Worse Than a Financial Collapse is Coming

What Will Happen Next

“The price of tram rides and beef, theatre tickets, and school, newspapers and haircuts, sugar and bacon, is going up every week. As a result, no one knows how long their money will last, and people are living in constant fear, thinking of nothing but eating and drinking, buying and selling.” — Eugeni Xammar, Spanish journalist in Berlin, February 1923.

What’s worse than an all-out financial collapse?  We’ve spoken a lot about economic collapses on this channel, but there is something worse than an all-out collapse hitting America and the world, and it is worsening by the day.  It’s inflation.  Typically, inflation is contained in one country or a group of closely intertwined nations. Normally, we don’t see inflation coupled with so many external forces coming together in a perfect storm- pandemics, lockdowns, an energy crisis, supply chain disruptions, and so forth.  This isn’t the first global inflationary crisis, but it is the first with these modern fiscal controls, exchanges, and an intricately woven global supply chain.  The inflation we are about to see worldwide is unique, and even expert economists readily confess they have seen nothing like it and cannot accurately say where or how it will end.

You have to realize that global inflation will mean more than just paying a dollar ten for the same goods that you paid a dollar for just a few months before.  An inflation threat at this level has the potential to alter the economies of nations fundamentally.  It threatens every aspect of our world from food, to land ownership, to government stability, to retirement plans, to simply surviving.  Here we will explore how this inflation isn’t local to your country but a global problem right now, how we don’t have the tools to avert it, what is going to happen, and what you still have a little time to do to encourage your survival through it.  Let’s explore what’s going on…

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A GLOBAL PROBLEM

Though many would turn their finger of blame on Biden, Merkel, Johnson, Macron, Putin, Jinping, Morrison, or insert the name of your leader here, the inflation crisis we are facing is much broader than one leader’s mismanagement.  It’s much more significant than one country’s failings.  It is far less contained and can’t be confined, this time, to one country’s or one region’s borders.  Global inflation is so bad right now that many leading economists are revising their long-term projections and bracing for an extended, worldwide economic decline.  It’s worse than expected and hasn’t yet been fully realized.  Some economies around the world will likely fail as a result.  In any massive economic shift, as we see here, there will be winners, and there will be losers.

To massively oversimplify what inflation is to understand it better, basically, climbing prices results in lower purchasing power.  It’s the same basket of goods or the same service, but now it costs more, and you make the same or less, as some businesses make up for the loss of profit by slashing worker wages.  Typically, inflation is measured using the Consumer Price Index (CPI).  This is a standardized group of goods (food, shelter, energy, and other items) that provides a baseline for comparison.  Every single index has been steadily rising.  The energy index alone has risen 24.8% over the last 12 months.  One of the most ominous indicators that an enormous inflationary storm is brewing on the horizon is that inflation is usually confined to one country or group of economically intertwined companies.  That’s not the case with this storm.  Even before the current supply chain and energy crisis, global inflation was projected at 3.5%– A number that is woefully in need of correction just a few months later.  In fact, Trading Economics data from last month put the G20 nation’s average inflation rate at 7.66%.  Even if you take out the troublesome economies of Argentina and Turkey, the G18 remaining countries average almost a 5% inflation increase.

No matter where you live, you likely are already feeling the effects.  Gasoline in the US is up over 30% since the beginning of the year, and natural gas prices in Europe have soared 400%.  The CPIs for over 100 countries worldwide are up just over the last quarter.  The cost of everything is going up, carts are getting smaller, and the world still struggles to find its economic footing after the lasting effects of COVID.

AN EMPTY TOOLBOX 

Typically, to ease inflation, the Federal Reserve would simply raise rates to stave it off.  Because the government has borrowed so much, increased debt, printed so much money, and kept rates forced low for so long, there isn’t anywhere they can turn.  The toolbox of tools to control inflation is empty.  If the Fed were to raise rates now in an already staggering economy struggling to get to its feet, bond prices, housing prices, stock markets would all falter, possibly even collapse.  

When the US defaults on bonds because the interest is too high to continue rolling over into debt and the country’s credit rating is slashed, a spiraling collapse starts moving and accelerating.  For years, the Fed’s only tool to fight economic collapse was to lower rates and fuel the debt party.  You can’t take the patient off the ventilator if he can’t breathe independently, yet there are no more tools available.  So, most governments worldwide are simply holding onto their chairs and bracing for the wild ride in hopes of discovering some, as yet unknown off-ramp or in the hopes that the current gears and valves all maxed out will hold up under the strain.

