It's already happening. Right now. Today.
We've already had massive plummets in the market, and if you made less than 6.3% in interest on your cash, you're losing money.
The "run on the bank" of 2008 is the collapse of the mortgage-backed securities scam, and with it, the topping of major financial institutions.
Let me put this in perspective for you.
If you worked at Bear Sterns for a while, maybe 10 years, let's say you had accumulated, oh, say, 5,000 shares of company stock in your 401(k). One year ago today, that would mean your retirement fund was worth (before tax), $735,600. This evening, it's worth $10,000.
If you haven't see it already, have a look at this map of foreclosures by state:
http://bigpicture.typepad.com/comments/2007/02/foreclosure_hea.htmlThere's no need to worry about a "run on the bank" because hardly anyone has any money there! For a while, th US Savings rate was NEGATIVE 2%.
It's about 0% now:
http://www.csmonitor.com/2007/0802/p02s01-usec.html25% of Americans have no savings AT ALL:
http://money.cnn.com/2007/04/10/pf/retir...7041108?cnn=yesGive the speed of news and information, is it likely we'll have a full-on panic? No, I think not. However, I do think that basic lifestyle matters are going to change, permanently, and that is going to be unpleasant for many of us.
Let me give you a perspective on the types of changes that I mean.
The first change is going to be in living arrangements. Watch for more bankrupt kids moving back in with family, and watch for those Mc Mansions turning into multi-family dwellings. What do you need more, a "media room" or another bedroom when 4 people move in?
The second change is the definition of "mandatory" spending.
Sure, there's the easy list -
Cable or Sat TV, magazine Subscriptions, Movies, Junk Food - those are not really that big a deal.
Let's look at what we call "haftas" and think about what a lifestyle change is really about.
Pick one: Housing or Health Insurance.
http://www.ama-assn.org/amednews/2007/07/16/gvca0716.htm18.3% of Americans have none. That number WILL rise.
Pick One: Food or Fuel
Food:
http://www.usnews.com/articles/news/2008/03/07/the-growing-food-cost-crisis.htmlAccording to the Department of Agriculture, grocery prices are rising at rates not seen since 1990. On the wholesale market, the country's biggest commodity crops—corn, wheat, and soybeans—are selling at record highs; wheat prices are up nearly 50 percent since the first of the year.
Fuel:
http://www.msnbc.msn.com/id/23550921/"8:36 p.m. ET, Sun., March. 9, 2008
NEW YORK - U.S. average retail gasoline prices have reached a new high of almost $3.20 per gallon and will likely jump another 20 to 30 cents in the next month, worsening the pain of consumers struggling to make ends meet in an economic downturn"
An economic collapse does not happen one morning when stocks plummet - its more like a giant moonbounce deflating. You see it going, but you can still bounce around for a while.
Also remember that this time, with instant global communications, the possibilities for a "softer" landing might be there.
I know you might not want to think about it, but we speak English here, just like in India, and last I heard, some hugely successful companies like Tata in India are hiring Americans.
http://www.boston.com/news/world/asia/ar...fshoring_twist/Folks, this stuff happens. Leaders change, times change, an economies ebb and flow. Keep sane, be frugal, and live lean and you'll be just fine.
But if you haven't canceled your cable TV yet...I'd say do it now, and use the money you saved to buy something that you might actually NEED one day.
Previous Topic
Index
