Navigating Treacherous Waters, Part II

This is the second part of a three-part series. Part I can be found here. Part III will deal with long-term investment strategies and policymaking.

UPDATED DISCLAIMER: As I noted before, these are just my thoughts are ARE DEFINITELY NOT financial advice that you should take without first talking to a financial advisor. Please do your own research before doing (or not doing) anything I mention. Also, I am NOT advocating a run on any banks!!

So let’s say you have a savings account at Washington Mutual….

The world is collapsing all about us. Unless we switch to the Gold Standard as the Founders and Joseph Smith intended, all is lost! Invest in cracked wheat and ammunition FAST!!!!!!!

Here are some broad suggestions for those concerned about the recent crisis. In honor of Talk Like a Pirate Day, some of my thoughts will be more swarthy than others.

1. Arrrrrr, don’t panic, ye scurvy knaves. Your anxiety will not solve the global financial crisis, nor will it help you or your family. Indeed, panicking is the reaction most likely to cause you to make poor financial decisions. For now the average consumer has been largely unaffected by the actions on Wall Street (eerily so). So try to relax. Go for a run. Watch Ratatouille.

2. Don’t make yer boss walk ye on yon plank. Your best income-generating source is most likely your job (or, for students, your job prospects upon graduation), and is likely to be your greatest financial asset over time. Don’t do anything to jeopardize your job. Take on additional projects, take seminars or other programs to increase your utility, and continue to work on your networks in case things should go awry.

3. Avast! Don’t throw your gold away on rum! Now (as in today) you should take serious stock of your assets and your liabilities. Chart out your bank accounts, investments, loans, mortgages, and sources of income. Literally chart it all out. Get the total financial picture. Then map out, based on your prior bank statements, your average monthly spending and the key areas where your spending is the highest. Now (as in today), identify unnecessary and frivolous spending (entertainment — including cable — and dining out are typically the two biggest villains), think about a budget, and start living well within your means. When I was in law school the financial aid department was fond of saying, “if you live like a lawyer when you are a student, you’ll end up living like a student when you’re a lawyer.” Those incremental and unnecessary expenses make all the difference. But to approach them, you must first identify them and have a full awareness of your state.

4. Keep yer bullion in more than one treasure chest, me hearties. The importance of diversification is one of the most important lessons we can draw from the collapse of Lehman Brothers. Even though the market is pretty brutal, don’t stop investing altogether — just be sure not to put all your eggs into one narrow portfolio (such as investing everything into your employer’s stock). 401(k)s are particularly good investments to be making right now. You won’t see a lot of short-term gains but getting into the market at the low point is a great, great thing. Remember “buy low, sell high”? Well, things are low right now.

5. Always keep some treasure hidden away, in case Davy Jones comes for ye! Expand your emergency fund. Cut back on frivolous spending (Comcast is probably getting thousands of dollars a year from you), and put it into a financial cushion that you can have handy in case of a layoff or other emergency. Every day we see tales of average middle class people who find themselves impoverished because of sudden medical bills or losing their jobs. Don’t let that happen to you — scrimp now and pat yourself on the back later.

Now a few more specific questions:

–Should I move my savings account? It depends. If this is your sole savings account and you regularly turn to it and depend upon having unrestricted access to it, you might consider moving it. Most bank accounts are FDIC-insured, so the concern is not losing your money; but the FDIC will not kick in immediately, and if your bank really does go under suddenly, there may be weeks where your funds are not accessible. Otherwise, there’s no reason to do anything and it will certainly lower your stress level to just keep things as they are.

–Should I buy a house? Hmmm. I do not believe that we have hit bottom in the housing market, certainly not nationwide. Some markets have corrected more than others, and may see a rebound — but it’s hard to say for sure. But housing prices are not the sole concern in buying right now; you also need to think about mortgage rates and accessibility. The 5% no-money-down instant mortgage of 2002 is gone — now try to get even an 8% mortgage, and heaven help ye if you need a jumbo loan. If you have the magic combination of a good mortgage rate locked-in and a deal on a house, I wouldn’t hesitate…. but that is an increasingly unlikely scenario. This is a great time to rent.

