The economy going up and down is a natural thing.
Everyone should be prepared for a downturn. In a downturn, construction can be seen as a luxury or a discretionary expense unless it fulfills a critical need, being one of the first things to stop and one of the last to bounce back.
An important question is, how big will the next downturn be? Will it change the world forever? The economy now is global, with global components. At times, these components weaken and fail, however if this happens to numerous components it can result in a crisis of global proportions.
On a macro-economic scale, there seems to be a lot of things happening. For decades, central banks have been using quantitative easing (QE) and low interest rates to artificially buoy up markets. The influx of QE money inflates market financial assets, and low interest rates invite large-scale loan-driven speculation with returns easily beating the cost of lending, but many big institutions get caught out when interest rates rise.
Add to this, other recent events, including government pandemic-panic business shutdowns; the war in Ukraine; trade wars since 2017; the green energy transition disrupting metals, oil and gas markets; the weakening US dollar world reserve currency status; major bank failures; Petro-dollar instability; development of the CBDC (central bank digital currency); and China’s huge BRI (belt & road initiative).
These all can negatively affect global supply chains, inflation, business plans and credit creation, resulting in a lot of economic, political and social tension. Fear and uncertainty increase and markets hate fear and uncertainty.
Charts of national and global debt levels all show a mountain of debt far greater than anything before. Add to this the fact that US Treasury bonds, supposedly the bedrock of global finance, have had yields from short-term and long-term bonds inverted for over a year now, which is a historically reliable recession predictor.
Maybe this time it is different, but if history is a guide, soon a big crash may hit hard, painfully transforming the economic landscape. There is a chance a new economy will emerge after the next crash.
And so often, it seems the experts are always surprised when a crash happens. Do you want to be led by these people? Maybe it’s time to start working towards taking matters into your own hands.
What do you do to prepare for a global financial catastrophe? The answer is not simple and depends on each person’s situation. Also, financial experts’ opinions vary greatly. One thing is certain, it’s always harder to start to act after a crash happens, a bit like digging your well when the drought starts.
Options for financial protection include investing in the proven, age-old currency of gold and precious metals, or US government bonds if they can withstand the storm, or cash for immediate liquidity, or trusting the steadfastness of property, and more. The number of options nearly equals the number of opinions.
Preparing for self-survival is good advice. In an unprecedented financial crisis, everyone else, including the government, may be too busy protecting themselves to do anything else.
This can be a good thing because awareness of it can force us to work towards and develop your own action plan, starting with achieving basic economic and financial competence and knowledge, then keep working at developing that knowledge to become more self-reliant.
First, people need to accept that they don’t know what they don’t know. How can they avoid something that is going to run over them if they don’t even know it is there. Actively committing to economic and financial self-education is vital.
Self-education in economics and finance means being able to make better decisions. Even engaging financial experts still requires knowledge to be able to effectively manage and direct them. This education is a life-long commitment to a complex subject. Even retirees now are at risk. Can you imagine retirement savings being halved at age 65? Superannuation funds may be demolished because of fund managers investing in shaky markets.
Education is foremost, but other measures can be taken, such as reducing or eliminating bad debt, changing the way you do business to reduce tax, collaboration or merging with other businesses (there is some safety in numbers), committing to exclusivity contracts with suppliers in return for lower prices, reducing cash to just what is needed short term, reinvesting paper assets into hard assets, developing intellectual property, and sharing intellectual skills. Even growing your own vegies and chooks or joining community business groups or produce co-ops can help.
Having better choices comes with better education, being able to either accept any of what others decide for the economy or reject it and develop your own strategy.
Commerce will always happen; people cannot live without it. There is more than enough money and things of value in the world for all. Anyone too, can offer, at any time, unlimited value, creativity, and ideas that cost nothing.
Economics is not a physical science; it is a social science, coming from people, which began before fur was traded for stone tools. Being a social science, it is shaped by people, and the smarter and more creative people are about the economy, the better off everyone will be.
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