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Community Thursday: What’s More Precious than Gold?

Gold is zooooming again.  On this run it may hit $2000.

Why?  An increasing number of smart people think/believe that the world’s economic and financial system is in deep trouble.

What kind of trouble?   You know the list:  Global economic depression.  Financial contagion.  Sovereign bankruptcy.  Hyper-inflation.  Financial collapse.

So, why are people buying gold?  Personal experience tells them it is the best way for them to preserve their wealth (and by extension:  options/flexibility) during periods of uncertainty.

While buying gold is a smart investment decision, it’s neither the only, nor the best way to hedge yourself against future global failures.

Here’s why.

More than just Economic Failure

It shouldn’t be news to you, but we live in a economically interdependent world.  Think about that for a second.  Most of us couldn’t get through an hour without relying on something that’s provided by the global production system.  We are completely and utterly dependent on it.  So is our community, our state, and our nation.

What this means is that any economic failure, of the level and type we are likely to experience (we get news to this effect nearly every day now), will crash more than the price of stocks and bonds.  It will also likely outlast any cache of food/ammo you stashed away for a rainy day.

How?   Here’s the list: Political chaos.  Supply system disruptions/failures.  Guerrilla warfare.  Hyper-crime.  Ubiquitous corruption.  Totalitarian nationalism.  Police states.  Rationing.  State seizures (either due to corrupt state officials or by decree).  Shortages.  Failed states.

As you can see, it’s a long and ugly list.

More Precious Than Gold

IN an environment this uncertain, an investment gold (while very useful) isn’t enough.

What you and I need is an investment more precious than gold: A Resilient Community.

A community that provides everything that a pile of gold cannot.   A stable environment that produces food, energy, water, a security.  An environment supported by a network of people that actually care whether you succeed or fail.

So, go ahead and put some of your money into gold.  However, if you are exceptionally savvy, put some of that money into a Resilient Community.  It may be the best investment you ever make.

Here’s a potential rule that we should try to quantify:  for every ounce of gold you buy, invest an equivalent amount into a resilient community.

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  • BRET

    Hi John,
    We have a few mutual friends (from OccupyBoston) I’m a fan of your blogs and concepts but am somewhat disheartened to not find any resources on how to get hooked directly into the resilient communities you speak of. I’m familiar with the Fellowship for Intentional Communities and Alt-Market as related portals, but as a fellow Bostonian, I’m curious as to what resources and tools you’re finding to apply at an intermediate level (not tactically as an individual) to solving your own personal resiliency along with that of your community. I think the grassroots approach you posit, needs to be married to more resources to help people jump start their progress into building resiliency at a larger level. After all decentralization cannot effectively take place in a jump diffusion manner, and thus needs to radiate down from existing models to find a more sustainable equilibrium. Would love to discuss further.

    • John, Bret, anyone else in the Boston area want to grab a beer sometime soon and talk about starting a group in the Boston area that focuses on resilient communities, super-empowerment etc?

      • johnrobb

        Sure. Should probably get together a Boston group from regular monthly coffees.

        • If you organize a get together in the Boston Area, please let us know.

    • Evan

      This is true John, in WWII in towns like Athens where the networks had collapsed completely (the Germans were sapping the economy and were leaving the population to literally starve so much that Oxfam was actually founded to relieve the Athenians from disaster) gold was not worth much. One gold sterling would buy 1-2 eggs…

      • johnrobb

        Evan,

        Do you have any link to more info on that. Really great insight.

        JR

  • I can really relate to Brett’s comment. It’s a fantastic idea and the best solution I can see, but the next step from the idea? I’ve tried talking to people and getting them on board (for years) but it just has not got any further than that, it just remains a good idea in theory. I fear most wont get it until it’s too late, and it will be a case of “Iwish I had”.

    I alone, while I might make sense, aren’t a big enough entity to be taken seriously (conditioning to only believe institutions?)

    Scott

    • johnrobb

      More than a theory Scott. Lots of people are making it happen right now.

