The economy of the United States is, at least in theory (barring Government intrusions) a Free Market economy.
Essentially this means our economic’s are governed by the rule of Supply and Demand.
Products or services with high demand and low supply are worth more while those with low demand and high supplies are worth less or maybe nothing at all. Our economy is not a complicated system.
It is self-regulating, self-correcting and pretty much in line with the laws of nature.
In our modern society, we trade paper money to indicate value. Many think the paper has no value, but this is not true. Anything has as much value as someone is willing to trade for it.
I can give my local grocer $3.25 for a gallon of milk only because he believes my $3.25 of paper money will be tradable for a good or service he needs.
The paper reflects the value of the item or service.
Why Would A Government Print Excess Dollars?
Well, the first reason is simple mistakes.
The Federal Reserve monitors the dollars in circulation and adjusts the Prime Interest rate to either encourage banks to borrow or not borrow from the Federal Reserve System.
If the Fed is worried inflation could occur they raise interest rates.
Overall this has the effects drawing money out of circulation as banks pay large interest payments on the loan back to the Fed, removing the dollars from circulation.
If the Fed is worried about deflation, or simply wants to stimulate the economy by making borrowed money cheap, they can lower interest rates—which is where we are today.
The general assumption is the Fed has the best interest of the US at heart and is trying to do what is best for the economy and the people. However, when political forces are present—after all, the Fed Chairman is appointed by the President—the Fed may drop interest rates to keep pumping money into an economy slowly bleeding to death.
Many think that is what is happening today.
In the past, the Treasury has sold bonds to pay for government borrowing—to pay for our perpetual deficit spending. Selling bonds has the effect of a large portion of our public debt being owned by foreign governments—such as China, Japan, South Korea, Britain, etc.
These countries essentially loan our government money and get paid back interest in return. Large-Scale loaning has led to an over $18 trillion dollar national debt (and counting)—up $9 trillion since President Bush left office just seven years ago.
Lately, however, due to this massive debt, other countries have grown skittish concerning our ability to repay this debt.
Every congressional budget cycle we borrow more to pay off our old debt. China, Japan, and the others have cut back on their purchases of our treasury bonds—yet we continue to spend more than we take in.
So Where Is All The Money Coming From?
The procedure currently being used is called Monetization.
Monetization means we are creating dollars with which to pay off our debt. It’s a pretty neat trick.
Our Federal Reserve is loaning money to banks at a very, very low-interest rate. The banks are buying Treasury bonds, which pay a higher interest than the banks are being charged by the Fed.
These bonds are fundamentally a way for the banks to take money from the federal reserve and move it directly into the Federal Treasury—to spent by the Federal Government.
So the banks earn interest with absolutely no risk. They merely act as a money laundering operation for the Federal Government.
Why do they do this? Two reasons:B
- Banks have to make money to exist. They make their money by loaning money. The Federal Government has never reneged on a Treasury bond yet—so it’s a very safe investment. In fact, the banks know the Government will go so far as to borrow more money to pay off the bonds. Only failing businesses borrow to pay off debt, and they can only borrow so much.
- The government can borrow as long as they have buyers for bonds.The Federal Government regulates the banks and if they are no cooperative the Government has many, many tactics for making their lives living hell.
Today the Fed’s purchases and transfers are electronic and instantaneous. The Fed says they will buy a bond and the Treasury prints more money—then moves it into the Government coffers.
So How Much Does The Federal Reserve Have In Reserve?
No one knows.
By law, the Federal Reserve cannot be audited. The idea here is that the Federal Reserve is independent of political parties and the Government itself.
If the Fed could be audited, then political pressures could be placed on it by minority parties to disclose their holdings. In desperate times, this could provide an accurate picture of the Fed’s reserves and cause public panic, bank runs, even impact elections.
The irony is that the very measures put in place to keep the Fed independent, give it the ability to be manipulated by the political party in charge.
Although many would like to see the Fed audited—the result could very well bring down the country.
The whole thing is a future house of cards we as citizens can only hope is being managed correctly—hope being the key descriptor.
One saving grace is that the US dollar is the world reserve currency—so there is a lot of tangible value out there in the world wrapped up in our paper dollars.
If the rest of the world ever drops the dollar as a global reserve—our dollar will go the way of the Russian Ruble.
The good news is that most other national currencies are even less reliable than our own. Although China now has a larger economy than the United States, no one trusts their money.
It is freely evident to any free-thinking citizen that this system is rife with risk and potential corruption.
What Happens When The Coming Economic Collapse Finally Occurs?
Simple.The dollars we each have in our bank accounts, our 401Ks, our wallets may suddenly become worthless, or nearly worthless, due to hyper-inflation.
Total economic collapse has happened to dozens of countries in the last thirty years(Iceland, Russia, Zimbabwe, Bolivia, Bosnia, Mexico, Nicaragua, Peru, Poland, Ukraine and Romania to name a few) and to the United States several times since our founding, most notably just after the Revolutionary War and during the Civil War—and the Federal Reserve didn’t even exist at those times.
