Are you ready for a slow, economic decline to disaster? As preppers, we sometimes fall into the trap of thinking about disasters happening quickly and on an epic scale. We seem to enjoy thinking and talking about how we will overcome the worst-case scenarios. However, the potential for the worst-case scenario to happen is much less than lesser case scenarios that are happening. Unfortunately, over time, the lesser case problems may add up and result in a major disaster for society.
Disasters Over Time
One type of scenario that may build over time is a financial crisis. All one has to do to see that a financial crisis can build upon some lesser problems, is look at the 2008 U.S. financial crisis. That particular crisis is considered by many to be the greatest financial problem since The Great Depression of the 1930’s.
When we examine the 2008 crisis, we find that it’s the climax of some problems that combined over time. For example, the financial crisis of 2008 was kicked off in 2007 by the failing of the subprime mortgage market in 2007. However, the failing of the home sales market in 2007 was a direct result of actions taken nearly 20-years prior.
Due to various court rulings, and government involvement in the mortgage industry with companies such as Freddie Mac and Fannie Mae, the mortgage crisis snowball began tumbling. One of the key precipitators was the Community Reinvestment Act (CRA).
The CRA was implemented to help low-income people get home loans. It did this by encouraging banks to approve loans for people who might otherwise not be qualified for the loan. As this was rolled out, government back Freddie and Fannie, began making sub-prime loans to people who may have previously not received home loans.
As Freddie and Fannie made the sub-prime loans, they began to attract business away from the traditional, non-government subsidized financial institutions. When this happened, the traditional, private banks, to remain competitive, were forced to loosen their lending practices.
It was these loose lending practices, combines with low-interest rates and lax regulation, which paved the way for predatory lending to occur. That new road helped the crisis snowball increase in size and speed as it barreled into 2007 and 2008.
When 2007 and 2008 hit, many of the people who were provided loans due to the CRA and would otherwise have not been able to secure a loan defaulted on their loans. In turn, due to the way the financial industry approached its loan practice this caused a ripple effect around the globe. Unfortunately, the ripples caused by this fiasco that built over 20-years turned into a tidal wave that caused a global crisis.
What’s the Point?
Okay, so what? So, what is the point of all of this? The point of all of this is simple. A disaster, such as an earthquake, or tsunami, may happen without a moment’s notice. However, disasters can also build over a long period before they release their full fury on society. What disasters can you think of that took time to be realized? If you can think of any, please post them in the comments below.
Here it Comes!
Now that we’ve discussed how disasters, especially financial disasters happen over time, we should talk about what you need to do to recognize a disaster is headed your way.
Knowing what is going on around you is a key to staying safe. Knowing what is going on around the world, is a key to remaining informed, flexible and ready to limit the amount of damage you may receive if things turn south with the economy.
By keeping a realistic, non-over reactive eye on what is going on, you’ll be more likely to recognize any problems before they impact you in a significant way.
The U.S. Dollar Quickly Loses Value
The U.S dollar losing value quickly is a precursor to hyperinflation. Should hyperinflation happen, you can expect a fast and possibly uncontrollable rise in prices. Often, economists state that a monthly increase of inflation of over 50-percent is an indicator that hyperinflation is occurring. When this happens, the basic necessitates of life often exceed the ability of people to purchase them. For example, in Venezuela, the cost of a dozen eggs rose to over $150 per dozen. It doesn’t take much thought to realize that will cause a major rift in society.
Run on the Banks
A run on the banks happens when a large number of bank customers withdraw their money simultaneously, out of fear of financial problems with the banking industry, etc. Think about movies you may have seen where bank run happen. When they happen, people run to the bank as fast as possible to get out all of their money.
When a run on the banks occurs, it could cause banks to close or possibly go out of business. As the run increases, banks may cut off lending money and stop allowing customers to make cash withdrawals. The bank may run out of cash and have nothing to give to the customers. When this happens, the run may spread. Ultimately, the impact of bank closures on society could be extremely damaging and catastrophic.
The Housing Market Crashes
As you read at the beginning of this article, the housing market is a good sign of our financial state of affairs. It’s good to remember, that a home is the largest purchase most people will ever make. Because the demand for housing is usually driven by high employment levels and increasing wages, low employment and decreasing wages spell trouble for the housing industry. Therefore, keep an eye open and when the economy takes a dive, and home sales plummet, be ready to act.
So, in the end, it’s important to understand that not all disaster happen instantaneously, with no warning, and devastate the world. The other possible scenario is that a disaster may build over time. As it does, it will provide warning signs to us observant preppers. Then, it’s up to us to capitalize on those warning signs and our advanced preparedness to deal with the oncoming storm the best we know how.
If you’d like to learn more about indicators of an economic decline, follow the link to our free giveaway 5 Indicators of an Economic Collapse.