## Monday, June 27, 2016

### Do you have a Collapse Insurance Policy?

Note: this one is a bit gloom-and-doom, with a survivalist bent

Alan Greenspan has raised the alarm about impending economic doom, and has even called for a return to the gold standard. Now your first thought might be, "didn't that guy kinda prove himself to be chronically wrong when forecasting the economy?" And you'd be right, because he did. Hailed as a genius, if you could go back in time through his tenure as Fed Chairman, closely follow his predictions, and then assume they were 100% wrong, you could make a killing. If ever there was a person who should be jailed for acting smarter than he is, it is Alan Greenspan.

On the other hand, for someone in his position to raise such claims merits attention. It's like if the former CEO of McDonald's said we should all stop eating out, but with more desperation. And really, who has a better feel for our economy crashing than the man with the most experience at wrecking it himself?

So I'm going to move forward with his warning, because it highlights my own predictions on the matter (tie goes to the confirmation bias). I hope to influence the reader to understand the dynamics at play here, and solidify their own circumstances, as well as to put myself on the record in the matter (people never believe that you successfully predicted something unless you can prove it).

I believe, like Greenspan, that economic and political calamity is inevitable, and I don't think most people are ready for such an event, physically or psychologically. Prompting Greenspan's comments were questions about Brexit's expected effect on the economy. The prognosis doesn't seem to be good. On the face of it, Brexit should not greatly change the global economic situation. I don't believe London will enact policies vastly different than those imposed on it by Brussels (although there will be some improvements). But what Brexit does is, it starts the run on the bank. No one wants to be the last loser in Europe holding the EU debt, and housing all the unproductive migrants. Brexit is not the problem, any more than the nervous depositor removing his investment is the problem. The problem with a run on the bank is that the bank was insolvent to begin with.

On our side, we know the US is not solvent. We know the $20 trillion national debt will never be paid. We know the demographics and entitlements schedules are a ticking time bomb. We know the government is only growing, while productivity is decreasing. We know that medical care is becoming unfeasible in its cost and that college and student loans are a big bubble waiting to burst. It is easy to be lulled into complacency. We look around and everything is fine. Everyone is still going to work. Everyone is driving nice cars. Everything is okay. I would really urge people to consider that it is not okay. That the critiques of our situation aren't some academic wrangling, but an impending crash that we cannot avoid, and will probably be worse the longer it takes to arrive. Let's think of of the whole thing as a matter of resources. Our society is flush with resources. There is a lot of money, a lot of food, a lot of oil. Humans have never had so much. Not only does our society have a lot of resources, but if operates on the assumption that there will always be more. We put our retirement into stocks knowing they will grow with the economy. We get mortgages for our homes knowing their values and our own incomes can only increase. When we invest, we are not taking ownership of something tangible, like industrial capital. To some extent we are, but what we are really doing is betting on the future economy. If I have$1000, I can purchase resources, say food, or perhaps a plot of land to grow food, or I can do what most people do (if they even have any extra money) and invest it. That \$1000 I give to the stock market yields me no resources, but I have the promise that I will one day convert that investment into more resources than I could have originally extracted.

So what we know as wealth does not equate to resources. For most people, their wealth is not substantiated by resources, but by the promise of future resources. And as long as there is reason to believe there will always be more resources, always economic growth, then everything is fine. But what if economic growth doesn't happen? What happens just if people believe that economic growth will not happen? When that time arrives, people will do the logical thing. They will take their investments (their bets on economic growth), and they will convert them back to tangible resources. As investments are cashed out, the remaining investments lose their value, as result of demand economics, and even more people will be prompted to remove their investments. This is a classic run on the bank type of scenario. If most of your wealth is tied up in financial products looking for the greatest return, you are at risk of this type of scenario. When it happens, if you end up on your ass, you will have only yourself to blame.

We no longer live in magical growth land. The chance of a run on investments is real, and if you are not insured against calamity, you are just as at risk as the guy who lives next to a river with no flood insurance. You are simply irresponsible at this point if you don't take out a 3-step economic crisis insurance plan, as follows.
1. You should have tangible resources available to you. I can't tell you what to have available (gold, guns, and food is standard among the collapse minded), so you need to ask yourself one question: if all my investments disappeared overnight, could I survive with what I have on hand? If you aren't sure the answer is yes, you have work to do.
2. If a run on investments occurs, you need to recognize it, and convert your investments to resources before none are left. Just by reading this post, you have a much greater ability to beat the pack than most people. But most people will get nothing at all.
3. You must know how you'll generate and defend resources. This is about education and psychological preparation as much as anything. Many people will lose their minds if they lose their wealth. They will become entirely paralyzed when faced with true physical hardship, let alone risk to survival. Don't be one of them. If you've have time to accept that bad times are possible, even inevitable, you will be so much further ahead than those suddenly having their little bubbles popped.
There are two extreme types of reactions to collapse. On the one hand you have the crazed survivalist, who is ready to head to the woods at a moment's notice, whose whole life is centered on the coming collapse. On the other hand, you have the delusional city-dwelling investor who aggressively maximizes returns and doesn't understand the risks of doing so. Be in the middle. Think of it as taking out an insurance policy. Yes, it will cost you some, but you reduce your risk exposure to the coming and inevitable collapse. Cheers.