Other questions?

UPDATES:

–YES, both husband and wife need to be involved in the financials. It is irresponsible and plain stupid for one half of a couple not to be completely informed as to where the money is coming from and where it is going. Each person should know where all the bank accounts are and what does what. If you don’t know the ins-and-outs of your finances, correcting that situation immediately should be your number one priority. Seriously.

–I just saw this test online, which I think is really good. Want to know if you can weather the financial storm? Here’s what one financial advisor does:

She asks [clients] to calculate their monthly expenses — from Botox shots to country club fees — and their monthly income from work and investments. Then she has them cut 10 or 20 percent off the income figure. If they can still afford their lifestyle, she tells them that they have enough of a cushion to protect them from a troubled economy.

–Also, here is a good, official site for people really worried about the FDIC and its impact on their deposits.

Comments

  1. So…we’re havin’ an International Talk Like a Pirate Day sale on stocks? `Tis good t’ know, matey!

  2. Steve,

    What do you think I should do with my shares of stock in The Dream Mine? Sell or stand pat?

  3. Dream mine. Good grief. Or, Arrgh!

  4. Steve, this a great series; very useful. Thanks for it!

    “Bullion” in #4 is clever, but I think “swag” might have been even better.

    Not only did President Hinckley warn us about things like this, but his infamous “get our houses in order” talk was almost exactly ten years ago, in the October 1998 General Conference. We had a whole decade to prepare…

  5. You want us to watch Ratatouille? That’s a movie about some real job security!

    And I’ll go add up our Botox and country club expenses right now. Thanks for the advice.

    (I’m actually enjoying the series and sure enjoy seeing some of those “someone said that someone said that Joseph Smith said that [fill in the blank]” people come out of the woodwork.)

  6. Thanks for these enlightening posts. I appreciate them and am coming to understand what’s going on a lot better.

    1. After years of not having cable, I KNEW it was a mistake when my husband insisted on signing up for Comcast a couple of months ago.

    2. I also appreciate the advice about how both partners need to be informed. I’m usually the one who is relegated to look after money matters, but you’ve inspired me to force both of us to make an appointment with our company’s financial guy when he comes to visit in November.

  7. Oh, and aaaargh.

  8. Steve,

    Thank you for your posts. I am looking forward to part 3.

    Regarding your third suggestion, my wife and I have found it very helpful to use Microsoft Money to track our accounts, maintain our budget, etc. It is difficult to get the big picture if it is on paper, with multiple accounts, etc. Quicken is also a good program, although, I have not used it myself. Regarding Microsoft Money, it is time intensive to gather the information and set everything up, but once it is running, it is very easy to maintain and track.

  9. cahkaylahlee says:

    Aye, and for those of you on a Mac, Cashbox is a nice, simple program to keep track of your accounts. And it’s free too!

  10. Thanks, Matey, for the good advice.

    It is interesting that the tendency to panic becomes a self-fulfilling prophecy. As more and more people panic, the problem compounds and what was feared becomes a reality.

    Also, I’m glad you mention cable. Often we think of such things as necessities, but there are many such wants that we can do without, and the resulting savings can be significant.

  11. Arrrrr, ’twas nothing. Blast Comcast to the shades!! Cable TV is the LDS equivalent of spending money on the daily lattes.

  12. Count me as one who panicked, and then diversified. I moved my life savings (largely in quarters) from under the mattress of the guest bed to several holes I dug in my back yard. But I’m not sure that that was the best idea, because ever since the grass started growing back, I’ve had a hard time remembering where all those holes are.

  13. I have a question, should I refinance? If so who should I do it with?

  14. Starfoxy, tell me more. Why are you looking to refinance? How much are we talking about? Where?

  15. This is a great series. I’d appreciate a post on how to decrease your expenses to that 80% to 90% of your income, too. I just adopted a son a few months ago. He’s got serious health issues so the combination of me wanting to spoil him in everything and his medical bills have us spending slightly more than we earn right now. I know we have to reverse that but looking at the budget I’m not sure how.

    The first thing we cut out, of course, were the country club fees, the stables, sold the yacht, the beach house, and so on. (kidding)

    Creative ideas on this are welcome!

