There are many discussions on the Wall Street effects of a pandemic but little discussion on personal planning for family survival. In the event that a family looses most or all of their income for an extended period of time, what would be the prudent expenditure of savings ? Would one continue their mortgage, auto, credit card payments, and utilities,until savings exaust or choose only to pay the most vital payments to extend resources? Would banks forclose and landlords evict tardy tenents in the midst of a prolonged pandemic ? Should savings be held in the bank or cash ?
The single principle to remember is that to collect on most Government assistance programs, you need an address. Pay for the dwelling in preference to virtually everything else.
I really hope that in the case of a bad pandemic our landlord would be kind enough to let everyone’s rent slip for a few months..expecially if most can’t attend work. I would try to pay with whatever savings i have at the time though. Both rent and electric would be first on my list. I think i would probably let the cell phone bill, the internet, and the college loans slip for a while if it meant i could pay my rent and electric at least for that much longer. It might screw with my perfect credit but i’d probably have more important things to worry about!
I think if it came down to half the country being a casualty everything will grind to a complete halt until it is “over”. There will be no one going to work to generate the utility bills. There will be no one to deliver the mail. Will you play with the mail even if you get it not knowing who has touched it? (ok maybe after 48 hours) Will banks even be open for your paid bills to be deposited by the landlords, cell company, etc? Will the power company keep running to have an internet connection? I think you can’t worry about stuff like this until it happens. In a worst-case scenario nothing will matter except pure survival. Its us or them at that point, no landlord is evicting anyone when 60% of the population is dead on the street, “sure come get the rent I am just not feeling real well”. “People” will not be willing to put up with crap from anyone its going to be mad max at that point. Bills will be the last thing everyone will worry about its going to be food, water, heat, fuel, security, and keeping what you have away from the people that don’t have it. Sorry it may seem cold but I have a survivalist mentality and its not like there has not been warning. Come one how many months do you need to prepare. This has been coming for years at this point anyway. Besides just the fact that you are aware enough to be reading this gives you a huge leap over the rest of the sheeple. Everyone is worried about buying presents and stupid stuff all the while oblivious to what is to come. Believe me if some landlord was crazy enough to try and evict me at the height of this. Said landlord would quickly find out about my preparations concerning security and keeping what I have from someone else! I am sure everyone will get all crazy over this post but its survival of the fittest.
Financial survival should be one of those many public debates held months in advance of a pandemic wave by which the government, commerce and the general public come to terms on what makes sense in many instances. It would amount to a new, probably temporary social contract, thereby avoiding to some extent the chaos of New Orleans.
In order to have that debate, somebody has to decide the time is ripe for it. Clearly, whether the time for public discussion and debate is ripe or not, that somebody isn’t bothered.
I am worried about the financial problems of maintainig a home while not being able to earn income. The only example we have is Katrina. It is my hope that governments will realize that evicting everyone from their homes will cause a great depression. It is my hope they will pass laws not allowing foreclosures for a period of time and a delaying of debt payment due for a period of time. I hope that during the pandemic, governemts will encourage people to work so that supply chains and money chains continue. It seems that the experts are saying that it will be impossible to sheild yourself from the pandemic and so we all might as well continue working. I hope the governments and media will educate the public as to how to protect yourself from infection and still remain a productive worker for the good of the whole society. I cna not see another way out of this.
Concerned,
No.
“I hope that during the pandemic, governemts will encourage people to work so that supply chains and money chains continue. It seems that the experts are saying that it will be impossible to sheild yourself from the pandemic and so we all might as well continue working.”
You should comprehend the concept of “essential services” and “essential personnel”.
Many operations could be streamlined to go for a few months with reduced staff, reduced recordkeeping and reporting, reduced this and that. 90% of the stuff in Costco isn’t going to sell, so why have 100% of staff. If it gets really bad or even only just bad, many businesses should shut down or pare down to skeleton crews.
“We might all as well continue working?”
No. The Kiwis seem to have decided to close their schools as soon as the first H5N1 case is recorded ANYWHERE IN THE COUNTRY.
In case you’re not “essential”, go home, read a good book and wash your hands every half hour just to get in practice. You’ll have plenty of company.
