by Don Sylvester

Created on: April 13, 2011

We are about to be hit by the moral equivalent of a meteorite. There is an economic, financial and political perfect storm headed our way. Today I begin a series of reports on the coming “Perfect Storm” and what you can do to prepare for it and come through it relatively intact. First up: financial chaos.

Turn to Revelation 18, verse 17 : “For in one hour such riches came to nothing”. This verse is no longer prophecy – it is reality! On May 6, 2010, the Dow Jones Industrial Average dropped 1,000 points in 30 minutes and no one knows exactly why or how it happened. Next time, what is to stop the Dow from dropping 10,000 points – or maybe all the way to zero? We live in a financial bubble that could burst at any time.

In 2010 Europe teetered on the brink of financial collapse. European central banks stepped in to “bail out” several countries, primarily Greece, Ireland, Portugal, Spain and Belgium. Demonstrators took to the streets to protest cuts in social welfare spending. Europe is bankrupt, but the people do not believe it. The same thing is now happening in the United States. This is doubly dangerous.

If the people do not believe that we are bankrupt, then our elected officials will not address the problem. How did we arrive at this point? For years, governments and their central banks have created an illusion of prosperity by printing money and authorizing credit to win the hearts and minds of their constituents. The plan worked. The people are now dependent. Meanwhile, productivity and the creation of real wealth has not kept pace with the printing presses. Hence, inflation is on the rise – at an alarming pace. The dollar is being devalued, and may lose its place as the world’s reserve currency. If that happens, the days of printing money to pay off our debts are over.

That we live in a global economy was no more plainly evident than when Japan was broken by the triple disaster of an earthquake, tsunami and nuclear reactor damage. Look at how the world financial markets reacted! What that tells us is –America cannot insulate itself from the effects of catastrophic events that occur beyond our borders. Nor can the rest of the world insulate itself from the financial chaos we are creating with our insane levels of debt and deficit spending. 

In this environment there is a danger that your money may become worthless. How can that happen you say? It is a fundamental problem. The value of our money derives from   our ability to produce things that other people need or want. We do not have enough people producing enough things worldwide. Currency loses its value when it is chasing too few goods. America went off the gold standard long ago – and there is not enough  gold and silver to go around if everyone wanted to convert today. True that the Fed can print more dollars if there is a panic, but the rest of the world won’t accept them.

What should you do to protect yourself from the coming financial Perfect Storm? I will discuss that in a future installment, but next up – the economic Perfect Storm

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