Preparing For The Coming Meltdown

There is a story I recall that when you enter a trading pit, it’s easy to get in. One by one you go in through the turnstiles. But every once in a while there is a panic and everyone wants out at the same time. This is the situation a lot of us are going to be caught in. Crashes happen when people least expect it. Usually before a crash, people are fully invested thinking that nothing could go wrong and that the trend of the recent past will extend linearly into the future. Turmoil almost always happen unexpectedly and usually proceeds long length of extreme calmness. Boring markets can be dangerous markets. In this situation when not much happens, people expect more of the same. Unfortunately most people will not react until a crisis becomes obvious.

The worst thing you can do is delay taking action until everyone else recognizes the problem. Then it may be too late.

For the longest time I have kept believing that the crash was right around the corner and I ended up being wrong. However based on the current housing mania we have around the country, I do believe it will happen very soon. We don’t know the timing of the next crash. It could be right around the corner or it could be some time in the future. But when it finally does happen you don’t want to be caught with your pants down. Our society has conditioned people to expect to be “rescued” when things turn sour. Because the “powers to be” and the Federal Reserve have been able to seemingly avert disaster (although at the expense of taxpayers and future wellness of the country) time after time again, they have made their citizens complacent. For instance, people think that the FDIC will always be able to come to the rescue whenever a bank has problems. The FDIC was designed to rescue only a few banks. If a nationwide bank run happens, the FDIC will have problems. You can’t be reliant on these type of guarantees.

The following tips are primarily geared towards those living in the US, but a lot of these ideas can apply globally. Preparation is tricky because for one thing it is hard to predict what actions the government will take during a major crisis. In the past I believed in hoarding cash but there is the possibility of government banning cash should things get out of hand in a hurry. Their reason is twofold: to clamp down on people doing business “off the books” and to be able to exercise negative interest rates. Evidently near zero percent rates weren’t low enough to maintain the corrupt banking pyramid scheme. If rates are negative, people will start to withdraw cash from their accounts. The powers hope that a ban on cash will stop that.

Time could be wearing thin. Making some of the moves below may become more difficult. Shifting large amount of funds away from the American banking system will likely alert the authorities. I recognize the fact that you may have gone through the trouble of preparation, but it turns out a crash does not happen. You haven’t lost much, except some time and effort. But think of the alternative. You may lose a lot if you are not prepared. Think of preparation as insurance. You insure your car and home, right? Why not provide some insurance for your assets as well?

There are two areas where wealth should be divided: hard physical assets and paper assets. Hard assets include precious metals, land, household belongings, etc. In other words hard assets are items that are physical and tangible. Paper assets on the other hand represent a claim. They are either in paper or digital form and include stocks, bonds, ETFs (exchange traded funds), paper money, and bank accounts. In the old days, paper assets represented a claim to a physical asset but that is not the case anymore except for gold & silver ETFs which are indeed claims to the real thing. All currencies around the world are fiat money and do not represent a claim to anything tangible. Their value is based on faith. Even the stock ownership of companies entitles you to assets that are almost entirely paper assets in themselves. The plants, equipment, and land represent only a fraction of the net assets (book value) of most corporations. But as corrupt as the paper system is you still need to have  it on hand. The primary reason is that in most cases it is the only way to perform transactions and to purchase necessities.

The following tactics may seem extreme and are designed for extreme situations. They may be more appropriate for those living in developing countries. Do your due diligence and ask yourself whether what you are doing is right for you. *

1. cash

Move your money away from the banking system. Leave only as much money in your bank to pay your bills. Banks will come under major pressure during the next crisis as loans will be defaulted on in large numbers. They are also highly leveraged with derivatives. It will take only a slightly above amount of withdrawals to cause problems to the system. Banks are only required to keep, at most, ten percent of your checking account deposit on hand. The rest gets loaned out – mortgages, car loans, student loans, etc. Should banks start to have problems, it is likely that there will be problems with your account since the FDIC has only enough funds to cover a small amount of accounts. The coming crisis should be deflationary, so you want to have your money in cash and cash equivalents (greenbacks and short-term 4-week treasury bills).

Treasury bills could be purchased through mutual fund such as American Century’s Capital Preservation Fund CPFXX. Or you could purchase them directly through www.treasurydirect.gov. The application process is somewhat lengthy for Treasury Direct, so you need to start early if you are thinking about investing in it.

I recognize that a ban on cash may be coming, but I also believe the banker’s plan to ban it may be thwarted if a crash is fast and intense enough. If a ban on cash does come it will likely be implemented in steps rather than all at once. For instance, the establishment may ban all cash transactions over $8000, then a month later, they may ban all transactions over $5000, and next month over $3000 and so on. There is also a small chance that the higher denomination bills such as the $50 or $100 gets removed, so make sure you have plenty of $20s on hand. Previously I was thinking of dividing your money equally between cash and Treasury bills, but now I believe it’s better to be more weighted in Treasuries than cash.*

 * If you have a history of run-ins with the IRS or are worried about an IRS seizure, it is probably not a good idea to invest in Treasury Bills through Treasury Direct. That would also be another reason not to keep much money in banks either, as bank accounts are the first thing that gets seized during an IRS raid.

