For those here who really believe that an economic disaster is brewing - one in which the dollars we've worked so hard to earn, invest and squirrel away will become worth no more than the paper we use to wipe our bottoms - have you been spending money like mad recently? What have you been purchasing? Or have you used the money to pay off debt?

Like everyone else, I have no idea what the future holds but I just wondered what this particular section of the population is doing with the money that they believe will soon be next to worthless.

Thanks, all.

I've been wondering this myself. All this money hording could be nothing more than toilet paper hording

debating on whether I should spend or save

The thing is most of the other major currencies have been doing the same thing yet even more.  Thus the dollar is actually up.  

well that's a silver lining

It's a good question, I've been selling treasuries this week because I think they're overvalued and at the rate we're going it won't be long before they stop looking like a safe haven, the question is what to buy...

I'm thinking at some point in the next few years I might go on a spending spree of sorts. Try to buy the bottom of the luxury goods market, maybe a boat, a plane for my Dad, etc.

It's really tough to predict what the markets are going to do these days,(well, except for the market for lowers and mags and such) it was much easier a few years ago, for me anyway.

I have been forgoing contributions into retirement funds and paying off everything. No credit cards or car payments as of last month. I am really debating taking the penalty and cashing out everything and paying off my mortgage.

McD's Dollar menu!  next question.

For the record I'm not one of those chicken littles here who believes that the USD is going to become worthless.  If anything, my prediction is that those who hold dollars (liquidity) are gonna make out like bandits if this keeps up.



I'm with you ... I've been keeping my eye on an Aero Highwayman leather jacket for the winter.  They are made in Scotland so they go on the GBP.  At the beginning of the fall, they were going for $800 on their US eBay store.  They're down to $599 now.  

Keep dropping, baby 'cos daddy needs a new leather jacket!!

Food.
Dried beans, rice ect. Anything that will last a long time stored in Rubbermade containers and a pretty large quantity of canned goods.I'm buying $3000.00 worth at Sam's this Saturday. Probably take me a few trips.
Think of it this way, when one drop of snow hits the ground, people rush out and clean out the shelves of milk and bread. How long do ya think the shelves will have food on them if there's an economic collapse and people think that they might not be able to get any more?  
When I'm hungry, I want something to eat. not a chunk of gold or silver.
Flame away

Oh yeah, my guns are to protect my family and food from the bad guys.

Yes, the dollar is up pretty good right now actually.

We're seeing deflation, not inflation.  With the tightening of lending standards and the collapse of various investment instruments, cash is becoming, once again, king.

We're in the middle of a deflationary event. The price of gas, equities, real estate, and commodities is going down in dollar terms.

In a deflation you want to hold onto dollars or, better, extremely safe loans to other people. The loans have to be paid back later in dollars that are more valuable. Owning assets is bad because the value of assets in dollar terms is dropping.

The dollar is deflating in supply and increasing in relative value. This is not the time to pay down fixed rate debt. You do that during an inflationary $ cycle when dollars are becoming worthless,pay is increasing and fixed rate debt remains the same (you pay in "cheap dollars".
Dollars sitting in a shoebox will still gain in value in a deflationary cycle. That's why investment is down:dollars are scarce for investment,borrowing and purchasing/spending because people are pulling out of those investments and are putting their money in safer investments (or a shoebox) where it can't be lent out to to others.

As a precautionary point,the best thing for your average Joe to do is to cut spending,bulk up cash reserves/savings,and try to hold on to your job.
The best thing for the country as a whole is for everyone to start spending their money and leave their retirement investments alone/contribute to them.
Spending by others=retained jobs.

we may have just bought a house  


dirt cheap home built in 2002.  2400 2250sq ft heated, 1.5 acre lot, brick, cherry cabinets, ceramic tile.

We will finance $120k and bought it at $165k.  We have the assets to almost buy out the mortgage.

yep, I'm retarded

edited for correctness

That would be one hell of a debate.

Might want to ask Dave Ramsey?

My one and only answer for every question concerning economics or investments is

"I don't know, but buy guns.  Lots of guns."

Pay down debts, stock up on food, firearms, ammo, and other items you can trade, or barter in bad times.  

