This is part 2 of the two-part video series, "How an Economy Collapses...and how to Protect Yourself".
On this blog, you can find the 2-part essay series of the same title. For a fuller understanding of the topic, consider viewing both videos and reading the essay.
Both this and the 1st part of this video series can be found here or feel free to head over Paul Mladjenovic's video channel at YouTube which is
http://www.youtube.com/paulmlad.
For those that want to implement immediate strategies for financial security, check out the financial audio ebook, "Financial Firewall" by clicking HERE or get more details at
http://bit.ly/tGFrU4.
Tuesday, December 20, 2011
Friday, December 16, 2011
essay: How an Economy Collapses… and How to Protect Yourself. Part 2 of 2
To recap the main point from Part one of this two-part essay series, I mentioned that the internal collapse of an economy occurs when it is overburdened by too much consumption (such as debt) and that the primary engine of this over-consumption is typically a government that has grown too big to sustain. The United States is definitely trending in that direction. I used my former country, Yugoslavia, as an example of what may occur.
The interesting thing about the economy collapse of the Soviet Union and Yugoslavia is that when the dust settled, both country’s land space was then made up of smaller nation states. The Soviet Union became Russia, Ukraine and so on. Yugoslavia became Croatia, Slovenia and so on. In the wake of an economic collapse, could the United States became a different configuation of two or more sovereign states?
Not every economic collapse unfolds as expected. The collapse of the Soviet Union was spectacular but much of the tumult was in Russia proper and the urban areas. The rural areas got through fairly well. What would happen in a collapse of the United States economy? Would there be strife and upheaval in major metropolitan areas?
There is plenty of speculation here along with events from our history that could provide clues about how people would behave. I personally do not fear the financial aspects of a collapse as much as I fear the social aspects. As I have written before, economic disintegration leads to social disintegration.
As I wrote in part one, an economic collapse is distinctly different from a currency collapse. In a currency collapse, the economy and its infrastructure could stay generally intact and in the aftermath could recover (with a new currency) relatively soon. Maybe not days or weeks but some type of normalcy could ensue in a matter of months.
In an economic collapse, the matter is much worse. The key is how soon production can recover from any disruptions that occurred. In addition, the big variable is how people will react when their routine and day-to-day needs (food, water, electricity, etc.) are severely disrupted. When many people are dependent, especially when you consider millions on public assistance, how will they act in the event that their subsidies are abruptly stopped? Greece and Egypt certainly provide us with unsettling examples.
When my former country, Yugoslavia, collapsed into oblivion in 1994, the result was chaos and civil war. Could such events happen in the United States?
Right now as I write this, some states in the US are already dangerously close to disintegration. States like California have been greatly mis-managed and the condition of some of their cities are very dubious. The United States economy is generally strong and diverse and you may not see a nationwide collapse (similar to how you didn’t see a nationwide collapse in the former Soviet Union) but you will definitely see pockets of dangerous upheaval in some parts.
I believe that no matter how the potential collapse unfolds, the best strategy to implement boils down to this to-do list:
1. Physical gold and silver bullion. Paper assets have risks attached to them. This is quite evident in recent years. Virtually any paper asset can go to “zero” value in frightening speed. Stocks, bonds, mutual funds, bank accounts and currencies could become worthless very quickly.
Precious metals in physical form do not have this “counter-party risk”. Consider diversifying away from paper assets by holding at least 5-10% of your assets in physical bullion form. Yes…gold and silver prices can fluctuate and can have some scary corrections but that is due to market buying and selling volatilty. Both metals have enduring value and they won’t go to zero.
2. On Stocks: only be long in stocks of companies that have proven and consistent profitability, pay dividends and sell goods and services that are considered “human need”. This includes food, water, energy etc. your common sense goes a long way in this pursuit and you should make it clear to your financial advisor. For more conservative investors, consider ETFs that specialize in the same categories.
3. Stay away from fixed-interest, long-term bonds regardless of whether they are corporate, treasury or municipal. Economic collapse or not, the danger of currency problems (such as the potential for inflation or even hyperinflation) is very real.
4. Self-sufficiency. Self-sufficiency is a good idea in good times and it is a great idea in bad times. If you are dependent on a third party (such as government assistance or pensions), it is very important to find out how solvent they are. But regardless of solvency, you will just be better off knowing that you can get by without relying on others. In a recent report, some 48 million people are dependent on food stamps. What happens when this service breaks down?
5. Find out about your town’s general well-being. Right now as you read this, there are literally hundreds of towns (thousands?) that are either considering or are already shrinking or eliminating essential services. There are towns that have closed their police departments and/or their fire departments. Decide what you will do in that town. Do you stay or move to a less-risky area?
