Doug Casey's four step plan to preparing for the Greater Depression...
EVEN IF you already consider yourself wealthy, it is worthwhile giving some thought to make and keep money,
writes Doug Casey, founder of Casey Research.
What
would you do if some act of God or of government, a catastrophic
lawsuit or a really serious misjudgment took you back to Square One?
One
thing about a real depression is that everybody loses. As Richard
Russell has quipped, the winners are those who lose the least. And as
far as I'm concerned, the Greater Depression is looming, not just
another cyclical downturn. You may find that, although you're far ahead
of your neighbors (you own precious metals, you've diversified
internationally and you don't believe much of what you hear from
official sources), you're still not as prepared as you'd like.
I think a good plan would be to approach the problem in four steps: Liquidate, Consolidate, Create and Speculate.
Step 1: Liquidate
Chances
are high that you have too much "stuff." Your garage, basement and
attic are so full of possessions that you may be renting a storage unit
for the overflow. That stuff is costing you money in storage cost, in
depreciation and in the weight of psychological baggage. It's limiting
your options; it's weighing you down. Get rid of it.
Right now it
has a market value. Perhaps to a friend you can call. Or to a neighbor
who might buy it if you have a yard sale. Or to some of the millions of
people on eBay. A year from now, when we're out of the eye of the
financial hurricane and back into the storm, it will likely have much
less value.
But right now there's a market. Even if most people
are no longer wearing those "He who dies with the most toys, wins"
T-shirts that were popular at the height of the boom, there are still
buyers. But the general standard of living is dropping, and mass
psychology is changing. In a year or two, you may find there aren't any
bids and the psychology of the country has changed radically. People
will be desperate for cash, and they'll all be cleaning out their
storage units (partly because they can't afford the rent on them).
Liquidate
whatever you don't actually need – clothes, furniture, tools, cars,
bikes, collections, electronics, properties, you-name-it. You'll be able
to re-buy something like it, or better, cheaper. Just as important,
you'll feel light and mobile. Unburdened by a bunch of possessions that
own you and weigh you down. It will definitely improve your psychology,
which is critical to the next stage. And the cash it generates will be
helpful for the rest of the plan.
Step 2: Consolidate
Take
stock of your assets. After Step 1, that should be a lot easier,
because you'll have less junk but a lot more cash. You'll already feel
more in control and empowered. And definitely richer. But your main
assets aren't money or things. It's the knowledge, skills and
connections you possess. Take stock of them. What do you know? What can
you do? Whom do you know? Make lists and think about these things, with
an eye to maximizing their value.
If you're light on knowledge,
skills and connections, then do something about it – although if you're
reading this, you probably already live life in a way that builds all of
those assets daily. But there's always room for improvement. Think the
Count of Monte Cristo. Or, if you're not so classically oriented, think
Sarah Connor after she met the Terminator.
Part of this process is
to look at what you're now doing. The chances are excellent there's a
better and more profitable allocation of your time. Even successful rock
stars tend to reinvent themselves every few years. You don't want to
get stale. That leads to Step 3.
Step 3: Create
Remember,
the essence of becoming wealthy is to produce more than you consume and
save the difference. But it's hard to maximize value working for
somebody else. And when you're given a job, it can be taken away for any
number of reasons. There is cause and there is effect. You don't want
to be the effect of somebody else's cause. You want to be the cause for
everything in your life. That implies working for yourself. At least
turn your present employer into a partner or an associate.
Perhaps
go through the Yellow Pages (while they still exist), page by page,
line by line, and see what you can provide as a service for the
businesses advertising there. I promise you, they're all looking for
someone to come along, kiss their world and make it better. Think like
an entrepreneur at all times. Remember that there is an infinite desire
for goods and services on the part of the 6 billion other people on the
planet. Find out how you can give them what they want, and the money
will roll in.
I've said many times that I believe you could
airdrop me naked and penniless into the heart of the Congo, and by the
time I emerged, I'd not just have survived, I'd come out wealthy. And,
believe me, I don't think wealth is by any means the most important
thing in life; it's important but should be considered a convenience,
not an imperative. Not that I'd want to be airdropped into the Congo at
the moment; I've gotten a bit lazy, I have other interests, and you
can't be everywhere and do everything.
But now that I think about
it, if I wanted to make a real fortune today from a small base, I might
prefer Africa to any other continent. As an educated Westerner, you can
quickly meet anyone, on an equal level, much more easily than you could
at home. If you have a reason that makes any sense at all, you can be in
the office of the president within a week. These countries are all
plagued with incompetence and corruption, they need everything, and
they're full of untapped resources and talent. This all inures to the
great advantage of a foreign entrepreneur.
Here's an idea. For
your next vacation, book a trip to Cameroon, Togo, Gabon, Zimbabwe or
Angola. Go through the Yellow Pages in the capital and meet everybody
who is anybody. The chances are good you'll come up with several deals
in the first week alone. If you can't find the time, send your kid who's
just out of school and idiotically thinks he may want to misallocate
time and money getting an MBA. This idea alone should be worth a million
Dollars. Or, as I would prefer to think of it, 700 ounces of gold.
But
to an economist, money, like all goods, has "declining marginal
utility." In other words, the more of something you have, the less you
need or want the next unit. Of course more is always better, but it's
unseemly, even degrading, to pursue anything beyond a certain point.
When
I was in Toronto a couple months ago, I spoke with a Chinese friend
who, I believe, is worth at least $250 million. As he waxed philosophic,
he allowed that he didn't feel he really needed more than 30
extra-large to live exactly as he liked. I agreed, in that meals in the
best restaurants, the finest clothes, cars and houses only cost so much.
And it's well within a conservative return on that capital, without
ever even touching the principal. Is it worth it to get more? Perhaps
not, unless your interests in the rest of life are entirely too narrow.
