Occasionally I receive comments from readers that are suggestive of topics to cover. Below is a comment I received a few days ago and I believe timely. I say “timely” because after all, sooner or later we will get to the situation described. No one really knows exactly what the fallout will be but I will take a stab at the broad picture.
You do a great job of seeing the big picture. We hear lots of warnings about the coming financial meltdown. I know no one can predict what it will look like or how severe it might be, but I would love to get your perspective on what actually and practically may be the things affected in the event if all ‘comes down’.
Banks fail, credit freezes, businesses grinding to a halt without credit . . . this much I can imagine, but is there more entailed and what does it mean practically for the guy on the street? And how long would we be waiting for a replacement system to bring back a sense of normality?
NOT asking for a personal reply here as I know it would be kind of involved, but thought it might possibly inspire a topic for an article at some point. I’d love to get an expanded perspective of what is in your mind when you say ‘once started will not be reversible and will take everything with it’.
Keep up the great work
First I will thank the reader for such kind words and say I always appreciate questions or ideas for topics. Whenever I do seminars or conferences I always prefer to do them in a question and answer format. I prefer this as opposed to reading from notes or a power point presentation because, who am I to know what your questions are and what you would prefer to hear of my thoughts on unless you tell me? I am asked all the time, how do I come up with so many different topics? I always respond “there are too many potential topics to cover, I just read or watch the news for 5 minutes until I either read or hear something or someone who is full of it” … thus my topic for the day.
So, what will a financial panic and collapse look like to the average person? My first thought in a one word answer is “ugly” but this is wrong. The reality will be “horror” at a minimum because so few expect what is coming. Before going any further please keep this thought in the back of your mind, 150 years ago or less, 90% of Americans were farmers or connected to farming/food in one way or another …the number is well less than 10% today.
That said, what are your basic human needs? Food, water, shelter and being able to protect yourself and loved ones. Let’s make an assumption that you wake up one Monday morning and the banks and stock markets do not open. You don’t even realize this until you get into work, but something’s not right. Your coworkers are not all there and the ones who are, are all gathered together talking about something …the markets and banks are closed. What is going to happen? What does this mean to you and your family?
In a nutshell it means that your life and everyone else’s have been “changed.” First and foremost, everything in the U.S. and most of the rest of the world runs on credit. Credit will break down and even the most pristine borrowers will not have access. This means what to you? It means your credit and debit cards will cease to function, you will not have access to your ATM either. It also means that your gas station, Walmart and favorite lunch spot will not be able to give you product via a debit or credit card because they do not function. What to do? If you have some cash dollars set aside for a rainy day, well, now it’s pouring and you don’t know when the rain will stop!
If you want goods you will need to use cash dollars to pay for them but …how long can this last? This question is easy to answer. Cash will transact until one of 3 things happens, it either “runs out,” goods “run out” or the unthinkable happens …cash is not accepted. Cash “running out” will happen last in my opinion because it won’t cease to exist but it will become scarce because let’s face it, how many people have loads of cash under their mattress today? Goods running out is a very real possibility especially if the “holiday” lasts a week or more. Please remember this and I know that many have not even thought about it, “Goods do not grow on Walmart’s shelves.” Goods must be shipped in and are usually stocked at night while you are sleeping. This is why it seems “like magic” goods appear for purchase. On average, grocery stores have about 3-4 days of goods stocked on their shelves for the community. When credit fails, how will they restock their shelves?
Follow this through, how do farmers plant their fields today? They borrow money to buy seed, fertilizer, feed, hay or whatever and then “harvest” their crop. They use tractors which require fuel and the fuel must be paid for (with either a check, debit or credit card, or a bank credit). What about the trucks which deliver the raw product to the processor or from the processor to the end store? How will they move the product? Also, how does the farmer now get paid by the processor, the processor get paid by the store or the store get paid by you the end user or consumer? Do you see the complexity of the problem that a bank holiday brings with it? What if the bank holiday lasts a full month or gosh forbid 6 months or more? As far as “duration” is concerned, I can envision it taking every bit of 6 months or more before a new “system” is up and beginning to run. The after effects will last several years in my opinion and for many, it will last for the rest of their lives because they were completely taken by surprise and lost everything.
