Economic Meltdown In Six Months

What would you do if an insider told you that in six months we would have an economic meltdown that would make the Great Depressions look like a walk in the park?

I want you to think about this seriously for just a bit.

What steps would you take? How would you prepare from a physical, emotional and financial standpoint? What measures would you take to help not only your own family, but your skeptical loved ones as well?

People today are largely divided on the economic security of America. Some say things are going great. Others say we’re headed for disaster.

Although I’m not certain we’re headed for disaster, I am concerned about the massive debt loads that both governments and individuals are carrying these days.

In the era preceding the Great Depression – also known as the Roaring Twenties – people we living the que sera sera life. Borrowing money when they could for cars and houses, living  life of grandeur in many place thanks in large part to a booming stock market and a booming industrial era.

The Great Depression

From Wikipedia:

The Roaring Twenties, the decade that followed World War I and led to the Crash, was a time of wealth and excess. Building on post-war optimism, rural Americans immigrated to the cities in vast numbers throughout the decade with the hopes of finding a more prosperous life in the ever growing expansion of America’s industrial sector. While the American cities prospered, the overproduction of agricultural produce created widespread financial despair among American farmers throughout the decade. This would later be blamed as one of the key factors that led to the 1929 stock market crash.

Despite the dangers of speculation, many believed that the stock market would continue to rise forever.  On March 25, 1929, after the Federal Reserve warned of excessive speculation, a mini crash occurred as investors started to sell stocks at a rapid pace, exposing the market’s shaky foundation. Two days later, banker Charles E. Mitchell announced his company the National City Bank would provide $25 million in credit to stop the market’s slide. Mitchell’s move brought a temporary halt to the financial crisis and call money declined from 20 to 8 percent. However, the American economy showed ominous signs of trouble: steel production declined, construction was sluggish, automobile sales went down, and consumers were building up high debts because of easy credit.

We know the rest of the story: the market did indeed crash and America spent the next decade+ digging out of a economic meltdown that caused a 25% unemployment rate and a 10% foreclosure rate at its worst, according to sources.

To this day, survivors of the Great Depressions are keen on avoiding debt and squirreling away cash as they live with the constant reminder of the tough economic times people faced during that period in American history.

These stories from the Great Depression will give you an idea of the specifics of what people went through to merely survive during that massive economic meltdown.

I remember one story in particular that a dear friend of mine tells: her father and his 9 siblings living with their parents in a chicken coop and catching frogs for dinner because there were no other options for the family.

Another Economic Crash?

Having studied the Great Depression quite intensely, I fear what would happen in America should we fall on hard times again. We saw a glimpse of that during the 2008 recession, and some report that the 2008 meltdown was equal to or worse than the Great Depression in terms of numbers, but people seem to have already forgotten those hard times.

In this culture where credit is readily available to just about anyone and TV ads and the Joneses work to remind us that life is about “living in the now”, there is little thought for preparing for the future.

And this led me to ask myself the question, “What would you do if you were told than an economic meltdown would happen in six months?”

For us, the plan would be simple but solid:

  1. We’d sell the house for something cheaper
  2. We’d take the proceeds from the sale and finish dumping our debt
  3. We’d stockpile big time the things we need for everyday life
  4. We’d work to warn others as best we could

I have no idea what financial future lies in store for America, our dear friends to the north in Canada and the rest of the world, but something deep in my spirit says we’d better prepare for tougher times. I work to pray and seek God as opposed to listening too much to the rhetoric of those more involved with the financial goings on of the world – whether those with sunshiney outlooks or those predicting gloom and doom. And my spirit feels agitated these days when I think about the financial future of the world.

So, we prepare. Hoping for the best but planning for the worst.

And if no financial crises hit these shores we’re in a better place anyway, and that’s a good thing, right?

What steps would you take if you were told that there would be an economic meltdown in six months?

 

*Image credit via Flickr and Pamela B

 

 

21 comments on “Economic Meltdown In Six Months

  1. I would hope we had a six month lead time if we were heading towards a major meltdown. That would give us all time to get better plans in place. Downsizing and stockpiling are great steps, because if an event occurred who knows how long it would last. I would also want to help as many family, friends and anyone else who would listen prepare too. I’m sure many would not believe it’s real and would need the help.

    1. “I’m sure many would not believe it’s real and would need the help.” I think so too, Brian. We would try and stockpile not just for ourselves, but enough for friends and family too.

