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Catherine’s Financial Detox

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This is a re-post of a summary of Catherine Austin-Fitt’s financial detox plan as given to Max Keiser five years, ago. The 15 pieces of wisdom extracted from the video are timeless. If you had started working on them in 2009 it would have had a dramatic impact on your life. Five years from now the same will be true about starting to work on them, today.

Catherine Austin Fitts is a breath of fresh air.

With a keen understanding of the links between politics, corruption, and money she is unmasking economic con-games, one by one, for the benefit of us all. Give her 15-minutes and she’ll explain the most complex schemes and enable you to see right through all sides of the rhetoric we’ve been hearing all our lives.

Not only that, but, she offers powerful solutions and action plans that can be implemented within minutes of watching one of her videos.

Listen to her describe her “Bailout Plan” in the video, below, which I found on The Edge with Max Keiser.

1. – Save Time

  1. Cut out TV and corporate media. They’re a brainwashing waste of time. You’ve got better things to do and think about. Get radical about cutting this out and save 5-10 hrs a week of “bad training”.
  2. Get corrupt people and enterprises out of your life. They get access to your data and money. Consider carefully the banks, brokerage houses or institutions you do business with.
  3. Control personal data. There is no privacy. Think through who you do business with and who has access to your data.
  4. Compliance – be impeccable with compliance. In a situation with highly complex rules and no privacy it’s easy to get caught up in a dragnet.
  5. Simplify. The less things you’re responsible for the better.

2. – Get Smart

Implementing 1. gives you time for 2. and 3.

  1. See things as they truly are.
  2. The greatest wealth creating entity of all time is the family. Think strategically about your family and friends.
  3. If you’re not in a conspiracy you need to start one. Conspiracy means to breathe together. Start a conspiracy with your family to benefit each other and keep corrupt institutions out of all your lives.
  4. Network with other people who know what’s going on. Nobody is as smart as all of us.
  5. If you have time, understand history. What’s happening today is logical if you understand the history of things like narcotics trafficking, mortgage fraud, etc.

3. – Reposition Your Assets

  1. The goal of the games of economic warfare are control and equity.
  2. Build your equity. Invest in your health and your knowledge. Think strategically about managing these key assets.
  3. We’re leaving a large bubble and now people want hard assets. Shift out of phony financial instruments into securities and hard assets with solid economics.
  4. Stick with long term trends. Follow the tapeworm. Don’t be confused by economic nonsense into investing into anything that is not long term and high quality like food, water, gold, Precious metals.
  5. Demonetize. We put money into financial assets, get yield, then buy things. This is a losing proposition.

Catherine Austin Fitts is always worth your time. Check out her blog which she calls, The Solari Report.

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Pawn Shop Sign
Business

So You Wanna be a Pawn Star?

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Pawn Shops were the largest source of consumer credit until 1964 before the flood of institutional credit.

Pawnbrokers have been around since ancient times and even kicked out of the Temple by Jesus for getting greedy on half-shekel premiums. Whether or not they’ve recovered from the incident is your call. But, one thing is for sure: Pawn brokers are filling the huge credit vacuum left by banks who have trillions in reserves but not a penny to lend. Unlike banks, the money a pawnbroker lends is based on real goods — first yours, then theirs.

After a Tivo marathon of Pawn Stars I’d seen Rick, Corey and the Old Man go through their process 50 times or so. Then, the was the last straw. Why does Rick let customers see his expert appraisals?!

A guy comes into the shop hoping his cuckoo clock may be worth something, but, has no idea. Rick thinks it’s original and calls an expert. By the time the expert is done blabbing in front of the customer a deal is struck for $4,200. Whuh? That guy would have been thrilled to get $500 bucks. Rick paid $3700 more than he had to! What’s going on here? This is terrible business . . . unless. . . you have a TV show. Then, it’s marketing genius!

Of course, cheating or abusing customers is not only wrong, but, the quickest way to lose a legitimate business. But, when it comes to the business of pawn shops . . .

Appraisals are the Heart

Modern pawn shops offer lots of services. None of them work without the shops ability to appraise the value of the goods their services revolve around. The History channel describes the Old Man as “The Appraiser” for good reason.

The ability to glean the value of a wide range of items makes or breaks a pawn shop. The quality of the appraisal, and negotiated price, determine the maximum profit potential for each item. Jabbering everything you know about an item puts the customer on an equal footing with the business. In fact, it provides a free service to the customer outside the scope of the pawn business. Pawn customers need money or a loan. If they need an expert appraisal then either . . .

Charge for Appraisals

Or don’t provide them. If you have to bring in an expert then charge a flat fee plus whatever the expert charges you (And have an agreement with the expert that you get first dibs). If the item is not worth an appraisal fee then the customer won’t purchase one.

So, why does Rick give away the heart of his business to folks who just need a few bucks to pay the rent? He doesn’t. The Pawn Stars are savvy businessmen using . . .

Appraisals as Marketing

You gotta love these guys. They take a $3700 loss on an item while demonstrating their expertise to TV viewers across the country. In other words, the ‘loss’ they take in front of the TV cameras is the cheapest marketing you could buy. What other pawn shops get 1000 customers a day and are doubling their store space?

Rick is talking to the TV cameras to demonstrate his shop’s expertise. He’s giving up some of the profit on each item pawned in exchange for marketing his business all over the country. And it’s working, fabulously! While I’m questioning their appraisal process these guys are marketing them all the way to the bank!

In one episode, Corey and Chum Lee are cleaning up the storage room and discover a statue that’s off pawn and should have been put up for sale. The item was a statue that Rick estimated could be sold for $2000. The Old Man comes in and recognizes the statue as one of his ‘buys’ for which he paid $200. I guess the TV cameras weren’t on for that one and the Old Man didn’t blab what he knew the statue to be worth. That’s the pawn business. The customer was happy enough with $200 to make the trade or he wouldn’t have sold it.

These guys are no dummies. Rick, The Old Man, Big Hoss, and even Chum Lee (For video games) are expert appraisers in their own areas.

Gold & Silver, The Blood

If Appraisals are the heart of the pawn business then gold and silver are the blood.

Watch the show closely and you’ll hear the Pawn Stars answer the phone with the greeting “Gold & Silver?”. That’s because the name of the shop is Gold & Silver Pawnshop. The “Old Man” is often seen counting money at his desk surrounded by silver bars. And notice the amount of silverware, superbowl rings and jewelry in the display cases in the background.

Antique guns, helicopters, cuckoo clocks and pinball machines are great fun! But, make no mistake: Their purpose is to draw attention to a business providing credit or reselling the equity in real things. More often than not those real things are gold & silver.

Few pawn items have the benefit of an international exchange to set price. That takes much of the risk out of appraising the real value of an item made with precious metals. Sure, the price changes every second, but, so does the price of everything if there was a ticker tape to broadcast it.

From a business vetting standpoint the gold & silver aspects of the pawn business are something that should interest you, or you’d be happy to learn more about. Pawnbrokers require a second hand dealers license (same as precious metals license) or a pawnbrokers license to buy and sell gold and silver. In Florida, the scales used to weigh gold are regulated by the department of agriculture, which is ridiculous.

Inside Scoop

When selling jewelry or odd lots of gold or silver to a pawn shop bring a nickel with you. It should weigh exactly 5 grams. If it weighs less, or, the pawnbroker doesn’t weigh your item, at all, then find another shop. So much for the department of agriculture.

Sell or Pawn?

Judging by Pawn Stars you’d think the business was 98% sales and 2% pawn. It’s actually 40% sales and 60% pawn (According to one of the fun facts between commercials). One episode showed they had almost 4000 items in the back of the shop!

Anyone contemplating the pawn business should be good with managing thousands of inventory items. And police require reporting, on a daily basis, of everything that’s purchased. Another tracking hassle is that no item may be sold until it sits in the ‘buy room‘ for 30 days and checked for theft. 30 days can make or break the sale of an ipod should a new generation come out making the old one obsolete.

From the customers point of view it’s either sell your item for a fraction of its value or take out a loan based on a fraction of its value. The customer will talk up the value of their item and convince the broker he wants the item back. That’s to persuade the broker that he’ll be paying the interest and will pay back the principal of the loan.

From the brokers point of view he has to accept the risk of not being able to sell the item or the risk of the customer not making loan payments. Either way, he’ll be left with the item. It’s his job to make sure he can resell the item for a profit if the customer doesn’t pay back the loan.

In Florida, the maximum interest allowed is 25% per month. If you come back in two weeks you may negotiate an extension on your 30-day loan. If you don’t pick it up after 30 days, or whenever you extended the loan to, you have a 30-day grace period (At the same interest rate). If you don’t pick it up it becomes property of the pawn shop on day 61.

Inside Scoop

The pawn broker doesn’t want your motorcycle helmet or guitar. He’s got lot’s of them in the back. What he wants is for you to make the interest payment, pay back the loan and pick up your item. Of course, he’s loaned you an amount that he can still profit on if he sells your item. But, unless it’s an exceptional item, the interest payment is what he wants. Even better, if you get the item back you’ll have it for another pawn and interest generating loan, later.

If you have a good track record of paying the interest and getting your item back there will be room to negotiate a higher price on the next item you pawn.

Competition

The competition for pawn shops are:

  • Garage sales
  • Word of mouth
  • Newspaper
  • Ebay
  • Craigslist
  • Flyers at the market
  • Bargain trader
  • Loan from Friends & Family using the item as collateral

If you’ve got time, and no money, then a little sales work puts the money into your pocket. If not, then the pawnbroker does the work and you get less money.

Most items have less value to others than to us as personal possessions. Whether you discover the objective value, yourself, or hear the adjusted value from the pawnbroker (After building in his profit) there’s no sense in blaming the messenger. It’s unlikely you’ll hear the pawnbrokers true appraisal for a valuable item, even if he knows it. Pawn shops are not the Antiques Road Show you’d expect by watching the Pawn Stars.

There’s nothing wrong with needing a bridge loan, now and then. But, pawning will cost you 25% of the loan amount on a monthly basis. The loan amount does not equal the full value of the item because that would leave no room for the pawn broker to profit from the items sale if you default. But, you’ll be chipping away at the value of the item at an alarming rate. That’s the nature of the pawn business.

Some customers interviewed after their Pawn Stars deal say they’ll just sell on ebay. That’s the right thing to do if you’ve got the time. But, there is something to be said for a trip to the pawn shop, talking with real people and quick money to pay the rent.

Restoring Disasters

One of the unique aspects of the Pawn Stars are their restorations. They buy disasters and restore them to original, sometimes better, condition. Rick has a rolodex of restorers that perform these miracles.

In one episode Rick buys a 1992 Schweizer helicopter for $10K. The thing was in pieces after a crashed landing. Although his expert quotes a price of $100k for the restoration he says it would then sell for $150k. Eventually, Rick gets the Old Man to agree to the restoration which turns out to be a stunning achievement. The episode ends with the Old Man taking off from North Vegas with a smile on his face and the aviation expert saying they could probably get $160k for it.

Great TV.

These restorations are wonderful and have the most profit potential of any part of Rick’s business. However, there’s one aspect to take into consideration that’s not mentioned on the show. If you were looking to buy the helicopter in question would you prefer one that had been restored from a crash or had never crashed?

If you’d prefer the one that had never crashed then:

  1. You’d want to pay less for the restored helicopter.
  2. The restored helicopter. would have to be in better shape than the non-crashed version.

The resale prices on the show are overstated. What the experts say its worth and what it actually sells for are two different things. But, hey, it’s great TV, either way.

Creating the Market

In many cases, this is irrelevant because there’s no market, whatsoever, for the non-restored version. In one episode Rick restores a 1930’s gas pump into a thing of glory. There was no market, at all, for the non restored version other than Rick, himself. The restoration created the market.

Now THAT’S good business!

Pawn for Hard Times?

Vetting a business you’ll be running yourself is more than learning the facts. It’s making decisions about the opportunity cost of not running any other business during this period of your life. To assist my wife in the vetting process I created a business vetting mindmap as a way of describing how to Vett Any Business Idea in 10 Minutes. It’s free and may it assist in discovering Your Optimal Buisiness.

