Note from JWR:

Today we present another Retreat Owner Profile, which will soon be added to the Profiles static page. BTW, we still have room for several more international profiles (outside the US). I am saving the last few slots in the US profiles section for people that have very unusual home/retreats. Perhaps someone that lives in an underground house, or someone that lives aboard a houseboat. If you decide to e-mail us your Profile, please closely follow the same format used in the the others. For your privacy, be sure change enough details so that your neighbors won’t recognize you. (You can even change the locale to another state with a similar climate).

Retreat Owner Profile: Mr. and Mrs. Dulce in Chile

70+ acre Chilean Retreat, plus a 1,500 acre cattle grazing permit.

Ages: 43 and 41, and one child age 3

Background: Family is from upstate New York, dairy farmers. I grew up in NC, history major who went into the Army as an aviator. Spent time living, travelling, and working in over 50 countries. Separated from the army as a Major and went into investments. Retired to Chile in the 2000s.

Why Chile? – Chile is the best kept secret in the world. A strong democratic country with five major political parties, Chile is very stable. Chile has lived thru the tough times when a communist leaning government threw the country into chaos, and a military government took control to restore things. Chile has seen what social disorder can do to a country, and that memory influences the country today. The country runs a budget surplus (Chile is the world’s largest producer of copper), has privatized social security accounts for each citizen, uses its resources very conservatively, and has the lowest level of poverty in Central and South America. Chile uses its budget surplus to fund its social programs, and also has a large slush fund to weather any economic storms. The privatized social security has made everyone a capitalist, even the socialists, so irresponsible spending is not tolerated by the populace.

The climate of Chile varies, because the country is 4,500 kilometers long, but only about 220 kilometers wide. The best description is Chile’s climate is “Baja to Alaska”, a mirror image of the western US. I live in the lakes district, which is the bread basket of Chile- a rolling hills farm area with many lakes/ rivers, large farms, and few people. Lots of rain in the winter and sun in the summer. Similar to Oregon or Washington. Chile only has 15 million people. Chile’s main roads are toll roads- the country bases its systems on a user tax. Why should an individual with no car/transport be taxed for interstates? In Chile, the tolls support the roads, the taxes are low. Local roads are not toll roads, just the interstates. It’s a nice system.

Annual Income: $10,000-$20,000. One can live well on $1,000 a month.

Investments: Gold and silver, outside the US.

Present Home: A 1,100 sq. ft. cabin. 2 bedroom, 1 bath. I took down a 60-year old cabin board by board to reuse as much of the old wood as possible. Rebuilt large post beam construction, very good insulation, wood stove heat, natural gas cooking and hot water. Also have a large barn that includes three horse stalls, hayloft, workshop/tack room and storage area. There is a woodshed/ laundry room outside. Water is gravity-fed year-round from a reservoir above my cabin. Underground pipes, so we have good water pressure. Electricity is buried cable- no power lines are visible. The place is wired for a diesel generator.

Vehicles: 2001 Toyota Hilux 4×4, gas. Vehicle taxes are about $75 a year, includes mandatory insurance. Vehicles require an road worthy inspection each year- $26. Gas in Chile is expensive – Chile has no native oil or natural gas. Fuel must be imported from Argentina, so gas is about $5 a gallon. Oil is also expensive- about $26 for the cheapest oil change. Chile’s one weakness is lack of fossil fuels.

Firearms: Mossberg 12 gauge, Winchester .44-40 lever-action made in 1898. Chile has good gun laws. Each individual can register 2 or 3. You need to pass a licensing course and register the weapons with the local army unit, but most people don’t. Chile’s laws are much like the US used to be. If you kill someone in self defense- no problem, no hassle. On your property, no problem. Example: We had a good employee that it turns out the police had been looking for. He had returned to his house one night and found some folks trying to burn down his father’s barn. He tried to stop them and got stabbed. Well, later that month he tracked down the attacker and shot him dead. The Police said it was warranted, a form of self defense since the attacker was a bad seed, they just wanted our employee to finish signing the paperwork/statement, then they let him walk! Common sense in a civil system.

Gardens/Orchards: 30 producing cherry trees. Two apple, three plum, two pear, one walnut. There is a very large avellano tree orchard. Multiple new fruit trees planted. 1/2 acre garden growing onions, lettuce, carrots, beets, corn, beans, cabbage, potatoes, pumpkin, goose-berry, red current, raspberries, and strawberries. Oh, and trying grapes this year- hope to get some wine down the road. Will build a greenhouse this summer to continue winter production.

Property tax: None. My property is too small. I love this country!

Pets/Livestock: One Dogo Argentino (great hunting dog), 2 horses. 40 head of cattle. Will raise hogs and bees for honey this summer.

Communications: Cell phone for emergency use, satellite direct TV, high speed internet.

Food Storage: Hard plastic waterproof containers. Do not have a long term supply built up yet. We usually have a few months on hand of apples, nuts when we harvest. Rice. One reason I moved here was because you could be self supporting, and we are in an agricultural area where we trade fence posts (I have a lot of wood) for hay, and expect to do the same with foodstuffs if needed. We will have chickens, and the property has plentiful wild boar and hares for hunting, along with partridge and dove, and there are nice trout in the river 1 km away.

Fuel Storage: 55 gallon drums, 20 liter containers for chain oil and mixing oil for the chainsaws.

Worst Case Scenario: The global depression takes away my English Premier League soccer matches on Direct TV! No, Chile should be good no matter what happens. Most folks still work hard with physical skills, are not spoiled, and don’t feel entitled. I am blessed that my wife was the daughter of a border policeman, her survival skills are much better than mine, and our livelihood is based on firewood, not electricity, so we can do pretty well. We only go to town once a week, could easily cut that down to once a month or never if need be. We fill up gas once every two months, so our rural and very healthy lifestyle is prepared for anything. And I can always ride my horses to town or around the lake to trade with my neighbors.