Again, though, this isn’t a uniquely American problem.  Natural gas prices have soared 400% in Europe this year as they brace for a brutal winter.  China refused coal from Australia and massively ramped up its production, causing prices for coal to plummet.  That would be great, but most developed countries have been moving away from coal for decades, so the lower coal prices do them little good.  Global supply-chain issues from labor to raw material shortages to shipping containers, port traffic jams, trains, and truckers persist.  While it does appear that most of the world is emerging from its third wave of the Coronavirus and the numbers of vaccinations is increasing, some countries like the United Kingdom, Russia, Germany, Poland, and the Netherlands still struggle to get their numbers down.  Corporations will seek to maintain profits by slashing labor and passing costs to consumers.  The world is under a dark cloud of an inflationary storm, the power of which remains unknown.  Any individual country’s efforts to alter the course, tweak their economy, or insulate themselves, aren’t enough to change their fate.

WHAT CAN YOU EXPECT?

HOUSING 

The shelter index indicates that we are about to see increases in rents and houses skyrocketing in price, especially in suburban and urban settings.  But don’t think you can sell high and buy up cheap farmland because the cost of farmland is going up as the wealthy and corporations snatch it up as part of their portfolios.  The current consumer faces poor job opportunities that require extensive experience or education while wages have been stagnant for over two decades.  The everyday consumer faces ever-increasing healthcare costs and these higher rates of inflation.  The cost of building a home has gone up considerably.  For every six homes constructed right now, ten families are looking to buy a home.  The shelter inflation rate in the US is up, and it’s up 26% in Canada.  Housing in some major cities around the world will become out of reach for the average person.  Corporations seeking to secure stable investments are in direct competition with consumers.  At the current rate, investors will one day own most homes because land ownership remains the tool for the rich to stabilize their portfolios in turbulent markets.  For more on that, see my video on why Bezos, Gates, and Turner are now farmers.  I will link to that at the end of this video.  

Expect the number of homeless to increase.  Expect to see more people engaged in the van life, moving into micro homes and apartments, trying to buy land, or setting up a homestead.  If you aren’t in a home already, expect prices to continue to increase and will likely become out of reach for the average consumer in the not so distant future.  Expect that many will have to move in with extended family, friends or make some other group cohabiting plans to find a livable situation for themselves.  Suppose the real estate bubble never pops, as many leading economists are beginning to realize, because institutional investors with deeper pockets continue to buy up homes away from average consumers.  Let me repeat this last point because it’s important you understand.  Many in this community are anticipating the housing market to burst similar to 2008.  But an even worse scenario that is playing out is that house prices are increasing rapidly as corporations are finding that houses provide a reliable cash flow when yields in the typical investment markets are diminishing.  In that case, many will be forced to rent, downsize, or find themselves on the streets even while some investor-owned properties are vacant.  As governments turn to higher tax bills and prices go up, how long will some who are comfortably in their homes now reach a point where they can no longer afford their tax bill?  You will start to hear more stories of regular people who have lived in their paid-off homes for years, losing their homes in retirement to taxes.

FOOD

Expect the number of people growing their own food, making their own alcohol, soap, cheese, and other items to increase.  The demand for raw materials and equipment needed for these endeavors will also increase.  We had a little glimpse of that when under lockdown, so many people explored canning for the first time.  In the coming months and probably through next year, you will see the contents of your shopping cart getting less and less while the totals at checkout will stay the same or increase.  Expect that the average consumer may not afford some staple items or processed foods that require labor, packaging, and distribution.  Any shortages or price increases that lead to any panic buying of any kind will only fuel the fire further.  It’s also worth noting that when food insecurity becomes an issue in a nation, that nation is setting itself up for failure as the common person will only endure a lack of food for only so long.

If food inflation is contained at just 10% over the next year, your $100 will only buy you $90 in groceries at the same time your rent, utilities, fuel, and everything else is going up, and your income has stayed the same or decreased.  When it comes to food, the unprepared will have to learn to get by on less and will compete for anything in abundance, snapping up the available supply of many foods.  And, if you have unknowingly slipped into the habit of buying foods out of season, as most consumers have, expect at least some of those items to no longer make it to your stores.  After the rising labor costs, packaging, and transport, it might not be as profitable to ship grapes from Chile, asparagus from Peru, avocados from Mexico, sugar from Central America, or coffee from Brazil.  Agricultural exports have barely maintained a spot above imports, but that may flip as corporate farmers have difficulty exporting their products for high costs when local consumers demand lower prices for the same product at home.  Corporations will sell to the highest bidder even if the local population is hungry.  Expect staple food items to cost more across the board and around the world.  