  16. Tatiana, I’d have to look at your expenses with you, but it’s my experience that we all have loads of unnecessary expenses.

    You don’t need yachts and club dues to spend lots of money on things that you don’t need. Looking at my own list from 6 months ago I could cite: Netflix, Comcast, local restaurants, driving (when I could be riding my bike), movies and other things. I think making your house more energy-efficient is another killer — look into winterizing your home, installing an automatically adjustable thermostat and related things. Entertaining and dining out were the real killers, though.

    PS – I still spend tons of money on this stuff. Except now I rarely drive and we’ve dropped Comcast. With regular rabbit-ear antennas we still get at least a dozen HD channels.

  17. This is a great time to rent.

    Maybe the lesser of two evils, but where I live landlords are entitled to automatic rent adjustments when the CPI tops 5%, which it just did. Yay.

  18. Ditto what Steve said, all the things he mentioned were the things we didn’t notice were eating up a ton of money in our budget.
    So we pared back our Netflix, got rid of the Russian channel and some other cable–and cut our restaurant and movie budget, and my Target spending habit:), and made the kids lunches every day instead of school lunch–and my husband bikes more. Weekend trips added up for us too–so much to do here, gas was a killer over the summer!
    I hate to make it that simple. I grew up very poor, so I know that people can’t just simply cut things like that out and increase the budget. A lot of people already don’t have those things to cut out of the budget.

  19. Ugh, sorry Peter. I would think that for most people, renting still is a great way to go — unless you take the view that homes will not be any cheaper in the next 5 years than they are right now.

  20. Thomas Parkin says:

    Great stuff, Steve. Really.

    I think the pressures on the economy are and will remain enormous for the foreseeable future. We may get some breaks here and there. Govmint is shore mortgaging da future, though. If we don’t see some robust growth sometime in the next ten years … man.

    Meantime.

    assets: everyone in household still has a functional pair of shoes. That’s good. Gotta have food and shoes.

    liabilities: sweet mother of all that’s good and pure!!!!!

    ~

  21. Well, we got swindled- we foolishly assumed that one had to ask for an interest only loan- only to find out that we were supposed to ask if we didn’t want one. We found out that our primary loan was interest only the day of the signing (when we had to be out of our apartment the next day). I was livid. I’ll email you the details.

  22. But what do you do when you are already scrimping and saving in all the categories mentioned above? and budgeting, and keeping track of your income and expenses in Quicken, and not having any left over, in fact, not having enough?

  23. Steve Evans says:

    SteveS, there’s no easy answer to those scenarios. I would go to your Bishop; present him with the budget you are working with, and ask for his advice and help.

  24. The biggest single way we’ve tried to save money (besides actually saving money) is by moving into a much more modest home than the bank and our realtors wanted us to buy. We’ve kept our total housing expenses to just over 20 percent of our pre-tax income, and it seems like it would be tough to spend more than that.

    Renting is not a good option for us since many landlords are not interested in renting to a family with five children, and if we were able to find a good place (that’s a big if here) it would cost more in our local market for us to rent than it did to purchase.

  25. But if we cut cable, how will my wife continue to TiVo 20 DIY shows a week? C’mon, be sensible!

    At least I don’t have to get rid of high-speed Internet; I’m sure the nice folks in the bay of pirates would be sad to see me go.

  26. FHL, I predict that “Flip This House” will become a science fiction series.

  27. Also, good financial advice is to put the Lord first in paying a full tithe and fast offerings.

    As far as expenses go, I went to our ward’s Enrichment meeting this week (yes, husbands were invited), and it was a presentation on making bread. The women talked about how much money they save by making their own bread, and not just loaves of bread but using the dough to make pizza and dozens of other items.

    A few other ideas for stretching the budget: limit fast food; plan meals and shopping trips in advance; use coupons; have a garden when/where possible.

  28. Jim, all good advice, except that I’d point out that fast food is not necessarily more expensive than eating at home. Indeed if you try to replicate a fast food meal at home it is likely to cost you more.