6. Think safety. In the event of social disintegration, more crime will be the norm. How can you secure yourself, your family and your property?
7. Are you discussing possibilities with your neighbors, friends and others in your “support circle”. Family and friends will become essential when people need to help each other. It is time to build alliances.
8. Start a part-time business. At my site, www.RavingCapitalist.com, I tell my subscribers and readers that weath-building isn’t just investing your assets for growth and/or income (passive wealth-building), it is also about using your time, effort and talents to make money (active weatlth-building). In today’s economy I think that having a part-time business is an essential part of your over-all wealth-building action plan and financial security. It is a form of diversification along with your job or pension.
9. While you are at the site, get a free subscription to the ezine Prosperity Alert. In January subscribers will receive a free report on the best resources and strategies for self-sufficiency and wealth-preservation strategies.
It is far from a complete list but I think it is a good start. Fortunately, you and I have many venues both locally and on the internet to network, plan, prepare and to be informed. Right now self-sufficiency and survival topics are popular topics since many people do see the writing on the wall and more people see the unsettling trend more clearly.
The economy is definitely struggling and it could be years before any significant rebound. The growth of government (federal, state & local) in terms of size, scope and debt has been relentless and the burden will become unsustainable.
The answers to all the questions in this essay will come soon enough and we probably won’t like the answers. I will certainly keep monitoring and commenting on “the big picture” and keep providing more information to you…stay tuned!
The big question for you is ....”are you prepared?” Sure…there is a remote chance that nothing or very little will happen but what is likely to happen? It doesn’t hurt to be prepared.
--------------------------------------------------------------------------------
Paul Mladjenovic , CFP is the author of “Stock Investing for Dummies” and the editor of the Prosperity Alert newsletter (available free at www.RavingCapitalist.com). He teaches nationally on investing and business start-up issues and his video & essay commentaries can be found at www.mladjenovic.blogspot.com.
------------------------------------------------------------------------------------------------------------------------------------------------------
The interesting thing about the economy collapse of the Soviet Union and Yugoslavia is that when the dust settled, both country’s land space was then made up of smaller nation states. The Soviet Union became Russia, Ukraine and so on. Yugoslavia became Croatia, Slovenia and so on. In the wake of an economic collapse, could the United States became a different configuation of two or more sovereign states?
Not every economic collapse unfolds as expected. The collapse of the Soviet Union was spectacular but much of the tumult was in Russia proper and the urban areas. The rural areas got through fairly well. What would happen in a collapse of the United States economy? Would there be strife and upheaval in major metropolitan areas?
There is plenty of speculation here along with events from our history that could provide clues about how people would behave. I personally do not fear the financial aspects of a collapse as much as I fear the social aspects. As I have written before, economic disintegration leads to social disintegration.
As I wrote in part one, an economic collapse is distinctly different from a currency collapse. In a currency collapse, the economy and its infrastructure could stay generally intact and in the aftermath could recover (with a new currency) relatively soon. Maybe not days or weeks but some type of normalcy could ensue in a matter of months.
In an economic collapse, the matter is much worse. The key is how soon production can recover from any disruptions that occurred. In addition, the big variable is how people will react when their routine and day-to-day needs (food, water, electricity, etc.) are severely disrupted. When many people are dependent, especially when you consider millions on public assistance, how will they act in the event that their subsidies are abruptly stopped? Greece and Egypt certainly provide us with unsettling examples.
When my former country, Yugoslavia, collapsed into oblivion in 1994, the result was chaos and civil war. Could such events happen in the United States?
Right now as I write this, some states in the US are already dangerously close to disintegration. States like California have been greatly mis-managed and the condition of some of their cities are very dubious. The United States economy is generally strong and diverse and you may not see a nationwide collapse (similar to how you didn’t see a nationwide collapse in the former Soviet Union) but you will definitely see pockets of dangerous upheaval in some parts.
I believe that no matter how the potential collapse unfolds, the best strategy to implement boils down to this to-do list:
1. Physical gold and silver bullion. Paper assets have risks attached to them. This is quite evident in recent years. Virtually any paper asset can go to “zero” value in frightening speed. Stocks, bonds, mutual funds, bank accounts and currencies could become worthless very quickly.
Precious metals in physical form do not have this “counter-party risk”. Consider diversifying away from paper assets by holding at least 5-10% of your assets in physical bullion form. Yes…gold and silver prices can fluctuate and can have some scary corrections but that is due to market buying and selling volatilty. Both metals have enduring value and they won’t go to zero.