Methinks (puts on Tin Foil beanie) the dollar will be wiped out (along with the US of A) and replaced with the NAU (North American Union) Amero (five to ten cents on the dollar.)

Or you could buy silver (in coins), or gold (coins) and wait it out.

The illegal mexicans might sneak back south too if the economy keeps getting worse. Lemons -> Lemonade

I have been spending on coins, cars, stuff for the house and car parts. There are lots of good deals out there. I try to do what everyone else is not doing. Last couple years I was saving money.

Almost everything I have gotten has been used from a private party. Lots of people need money and are selling thier stuff.

Follow up. I make extra money on Ebay selling old computer chips and telecommunication parts. Business has never been better. Lots of sales to business and not single people.  Seams like everyone is hunting for the best deal.

Not retarded at all and I'm about to do the same.  In economic situations like this it is good to maintain a cash reserve.  This gives you flexibility for whatever happens....

If something were to happen to your job, you'll be able to make ends meet for quite a while.  If we experience inflation (which I think is likely the way we're printing money these days), you've got a great hedge with a fixed mortgage payment.  

I figure if things work out for the better in the future then being debt free will allow me to contribute at a much higher level than before so I really would not be setting myself back any. If things really go south then I made the smart move and paid everything off rather than sat on a pile of toilet paper.

The CPI decrease has me a bit worried.  I simply could not pass on the house despite the announcement yesterday.

Credit is tight, the owner had to move, their relocation company had to sell the property before year's end, our finances are fine.

Too good of a deal to pass up, despite my misgivings.  We've been putting back for some time now, vehicles are paid off (not counting her business SUV), we owed ~10% of our starter home's value and sold it for $3k under asking price (which was $30k more than we bought it for).

I hope like hell this wasn't a huge mistake.

The house isn't a mistake.

Great replies. Lots of thought-provoking approaches to what's going on these days.

The thought of finding myself with a bunch of worthless paper is scary. I'd kick myself for not actually using it to pay off debt when a buck was worth a buck.

I know, I know, there're plenty of other things that better warrant my worries. Guess I'm just mentally masturbating tonight.  

I've been fortunate enough to save some good $$ over the past few years.  With that said over the past year I have: eliminated all credit card debt, paid off my school loans, paid off my new motorcycle, paid off my new(ish) truck, and have heavily invested in food, water purification methods, ammo, guns, gear, and a bunch of other stuff that is discussed to death here.

I figure if I never have a real need for the things I bought and paid for I can always trade them for other goods and services.

House and cars were free and clear before the meltdown, had six months food water, TP soap meds, batteries, etc.

Now I'm doing a balancing act. This can play out at least three very different ways:

1. Correction in the markets, then business as usual.

2. Complete meltdown, banks close, deflationary event.

3. Complete meltdown, government fires up the really BIG printing presses to fight it off, hyperinflation.

Best response for option one is to hold cash and get back in the markets at bottom to cash in on large gains. Make sure the IRA is central here, to take full advantage of the cap gains umbrella. Big spending sprees will tie up investmnt capital.

Best response for option two is ready cash reserves. I do not discuss ongoing security operations. If you have the big four met, water, heat, food and security, your monthly cash requirements drop allowing more ready cash for bargain purchases.

Best response for option three is to hold PMs, real estate, hard assets, and self sufficiency in the big four, water, heat, food and security. Big purchases now avoid inflationary devaluation of dollar based assets later, also avoid higher taxes under Obama.

Like I said, I'm running a balancing act. I have strong holdings in PMs and real estate already, though I may increase PM holdings if stock prices and PM prices continue to fall. I also have a strong position in ready cash, both in and out of the banking system.

I bought back into the market for 200k on election day, will buy in more if the current price drop levels off. Sort of a dollar cost averaging scheme, buying in each time we see a temporary bottom, all the while being VERY careful not to put more than half my net worth into equities.

I'm also VERY busy with large purchases. Obama WILL raise taxes, including sales taxes, the gubmint DID print up at least a trillion in counterfiet paper for the bailout, there WILL be inflationary pressures and devaluation of US currency long term. I'm careful to buy things I will need for a total meltdown AND also will need if the markets recover.

