Preparing for Financial Disaster

One of the things that I have always blogged about is being ready for disasters. A disaster that involves the collapse of society is the one that preppers seem to find the most “sexy” and they spend their time planning on it- stockpiling guns, ammo, food, and the like. The thing with that is, it is also the disaster that we are least likely to experience.

The most likely disaster that we are likely to affect is a personal one. A disaster that affects just you, or your family. A personal disaster may be something as small as a flat tire, or as personally destructive as cancer, or simply being laid off from your job. We cannot know what that disaster will be, but there is a pretty good chance that the best way to fix it will be… money.

Even if that disaster is more widespread- say one that affects your neighborhood, your town, or even the entire county, whether it is a tornado, earthquake, or hurricane, a wildfire, or a chemical spill, one thing that you are always going to need at some point is money.

That’s why it amazes me that 57% of Americans can’t even deal with an emergency that would cost them $1,000. Sure, stockpiling food, ammo, or some other piece of cool gear is more fun, but money is going to be your friend in most disasters at some point. Having $1000 in emergency cash is going to help you out of more disasters than that new ACOG or that second 1911. I know what you are thinking- “Divemedic, didn’t you say that the dollar is in trouble? If I stockpile too many dollars, aren’t I at risk of it becoming worthless?”

You sure are, but it is still important to have a reserve to get you through those personal disasters. The ideal emergency savings fund is to have at least three month’s expenses, but having a year’s worth gives you a level of financial independence that we are all looking for.

Here is what I did, and what I recommend. Put away a few bucks a week. For this example, let’s say that you have $4000 per month in expenses. Soon, you will have emergency funds if you follow this plan:

Have a week’s expenses available in the house in the event of an immediate problem. Not a week’s pay- a week’s expenses. In cash. Seal it in an envelope and squirrel it away somewhere. You can put it in the gun safe, or you can make a “poor man’s safe:” mount an add-on electrical box in the wall, and put a CATV or phone jack plate on it. You can hide the cash in the empty box. For less than $10, you have a place to hide things that thieves won’t look at twice. With $1000 in there, you have emergency cash that is readily at hand, likely won’t be stolen, and it puts you ahead of 57% of Americans. (EDITED TO ADD: I use mixed bills, so in an emergency I have change: 20 $1 bills, 10 $5 bills, 13 $10 bills, 10 $20 bills, 7 $100 bills /End Edit) Now you just have to forget it’s there and not touch it when you need a few bucks to pay for pizza. Self control. That money is for disasters, not as a slush fund.

Now that you don’t have to worry about a flat tire or a broken window. You have a cushion that will make sure that you don’t have to hock your wedding ring, your handgun, or have to go hungry just because of that flat tire. Just remember to replace it if you ever need to use it in an emergency.

Now that you have that emergency stash of a week’s cash on hand, you need to work on hitting a month’s cash. For that, we keep it in a savings account. We have a savings account at the local bank where we keep the rest of a month’s expenses, but we exclude it from being able to be touched with an ATM, so we have to go into the bank during banking hours to get it. That makes sure that we aren’t tempted to spend it for something that isn’t important. Ask your bank, they will tell you how to set it up that way. Putting that money in the local bank means that you have access to it within a day or two. Three week’s cash isn’t so large that we need to worry too much about inflation killing it. Sure, it doesn’t earn any interest to speak of, but it’s only $3000 or so. Not gonna break you. Now that money can be used for a bigger disaster. Your home’s air conditioner just broke, and now you can deal with it. You broke your arm and need to pay the doctor. Something like that is no longer the big problem that it would have been. So you have a week’s cash in the house, and three weeks in the bank. That’s your first month, and now you can deal with $4000 worth of disaster. You are now more prepared for financial catastrophe than 65% of Americans.

Once you are here, use all of your savings money to eliminate your credit card debt, if you have any. Credit cards charge such large interest amounts that they are poison to your financial future. Get rid of the balances on them before you go any further in saving for emergencies. Then start working on the second month of emergency money.

For your second month, you can put it somewhere that makes it less convenient for you to raid. If you have a large disaster, you can get to the money within a week or so, and you can seek out a place where you will get interest. I recommend an Internet bank like Ally, Synchrony, or Capital One. They are offering rates of 4 or 5 percent, and you can transfer the cash into your checking account within a couple of business days if you need it.