Pawn Broker Characteristics

Pawn brokers seem to:

  • Have a talent for appraising value. Part of that is knowing when to call in an expert.
  • Have a collectors’ mentality and eclectic interests.
  • Be willing and competent to deal with items for which they have no interest.
  • Understand value and money and the difference between them.
  • Be willing to buy, fix up and sell.
  • Be comfortable negotiating price and loan terms.
  • Be tactful and firm with customers who disagree.
  • Be comfortable in a cluttered environment.
  • Be able to manage inventory.
  • Be organized enough to adhere to all the regulations and compliance that surround the business.

You’ll want to already have many of these characteristics, not just be willing to acquire them because ‘pawning is big, right now’.

Price of Admission

Pawning is highly regulated. Varying by state, you’ll need to obtain or have a:

  • Banking and lending license.
  • Second hand dealers license (Or Precious metals license)
  • Pawnbrokers license
  • FFL if you’re buying/selling guns.
  • Large positive net worth.

You’ll be subject to extensive criminal background checks to obtain the licenses, above. And a large positive net worth is required to fund the beginning inventory of gold and silver. Pawn brokers give loans, they don’t get them.

Security

For this pure cash business security is a major concern complicated by customers needing close up access to gold and silver items. On one episode, Cory refers to the number of employees working at the shop and it was more than I expected. I’ll bet some of those folks are needed for extra security.

Related Possibilities

No need to be the owner. You could also be:

  • An employee.
  • A consultant appraiser in the area of your expertise.
  • A restorer.

Pawn Shop +

If pawn shops become the new hub for consumer credit then why not make it a fun gathering place? Rent Movies, Instruments, serve coffee, provide web access, whatever.

I hesitate to recommend Check Cashing, Payroll Loans and Car Title Loans because they have a reputation for taking advantage of people when they’re down. If you can provide these services, fairly, then they wouldn’t require any more infrastructure or regulatory hoops than you’ve already taken on for your pawn business.

Also, a pawn shop could have a coin shop, and vice versa. Pawn & Coin or Coins & Pawn is a natural combination.

Beauty’s in the Eye of the Gold

Beauty may be in the eye of the beholder, but, all you have time for is the gold. If you add coin shop services then deal in bullion only. If people bring in collectible coins give them a fair offer on the bullion content only. They’ll get the picture and you’ll bypass the hassles and risks of collectible coins.

Parting Facts & Words

  • Pawning is a multi billion dollar business with some 125,000 shops in US and several traded public companies.
  • The National Pawnbrokers Association says the average loan is $80 and that most customers are employed.
  • Customers tend to be primarily men, homeowners around 35 years of age that need quick money because they have no line of credit.
  • Not all pawn shops sell guns due to the additional burdens of the FFL license and paperwork required.

Pawn shops are getting busy partly due to the TV show and mostly because people need them to supply credit. Banks aren’t lending, credit cards are maxed out and millions are out of work for the foreseeable future.

If you’ve exhausted your options (See competition section above) and can save bank fees, eviction, payroll or getting the heat shut off then, by all means, at least pawn shop loans are based on real goods.

For those vetting the pawn business, however, more customers don’t necessarily mean more profit. If new pawn customers default on their loans it leaves behind a pile of stuff. If nobody wants, or can afford, that stuff then the pawn shop just becomes a huge repository of unsaleable junk.

That’s not the kind of bubble you’ll need to be a Pawn Star.

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Optimal Barter Equation
Banking

Optimal Barter Equation

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An item with money qualities might be a good barter item. To be an Optimal Barter Item it must also directly fulfill multiple human needs in the circumstances of the barter.

For each scenario under consideration ask yourself what items would directly fulfill multiple human needs and be widely accepted in trade in excess of the trader’s need. If the item is also transportable, divisible, storable, measurable and hard to counterfeit then it’s a winner: An alternative form of money in the circumstances of the barter.

Since anything can be used in barter it’s worth making an equation as a tool to separate the wheat from the chaff:

(M * N * LP)1-n = Optimal Barter

Where M are the money qualities, N is how directly the item fulfills a need and LP is the Life Priority of the need fulfilled. Note the 1-n subscript. That’s because an item can fulfill needs across multiple categories of life. In fact, the best barter items do.

Money & Substitutes – (M)

One way to compare barter items with each other is to compare each with money and rate them according to how they measure up. The top items on the resulting list are possible money substitutes. Their fulfillment of human needs, however, is another matter entirely. See ‘Ammo vs. Money’ where I compare ammunition with all the attributes of money.

When barter is king money is dethroned: It takes a backseat to the direct fulfillment of human needs. The concept of money and its substitutes is still useful, however, because many items that fulfill human needs are also decent money substitutes.

Water, food, syringes, antibiotics, IV Lines, portable water filters, firearms, ammunition, batteries and radios are worth more than the money used to buy them even in good times. In a crisis some of these are needed so badly they might overcome the biggest stumbling block of barter: The lack of a double coincidence of wants.

Direct Need Fulfillment – (N)

Water quenches thirst, Food satisfies hunger, Tarps block rain and wind.

The more direct the fulfillment the higher quality the item. I’m a big fan of substitutes but they’re not as easily recognized in the midst of a crisis as the real thing. Since barter items are best stocked after covering the essentials for your family it’s best to focus on items that fulfill needs, directly. There’s one exception to this line of thinking.

The best barter items span multiple categories of use: They directly fulfill some needs and indirectly fulfill others. Water is an easy example: It directly quenches thirst and cleans skin and has an almost infinite number of other uses. Water’s indirect uses multiply it’s desirability as is the case with other Optimal barter candidates.

Life Priorities – (LP)

It’s a constant burden to mankind that choices must be made with imperfect knowledge. With perfect knowledge ordering priorities is a cinch. However, wait too long for specifics to prepare and risk not being prepared, at all.

My Life Priorities are the same in good times and in bad. In a crisis I’ll rely on intuition to reorder priorities according to the scenario. For instance, although Water is #1 the urgency in finding a source is greater in a desert than in a rainforest. Medicine is #5 though in the absence of sickness or injury securing communications might pay bigger dividends. These are not compromises; just working flexibility and a trust of intuition after being prepared, in general.

For the purposes of preparing in advance for a non-specific crisis I’ve chosen to order life’s priorities in the following categories:

  1. Water
  2. Shelter & Clothing
  3. Food
  4. Security
  5. Health & Medicine
  6. Communications
  7. Power
  8. Hygiene & Sanitation
  9. General Tools
  10. Transportation

Going through your own reasoning process and placing these categories in order is surprisingly useful. Knowing your priorities is key in making disciplined and balanced choices when allocating limited resources.

Narrowing Down the Barter List

  1. Think through your Life Priorities and order them into categories (As many as you find useful).
  2. Consider the bolded items in the Comprehensive Barter Item List as barter items worthy of consideration (And please send me your suggestions).
  3. Group the resulting items from step 2 that strike you as filling the most pressing human Needs into your life priority categories.
  4. Sort items within each category by your sense of its importance.
  5. Use your Life Priority categories and assign a primary category and then the secondary categories that the item serves.
  6. Take each item compare it with the attributes of money and assign a value where 10 = Money and 0 = nothing in common with money.
  7. Keep sorting using the criteria in steps 4 thru 7 until you narrow the list down to 20 to 50 items or however many you’d like to use as input to the Barter Equation.

The resulting items are the best items to use as input to the equation.

Consider Three Scenarios

Consider narrowing down your preparation scenarios to three:

  1. The most likely threat to your physical location.
  2. The threat that comes to mind when consulting your informed intuition.
  3. The everyday potential threats and outages that normal life presents.

For example, my three are Fire, Dollar devaluation/Inflation and Electrical Power Outages.

Applying the Equation

Grabbing some promising barter items from the Comprehensive Barter Item List for my three scenarios here’s my impression of the values that should be assigned to them for each variable in the Barter Equation. The equation has not yet been applied. They have merely been sorted by their primary Life Priority category and then by their respective Money qualities. This is as far as people usually go when when considering barter items.

  • The higher the N the more direct its fulfillment of LP1 (As Ordered by my Life Priorities, above).
  • The higher the M the more qualities of Money the Item has.
  • LP1 is the items primary fulfillment category (In my opinion) and LP2 thru N are its secondary fulfillment categories.

Sorted by Primary Life Priority, then by Money Qualities

Barter Equation not Applied.

Item N M LP1 LP2 thru N
Water Packets 10 7 1 3,5,7,9
Portable Filters 5 5 1 3,5,7,9
Duct Tape 7 7 2 4,5,7,8,9
Tarps 8 6 2 4,7,8,9
Aluminum Foil 4 8 3 5,7,9
Coconut Oil 10 7 3 5,7,9
Eggs & Milk 10 6 3 5
Baking Soda 3 5 3 5,7,9
Ammunition 8 8 4 3,6,9
Syringes 5 6 5 7,9
Alcohol Wipes 6 6 5 7,9
Antibiotic Lotion 8 6 5 7
Fuel 8 6 7 4,5,6,9,10
Generator 8 2 7 4,5,6,9,10
Soap Bars 7 6 8 5

 

Applying the Optimal Barter Equation (First Dimension Only)

Here is where the items rank after using a spreadsheet to apply the equation to each items M, N and the LP of their primary category only. In other words, this is where the item would rank if its fulfillment of needs in other life priority categories was left out of consideration.

(M * N * LP) = Optimal Barter

Rank Item N M LP1 LP2 thru N
1 Water Packets 10 7 1 3,5,7,9
2 Coconut Oil 10 7 3 5,7,9
3 Eggs & Milk 10 6 3 5
4 Ammunition 8 8 4 3,6,9
5 Duct Tape 7 7 2 4,5,7,8,9
6 Tarps 8 6 2 4,7,8,9
7 Antibiotic Lotion 8 6 5 7
8 Aluminum Foil 4 8 3 5,7,9
9 Portable Filters 5 5 1 3,5,7,9
10 Alcohol Wipes 6 6 5 7,9
11 Fuel 8 6 7 4,5,6,9,10
12 Syringes 5 6 5 7,9
13 Soap Bars 7 6 8 5
14 Baking Soda 3 5 3 5,7,9
15 Generator 8 2 7 4,5,6,9,10

Applying the Optimal Barter Equation to All Dimensions of Each Barter Item

Applying the equation now to both the primary and secondary life priority categories the item serves. Notice the increased liquidity of items that serve a broad number of categories.

(M * N * LP)1-n = Optimal Barter

Rank Item N M LP1 LP2 thru N
1 Water Packets 10 7 1 3,5,7,9
2 Duct Tape 7 7 2 4,5,7,8,9
3 Ammunition 8 8 4 3,6,9
4 Coconut Oil 10 7 3 5,7,9
5 Tarps 8 6 2 4,7,8,9
6 Fuel 8 6 7 4,5,6,9,10
7 Eggs & Milk 10 6 3 5
8 Portable Filters 5 5 1 3,5,7,9
9 Aluminum Foil 4 8 3 5,7,9
10 Antibiotic Lotion 8 6 5 7
11 Alcohol Wipes 6 6 5 7,9
12 Generator 8 2 7 4,5,6,9,10
13 Soap Bars 7 6 8 5
14 Syringes 5 6 5 7,9
15 Baking Soda 3 5 3 5,7,9

The above fifteen choices were chosen only to show how to apply the equation. It would be interesting to apply the equation to all barter items and see the results. If there’s enough interest that would be a fun exercise for another article.

The resulting Top 10 items of your application of the equation are most worthy of your barter resources. They will directly fulfill the needs of your family while providing a backup form of money or trade liquidity during barter economies. Your proposed trades with these items are more likely to be accepted by fellow traders than those who haven’t gone through the exercise.

Whiskey, Cigarettes & Chocolate

These three items have proven themselves to be good barter items in real barter ‘economies’. The equation handles them well if you add them to your Life Priority list and give them a high “M”, which they deserve.

For instance, perhaps you would swap my priority of “Transportation” with “Vices” to account for Whiskey and Cigarettes. You would also rate these items high in “M” because they do fair well as money substitutes.

Chocolate fits naturally in the Food and Health categories and has a high “M” if the climate is not too warm.

The value of everything varies continuously in time. That doesn’t mean there’s no value in evaluating their relative standing in the only moment we have: Now.

