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Economic collapse occurs very quickly without anyone even predicting it.
One of the causes of economic collapse is the surprise element of it. For the vast majority of people, it is highly difficult to spot the signs of imminent failure. September 17th, 2008 is the date when the U.S. almost collapsed. During this date, the Reserve Primary Fund broke the buck. As a result, investors were in a panic and withdrew a record amount accounting for $ 140 billion from money market accounts where businesses keep their funds to finance day-to-day operations.
Experts claim that if investors would continue taking money out for one more week the economy would have definitely collapsed. As a result, trucks would stop rolling, grocery stores would be out of food, businesses would close and hospitals would not have medications needed to ease your back pain or any other type of pain. As you can see, the economy of the United States was very close to a real collapse.
The total collapse was prevented by the plan created by the Federal Reserve Chairman, the U.S. Treasury Secretary, Ben Bernanke (who was a Great Depression scholar) and Hank Paulson (a Wall Street veteran). Due to their bailout plan that managed to supply enough cash helped to prevent the total collapse of the economy. Even though the financial crisis of 2018 did a lot of damage, it could have been even worse.
For the purpose of understanding how life was during the Great Depression, you should talk to someone who lived through that period of time. As far as you know, the stock market collapsed on black Thursday and by the following Tuesday, it was already down 25 percent. Life savings of the majority of investors were lost during the weekend. The Dow J was not able to recover until 1954.
One out of four people were employed in 1933 and wages for the ones who still had jobs fell dramatically. Apart from that, the United States GDP (Gross Domestic Product) was cut in half. As a result of all the aforementioned, thousands of farmers and other unemployed people were forced to move to California in order to search for work. Additionally, a big portion of people became homeless.
An economic collapse could cause you even more pain than back pain after the injury, as an example. As a result of this condition, people lose access to credit and banks close. Apart from that, the demand would outweigh the supply of food, fuel, gas, and other necessities. You should also keep in mind that if the collapse affects local governments and institutions, water and electricity would be no longer available. This would lead to people panicking and when people panic, they would revert to survival and self-defense modes. A modern economy would transform into a traditional economy where those who grow food barter for other services.
You should also keep in mind that a collapse of the economy of the United States would lead to global panic. Interest rates would increase with dramatic speed, investors would rush for other currencies such as euro, gold and yuan and the demand for the dollar and U.S. treasuries would plummet. In turn, it would lead not just to inflation but rather hyperinflation because of the dollar having almost no value.
Before diving into the topic, it is important to understand what financial crisis means. During the financial crisis, asset prices decline dramatically, businesses and financial institutions are not able to pay their debts as well as experiencing liquidity shortages. Furthermore, financial crisis is typically associated with a panic during which investors sell their assets or withdraw money from savings accounts. This is normally done because of the fear that the value of these assets will decrease significantly if they remain in financial institutions. Some other signs of a financial crisis are a stock market crash, the bursting of a speculative financial bubble, a currency crisis, and sovereign default. It is also worse mentioning that a financial crisis can affect only banks or can spread through the whole economy or even economies worldwide.
You should keep it clear for yourself and have a clear understanding that crisis and collapse are not the same. A lot of people are mistaken when saying that the financial crisis of 2008 was a collapse. Undoubtedly, a huge number of people lost their jobs but the basic services were still available. The early signs of the financial crisis in 2018 were dramatic falling prices for houses and increasing mortgage defaults in 2006. It led to panic among investors and led to massive bank withdrawals. Bailing out “too big to fail” banks and insurance companies was the only choice for the government in order to prevent national and global financial catastrophes.
It is going to be a challenge to prepare yourself for a collapse. As was mentioned above, the collapse can occur unexpectedly and without warning. The majority of the crises are survived through the knowledge and wits of people as well as helping out each other.
However, specialists still prepared several steps that might assist you in preparing for the collapse and they are as follows:
The size of the U.S. economy makes it quite elastic. The chance of the aforementioned events causing a collapse is relatively small. The government can take the needed actions quickly in order to avoid collapse when required. Experts claim that financial collapse can be prevented by the Federal Reserve with a few phone calls. For instance, contractionary monetary tools can be used for the purpose of taming hyperinflation.
Additionally, a president can release strategic oil reserves in order to offset an oil embargo. A cyber threat can be addressed by homeland security. In simple terms, the vast majority of federal government programs are aimed to prevent an economic collapse. However, it should be also said that the aforementioned strategies are not able to protect from the widespread and pervasive crises that are caused by climate change. Some of the effects of climate change are rising sea levels, extreme weather, and depletion of fish stocks.