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Friday, August 31, 2012

Valuable, Durable, Portable and Easily Divisible

Different preppers have different beliefs as to the depth and breadth of the event which causes their plan to be implemented.  Some believe the event will be no more than a "personal recession" - a job loss, perhaps.  It could escalate to a national or worldwide depression.  We could have martial law inflicted upon us, or the government could go full-throttle communist with a centrally planned economy.  Worse case, I believe, would be an electromagnetic pulse (EMP) - either man-made or natural - sufficient in size and location to take out our national electrical grid.

Regardless of which scenario(s) for which you're planning, you're being, uhm, imprudent, if you're not planning for a hole in your preps.  You may have food, water, shelter, medical, security and equipment for you and your crew to last a full 10 years.  What happens if half of it is stolen, rots or otherwise is inadequate?

You're screwed.

You need to have goods or skills which allow you to acquire what you need.  Barter, baby.  You need to be able to barter.

Most mediums of exchange have four traits in common.  They're Valuable, Durable, Portable and Easily Divisible.

Valuable:  Someone else wants what you have.  It matters not if YOU think it has value - your trading partner must perceive value.  You might have a sculpture which cost hundreds of thousands of dollars before the balloon went up.  Afterwards, depending upon the type of event which occurs, it may have no value beyond its ability to keep your hat and overcoat off of the floor.  Things which have value prior to an event may have little or none after an event, and common, pedestrian goods may be your most prized possessions.

Durable:  What is the life cycle of your goods?  In general, something which spoils quickly, or loses its utility over time will hold less value than a hearty, durable good.  Milk would be less valuable than cheese, for instance.  There are exceptions, of course.  Gasoline eventually loses its effectiveness.  In an event such as an EMP where the grid is down and gas stations are unable to give you gasoline, a couple gallons would be VERY valuable.  In a depression, maybe not so much.

Portable:  Can you deliver your goods without much fuss?  If you own real estate, it's not going anywhere.  Unless you have a local buyer or trader, it could be valueless.  A couple of stacks of 1 ounce gold coins can currently represent the same value.

Easily Divisible:  Can you break it down into smaller units?  In addition to making the item more portable because of its smaller size, you are generally able to get a premium over larger units.  Why is that?  Because more people can afford to buy the smaller units.  A one ounce gold piece has a 5% premium over spot gold prices.  A 10th ounce coin has a 12%-15% premium. 

"Yeah, but...."

I can hear it already.  "Chief, you can't eat gold or silver."  Yep, and you can't buy or trade for a side of beef with real estate, either.

Diversify your holding.  You have no idea what will be needed - and have value - in the future, because you have no way of knowing exactly what is going to happen in the future.

A key to success, I believe, will be having the skills to convert raw materials into goods which have more value than the raw materials.   Let's say you're in an area with an abundance of corn.  You have lots of it, as do your neighbors.  If you have the skills to convert that corn into ethanol, you've now made it more valuable AND versatile.  Sell/trade it as fuel or as a beverage.

Accept The Challenge

During the war in Bosnia, one of the survivors made a comment along the lines of, "If you have clean water and toilet paper, you're a rich man."

In virtually all emergency/disaster scenarios, food, water, guns, ammo, alcohol and precious metals will be valuable.  Knowing which items to hold in storage can be a crap shoot.

For instance, if we are faced with an economic depression, storing mass amounts of water would be a waste of time and resources.  We'd still be able to turn on a faucet, and get all the water we need.  Having a huge store of precious metals could make you a king.

Conversely, if we have an EMP event, clean, potable water would be mind-numbingly valuable, and precious metals would be more valuable as fishing sinkers than as a medium of trade.

The key, I believe, is to diversify and adapt.  For instance, I don't store a gajillion gallons of water, but I have the skills and tools (and access to water) to make a gajillion gallons.  Filters and chemicals, plus the skills to go "old school" if my modern tools are lost or stolen.

Right now, as I read the tea leaves of our society, I think the likelihood of an economic crash, the confiscation or further restrictions on access to guns and ammo, and further intrusions into our private lives/information are on the top of the Hit Parade of possible events.  As such,  I focus my limited resources on those areas.

I am moderately prepared for virtually any event - up to and including an EMP - and well prepared for those events listed above.

Because the tea leaves can sometimes be cloudy, I have stores of things that have been valuable in past disasters/emergencies.  Hygiene items, precious metals, guns, ammo, water making goods, communications devices, alcohol, sugar, fats, salt.

All of these are in quantities normally deemed "above normal", but that's the idea.  These things - and a number of fairly specialized skills - are my currency for the future.

When you're putting something away for barter, run them by the Valuable, Durable, Portable and Divisible test.  If you miss on one or more of the requirements, think hard about whether it will help you in the future.

Copyright 2012 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.

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