I thought we were supposed to be nice to newbies? Anyway People can not stay home and have no income for 18 months to two years - which experts predict will be the length of the pandemic. “Essential people only” can work for a month or two but then grim reality sets in. Look at the New Orleans people who now have to pay current mortgage payments plus the past 90 days worth averaged out over a year or the banks will “lose credibility with their stockholders”. Any personal pandemic plan must include a way to support your family safely during the pandemic. That was the point I was trying to make.
Contracts in the US esp. in California contain a “force majeure” clause to cover “Acts of God”.
Landlords will have a difficult time evicting anyone under such conditions. Many companies will be forced to claim “force majeure” on their contracts under pandemic conditions.
“Any personal pandemic plan must include a way to support your family safely during the pandemic. That was the point I was trying to make.”
That’s a good point too, but it doesn’t necessarily follow that going into “nonessential work” would be the best thing to do.
Don’t forget the #2,000 emergency stipend doled out to Katrina victims and others by the Federal government. Put another way, if you multiply $2,000 by 1,000,000 hurricane victims (probably more than was paid) you have $2 billion dollars allocated to hardship payments, about two weeks worth of Iraq operations if I’m not mistaken, Then, if the government paid $2,000 to 100,000,000 Americans for loss of income due to self quarantine, that’s $200 billion, maybe a large fraction of what Iraq’s cost so far.
Then, if we figured the troops in Iraq were more at risk of bugs than bullets and brought them home straightaway, we could better afford to be financially prepared at home.
In other words, do the math and weigh the consequences. Put everything on the table and think it through. A good bit of the problem we have now is that too many people refuse to think of any meaningful departure from status quo. They’d only consider some other way if it kicked them in the ass.
Forgive me, mom, honestly, I don’t mean to be mean; this is just my vulgar way, sort of Rupert-like at heart.
…”Then, if the government paid $2,000 to 100,000,000 Americans for loss of income due to self quarantine, that’s $200 billion”…
I do not think that is in any government plan; let’s ask our elected officials.
[I’d be happy if they decided to have a national health care plan, like Finland and Canada, ect, do though, if they want to give the American public & veterans what funds they gave Bush’s War. I think after a pandemic we’d need a single payer health plan; we’d need to get the remaining people up to speed, and keep them productive. Medical bankruptcies are too common here.]
If they just put a freeze on rent/mortgage and some taxes, ect, until people could get back to work, maybe. Doesn’t make sense for telephone companies, utilitiy companies, ect, to shut all the survivors off for being late paying their bills; would leave them with zero customers??
It will be quite a tangled mess whatever way we look at it. [Alan Greenspan retired just in time, eh? (Ok, he is 79; guess we can’t say he’s running off.) Good luck to Mr.Bernanke. ]
I’d ask all the businesses I pay bills to what their pandemic&post-plans are, but, from my local health authorities’ positions as regards bird flu I hesitate to ask; wouldn’t get an answer.
“I do not think that is in any government plan; let’s ask our elected officials.”
Yes, cr, that’s a good idea, exactly what we should do. It isn’t in any plan that we know of because our government doesn’t want to deal with us now. If New Orleans shows us what might well happen, we won’t know squat until sometime after midnight when the levee breaks and water starts pouring in. At that point, everything the bureaucrats have decided behind closed doors (with no public discussion or debate) will be enacted by fiat along with enactments of everything else unforeseen, unplanned and having no organization or material provision before the fact.
“Let’s ask our elected officials” is exactly what we should do. I cringe that so many people feel vulnerable now because they have no idea what government does, or what it ought to do; what it spends money on, ought or ought not to spend money on.
Personally, I think it falls under the rubric of “domestic Tranquility”, “common defence”, “the general Welfare” and “the Blessings of Liberty”.
THE UNITED STATES CONSTITUTION
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
Who should we thank now that so many Americans have interest-only mortgages and maxed-out credit cards? Who shows us every ten minutes that the best reason to smile these days is to have just bought something? Does this relentless merchandising have anything to do with perceptions so many people now have that they should eventually risk their lives for pittance because our public servants are keeping their powder dry?