Another benefit for the country of Chile is that the weather comes from the South Pacific- the closet country to us that direction is New Zealand. Chile is not on any prominent wind streams that could bring nuclear or biological fallout. Chile has no real threats or enemies and the country has the best trained military in Central or South America (Not a large military, but Chile still has a mandatory draft and trains 200,000 citizens each year for a 12 or 18 month service. Chile’s military heritage is Prussian and since everyone serves at some point, the populace is well disciplined compared to most nations). Chile is bordered on the north by the driest desert in the world, on the east by the Andes, the Antarctic on the south and the pacific ocean on the west, so Chile is very well defended against entry from disease/plague/etc. Come to Chile! Life is good!

Three Letters Re: The Savvy Barterer

Hi Jim:
That first paragraph touched a nerve, because it was so truthful for me. My senior year in college everybody went to Ft. Liquordale. I went to Marrakech. Amazing experience. And boy did I get burned on some of the things I bought there. Some by as much as 1,000%. But the learning experience I came away with was priceless.

The negotiation skills I learned there have become by far my most valuable business tool. That experience really made me think. On one hobby web site where I have collected much feedback my favorite one of all is “He exhibited finely honed buying and selling skills: a pleasure to do business with.” There is so much to bartering, selling, and buying skills. Part of it is even some poker skills.

For the most part we in America consider haggling painful and want it over with as quickly as possible. People over there (in Marrakech) have all day to barter. I think to myself, “It’s my money, I earned it. Why don’t I follow their example and try my very best to get something at the lowest price and see what kind of game we can play to save some dough.” Make it a game and it naturally makes people interested because of competition. But winning the game and letting them make a small profit was the part that I enjoyed.

Yes, sometimes it is majoring in the minors. I don’t have 15 minutes to haggle over a half a kilo of dates, but knowing the real price something should cost hastens the process. I came back home a changed person and used my newfound skills to make and save some real money here at home. When I buy a used item off, say craigslist, I don’t simply make an offer out of thin air. I provide a rational, believable, supportable argument why I am offering what I am offering and why the seller should accept my offer.

Cash is king right now. Not enough people have it, and many desire it more than they desire their toys. One should remember that he who has the cash, now has what everybody wants. If you won’t sell it to me at the price I am offering: I’ll just keep looking. And then they think you might just be the last guy who comes offering them some cash and often you get what you are after.

People just need to slow down the process. I personally like to get off topic. Ask some roundabout personal background questions in friendly way. You can get some valuable insight into whether someone is being truthful or not. Sometimes based upon those answers I choose not to even bother to make an offer. But I am always polite, and respectful. Barter and haggling need not be unfriendly or acrimonious. I usually have more respect for someone who tries: much like respecting your adversary.

I never show too much interest, and make it known I am looking at other similar items elsewhere. Make a point of examining faults quietly, not to annoy the buyer but simply to show those faults are mutually acknowledged.

One of the most valuable things I learned in Marrakech was never offer a price. Work your way down, but don’t offer a price unless you must, toward the end of the game. But, offering a price there is something you must follow thru on. Walking away from an offer you made is very bad form and considered shameful. Here in the US you almost always offer a price on the low end: from a point where you can’t get hurt. Often times I will start negotiations on the phone. But I always ask the seller for his price. Never make an offer before you ask the seller for his price. I have been amazed the few times in my life where I bit my lip and asked the seller for a price, and got one that was far below what I was going to offer for it. Pleasant surprise indeed, and then you can even negotiate downwards from that point. You will get a better price from someone who realizes you are educated in their ways of haggling and you will get to that price quicker.

When I have occasionally dealt with people here in the US who were from North Africa: I usually sense they feel we are fools. Fools in the sense we spend money too easily, to fast, on impulse. We rush one of the most important facets of business. Haggling is a skill most our brethren need to brush up on. Who says you have to spend your money today?

Hope the insight is of some value. I appreciate your work very much. – John E.

 

Greetings from the Foothills of Maine:
Bartering truly is the greatest sport and a New England national pastime. I’d rather barter than eat. Most folks I know would. I learned to bargain early from a farmer father who was a rather fine trader.

Here’s a tip for our new traders: I’ve never encountered a fellow who wouldn’t take a chance. You see, sometimes a fellow would have accepted my last offer if it weren’t for the “giving in.” Everyone likes to think they have the last word. So somebody pulls a quarter out. If I win he takes my price. If he wins the toss, I take his price. (Which I have already decided I would pay, but I don’t want to give in either and let him have the last word.) It’s all about the dance. I know people who won’t trade unless they haggle-dance first. It’s a contest, a game, a sport — so to speak. I call heads because a quarter goes heads more times than tails. (It’s slightly more likely than tails on a quarter.) I win, he frowns, we all have a good laugh. I pay him, load my goods, and leave. I’ll be welcome back to deal with him in the future, but I’ll won’t be able to use the “flip” again. He won’t remember most of his customers, but he’ll remember me and the “flip.” – CC in Maine

 

Dear Jim:
Great article on bartering. Here is an inexpensive pocket weight scale I found. With this scale, some calipers, and a good reference you can check coin weight, thickness and diameter to verify authenticity to specifications for coins not covered by the Fisch Instruments gauges.
Regards, OSOM

Odds ‘n Sods:

Thanks to Mike C. for this article from Forbes: Abandoned Mine Exploration

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More Sturm und Drang from Cheryl: Fiscal Cat 5 Hurricane Warning — Asian Markets Drop — Dollar Roars Back As Global Debts Are Called In — UK Recession Fears Sparks Massive Sell-Off Of Sterling — Global Bank Lending Sinks To 30-Year Low — Demand For Gold Soars As Prices Tumble — World Markets On Edge — Credit Suisse Reports 670M Pound Loss — Nikkei Hits 5-1/2-Year Low — Wachovia Has $23.9 Billion 3Q Loss — Credit Crisis A Catastrophe For Auto Sales

   o o o

Eric sent us a link to a Root Cellar Food Storage Chart.