  • matt45

    Hi Bret,

    When I think of Resilient Communities, I imagine subdivisions/villages built as resilient communities. Maybe some kind of land developer who thinks about the different systems that need to be different (power,water, etc.) before he starts building. I also think about how I would retrofit a McMansion subdivision to make it more resilient.

    What are your thoughts?

    • Bret

      Matt, I agree with your thoughts. Retrofitting our existing societal structures is the key. A subdivision would be a great start if you could organize it to work integratively as a common unit, but that’s asking a lot for most suburbanites to jump into it. Vegetable gardens in every front yard would be a good start but I think a larger scale initiative is whats called for where things can remain decentralized enough to remain resilient but not onerous to the individual participant ala what Jan is doing.

      • johnrobb

        Bret,

        You can retrofit nearly any community. I know a resilient entrepreneur that actually drew a line around a bombed out section of a major US city and is transforming it.

        JR

  • @Bret, roll your own. In my experience, most resilient communities are based on personal trust and are therefore difficult to just up and insert yourself into. As a member of Occupy, you have a leg up on many “average” people who remain (for now) unaware of the grave dangers staring us all in the face. You have, undoubtedly, friends who are also aware like you and on the same page, more or less.

    You are the center of your own universe. And nobody else can look out for you the way you can. Start your own conspiracy. Don’t wait for someone to let you into their little clubby club.

    BTW, if you are from Boston I too may know some of the people you know.

  • maureen

    Sorry that this sounds selfish – but my family and i have worked way to hard at this to start trying to work with “OCCUPY”. A group that feels that because I did alot of work and have prepared (with a lot of saving and doing without) so that I can give to the 99% who have been sitting on their butts screaming at people is crazy . Go out and do your own research – set up your community, and I hope that all those you trust will actually do some work to get it started – my bet – you will be doing all the work and when there is a crisis – they will be taking from you – the 1%.

    • johnrobb

      Maureen,

      I’ve found that whether or not a person is a “taker” or “maker” can’t be determined by what they wear. For example, in my personal experience, the worst “takers” I’ve found wear suits and call themselves professionals.

  • I thought of another thing: In any group, there will be one or two stars who do almost all the heavy lifting, many who do a little, some who do close to nothing so they can leech off it, and a couple who try to undermine it with drama so as to feed their egos. And sometimes there will be people who try to steal the whole thing out from under you.

    In a survival situation, the stakes are higher than, say, a steering committee for a nonprofit. What will you do if faced with a mooch, or worse?

    You WILL be managing other people, whether you are the leader of your resilient group or not, under stressful conditions. It’s a good time now, while things are still quiet, to learn something about how to do this.

    • Resilient communities can be anything from an indigenous village to a retrofitted suburb. A bunch of rural neighbors that know each other, grow a lot of food and know how to fix their trucks and well pumps are as good a start as any. Cooperative ventures a la Ecovillages are another solution. I study organizational leadership and am starting to work this stuff out over at my website. Of particular interest to me is finding the right balance of cooperative and private ownership at the community or village scale. There are efficiencies and securities in cooperative ventures that are not to be passed up, but they can be tricky.

      • different clue

        One could solve the “maker versus moocher” problem by treating early RC efforts as RC 1.0 testbeds. The “makers” will recognize eachother and can begin to establish secret links and contacts with eachother for when the time comes to tiptoe away from the RC 1.0 testbeds and form very quiet very low-profile RC 2.0 real application centers without any of the moochers being part of the RC 2.0 centers. Leave the moochers behind to wonder where the makers went and why the
        RC 1.0 testbeds are becoming empty shells of starvation.

  • @johnrobb. I know it’s more than a theory. It is happening right now where I am, but the community I work with has it in their heritage and I’m just helping to take it further (good for us, but others aren’t so lucky). Some sort of pathway as an idea is what I am relating to in Brett’s comment, a lot of us get the resilient community idea and are making it happen (the idea has been around for ever) , but the thinking around the pathway/transition is what I believe lacks. The resilient community is quite obvious as an answer, but the transition is a void of ideas at the moment. If there was a working model of transition from peoples currently dis-empowered lifestyle to a resilient community, that could help lead to a meaningful and revolutionary social change.

