Letter Re: Are Simultaneous Inflation and Deflation Possible?

Hi Jim,
Your excellent post about the possibility of simultaneous inflation and deflation got my head to spinning about ways to protect ourselves from a seemingly near-certain banking crisis. Such a scenario would certainly be a major headache for everyone, no matter how large their bank accounts, but it would be a huge problem for those of us who are in business for ourselves and need a constant cash flow through the banking system to pay payroll, expenses, taxes, etc. Therefore, I wondered if you and/or any of your readers had any suggestions for preparing for banking problems ahead of time, just like we do (and have done) with other areas of life. I find that one of the greatest benefits of your blog is that almost every post stirs me mentally and spiritually, to evaluate and re-evaluate my attitudes and actions when in comes to preparedness, and to pray over them for guidance. Perhaps others have been thinking likewise, especially when it comes to the banking crisis. I’ll start out with my own situation and suggestions, and hopefully others will build on them – or refute them if needed.

My situation is that our seasonal family business usually generates enough in the first 6-9 months of the year to support us for the remainder of the year. In the past, we have kept these funds liquid in our corporate bank account and used them for payroll and regular operating expenses each month as the year progresses. Now, however, I am concerned about a possible banking crises (bank runs, failures, limits on withdrawals, etc.) that is getting more press – even in the mainstream media. How can I best protect my assets, not lose what we’ve worked hard in the early part of the year and still have the money/cash/etc. available for use? I can vividly imagine a full-blown banking crisis like you mentioned in your article – and I shudder to realize that available funds we depend on could be “frozen” for a time (at best) or gone completely (at worst) in such a scenario.

I’ve thought of several options:
1. Spread the risk among several banks by opening other accounts, with each account holding a small amount of our total funds, so that if one bank fails, all our “eggs” would not break in one basket. This would be a bit cumbersome, but could work unless/until things got really bad across the board in the whole banking system.
2. Pull out more cash now and use petty cash to pay for things instead of checks and credit cards. This would be a paperwork nightmare to keep a lot of receipts and could be a security problem, but would certainly be liquid. However, would this also open us up to look like drug dealers or doing something shady?
3. Immediately purchase in bulk any items we would need for the future, prepay any bills for the year, and keep only enough money in the bank to pay large expenses. I like this idea since it would also beat inflation on basic goods we already need and use. We already have a one-year surplus of food and emergency supplies, etc., but perhaps we need more. However, this wouldn’t help meet payroll, taxes, etc., unless we had to start paying our employees in toilet paper and food stuffs!
4. Buy gold and/or silver now with the funds we have. Sell the same later in the year, as the funds are needed, and when the metals (hopefully) have risen compared to the dollar. I’m not sure how feasible this idea is. Would there be any advantage at all, or would my profit get eaten up in transaction/sales fees, etc.? Also, if there were a large scale banking crisis, how do we possibly exchange our gold and silver for FRNs (or whatever the currency may be)?
I can certainly see the wisdom in having supplies positioned in advance and thus be able to “hunker down” in place or at our retreat for a time. There are so many possibilities and variables! Perhaps a combination of all of these – and more – would be best. Well, that’s a start. Thanks for any light you may be able to shed on this. – Greg in North Carolina

JWR Replies: My advice is to use a combination of all of the options that you described, with the exception of option #2. In the coming years, as inflation kicks in, greenback cash will start to seem uncomfortably perishable. OBTW, I suspect that the “$10,000 in cash or equivalents” Federal tax reporting threshold will be frozen indefinitely, despite the unceasing march of inflation. Hence, more and more innocent people will come under undue scrutiny from the IRS.

Letter Re: Concealment Holster Recommendations for a Humid Climate

Jim,
I need to get some concealed holsters for myself and my wife for our Glocks. What do you guys recommend? Thanks, – SF in Hawaii

JWR Replies: For concealment, I generally prefer Milt Sparks brand holsters. However, in your high-humidity climate, anything made of leather is probably a mistake, especially for everyday wear. High humidity means a constant battle against rusty guns and moldy leather. (In Hawaii, nothing ever seems to get really “dry.”) So in your circumstances, I recommend Kydex.

