Last year at this time, I
suggested that it would be good to "invest" in a small collection
of basic materials that would reduce one's dependency on existing systems in the
event of systemic breakdown. In short, the classic "escape
backpack" in case urban/suburban areas became uninhabitable.
Doesn't seem so kooky
now, does it?
That advice stands for
2008. Although there wasn't really any reason to put the "escape backpack"
to use in 2007, nevertheless it hasn't really fallen in value either, which
is more than you can say of most investments during the year. This is
insurance that you only pay for once. Maybe it is worth pointing out that the
big score for 2007, namely long CDS on mortgage-related paper, is also a form
of insurance. (Pros -- if you are still long CDS, I'd suggest selling it back
to your dealer while the dealer is still able to pay.)
Besides, the "escape
backpack" is also handy for recreational backpacking as well.
This year's
"investment" is more of the same, although on a wider scale. How
can you reduce your dependence on existing systems -- whether your place of
employment, water, electricity, or food and fuel delivery? I expect that
during 2008, an overall theme will be that such systems deteriorate markedly.
As soon as February, the
city of Atlanta may become uninhabitable due to a shortage of water. Of
course there is still more than enough water to drink. People only drink a
gallon a day or so. The problem is, if someone uses that gallon to flush
their toilet or water their dying roses, then someone else's tap could run
dry. In short, the system doesn't work. Who would have
thought that Atlanta could be the New Orleans of drought? I would have put
Phoenix higher on the list.
At the same time, I hear
that local governments in Florida may be unable to pay government workers due
to a freeze on assets held in a state-managed money market fund. Maybe trash
won't be picked up, or school bus service will be cut back. More
deteriorating systems.
In California, we saw
half a million people evacuated due to fires. There have always been fires in
California, but rarely so large. What might have happened if the emergency
teams hadn't been paid in weeks due to a busted money-market fund?
The Pacific Northwest
just got hit with a windstorm of epic proportions. Winds in excess of 150 mph
were recorded on the western Olympic Peninsula. That's not too common either.
The accompanying rainstorms flooded I-5, which is used by 11,000 trucks per
day. Someone's inventory isn't going to be replaced just-in-time.
I-5 underwater in
Washington State
About 340,000 people were
evacuated in Jakarta due to high tides. Not a tsunami. Not a storm surge.
Just a tide that kept on getting higher, flooding several sections of the
city. The same thing has been reported recently in India, Mexico, the U.K.
and Vietnam. Tides are supposed to be predictable. They've
become unpredictable.
Why is the water waist
deep in Jakarta? No official explanation. When in doubt, blame global warming!
Eighty percent of the
entire Mexican state of Tabasco ended up underwater recently.
Gasoline inventories were
recently at rock-bottom, bumping against the "minimum operating
levels" which basically represents the gasoline in the transportation
pipe. Already there have been spot shortages at places at the "end of
the pipe," like North Dakota. If everyone got worried
about the gasoline situation simultaneously, and filled their gas tank
(nevermind extra storage tanks), the system would run dry in hours.
U.S. banks have begun to
limit withdrawals from bank accounts. What if you need to transfer money
quickly? What if your bank goes bust and your account is stuck in FDIC limbo?
What if your broker goes bust and, in the confusion, you are unable to cash
in your "safe" money market fund? More deteriorating systems. Keep
a month's worth of cash handy. And gold. Obviously.
I haven't even touched on
more dramatic scenarios, such as a quick melting of the Greenland ice cap (or
Antarctica!), which scientists say is happening as we speak. Or a major
earthquake along the New Madrid fault. Or something related to the fact that
the moon and stars are still not in their correct locations. Is the earth wobbling?
As I mentioned last year,
certain wealthy people have already started to make preparations. Tom Cruise
recently spent $10 million on a Mogambo-style complex in Aspen, Colorado. Bill
Gates' foundation is spending $30 million, along with the Rockefeller
Foundation, to create a giant seed bank on a Norwegian island. It has dual
blast-proof doors, two airlocks, and steel-reinforced concrete walls a full
meter thick, to provide protection to three million varieties of seeds.
(Protection from what?) Ted Turner is buying millions
of acres of land and reverting it to buffalo pasture, which is a sort of
natural seed/animal bank. Is there something they're not telling you in the
media companies they own?
I could go on, but it is
better to think of what people without a spare $10 million can do in the face
of great uncertainty. You may be dependent on employment income to pay a
mortgage or credit card bills, for example. There is no easy way to resolve
this, but there is a quick way. If you are grossly over your head, look into
legal means to resolve the issue in one stroke.
It is winter now in
southern New England, where I live. Nothing is growing for a thousand miles
in any direction. Traditionally, this was a time when people consumed the
preserved foods they had stockpiled over the harvest season. Today, people
just assume that the shipments from Mexico, Argentina and California will
keep coming. Do you have enough food to make it to the first crops in June?