A lot of things ought to out in the open now and they’re not. Multiple clusters of h2h cases in Asia and still no WHO declaration of Phase 4. Maybe somebody wants to bank Christmas first.
People may not be aware of it, but mortgage documents often grant the lender a “security interest” in *any* bank accounts maintained by the borrower with the lender. I.e., if you bank with Bank of America, and they hold your mortgage, the mortgage documents may allow them to tap into your bank account and take your money to pay the mortgage payments, all without your contemporaneous consent.
One idea I have had, which may have some applicability to other people, is to move my available cash into an account with a bank that (a) I don’t owe any money to (e.g. a mortgage payment), and (b) into an account that is not authorized for any other “automatic” payments (e.g., utilities, phone, etc.).
My reasoning is that many mortgages include a clause granting the lender a security interest in bank accounts maintained by the borrower at the lender. I do not want BB&T (my main bank and mortgage lender) to be able to diminish my cash hoard using any kind of automatic withdrawal mechanism, so when I think the time is right, I will move my cash to my SunTrust account (which does not lend me any money). I have already set up the SunTrust account.
I think that in a case of a flu pandemic there will be centralized government actions prohibiting foreclosures, at least until the state of emergency is officially lifted. But this would not prevent banks from seizing all of your $$$, if your mortgage documents permitted it. I don’t want my cash stash reduced during a prolonged self-quarantine by “automatic” withdrawals or mortgage-document-permitted cash seizures by my lender bank.
Building upon Robert’s excellent post - The same is true of credit cards. When I got a credit card from my credit union, there was a clause in the documentation (in fine print) that they could take whatever was in my account (have to have a checking account in order to get a credit card) to pay for the cc, in the event that I did not make my payments.
While it is likely the government would do something to halt bill collection, it would probably come too late for those whose banks started debiting customers’ accounts a month into the pandemic.
Another thing to remember is not to open an account at a bank where you are on any other accounts. If you are on an account with a relative, and that person has their own, separate account at the same bank, and bounces a check, then the bank can come take the $ from your account. (This happens to elderly parents who put their children on their accounts “in case something happens”, then the adult child doesn’t pay their car loan and the parent’s account is hit).
GOLD!
re RobertNAtl: after the hurricanes-which-shall-not-be-mentioned…those in the affected areas who had lost their homes were granted a whole 3 months I believe in which their payments were postponed. The banks are going after the payments, and the local governments were trying to get an extension. I think it depends on the federal government at the time- ie a friend to big business? then I’d expect alot of foreclosures…If people have just enough to get by on now, how the heck can they be expected to cover everything in the event of highter prices, layoffs etc? I think those who can get by will have alot of friends etc knocking on the door…………..
Ben Shalom Bernanke …….. He gave a speech in 2002 entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” in which he discussed possible Fed actions to prevent deflation saying, “A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Further describing several options in the government’s arsenal for fighting deflation Bernanke also said, “the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” These metaphors referred to the potential of the Fed to give money directly to citizens (as opposed to working through banks) as a last-resort possibility to stop deflation………
I wonder if we’ll see a bail-out of the mortgage industry?
What happened to the economy in 1918. Didn’t it boom in the twenties?
World Bank Chief is worried about impact of bird flu on global economy.
What are the most important issues to consider for financial survival during a pandemic?
Panic could overwhelm communications in pandemic http://tinyurl.com/qlqnz
Banks are run by people who will get sick and panic just like the rest of us. Foreclosure notices are delivered by officers of the court. I think the police will have more on their hands than serving notices of foreclosure and eviction notices. Repo guys are not going to be interested in catching the flu. Depending of the die off, there may very well be a moratorium on debt collection that could last months or years.
Having said that, I hold banks in the same esteem I hold cockroaches and lawyers. They are very resilient, and will probably be hear long after the rest of us are gone
As of now, don’t put any spare money at the bank, whether it is a bank you owe money to or not. The day TSHTF, go cash in anything money left on your bank accounts and take it with you. Stop all direct debit orders.
There will be so much disruption that bank employees might not show up to work at the bank or to fill in the money boxes, the pay checks won’t come through the mail. You might need cash to bargain for essentials. Keep your spare cash well hidden within easy reach and don’t tell anyone. Keep very small bills so as not to attract attention if you have to buy things on the black market.
