[Johnathan Clayborn]
There is a lot of talking going around right now. People are scared, stressed out, and unsure of their future. Individuals like Harold Camping are constantly predicating the end of the world. Others, who are somewhat less pessimistic, are heralding the complete and total collapse of the US economy.
The majority of the population, me included, is just unsure. Sure, the US economy is bad, but it can recover. Of course, our unemployment rates are at an all-time high (more on that in a later blog), so it could just burst completely. The burst of the housing bubble forced hundreds of thousands of home owners to walk away from their homes, saddling them with a debt that they cannot repay. Many of these people elect bankruptcy as an option, which prohibits the banks and other lenders from recovering their cash. As a result the economy is just taking a beating, and the hits keep on coming.
But, this particular entry isn't so much about the state of the economy in the country as it is about social psychology. For the most part the people who believe that the system will completely collapse in on itself fall into one of two major categories; the hoarder, and the spender. Both seem to think that they have a "foolproof" plan to allow them to survive any disaster situation, a possible economic collapse included.
The "hoarder" personality typically makes some pretty egregious oversights in their plan, but that's a discussion for another time. I want to really talk about the "spender". There are a number of commercials that I've seen recently on TV that are targeting this crowd. The basic concept here is "dump all of your money into Gold or Silver (or other precious metals) and you'll be guaranteed a safe investment and a secure future! I just have to shake my head when I see this, or I hear of people talking about this. It's folly.
In a stable market with good economic measures an investment in gold or silver may not be a bad idea. Buy it when it's cheap, sit in on it for a while, split your investment, watch it grow, and sell while it's high. Yes, you can come out on top financially if you are prudent. However, let's examine some of these follies.
1. Several of these "buy precious metals" programs don’t actually send you the gold. Instead you get a certificate "voucher" that says that you own the gold. If there really is some economic catastrophe, what good is it going to do to have a piece of paper that says that you own gold 5 states away?
2. Okay, so you physically have gold in your house. Now what? Let's be completely pragmatic for a moment. According to data from the USDA, many US households are "food insecure". In fact most households only have enough food on hand to last 3 weeks or less. So, hypothetically speaking, there is a total breakdown of the economic system. Money is suddenly worthless. Crowds will panic and rioting and looting will ensue. But that's okay, you have gold, you’re safe. Except, that of the 3 weeks of food you have saved up, probably at least half of that is in your freezer. And if you lose power? Okay, so you have some canned goods left. But the problem is that you can't eat gold. Data from the IRS shows that people spend between 55%-60% of their income on food. And if you don’t have any food and there is no food to go around, you can expect that food will be the valuable commodity, not gold (which is where the hoarders get into trouble). The point that I'm trying to make here is that instead of buying food, you've bought a chunk of metal.
3. Many of these "spenders" assume that they'll magically be able to buy exactly what they need with their gold and therefore, there's nothing to worry about. How wrong they are. There is no reason to believe that after a week or two Gold will still retain its value. Gold is an arbitrary thing. It only has value because we, as a society, have assigned it a value. There is no guarantee that it will continue to have value after an economic collapse. Money has not always been based on gold. In ancient Japan money was based on rice, and in ancient Mesopotamia it was based on barley. Other systems throughout the world have had money backed by; salt, tobacco, stones, steel, cigarettes, and other items. It seems likely to me, that in a metropolis area of over 3 million people facing a complete economic collapse, then the primary focus is going to be on food and water. There are not nearly enough farms nearby to feed everyone. Try to use gold to buy food when there are 3 million starving people roaming the streets, let me know how effective that is for you.
Another thing that the "spenders" fail to realize; even if gold does retain its value, what's to guarantee that you'll get to keep it or use it as intended? Suppose you find someone willing to trade goods for gold. You hand over your gold and he tells you to take a hike. Now what? Are you going to call the cops on him? Good luck with that. Are you going to take it back from him? I doubt it. These types of situations tend to evoke the worst in people. What's to stop them from just killing you and taking it from your cold, dead fingers?
These types of situation tend to bring out the worst in people. Don’t fall victim to the hype. Save your money. Many of these companies are just predators who are looking to make a quick buck by capitalizing on your fears. If you really want to survive a disaster situation make smart choices; vegetable seeds, hand tools, firearms and ammo, medical supplies, water purification tablets, etc. Basically, just gather the materials that you would gather if you were being dropped on the shore of a deserted island and you only had what you brought with you. Obviously, one would hope that it never comes to that....but if you are going to worry about the "end of the world" and the like, at least make smart choices about it.
Sources:
http://www.irs.gov/businesses/small/article/0,,id=104627,00.html
http://www.fns.usda.gov/fsec/files/fsguide.pdf
http://www.xat.org/xat/moneyhistory.html
http://library.thinkquest.org/28718/history.html
There is a lot of talking going around right now. People are scared, stressed out, and unsure of their future. Individuals like Harold Camping are constantly predicating the end of the world. Others, who are somewhat less pessimistic, are heralding the complete and total collapse of the US economy.