What about water? There are many inputs into clean water coming out of your faucet, can a city get their workers to maintain the water supply if they cannot pay them? Or what about power plants? What do you do if your oil tank for your heat runs out? Or, how does the electric company pay their workers to keep the plant online? Do you have electric heat? Lights? Stove and microwave? What about your fridge and freezer?”
Have you ever lived through a hurricane or other natural disaster for more than 3 or 4 days? I have personally and can tell you the first day or two is “quaint,” after that, it pretty much stinks to put it mildly. A credit breakdown is going to affect nearly everything you use in your day to day life. Think about it, the possibility of no internet, no phones, no stores, no fuel, and no garage to fix your car even if you had fuel, none of the daily niceties that we have grown so accustomed to and take for granted. I think “we,” (myself included) will be amazed at what products and services cease or become temporarily unavailable during a credit freeze.
Yes I know, “Holter you are an idiot, this can never happen.” Well, let me say this, since 2008 with the lack of any reform and “pedal to the metal” policies in place of the same things that brought us to 2008, the question is not “if,” it is only “when.” We absolutely and mathematically will have a credit, financial and currency crisis sooner or later. The only variable will be “how bad”. Will it only be a partial “reset” where currencies are devalued versus real goods, i.e. a managed event or will it be a more drastic event? An overnight thing …or something worse?
I will also say this, in my opinion the brunt of whatever hits will affect the West and developed nations far worse than the East and lesser developed nations. I lived in Costa Rica for five years and know some people who won’t care one way or the other. They eat mostly rice and beans which are grown locally and go to bed at 6:00 when the Sun goes down. Some have no electricity and rely on a stream for running water. This is the exception but these living conditions do exist. This is nearly unheard of in the fully developed world.
Before finishing this I think it is important to mention “finance.” Many people will be wiped out depending on “what” their investments are and “who” their custodians are. Will we have bank “bail ins” where your balance is lower when the bank re opens? Probably yes. Will we have a devalued dollar where whatever your balance was will now purchase less in the way of goods and services? Most probably yes also. Did your broker “lend out” your securities before they failed? Maybe, and if they did it may take years for you to get them back. What about your pensions? Are they “guaranteed in stone” or were they invested in assets which were almost surely affected? What will the income stream “buy” even if they do pay you what they promised? What if your payment is far less than what was promised? What I am talking about is a drastic drop in standard of living for 98-99% of the population.
Also, which stocks do you own? Are they “necessity” stocks or the type that produce something real or are they of the “touchy feely” type like a bank, insurance company or consulting? Can you imagine in your mind’s eye what type of companies will fare the best in a financial panic and the following bankruptcies and crackup? Will a food producer be more important to the economy than a computer consulting firm? For me personally, “air” is important but I’m a meat and potatoes kind of guy and believe that if we are starting from the ground up, necessities are probably a better bet to begin with. I will finish with a question you should ask yourself, when this event or some variation does take place, how do you want to arrive when things reopen? Would it be nice to have some “money,” some “wealth” or would you rather be broke and start all over?
In my opinion, anyone who does not prepare for the coming life changing financial event(s) is making a big mistake, but it will eventually pass. Arriving into whatever the new financial system looks like without wealth will be a burden for the rest of your lives. Arriving with silver and gold in tow will guarantee yourself of having some wealth and something to start over with, a “head start” if you will. Yes, more is better than less but when all is said and done it will not matter what you “paid” for your metal …as long as you arrive with wealth and not lots and lots of something that “used to be” wealth.
Nicely done! It’s a scary scenario indeed!
Thanks Matt, it is for real.
Dear Mr. Holter;
Whatever You write I read with a great interest but Your today’s creation is the best I seen /read anywhere…Yourself included !!!
Down to earth, painful but most probable picture and (we all hope) still leaving some time for an action on the part of Your followers.
Please accept my most sincere THANK YOU and best wishes to You and Your loved ones.
thank you Norbert, but not much time.
