Over the course of the last few years, there has been a great deal of concern about the sustainability of our financial system. Many concerned citizens point to the rising national debt, and the fact that, on a more personal level, we have hard time avoiding debt. With fiat money making it easier than ever to just spend as much as you want, and without any real interest on the part of most politicians to curb spending, worries are cropping up that a financial apocalypse is on the way.
Now, no one knows when such an economic collapse would actually occur — or even if it would. Right now, there are a few theories about what could be coming in terms of our economic situation:
- Another recession: There is an argument that another recession is eminent. Due to the fact that no Congress or Administration wants a recession on their watch, there is an interest in playing kick the can with the economy. Policymakers try to put off recessions by using various tactics (such as cutting interest rates). This messes up the economic cycle, and means that recessions don’t get to play out the way they need to. This means that recessions are more frequent, and could even get progressively bigger.
- We’re already in a “real” depression: Others insist that we’re in the midst of a “real” depression, or if we aren’t, we will be in once soon. The idea is that we’re limping along, but all the excessive borrowing isn’t going to help the government or individuals, and are economy is in a precarious position.
- Total economic collapse, thanks to a loss of confidence in the dollar: And, of course, there are those that believe the financial apocalypse is right around the corner. That confidence in the dollar will disappear and the financial system as we know it will disappear in dramatic fashion.
Theories, of course, run gamut and there are ranges to the severity of financial ruin predicted by different theories. The real question is this: Do you believe a financial apocalypse is coming? And what should you do about it?
Situation: Total Financial Apocalypse
When it comes to a total financial apocalypse, it’s hard to say what could happen. Many think that we are approaching that point because the debt to GDP ratio in the United States is at right around 101 to 102 percent. However, the question is whether or not that level is sustainable. Japan has been sitting at close 200% debt to GDP and no one seems to be worried about the eminent collapse of Japan’s economy. On the other hand, everyone freaked out at Greece’s ratio of a little more than 143%, and things went really crazy when Greece’s ratio hit 160%.
In many ways, it’s about perception and confidence. If enough people perceive that financial apocalypse is coming, they will act in a way that will precipitate the very thing they are afraid of. Right now, there are enough people who still trust the system in a way that supports it.
What can you do to prepare in the event of a worst-case scenario? Here are some ideas for preparing yourself ahead of time:
Get back to financial basics: First of all, it makes sense to get back to financial basics. Create an emergency fund. Live within your means. Involve yourself in responsible investing. Protect your assets with insurance. Even if things don’t completely go off the rails, living this way will ensure that you are prepared for a range of situations, from a depression to economic expansion to a devastating natural disaster.
You can also consider alternative types of value. Even though gold and silver aren’t “officially” considered money these days, many people still associate precious metals with value. Add a little diversity to your portfolio and consider including hard assets like precious metals and real estate. While you don’t want to become overly invested in these assets, it doesn’t hurt to add them to your portfolio. Just make sure you can store and access physical gold and silver, since it won’t do you much good if you can’t get to it.
Non-financial preparedness: The unfortunate reality of a total financial apocalypse is that there would be some survival-type situations that would arise. This means that you need to consider areas of preparedness beyond the merely financial. You can put together a bug out bag that can serve you well in the event that you need to leave. You should have emergency supplies and food, as well as some form of money. Consider food storage, learning to obtain your own food, and skills like sewing that can help you repair clothing, as well as looking for alternative sources of fuel and warmth.
This non-financial preparedness can also help you get ready for natural disaster. Even if the financial apocalypse never comes, you still want to be prepared. What about another Hurricane Sandy, or a massive earthquake? What would you do if you had no power for a few days? Preparing in this way protects you from a number of personal apocalypse scenarios, even if they are temporary.
Invest in yourself: Finally, don’t forget to invest in yourself. Making an investment in yourself can help you weather almost any financial storm. One of the best things you can do is to educate yourself (even if you don’t get a formal degree) and develop marketable skills. That way, you are better equipped to handle a job loss or get through a recession. You can even invest in yourself by learning survival skills that can come in handy in any situation. Remember that you are your best asset, and you will need it fully developed in the event of a financial apocalypse.
What do you think? Is a financial apocalypse coming? Even if it’s not, would you be prepared for a setback? How do you prepare for what’s next?