For your third month: You can start stockpiling precious metals. The problem with PMs is that you can’t buy and sell for what the metal is worth. The other party to such a transaction wants to make money on the deal, so there is a penalty to buying and selling, but that is an advantage. You see, we can be our own worst enemy when it comes to emergency savings when we spend it for something that isn’t a true emergency. If you lose a little when you sell a PM, you are less likely to be frivolous with your emergency fund.

So for that third month, silver rounds are a great choice. With silver running about $20-25 an ounce, stockpiling half and full ounce silver rounds is a good way to save. Buying a few of them at a time is relatively painless. There are 20 rounds to a tube. Six tubes of one ounce silver rounds, and four tubes of half ounce rounds will weigh in at 160 ounces (ten pounds). That’s $4000 of PM that you can convert to dollars at a slight loss, and if there is a TEOTWAWKI event, you have very tradeable silver “coins” that you can use for trade. If you need cash in dollars, you can sell the rounds (at a slight premium- say 10% off melt value) within a couple of hours or days. When you complete this, you will have an emergency fund that will carry you through an entire quarter without a job, or cover a pretty significant issue like “the house needs a new roof” without getting killed financially. This is a level of independence that three quarters of America don’t have.

Once you get to this point, all of your extra money should go to getting rid of car payments and other major expenses. You don’t have credit card balances, you have 90 days worth of emergency money, not get that monkey off your back. Do you really need a new car every two years? Pay that off, get rid of that monthly payment. It will be easier to save for the next step that way. It will also reduce your monthly expenses by quite a bit, and will allow you to stretch those emergency funds.

For month four, five, and six, we have less of a need for trade, and more of a need to store value. So gold is where you can store a bit of emergency money. Don’t get coins. The premium for coins means paying 5 percent more than if you buy gold bars. Larger bars mean less premium, so the key here is to keep larger bars to reduce the amount you lose while buying and selling, but still make them small enough to be useful for trade. Gold bars are concentrated wealth. They are easy to store or hide.

For month four, buy 5 two gram bars, 4 five gram bars, and a 1 ounce bar. That gives you some flexibility to cash out what you need without cashing out an entire month’s worth of gold. The best part is that together, they weigh only about 2 ounces.

For month five and six, buy a four of the one ounce bars. That is another $8,000 or so. Now you have almost $25,000 in emergency money. That’s enough to get you through half a year of having no money, and gives you a level of financial independence that gets you to the point where losing a job, a major illness, or a pretty significant disaster will not be the major problem that it would have been.

Now concentrate on paying off that house. Pay extra payments towards that mortgage. With no mortgage, your six month’s worth of funds is now a year’s worth, because your monthly expenses are minimal.

It also makes you more stable than 95% of the American public. You can do it with a minimum of heartache, and the peace of mind it gives you is incredible, and now you have “fuck you money” because your house is paid, you have a year’s living expenses in the bank, and you don’t have to worry about the money it will take to deal with most disasters.

Now, the disclaimer: I don’t advertise, and receive nothing for my reviews or articles. I have no relationship with any products, companies, or vendors that I review or recommend here, other than being a customer. If I ever *DO* have a financial interest, I will disclose it. Otherwise, I pay what you would pay. No discounts or other incentives here. I only post these things because I think that my readers would be interested

All My Life…

The young adults of today have no concept of how things were before they were born. It’s like they are completely ignorant of history:

I remember a jingle for car loans from the early 80’s, and people were crowing about interest rates being “down” to “only 9.9%” In fact, the Fed set the overnight rate at 17% in May of 1981. The result of this was that auto loans were going for an average of 18%, and that was for someone with good credit. At the end of 1982, auto loan rates were still around 11% for good credit. The average rate now is right around 6%.

She complains that an average house that cost $73,700 would today be worth $230,000. That is because she is using the government inflation figures. Let’s instead use gold as a benchmark. In 1982, that $74,000 house would have sold for 167 ounces of gold. That same 167 ounces would buy you a $347,000 house.

She then goes on to claim that college graduates were getting $33,000 right out of college. She is mistaken. The average college graduate in 1981 received a starting salary of $15,200 a year. Using gold as our metric, that is equal to 34 ounces of gold, meaning that the house in 1981 would cost 4.9 years’ pay. Today, that 34 ounces is worth $66,000 a year.