Optimal Barter Items are like Superfoods

To be honest I had a different equation written when beginning this article. After going through the entire process it became obvious that some items are to barter what superfoods are to health: They provide a kind of comprehensive nourishment; they fulfill multiple high-priority needs!

I did not rig the equation to favor items that met multiple needs. I only discovered that no item that fulfilled only one need could compete with the liquidity or desirability of a barter item that fulfilled needs across the spectrum of life’s highest priorities.

The Trade Trumps the Traded

As with the use of money trade is more valuable than what’s traded. Who makes that judgment? You do by making the trade. After all, if you’d rather keep the items you’re exchanging then why don’t you? Even protesting ‘no choice’ admits you value what you get more than what you give. And, your fellow trader feels the same, no?

The Trade Trumps the Traded, every time, as evidenced by the fact that the Trade was made.

Human Needs Trump Liquidity

The purpose of your Optimal Barter Equation is to zero-in on the barter items most worthy of your limited resources. They’re the most liquid components of your preparedness plan. Since the top candidates are also essential it’s a judgment call to decide when you have enough. While your overall preparedness will be well served with these items be careful not to prioritize barter items over the broad range of essentials needed by every family.

Copyright © 2014 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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Douglas Family Stockpile
Barter

400 Items for Barter

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Anything can be used in barter. But, what good is a list of everything? Still, I found the attempt to be comprehensive revealing of how vast the possibilities of barter are.

I made this Barter List as a sub-task in writing an article comparing Ammunition with other barter items. While searching the web for ideas I was surprised to find that the largest list contained only 101 items. Nobody had taken barter to its logical extreme of anything being a potential barter item. The list, below, has 422 items and gets the ball rolling.

I don’t recommend going out and purchasing excess quantities of the items on this list; that’s not its purpose. Most people don’t have all the essentials needed for a disaster. Stockpiling excess for barter before having enough of the essentials could be a tragic mistake. However, knowing where enough ends and excess begins is not easy. After all, the best barter items are essentials that only become eligible for barter when possessed in excess.

This Barter Item List will be used as raw input to create more focused and actionable lists. See the Optimal Barter Equation for a method to rate these barter items with respect to money, essential needs and life priorities.

See Checklist For Hard Times for a list of tasks and essentials that every family should consider having on hand.

(Note: Items in Bold are potential money substitutes. The word Items is used as there are no skills or services listed. I may make a separate list of barterable skills and services in a subsequent article.)

Air Pumps
Alarm Systems
Alcohol For Sterilization
Allen Wrenches
Aloe
Aluminum Foil – Heavy
Ammunition
Ant Traps
Antibacterial Soap
Antibiotics – Augmentin & General
Anti-Fungal Spray
Anti-Histamines
Apple Cider Vinegar
Aspirin
Atmospheric Water Generator
Auto Mechanics Tools
Axes

 

Baby Food Jars
Baby Formula
Baby Oils
Baby Wipes
Backpacks
Bag Balm – Antiseptic Lotion
Baking Sheets
Baking Soda
Baking Supplies
Ballpoint Pens
Bandages
Bandana
Barley
Baseball Bats
Baseball Caps
Batons
Bats
Batteries
Beanies
Beans
Belts
Betadine
Bibles
Bicycle Chains
Bicycle Pumps
Bicycle Tires & Tubes
Bicycles
Binoculars
Blankets
Bleach – Sterilization
Blood-Pressure Cuffs
Board Games
Bolt Cutters
Bolts
Book – Carla Emery’s “Encyclopedia Of Country Living”.
Book – Favorite Novels
Book – Gray’s Anatomy
Book – How Things Work Type Books
Book – Hyperinflation Survival Guide
Book – Physician’s Desk Reference (PDR)
Book – Recipes
Book – SAS Survival Handbook
Boots
Bow Saws
Buckets, Pales & Lids
Bugout Kits
Bullet Proof Vests
Bullion Coins – Silver & Gold
Burn Treatment Supplies

 

Calculators – Solar
Can Openers
Candles
Canned  Beans
Canned  Chili
Canned  Fruit
Canned  Milk – Evaporated
Canned  Salmon
Canned  Tuna
Canned Fruits
Canned Meats
Canned Soups
Canned Stews
Canned Veggies
Cannabis
Canning Jars With Seals And Lids
Canning Supplies
Containers – Tools
Carabiners
Carbon Monoxide Alarm
Carrying Cases
Cash – Foreign Or Domestic
Cereal
Chain
Charcoal, Sand And Barrel For Filtration
Chewing Gum
Chickens
Chisels (Wood And Metal Working)
Chocolate
Cigarettes
Cigars
Clamps
Cleaning Brushes
Clothes Pins/Line/Hangers
Clubs
Cocoa
Coconuts
Coconut Oils
Coffee
Coleman Fuel
Coleman’s Pump Repair Kit
Condoms
Containers – Food Storage
Containers – Water
Cooking Spices
Cookstoves
Copper – (Wire, pots, etc.)
Cosmetics
Cots And Inflatable Mattresses
Cotton Hankerchiefs
Crackers
Cups
Cutters (Side-Cutters, End-Cutters, Snips)

 

Dental Floss
Dentistry Kits
Diaper Pins
Diapers
Diaries
Dice
Dishes
Drill Bits
Driver Bits (With Manual Drivers)
Duct Tape (Camo Or Olive Drab)
Duffel Bags
Duracoat
DVDs & Music CDs

 

Ear Protection
Egg Beaters
Eggs (Freeze Dried)
Electricity Generator
Epoxy
Eye Protection

 

Feminine Hygiene Products
Files – Iron
Fire Extinguishers
Fire Starters – Magnesium
Firearms
Firefighting
Firewood
First Aid Kits
Fish Hooks
Fishing Line
Fishing Rod & Reel
Fishing Tackle
Flashlights
Flour
Freeze DriedFood
Fuel – Diesel
Fuel – Gasoline
Fuel – Natural Gas/Propane
Fuel – Stove – Sterno, White Gas

 

Garbage Bags
Garbage Cans
Garden Seeds (Non-Hybrid)
Gardening Tools & Supplies
Garlic
Gas Stabilizer
Gasoline Containers
Generators
Glasses – Reading & Prescription
Gloves – Work
Glue
Goats
Gold
Graham Crackers
Grain Mill (Non-Electric)
Graphite Grease
Gravy
Grease
Gun Cleaners
Gun Cleaning Kit
Gun Holsters
Gun Magazines
Gun Parts
Gun Scopes
Gun Sights
Gun Slings
Gunsmithing Tools

 

Hairbrush
Haircare
Hammers (Of All Sizes)
Hand Pumps & Siphons
Handguns
Handsaws
Hard Candy
Hatchets
Hats – Sun Protection
Heater Head For Propane
Hemostats
Hemp
Herbs
Holsters – Gun
Honey & Honey Powders
Hot Water Bottles
Hydrogen Peroxide

 

Ice Chests
Ice Or The Ability To Make It
Ice Packs
Imodium
Iodine
IV Lines & Bags

 

Jackets
Jean Shirts
Jeans
Jerky
Jewelry
Journals

 

Kerosene
Kleenex
Knife – Folding
Knife – Hunting
Knife – Machete
Knife – Multi-Tool

 

Ladies’ Supplies
Lamp Oil
Lamps
Lanolin
Lantern Mantles: Aladdin, Coleman, Etc.
Laundry Detergent
LED Lights For All Rooms In The House
Light Bulbs
Lighter Fluid
Lighters – Disposable
Lightsticks
Lime – Outhouse
Liquor – Whiskey, Vodka
Lotions
Lumber

 

Magazines – Reading
Magazines & Speed Loaders – Gun
Mantles: Aladdin, Coleman
Maps – Topographic Of Your Area
Masterlocks
Matches
Mats
Mattress’s – Inflatable
Measuring Cups
Measuring Spoons
Medical & Gas Masks
Medications – OTC
Medications – Prescription
Metal Mixing Bowls
Milk – Powdered & Condensed
Milk (Freeze Dried)
Minerals
Mop Bucket W/Wringer
Mops
Mosquito Repellent
Mousetraps
Mouthwash/Floss,
Mylar Bags

 

Nail Clippers
Nails Nalgene Water Bottles
Needles – Medical
Needles – Sewing
Notebooks And Pads
Nuts
Nylon Cord

 

Oil – Canola
Oil – Motor
Oil – Olive
Oil – Tools
Oil – Vegetable
Oil- Coconut

 

Pacifiers For Babies
Pad-Locks
Painkillers, Aspirin
Paintball Gun
Pans
Paper
Paper Plates
Paper Towels Paracord
Paraffin Wax
Pasta
Peanut Butter
Pellets For Winter
Pencils, Paper, Note Pads
Penlights
Pepper
Pepper Spray
Peroxide
Pet Food
Pillows
Pins
Pipe Tobacco
Plastic Sheetin
Playing Cards
Plywood (3/4 inch)
Popcorn
Portable Toilets
Posts
Potato Peelers
Pots And Pans
Pretzels
Propane Cylinders
Protein Bars
Pry-Bars

Q-Tips

Radio – AM/FM (Crank Power)
Radio – Long Wave For Backup Communications
Radio – Police Band Monitoring
Radio – Short Wave For Local Communication And Monitoring
Rain Gear
Rakes
Rat Poison
Razors
Reading Glasses
Rice
Rifles
Roach Killer
Roasting Pans – Aluminum
Rope
Rubberized Boots
Rubbing Alcohol

 

Safe – Fireproof
Saline Solution
Salt – Sea Salt And Some Iodized
Saltines
Sand Paper
Sandals
Scalpels And Blades
Scissors
Screen Patches
Screwdrivers
Screws (All kinds, 3-inch Deck Screws)
Seeds
Sewing Kits & Items
Shampoo
Sharpening Stones, Files
Shaving Razors & Cream
Shotguns
Shovels
Silver Bullion
Silver Coins– Pre-1965
Skin Products
Sleeping Bags
Slings/Splints
Slingshot
Smoke And CO Detectors
Snares
Sneakers
Soap (Hand, Dish, Laundry, Cleansers)
Socket Sets
Socks
Soda
Solar Calculators
Solar Panels
Soup Base
Soysauce
Spices
Spikes
Spotlights – Portable
Spray & Squirt Bottles
Stakes
Staples
Steel Wool
Sterile Pads
Stethoscopes
Stevia
Stove – BBQ Grill Or Portable Coleman
Sugar – Brown
Sunglasses
Sunscreen
Sutures
Syringes – Dental, Intravenous
Syringes – Wound Cleaning
Syrups
Surgery Kit

 

Tampons
Tang
Tarps
Tea
Thermal Underwear
Thermometers
Thermos Bottles
Tires – Spare
Tobacco
Toilet Paper
Tomato Paste
Tools – General
Tools For Gardening
Toothbrush/Paste
Towels
Trail Mix
T-Shirts
Tuna Fish (In Oil)
Tweezers
Twine

 

Underwear
Utensils
Vaseline
Vegetable Oil (For Cooking)
Vinegar
Visqueen
Vitamins

 

Wagons & Carts
Washboards
Watches
Water – Packets, Locally Purified
Water Containers
Water Containers For Car
Water Filter – 3-Stage Under Sink For Drinking Water
Water Filter – Whole House Chlorine
Water Filters/Purifiers – Portable
Wax Paper
WD-40
Weather Stripping
Web Gear
Wedges
Welding Tools
Wheat
Whiskey
Whisks
Wicks
Window Insulation Kits
Wine
Wire – Electrical
Wire – Fence
Wire – Household
Woodworking Tools
Wool  Scarves
Wool Blankets
Wool Mittens
Wool Socks
Wool Sweaters
Wool Work Clothes
Work Gloves
Work Shirts
Workboots
Wrench Sets
Writing Paper/Pads/Pencils
Yeast
Zip Ties

Copyright © 2010 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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Barter

Ammo for Barter – Part 2: Ammo vs. Other Barter Items

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I put Ammunition after Water, Duct Tape and Coconut oil and before Fuel, Tarps, Paracord and Whiskey. But, that’s just me. On a recent trip to Peru I noticed a fresh role of toilet paper on the dash of every taxi.

A man’s got to have his priorities!

