Monday, May 31, 2010

After the Crash

I'd like to take a few moments to make a followup post on my "Worst Case Scenario" post from last week. There is a lot of speculation on what it would mean to the average working serf when just such a crash does occur. There are many different scenarios, and it kinda depends on where and how it occurs as to how it'll be played out here. Here's my idea on how it'll be played out based upon my "financial system collapse" scenario, and I'll just go forward from the post I made last week when the banking system collapses.

On Monday, the markets will not be opened as the central bankers cannot agree on a common strategy to deal with the mess. (It's here that I need to say that it's possible the central bankers print money Zimbabwe style, but in my opinion, this will not work.. as food and gas prices soar, people can't make their bills.. and worse, they begin to get really scared and start withdrawing any money left in the banks, bonds and stocks, thus leading to.. a banking collapse). It's my opinion that after Sept 2008, the US Gov't has a plan in place for just such an emergency; they obviously are'nt letting me in on it, so this is my best guess. I'd wager that "The Plan" is to nationalize vital utilities and companies. I think there will be no choice but to hit the "reset" button on the financial system, which does two things.. first it wipes out any debts owed by anyone anywhere.. including home mortgages, which is a way to ensure that 100 million families don't become homeless and it'll make them kinda glad in a way for the collapse, thus ensuring political stability. I believe that states will then issue ration cards for all the unemployed, which will be at least half the adult population. I believe the state will take all foreclosed properties and give them to families; hotels will be siezed by states and used. The second part of this is that anyone with money, bonds or stock are wiped out, even if you are saving the money in your mattress. Retirement is now a pipe dream, as is a job.

The people will notice that gas is extremely valueable; your ration card will allow unemployed folk perhaps 2 gallons a week or so as the Arabs refuse USD and demand a barter of goods.. grains primarily. The local stores will be essentially cleaned out, and only the basics of life are available. Instead of perhaps thirty brands of toothpaste, you'll have one. Coffee, booze and cigs are a memory. The food will be more local.. there will be no more imported grapes from Chile or Italian Olive Oil; instead you'll have bread, carrots, potatoes and beans. People will begin using bicycles again out of necessity; golf carts and mopeds soar in value.

How bad it gets also depends on where you are.. life in the inner cities will become even more violent and awful, and this will slowly spread to the suburbs. Jewelry stores and other stores will be cleaned out by thieves in most parts of the cities. But if you are living in a smaller town, especially with farms nearby, life will be much better. I also think that the state would be empowered with state of emergency police powers to ensure things don't become chaotic, but simple crime will be really bad. Deputized police will roam the streets doing battle with thugs. Those who can flee to the countryside; most will not be able to as there is no money to rent a home, no apartments available or even the gasoline to get there. I also think that hungry people in other countries, where things are even worse, will begin to flood into the US, with Florida and the Southwest becoming very volatile places. The elderly will not have medicines available as before; the mortality rate will go up.

Soon enough the Gov't will issue a new currency, perhaps in union with other central banks; I can easily see a new global currency standard based on a basket of commodities. The Depression will last for at least a decade; most will not have a formal job for some time. But we as a nation are an industrious lot; we'll begin to plant "victory gardens" in our back yards and in open spaces; flea markets will crop up; family restaurants also instead of Burger King. We'll need tools to do this and someone will begin a shop to produce them in area. The currency will slowly return; banks begin lending; the stock market re-opens. But life will be much different; we'll never again see an era like the 1990s and 2000s. For most of our history, the vast majority of Americans were not able to get loans for anything other than a house, and even then you needed a very large chunk as a down payment. We will (and should) return to this. I'm hoping that we can abolish the Federal Reserve/fiat currency system, but I fear that is more than can be hoped for.

Here's another man's opinion {Bruce Krasting, a very respected comentator, former hedge fund manager and forex trader} on what would might happen-- be warned; his view is much darker than mine is:

I recently found an outstanding website on this subject for all who are so interested; on here you will find many differing opinions about life after prosperity, but nearly all believe that gardening, living in small out of the way places and stocking up on barterable goods is a terrific start..


  1. Good articles and fairly plausible as a worse case scenario, however I can't see the country avoiding a mad max scene if the majority of jobs are gone. There's just no way to provide the barest of essentials for 309 million Americans if the bulk of producers are sitting around for an extended period.

    Also, considering the sway the powers behind the system (i.e. the owners of the FED, Goldman and JP Morgan) have over the Government, I think they won't allow the complete default of their precious bonds. We've seen how they've moved heaven and earth so far to avoid taking a haircut. Look for it to continue.

  2. eponymous eggplantJune 1, 2010 at 8:34 PM

    I think inner cities will be safer than the suburbs personally. Having lived in both I've found that urban life has a much richer social network, and people tend to look out for each other. in the 'burbs, less so.

  3. "The food will be more local.. there will be no more imported grapes from Chile; instead you'll have bread, carrots and beans."
    Sounds like the former Soviet Union. There were times, in mid-winter, when the only vegetable available in a local shop was jars of pickled squash. And this was less than 20 years ago!

  4. Eggplant - what will those residents of the inner cities eat? WHere will they get their drinking water?

    Just asking...

  5. You forgot to mention the gigadeaths. Whenever the carefully crafted, complex system that supports 7 billion of us collapses, there will be billions of people who die suddenly or starvation and violence. It will not be a pleasant world. The end will come with bangs AND whimpers, so loud as to make the soul cringe.

  6. Yikes I think Bukko is right if all this comes to pass. I missed this post Mr K and thank you for referring me back to it.

  7. Sometimes living is overrated. What is there left to do when you are 85-100 years old. I have recent experience with nursing homes and these people may as well be dead for the quality of life they have. I hope every god awful thing you related comes to pass as the people of the "civilized" counties are soft and they are not self sufficient. I mostly want to see the kleptomaniac bankers hung all along Wall Street. The government falls and we create a new government just as the founding fathers said we should do when it no longer represents the people.

  8. Anonymous said...
    "Good articles and fairly plausible as a worse case scenario"

    I would not categorize this as a "worst case scenario". The worst case would include nuclear 'ingredients'.

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