You'd be surprised how
inexpensive six months of food is. Rice, beans, pasta, flour, corn meal and
the like can be purchased for well under a dollar a pound. Canned food, from
peaches to tomatoes to chili, is also very cheap. There is no reason to use
freeze-dried or other specialty products. The stuff at your supermarket works
fine and tastes better. Even if the supermarkets remain well-stocked, it
might be a good opportunity to learn how to kick the meat and processed-foods
habit and make tasty and nutritious food for almost nothing. Both your
accountant and doctor would approve.
Keep twenty gallons of
gas in your garage. (Be careful -- it's flammable!) And how about a bike?
Electricity is totemic.
People imagine that losing electricity means a return to a caveman level of
existence. And yet, the cathedrals of Europe and Mozart's symphonies were
created without electricity. Probably the highest-value use of electricity is
to provide light. You can buy a simple LED-based mountaineering headlamp for
about $40. (www.campmor.com) If you look, you can find little solar AA battery chargers that are about as big as
a paperback book, for another $30 or so. Add some rechargeable batteries, and
you've got a completely self-contained electrical lighting system that weighs
under two pounds and costs less than $100.
Kerosene lanterns, which
can run on heating oil, jet fuel or diesel fuel (three other names for
kerosene), cost less than $20 each at www.lehmans.com. Candles -- the big
ones that burn for a looong time -- can be picked up cheaply at Ikea
(ikea.com).
A Berkey gravity water
filter/purifier allows you to make drinking water out of collected rainwater
or water from a local creek. One set of filters will process 6,000 gallons,
which is enough for four people for three years. No electricity required.
(www.berkeyfilters.com) Personally, I prefer the stainless steel models.
To collect rainwater (yo
Atlanta!), try therainwell.com. You can set up a simple rainbarrel off your
rain gutter downspout for less than $100. A 55-gallon drum of rainwater would
last two people a month, if you had to stretch it.
Bathing can be done with
a simple sponge bath (used in all hospitals), or a Sun Shower-type system
($25, campmor.com). One spring, I bathed while standing on the frozen Yukon
river in 35 degree weather, using two liters of hot water made from melting
snow over a campfire. There's no excuse for not bathing.
The ambitious might even
look into alternatives for long-term shelter. The military has long
experience in using tents for extended use. Remember the TV show M.A.S.H.? A decent
canvas tent and woodstove can be had for under $500. Try www.armytents.com.
Tent cities have already begun to pop up in California. Have the
nicest tent on the block.
Coleman makes camp stoves
that run on propane or automobile gasoline. They work about as well as a
normal kitchen stove. www.campmor.com.
You can "flush"
a toilet simply by pouring water in the bowl, but if water is scarce or there
are sewage problems, you can look into "humanure" composting. All
you need is "humanure" and some cellulosic material, like sawdust,
grass clippings or dead leaves.
Humanure Tips
Around here, when the
electricity went out for a few days a couple years ago, that took out the
water pump, heater, and electric range all at once. The heating pipes then
froze, disabling the heater even after the power came back on, until the
weather warmed up. At least the pipes didn't break. Talk about a fragile
system! Try to keep everything independent and redundant -- multiple sources
of light (kerosene lamps, candles, headlamps), multiple sources of heat and
cooking (Coleman stove, propane burner, fireplace, kerosene space heater),
multiple sources of water (well, local creek, rainbarrel), etc., none of
which depends on the functioning of another system.
There is no reason to be
silly about it. With a $1000 budget, you can go a long way towards releasing
your dependency on external systems. That's about the cost of a single gold
coin. Which is going to do you more good? Then go back to your normal life.
For the skeptics: Look, I know how much
this sort of thing is appreciated -- not one damn bit. I'm putting it here so
that nobody says "you should have told us!" I told you. You had
your chance.
* * *
One system that isn't
working so hot right now (is that a pun?) is people's home heating systems.
In the Northeast, heating oil costs are just too high for many people to go
on along with the system they used to use. (Natgas users are gloating now,
but you're going to get it good and hard too, eventually.) This is another
system that many people now need to say goodbye to. What is the purpose of
home heating? To heat your home? No, it's to heat your body. You can only get
so far by "conserving," such as turning down the thermostat to 65
degrees and putting on a sweater. You can't really go much below 63 degrees,
as it starts to get very uncomfortable. That might lower your fuel bill from
$600 a month to $500. The trick is not to "conserve," but to use
less -- in other words, adopt a new system which inherently has
no need for the amount of fuel required by the old system. For our own house,
we added insulation to the attic (an easy job you can do yourself) and
limited the space we heat to just the upstairs. The downstairs is left at 50
degrees. The result: 50% less heating oil burned, but the heated upstairs is
now warmer than it was before. What if we wanted to reduce our
heating oil use by another 50% for a total of 75%? I would disable the
downstairs heating system altogether, and keep the plumbing pipes warm by
insulating them and adding electric pipe tape. (Put the pipe tape on a timer
so it only runs during the night.) Then, I would add insulated curtains to
all the windows, and close them at night. Also, I would add an automated
thermostat that lowers the temperature to 50 degrees during the night, and
add more blankets to the bed.
