August 17, 2017

A Practical Look at the Economy and What You Can Do To Prepare

I was recently sent an email from fellow Prepared Christian Jeff, asking if I would give my thoughts on the economy, debt and how scripture may tie into it. First, thanks Jeff for the email! Second, I’ll say that I am, by no means, an economics expert. I could only give a novices explanation to the workings of the stock market, or how the economy of a country works. I am, however an expert at threat analysis and troubleshooting in general. While I do think I could do wonders to fix the economy, nothing I say will have any impact on a national level. But I also have some ideas that could help you and your family get out of debt, put more money into your pockets, and build an emergency fund.
At a National Level

The truth is that nothing I say in this segment matters to the extent that we can do anything about it. It is important to understand how and why things will trickle down to the point where you will feel it.

I don’t want to get to political, but we can’t discuss our national economy and our debt without wading into politics. I used to be someone who thought the person we voted for would have some impact on the economy; no longer. I have used this analogy before; our economy lies in a coffin, one party is pounding in nails slowly but steadily with a hammer. The other is frantically putting them in with a pneumatic nail gun. While one might be doing the job slower, they’re still putting nails in the coffin.

President Bush increased the national debt a huge amount with the start to the wars in Afghanistan and Iraq, and the creation of DHS. This was made to look like child’s play by the staggering amount of debt the Obama administration has created. From the continuation and eventual withdrawal of the war in Iraq, to the ongoing war in Afghanistan, the various militaristic involvements, to the untold number of social programs and on and on and on. Not to mention QE 1, 2 and 3, and Obama care. We have more American’s on welfare and disability than ever before; there are 20 million people that cannot feed themselves without some form of government aid. Some could argue that this was done on purpose, research the Cloward Piven strategy.

I could go on and on, but the point is that in the last fifteen years the value of the dollar has decreased significantly. The country has taken on debt that, if we stopped spending today, would probably still take my great grandchildren to pay off. But that won’t happen. I believe each President for the last fifty years has spent more than his predecessor. Instead, we’ll keep digging the hole deeper and ask China and other nations to help remove some of the dirt from time to time.
At a Local Level

How can this affect you? I’m not one who believes in the impending economic collapse that will see societal collapse and WROL (Without Rule Of Law) overnight. Instead, I think it will be a slow boil. I believe it is only a matter of time until we see another recession. I think that this one will be harsher than that of 2008. Federal dollars will have to stretch further due to the above mentioned incurred debt, so cuts will need to be made.

These cuts will be to federally funded programs, some in terms of money given to states, and others in forms of cuts to social programs. If less federal dollars are coming into the states, the states need to make cuts, thusly will the cities.

When we see a recession, we obviously see unemployment rise. We’re not in a recession now, and I am seeing more local businesses fold then I am seeing open. When we do see a recession, this number will rise. If you would like a few ways to judge the health of your local economy, I wrote an article called Signs of a Slowing Local Economy.

In the last five years I have seen some reports that cities are no longer having street lights on after certain hours. Police have said they won’t respond to certain crimes and won’t ticket or arrest for others.

We’re also seeing more and more young adults living with their parents. I think the main reason for this is that the jobs they are able to find aren’t paying enough for them to afford living on their own. I have read that the unemployment rate for people in this age group is nearly three times what it is for older workers.

These items might seem unrelated, but let me tie them together. We’re not currently in a recession, and there are several municipalities making cuts to basic safety features. Many small businesses are closing their doors and we have many college-age people living with their parents because they are either unemployed or underemployed. All of this is occurring during a “stable” economy.
The College Bubble

Here is an article that will explain the College Bubble better and in more detail than I. Here is my quick and dirty explanation; federally backed student loans are handed out to just about anyone. Colleges are continually raising the tuition costs; I wish someone could explain to me why it costs more not to teach someone about a topic like computer programming than it did ten years ago. Student loan debt is over 1 trillion dollars and, according to the linked article, has surpassed credit card debt.

I see enough similarities to the housing bubble to believe it will pop. When it does, enrollment will drastically decrease, causing schools to lower tuition or close. In both cases, cuts to staff and salaries will be made. I also agree with the article that it will be much harder to get a student loan.

