Given the last post, and the massive amounts of information I covered, along with opinion offered, I thought it might be a good idea to map out a few experiences that shaped my current lines of thought. Yes, it’s all a bit self-indulgent, but it does end with a few suggestions that might be interesting to consider.
So without further adieu, check out how my views on the economy were formed.
The Wealth Effect
I came to my current conclusions about the state of the future economy nearly 3.5 years ago. My former industry was in the midst of a raging bull market that was supposed to last until 2017. It was a sure thing, and I would have retired a millionaire (and my bosses would have been far richer than that), had the worldwide housing/real estate bubble not collapsed.
I was the guy who gave one little company a worldwide profile. In addition to my SEO/Web Development duties, I wrote a weekly blog that gained some nice attention from industry trade magazines, and some broader exposure in certain instances. That blog now exists in a file, and in the Internet Archive’s Wayback Machine.
Am I proud of that? Yes. I’m deeply happy with both the quality of work I did, and of the things I was able to accomplish. However, pride comes before a fall. The financial crisis didn’t hit our core business until July of 2008, nearly a year after the first scare in the financial markets. To say the bubble burst would be an understatement. I kept writing, effectively journaling and examining crises, even as the business began to tank.
There was blame all around, as supply completely surpassed demand in what seemed like minutes. Much of that fallout came from the declining construction market in Dubai. I heard reports from people on the ground in Dubai. Entire fleets of construction equipment were idle. We would ship between 4-6 40′ containers, stuffed floor-to-ceiling with crane tires to a single customer, every other month.
The amount of business we did directly with Dubai, or with dealers who sold to Dubai was staggering. Equally incredible was the amount of business we did with Mexico, South America, South Africa, and Australia. Come to think of it, we did really good business in Russia, and Eastern Europe as well. Surprise heavy equipment haven: Belgium.
Where Did It All Go Wrong?
I’m fairly analytical, so when things go wrong, I am hardwired to seek out causality. So, I did. Bottom line, easy credit caused construction booms and industrial expansion, worldwide. This caused demand for iron, precious metals like silver (the best electrical conductor, period.) and copper. Dubai and the domestic construction markets collapsed almost simultaneously.
This freed up industrial metals, as demand collapsed quickly and stockpiles increased rapidly. Mines, especially massive conglomerates, cut workers worldwide. In the case of mining giant Rio Tinto, it meant 14,000+ workers were declared “redundant”, in a single day.
As our market worsened, I firmly believed that precious metals would rise, due to the instability of the markets. Unfortunately, I also believed demand for these metals would be able to fully support a recovery. It turns out that industrial metals prop up the mining industry worldwide. Business kept declining, even as precious metals began their rise.
Eventually, the blog became about exposing corruption within the industry, International trade law, and even a post or two about the environmental impacts of mountaintop removal mining. Good times.
Remind Me Why I Should Care…
Well, first off, I’ve spared you all the bitter parts of my experience up to this point. Consider yourself lucky. Next, I was right about precious metals, and a few other things I won’t bore you with.
The whole point of this, and the financial collapses of the past 12 years, is that the truly bad events are the ones you don’t see coming. There were people who predicted these events for months. I can predict what I do see coming, based on household fundamentals. If your total debt payments exceeded your salary for the year, it would be a very great problem. This problem is extremely dangerous when the economy you are speaking of is the USA.
Even if we keep other factors neutral (like China, Qaddafi lighting oil wells on fire, Iran.), we still have a problem. I don’t believe in the stock market, or Ben Bernanke’s claims that he has inflation under control.
Many people think I am worried about the future. I’m not worried about the future, I’m just waiting on the inevitable. Whether it means the economy manages to survive for the next few years, or it means a collapse in the next 6 months, I’m not super worried. Don’t get me wrong, it’s serious. I just have no control over when these things happen, or the severity.
If the last few years have proved anything, it’s that God is faithful, and I’ll survive.
Got Plans?
So, what do I suggest you do, given current conditions?
1.) Will it float…err..keep?
Stick to the basics. Buy some food. It will save you money in the future. When you do, make sure it’s not perishable in the short term. Cans of veggies, flour, and tuna fish are all pretty good options. Sardines also work. Just make sure you have the Scope sitting on ready. Think of it as investing, rather than just grocery shopping.
2.) Buy some silver.
The stuff is still cheap at $33 an ounce. Plus, if you drop a piece somewhere and lose it, it won’t upset you as much as dropping an ounce of gold. It will appreciate in value over the next few years, unlike the money in your pocket.
3.) Pray.
Not really optional. As I quickly found out, this is the most important step before and after any unforeseen event smacks you in the head.
Proper Planning Prevents…Nothing, Actually.
There’s nothing preventing a giant meteor from falling out of the sky and crushing Beijing, tomorrow. Some scientist may save us all from an energy crisis, and invent an environmentally friendly fuel that is dirt cheap to produce. I could find a ticket for a lottery that I didn’t enter, and retire with millions of dollars.
It all theoretically could happen. The odds are against any of these happening, which is why I have basic, flexible plans in place.
Like I said, this all kind of self-serving, because I like being right about things. This blog allows an objective measure as to whether I was right or wrong on a particular issue. That’s kind of important to me, as are the people reading this.
Next time, I’ll try to write something unrelated to the economy, and a little less “me-focused”. Until then, I’ll be…
Signing off…
{ 2 comments… read them below or add one }
I am also investing in another precious metal: lead. There’s being a steward to consider, but I fail to believe that when put in dire situations, men will not do evil. Being prepared includes being able to hunt and protect.
Oh, I believe in lead, too.