What would do if you had a strong impression that another recession was coming soon? What kinds of actions and changes would you take to weather the coming storm? The steps that I list below aren’t a complete list by any means, and I don’t expect that anyone would be able to accomplish them all, but if any of them sparks something in you to do something that you’re not already doing to become better prepared for a sudden and significant economic downturn, I will have fulfilled the purpose of this blog.
The signs of a coming new recession are all around us:
- There has never been a sufficient recovery from the Great Recession that started in the autumn of 2008 with the collapse of the housing market. A huge number of people have been unemployed or severely under-employed since that time. They haven’t experienced any recovery or reprieve, just a severe downslide to the brink of poverty and a radical adjustment to what for them has become “the new normal.”
- Having tens of millions of new people become dependent on the government for food stamps, medical care, and other necessities of life has been a boat anchor for the economy. In a real recovery they would find decent jobs, they would produce something, make their own money, spend their own money, and save some of their own money. All of these things would make life better for everyone. Instead, it is a growing problem that will continue to apply downward pressure on the economy.
- Big companies have begun laying people off again. Sandy and I run a business-to-business company. Our client businesses have stopped spending money, are laying off employees, and are offering early retirement deals to help save money in the future. All of these are signs of economic contraction.
- The stock market has been climbing to record highs, but it’s all smoke and mirrors. The rise isn’t caused by underlying economic strength, but because of years of “economic easing,” the federal policy of printing billions of dollars of new money out of thin air. It creates the illusion of wealth without having any real foundation for it.
I could go on, but if you’re reading this article, you probably don’t need to be convinced. You just want to know what to do to help you prepare for it.
- Stop the bleeding! Are you spending money as if all is well and everything will go on as it always has? Stop it. Take an honest look at every aspect of your life and look for places where you are spending money that you may soon wish you still had. Sandy and I love to travel, but because of the recessionary clouds on the horizon, we’re not going anywhere for a while. Our DirecTV bill is $100 per month. I’m looking into pulling the plug on it and going with all Internet-based streaming TV. Eating out can be another huge drain on a household budget. You can eat like royalty at home for a week for the price of one or two meals out at a marginal restaurant. Make sacrifices. Stop the bleeding.
- Reduce your debt. Debt is the obligation for payment of money that you spent sometime in the past. Debt is just like the government’s economic easing policy — you generate cash out of thin air to buy things you can’t afford today and hope that you can find a way to pay for them tomorrow. When a recession hits and you aren’t making as much money as you used to (or no money at all), you don’t want to have to pay for purchases you made a long time ago. You’ll need everything that’s coming in to go toward current expenses. Reduce or eliminate your debt now so that you won’t be trying to pay for past expenses at a time of increased current need.
- Spend wisely. Is there anything that you could buy now that would be a good investment against hard times to come? Is there anything that you could buy now that would either help reduce your expenses or increase your income in the future? I’m thinking about things like:
- Sell some of your stuff. Do it now. We all have stuff that we don’t really use or need, but for some bizarre reason we hang on to. Sell it now, while you can find a buyer who has the money to pay you what’s it’s worth. The other option is waiting until a major recession hits, needing to sell it to generate cash, and not being able to find anyone who can afford to buy it.
- Save wisely. It’s tempting to spend all of your money now to buy things that you expect to need in the future. Prices continue to inch upward on almost everything, while incomes remain flat or actually decrease. Some staples that we stocked up on a couple of years ago are selling for 25% more now. That’s a pretty good investment return. Some people believe that our money won’t be worth anything in the not-to-distant future, so they say you need to spend it now to get anything at all from it. I don’t know enough about that stuff to have an opinion on it, but I do know that having a cash reserve has always been a good idea in the past and looks like it’s still a wise choice for the foreseeable future. Saving wisely can be a tricky one. Save as much as you can afford to now so that you are able to meet future expenses, emergencies, or can pounce on a great deal if the opportunity presents itself, but don’t save so much that you can’t spend wisely and reduce your debt now.
- Increase your income. Earning more money will help you accomplish all of the bullet points in this article. There’s a lot of talk these days about creating multiple revenue streams, which is just another way to say adding an additional source of income to your primary job. You’ve heard the old saying that “it takes money to make money.” Yes, but to meet the goals of the challenge of preparing for the sudden onset of a significant recession, you want to find something that you can do to earn extra money that won’t cost you an arm and a leg to set up. What can you do to earn a buck on the side without a lot of start-up costs?