ENERGY

The cost of producing and delivering energy to you will continue to rise.  Heating and cooling your home will cost more.  Trying to go solar will cost more.  Even buying gasoline will cost more.  The only solution is to try and consume less.  While corporations struggle to maintain profits, they will often declare their energy consumption emergencies to justify it.  All those alleged peak hours do, however, is allow them to make up profits by quadrupling rates.  The prices for energy-intensive metals like nickel, steel, silicone are all skyrocketing.  Synthetic fertilizer, mostly made from natural gas, has blasted up 300%, and that only further feeds the food price increases.  Only some form of government intervention that mandates large-scale power cuts and rationing to specific sectors can curb current consumer demand and temper gas prices. Still, in a climate where distrust of government is at an all-time high, that’s not likely to happen.

WHAT CAN YOU DO?

There isn’t much you can do not to feel the impact of rising costs on everything, everywhere.  Unless you are completely off-grid and self-sufficient, you will feel the effects.  If you are prepping, you will be able to lessen the impact of global inflation.  When you build a shelf-stable supply of food for a disaster, you are also providing yourself a means to make it through a period of high inflation.  Prepping lessens the impact of global inflation in all aspects of your life.  Turn to the basics of food, water, shelter, and energy.  Make the changes now, out of choice, rather than when the herd makes the same choices out of necessity and drives up costs further as a result.

Such global strain on economies can result in massive political upheaval, civil unrest, even regime changes, as people are both desperate and myopically view global problems as locally caused.  Make sure you have a security plan in place and have at least some plan should the need arise for you to bug out.  Build your network and connections now.  That can be a family you can rely on or just a collective of gardeners that all share their various harvests.  The best way to stay out of the national and global change and policy shifts is to get local with your resources.  It won’t matter if there is a shortage of eggs, honey, chicken, milk, butter, berries, or bacon if you have taken the time to find local sources.

Learn to forage for or grow something.  If you haven’t found, harvested, and cooked a puffball mushroom, maybe you should go out this weekend and try instead of your usual entertainment.  If you haven’t planted some sunchokes, a small container garden, or even a microgreens garden in your kitchen or apartment, the window to do so is closing.  Learn that skill that can lead to a side job and more income for you or will simply just save you money over the long haul.  You will be glad you did if the inflation continues to rise, but you won’t be able to when the masses are also trying to.  The reality is, when the forecasters see global inflation and none of them are forecasting an end to it, people will either have to do for themselves or join the desperate masses and go without.

As simple as it may sound, take the time now to focus on your mental and physical health.  Those are your number one preps that will help you in all other areas.  We all know people who say year after year that this is the year they will make a change.  We know many problems of physical and mental health are a result of lifestyle and personal choices.  We also know that when we are stripped of everything, all that remains are our bodies and our minds.  So, take the steps now to make these most critical preps as strong as they can be.  That can be as simple as getting in the habit of walking or hiking, foraging, or meditation.  It doesn’t have to be a dramatic change.  You can start in the smallest of ways so long as you make efforts every day, but you have to start.  Learn a skill, go on your walkabout, remove toxic people and things from your life and get a breath of fresh air.

Finally, take a hard look at your financial resources.  Live your life now like you’re on limited funds.  You might pass on the luxury purchases in favor of getting a few extra supplies here and there.  This isn’t an investment channel, and I don’t offer any financial advice.  That said, it would seem to make sense to look at your current spending habits and determine where you can modify those habits to meet the new realities of the rising cost of everything.  As I said, there will be both winners and losers from both the inflation and the recovery.  If a chunk of your budget goes to entertainment, it might be time to cultivate a hobby that will keep you entertained and produce for yourself and save you money.  If you’re close to retirement, now might be the time to make sure all your retirement investments aren’t solely in the stock market.  

CONCLUSION

So what can you do?  You can learn to do it for yourself.  That’s the essence of prepping, in my opinion.  Sure, preparing for the massive disasters that can suddenly plunge our world into desperation and chaos is an excellent reason to prep.  For many, that is the sole reason.  Global inflation isn’t a disaster that overcomes us in a day.  The mechanisms that lead to it have been smoldering in the background for months, years, even decades.  The catalyst, the fuel that ignites a more significant fire, like a pandemic, lockdowns, and supply chain failures, is just the final piece to cast us out of our comfort zones and into unchartered territory.  That’s where we are today, on the cusp of a slowly unfolding disaster called inflation.  We can neither see its top edge nor know how dramatically it will impact our daily lives.  We don’t even have a sense of the whole during these early days.  The only thing we know right now with certainty is that we are only at the beginning of it, and we have few tools to prevent us from flying headlong into it.

What do you think?  Are you seeing rising costs in places I haven’t mentioned here?  What’s your forecast?  Let us all know in the comments below. 

As always, stay safe out there.