We have been very happy with the Blade-Tech brand Kydex holsters and magazine pouches. We use them extensively here at the Rawles Ranch for our M1911s. We started using them about two years ago, soon after we saw how prevalent they were, when The Memsahib and I went to take a four day defensive handgun course at Front Sight.

See this SurvivalBlog post from March of 2007 for more about holsters in general, and Blade-Tech in particular. Their Inside the Waistband (IWB) model is probably best for concealment. Although their standard holster with a paddle conversion might work too. I have found that people either immediately love or hate paddles, but most folks like IWBs. Remember to get a thick, stiff, and fairly wide belt, regardless of your choice of holster. The belt that you use is crucial for keeping a holstered pistol stable and secure. you don’t want to have it flopping around. When I shop for clothes, one of the first things that I now look for is large belt loops to accommodate a thick, wide belt.

And, FWIW, I’m a big believer in getting stainless steel pistols for everyday carry, especially in humid climates.

Odds ‘n Sods:

Our friend Mike mentioned a web page that shows the contents of various vehicular kits for G.O.O.D., camping, first aid, and so forth.

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Reader Amy Q. pointed us to a post on another site that has some good ideas for building up a second income. As I’ve mentioned before, every family should have a second income that they can fall back on, in the event of a layoff. A home-based business might also grow into something that will be your ticket to living at your retreat year-round.

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Eric spotted this: Bernanke predicts banks will go under. This seems to bit of deliberate posturing, so Bernanke can later say “I told you so.” Speaking of “Helicopter Ben”, Karen found this for us: Federal Reserve Chairman Ben Bernanke Hints at More Interest Rate Cuts

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Also courtesy of Eric: Quantum’s Jim Rogers says US ‘out of control’

Notes from JWR:

Today we welcome our newest advertiser, Uncle Howard’s. They are a builder that specializes in barns, shops, combination house/shops and combination house/RV garages. Their designs maximize storage space, which is important for those that are preparedness-minded and have a lot of logistics to store. Their construction costs are very low. Be sure to visit their web site.

Special thanks to reader “RK” who very kindly sent his 10 Cent Challenge subscription payment in the form of a 1/10th-ounce American Eagle gold coin. That was very kind of you! Speaking of gold, I noticed that the spot price of gold briefly touched $975 per ounce before settling to $973.60 on Friday. Concurrently, the US Dollar Index sagged below 73.70. (When I last checked, it took $1.51 to buy one Euro!) Also on Friday, the DJIA lost 315 points (2.51%). The “Leap Day” Dow sell-off was in reaction to AIG’s huge 6.56% one day loss, blamed on, of course, subprime mortgages. CitiGroup lost 5.19% the same day. Be ready for more turbulence and downward pressure in these markets. If the Dow drops below 11,508 (its low point, in the past year), or if the USD Index drops below 72, there could be what my friend The Chartist Gnome calls “seemingly instantaneous negative implications.” Minimize your dollar exposure, folks!

I’m presently catching up on my backlog of correspondence. The following are some recent letters and e-mails:

Letter Re: Being Prepared for an Avian Influenza Outbreak

Sir,
Please pass on a reminder to people to prepare themselves with a plan and supplies to deal with for the inevitable event [of an Avian Influenza outbreak]. Begin by practicing impeccable agricultural hygiene and discouraging any visitation of persons near their barn yards, hen houses and migratory wildlife flocks of geese or ducks on or near their ponds, open water sources or feed sources. This is best done with a couple of good herding type dogs who don’t mind getting their feet wet in the ponds or on the property watering holes. Our chickens are free range, yet they are blocked from the access of the open water sources, and their supple mental food and calcium sources are kept away from access of migrating and indigenous species of birds. The dogs also help with poultry predatory losses from fox, coons and hawks. – KBF

Letter Re: NOAA Weather Spotter Training

Jim,
I recently attended a presentation by the National Weather Service (NWS) which was intended to educate volunteer weather spotters. The training is put on by NWS meteorologists, and is focused on the weather typical for your area. Throughout the night I felt like this information would be especially useful in light of a SHTF scenario, where regular weather alerts may not be available.
Worst case? It’s free, only takes a couple of hours, and it could put you in touch with other volunteers who might be more receptive to a preparedness mindset. To find out more about schedules and content, your visitors can go to the NWS web site and find their local NOAA branch. Each regional office sets its own calendar for training events, and they’re always looking for more volunteers. Midnight