  2. I’m a little scared of where things look right now. I think the Fed is currently in the back pocket of Wall Street and that is a dangerous thing for anybody that’s, well, not on Wall Street. The market gains are being pushed up by Fed policy, but what it means is that Wall Street can make an organized exit before anything big happens, which will leave everybody else (ie retail) holding the losses. And the really scary part is that typically the Fed has the ability to lower rates as a countermeasure to a worsening economy, but their bowing to Wall Street and holding the rates too low have made it such that that they will have no gas in the tank when the next hit on the economy comes.

    1. Exactly, MB! Those are the types of indicators that have me a bit apprehensive as well. It’s as if we’ve been living in a fantasy world for the last several years and we’re about to be hit with reality.

  3. I read an interesting article a while back about a survivor of the war in Bosnia. Their economy totally collapsed, and he said that more important than money (because there was no money) was having things to barter with. Food was on the top of the list, but he said that the most popular thing that was bartered with was throw away Bic Lighters. Candles were also at the top. I thought that was interesting.

    But for me, my family would bunker down together and pool our resources. I am a single woman of 62 years, and I would need the protection of my Ex-Marine son in law. My daughter already stock piles food and she is growing a lot of food and is planning on raising chickens.

    Let’s pray it doesn’t come to this.

    1. I’ve read that article too and found it very interesting, Dianne!! It’s great that your daughter and son-in-law have the education and are doing the things that need to be done in case something comes to pass. I call that smart planning. Maybe the SHTF, maybe it won’t. But it certainly doesn’t hurt anything to be prepared.

  4. Great post, Laurie! I tend to constantly reassure myself that, since we got through 2008 okay, we would be fine – recovery was relatively quick for us then. But you really made me consider what I would do if it happened again or if it was even worse this time. I admit, the thought brings on significant anxiety! I hope we would have 6 months to prepare.

    We grow a lot of food for a portion of the year, plus we have a decent stockpile, so I think we’d be okay on that end. We do have a significant mortgage, which would be our major issue, and I’m not sure if we’d be able to sell it in an economic crisis.

    Thanks for making me think on this issue!

    1. That’s wonderful that you have a stockpile and are growing food, Amanda!! Hopefully you guys figure out a plan for handling the mortgage – either now or if that crisis hits. Best of luck to you!!

  5. I think it is hard to anticipate what we would do given the fact that if it was said it would be worse than the great depression, you don’t know what would happen to the monetary system. I would try to get our debt down as far as possible so our obligations would be able to meet as many as possible once things went South. I would also try and stockpile as many essentials as possible in case we were to get cut off.

    1. That seems to be the theme. Wise ideas, IMHO. The truth of the matter is that we likely will have little or no warning if something should hit.

  6. Our two big goals are paying down our debt as much as possible & having some type of money or commodity that could be bartered in case a bank holiday occurs. That way I can still exchange some form of wealth for food or other necessities.

    If I remember correctly they closed the banks for several days in a row during the Great Depression & similar to Cyprus last year. If that happens, I don’t know if credit cards will function (maybe somebody else knows the answer).

  7. I think that the main problem is that people have absolutely and truly forgotten how *tough* times can really be. The Great Recession has been in the rearview mirror for many people, while for others, they are still dealing with the ramifications 8 years later. We collectively as a people, need to recognize that simplicity is key, savings is a necessity, and “living just for today, no matter the consequences”, is not the best idea. Learning from the past is important.

    1. I agree, Mackenzie! We as a people forget so quickly when times are tough, and fail to remember the lessons learned. Love what you said about simplicity too. Many people from the Great Depression learned how glorious the simple life can indeed be.

  8. I also get the impression that tough times are ahead. I don’t know what form it will take, but something as simple as a rise in interest rates could devastate so many people’s personal finances. If I knew things were going to go downhill in a hurry, I think I would be doing what we’re doing now – a combination of debt-reduction and saving. And you’re right – if no crisis occurs, we’ll be better off for what we’ve done in preparation for a crisis anyway. Win-win : )

  9. I think many of us have gotten comfortable and forgot about the tough times. I’m glad the economy is better, but it looks like we might be headed toward something bad soon? I’m trying to protect myself financially!

  10. I would contact all the personal finance bloggers that I know and suggest we split rent. I joke but most people that write about money online have 100% in stocks. As a community, financial bloggers would probably get hurt more than most in a second Great Depression, including myself. I suppose I believe in my ability to plant seeds and hunt more than the shock absorbing power of bonds right now.

Leave a Reply

Your email address will not be published. Required fields are marked *