2. On Stocks: only be long in stocks of companies that have proven and consistent profitability, pay dividends and sell goods and services that are considered “human need”. This includes food, water, energy etc. your common sense goes a long way in this pursuit and you should make it clear to your financial advisor. For more conservative investors, consider ETFs that specialize in the same categories.
3. Stay away from fixed-interest, long-term bonds regardless of whether they are corporate, treasury or municipal. Economic collapse or not, the danger of currency problems (such as the potential for inflation or even hyperinflation) is very real.
4. Self-sufficiency. Self-sufficiency is a good idea in good times and it is a great idea in bad times. If you are dependent on a third party (such as government assistance or pensions), it is very important to find out how solvent they are. But regardless of solvency, you will just be better off knowing that you can get by without relying on others. In a recent report, some 48 million people are dependent on food stamps. What happens when this service breaks down?
5. Find out about your town’s general well-being. Right now as you read this, there are literally hundreds of towns (thousands?) that are either considering or are already shrinking or eliminating essential services. There are towns that have closed their police departments and/or their fire departments. Decide what you will do in that town. Do you stay or move to a less-risky area?
6. Think safety. In the event of social disintegration, more crime will be the norm. How can you secure yourself, your family and your property?
7. Are you discussing possibilities with your neighbors, friends and others in your “support circle”. Family and friends will become essential when people need to help each other. It is time to build alliances.
8. Start a part-time business. At my site, www.RavingCapitalist.com, I tell my subscribers and readers that weath-building isn’t just investing your assets for growth and/or income (passive wealth-building), it is also about using your time, effort and talents to make money (active weatlth-building). In today’s economy I think that having a part-time business is an essential part of your over-all wealth-building action plan and financial security. It is a form of diversification along with your job or pension.
9. While you are at the site, get a free subscription to the ezine Prosperity Alert. In January subscribers will receive a free report on the best resources and strategies for self-sufficiency and wealth-preservation strategies.
It is far from a complete list but I think it is a good start. Fortunately, you and I have many venues both locally and on the internet to network, plan, prepare and to be informed. Right now self-sufficiency and survival topics are popular topics since many people do see the writing on the wall and more people see the unsettling trend more clearly.
The economy is definitely struggling and it could be years before any significant rebound. The growth of government (federal, state & local) in terms of size, scope and debt has been relentless and the burden will become unsustainable.
The answers to all the questions in this essay will come soon enough and we probably won’t like the answers. I will certainly keep monitoring and commenting on “the big picture” and keep providing more information to you…stay tuned!
The big question for you is ....”are you prepared?” Sure…there is a remote chance that nothing or very little will happen but what is likely to happen? It doesn’t hurt to be prepared.
--------------------------------------------------------------------------------
Paul Mladjenovic , CFP is the author of “Stock Investing for Dummies” and the editor of the Prosperity Alert newsletter (available free at www.RavingCapitalist.com). He teaches nationally on investing and business start-up issues and his video & essay commentaries can be found at www.mladjenovic.blogspot.com.
------------------------------------------------------------------------------------------------------------------------------------------------------
Monday, December 12, 2011
Video: How an Economy Collapses (part 1 of 2)
Because it is such an important topic, I am covering it in both essay and video commentaries. Here is Part 1 of the video commentary from Youtube:
For those that want to implement financial strategies immediately, consider Paul Mladjenovic's audio ebook "Financial Firewall" by clicking HERE.
Thanks for viewing part 1. Part 2 will be out within a few days.
I wish you a joyful holiday season and a prosperous and safe 2012!
Regards,
Paul Mladjenovic
www.RavingCapitalist.com
P.S. Coming soon...A very special program to help you have a successful 2012...no matter how bad the economy gets! To get the details soon, get a free subscription to the free ezine, Prosperity Alert (click here).
For those that want to implement financial strategies immediately, consider Paul Mladjenovic's audio ebook "Financial Firewall" by clicking HERE.
Thanks for viewing part 1. Part 2 will be out within a few days.
I wish you a joyful holiday season and a prosperous and safe 2012!
Regards,
Paul Mladjenovic
www.RavingCapitalist.com
P.S. Coming soon...A very special program to help you have a successful 2012...no matter how bad the economy gets! To get the details soon, get a free subscription to the free ezine, Prosperity Alert (click here).
Thursday, December 8, 2011
How an Economy Collapses… and How to Protect Yourself. Part 1 of 2
Copyright 2011. Paul Mladjenovic. All rights reserved.
