YOU CAN SURVIVE ANY FINANCIAL DISASTER, by David Smyth, Chicago: Henry Regnery Co., 1976, 252 pp., $10.
Ever since Harry Browne scored his publishing coup with How You Can Profit from the Coming Devaluation (1969), the book markets have been, if not flooded, then at least drizzled with survival-oriented books on investing. I have recently cranked out one myself. Perhaps we can look forward to a book called 96 Ways You Can Make a Killing after an Atomic Attack. The subtitle of Mr. Smyth's book seems to promise almost as much: "Strategies To Beat Triple-Digit Inflation, Severe Depression, Even Wartime Catastrophes." Amazingly, the book really does come close to providing what the cover promises.
Smyth is the World Services Financial Editor for the Associated Press. He is nevertheless a certifiable gold bug, anti-Keynesian to the core. What he has done is to provide the reader with several strategies that ought to work in times of economic disintegration. Even more helpful, he provides names and addresses of the companies involved in selling the kinds of investments he recommends. You would be surprised at how few of the investment books really do tell you precisely how to go about setting up a survival investment program, from Swiss banks to money market funds to mutual funds that offer insurance against paper losses in the stock market. I, for one, had never heard of the French Pinay bond; it's indexed to the market price of the French gold Napoleon coin.
The book is well worth $10 and the time needed to digest its contents.
It is sad that the book wasn't brought out by a firm like Dow Jones-Irwin. It seems that Arlington House winds up publishing most of these titles. Regnery, another conservative publishing firm, has now entered the field. But the conventional houses are still woefully conventional, unless they have a guaranteed bestseller like a Harry Browne book.
For entrepreneurs who expect the worst, however, the absence of mainstream survival investment books for the general public to read is a distinct advantage. The gold debacle of 1975-76 scared newcomers to the disaster investment markets (since these markets became mini-disasters themselves), and the public at large is still unaware of the effects of Keynesian economic policies in a world based on an extensive division of labor. Smyth's book is an excellent introduction to disaster hedging, but I doubt that it will become a bestseller.
The introductory chapters are quite convincing to the initiated, and I suspect that the uninitiated will be impressed. He discusses the causes of price inflation (government-produced fiat money) and the inevitable results of price inflation, especially the disintegration of the capital markets. Smyth grew up in Argentina and saw his father's investments (with the exception of the apartment he lived in) evaporate. Now it's about to happen here. "The decline of the dollar is a story of growing delusions of grandeur in Washington, and its decadence will continue for as long as those delusions persist." The rising expenditures of the modern State have made escape impossible for the politicians. They have to spend. Reducing budgets is politically impossible. "Eventually, of course, such a system will destroy itself." Given this premise, what can an investor do?
First, put your money into gold and silver coins. Second, do not become a long-term creditor. Do not buy long-term bonds, annuities (except Swiss annuities), mortgages, and so forth. Forget about your dollar-denominated pension. Forget about social security.
He is conventional enough to recommend the stock market, so long as price inflation stays under 8.5 percent per annum. He recommends foreign stocks and mutual funds. (This is especially pertinent advice once price controls are imposed in this country.) Buy Treasury bills, preferably 90-day bills. Don't invest in any government debt certificates that have maturities longer than one year. He calls bonds "certificates of guaranteed confiscation" quoting Franz Pick.
He tells us how we can get into Swiss francs during a dollar-glutted Swiss moratorium. Every once in a while, the Swiss put negative interest penalties on large foreign deposits in Swiss banks. The answer is to open a Swiss franc account in Austria's Bankhaus Deak, Rathausstrasse 20, A-1010, Vienna. Ah, the wonders of the international money market! Even the Swiss, in moments of monetary statism, can't stem the tide.
How about a Lombard bond, some of which are still around? The idiots who created it had faith in the IMF, with its statist system of fixed exchange rates (price controls) among fiat currencies. They felt confident when they offered bond holders the right to take their interest payments in the currency of their choice. That was back in the days of plus or minus two percent swings between currencies. You buy these bonds with dollars, and if your chosen currency jumps by 10 percent, you can reap the rewards. Needless to say, they aren't issuing these bonds any longer. But there are others that do provide a measure of protection against currency fluctuations. Smyth tells you which ones they are.
Socialism is coming. War may be coming. You are better off in a rural community or a town under 50,000. Public utilities will be strangled by public pressure against rate increases, so find yourself alternative energy sources, meaning decentralized energy sources.
"The time to act," he writes, "is before disaster is at hand, when the world is at peace, when it is still easy, legal, and socially acceptable to do so." Keep some of your assets in a neutral nation. Pay cash for gold and silver coins. Leave few records. He doesn't recommend guns, but the rest of the survival list is intact.
The book is well written, logically constructed, highly informative. It can be used to scare your Aunt Martha into pulling some of her savings out of her AT&T bonds, 2003. It can also be used by those who are quite familiar with doom and gloom investing. If you were to own only two books on survival investing, this would be one of them. (I am too modest to mention the other.)
Gary North edits Remnant Review, a biweekly newsletter, and writes on a regular basis for the Ruff Times. His latest book is How You Can Profit from the Coming Price Controls (Loopholes Press, Box 1580, Springfield, VA 22151; $10).
This article originally appeared in print under the headline "You Can Survive Any Financial Disaster".