In Part One I talked briefly about what bankruptcy is, and its intended useful purpose. In Part Two, I illustrated how the United States federal government is at, or nearing, bankruptcy. Here in Part Three, I give you my ideas of how you can deal with the situation in your own life.
But first, a caveat, to cover my ass legally. This isn’t “financial advice”. I’m not qualified to be a “financial advisor”. I’m just telling you what I’d do, based on what I’ve learned in my amateur pursuit of an economic education.
As I said, there’s very little President Trump (or any President) can do to avoid what’s coming. However, what Donald Trump did during his previous administration – and what he says he intends to do during this second one (particularly reducing regulations on businesses, and the size of the federal government, together with lowering taxes — will make it far easier for you to deal with the coming economic crisis. So the election did make a difference.
What you can do to help yourself is really nothing new. Step one: GET OUT OF DEBT! Unless you do that, nothing else you do will matter. Period.
To my parents’ and grand-parents’ generations (the only ones in history with whom I’ve had first-hand contact) knowing how to stay out of debt was common sense. You don’t spend more than you earn.
Apparently, that common sense approach is no longer the case for too many of my own generation, and seemingly most of the current younger generations. Based on the response I get when I suggest the idea of “living within your means” — as in not spending more than you earn — that is apparently a novel concept. They look at me like I have two heads and am speaking Martian.
If you must go into debt, only do so for tangible assets, such as a (fixed, not variable rate) home mortgage. Or income-producing real property that pays for itself, or land on which you can grow food.
A car loan, unfortunately, has become almost a necessity – but can be ameliorated by not buying more than you need for functional transportation or work requirements. Once you have a vehicle, maintain and keep it as long as possible. (My truck is 16 years old, approaching 250k miles. It’s been to Pagosa, and back here to Florida, twice.)
Though I’m skeptical of the younger generations living within their means, I must admit to seeing some flickering positive signs amongst some youngsters. Two of my grandchildren refuse to have credit cards, and both have good jobs without having incurred student loan debt.
While we’re on the subject of student loans, consider this. Prior to 2010, nearly all student loans were provided by private banks – which had some semblance of limits on how much they would loan any one student.
But then, federal legislation provided the U.S. Treasury with a near monopoly on student loan originations and sidelined most private lenders. Subsequently, student loan debt surged to over $100 billion per year by 2012.
That’s billion, with a ‘B’.
Who got all that student loan money? Well, students, yeah – but who did they give it to? University employees, primarily administrators and faculty. It was government welfare for higher education employees.
And what did the students get for all that loan money? Some got an education they will be able to use to enhance their earning prospects… and their ability to pay higher taxes!
But some got useless degrees, while being indoctrinated by professors.
“The biggest threat to our future isn’t climate change, China, or the national debt. It is the tyrannical grip that a hopelessly corrupt higher education now has on our national life.”
(I had personal experience with the effects of that indoctrination when I was a law professor. Read about it here.)
Too many students got hopelessly in debt. And the same law that enabled them to incur that debt, prevents them from getting out from under it through bankruptcy! That’s why President Biden tried so desperately to illegally (according to the U.S. Supreme Court) pay off the student’s loans. Too many of them have no other way out of repaying those loans.
Step two, which greatly contributes to achieving Step one: Learn the difference between ‘needs’ and ‘wants’. Before spending on anything ask yourself “Do I really need this, or do I just want it?”
Also, question what you think you ‘deserve’. I previously explained it this way:
The other day I heard a radio ad for an auto dealership that specializes in trucks. The ad said “Come to _____ and get the truck you deserve!” I guess I deserve a truck! The deserve language is in other ads. A dentist in my locale says he can give me the smile I deserve, and I can get the vacation I deserve here. Deserve has become synonymous with want — and not just for two-year-olds.
Right about now I can hear some of you saying, “Screw you, Gary! I’m not going to live my life like a miser. We need some fun in our lives!”
I agree — but remember what I’m talking about here. Despite what Trump (or any other president) can do, what’s coming is not the party-time ‘Roaring Twenties” my grandparents enjoyed a century ago. Nor is it the economic good times of the late ’80s and ’90s I lived through.
I’m telling you to get ready for what very likely will be at least the stagflation of the 1970s — or worse, the cataclysmic deflation of the 1930s. You can’t survive long by spending like a sailor on shore leave if the cost of the necessities to sustain life consumes most of your resources… when you can get the necessities at all.
Now, some alarmists will tell you to take all your money out of the bank, sell all your stocks, and put all your money in gold. I’ve written about gold before.. Well… here are some more tidbits about gold.
This time last year, the market (‘spot’) price of gold was under $2,000 per ounce. That meant if you went to your local coin shop you could buy a United States mint 1 oz Liberty $50 gold coin for about $2000.
(Here’s a Wikipedia link to show you the coin. As with much Wikipedia information, be careful. Some of what it says about gold coins is wrong.)
You may notice that is a $50 dollar coin. That’s because the ‘official’value the government gives to an ounce of gold is just that… $50. Which is what a bank will give you in exchange for that coin — not the current spot price, or what you paid for it.
If, however, you had bought a 1oz $50 liberty coin last year for $2000 from a coin shop, and took that coin back to the same shop to sell to them today, they’d pay you somewhere between $2600 and $2700 (the current ‘spot’ price)! That’s a 33% profit… and because it is a legal tender gold coin there will be no federal tax on that profit !
But… it’s actually not a profit in the sense that the gold coin increased in value. The intrinsic value of gold hasn’t changed. What actually happened is that the number of dollars it takes to buy the gold coin increased by 33% — meaning the buying power of your dollars has decreased by 33%. In other words, 33% inflation — in one year — based on a gold standard!
Of course, the spot price of gold could have gone down, rather than up… particularly since the U.S. government, and large financial institutions, have been manipulating the gold spot price since 1933. Then, since we private citizens could again own gold bullion beginning in 1974, the price has been manipulated to keep it low to discourage us peasants from buying it — rather than putting our money into stocks and government bonds from which the elites profit.
Meanwhile… over the past decade, foreign governments, and the same large institutions that have kept the spot price suppressed, have been quietly buying large quantities of gold (at the artificially suppressed prices) which they are stockpiling as a hedge against the very financial crisis they have been complicit in creating.
And now that those big players have acquired large stashes of gold, the spot price is reaching record highs. You can draw your own conclusions about that set of facts — and whether you want to buy gold for yourself (if you can afford it).
If you decide to buy gold, I’ll pass on the advice of every ‘gold bug’ I’ve ever listened to, to wit: “Do not buy gold as an investment from which you are seeking to make a profit. Buy it only to hold on to as a way to preserve your wealth.” (Think of the 33% inflation over the past year.)
I’m not telling you to buy gold… or not to. If you do, however, be sure you know what you are doing. There are a lot of gold scams online, and advertised in media, including TV. Whatever you decide to do, your objective should be to survive the coming economic crisis that seems unavoidable.
Beyond personal economic survival, the best we can hope for is that President Donald Trump does what he has successfully done in his private business affairs… shepherd the country through national bankruptcy, so that we can come out of it with a clean slate and a better future.