Hey Veterans: Are You Concerned About Losing Your Savings and Investments in An Economic Slowdown?
Well, even though times seem to be riding high, the prosperity doesn’t seem to be, so I feel you there!
As of the time of this post, the Dow average is currently above 27,600. We have been riding the coattails of a bull market that has seen the Dow rise 21% in one year and over 35% in the last two years. Have your investments kept up?
Yet, objectively, I (and others with way more clout and personal financial education than I) believe that the US economy is really not supporting this gain, making it seem artificial.
So when the economy does go ahead and take a tumble, many that are relying on it to fuel their investment portfolios will feel a serious pinch in their pocket, and a punch in their gut.
It is quite possible that many jobs and the value of retirement accounts and other paper investments such as stocks could be significantly reduced overnight.
Per President Trump’s first presidential address to Congress, he pointed out eleven startling facts that point to an economy that seems to be struggling to maintain a facade of prosperity. I think this list points to a coming crisis. And we should start to prepare for that.
11 Factors Pointing To Economic Slowdown!
1. Ninety-four million Americans are out of the labor force.
This means that even if they are not reported in the labor statistics, there is a significant and rising level of poverty combined with debt that acts as a serious weight on America’s GDP.
How long can this group of people continue to grow? How can we justify calling ourselves a wealthy nation when such a large percentage of able-bodied people are not able to produce?
The number to look at is not the unemployment rate, but the participation rate which has dropped from around 67% down to 63%. This means there are a large number of people who have given up trying to be a part of the labor force.
2. Over 43 million people are now living at or below the poverty line.
Given the numbers of those who are chronically unemployed, or who have just given up on trying to work, you should expect this number to grow. This also provides us with another reason to assume that perhaps things are not as rosy as the financial news networks suggest.
3. 43 million Americans are enrolled in the Supplemental Nutrition Assistance Program.
Oh, you don’t know what SNAP is? Well, maybe you know this program by it’s former name: Food Stamps. Without looking into this stat, I would hazard a guess that the people from point #2 are the ones populating point #3. Yikes!
This is a double-drag on the economy. Less workers producing, more hand-outs a handin’.
For many people, this safety net is needed. I appreciate that it is there because there are places in the world where there is no safety net, and it is not pretty. (Looking at you, South America!)
However, what do you think would happen to this number if our current bubble bursts? Is the US really doing so well that it can handle even a 10% increase to those in need of this type of assistance?
4. More than 20% of people in their prime working years are unemployed.
Do you have four long-time friends? It is very likely that one of your group is chronically unemployed or severely underemployed.
If this were a number that was regularly reported on television even people who absolutely hate math would begin to think “Hey, seems that something’s not right out there”. They might even begin to think that maybe these awesomely advancing stock market prices and historically low unemployment figures might be detached from from the real world.
5. We have had the weirdest version of a financial recovery since, well, the Great Depression.
Why?
Because in order to dig America out of the housing and credit bubble collapse, the Obama administration had to create more new national debt than almost all of the other Presidents combined.
People like to point fingers and say “Spend Thrift!!!” but consider the alternative. What would life be like now if the dark-debt tide was allowed to run it’s course naturally.
In a dramatic meeting on September 18, 2008, Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke met with key legislators to propose a $700 billion emergency bailout. Bernanke reportedly told them: “If we don’t do this, we may not have an economy on Monday.”
This contagion was just not an American problem, it was a global problem. We did what we had to in order to stop the mayhem.
But the problem HAS NOT GONE AWAY! The debt stacks have been shuffled around and –POOF– their number has doubled.
6. We’ve lost one-quarter of our manufacturing jobs since NAFTA was approved.
And we really thought this would be a good idea for America even if it weren’t such a great idea for Mexico. Some say that it’s not the fault of NAFTA, but of world competition for cheap labor.
Whatever the cause, we did not have enough foresight to look into the futures of those families who would be affected by this exodus of meaningful work.
We are seriously late in even attempting to address the need to get this population meaningful productive employment.
7. America has lost over 50,000 factories since China joined the World Trade Organization in 2001.
Ok, so we didn’t misplace them. They were just run out of business by that same cheap labor thing we discussed before.
Economists will point out that wealth creation in America is now more about intellectual property (i.e. software and patents) than about bricks and mortar.
I think they have a valid point within specific, small, time-frames.
The math doesn’t work when you think in terms of hundreds of years. The only things that have a fighting chance at retaining value over this stretch would be things that are considered a HARD GOOD.
Real estate and precious metals will probably always represent real long-term national wealth.
Ideas come and go, and so too the “wealth” created by them. Particularly if that wealth is parked only in fiat money.
I challenge anyone to name one governmental fiat monetary unit (i.e. money that is not based on an underlying hard good) that has been able to retain any of its originally established value over a period of even 200 years.
8. The US Dollar has lost between 10 and 20 percent of its value since 2008.
Some might say ‘only 10%? I can live with that!‘. Since that time, bank savings interest rates have hovered around 1% per year. Meaning that in real terms bank holdings have probably lost you value. This represents real wealth loss.
But the bigger story is that the US Dollar is over 230 years old. Losing even 10 percent value in the last 9 years shows an alarming increase in the rate of wealth destruction of this monetary unit. At this rate, we would need a new unit of exchange much sooner than we realize.
Ready for that?
9. The US trade deficit with the world in 2018 was a little over $600 billion.
This amount puts the total accumulated trade deficit over the past 20 years at over 7.3 Trillion dollars. This is the number of excess dollars that flowed to other nations because we have preferred the goods of other nations.
Economists argue that either this is a good thing for US consumers, or it means nothing.
I prefer to look at it as a scorecard. Per www.epi.org, in the 1950’s and 1960’s the US was the world’s leading trade powerhouse. I am not saying that life was perfect during that time period by any means.
However, if you were a wage earner living in that environment who was then magically transported to our time, you would be very surprised to learn that America is not the #1 country owed money, but is now the #1 borrower! And what happened to the stay-at-home wife and debt-free lifestyle?
Some states increased premiums 116 percent in 2017. The state of the worker (or potential worker) is in serious jeopardy if they teeter on the edge of bankruptcy every time they have a child, or break a bone.
11. The US infrastructure is really in need of repair.
But we have instead spent trillions overseas over the last few decades. It seems like an opportunity missed and something that can’t continue long-term.
So, there it is.
This state of affairs when combined with an overall sense of mild alarm, does not give me a warm fuzzy feeling about the current market levels.
Seriously, can we determine if anything pervasively positive to the economy as a whole is driving the current market optimism?
The US Economy is seriously hampered by these and many other factors. Given that fact, it is all likely to end very abruptly.
So, what will you do to protect yourself?
I suggest you begin by reading a good book by Harry Browne that talks about hard good wealth accumulation. I wholeheartedly believe in the wisdom Harry Browne dispensed on setting aside a portion of your investments in what he calls a “permanent portfolio”. This portfolio of investments is designed to be able to withstand anything that could possibly happen financially outside of the comet that destroyed the dinosaurs.
After you finish, take action on that book, then begin another one, and so on, until you feel quite secure that no matter what happens in the economy and the markets, you and your family will have access to valuable goods that can truly aid in survival, and not just look good on paper.
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