When things come back to normal, if you’re still alive, there’ll be time enough to worry about debts!
Store cash now - there won’t be much available later, banks might be closed, etc. Everytime I go to the ATM I take an extra $50 and put it away. It’s not so much that I notice it and it is building up over time. I can’t possibly cash out my lifesavings. Not only is it unsafe but it’s impossible. I’ll just have to hope that over time the economy will recover. If we’re thinking 1918-like outcomes the economy did recover fairly quickly - until it crashed in 29′ of course!
Bird flu poll reveals U.S. economic collapse likely in the event of a human pandemic.
The above study has some merit but be cautious when reading through these kinds of articles for the “slant”. There will be economic disruption but it is difficult to determine the extent.
The economy is very different today than it was in 1918. The average american has the bulk of their wealth tied up in their homes - and the homes have large debt balances attached to it. Many of the loan structures are questionable at best - little down, adjustable interest rates, no principle repayment at all, etc… all because of the desire to buy more house at inflated prices than these families really can afford. Then there is the consumer debt, lack of savings, and lack of ability to provide basic needs without purchasing it (food, heat, and water).
In 1918, there were mortgages yes - but not nearly as common and they were plain jane debt obligations and a loan was not granted unless the applicant actually had a reasonable down payment and a clear ability to repay. In 1918, savings rates were much higher, average debt ratio much lower, and living BELOW your means was normal. The proportion of families in rural areas was higher. Those in town lived on larger lots, had clotheslines etc, a wood stove, and something akin to a “victory garden” in their backyard. Workplace/occupation was closer to home - so transportation disruptions were less impactive. Produce was acquired from local producers - so transportaion disruptions were less traumatic. Since that time we have been wallowing in cheap oil and have built a surburban paradise that has used up large portions of aerable land for food production - turning that over to a few large mega farms that also rely on cheap oil for food production (fertilizer, insecticides, machinery to plant/spray/harvest/distribute and then shipping on a mass highway system that was only built and completed in our parents lifetime).
Looking at 1918 and hoping we will “bounce back” so easily is not being realistic. Even then, I don’t think they really bounced back all that well then either. We have radically changed and are very vulnerable as a society as a result. Not only vulnerable to disease (too many of us, living in densely packed areas, and traveling all over the place in our global economy) - but vulnerable to economic and system failure. Pandemic is just one of many events that can pull the key card out of the “house of cards” we have built for ourselves in the past 100 years.
I agree we have a “house of cards”. I will not take much interruption in this “just-in-time” system we now have to create major economic impacts. The question is, What can we personally do to diminish the impact financially? I think, first, health and safety are the most important items to take stock of. Once those are satisfied, I think your income stream is very important and essential to a financial survival plan. What jobs will be the most secure in a pandemic? What other skills will be needed?
I personally plan to use my available resources to pay for my mortgage, basic home insurance, property taxes, electricity, and basic landline phone service. All other bills will wait until things settle down before I will resume paying them. I have savings, I have vacation/sick leave etc that I would expect to receive - but I would be very cautious about paying everything right from the start of a “emergency” and end up using everything I had too early/too fast. Who knows how long the cash crunch may occur. If the internet and mail are not functioning - such that I CANNOT pay… then I will probably be just one of many who will NOT be paying until the ability to transfer payment can be resumed in some fashion.
My first priority though is Shelter (my home). The next priority is food, water, and heat. I have food reserves, my garden (at my home that is my first priority item), water and heat if I can keep electricity going… other wise I have low tech options for both of these. So that is why my bill paying will be focussed on those only during a pandemic. Communications is super to have if possible - so paying the landline phone bill is part of that desire - but honestly if needed I would drop that too. No cable tv, no internet, no cell phone, no “other debt” payments - they can wait or cease all together if need be.
I think having cash on hand is a good idea to some extent - but honestly - most of the need for payment I would have - would be my mortgage and taxes - and frankly if the banking/mail service is not working - I don’t expect that the payment receipting clerks would be functioning at the national firm I have my mortgage with - nor would I be able to “walk my cash payment” into them - as they don’t have any local presence here.
