Lies! Economic theory contains more half-truths and lies than any other scientific study. Bad economists present their errors to the public better than good economists present their truths.
The challenge for non-experts is that the result of economic theory is rarely seen in an observable time frame. This fact opens up endless opportunity for manipulation of the uninformed by the devious, the powerful, and the greedy.
Economic collapse is already happening, in slow motion. Stay ahead of the doomsday curve. More important than firearms, more crucial than food stores, more urgent than seed collecting, understanding economics could help you predict a collapse before it happens.
7 Economic Rules for Preppers is a series of blog posts to help you clear the fog and understand what may be the single most important factor in your preparedness strategy.
Rule 2: Wealth is not Money. Consider this lie:
Lie: To get and be rich means to have money and having money is the same as having wealth.
Fact: True wealth is what is made and utilized. That includes food, clothing, tools, motor vehicles and other technological improves that empower man to improve his condition. These innovations save lives, prevent disease, improve quality of life, etc. The most important of the true wealth articles is knowledge. Knowledge used to solve problems is at the heart of creating value beyond a dollar amount.
One could argue that the more money you have the more tools you can buy. The more tools you buy, the better your life becomes. For the Prepper, this is a particularly interesting argument. Consider these questions:
- How many preps would you buy if you had endless supplies of cash?
- At what point is there a diminishing rate of return on your prepping investment?
The one prep that money cannot buy is knowledge. Knowledge must be gained through an effort beyond expenditure of cash. Sure, you can buy books on prepping but you cannot gain their value unless you read them then practice the skills. The wealth is not in the books. The wealth is in the knowledge gained by the lessons in the books and in your ability to put them into practice. It is easy to see how the best Prepper will not be the one with the deepest pockets. You could argue that the best Prepper will be the one with the largest brain of useful knowledge which money cannot buy. That is the nature of true wealth.
The problem with the wealth and money lie is compounded when you consider inflation. Economic financial inflation is the action whereby you have more dollars in your hand but they are worth less and less. In simple terms, one dollar bought one gallon of gasoline in 1993, that same dollar will now buy 1/4 gallon of gas. The highest rates of inflation in the USA include years:
These three years saw rates above 14%. Historically, a primary cause of inflation is printing of money without the backing of something of value like gold or silver.
Your purchasing power is directly related to inflation. The higher the rate of inflation the less you are able to buy with your dollar. This includes your ability to pay off existing debt. Even though your dollar buys less, your debt load stays the same. If you owe $10,000 on a credit card and inflation suddenly rises from 1% to 10% then it instantly requires $11,000 to pay off that $10k of debt. This is why money is not wealth. Money is easier to erode or destroy. True wealth, like knowledge, is less likely to be destroyed through things like inflation. Can you see why getting out of debt should be at the top of any Prepper’s list?
Finally, this begs the question of WHEN will we see increases in inflation. Know that all economic trends are cyclical. It is easy to predict that, when inflation rates are near zero for long periods of time, inflation rates are destined to rise. Economic history of other countries, like Mexico, shows us that printing of money without a gold standard results in a predictable and inevitable event of hyper inflation. This is the situation where something like 100,000 Pesos is worth $1.00. A good chart for observing our nation’s rate of inflation is at http://www.usinflationcalculator.com/inflation/historical-inflation-rates/.
Make your own informed decisions. Where do you think the USA rate of inflation is headed in 2015? Why?
Learn more about economics and finding extra cash for preps on Bennett’s Blog.