There are growing fears that an economic collapse is on the way. Is this fear justified? Before we conclude that it is a by-gone conclusion and that it’s time to head for the hills, let’s first cover how and why an economy collapses. In this essay I talk about economic collapse as an “internal event”. Keep in mind that there are “external” reasons for an economy to collapse (such as war and/or natural events such as earthquakes etc.)
Keep in mind first that we are talking about an “economic” collapse… don’t confuse this with a “currency” collapse. History has witnessed thousands of currencies collapsing into oblivion and in many of those the economy in question was able to get through it without general harm to the economic infrastucture and much of society. Yes…currency collapses are very painful but they don’t necessarily spell doom for society.
My former country, Yugoslavia, experienced both a currency collapse and also an economic collapse. It was, after all, a communist country (hard-core socialism) and so it was already an “economic basket case”. The populace was already suffering before its currency was hyper-inflated into oblivion. During 1993-94, Yugoslavia’s hyperinflation caused the dinar (its currency at the time) to become worthless and the currency indeed collapsed. As I have written before, “Economic disintegration leads to social disintegration”. Soon the currency collapse led to economic collapse. Chaos and civil war followed.
Could a similar economic collapse occur in the United States?! The harsh truth is that it is not out of the question and…let’s face it… we are clearly trending in that direction.
Back to the central topic of “how an economy collapses”. It can easily boil down to the simple dynamic of supply and demand. A good economy is a reasonable balance between supply (production) and demand (consumption). Put simply, when consumption greatly exceeds production, you have an “imbalance” which (if not rectified) leads to an unsustainable situation resulting in collapse. The most important hallmark of a successful economy is production. This means that people are producing (goods and services) through work, effort, ambition, innovation and initiative. This is usually embodied in the private sector. The most important economic incentive for production is profit.
The problem is consumption and the culprit is usually found in a single entity…government. No matter how you slice or spin it, for reasons both good and bad, the government (the public sector) is an engine of consumption. More government means more consumption and it also means a coercive burden on the private sector. What happens when the folks in the private sector can no longer sustain the folks in the government?
The current data bear out this imbalance. It was recently reported that over 48 million people in the US receive food stamps. Our current federal government budget deficits annually exceed a mind-boggling $1 trillion. Total federal debt is surpassing $15 trillion. Unfunded federal liabilities (Social Security and Medicare) are passed $50 trillion. Then there is war! War and national defense is also very expensive. Oh…and don’t forget about massive bank bailouts too. This explosion of massive spending can not be sustained and the economic danger is unprecedented.
As I wrote earlier, Yugoslavia was a communist country. Communism is an extreme form of “statism” or the idea that “the State” …government… should be growing in size, scope and reach. A communist government typically rewards or encourages consumption while simultaneously discouraging or penalizing production. Communism obliterates the “profit motive”…so why bother producing? Therefore, communism (or other form of totalitarian government) never survives on its own. The imbalance is impossible to carry indefinitely.
Never forget that federal and state governments are engines of consumption. Government does not produce wealth… it can only take it or destroy it. Politicians promise more and more to win favor with voters. More and more folks are either employed by the government or are dependent on government. Meanwhile, less and less folks are producing and paying for this burden. Is it such a mystery that this type of dynamic usually ends badly? We can only hope that our leaders and our society take the necessary and painful steps to mitigate or avert catastrophe (such as shrink government). Keep praying!
You and I will not be able to turn the situation around in any meaningful way (not yet anyway) but we can take steps to protect ourselves as citizens and investors. I will provide more details in part two of this essay (coming shortly) and make available more video commentaries at my blog, but let me reveal the first thing you should do:
Accumulate gold and silver physical bullion to be diversified away from the risk of paper investments (I cover this in a short video commentary found at my blog (or my Youtube channel (www.youtube.com/paulmlad). That is a first step and an easy step that anyone can do immediately. I will give more details on this and other considerations in part two of this essay and other videos to come.
The bottom line is that an economic collapse will be an ugly event. Let Greece be a warning to you. Even lesser events (such as a banking crisis) could wipe out your savings or investments. Preparing for the potential problems of an economic collapse is prudent and much of what you can do does not require a major lifestyle change (such as moving to a distant cave). The point is that the majority of citizens and investors are not adequately protecting themselves.
What are you doing to minimize the risk? See you in part two (coming soon)…
--------------------------------------------------------------
P.S. What better time to put up a "Financial Firewall". You can protect your finances and your investment portfolio with easy steps you can do immediately!
