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Events to Occur in an Economic Collapse

In an economic collapse, the following events will likely occur:

  • Every pension fund blows up. All of them. Many doubled into the decline and will be utterly destroyed. Chief among them will be big municipal funds like CALPERs.
  • Annuities and insurance companies blow up. You don't think they can pay when they're figuring on an 8% annualized return, do you? Well, no they can't. Oh yeah, your state insurance on those is $100,000 in most states - the rest of your principal is "at risk." This, of course, assumes the State has the $100,000 too.
  • The FDIC has no prayer of covering it. They have no way to cover it should it become a widespread problem. It will. Oh yeah, you can't sue the government either.
  • The government Ponzi blows up. Tax receipts will get cut in half. Deficit spending will be impossible. Instead of a 40% "draconian" cut in government spending we will have to cut spending by 60% or more. Entitlements will be decimated; retirement entitlements will go last, but go they will. Food stamps, Section 8, Medicaid, all gone. Bet on it.
  • All the other things that depend on the government Ponzi blow up. Medical care as we know it, education, state programs, all gone.
  • Disruptions in what would be considered "essential" goods and services are likely.
  • Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop.
  • High unemployment. The unemployed will have 5-10 million in direct layoffs added within 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
  • Civil order is lost. In some places I'm sure things will be fine in that regard, likely in places where self-defense is recognized as the unalienable right that it is. In others? Not so much. If you live in a big city - or an "unfriendly" place in regards to self-defense, you need to be thinking about this quite-seriously. The Military and Guard will be called up to try to stop it. They won't be able to. Witness New Orleans after Katrina for how fast, and how bad, it can get.
  • The world will recognize the Depression we have tried to cover up. This is not a US-centric story. The Eurozone will get the unemployment and tax consequences too. Germany will be forced to choose between propping up the entire rest of the Euro (which it can't) and detonating it and going back to the Deutsche Mark (which it will be forced to.)
  • A high probability of war. War is the classical solution to these problems, and it is unlikely to be different this time.

The good news is that this process will clear The Bezzle out of the system. The bad news is that you won't have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.

The above was largely excerpted from