Jim’s Quote of the Day:

"If we find our government in all its branches rushing headlong… into the arms of monarchy, if we find them violating our dearest rights, the trial by jury, the freedom of the press, the freedom of opinion, civil or religious, or opening on our peace of mind or personal safety the sluices of terrorism, if we see them raising standing armies, when the absence of all other danger points to these as the sole objects on which they are to be employed, then indeed let us withdraw and call the nation to its tents. But while our functionaries are wise, and honest, and vigilant, let us move compactly under their guidance, and we have nothing to fear. Things may here and there go a little wrong. It is not in their power to prevent it. But all will be right in the end, though not perhaps by the shortest means." – Thomas Jefferson to William Duane, 1811. ME 13:29

Note from JWR:

Welcome to the thousands of new SurvivalBlog readers who’ve arrived after yesterday’s prominent mention of SurvivalBLog.com on MSNBC.The same mention also pushed up the Amazon sales rank of my novel “Patriots: Surviving the Coming Collapse” to around #800. (Out of more than two million books listed. Not bad for a novel that has been in print for 11 years!)

OBTW, I’ve been getting dozens of e-mails from SurvivalBlog newbies, asking very familiar questions, such as: “What’s the safest area to relocate to?”, “How do I store rice to protect it from vermin?”, “What are the best things to keep on hand for barter?”, and “How can insulin be stored without grid power?” I recommend that new readers take full advantage of the SurvivalBlog Search box (at the top of the right-hand bar) as well as the numerous static topic pages that are easily accessed using the buttons at the top of our main page. Read the “About” and “Precepts” pages first. After that you might n reading through some of the “Retreat Owner Profiles” and my “Recommended Retreat Areas” pages.

 

The high bid in the current SurvivalBlog Benefit Auction is now at $535. This auction is for a mixed lot that includes:

1.) A huge lot of DVDs, CD-ROMs and hard copy nuclear survival/self-sufficiency references (a $300+ value) donated by Richard Fleetwood of www.SurvivalCD.com

2.) A custom-made, fully-stocked EMS Medic Bag from Cajun Safety and Survival (a $212 retail value)

3.) A NukAlert radiation detector donated by at KI4U.com (a $160 retail value)

4.) A case (6 cans) of Mountain House freeze dried foods in #10 (96 ounce) cans donated by Ready Made Resources (a $160 value)

5.) An autographed copy of “Patriots: Surviving the Coming Collapse” ($24, retail)

See the SurvivalBlog Benefit Auction page for complete details on these items. This auction ends on November 15th. Please e-mail us your bid.

The Savvy Barterer–References, Skills, and Tools for TEOTWAWKI Barter

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One of my long-standing Precepts is that every prepared individual should be ready for both barter and dispensing charity. Today, I’ll be briefly discussing barter. Being ready to barter is not just a matter of having a pile of “stuff” to barter. While barter and charity logistics are important, what is even more important is what is between your ears.

A Bazaar Experience

Bartering takes practice. Dickering is an acquired skill. Short of buying yourself a plane ticket to Marrakech, I suggest that you start attending gun shows, garage sales, and flea markets. Learn how to haggle.

One of my long standing Rawlesian Precepts is having the skills and material acquired to conduct barter in a post-collapse society. Much has been written about what goods to keep on hand for bartering. But precious little has been discussed in survivalist literature on the skills required to barter effectively, and how to protect yourself from fraud.

I recommend that you practice bartering on a very small scale at first, to sharpen your eye for value and your ability to dicker in a manner that will result in a fair trade. (Mutually agreeable and mutually beneficial.) The occasional transaction where you end up slighted is hardly cause for concern. But unless you develop the proper bartering skills, you’ll end up on the weaker side of bargains again and again, and thus fritter away your tangible working capital. The attributes that will put you in a superior bartering position include specific knowledge about what is being traded, knowledge about who’s sitting on the the other side of the table, and good old-fashioned “horse trading sense”.

Knowledge and References
The more you know about the goods being exchanged the better you’ll be able to dicker. Armed with this knowledge, you’ll be able to honestly, yet persuasively talk up the virtues of your own goods, while politely talking down the defects of your trading partner’s goods. Hence, the the greater your technical knowledge of the goods, the better. Take the time to study and develop an ‘appraiser’s eye’ for the condition of used merchandise, the relative value of goods from one maker versus another, and knowledge of the overall market . With that knowledge you can articulate the scarcity of any particular item in your barter stock. (After all, as with any other free market transaction, the key factor in determining value is the supply-demand ratio.) If you are trading for a collectible item then knowing how scarce they are can put you at a tremendous advantage in negotiation. It is important to gather as many references as possible about the items that you plan to barter. Francis Bacon said it best: “Knowledge is power.” You need to authoritatively know which maker, model, variation, grade, year of production, etc. to look for. Product expertise helps makes you a savvy buyer or seller. There are dozens of references on specific types of tool, guns, and collectibles that are valuable to keep on hand. For example, two of the most important ones that I ‘ve found for firearms are: “The Blue Book of Gun Values” and “Flayderman’s Guide to Antique Firearms and Their Values.”

Similarly, knowing exactly how to properly gauge the condition of a used item is quite important. For example, with firearms, the percentage of original bluing remaining, cracks or wear to a gun’s stock, bore condition, chamber condition, bolt face erosion, action tightness, headspace, and so forth all make a huge difference in the value of a used gun.

