Survive Infinite Dangers: The Family Survival Guide of 21st Century Dangers (18 page)

Mankind continues to work overtime dreaming up way to self-destruct. Why? There must be a self-destruct gene carried in every human being. Think about it and you’ll realize about every 2,000 years mankind almost (just almost) destroys itself and then has to climb back through a thousand years of Dark Ages before it slowly begins to rebuild to a crescendo then repeats the whole sequence all over again. Greece 4,000 years ago, Rome 2,000 years ago; are we due again? Let’s hope we can break what seems to be a curse. A great book on this subject with predictions that have been so accurate to be eerie since its printing in 1998 is called “The Fourth Turning”. When you read how “spot on correct” their predictions have been for the period from 1998 until today you will pay attention to what they predict for the future. The “reasons” all make perfect sense. It’s as if there was a huge jig-saw puzzle with a million pieces all along these thousands of years and these two authors put the pieces together! They made the “whys” of the past so clear and they made the “probable future” just as clear. If I could bet on any one set of predictions for the next 500 years it would be contained within the pages of “The Fourth Turning”. I’d encourage you to read this book; most libraries carry copies.

Let’s get to the reason for this chapter. First of all just when the tried and true “pie rule of investing” of 25% bonds, 25% stocks, 25% real estate and 25% “all other” was needed to work the most it blew up just when the baby boom generation needed it the most. The idea was that as people came closer to retirement it was supposed to be more bonds and more conservative everything. When solid stocks and bonds like General Motors and hundreds of other “rock solid investments” go from over $100 a share to bankrupt what’s an investor to do? This book does not provide one stock tip or even investing advice. It provides advice on having at least something of value no matter what the world does.

Never put all your eggs in one basket. Ever heard that expression? Etch it in stone for everything to do with this book. First of all, all governments and civilizations eventually fall. Maybe the one we’re in won’t fall for another 500 years but none have ever lasted forever. And with each fall, their fiat currency becomes worthless as well. But knowing “when” is, as that old game show title said “The 64 Thousand Dollar Question”. Name a currency 400 years old that is still accepted anywhere in the world. There are none. Some American and European currency of the late 18
^th
century are technically still legal currency but their value to coin collectors are worth far more than the “one pence” stamped on an early 19
^th
century coin. A merchant might take it for a penny than race to a coin store to sell it for thousands of dollars. Fiat currency due to government caused inflation always turns to dust until it becomes valuable as an antique coin or bill. What “currency” has held value for thousands of years and will keep doing so until some chemist bankrupts the world by turning rocks into gold and silver. Having some silver and gold is always a good idea. On the other hand you can’t eat silver and gold so consider both not as speculation or a storehouse of most of your assets, just some of your assets and as your longest term asset.

These are assets that should be the bedrock of the net worth of your family. Assets your grandfather should have had (but probably did not) and you hope your great, great, great grandchildren who you’ll never hold without any generation cashing it in for a few years of a wild fling. It should be treated with respect and reverence. Your family for eons will never be penniless. Ancestors will always have something of value in times of extreme stress in civilization.

Yes, governments may try to confiscate your silver and gold. Since silver and gold ownership is currently legal I can legally write “that’s what sealable boxes, paraffin and shovels are for” without breaking any law by writing it. Just make sure someone besides you (better to have three or four people who you completely trust) know the locations where you buried or hid your silver, gold or other valuable that has held value for thousands of years. Particularly gold coins are small enough that a million dollars can be incased in melted paraffin, double sealed in metal stainless steel (rust proof) water-proof boxes and buried ten feet down with no harm to the fortune in coins. Civilization stabilizes and they’re dug up 100 years later. And you had value in the ground all that time. Your grandchild when they visit your grave hopefully will thank you.