Find out more about the Financial Firewall audio ebook at:
http://www.ravingcapitalist.com/paulmlad/ravingcapitalist/FinancialFirewall.html
There are growing fears that an economic collapse is on the way. Is this fear justified? Before we conclude that it is a by-gone conclusion and that it’s time to head for the hills, let’s first cover how and why an economy collapses. In this essay I talk about economic collapse as an “internal event”. Keep in mind that there are “external” reasons for an economy to collapse (such as war and/or natural events such as earthquakes etc.)
Keep in mind first that we are talking about an “economic” collapse… don’t confuse this with a “currency” collapse. History has witnessed thousands of currencies collapsing into oblivion and in many of those the economy in question was able to get through it without general harm to the economic infrastucture and much of society. Yes…currency collapses are very painful but they don’t necessarily spell doom for society.
My former country, Yugoslavia, experienced both a currency collapse and also an economic collapse. It was, after all, a communist country (hard-core socialism) and so it was already an “economic basket case”. The populace was already suffering before its currency was hyper-inflated into oblivion. During 1993-94, Yugoslavia’s hyperinflation caused the dinar (its currency at the time) to become worthless and the currency indeed collapsed. As I have written before, “Economic disintegration leads to social disintegration”. Soon the currency collapse led to economic collapse. Chaos and civil war followed.
Could a similar economic collapse occur in the United States?! The harsh truth is that it is not out of the question and…let’s face it… we are clearly trending in that direction.
Back to the central topic of “how an economy collapses”. It can easily boil down to the simple dynamic of supply and demand. A good economy is a reasonable balance between supply (production) and demand (consumption). Put simply, when consumption greatly exceeds production, you have an “imbalance” which (if not rectified) leads to an unsustainable situation resulting in collapse. The most important hallmark of a successful economy is production. This means that people are producing (goods and services) through work, effort, ambition, innovation and initiative. This is usually embodied in the private sector. The most important economic incentive for production is profit.
The problem is consumption and the culprit is usually found in a single entity…government. No matter how you slice or spin it, for reasons both good and bad, the government (the public sector) is an engine of consumption. More government means more consumption and it also means a coercive burden on the private sector. What happens when the folks in the private sector can no longer sustain the folks in the government?
The current data bear out this imbalance. It was recently reported that over 48 million people in the US receive food stamps. Our current federal government budget deficits annually exceed a mind-boggling $1 trillion. Total federal debt is surpassing $15 trillion. Unfunded federal liabilities (Social Security and Medicare) are passed $50 trillion. Then there is war! War and national defense is also very expensive. Oh…and don’t forget about massive bank bailouts too. This explosion of massive spending can not be sustained and the economic danger is unprecedented.
As I wrote earlier, Yugoslavia was a communist country. Communism is an extreme form of “statism” or the idea that “the State” …government… should be growing in size, scope and reach. A communist government typically rewards or encourages consumption while simultaneously discouraging or penalizing production. Communism obliterates the “profit motive”…so why bother producing? Therefore, communism (or other form of totalitarian government) never survives on its own. The imbalance is impossible to carry indefinitely.
Never forget that federal and state governments are engines of consumption. Government does not produce wealth… it can only take it or destroy it. Politicians promise more and more to win favor with voters. More and more folks are either employed by the government or are dependent on government. Meanwhile, less and less folks are producing and paying for this burden. Is it such a mystery that this type of dynamic usually ends badly? We can only hope that our leaders and our society take the necessary and painful steps to mitigate or avert catastrophe (such as shrink government). Keep praying!
You and I will not be able to turn the situation around in any meaningful way (not yet anyway) but we can take steps to protect ourselves as citizens and investors. I will provide more details in part two of this essay (coming shortly) and make available more video commentaries at my blog, but let me reveal the first thing you should do:
Accumulate gold and silver physical bullion to be diversified away from the risk of paper investments (I cover this in a short video commentary found at my blog (or my Youtube channel (www.youtube.com/paulmlad). That is a first step and an easy step that anyone can do immediately. I will give more details on this and other considerations in part two of this essay and other videos to come.
The bottom line is that an economic collapse will be an ugly event. Let Greece be a warning to you. Even lesser events (such as a banking crisis) could wipe out your savings or investments. Preparing for the potential problems of an economic collapse is prudent and much of what you can do does not require a major lifestyle change (such as moving to a distant cave). The point is that the majority of citizens and investors are not adequately protecting themselves.
What are you doing to minimize the risk? See you in part two (coming soon)…
--------------------------------------------------------------
P.S. What better time to put up a "Financial Firewall". You can protect your finances and your investment portfolio with easy steps you can do immediately!
Find out more about the Financial Firewall audio ebook at:
http://www.ravingcapitalist.com/paulmlad/ravingcapitalist/FinancialFirewall.html
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