  • John Galt III

    “market inefficiency ~ mispricings ~ misallocation of resources: what’s more precious than gold?”

    I’ve been looking for investments that outperformed gold over the past 10 years. They’re hard to find. I thought that I might learn something from considering them.

    This observation from the article is brilliant: “A stable environment that produces food, energy, water, and security” will outperform gold over the next 10 years. Happiness and health bear mention as things more precious than gold.

    The first step for me was recognizing that mispricings arise from human cognitive limitations, which took me the better part of three years to understand. Recognizing that mispricings are the key to success took 48 years and could be said to be the zeroth step. I gave a good talk a few years ago on the topic of mispricings, showing that they affect the financial system at two levels. At the time I was not clever enough to realize that mispricings are caused by humans, e.g., being greedy when they should be fearful, and vice versa. We also have a tendency to group-think, short-term bias and giving leaders undue credit and influence and other cognitive limitations that would fill a library.

    Mispricing is nearly a synonym for market inefficiency. People routinely fail to optimize expected value (see Dan Gilbert links below for proof).

    Blood, sweat and tears are just alternate currency systems. They, paper money, and real money are proxies for Gibbs free energy, which is required to keep non-equilibrium thermodynamic systems operating. Hayek’s Nobel prize really was for recognizing the effect of money on the system, which is closely related. To zero
    order, the Fed could print up just the right amount of money, or having printed a little too much, could withdraw liquidity. That overlooks system dynamics. You could think of the flow of money as having momentum. Oscillating the flow rate can quite literally shake the system apart, without violating any rules that a Keynesian might suggest to establish safe operating parameters. Small scale systems and objects are more robust, just like the proverbial brick shithouse.

    The next step was recognizing that market inefficiency is essentially the mismatch between reality and what people believe reality to be. That took another half a year. Maybe more.

    It’s a short step from there to the human condition, which would be better if people could overcome their cognitive limitations and get a better grip on reality. That is a critical step in maximizing expected value. Our problems, including the quasi-Federal non-Reserve are largely political.

    Television plays a role in driving a wedge between reality and the perception of reality. There are countless other forces in our society that purposely distort perceptions of reality. Then there are websites like this one, Al Jazeera and Zerohedge that provide very healthy and useful anti-spin. Nakedcapitalism, market-ticker.org, schneier.com, woodpilereport, urbansurvival and survivalblog are good too.

    My interest in history is understanding the lessons of history, although the counterargument is that “the lesson of history is that we don’t learn from history.”

    Dan Gilbert on happiness (proof of the human difficulty with resource allocation on such a simple purpose).

    http://www.ted.com/talks/dan_gilbert_asks_why_are_we_happy.html
    http://www.ted.com/talks/dan_gilbert_researches_happiness.html

    Our cognitive limitations make it very difficult to pursue some purposes, including efficient resource allocation and governing ourselves on a scale larger than 150 people. Schneier’s new book, Liars and Outliers, will shed some light on why.

  • We’ve been working on this for nearly six years on a Canadian island, but could use some help.

    We have a wonderful piece of land with a couple houses, plentiful water, good neighbours. It is owned in the name of a BC Cooperative Association. We are producing (in gross measure) our own food and at least some of our own energy.

    We’ve been through (and are going through) a number of the trials and tribulations alluded to by other commenters here. It can be hard work.

    The bad news is that as long as energy and food is relatively plentiful, competition reigns. But my formal education in ecology tells me that when things get bad enough, you’ll see much more cooperation. Hope we can make it until then!

    More info at: http://www.EcoReality.org/wiki/Join

    • Bret

      Jan, I just saw your website, and it looks like you have successfully implemented the concept that I am interested in pursuing. Your website is a wealth of info, ala John’s miiu wiki. Have you considered franchising via a consulting startup relationship?

