Tuesday, February 14, 2017

Famine the Unanticipated Catastrophe

People assume that famines are caused by a poor growing season. This is true in agrarian societies where everyone farms. However, a financial world banking catastrophe could lead to the same result; where starvation occurs from lack of funds to purchase food. Also, we may be fast approaching a limit where food production can’t keep up with the increased population. War in the Middle East, is curbing a lot of farm production, which is leading to starvation for many.

And then there is global warming. Once the North polar ice cap melts, the Gulf Stream ocean current could change its direction a tad, making Eastern Europe too cold for food cultivation.

A famine could affect a large part of the world’s population. We are at a point now, where bad weather, financial instability or political instability, could determine who will live or die. A nuclear skirmish in a quest to grab resources, could make food very scarce in some areas.

The next famine will not be anticipated. It may be an economic or financial disaster that triggers it. When it happens, the logistics of transporting food to those that need it could be very hard to accomplish. Imagine a high-density population area like India, where many are already at starvation levels and barely surviving. This could be the end of the road for them.

Without the means to purchase food, life is a real struggle. Most of us are not in a position to grow and produce the food we need; we pay others to provide it to us. Those in the third world who are starving to death slowly, could be the medium for new super diseases that the rest of the world will have to deal with in the future. It is this group, with very weakened immune systems, that could be the incubator for a future plague far worse than any war imaginable.

The funny thing is, the third world was our source of cheap labor. As our economy slows down, the funds that made life possible for them will disappear. That thought worries me. A hungry mountain lion is not going to knock on your door and bargain with you over the price of its next meal -- your pet dog in the back yard.


Anonymous said...

Hi Jim,
I've been reading over your posts from many years ago, and I see that you had a good analysis of the situation before 2008 happened.

Where do you think we are today in the housing market, and do you think prices will go up/down and when?

How do you see economic moving next year years?

Thank you for your blog and time!

Jim in San Marcos said...

Hi Anon

If you buy a house with one concept in mind, you will hold it until you pay it off, all that you need to consider is the monthly payment. We just bought a house using my VA benefits for a half million. The payments are $2,700 a month. We rented an even bigger house for $1,750 for 18 years 6 miles away. Most houses in the area we moved from were renting around $2,400 to $2,800. So we had a very good deal for 18 years.

Borrowing a half million at 3.5% interest, for 30 years, when your 70 years old, is kind of like robbing a bank. It will cash flow for my son as a rental when he inherits it.

At the present time, interest rates will have to rise. As they rise, the values of housing have to decrease to keep the mortgage payment around $2,500 per month. The great unknown is inflation, perceived and real. I would expect this half million dollar home to fetch 2 million in 20 years. It won't represent an increase in value, it will just be a measure of dollars today converted by inflation to dollars of tomorrow.

In my 50 years of interacting with the economy, cigarettes have gone from 23 cents a pack to $6.00. Those 20 years old just entering the economy, cigarettes have always been $6.00. Both mind sets are different but the insidious nature behind inflation is only apparent with age.

I do see the economy improving over time. If Trump can get rid of half of the regulations on business, we will see more business that can start up without beginning in a garage.

My only advice is to diversify a bit. 10% for gambling and the rest on common sense.
The 10% for off the wall stuff does pay off, even if you lose, you can deduct $3,000 of it off of your taxable income each year. The government gives you a healthy tax break on speculation.

Anonymous said...

Thank you very much Jim! That is a excellent suggestion and often most overlooked. I am relatively young so I tend not to have a the perspective of time on my side yet. Currently, I am looking at buying a house, and I am looking somewhere to live long term, and for it to be affordable even if my income goes down 30%.

Thank you and I look forward to new posts!

Jim in San Marcos said...

Hi Anon

Another concept overlooked is when the house is paid off in say 20 years. The future rent you receive allows you to rent a comparable place any where. Plus the visits to the property are tax deductible.

Property management can be a headache if you push to get top dollar. My tenant in Colorado has been in the place since 1992. I could raise the rent $200 a month to fair market value and she would probably move out.

My only regret is that I didn't buy a second rental, I could have doubled my return. But, a second rental at that time would have really strained my savings. I needed extra money for the support of the property for unexpected repairs. Repairing the roof was one of them.

Thank you for reading and good luck in your struggle for success in the future.

Anonymous said...

>"However, a financial world banking catastrophe could lead to the same result; where starvation occurs from lack of funds to purchase food. "

...and the farmers may not have access to the funds they need to grow the food in the first place.

Anonymous said...

Thank you Jim! That is a great recommendation as well concerning rentals. I appreciate your advice.

burmanhands said...
This comment has been removed by the author.
Jim in San Marcos said...

Hi All

The comment above was deleted by the author which is ok with me, it preserves his anonymity. But I would like to share what he wrote:

"Americans have never experienced living in an unstable country - when there was good income for all nobody complained. I grew up in Rhodesia (Zimbabwe) which went from beautiful small modern country to degraded overpopulated hell. The problem exploited by communism at that time was its two social levels, rich and poor. Now these inequalities are at the heart of the Empire. I fail to see how you will protect against the rising costs of living when even basic needs become scarce. Forget all the rules that apply to stable countries. Property in Zimbabwe still has value, but living in it is very expensive because all the services are broken - and anyone with more money is a target.
After that experience one really understands the value of law, order and ethical government, rewards of properity, which fail when nations get poorer."

What really scares me about his post is that I knew Rhodesia and thought Zimbabwe had to be some other African country with a very bad currency. Pardon my "blond moment."