My old well had a lot of rust, creating problems for plumbing, laundry, dishes, fixtures, etc. I had a new, deeper one drilled, with a handpump installed on the old one. Spares for the handpump. I added propane whole house heating as backup for the propane-electric main furnace and the electric only whole house oil filled space heater system.

Whole house generator, 14kW, propane fired, goes in next week, just waiting on delivery now.

Propane tanks goes from 500 gallon capacity to 1000 gallon capacity when it runs low in January.

Depending on how long the downward trend continues, I may look into geothermal heat, wind and solar electrical generation systems, and solar water heat early next year, before Obama can mess up the tax scheme too much. Balancing act there too, between Obama's foolish "green" tendencies, and Obama's foolish 'wealth distribution" tendencies.

Permanent install, large capacity gasoline storage, with handpump and metering, plus security, is finished and filled. If things return to normal, I'll laugh my way through next summer's five dollar a gallon price increases, filling up from my own tank which was filled at $1.84/9 per gallon. Don't forget the Stabil.

I need a much larger grass cutting solution, it takes me 15 hours for one full cut/trim/sweep cycle now. A good condition used Deere 40 horse tractor with PTO, a front loader, and a six foot finish cut mowing deck will cover many needs. A set of disks or a tiller, bought used, can gather rust for 20 years if need be, then still work to get a crop in should everything fall apart.

A big roll of 6 inch grid wire fencing would be useful for small quantities of livestock, with smaller mesh useful for chickens, rabbits, etc.

I'm looking at increasing my acreage, but real estate prices, especially Ag land, haven't really reached bottom yet. I'm also watching houses and acreage, nothing developing there yet, but prices are still falling. I'm ready to carry a house or two for years if I can buy in at the right price.

In short, DIVERSIFICATION is the key right now. READY cash, PMs, REAL value assets in water, heat, food and security, BARGAIN equities, and BARGAIN real estate put you in good position no matter WHICH way things go from here.

Things you KNOW you'll need, ammunition, for instance, over the next 4-8 years are probably at or near the lowest price you'll see during that period. Ditto on income, cap gains and sales taxes.

YMMV.

I worry about inflation because I know how much counterfeit paper currency the gubmint is printing right now. yes, deflation is the most pressing concern right now, but inflastion has already been incurred, no matter how long it takes to become visible.

The old debt was around ten trillion, we've raised that by at least ten percent in bailouts in just the last six months. Once you print that much paper, you WILL see a ten percent devaluation in buying power as sure as the sun rises tomorrow, the only question is how soon.

If the deflation continues, the gubmint WILL step up the printing of counterfiet currency, right up to and well past hyper-inflationary levels.

You are free to believe that deflation is the opnly threat on the horizon, but i choose to believe the obvious, BOTH are a threat and if you only prepare for one, you risk very unpleasant surprises.

Do you REALLY think the gubmint will stand idly by while the welfare parasites starve, and their own paychecks are returned stamped "NSF"?

Or will they print till they run put of paper and ink?

Decide wisely, your future is at stake.

Almost all of the deflation we saw in the month of October was energy prices.  Most everything else (food, health care, recreation) is mildly up in price.

Cheaper energy prices are good for everybody in the long run.  Well, except maybe people completely dependent on the sale of energy (sucks for the middle east)

With oil prices down below $50/bbl and gas at $1.61 a gallon I think this deflation will be very short lived.  It looks more like a correction to the tremendous energy price spikes of the last few months.

All commodities are way down. Copper, corn, lumber, soybeans, etc. There was a bubble in the commodities market that reached its peak in the summer of '08. It's all unwinding now as the hedgies get hammered with redemptions and have to unwind their leveraged positions. Demand is dropping on a global scale, too.

I believe this to be true.

Catch-22...spend to save the economy and you won't have that liquid cash.

we're clearly having some deflation, but how do you know "we're in the middle of a deflationary event"?  Maybe we're in the beginning, maybe the middle, maybe at the end.  The .gov appears inclined to give out money to stimulate the economy which, in my mind at least, would seem to lead to inflation in the future.  I think the OP's question is a good one.  What's going to happen and what do you stock up on now?