The majority of the population, me included, is just unsure. Sure, the US economy is bad, but it can recover. Of course, our unemployment rates are at an all-time high (more on that in a later blog), so it could just burst completely. The burst of the housing bubble forced hundreds of thousands of home owners to walk away from their homes, saddling them with a debt that they cannot repay. Many of these people elect bankruptcy as an option, which prohibits the banks and other lenders from recovering their cash. As a result the economy is just taking a beating, and the hits keep on coming.
But, this particular entry isn't so much about the state of the economy in the country as it is about social psychology. For the most part the people who believe that the system will completely collapse in on itself fall into one of two major categories; the hoarder, and the spender. Both seem to think that they have a "foolproof" plan to allow them to survive any disaster situation, a possible economic collapse included.
The "hoarder" personality typically makes some pretty egregious oversights in their plan, but that's a discussion for another time. I want to really talk about the "spender". There are a number of commercials that I've seen recently on TV that are targeting this crowd. The basic concept here is "dump all of your money into Gold or Silver (or other precious metals) and you'll be guaranteed a safe investment and a secure future! I just have to shake my head when I see this, or I hear of people talking about this. It's folly.
In a stable market with good economic measures an investment in gold or silver may not be a bad idea. Buy it when it's cheap, sit in on it for a while, split your investment, watch it grow, and sell while it's high. Yes, you can come out on top financially if you are prudent. However, let's examine some of these follies.
1. Several of these "buy precious metals" programs don’t actually send you the gold. Instead you get a certificate "voucher" that says that you own the gold. If there really is some economic catastrophe, what good is it going to do to have a piece of paper that says that you own gold 5 states away?
2. Okay, so you physically have gold in your house. Now what? Let's be completely pragmatic for a moment. According to data from the USDA, many US households are "food insecure". In fact most households only have enough food on hand to last 3 weeks or less. So, hypothetically speaking, there is a total breakdown of the economic system. Money is suddenly worthless. Crowds will panic and rioting and looting will ensue. But that's okay, you have gold, you’re safe. Except, that of the 3 weeks of food you have saved up, probably at least half of that is in your freezer. And if you lose power? Okay, so you have some canned goods left. But the problem is that you can't eat gold. Data from the IRS shows that people spend between 55%-60% of their income on food. And if you don’t have any food and there is no food to go around, you can expect that food will be the valuable commodity, not gold (which is where the hoarders get into trouble). The point that I'm trying to make here is that instead of buying food, you've bought a chunk of metal.
3. Many of these "spenders" assume that they'll magically be able to buy exactly what they need with their gold and therefore, there's nothing to worry about. How wrong they are. There is no reason to believe that after a week or two Gold will still retain its value. Gold is an arbitrary thing. It only has value because we, as a society, have assigned it a value. There is no guarantee that it will continue to have value after an economic collapse. Money has not always been based on gold. In ancient Japan money was based on rice, and in ancient Mesopotamia it was based on barley. Other systems throughout the world have had money backed by; salt, tobacco, stones, steel, cigarettes, and other items. It seems likely to me, that in a metropolis area of over 3 million people facing a complete economic collapse, then the primary focus is going to be on food and water. There are not nearly enough farms nearby to feed everyone. Try to use gold to buy food when there are 3 million starving people roaming the streets, let me know how effective that is for you.
Another thing that the "spenders" fail to realize; even if gold does retain its value, what's to guarantee that you'll get to keep it or use it as intended? Suppose you find someone willing to trade goods for gold. You hand over your gold and he tells you to take a hike. Now what? Are you going to call the cops on him? Good luck with that. Are you going to take it back from him? I doubt it. These types of situations tend to evoke the worst in people. What's to stop them from just killing you and taking it from your cold, dead fingers?
These types of situation tend to bring out the worst in people. Don’t fall victim to the hype. Save your money. Many of these companies are just predators who are looking to make a quick buck by capitalizing on your fears. If you really want to survive a disaster situation make smart choices; vegetable seeds, hand tools, firearms and ammo, medical supplies, water purification tablets, etc. Basically, just gather the materials that you would gather if you were being dropped on the shore of a deserted island and you only had what you brought with you. Obviously, one would hope that it never comes to that....but if you are going to worry about the "end of the world" and the like, at least make smart choices about it.
Sources:
http://www.irs.gov/businesses/small/article/0,,id=104627,00.html
http://www.fns.usda.gov/fsec/files/fsguide.pdf
http://www.xat.org/xat/moneyhistory.html
http://library.thinkquest.org/28718/history.html
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These blogs represent my thoughts, ideas and opinions. They may be different from yours. You may not agree with them. While I do enjoy a good, polite debate on a topic (where points are countered with other points based on logic, reason and fact), I do not enjoy an argument (where you tell me that I am wrong simply because you disagree and cannot offer any reasons to support your position). I am very respectful of others, and I expect everyone on here to be respectful in return, not only to me, but to each other as well. Disrespectful posts will be deleted automatically. Feel free to share your ideas, but keep it civil, please.