The point of money is to allow you freedom, not make you crazy with
getting more.
That doesn't rule out speculation as an avocation, however. More – everything else being equal – is still better.
Step 4: Speculate
You've
got money. Now you have to keep it and make it grow, because staying in
the same place amounts to going backwards. That's partially because the
world at large will continue getting wealthier, even as the Dollars you
own lose value.
In the past, I've discussed why a lot of old
rules for success are actually going to prove counterproductive over the
next few years. Saving with Dollars will be foolish as they dry up and
blow away. Investing according to classic rules will be very tricky in a
radically changing economy. Most people will try to outrun inflation by
trading or gambling. The markets, which are the natural friend of
productive people, will perversely prove very destructive to them in the
years to come.
You'll know when the final bottom in the stock
market has come: The average guy won't want to hear about the stock
market, if he even remembers it exists. And if he does, he'll want it
abolished.
Instead of becoming a victim of inflation and other
politically caused distortions in the marketplace, you can profit from
these things. Rational speculation is the optimum approach.
What to Do If You're Already Wealthy?
Perhaps,
however, you've already covered all the financial bases to your
satisfaction. Quo vadis? I have several thoughts on the meaning of
wealth. You may find some of them of value as prices of everything
fluctuate radically in the years ahead.
First, recognize that wealth is a high moral good. Don't feel guilty about having it or about wanting more.
If
you've already accumulated and deployed enough capital to allow you to
jump off the golden treadmill, congratulations: chances are high that
you are an exceptional human being. I say that because the moral value
of being wealthy is underrated. I don't mean that in a Calvinistic way,
in that Calvin believed Yahweh rewarded the righteous by making them
rich. But I do believe that productive people – people who work hard to
provide goods and services for others – definitely tend to be wealthier
than unproductive people. They deserve to be. And since we don't live in
a malevolent universe, people generally get what they deserve. So, yes,
wealth is definitely one indicator of moral excellence.
Sure,
some wealthy people got that way by lying, cheating and stealing. But
they're exceptions. It's much easier to become wealthy if (in addition
to having virtues like diligence, competence and judgment) you are known
to be truthful and honest. Those who automatically think ill of the
rich are, at best, paranoid fools. Put it this way: Rich people may lack
some virtues, but they definitely have at least a few that made them
rich. Poor people, on the other hand, will certainly lack some virtues,
and they'll definitely have some vices that kept them poor.
I'm a
fan of some aspects of Gurdjieff, the late 19th to mid 20th century
Russian mystic, who was also a merchant adventurer at some points in his
colorful life. He said that anyone who successfully employed at least
20 other people must be considered at least partially enlightened and a
type of guru. That viewpoint always resonated with me. Self-made wealthy
people may not be saints or mystics or intellectuals or even especially
thoughtful or moral. But they've proven they're better than the average
bear in at least one important way: they can create and conserve
wealth. And they've thereby eased everyone's path to further
accomplishments.
Second, figure out your purpose in having money.
Sure,
money makes life easier. And it's nice how it enables you to assist
people you like with material things. But I strongly suggest that you
not take too short a view on this matter. Accelerating advances in
medical science are not only lengthening human life expectancy, but new
developments now in the works have the potential to vastly improve your
capability and health as well.
Is it possible to live to age 200,
with all the wealth, knowledge and wisdom that implies, while
maintaining the body of a 30-year-old? Not yet. But the prospect is on
the horizon. It will, however, be available only to those who can afford
it. Ray Kurzweil makes a case that the Singularity is near, and I buy
his reasoning. It would be tragic indeed if anyone frittered away his
wealth, thinking he wouldn't live very long, and then succumbed to a
self-fulfilling prophecy, not because of medical difficulties, but
because of financial difficulties.
Third, don't give your money to charity.
Entirely
apart from showing a lack of both imagination and foresight, it's a
complete waste of good money, pure and simple. Contrary to popular
opinion, it rarely does any good; it often does great harm. The whole
concept of charitable giving is corrupt and desperately in need of a
complete rethinking.
Fourth, if you do care about
posterity (who knows, you might be reincarnated…), and on the chance
you don't make it to the Singularity, carefully consider how to dispose
of your estate.
For one thing, there's no reason to automatically
leave anything to your children – unless they deserve it. The notion
that someone should inherit just because he shares your genes is flawed
and thoughtless. The example of Marcus Aurelius leaving the Roman Empire
to his worthless son, Commodus, should be instructive. Wealth should be
left to someone who is most capable of increasing it – at least if you
want to benefit humanity in general. And, yes, I'm quite aware that
humanity in general may deserve absolutely nothing.
At a minimum,
consider that memes are far more important than genes. It's wiser,
therefore, to leave your wealth only to individuals (related to you or
not) who will carry forth values you hold dear and are worthy of the
wealth. If nothing else, make sure you disinherit the government.
Also
consider that dividing wealth dissipates it and generally makes it less
useful. If you have a million Dollars, you could leave a thousand
Dollars to each of a thousand people. But apart from the fact that it's
unlikely anyone knows a thousand worthy people, that much money is only
enough for a modest vacation or a few baubles. The larger the pool of
capital, the more ways it can be used, the more creative power it has,
and the more likely it will be conserved and used creatively. I favor
the Roman system, in which one could adopt children of any age – but
always after you could see what their character was. You might want to
do that if your own kids don't make the grade.
The Bottom Line
If
you want serious money, you have to get serious about money. You need
to understand these fundamentals and never forget them. Don't let all
the garbage reported in the financial media you read, see or hear
confuse you about what money really is. Don't consume more than you
make: save! Don't spend: invest!
Source: http://goldnews.bullionvault.com/survive_the_collapse_090620111