Great column as always! Have you heard of the idea to make
Gold and silver filled plastic notes? Link here: http://tinyurl.com/kpfqyed
Thanks Greg, no I have not heard of them.
followed the link, this is fine for notes but what about “money in the bank” or digital balances?
This may come across as whining but I’m tired, worn down, frustrated and utterly sickened by this fake economy, fake money, fake news, fake anything and everything. I like everyone have been struggling for years now just to keep my head above water, food on the table and gas in the tank. Each year that task gets tougher and tougher. I’m afraid I don’t have much patience left and I actually feel as though the picture you just painted will be far easier to stomach than the current fake world I am forced to live in. Yeah, it will probably be worse than the current pain but at least it will be REAL. The only thing keeping me going is the effort to achieve mental toughness by forcing myself to be purposefully thankful. If you think hard enough you can always find something to be thankful for. Thanks for all the time and effort you guys put into your work.
Keep your head up Mark, “real” will get here soon enough.
Hi Mark, please know that you have comrades from all over the world. We’re on the good side. The bastards have clearly been identified. Please know that they’re pissing their pants and they will get to know “bad” in due time. They should know that value cannot be destroyed. Look around and consider all of it, WE made society and everything in it, remember (?!). Our main task now, is to keep a healthy mindset. We’re all in this together, and we’ll do this together. We know their flaws, their mistakes. History learns that justice has never died. They’ll be punished in an unspeakable way. Think of it as this: “They’ll be singing children songs to calm themselves down”. No words can describe these “men”. They’re evil to the bone. Great article Bill, wake up call.
but very few of “us” at this point.
Bill, believe me, people will know. What’s my age again? I have a LONG way to go. The baton has been passed.
yes, but they will figure it out after the fact.
Very sobering thoughts but with everything that is going on in the world you’d have to live in some kind of fantasy world to not at least contemplate such a dire scenario playing out. I try to get this across to people all the time and the response is usually the same – sure it COULD happen but it’s not like it’s going to happen tomorrow, so I will worry about it when the time comes!
Somehow people don’t grasp the concept that when it comes to preparation that it is far better to be a few years too early than even one minute too late.
To literally gamble not only with your life savings but with your own life by pretending that everything is just going to be alright is just incomprehensible to me….
correct Al, it’s a bad bet.
I beginning to think you have a crystal ball !!!
Several true stories I want to share with you and the readers:
1. I have a cousin that is very high up in our govt (you would probably recognize his name if I were to give it, but I won’t). He is presently in Moscow. Several years ago he advised me to get out of the fiat dollar (aka petro dollar) and I did. I have been my own banker ever since. Over a year ago he told me that I would see a complete world wide financial melt down before I turn 65 years old. I’ll be 65 in January of 2016 (16 short months away). He stated “BEFORE” I was 65, so what does that tell you? He also stated it could happen much sooner, but it just couldn’t be held together for me to reach 65.
2. A good friend of mine John (not his real name) had a grandmother (now deceased) that was able to see future events quite acurrately before they happened. His family was always commenting on her predictions. She also talked a lot to him about the great depression that she grew up in. She told him to never forget to always be self sufficient because he was going to see much more horrible times than what she did. He told him this when he was a teenager. He is now in his 50’s. The song “A Country Boy Can Survive” describes him accurately.
A book I would recommend to those that want to be as ready as possible is “DARE TO PREARE!” by Holly Drennan Deyo (5th Edition 2013). No one will be totally prepared. but after reading this 600+ pages you will be in better shape than 99% of the rest of the population, including your family and friends that think you are nuts because they just don’t believe these bad evens are going to happen (THEY WILL HOWEVER). Page 589 is entitled “Barterable Items That Disappear First In A Crisis” (this includes a mother nature crisis as well). These items will serve you better than money when it all hits the fan. One item on this long list is matches. If the electricity goes off for an extended period of time these are badly needed. Whom do you know today that even keeps matches? By the way the Dollar Store still sells the big boxes of kitchen matches that our grandmothers had by the wood cooking stoves. I have over a hundred of boxes in sealed 5 gallon buckets just for bartering. You will be amazed at the list of items that are easy to obtain now but will quickly disappear and could be your “money” until a new system can be put in place.
