Bad times.
Estimated read time: 5 minutes 45 seconds.
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In the mid-1850s, the United States rode the crest of an unprecedented wave of prosperity. New railroads spread like gleaming ribbons of iron across the land, and credit gushed freely as Americans revelled in blind optimism about the nation’s surging growth.
People and businesses piled themselves into debt, convinced of a never-ending boom. Banks lent freely, merchants stocked warehouses with goods bought on credit, and farmers took out mortgages on new land to fund aggressive expansion. Nearly everyone—from small shopkeepers to big bankers—seized on the opportunity to bet with debt that tomorrow would be even better.
Occasionally, a few observers warned that this castle, built on credit and speculation, might prove fragile. In the spring of 1857, one commentator said “no one saw any sign of the approaching crash,” as every indicator of growth hit record highs, and it seemed nothing could derail this gravy train.
But by late summer of 1857, this façade of endless growth began to crack. On August 24, a major New York enterprise—the prestigious Ohio Life Insurance and Trust Company—failed, shaking investor confidence. Telegraph wires carried the bad news across the nation, sparking a growing fear from Wall Street in the east to frontier banks across the Midwest.
Panic set in. Businesses that had thrived on easy credit were wiped out in weeks or even days, and banks saw crowds of jittery depositors besieging their doors. Weeks later, disaster struck at sea: a steamer carrying California gold, the SS Central America, sank in a hurricane, wiping out a much-needed shipment of hard currency for Eastern banks.
By October, the frenzy was full-blown. Stock prices plummeted, banks shuttered, and tens of thousands lost their jobs as credit evaporated. In New York, thousands of panicked residents swarmed outside banks, jostling and shouting as they attempted to withdraw their money. The long, giddy night of the 1850s boom had ended in a sudden, sobering crash.
But this American crisis did not stop at the edge of the sea. European investors and markets had poured capital into U.S. railroads and farms during the boom, and were heavily dependent on American grain and cotton. When the U.S. economy crashed, the shockwaves quickly spread across the Atlantic. British banks teetered, and confidence in Europe faltered. In London, the government quietly allowed the Bank of England to break its own gold reserve rules to shore up the system, which only served to fuel more fear.
By November, chaos had struck Europe. Banks in England were collapsing, and in Scotland, a major bank failed under a run, taking nearly a hundred branch offices with it.
In mere weeks, the debts and dreams of the 1850s came crashing down. A credit-fuelled house of cards collapsed with stunning speed, sending shockwaves around the world.
Economic change.
Life as we know it is likely about to change in a big way.
And like the crisis of the mid-1850s, this coming change will likely also originate in the United States, but like a financial virus will spread economic destruction to Europe and beyond.
Nobody will doubt that we’re currently eyeball-deep in debt. Especially if current statistics from the United States are to be believed.
Right now, the number of people defaulting on their car loans is at the highest rate on record.
As of February this year, U.S. credit card debt reached its highest level on record, standing at $1.21 trillion. This is in line with household debt, which is now at its record peak, currently just over $18 trillion.
More people are late paying their mortgages than at any time in the last 20 years.
And as per a recent story by CNBC, the number of people using “buy now, pay later” services for groceries has increased by nearly 80% in just one year, with significantly more people also paying those loans late.
While these figures may sound like a U.S. problem. Unfortunately, they’re an all of us problem. And we don’t have to go back to the middle of the 19th century to see why.
In case you’re unaware, the 2008 Global Financial Crisis (GFC) was triggered solely by mortgage defaults in the United States. A collapse of the mortgage bond market led to a global slowdown for several years, trillions of dollars in value lost across the world, rising global unemployment, increased poverty, as well as the complete bankruptcy of two countries in Europe: Iceland and Greece.
All this, because people could no longer afford to pay their mortgages in the U.S.
Well, we may be on the verge of a similar situation happening again very soon.
Today, U.S. mortgage delinquency rates are nearly identical to what they were two years before the 2008 housing market collapse—and they’re rising. But unlike in 2008, the issue is that many other factors exist now related to overall debt which are much worse, like the household, credit card, and payday loan defaults I described above.