Life Priorities – (LP)

For the purposes of preparing for a non-specific crisis I’ve chosen to order life’s priorities in the following categories:

  1. Water
  2. Shelter
  3. Food
  4. Security
  5. Health & Medicine
  6. Communications
  7. Power
  8. Hygiene & Sanitation
  9. General Tools
  10. Transportation
  11. Spices & Vices

Going through your own reasoning process and placing these categories in order is surprisingly useful. Knowing your priorities is key in making disciplined and balanced choices when allocating limited resources.

Any situation requiring something akin to a remote control drill is eligible for the deployment of firearms and ammunition. Contrary to mainstream media brainwashing firearms have a broad range of application: They serve needs in three out of ten of my top 10 Life Priority categories: Security, Food and General Tools.

Differences of opinion on the value of barter items will be rooted in Life Priorities. Your vision of where Food, Security and General Tools fit into the big picture –And your strategy in providing them– will change the ‘price’ and liquidity you assign to firearms and ammunition.

Informed Subjectivity

In a barter economy you are one half of the pricing system and your fellow trader is the other half. Making subjective judgments about the value of a barter item is not a weak method; It’s the only method. Barter economies have no broad pricing system other than the subjective judgments of the traders. Instead of complaining about subjectivity develop an informed subjectivity to become a better trader.

In barter price is expressed in terms of the desired item. To save myself from drowning in a sea of subjectivity I came up with Your Optimal Barter Equation. Please see that article for a description of the equation. Simply stated:

(M * N * LP)1-n = YO Barter

Where M are the money qualities, N is how directly the item fulfills a need and LP is the Life Priority of the need fulfilled. Note the 1-n subscript. That’s because an item can fulfill needs across multiple categories of life. In fact, the best barter items do.

Money – (M)

Ammunition is compared with the attributes of Money in the first part of this series. Ammo fairs well in the comparison. On a scale of 1-to-10 where 10 is money I give Ammunition a rating of eight. It is viable, if not strong, in seven out of the 10 attributes of money; it is not fungible, is divisible only within the same cartridge and is best traded in manufactured lots. It is also destroyed or unpredictable if wet.

Direct Need Fulfillment – (N)

Bartering ammo instead of a gun is like bartering fuel instead of a car. The ‘fuel’ for these machines have more of the attributes of money yet directly fill needs for the same Life Priorities.

Because ammunition requires a gun I’ve given ammo an eight instead of a 10 when scoring its direct fulfillment (N). Before settling on eight, however, substitutes should be considered.

Ammunition Substitutes?

  1. Security. Walking through the aftermath of Haiti or Katrina with pepper spray or rubber bullets is a weak security play. Even if you emerge unscathed what’s your strategy to provide security for your family? The stabilizing peace that follows in the wake of responsible gun ownership is dramatic, even in good times. How much more so in a crisis? Avoidance, lights, fair trade, keeping your word are minimum behaviors of rational people. However, security is not holistic until violence that may be thrust against you by less spiritual or less rational creatures can be stopped.
  2. Food. Yes, if complete proteins are stocked in advance. Have plenty of beans & rice, whey, TVP, Hempseed, milk, eggs, soybeans, etc. You can leave hunting to hunters only with advance preparation (And hunters would be grateful if you would be so prepared).
  3. General Tools. Need a remote control drill? Then you need firearms and ammunition. No substitutes as of 2010.

Substituting peace for violence is a noble quest undertaken within one’s own heart. Would you stake your life on all those around you achieving this state of Grace? Stockpiling a nutritious variety of complete proteins will quell your families need to hunt. Do you have this food set aside and ready to go?

At best, substitutes for firearms and ammunition are indirect and require advanced preparation. While encouraging all reasonable avoidance of violence and advanced preparation my direct fulfillment (N) score of ammunition remains an eight.

How Does Ammo Stack Up?

I took the best money substitute candidates from the  400 Item Barter List and narrowed it down to 44 Items. After assigning M, N and LP values to each item a spreadsheet was used to calculate scores using Your Optimal Barter Equation:

(M * N * LP)1-n = YO Barter

The equation was applied to the items primary (LP1) and secondary (LP2 thru N) Life Priority categories. The top 21 items ranked as follows:

Rank Item N M LP1 LP2 thru N
1 Water Packets 10 7 1 3,5,7,9
2 Lighters 9 6 2 3,4,5,8,9
3 Duct Tape 7 7 2 4,5,7,8,9
4 Batteries 10 5 7 4,5,6,7,9
5 Coconut Oil 10 7 3 5,7,9
6 Ammunition 8 8 4 3,6,9
7 Fuel 8 6 7 4,5,6,9,10
8 Tarps 8 6 2 4,7,8,9
9 Paracord 10 6 9 2,4
10 Salt 10 7 3 5,11
11 Hemp 9 7 3 5,11
12 Silver (1 oz) 10 10 9 5
13 Eggs & Milk 10 6 3 5
14 Portable Filters 5 5 1 3,5,7,9
15 Wine 10 5 11 3,5
16 Whiskey 10 7 11 5,8
17 Handgun 8 5 4 9,3
18 Razors 8 7 8 5,9
19 Aluminum Foil 4 8 3 5,7,9
20 Aloe 10 6 5 8
21 Rifle 8 4 4 3,9

As you can see, accounting for a barter items use across multiple categories yields surprising results. I didn’t expect Lighters, for example, to rate so high. However, it’s difficult to protest a Lighter’s compactness, money-like qualities and it’s direct fulfillment of needs across six of my highest Life Priority categories. Water, Lighters and Duct Tape are clear winners (Using my values).

The next three items grouped closely; there was no clear winner among Batteries, Coconut Oil and Ammunition.

I expected Eggs & Milk to rate higher but the equation is a measure of a barter items liquidity in a barter economy. The ranked items are not a preparedness list, per se. It would be a tragic mistake to stockpile excess of the above items instead of focusing on your overall preparedness needs. However, having an excess of top scoring barter items would be among the easiest errors to correct in a crisis and might help fill in the gaps of your overall plan.

Point in Time Value

Change the scenario and change the price. A box of .357 costs less when golfing at Pebble Beach than in the aftermath of the LA Riots. The value of everything changes in time for too many reasons to list. That doesn’t mean there’s no use in taking a stab at relative value in the only moment we have: Now.

My ranking of these barter items was done in the same way as a trade: Subjectively. If I place a higher value on Coconut oil than Aloe does that make me an informed consumer of Coconut oil or an ignorant one of Aloe? You tell me, my fellow trader. The subjective evaluation of the price of a barter item is not a weakness of method: It IS the method.

Ammunition is a Barter Superfood

These top 21 barter items are the superfoods of a barter economy: They provide a kind of nourishment across Lifes’ Priorities. Even after a good meal a bag of Salt still appeals. Even with a full tank of gas a spare five gallons is not to be dismissed. And, you don’t have to be a shooter to know that a few boxes of .38 Special could be traded for just about anything.

While discussing the subject of this article with a friend he jokingly said, “Forget about other barter items. A gun is your ticket to get everything you need!”. When we were done laughing I realized he had perfectly captured the spirit of the unprepared, less rational or desperate. Unfortuneatly, even in good times there are at least 76 Reasons to Have a Gun and the ammunition they use.

Like water in the desert, food during famine or shelter in a storm, the value of a gun and the ammunition it uses is exactly equivalent to the value of the life it defends at the moment it defends it. Unlike water, food and shelter, however, the gun may not have to be fired to achieve its full value.

May only one half of that decision be left to someone else.

Ammo for Barter — Part 1: Ammo vs. Money

 

Copyright © 2009 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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How To Pay Off Your House using Silver & Inflation – Part 2

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The Daily Grind

Working this plan to pay off your house doesn’t free you from the daily grind, in the short term. You’ll still need to:

  1. Keep making the payments on your mortgage.
  2. Keep making payments on other fixed debts and expenses.
  3. Scrape and save whatever you can.
  4. Store your savings into silver until you reach your target number of ounces.
  5. Keep your head above water during this disintegrating economy.
  6. Monitor the price of silver and be willing and able to cash in when the time is right.
  7. Cash in, pay the taxes, make large payments on your mortgage and lay low.

Doomed From the Start?

Are you paying on a mortgage from the overvalued bubble market?

The contrast between the difficulty of paying off a bubble mortgage and buying a new house in cash is going to get extreme. If it’s too much harder then consider a short sale, rent for a while and use your silver to purchase a new home when the time is right. You might as well benefit from lower housing prices.

As mentioned in Part 1 the money the bank ‘gave’ you was conjured out of thin air because of The Awful Truth of How US Dollars are Created. It’s morally wrong to break a legal contract and I’m not advising one to do that. However, many debtors are questioning whether a mortgage is a legally binding contract since the bank doesn’t provide equal consideration (The Bank brings no risk to the contract since the money is created out of thin air using your signature).

Tax on Standing Still

Standing still will cost more dollars in the future than it does now. If you manage to come up with more dollars to stand still you’ll be taxed as if you’ve gained something.

This double theft of inflation and more taxes is ridiculous, of course. But, you’ll have to put more silver aside to pay the taxes on your non-gain. Otherwise, you’ll fall short of you’re goal to pay off the house.

How much more silver you’ll need for taxes is a function of the size of your mortgage and your current and future tax rates. It’s a moving target, but, you’ll have to take a stab at quantifying it to achieve your goal.

Federal

Buying or selling back silver eagles require no 1099 broker reporting. $1000 face value of junk silver (752 oz silver) is the threshold of reportabability. Less than 1000 oz of other forms is not reportable. A tax advisor would probably tell you that its good to know the reporting rules, but, they don’t affect the definition of when you’ve realized a capitol gain. You may, however, want to sell in increments less than 1000 oz. to minimize paperwork.

Sales Tax

Purchase in increments greater than $1500 to avoid paying sales tax on the purchase. Check your state rules for the threshold.

How Much Silver Do You Need?

Enough to pay off your mortgage, pay taxes on the non-gain and cover the spread on the buy and sell of the silver. If you can swing it why not add all your fixed debts to the mortgage amount and buy your way out of all debts?

The 1980 price of silver was $50/oz. The inflation adjusted price of $50 in 1980 is $129 in 2008. And yet, the current October 2009 spot price of silver is $16.32/oz.

Based on your belief use a silver price of anything between $35 and $129 for your calculations of the number of ounces to purchase with today’s savings. Then pick the month and year you think it will be worth that price. My number is $75.

I believe the dollar will fall and silver will rise in dollar terms so that one ounce of silver will be denominated in at least 75 dollars within three years. Tell me that its November 2012 and silver is $75 an once and I wouldn’t think you were saying anything extraordinary.

Example

Principal owed = $100K
Silver Now = $16.32
Silver Then = $75
Cap gains tax = 15%
Spread on the buy = 6%
Spread on the Sell = 2%
Ounces needed = 1537 costing $26,589 in todays dollars with buy spread
Sale price of 1537 oz. after paying sell spread = $112,969
Cap gains paid = $12,957 (costing 173 ounces at $75/oz)
Net (After taxes and spreads) = $100,012

So, for every dollar you save in silver you’ll be able to payoff 3.8 dollars of mortgage after paying the taxes on the silver gain if silver goes to $75.

How does that compare to saving dollars in a bank at 0 interest? Let’s say every dollar you have now is worth 60 cents then. That means instead of having 3.8 dollars you’ll have 0.6 dollars. That means you’ll have 6.3 times more dollars in your hand if your savings is in silver rather than dollars (3.8 / 0.6 = 6.33).

Step-by-Step

  1. Decide what you think the price of silver will be in three years.
  2. Look up how much you’ll owe on your house in three years.
  3. Divide principal owed / silver spot in #1.
  4. Add in the buy spread on the purchase
  5. Add in the taxes on the gain.
  6. Add in the sell spread.
  7. Add 2, 4, 5 and 6 and recalculate #3 substituting the new number for the numerator (It’s recursive because of the taxes. I made a spreadsheet to calculate 1-7).
  8. Find a source to purchase the silver.
  9. Purchase the silver
  10. Purchase a gun safe, not necessarily shipped to your own property.
  11. Take physical delivery of your silver and store it somewhere safe — The gun safe being one of many options.
  12. Keep making your mortgage payments and other expenses
  13. Monitor the spot price of silver
  14. Get as familiar and comfortable with selling your silver as you did in buying it in step 9.
  15. Wait until the value of your silver hits your spot price.
  16. Sell the silver in increments that enable you to minimize taxes on the gain.
  17. As you sell the silver make huge payments on the principal of your mortgage.

