How to prosper during the coming bad years. By Howard J. Ruff, Times Books, New York, N.Y.

“Invest in inflation; it’s the only thing that is going up”

Doom and Gloomer or Just Good Analysis?

It is difficult to ignore the facts that this country is in way over its head with debt. Eventually it will catch up to us at some point. Also, most of our debt is now owned by foreign countries.

I just don’t see how this problem can be fixed unless there are serious cutbacks in government spending and the debt situation is given a priority. Our debt is growing at a greater rate than government revenues. How much longer can we continue to rob Peter to pay Paul? The world may not come to an end tomorrow, but Howard Ruff makes a very compelling case in How To Prosper During The Coming Bad Years In The 21st Century that we have some serious problems, which could have a severe impact on your investment portfolio if they come to fruition.

Howard Ruff does not believe the ‘United States is going under’ However, he does feel that the nation is in an increasingly fragile state, where collapses (national, local or within families) are more and more likely to occur. Ruff’s opinion is that we will survive the coming economic and social difficulties if we are prepared. Personal preparation is the focus of his book.

Part I: Problems

Odds are, your neighbor spends more than he makes. The same could be said of you, your county government and most Washington offices. Debt and mortgages are the norm. But the result of spending money we don’t have is inflation, and this is the monster creeping up to devour us. Nevertheless, you don’t have to be eaten alive if you understand the dangers involved, and make some simple decisions to regulate your assets.

Economic trends indicate, says Ruff that eventually, whether through inflation or national emergency, the nation's monetary system will forcibly be returned to the gold backed standard. When the time comes, because our gold reserves have been greatly depleted, the price of metals will skyrocket. Investors in commodities such as precious metals that hold up their value or go up in value, will not only survive, but prosper during this crisis. These financially shrewd individuals and families will remain “solvent, self –sufficient and panic-proof….”

What are the issues that will threaten your future prosperity? How will you react to these realities? Ruff suggests the following along with possible scenarios for each:

Inflation

Inflation is the decrease in value of your money. Both history and contemporary national and international crises have shown that inflation can weaken personal pocketbooks and shatter national economies. The world’s economic future depends on the U.S. Dollar, which is recurrently at risk of collapse.

In like manner, your individual retirement account robs you. The retirement annuity that looked so good twenty years ago would now reduce you to living at the poverty level. Governmental inflation reduces your spending power, nibbles at your savings, your stocks….In short; most of your assets are diminishing in value.

Who loses money due to inflation?

• The lender (you, if you have a mortgage, a life insurance policy, or bonds)

• The saver (you again, if you put money into a bank or Savings and Loan)

• The pensioner (you, if you have set up an annuity or rely on Social Security or both of which feed on your interest and whose actual purchasing power will be close to nil by the time you in on them)

Who are the winners?

• Big borrowers (like the Government)

• Big Business

• Mortgage Companies

• Those who invest early to hedge potential financial chaos (like Warren Buffet or possibly you)

City Deterioration

The dearth of safety and services in our major cities, and their preponderance of poor and dissatisfied inhabitants, will make them the first victims of inflation and monetary disruption. The already dangerous climate of our cities is worsening. Crime does pay because so few criminals go to jail; property values plummet; jobs are scarce. When the ‘crunch hits’ city families and properties will be in danger.

Ruff further avows that, besides cities overcrowded with people “on the edge” of poverty, a combination of other factors puts us all at risk: decreasing birth rates and increasing longevity; general distrust, by most citizens of governments and their economic future’ and the reliance of the American Banks on foreign capital. These risk factors may cause small breakdowns (materials shortages or a series of strikes, for instance), or they may lead to one major disaster.

“Basically,” says Ruff, “I am outlining a new way of helping people become financially secure at a time when the institutions they have come to depend on are clearly failing them.”

Parts II and III

Preservation and Strategy

Inflation can be good for you – If you invest in it. To make inflation work for you, you must own something which is going to go up in value as fast or faster than inflation itself is rising.

If you have to periodically buy something on a regular basis, and prices rise, your are hurt by inflation. If you already bought a lot of it when it was cheap, you can watch your wealth increase and you on good terms with the inflationary monster……[Then] if you live in the right place and have a reasonable amount of self-sufficiency, and the distribution machine misses a few beats you’ll be still be O.K.

Even if the odds favor good times in the coming few years, Ruff submits the following as sound advice. (For emphasis, he leaves his most important recommendation till last)

• Keep, in a safe deposit box, a bag of “junk” silver (one per person), and, if feasible, and equivalent amount of god to avoid the hazards of our paper-based economy. Metals hold steady in value even in the worst of times. (However, don’t buy from a private mint or on margin.)

• Avoid unnecessary debt. Over-extension causes risks – and accompanying fear. Borrow only to purchase income-producing investments or those that inflate in overall value. Pay off your mortgage completely if possible.

• Sell big-city or suburban real estate and purchase small-town property. Move there, if you are able. Small town homes will be the safest in time of crisis – riot, disrupted services (water supply, electricity, ect) of financial depression.

• When buying a home or investment property, either pay in immediate cash or invest as little cash as possible; “Nothing in between makes sense.” By choosing one of these two paths, you either avoid the interest of a mortgage, or leave your funds available for other good investments.

• In less urban areas, small-scale residential units (up to a “four-plex's” are usually favorable investments. There will always be renters; everybody has to have a place to live. (Of course, remember that being a landlord also takes time and upkeep. Don’t invest beyond your resources.)

• Spread your risks among as many inflation-beating investments as possible.

• Be highly self sufficient. By all means, have some food stored and plant a garden. Keep chickens or rabbits: have a generator, water well a modern wood burning stove and a supply of wood, an underground gas tank, a bicycle or moped. Know how to hunt and fish, and have the needed equipment. Learn practical skills such as home and auto repair.

• Plan your future as if Social Security didn’t exist.

• Maintain some cash reserves for emergencies, but don’t keep them in savings or checking accounts. Money-funds or Treasury Bills earn better rates and are liquid and safe.

• Have on hand a supply of those items that would likely be scarce in the event of a shortage: food, water seeds, tools ammunition, reading material, durable clothing, soap toilet paper, motor oil, automobile replacement parts, light bulbs, ect. Buy those in quantity when they are at bargain prices. It will surely save you money; and the items you don’t use yourself may serve as barter in times of need.

Top Number One Recommendation:

Store enough usable food to last one year (dehydrated food is top priority). In Europe during the early 1920’s, diamonds, heirlooms, silver sets, and other luxury items were steadily transferred from their upper class owners to the peasants as barter fro sacks of potatoes. Panic-proof yourself by having food on hand before the widespread hoarding that commonly accompanies a crisis. Many factors make food a vulnerable commodity – weather conditions, oil supply, transportation and worker demands, for example, not to mention your monetary ability to buy food if the economy goes sour.

Ruff stresses having a proper food supply; after all, “no one can raise prices on food you bought last year” and “food storage is insurance you can eat” Stored food represents money well invested, and not only prepares you to meet a possible widespread disaster down the road, but hedges you up against personal hardship brought on by and accident or loss of work.

How to Prosper in the Coming Bad Years provides details on many other subjects related to basic principle of preparedness: real estate: leveraging of money: metals-buying: negotiation techniques; securing a loan; steps and stages of survival; food production, planning, buying , and storage, ect.

The book’s appendices list publications and newsletters that , in Ruff’s view, offer good financial advice (The Wall Street Journal, Business Week, Forbes) Also Ruff endorses certain companies that can help make real progress toward your present goals of future prosperity and peace of mind.