Detailed knowledge is also crucial when determining the value of a rare coin. (For most of us, that knowledge is too specialized. It can take many years to develop coin grading skills, so a novice can get in over his head very easily. The difference between an MS-66 coin and an MS-68 coin is very subtle, yet that difference can mean thousands of dollars difference in a coin’s price. I therefore recommend that novices only trade professionally graded coins that have been graded and sealed (or “slabbed”) by either PCGS or NGC. A coin dealer Blue Sheet is a crucial reference for measuring the current value of coins with particular mint marks and dates, in any given grade on the Sheldon Scale. Even having an out-of-date Blue Sheet is better than nothing, since it will show relative values of coins, which change fairly gradually. Again, this is not for a novice, or part-time dabbler. (FWIW, even though I have been buying rare coins for more than 20 years, I still consider myself effectively a “novice” level since I don’t ge frequent coin grading practice. Hence, I only buy slabs. (“A man has got to know his limitations.”)

Tools

To be ready to barter with bullion gold cons or scrap gold it is important to have a touchstone, an acid test kit, test needles, a very accurate scale, and a set of Fisch coin authenticity dimensional gauges.

When bartering for canned goods it’s important to have a Julian Calendar (since some packers use Julian dates) and a hard copy of this chart showing how to decipher date of pack codes from various canners and packers.

For liquid fuel it’s important to know if the fuel has been contaminated or adulterated. (Coincidentally, one of our newest advertisers, UR-2B-Prepared.com sells water test strips.

For batteries, it’s important to have a voltmeter. (For the greatest versatility, buy a Volt-Ohm meter with test probes on leads, rather than a typical tray-type home battery tester. )

For examining the the fine details of just about anything–such reading hallmarks–a jeweler’s loupe (magnifying glass) is a must.

For evaluating firearms, as a minimum buy a 6 foot tape measure and a fiber optic bore inspection light.

Dickering Tactics
Above and beyond getting technical knowledge is the hard to quantify “people skill” of dickering. Dickering skills can take years to develop. Part of this is learning how to “read” the face and body language of the gent on the other side of the table. How anxious is he to unload something that he has, or to acquire something that you have? How quick they are to make or accept an offer is a key indicator. And if there is a savvy trader sizing you up, you have to learn to keep a “poker face”, not revealing how excited you are to see a particular item being offered.

Take your time in carefully examining any item offered to you. This accomplishes two things. Firstly, it gives you the opportunity to spot any flaws, defects or signs of wear on the item being offered. Secondly, the more time that you spend examining the item will lead the seller to subconsciously start to doubt the value of what he is offering. If you’re in a flea market or gun show situation once you have an item in your hands you are essentially free to examine it without fear of someone else buying it. Take your time!

If you make an offer for an item, and it is rejected or the counter offer made is ridiculously low than the very best thing you can do is put the item back down on the table. This psychologically distances you from the item, and again, makes the seller begin to doubt it’s value. In the dickering process one of the most valuable phrases that you can use is “Is that the best you can do?” If the seller won’t budge, and you are close to an acceptable price, the next best thing to do is to offer to sweeten the deal with additional goods offered on your side of the bargain. If you still can’t reach an agreement it probably wouldn’t hurt to subtly talk down the value of what’s being offered to you, and talk up the value of what you are offering. “This is a mighty fine widget it’s too bad about this crack and this wear… If it weren’t for that, I think your asking price would be fair.”

The next most valuable thing you can learn to say is to say nothing. After making an offer and receiving a counter offer, silently start counting to twenty. There is something about a long pause that causes all but the most stalwart dickerer to want to fill that silence And nine times out of ten, they will fill that silence with another offer, usually one that is more agreeable.

As a last resort, if you are still at an impasse in reaching an mutually-agreeable trade, your tool of last resort is to thank the seller and start to walk away from the table. This will be your final gauge of just how anxious the seller is to move his merchandise. If you hear “Wait, wait, wait, come back here…”, then you know that the seller still has room to negotiate on price or quantities. Keep in mind however, that this is a dangerous tactic. Once you walk away from a table without the seller voicing objection, but return later, you have subconsciously boxed yourself into the previously-offered price. If you come back later for the same item, the seller will know that you are anxious to purchase it, and did not find a better deal for a comparable item elsewhere, so they’ll probably hold to the same price.

When selling, keep in mind that you can negotiate downwards, but not upwards. Always make your initial asking price somewhat higher than what you really want out of it. Some people will not agree to even a good deal, unless they can extract at least one price concession from you. So, set a fairly high price, and then negotiate downward.

If your counterpart brings an item to offer to you, but that item is of no interest to you, always thank him for his time: ‘Thanks, but I’m not interested in that right now. Do you have any X available?”, describing what you are looking for in trade. Remember, a sales venue is an opportunity to gather information about other items a seller may have available, but may not physically have with them. It may not hurt to make arrangements to see them at the next event, reminding them to bring those items so you can make a deal next time.

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When going to attend a flea market, gun show, or horse trading session, it is important to “dress down”. If you wear a fancy Rolex watch, or fancy designer clothes, consciously or unconsciously your counterpart will size you up as being made of money. So dress very casually, including your shoes. Leave your jewelry, pens, and nice watch at home. Wear your cheap plastic-cased digital watch for these excursions.

You also need to learn to be observant about your counterpart. Is he a collector, that happens to sell on the side, or is he a journeyman salesman, who makes a livelihood at the business. Is he retiring and selling off inventory? Is he someone selling merchandise on behalf of a friend or relative? The bottom line is: just how anxious is your counterpart in making a deal?

