Storm Clouds

There is an ugly feeling in the air, at least in financial circles. There is growing, if anecdotal evidence that we might be headed for some unsettling times. If so, there are things you need to be doing, but first let’s look at what’s going on in the world that has brought us (or at least me) to this gloomy prognostication.

First, there is the ongoing situation in Europe. Greece and its financial woes are hardly, if at all resolved, and several other of the weaker economies in the EU are desperately trying to avoid Greece’s situation. Should Greece or one of the other countries default, it will send major ripples through the world’s financial structure.

On this side of the pond, the USA is currently struggling to resolve its debt cieling and deficit problems, and as of this writing, have only three weeks to do so. If an agreement between the parties is not reached, the US will be in default of its debt by early August, and the shockwaves that will occur in the markets don’t bear thinking about.

Even if that is resolved (and political games of chicken aside, it likely will be), the US economy is still faltering, and the world’s largest economic engine is at risk of stalling out, with consequences for almost everyone else in the world. The underlying causes of the 2008 crisis still exist. All that was done in the last few years was just treating symptoms, not curing the disease.

If you’re wondering where that leaves you, Joe or Jill Average, the answer is: Not in a good place. You might see goods scarcities, price inflation and possibly hyperinflation, large interest rate rises, more unemployment. I don’t think the possibility of another major depression is at all out of the question, with all the consequences that involves.

It is time to batten down the hatches and prepare to ride out the storm, economically speaking. If you have major debt, get rid of it. If you have a mortgage, even though the short term rates are really good, I’d think about locking in for up to five years to protect yourself. Consider looking at whatever investments you have and how you may be able to shift those to safer areas.

Look at you’re spending as well. Do you really need the bigger car, the 200 channel satellite package, or to eat out as much as you do? Cut your living expenses to the bone and start setting money aside. You need to have a reserve fund of at least three months expenses, but six would be far better.

And for me, here’s some extreme advice: I’ve never been big on buying physical gold and silver (can’t eat it or wear it), but I’d take at least 10% of the money you save and invest in some precious metals. Silver is (relatively) cheap compared to gold.

If there is overtime available, take it, it won’t last. If you can get a second job, think about doing it, at least for long enough to get better set financially.

I am not usually a doom and gloom guy. In fact, prepping makes me relaxed and happy. But right now I’m very pessimistic about the overall economic picture, and I am taking steps I never would have considered to ensure my economic preparedness in case of an ‘event’.

You might want to do so as well.

Originally posted July 10, 2011 @ CPN