Budgeting for a Lifestyle Contraction
by Gary North: Social
Security, Ponzi Schemes, and Leprechaun Economics
I regard survivalism
as a legitimate lifestyle that is hedging against a series of events
that are unlikely to take place, but which if they ever take place,
the serious survivalist will be in a much better position to deal
with these events than most others who live in an urban environment.
The basic issue
of survivalism is this: preparing against a rapid, comprehensive,
and unexpected collapse of the division of labor. There are very
few examples of anything like this in modern times, other than war
If there were
a major crisis in the banking system in which central banks could
not create digital money fast enough to save the largest banks from
collapse, there could be this sort of contraction. But even in the
Great Depression, it took three years to get from 1930 to 1933,
which was the trough of the depression. There was time to react.
There is always
the possibility of nuclear war. We
came perilously close to this in 1983, and close calls probably
happened on more than one occasion. But it did not happen. To think
that it could not possibly have happened is naïve. But, on
the other hand, to think that there was a high probability that
it would happen was also naïve. It was a long shot, but it
was within the realm of possibility.
world, I think the greatest threat in this regard is the threat
of biological warfare. I think that this threat will increase over
time. Again, I regard it as a low-probability event, but the devastation
that it could cause is unthinkable -- so we prefer not to think
about it. If we were in a situation in which a true plague struck
modern society, the only way to prevent or at least reduce the likelihood
of being afflicted is complete isolation. This would mean complete
isolation from family members who show up on our doorsteps. I regard
this as a risk that most families would take, which means that the
spread of the plague would probably continue unabated. It would
simply have to play itself out. The economic devastation would be
massive, because millions of people would refuse to go to work.
They would not want to have contact with other individuals in closed
spaces. The division of labor would contract, although I am not
saying that it would collapse. Our lifestyles would be fundamentally
altered until the plague receded.
you are not willing to hedge against this kind of event, then it
seems to me that the word "preparation" is better than
the word "survival." Survival planning means a systematic
withdrawal from the division of labor society for several hours
a week. It means getting prepared emotionally for a major contraction
of the division of labor. It means getting the skills necessary
to function in such an economy. Almost no one is willing to do this,
so I do not really believe that we should spend a lot of time on
survivalism. In other words, if you are not willing to spend 20
hours a week on gaining the skills necessary for productivity in
a society with the division of labor comparable to 1850, which was
a lot better than 1790, I do not think survivalism is sensible.
I think the
best way to think about the problem would be to imagine your situation
if your family lost all income from outside sources for a period
of two years. This is not beyond the realm of possibility. Most
middle-class families would be out of money within six months. But
if this were to hit all families equally, some of the largest expenses
would be removed. There would be very few people paying their mortgage
payments every month, but there would also be relatively few foreclosures.
If something like this happened across the boards, the foreclosure
process would be delayed. But if you alone were the victim of this
kind of reduction of income, you would then face the possibility
of foreclosure, but probably not within a two-year period. You would
have some maneuvering room.
If you had
a year of stored food, which can be purchased cheaply today, you
would be in much better psychological shape to deal with unemployment.
You would not know that you had two years of unemployment facing
you. You would hope that something would turn up. What you need
in that situation is the ability to cut your expenses to the bone
overnight. You have to match your lack of income with a lack of
outgo. Most families are not prepared to do this. They are stretched
to their limits in terms of debt. They have few reserves.
best way to prepare for this kind of scenario is to build up reserves
in the broadest sense. These include reserves of personal business
contacts, reserves associated with a small business on the side,
reserves associated with regular consumer goods store in the home,
and cash in the bank. These are the kinds of reserves that really
are necessary to families in a recession. If we have another recession,
and if that recession were to turn into a depression, both of which
are possible, and both of which are much more likely than biological
warfare, the family with reserves would be in a far better position.
These reserves above all would be psychological. The individual
would not be forced take the first job that came along, nor would
he be in panic mode with respect to his inability to maintain his
This is why
I think lifestyle preparation is more important than survivalism.
I think it is wise to begin to prepare for a sharp loss of income
before this loss of income takes place. The individual begins to
budget his time and money in terms of building up reserves for a
time of unemployment that lasts longer than the head of the household
would otherwise expect.
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North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.
2013 Gary North
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