Indeed the entire banking system is insolvent right now. It is physically impossible to pay back all the credit that has been extended on the fiat based money supply that actually exists.
Economist Mike Shedlock in What is Money and How Does One Measure It?
With a way of life that is so dependent on the convenient exchange of paper and plastic currency, many would be completely unprepared to handle a glitch in the system. A market crash, dollar collapse, personal tragedy, natural disaster or other form of major emergency would prove many to be ill-prepared to handle the resulting changes and demands.
Many have begun preparing ahead for potential emergency situations, knowing that those in past disasters were much better off if they had made even the smallest of preparations. An important part of this preparation is staying ready for the unknown.
Consider what the loss of your job might mean to your lifestyle. It’s not that hard to believe the job market might go south again and most families are not prepared to handle a layoff situation.
Pay off Debt – Paying off debt now and not getting into larger debts will answer many of the natural disaster or job market emergencies that a family might run into. Without monthly bills owed, you will have less financial pressure to find an immediate solution if the collapse is not a global one.
Save Now – Storing any additional income in tangible assets, savings and investments will also help prepare for a potential personal emergency. If the need arises, savings can be used and tangible assets and investments can be sold to pay for the time it takes to get a new job, emergency health care or any type of personal disaster.
Aside from a possible personal emergency, the looming possibility of a crashing market, war or economic instability adds to the pressure of what we face and how we should plan for the days to come. As countries continue to store up weapons on a massive scale, go further into debt, and continue to depend on dwindling resources, many have taken to reading the tea leaves of current events and are finding ways to financially prepare themselves in case catastrophe strikes.
Spend Paper Assets – SHTFplan recommends preparing for the future by spending all paper assets, “For those with physical, non-precious metal denominated currency on hand (paper dollars, non-silver coins), spending it as rapidly as possible is the best approach.” A complete lack of intrinsic value in the currency means if the market were to collapse it would be of no value to anyone.
Spending all paper assets, however, would not be helpful if there was a continuation of status quo or a future growth in the economy. This has to be done with careful thought. You need a plan of what you are after with that paper money. Don’t spend it just because. Buy or build a bug out location, store food & water, or put it to other uses to further your preparedness.
Storing Physical Assets – If a global or governmental crash were to occur, the money stockpiled in savings accounts, stocks and bonds would be lost. This means that a well-rounded approach to possible events would include the storage of items that would become incredibly valuable in a widespread emergency: food, clothing, medical supplies, fuel, water, etc. If a major system breakdown were to occur, unavailable essential goods will be of most value.
Investing in Real Currency – In a long-term situation, a personal emergency or some limited disaster situations, precious metals will hold their value and be much more reliable than a savings account or non-precious metal denominated currency. Gold and silver have also been fairly consistent in retaining value over the years in the majority of countries and civilizations, so it is a fair bet to think precious metals will continue to increase in value.
Bonds – Bonds are a loan to the US Government for a specified amount of time. Over the time frame of the loan, the bond will build up interest and then be paid by the government when the full term is up. Cashing a bond early does not result in penalties, but will result in not getting the full maturity from the bond with all potential interest.
Money Market or Certificates of Deposit (CDs) – These are low-yielding ways to invest money that gain higher interest than a savings account, but are also not easily accessible until the time frame set is up. Money Markets are not FDIC insured and may require a minimum balance. CDs are FDIC insured, but you cannot withdraw money early without facing penalties.
Stock Market – The goal of most investors is to purchase stocks at low prices and then sell them for higher prices, raking in profit on the difference. The struggle with this market is the volatile nature of rising and falling prices on a daily basis; knowing what constitutes as a low point and when to jump the train on a rising track has proven difficult for many.
Investing in long term stock options (companies you believe will continue to increase in value over the years) and short term stocks (companies that are cheap now, but you believe will quickly rise in value over the next several months) are the most common ways that investors try to play the stock market.
Striking a Balance
Storing money in a bank or purchasing bonds, CDs, the Money Market and stocks is highly dependent on a working system. History has shown the possibility of collapsing banks and lost savings; from the Cyprus banking collapse to the Great Depression, an economic collapse is a very real threat to personal finances in an emergency situation.
Storing physical assets can be difficult because in the current situation, their value is lower and will not increase in value. Not to mention, where you’re going to store it all.
While precious metals are intrinsic in their worth, they may be of little value in an emergency situation. If there is real concern about survival, gold and silver will be of much less value than water, clothing, food and fuel. Precious metals also cannot be easily spent in the current market situation.
The wise investor will realize the impossibility of being 100% sure of the future and will work hard to keep from putting all of his eggs into one basket.