I hate debt. In fact, I think it steals from ones future; and you should too. This isn’t to say I don’t use it, I just avoid it at all costs. I saw statistics that say the average household has from $7,000-$12,000 in credit card debt alone. If you could pay $100 toward your credit card debt each month, it would take almost six years to pay off $7,000. Unfortunately many of us who use credit cards can only afford to pay the minimum payments. I bought into this trap in my early twenties. I bought a computer for $2,500 and made the minimum payments. It took me seven years to pay that off.

The Bible lists the word debt in less than ten verses. My favorite is this one from Romans 13:8:

“Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.”

Biblical times didn’t look at debt like we do. Back then, if you had a debt and you couldn’t pay when the debtor wanted to collect, you could be sold into slavery until the debt was paid. Now this isn’t the kind of slavery we had in America. It was more like indentured servitude. An indentured slave would work until their debt was paid off. I don’t know this for sure, but I would imagine that the cost for room and board would be added to their debt, increasing the amount of time they might need to work. Keep in mind, it was Jewish custom to forgive the debts of fellow Jews (I believe) every seven years.

If you’re currently living a lifestyle where you use your credit cards frequently and are sporting hefty debt, you might not see it as slavery. But I bet as soon as you decide you want to be debt free you will be.
What Do I Suggest?

It’s not my place to tell you what to do. Instead, I’ll offer my suggestions. First, you have to want to get out of debt and decide to only spend what you have, as does your spouse if you have one. Along with this, Tithe. If you don’t have a church you want to give to, find a Christian organization to give to. Give God what is His, and let Him bless you in return.

Next, I would work on an emergency fund before paying off the credit cards. You need to be able to pay for the things that go wrong without going into more debt. I think enough money to pay one month’s bills makes sense. This way if there is a major car repair, or you’re hurt and can’t work for a few weeks, the bills are paid.

Now, I would pay the minimum on all cards, then pick the card with the smallest outstanding balance and throw as much “extra” money at it as you can. Once it is paid off, use all of that money to pay the next smallest one, and so on until all cards are paid off. I haven’t looked into him much, but I believe Dave Ramsey has a similar approach and I know some of you have had great success with it.

So, you’re debt free. Now what? Now I think would be a good time to do two things; pick a more expensive prep, save up for it and purchase it with cash.

Don’t hesitate to hold cash. I know some people believe cash will be worthless overnight. The only scenario I can see that in is a total grid down event, and even then it would hold its value for a time. Now that I think about it, in this scenario and many others, cash will still be king, at least for a while. People know its value, they believe it is worth what it is stamped with and transactions can be done without power.

It is a good idea to keep some cash at home, or in a safe deposit box. I also keep a small amount of emergency cash on me. In fact, they are the same bills I originally started carrying. I consider this money only to be spent in dire situations.

I think saving for retirement is a good idea. We have no idea when or if the economic “meltdown” is coming, or what shape it will take. I know some of you believe the fed will seize all assets in 401K accounts. I just don’t see it. I think there would be blood in the streets and they know it. I can’t even imagine what creative ways they would use to come after more of our money, but I do think that they would do it going forward, not taking money that has already been saved.

Once you are debt free and have your preps squared away, you could work on both barter items and learning skills that you could barter.

This would also be a good time to invest in precious metals, if that is of interest. I think it is a good idea. I wrote a two part primer on precious metals, part one and part two. I see gold and silver as currency that has held its value over time, that can be used to barter. I don’t hold it as an investment. I see it the same as paper money but with a stronger run in terms of holding value.

One other big ticket item you may consider is a BOL (bug out location). This is a goal of mine; a piece of land I can do some permaculture on, use as a vacation spot, and BOL if ever needed. Does this mean more debt? It might. We will have to pay cash for raw land or take a mortgage for land with a structure. If this is my only other debt besides my current mortgage, I think there is more than enough upside to take on the additional debt.

The last thing I will suggest to do once you are debt free is to save up and treat yourself in some way. Life is more than prepping, working and saving; as long as we don’t go into debt for it, splurge a little.
Final Thoughts

The point I am trying to make is that there is plenty to be concerned about when it comes to the economy. Watch for national signs, and especially local signs because these things never happen overnight. The best thing we can do now or if things really go sideways and we do see a complete economic collapse overnight, is to have our financial house in order.

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