When will the machine stop?

[RunningBum]

I agree that social decline is the greatest danger, and I'm not prepared for that.

If the dollar is just devalued, and inflation runs higher, I might have to go back to work, or live with relatives who are working, or live very, very basically. I can do that if I have to. I guess part of my strategy is to keep a 30-35% international stock allocation in case the problem is more in the US than elsewhere, but I'm sure the world will be heavily affected if the US goes bad.

But if things turn to chaos, and there is rampant killing and stealing for food and stuff, I'm not at all ready for that. It's kind of interesting that my older brother, who says he knows he'll probably always have to work since he didn't start saving anything until he was about 50, would do a lot better in that worst case because he cans food and has guns. Plus he's a lot handier with most things than I am.

 

[joeea]

I was thinking about things like: U.S. default on debt, hyper-inflation, terrorist nukes, etc. Definitely more than an economic downturn, which, like most of us FIRE-ees, I think I can weather.

So when you wrote "More importantly, have you. or do you plan to soon, make changes to protect your assets from some type of financial collapse?" you were talking about terrorist nukes?

Okay.

I must admit that I've done nothing to protect my assets from terrorist nukes.

You?

 

[marko]

I worry a lot more about society collapsing than any budget issues. The USA's system relies on people generally being honest and law abiding. Imagine a society that disobeys laws as a general matter, has no respect for police, and criminals do not have to fear getting caught or going to prison. You cannot lock up everyone, so small crimes like shoplifting, graffiti, burglary, etc. go un-prosecuted and common........................... Inflation is caused by too much money chasing too few goods. Not printing money. A $15 an hour minimum wage will cause more inflation than printing an extra trillion.

Welcome back Senator! And +1 on everything you just said.

 

[jjflyman]

I find it very humerus that so many members here refuse to consider a future financial collapse. Watch some documentaries on the of 2008 "great recession" to realize how close we all came to an economic meltdown. Once the dominoes begin to fall, it will be near impossible to stop. IDK what anybody can do to protect themselves. Just hope it doesn't happen in our lifetime. I do know that at some point, it will all come apart, if the debt gets to 50 Trillion? 80 Trillion? 100 Trillion? At some point the balloon pops.

 

[Masquernom]

In 2015 the interest payments on the federal debt were about 6% of the federal budget. In 2019 the interest payments are about 9% of the federal budget. The interest payments are the fastest growing portion of the federal budget.
Politicians will promise to "grow the economy" to reduce the interest payments as a percentage of the budget. Personally, I don't believe that will work. But it's a painless promise that gets you elected.
As the interest increases you have two main areas of the budget that must shrink. Either social security and medicare payments must go down, or defense spending must go down. Those are the two big budget items. You will be hearing a lot more about the budget for these two areas from your politicians in the near future.

 

[Senator]

So when you wrote "More importantly, have you. or do you plan to soon, make changes to protect your assets from some type of financial collapse?" you were talking about terrorist nukes?

Okay.

I must admit that I've done nothing to protect my assets from terrorist nukes.

You?

Terrorist nukes are not going to happen. Even if they do, it will be in an area where most people are not there. It would be relatively small. Even if San Fran was wiped out, the rest of the USA would be intact. Similar to 911.

A terrorist nuke would much more likely affect a city block, not a city. It would be a small bump for retirees, not an abyss. A major earthquake would be much more likely and devastating if you lived in the area.

Hyper inflation is not happening as long as household wages are contained, or lending criteria is not too loose... The definition of inflation is too few goods being chased by too much money. 15% - 20% could happen, it happened before. China will not let prices get too high, they will lower prices to match our demand. They need to keep the billions working.

Take away a lenders ability to use proper risk mitigation, or give them incentive to ignore risk, and all bets are off. It happened in 2008.

I worry about stuff that could actually happen. A person knifing me on the bus or train is much more likely and would be a small impact to the USA, but would be a huge impact to me. I stay off most public transportation (even though it's free) and out of places that I think that is more likely to happen.

 

[samclem]

Thanks for the interesting discussion.