> TEOTWAWKI Blog: FerFal on Preparing for an Economic Crisis

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4/9/13

FerFal on Preparing for an Economic Crisis



Thanks to Ryan at TSLRF for pointing this one out.

Great basic overview from FerFal r.e. steps to take to prepare for an economic collapse - legitimate good advice.

Like we discussed here a while back, FerFal talks about the importance of having cash on hand in a situation like this. Most currencies will take a while to collapse - or at least for the market to realize that they have collapsed - but banking systems collapse much faster. In that initial "gap" period, as FerFal says, cash is king.

This is what happens in the real world...not an immediate descent to Mad Max anarchy, but freezing of assets, inaccessibility of banking and cash, etc.

Definitely worth a watch.

To FerFal's advice, I would also add that, eventually, you consider having some cash in alternate currencies. BitCoin is getting a lot of press these days and the value has sky rocketed since the beginning of the year. Worth a look. If you live near a border or have family in an international country, it'd be prudent to have some of that currency around. A little bit of diversification is a good thing, amigos.

7 comments :

  1. Buy gold or silver; coins or bars. Store them at home, discreetly and securely. Local currency is fine for short term issues, but in an economic collapse, people rush to gold and the price rockets.

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  2. I never understood why folks feel that, in a full-blown currency crisis, the various governments wouldn't simply make transactions in metals illegal? It would certainly be in the .gov's interest to maintain full tracking of where money was and how it was spent. And how likely are you to be able to barter if metals are unable to be redeemed for whatever passes for currency at that time? (Note: I find a financial crisis where the U.S. issues a new currency more likely than a full-blown Mad Max scenario, unless a global war or similar disaster is somehow involved).

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    1. It sure could happen. Lots of stuff could happen--that's the whole point. You shouldn't rely 100% on anything. Precious metals have their place but have risks just like anything else. The vid is about hedging your bets so you have as many options available as possible. Good advice for any area of prepping.

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  3. Watched it--great advice all around!

    There is no single perfect protection against an economic collapse. Banks, cash, precious metals, even off-shore accounts like the vid suggest--they all have their function and their proper place.

    Are there pros for cash? Sure. Are there cons? Yes. Are there pros and cons with precious metals. Yup. They are a good way to store wealth physically, likely to always hold at least some value no matter what, and might be a good investment too. But good luck trying to buy a gallon of milk at Walmart with your gold and silver coins. Plus while they have gone way up in price lately there is also very real risk that they could undergo a sharp drop in value--maybe a drop you don't see coming. And even in a disaster scenario gold and silver aren't going to be super liquid. Also, like Anon says I suppose the government could outlaw dealing with precious metals. They could even confiscate them like they have done in the past. The US government did so in 1933. (Stupid Roosevelt) So you have to weigh the risks against potential payoff. There are great things about precious metals and some not so great things.

    There are pros and cons with everything--banks, cash, metals, stocks, bonds, off-shore accounts etc etc? You shouldn't just go with one solution. Most people do: banks. There is nothing evil or especially wrong with banks--they are super convenient and without using them to some degree it can be difficult to live and function in our modern world. But like anything there are risks and that is what this is all about. Give yourself as many options as possible, weighing the risk vs reward, so in any case you'll have at least something to fall back on.

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  4. Why would Wally World stop accepting credit card? That point is not explained and it hinders the overall message a bit IMO.

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    1. There's a variety of reasons...power outage, banking system collapse...heck, your personal credit card could be compromised by fraud or a technical glitch.

      The commenter below has some great thoughts, too.

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  5. When our financial system almost went off the tracks back in 2007 – 2008, one unforeseen event that our government did not anticipate was that sellers of goods and services would panic and stop offering or accepting credit. I am not talking about banks or financial institutions. I am talking about companies that engage in business-to-business transactions. When large businesses stop accepting or offering credit, especially international or foreign companies, an economic crisis can bring business to a halt. This is one of the reasons (there were others) the U.S. Government was so willing to rush in to stop the free fall. Almost all businesses work on credit and the ability to pay after a good or service is purchased is paramount for our economy. If credit was no longer available or accepted, economies around the world would stop. Is it possible that this could happen? Maybe. What is more likely is that in the early stages of a financial crisis when panic rules the day, credit freezes until companies, both big and small are able to assess the situation. If the situation stabilizes or there are reasonable assurances that credit obligations will be fulfilled, then credit will be offered and accepted again.

    However, in those early days most goods you may need will probably be cash only. While water, power, gas and other public services provided by a municipality would not be immediately affected, it is the everyday items consumers buy like: food, health and hygiene goods, medicine, prescription drugs, gasoline, etc. would likely be cash only. So if there is a run on food, water, OTC medicines and other goods at Wally World, the first thing local and regional managers will do is stop accepting credit. Freezing credit is a tool used to protect companies from incurring losses during a crisis. Cash is king and companies know that credit companies take 30 days or more to pay (if they are able to). If the situation worsened, consumers can claim credit card fraud or unauthorized transactions with the credit card companies to avoid paying for the items. This would further slow the process of Wally World receiving payment. In order for Wally World to buy more goods it has to pay it suppliers and if the crisis is such that its vendors want cash then Wally World is in trouble if it is accepting credit.

    Bottom line, credit is a luxury that everyone relies on is some form or the other (you don't pay as you go for most utilities and services) everyday. And it is the first thing to go during a real or perceived crisis. The reason we didn't see it in 2007 - 2008 was that the credit crunch was contained early on. It was the U.S. Governments unwillingness to directly intervene with cash and resources to stabilize and support the economy and trade that helped to create the Great Depression. Once credit froze, no one could buy anything without cash. Many lost everything because they could not pay the mortgage or utility bills anymore and credit was not available.

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