  29. Replicating fast food may cost more, but making a decent meal will not, assuming you’re talking about any quantity above one or two people. I can make a nice pot roast (slightly more than one serving per person purchased on sale), gravy, roasted red potatoes, dinner rolls, roasted green beans, and dessert for about 12-14 dollars (all vegetables grown and purchased locally) and have leftovers, or we could all go to McDs and each have three items from the dollar menu (burger, small fries, small soda) and spend over $20.

  30. We got rid of our land line, since we rarely use it. Making bread sounds fun and tasty. Maybe we could swap from cable internet to DSL.

    I read an article in the Ensign a while back about using the stair step method or something like that. If you currently eat at nice restaurants, step down to fast food. If you now eat out at fast food restaurants, start eating at home more, and so on. If your entertainment is going to the movies then try renting dvds instead. If you rent dvds now then try putting on a play or something. Whatever it is you do, step down a level from where you are now to a cheaper level. Do that in all areas you can manage. That was the idea. It was a good article. I bet one of the google-fu masters here can find it for me again. I love the church’s teachings on practical matters like this.

  31. Use the heck out of your local library.

  32. There are plenty of non-financial reasons to eliminate fast food from your diet, of course.

    We’re going to get rid of our second full-size vehicle and have ordered (seriously!) a Smart Car.

  33. Steve Evans says:

    Smarts rule. Congrats Mikey.

  34. Steve Evans, you’re a regular renaissance man. I thought your background was primarily in the humanities–and now you’re talking finances like a seasoned consultant? And you’re telling us that you went to law school? Sheesh! I can understand your expertise in pirate lingo, but whence cometh such knowledge that is typically so antithetical to the thoughts and desires of an artist?

    Non can be too sher that he know a man save he sail with’m in the deepest waters whar the fiercest monsters await to take his ship below the briney blue.

  35. When I became self-employed and didn’t know whether the money I made this week would have to last for two weeks or six months (and yeah, sometimes it does have to stretch that long), I went on an absolute spending freeze. For two years the only clothing I bought was pantyhose. No movies, no eating out, no chips or cookies or frozen dinners. I gave up my car, had the phone turned off, and in winter I closed most of the house and lived in two heated rooms. I made bread and lots of vegetable soup.

    It was drastic, and I couldn’t have done it with any dependents. I don’t suggest that anybody else try it unless they’re as committed as I was to the goal. I no longer have to live that way.

    But I found after only a few weeks that I was perfectly happy without the “stuff” I had been so used to buying. Now that I can afford to be more normal in my spending, it’s still just as easy and enjoyable NOT to buy frozen meals or collect DVDs. I hadn’t been at all aware of how much money I was wasting, and how little pleasure the “stuff” really brought me. Spending was habit more than anything else.

    So if you want to save more without living less, I echo Steve’s #3 about identifying and eliminating frivolous expenses. We all have them. Go on a spending fast for even a week and notice what you’re not buying that you would have bought last week. You can shrug and do without it quite easily. Then don’t buy it next week, either.

    (Sorry for the length of this, Steve.)

  36. Neal Kramer says:

    Thanks, Steve.

    Don’t just worry about Comcast, lose that cell phone! How much have you lost in overages in the last year? Never text anyone.

    Don’t buy that teenager a car!

    Think twice about remodeling the house that just lost 1/3 of its equity.

    Pay off those GAP and Nordstrom credit cards and then get rid of them.

    Pay your tithing.

    Have a legitimate, real emergency fund.

    And never forget to play golf.

    Neal

    PS Donate the stuff you don’t need to people who do.

  37. Steve Evans says:

    Jack, sorry to disappoint!

    Ardis, never worry about whether your comments are too long. It’s QUALITY!

  38. I’m a news junky, probably like many here.

    Am I the only one a little stunned by all these reports today saying the “entire financial system is on the brink of imminent collapse” and (on NBC) that we were “absolutely” on the “precipice of a great depression” ??? Is this hyperbole?

    Don’t remember hearing financial news like this ever before.

  39. saw that too. sobering. I know alot of people are pulling cash out.