Check the current spot price here and find a local coin shop.

That’s it! Don’t think about it too much or cash in the silver too early. Get back to your life.

If You Don’t Have the Money

The savings required to buy enough silver to pay off your mortgage is small in comparison to the size of a mortgage. However, it’s by no means a trivial amount of savings.

If you don’t have enough then either buy what you can or focus on other real assets. I keep a running list of my favorite real assets in Checklist for Hard Times. In that article I recommend not buying precious metals until you have the real things needed to fulfill the needs of your family. Providing shelter (Paying off the house) certainly qualifies as providing for the needs of your family, in my book.

With all this talk of money and sliver you might be surprised that my philosophy is that Everything is Worth More Than Money.

Belief is Good (And Downside Risk is Minimal)

The technique I’m proposing will work for balanced and financially conservative reasons. Yes, silver is undervalued, but, don’t bet the farm on it. Rather, payoff the farm with it. Use the rest of your savings to hedge risk and purchase tools and seeds for the harvest.

What I’m not saying:

  • Buy silver because you’ll make a lot of money.
  • Silver is your last chance at an investment of a lifetime.
  • Put every spare dime into more silver.
  • The silver market is manipulated and will spring back with a vengence.

I can’t make these statements because markets can be manipulated and investors can be wrong longer than you or I can remain solvent.

What I am saying:

  • The dollar will continue to fall and there is no government plan, action or will to save it.
  • The dollar will not be saved by deflation (Occuring simultaneously with overpowering inflation).
  • Silver is the most undervalued candidate among many other choices for hard assets in which to preserve savings.
  • Silver is not your only alternative for this plan. It’s just what I think is the best alternative.
  • Silver will preserve, though not necessarily increase your real purchasing power. It is the preservation, not the increase that this plan depends on.

Whether you execute the plan depends on your belief. Writers that specialize in precious metals are better sources to hone your beliefs than I can be in this article. I’ll list my favorites, below and suggest a reading sequence.

Belief is best when it comes from your own research. I recommend reading the following articles, in this order, to optimize your time.

  1. Refuting Myths about Gold
  2. “Why is Gold Money?”
  3. Then and Now
  4. The Great Silver Spike of 1980
  5. Find Your Local Coin Shop
  6. Future Gold & Silver Prices
  7. The Silver ETF: What’s the deal?
  8. The Money Chart
  9. How to Buy Silver, & Avoid Getting Scammed
  10. Silver: Questions and Answers
  11. Why Silver is better than Oil as an Investment
  12. Fekete Questions Me, & Why Banning Usury Won’t Work
  13. Fekete Answers Me & the Debate Continues
  14. Bar Graphs of Silver vs. Money
  15. FAQ
  16. The Money Charts – 2008
  17. What’s the Price of Silver? 
  18. Troubled Silver Dealers
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How To Pay Off Your House using Silver & Inflation – Part 1

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In 1980 it took 814 ounces of silver to purchase a median-price home in the US.1 In today’s dollar 814 ounces would cost you $13,154.2

If this happens again you’ll be able to purchase a home, free and clear, for $13,154 of today’s dollar if stored in silver instead of the bank.

This article is not about buying new houses. It’s about a technique to get out of debt and own the house you live in. The debt I’m referring to, here, is fixed: Your rate and monthly payments are the same for the life of the loan.

You need only track the remaining principal on your mortgage and the spot price of silver to come up with input numbers for my proposed technique. Whether or not you execute the plan will depend on your belief.

Belief is best when it comes from your own research. I’ll provide some points of departure for that research but want to focus on execution, here.

Perhaps your belief will come easier knowing that what I’m proposing is just a . . .

Faster Version of the ‘Same Old Thing’

As a debtor, inflation helps pay off your mortgage if your wages keep up.

Every monthly payment is worth less to the bank. The inflation (Theft) is slow enough that wages get a chance to catch up. They rarely do keep pace, but, the number of dollars you receive usually does increase over time.

Three things are happening here on a normal basis as you pay off your mortgage:

  1. Your getting paid more dollars from your employer or customers as you attempt to maintain purchasing power.
  2. Each of your fixed payments are worth less to the bank.
  3. The value of the balance due on the mortgage decreases by the principal portion of your payment and the inflation adjusted value of the remaining debt.

To speed up this existing process I propose that more of the the fruits of your labor be stored in silver to preserve (And possibly increase) its purchasing power. In effect, you’ll be speeding up step 1, above, by translating back your silver savings into dollars at some future date and paying down your mortgage. By that time, however, the dollar will have fallen and silver will have risen.

The silver you cash back into dollars will pay off a larger chunk of the currency your mortgage is denominated in: Dollars. Those increased number dollars may or may not have more purchasing power. But, you don’t need them to. All you need is for the silver to buy more fiat dollars to satisfy the mortgage. In other words, the mere act of preserving existing purchasing power will give the same effect as an increase in purchasing power when it comes to ‘purchasing’ debt.

In this one respect the falling dollar can be used as a One Trick Pony to help you escape from fixed debt.

Give to Caesar What is Caesar’s

As the dollar falls silver (And gold) rise in dollar terms to accurately reflect their unchanging value through the prism of a disintegrating metric (The dollar). Happily for you that disintegrating metric is what you owe the bank. Your mortgage says you owe dollars, not gold or silver. So store real value. When that real value is inevitably worth more tokens in the future turn them over to the bank to purchase your freedom.

Give to Caesar what is Caesar’s: The tokens he conjured out of thin air that now enslave you.

This Bubble’s For You

As people start to catch on and gravitate towards true value more will flee the dollar and buy up real assets. Silver is one of the prime candidates. The above ground silver available for purchase starts to disappear. This secondary event, in turn, causes more flight from the dollar which feeds an even more rapid rise in the price of silver. Then silver, itself, starts to rise even above its true value being one of the few worthy recipients of the flight from the dollar.

The amplification effect on price between silver scarcity and flight from the dollar continues until it takes the familiar shape of historical bubbles we’re now all familiar with. However, knowing this in advance and setting aside a modest amount of silver means that This Bubble’s For You.

I base this on . . .

A Radical Prediction that What’s Happening Will Continue

The Dollar Has Fallen 40% in the Last Eight Years. Contemplating another 40% decline in the dollar is no more outrageous than expecting things to continue as they have been.

If the dollar falls another 40% then a mortgage of $100K will be worth $60K in current value. Before shedding too many tears for the bank recall that the money they ‘gave’ you was conjured out of thin air because of The Awful Truth of How US Dollars are Created.

Apart from some temporary uptick the MSM will seize on as ‘proof of recovery’ do you know of anything being done that will save our fiat tokens?

Get On the Short List

You won’t fully benefit from the decreased value of the mortgage unless you can manage one of the following:

  1. Your wages keep up with Inflation. If you increased your wages by 40% from 2001 to 2009 it was due to your own efforts not the silly CPI adjustments referred to as your raise.
  2. You get paid the same wages in a currency that maintains its purchasing power. If you can manage this you either don’t live in the US or I’m reading your financial columns and watching your youtube videos. Thank you and enjoy the fresh air of the Swiss mountains or I hope your Mandarin lessons are going well, Mr. Rogers.
  3. You use today’s dollar to purchase an asset or commodity that maintains its purchasing power.
    Bingo! Now, that’s I’m talking about.
  4. You come up with a money making idea that brings in tons of dough. Creating value for our fellow human beings is what it’s all about. Please don’t get lazy and keep the fruits of your labor in tokens.

With sharp inflation it’s a challenge to keep wages up even if you own the company. Business owners walk their own tightrope raising prices. Will the inevitable price increases be passed onto employees, immediately? Actually, they can’t.

Conducting business with a volatile currency is an expertise more likely possessed in a Banana Republic. If you’re trying to acquire such expertise there’s a fabulous little book that has a place on your nightstand: The Hyperinflation Survival Guide: Strategies for American Businesses

Stay Tuned for Part 2 of 2

I’ll get very specific in Part 2 of 2 with:

  • The Daily Grind
  • Tax on Standing Still
  • How Much Silver Do you Need?
  • Step-by-Step Implementation
  • If You Don’t Have the Money
  • Belief is Good (And Downside Risk is Minimal)

1Guide to Investing in Gold and Silver, Michael Maloney, Page 152. Maloney uses the Case-Shiller Home Price Index January 1980 home price of $42,747 divided by the silver price of $52.50/oz.

2It’s 10/30/2009 and silver is $16.32/oz. The dollar index is 76.38.

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Living With My In-Laws (One Year Later)

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It’s been 13 months since we moved my mother in to live with us. She was in a nursing home and it was time to get her out of there. Just prior, my mother and father-in-law moved in to live with us, as well. Five months later Timothy, our first child, was born.

That’s five adults, one baby and two dogs spread accross 4 generations; all living under one roof.

Our house was large enough, we had a baby on the way, needed help taking care of my mother and my in-laws were looking for a way to decrease their expenses and take life a little easier. For more background on the decision and the story of moving in together see Why I Live With My In-Laws.

This is an update to that article.

How’s It Going? – Bottom Line

Extremely well, with unexpected benefits and problems and ways to handle each.

Unexpected Benefits

Part of the ‘unexpected’ benefits are how much I didn’t expect to appreciate the benefits listed in my previous article as much as I do. Division of labor, economies of scale, precious time with family, help with mom. It’s one thing to think about these things and its quite another to experience them in your everyday life.

Grandparents for Timothy

This was just an idea last year when everyone moved in. Now, its real. The reality of having Timothy, Martha, Fabio and my mom together in the same house is truly priceless. There’s only three people on the planet that love Timothy as much as Isabel and I do. Having them all under one roof is a daily unfolding wonder and blessing. Even now I may not fully appreciate all the aspects and advantages to Timothy, and all of us.

And the babysitting? Are you kidding me? Who ya gonna call? Isabel and I haven’t had to contemplate the tradeoffs, risks and worries of leaving Timothy with a stranger as we run errands or just want to spend some alone time, together.

This is way beyond money.

Productivity at Home

I work at home. With an 8 month old baby it’s a miracle I can be so productive out of a home office. Sure, we could drop Timothy off at day care. He spends all day with his grandparents and me in what has to be the ideal environment. Even if we incurred the cost, risk and effort to leave Timothy at day care it would be a downgrade in the quality of his life and ours.

Daughter and Father

Isabel and Fabio have a similar temperament: They’re both quick to react and quick to wind down. At first, we all thought they’d be arguing with each other since they’re so similar. Nope. Turns out they’re so in tune with each other that things get resolved almost before they happen.

Daughter and Mother

Isabel and Martha don’t have the same tempermant. But, they are both very feminine and give ideas to each other in a non-competitive way. They may not admit this but I think they motivate each other to do more.

In other words, they both do more than they would without each other.

Mother-in-Law and Son-in-Law (Me)

Martha and I both tend to “Work behind the scenes” to accomplish our goals. Now we conspire with each other for the same purpose.

Nerve Center for Family

With five (Instead of two) adults in the same house its easier to keep in touch with extended family members and friends. That’s more connection for less effort. Since these are people we love and care about that is a very good thing.

All of us enjoy having guests. We have more guests because there are more people to visit. And, we enjoy them more because we’re all pitching in to entertain.

As a single man until the age of 44 I traveled for Christmas 20 years in a row. Now, I’m thrilled to have most of the family here and pass the travel burden onto the remaining single members of the family or those looking to take a break in wine country.

Circular Benefits

Everything that benefits one of us loops back around to benefit all of us. Here are some examples of how this plays out:

  1. My productivity at home leads to peace of mind and more abundance brought into our house. That peace of mind is felt by Timothy and sets an example for him that its possible to live a great life and not be stressed out all the time. More abundance leads to the ability to sustain our lifestyle.
  2. Isabel is freed up from most of the conventional tasks on a new mother’s list. The way I put it is, by the time her alarm clock rings in the morning, she has accomplished more than most new mothers can in two days.
  3. We purchased reclining couches for the living room to make it more comfortable to watch TV. That lead to ‘movie night’ Fridays. Movie night is a great excuse for everyone to spend time together. It also saves on the $150 it would cost for all four of us to go to the movie theatre after coke, popcorn, babysitting and who knows what else.

