A friend writes:
But I cannot seem to disregard the notion.
This is a very tough issue, and one that I have only a brief amount of time to address.
But here goes . . .
This is the “Nukes in New York” scenario or “NiNY” scenario. It’s something a great number of us thought about all the time three and four years ago, and is something that most of us think about from time to time still: what would happen if Osama nuked Wall Street, and really succeeded in taking down our entire financial system?
I have never come up with a good response to the question of how one stays financially healthy when faced with the end of the world as we know it, other than to say that my hunch is that guns and stored food/water/fuel/trusted servants/etc. are going to be a lot more handy than gold coins.
Not a happy thought, that, is it? But there’s nothing happy about NiNY.
So ask yourself this: “If I am (to use a common symbol of unlimited wealth) Donald Trump, and if the end of the world as we know it comes around, what do I need?”
Well, I’d say that you need an army of trusted servants, because gosh all mighty you are not a physically able person, let alone someone who can physically confront all comers successfully, and you need food and water and fuel to keep you and your family and your army and the families of your army alive and warm (because it gets cold in New York, and you might be there when the whole things happens).
But what about gold?
I am not a big believer in the idea that a gold-based economy will, if our economic system crumbles, replace the currency- and digit-based one we currently have (digit-based in the sense that most of our wealth is stored electronically).
If systems simply revert, so that once a system fails what remains is the system that the now-failed system replaced, that would be the case, but the Red Queen (the RQ in JFRQ) says that that is not at all what happens.
So my hunch is that, if the currency-based market goes away, then guns and brute force will be what matters.
Think of it this way: if all hell breaks loose, and you have water and gold but no food and no guns, how you gonna feel walking up to someone with a gun and food but no water and no gold, and saying to him or her, “Will you accept from me my gold Krugerrand for ten [one?] [one hundred?] loaves of bread?
For most people, the next line coming at you right after you ask that question conjures up scenes from Bruce Willis and Harrison Ford movies.
So, maybe, you say, a person’s gold can buy him or her that army once NiNY happens?
Maybe, but far better is to buy the army before you need it.
So if I’m Donald, I have put dozens of kids through college — the kids of my servants — and helped them in all sorts of different ways, so that their parents (a good number of whom I hired for their sheer physical size and ability to keep me and my family secure) will be more likely to stick with me when the going gets NiNY tough — tough in a NINY way.
That being said, I’m always happy to see people with a smidgen of gold coins because (a) they are quite extraordinarily beautiful, and (b) I could be 100% wrong about whether a gold economy could ensue following NiNY, and (c) diversity of wealth-storage techniques is always a good thing.
So what’s a smidgen? Well, that depends.
If I have, say, $100k to my name, I wouldn’t have more than a couple hundred dollars worth, max. There are too many non-NiNY scenarios that are way more likely (e.g., living to be 100 and healthy, and needing to have enough wealth stored up to last me for 30 or 40 years of retirement) to justify having a carve out for something that (a) can get lost pretty easily (we’re talking about the physical sort of gold here, such as coins, rather than the financial sort, such as GLD ETFs), (b) might depreciate badly, either in actually being worth fewer dollars or in terms of not keeping up with inflation (since the $800 an ounce euphoria of the 70s gold hasn’t made much money for anybody until the past six months or so) (currently gold is at about $555 an ounce, up from the low $400s a year ago).
But if I have, say, $1 million, then I could see having several thousand or several tens of thousands if I really want to make a bet and/or I find gold coins as lovely as the guy at Financial Health Blog says they are.
One last thing about gold: for one reason or another, more than a fair share of financial quacks in the world hawk gold. In fact, Wall Street conventional wisdom purveyors even have a label for these folks, which is at least slightly pejorative. They call them Gold Bugs.
Now I’m sure that there are a lot of brilliant economists out there who believe that we will return to a gold-based economy. I am not an economist, and I usually can’t even understand half of what they say, but I am sure that there are some real smarts out there who think that buying gold is a very, very smart, very, very financially healthy thing to do.
So if someone tells you to buy gold and they are an economist, or otherwise outside the financial sales world, that means one thing. But if someone who is part of the financial industrial complex tells you the same thing, be doubtful. And err or running away from them. Real fast. Do not buy that which is offered to you.
And if a survivalist tells you that gold is where it’s at, well, then ask him or her which is more important: the gun or the gold?
But, enough on gold for now. How about other more practical financial health solutions to external calamity?
Well, you know what might really be handy? How about having a horde or two of twenties, and maybe some hundreds (the ones that have Ben Franklin smiling/Mona-Lisa’ing out at you) to boot? How about forgetting about the armies, and how about forgetting about the hopefully-loyalty-bought servants. We are, after all, not unlimited in our wealth, are we? And NiNY has never happened, has it?
But think about how earthquakes, fires, hurricanes and tsunamis have happened — and happened pretty frequently at that. And think about what can really be a drag on top of a drag on top of a drag: something terrible befalling you and everyone around you — your entire city, which hopefully you are madly in love with, as people in New Orleans seem to be — so that it’s a bad scenario, but not so bad a scenario as a NiNY scenario, and you just happen to have zero cash on hand and all the ATM machines are out, and are probably going to stay out for the better part of a week or two. Now what’ch’ya gonna do?
So I am also a big believer in people having a lot more cash on hand — bills, not digits — than most people have on hand.
And having lived through the 1989 Loma Prieta earthquake here in SF (“The Pretty Big One” we like to call it), I also feel obliged to say this:
Sound like a plan?
This plan acknowledges that we don’t need to send Donald’s servants’ kids to school today and that, rather, what we need to do is help send Osama’s prospects’ kids to school today.
If we do that, then there’ll be fewer prospects out there for Osama to harvest, and far fewer people out there contemplating what it would take to do a NiNY and to end the world as we know it.
And then all of us can get back to thinking about how to add to this beautiful world of ours rather than thinking about how to protect us from those who subtract from it.
I mean, I mean, did I just hear myself up above condoning all of us going out and buying guns?
[Please hear that last line in your head using your best early-Arlo-Guthrie, talking-story-song voicing.]
And let’s all keep our fingers crossed and whatever else we can do to help reduce the possibility of NiNY, and to help increase the possibility that the people born today, January 13th, 2006, find themselves to have been born at a most lucky time — a most fortunate time — because, as it turned out, 1/13/06 just so happened to mark the beginning of the very best of times for one and for all and for every one and for every all.