What percentage of your assets should you put into gold and silver (there are other precious metals as well as diamonds, fine art and so forth but I’ll stick to what I know the most about and the common man recognizes (try to pawn a Monet painting and watch the expression on the pawn shop clerk’s face). Remember K.I.S.S. (keep it simple stupid)? That applies as much to assets as anything I can think of. Personally, right now I have too much tied up in real estate so there are practical matters to consider. I have property on the market and if it sells half of the proceeds are going into gold and silver. Remember, this is a multi-generational investment. When the rare but not impossible super Depression hits and only food and water have value even value of precious metals will plummet – for awhile then they’ll regain their value and keep going up and up and --. A man with one loaf of bread between him and starvation will keep the bread and you keep your gold. But these are short-term disasters so never, ever panic. After a severe almost “Armageddon” happens gold and silver has always skyrocketed in value because IF you have extra food that is the time to buy gold and silver at temporary low prices. Short sighted people who thought owning only gold and silver would be able to buy anything the need in any situation will be rudely surprised to learn people with food and water for sale have unbelievable prices on their items for sale. Say, one ounce of silver for a quart of milk and one ounce of gold for food for a week. Six months later when food is again available at reasonable prices that same gold or silver will be worth many times what you gave for it.

There were far more fortunes made during the Great Depression than in any decade leading up to the 1930’s. How can that be when you see only lines of unemployed wanting on a bowl of soup to survive another day? Well, the wealth of countries did not disappear; it just moved from one large group of people to a very small number of people. An example would be the Kennedy family. Their original fortune came from “moonshine” during Prohibition. Joe Kennedy (well, I won’t list the rumors of how he knew in advance the stock market was about to crash but suffice it to say, he did know) accumulated all of the cash possible then waited until income producing property reached it’s all time low in price then used his much appreciated cash to buy considerable amount of real estate with the cornerstone being much of downtown Chicago. Commercial real estate did rise in value and, today, the Kennedy family receives more in rent each month then Joe Kennedy paid for all of their real estate in the 1930’s. In the 1930’s “cash was King” as dollar bills represented real gold and silver. Find a dollar bill from the 1930’s in a rare coin shop and you’ll see “silver certificate – may be exchanged for silver upon request” on the bill but no longer. That ended in 1971 when the U.S. dollar was no longer backed by silver or gold. It is, essentially, backed by nothing!

Today, the “cash” so valuable during the Depression is silver and gold. Everyone has their own investment plans. I share my plans with you only to provide you another possibility to consider. I do not provide financial advice and, in fact, it is against the law for me to do so. Thus I only mention what my plans are and that they are subject to change as the economy changes. One last point, remembering KISS, I’d recommend buying only the one ounce American silver eagle coin. Few people will know anything about silver but they will recognize a brilliant uncirculated shiny American silver coin. There are many reputable dealers on the Web to buy from but check reputations first.

I believe at the bottom of the next economic Depression, there will be a relatively brief period of time when prime high quality income producing real estate will sell at beyond panic “I’ll take anything for it!” prices while precious metals (primarily gold and silver) will be valued at prices far higher than they are today. THAT brief “window” is when huge transfers of wealth occur; transfers that will establish new family economic dynasties. I use the Kennedy family as an example again. Joe Kennedy, Sr. picked the right time to spend his hoard of cash (today it would be gold and silver) to buy
prime high quality income producing
real estate. I emphasize “prime high quality income producing” as anything less will not appreciate in value very quickly and, perhaps, not at all after the Depression ends and the economy recovers. I write this with the assumption that the next Depression will not be the last one. When Rome fell for the last time those who bought real estate very cheaply were simply those who ended up owning permanent ruins.

What DO you barter (trade) your silver and/or gold for? High quality prime farm land is a good idea. People will always need to eat and when acres of land in, say, Iowa can be traded for a few silver coins THAT is the time to exit at least some of your holdings of precious metals. Another good buy would be commercial real estate that is in prime areas of major cities that you believe will be among the first to climb out of the Depression. Do NOT waste your precious metals on anything less than the best income producing properties. Joe Kennedy could have purchased most of South Chicago for the blocks of downtown Chicago he did buy but that investment today would be miles of slums and boarded up buildings providing nothing but headaches. There is land to buy rich with natural resources. Everything from timber to coal to mining to – the list goes on. When the recovery begins the precious metals will begin to drop in value from the sky high points they reached while income producing properties (that, hopefully, you traded some of your gold and silver for) will begin to generate income that goes up and up. Should whatever happens be so bad that no recovery will ever occur then nothing will be worth a thing; including precious metals. But we’ll assume a recovery will occur.

