is there truth to the reports of them wearing "magic" undergarments?
Howard Stern has asked about that on his show.
Absolutely true. Only after Mormons have qualified to go to the Temple (don't masturbate, pay 10% and PAY UP IF YOU ARE BEHIND, don't drink/smoke/coffee, attend 3 hour church meeting, work free for the church, are faithful or celibate, and don't speak out against the Mormon church)
The magic underwear is called "garments" and they carry buttonholes over the nipples, navel and one knee. These are symbols representing the same things Masons believe in. Masons actually used to cut these symbols through the fabric into the flesh, leaving scars for reminders of oaths. Joseph Smith "imported" the Masonic temple ceremony for the purpose of making the ladies he was poking swear they wouldn't tell or they would allow themselves to be killed. Emma, Joseph's wife, objected to having her chest carved and designed the garments with symbolic red thread to represent the blood of the cuts. The red became white overtime and the long union suit evolved with changing fashion to be the hideous creations they are today - tops and bottoms of nylon or cotton, like boxers and t shirts. They insure modesty because they must be covered at all times.
At first they had no super powers, but then as a matter of Mormon folklore, like every religion has, there began to circulate rumors that the garment had saved so-and-so from getting burned because the flames stopped where his garments started. OR, my personal favorite, the body found floating in the ocean had been eaten by sharks, except where the garments were. Today even the average Mormon can give you a garment urban legend off the top of his head. The general authorities of the church tell them as inspirational stories from the pulpit.
Taking advanced courses in Utah in Folklore of Religion at Utah State, I learned additional super powers that were believed by some members: that if you had sex without taking off the sacred underwear, your child would be more spiritual, maybe even a prophet. OR, Joseph Smith was killed because he was not wearing his garments the day he was shot--they would have stopped the bullets.
I personally dated a man in Utah, a high school principal, and took him with my family on a rockhunting camping trip. After refusing to help put up the tent, he refused to take off his garments to bathe or change them the whole four days. He ended up having the tent to himself and the kids and I slept outside. My teenagers were in hysterics laughing at this superstitious nonsense, which he explained, "There are wild animals out there and for all we know, my garments are protecting us all."
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