Beo's Guide to Surviving the Collapse of the US Economy

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Beo's Guide to Surviving the Collapse of the US Economy

Postby Beowulf » Fri Oct 23, 2009 2:38 pm

This thread will be postings of my conclusions, not the volumes of reading that lead to those conclusions. You'll just have to trust me.

If the dollar continues to be devalued at its current state, the USA will experience whats called hyper-inflation. You've probably heard that word tossed around a few times on CNN already. You know those old images in your history book where Germans were burning their paper money to cook food because it was so worthless? Thats hyperinflation. When the currency is so inflated, its worth practically nothing. Think $150 for a loaf of bread.

Most Americans immediate reaction is an emotional one: "This is the USA! That can't happen!" Yes it can, and it is.

So you have a savings account and a little money put away? Do what the Chinese are doing: BUY GOLD. As the dollar becomes more worthless, gold becomes more valuable. Any money spent investing in gold is easily going to double in the next 5 years, so its a win/win.

If you're like me and are struggling to pay rent every month, you don't have the luxury of investing 10s of thousands of dollars in anything. What you CAN do is empty your savings account and keep it in cash. You might think "But I get a 2% interest rate per year with that! Its making me money!". No its not. If our currency is inflating more than 2% every year then you aren't making any money. If our currency is inflating something more realistic like 15%-20% every year, then your money is being eaten away.

Right now, unless a bank gives you 30% interest on a savings account, there is no use in having one. Your money isn't safe, and its sitting there being eaten. Get it out.

If you google this kind of stuff, you'll find a lot of people telling you to buy rice and generators for the impending end of the world as we know it. Don't live in fear, but be ready for big shit to happen, because it is.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Knowname » Fri Oct 23, 2009 4:39 pm

move to canada
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby CodeZTM » Fri Oct 23, 2009 4:54 pm

With economics as my minor, what Beo is saying is... Well, it's slightly true. And he's right, America might slip into hyper-inflation if our dollar value keeps devauling at the current rate.

But we also have to remember that the economy isn't a straight line of growth. In fact, America has pretty much hit its peak growth rate until the technology improves our productivity, so things are starting to slow down. It's not helped that other nations like India and China have ridiculously high rates of growth [16% and up compared to our 4% last year], which is hurting our net exports/imports in the GDP calculations. [But never fear, for China and India's growth rate will plateau out eventually]

Because of that, our economy is going through cycles, and right now we're in a recession cycle. The 90's was our peak, and we started falling shortly after that. We're in the depths of it right now, but we also have to remember that eventually it will go back up slowly and build up unless economists are morons and Americans quit investing money all together.

It'll be years before everything is fixed. People just need to [*gulp*] have faith in the economy and America as a whole, and quit going batshit insane about it like CNN/FoxNews keep carrying on. This has happened before, it will happen again. We will survive. :up: maybe

Ok, I'm done being serious now. |:>
Last edited by CodeZTM on Fri Oct 23, 2009 7:14 pm, edited 1 time in total.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby kenisama » Fri Oct 23, 2009 7:04 pm

nah, we're screwed... watch AMVs :amv:

I try not to worry about stuff like this, because if you think about, there's really nothing everyday Joe Schmo American can do about it but go with the punches (though I concur with the gold, it's the smartest investment anyone can make, no denying that).
George Orwell wrote:People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby dwchang » Fri Oct 23, 2009 8:06 pm

Beowulf wrote:Most Americans immediate reaction is an emotional one: "This is the USA! That can't happen!" Yes it can, and it is.


Single digit percentage inflation is hardly hyperinflation. Hyperinflation is what is happening in Zimbabwe where a can of food costs literally millions of Zimbabwe dollars. At a academic conference a colleague was attending a Zimbabwe guy was there and our colleague asked if he could do an exchange of $20 to Zimbabwe dollars. The guy said he'd have to give a suitcase full of money to give the equivalent. Furthermore, they chopped off three 0's from their currency so it wasn't billions anymore.