Unexpected Problems

And what about me and my new in-laws? Most people have trouble even with roomates. How about living with two new roomates you’re just getting to know? There had to be problems and arguments and blow-ups, don’t you think?

Not really. Sure, we’ve had our misunderstandings while getting to know each other, but, nothing more. Once you translate the culture and language our underlying goals are so united there’s nothing to argue about.

The real surprise was watching Fabio and Martha go through the adjustment of living with each other while spending the whole day together. They’d raised two kids and been married for 30 years, but, had never spent as much daily time together as when they moved in with us.

Trash

We do more shopping online, nowadays. Things that would normally come together in a bag get delivered separately in a box. That brings more boxes into the house. With baby showers, birthdays, more guests, medical supplies and holidays we have a lot of trash!

I’m bad about remembering trash day. That’s a disaster with six people in the house. One false move and we’ll never catch up without a trip to the dump.

Fabio has taken to overseeing our trash situation. Believe me, when I wake up on Friday morning and don’t have to panic at the sound of the garbage trucks I’m very grateful.

Space & House Layout

More people means more guests. Guests need a place to stay. Our only ‘spare’ room was my office. So, whenever we had guests I had to give up my office. Sure, I could use the computer during the day, but, at least half of my productivity happens at night after everyone is asleep.

Guests were’nt the only reason for a new home office. The only room that could hold my filing cabinets, computer, books, reference materials and have room for a meeting with another person was my first office. That was also the only downstairs room available for my mom. As it turned out, using the last remaining bedroom upstairs didn’t work for several reasons:

When guests came I lost night-time use of the office. For me that was about half of my productivity.

The room was not really all mine. Isabel kept her office books, cabinets, lights and reference materials in the room. The closet was half full of her stuff and the other half was an overflow closet used by Martha.

My office was half upstairs and half downstairs. I had to go up and down the stairs three times just to stage the items needed to work on a project. Any doorbell ring or need for additional materials would send me upstairs and downstairs, yet again.

And so . . .

The Man Cave is Born

What this all lead to was the need to create another room in the house. The optimal room would be:

  • Downstairs.
  • Big enough for all the ‘tools’ for my work.
  • Not infringe on another mandatory use of space.
  • Accessible, but not too accessible to the daily activities of the house.

And so, my friend David and carved out 1/3 of our 3-car garage and made it into an office. It took 2.5 months of back-breaking work. Frankly, it was a study in the drawbacks and benefits of working on only one goal and ignoring all others. One day I’ll write an article on whether or not that’s the optimal approach.

Although I had designed an addition to the house that would have been perfect it was just too expensive to build considering all the other purchases I was making to make sure we’d make it through this terrible downturn in the economy.

Person by Person

In my first article I said there had to be something in it for everyone for the whole multi-generational living to work. Now that we’ve been together 13 months let’s go person by person and look at how its been for each one of us.

Mom

The joy on my mom’s face when she see’s Timothy (Every day) says it all.

On her second trip to the doctor, four months after moving in, he couldn’t believe how much she had improved. And that was before Timothy was born. We have lunch every day together and sometimes even a party on the patio. Timothy looks over and screams when mom waves at him and that’s a great ‘conversation’ to watch.

My mom’s health is not well and she doesn’t always cooperate with Martha when its time to do her exercises. However, I have my doubts that she’d be with us, at all, if it weren’t for the comfort and care she receieves by living with us.

Martha

Martha is obviously happy and also a bit restless. She’s taken on another child to take care of during the day for extra income and earns every penny of it.

Fabio

Fabio loves being at home. Later, he’ll probably need to get out more. But, for now there’s plenty going on in the house to entertain.

Timothy

Timothy gets parents who are smiling and not stressed out. He has the priceless attention and love of his grandparents. He feels the support of living in a home where everyone is looking out for each other and gets far more interaction than would be possible in daycare.

He’s learning Spanish as his first language and will pick up english like a sponge when it’s time. He might even be ready to learn a third by the time most students are deciding on a second.

Isabel

Before Isabel’s alarm clock goes off in the morning she’s gotten more ‘done’ than most mothers could in three days. That’s because most of what needs to be done around the house is split between myself, Fabio, Martha or other Martha (Who comes to clean house three times a month).

“People like doing things for me.”, she says. As a smart husband I won’t touch that statement.

Me

When I was single just thinking about living like this would have been like thinking about walking on the moon. Even now its an unfolding mystery. I’m suprised to find very little on the internet written about the subject coming from Americans. For economic reasons I predict that’s going to change.

Ironically, being willing to give up the freedom I had when I was single has been the very means of becoming more free than I’ve ever felt in my life.

I’m surprised the whole arrangement goes as well as it does.

What Happens Around Here

Here’s some things that happen around here:

  • Almuerzo – Spanish for “Lunch”. Everyday at 12pm prepared by Fabio. You know its happening when the intercom rings.
  • Movie Night – We bought special couches that recline so up to 6 people can recline in comfort. I figure every movie saves us $150 though saving money wasn’t the motivation.
  • Boys Day / Girls Day – With lots of people around this need becomes obvious. The girls want to do their thing without prying eyes. The boys want to do their thing without hearing comments.

Everybody’s Got Their Secret Stash

Martha has her sweets, mom’s got her cookies, Fabio has his whisky and I have my figs and wine. Isabel doesn’t have to keep a stash because Fabio keeps it for her for. Or maybe she’s just better at keeping secrets than we are.

What Our Friends Said?

Last month our friends and family told us they gave us two months, tops.

Can you blame them? What odds do you give someone bungy jumping from a helicopter?

And this article is not a, “See?, We TOLD you it would work!” I can’t do that because the lifestyle is an unfolding mystery. I can tell you the benefits and drawbacks in retrospect, but, the future is not predictable.

One of my favorite comments was, “If we predict failure we only have to be right once. For you to pronounce success you have to be right 24 hours a day, forever”. That’s only true if we took some kind of club oath. I’d say being happy for a solid year counts for a good measure of success.

Hernan (Fabio’s brother) thanked Fabio, not me, for his hospitality for a 2 week stay at the house. It occured to me, that night, that it was a sign of the success of living together. It’s not really my house, anymore. Its “our” house.

The things I have are just things I’m using while I’m alive. They don’t seem like mine, really. They’re just things and tools and materials. Now the house has become just another tool to get a job done.

Coverage

One of my favorite benefits is coverage. Here’s some examples:

  • If I need to run an errand I have coverage for Timothy and mom’s care.
  • If Isabel needs to work late she has coverage for Timothy. Tasks she ‘meant’ to get done that night can be delegated to us and she’ll probably have dinner waiting for her when she gets home.
  • If Fabio wants to go to Colombia for a few weeks he can pack a few things and go. He can easily plug back into his routine upon return.
  • If Martha needs the afternoon to go the doctor there’s not much planning needed for Fabio and I to cover for her.

The real value of coverage is that it is general and flexible. As things come up for each of us we know others are there to cover for us. Its a general comfort that becomes specific as life events unfold.

BBQs

I love BBQ’s. With more people and guests there are more excuses to have one. There’s also more oppurtunity to combine events like birthdays and anniversaries.

Cadence of the Day

Our days unfold with a cadence that marks time and gives things to look forward to. I know for sure this doesn’t happen when you’re single.

The Future

Fabio and Martha have considered selling their home in Orlando and probably would if the market allows.

If we have a second child the guest room goes to the baby. Even with the garage office I built to free up an official guest room we’ll be left with no spare rooms.

A prolonged recession in the US is now guaranteed. That makes our living situation even more beneficial. Perhaps these articles will be helpful to more Americans as they contemplate throwing in, together.

Copyright © 2009 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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Why I Live With My In-Laws!

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I can’t claim credit for the idea that my father and mother-in-law move in with us. Or that we move my mom from her nursing home into my office. . . .

. . . .Because that would be five people and two dogs in the same house with a baby on the way!

Oh, no. It was my optimal Wife that came up with this masterpiece. She saw the mounting nursing home bills, knew a baby was coming and swung into action. By the time she was finished laying it all out, one night after work, she had a way to upgrade all of our lives. And that upgrade goes double for her. But, what can I say? It was her idea.

Her radical plan was to have us all living together. We would divide up tasks according to our abilities, split costs where we could, spend time together, help her parents ramp down from a lifetime of work and bridge the 3000 mile distance between our baby and its grandparents.

She was proposing we live like a family. A multi-generational family.

It was outrageous!

The American Way?

Why wasn’t this anti-radical vision my idea?

Because I grew up in Florida in the late 70’s/early 80’s. A period in American history when we were doing all we could to make ourselves into personal sovereign nations.

Families were relocate-able units set up to follow the money wherever it lead. Women’s lib ‘freed up’ mom to go to work. Dads were encouraged to do whatever to ‘find themselves’. And the kids watched Miami Vice and thought the drug dealers were way better off than Crockett and Tubbs. The only question was how we were gonna get one of those Ferrari’s and live in a mansion in Miami without getting arrested?

Family. Aren’t those the people you live with until you get a job? Everyone knows the goal is to decrease the number of generations in one house from two to one!

Not so fast.

What was left over from mom’s check after taxes barely paid for babysitting and Friday night pizza. Dad got sick of microwaved hot dogs and found out how much better life was with mom around. Mom didn’t like office politics. And my brother and I were hard pressed to improve on my father’s job, which he loved. We were living pretty well and dad
still managed to retire at 52.

Panic

But, what’s happening here? Isabel and I have only been married for 16 months and we’ll never be alone in the house together again for at least 18 years or more! How could we stand that? Doesn’t everybody feel on top of each other? Who pays for all the food, mortgage, utilities, cable and what about all the potential noise and distractions all the time of everyone in the kitchen?

The Decision

Most of what makes life good or bad is set by five decisions or less.

Make them well and you eliminate 95% of the life’s friction. Make them badly and you’re plagued with problems that aren’t even solvable. This was one of those decisions.

For all my talk about optimizing everything and making balanced decisions from every vantage point my wife just fell asleep with a problem and woke up with the solution. But, Making the final decision gave me a headache for the next three weeks.

If I list everything that concerned me over living as a multi-generational household it would be the length of the phone book. Everything is affected by a decision like this.

Take the big things like space, time, money, personalities, family, daily activities, food, alone time and noise. Then imagine how each one affects the others on the list. Then factor in that we’ve only been married for 16-months. Add in that we would be taking on the full-time care of my mom who had two strokes, last year. And don’t think too much about that baby on the way or you might go a little nuts.

“Don’t make such a big deal about it.”, Isabel said.

First of all, you can’t get all the facts to make a decision like this. The permutations are not computable because you don’t have solid data for input. Its all anecdotal evidence from people you don’t know. How do I know these people share my values and preferences?

In the end, I used three tools to help make the decision: A mind map, a stop-loss provision and a leap of faith.

On the mind map I listed out every concern that came to mind. I drew lines connecting every box that affected the others (There were a lot of lines). I googled as much as I could to get other peoples’ experience. I tried to come up with a creative solution to anything that still caused concern. Then I slept on it, woke up, and did the same thing again. For Three weeks.

After all that I was ready to consult my newly informed intuition.

The result? Few problems that couldn’t be worked out. Everything depended on the personalities and character of the people involved. And these were unknowns in the circumstances under consideration because none of us had had lived this way before.

Several times in our brief marriage I asked my wife to have faith in something I felt strongly about and she went along. Things turned out as predicted and I’d like to think she’s more comfortable with my judgment. Now the shoe was on the other foot and she was asking me to have faith in her instincts. You might say, I owed her one.

You might also say there’s no way to eliminate the “Leap of Faith” aspect to a decision like this. But, her certainty did make the leap easier.

OK, so it might work. But, what if we’re wrong? Is there any way out?

To feel more comfortable in taking the first steps we put a few stop-loss provisions in place:

  1. Fabio and Martha rented their house in Florida rather than sell it.
  2. I made a two-year commitment to see if it would work.
  3. I designed an addition to the house in case we didn’t have enough space.