As to minimizing the impact, I think everyone should at least have a few months of mortgage payments in the bank account - along with enough extra to make a 1/2 annual payment on your property taxes. I know that is very hard for many people to do - but once the food preps etc are provided for - a bank prep is probably a good idea as well. Same “safety net” concept and again it applies to just about all hazards we can think of.
Having said that… I don’t think having VAST SUMS in the bank or investments is such a great idea either because it may become unavailable or completely devalued ultimately - especially if the money in that bank/investment accounts are at the expense of not paying off debt (including the mortage) and/or having adequate food and supplies on hand for a reasonable level of self sufficiency. Hard useful assets (kept in good repair and function), a reasonable cash reserve in the bank, and a commitment to removal of debt BEFORE amassing large sums in retirement accounts and other investments… is what I feel is financially prudent.
Just my two cents worth.
Having grown up on the gulf coast and been through the aftermaths of many hurricanes, I can’t stress enough the value of low denomination cash money.
Most stores stop taking checks, credit cards, etc. becuase they know that they can - also, magically prices seem to rise during emergency situations.
You might think that you wouldn’t be going out during this time, especially if you’ve preped well enough - but there will certainly be emergency situations that come while you are in isolation and it would be terrible if you didn’t have the cash to buy replacement parts at 3 to 5 times the price, or to bribe someone to help or to leave you alone when the need arises.
DD and jquest - I think you are both right about having some available cash on hand in small bills. The ATMS may not function well and banks may need to limit the amount of cash withdrawals per person. I think 2 to 3 months of living expenses on hand would be a reasonable amount.
Heads up! The Iranian Oil Bourse is finally a go-ahead… not directly related to bird flu, but once you know the details, it is one more reason to prep!
Predicted further fall of U.S. dollar and possible grave repercussions for U.S. (and then global) economy. Re: investments, start thinking about other currencies, perhaps — gold, perhaps — or if you aren’t sure, time to start reading and researching! Like an economic epidemic broiling unnoticed… arguably, of course. Not all financial experts agree - most think of it as some “left-wing internet conspiracy theory” - but we’ll know starting next week.
Just thought I should mention it here to everyone who wants to stay on top of general personal security-type issues…
I posted this on a couple of the other financial threads as well but will repeat here
since it is so important.
April 26, 2006 Speech by Hon. Ron Paul of Texas to U.S. House of Representatives
What The Price of Gold Is Telling Us
If this helps anyone understand gold or why they might want to get a book and read up on it then great! Very important reading re: financial planning implications in light of a possible pandemic in next 5 years (or for then next 5 years even if no pandemic, actually…)
Rice – So exactly what is this all supposed to be telling us? Unload our dollars and move into gold or silver?
An example to help me better understand, Lets say that one has 500 thousand in mutual funds in the market as of today? What ‘could’ a suggested method to #1 – protect the principle and #2 if at all possible continue to earn at lease a little interest.
I would think that government bonds or CD’s may be an option. Any suggestions (totally unofficial) of course.
Here’s what Steve Roach at Morgan Stanley says today. He’s someone I listen to.
Thom
The downside of gold is that it earns no interest or dividends. It is technically not an investment. It is more like a super safe bank account that won’t be corroded by inflation.
BUT
Effectively speaking, you still “make” money if you hold gold, because gold rises as the U.S. dollar falls. And right now the U.S. dollar is falling bigtime (it’s a fact, but the exact data isn’t available to the public — the total U.S. money supply is now CLASSIFIED data. And no audits are permitted on the U.S. Treasury holdings of gold either).
start by reading that article I posted…. it covers a lot of basics really simply. It’s also surprisingly honest and matter-of-fact.
Here’s a good snippet from Hon. Ron Paul’s speech:
“Since 2001 the dollar has been devalued by 60%.
In 1934 FDR devalued the dollar by 41%.
In 1971 Nixon devalued the dollar by 7.9%.
In 1973 Nixon devalued the dollar by 10%.
These were momentous monetary events, and every knowledgeable person worldwide paid close attention. Major changes were endured in 1979 and 1980 to save the dollar from disintegration. This involved a severe recession, interest rates over 21%, and general price inflation of 15%.
