Preparing for Economic Collapse

5/13/2011

Preparing for Economic Collapse

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“How can I prepare for an economic collapse?” is one of the most common questions I get. It usually takes me a second to start to explain how complex such a question is. It’s like asking an auto mechanic, “Say, how do you build a car?” or asking a computer engineer, “What’s all that stuff inside my laptop?”

I do have some first-hand experience in this matter, though. The economy in my country, Argentina, has gone through various crises, but none as large as when the economy collapsed in 2001 after a decade of apparent prosperity. The currency devaluated, and Argentina defaulted on its USD$132 billion debt, the largest default ever. The middle class took to the streets after bank accounts were frozen, and the president was forced to resign, escaping the presidential building in a helicopter.

What I’ll do is, provide five quick foundational steps, based on what I know, for you to follow so as to be better prepared if something like what happened in my country ever happens in yours.

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Step #1: Secure a percentage of your savings in bullion.

Five years ago, even the most paranoid person claimed you would never see “nationalized” banks in USA. The gung-ho survivalists claimed the entire country would go up in flames and open revolts would start before something as insane as a $700+ billion bailout to save the “too big to fail” rich elite was laid on the backs of the American working class. Yet here we are.

When I try to explain this very important issue to my American friends, they tell me that banks would never steal people’s money because there are laws against that in the USA. Their money is insured. We had those same laws in Argentina, but still it happened. We had a constitutional right to private property. Yet the constitution mattered little during the collapse. Go right ahead — sue the government of the United States if something like that ever happens. Maybe you’ll get some of your savings back in a few years. If they feel like returning it.

What people don’t understand is that laws are written by men, not some greater power. As soon as those running the show feel an emergency decree or law is in order, existing laws are simply rewritten. They may even be ignored all together! What do you do if something like that happens? You may complain, you may sue, but you’re not changing the cold hard fact that as of right now that bank door is closed, that ATM has no money in it, and you still have to survive. This is something Argentines have experienced and know very well. Hundreds of thousands of us have banged the doors of our banks, for years, without a penny being returned. You still sued, and waited, and spent the little money you had by hiring a lawyer. You lose, they win…unless you have some of that money at hand before they decide to steal it.

Every single Argentine wishes he could go back in time, close his bank account, and put that money into gold. We would all do that if we had a time machine. Since you can’t guess the future, all you can do is estimate what can happen and play the odds in your favor. In the event of a full economic collapse, if you have 20% of your savings in physical gold and silver, that’s a percentage of your savings that is spared. It’s not an investment; don’t go crazy over gold and silver going up or down a few dollars, just be content that it’s not getting any lighter as it sits in your safe. If the economy collapses or even if there’s simply inflation (as there clearly will be), that percentage of your savings in precious metals is safe and will likely go up in price beyond its standard purchasing power as things get worse.

During the first stages of a severe economic crisis, you will see ATMs running out of money fast, and many stores won’t be accepting credit cards. As the saying goes, “Cash is king” during those times. Your precious metal can be sold to a dealer, but you better keep that stored for now. When everyone is running around looking for an ATM with a few bucks in it, having a month’s worth of expenses in cash means you won’t be one of them. Why not more than a month´s worth of expenses? Because if the economy fully collapses, that paper money will lose its value within hours. It may drop 50%, 60%, or 75%, as happened in Argentina. Who knows? All you know is that as the currency loses value, the value of the precious metals you have stored goes up in proportion. Still, during those first days, a wad of cash gets you what you need.

>> So, step one is acquiring precious metals (I generally recommend 20% of your savings but each person is a separate case) and a month’s worth of expenses in cash, kept safe at home.

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Step #2:  Stock up on food.

The more you have, the better. There may be periods of civil unrest like the ones we saw where stores are being looted and closed after that. There may be problems with resupply because of logistical complications. It’s better if you already have 6 to 12 months worth of food in your expanded pantry. Also, keep in mind the food you buy now will be considerably cheaper compared to post-inflation prices.

