In yesterday’s post, I suggested our current state of war and inflation may be in the new normal and the last few decades of peace and prosperity may be the aberration. Belwo are a few data points to support that argument.
Energy Crisis to Last Years
In this article from CNN, experts warn that the current energy crisis may be worse than the one we faced in the 1970s and could last for years. “This energy crisis is much bigger than the oil crises of the 1970s and 1980s. And it will probably last longer,” said Fatih Birol, head of the International Energy Agency.
In that crisis, America suffered a lack of oil that led to gasoline shortages and lines at fuel pumps, but there was no shortage of coal, natural gas, or electricity. While it was often called an energy crisis, it was in fact an oil crisis. “Now we have an oil crisis, a gas crisis and an electricity crisis at the same time,” said Birol.
While that crisis was largely the result of outside forces, an Arab oil embargo, this one is self-imposed in an attempt to reduce greenhouse gasses. By over-regulating the use of coal-burning power plants, a mainstay of the industry, the government made them too expensive to operate and utilities shut them down. The result? Insufficient electrical generation capacity to meet system needs at peak times.
Your Options
The best option here is to become as energy independent as possible. While I know some folks in West Virginia and Pennsylvania with oil or gas wells in their back yards, that’s not possible for most of us. That leaves the prepper with two options: Solar power or installing a large generator. Neither are cheap, but solar power is the most expensive. Its advantage, however, is you don’t need to fill a large storage tank with gas, diesel or propane.
You can, of course, reduce your needs by buying a small high-mileage vehicle or an electric car (which still requires electricity), taking mass transit, working from home, switching to LED lightbulbs, and trying to use energy efficient appliances. That may help deduce your load on the system, but it doesn’t help you during a blackout or when there is no gas at the pump.
Inflation Can Last Years
In an article published on June 2, MarketWatch says, “There’s a risk that price gains could take much longer than expected to fall back down, even when the Federal Reserve is aggressively hiking interest rates.” While many economists expect inflation rates to drop back to 5 percent by year end, historical data shows this may not be the case. For example:
“There are aspects of the historical pattern that are very relevant: Namely, that inflation took a number of years to develop, kept growing, receded, then came back and was hard to get rid of,” said Mace McCain, chief investment officer at San Antonio-based Frost Investment Advisors, which manages $4.7 billion.
“That is also probably true today, we just have to be a little careful about drawing direct comparisons,”
As ZeroHedge reports, the policies being instituted by the Biden Administration and other governments around the world create temporary price decreases and do nothing to address the underlying problem. For example, while releasing millions of gallons of oil from the emergency stockpile steadied gas prices for a month, prices resumed their rapid climb when the releases ended.
According to the article, “While politically expedient, these efforts encourage additional spending,” which is inflationary rather than deflationary.
Finally, we have to consider the impact of COVID-19 on production in China and how that, in turn, affects our supply chain. While they expected Shanghai to drop restrictions and restart production in many of the factories that were closed, they remain committed to the zero COVID policy. This means there could be other shutdowns across the country in a few months or next year. This kind of supply disruption will help keep prices high.
How to Fight Inflation
Back in March and June of 2021—yes, a year ago—when there were hints of inflation, we recommended several ways to prepare for it. While you would have been better off preparing year ago, you may still be able to ready yourself for increased inflation. Here are a few posts worth reviewing:
- How to Cut Back on Spending and Live Frugally During Inflation
- All About Inflation and How to Protect Yourself
- Another Way to Prepare for Inflation: Buy Now to Save later
- How I Plan to Manage High Inflation and Rising Costs
- What is Hyperinflation and How to Survive it
You can also review all of our inflation stories. If you are a recent reader, you’ll be shocked at the accuracy of our predictions. For example, on June 12, 2021, we said:
Let’s fast-forward six months or a year and imagine that the country remains in the grips of a wave of inflation. The amount of money you spend weekly to put food on your family’s table has increased 50 percent. Gasoline is $5.39 a gallon. It cost $1,350 to fill your propane tank and you know you usually have to fill it at least three times over the winter.
Those prices sounds eerily accurate don’t they?
Food Shortages
Last year, before the war in Ukraine started, we were already warning about food shortages. COVID-19 disruptions were still being felt. Drought in much of the Western United States reduced food production. Flooding in Brazil damaged crops. Mudslides and floods in Canada damaged crops and halted transportation. These and many more weather-related problems all affect food production. Yes, the war makes them worse, but things were not perfect before Russia invaded Ukraine.
We are seeing the very beginnings of food shortages. A lack of chicken and limits on buying eggs due to avian influenza are just small signs of what is to come. Countries like Egypt and Lebanon, who rely in grain from the Ukraine will face immediate shortages, but the major impact in the U.S. will occur after the next harvests are reduced due to the lack of fertilizer.
How to Prepare
The best way to prepare is to have a stockpile of food. We’ve covered this in detail, but here’s a quick recap: Start with standard canned foods and dry goods from your grocery store or a club store like Costco. Be sure to include canned meats. Then add larger quantities of staple items like rice, beans, flour, powdered milk, oatmeal, pasta, and pancake mix. If you have a grain mill, buy several hundred pounds of wheat and store it in 5-gallon buckets. You can also pack rice and beans in these pails. Only when you have a year or more of this basic food should you invest in expensive freeze-dried long-term storage food sold by prepping companies. (Assuming they have any in stock.)
You can also garden, raise chickens or other small livestock, and plant fruit trees and berry bushes. The more food you can produce by yourself, the less you will depend on big agriculture and big oil to keep food on your family’s table.
War Throughout History
When you look at the past 2,000 years, it seems like war is a constant state. Just look at this list of wars from Wikipedia. Did you have any idea that there were so many or they occurred so often? Think about the Thirty Years War as an example of a constant state of war.
Perhaps war is necessary because it creates competition, which is one thing that helped humans evolve and reach the top of the food chain. War certainly drives innovation. It’s given us things like iron-clad ships, canned food, smokeless gunpowder, radar, penicillin, zippers, jet engines, blood plasma transfusions, synthetic rubber, water purification tablets, small aerosol cans, nuclear power, microwave ovens, duct tape, rockets, computers, and digital cameras. Of course, it’s also killed millions and given us the potential to kill hundreds of millions via nuclear or biological warfare.
In any case, there is a good argument for war being the natural state of mankind interrupted by an occasional decade or two in which peace breaks out.
Again, my premise yesterday was that our current state of high inflation, food shortages, and a war in Europe are normal and the period of relative peace and prosperity we experienced over the past couple decades was an aberration.
If you don’t agree, leave a comment and convince me otherwise.
