The events taking place in the world right now have lots of folks anxious, nervous, and some are getting the feeling that we are a lot closer to a possible economic collapse since 2008.
Japan, the world’s third largest economy has just suffered a tremendous blow, the total fallout of which is yet to be determined. The 9.0 earthquake has destroyed or damaged much of the infrastructure in parts of the country. The tsunami has devastated entire regions, while we have all watched in horror. The Fukushima nuclear power plant disaster is still unfolding and may leave that entire part of the country uninhabitable due to radiation entering the environment, soil, and water supply.
Japan will pay many hundreds of billions of dollars (10’s of Trillions of yen), if not much more, to rebuild. They may have to sell some of their U.S. Treasuries, and limit or eliminate new purchases of U.S. Treasuries.
Libya and the Middle East
The situation in Libya, although hopeful for democracy, is adding more uncertainty to the entire Middle East region following the recent uprising in Egypt and the prospect of trouble in Saudi Arabia. With oil at 100 dollars a barrel, every increase of a single dollar has a major impact on the costs of nearly everything that we consume, as the increases are passed down to the consumer and are magnified over layers of manufacture and distribution.
U.S. Federal Reserve
The Fed continues to print money and to fund the U.S. government with their monthly 100 to 200 billion dollar deficit spending. The U.S. dollar is looking worse and worse as an investment, and other countries are working their way around the dollar and eliminating it from their transactions. For example, China now imports a huge amount of oil from Russia, and they do not exchange in dollars. Buying U.S. debt (Treasuries) is becoming less and less attractive for investors.
The derivatives time-bomb still exists (hundreds of Trillions of dollars), and is as bad or worse than before 2008, according to many. The too-big-to-fail institutions have received free money from the Fed, even internationally, and continue to make bad bets. The U.S. government has now absorbed, or taken upon their books with guarantees, much of the ‘bad assets’ from the too-big-to-fail institutions.
Lots of opinion out there suggests that the run-up in the stock market since 2008 is directly due to the Fed’s injection of money into the system, and not much of anything to do with personal investment money from you and I. Given the apparent fragility of this house-of-cards, some believe that a stock market crash is inevitable.
The point is, it feels like things are quite shaky and definitely uncertain in the world right now. Given the speed at which information moves today, and the speed at which financial systems transact these days, it may not take much to tip things over right now.
It is a good idea for many reasons, to be prepared and take preemptive action with your finances and overall preparedness plans when you think that things aren’t going well out there. It certainly can’t hurt. A good thing may be to hold some cash as reserve (and not all of it in a bank). Have a look at your own preparedness plans. Stock up some more with food, and get those supplies you’ve been putting off.
After all, you depend upon you.
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