She is just wrong. Every generation feels like they had it worse than the ones who came before. I’m sure the people who lived through the rationing of WW2, the Yellow fever and polio pandemics of the early 20th century, and the Great Depression would beg to differ.

Inflation

Prices for April were up 4.9% year over year. That doesn’t tell the whole story, though. There were pretty big increases in food prices. Year over year increases:

  • Anything with flour is up significantly– white bread is up more than 23%, wheat bread 24%, chocolate chip cookies 24.4%
  • Ketchup prices are up 24%.
  • Mustard is up 13%
  • Relish is up 12%
  • Eggs are up 30%.
  • Meat products are up, but not as much as wheat. Poultry is up 5% year over year, pork and beef remained fairly stable.
  • Cheddar Cheese is up 5%.
  • Potatoes are up 15%
  • Strawberries are up 9%

The only good news is that lettuce is down 12%.

Economic Warfare

Human beings only have two ways to deal with one another: reason and force. If you want me to do something for you, you have a choice of either convincing me via argument, or force me to do your bidding under threat of force. Every human interaction falls into one of those two categories, without exception. Reason or force, that’s it.

Marko Kloos, Why the gun is civilization, 2007

At the national level, it is negotiation (diplomacy) or warfare. Warfare is the method of getting an adversary to take a course of action involuntarily. Using or threatening another nation with warfare isn’t the only way to wage war. It can be done with economic force as well. Countries engaging in economic warfare seek to weaken an adversary’s economy by denying the adversary access to necessary resources or by otherwise inhibiting its ability to benefit from trade, financial, and technological exchanges with other countries.

The US and its politicians have for years wielded economic force (sanctions and the like) for decades without realizing just how much resentment it causes. For some reason, our leaders seem to think that everything that happens in the world is something that the US needs to be involved in.

So they use sanctions like a club. They twist the arms of some nations to support them in boycotts, UN decisions, and the like. Each time the US flexes its muscle, dislike and resentment builds. Why? Because these nations are being held at economic gunpoint and are being forced to take an action that is against what they perceive is their best interests. In other words, they are being attacked by the US in economic warfare. This was caused by the US using its economic might as a club to keep other nations in line, rather than using it as a surgical instrument.

Make no mistake, the US has been engaged in economic warfare for most of the post-WW2 period. Who started it? I will leave that to historians, but make no mistake, the US is using the economic advantage its had by being the only nation whose economic base wasn’t wrecked in WW2, backed by pure military might to enforce its will upon the nations of the world. We have been engaged in economic warfare with one nation or another for decades.

This works until the economically and militarily strong nation begins to weaken. COVID, along with the government’s response to it, the fact that our nation’s President is a dotard, and the runaway inflation being caused by profligate spending did exactly that.

So China and the BRICS nations are responding in kind. China is seeing to it that the economic empire that the US has been engaged in maintaining is coming to an end. As the President of the US, Biden’s responsibility is to see to it that the US and its citizens are taken care of. He is too busy lining his pockets and following the instructions of his Chinese masters.

China is a master at long term planning. They have thoroughly infiltrated the US government. From congressmen sleeping with Chinese intelligence agencies to plain old fashioned bribery, the nation’s key government officials have been completely compromised.

So China is following up on its biological warfare attack by counter attacking the US by destroying the dollar. It’s brilliant- they cause a pandemic that the US helped fund the creation of, help fund the gaming of the US election that followed, using that to put one of its assets in charge, then attack the currency while their asset distracts us with a proxy war that China is assisting in.

China isn’t stupid- they know what the US can and can’t do. They are playing the long game while the US spends its time and resources worrying about an inconsequential war between Ukraine and Russia. The US has sent more than $70 billion to Ukraine in the past 16 months, and just budgeted an additional $45 billion in the latest debt ceiling deal.

Meanwhile, the US dollar is being deliberately and systematically attacked. Where does this go? Do the math and tell me what you think in comments…

No Limits

The Republicans this weekend did what they always do. They caved in. They reached a deal for our nation’s debt that allows them to campaign as conservative while actually doing nothing of substance.

The deal allows the government to spend until January 1, 2025 without any limits at all.

It’s what Republicans do best- feather their own nests. That’s why Trump vs. DeSantis is a meaningless debate.

