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

[Beowulf]

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.

[Knowname]

move to canada

[CodeZTM]

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. maybe

Ok, I'm done being serious now.

[kenisama]

nah, we're screwed... watch AMVs

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).

[dwchang]

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.

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.

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.

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.

[Moonlight Soldier]

move to canada

\o/

[godix]

General rule of life: predictions that boil down to 'if this goes on...' almost never are accurate because things rarely go on.

[Otohiko]

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.

[Knowname]

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.

[Beowulf]

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.