Timing and Rapport

When approaching a vendors booth or table for the first time it is important to first wait until the vendor has finished dealing with any previous customers. Don’t interrupt a man when he’s making a deal! Smile and make eye contact, and if appropriate for the venue, introduce yourself and shake hands. If you are a fellow vendor, it’s important to wear your badge, or otherwise make it known that you also have a table or booth. This lets the seller know that he is talking to a wholesale rather than retail customer. This can make a tremendous difference when negotiating price. Even if the vendor appears to have a pile of worthless junk on his table (with perhaps a few nice items of interest) make a point of expressing your admiration for his merchandise. Say something like “You’ve got a real nice inventory here” or “I can see that you have good taste in widgets“. This is an important step in developing rapport with you counterpart. While it doesn’t hurt to point out a defect on an individual item while negotiating for it, do not “run down” the quality or condition of everything that you see. Doing so could skunk the entire deal-making process. OBTW, don’t be shy about pointing out defects in your own merchandise. “Oh, in case you didn’t notice, there is one dent here…” That lets your customer know that you are reputable.

Another key aspect of understanding buying and selling psychology is the “stage of the game”. At the beginning of a show or sale most journeymen sellers arrive inventory rich, and cash poor. Near the end of the show, they will likely have more cash (or precious metals) on hand and then will be in a better position to make offers. Although some of the best items may have already been sold, one of the best times to make a purchase or trade is near the end of a show, when some sellers have had a “slow show”. At flea markets and gun show wait until just before the vendor’s “tear down” and pack-up time begins. Depending on their situation they might feel desperate to make a good sale or a couple of good swaps so that they can feel that they’ve made the show worthwhile. So, if you saw an item earlier in the show, and could not negotiate an agreeable price, wait for the end of the sales event. This, BTW, is particularly valuable tactic if the item in question is particularly bulky or heavy. It is the unspoken goal of every seller to “go home light“.

If you encounter a seller that has the sort of merchandise that you think would be of future interest, then it’s important to get that seller’s particulars so that you can contact him later. Take copious notes. The same applies when you encounter a seller that has a particularly valuable area of expertise or a rare stock of items–especially spare parts. These are people well worth “networking” with.

Never Trade Hard for Soft
When negotiating a trade, keep in mind the absolutely fundamental rule: “never trade hard for soft“. This means, if what you are offering in a trade is a compact, valuable, durable, tangible item, that is in short supply, or highly valued, the don’t make the mistake of trading it away for items that are less durable or desirable. Otherwise, at the end of the day, your counterpart will be going home with the better goods than you. The only exception to this rule would be if your counterpart is willing to trade a much greater quantity of his items and that you know that you have a ready market for them. A corollary to this rule is, that it is better to trade your bulky for his compact. (Or as one aging gun show vendor I met in put it, “Don’t never trade away handguns for rifles or shotguns.” That is simple yet sage advice.) This is particularly important in venues where space is at a premium, and you are paying for the use of that space.

In closing, barter takes time to learn. Invest that time. Also invest in the proper references. Lastly, invest in a stock of top quality barter goods that you predict will be sought-after in a post collapse world. With the right goods and the requisite knowledge, you and your family will never starve.

Four Letters Re: Currency Inflation Expectations for the US

James:

The letter [from reader PNG] has severe mistakes and is fundamentally misleading – your readers deserve even more refutation before anyone is lulled into a false sense of security. To quote: “Let’s say the Treasury just invents another two trillion dollars by printing currency and forgiving loans. Let’s say they do that every year for the next five years. How much inflation would that create? The absolute maximum inflation rate from this example is about 20%, because there’s ten trillion dollars in circulation already.”

  1. These numbers are incredibly far off the mark. Actually M1 is the narrow definition of money – the core money supply that the Fed controls. It just spiked from ~ 850 billion to ~1,010 billion ($1.01 trillion) in one month.
    So he’s off by a factor of 10 here. If the Fed printed (or created digitally) the hypothetical two trillion $ this would triple the M1 money supply. Three times as much money chasing goods would ignite hyperinflation very quickly…
  2. And let’s not forget about the multiplier effect of fractional reserve banking! Even much smaller amounts of money creation are going to create serious inflation because we live with the fundamentally dishonest and unstable fractional reserve banking system. $10 deposited in a bank is used as “reserves” to loan out more than $100. (Banks are only obligated to keep less than 10% in reserves to pay depositors). Off by another factor of 10! Two trillion in new money becomes more than twenty trillion dollars in loans.
    Quoting again: “But in practice, the additional money dilutes the much larger pool of value represented by goods and services. This must be true because the entire money supply isn’t enough to buy everything that is for sale.”
  3. Actually money has velocity – it is spent, or changes hands, several times per year. The money supply multiplied by the velocity determines the amount of dollars bidding for the total supply of goods. E.g., $100 times a velocity, or turnover, of 10 times a year = $1,000 spent in one year. This $1,000 bids for the supply of goods, NOT just the $100.
    In the US (right now) velocity is moderate. In Zimbabwe it is incredibly fast. So looking at just the supply of money is only half of the equation when you look at the $ bidding up prices for goods.
  4. There are lots of other mistakes here, but one last note is in order “That kind of inflation is literally unprecedented in otherwise functional economies” Crack open an encyclopedia, and look under W, for Weimar Germany! And don’t confuse cause with effect – economies become dysfunctional because of inflation – Argentina is a good place to start reading…

An aside – thanks to Dr. Gary North for making the link above freely available on the public section of his web site. Sign up for his free Reality Check newsletter if you’d like advance notice of economic trends based on real numbers. (BTW, I have no relation to Gary North, other than gratitude for giving me far more education than I paid for as a subscriber.) Yours truly, – OSOM

 

Jim:
Here are a couple of facts about inflation I’d like to share:

FACT: The US Federal Reserve is issuing loaned money at its discount window at the rate of $100 Billion per day which is $36 Trillion, annualized. The $100 billion daily rate is actually increasing each week. These quantities of money will never be paid back because the national debt is 10T$ which it took 95 years to accumulate. This is highly inflationary.

FACT: Every bank account has been guaranteed to $250,000 [more than twice the old limit] with unlimited funds to back up FDIC insurance. This will be highly inflationary, if banks fail. – J.K.

 

Jim:
Referring to the letter by PNG, “currency inflation expectations” and your response. I would like to quibble a great deal with PNG, and a little with you.