By the way, it is highly unlikely a new system will be put in place within 6 months. If so, the government would not have all the FEMA camps that are waiting and ready.
Again, Bill, thank you for educating us main street folks.
welcome Farrell, $100 now for 100 BIC lighters will also work.
Your comment. “…$100 now for 100 BIC lighters will work also…” is 100% accurate.
For over a year I have been buying the 7 pack of Scripto lighters for a $1.77 a pack by the front registers in WalMart.
ps – don’t forget the toliet paper as life isn’t fun when you run out !!!
that would be crappy.
Hi Bill,I have been following you, ever since I found you on zero hedge, I’ve tried telling any one who will listen and prepare for the coming crash, but everyone is just concerned about every day living to worry about some thing in there possible future, and think that I am beginning to get boring,so I think I know now, how Noah felt before the flood. Most of your work understandably is USA centred, and frankly your above article gives a good indication how things would pan out. what I’m asking is would the UK be as hard hit as the states, considering we have the pound and not the dollar??? keep up the good work Bill
Hi Alan, I think the UK will be just as bad or maybe worse because you don’t have the agriculture that the U.S. does. At least the U.S. does grow a surplus of foods and grains. The pound is just as sick as the dollar when all is said and done.
In that scarry scenario that you are describing, your last paragraph is completely untrue: silver and gold will not be wealth by any means. Who will care about your silver and gold when people will be fighting for food and their lives?
in that “last paragraph” I say that gold and silver “in tow” arriving in whatever new system will give you a head start. Please read everything I write before correcting me. Did I say go out and buy gold and silver …and that’s all you will need?
Bill spot on. After reading your latest post would love to sometime do a Q+A and digest your views on what a plan B should consist of. Nailed it on the percentage of folks in farming rather than focusing on population density. The farmer has been all but removed from the masses eyesight and I’m confident some now honestly believe tuna is caught in cans. Average distance from source to shelf in much of the states is over 1500 miles. Keep on the spreading the reality even though most are more comfortable bathing in the bathwater of denial. It’s only history repeating and and throughout history the masses have always been wrong. I feel what will be the difference in making this one the big daddy of them all is how the world is so interconnected compared to past occurrences. I would respectfully like to hear your views compared to the previous interviews done with James Westley Rawles and Gonzalo Lira.
the one thing I have no patience for is fishing, I do my fishing at the grocery store and many times have to settle for a can.
yea but at least you mentioned fishing so you still know the source of its origonation. Think about the Q/A sometime we’ll help a lot of good open minded folks and I believe that what it’s all about.
am already contemplating it, thanks!
If anybody does not understand what you mean by being without water, gas and electricity you should ask them to have all three shut off for 24 hours and I am certain they will be yelling before the 2nc hours is pasted.
Like I said, the first 24 hours is “quaint”, after that it pretty much sucks.
Would appreciate your thoughts on credit balance owed to the bank i.e. credit cards, auto payments, mortgage payment,etc. at the time of the crash.
Will those balances remain the same? and to be paid back with devalued dollars after the reset? Will the banks possibly adust those balances with the reset.
Credit Jubilee would be nice but don’t see it happening.
Thanks in advance
most probably no credit jubilee.
Bill, another great column. Level headed and concise. I was in the middle of the big fire that hit San Diego county in 03 so I can relate to the 1st 24 hrs being “quaint” and then it just sucks. Had to keep the deep freeze going with a generator for 8 days. That’s some expensive electricity and that is IF you have the gas. But it taught me something. Now we are semi prepared. I hope you do the Q&A session. You’re without a doubt the most logical, level headed guy out there. Always a good read. Also, I’ll be heeding RF’s advise above and getting/reading the book he mentions.
thanks lenn, being prepared cannot hurt.
In some ways this era “feels” like 1999 to me. I kept waiting for the Big One. When the calendar rolled over to January 1 2000 and the next few weeks proved mostly uneventful I figuratively wiped my brow and said to myself, “Whew, that sure was close! But the coast looks clear now.”