- Build things
- Repair things
- Cook / bake / cater food
- Sewing and alterations
- Create and sell crafts or works of art
- Sell new or used products on Amazon (yes, you can do that), eBay, or Etsy
- Pet-sitting or house-sitting
- Do yardwork
- Trust God. I really wanted to lead with this point, but I also didn’t want anyone to tune out before I got to it. You won’t find “God helps those who help themselves” quoted in the Bible anywhere, but I believe that God expects us to do our part, and He wants us to trust Him to do what we can’t. Some people refuse to prep because of their faith in God. I’m just the opposite — I prep because of my faith in God. I take action because I trust in Him.
Even since I sat down to write this I’ve received word of one of our client companies cutting their budget to the core and requiring all employees to take a week off without pay this summer. The storm clouds of recession (or worse) are everywhere. It’s time to get busy and it’s time to trust God.
I watch Doomsday Preppers. I don’t believe everything they say on the show, but I watch it. I know that the producers have their own agenda and they want to include some variety, so they have the featured preppers say that they’re preparing for a volcano to erupt in Wyoming, or an earthquake to hit the Midwest, or an epidemic of some exotic disease. Exciting stuff, but at the end of every episode the voice-over dude comes on and calms our fears by telling us how astronomically improbable these doomsday scenarios are.
The Real Danger
Back in the real world, most preppers are preparing for an event that experts from many, many fields agree is extremely probable in the not-too-distant future: a global economic collapse.
Let’s face it — there has been no real recovery from the Great Recession, as reported in this recent article from the Chicago Sun-Times. (Note: I’m not as rosy about our housing market recovery as their article is.) The government of Cyprus is stealing money from the private bank accounts of their citizens and some have speculated that such options are on the table for handling the debt crisis in this country, too. Greece, Portugal, Spain, and Ireland have been in the news with alarming tales of their economic problems. New stories are coming out about how Japan is printing money like mad (as is America) to try to stimulate their economy.
One of the many problems with America’s economy is that we’ve become a consumer nation. We consume more goods than we produce. It wasn’t always that way. We used to make a lot of stuff here and sell it to the rest of the world. But then the big corporations discovered that they could save a buck by moving their manufacturing centers overseas and exploiting cheap foreign labor. Corporate profits went up as expenses went down, but America lost its manufacturing base. Look at the labels on the products that you buy. Where were they made? A lot of it comes from China, but you’ll find other nations as well. It’s become pretty rare to find a consumer product made in the USA. We’re not just dependent on foreign oil; we’ve also become dependent on imported manufactured goods.
It seems like the only booming economy is China, where (surprise, surprise) all of our manufactured goods are coming from.
Things Aren’t Always What They Seem
Not so fast, there. China’s economy might not be booming as much as it appears and may in fact be the biggest economic bubble of all.
We said that America has become a consumer nation. China has the opposite problem. Even with their staggering population, they produce far more than they consume. China’s economy is dependent on exporting manufactured goods. For a couple of decades now, we’ve had a vigorous trade relationship with China. We send them our money and they send us their goods. (In case you didn’t catch that, that’s not a good thing.) If the money stops flowing into China, they’re going to be in a world of hurt. It should be obvious that with all the American national debt that’s held by China our eventual inability to pay off our loans will send a shockwave through the Chinese economy. But for now, the money is still flowing.
So what are the Chinese doing with all of
our their money? For starters, they’re building factories to manufacture more stuff. Just as it was in America 100 years ago, people are leaving the countryside to move into the cities because that’s where the jobs are, so the cities are growing by leaps and bounds to accommodate both the growing businesses and the influx of new residents. Because of their booming manufacturing base, China has seen a rapid expansion of the middle class, and now they have more expendable income than they know what to do with. Due to Chinese governmental regulations, there are limited investment opportunities for the average person, but one investment opportunity that they are allowed is real estate.
On March 3, 2013, CBS’s news show 60 Minutes ran a chilling story about the building boom in China. You really need to see this video. You’ve hung with this posting this long. This is the pay-off. Here’s the link: China’s Empty Cities.
The implications are scary. The bursting of America’s housing bubble sent us into the Great Recession which we have not recovered from. We’re in a weakened condition. What happens if/when this Chinese real estate speculation bubble pops?
What Can I Do About It?
The reason why I write stuff like this is not to scare you, but to prompt you to not be caught unaware and unprepared. Proverbs 22:3 says, “The prudent see danger and take refuge, but the simple keep going and pay the penalty.” It’s time that we start constructing our place of refuge. You can do it right where you are by stocking up on food and supplies that you might not be able to find or afford when the next economic downturn hits. You can learn skills that will help you through hard times. You can search out other like-minded people and form a supportive community. And you can keep reading this blog…And share it with your friends – click on any of the share buttons below. Thanks!