Point of No Return

From CNBC comes the report that 57% of US residents paid no income taxes in 2021.

What we have here is a country where more than half of the nation votes for a living. They vote to get largesse from the public treasury without the education or intelligence to see the cost. They also vote to punish the remaining 43% of the country through confiscatory taxation.

You will note that I did not say that they vote to make the 43% pay for it, because that 43% doesn’t pay for it. They can’t. The government took in $5.0 trillion through taxation in 2022, but spent $6.5 trillion. For every dollar collected in taxes, the government spent $1.30.

Now tell me how this is fixable. How are you going to get the 57% to vote for a decrease in payments? Hint: You aren’t.

Inflation vs. Price Increase

There is a difference between price increases and inflation. With a price increase, the commodity that you want to purchase becomes more expensive. This is usually due to supply and demand forces that change the market price for that commodity. With inflation, all commodities cost more in the currency that has been inflated. This is also caused by supply and demand forces, but in this case those forces are acting upon the currency. The supply of currency is up, so it becomes worth less. At a certain point, this causes demand for that currency to drop, further exacerbating the inflation.

This is important when we discuss what commenter elrod had to say about ammo prices:

As for ammo, especially War Shots, we’ll never see pre-Covid prices again (I need a time machine….) 

He’s right. Ammo prices have been rising. Small arms ammunition prices shot up 157% from 2000 to 2022, a period in which price increases caused by inflation climbed by 170%, meaning that in terms of other goods and services, ammo is cheaper now than it was in 2000. To illustrate the impact of rising prices, a box of 20 .223 caliber rifle rounds cost about $12 in the year 2000. Today, the same ammunition costs more than $30.

My very first handgun that I bought was a Smith and Wesson Model 59. (I’m still sorry I sold that gun) Since 9mm was not yet a popular cartridge in 1987, the ammo for it wasn’t as cheap as other calibers. I remember paying $7.50 for a box of 9mm ball. Two years later, I bought a S&W 4506 when they first came out, and was paying $8 per box of UMC .45 ball.

The price increases of ammo that were brought about by COVID were due to a supply issue created by the closing of ports, factories, and shipping facilities as a part of governments shutting down portions of the economy, and were exacerbated by a huge increase in demand that was brought about by panic buying of ammo in light of the George Floyd/Antifa/BLM civil disturbances. The double whammy of supply reduction and demand increase conspired to cause a shortage, which drove up ammo and firearms prices.

That issue has largely been corrected, and the supply issue has largely returned to normal for the mainstream cartridges. There are still shortages of off track ammo like revolver ammo, 10mm, and other calibers that are now short in supply because manufacturers are concentrating on the mainstream ammo supply. As that continues to stabilize, the sidestream ammo market prices will come down a bit.

However, I don’t think that ammo prices will ever return to where they were in January of 2020, when I was buying 9mm for $7 per box (less than I was paying in the 1980s!).

That is why I do not think the elevated ammo prices that we are seeing now have anything to do with the COVID shutdown. The prices we see now are the new floor. Thanks to the inflationary pressures of Trump and Biden (and the uniparty) running the government printing presses, the dollar is worth less. That means that the prices of everything that is sold for dollars will be higher in terms of dollar cost. That is, the new prices for ammo are caused by inflation.

In February of 2019, there were 15.45 trillion dollars in existence in the entire world. By July of 2022, there were 21.73 trillion dollars in existence- a whopping 40% increase in supply in only 2.3 years.

We know that there were less goods and services available, but there were 40 percent more dollars chasing that reduced amount of goods and services. That caused inflation. The United States is in the midst of a period of historic inflation. The average price of goods and services was up a multi-decade high of 9.1% year over year in June 2022. 

Since that peak in July of 2022, the Fed has taken steps to reduce the money supply, and we now have somewhere around $20.6 trillion in circulation. We are never going to get back to $16 trillion. It isn’t possible without collapsing this house of cards our economy is built upon.

So for that reason, we are never going to see prices like February of 2020 again. Those days are gone. Enjoy your time paying $10 per 50 round box of 9mm. It will cost more as we print more money. There will come a time when we look back wistfully at $10 ammo boxes.

Too Little, Too Late

Perhaps it’s because I am newly unemployed, or maybe not. However, today is a bit of a black pill day for me.