Only the coast wasn’t clear. 9/11 occurred almost two years later.
A shopping trip to a local office products retail store yesterday (9/3) taught me what happens when credit lines die. I noticed a big line behind one of the registers while walking into the store, but I didn’t pay much attention to it. Lines happen in a retail store.
So I took my goods off the shelf and went back up front to pay. The big line was still there. That happens too. In my boredom I looked around. Only then did I notice a hand printed sign at each cash register, save the one with the big line, that said, “Register Does Not Work.”
The manager came out to announce to the line, “Our servers have been down for two days. And now the only register that was working just went down. We can now only accept cash or checks. We can not accept credit cards or debit cards.”
The crowd waiting in line murmured. The world felt strange.
“This is how it feels when the Big One happens.” I said to myself.
“How about a debit card?” asked the man in front of me.
“No, we can not accept debit cards. We can only accept cash or checks.” said the manager again.
The moral of my story is that stores will also accept checks, at least for a while. Possibly out of denial of reality more than anything else.
PS. “Our servers have been down for two days.” could be code for “Our bank cut off our credit two days ago.”
“checks” will not be accepted when the banks go down
Thank you for your insight into future financial issues that most of the US is woefully ignoring. Would it be possible for you to consider an article/essay on what would be a Plan “B” to deal with our coming financial meltdown? Prepping food, water and supplies is obvious, but what will happen in the cities if city water workers don’t go to work. Do you have enough water and or a way to get water and clean it/treat it? Food is gone from the super markets and your neighbors are knocking on your front door? What to do? What to do? Tough, super hard decisions are coming.
David, life will be impossible in “the city”.
Bill, great article – one of the best that you’ve written. Thanks for trying to wake up the masses!
I’ve enjoyed your articles. Been meaning to ask you, but what prompted you to return the US?
when the banks close, “gringos” will be bigger targets than they already are. Crime is rampant but not reported, home invasions happen constantly. We decided to live in Texas with like minded people.
Since 210bc the Chinese people were protected from foreigners by the Great Wall of China. Today 99.9% of the Chinese people are protected from the financial collapse of all foreign governments.
All Banks that are registered by the Peoples Bank of China (PBOC), will function without any change in their operations, and all government approved projects will continue to be funded. The so-called “Shadow Banks” are private Trust enterprises and totally independent of the PBOC and the Chinese Treasury.
China has acquired more gold than any other country, and since gold is money it is also China’s savings and support of its currency.
The lights may go out in other foreign countries, but they will remain brightly lit in China.
they will not be totally unscathed however.
I do not understand what you mean by: “they will not be totally unscathed however.”
Only the Real Estate Development Billionaires will be affected. The 99% Chinese are apolitical, and will not notice any change in the foreign countries.
President Xi Jinping and the leadership has a 92% Approval Rating, and they add over one million new jobs each year.
The PBOC does not give money to their banks and Stock Markets, they fund High-Speed railroads, low-cost housing, and many other humanitarian projects. These projects are long-term investments for future sustainability.
All Banks that are registered by PBOC is required to retain 19.5$ capital for bad debts, and their average bad-debt ratio is less than 2%. No other banking system world-wide is as conservative as the Chinese.
The average Chinese love taking trips, and after the collapse of Western economy, the Chinese Tourist enterprises will become a major growth industry.
they do not live and do commerce in a “vacuum”, they will be affected in some fashion. Adjustments will have to be made as the U.S. will not be able to purchase their production. Yes China is in a good position but not they will be affected when the bubbles burst.
Don’t sell China short. China invented paper, and paper fiat money. China’s government is continuously raising the standard of living of its 1,300 billion population. Since the U.S has only 300 million population, China will be able to support a “Kennedy” Treasury Dollar, and buy Alaskan gas and oil after the removal of the Federal Reserve, Comex, LMBA, and the manipulation of the financial markets.
Waw, Victor. That’s quite a loaded piece of information. It sure paints a different perspective on the concept of “99.9% vs 0.1%”.