless you in return.

Next, I would work on an emergency fund before paying off the credit cards. You need to be able to pay for the things that go wrong without going into more debt. I think enough money to pay one month’s bills makes sense. This way if there is a major car repair, or you’re hurt and can’t work for a few weeks, the bills are paid.

Now, I would pay the minimum on all cards, then pick the card with the smallest outstanding balance and throw as much “extra” money at it as you can. Once it is paid off, use all of that money to pay the next smallest one, and so on until all cards are paid off. I haven’t looked into him much, but I believe Dave Ramsey has a similar approach and I know some of you have had great success with it.

So, you’re debt free. Now what? Now I think would be a good time to do two things; pick a more expensive prep, save up for it and purchase it with cash.

Don’t hesitate to hold cash. I know some people believe cash will be worthless overnight. The only scenario I can see that in is a total grid down event, and even then it would hold its value for a time. Now that I think about it, in this scenario and many others, cash will still be king, at least for a while. People know its value, they believe it is worth what it is stamped with and transactions can be done without power.

It is a good idea to keep some cash at home, or in a safe deposit box. I also keep a small amount of emergency cash on me. In fact, they are the same bills I originally started carrying. I consider this money only to be spent in dire situations.

I think saving for retirement is a good idea. We have no idea when or if the economic “meltdown” is coming, or what shape it will take. I know some of you believe the fed will seize all assets in 401K accounts. I just don’t see it. I think there would be blood in the streets and they know it. I can’t even imagine what creative ways they would use to come after more of our money, but I do think that they would do it going forward, not taking money that has already been saved.

Once you are debt free and have your preps squared away, you could work on both barter items and learning skills that you could barter.

This would also be a good time to invest in precious metals, if that is of interest. I think it is a good idea. I wrote a two part primer on precious metals, part one and part two. I see gold and silver as currency that has held its value over time, that can be used to barter. I don’t hold it as an investment. I see it the same as paper money but with a stronger run in terms of holding value.

One other big ticket item you may consider is a BOL (bug out location). This is a goal of mine; a piece of land I can do some permaculture on, use as a vacation spot, and BOL if ever needed. Does this mean more debt? It might. We will have to pay cash for raw land or take a mortgage for land with a structure. If this is my only other debt besides my current mortgage, I think there is more than enough upside to take on the additional debt.

The last thing I will suggest to do once you are debt free is to save up and treat yourself in some way. Life is more than prepping, working and saving; as long as we don’t go into debt for it, splurge a little.
 
 
Final Thoughts

The point I am trying to make is that there is plenty to be concerned about when it comes to the economy. Watch for national signs, and especially local signs because these things never happen overnight. The best thing we can do now or if things really go sideways and we do see a complete economic collapse overnight, is to have our financial house in order.

 
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Tidbits Three, Giveaways and Some Important News Stories

Today I want to cover several small topics that I think might interest you but are too short for their own blog post; from giveaways to important news stories.
 

Threat Journal Giveaway

AlertsUSA Threat Journal is giving away a 6 month emergency food supply from Wise Food Storage. No purchase is necessary. Just subscribe to their newsletter using the signup form on their Facebook page. The drawing will be held this summer.

 

The Preparedness Review

The second edition of the Preparedness Review is now available as a free download. It is packed full of great information throughout its seventeen articles and over 76 pages! To download, you can either directly here, or you can visit the Preparedness Review to view the full release notes. Below are the names of the authors featured in this edition.

•Chris Ray
•James W. Rawles
•Ray Gano
•Creek Stewart
•Dr. Bones & Nurse Amy
•Tess Pennington
•David Safewater
•Joe Nobody
•Gaye Levy
•Daisy Luther
•Erich
•Gary Griffin
•John Beck
•Jeff “The Berkey Guy” Gleason
•Brandon
•Michael Bunker
•Chris Newman

Green Houses.pro

Green Houses.pro has kindly offered members of the Preparedness Club a 10% discount. Here is a little info about them:
“Proud builder of the World’s strongest residential greenhouses. Made from 2-1/2″ square galvanized steel beams. Able to withstand 100 MPH winds and built to last for generations. Each greenhouse is custom fabricated to every customer’s specific needs and desires yet still priced affordably enough for anyone to enjoy. We install greenhouses in the lower 48 states and can ship kits as well for those do-it-yourselfers who want to save a few bucks.””
 