Today we face a 60% devaluation and counting, yet no one seems to care. It’s of greater significance than the three events mentioned above. And yet the one measurement that best reflects the degree of inflation, the Fed and our government deny us. Since March, M3 reporting has been discontinued. For starters, I’d like to see Congress demand that this report be resumed. I fully believe the American people and Congress are entitled to this information. Will we one day complain about false intelligence, as we have with the Iraq war? Will we complain about not having enough information to address monetary policy after it’s too late?”
Added the Lowry Institute and US Congressional Budget Office economic impact assessments to the Economic page. Interesting how they paint somewhat different pictures.
Question to you financially wiser folks…
The majority of our savings is in the local credit union. I am considering moving at least some of it to a major bank with a better chance of “surviving” a pandemic. where do I find the info to make and educated decision on which bank? how does one judge bank solvency? Any advice or direction would be appreciated.
Bump
My grandmother, bless her,always told us to keep our money divided between 3 banks, and make them as different as possible (different counties or local/national chain, etc).She did live through more than a few crises, and always managed to come through fine.
I’ve always been a radical supporter of living debt-free.
There are strange things going on in banks today. Just this afternoon we went to withdraw 2 matured IRAs from Harris Bank and then take them to another bank. Harris charged us $100.00 “paperwork” fee to close them.!!!! When we told them that we never agreed to a closing fee when we opened the account, they told us the fee wasn’t there when we opened it, but it is now and if we wanted our money back we had to pay it.
The Federal government is heavily involved in whether a bank is being run properly. We had a local bank shut down for poor management and reopened with a new banking firm. All our money was safe during the takeover and only had a couple days inconvenience.
Banks are not my favorite business today.
bluerose - at 02:12 --- Banks are not MY favorites, either. A few years ago (less than 10), a very large US bank let their employees know that they were all being cut from full-time employees to less than part-time, The “official” reason was that full-time employees weren’t needed in branches of the bank that weren’t busy all day every day. In reality, the truth was that their hours were cut in order to save money on company-paid benefits that were only paid to full-time employees. The majority of the people who were hurt by this “scam” were the under-paid tellers, who depended on the health insurance for their young families.
Banks are charging fees for all kinds of crazy things now…I asked for a payoff amount for my home mortgage on my house just last month, and I was told it would cost $30 to tell me how much I owed them!! Times 2 because I have a first and second mortgage!
Nowadays, it’s all about how much money can the corporation save, at any cost to the employees or customers. And it’s not only banks…it’s all around us.
protective mother - get on some financial websites like Money.com which can help to evalaute the larger bank in terms of assets, etc. One good option to park your savings is emigrant bank. The have an on-line saving bank that offers a very high yield (4%)relative to a traditional savings account (maybe 1.5% if you can find it). Emigrant is one othe largest privately held banks in the country. They dont’ have to deal with stock market idiots or shareholders.
I am hoping to have a job during the pandemic. However, if I don’t and I have to choose the bills to pay, I will make sure that I pay my health insurance, my car insurance and my life insurance. These are critical in that if you have a claim on any of these due to health, accident or death and you have not paid the premiums, you are “out of luck”.
If I can’t pay my mortgage and taxes, I will have to catch up when the pandemic is over. I don’t think that the mortgage companies or towns are going to be very anxious to foreclose on us. Don’t forget, when the pandemic is over there will be alot less homeowners and it just won’t help the mortgage companies or banks to foreclose on real estate and hold MORE inventory - they will have enough to deal with if we have millions die.
The same thing would go for renters. I am a landlord and own two other residences in the town I live in. I have long standing leases for each of them. I fully expect that my tenants may not be able to pay their rent in a pandemic. This does alarm me, however, it would not be in my interest to try to evict these people. I would have a better chance working with them by maybe offering partial rents until they are back on their feet. Worse case, if they try to run off without paying their back-rent during a pandemic, I would be in better shape taking them to court after the pandemic than during it. Again, it won’t be in a landlord’s best interest to evict and now have a piece of property in a market with way too many rentals due to a large number of deaths, illnesses, etc.
bump for cherokee rose
Thanks ricewiki :-)
ricewiki – at 13:05
“Not all financial experts agree - most think of it as some “left-wing internet conspiracy theory” - but we’ll know starting next week. “
Rice I am curious what were you expecting to see this week was it the present market correction or some other factor?
