Posted on 01/15/2021 10:20:17 AM PST by SeekAndFind
Dear Chuck,
Is America heading towards an economic collapse? If so, how do I prepare?
Worried Boomer
Dear Worried Boomer,
My view is we are headed towards another economic crisis with a low risk of an actual economic and/or currency collapse. In either scenario, there are ways to be prepared.
Economic Crisis vs. Collapse
An economic crisis is different from a collapse. America has worked through several in my lifetime: ‘70s stagflation, ‘81 recession, ‘89 savings and loan crisis, post-9/11 recession, ‘08 great financial crisis, and the 2020 coronavirus crisis we are in now. A collapse is brought on by a complex set of factors that must merge simultaneously but at its very core is a devastating interruption in economic output and/or a loss of confidence in a currency.
In an article for Investopedia, Sean Ross explains, “The root of any collapse stems from a lack of faith in the stability or usefulness of money to serve as an effective store of value or medium of exchange. As soon as users stop believing that a currency is useful, that currency is in trouble.”
The advantage America has is that no other nation has the vast diversification of economic output nor presents a viable alternative to the stability of the U.S. dollar….yet.
The two warning signs of a possible collapse are (1) high unemployment and (2) runaway inflation. Essentially, this is when there are not enough jobs for the economy to grow and too much worthless money being pumped into the economy.
Reasons the Dollar Could Collapse
1. High inflation combined with high debt. In 2008, the Fed printed trillions of dollars. In 2020, they printed more trillions. In The Counter-Revolution in Monetary Theory, Milton Friedman writes, “Printing more money, without a corresponding increase in the overall output value of the economy, necessarily decreases the currency’s value, with prices rising in response.”
2. Destabilizing events: think wars, pandemics, cyberattacks, terrorist attacks, uncontrolled printing; lack of confidence in the Federal Reserve, the President, or government at large.
3. Loss of confidence in the U.S. dollar. If foreign countries drop the U.S. dollar it could trigger a recession. Should China and Japan – who own the majority of our $6 trillion debt – drop their holdings, it could usher in a worldwide reset. This could usher in a digital alternative.
What Would Happen?
Panic would ensue because it would happen quickly. Demand for the dollar would drop dramatically along with U.S. Treasuries. Interest rates would increase. Hyperinflation would occur as investors would turn to other currencies. The dollar would decrease in value and prices would jump.
A collapse would be cataclysmic in the damage and disruption it would cause to not only our lives but to the rest of the world. Imagine how your life might be affected if banks and ATMs suddenly closed, you had no access to credit, there were limited supplies of groceries, gasoline, and other essentials, paired with an increase in civil unrest and crime. These scenarios would impact the postal service, transportation, education, health care, etc. Survival in this kind of environment for any length of time would be difficult.
We have many contemporary examples to learn from with varying degrees of damage: Germany, Argentina, Iceland, and Zimbabwe have all suffered a currency collapse. Of course, none of those nations have the size and stature of the U.S. dollar so a similar event in this country seems unimaginable, but it is not impossible.
How to Prepare?
1. Diversify your investments and income sources.
Solomon commented on this back in ancient times. In Ecclesiastes 11:2 he advises us to diversify into seven or eight differing assets while in Ecclesiastes 11:6 we are advised to have multiple sources of income.
Ask yourself if your career provides an essential service. If not, consider changing or getting certified in areas that would give you greater job security. This is important to remember when preparing your children for their future.
2. Get out of debt.
The Bible warns us repeatedly to avoid enslavement and compares debt to being like a slave. You can weather a crisis or a collapse with less stress and greater flexibility without debt.
3. Consider investing in hard assets or commodities.
Gold and Bitcoin represent an alternative to the U.S. dollar. When fear or volatility begins to rise, the price of these alternatives also rises. But these are not the only options to hedge against a crisis or collapse. Real estate, equipment, commodities, and precious metals are also favorable investments during a time of turbulence. There is not one single option that will always protect you; that is why diversification is essential.
Seat Belts, Not Parachutes
Brad McMillan at Forbes believes doomsayers are coming out of the woodwork. He says, “Volatility in a currency’s value does not mean the currency will collapse any more than a drop in Amazon’s share price means the company is going away.” In July, he said we would see a collapse coming long before it happens but did not believe it was coming soon.
I want the body of Christ to be prepared if and when a crisis/collapse occurs. In my new book,7 Gray Swans, Trends that Threaten Our Financial Future, I discuss the economic trends that concern me and the present challenges we face such as Universal Basic Income, Modern Monetary Theory, and a cashless society, among others.
Taking precautions now is like wearing a seatbelt in a fast-moving car or airplane. It makes sense. However, I do not believe it is time to look for the parachute!
Chuck Bentley is CEO of Crown Financial Ministries, the largest Christian financial ministry in the world, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Money Problems, Marriage Solutions
Once I crack open this alchemist stone and start turning lead into gold, the gold price will collapse! But first I'll sell gold short so I make even more money.
More seriously, stock up on food, water, toilet paper and other essentials. Don't be in a situation where you will die if the grocery store closed today for a month. In the worst case you'll have to rotate stock when you buy more and eat the older cans of food.