News Events

North Korea
The news about the tensions between the US and North Korea seems to have cooled off since the Boston Marathon terrorist attack but I don’t believe the actual tensions have. Here is an article from Forbes.com called The Ultimate North Korean Missile Threat To America: A Nuke Power Grid Attack.. I won’t go into detail on the article, but it does a very good job at explaining what the threat is and what the White House and the DOD are doing about it. While there are some saying North Korea is just saber rattling, the article quotes an expert on North Korea:

“Victor Cha, a specialist on North Korea at the Center for Strategic and International Studies, sees the matter quite differently. “North Korea’s ballistic missile and nuclear threat is very much a near-term threat. For people to say it’s just bluster, well, the bluster may be harmless, but the steady progression in their program is not harmless.”

Finance

There are two articles that I think are very important. If you have any money in banks, I recommend you read them.

The first is called No Bank Deposits Will Be Spared from Confiscation. It does a great job explaining why money in a bank is not safe from confiscation. The article explains it far better than I can even summarize. The second article called,explains why the Cyprus style confiscations will happen again.

Why does this matter? China. China holds an incredible amount of American debt. Keep in mind that it was not Cyprus that wanted to confiscate money from bank accounts. It was the EU who had been bailing them out and owned their debt.

While true that the FDIC does insure deposits, banks hold very little cash on hand, usually less than $5,000-$10,000. If people wanted to rush to the bank to get their money out before a confiscation, they would run out of money quickly. If this happened at multiple banks, the FDIC couldn’t afford to pay it all out.

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What would you do: Stock Market Crash and Bank Holiday

Disclaimer: I pay attention to the overall economy but I don’t invest in the stock market and don’t follow it closely. I may use the wrong terms here but you should get the over all idea.

On Monday morning the stock market drops 500 points and another 200 hundred Monday afternoon. Tuesday sees a bloodbath of losses, over 1000 points, and markets around the world are all losing ground. On Wednesday things look like they may be turning around with a gain of 200 points. That is, until early afternoon when one of the largest stocks ever plunges 1200 points prompting authorities to announce that the market will be closing early and will be closed until next week to give them time to correct the situation.

This causes a panic and many people storm their local banks, taking out as much cash as they can. Several fights have broken out at ATM’s as they are quickly bled dry. A bank holiday has been called until early next week; the FDIC has assured people that they will have their money available at that time.

So, what would you do?

(Check the comments section to see the answers from everyone as well as to add your own.)

 

 

Preparedness Tip: Homemade Laundry Soap

I came across an article on making laundry soap and mentioned it to my wife. She looked into it and decided to give it a shot. Follow the link to see how to make laundry soap. with pictures included. I’ll just give you my thoughts.

For under $20 my wife was able to purchase enough supplies to make enough laundry soap to last us roughly a year and in my guestimation we spend around $100 on commercial laundry detergent. (for reference, there are my wife and I and two teenage boys)

We used it for roughly 2 months and stopped because it didn’t get the clothes as clean as commercial detergent. In the FAQ section of the site explaining the process, she mentions that some commenters have said they double the amount of Borax, which makes it clean more thoroughly. We did not try that.

My wife also didn’t care for the smell, but you can add things to change it.

We have an HE (High Efficiency) washer and did some research before using it. I was able to find a few people who had tried it and had no issues. We gave it a shot and had no problems. In fact, my wife heard that homemade laundry soap is actually better for HE washers, as it doesn’t create the suds that aren’t good for them.

We kept the ingredients and will use it if things get ugly, but have continued to use commercial detergents since going back.

If you’re looking for a way to save money, this might be of interest, if you try it let me know how it worked for you.