With the mind map to mentally sort through the details, the leap of faith I owed Isabel and the above stop-loss provisions there were no excuses left to postpone the decision.

I was satisfied the downside to giving it a try had been minimized.

Moving In

Martha

Martha came first. She put in her notice to St. John’s, put on a baby shower for us and said her goodbyes to all her friends in Orlando. She was getting out of retail at the perfect time. She had been on her feet for 20 years and it was time to take a break and be with her daughter and grandchild-to-be.

In the weeks leading up to her arrival the boxes trickled in at the front door and were hauled up to the jungle, our safari theme guest room, one-by-one. If there was a time of nervousness for me it was watching the boxes arrive and wondering what we were getting ourselves into.

Martha is only 11 years older than me and only 3 years older than my friend, David, so there is no generation gap to speak of. When she arrived it was more like greeting a friend than a mother-in-law. It felt like a friend was spending a few weeks with us.

Mom

We had to get training to learn how to take care of my mom. They taught us how to transfer her from the bed to the chair, from the chair to the shower, how to prepare food and ways to help her do exercises. There was also a strict drug regimen that took some getting used to. Support equipment trickled in from the UPS guy. Stuff like wheelchairs, a shower chair, transfer poles and oxygen bottles were arriving every other day.

Then it was time to move my mom into the house. The actual move was the last step in a long project, beyond the scope of this article. It was quite a balancing act to prepare for her full-time care because she’s confined to a wheelchair and needs quite a range of care and attention. Martha took the sting out of all if this and everything went smoothly mostly because of her.

Mom was thrilled in a hundred different ways to be living at home.

After about two months of adjustments and many sessions with physical and occupational therapists we started to get the hang of the work involved. There were lots of medicare forms to sign and equipment to set up. Isabel set up all moms prescriptions to be automatically filled every quarter by just logging on and checking what we were running out of.

Fabio

My mom and Martha were here for about two months before Fabio came. By that time we had most things worked out and running smoothly.

Fabio gave a 45-day notice to the law firm he was working for. Along notice because he was working for his nephew Rodrigo and there was a lot of planning needed for a smooth transition.

When he arrived the house felt more balanced. I didn’t realize the balance had shifted so much to the feminine until he swayed it back to neutral.

Fabio’s first adjustment was what to do when the phone doesn’t ring. Back in Orlando he was getting ten calls an hour on the job. Now there was only the sound of the breeze on the patio, the geese flying overhead and the TV if he turned it on.

It wasn’t long before Fabio’s talents as a chef were put into swing when six cousins came to visit for a week. That brought the total in the house up to eleven for the week!

How’s It Workin’ Out?

After four months it’s working out better than my wife expected with advantages I didn’t expect.

Space

We dodged the bullet on space issues by having a larger house from the start.

We saw 76 houses before choosing this one. Our goal was to avoid having to move again before our kids went to college. The most obvious weakness would have been lack of space and 3049 square feet has been enough. More importantly, the layout is efficient, functional areas are separated and it handles people well. Hallelujah!

Bedrooms

Four of the five bedrooms are taken. The last one is ready for the baby coming next week. Since all kids get their own bedrooms, nowadays, we won’t have space issues until a second child comes along.

Alone Time

Alone time is more than having your own room. We have four options that can be used by anyone in the house:

  1. The living room is off by itself.
  2. The patio.
  3. The outside front of the house on the “Silla de Navidad” or Christmas Chair.
  4. On the golf course trails.

These areas don’t have doors. However, it’s not easy to find you unless you know where to look.

Guests

When guests come the blow-up beds from Costco come out and go into my office or one of the common areas. My office is perfect for that and the common areas feel like you have your own room.

I think its a waste of house to have rooms set aside only for guests. Many people think guest only rooms are mandatory. I think the mandatory rooms are for people who live in the house. I have no problem giving up my bedroom for a guest and can easily blow-up a bed and sleep in my office for a few days.

Noise

Noise has not been a problem other than my reluctance to sing loudly and write songs when people are around. As a musician I’m sensitive to noise. If its not a problem for me then it probably won’t be a problem for someone else.

Sometimes its hard to watch TV in the family room as people accumulate in the kitchen. But, we have one of those large family rooms connected to a large kitchen. What else would you expect with a room design like that?

If anyone really wants to watch something they go to their own rooms where there’s no interruptions. I’d rather have the family room/kitchen combination because its where everyone hangs out.

Expenses

Household expenses are about 10% higher in the form of electricity, cable, water and gas. We split food, so, food remains the same. You could look at the cost increase in three different ways:

  1. It’s 10% more expensive.
  2. That the incremental cost per person added is low.
  3. That with a 10% increase overall expenses will still be much lower because more people are splitting all costs.

#1 and #2 are self-explanatory.

If you computed #3 by dividing all costs by five it would be a lot of money saved. But, we don’t do that for the same reason most people probably won’t: Money is only one way to keep track of contribution to a household

In our case Fabio and Martha make it more feasible to take on the full-time care of my mom. If mom is living here we save on paying a nursing home. Saving that expense frees up money to pay other expenses and improves the quality of all our lives, my mom’s most of all.

Fabio and Martha rent their house in Florida which pays for their house expenses. They have no house expenses here so can more easily cover bills like health insurance, gas, cell phone., etc.

Our costs have risen by 10% but we had to pay 90% of those costs, anyway. The more economies of scale and division of labor benefits (See below) that occur the more the additional 10% returns.

I think of it like the difference between buying one meal at a restaurant and eating at a buffet. You pay a little more for the buffet, but, the variety and quality of your meal is improved.

Economies of Scale

We can prepare a meal for five people as easily as two. And by scaling the same ingredients to a recipe the leftovers can last for several meals.

The Same goes for grocery shopping. One trip to the grocery store is taken to shop for five people instead of two. The gas, time and effort is the same while the people it serves is more than double. And we can buy the large cans at Costco making the food cheaper by the once. When the cans are opened they’re less likely to spoil and that means less waste.

Isabel and I each have an SUV. Fabio and Martha have a sedan. Since Isabel is the only person who commutes to work she switched to the sedan and her commuting costs were cut in half. Fabio and Martha can use the SUV around town which requires less mileage and gas on the larger car.

Some things are better, but not cheaper. A bachelor has little incentive to cook for himself, but a family almost always does. That leads to more cooked meals which are more nutritional than foraging out of the pantry.

Division of Labor

There are four people instead of two to manage chores or maintenance around the house. We also get the advantages of four people’s strengths instead of two. A task we have equal ability to perform can be rotated. The result is that the house runs smoother with less effort from any one person.

There’s also less stress. We have natural backup for the everyday overhead of living. Anything from a 2-hour trip to the grocery store to answering the door for the UPS guy.

This may seem trivial but it adds up. For me, its led to more work time and less distractions to write articles such as the one you’re reading.

To get an idea how the time and effort saved adds up look at the following list and add up the time you would save if you only had to perform the task every third time it was needed:

  • Grocery Shopping
  • Running Errands
  • Mailing Packages
  • Answering the Door
  • Washing Dishes
  • Screening Telemarketing Calls
  • Washing Clothes
  • Walking the Dog
  • Moving furniture
  • Taking Out the Trash
  • Preparing meals

Time with Family

We’re knocking it out of the park when it comes to time spent with family. Here’s what I observed around the house in the last month:

  • Singing Nat King Cole songs in Spanish on the patio while barbecuing lunch on the grill.
  • My mom on the patio with Lucy on her lap and laughing at the lyrics to a Jimmy Buffet song.
  • Isabel coming home to her favorite Colombian dish instead of having to make dinner when she’s tired.
  • Isabel and Martha on the couch looking at Facebook photos of a long lost friend.
  • Talking with Fabio and Martha on the Silla de Navidad about the Fannie Mae/Freddie Mac beginning of the next Great Depression.
  • Ricky following around grandpop whining and begging for a walk.
  • Martha telling stories of what Isabel was like as a child.
  • Visiting vineyards on Sundays after church to pick out a place to have the baby baptized.
  • Isabel and Martha and Maju (Fabio’s sister) decorating the baby’s room, together.

I’ve noticed the house is now the Family nerve center for extended family not living here, as well. Keeping up social contact with them is easier.

None of these things would’ve occurred if we weren’t under the same roof for longer than Christmas visits. And the whole situation will be what our children think of as normal. They will assume its just the way family’s live.

Your Optimal Family Living?

So far, yes.

However, I cannot make a whole-hearted recommendation of MG family living to everyone reading this. There are too many prerequisites, many of which are not in your control. I do recommend being open to considering it in light of the prerequisites, listed below.

Money and Family

It is possible to save money living like this. But, a more realistic goal is to improve your quality of life. Most of the benefits are intangible. Like the best things in life they can be counted on your fingers but maybe not in your bank account.

If you’re on the verge of financial disaster this isn’t going to save you. You probably won’t have the temperament or patience to make it work. One of the ways you could ruin it is to walk around with a calculator and tally up every nickel and dime insisting that everyone pay their fair share. Unless your calculator has has a “Quality of Life” button the numbers won’t prove the case, either way.

House Layout is Critical

Layout is more important than size. I’ve seen 2000 sq. ft. houses that would work and 5000 sq. ft. houses that wouldn’t. Here’s a shopping list of features that would make MG family living easier:

  • One bedroom per person or couple
  • One full bathroom per four people
  • Bathrooms accessible without intruding on privacy
  • Bedrooms separate from dining room for noise
  • Bedrooms separate from family room for noise
  • Kitchen and pantry large enough to handle everyone
  • House should have places for alone time, besides bedrooms

Including the baby we’ll average 508/sq. ft per person. I don’t know if that’s a magic number because layout is more important that space. Just adding it here for reference.

Good for Everyone

This whole multi-generational family living is voluntary, for everyone. You’d be fooling yourselves to think it was sustainable if there wasn’t something in it for everyone. The more, the better.

Even if your situation does benefit everyone, personalities may not mix. Ours do, so it works. But, any personality friction will only be worse if there isn’t something in it for everyone.

An Extension of Existing Compatibility

My wife and I have similar families, values and goals. And, we were raised in the same part of the country by parents with similar values. During these four months it feels as if our existing compatibility was extended to include our family. Is it really such a stretch that the family she came from is compatible with the family I came from?

Neil Clark Warren, Ph.D. says, “…when two people come from similar backgrounds, they operate from a position of strength. Their relationship is made significantly easier by all the customs and practices they have in common.”

And here’s what he says about the opposite:

“Forging a relationship with an opposite is so hard because every difference you have requires negotiation and adaptation. Accommodation and compromise will necessitate plenty of change. This change creates a kind of stress. If there are too many differences, you may not be able to survive all the strain involved in adapting to each other.”

Starting with you and your wife, a house full of opposites is more likely to zap everyone’s strengths just to cope with all the differences. Families with similar backgrounds, however, can focus on contributing individual strengths for the benefit of all.

The Future

We have many upcoming challenges:

  • How do things change when the baby comes?
  • A second child?
  • What Happens When My Mom Passes Away?
  • Estate Planning?
  • Building the Addition to the house?

And what challenges will time reveal that we don’t know about yet?

I plan to update this article, every year, for other families thinking of moving in together. I could have used an article like this five-months ago.

I don’t have an all-time final verdict. But, I do have the verdict on the last four months. I will whisper the three magic words my wife most longs to hear: “You were right”.

Copyright © 2008 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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Banking

SLV is Not Silver

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When something is rare, valuable and getting rarer, the price should go up. If the price goes down then something’s wrong. Since there doesn’t appear to be anything close to a free market for silver nonsensical behavior like this is frequent.

In situations like this you may be tempted buy shares of SLV. I don’t like all the layers between shares of SLV and the underlying metal. Owning Shares is not the same as owning the metal. It’s only the closest you can get to silver when trading on the AMEX. If you insist on pressing a button on the computer screen to “invest” in silver then you’re taking on a lot more risk than you would if you took the trouble of driving to a coin shop.

SLV is charged with buying and selling whatever amount of silver is needed so that the value of the shares match the spot price as closely as possible, after expenses and liabilities. The trades are purposely robotic: The spot price, not skill or market timing, drives the trade.