First, for reader PNG,

Week before last, the Fed increased the money supply by nearly 23% in one week. They have been increasing the supply by huge amounts weekly, but that one took the cake. Disregarding Jim’s accurate argument that there are other things to inflation, (e.g. velocity of money) simply multiplying 22% times 52 weeks gives a minimum annual inflation number of 1144%. The way the Fed has been “printing” money since Aug 17 this year, triple digit inflation is almost a given. (Not that the Fed can really “Print” money, but it can sure “Create”.)

The government is constantly changing the way it calculates inflation. Now they talk about “core” inflation, leaving out the “volatile” food and energy, etc. costs. Since when do we not need food and energy to survive? If one calculates inflation using exactly the same methods used during the Clinton administration, (as they do over at the “shadow stats” web site) you will note inflation is running well over 10% NOW, and it takes some time for newly “printed” money to work its way through the system to become inflation.

And for you, Jim,
I certainly agree with your observations about debt and derivatives. The world bank and others are coming up with estimates that the notional amounts of derivatives run in the order of 1.31 Quadrillion dollars. No one knows for sure. If any one of the three counterparties to a derivative default, then the notional amount owed becomes a real amount owed. To put that in perspective, the GNP of the entire world economy doesn’t run over $50 trillion. A bailout of $700 billion is peeing in the ocean because there are a lot more zeros in a quadrillion than in a billion. A quadrillion is a million billions. Parts of this house of cards are failing now, (your comment about Lehman’s explosion date of Oct. 21 is spot on) and the numbers are so huge that undoubtedly one will take down others in a row of dominoes effect. Lehman may be that first domino.

My quibble with you regards another possibility to inflation. In our fractional reserve banking system, every dollar “printed” by the Fed is normally multiplied by about 10 by the banking system (Theoretically it can be much more than 10) So to inaccurately describe in economic terms, the dollar bills “printed” by the Fed might be called M1. By the time that one M1 dollar makes its way through the banking system an additional 9 have been created via loans for any purpose to the average guy or company. That might be called M3. The commercial banks get one dollar but loan out ten. And there is no way of telling whether what you are spending is created by a commercial bank loan or was “printed” by the Fed, and in practice, normally it doesn’t matter. There are, however rules as to how much the banks can loan out based on reserves, which are normally the capital and accumulated profit. (Equity)

However, in special circumstances such as we now face, it does matter whether dollars are Fed created or commercial bank created. Normally, to make as much profit as possible, commercial banks will try to lend out every dollar they can. In the current situation there are two things that stop the commercial banks from lending. The first is they are scared silly, and rightly so. They have gone from worrying about the return on money to worrying about the return of money. No one can tell whether a bank is bankrupt or not, because IF they hold derivatives, those derivatives may suddenly become a giant liability. As well, all the major companies used derivatives freely, and they are suspect too. Ergo we have a credit crunch where the banks are afraid to lend, even to each other. The fractional bank multiplier (one in, ten out) is not working, contracting the M3, or money on the street. Very deflationary.

All these billions the banks are “writing off” come directly from their equity, or reserves. Since they can only lend out a certain multiple of their ‘reserves’, those reserves, or accumulated profit, are dropping like a rock because of the writeoffs. They must contract their lending to remain within the rules. So, it becomes an issue of the commercial banks being neither willing, nor able to lend.

The government allows certain borrowings from the central bank to be counted as reserves in time of turmoil, which hasn’t been a problem within the life span of most alive today. During 2007, and prior, US bank reserves ran in the order of $43 billion. The latest US figures I saw shows “non borrowed” reserves at minus $403 billion. The rest is government loans “counted” as reserves. Every bank in the US, and most of the rest of the world, is bankrupt. Well, there will be one or two prudent exceptions, but they will also likely be taken down too, if only because of the number of checks in circulation.

Suddenly those nine dollars of commercial bank created dollars are shrinking, and they can shrink even faster than the government can print. All this is highly deflationary, as the world found to its dismay in 1929. Why do you think Paulson has opted to buy equity in banks with a significant part of his $700 billion? It pumps their reserves, so they have the ability to lend. No one has mentioned how they can cause banks to have a willingness to lend.

My point is that so many assets are being destroyed, as they were in 1929, that a deflationary scenario is entirely possible. And deflation is a much meaner beast than inflation. I have previously forecast elsewhere an inflation followed by deflation until it is all Fed created money. Then it is Zimbabwe[-like situation for America], if the system holds together that long.

Like you, I much prefer a world of sleeping well at night, hot showers and lights that turn on at the flick of a switch. – Allen

 

Mr. Rawles;
In response to he recent post where another reader thought that triple digit inflation could only happen with $10 trillion per year increases in the money supply I would like to provide some further economic insight for your readers.

  1. Prices are determined by supply and demand; therefore, a drop in demand for dollars can have a far greater effect than a increase in supply. Many people do not realize that in Germany the inflation rate was many times the rate of the increase in the money supply.
  2. If the dollar loses its reserve currency status (currently being discussed) then international demand could fall off a cliff forcing half of the dollar supply back to the United States (100% inflation).
  3. There is a time-lag for inflation. In the early days people expect price stability and so inflation is much lower in than the actual increase in supply. Over time people expect more and more inflation until it spirals out of control. It is a geometric function where most of the action takes place in a very short period of time. In other words, the huge increase in the money supply that resulted in home prices going up has not yet fully been priced into other goods and services.
  4. A decrease in production (due to recession) decreases the supply of goods competing with existing money causing inflation.
  5. Ever dollar FDIC pays out is inflationary; therefore, with the government backing almost everything these days every deflationary “force” is countered by inflationary government action. Ultimately, interest on the national debt will exceed the ability to tax… this is the end game for the dollar.

