Preparation is More than Buying Bottled Water

Hurricane Michael caught a lot of people unprepared.  What looked like an uneventful gulf storm turned into a raging monster by the time it made landfall in the Florida panhandle.

Michael missed us completely this year.  I never really worried about it because there was so little error in the track and it was a relatively small storm. If we had to leave there were plenty of exits.

On the other hand, last year’s Irma was huge and violent.  The track was truly a once-in-a-century kind of thing.  It left us with very few options.  Irma was bearing down on us in a way that, for the first time in the more then 30 years I’ve lived in and around Gainesville, my wife and I considered boarding up and bugging out.

We boarded up, but ultimately didn’t need to bug out.  It was mostly a non-event for us, but it could have been far worse.

But, preparation like that is not something you do at the last minute.  It’s not running to the store and buying bottled water and peanut butter to last you through a few days without power.

Preparation is a state of mind. It’s having 90% of the things you need well before the storm is even named.  And then all you have to do is go through a short checklist calmly.

It needs to suffuse your entire lifestyle if you are going to put yourself in harm’s way.  And living in Florida is the very definition of in harm’s way.

Gold Goats ‘n Guns is all about that state of mind.

It is taking responsibility for your personal well-being in a way that is holistic, it’s a lifestyle not a momentary rush to judgment.  It doesn’t matter the issue – politics, health, your investments, — stress and anxiety lead to making bad decisions based on fear.

And living in fear is the last thing any of us want to do.  It is, ultimately, why we do the things we do, to satisfy present and near-future needs to allay anxiety about what unexpected thing will come at us next.

This is why I’m so rabidly not a Keynesian.  The central tenet of Keynesian economics that has been seized upon by power-hungry central planners is the paradox of thrift.

The Paradox of Thrift is the opposite of being prepared.  It’s actually hostile to the very rational notion that savings are what a sustainable economy is built upon.  And savers are the ones upon whom the society will rebuild itself after a crisis.

Simply stated Keynes believed there was a point where savings by consumers was detrimental to aggregate demand and that shifting their preferences from farther out in time to more immediate concerns was a never-ending spiral to the zero-bound of economic activity.

This, of course, is nonsense.  Because all Keynes was doing was describing one of the two most fundamental laws of economics, The Law of Diminishing Marginal Utility.  Now that sounds like a mouthful, but it is really simple.

It means that no matter the thing, the first unit of that thing will satisfy the greatest amount of your need for it.  And each successive unit will necessarily fulfill your needs less.  Think food or water.  The first mouthful of water is the most valuable to a man dying of thirst.  The second is good.  The third not as acute.  And so on.

Eventually his demand for water will slack off as his thirst is met.

It’s the same thing with savings.  The first dollar saved is the most important.  The thirty millionth?  Not so much.  The less you fear the future and the more savings you have, the less likely you are to save further.

Central planners like expansions, it makes them look like geniuses.

The Paradox of Thrift, however sees the opposite as insurmountable.  Because as prices fall expectations, they say, will keep thrifty consumers from entering back in until too much damage to the economy is done.

Central Planners hate contractions.  It makes them look like idiots. 

They get voted out of office if the people hold their water on spending, as it were.

But, that’s nonsense.  Because only you know what you need to satisfy your fears.  Printing money and increasing government spending only masks the underlying problems which were never addressed.

People will re-enter the market when they are ready.  Those who plan for downturns, savers, are punished by this mindset.  Central banks lower interest rates.  The Treasury prints more counterfeit money, spending it into the economy and raising prices while savers wait, like Godot, for a market which never comes to them.

Eventually, even they have to re-enter the market to attempt to eke out a reasonable return on their savings.

Central Planners want to look like saviors, it wins them re-election.

Those of us who are prudent have our futures snatched away from us by those who benefit from this insane system of continuing illusory economic growth built on an ever-shrinking pool of real savings.

When my wife and I bought our property and built our house fifteen years ago, we knew we’d save a lot over time by paying a lot less in interest on the mortgage.

But, it was also a period of time where we built ourselves up mentally and physically knowing we were strong enough to weather any economic or political storm if this weird world built by insane central planners fell to pieces.

Being informed is being prepared.

When I look at what’s happening in the U.S. and Europe today, I see tremendous political risk finally being acknowledged by the equity markets.  We just saw a major upset of the German political scene in Bavaria.  All year German stocks have been signaling anxiety about the changing political order in not only Germany but all of Europe.

This week’s extreme weakness in the German DAX and the U.S. Dow Jones are reflections of the growing concerns that the rules of our political order are changing.  And when change is in the air, smart people save money.

This week’s big breakout move in gold was a pure flight to safety play.  Smart people went to cash.  They sold bonds as well as stocks.  They bought Gold and potentially began the biggest round of short-covering of the entire seven-year bear market.

Those that have diligently waited through this grinding seven-year bear market in gold are beginning to lose faith.  It’s normal and natural.  Bear markets try to grind everyone into dust.  Politicians won’t change unless threatened to within an inch of their political lives.

But, deploying your savings into a very mature bull market in equities is fear of missing out driving you and not what you should be fearing.

You should be fearing that the Central Planners will respond to the brewing crisis like they did to the last one.  The next storm on the horizon will look Michael and Irma had a baby named Mario.

The intensity of Michael, the size and ferocity of Irma and a clueless Mario Draghi at the European Central Bank too frozen by fear to do anything other than what has come before.   Mostly talk incoherently and print a lot of money.

Even Keynes would be horrified by what the Central Banks have wrought.

Because what looms on the horizon is a shift in sentiment from the public believing the Central Planners have it all under control to not believing a word that comes out of their mouths.

And when it is revealed that Draghi’s plan for Europe is to run out and buy a bunch of bottled water and pray you’ll be glad you spent your previous years building up the nerves to ride this one out.

Because that is the exact environment where gold is stronger than any grade of plywood.


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