Preppers

http://www.newsweek.com/id/228428

Decent article from Newsweek.  I like the fact that they distinguish between being prepared for common situations versus the collapse of society.  It does seem somewhat odd though, to frame preparedness in the context of fear and paranoia as opposed to simple common sense.

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Swine Flu

It seems to be even milder than the normal flu, so I’m not too worried right now.

Then again, the 1918 pandemic started out mild, disappeared for a little while, then came back with a vengeance to kill hundreds of million people the world over.

So it warrants keeping an eye on it.

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Worsening Conditions

The economy appeared to stabilize in December/January, but is now taking a turn for the worse.  Many will continue to call bottoms, only to be disappointed shortly thereafter.  Eventually the economy will turn around, but we have a rough couple of years ahead of us.  Don’t be lulled into a false sense of security.

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New Year’s Resolutions

Top Ten Preparedness Resolutions:

1. Assemble a bug out bag or improve your existing one

2. Put together a vehicle kit

3. Buy a generator

4. Implement a food storage program

5. Plant a garden (come the Spring)

6. Test/update fire extinguishers and first aid kits around the house

7. Get your financial house in order - save more and eliminate debt

8. Live a healthier lifestyle

9. Learn new skills

10. Reconnect with relatives and old friends

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Reconnecting with food

Great article from the BBC on why our food system needs a “fundamental rethink”:

http://news.bbc.co.uk/1/hi/sci/tech/7795652.stm

One of the recommendations is more localization of food supplies.  Apart from the logistical benefit, there is also the psychological benefit of reconnecting with your food.  Too many people these days, particularly the young, have no idea where their food comes from (hint: the supermarket is not the correct answer).

There are a few ways to reconnect with your food:

  • Plant a vegetable garden.  Great link here: http://ag.arizona.edu/pubs/garden/mg/vegetable/index.html
  • Fish (I’m personally an avid kayak fisherman)
  • Hunt (if this personal choice suits you)
  • Learn how to cook.  That is, how to REALLY cook, not just prepare meals.  Learn how to bake bread and cook other staples from scratch.
  • Learn food preservation - canning, dehydration, etc.

The ability to provide for one’s own meals helped many survive the Great Depression, and enables many to survive in less affluent parts of the world today.  Unfortunately, this is something that is rapidly being lost in much of the US.

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Home Heating Alternatives

Just saw this article in the New York Times:

http://www.nytimes.com/2008/12/27/business/27coal.html?_r=1&ref=business

Apparently, coal-burning stoves are making a comeback, at least for those in close proximity to coal mines.  It’s dirty, stinky,  and not very enviro-friendly, but apparently it can be much cheaper than natural gas or heating oil, and, if you have the space, fairly easy and safe to store (unlike liquid fuels).

One thing to consider - some (though not all) wood burning stoves can also burn coal.  Generally, they just require the right sort of internal insulation to handle the higher temps coal produces.  If this is a route you want to pursue, look for a wood burning stove that can handle coal.  That way, you have multiple fuel options.

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Cloth Diapers

This tip comes via my wife and two year old daughter.  At first, I was a little turned off by the idea.  However, I have come to see it as a very wise move.  We use the Bum Genius brand.  They’re not like in the old days where you had a square of cloth that needed to be folded in a particular way and then closed with a safety pin.  The current ones are shaped just like regular disposable diapers, with elastic around the legs and they seal with velcro tabs.  At 5 diapers per day, that’s 150 diapers per month saved.  It’s good for the environment, good for the baby, good for the pocketbook, and from a preparedness standpoint, you never have to worry about running out of diapers on a Sunday night.

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Surviving Deflation

Last week’s CPI (-1.0%) and PPI (-2.8%) confirmed what many economists feared - the financial market crash and economic slowdown was triggering a period of deflation (falling prices).  Deflation is bad because it can cause an economy to come to a grinding halt.  It works through a number of insidious pathways.  Consumers defer purchases because goods will be cheaper in the future.  Businesses watch profit evaporate as inventories fall in value.  It also becomes difficult for businesses to undertake profitable investment projects since deflation causes the real (i.e., inflation adjusted) interest rate to rise - with a -2.8% deflation rate and a 6% nominal interest rate on loans, the real rate is 6.8% which may (particularly in recessionary times) be more than the business can earn on a new project.  As businesses cut back, unemployment rises, people consume even less, and deflation accelerates further, sinking the economy in a downward spiral.