Beowulf wrote:So you have a savings account and a little money put away? Do what the Chinese are doing: BUY GOLD. As the dollar becomes more worthless, gold becomes more valuable. Any money spent investing in gold is easily going to double in the next 5 years, so its a win/win.


It's too late. If you bought Gold five years ago you'd be right, but everyone is going into it now and like any other investment, if you're late to the party you miss out. It'll still go up I'm sure, but nowhere near the growth it had in the last five years. There are too many investors now (supply/demand) and there's no way it could sustain that type of growth.

Beowulf wrote:Right now, unless a bank gives you 30% interest on a savings account, there is no use in having one. Your money isn't safe, and its sitting there being eaten. Get it out.


Your money is perfectly safe because of the FDIC. You're basically saying you'd rather have your money with 0% growth then a non-zero% of growth. The bank's interest is still more than keeping your money at 0% interest. In fact, using the inflation argument, taking your money out is basically negative interest because each day your money is worth less than the previous.

Furthermore, that type of mentality of a run on the banks is one of the reasons banks went under during the depression. The mob mentality of "my money isn't safe I should take it out" led banks to well...not have money. It's a self-fulfilling prophecy and that type of scare tactic will actually make things worse and compound the problem.

There's a reason the Federal Reserve exists. If things were to get that out of hand, it's their job to cool things off. Given they already have interest rates so low so one could easily argue they have very few options left if things got worse. Thankfully they're not and many of the recent quarterly statistics show that.

Beowulf wrote:If you google this kind of stuff, you'll find a lot of people telling you to buy rice and generators for the impending end of the world as we know it. Don't live in fear, but be ready for big shit to happen, because it is.


Now I'm not saying everything is peachy keen, but fear-mongering tactics never work out well. The economy is built on confidence and the moment consumers lose complete confident, the system falls apart. Things are pretty bad right now, but I don't think taking drastic actions that might make things even worse are the answer.

If I were go to into way too much detail, we're basically seeing a backlash to the supply-side economics and free-market ideals from the 1940's and onwards (Milton Friedman). Now I'm actually a believer in such things, but obviously we went too far with it and need some regulation. Economists now are rethinking their philosophies and starting to realize that sometimes a Keynesian system is actually valid (he was ridiculed up until recently). It's actually literally what happened after the Great Depression. Immediately after, folks adopted a regulation and demand-side economy and then maybe a decade later, went back to free-trade and a Friedman-based model.

As someone noted, this is all cyclical. It's happened before and it'll happen again until folks realize there is no ONE answer to the economy. You have to change your strategy based on what is occurring. Clearly we screwed up and kept going down a bad road.

In any case, these things have interested me for quite some time. I took quite a few classes in Economics in college and grad school even though I am not a major and it helps my father has a Ph. D. in this. Glad to see some intelligent discussion here.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Moonlight Soldier » Fri Oct 23, 2009 8:25 pm

Knowname wrote:move to canada

\o/
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby godix » Fri Oct 23, 2009 11:35 pm

General rule of life: predictions that boil down to 'if this goes on...' almost never are accurate because things rarely go on.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Otohiko » Fri Oct 23, 2009 11:40 pm

I have an ironic perspective on all of this, having lived through the collapse of the Russian economy during the 90s. It can happen anywhere. At the same time, living through it is not a giant, impossible deal. Nor is being dirt-poor.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Knowname » Sat Oct 24, 2009 1:13 pm

dwchang wrote:
Beowulf wrote:Right now, unless a bank gives you 30% interest on a savings account, there is no use in having one. Your money isn't safe, and its sitting there being eaten. Get it out.


Your money is perfectly safe because of the FDIC. You're basically saying you'd rather have your money with 0% growth then a non-zero% of growth. The bank's interest is still more than keeping your money at 0% interest. In fact, using the inflation argument, taking your money out is basically negative interest because each day your money is worth less than the previous.