 
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Primer for Precious Metals (part two of two)

What Types Of Precious Metals Should You Buy?
This is really two questions; which kind? and in what form can/should you purchase precious metals? Wikipedia has a good explanation of precious metals and it explains bullion as:

“Precious metals in bulk form are known as bullion, and are traded on commodity markets. Bullion metals may be cast into ingots (bars), or minted into coins. The defining attribute of bullion is that it is valued by its mass and purity rather than by a face value as money.” The (bars) was added by me.

To answer the first question about the kinds of precious metals that are available to purchase, there is gold, silver, platinum, rhodium or Icantafforditium to name a few. For a few reasons it is my opinion that silver and gold are the best choices. They are easily recognized, so that the layman can recognize them and have some idea as to their worth. Secondly, until this year, when the price of gold skyrocketed, they were much more affordable. Silver is still considerably cheaper. In my opinion gold has enough other reasons to make it a better choice than platinum or rhodium.

The second question is in what form should you purchase bullion? I have read opinions on preparedness sites and forums and have seen people say they are storing gold and silver jewelry, bars and coins. When it comes to coins there are two types of denominations. The first comes in tenth ounce, quarter ounce, half ounce and one ounce. Then there are pre-1965 coins. These coins were 90% silver. I have seen pre-65 coins available in a wide range of options.

Unless you’re wealthy and going to invest in large amounts and buy bars, from a preparedness standpoint coins make the most sense to me. They are easily bought and sold both on-line and in coin stores. One of the reasons prepper’s buy PM’s is in case the economy fails.

One of the questions I have seen asked is “what do we do with it then?” It’s a fair question and in part my answer will be conjecture, as, in our modern economy American’s don’t (in large part) use gold and silver as currency. However, I have read a few articles written by people in other countries whose economies have collapsed and often gold and silver are used for barter. I read an article from a gentleman in Argentina that said that after the collapse of their economy (after 2002) there were black markets where you could trade in PM’s. As things stand right now, I know I could take a gold Eagle and sell it at a pawn shop, take it to one of many “I buy gold” stores, a few jewelry shops that buy gold and a coin store. Silver might be harder to sell, but not much.

It can also be used as currency itself. Let’s say that the economy is really bad and the dollar is worth 25% of what it is today. You own a potato farm and I own a chicken farm and you come to me with potatoes wanting to trade. I don’t want any potatoes but if you happen to have an ounce of silver. I can trade for it and use the silver to get .22 ammo or something else I need.

The other benefit of coins is that, because they are minted, it’s harder to counterfeit them. I read a story about gold bar’s being hollowed out and filled with another metal. A one ounce gold coin is pretty small so I’m not sure that would be possible. If it was, would it be worth it for the small amount of gold you would be able to hollow out? I’m not sure this is a huge worry for bars but just another small point for coins in my mind.
 
 
Dangers of Owning Precious Metals

Precious metals like any investment can lose their worth. As I have mentioned, they have always had some value. I have covered confiscation and not being able to use it as currency above and in part one of this article.
 
 
Hyper-Deflation

Since gold is a hedge against inflation or hyperinflation, in a hyper-deflation scenario, the gold is worth little and cash is strong. I’ll be the first to admit that I am no economist, but this scenario doesn’t seem likely.
 
 
How Much Should I Invest In?

That is something you are going to have to answer for yourself Here are a couple things to think about. How are your other preps? Do you have at least 3 months “eat what you store” food put up? What about water purification, BOB’s, self-defense or other preps? I do think having PM’s is a good idea, but not at the cost of your overall preparedness.

If your other preps are squared away and your family can afford it, I think 5-10% of your overall investments are a good idea. As far as kind, at the time I am writing this article gold is at $1663 an ounce and silver is at $32 an ounce some of both is a good idea, but silver is so much cheaper.
 
 
Gold and Silver Parity

Gold and silver have usually gone up or down at a fairly close pace to each other. If gold goes up 10%, silver does too. A year or so ago, gold started climbing and silver only rose slightly. That can only mean two things; either gold is overvalued and will come down or, silver is undervalued and should go up. Take this with a grain of salt; I have seen predictions of silver being over $200 an ounce. Even if it doesn’t go that high, in my opinion, silver is a safer option.
 
