Posted on 01/15/2021 10:20:17 AM PST by SeekAndFind
Dear Chuck,
Is America heading towards an economic collapse? If so, how do I prepare?
Worried Boomer
Dear Worried Boomer,
My view is we are headed towards another economic crisis with a low risk of an actual economic and/or currency collapse. In either scenario, there are ways to be prepared.
Economic Crisis vs. Collapse
An economic crisis is different from a collapse. America has worked through several in my lifetime: ‘70s stagflation, ‘81 recession, ‘89 savings and loan crisis, post-9/11 recession, ‘08 great financial crisis, and the 2020 coronavirus crisis we are in now. A collapse is brought on by a complex set of factors that must merge simultaneously but at its very core is a devastating interruption in economic output and/or a loss of confidence in a currency.
In an article for Investopedia, Sean Ross explains, “The root of any collapse stems from a lack of faith in the stability or usefulness of money to serve as an effective store of value or medium of exchange. As soon as users stop believing that a currency is useful, that currency is in trouble.”
The advantage America has is that no other nation has the vast diversification of economic output nor presents a viable alternative to the stability of the U.S. dollar….yet.
The two warning signs of a possible collapse are (1) high unemployment and (2) runaway inflation. Essentially, this is when there are not enough jobs for the economy to grow and too much worthless money being pumped into the economy.
Reasons the Dollar Could Collapse
1. High inflation combined with high debt. In 2008, the Fed printed trillions of dollars. In 2020, they printed more trillions. In The Counter-Revolution in Monetary Theory, Milton Friedman writes, “Printing more money, without a corresponding increase in the overall output value of the economy, necessarily decreases the currency’s value, with prices rising in response.”
2. Destabilizing events: think wars, pandemics, cyberattacks, terrorist attacks, uncontrolled printing; lack of confidence in the Federal Reserve, the President, or government at large.
3. Loss of confidence in the U.S. dollar. If foreign countries drop the U.S. dollar it could trigger a recession. Should China and Japan – who own the majority of our $6 trillion debt – drop their holdings, it could usher in a worldwide reset. This could usher in a digital alternative.
What Would Happen?
Panic would ensue because it would happen quickly. Demand for the dollar would drop dramatically along with U.S. Treasuries. Interest rates would increase. Hyperinflation would occur as investors would turn to other currencies. The dollar would decrease in value and prices would jump.
A collapse would be cataclysmic in the damage and disruption it would cause to not only our lives but to the rest of the world. Imagine how your life might be affected if banks and ATMs suddenly closed, you had no access to credit, there were limited supplies of groceries, gasoline, and other essentials, paired with an increase in civil unrest and crime. These scenarios would impact the postal service, transportation, education, health care, etc. Survival in this kind of environment for any length of time would be difficult.
We have many contemporary examples to learn from with varying degrees of damage: Germany, Argentina, Iceland, and Zimbabwe have all suffered a currency collapse. Of course, none of those nations have the size and stature of the U.S. dollar so a similar event in this country seems unimaginable, but it is not impossible.
How to Prepare?
1. Diversify your investments and income sources.
Solomon commented on this back in ancient times. In Ecclesiastes 11:2 he advises us to diversify into seven or eight differing assets while in Ecclesiastes 11:6 we are advised to have multiple sources of income.
Ask yourself if your career provides an essential service. If not, consider changing or getting certified in areas that would give you greater job security. This is important to remember when preparing your children for their future.
2. Get out of debt.
The Bible warns us repeatedly to avoid enslavement and compares debt to being like a slave. You can weather a crisis or a collapse with less stress and greater flexibility without debt.
3. Consider investing in hard assets or commodities.
Gold and Bitcoin represent an alternative to the U.S. dollar. When fear or volatility begins to rise, the price of these alternatives also rises. But these are not the only options to hedge against a crisis or collapse. Real estate, equipment, commodities, and precious metals are also favorable investments during a time of turbulence. There is not one single option that will always protect you; that is why diversification is essential.
Seat Belts, Not Parachutes
Brad McMillan at Forbes believes doomsayers are coming out of the woodwork. He says, “Volatility in a currency’s value does not mean the currency will collapse any more than a drop in Amazon’s share price means the company is going away.” In July, he said we would see a collapse coming long before it happens but did not believe it was coming soon.
I want the body of Christ to be prepared if and when a crisis/collapse occurs. In my new book,7 Gray Swans, Trends that Threaten Our Financial Future, I discuss the economic trends that concern me and the present challenges we face such as Universal Basic Income, Modern Monetary Theory, and a cashless society, among others.
Taking precautions now is like wearing a seatbelt in a fast-moving car or airplane. It makes sense. However, I do not believe it is time to look for the parachute!
Chuck Bentley is CEO of Crown Financial Ministries, the largest Christian financial ministry in the world, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Money Problems, Marriage Solutions
Y’should’a canned a TON of stuff from last years’ garden.
Buy gold! It has never collapsed.
“How do I prepare?”
Matthew to Revelation.
Well...no pun intended...your life only lasts a few days longer than your water supply.
Pray for the Grace and Strength of Faith to endure the coming chastisements.
Invest your stimulus check in lotto tickets?
And scratcher's...to diversify.
Invest in popcorn futures.
The government seems to think that creating money will lead to a recovery. It will lead to a loss of purchasing power of the dollar, causing the numbers (GDP, DOW, NASDAC, etc) to go up, thus creating the illusion of recovery.
Prices will be going up while the “economic indicators” go up too, but very few will see what should be obvious, that the rise is due to inflation. Will the public be smart enough to see the correlation? Silly question. Surely you jest.
“Buy gold! It has never collapsed.”
I’m unaware of any local merchants who will accept gold as payment.
This ^
I was disappointed i didn’t win the 700 dollar lotto Wednesday..I had serious plans for that money.
I’m diversified. I have .223, 7.62x39, .308, 7.62x54R, ...
Gold.
I was disappointed i didn’t win the 700 MILLION dollar lotto Wednesday..I had serious plans for that money.
Buried money is nearly as useless during hyper inflation as having a lost bank account. I think that’s a part of the point of the article.
What are your tangible assets and other forms of value/commodity/revenue?
Buy gold....true, but do not put all eggs into one basket. Fedcoin, the US cashless digital currency is steam rolling through Congress, Treasury and Fed. Do you really think “ they” will allow any competition? Fedcoin will allow total financial control....and by the way, the USD index had the dreaded “ death cross “occur 6-7 months ago and has already declined 12-14 percent....nothing really safe when the unit( dollar) you trade in collapses. Study the world’s currency crisis’s, and what destroyed Russia, Argentina, Venezuela, Brazil......the list is long. When socialism raised its head, currency collapses quickly followed.....it took only three years for Venezuela to fully collapse, and Argentina( the wealthiest SA nation) less than that.
Amen!
The whole thing is going to go belly up.
And those who labor in the service of a worldly demonic kingdom that’s on borrowed time are trying to make it happen even if they don’t know it.
Why, for example, does our society look like it is plagued by large numbers of folks displaying the fruit described in Romans 1:18-32 that is found among those who refuse to retain knowledge of the Lord? The falling away is arguably happening now.
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