Posted On 02 Mar 2012
Will there soon be an economic collapse? If so, what’s the best way to prepare for it?
Nobody knows the answer to either question.
My prediction? The recession that we’ve been in since 2007 is still with us and is a sign of lasting economic change. Before 2015 there will be a currency collapse, and the stock markets will drop by at least one-half (and more likely two-thirds). That will herald a worldwide depression followed by hyperinflation.
What are the odds that that prediction will prove accurate? It’s impossible to tell.
I hope that I’m wrong! However, this isn’t a time for wishful thinking.
Eventually, even if the world’s current economic and political systems take a serious hit and are transformed, there will be stabilization. The question here concerns to best way for individual Americans to get from here to there. While hoping for the best, why not be prepared?
Either there will be a major economic collapse or there won’t be. If there will be, then it will either come sooner or later. So let’s look at these three alternatives and what may prove to be the best way to deal with them.
First, there won’t be a major economic collapse.
Unfortunately, this is the least likely of the three outcomes. Despite current signs to the contrary, what could prevent an economic collapse?
The only realistic possibility that it won’t occur would be a major but unforeseen technological breakthrough.
Current indicators are so dire that this would actually require multiple technological breakthroughs simultaneously. For example, if a nonpolluting, virtually inexhaustible, and inexpensive new source of energy came on line quickly in conjunction with a major breakthrough in nanotechnology, that would be a game changer.
Second, there will soon be a major economic collapse.
In addition to various hot wars around the world, currency warfare and cyber warfare are already being waged. Political turmoil in the middle east or bad decisions involving Iran, Pakistan, or North Korea could easily upset the fragile global economic system in the next three years.
Historically, collapses have been much more frequent than major technological breakthroughs.
There is growing dissatisfaction, too, with the dollar standard. No fiat currency has ever stood the test of time, and time seems to be running out on the dollar.
Every thinking person understands that the world is awash in debt. Furthermore, since current economies depend upon growth and there simply isn’t enough growth, countries are already trying to steal growth from other countries, which is sufficient to explain why there is already currency and cyber warfare.
There’s no easy way out. For example, if a country under attack responds by cheapening its currency, that just creates more inflation and economic dislocation.
Third, there will be a major economic collapse in five or ten years. (It’s early 2012 now.)
Despite relentlessly increasing pressure from such looming catastrophes as global warming; the depletion of nonrenewable supplies of oil, natural gas, and water from ancient underground reservoirs; and still increasing human population growth, many people have a vested interest in maintaining the status quo for as long as possible and preventing an economic collapse.
Political leaders may be able to stave off economic collapse for another decade. Doing so might well make it worse than it would otherwise have been, but it would postpone the shock and suffering for a few years yet.
So, take your pick.
What’s the best way to prepare?
I don’t know.
If asked, my general answer would be: “Do your best to serve others today.” That’s based on the fact that the best way to prepare for tomorrow is to live well today. The best kind of life is a life of selfless service (giving, loving). If you agree, focus on helping others help themselves (as I’m doing with this blog).
This is not a new idea. At least since the time of the ancient Chinese Daoists, some philosophers have been saying this. I happen to agree with them.
The best way to do that is to show (not tell) others how to live well. That’s usually much more effective than preaching or teaching. (So living happily in solitude as a hermit is, pace Aristotle, not necessarily an undesirable kind of life.)
Long term financial well-being requires prudential behavior, which comes from realistic thinking. So ask yourself: “What is the best way for me to prepare for each of the three scenarios?”
First, eliminate liabilities and acquire assets. [See some of the posts whose links are provided below as well as Kiyosaki’s books.]
Second, take advantage of the bull market in gold and silver.
It’s been rising for a decade and it’s still rising. Since commodity bubbles typically rise for much longer than that, even getting in today could make a big difference in just two or three years.
The idea is not to hoard gold and silver. The idea is to buy them, wait until the bubble gets near its top, sell them, and use the proceeds to invest in undervalued assets.
Remember: assets put money into your pocket. They are things like apartment buildings and profitable businesses.
All investments like precious metals, real estate, commodities (other than precious metals), stocks, bonds, and so on rise and fall. They fluctuate. They experience waves or cycles.
To have wealth transferred to you, buy low and sell high.
So, if you buy now, when the prices of gold and silver are still relatively low, and sell later, when their prices are much higher, you will increase your wealth. Then use that wealth to buy other investments are undervalued.
Third, same plan as for the second scenario: take advantage of the bull market in gold and silver.
In fact, that plan will work even better assuming that that market keeps rising for another five or ten years.
In any event, stay nimble. Economies are too important to governments to remain unregulated. Free markets are, and always have been, a myth.
For example, right now the federal government is trying to keep the bull market in gold and silver from rising even faster in order to preserve faith in the dollar standard, which has been a paper or fiat currency since 1971. Could politicians enact a windfall profits tax to punish those who have the financial foresight to be heavily invested right now in gold and silver? Yes.
So the rules of the game may change. Since it’s impossible to predict what will happen, you’ve really no choice but to accept full and sole responsibility for your own financial condition. There are plenty of people who will tell you they are gurus, but nobody has a clue what will happen.
So, make your own guesstimate of what will happen, act accordingly, and see what unfolds.
Do not attach yourself to anyone else’s ideas (including mine). Educate yourself, go with your best judgment, and then flourish or suffer financially.
(In fact, it’s a good idea never to attach yourself to anything! For an explanation, see the posts in the spiritual well-being category.)
Here are some resources that may help:
Related posts (in chronological order): Sitesell, Gold, Currency Collapse, Increase Your Assets, Monetary Value, Rich or Poor?, Your House, Peak Oil, Buy Gold, Real Estate Investing, Inflation, Stealth Tax, Global Economic Collapse, Sound Money, Price-Rent Ratio, Silver, Cash Flows, After the Party, and The Best Place to Live.
Recommended Reading: Robert Kiyosaki’s Rich Dad Poor Dad and The Cashflow Quadrant and James Rickards’s Currency Wars.
As always, if you know someone who might benefit from this, please forward it.