“Everywhere I look I am reading this message that the economy is going to blow but I have no idea what that means in real practical terms. Does any one have an informed opinion on just how bad it is going to get for the man in the street? Not the guy with the big portfolio, the guy with two kids and a mortgage.”
The question (actually a reader comment from a previous article), is a very good one. What will it mean to the average ‘Joe’, if and when the economy crashes hard.
I say ‘if’, only because there is a chance that ‘they’ may still somewhat control the crash landing, although it will still crash – the crash will still be nearly as painful for ‘Joe’.
I say ‘when’, because logically there is no other way for this cycle to end – it must end badly. A question is, how bad will bad be…
So, what will it mean for ‘Joe’? (the guy with the two kids and a mortgage)
Joe probably busts his ass every day, so to speak, to bring home the bacon. Joe’s wife probably does too. Between them, they probably make enough money to barely make ends meet, or maybe they have a little left over (or maybe even more than just a little), but it’s not enough to write home about…
They probably vacation once or twice a year (or used to). They probably have a mortgage that today is barely ‘even’ with market value or possibly even ‘under water’ (owe more than it’s worth). They probably have one car loan between them while the other car may be paid off or purchased used. There might be an outstanding college tuition loan too. No doubt there is some credit card debt as well. Joe might have a savings account with a few grand in it. He probably has a 401K-plan from work (depending on his employer), and it has taken quite a financial hit due to the disastrous results on Wall street of late – once again (remember ’08’?). Unfortunately, Joe’s 401K plan doesn’t have any funds that allow him to invest in gold or silver…
So, what will it mean for Joe when the economy blows up?
1. If he has a 401K, it will tank even more than it has in the past. This will put off any hopes of retirement that much further.
2. His bank may be closed, and he may have to wait until the FDIC sorts out getting his money back. (Too-Big-To-Fail banks will probably be saved once again)
3. What money he does have, will be worth much less than it was just a short time ago.
4. The prices of most everything will rise faster because the ‘value’ of the currency (in this case, the dollar) will be worth less.
5. His employer will not raise his pay to keep up with the devaluation of the dollar.
6. Joe may lose his job as employers and corporations scramble to stay afloat.
7. Unemployment will skyrocket. Event the ‘government numbers’ will look bad.
8. The stresses at home will become intense due to the pressures of finding ways to keep up with the bills.
9. What little spending that Joe and family was doing in the first place, will be cut entirely, therefore increasing the speed of the overall demise of the economy as all other ‘Joe’s’ will be doing the same thing.
10. No consumer spending, no products to sell, companies fail.
11. If Joe is still working, the expectations, hours worked, and pressures from the job will be enormous as employers leverage the desperation knowing that thousands are waiting in the wings to get a job.
12. So many people are out of work, and becoming angry or desperate, that social unrest will become wide spread while authorities are of insufficient numbers to contain it all.
13. Crime will increase, especially robberies including home invasions. Joe ‘may’ become a victim himself one day.
In general, and in summary, I believe that life as we know it will become much more gloomy as we all try to cope with making ends meet.
The good news, and something to plan for, is that those who have no debt will do the best, and will be the happiest.
More good news is that once the real bottom is reached, and although it will take awhile to make the adjustment, a new cycle will begin – probably one with hope, renewed core values and responsibility, and a new generation of children whose parents have lived through the 2nd Great Depression.
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