Disclaimer: the following is not financial advice. It is a scenario intended for academic study only.
How often have we heard the financial gurus tell us how critically important it is to get out of debt? Some of these national figures have risen to the level of superstars with nearly a cult like following. I suppose there are plenty of folks that need to be told how to save their money and what they are “allowed “ to spend their hard earned cash on. Notice that these same professionals want you to part with some of your cash to pay for their books, seminars, cd rom programs, etc. When I hear these parrots of pennies squawk their advice, I ‘m reminded of the quote from J. Paul Getty: “In times of rapid change, experience could be your worst enemy.”
I’ve always been keenly aware of the pitfalls that excessive debt poses to the individual, and have done my best to limit debt to my mortgage. This has always made the most sense to me. During the mid- nineties some folks were praising the concept of the second mortgage and proclaiming that you never want to pay off your house when you could make more money in the markets. I wonder what those folks are advising now. Why is debt now considering such an evil thing when a decade ago it was held as a viable tool to build wealth? Why are those 401(k) accounts that were promoted as the common man’s path to riches and happiness now being raided for whatever funds can be salvaged? I know plenty of people who planned to retire several years ago that cannot now afford to because of the damage their private pensions and real estate suffered since 2006. ? I’d like to believe I’m a free thinker and ponder my best course of action even though it may run contrary to conservative wisdom.
My point is debt is not necessarily the evil word that many make it out to be. There is stupid debt and smart debt (yes, smart debt.) Any student of history and any prepper that’s done their homework know the devastation a government with little oversight by, or accountability to, the people can do to a nation’s economy. I’m not an economist but all the signs I’m seeing suggest we are in for some terrible economic times, including the potential for hyperinflation.
If we had a crystal ball and could look into the near future, we would know exactly what to do. Let’s pretend we have that power and we’re looking at the events taking shape during October, 2014. For the past two years our federal (feudal) overlords have continued to tax, borrow and spend our money on enhanced social programs and safety nets for the poor. With this loose economic policy, entitlements and obligations combined with massive unemployment and the interest on the national debt have surpassed revenue. In an attempt to keep financial collapse in check, the U.S. Department of Treasury’s Bureau of Engraving and Printing opens a third production facility in St. Louis, MO. The Federal Reserve Bank initiates QE4 and a tidal wave of greenbacks flood into the American monetary system. Within two months the effective purchasing power of U.S. currency drops to ten cents on the dollar. A loaf of bread costs $20, a two pack of one pound propane cylinders cost $45, a 5 ounce bag of beef jerky $60, and an eight pack of Energizer D cell batteries will set you back a whopping $145!
Back to the present day: keeping an eye on current events I realize that food prices will skyrocket not only due to hyperinflation but also the continued shortage of arable land; the increased use of corn for ethanol; falling water levels; and global population increases. I speculate the cost of firearms and ammunition, items I need to ensure my families safety, will climb even higher due to increased taxes, regulation, and limited availability. Rather than let these concerns become overwhelming I decide to take action and implement John Pugsley’s The Alpha Strategy*. However, due to the criticality of the situation, I implement his plan with a twist. Rather than wait until I save money that continually loses purchasing power, I use a credit card with 0% interest for 12 months, which afterwards reverts to 15.9% annual interest. If I don’t pay off the balance at the end of 12 months, I search for another 0% or low interest offer and transfer the balance over. Even with the transfer fee I’m still much further ahead with a larder full of food, supplies, and equipment that I acquired for a much lower price than I would have if I purchased slowly on a cash basis. This strategy also leverages any cash reserves for the acquisition of secluded property, bug-out vehicles, precious metals or other commodities not practical to obtain through revolving credit.
Many folks will disagree with this strategy. So goes the herd. It’s not difficult to find financial advice since there is no shortage of charlatans who would love to manage your money and keep a slice of your cash for themselves. Exercise your option to think for yourself and trust you gut. Only a fool delegates the responsibility for his welfare to another.