Sailor - I am not ricewiki - but I will jump in and just say that although the Iran Oil Bourse made the announcements of opening “soon” it (as of yet) has not actually happened. A trading hub of that size and complexity is hard to get operational - likely to suffer from delays and start up problems. However, many in the financial community believe this WILL occur in the near future - and was actually something that would havelikely occurred sooner - had it not been for direct US intervention. You see… Saddam Hussein was making all sorts of noises of taking payment for Iraq oil in a currency OTHER than the US dollar prior to our going to war on them. Many speculate that this was one of the real foundational reasons why the ruse of a “imminent threat from weapons of mass destruction” was pitched to the american public with such a feverish zeal. We HAD to do a unilateral strike to take out this character before he made good on those threats and took the US economy down to the mat. The US dollar as the world’s reserve currency is critical to our continued economic system. So the reason for invasion had to be pitched - and pitched hard.
Regardless if that is really true or not, the issue of dollar hedgemony in the oil markets is very very important. Our dollar used to be backed by gold - but that was stopped quite a long time ago and now our dollar’s value in the world markets is based on the “perceived” value it has to those other nations. Because they “believe” it has value - it does. The reason it is valueable to others is that they need that currency (the reserve currency) to settle their largest international trade balance account - that being their oil bill. For growing industrial nations - oil supply is of utmost importance to keep their populations fed (agriindustry) and their people happily employed making plastics and goods, and clothed and housed in petroleum based products. So they do business with the US and via trade to acquire our US dollars which they can then use for settling these very important accounts. The US is able to grow in this environment because even though we no longer are a major producer and are instead a major CONSUMER - we pay for these goods by issueing IOUs (our national debt obligations) and by printing more currency. Heck, that is how we pay for OUR vast oil imports as well.
So think about this for a moment and you can see that if the lock we currently hold on the US dollar being the currency of choice for settlement of these oil transactions were to be seriously challenged - it would scare the bejeebus out of the current administration of the national government. Suddenly OUR oil bill would come due and we would have to pay for it in … say… EUROS! Can’t print those… so we would have to earn them by trading with the European nations for something they want and value. Gosh… what would that be? We outsourced much of our production capabilitys quite a while ago… it takes lots of energy (oil and petroleum products) to produce food for the world (our best export) but we don’t have the money now to pay for it…. hmmmm… suddenly a big hole in our economic status and health. Not to mention that the “perceived value” of the US dollar would plummet and you essentially have now moved to a depression - in the purest sense of the word.
The difference between a depression in today’s world and the last great depression of the late 20′s and 30′s - is that the depression then was considered “a time of want amidst plenty” - jobs and cash were not to be found by most but there WAS food and resources within the nation. In today’s world with our food (to an increasing extent), pharmaceuticals and supplies mostly coming from importation from other nations - a depression today would more likely be “ a time of want amidst great scarcity”.
So … to answer the question… those who believe that the opening of an Iranian Oil Bourse with settlement in Euros being a truly important economic event… would expect to see the US dollar drop in value to other currencies - particularly the Euro in this case - shortly thereafter.
The good news is… the Bourse has not been opened yet… and appears to be suffering from major delays. Even more likely that the US will never ALLOW it to open. Ever wonder why the US is getting so worked up into a froth about Iran’s “nuclear aspirations”?
Sorry for the long post - but my actual professional life is in finance.
DoubleD – at 00:08
Thanks for the Explanation, I presume that if the US$ goes down then the value of Gold should go up so that may be what Rice was refering to?
Likely that is the intent of the comment - but I would love to hear from ricewiki directly on this topic.
Au and Ag are suffering at present as the short or COT side is being let out of their disatrous positions by their powerful US friends flooding the market. Price will likely rocket again as the supply side falls over soon. Emerging economies are grabbing Au big time whilst the old order sells theirs. Gold will likely become currency again as the $US is not backed, so its not a bad idea to load up now - the smartest money was there over a year ago, on the long side and holding physical.