This large supply of food will bring peace of mind in case of job loss, as well. Who knows how long it will be before you find another source of income? After the 2001 collapse, some people genuinely spent YEARS looking for a job without finding any. I can’t emphasize enough the peace of mind it brings knowing you still have some time, and that you can, in fact, put food on the table the following night.

The food should be long-term storage type, requiring little or no cooking, at least for some of it. Water is also essential, so having a two-week supply is advised. The minimum amount is a gallon per person per day, and you should double that for flushing toilets and taking an elemental bath in case the water service is interrupted.

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Step #3: Acquire the essentials by putting together a survival/emergency kit.

This will include your typical camping gear: a tent, sleeping bags, a stove (have enough fuel for it in case services are disrupted), first aid kit, medicines, LED flashlights and several spare batteries. Depending on how bad civil unrest gets, there may be problems with the infrastructure. After the economy collapsed in Argentina, the power company simply couldn’t afford the repairs needed, and it hadn’t planned for something like this, either. Rolling blackouts became common, and having LED lights and rechargeable batteries was a blessing. You could easily spend two or three days without power during summer. At one time, downtown Buenos Aires was left without power for five days. Imagine the complications this brings. If natural gas service is interrupted, you may need other ways of cooking. A camping stove and enough fuel will get you through it.

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Step #4: Improve your personal and home security.

If you ask any Argentinean what concerns him the most, 9 out of 10 people will have the same answer: security. In second place is the economic situation. Ten years after the economic collapse, things are nothing like they used to be. Half the middle class became poor and its standard of living has decreased considerably. We’re still a high-risk economy, and it shows. Inflation is still rampant and could be anywhere from 5% to 10% per month, usually hitting the middle class the worst. But that’s something we’ve grown used to. That’s something we can live with.

What concerns Argentineans the most is the crime problem, and the out-of-control violent crime we suffer is the mayor legacy of the 2001 economic collapse. Poverty sure didn’t help, nor did social segregation; but the greatest cause responsible for the crime levels we suffer is our own government. The liberal government that took control after the collapse considers criminals to be poor victims of brutal capitalism. The unofficial stance is that criminals have a right to steal, murder and rape – in their view, it’s how the “poor” get back to the rich and middle class that thrived during the 90’s. Of course with a government like that, the crime problem just keeps getting worse.

During the first days after the economy collapsed, civil unrest, rioting and looting was out of control. A state of siege and military law was declared, enforcing curfew hours after 10PM. This lasted a few months, and while order was recovered in the capitol district, months after that there still were occasional revolts and looting. The sense of lawlessness extended way beyond the visible accounts depicted by the TV and general media. Its during time like these that you realize you must have means of defending yourself and your family.

My advice is to make your home as secure as possible against criminals that may be taking advantage of the lack of control during the worst of the rioting. After that, a better security plan for the entire family must be worked out. As things get worse, you understand that you can no longer afford to be lax about your personal and home security. Those that are quickly become vicitims. With a more secure home, you may want to consider having a weapon to defend yourself. Certainly not an easy decision and one you must be extremely serious about. If you have the self-control and maturity to handle one, having a firearm and getting the minimum training so as to know how to use it if it ever comes to that is something you should consider doing.

Crime and insecurity will be one of the greatest threats people all across USA will suffer, and very few will be ready for it. It won’t happen one dark gloomy night after watching the latest horror movie. It will happen in the Walmart parking lot at 3PM, with plenty of people around (people that will hurry out of the way, pretending not to see anything). You’ll be thinking about what you just bought, that you maybe should have bought Lucky Charms instead of Corn Flakes. That’s when the nicely dressed person along with two other buddies, all dressing well (neat hair cuts, too), pulls a gun on you. Developing a sense of awareness will be the most important part, as well as making the rest of your family comprehend that times have changed and you can no longer be careless regarding security.

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Step #5: Embrace a different mindset.