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Primer for Precious Metals (part one of two)

A reader and new friend recently asked me about precious metals. I don’t claim to be an expert in PM’s (precious metals). In fact, I have only recently begun to invest in them. However, I have been researching them for some time, mostly so that when I did purchase them, I made informed decisions. As I said, I am not an expert in PM’s or in the economy in general If I make any misstatements please let me know and I will correct them.
 
 
Why Invest in PM’s?

There are many reasons people invest in PM’s. One such reason is that precious metals have always had a value as currency. Many people use PM’s as a hedge against inflation. The value of gold is static. As an example; 100 years ago, an ounce of gold could buy a high quality suit. Today you could still get a high quality suit for that ounce of gold. The value of the gold remained the same. However, the value of the dollar is worth less today than it was 100 years ago.

Another reason some people invest in PM’s is that gold and silver coins are universal. Whether the coin is an American eagle, South African Krugerrand, Canadian Maple Leaf or another countries’ currency, an ounce of gold is an ounce of gold. If you have to go to another country, you could easily carry a small fortune in gold coins relatively unnoticed. The ounce of gold will have value, even if it is in another countries’ denomination, whereas the paper dollar might not.
 
 

Things to Consider

Ways to Invest In Precious Metals

There are ways to invest in gold; ETF (exchange traded funds), mining stocks, IRA, etc. The purpose of this article relates to ownership. If you buy gold take ownership of it. Don’t just get a certificate saying that you own it. I have read about companies that were selling gold certificates for gold that they did not have.
 
 
Online or in Person

Since you’re going to take possession of it, should you purchase it online or in person? This is a personal choice. I suggest you research the company you plan to purchase from. There is one reason to purchase in person and that is paying cash, if you can find a local dealer that will take it. The reason for this is the lack of paper trail.

President Franklin D. Roosevelt issued Executive Order 6102 forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States.” There are individuals who think that since it was done once, it could be done again. I don’t know if this is a rational concern or not, here are my thoughts;

We live in a different age. I can’t see many Americans today selling their gold at a debased rate of possibly 10-25% of the price they paid for it. I however would like to see them try to get it out of all those gangsters’ teeth! (haha)

For confiscation to be effective, they would have to count on Americans turning in the gold. The last time, many people sent their gold to other countries to protect it. It would be much easier to go after people’s 401k’s or other electronic investments. They could implement a tax on retirement funds and your investment company could send them the payment, all without your being able to do anything about it.
 
 
IRS Form 1099

There is a post on the Investing Blog that explains this better than I could. It says that “Starting after December 31, 2011, the 1099 will function as a tax form for ALL business to business transactions of over $600.”

Here is why this matters for precious metals:

“One industry was quick to turn against the new 1099 provision, the physical gold bullion dealers. And while they may have been very loud, and very “extreme” about the law and its effects, they did have a very good point: this law affects individuals as well.

You see, any and all transactions with a business are to be documented with a 1099-Misc form. Thus, if I were to walk into a coin shop after the law takes effect, it would be required of me to fill out a 1099-Misc and leave my tax identification number (my social security number) to sell the proprietor a single Krugerrand.

And while it is easy to defend the law on the basis that many companies and sole proprietors do have a “DBA” (Doing Business As) tax identification number, individuals are almost always dependent on their social security number.

To further drive the point: a number of states and municipalities require gold dealers and coin shops to copy the license of anyone selling gold or silver of a certain threshold value.

Consider, for just one moment, the possible dangers of giving someone your license (which has your address) and on a 1099 your social security number. Sounds like identity theft.”

After this change takes place, fractional gold coins or silver with a cost of less than $600 or silver might be your best option.
 
 
Spot Price

The spot price is the current price at which a commodity such as PM’s can be bought or sold at a specified time and place. You can expect to pay a bit over spot price, for handling fees, etc.

Primer for Precious Metals (part two of two)

 
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