Surviving the Economic Meltdown

Surviving the 2008 financial meltdown will mean different things for different people. For the very wealthy 2%, no matter how much money they may have lost on paper, they will survive quite nicely. They may not be able to buy another house, another boat, or another private jet, but food, clothing, and shelter should not be a problem.

At the other end of the spectrum, things are going to be a little tougher. For those who lost both jobs and homes, survival will mean trying to find some kind of shelter, whether a homeless shelter or some safe shelter outside. It will mean bread lines and soup lines. It will mean trying to get medical care for sick children and adults.

As more and more people lose their jobs and more people lose their homes, continuing into 2009, survival really means survival. Many of these people are regular middle class Americans. These are people who were living the American dream mere months ago or a year ago. Their sudden turn of fortune will be a shattering experience, one for which their previous lifestyle has not prepared them.

We are in a downward spiral in which people are spending less money because they have less money. Stores are closing or laying off workers, meaning even less money to spend and more closures. It will hit bottom at some point, but there is going to be a lot of pain before that happens and possibly a fair amount of civil unrest, riots, and more crime.

For those who still have their home or apartment and their job, your survival will depend a good deal on how responsibly you have lived up to this point. Is your job secure for the next few years at least? Is your house paid for or are you capable of making the payments into the foreseeable future?

We are caught between a rock and a bigger rock. Survival for many will mean drastically cutting back on your spending before circumstances force you to cut back. But if we cut back on our spending, we will contribute to the ongoing collapse.

The government, including our president-elect, believes that giving money to Americans to spend will help to stabilize the economy and bring us out of this recession/depression. It will not. The taxpayer money handed to the banks and Wall Street was supposed to stimulate lending, but Paulson and Bernanke included no oversight. There were no conditions placed on that huge chunk of change. So the banks used the money to make investments, buy up smaller banks, give bonuses to their big-shots, and dividends to their shareholders.

Money handed out to the middle class will be used to pay off bills. It will not be spent on “stuff.” It will not stimulate the economy. It will not create jobs. It will put off the inevitable for a short time and at great cost.

Bernanke and the Fed, like Greenspan before him, have done the opposite of what this country needs to survive. Greenspan dropped the Fed rate to 1% in order to create a soft landing after the tech bubble burst. All he succeeded in doing was to create another even bigger bubble. The housing bubble has spread like a cancer to every segment of American life. Greenspan’s policies were a disaster.

So the Fed has dropped the bank lending rate to a range of 0% to 0.25%, even lower than Greenspan. This has the effect of destroying any kind of savings plan. Whether you have money in a savings account, money market account, or Certificate of Deposit (CD), inflation will eat that money up and you will end up losing your capital.

This plan didn’t work out for Japan. Why would it work for us? So survival means that you have to make more money, with whatever you have to invest, than you could possibly get with any reasonably safe investment. Survival means taking bigger risks and possibly losing even more of your scarce funds than you would lose in a savings account.

There are those who are even questioning whether the U.S. can survive the insane economic policies (or lack of policies) of the last decade or two. There is only one relatively safe bet in the current meltdown climate. When the fiat currency plummets, and the dollar is going to fall a long way under present economic policies, the only place to turn is to real money.

Fiat currencies, the currencies of every nation in the world, are worthless pieces of paper backed by nothing but the promise of the government. Right now in Zimbabwe, it takes millions of dollars to buy a loaf of bread. That could happen here as Bernanke and friends pump more worthless dollars into the system. Their means of saving the economy is destroying it.

What is real money? American currency used to be backed by real money. World currencies used to be backed by real money. U.S. dollars used to be exchangeable for gold and silver. They are no longer. Gold and silver are real money and have been real money for thousands of years. When fiat currencies go into the toilet, the value of gold and silver soar.

Right now, at the end of 2008, the precious metals and precious metals miners have gotten hit, just like the rest of the market. But real money will not be held down when phony money plummets. Even though the spot price of gold and silver are low right now, people are buying physical metals faster than it can be fabricated. There is a shortage of coins and bars.

If you have any free cash to invest, buy gold and silver coins and bars. You can of course invest in precious metals funds and Exchange Traded Funds (ETFs) but these metals can be confiscated by the government. The government has confiscated citizens’ gold before. It is best to have possession of your gold and silver. This could be the difference between survival and personal meltdown.