Letter Re: The “Invention Nation” Documentary Television Series

Jim,
I don’t know if this has been posted here or not. I have finished watching a series on the Science Channel called “Invention Nation“. The show primarily feature inventors who are inventing ways to “go green”. Many of these inventions and ideas fit in perfectly with being self-sufficient. Some of the topics are; used cooking oil for diesel engines, solar power technology, passive solar for heating homes and water, bicycle generators, etc… The series will rerun starting in March and may be worth a look for the preparedness minded. See the Invention Nation web site. Thanks to you and your family for all you do. – Randy G.

Letter Re: The EconomicIndicators.gov Web Site

James,
It looks like the U.S. Department of Commerce Economic Indicators web site now will continue to operate and they are going to enhance the site to boot. Here is the recently updated notice from their web site:

The U.S. Department of Commerce’s Economics and Statistics Administration (ESA) has decided to continue the economicindicators.gov web site. Featuring the economic releases from ESA’s Census Bureau and Bureau of Economic Analysis (BEA), the site was started by this Administration in 2002 to give greater awareness to these economic statistics. ESA initially planned to discontinue the service due to cost concerns but given the feedback ESA received, the decision has been made to continue the site and improve its functionality.

Just though you might like to know. – John W.

Letter Re: Sizing a Retreat AC Power Generator

Mr. Rawles:
In attempting to size an emergency generator for my home, I have run across some interesting questions that I hope you and/or your other readers will be able to help me with. I lived through the blizzards of the 1990s here in the southern West Virginia coal camps, and I will never forget us and all of our neighbors being without power and unable to get out of our own driveways for 23+ days in 1993.

It marked the very beginnings of my awakening to the necessity of being properly prepared. With that in mind, I am attempting to set my home up with the ability to keep a bare minimum level of electrical appliances running in the case of a long-term outage; namely 2 refrigerators w/ freezers, a chest freezer, and an upright freezer (all just a few years old, so fairly energy efficient).

I am gauging the power being used by these appliances using a Kill-A-Watt. And, honestly, I’m afraid that I am doing something wrong. My number seem awfully low.

The first test I ran was on my chest freezer; after two hours of measurement, the freezer had consumed just 0.05 KWH or 50 watts of power at 25 watts per hour. I was surprised, but not terribly because the lid was not opened during the span of the test.

Next, I tested the refrigerator in my kitchen. It is a an Energy Star compliant Whirlpool brand 25.55 cu. ft. model with water and ice in the door. As a result of the chest freezer coming in lower than I expected, I purposely skewed the refrigerator experiment with the hopes of over-estimating the true usage. To that end, I was sure to be a bad boy and do things such as holding the door open and staring in like a goober for five minutes. I also refilled the dog’s water bowl from the door (forcing the pump into action) and virtually emptied the ice bin as crushed ice through the door (a big cup of ice water is yum!) to force the ice maker to have to run and make more. But, even with all that, my two hour test yielded a cumulative KWH usage of just 0.13. A measly 130 watts at 65 watts per hour.

Researching this online, I’m finding sites that estimate the typical household fridge uses between 150-250 watts per hour with peaks upward of 700+ watts. Am I doing really well on efficiency or am I missing something? I’ll wait to hear back before I run the remaining tests. Thanks! – JSC

Letter Re: Lessons from Brazil, Circa the Late 1990s

James,
I was chatting with a friend of mine who lives in Sao Paulo, Brazil and we got to talking about their economy. What really caught my attention was what life was like about the time they went their economic collapse, I think he said around 1998.

Brazil had several years of increasing inflation and finally reached 50% per month! At that rate people were paid weekly instead of monthly and everyone would convert paychecks to hard goods and consumables. I told him there would be riots in the streets and marches on the White House if we ever had 50% per month inflation. He replied the Brazilians would complain but pretty much accept whatever came along.