Hopefully, you timed the huge spike in the value of your silver and gold to exchange it for long-term quality property that will leave your family as one of the “very rich” for generations to come. Anyway, that’s how many of the wealthy families of today became wealthy during the Great Depression. The only difference today is that fiat (paper) money is backed by nothing thus your long-term assets going into a Depression needs to be in silver, gold or other commodities. Then “trade” at the optimum moment. Wealth did not disappear in the 30’s; it just transferred from one group of people to others.

Never put more into something that you couldn’t afford to lose it all. Gold and silver will never drop to a value of zero (as a stock might) but (an old expression I live by) “never bet the farm on anything”. And always keep some “chips” in reserve. Go flat broke and it is extra hard to start over. Always keep some “start over” money stuck away that is NEVER touched (unless you do go broke and have to start over).

FDR’s confiscation of gold and silver in 1934 needs to be explained to set that worry aside. Some people readily parted with their gold because FDR asked. Others (about 75%) just hid what they owned. The government actually purchased the metals rather than took them outright. Plus the “going price” back then for gold and silver was a small fraction of what it is worth today. Would the government pay the prevailing price today? I doubt it. People today are either wiser or more cynical. Few would part with their gold and silver unless there was a gun in their face. Few would let it get that far. Their gold and silver would be long buried and forgotten about (except for a few people). FDR confiscated (actually it was purchased) privately held gold because our currency notes were actually backed by silver and/or gold.

With the Depression spreading world-wide and governments beginning to panic they had an old fashioned “run on the bank” at Ft. Knox. After the loss of a huge amount of gold President Roosevelt “shut the window” at Ft. Knox (to Americans – not other countries) and called in all silver and gold notes in exchange for notes that were backed by the “full faith and trust of the U.S. government”, in other words, the taxing power to tax America as much as it needed to defend the American dollar. FDR called in privately held gold to replenish our stock of gold in Ft. Knox. What is there now? The last audit was in 1953 in spite of a law that mandates a public physical audit every three years. This alone is the basis of many wild stories true or not. But for purposes of this book we’ll assume the gold they say is there, is there.

Things ran along pretty smoothly until President Johnson decided he could fight a war (Vietnam War) and “The War on Poverty” at the same time. Both failed (the second one has a life of its own and appears will never end). By the time President Nixon took over, inflation unheard of for many decades began to appear as Nixon printed more money than we had gold to back it up. This led to his decision (called the Bretton Woods conference) to take us off the gold standard. The dollar would no longer be worth $35 an ounce. We would no longer sell gold to anyone; an American or any foreign country. BUT the “horse was out of the barn”. Most of our gold was gone and is still gone. From that day forward government realized they could print an unlimited amount of currency and blame a vague word called “inflation” for prices going up instead of too many (newly printed) dollars chasing too few goods.

But for years and even today government is able to convince (too) many people with little financial knowledge that higher prices are the fault of shop keepers, manufacturers and so forth when they are among the primary victims! In 1973 it was made legal for Americans to own gold again. To the government, gold is still worth some unknown low price but the amount of paper and coinage keeps rising faster than the country’s GNP (Gross National Product). As this book is being written a one ounce American eagle gold coin sells for about $1,400 and silver for about $28 an ounce. If you had put all your money in gold and silver in 1973 you would have had quite a gain. But that’s assuming the government would succumb to the temptation of printing more money than they have gold to back it up with. Since money often allows popular social programs to be voted into law insuring happy voters who then vote for incumbent governments, printing too much money is a world-wide “disease”. It’s a monetary disease as it will render the fiat currency worthless and that can lead to unpredictable results (always bad such as the German Weimar Republic of 1924 where a wheelbarrow of currency wouldn’t buy a full loaf of bread). Even though the people brought it on themselves they blamed the government. That ushered in Adolf Hitler, World War Two and the loss of 100 million lives.