Monthly Archives: January 2017

Are You Ready For An Inflationary Depression?

By: Tom Chatham

We are heading into a new depression. It is not coming. It is already here but we are only in the beginning so it may not be easy for many people to see just yet. Once it is easy to see it will be too late for any meaningful actions to mitigate the effects. Just as you must prepare for a tornado ahead of time, you must prepare for economic conditions early.

We have 20 trillion in debt, over 200 trillion in unfunded liabilities and over a quadrillion in derivatives held by the banks. Our GDP is only about 17 trillion a year and world GDP is only about 60 trillion. It does not take a math wiz to realize that even if we are not paying any interest at all on this massive debt, there is no way to ever pay it all back short of some type of default.

That is what depressions do. They wipe out all of the misallocation of resources and bad debt and provide a reset for the economy. These resets can be relatively easy or they can be very destructive depending on the amount of misallocation that is present in the system. The amount of debt, brought on by decades of unrestricted credit creation, is the largest in history. That means we are in for a very bad ride in the near future.

Much of the money that people think they have is really only made up of digits in some computer somewhere. The banking industry has already taken this money for its own use. To eliminate the need to ever give it back to the rightful owners they must destroy these digits. That is what the new bail-ins are all about. They can at some point just wipe all of those digits out of existence and say tough luck suckers.

The depression of the 1930’s was a deflationary one in nature. People lost their jobs, prices fell and cash was king. People holding bonds did very well. In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse. Banks will enact bail-ins to stay solvent and people will go broke while holding piles of cash.

In the end the inflationary depression will end with the currency collapsing and people losing everything they have that is not fully owned. Eventually we will see deflation as prices fall due to the destruction of the monetary system. At this point most people will be financially devastated. Those that make it to this point with their wealth in tact will be the new wealthy class.

So how can a person survive something like this? You simply need to focus on the needs of your family over this period of time. If you can provide the needs of your family regardless of the prices at the time, you will make it through the worst of times, This means you need a plan to provide these items to your family whether prices are rising or falling. If you have a years supply of food, it does not matter what the current price is, you will have the means to feed them.

If your home is paid for, your car is paid for and you have a supply of energy or a way to produce it yourself, it will not matter to you how fast prices are changing or how much money you bring home every week. You will be able to live outside of the rapidly changing economy. The rapid changes that will destroy others will only provide you a glancing blow.

Those that survive on credit will be devastated as their access to credit is cut off and they become unable to continue making payments on their possessions. They will be devastated even if they still have a paying job. For those that expect to survive on their savings and pensions, they will find those accounts empty following any bail-ins.

Where you live will also play a major role in how well you survive the depression. What do you think will happen when those dependent multi generational families lose their welfare and food stamps following the breakdown of the credit system and prices rise faster than benefits? The ability to produce some items yourself will also depend on your location and the ability to stay safe.

The whole of the production and distribution system depends on 30 day credit. When the credit system ceases to function, goods will stop being produced and transported. This will lead to high prices and few goods to buy. So even if you have a bag full of money you may not be able to buy what you want at some point.

Just like a tornado that tears through a community, a depression can leave the people without the resources they need unless they have them hidden away safely for future use following the event. This is why having resources, real physical goods, put away now will allow you to thrive when the system fails. When the system resets, you will not get a second chance to do it right. You only have one shot and that requires you to finalize your preparations now while you still can make a difference.

The whole point of preparing for this type of upheaval is to maintain a standard of living that you find acceptable. Lack of preparation in this type of event will likely find you living much poorer than you would like. If you are successful in maintaining your standard of living and preserving your wealth throughout this event you will have won the battle and set yourself up for a better future when things stabilize.

Prepare For The Peace That Follows The Chaos

By: Tom Chatham

The people that are preparing for some sort of chaos in their future are only doing the prudent thing considering the environment we are now living in. Those with growing piles of supplies for disasters, war or some type of collapse have made the mental leap that is required to prepare themselves for unknown eventualities that can be life altering. These people have made a plan to survive the difficult times that come and live to tell of it.

What many of these people have not contemplated is the day when the chaos is over and life begins to return to some new type of normalcy. Most people simply plan for chaos and never think about coming out of the other side at some point. While chaos can leave you in an unknown place you should have some idea what you will do when normalcy begins to return to society.

If you planned ahead you probably have a plan to provide necessities such as food and water for the duration of the chaos. Ultimately you will have a plan to provide these things in a sustainable way since you do not know how long the crisis will last. Once society begins to reestablish some sort of order you need to have some type of idea what your next move will be.

If you already have the means to produce food and water sustainably you may then want to move into excess production to trade to others as a way to get other things you need. If the local market is saturated with others like yourself there may not be a big demand for food so you need some other product to trade. These are the things you need to think about for after the chaos.

When society begins to stabilize and rebuild itself people will want many of the things they have been deprived of for the duration of the crisis. As society begins to build up there will be a need for people to produce these things either on a small scale or a large scale depending on the item. This is what your post crisis plan needs to take into account.

The ability to produce these items will require infrastructure of some type. Depending on the type of crisis you went through, many of the resources you may need to produce things will likely have been destroyed. In a worst case scenario you need to have either production equipment that survives the chaos or the ability to make new equipment yourself. This is how a production base will be reestablished in a post crisis era. Those that have this production capability will be very important persons in the community.

This production capability does not have to be a large scale proposition. It can be as simple as a floor loom and spinning wheel to make clothing, a grinder to make flour and meal, wood working tools to make furniture, metal working equipment to make tools or equipment to produce some type of fuel such as alcohol. This production capability also extends to services that people need such as medical services or transportation.

Having some type of production capability is not only good for surviving the crisis but also to have the means to improve living conditions after the worst is over. At some point you will want to once again ply a trade to generate income for your family.

Two hundred years ago many small communities were largely self sufficient. You had farmers producing food, blacksmiths working metal, individuals making cloth, coopers making barrels and wheels and mills grinding wheat and cutting lumber. The whole community worked as a self sufficient unit.

There are those today calling for people to create small groups or communities to ride out any chaos that may come in the future. The primary reason is for collective security in the event society becomes violent and uncontrollable. This same small group can provide the basis for a self sufficient community following an event.

An individual can become self sufficient to some degree but there are only so many hours in a day and many types of basic production requires many hours of work to produce a product. This means that an individual is very limited in the amount of goods he can produce in a given amount of time and thus is limited to the amount of excess production he can produce. With a community of producers, every person can work in the field they are most productive in and increase the overall supply of goods. It is for this reason that small groups will be valuable after an event as well as during.

If each of the members of this group can provide different capabilities to the group as well as production equipment, it will enhance the overall standard of living of the entire group. Maintaining a production capability during the crisis that can be ramped up once conditions have stabilized will benefit those in and around the community and greatly improve conditions in the months following.

While conditions can be violent during a crisis, the lack of resources following the crisis can extend it longer than necessary as people fight for the limited supplies. When people have the things they need they are easier to live with and infighting is greatly reduced. It is for this reason that the ability to produce following a crisis is just as important as during . Having a plan to insure production capability for necessary goods following an event can help to stabilize the situation and eventually normalization to the local area. The Marshal Plan that helped to rebuild Europe following WWII did just that.

For those that believe we are headed for difficult times, they need to think up their own type of local Marshal Plan to help rebuild following an event that could fracture the country and leave behind a third world country in its wake.