Unfortunately, if your
use falls in half and prices double, you're just jogging in place in terms of
total expenses. (Note: oil prices will probably double again.) Need to go
farther? I would choose one room of the house -- in my case one of the two
living rooms -- and add six inches of styrofoam insulation to the walls and
ceiling. This adds about R-30 for a total of about R-45 for the exterior
walls. Of course, we would use insulated curtains as well. This is about a
375 square foot space and includes a fireplace. I would add a high-efficiency
woodstove to the fireplace (free standing, not an insert). I would also add
two layers of reflective foam-foil insulation to the floor under this room,
which is accessed by the basement. Then, I would paint all the walls with Thermoshield paint, which reflects infrared
radiation. (If this sounds like too much work and expense, forget about the
added insulation on the walls and ceiling and just use the paint. If you want
quick/cheap insulation, just staple foam/foil to the walls and ceiling. It
looks like hell, though.) In the end, you'd have a very tightly insulated
single 375 square foot room, which you could easily heat with the woodstove
on its lowest setting. (If you can't use a woodstove, consider a vented single-room heater that runs on natgas or
propane. You can also add an oil dripper to a woodstove so that it runs on
heating oil.) Disconnect the heating system altogether and drain all the
heating-related pipes so they don't freeze. Keep bathrooms and other plumbing
warm with pipe insulation, pipe tape, and small electric heaters set at 45
degrees in bathrooms, under the kitchen sink, etc. You might still need the
basement heater for hot water -- or, consider a tankless heater (uses 30%-50% less fuel)
running on propane or natgas.
Unvented space heaters,
which run on kerosene or natgas/propane also work quite well,
although you have to be careful regarding the buildup of exhaust fumes in the
room. For this reason, they are unpopular in the US, but they are used quite
often in Japan. I used an unvented natural gas heater for several winters
myself.
Well, we just
disconnected that darn heater altogether, replacing it with a small
single-room heater running on wood, natgas, heating oil or propane. In the
hundreds of years before 1950 or so, this is how people always spent the
winter -- in a single room, around the fireplace. (Note: open fireplaces are
horribly inefficient. Use a woodstove.) Do you think the 19th century farmers
burned heating oil refined from Saudi crude?
Modern woodstoves --
built after 1990 or so -- are now required to burn much more cleanly than the
older versions, which were really just iron boxes. They produce much less
smoke and smell outside, create more heat per pound of wood, and are
appropriate for more densely populated areas. Don't bother with a used stove
from before 1990 or so.
Want to go farther? Then consider
a small room, like 10x12. Add R-40+ insulation to the walls, ceiling and
floor, plus Thermoshield paint and insulated curtains as previously noted.
With this level of insulation and a small space, you could probably heat it
quite nicely with a 100 watt lightbulb. This is plenty of space for a table,
desk and an easy chair or two. If you want to be simple and cheap about it,
insulate the attic above your chosen room to R-60, and paint the room with
Thermoshield paint.
I think electric blankets
are unhealthy, but you can do a lot to make your bed comfy even if the
bedroom is at zero degrees (as it might be if it is unheated). Pile on the
down comforters of course, but also wear pajamas and, if necessary, a
nightcap. Four-poster beds were developed to enclose and insulate the
sleeper, and some people have experimented with small enclosed sleeping
chambers. This is the way people got by in the chilly Northeast, until about
sixty years ago.
Want to go still farther?
How much farther can you go? Since you're trying to heat your body
not your house, you could try these electrically heated jacket and pants, designed for winter
motorcyclists. They run on about 100 watts on the highest setting, which is
good enough for riding a motorcycle at sixty mles per hour in subzero
weather. Probably you could do fine on a lower setting, of about 30 watts or
so. If you use it for 16 hours a day at 30 watts, that's 480 watt/hours. At
$0.20 per kilowatt hour, you're talking about $0.10 a day or $3.00 a month.
That would be pretty silly, but we can see that the "need" to throw
$600 per month up the chimney in after-tax heating costs is really an
imaginary "need" created by a system that is now obsolete.
I know people are going
to have a thousand complaints. "I can't do that because...." There
is only one reason why they "can't do that." The reason is:
"because nobody else is doing that yet." My suggestion?
Get up off your knees!
Nathan
Lewis
Nathan Lewis was formerly the chief international
economist of a leading economic forecasting firm. He now works in asset
management. Lewis has written for the Financial Times, the Wall Street
Journal Asia, the Japan Times, Pravda, and other publications. He has
appeared on financial television in the United
States, Japan,
and the Middle East. About the Book: Gold:
The Once and Future Money (Wiley, 2007, ISBN: 978-0-470-04766-8, $27.95) is
available at bookstores nationwide, from all major online booksellers, and
direct from the publisher at www.wileyfinance.com or 800-225-5945. In Canada,
call 800-567-4797.
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