As ETF’s age, they have to sell more and more of the underlying commodity to pay for expenses and profits. The older the ETF the less correlation they have with the underlying commodity. GLD is two years older than SLV so has less correlation with physical Gold than SLV has with Silver which is still about 99% (And falling).

Another negative for SLV is the size of the stockpile the ETF has accumulated, now 206 million ounces. Such is a ripe target for state seizure or other theft. And, who knows if SLV is just leasing silver, for a day, to pass monthly inspections to satisfy investors of their “reserves”.

It wouldn’t make sense in a normal market to call Gold an investment. Gold is just Money, no more, no less. I do see Silver as an investment, however, even though it’s also money. As a commodity the scarcity of silver is bullish with respect to its industrial demand. This would be smoothly worked out in a free market, if there was one. But, like gold, the spot price of silver (Based on the futures market on the COMEX exchange) is manipulated to make the dollar appear strong. You’d have to be directly privy to manipulation decisions to understand “market” timing.

Eventually, as the physical market cannot meet industrial demand the price will go up irrespective of manipulation. A monetary premium would be a bonus.

Mike Maloney describes Gold and Silver ETFs:

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Your Optimal Bailout Plan

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Last April, I sent an urgent e-mail to my friends and family urging them to consider taking protective measures against the collapsing US dollar. Now that I have YourOptimal.com up and running I’d like to put forth a more formalized plan and make it available to a wider audience.

(For an update of this bailout plan, see Depression Proof Your Money)

You don’t have to agree with my future predictions to be inspired to protect yourself from our current 10% inflation rate. Do nothing and your $100 today will be worth $86 next year if its in the bank. I will be adding more articles, links and resources that will explore optimizing various aspects of life in light of the dismal state of our US and world economies. The purpose of the plan, below, is to provide an Optimal plan of action in case you are already convinced that action is required to protect yourself from the coming Hyperinflationary Depression. Here’s the plan:

  1. Pay off all debts, within reason.
  2. Move out of all investments dependent on US dollars.
  3. Move all but 3-months of expenses out of banks into tangible & liquid assets.
  4. Decrease your monthly overhead as much as possible.
  5. Get rid of all physical objects you don’t need.

That’s it. Although the economic problems we are experiencing may appear to be very complex Your Optimal Bailout Plan for protection need not be.

Ninety percent of the protections you can achieve from the collapsing US Dollar will come from your complete and thorough implementation of the above 5-Steps. In fact, if you live in the US it may not be possible to save the remaining 10% of your assets since you need to keep some US Dollars in the ‘pipeline’ just to conduct your everyday affairs.

There are many non-financial aspects of the crisis that we are entering. I look forward to addressing those in future articles. For now, there is no point in complicating the plan until you have a handle on the above 5-Steps. Let’s go into detail about each of these steps.

Pay Off All Debts, Within Reason

Since we are entering the most inflationary period in all of US History we have to look at debt a little differently. During hyperinflation some debts become assets for the debtor. You may stand to gain more by making the payments than paying them off. That’s because your debts are denominated in a currency that is losing its value on a daily basis. The contract you have with the bank to pay off your house requires you to pay US Dollars. The actual value (Purchasing power) of future dollars is much less than the value of the dollars now in your wallet. If you can find a way to preserve the value of your dollars, today, then you can exchange that value for many more dollars, tomorrow, and make your future monthly payments much easier.

To give an idea of just how much you can benefit from this technique let’s look at the history of the US Dollar from 1950-1990. The US Dollar lost 82% of its purchasing power from 1950-1990. And it has lost 47% of its 1990 value as of 2007. So there is nothing extraordinary about predicting it will lose its
remaining value. Seventeen other countries lost 99% of their currency value during the same period and Fifty-two fiat currencies lost even more value than the US Dollar! This is business as usual for any paper fiat currency. The worst performing currency on the list was the Argentinean peso. Here’s an interesting comparison between Argentina and the US.

Hyperinflation Can Pay Off Your House Loan

If the US Dollar is worth 50% of what it is today (7/15/2008) in 5 years then a mortgage of $100,000 today will be worth $50,000 in July of 2013. If you make your payments for the next 5 years you will have paid down your mortgage by whatever principle your payments could manage and the inflationary decline of the US Dollar will make an additional $50,000 payment for you!

The reason you rarely hear this advice is that its very tricky to manage. You will have to make sure you can manage all of the following variables:

  • Store your current dollars in something that maintains its current value.
  • Keep enough dollars on hand to make the debt payments.
  • Keep enough dollars on hand to pay for all of your other expenses.
  • Monitor the value of dollars and the value of your tangible asset.
  • Be willing and able to translate your tangible asset back to dollars.
  • Manage your bank account(s) so that you have just enough to meet expenses.
  • Have the mental and emotional fortitude to stay the course.

Using silver as an example, 1000 ounces of silver could have purchased a median value home in 1980. Some say it will again as as we enter this second round of the most hyper inflationary period in US History. You can purchase 1000 ounces of silver today for $14,000. As the dollar value falls you cash in the silver to make your house payments. If the economy goes like it did in 1980 that’s all the silver you need to purchase the note. But, make sure you buy the actual silver and keep it in your possession. The same technique can be applied with gold, of course.

Most financial people don’t want to get into these complexities. They want to keep things simple. They also know from experience that most people are overwhelmed with the details of everyday life and have limited time left over to tend to the financial aspects of their lives other than their job. You may also not be able to make your debt payments if you lose your job.

If you think you can manage all of the above variables then my advice would be to not payoff or accelerate the payoff of your fixed rate mortgage. If you have an ARM then this advice does not apply. In the case of an ARM you might want to consider a short sale while the climate is socially acceptable and you get the special tax break of not having to pay taxes on the amount that the bank let’s you off the hook.

If you have other long-term debts with an interest rate less than 7% (Student loans?) then you should probably not pay them off either. This is assuming you take the same approach as outlined above by purchasing other tangible assets that can be used to make future payments.

If you have long-term debts greater than 11% then you should pay them off despite the upcoming hyperinflation. Just getting free of the burden of these debts is enough incentive to pay them off. You’ll also be left with that much more resources to put towards the other 4-Steps of this plan.

Between 7 and 11% is the gray area and you’ll have to decide how well you can manage the complexities, above, in holding onto debt during periods of hyperinflation.

Move Out of All Investments Dependent on US Dollars

In 1944 we made an agreement with Saudi Arabia to provide military protection for them as long as they agreed to accept only US Dollars in exchange for oil. Since every country needs oil for energy, and many other things, every country had to start stockpiling large amounts of US Dollars to pay for their oil. This little known backdoor negotiation, along with the Bretton Woods Agreement in the same year, is how the US Dollar came to be the world’s predominant reserve currency.

Its important to understand the ramifications of the US Dollar being the world’s reserve currency in order to evaluate whether any given investment is dependant on the US Dollar. It gets even more complicated when other entire countries peg the value of their currency to the US Dollar. The effects of the good, bad and the ugly management of the US Dollar ends up getting exported to entire world in one way or another.

Because the US Dollar has a world effect unlike any other currency in the history of the world the US had the potential to effect the world in a very positive way. Unfortunately, the US defaulted on its international promise to exchange dollars for Gold in 1971.
This made every currency in the world into a fiat currency overnight. No longer tied to any objective value they have been freed to float at the whims of politicians, Central Banks, the World Bank and the IMF, ever since.

The history of fiat currencies, however, has proven that once a paper currency is not backed by any objective value the issuing government cannot resist the temptation to print more and more of them. Unfortunately, the US has been no exception to this historical rule. We did, however, manage to take the creation of US Dollars to a whole new level by skipping the difficulties of the printing press and going right to computer! And since other countries have to use Dollars to buy oil, and some even use US dollars as a backup or primary currency themselves, we’ve been able to get away with printing far and above the amount of paper dollars any country ever has before causing the currency to collapse.

As of 7/19/2008 the charts showing the value of the US Dollar against gold is remarkably similar to the charts of other countries just before they entered the final stages of hyperinflation. Here’s how it played out in Germany between 1919-1923:

What this means for moving out of any investment dependant on US Dollars is that almost nothing is safe. Conducting business during hyperinflation is very difficult and most US companies do not have the experience to manage the difficulties. To make matters worse, the individual equities of even the best run companies are psychologically tied to the broad market of all equities. When the broad market takes a hit so do all the rest, whether they deserve it or not. Therefore, even the stock of well run US companies is not a safe haven for your money.

Even moving US Dollars into another currency is dangerous because all the currencies of the world are fiat currencies. Although its the US and Zimbabwe in the news, lately, our mismanagement is already causing inflation around the globe as other countries continue to purchase our debt instead of investing the money into their own economies.

Bankruptcies and hyperinflation seem to be the plan for dealing with this crisis. Bankruptcies are the quickest way to deflate the amount of currency in circulation, either real or on the computer screen. And hyperinflation makes all of our debts much cheaper to pay off. What better way for the US to avoid defaulting on their unpayable debts then by paying them off with dollars made worthless through hyperinflation?

But, we don’t even get much of the benefit of the deflationary bankruptcies to balance out the inflation because the Fed conjures up however many billions of dollars necessary to ‘provide liquidity’ for failed large banks and mortgage lenders.

For all theses reasons I believe the only safe thing to do is to park your money in tangible commodities that preserve value. My personal favorite is silver, but, there is also oil, cotton, tobacco, sugar, wheat, copper, steel, gold, brass and anything else China and India need to keep their countries on the rise. If silver is your choice here’s how you can invest in silver.

The worst place to have money is in US Dollars, Checking or Savings accounts, CD’s, US Equities or indexes, T-bills or bonds.

Move All but 3-Months of Expenses Out of Banks Into Tangible & Liquid Assets

When you get a dollar in your hands that you don’t need for the next three months of expenses spend it on something of real value as fast as possible. Pay a bill, pay off a high interest debt, see if you can pay monthly bills in advance for the whole year, upgrade your slow computer and maybe even purchase food items with a long shelf life. When you’ve done all that and you still have money left over then its time to purchase more well known tangible assets.

I can only recommend Silver and Gold to fill this role because I have direct experience with them. The process is difficult enough without complicating it further by trading in and out of commodity stocks and keeping track of the tax ramifications. With silver or gold you can trade in and trade out as much as you need, almost anywhere, with no tax problems to worry about. The VAT makes it difficult to do this in the UK although I’ve read that you get it back upon selling.

If you have a 401K you can’t withdrawal without penalties then consider investing in a commodities ETF, Agricultural index, Natural resources and anything else that mankind requires and cannot do without like cotton, sugar, wheat, steel, iron, brass, silver, gold, corn, etc. If your 401K is limited in its options to invest then you have limited options to protect it.

Decrease Your Monthly Overhead As Much As Possible

Any extra money you have right now should go into purchasing tangible commodities that can preserve current value for when the US Dollar collapses. Therefore, any unnecessary monthly expenses should be cut back or stopped completely. Here’s a beginning list of things to get rid of:

  • Cable channel subscriptions you don’t watch
  • Internet subscriptions you don’t benefit from
  • Expensive Coffee
  • Excess minute plans for your cellular phone
  • Consider dropping phone land lines, altogether
  • Magazine subscriptions you don’t read
  • Eating out too often
  • Drinking out too often
  • Going to the movies when you can rent a DVD
  • Over insuring your house, car, health, life
  • Driving too far from home or work for errands or services
  • Overusing the A/C or Heater when fans, windows or firewood would do
  • Work at home a few days a week to cut down commuting time & money

Any money you save could go towards paying down debt. If you’re out of debt then consider taking the money saved and purchase silver coins at your local coin shop.

Get Rid of All Physical Objects You Don’t Need

Anything you own that you don’t need or use is a drain on your limited resources of time, effort, money, space, insurance, storage fees., etc. Your life will improve whenever you get rid of things you don’t need, now more than ever

  • Clean out the garage
  • Sell, donate or throw out the items in the garage you don’t need
  • Sell any cars you don’t use or need.
  • Hire a student or family member to put items on ebay and manage the sale
  • Donate items to others that are too bulky to sell

Copyright © 2008 by Terence Gillespie. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given to McGillespie.com

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