The Sinking Ship

RMS Titanic

Shortly after the Titanic struck the iceberg, the overwhelming majority of the passengers and crew felt that while there had been a big bump, that everything was basically fine.  After all, the ship was still afloat.  When told that the ship was fatally compromised, and that they needed to get into the life boats, the vast majority thought this was an absurd over-reaction to the situation.

The economic situation today is like that of the Titanic.  It isn’t a perfect analogy, as the economic situation hasn’t been caused by one sudden and unexpected event, but its close enough.  The economy is fatally damaged.  It WILL sink.  The fact that it hasn’t sunk yet is not proof that it isn’t sinking and won’t shortly capsize.

Most people, like the Titanic’s passengers, and most of the crew, believe the current economic situation will just continue on similar to the way it is today.  There might be some minor problems, but they believe that everything is fundamentally sound.  Some even think that the situation is improving.  The dot-com bubble of 2000 is seen as ancient history, and the crisis of 2008, in their minds, has been completely handled.

The fact is that the world is sinking in debt.  Individuals are deep in debt.  Governments are deep in debt.  Both groups so much so that it can never be repaid.  And it is the weight of this cumulative debt that will eventually cause the economy to “sink beneath the waves”.

The iceberg in this “Titanic” analogy has been the world’s central banks.  They have moved the world away from true free market economics by their interventions and interference.  They have enabled governments to accumulate crushing debt.  They have intervened in financial markets to the point that stock prices bear little if any resemblance to actual worth, turning them into casinos of speculation.  They have taken control of the rate of interest charges by loans, and thereby have enabled individuals to also take on far too much debt, while at the same time completely destroying any incentive to save or to actually invest.

People are kidding themselves into thinking that everything is just fine.  After all, that’s what we want.  We want everything to be ok, and for the future to just be an extension of the calm lives most of us have led since World War Two.  But the facts point to the ship sinking.  And if you and your family don’t take action now, while everything still appears to be calm, you will be caught up in the panic and the calamity that is about to take place.

What to Do

Start preparing, financially and physically, for what is about to happen.  Don’t be like the masses, living life one minute to the next without much care for the future.

Start by putting your financial house in order.  Live within your means.  And don’t count the value of your house or your stock portfolio to remain the same or to grow.  In fact, both can radically move to the downside in literally the blink of an eye.

Prepare for at least some short period of extreme duress.  Be able to take care of yourself and your family with what you have in your house for a period of time.

Don’t expect the future to be like the past because that is all that you have personally experienced in your own lifetime so far.

 

 

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