  40. Pulling some cash out – that’s something I hear people talking about …

  41. “Don’t remember hearing financial news like this ever before.” (38)

    Sure doesn’t sound like what was being said on NPR this morning. If I understood him correctly, Barney Frank gave a rather rosy picture of what happened this week.

  42. Given that we were on the “precipice of a depression” and avoided it, I’d say that’s cause for a (relatively) rosy outlook from where we stand today. That doesn’t mean the situation wasn’t dire, as described here.

  43. Token Average Member says:

    We may have stepped back from the edge a few feet, but the precipice has not turned in to a beautiful rolling plain. If we don’t learn from the experience and follow through on our plans to economize and become more self-reliant, basically do what the GAs have been saying right along, we may very well follow the rest of the lemmings over the cliff next time.

  44. In 1971, roughly, an unskilled worker made about 45K in 2008 dollars. It’s been downhill since then. Why? The reasons are complex, but one of the main driving forces has been the overhaul of the tax code more-or-less starting with Reagan, with more and more of the tax burden being put on the middle class and less and less being put on the upper upper upper class. This has resulted in the GPA roughly doubling in the last twenty years with all of the proceeds being seen in the tippy top–the .05 percent, essentially. I don’t know how to put this politely, but Steve Evans is a very sweet gentle soul, but when it comes to actual economic information, uhhhh, not so good…..

  45. Steve Evans says:

    djinn, I am probably not smart compared to you. After all your GPA doubled in the last twenty years.

    Actually your remarks have virtually no bearing on what I have said at all. Not sure why you would want to cast your tax burden thoughts as some sort of refutation when they’re not. If you want to score points, consider yourself Boss Commenter #1! Gold stars!

  46. But I found after only a few weeks that I was perfectly happy without the “stuff” I had been so used to buying. Now that I can afford to be more normal in my spending, it’s still just as easy and enjoyable NOT to buy frozen meals or collect DVDs. I hadn’t been at all aware of how much money I was wasting, and how little pleasure the “stuff” really brought me. Spending was habit more than anything else.

    That really was true for me when I was single.

    As it is now, we have decided to cut out the cable television and, though we went with a more stable phone company after SunRocket died on us, we just switched to Vonage tonight. Next we change up our broadband provider to drive the cost down again.

    Now, if we watched more television, it would be a different story. ;)

  47. I appreciate this series, Steve. It is amazing how many little extra expenses creep in when things are good. It is painful to cut back, but once you are used to the change you really can be happy without extras.

    I would add the recommendation for food storage to your advice about an emergency fund. If I understand all of this right, the government has doubled the national debt in two weeks, committing to pay a lot of money it doesn’t have. That means either massive tax increases or massive inflation is in our future (since inflation is caused by expanding the money supply). A low risk way of protecting yourself from inflation is by buying future needs now and storing them for a future time when they will be more expensive. So: food storage, non-food household supplies, clothes storage (yard sale clothes in sizes that the kids will be growing into are cheap, and fuel storage (or green energy adjustments to your home or lifestyle so you don’t need as much fuel).

    M&M and I have started a blog about food storage. Come and join us!

  48. Steve,

    A couple of things.

    1) Now is actually a pretty good time to buy a house. Most housing markets are flooded with bank-owned foreclosed properties and banks are desperate to unload them for next to nothing.

    2) With a government-backed FHA loan one can purchase a home with 3% down. Rates dropped significantly when the Fed took over Fannie Mae and Freddie Mac a few week back so it is not hard to get a 6% rate or better on a 30-year fixed loan with decent credit right now.

    3) These same basic principles apply to FHA refinances. People with ARM’s that are about to adjust could look into an FHA refinance. With the FHA you can refinance up to 97% of the current appraised value of the home. This doesn’t help if you are already upside down (owe more than the place is worth) but it is a good option for people with some equity left.

    4) The comment about jumbo loans is only partially true. Any loan over $417,000 is officially considered jumbo. But recent legislation raised the FHA loan limits all over the country and in the more expensive counties FHA loans can be as high as $729,000 through the end of this year with no significant “jumbo” penalties on the interest rate.