Bump for Ricewiki
Sailor
Yes, when faith in the USD goes down, the “price” of gold goes up. A high or growing gold price usually means less confidence in the USD (only because presently the USD is the world’s reserve currency - it won’t always be, it doesn’t have to be, and the US is definitely fighting to keep it that way since it ensures their military dominance and v.v.)
Basically no one is living in a real free market economy, since the “price” of gold is constatnly being artificially manipulated and lots of underhanded stuff going on to keep economies from shifting in directions their governments don’t want. But alas, sometimes not even that is enough and the econ will crash anyway (see Argentina in 2001–2002, I believe).
But I’m no expert on this… just personal reading. DoubleD says it well.
Yes, one consensus seems to be that gold is undergoing some correction right now, but that it will continue to rise afterwards.
Corrections are natural and to be expected, since there will always be people, banks and mutual funds looking to cash in the gains they have made.
We are basically in the middle of the largest (perhaps) single financial experiment in history - never ever ever, until 1971, has any economy not been backed by gold (or another commodity). But since 1971, thanks to Nixon, the U.S. tore the gold backing away from the dollar (which created a ripple effect and banks around the world had to do the same to keep their economies competitive). Since 1971, we’ve been using “play” money, “paper” money, monopoly money. the only thing behind each dollar now is another dollar (we hope). The only real thing holding up the fiat money economy is confidence that it won’t fall apart. Hence the sensitivity between US dollar value and gold value.
In some ways, this scenario is almost as scary as the looming pandemic (to me, anyway).
There are similarities between the collapse of the dollar and panflu- both are, IMHO, imevitable. Panflu may in fact trigger the collapse of the dollar. Gold is a good medium of exchange; so is ammunition.
Simple .22 LR ammo presently sells 500 for $9 at any Walmart. After an economic collapse, I expect that you’ll pay a silver dime for a couple .22 shells, and several silver dollars for a box of 50 .38 specials or a box of 20 30–30 shells or .308 shells. Even if you don’t own a gun, stocking up on common ammunition such as .22 LR, .38 special, 12 gauge shotgun ammo, or the common rifle rounds is likely to be a good financial investment. Kept cool and dry, ammo lasts for decades.
Forbes has an article on “Hedging Against a Bird Flu Pandemic” that gives some financial advice.
The articl is here
Rock – at 14:34 Forbes has an article on “Hedging Against a Bird Flu Pandemic” that gives some financial advice……from the article: “Ebay (nasdaq: EBAY - news - people ) and other shopping services should do well. “
Heck, I’m going to start advertising my listings as flu-free! I already started mentioning fluwikie in a couple if them….I should just go all out!
Financial impact will depend on the scale of any pandemic, if in fact one actually occurs. A pandemic killing millions would have a significant impact on the economic health of affected persons and communities, but a pandemic killing billions would render economic issues obsolete. Money is only paper, but it has real value as long as we all agree to pretend it does. Fictional accounts going all the way back to Mary Shelley’s The Last Man (1826) to Boyle’s Full Circle (2004), as well as movies like Twelve Monkeys predict the irrelevance of economies in a post-pandemic society. There are nonfictional accounts back up those predictions. The economies of Europe fell apart during the Black Death, and were almost nonexistent until the Rennassaince.
Note the Forbes article recommends getting your antivirals now.
Bump - so that ‘Closed BroncoBill’ won’t own the ‘Last 50′ list
bump
MonkeyMan – at 17:59
Maybe on a national scale … but during the middle ages most economies of scale were local anyway. It was only the monarchs that tought in terms of national economies. <grin> Mostly local warlords, fiefdoms, etc. were the top of the food chain unless tribute was being paid to someone.
Economies will never disappear they will just go local in size. Most national economies are artificially propped up in one way or another … through subsidies, trade restrictions, etc.
Without the props a lot of people will be surprised at their true economic power … both large and small. Those individuals who are “useful” and have skills that others need whether that is on the service end or the production end, will have great economic power because they will have something to trade with. Those individuals who can’t or won’t develop those skills or who have an over blown sense of their own worth or who believe in entitlement will faulter in a reality-based economy.
“the plumbers will inherit the earth” <chortle>
I love it!
I feel a limerick moment bubbling in my brain…..
Closed to maintain Forum speed.