Finally when inflation was so bad the president called in a cousin of his who was an economics professor and she recommended a drastic measure to save the government. One day it was announced that all banks accounts would be limited to $50 and all other funds would be “loaned” to the government. Can you imagine having this happen in the US ?! Fortunately his father was a small business owner and sensed something bad coming down, so days before the bank confiscations he had incrementally withdrawn his life savings of $60,000. The mother was frantic because they could lose 50% – 60% every month the cash was not earning interest in the bank. A few days later and most people lost all their cash while this father was sitting pretty, comparatively. My friend and his family survived fairly well. A friend of theirs had just sold his business and left all the proceeds, about $150,000 in the bank! He was wiped out and several days later committed suicide.

Sao Paulo is a densely populated city of about 15 million so it is amazing there was not widespread rioting, looting and social deconstruction. Supposedly the saving grace was that jobs were not slashed so everyone just picked up the pieces after the confiscation and moved ahead with their next paycheck.

Lessons to consider:
* Governments can act swiftly and unpredictably, and usually to the detriment of the individual
* Don’t keep the majority of your savings in any form of bank account. Stock funds are a bit safer but would have been next in line.
* Cash on hand, even evaporating with inflation, is a must. Keep a good amount of cash on hand to get through the initial shocks.
* Material goods are the king of survival. In Brazil wage earners immediately converted paychecks to material goods. They are the only thing that holds value. Gold was not in widespread use in the city except for the shadier parts of town. You did not want to be walking around Sao Paulo with any amount of cash or gold.
* Like in the stories of Argentina, urban life can continue in a SHTF situation, but you should still be prepared. I don’t doubt that Brazilians outside the city were much less impacted and already much more reliant on natural resources and tools than the average city dweller. – JB in Oregon

Odds ‘n Sods:

Reader Daniel K. recommended an essay about dependence on grid power, posted over at the Jeff Rense site: Worst Drug On Earth Stops In 8 Milliseconds

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Freddie Mac posts $2.5 Billion Loss in Fourth Quarter of 2007

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I just heard that “The Armchair Survivalist” weekly Internet radio show is expanding to shortwave, on WWCR, starting tonight. Kurt covers some interesting topics and he has some great guests. He also still operates Survival Enterprises (that you may remember as a former SurvivalBlog advertiser). They sell a variety of storage foods and gear at competitive prices. Check out Kurt’s web pages, and listen in.

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Automated killer robots ‘threat to humanity’

Jim’s Quote of the Day:

“I practice charity regularly. I believe in sharing. But when government takes our money by force and gives it to others, that’s not sharing.” – John Stossel

Note from JWR:

After more than 10 years of searching, it now appears that a movie production company wants to buy my “Pulling Through” screenplay. I hope to be posting more news about this development sometime in the next two weeks.Stay tuned.

Letter Re: How/Where Can I Learn About Fiber Arts?

Dear Memsahib:

In your biography, I noticed that you wrote: “I also have taught Fiber Arts. I can shear a sheep, angora goat, or angora rabbit and wash, card, dye, spin, knit, weave, (and/or felt) the wool into socks, mittens, a hat, scarf, or a sweater.”

Speaking for those who happen to have a small herd of Angora goats, but no practical knowledge of shearing or weaving/knitting, to say nothing about “wash – card – dye – spin,” are there any books you can recommend? Or perhaps, alternatively, a DVD? Thanks, – Pete M.

The Memsahib Replies: I think hands-on learning is so much better than a book or DVD for learning fiber art skills. These are truly “hands-on” tactile skills.

I would recommend you look for a Fiber Guild in your area. These are groups (mostly women) who get together to learn spinning, knitting, felting, weaving, etc. Depending on the guild, they may sponsor workshops with a fee to attend, or there may be informal lessons at the meetings. You may also find buyers for your mohair (the fleece of angora goats) as well as your kids (baby goats, not your children) at the guild meetings.

The “Spin Off” magazine web site has a link to a directory of fiber guilds.

Another great resource is your local yarn shop. Our local yarn shop owner offers classes on knitting and crochet for a nominal cost. She also has spinning and felting teachers come in to give workshops several times a year. Maybe your local yarn shop owner can hook you up. (Pardon the pun.)