What can you do to protect yourself?

  1. Pay off debt.  This is extremely important.  One of the particularly nasty effects of deflation is that it increases your real debt burden - you are paying the loan back with dollars worth more than when you took the loan out.  Try to eliminate debt as quickly as possible.
  2. Defer big purchases.  While this may be bad for the overall system, it is smart for the individual.
  3. Don’t invest any new money in risky investments.  Cash is king during a deflationary period.  Keep your money in liquid, FDIC-insure accounts.
  4. If you have money invested in stocks in a retirement account, and you have >10 years until retirement, leave it alone.  The market has fallen substantially in recent months and unless you need the money soon, pulling it out now is probably a mistake.  Do not add to it though, see #3 above.
  5. Avoid precious metals.  Gold is an inflation hedge.  It will perform poorly in a deflationary environment.
  6. Secure your job to the extent possible.  If your job situation is inherently insecure, start looking (discretely) for a new position.
  7. Don’t panic!  All we have so far is one data point, and the situation can change quickly.  There is also always the risk that the government overreacts, and brings about inflation a couple of years down the road.
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Prepare for what exactly?

This sounds like a simple question, but let’s give it a little thought.  Prepare for the unexpected, obviously, but recognize that (unless you’re extremely wealthy) you have limited time and resources to apply towards your preparedness plan.  Don’t focus on “end of the world”, “collapse of civilization”, “Armageddon” type scenarios.  Focus on unexpected events that are likely to happen.  Some examples:

Natural Disasters

  • Hurricanes
  • Earthquakes
  • Tornadoes
  • Floods

Civil Emergencies

  • Power outages
  • Water/sewer/natural gas disruptions
  • Fuel shortages
  • Supply disruptions leading to empty stores
  • Infectious disease epidemic

Everyday challenges

  • Automobile breakdown or flat tire
  • Household problem - faulty furnace, leaking roof, fire
  • Illness or injury

Financial problems

  • Job loss
  • Financial loss in retirement funds
  • Theft/fraud
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Some really troubling economic signs

Last week, the unemployment rate rose to 6.5%, the highest it has been since early 1994. However, that’s not the big story. The big story is how fast it’s rising given how early it is in the current recession. The last recession ran from March 2001 through November 2001. The unemployment rate started rising two months before the recession originally started, continued slowly upwards, but didn’t peak until June 2003 - almost 2 years after the recession ended. The recession previous to that ran from July 1990 to March 1991. However, unemployment didn’t peak until June 1992. More than a year after the end of the recession. I think we’re likely to see a similar pattern this time - with the recession ending in mid-2009, but unemployment continuing to rise for another 1-2 years after that. I would not be surprised to see >10% unemployment by mid-2010.

My other big concern is debt-to-GDP levels. Over the past few years, these have risen to levels that are a multiple of previous historic highs. Not just in the US or Europe, but in pretty much every industrialized nation in the world. A good part of this was a result of the global housing boom, which is now over. The obvious question is - what happens when you combine an already crushing debt burden with an economic slowdown, falling asset prices, and now rising unemployment (and thus falling personal income). The immediate answer, on an individual level, is default/bankruptcy. The longer term consequences for the economy (getting stuck in a vicious downward cycle) are even more stark. Then there’s the fact that this is the first time post-WWII when every major economy is heading into a recession together.

I’m not predicting an end of the world scenario. I’m not even predicting a repeat of the Great Depression (it’s unlikely simply because the central banks of the world are in panic mode right now, doing everything they can specifically to prevent it, something they didn’t do in 1930). I am predicting what will probably be the worst economic recession since the Great Depression. We’ve gotten used to recessions being short and shallow over the past 25 years, and this one will be neither. I hope I’m wrong, but the evidence points in this direction.

What can you do?  Start making plans for handling a job loss.  Get in touch with former co-workers, revive your old networks, start putting feelers out with other employers, update your resume, and update your skills to align with whatever skills in your field are currently in demand.  Do not take on any more debt, and to the extent you are able (without negatively impacting your savings) start paying down existing debt.  Increase your savings.  Cut out spending on unnecessary items.  Look for ways to do more with less.

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