Survive An Economic Depression

Like many terms and labels these days that are not to be used due to political correctness, the word depression will likely never be used to describe the current and coming economic situation. Unfortunately, not labeling the environment a "depression" will do little to prevent the consequences of a real depression.

Regardless of the label and the accepted definition of the word, it should be evident to almost everyone that this is not the typical business cycle recession that our economy bounces back from quickly. We are absolutely in the early innings of an economic depression. This one is different. Why is it different?

Well, the credit bubble has been popped. The credit bubble fueled our economy for years propelling economic numbers to new highs whether it was GDP or the Dow Jones. This bubble is popped and cannot be reflated to previous highs. The result from the popping of the bubble was a drop in asset prices (stocks, houses, etc.). While asset prices have stabilized or rebounded somewhat in 2009 and 2010, it is important that you are not decieved by this mirage. The depression is still here and is getting worse.

The Dow Jones can be propelled higher by easy monetary policy. Housing values can be stabilized by government incentives and artificially low interest rates. But these stories do not reveal the truth of the economy. The truth is that the economy is broken. The following will characterize our economy both now and for years to come:

• High unemployment
• Continued weakness in consumer activity as compared to previous years
• Flat to lower home values
• Struggling small businesses

While large corporations that have the favor of Washington and access to easy money from Wall St. will be able to perform in this environment, the real engine of the economy, small business, is dying. Business volumes are off and business owners are doing more instead of hiring new employees. The economy is structurally broken and isn't coming back.

While the macro picture is bleak, do not be alarmed. You can take actinos to not only survive this depression but potentially take advantage of the changing landscape and find new opportunities for prosperity amidst the gloom and doom.

Specific Actions To Take To Survive:

1. Pay off your debts - It is essential to get rid of the burden of debts. In a deflationary environment, your debts can easily overwhelm you. Get rid of them now while you can.
   
2. Get used to a lower standard of living - This serves two purposes. First, it will allow you to lower your spending and put away money for hard times ahead. Second, it will force you to get used to a lower standard of living which will likely be forced upon most people when the depression becomes evident.
3. Stock up on consumer goods - This will allow you to prepare for supply shortages and also serves as an emergency fund of goods.By stockpiling goods, you can whether a wide variety of uncertainties that might come with economic collapse. Remember, having emergency cash is good, but if there are no available goods to purchase, your cash is pretty useless. Protect yourself by doing both.  The Alpha Strategy is a defensive financial strategy that has stockpiling consumer goods at its core.
   
4. Build a reserve of cash and precious metals - A mix of cash and precious metals such as gold and silver coins on your possession can provide an additional level of security.
5. Get a second income stream going - Diversifying your income can help you hang on financially even after potential job loss. Also, the additional income source can really help you boost your savings while you prepare for the depression. Check out some ways to Earn Money From Home and work on a second income stream.
6. Consider buying some protection/defense - I am a firm believer in owning a firearms. In a depression, a rise in crime is very likely. Couple this with the fact that municipalities will be cash strapped which will likely result in a decrease in police presence, and you might need to protect and defend yourself and your family.

Some of the above action steps might seem a little "extreme" or unusual. I am a firm believer in preparing for the worst and hoping for the best. If a depression doesn't materialize and we're back to happy days, then the result of taking these actions will be a little more money in your bank, some extra supplies and a second income. Is that really a bad scenario?

On the other hand, if a Depression does materialize and you're not prepared, do you really want to imagine the potential consequences? Do you and your family a favor and start taking some of these steps immediately.

As we progress in this economic environment, it is important to stay on top of events.  In this section, I wish to provide an update - it's currently August 2010. 

Recently the Federal Reserve has moved back into quantitative easing mode signaling the end of their baseless arguments that the economy is recovering.  The fact that the Fed is moving into the economy more and more rather than pulling back is all the evidence you need to see the economic reality out there.

Printing money to inflate the economy will never result in a healthy economy.  It's important you take action according to the steps outlined in this page.  You must protect yourself.  Nobody is going to do it for you.