When Argentina went through its economic collapse, people handled it differently. Maybe the most common response was denial. The “I can’t believe this is happening “ attitude was pretty popular. Others complained, but you soon understood it changed nothing: it only made you feel more miserable, more stressed, and that was something you could do without. Others just ended their misery. Suicide rates doubled after the collapse, sometimes jumping under the train at early rush hour, in a desperate attempt to make their misery noticed by others.

What you need to do is become more positive, more active. Be someone that, while accepting those things you can’t change, do something about the ones you can. Get involved now, do what I just recommended right now, it will bring you peace of mind. Remember to stay positive and put every problem into perspective. Complain less. You’ll have enough to complain about when inflation gets worse. Soon you’ll understand that material things can be replaced, and you become more greatful of what you have instead of worrying about what you don’t. Being someone that gets easily depressed will be the end of you as the economy worsens. Its essential to keep a positive attitude. Problems much worse that what you are used to will be of daily occurrence. You’ll just have to roll with it, learn to cope with the new world you live in. Reinforce your relationships with people, fight stress by finding a hobby you enjoy, hopefully one that has a practical side as well. After the collapse, lots of people started their own business when they realized there where no jobs to be found. Maybe it’s better if you get started now, just in case you ever need it to earn a living.

These are my recommendations. I know many people could have used such advice back when our economy collapsed.

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Some common questions regarding hyperinflation

How quickly does it happen?

These events occur fast but there are signs: lack of investment, higher interest rates, unemployment. When banks start coming up with excuses so as to not give you your money right away when closing an account, that’s usually not a good sign.

As for inflation and hyperinflation it happens right in front of your eyes. It actually happened to me that the price of an item I picked in a store almost doubled in price by the time I reached the cash register. Good for me the employee just placed the sticker with the new price over the old one (no time to remove them) Employees rushed around changing prices, several times a day, all day long during the ongoing crisis. It was fun to peel back the stack of stickers with the different prices and see how they had gone up in a matter of hours. Rioting happens fast, too. Once the banks close rioting is just minutes away.

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What happens to your savings/investments?

I didn’t have much but managed to close my account just a day before the banks closed their doors. My parents are accountants and saw the signs mentioned earlier. When we went to the bank a nice lady told us they didn’t have USD$1,000 in the bank. Our jaws just dropped. That same day we went to the main branch and closed the account my sister and I had. The next day all banks closed, the accounts where frozen.

As for real estate, that was a pretty safe investment. Eventually rents went up so as to compensate for the devaluation. Of course you were much better of with your money in bricks and mortar than in a bank account.

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How does the populace react?

Violently, as you’d expect when your life savings are stolen from you.

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What is the government saying/doing?

Laws were changed to make everything nice and legal. The excuses the then-president Fernando De La Rua came up with in his speeches during the crisis just made everything worse.

Just days before the bank holidays they promised none of that would happen. Same thing before the devaluation. They swore on their mothers’s names they wouldn’t do such a thing, then did it the following day. Politicians tend to do such things, and they are all similar worldwide.

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What happens to the capital markets?

The stock market dropped like a rock, then shut down. What surprised you the most was how everything was simply frozen in expectation. No one wanted to spend a single cent, not even to buy half a gallon of paint for a work site because you just didn’t know what would happen in a matter of hours, let alone next week. The biggest investors had sold and left the country months before everything went down. Another sign to look for.

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Does violence and crime become an immediate concern?

Yes it does. While stores were the more common targets, houses were looted, too. The best thing to do was stay home, have a defendable position and be armed. I had looters not 20 yards away from my home. What do you do if they rush your home? Can you just open fire on them? What will they do when/if you do? All these things flash into your mind.

A significant amount of people behave because they believe there’s a punishment if they do otherwise. Once that fear is removed because the authorities have clearly lost control, you see the worst of people’s nature. It’s not a pleasant thought, but it’s better to be ready.

Take care,

Fernando “FerFAL” Aguirre.

ChrisMaterson.com

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5/13/2011

Workers in trouble: US middle class disappearing

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The US was once home to the picture-perfect American dream. A house, a car, and a job symbolized the middle class as the core of a prosperous country. Yet for an increasing amount of Americans some or all of these are now out of reach.

