Chapter 12

Thinking the Unthinkable

America has never been more vulnerable to such unthinkable surprises, nor have they ever been more likely, and they are always to the downside. Here's a list:

• Unexpected loss of income. You can lose your income and your retirement if you are laid off because your employer is threatened by a recession or depression, sudden interest-rate changes, supply problems, war, unexpected changes in regulations or tax laws, the death of a founder, a hostile takeover, sudden foreign competition, corporate misjudgments, wildcat strikes, hurricanes or earthquakes, power-grid failures, terrorist attacks, or an underfunded pension plan. Your employer might sell out to another company, and your department might be wiped out or transferred to Saskatchewan. You may have gone to work for a big company for safety and security, only to find out there is no security when other people can make unilateral decisions about you unrelated to your competence.
• An attack by terrorist-inspired and -financed hackers that disrupts the economy and normal distribution of goods and services, and can cause a breakdown or even the disappearance of the dollar and the world's monetary system. More about this later.
• Disabling health problems that abort your prosperity or wealth program, such as a heart attack, accidents, cancer, or other serious disease.

To protect yourself and your family in case of any of these unexpected troubles, there are three insurance steps you should take:

1. Accumulate approximately six months of cash (dollars) in reserve, sufficient to pay the mortgage, installment payments, and operating expenses for a car, as well as fresh food.
2. Have an emergency commodity stash, including a six-month supply of food.
3. Own roughly $2,000 to $3,000 worth of gold and silver coins per family member.

Let's discuss these one at a time.

WHY SIX MONTHS OF CASH?

If your income is cut off for any reason, you need enough to cover your essential needs for about six months, which would probably be enough to pay the bills until you were able to right your financial boat. This can be in a local bank, unless a banking collapse is threatened.

WHY AN EMERGENCY COMMODITY STASH?

What if the August 2003 power blackout wasn't over in two or three days? What if it had been caused by a strategic terrorist hacker attack and you couldn't buy common goods because the electronic cash registers wouldn't work? You would wish you had a supply of nonspoilable, canned, dehydrated, and freeze-dried food, water for drinking and cooking, flashlights and batteries, diapers, prescription drugs, first-aid supplies, toilet paper and paper towels, motor oil, soap and laundry detergent, battery chargers, 5- and 10-gallon cans of gas, warm clothes, candles, charcoal and a grill, a battery-operated radio, and so on.

But why? Back in the Introduction I told you about my 1968 bankruptcy when I went to work rich and came home broke, which ruined my whole day. Some months prior to that calamity, a cousin had come through town looking for work, so Kay hired him to build some shelves in the garage for the food-storage program we were going to start. It was a standard principle for Mormons to have at least a six-month supply of food on hand, but I had always pooh-poohed the idea to Kay, telling her, “When you have money, you can always go down to the store and buy food.” I felt we were at least very prosperous with my booming speed-reading school. But then my franchise was canceled overnight, my office doors were locked, and my bank accounts were frozen, and I had less than $20 in my pocket. We went out to the garage and stood by the shelves that were stocked with food items Kay had squirreled away using money squeezed out of the food budget, and as we embraced in the garage, we shed tears of gratitude.

I had always thought that food storage was for some possible future time when there might be big, generalized problems for society at large and everyone was in trouble. It had never occurred to me that there might be much more personal and close-to-home reasons for a food storage program. There was no generalized economic problem in our town, nor was there any on the horizon, but there was a potential famine at 27 Arroyo Drive in Moraga, California, and we used our food storage for several months until I got my cash flow rolling again.

Ever since then, I have been a passionate advocate for food-storage programs for America, and never has there been a time when this prudent, riskless, conservative idea made more sense than it does today. There are some serious vulnerabilities and some very credible threats to our smoothly functioning society and no shortage of motivated and well-financed enemies willing and eager to exploit them.

Even without external threats, we live in an age where layoffs and business failures are more and more common. There is also a rising tide of bankruptcies, as described in Chapter 4, and many find themselves in need of charitable help because they can't help themselves. The Mormon idea of personal food storage is at least in part a moral decision that if you are prepared for financial trouble before it materializes, you will not have to dip into other people's pockets through the taxing power of government when trouble actually shows up.

VULNERABILITIES

What if hackers, paid and motivated by America-hating terrorists, launched a virus or other electronic gremlin that disabled the nation's computer systems for even a week or two? What if the ATM machines weren't working for a week or two, as happened for only two or three days in New York, Buffalo, Toronto, Detroit, and places in between in the 2003 power blackout? What if the cash registers at your local supermarket didn't work and you couldn't buy anything? What if your credit and debit cards couldn't be accepted and cash prices tripled? What if terrorists contaminated your local water supply? (We know they have been exploring that possibility.)