2. gold

Invest in some gold and silver. I’m talking actual bullion, not futures contracts, ETFs, or anything paper. Invest in “junk” silver such as pre-1964 silver dimes, quarters, and half-dollars. Should the cash ban be coming trade your notes in for bullion. You may also consider a service that stores your gold outside the US, such Bullion Vault. I’m not familiar with this type of service, so do your research before using them. One note about gold and silver is that they are subject to booms and busts like so many other assets. When you purchase metals you must have a long term outlook and not worry about day-to-day fluctuations.

3. canned

Invest in tangible goods. There may not be too many safe assets to invest in. Cash is risky because of the possibilities of theft, hyperinflation, or a ban. Paper assets such as Treasury securities, brokerage accounts, or gold ETFs may be risky because they merely represent claims to assets. Gold can be risky because of fluctuations in value and problems with theft. Bitcoin is risky because it does not have a long term track record, it fluctuates a lot, and it could be replaced by a superior technology in the future. Because of those things tangibles such as canned foods, toilet paper, ammo, first aid kits, etc. may be the way to go. Be creative and think what may come in handy should SHTF. You may want to invest in at least a couple of firearms, a bicycle (preferably a touring bike where you can attach racks and panniers), solar panels, or even an RV. Even a basic reliable car should hold some value during a crisis. My belief is that while these things may depreciate during deflation, their relative value will increase compared to most other things.

I have to emphasize investing in something that is not a fad, is not a collectible, and is not a luxury item. Think basic and reliable.  Additionally if a ban on cash is coming you’d want to have those things on hand, because they could be used as barter.

4. currencies

Invest in some safe foreign currencies. Although the US dollar is the world’s reserve currency, it is not the world’s safest currency. At some point it may have problems. If you have significant wealth, you should consider investing in the currencies of Singapore and Switzerland. I am not an expert in this area, so please consult with a professional.

5 th

Invest in crypto currencies? This is purely speculative. I have a hard time getting around the fact that crypto currencies, such as Bitcoin, are basically nothing but computer coding. I suspect that crypto currencies are worth what they are worth because of tremendous amounts of speculation especially from big Wall Street guys. As for their use as a currency, the biggest problem with cryptos is that they fluctuate a lot in value. I could envision one day when Bitcoins become worthless, a fad the same way internet stocks were in the late 1990s. However, there are those such as Robert Prechter who believes that the growing popularity of Bitcoin will some day bring down the Federal Reserve system. That seems a bit far-fetched.

6. th

Prepare for civil unrest especially if you live in an urban area. Unlike the last Great Depression, far more people today are dependent on government services. And since that time there has been a lot of moral decay in our society. Today, at least half of all Americans are dependent on some sort of welfare, food stamps, social security, medicare, and disability. Think about how they’ll react when they see these services curtailed.

7. tv

Turn off your TV (and be very cautious of the alternative media). Mainstream news WILL NOT warn you of the coming collapse. They will not bring up the subject until it actually happens. And when it happens they’ll say the crisis could not have been predicted. The last thing the media wants to do is panic the public so they won’t bring this subject up until crisis becomes obvious. BTW, ninety percent of all media in the US is controlled by just six corporations.

Additionally, take most alternative news with a healthy does of skepticism as well. The alternative media does a lot of fearmongering and promote a lot of doom and gloom. They do this not to warn you of collapse but to persuade you to invest in gold and silver and many survival products. The alt-media has close connections and sponsorships with companies that sell gold and silver and survival products.

Lastly, remember this. When the bottom arrives you will have the buying opportunity of a lifetime. So you better save up.

———————————————————————————-

Here’s an example of how you may want to divide your portfolio if you have between $50k and $250k in assets:

  • 13 % paper cash
  • 13 % Treasury-only mutual fund such as American Century
  • 13 % Treasury Bills directly from the government
  • 25 % Gold and silver bullion
  • 25 % Tangible Goods
  • 10%  Miscellaneous areas such as a brokerage account, checking account, and Bitcoin

If you have more than $250k in assets I would strongly recommend you invest a chunk of that overseas.

You should not have any of your money in the following:

  • Bank CDs
  • Municipal Bonds
  • Junk Bonds
  • Stocks
  • Money Market Funds
  • Bank accounts (except just enough to cover paying bills)

Recommended sources:

Conquer the Crash by Robert Prechter 3rd Edition (2014)

* Disclaimer: I can not be held responsible for damages that may occur from the actions you take based on my information. Follow my advice and you may get screwed. Follow the advice of the mainstream and the alternative media and you WILL be screwed.

- Revised Feb 10,2021 by Alex

Leave a Reply