  • Bret

    Wow, great responses! And I apologize for the manifesto I’m about to write and if i ramble at all. This has been a great commentary thread and I think that everyone here has hit on the most cogent points without devolving into a melee, which speaks to the quality of the participants on this blog.  I personally oscillate between all the perspectives above, but i think the central theme may be that we live in a segmented society without the proper mechanisms for social interaction to build the communities that we all desire for mutual support and benefit.  Robert Putnam’s book Bowling alone hits on one key issue, which is the decline of civic organizations that lead to continuous feedback and connectivity between members of society and thus lead to greater understanding and empathy towards our fellow man and working towards solutions to help solve issues in our community.  To me this is the key to long term success and is the missing link between the tactical/individual approaches highlighted in many blogs, such as res com and survivalblog, etc.  and paternalistic approaches that some often try to dictate to others, in the form of govt programs, etc.  I don’t think anyone can dictate the solutions and our grassroots solutions (of resiliency) are difficult to escalate to a community level, although I applaud others who are diligently working to do so.

    On a personal note, When i moved to boston about a decade ago, i knew nobody, my personal support network was nonexistent and thus I got involved in my community as a way of becoming situated and connected.  I think most people find their community through family and religious organizations(which for a large part have become their own form of elitism) but even those are becoming harder with the transience of employment opportunities and the extremism found in all aspects of society and lack of respect for where people a coming from in their views based on their backgrounds and culture.  I personally found one of the few remaining civic organizations as my outlet for pursuing my intellectual/philosophical interests outside of my work and have found it an excellent way to connect with my fellow man from all walks of life and has helped evolve my own personal understanding of these concepts and continue to build my personal community.  I now find myself at a point where I am actively searching for these deeper communal ties in the form of a more resilient community…more about that later…

    Penny brought up another good point about the workload being shouldered by a few members, which I have often seen in my experience with organizations and in society, and I think that this leads to resentment from both sides which is what we are seeing today.  I think the occupy movement is just a small facet for those who feel this the most sharply and feel that they can be a force for representing the backlash against the ultra competitive society we have cultivated.  Now I personally find myself on the other side as part of the “white collar elite” but through some combination of hard work (of my blue collar progenitors) and luck, I find myself caught between both worlds; seeing the implicit danger of an over leveraged society and also realizing the only reason we are even able to have these discussions is because of the benefits of capitalism in the forms of specialization and excess capacity, thus we can even have the time to discuss these concepts and attack our weaknesses, unlike our farm bound ancestors prior to the industrial revolution. It is somewhat of a testament to our society that we have the free flow of information and ideas that can potentially solve the very issues created by aspects of it.

    As for my own personal plan to “roll my own” i personally like the Alt market model of barter networks (decentralize some of our reliance on highly leveraged interconnected networks prone to failure/disruption) minus the whole moving to Montana part.  I think it’s incumbent for us to solve these issues at home rather than rely on the original American model of finding a whole new society or “go Galt.”  I have some experience with the Israeli kibbutz model and am looking into doing something similar around a cooperative model for community based farming (there’s actually one in newton that I am studying) but it needs to move beyond that to a larger network of social entrepreneurship based businesses that focus on both personal resiliency and these secondary markets for like minded individuals ala the alt market concept that Brandon Smith has started.  Obviously the natural pathway of these types of businesses is to go the corporate route and over leverage via a grow or die mentality as most organizations develop but I think the kickstarter and crowdsourcing models can work to get these type of organizations in a financial shape to be self sustaining, without a direct profit motive.

    Ok time to get off my high horse.  I welcome any criticisms or thoughts on any of my points and look forward to continuing the discussion we are fostering.

    John, I would be very interested in a working group to discuss these concepts on a regular basis.  We can’t possibly hit on the answers to these issues in one thread, but I think we could build on these ideas together.

  • Robert424

    I am suprised that no one as yet has mentioned the Transition Town Movement. It is global and has several places in the US. Just Google transition towns USA and get to an information rich website.

    • johnrobb

      Robert,

      Thanks much. Will definitely get to TT. I’ve been working back and forth with them since Rob H kicked off the movement back in the late 0’s.

      JR

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