In other words, while nobody has a crystal ball, the numbers indicate that a severe economic collapse in the USA, similar to 2008, could be on the horizon.
And if that happens, the knock-on effect will cause a much larger recession worldwide than we saw starting 17 years ago. How much larger? I’m not going to speculate; suffice it to say that it’ll likely be worse than what began in 2008.
It’s not just me saying this either. Some of the largest banks in the world, such as J.P. Morgan, are predicting a 60% chance of a global economic event or recession like this occurring within the next 12 months. In other words, it’s more likely to happen than not.
To summarise all of the above, things are very likely to go financially bad sometime in the immediate future.
Not just for the United States.
For all of us.
We’re almost certainly entering a time of chaos. These are the prosperous financial days before the devastating economic end times.
I don’t say this to make you fearful. Quite the opposite: I say it so you can take action to prepare for this possible upcoming storm.
If I had a shortlist of things I would do to get ready for such an event, it would be as follows:
Buy gold and silver. You’ve heard me talk about this ad nauseam, so I won’t reiterate on this point any further.
Prioritise paying off debt. Especially any high-interest debt you may have.
Ensure you have at least one other residency permit (or even better, citizenship/passport). This is an insurance policy in case things get really bad in your home country (unaffordability, massive unemployment, etc.) and you need a backup plan to go somewhere where things are better.
Increase your earning ability. Get more clients, grow your business, and do whatever it takes to have more in reserve to protect yourself from a company recession, crisis, or crash. One of the best ways to do this is to reduce what you pay in taxes—try our membership Untaxable here at no cost to learn how to do this.
Become more employable. If you're not self-employed (which would be preferable), ensure you up-level your skills to become more employable. In times of recession, as unemployment rises, only those with the most skills will be guaranteed a job.
If I were preparing for a global recession today, these are the key areas I would focus on first.
Beyond all of that, I believe it’s always important to focus on becoming as untouchable in times of crisis as possible, regardless of how near or far one may be.
Become more independent.
Become less reliant on an employer or your government.
Become as self-sufficient as you possibly can.
Leon.
Founder, Abundantia.
P.S. — Remember, Abundantia will be migrating into the Anticitizen brand over the coming months. To prepare, you can subscribe to the Anticitizen newsletter here.
Giant-grocer corporations here in Canada have been raking-in record profits, year after year, while a record number of people have to choose between which necessities of life they can afford. To say it feels unfair is an understatement, but what can I or most other shoppers realistically do about it?
There still are many Canadians who hold the erroneous notion that they live and buy in a nation with truly competitive and therefore consumer-fair markets. But in reality, big corporations are able to get unaccountably even bigger, defying the very spirit of government oversight rules established to ensure healthy competition by limiting concentrated ownership — especially in regard to corporations selling and profiteering from the necessities of life, notably food.
Those rules, however, are largely un-enforced by the government.
I feel that the heavily corporatized mainstream news-media, which is virtually all of it, has been editorially emasculated thus negligent when it comes to regularly investigating and exposing such societally consequential oversight-rule breaking.
Problematically, elected officials are getting indebted thus beholden to huge corporate entities, largely due to the latter's generous political monetary donations.
Meanwhile, a very large and growing populace are increasingly too overworked, tired, worried and even rightfully angry about food and housing unaffordability thus insecurity for themselves or their family — largely due to insufficient income — to criticize or boycott Big Business/Industry for the societal damage it needlessly causes/allows, particularly when not immediately observable. And I doubt that this effect is totally accidental, as it greatly benefits the interests of insatiable corporate greed.
Still, there must be a point at which corporate greed thus practice will end up hurting big business’s own monetary interests. Or is the unlimited-profit objective/nature somehow irresistible? It brings to mind the allegorical fox stung by the instinct-abiding scorpion while ferrying it across the river, leaving both to drown.
Easy credit is the problem everywhere. People have a tendency to live above their means as they can borrow whatever they need to satisfy WHIMS not necessities.
An example for Americans: Must you drive a new auto? Must it be an overpriced pickup or SUV? Will a serviceable used sedan (think corolla or civic) not work?