A Self-Employed Carpenter's Continued Thoughts on the Future

My first article on this topic concerned the sharp contraction of the residential construction industry in the U.S. I am a self-employed carpenter. The main thrust of that article was that the housing market is not going to recover to anything approaching its zenith.

Bloomberg Business reported in January that housing starts fell again in December to a 529,000 annual rate. The annual rate in a good economy is considered to be a million new homes per year. The recent peak in 2005 was 2 million homes. Nationally, production for the residential construction industry has dropped about 75% off its peak. Inflation, lack of wealth, and rising energy costs preclude any great gains in housing output in the near future. The majority of the skilled construction workers will be doing something other than residential construction in the near future.

What is it that we’ll be doing? First off, we are craftsman. “Craftsman” is a mind-set, a personality type. Throughout history, craftsmen have exchanged their labor, skills, and ideas for the expendable wealth of those who have it. That is the ball upon which we need to keep our eye. Many of us will likely still be craftsman in the next economy.

The best-run construction companies will be able to get lean enough to live through the hard times and carve out a niche in the new residential construction industry. Most companies and individuals will not make it back. The current overextended financial situation in the U.S. will cause our world to “shrink.” Inflation and sharply rising fuel prices will force a lot of economic activity back down to the community level.

Many things that we currently take for granted will become more difficult to obtain. Acquiring food, fuel, heat, and shelter will take on a greater importance in the day-to-day life of the middle class. I’m not talking about the Apocalypse. I’m just saying that things will not be as comfortable as they once were. You and your fellow middle classers will be conducting more business within your neighborhoods and communities.

What do we craftsman do in the transition? First of all, keep your hand in the old construction game as long as you can. Do not create new debt for yourself. Do not bid jobs so close to the bone that you have no wiggle room. If something goes awry, and it usually does, you will have either new debt or legal problems.

Speaking of new debt, get out of your old debt. The leaner you emerge from this transition period, the better your choices will be. If you have any liquid assets, consider owning some physical silver. Cash will be eaten away by inflation. Gold is too hard to trade casually, too dangerous to possess. Silver, cash, and labor hours are excellent barter items. Barter will be big at the community level. Be prepared to swap your skills for someone else’s.

As a craftsman, imagine using your set of tools and skills to create or assist in what is going to be needed for a local economy. Think along these four lines as a start…repairing versus replacing, expensive petroleum, rental property, and food. It is likely then some or all of your skills can find a home in these areas.

Today and in the future, broken items will be repaired to a much larger extent than in the past. We will cease in large part to be a throwaway society. Learn how to cut glass. Windows and doors can be repaired, instead of replaced. Learn to rebuild a door or window frame. Make use of used and recycled materials. Start sorting the debris from your jobs, de-nail and store reusable items.

Petroleum product prices will rise faster than the inflation rate. Supply is flat, and demand from Asia will continue to increase steadily. Home heating will be increasingly augmented by wood stoves. Learn how to rebuild old wood stoves and install them. Firewood will be needed. Can you produce firewood efficiently enough to make a profit? Diesel fuel will be expensive. Does anyone in your area already make biodiesel? If not, look into it how it is done.

You probably have a truck; combine your errands with others to cut down on fuel usage and earn yourself extra cash or barter. If you have a wood lot or access to one, what about a sawmill? You and others will always need lumber. The scrap can be used for heat. You could run the mill on biodiesel or alcohol. Dare I even bring up the possibility of a still?

There will be an increase in the need for rental properties. Being a landlord is not for everyone, but if you have the initial assets, why not use your skills to become a landlord? Buying older buildings and converting them into multiunit apartments takes lots of capital and labor, but should be a profitable endeavor in the next decade. Unfortunately, foreclosures will continue, and those families will be renting their next living space. Look carefully and thoroughly into this option before jumping in.

Some of your neighbors will look into animal husbandry and gardening to secure some of their food supply. They will need help: shelters, outbuildings, fences, and access to water. Look into how to build and use a smokehouse. Know who in your community does butchering. Build a business relationship now. Canning will become more important. Consider one good outdoor summer kitchen for the neighborhood. Canned food and veggies are good barter, and so is home-baked bread and home-brewed beer.

Start small with any of these new directions. Keep yourself in the residential housing trade as long as possible. If you can, make a transition into a service or manufacturing sector of the economy as well. Keep as many options open as possible.

Imagine this transition period as a river to be crossed. The banks of the old economy are behind us. The current is fast, the obstacles are numerous. Don’t allow yourself to drift with the current. Use your craftsmanship as your paddle, drive yourself forward, and steer around the rocks. Pick your path through the transition and aim for your spot on the opposite shore. The craftsmen that emerge from this transition period prepared and on course may well find themselves involved in a life more gentle and satisfying than the one they left.

Jim Kearns
Whiskey & Gunpowder

February 11, 2011

The Daily Reckoning