I believe what he's saying is spend it (I've known that for years ><) lol but more specifically invest it in a higher yeilding investment than the bank. Thus his former statement about Gold.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Beowulf » Sat Oct 24, 2009 1:16 pm

Indeed, the bones of what I said is that there is no reason to have a savings account. Take all that money and put it in gold. Even though its completely recovered from its Q4 2008 plunge, it still needs to double imo.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Otohiko » Sat Oct 24, 2009 4:00 pm

To expand a little on my experience - that's the reason we avoid savings accounts and investments into anything but real, hard assets. Around 1991, all savings that anyone in my family had went down the drain. My grandparents suffered most from it, having lost maybe the equivalent of $15-30,000 each. In 1993, our "share of former state property" which was invested into a supposedly respectable venture on the market also went AWOL and was never seen again. During this period, prices inflated somewhere around 100,000 times.

In 1991, my dad started buying up anything he could that he knew would never be out of demand. He bought a whole stack of huge rolls of plain grey cloth, and gradually bartered them with other people, eventually converting this stack into a much smaller collection of valuable metals. He decided to quit that business when someone offered him to help re-sell some uranium. However when he sold off these assets, the worst of the inflation was over and it made for a very valuable supplement to the family income. Noone saw it getting that bad in Russia - but having a little bit of precautionary thought and distrust towards commercial optimism helped my family. When shit goes down, it's the people with big connections and big titles that get away in the market. The little people get burned. We've seen this in the US a lot over the past year. So if you have a survival mindset, buy real things. Now, noone says you have to and by no means are things that bad. However it can and does happen. And when it does, it usually happens well before anyone can do anything about it, especially the people most liable to be hurt by it.

As I say though, poverty is an overrated bogeyman. For most of the first half of my life, I lived in a family of four that had an income equivalent of about $600 a month - with prices levels for most staples being near-identical to present-day US equivalent. How was it? I know it wasn't terribly easy for my dad, but honestly, as a family we were doing just fine. And as a kid, I pretty much had an awesome time that hasn't been matched since.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby ZephyrStar » Sat Oct 24, 2009 4:23 pm

Yeah, don't buy gold now. Buy shit you can use and save. Gold would have been great back when it was only 300$ an oz. I shoulda bought it then. Oh well. One big big big thing is, GET THE FUCK RID OF ANY CREDIT CARD DEBT YOU HAVE. That shit will suck the lifeblood out of you. Pay that fucker off and cancel it if you're the kinda person who leaves a balance on there.



......



Either that, or max it out buying survival things like guns and ammo? :> It pisses me off that I have to spend 20$ for a box of 9mm rounds :/
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Knowname » Sat Oct 24, 2009 4:51 pm

If my bank account went down I'd lose about the equivalent of $15 too :/
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby dwchang » Sat Oct 24, 2009 8:15 pm

Beowulf wrote:Indeed, the bones of what I said is that there is no reason to have a savings account. Take all that money and put it in gold. Even though its completely recovered from its Q4 2008 plunge, it still needs to double imo.


Fair enough. In reality I don't have much in my savings and most of my money is invested so I'm already doing that, but I was basically taking what you said as a "take your money out and put it under your mattress" which I strongly disagreed with.

At the same time, it's good to have some money somewhere as a rainy day fund. I've had one since I graduated college and had a job. My mom recommended it and it's a nice little safety net in case things do go terrible. It's not difficult either. Just save ~3 months worth of living expenses gradually or better yet, spend frugally until you have it saved up. It's nice to know I have something and I recommend all new graduates or newly employed folks to do the same.
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Re: Beo's Guide to Surviving the Collapse of the US Economy

Postby Zarxrax » Sun Oct 25, 2009 10:56 am

I have a lot of my money in gold. I usually go with coins because they are pretty, even though there is a bit of an extra markup on them.

It's also important to know how to plant a garden, and get REAL seeds for them (a lot of the seeds on the market today are genetically modified so that the resulting plants wont have any seeds in them). But then if the shit hits the fan, you are definitely going to need some guns to protect your crops.
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