A Survivalist Approach to an Economic Crisis

J.D. at the Get Rich Slowly blog wrote an interesting article this week on Bull Moves in Bear Markets.  The title is from a book written by Peter Schiff, a well known predictor of impending collapse of the U.S. financial system, up to and including the government.  Indeed, one of Schiff’s recommendations for preparing for his economic “end of days” scenario is to stockpile household goods, buy precious metals, and perhaps even move to a foreign country having a more attractive currency. 

J.D.’s piece brought to mind another blurb I read recently in Business Week online entitled “Safe Investments When Gold is Too Volatile.”  I am not a fan of gold investing so the title of the story intrigued me.  Upon reading it, I was fascinated by the views of Marc Faber, editor of the subscription-based Gloom, Boom & Doom Report.  Addressing current and predicted market conditions, Faber suggests that owning a farm with no mortgage would be a good “safe haven” strategy for surviving the economic crisis that he expects to get worse before it gets better.   

Faber may have been thinking of farmland simply as a secure investment.  But when he also recommended that the farm have no mortgage, I suspect that there is more of a “survivalist” mentality at work, similar to the thinking of Peter Schiff.  If you own a farm free and clear, and can use that farm to produce your own food, you now have a means of providing shelter and sustenance to you and your family, with little need for income.  You can survive a significant economic crisis that way. 

Mr. ToughMoneyLove has to confess that he has considered implementing “survivalist” tactics in preparing for continued deterioration of the economy.  Actually, these preparations began two years ago, when talk of an avian flu epidemic reached the mainstream media.  At that time, we purchased a water purifier, generator, emergency lighting and communications equipment (I am a Ham radio operator), extra medicine and medical supplies (my wife is a nurse), etc.  We also stashed cash and about six months worth of food in the house.  Yeah – we got quite serious about it, as did other members of our extended family, with whom we shared ideas and concerns.  In fact, everything is still in place and ready to go.  (Some of the stored food is starting to expire so that is something we need to work on.)  

So how and why do survivalist tactics fit into an economic crisis of the type we are now facing?  That’s interesting question and I suppose there are several possibilities.  First, there is the possibility of extended job loss and loss of income.  In other words, an economic crisis can accelerate the need for access to resources that a family would otherwise require for a planned retirement.  If things get substantially worse in our economy, the first level of disaster in my case is that many of our clients may go out of business or simply stop using our services.  No clients – no income.  

The second level of disaster could be what Marc Faber and Peter Schiff are hinting at – a complete meltdown and collapse of the economy, causing such massive job loss and discontent that significant components of the economy simply stop functioning.  This is precisely what we prepared for with a possible avian flu pandemic.  In the “meltdown” scenario, the Mr. ToughMoneyLove family needs access to basic resources that perhaps money can’t buy – either because they are no longer available or because our money has become worthless. 

This brings us back to the “farm with no mortgage” investment concept espoused by Mr. Gloom and Doom, Marc Faber.  A working farm capable of providing shelter, water, protein and vegetables would be a tremendous economic refuge in a time of extended crisis.  It could support friends and family as well.  (It could also provide a haven for Mrs. ToughMoneyLove’s beloved horse, Belle. )

We are not planning on buying a farm.  I don’t know anything about farming and don’t plan on learning now.  But the “survivalist” mindset can be extended into what we are planning on doing and what others can think about doing in their own lives.  We want to have a place to live that we own 100%, which pays us in the form of shelter services, without us needing income to pay for those services.  That is why we are paying off our mortgage this year.  We want to continue to own our vehicles, to provide transportation services without need for substantial income to pay for those services.  In other words, we want to use economic survivalist tactics to acquire assets that will allow us to maintain a reasonable standard of living, even if the deteriorating economy spirals down into a true disaster, as some think it will. 

Now some of you are thinking that such preparations will be a huge waste of time and resources if true disaster doesn’t strike.  I understand that concern.  But I don’t think of it that way.  Our new government is going to raise taxes, big time.  It has to.  Frankly, this is going to create significant mental disincentives toward work among end-stage baby boomers.  More work to earn the same income because of higher taxes?  Boomers are not gonna wanna do it.  So, having assets and resources in place to allow us to live without significant taxable income is what we need to fight back against high taxes and to adjust to a lower net income.  (I wrote earlier about this concept in relation to a paid-off mortgage.)  

So this is my thinking.  Is anyone else thinking like a survivalist in preparing for economic disaster?  Or am I just overreacting?

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9 Responses to “A Survivalist Approach to an Economic Crisis”
  1. I don’t get it. You’re stockpiling food to hedge against higher taxes? For another stock crash? Inflation? Why would any of these things mean you need emergency rations?

  2. No – you need to think bigger picture. I’m paying off assets that provide needed services (shelter, transportation, etc.) as a hedge against loss of net income due to higher taxes and/or deepening recession. The stockpiling of food would be helpful only for a shorter-term disruption of the economy caused by other economic shock, e.g., avian flu, widespread labor strike, etc.

  3. I don’t think you’re overreacting. I may not go out and buy a farm, but I think it’s reasonable to prepare for the possibility of a major crisis, whether as a result of economic collapse or hardship, a natural disaster, or some other emergency. Owning the things you need outright and having access to the things you might need is just good planning. The reason I’m determined to pay off my mortgage ASAP isn’t for the financial benefits, it’s for the security that this affords.

  4. David says:

    We have been thinking like that for a little while now. I do wish we had a farm now, but that’s our ultimate goal for when we finally buy property – farm, acres, gardens, animals.

  5. David – I like your goal but I hope you have farm skills. Unfortunately, I don’t.

  6. David says:

    Don’t worry, I can teach you 😉

  7. ConnieBrz says:

    Love the article :)

    I understand the concept of having a mortgage-free farm (or home) in a survivalist type scenerio but what about taxes? If things melt down to that point, forget the mortgage payment, who’s going to be able to pay those sky-high taxes? Folks could still lose their home, shelter and food production.

    Guess I keep coming back to the necessity of having income producing assets to pay the bills… so what could be considered income producing assets in a survivalist economy situation?

    Maybe some mortgage-free rent houses in starter home neighborhoods?

  8. Connie: I think the key is to have assets that actually minimize the income you need so that you don’t pay much in taxes. As for property taxes, well not much we can do about those. You will need some income for that.

  9. Sarah says:

    What do you do if you rent and can’t afford or want to get a loan for a home? How do you prepare besides having food and supplies and a free and clear car?

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