Distribution of food and other commodities is becoming more and more computerized and interdependent, and just-in-time purchasing and delivery are common business practices. If the trucks don't roll as scheduled, there will be instant shortages, aggravated and accelerated by panic buying.

The number of Muslims who have been radicalized into becoming America haters has been growing by the millions. They call us the Great Satan, and we seem to be doing everything we can to affirm their perceptions. Did you know that the most-watched TV reruns in the Muslim countries are Baywatch and Jerry Springer? Millions of Muslims think that these shows are honest representations of the real America. Millions of young Muslims believe that when they kill Americans, they are doing God a favor. And their technological expertise is growing by leaps and bounds. What if they launched a virus that spread to most of America's computers and servers, and they brought down the power grid?

OASES OF STABILITY

The August 2003 blackout is a cautionary tale. While millions of people were scrambling to buy food, water, and flashlights, there were tens of thousands of oases of stability everywhere—the Mormons! I promised that I wouldn't turn this book into a religious tract, but one Mormon practice spills over into the broader social arena—food storage—and you don't have to agree with our theology or join us to benefit from this principle. For Mormons, this is not an apocalyptic thing; it's just the natural outgrowth of the nineteenth-century self-sufficiency attitude that is a part of the Mormon cultural heritage. And we love to share the idea with neighbors and friends, because if this practice became universal, the communities our families live in would be safer and more stable.

Let me tell you what happened for two or three days in August 2003.

The blackout across the Northeast and Midwest was a great test of personal and family preparedness for the Mormons, as several days without electricity or water came unexpectedly and in many forms, and the Mormons have been advised for several years by church leaders to have a personal preparedness program. Whatever else you may think of Mormonism (The Church of Jesus Christ of Latter-Day Saints), it is an eminently practical church. As a result, Mormons from Connecticut to Michigan and Toronto to Ohio generally fared well when the lights went out and all power failed. Reported one bishop (the functional equivalent of a pastor), “A few minutes after the blackout began, I implemented our 72-hour emergency plan, which includes verbal communication with each family, paying particular attention to widows, children, and the disabled ... various members offered to assist needy families with electricity from backup generators.”

A common observation among local church leaders was that there was a sense of calm, much of which had to do with being prepared. Said one bishop, “Being fairly well prepared certainly made a big difference in how we reacted.” Another bishop echoed what others had learned—that cordless phones don't work when the power is out.

Many church members who worked in Manhattan and lived 20 or 30 miles away spent the night in the Manhattan Stake Center (a Stake is the Mormon equivalent of a diocese), as did visitors to the city whose electronic hotel keys no longer worked. In Grand Rapids, Michigan, a single mother with two children offered to bring widows to her home where she could feed and care for them. She walked to her non-Mormon neighbors to offer food and assistance. When the blackout hit, the Mormons watched calmly as others scurried to grocery stores. Some areas were without power for up to three days.

Some years ago, one of my subscribers, in a lame attempt at humor, said, “I will have a food storage program; I will just buy a gun and move next door to a Mormon.” Ha ha! There is a better way; do it yourself!

WHY GOLD AND SILVER?

This is a much more complex question and answer. Gold and silver are your protection against runaway inflation, war, international currency exchange problems, a devastating hacker attack on the world's monetary system (which is a real threat, and very likely) and a collapse or devaluation of the dollar through inflation, which we saw less than three decades ago. In the inflation of the late seventies and early eighties, gold went up more than 700 percent, and silver more than 2,500 percent.

In almost all ages, these metals have been real money. All paper currencies eventually die; and the world is littered with dead paper currencies; but there has never been a time when gold and silver were not valuable, either as a means of exchange or as a store of value, or both. They would replace or substitute for all paper currencies if the dollar were to take its place alongside the defunct deutschmark. If the dollar survives all these potential assaults and you need some dollars, there is a ready market for your coins at any neighborhood coin dealer, probably at a profit, as gold is in the early stages of a long bull market even as I write.

You need a variety of gold and silver coins in various weights and denominations, which I will elaborate on later. I have also discussed gold in Chapter 9. Look there for more details.

TERRORISM AND GOLD

The terrorist attack on the World Trade Center was really more than just an attempt to spread terror: It was an assault on the monetary system of America and the rest of the Western World. Ten years ago, the consequences worldwide would have been beyond imagination. In order to understand why, you have to understand the nature of money.