This country was founded on the ideals of life, liberty and the pursuit of happiness. How can you be happy if you can’t pay your rent? How is this American in any shape or form?” asked journalist and activist Mike Elk.

The new America is littered with millions of homes lost and abandoned with the unemployed officially numbered at over 13 million still queuing to get a job. Does this mean the middle class is disappearing in the US?

There have been 4 pillars that supported the American middle class: the chance to retire, the chance to send your kids to higher education, graduate school or university, the chance to work and afford a comfortable standard of living, and access to medical care. And if we look, all four of these pillars are chipped, cracked or swaying,” explained economist Max Fraad Wolff from the New School in New York.

Today over 60 percent of Americans say they typically live paycheck to paycheck – leaving little for college fees, mortgage payments or retirement. The US is increasingly being divided into rich and poor with the traditionally large center – the middle class – being squeezed out. The bottom 50 percent of earners today own less than 1 percent of the country’s wealth.

America has gone from being the most egalitarian nation back in the 1960s and early 70s, to now, where the gap between the rich and the poor is the widest in the United States than any of the industrialized nations. So, by every index the middle class is dead in America,” said trends forecaster Gerald Celente.

Caleb is from a traditional American middle class family. The 23-year-old college graduate lives in a rented basement, and says middle class jobs do not exist anymore.

I was taught all my life by the media and in school that the U.S. was the greatest country in the world, because if you just work hard, you can be part of this magical middle class. I am part of a generation of youth who will never have this so-called American dream,” he sighed.

Finding work on average takes eight and a half months now and with 6 Americans vying for each job, the prospects for the country’s youth look dim.

The future that lies is living in basements like I do. Some of them are becoming homeless. Others are going to prison. There is increased crime and drug use, and things like that. There is also the wars – the military, they don’t have a recruitment problem anymore now that the economy has declined so much“, said Caleb.

What has not declined is military spending.

I’m a teacher, there’s teachers laid off left and right. This is the future of our country, and we’re spending tremendous, tremendous billions are being spent on the war machine,” said Elo-Mai Noormets, a New York teacher.

These priorities have had a devastating effect on middle and working class America.

Melony Samuels has been running a food pantry in New York for years.

Now we are seeing people that do have an education, used to have decent jobs, now on line. Coming here teary-eyed, they never thought this would happen to them,” described the founder of the Bedstuy Campaign Against Hunger.

Some 40 percent of the 43 million food stamp recipients today are working Americans, and every 5th child now lives below the poverty line.

America grew prosperous on the belief that the next generation of workers would live better than the first, but nowadays – the outlook for the future is anything but optimistic.

We’re going to see more and more of a squeeze – more people on food stamps, more people at food kitchens, and more malnourished and hungry children in this country, no question,” said author and food expert Fred Kaufman.

As the foundation of the middle class continues to crumble, concerns are growing that the heart of the American dream could stop beating altogether.

And if the middle class collapses, the face of America in the 21st century could become one this country has never seen before.

Thom Hartmann, the host of the Big Picture on RT explained that over the last 30 years the American economy has dramatically shifted, away from production and towards consumerism and debt.

The middle class is tapped out,” he said, explaining that Americans began to use credit, financial equity and other means to spend more without saving and investing. “We’ve seen the wealth of the middle class whipped out.”

He credits formed US President Ronald Reagan for destroying the US middle class, arguing his policies and a group of ideologues threatened by social change.

Before Reagan became President we were the largest importer of raw materials in the entire world. We brought iron ore into the country and turned it into things like radios, TVs, cars. We were the largest exporter of finished goods. We were the world’s largest creditor. We have completely reduced that in 30 years. We are now the world’s largest debtor and the world’s largest importer of finished goods and the world’s largest exporter of raw materials. We have becoming the mining operation for the world and the consumer,” Hartmann added.

He explained than prior to the civil rights movement groups of ideologues recognized a rise in the middle class was coming, and sought to correct it. They saw the middle class as a threat.

Source: www.rt.com

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T/g:  RT’s Anastasia Churkina

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