When you factor in these things, triple digit inflation does not take much time to get rolling. In fact, it can go from 10% (current) to 100% inflation in just a few weeks. I hope this material is useful for your readers. – Dan in Virginia

Odds ‘n Sods:

From Rick D.: Inflation Creates Run On Argentine Coins

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David in Israel, one of our foreign correspondents, and a rabbinical student sent us this comment: “It is interesting that you mention the shmita (the jubilee or yovel in Hebrew is a 49 year cycle where sold property is returned and slaves freed) a seven year cycle where all debts are forgiven, and at the end of the year that we let our fields lie fallow. The day of the 777.68 point Dow drop, the largest point drop in history, hit on the exact day that the shmita cycle and the year 5768 ended and all debts were forgiven. Whether coincidence or our Creator giving us a little wink, you will have to decide.”

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A hat tip to OSOM for this piece to add to the rather thin ‘Good News’ file: New developments in efficient solar power.

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The latest news and commentary from Cheryl N., our Economic Editor: Dow Sinks 514 As Recession Warnings Grow Louder — Oil Sinks To 16-Month Low ($66.75/barrel) — Fed To Pump $540 Billion More Liquidity — World Recession Likely Says [UK PM] Brown — Fed Tries To Prevent “Great Depression II” — Pound Tumbles as BoE Admits Recession — More Euro Banks May Fail Says IMF — 41 States Report Increased Monthly Job Losses — CDO Cuts Show $1 Trillion Corporate-Debt Bets Toxic — A Little Thing Called Inflation (The Mogambo Guru) — Asian Markets Down After US Rout; Nikkei Down 7%

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A comment from reader Mike: “I have secured a ‘mining claim’ in Washington state. It can be easily used as a retreat when TSHTF. The cost is $100 per year, [with a lease administered by] the BLM.” Mining claims have been mentioned a couple time before in SurvivalBlog, such as this letter, but we plan to cover this in greater detail soon.

Note from JWR:

SurvivalBlog was prominently mentioned in a front page piece on MSNBC yesterday and the resulting hits nearly crashed our server. (We got almost 90,000 unique visits in one day! That’s nearly as many as we usually get in a week.) Here is the article: Hard times have some flirting with survivalism–Economic angst has Americans stockpiling ‘beans, bullets and Band-Aids’. The story itself was well-written, but the headline was a bit much. Flirting? Flirting? I’d say that it is more like America has run off and eloped in Las Vegas with Survivalism.

The high bid in the current SurvivalBlog Benefit Auction is now at $460. This auction is for a mixed lot that includes:

1.) A huge lot of DVDs, CD-ROMs and hard copy nuclear survival/self-sufficiency references (a $300+ value) donated by Richard Fleetwood of www.SurvivalCD.com

2.) A custom-made, fully-stocked EMS Medic Bag from Cajun Safety and Survival (a $212 retail value)

3.) A NukAlert radiation detector donated by at KI4U.com (a $160 retail value)

4.) A case (6 cans) of Mountain House freeze dried foods in #10 (96 ounce) cans donated by Ready Made Resources (a $160 value)

5.) An autographed copy of “Patriots: Surviving the Coming Collapse” ($24, retail)

See the SurvivalBlog Benefit Auction page for complete details on these items. This auction ends on November 15th. Please e-mail us your bid.

Three Letters Re: Advice on Driveway Alarms for Retreat Security

Mr. Rawles,
We’ve been using the Dakota Alert driveway alarm for years. We use the model with the underground sensor that will only go off when a metal object comes near it such as a large (or even small) vehicle. The advantage of this is it has absolutely no false alarms. When the receiver says a car is coming down our (long) driveway, then a car is coming. There is nothing worse than an alarm that gives false alarm all the time and you no longer can trust it. The infrared driveway alarms that I’ve tried do this especially if you live in an area with lots of game running around such as deer, etc. Because of the absence of false alarms, I know when my driveway alarm goes off at 3 a.m.that someone is coming and I can be sure to have the appropriate welcome ready for them.

The other advantage is the unit is very discreet. With almost 50 feet of underground rated cable, I can bury the sensor next to the driveway and put the transmitter away from the road in an elevated position (such as a tree) and it is almost impossible to see. The 9 volt DC battery it uses lasts us about 8-12 months easily. I highly recommend the Dakota Alert. It’s a great product and well worth the money. – Craig

 

Jim:
I can vouch for the Reporter brand driveway alarm system. It’s American-made and is fairly reliable. I had two different chinese-made systems which used magnetic sensors before I found out about this one. The [mainland] Chinese-made ones would become very prone to false alerts before they both eventually broke down. One lasted a year and the other lasted two years. One of them ended up ringing the base unit non-stop.

I’ve used the older Reporter [design] for nearly three years and it has held up to midwestern temperatures and weather extremes. It’s range will drop to 100 yds if you use the supplied antennas with the receiver kept indoors. The sensor is very constrained in how it must be aimed in order to detect vehicles. Contrast in temperature in important. A cold vehicle that leaves your property will probably not always set it off. On the flip side, I’ve never had a false alarm with it. It will pick up small animals that get exactly within its sensor path –including rabbits and occasionally a bird. Likewise, I had a spider crawl onto the sensor which set it off and made for an amusing mystery until I looked at the sensor itself. It will sometimes miss vehicles coming in due to types of tires, position of muffler
which could escape a single sensor. This takes some experimentation and an understanding that it isn’t always going to be 100% perfect. It’s like any other piece of gear that can fail. Later, – Chris

 

Dear JWR:
I replaced my wired driveway alert with a wireless Dakota Alert unit several years ago. I have been pleased with the performance and customer support. I use a magnetic sensor to minimize false alerts, although my neighbor’s cow and large deer can somehow trigger it from tromping down my driveway. The 9 volt alkaline battery has been unreliable in cold weather and I have purchased lithium batteries to test this winter.
Also, the sensor and cable are enclosed in plastic conduit to keep the critters with sharp teeth from giving me another repair project I purchased and returned the Dakota Alert portable receiver as it was very disappointing. Thanks to all for the tip on using the alert with a MURS [handheld] radio. BTW, I’ve made my 10 Cent Challenge. Thanks, – Jon

Letter Re: Advice on Silver Coins for Barter

Mr. Rawles,
I have only a small amount of silver American coins but I constantly look for more. I find your advice to buy pre-1964 dimes, quarters and half-dollars difficult to realize as coin collectors are not selling junk silver in my area (Dallas/Fort Worth). To be frank the silver coins that are available are being sold at crazy prices (two or more times spot) over priced right now as everyone is freaking out about the economy. Reasonably priced coins, though significantly delayed, are available online and my collection has mainly been purchased this way.

