Waiting For The Depression…
Yesterday’s post was on whether or not the stock market has really bottomed. On a related subject, I want to make a few comments about the supposed Depression that is still heading our way. First, a little background. Many people who follow economics and the markets believe that a Depression is inevitable. By Depression, I mean a severe recession, worse than the recession of 2007-2009. Many people, myself included, believe that the actions taking to avoid the current recession will do more harm in the long run than good. Some believe that it will lead to an actual Depression with severe consequences.
Typically my viewpoint is one where I am critical of actions and policy that delays the inevitable… the Depression. The reason for this is because by delaying the consequences of our overleveraged, overconsuming society is that the eventually crash becomes worse the longer we put it off. Typically, I say bring it now! Let’s get it over with! That way we can restructure and the quicker we can get on to real growth and real prosperity.
This past weekend I thought about this for a while, and I decided that there are some good results of our government propping up the economy in order to prolong the inevitable (they think escape the inevitable). The good result is mainly one: time. What do you need time for? To prepare for a potential depression of course!
Don’t Waste The Time You’re Given
Preparations can be categorized into two camps: financial and security. First, you can take financial preparations such as scaling back your positions in stocks, diversifying into hard assets like gold and silver, etc. While a deflationary depression could make gold prices go lower, gold will still be a decent place to be; therefore, allocate some of your assets to gold. You can research and decide for yourself how much that should be.
When it comes to security, I have yet to subscribe to the idea that the world is going to completely come to an end (though, I don’t totally dismiss these folks and what they say). With that said, there are real things to prepare for in a severe Depressionary environment. The main thing is an increase in crime. You can take this time to find ways to secure your home, acquire and learn how to use firearms, install a security system, etc. I think an increase in crime is a real possibility, especially when you consider the terrible financial position of municipalities across the country. Funding for police forces will likely be limited.
In addition to crime, you may consider stocking up on some basic necessities should some type of disruption take place. If you take a step back and think about how dependent you are on others, it’s actually quite scary. Again, while society probably won’t break down completely, why not prepare for some level of disruption. How far you want to take this is up to you.
My official position on whether or not we’re heading for a Depression is… I don’t know. I do think we’re heading for more economic troubles. I think there’s a good chance that the next recession is worse than the current/previous one. None of the problems were fixed and in fact, we’re probably worse off than we were in 2007. Some level of preparation is recommended.