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Thursday, March 21, 2013

Contingency planning for the economic apocalypse


Whether you're talking about towns, cities, states, nations, or businesses, the failure to apply forward-thinking strategic planning—especially emergency planning—is the best way I know of to kill off an otherwise completely successful enterprise, because sooner or later something unexpected, perhaps even catastrophic, is going to happen.

Individuals seldomly follow suit in their personal affairs. While they may imagine an infinity of dire scenarios in their professional contingency planning, it's not often that they apply this same planning to their personal lives. Our society has come up with a variety of schemes to outsource risk-assessment and planning. These schemes are called insurance. Most people have life insurance and health insurance. We have collision coverage for our vehicles and renters and home-owners insurance. We assume that these various protective policies will take care of any unforeseen and unfortunate outcomes that may turn up. The great problem with all these insurance policies is that they each assume the same thing...that regardless of whatever little financial perturbations and ripples in whatever local pond it might be, the vastness of the American economy as a whole will be almost entirely unaffected.

Even if you're happy with your investments, even if you have health insurance, life insurance, and a retirement plan well on the way to being completely funded, despite all your planning there could still be a big problem. Have you fully considered a scenario where the world economy has collapsed because the US dollar is experiencing hyperinflation? What good will a million dollar life-insurance policy do, when a cup of coffee costs a million dollars? The answer to my hypothetical question is: you can buy a cup of coffee!

Before currency becomes completely worthless, frightened citizens of a bankrupt nation often exchange their hyperinflating currency for a stable foreign currency. They invest in hedge funds that don't rely on their nation’s currency. They buy commodities that they believe will hold value like gold and silver. Despite their prudent well-intentioned foresight, when the local grocery store has no food, when the snack machines have no snacks, when the convenience stores are inconveniently closed for business, what will these forward-thinking possessors of gold, silver, or foreign currencies do with all this inedible wealth? Gold is both pretty and completely indigestible, containing not a single calorie.

Before currency becomes completely worthless, frightened citizens of a bankrupt nation often stockpile food, guns and ammo. That's all well and good, but after a certain point food is a poor investment indeed; first because it is perishable, and last because it's the one thing that other people who don't have it believe you must give them if they're hungry and you have more than you can eat on the spot. There is enormous social pressure that's incredibly hard to resist when it comes to sharing food. My wife can't even resist the begging of a dog under the table; how much harder would it be for her to resist the begging of a starving neighbor's child? Similarly, the stockpiling of guns and ammo makes sense only in the context of a person guarding their hoarded food. Is this really the position anyone would want to find themselves in? How will these guns and this hoard of food stop others—angry, jealous, and hungry others—from throwing Molotov cocktails at the home of the well-provisioned contingency planner?

It should be apparent to you and in fact to everyone that in the event of a wholesale failure of United States currency, none of the traditional contingency plans which include insurance, food-hoarding, investments in precious metals, foreign currency, stocks, bonds, mutual funds, hedge funds, etc., will prove of much use when there's no food, no gasoline, no power, and when hungry predators with guns come looking.
No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend's were.
Each man's death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.
—John Donne
It's difficult if not impossible in the face of extreme pressure after catastrophic events have already occurred to come up with solutions to existential difficulties unless holistic contingency planning has already been accomplished. What is required under these dire circumstances is not a sprinkling of individuals and families in their isolated homes, but a community in a stronghold. These self-sustaining self-protecting communities which are found on military bases or in the walled and guarded vacation resorts on tropical islands like Jamaica for instance, are—in my opinion—an ideal contingency model for an economic apocalypse.

A successful and prosperous outcome requires a homogeneous group of people who share similar traits and goals who can get along with each other, living together and working together. Some cooperatives would make guns or ammunition. Some would distill a variety of alcohols and brew beers. Some of them would be farmers who'd store their grain within an immense and walled grainery. There could be harbor fortresses with armadas of fishing boats. The point is that these self-contained homogeneous communities or cooperatives would be self-protected and productive. Through beneficial trade with other cooperatives, all concerned would be able to achieve and then maintain a respectable degree of prosperity and comfort, and all this without the need for dollar bills or gold bullion.

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