On the other hand, silver dollars are frequently for sale at local coin stores. I purchase these when the market is favorable. They are especially easy to store in rolls. You never mention these coins though so I have some trepidation about making this the foundation of my bullion stash. Could you comment on this as well as 99% silver American Eagles as a survival monetary reserve? Thanks, – Neal

JWR: Replies: The premium is generally much higher for silver dollars (than dimes, quarters and halves), because even noticeably-worn dollars are in constant demand for the jewelry trade. (Belt buckles, etc.) A dollar coin also has a hair more silver content, than four quarters, but that is only significant for large quantities. (765 ounces versus 715 ounces, per $1,000 face value, if I recall correctly. That info is in my FAQ.)

Therefore, if your goal is accumulating a stock of coins for barter, then unless you can get silver dollars at nearly the same price as smaller silver, then buy only the smaller denomination silver coins.
One ounce silver American Eagles also command a higher premium than generic trade dollars. Although they are vaguely more recognizable than generics for barter purposes, I don’t think that they are worth paying the premium. The type of trade “dollars” that I look for are the commercially made (not from a the U.S. Mint) “US Assay Silver — .999 Fine — Trade Unit” one-ounce rounds. (To see an example, here is one that recently sold on eBay.) These are quite recognizable and hence will be trusted for barter–perhaps even more so than even American Eagles from the US Mint. Sadly, the average man on the street is ignorant about precious metals has probably never held an American Eagle coin in his hand. If you can find some these rounds (with the current scarcity), they sell for about 20% less that American Eagles or Canadian Maple Leafs. But of course in today’s incredibly scant market, beggars can’t be choosers.

Letter Re: Recreational Vehicles and Investing in Tangibles

Jim,
Thank you for the blog and all the great info you put out. I have a couple of questions that I would like to ask you, but first a little info about myself. I am a 40 year old male with a wife and two kids. I live in Kansas, I work at a large manufacturing plant and my wife works for a insurance company. We have a mortgage and other dept. I would like to buy some land out of town and build a retreat for my family and myself for when TSHTF but can not afford it right now. My grandfather though does own land about a hour north of here. I was wondering what you thought about buying a RV, stocking it with supplies and when the time comes bugging out in that. Also you are always saying to invest in tangibles, What do you recommend ? Thirty round magazines? Ammunition? Barter items? Right now I have about $1,000 to invest but I am lost as to what to buy. I already have my protection squared away so that is not an issue. Once again thank you for all you do and I wish your wife a full and speedy recovery. – Mike in the Great Plains

JWR Replies: I’m fairly certain that you are suggesting an RV strictly as a one-way “Get Out of Dodge” (G.O.O.D.) vehicle to get to your grandfather’s farm, rather than as a vague concept for retreating. For any readers that might consider wandering aimlessly in an RV, see this narrative that I wrote in the early days of SurvivalBlog:

“Land mobile” retreating in a recreational vehicle (RV) is another invitation to disaster. In a TEOTWAWKI situation, a fixed location retreat is vastly superior to going mobile. In my opinion the myth of ”Road Warrior” mobility and firepower is in actuality just an expanded opportunity to wander into ambush after ambush. No vehicle short of a $70,000+ Cadillac Gage V100 wheeled armored personnel carrier (APC) would have both the cargo capacity and the ballistic protection required. (A little Ferret scout car just doesn’t have the capacity. I speak from personal experience on that!) Also, consider that you would need a pair of APCs to provide mutually supporting defensive fire. And then of course you will probably want a belt-fed for each. With spares, ammo, and accessories that is an additional $3,000 per vehicle.

If by chance you already have a fully stocked retreat established and have $150,000 in cash laying around for a couple of ultimate G.O.O.D. vehicles, see: Dave Uhrig’s web site and then click on “Armor”. (I should mention that I have done business with Dave Uhrig on two occasions. He is quite reputable.)

Here is a dose of reality for you: If you choose to go entirely vehicle mobile then you will eventually lose a battle–most likely in a roadblock ambush–or your RV will break down. Or it will run out of fuel–with some likelihood that it will be on exposed terrain in an untenable situation. Also, since the logistics that you could carry would be limited, you will start out with an inherent disadvantage to fixed location retreats. This also creates the prospect that once your food supplies are depleted you will be tempted to take what you need from others. To paraphrase John Dibari (my high school chemistry instructor) when he described troublemakers: “If you aren’t part of the solution–you’re the precipitate.” (That is, someone who precipitates trouble–part of the problem, not the solution.) Scratch that idea!

Since you have a definite destination (your grandfather’s house), then you are better off just storing (“pre-positioning”) what you will need there, rather than trying cram what you will need into an RV for an 11th Hour trip outta Dodge. Odds are that those items will be more secure there, than if they were stored at your house in the Big City, anyway. If his house lacks the requisite storage space perhaps he would be agreeable to you buying a 20 foot CONEX for your gear, and storing it there

In answer to your other question: See this SurvivalBlog post from 2007 for my recommendations on buying full capacity firearms magazines, for barter.