    5) There may also be a ray of hope in the new finance legislation the Democrats pushed through congress over the summer for people who are upside down on their current mortgages. They are calling the new potential loans “HOPE loans” and are basically FHA short-refis, which means that in lieu of foreclosing some people will be allowed to get a new loan at 90% of the current value of the home.

    See this site that for more about all of that. (I am connected with that site so anyone can email me with any questions and I’ll try to help.)

  49. Steve Evans says:

    Geoff, I was hoping you’d chime in. As a Seattleite our housing market hasn’t yet collapsed — I have the same suspicions about the SF Bay Area. Arizonerds may have bit the floor.

  50. Steve,
    SF houses are still coming down. But for us it is still a good time to buy. We have 20% down, and can get a fixed rate for under 6%. Rates will rise as houses come down a bit–so it all kind of balances out.
    Houses her have come down alread 38% over the past year (but still haven’t bottomed). The central valley of CA seems to be bottoming now–I expect it to slow and then go down again in the Spring.

  51. I want to add, now is a bad time to rent here if you can buy. Rent prices are skyrocketing, and they are hard to find. It also appears slumlords are on the rise–investors who can’t afford to take care of their rentals.

    Arizona is in extra bad shape because of the slumlords (25% of houses there are/were owned by Californians-who let them go into foreclosure, often without warning renters), and they passed a law targeting undocumented workers recently which drives many people out of areas where renters lived.

  52. In considering a house purchase right now, it is also important to consider some fundamental market shifts in the housing market that are currently happening as well. There is a major trend towards more urban housing preferences, especially among the young professionals who are emerging as the driving force in the housing market. This will have long-term impacts on the quality of life in suburban communities.

    In short, those closely following these housing and demographic trends have suggested our country’s demand for single family homes has been nearly met already for the next 30 years. This means that many housing values that have declined due to the current foreclosure problems may very well still lag even after that’s all worked out. Inner ring and well-established suburbs will recover better than exurban development.

    I would definitely think twice before looking for good deals on the metropolitan outskirts. Personally, I would not buy in the outskirts of any community in California’s central valley (to use mmiles example) for this reason.

  53. Think Japan 1991. And thanks for the gold star.

  54. djinn, whether or not we’re hit with Japanese stagflation is still to be determined. Much will have to do with how the investment banks use their newfound bailout money.

  55. They’ll likely use it to bolster capital, decrease leverage, and shrink their balance sheets, not loan it out.

  56. I’m not a fan of giving blanket advice like “get rid of your cable.” If I didn’t spend the money on cable, I can more or less guarantee that I’d spend it on books — and far more than the $60 for my cable service. Or, I’d end out spending the money on gas to visit people who do have cable (*). Same goes with eating out; short of eating a handful of staple meals every single day (which I simply won’t do given my current position) I typically do save money by eating out. Then again, I’m single, and I pay very little in rent (about as much as my mom did when she was my age, making 1/8th what I do.)

    When I was an intern in DC I ate mostly popcorn and ramen noodles and never did anything, and I don’t use credit cards or have any other debt besides student loans. For years I went weeks or months without buying anything, and all that’s meant is now having to spend far more on basic stuff than I should have to do, because everything’s worn out or I just was too scared to invest in spoons. Technically speaking I still haven’t bought any spoons; I have leftover silverware from my mom. I should probably buy some spoons. The point is, everyone has a point where cuts go from being necessary but doable, to drastic and counterproductive. For me that line stands on the other side of not having cable.

    (*) I spend more on the internet. On the other hand, I actually make money with my computer, so I eschew that guilt with pure reason on my side. I’ve made enough on CafePress this month to pay for my internet service through the end of the year. =P

  57. Steve Evans says:

    “If I didn’t spend the money on cable, I can more or less guarantee that I’d spend it on books”

    Sarah, implicit in the advice is to NOT spend the money at all, not just to shuffle it around.

    P.S. — libraries are marvelous things.

  58. Also, there was no stagflation in Japan. There has been a protracted deflation in home and most asset prices in Japan for nearly 20 years.

  59. Here is how libraries can be more expensive then cable.

    1. Check out 50 kids books
    2. Return 50 kids books 5 days late
    3. .25 per day per book fine

    $1.25 times 50 books equals $62.50

  60. Steve Evans says:

    woodboy, really? I am misinformed!

    bbell, 50 kids books???

