Here are some articles on inflation and currency troubles that we, as preppers, can learn from.
In article one from Bloomberg, shoppers in Venezuela are finding it hard to find basics, including chicken and laundry detergent. The country is experiencing a 64% rate of annual inflation, and the plunging price of oil is limiting their access to foreign currency, causing further problems. This means the government cannot provide simple things like laundry detergent and toilet paper to its people because those goods are bought with dollars from other countries.
We also see that the “official” exchange rate is 6.3 bolivars to a U.S. dollar, but the black market rate is 30 times higher – 187 bolivars to the dollar. This is a government that is sliding towards collapse.
Article two from the Wall Street Journal might appear to be similar to one, but is a little different. Women in Argentina cannot find tampon on the store shelves because there are not enough dollars available for importers to buy them from international manufacturers. An Argentine economist is quoted as saying “We gave ended up with a socialist system in which one bureaucrat decides what you can import or produce at which price and when.”
Other news reports state that supply and demand has driven the cost of tampons in Argentina to $30a box.
So, what can we learn from these articles?
First, all those lists and articles on what to store and what can be useful for barter were correct: Common, everyday items we take for granted are valuable in an economic collapse or a TEOTWAWKI situation. So stock your beans, bullets and bandages, but don’t forget soap, laundry and dish detergent, diapers, feminine hygiene products, toilet paper and other health and beauty items.
I can’t help but remember the scene from the Book of Eli in which the antagonist washes his wife’s hair using a tiny hotel-size bottle of shampoo they recovered. In the movie, this simple act that most of us do daily without a second thought is portrayed as a moving, major event.
Second, you need to know how to make these basics, how work around their absence, or how to live without them.
For example, you can make your own laundry detergent relatively easily. There are plenty or recipes and instructions the internet, including You Tube videos. All it really takes is some bars of Fels Naptha soap, Borax, and some washing soda (not to be confused with baking soda, even though it is made by Arm & Hammer), all of which are usually available from Walmart. You can stock these raw materials in your basement. There are also plenty of alternatives to disposable items, like cloth diapers. Prepare ahead of time and you will not be waiting in line at six different grocery stores like the woman in story one.
Third, governments and politicians of all parties lie to make themselves look better. Venezuela has figures no one believes about their currency exchange rate and we lie about the unemployment rate by changing the yard stick. Simply put: take everything the government says about the economy with a grain of salt.
Fourth, government intervention makes economic problems worse. Prices are determined by the natural law of supply and demand, and they float up or down based on a host of factors. Messing with the free market creates injustices and Man-made laws that seek to interfere actually force inequality into the marketplace and inevitably make the situation worse rather than better.
Let’s look at a simple example that is basic but sufficient for our needs: Imagine that the price of a dozen large eggs rises from $2 to $4 in a matter of weeks and the population is upset. Convinced that stores are over charging their customers, the government passes a law saying that you can only sell eggs at $2 a dozen. Does this result in more eggs on store shelves at lower prices? No. Why not? Because the store cannot buy them from farmers at a low enough price to make any money at $2 a dozen, so they stop selling them. Suddenly, instead of having to pay $4 a dozen for eggs, there are no eggs to be found and the price doubles again to $8 per dozen.
This is a high enough price that a black market in eggs is created. An enterprising guy we’ll call Joe sees that he can make a killing selling eggs for $8 a dozen, if only he can buy them for $4. He goes to Bob, a grocery store manager, and offers to buy all the eggs he has at $4 a dozen.
Angry at having to sell eggs at a loss, Bob decides it selling to Joe worth the risk, but he wants $5 a dozen. After all, he needs to recoup his losses after selling eggs for only $2, so he takes Joe up on his offer, but insist on $5 per dozen. Joe agrees.
Let’s say that Bob’s store gets a delivery of 1,000 cartons of eggs. To keep the government off their back, they sell 200 cartons in the store at $2 each, and then they put up a sign that says “Sold Out – No more eggs today.” 700 dozen eggs are sold to Joe at $5 per dozen and disappear out the back door only to be sold off the back of Joes’ truck for $8 or more per dozen to desperate people who cannot find eggs in the store. The remaining 100 dozen are given to employees as part of their pay and to keep them from reporting Bob to the pricing police. A few are traded to butchers and other vendors in return for meat, and some are probably given to the inspectors and government officials as bribes. At the end of the day, Bob is not losing money, Joe is making money, and the consumer got screwed. Again.
In the end, by trying to artificially control the price of eggs, the government has contributed to a doubling of the price, making things worse for the consumer. And just as people in Argentina are buying up all the tampons (thereby making a small shortage into a severe one) or people in the U.S. are buying up all the .22LR ammunition as soon as it hits the shelf, they market is knocked out of kilter and may take years to settle back down to a natural state.
Finally, we have story three from NBC News, which predicts that the rapid rise of food prices here in the U.S. will continue. Beef in 2015 will be about twice the cost it was in 2009 and for many families is considered a “luxury” item. Story four says the money consumers are saving thanks to lower gas prices is being consumed by rising grocery store prices.
To a certain extent, you can combat rising food prices by buying in bulk, eating more beans and rice, eating out less, and by cooking from scratch instead of buying prepared foods. But when the cost of meat and eggs keeps going up, you either need to cut back or spend more.
One option many preppers choose is to grow their own. Chickens provide eggs and occasional meat. With three does and a buck, rabbits can provide meat for one or two meals of good lean meat a week. Goats can provide milk and occasional meat. Hunting and trapping is another option, especially for those who live in more rural areas.
A final lesson: Keep preparing. We may not be Russia, Venezuela or Argentina, but we have seen double digit inflation in my lifetime, and the depression was less than a century ago. Economic collapse may or may not lie ahead, but even a bubble bursting can cause lasting economic damage if you lose your job, your house, or your savings.