The dollar is mostly in cyberspace; less than 5 percent of all dollars are minted, printed, or coined. All those trillions of dollars (no one knows exactly how many) exist only as computer entries and can be sent around the world with a computer keystroke. A decade ago, nearly all of these computers were in New York, a lot of them in the World Trade Center. Then, a few years ago, the powerful institutions that operate most of the computers that are the heart of the New York Stock Exchange, the Nasdaq, currency trading, and the Treasury- and municipal-bond markets began to decentralize their computer operations. Many of them were moved across the Hudson River to New Jersey, so even as the world watched the World Trade Center collapse, the world's markets hardly missed a beat. One of the world's largest bond traders lost 85 percent of its employees when the buildings crumbled, but trading went on worldwide.

The world's top terrorists are not fools, and they have learned from experience. I believe they now know that America could be brought to its knees if they could contaminate or destroy the software and hardware that runs the Western World.

Much of the multinational banks' international operations are run in Panama in the former Canal Zone without oversight or regulation. How did this happen? America's chief negotiator during the Jimmy Carter canal giveaway, Sol Linowitz, a member of the board of Chemical Bank, was given an interim appointment of one day less than six months so he would not need Senate confirmation. Not only was the deal with Panama signed just one day short of the end of Linowitz's term, but bank buildings were already springing up like mushrooms all over the Canal Zone for months in anticipation of the Canal Zone becoming a free banking zone, which it is now. Three billion dollars in American bank loans to Panama were made good as Panama seized control of the canal revenues.

I'm not a computer expert, but I have been given reason to believe by people who are experts that the computer systems in Panama are much more vulnerable to attack than those in America, and even more important.

But what does this have to do with gold and silver?

Until quite recently in the history of money, gold was the ultimate money—a means of exchange and a store of value. We still say “as good as gold,” one of our sports heroes might still be called “the Golden Boy”; retirement is called “the Golden Years.” Until Nixon closed the gold window, our money was backed by gold. Now we take a worthless piece of paper and try to make it valuable by merely applying ink. But what happens when the computers go down and we can't get the ink-engraved paper or use our credit or debit cards? Gold and silver coins will be considered real money everywhere in the world. The Germans still remember the inflation that devastated them after World War I, when a wheelbarrow full of money wouldn't buy a loaf of bread, but an American dime would. The Swiss still have a gold-backed currency. In India, people wear much of their wealth around their necks in the form of gold chains. Gold is part of the monetary holdings of nearly all of the world's central banks. The Chinese are still big fans of gold, and in America we are only two decades away from the days when a gold rush drove the price of gold from $120 an ounce to $850, and silver from $2 to $50.

This chapter is not about gold and silver as investments, although that may be a darn good idea, as explained in Chapter 9. I am arguing for each family to have $2,000 to $3,000 in gold and silver coins as a hedge against the possible day when dollars are not available and you need a means of exchange.

I have asked Jim Cook, president of Investment Rarities (www.investmentrarities.com, 800-828-1860), to suggest a coin portfolio of about $3,000 for your consideration for each family member. Jim has served tens of thousands of my subscribers over the years. I have also asked him to create a Howard Ruff Core Package. I have no financial interest of any kind in this recommendation. Jim suggests ¼ bag ($250 face value) of pre-1965 silver dimes or quarters, worth about $1,000), three rolls (200 coins per roll) of U.S. silver eagles (worth about $450), and four 1-ounce gold coins (krugerrands, eagles, or maple leafs) worth about $1,600. You should have one such portfolio for each family member.

I believe America's biggest terrorist threat is not airplane hijacking but terrorist-inspired computer hacking. If I wanted to disable America, I would simultaneously detonate dirty nuclear devices in Northern New Jersey and the Canal Zone to make them uninhabitable and all those computers inaccessible because of nuclear contamination, and launch a nightmare horde of viruses at the Internet and the servers and computers that manage the world's money supply.

Is this a prophecy? Not at all; I'm no prophet. It's merely a statement of growing possibilities, and an argument to be prepared with a stash of cash, gold and silver coins, and essential commodities. Then relax and sleep well again.

But what if none of these worst cases ever materializes? Well, unlike the money you spend on premiums for term insurance or health insurance, you can eat or otherwise use the stored commodities, or liquidate the gold and silver for dollars—most likely at a profit, as gold responds to war, inflation, and other calamities, and I believe that at least some of these things are likely in our future. In the meantime, proceed with your prosperity or wealth program, knowing you are prepared in case everything else goes to hell for awhile. And don't use the fears I may have aroused as an excuse to ignore everything I may have taught you about how to become Safely Prosperous or Really Rich. If you just stand pat with your life as it is now, you are far more vulnerable to these fearsome theoretical possibilities than you would be if you were out of debt.