What does "drop their holdings" actually mean?
It means: Selling their holdings (i.e., DEBT) to someone else. That counter-party must be willing to buy that debt.
Money is not destroyed in that way - it simply changes hands.
Regards,
Well said. Time is short.
This makes absolutely NO sense.
If a currency is destined to "crash," the most-stupid move one could make would be to first shed all of one's debt.
If I owe, say, $100,000 (in the form of, e.g., a fixed-rate mortgage) on Jan. 1, and then the dollar crashes, so that a loaf of bread now costs $10,000, why wouldn't I eagerly look forward to selling ten loaves of bread that I have baked in order to pay off my mortgage?
The truth is, of course, actually more complicated - but that is the gist of my argument.
Regards,
If you believe systemic collapse is coming, the most logical thing might be - Get in to debt now! Especially if it is for productive assets.
systemic collapse means your creditor might disappear. Or It may mean debt jubilees, Or If government’s response is money printing and hyperinflation (remember, government is the biggest debtor of all) then you can pay back your debts in a worthless currency.
In Weimar Germany’s hyperinflation, farmers and land-owners did just fine, and smart businessmen and political cronies who knew what was happening built massive empires buying cheap assets. Look up Hugo Stinnes
"...close your bank account and bury your money..."
I am surprised by the lack of knowledge. ALL countries are studying and pushing a cashless digital currency. China has a working model currently being tested. The US senate bill calls for cashless by the end of 2021. There has been many Treasury and Fed meetings on how to instate it. The Senate bill has already been fast tracked into committee. Fedcoin gives government’s TOTAL control.....and guess what China’s digital cash dictates- you can not buy gold with it.....and all purchase are continuously monitored.
Prep is never a bad idea.
If a monetary/social collapse happens, all the prep in the world will buy you a few weeks at best unless you live in a secluded rural area, where you could last for quite some time. The first order of business for real prep is a self-sufficient bugout spot that is way out in the sticks.
If you are in a populated area, you and your gang will be under siege by other larger roving gangs who will wipe you out pretty quickly. Fixed and easily reachable positions won’t survive long under assault.
The good news is, such a collapse is not likely, imho.
Yes I have stocked up on food in POP-TOP cans in case my electric can opener is in-operative. Actually I worry more about electricity staying off for several days due to a nasty hurricane visiting my town in Florida.
A few years back while living in Marysville, WA we had a snow storm and knocked out electric power for 36 hours. With an all electric condo, and freezing cold outside, it was brutally cold inside. Luckily we had a propane grill on patio to make some warm tea and food.
Over long periods of time, land is one of the ultimate commodities. The problem is that during anarchy, you will probably need more than a deed to keep it.
Amm0 is like currency during anarchy, but during such times, it’s practically a perishable commodity because you may have to consume it before you can sell it. heh
When it all goes in the air, food is very precious, or the means to produce it. In some ways, this goes partially back to the land commodity, but it gets more complex. Not only do you have to have the means to produce, but again, to protect.
But when all you are really talking about is hyper-inflation of currency, the other aspects of anarchy are assumed and hard to predict, so you you may not need to declare ‘protection’ as a conceptual yet tangible commodity, I would suggest usable land is more definitive in this case.
I was pulling for your winning that lottery. And, I wish to thank you for having planned to be so generous with me. I know you would have helped a brother out if you had just won.
You'll get 'em next time.
“Buy gold! It has never collapsed.”
Gold will be worthless in a true economic collapse.
Only barterable goods will have any value. ammo, food, medical supplies, gas, kerosine and diesel fuel.
My prognosticators are in agreement, yes it will happen, and begins the March to April window.
Since the U.S. government's debt is denominated in U.S. dollars ("Our currency - your problem" is the famous dictum), the govt. would have to put the printing presses into overdrive in order to service that debt.
That would, of course, have a long-term impact on our currency (foreign investors would probably greatly reduce their FUTURE purchasing of U.S. debt, and IMPORTS would become more expensive), but the short-term benefits for private individuals with big mortgages or other debt of any kind would be tremendous.
And U.S. citizens wanting to invest in govt. certificates would suddenly find that they could get a return of 10% or more, instead of actually paying negative interest rates.
A win-win for the "little guy" (at least during the transitional period).
In the long term, of course, confidence in the U.S. $ would erode, and efforts to introduce a new global Leitwährung would gain steam.
Regards,
Consider platinum and buy any amount, grams, small bullion coins or ounces if you can. It is behind gold silver and palladium. I believe it’s going to skyrocket like palladium did the last couple years. Silver American eagles or Canadian maple leaves will be a good barter currency. More easily traded and less dangerous to walk around with than gold in a societal melt down.
If the economy collapses I can’t see some banker and a sheriff coming to repossess my house in the near future, both of those people will have much larger fish to fry than kicking me to the curb.
Silver, Gold or any valuable things will not save you, btw.
They will help only in a partial collapse where a semblance of order can be maintained by the government. In a total collapse life will be brutish and short. 95% of people will be out of food and desperate in a week.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.