Reader BobF is angry that his money is gone. They took money from him for decades, and now there won’t be any left to pay the Social Security and the Pension that he was promised. I agree, it’s perfectly acceptable to be angry about that. Heck, when I first was told (by someone commenting on this very blog) that my pension was simply a way for public employees to screw the employers that had to pay them, I was pissed. I spent decades, working for less money than I could have gotten elsewhere, risking my life to EARN that pension.

The money is gone. They spent it. Like a dad who is angry because when you sent your kid off to college, you gave him your credit cards to use in the event of an emergency, and he maxed them all out on unnecessary bullshit, it’s our fault for giving them essentially unmonitored access to the credit cards. Yep, I said it- it is our fault for not watching what they were spending the money on. So now we have $200,000 in maxed out credit cards, and nothing to show for it. Except in this case, it’s $35 trillion worth of useless treasury notes, and a bunch of promises.

So yeah, everyone is getting screwed. Take a moment to let that sink in. Now feel the anger? You pissed off? Well, so was I, when I first began to realize just how fucked we are.

The time to complain about that was when the Congress spent DECADES throwing money around like a Frat boy with his dad’s credit cards. And yes, it was spent on bullshit.

  • $190,000 by Senator Charles Schumer (D-N.Y.) for digitization of the New York Historical Society’s photo collection.
  • $200,000 by Rep. Howard Berman (D-Calif.) for the Providence Holy Cross Foundation tattoo removal violence prevention program in Mission Hills.
  • More than $220 million to build a bridge between Gravina Island, an island that was home to 50 residents at the time, and the Ketchikan Airport.
  • Don’t think that the holy grail of the Republicans, the defense budget, was immune from this waste. Rep. Duke Cunningham (R-Ca.) resigned and pleaded guilty to accepting $2.4 million in kickbacks from military contractors for steering billions of dollars worth of defense budget dollars their way, using his positions on the Defense Appropriations subcommittee and the Intelligence Committee to insert earmarks for military spending.
  • $500,000 in federal funding for the construction of a very unique museum in Sparta—a town that had a population of about 18,000—the Sparta Teapot Museum of Craft and Design.
  • $14.8 billion to Boston for a tunnel (The Big Dig) that was the most expensive highway project in history.
  • $3.4 million for a tunnel in Florida that would allow turtles to cross Highway 27 safely.

Decades of wasteful project after wasteful project, adding up to hundreds of trillions of dollars in spending. Every single President since Eisenhower has been a part of it. Who is blame? We are. We let them do it. Let the anger soak through you, then take a deep breath. Let it out. I agree with you. It sucks.

The money is gone. There is no way that it will ever be paid back. We owe more money than physically exists. That right- add up all of the money in the world: Dollars, Euros, Yen, Yuan, all of it. Now send it all in. That doesn’t even pay what the US owes, much less the debt of all of the other nations in the world. Now you begin to see just how fucked we all are. Yes, I am using the word “fucked” even though profanity is not used here very often. Why? Because no other word really begins to describe just how bad things really are.

There is no way out of this. The bill is going to come due, and we are the ones who will be stuck with it. That pension you are owed? Gone. The Social Security fund that took from you a third of every dollar that you earned for your entire working life? It’s been spent. I’ve been warning you about this since I figured it out, back in 2007.

Again, the time for us to have fixed this passed some time ago. I became an adult during the Reagan administration. It was probably already too late at that point. My generation inherited the problem, but we certainly didn’t even try to fix it. So yeah, I blame the Boomers (and my own parents, who were part of the silent generation) for creating the problem, but the generations since then certainly didn’t try to fix anything. That makes all of us responsible.

Lacta alea est. It’s too late to cry over spilt milk. You can be mad, but that is like the old man yelling at clouds: it doesn’t change anything.

All we can do now is try and save what we can, and in my opinion, all we can do is try and save our local area. Be ready, band together with as many like minded neighbors as you can, and try to weather the storm. Sauve qui peut.

Get skills. Stockpile tools, gear, food. Learn to garden. Plan. Make friends with neighbors who have complimentary skills. Stockpile stuff that you can trade to people with skills who may compliment your own. For example, extra guns for neighbors who may not have one. They can use it to stand watch while you sleep, or cover your backside.

It’s coming. We don’t know when, but at this point, it’s undeniable.