  61. Hey, I got 5 kids 8 and under. So 10 books per kid every three weeks or so.

  62. geeez man, you don’t need to go to the library, you ARE a library.

  63. Sometimes I think our late fees single handedly fund the library.

  64. When do we get Part III??

    /s/ Eager

  65. Ardis, Part III is the hardest part, I’m working on it now but it will take a couple of days.

  66. ….plus I’m really lazy.

  67. Okay, I’ll be patient — just wanted you to know your vast public is panting for the pearls of great price we know your lazy genius will cast before us.

  68. Good things come to those who wait! Also, crappy things.

  69. Stagflation is generally defined as stagnant economy + high inflation. Japan had the stagnation, but not the inflation. There is nothing inflationary about 0% central bank interest rates, continually falling homes values, and debt writedowns. Japan’s situation in the 1990s and early 2000s is considered a classic case of deflation, and this is well documented.

    Not that wikipedia is authoratative, but:

    http://en.wikipedia.org/wiki/Deflation#Deflation_in_Japan

    Contrast with stagflation in the 70s in the US characterized by high unemployment plus interest rates of well over 10%.

  70. Steve Evans says:

    Thanks woodboy.

  71. jonahtrainer says:

    “The world is collapsing all about us. Unless we switch to the Gold Standard as the Founders and Joseph Smith intended, all is lost! Invest in cracked wheat and ammunition FAST!!!!!!”

    Steve, are you serious? I highly doubt someone would be sarcastic about such important topics.

    Here is the complete quote by the Prophet Joseph Smith “I consider that it is not only prudential, but absolutely necessary to protect the inhabitants of this city from being imposed upon by a spurious currency. … I think it much safer to go upon the hard money system altogether. I have examined the Constitution upon this subject and find my doubts removed.” [Source: Scriptural Teachings of the Prophet Joseph, Deseret Book 1993, page 368]

    The Founding Fathers included monetary provisions in the Constitution for a reason.

    Gold and silver are not mere commodities but essential checks and balances in the political machinery of the United States as governed by the US Constitution. Any lawyer should know that. What does sound money protect against?

    Alan Greenspan said, “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” Gold and Economic Freedom, 1966.

    Ludwig von Mises put it another way with, “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.” [The Theory of Money and Credit, chapter 21]

    Oh, make no mistake about it. Many countries have traveled this road before where the critical question is posed Repression or Regeneration. When faced with a similar problem Weimar Germany chose Repression with Hitler.

    Ezra Taft Benson warned that “There are some things we can and must do at once if we are to stave off a holocaust of destruction.” [“A Witness and a Warning,” Ensign, Nov 1979, 31]

    Ezra Taft Benson also warned about the pernicious effects of inflation. “Recent history has demonstrated that in difficult days it is reserves with intrinsic value that are of most worth, rather than reserves, the value of which may be destroyed through inflation. It is well to remember that continued government deficits cause inflation; inflation is used as an excuse for ineffective price controls; price controls lead to shortages; artificial shortages inevitably are used as an excuse to implement rationing. … I have seen the ravages of inflation. I shall never forget Germany in the early 1920s. In December 1923 in Cologne, Germany, I paid six billion marks for breakfast. That was just 15 cents in American money. Today, the real inflation concern is in America and several other nations.” [“Prepare Ye,” Ensign, Jan 1974, 68]

    The Germany’s war reparations could easily be replaced with America’s OTC derivatives.

    In addition to food storage people may want to have what are called ‘Last Plane Accounts’. They answer the questions ‘If you had to take the last plane out of the country (1) where would you go and (2) how would you maintain your standard of living?’

    Also, if you had looked at the Federal Reserve H.3 report you probably would be recommending people get their money out of the banks …..

  72. jonahtrainer,

    I won’t comment on the rest because we are not going back to the gold standard. But regarding the “last place” issue, I don’t think it is typical for refugees to expect to maintain their standard of living. If they want to, generally they do it like the rest of us, get jobs and go to work.

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