How To Protect Yourself As The Economy Sinks

[No DUplicitous DUpe]

How To Protect Yourself As The Economy Sinks
(posted with permission of the author from http://www.saneramblings.com)

WARNING: What I'm about to tell you is very strong. It is the opposite of what most experts say will happen. Why should you believe me? In 2007, I published "How To Protect Yourself From The Coming Financial Crisis" on http://www.saneramblings.com far before most experts knew there was a problem.

Since then I've published updates that were also right, while the experts have been wrong as is obvious from the deepening financial disaster that confronts us all. I have nothing to sell you, no ax to grind:

Our ship hit an iceberg and is taking on water fast. The captain and crew are bailing out the water but they're rapidly losing the battle as the water rushes in and the ship will soon sink.

But the captain shouts, there are "glimmers of hope" and many passengers sigh in relief and return to their normal activities. But those who are more prudent quietly make their way to the life boats taking with them others who will follow.

How do you know this disaster is happening? When our financial ship hit the iceberg aside from the jolt, you may not have felt much more. But you will soon. Interest rates have been manipulated by the Fed to record lows. However, those interest rates will rise and then will skyrocket.

Here is why it will happen, how it will affect you and what you can do to protect yourself:

Why will this happen? The already staggering size U.S. debt is rising faster than a mushroom cloud over an atomic bomb explosion and is every bit as toxic.

As a result the Chinese and other major investors are fearful the U.S. will default on its debts or inflate its currency. Fed Chief Ben Bernanke calmed the global financial markets recently by assuring everyone the Fed would join with them and buy up to $300 billion in U.S. debt.

However, confidence soon fell through the floor as investors realized the Fed is creating the money out of thin air to buy that debt. Compounding their fears, the U.S. deficits are mounting faster than ever.

The current estimate of U.S. debt to be funded this year is $2.5 trillion but don't memorize that number because it will soon be higher. By comparison the Fed buying $300 billion of it is a drop in the bucket.

How will this affect you? Inflation. When the cost of money goes up so does the price of what you buy. At first the government will deny it but you'll know better as you pay higher prices at the grocery store, the gas station, and in your home for electricity and gas. The banks you bailed out will charge you more interest and fees and your taxes will jump as federal, state and local governments become strapped for cash.

What should you do? If you have long term financings planned, do them soon while interest rates are at record lows, and do them with fixed rate financing only. You will not see interest rates this low again for many years and you will be glad tomorrow that you locked in those low rates today.

Second, keep your job. Either become an expert in a field the public needs such as healthcare or become a jack of all trades by learning to perform many different functions.

Third, if you can afford it please invest in income producing assets. For example, buy residential real estate in major job centers, preferably in low crime, good school communities. Everyone needs to live somewhere and most people will make it a high priority to pay you. That money will be in ever inflating dollars as they pay off your property and give you income.

Forth, some sophisticated investors are already buying gold as a hedge against the dollar collapsing. You too may want to buy U.S. Gold Eagles or other one ounce or smaller gold coins.

Fifth, life is precious so enjoy each day you have. It costs nothing to give a hug or to smell a rose.

Because of the rampant greed and a broken system that rewards it with bailouts and stimulus plans, and a powerful dependence on military spending, the U.S. will pay whatever it has to get money. Please take some or all of these steps to protect yourself.

Eventually we will rise from the ashes, hopefully a better and more compassionate society, wiser from the experience. The good news is we are all in this together and together we can help one another, as we persevere and triumph together.

Dick

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comments both in agreement and in disagreement are welcomed and appreciated!

[leftstreet]

1. Work harder, invest more, buy gold. Sounds like a Republican mantra

How about organize the working classes?

That's what the Democratic party was supposed to be about

[county worker]

2. If you have the money to do those things the recession may not hurt you.

It's like telling a cripple to get up and walk if you are poor or unemployed and can't pay your bills.

In the great depression there were people having houses build along the Jersey shore because they had nothing better to do with their money. They must have gotten similar advice as you give now. It didn't do much for anyone other than create jobs building the houses but it was no advice to the majority in the 1930's.

[Warpy]

3. Some of this is sound, some of it is silly

The advice about keeping your job and expanding your skill set is good. So is the advice about getting only fixed rate long term loans. That was good advice even when the house of cards was still standing.

However, pointing out that some people are hoarding gold is rather silly. The target audience of "have some, not a lot" isn't the audience that should be thinking about shiny rocks, which are hard to store, thief magnets, and rarely bring their worth in a true crisis. The gold bugs, as this guy, are betting on runaway inflation. I don't think we're going to see that, as there are as many if not more deflationary pressures right now.

In addition, gold doesn't earn any more than stuffing dollars into a mattress does and will lose value during deflation, unlike those dollars. Income producing assets are always the best kind, although it might be a few years before you see solid, steady income.

Fiat currency will always inflate, of course, and wages will always lag behind that inflation unless the government or unions interfere with the process. However, gold is only a good hedge against that inflation when there are no deflationary pressures and when enough of one's disposable income can be diverted from income producing assets to put into something that inert.

[Mojorabbit]

4. Normally I would agree with you about gold

but it has doubled it's value since I bought a little and my other investments have lost half their value. What happens in the future remains to be seen.

[Warpy]

5. Read the part of diverting enough income to make a difference

because the whole point is that those of us who have a little are simply not going to be able to buy sufficient quantities of the stuff to provide an adequate hedge.

We're better off with income producing securities that give us income from year to year than with an inert commodity whose value might fluctuate in fiat dollars but which does no useful work and doesn't earn a dime.

[scheming daemons]

6. Sounds like something that would've been posted by Glenn Beck..

...meh.

[Mari333]

7. another person remarkably out of touch

smell a rose is a nice thought, but not if you are living in a homeless shelter because you lost your house and the last job you had was outsourced to india and your daughter will die without surgery and your family is choosing between medicine and food.

[northernlights]

8. don't lose your job?

Gee, why didn't I think of that?:think:

Normal advice for good times and bad. Too late for the vast majority. As if we had a choice when our industries tanked...