Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Beating the Credit Crunch Financial Bust

Stock-Markets / Credit Crunch Sep 17, 2007 - 12:54 AM GMT

By: Andy_Sutton

Stock-Markets Of the over 500,000 words in the English language, I am pretty confident at this point that most of them have been used in one way or another to describe the current credit disaster. I am very confident in calling this a disaster since the bobbleheads on TV insist on saying it ain't so. The question that continues to show up in my inbox on a daily basis, and now with more urgency than ever is how to beat this? Is it possible? What can the little guy do? I think that most people are at least aware that this is going to hurt.


They may not understand the minutia of it all, nor do they need to. They do need to understand that the government's arsenal to fight this mess (that they in part created) consists entirely of weapons of cash destruction. This bailout will result in the confiscation of wealth, savings and investment alike. History tells us time and time again that the savers are the ones who always pay for the profligacy of the masses.

What to do about it?

In this regard, there is good news and bad news. The good news is that there are some things that one can do to lessen the effects of this. The bad news is that there is no magic bullet. There is nothing that will insulate 100% of one's wealth and standard of living against this massive coming hyperinflation. There are no guarantees. There are only suggestions, borne out by history and common sense:

1) Live a simple life with simple pleasures. The extravagant lifestyle of the American consumer is about to end. It might end slowly or it might end abruptly, but end it will. This may sound completely ridiculous and non-financial in nature, but it is really the best defense against a declining standard of living. The old adage you won't miss what you didn't have applies heavily here.

2) Tune in to alternative media sources for important information about the crisis. Paying attention to the alphabet soup networks is truly hazardous to your financial health. Their agenda is simple: push the rosy view that we have a Goldilocks economy that can never falter. They are owned by corporations that have a vested interest in maintaining the status quo - no matter what the cost to you. Be your own advocate. If a doctor told you that you needed brain surgery, you'd be likely to get a second opinion. Why should your financial future be any different?

3) From King to Trash. I am a firm believer in the notion that we will 'suffer' from at least a brief bout of genuine deflation before the hyperinflation sets in. During this time, cash will be King. Ironically, the powers that be would convince us that somehow deflation is evil. That somehow, your money buying more (because it is more scarce) is a bad thing. Incredible. The key here will be identifying the inflection point and acting accordingly. When the hyperinflation hits, converting cash to tangibles will be necessary. This shift from deflation to relative equilibrium to hyperinflation may happen slowly or quickly. Being aware of it is key. Do not rely on the media and or government for this information.

4)  Own real assets. Anything that is perceived as being valuable, is used in the production of other items or can be consumed is a good place to look in terms of investment. When I say investment, I don't necessarily mean through the financial markets. Gold and silver are both very portable, tangible assets. Silver has less monetary attributes than gold, but is an important component in the production of many basic goods today. Real assets act as a double benefit. They can either be used or traded for things that may be used. Gold has been real money for 5000 years ago and when fiats fall, gold again reigns supreme over all challengers. Got gold?

5) Cut petroleum consumption. This past week, oil prices touched $80/bbl with no major 'news' events. There was a weak tropical storm in the Gulf, but nothing terribly serious, and the usual Middle Eastern strife, but no cataclysmic event to speak of. This is most likely a function of the weaker dollar, which bodes for higher oil and gas prices down the road. Throw in Peak Cheap Oil for good measure and it makes sense to cut back wherever possible in advance of the inevitable price increases. Again, you will not miss what you don't have or are not used to. This is easier said than done for most. The suburban sprawl has resulted in longer and longer commutes and finding a good job close to home is not always an option. Consider public transportation and other fuel-saving strategies.

6) Exit the US Dollar. Even though in the end, all fiat currencies will return to their intrinsic value (zero), in the interim there is some element of safety to be had in exiting the US Dollar in favor of more profitable currencies. This will be especially true if the Fed cuts interest rates as expected this coming week. The dollar and the American consumption/debt-based economy are clearly an albatross on the productive capacity of the world. The dollar is a prime candidate for a significant devaluation. There are a multitude of foreign currency ETF's, mutual funds and CD's available for purchase. This will continue to be the case as the demand for non dollar-denominated assets continues to grow. Remember though that these are only TEMPORARY havens and should not be trusted for long-term financial security.

Granted, other than #4 and #6 we are not really dealing with financial solutions. This is going to be a lifestyle issue even more than a financial one. For too many generations, Americans have been as a whole, used to the best of everything. We are not conditioned to think of a time when that was not the case. The Great Depression is merely an inconvenient chapter in the history book of human existence. We really do not believe that it can happen again. We are so much smarter now. So much more sophisticated. Are you willing to bet on it?

By Andy Sutton
http://www.my2centsonline.com

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. He currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar.

Andy Sutton Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Roger Koss
29 Jan 08, 12:55
Problem with 401Ks
Andy, I have been worrying about this for a couple years now, and every article I read, none has posted anything about 401Ks. We are all being bombarded with the recommendations that we should be saving as much as possible into a 401K for our retirements. On the surface, and over the course of limited history (<100years) this seems like a good idea. What scares me is that we are putting a boat load of money into funds that can virtually disappear. And the government is a co-conspirator in this case, heavily promoting the use of this investment vehicle. I am wondering if we should be taking the tax hit on the money and buying something like land, tractors, I don't know...the problem with that is that taxes on the properties are brutal...not to mention liability. Whats a saver to do? Thx

Post Comment

Only logged in users are allowed to post comments. Register/ Log in