In a deflation you stock up on dollars and eliminate your debt to other people. You avoid buying major assets because the price will be cheaper later. You want to hold (solid) loans to other people, since they'll be paying you back with dollars that are even more valuable later, in addition to the interest you get. Deflation benefits savers and punishes borrowers and the leveraged. A classic example would be someone who borrowed a lot of money to buy real estate. the value of the real estate is dropping, and the value of a dollar is increasing. Wealth also evaporates because the value of assets decreases.

The fed is flooding the market with dollars because of the risk of entering a deflationary spiral, in which no one buys stuff, instead preferring to hold onto dollars and waiting for lower prices. The credit contraction is also reducing the supply of dollars that can be used to bid up asset prices.

The classic example of a deflation is the Great Depression. Dollars became so rare that barter systems and locally minted "money" were used instead in some places.

I don't know how much longer the deflation will go on; if you like, call it being in the midst of a deflation rather than being in the middle of one.

Yup... last time I checked currencies (admittedly a while ago) the dollar was trading against the Euro at like 1.60 per Euro, and was about on par with the Canadian dollar, with close to two bucks for a single pound.

I checked again yesterday and the Canadian dollar is back to being worth only 77¢, the Euro is only $1.21, and the British pound has fallen below $1.50.

Whoever thought the US was gonna fall without taking the entire world with it was wrong. We stumble, the world falls. We fall, the world crumbles.

EDIT: And for the record, I think we could USE some deflation. Not dangerous levels, no, but the .gov printing press has been running overtime for too long. Let some people's salaries and savings accounts start actually having punch again.

The threat is deflation, not inflation.

Surely you read the newspaper every day so you know what's going on though, right?

More and more, I'm leaning towards deflation - not inflation - in the coming months. If that's the case, you're going to want to hold onto dollars.

I agree.   But, like most things in life, timing is everything.  Right now, home prices are dropping like a rock (stock prices too, btw).  Energy costs are down, a lot of commodities are down.  The fundamental questions to be answered are: are they going to keep going down (in which case I'd hoard my dollars) are are they going to start going up (in which case, I want to start converting my dollars to something that will be worth more in the future).  Unfortunately, my crystal ball is broken, so I haven't got a clue.  

This guy (LINK) thinks that the fed will probably lower interest rates to try to stimulate the economy and prevent deflation and, if that fails, start printing more money.  He quotes Bernake as saying that a determined government can always cause inflation.  I note that this article is from February 2008 and dealt with the "credit crisis" before I had ever heard anyone else use the term, so apparently this guy's crystal ball works better than mine.  But, even assuming that the government pursues an inflationary policy, it's unclear to me it will work in the short term.  So, I guess I'm going to continue saving dollars until I see evidence inflation is coming back.

The only thing to worry about is if all of these bailout plans happen, along with Obama's massive entitlement programs.  Inflation will run out of control.  I figure you need to hold some cash and some assets.

Just like everything else.  the dollar bubble has started.  When it pop, it will crash.  Ride the bubble now and get out before it pops.

Hey, you need a place to live. Plus, from the #s you posted it does not look like you aren't over-extending yourself. I don't think you made a mistake.

We see the signs of it (gas price for one).  I believe this will be bigger concern as more people will get laid off and no one is buying anything.

If you have cash, cash will be king, until it also pops.

+1

We will see deflation in the short to medium term.  Inflation may come in the longer term depending on how the government responds to the deflation.

All the wealth being destroyed in the stock market leads to people buying less goods, which leads to companies lowering prices, and when that doesn't work they lay off lots of people, which then leads to people having less money and buying less goods, which leads to....

Inflation is too much money going after too few goods.  Deflation is just a spiral of massive destruction of income and wealth.

It is is clear that our economy has some big problems.  I have seen good arguments for inflation (runaway government spending, ...) and deflation (many similarities to 1929, ...).  You should confirm the inflation theory before spending all of you money.

There was some talk about the English lb collapsing

Plan on trips to Europe

Someone mentioned accepting the withdrawl penalties and throwing their stocks/bonds investments toward paying off loans and mortgages. Good gamble or bad?

*GAAAAAAAAAAAAASSSSSSSSSSSSSSSSSSSSSSSPPPPPPPPPPP*

You mean... diversify????

The most common, ordinary, mundane, non-panicked, sensible, level headed economic advice????

On ARFCOM?????

this

In a worst case SHTF scenario, it would be nice to know you will have a roof over your head at the very least.