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Being Financially Prepared For the Next Crisis

The economic crisis is likely to come soon, probably within the next 18 months. As I stated in a previous post, it’s going to be worse than the 2007-08 Great Recession. In the aftermath of the 07 recession, many Americans were left homeless living in tent cities. The next crash will likely destroy what’s left of the American middle class; one should be financially prepared to deal with the future crisis.

What Can We Expect?

I expect the Federal Reserve to re-open its original playbook. It will lower rates down to zero, possibly even below zero and start quantitative easing 4 (QE4). However; QE4 will be bigger than QE1, QE2, and QE3 combined.

Sure, QE4 doesn’t so sound bad since the previous rounds of quantitative easing didn’t have any significant adverse effects towards the economy, and so it seems natural that QE4 will end in the same result.

Unfortunately for QE4, the results won’t be the same. Once the Federal Reserve launches QE4, the markets will understand that QE was never temporary and QE is permanently here to stay.

Furthermore, the U.S. government is likely to continue ramping up more debt, causing investors and Americans to lose faith in the U.S. Dollar and U.S Treasuries.  Yes, this will end with a dollar collapse, and it won’t be pretty.

In August 2011, the U.S. dollar index reached an all-time low of 73 points. By the time we see QE4, the dollar will or will be on the way of surpassing the 2011 record low. Also, QE4 will bring about the massive inflation that was non-existent during the past QEs.

How to Prepare for the Crisis?

The next crisis will probably result in stagflation, due to QE4’s inflation consumer prices will rise while the economic productivity slows down. Banks will probably become insolvent and will likely declare bail-ins and bank holidays.

During this time, ATM cards and credit cards will be inoperable. To prepare for this one should have cash stored outside the banking system, that way one will still have the means to purchase goods.

How much cash you should have, depends on your needs and how many goods you already have stored away. For example, I have a food pantry that will last my family and me for at least six months. Therefore, I don’t need much cash stored outside the banking system for food or even commissaries. However, I do have about $2,000 stored in a personal safe.

Don’t Exclude Gold and Silver

Another method to prepare for the next crisis is to own physical gold and silver. Precious metals are a good hedge against inflation. As the economy tumbles into a stagflationary environment, the value of the U.S. dollar will fall while gold and silver’s will skyrocket.

However, I wouldn’t exclusively buy physical gold and silver. A great investment would also be gold and silver mining stocks, even oil or commodities stocks, in general, will be a significant investment. If the price of physical gold and silver goes up, gold and silver mining stocks could go up tenfold or more.

I own some mining stocks, and when the value of gold goes up to $20, I make about $1,000 from my gold mining fund, indeed, not a bad return.

Of course, when the price goes down $20, I also lose $1,000. However; I am investing long-term as I understand that the U.S. Dollar days are coming to an end; it’s just a matter of when.

Lastly, you may want to think about getting some protection, such as a firearm. It’s entirely possible that things may not get as bad as the Venezuelan crisis. However, it’s always best to prepare for the worse and hope for the best.

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