We all know a severe downturn is underway. Unfortunately, it’s too late to start preparing. If you don’t have the necessary skills, education, financial security in place, you can’t suddenly make it happen, as you alluded to in one of your sentences. Right now, the best advice people, who read your blog, can use is how to plan for the future and make the most out of what we have managed to retain.

Those of us who have planned well and lived within our means should take advantage of “buying low”. For example I’ve needed a new more efficient refrigerator for years. I refrained from buying, since I would have been negotiating alongside people who were handed out credit they shouldn’t have been given. I just refinanced my mortgage with a fixed 30 year 4.625% rate. If times get tough for me, I have a smaller obligation, if not, I pay a much lower rate.

I don’t understand the logic behind stocking up on credit cards. That makes absolutely no sense. It’s better to go to a soup kitchen, a food pantry, or some place like Glide Memorial Church than to rack up credit card debt on food. Ask anyone who lived through very tough times. You should advise people to seek help through social services, before building up debt, on credit cards they’ll never be able to repay. That’s one of the reasons we’re in the mess we’re in right now.

Regarding this point: “…you should make every effort to become one of the people that may remain…” If you ever lost your job, through no fault of your own, you would know this sounds insensitive, and probably sparked Christian’s response. If you’re going to lose your job, you’ll lose it. Additionally, that statement has an undertone that suggest undermining your colleagues: seek out brownie points, point out someone else’s shortcomings to detract from your own… The list goes on, and it creates a very unpleasant atmosphere to work in. Of course it’s great if you’re able to keep your job. But keep in mind that if you get canned, there is very little you could have done to change that outcome.

Another important issue to focus on, as Occdude pointed out, is inflation. If you think it will never happen to you, I’m certain that those raggedy, post WWII Europeans we have all seen pictures of, taking a cart-load of cash/trash to the market to buy a loaf of bread didn’t think it would ever happen to them, either.

Thanks for your entry. Even though I disagree with some of your points, I agree with the premise that we’re in for some tough times, and we need to take certain actions to protect ourselves.

BTW the world moved on during the Great Depression. Of course I do not like the way Germans put Hilter in power. My grandfather did fine as a farmer. He did not starve.

The manifistation of this scenario will be decreasing asset prices, real estate, stocks, bonds with an increase in commodities, staples, non-durables all the important stuff.

I look for Dow to be in the 3000-4000 (would be lower if it weren’t for government money printing), I think one OZ of gold will equal the DOW so look for gold to be in the 3000-4000 dollar range. Oil should keep its historic 10-1 ratio so look for 300-400 dollar a barrel of oil. Gas got up to 5 dollars a gallon at 150 a barrel so look for 10-12 a gallon for gas.

Now what to do. Real stuff is always a bargain. Buy food that will store. I know it sounds crazy now, but food will always have value in deflation or inflation. Trade in your gas guzzler for a high mileage car and learn how to maximize gas mileage. Right now the economy is in liquidation phase, that will turn once all this newly created money comes out of treasuries, so deals are to be had for durable goods, washers, refridgerators, cars and food are relatively cheap in this liquidation environment, that wont last. China makes most of our goods and the dollar is enjoying a respite for now, that wont last, if you need a Chinese durable goods like shoes, clothes, tools or whatever now is the time to get it. Oil too on a dollar level will not stay at these levels. The world will decouple, the East will rise, and our standard of living will fall generally and if you don’t take precautions your standard of living will fall specifically.

There is a free online book that was written in the early 80’s during inflationary period called the “alpha strategy” which is a little dated, but gives you great ideas on what is true wealth and how to preserve your standard of living. Buy physical gold to preserve any wealth you wish to hold in the future that you cant consume in the immediate future, gold is a preservation of purchasing power, so if you want the same purchasing power in the future buy gold. If you want to invest for the long term 20 plus years, look eastward at china with etfs, brazil, australia, singapore, taiwan and hong kong. Buy their reits, look at mutual funds specializing in s.e. asia which will be the next gowth spot. Buy their dividend yielding reits, etfs, mutual funds. The East is rising just like the sun.

Our world economy is changing. The rest of the world wants a taste of what we have and we need to readjust our overly consumptive society. This is going to be a painful process for us, but it doesn’t need to be crippling. People need to look for ways to maximise value, invent, create, save and innovate. The government needs to shrink and people need to adopt traditional values of family, friends and community again. We dont have the resources for everyone to atomize themselves in their own cocoon anymore. Participate in your communities. If you want a nice environment dont look for the government to do it for you, you have to build it yourself, twas always thus, thus twill always be.

How about a net worth update since we are at the end of January? Are you still in the 6 figures for NW?

I’ve been playing with stocks and got burned badly yesterday (friday).

-Mike

Because whatever you think can prepare you for a depression is wrong. Our society is based on rational thinking, and being able to plan and prepare ourselves. But when things like a depression like the one you are talking about occurs all rationality goes out the window.

Let me illustrate:

1) You say get as many credit cards as you can and use them to buy food. Dude, if we have a depression the banks are a goner. That means the credit cards you worked so hard to get are essentially useless. If anything I would advise put as much money on the credit cards now and use that money to barter with.

2) You are an employee, wow, woopee dooo… If your company is cutting 30 to 40% of the employees, well at least those people will be unemployed to work under the table. Whereas you as the single worker in the company will be wondering if you will be paid. I bet you will not even be paid, and if you will be it will not be your full payment.

3) Cut everything to the barebone. Really? So tell me what is barebone? Because if you are saying we are going to have a depression, then cut off cable, cut off telephone, sell your car, and so on…

4) Why sell everything? If we have a depression then we are all in the same boat and hence there is no winning or loosing. Thus if you can’t pay for anything, hey so what. What’s the worst they will do? Take your house or car? It’s not like they will not already be taking things.

I worked for an investment bank and my boss gave me a piece of advice. He said, “if you truly believe that we are headed towards a depression then you better learn animal husbandry.”

I looked at him and said,”Huh? Why?”

He replied, “If you truly believe we are headed towards a depression then whatever we have today is going to be completely meaningless and left over will be only the absolute bare essentials that have worked for thousands of years.”

The people that need the most help will get slammed the hardest in the coming years…

Frugal I think your view is spot on. People don’t realize what lies ahead.

“A piece of the sky? Shaped like a stop sign? Not again!”

“A piece of the sky? Shaped like a stop sign? Not again!”

“A piece of the sky? Shaped like a stop sign? Not again!”