This yearend is unlike any yearend of the past. In the past, most of us have closed out our year thinking about Christmas gifts, last chance deductions, and what to do on New Year’s Eve. Not for me this year. The question now is “Am I prepared for the worst case scenario- economic chaos?” I am not an alarmist but I am not a cow that wants to be led to the slaughter house. Little did I realize the importance of my Degree in Economics obtained some four decades later. We were led to believe that the U.S. was a “free market” economy. Wrong. We were led to believe public servants served the public. Wrong again. We were led to believe that those elected officials would strongly defend The Constitution. Sorry, only when it is convenient.
The global economic system is in total disarray. The banking system has financial landmines that would rival the fields in Cambodia. Political pressure to hide losses inside the balance sheet of major banks creates a credibility gap bigger than the Grand Canyon. When central banks around the world make a concerted effort to provide liquidity, this would indicate a larger problem than the average person can imagine.
Since governments control the system by creating money out of thin air, major resources in the economy are redirected from the productive and innovative private sector to the totally inefficient and bureaucratic public sector. The public sector only consumes wealth. Nothing but promises are produced. By taking critical resources from the private sector, consuming most of what it takes and then giving the rest to the most unproductive part of society (entitlements), governments perpetuate the worst part of the economy and destroys the ability of the nation to expand via the private sector. In the past, the private sector could overcome the drag of government. But now uncertainty has replaced the willingness of the risk taker to invest in long-term projects. Artificially low interest rates have sent the caution signal to management as an indication of further weakness in the system. Europe will see bank failures in 2012 and nobody knows how serious it could get for the average guy. Never in the history of the world are there so many countries with serious fiscal problems all at once. There is no economic book or white paper to refer to.
The interconnectedness of the global financial system may have been a good idea in theory but now some catastrophic event 5,000 miles away can affect you and me. If things get ugly, the politicians will be in the bunker looking at us on their closed-circuit TV’s. Self-preservation is the one consistency among most of the world’s politicians.
So with that said, my strategy is as follows:
1. Keep my communication lines open with Our Heavenly Father. HE is the Merciful One.
2. Look in the mirror to see if there is any denial that needs to be dealt with.
3. Forgive everyone. You don’t need any bitterness when you brother is in deep trouble.
4. Check the pantry. Make sure you have plenty of non-perishable food on hand. It’s better to have too much than not enough. If by some miracle financial system survives the next 60 months, you can donate extra food to a food pantry.
5. Make sure you have good, durable clothing to handle the elements. Power outage are occurring more frequently and you should be prepared for substandard response time to outages.
6. Keep extra cash available in a safe place in case of a “bank holiday”. Notice how they put a positive spin on a disintegrating situation? Holiday? Not for you or me. Generally, the small print in the signature card you signed at your financial institution includes a right for the bank to hold your money for up to 30 days or more. Since it has rarely been exercised, people have grown accustomed to the assumption that they can access their money at any time.
7. Minimize debt and do not add any more. Cash is still king. If you can’t pay cash, you probably don’t need it. “That’s what my momma always said.” Oh yes, she grew up in the last Great Depression.
8. Hyperinflation is more than a 50% probability in many countries around the world. Don’t assume it won’t come to the shores of the U.S.
9. Hard assets will preserve value. I have begun the direct registration of stocks held in my broker account. I don’t want a middle man with potential fraudulent intent to compromise my ownership position. MF Global comes to mind.
10. Make sure your property taxes are paid up and you have enough reserves to pay them for at least 36 months. You just thought you owned your house. The taxman can confiscate property if necessary.
11. Make sure you pay the IRS monies owed. As long as they have power and authority by statute to collect tax, pay the tax.
12. For the hundredth time, simplify. If things get tough, all of the big boy toys will be of no value. That goes for you “big girls” as well.
13. Ask Our Heavenly Father what you should do with your retirement account. I cannot advise you on your investments but Our Heavenly Father can and will.
14. Encourage your family and friends to follow similar defensive moves.
15. Express an attitude of gratitude daily.
16. Walk the Love walk!
In 2017, I would like to reflect back and see that the steps I took turned out to be unnecessary, but I don’t think that will be the case. Be vigilant!