So what happens when paper money becomes worth just that—worthless paper? What is your economic collapse survival plan? What will we use for money?
Remember—goods and services are tangible.
Many will still exist when the after the coming economic collapse.
How To Prepare For Economic Collapse
One key principle to remember: don’t mistake cash dollars for value.
Cash dollars only have value if they can be traded for something with real value—such as food, tools, hardware, fuel, etc. But what if no one will take dollars in trade? What becomes the new collapsed ecomony’s currency?
What will a collapsed economy look like?
The new economy will still operate under the rules of supply and demand—no getting around this. It’s a law of nature.
The more in demand something is, the more value it has, the more people will pay to get it. But what will people use as currency if dollars are useless?
The Barter Economy is the natural evolution of supply and demand when the dollar fails. This simply means people will trade tangible assets, rather than paper money.
For instance, a fish will hold a certain value as a food source, whereas, a fishing pole will be hundreds of times more valuable.
So what are valuable tangible assets to help survive in a post-apocalyptic economy?
Eggs hold value, but chickens have more.
Water will have value, and will most likely keep climbing in value as droughts continue to deplete our ground water well supplies.
Most of these tangible assets’ value is based on whether they represent short term or long term value.
Food is immediate. Durable goods are long term. Some common durable goods that will hold value include:
Hand tools, such as saws, drills, hammers, axes, knives, etc.
Rope, wire, cordage, fasteners, nails, building materials, generators, solar panels, wood-fired stoves, batteries.
Some durable goods are hybrids—both short and long term. Cars, for instance, have a long term value, but are only as valuable as the availability of fuel, a short term value.
There Are A Few Exceptions Though…
Although, firearms have a long term value, the availability of ammunition, a short term value, should limit its overall value. However, firearms represent an anomaly.
A loaded firearm can mean the difference between life and death— giving it ultimate value to the individual possessing it—more than food, water or any other worldly possession.
In the case of a less altruistic individual, a loaded firearm can serve as a coercive force to gain tangible assets belonging to someone else, giving it the value equivalent to whatever can be gained by using it in this less-than-moral fashion.
This is something to keep in mind when trading with someone with an AR-15 slung over his shoulder.
Even if you don’t own a firearm, ammunition represents an important tangible asset worth significant value. So you could start storing lots of it.
Even A Single Cartridge Can Be Bartered
A single .30-06 rifle cartridge can be the difference between a family eating or moving a week closer to starvation. A $25 box of 525 .22 Long Rifle cartridges, represents months of small game on the dinner table, such as squirrels, rabbits, etc.
One key point to remember: the rifle cartridges still represent months of food, even if you don’t possess a rifle. The trick is to find someone who does and trade them for something of equal value.
Ammunition is a great way to prep for a post-apocalyptic world. Rifle and pistol cartridges will always have value.
One strategy to employ is to arm yourself with firearms using very common cartridges—the more common the better. The most common pistol cartridges are 9mm, 38 Special and .45 ACP. The most common rifle cartridges are .22 Long Rifle, 7.62x39mm and 5.56x45mm.
Another important category with significant value is medications and medical supplies. When civilization’s economy collapses, our access to medications will dwindle, however, people will continue to fall ill, perhaps in even larger numbers than before.
Even over the counter drugs will become incredibly valuable.
Some common medications and medical supplies to stock up on include: aspirin, acetaminophen, antibiotic creams, antihistamines, cough syrup, cold and flu medications, Band-aids, bandages, alcohol, hydrogen peroxide, oral thermometers, etc.
Get a couple first responder kits and you’ll be good to go.
What About Vices For Economic Collapse Preparation?
People’s addictions don’t stop just because civilization has collapsed. Here are a few that can be used for barter: cigarettes, beer, hard liquor—and if your post-apocalyptic address is in Colorado—well—you know…
How About Gold After The Coming Economic Collapse?
Precious metals have been used as investments and currency for thousands of years. How do these fare in a post-apocalyptic world? These assets represent a very different animal.
People will still value gold even in a post-apocalyptic world. However, this value is very, very long term and somewhat theoretical. It is based on the notion the world will return to a normal state at some point in the future and the gold can be exchanged for cash.
- You can’t eat it.
- It can’t catch a fish or kill a deer.
- It can’t protect you or your family.
- However, there are people who will take it in trade.
Supreme caution must be exercised if you advertise the fact you possess gold or some other precious metal. More than likely if you try to trade with it, you will find someone with an AK-47 following you home to relieve you of the rest of your gold.
Gold, silver and the others are great investments as a hedge against inflation, but only as a hedge.
It presumes the cash dollar still has some value. If the dollar fails completely, gold is nearly useless. The people who do want it are the same people you don’t want to meet.
The barter economy will begin on Day One of the coming economic collapse. What are you going to use on Day Two to provide for your families?