What to do with money now, assuming a huge crash is coming?

Maserati wrote:

What bothers me, among other things, is the unilateral varying of the social contract by the government.

And, that variance is hardly ever, if at all, in favor of the citizen as an individual.

Who is to say what the tax rate will be when you begin to withdraw from your retirement account? The government.

Who is to say how much you can put into such an account, both annually and in total? The government.

Who is to say whether or not you must withdraw, whether you want to or not? The government.

Who is to say what the effects are of early withdrawal, if needed? The government.

Who requires you to put money in a retirement account, no one.

All of your complaints are baseless whining, no one is forcing you to use a retirement account. The government offers retirement accounts as a means to reduce your tax burden. If you don't like their rules don't participate in that system. You are free to manage your money under the regular tax system.

This is exactly the kind of stuff that's currently scaring the heck out of me. How many people actually believe that this is the way to go?!

Tangent from civilization wrote:

Buy some remote farm land, and learn how to live sustainably for the long term. Kind of like the Amish, where most work is done my men and animal, except you could use sustainable things like solar electricity and have emergency supplies of diesel, etc. Ideally you'd move in with a few families you are close to, for strength in numbers in case any hostilities arise. For that you'll also want to be well armed, well trained, and have good plans to stand guard and defend your land against the inevitable trespassers. If you truly believe a total collapse is coming, this is really your best bet at having a decent life.

Aethelred wrote:

This is exactly the kind of stuff that's currently scaring the heck out of me. How many people actually believe that this is the way to go?!

Tangent from civilization wrote:

Buy some remote farm land, and learn how to live sustainably for the long term. Kind of like the Amish, where most work is done my men and animal, except you could use sustainable things like solar electricity and have emergency supplies of diesel, etc. Ideally you'd move in with a few families you are close to, for strength in numbers in case any hostilities arise. For that you'll also want to be well armed, well trained, and have good plans to stand guard and defend your land against the inevitable trespassers. If you truly believe a total collapse is coming, this is really your best bet at having a decent life.

I know how stupid is that? Just stock up on guns and ammo, get a few bros together and spend your time taking stuff from these foolish farmer Amish types.

If you truly believe a crash is coming, put your money in booze and guns, they always do well in a crash.

I will tell you guys something: I have experience with all of that, and it's not all it's cracked up to be.

I have started, built, and sold a hydroponic "farm", which was done in large barn structures on a traditional farm, and I actually lived in that barn for a year-and-a-half. I also lived in an RV on another project. I have lived crapping into plastic bags and eating fish that I caught, when things were tight and all money was tied up in projects. One of my degrees is in environmental science, another in engineering--I can tell you all about everything from high-tech photovoltaic systems to passive solar and the Whole Earth Catalog. I have rebuilt engines, I know mechanics inside and out. I have served in the military in a combat role, I know my way around weapons and tactics.

AND ALL OF THAT SUCKS.

No way I would want to combine all of that at once and live the rest of my life like that. If I wanted to do that, I could move to Afghanistan right now with all my money, and be considered uber-rich. NO THANKS.

I'm looking for reasonably civilized ways to adapt to conditions that I see coming in the future. I understand that dispute resolution will be difficult--that is what the civil legal system is for right now, but when things go to pot, the expense of that system becomes of increasingly questionable value.

But I don't see complete anarchy or tribalism happening soon--just something like "the great depression"--sure people had to make to, but there weren't people killing each other everywhere. Social structures continued.

Also, "remote" farm land is seldom sufficiently productive to make it worthwhile in many ways.

Also I am a social creature, and not bunkerized. I will not live among the socially cloistered, like the Amish. Heck, I won't even live in the suburbs!

Still looking for interesting, reasonable suggestions...

Like I said about HELOC's, consumer credit in the US rose "more than forecast" in February 2014:

http://www.bloomberg.com/news/2014-04-07/consumer-credit-in-u-s-increased-more-than-forecast-in-february.html

And further to my "how much do you need to have to avail yourself of the mechanisms available to the rich" question, there is this news:

http://www.cnbc.com/id/101540240

The "top of the middle"--those with some but not enough to play hardball, has risen to several million. If you have, say, more than a million but less than that, you are in a no-man's-land--you might think you are OK, but you will be the prime target--big enough to go after, but not so big as to be able to come out of the process with relatively the same status as you had going in.

Some recent study finds that among young people with $100k to invest, they keep 42% of it in cash, which is higher than previous generations.

Good for them, IMO.

Markets twitchy this week, not a good vibe.

Regarding "retirement accounts": consider the flagship account, SS. According to some study out of Harvard, "Without reform, Social Security beneficiaries will face a 23 percent benefit cut in 2033."

You see what I'm getting at: either they take the money from you now through increased contributions, or they take it from you later through decreased benefits.

You know what will happen, because people are so gullible and because government just grows? BOTH.

They will argue for and receive increased contributions in the interim, and then say that external forces caused situations so bad that they ultimately can't afford to pay out on the back end.

This is the easiest "retirement account" to raid, but the others are almost as easy, especially when they are all treated as parts of a single source of retirement income.

To keep this thread somewhat updated, I would now direct attention to an article that says that, based on data from the US Census Bureau, only 86 million "full-time private sector workers" support 148 million "benefit-takers":

http://www.cnsnews.com/commentary/terence-p-jeffrey/86m-full-time-private-sector-workers-sustain-148m-benefit-takers

Read the article, and try to ignore the spin. Some of the "benefit-takers" deserve some of the benefit they receive, possibly all; some deserve none, or only a portion--but the point IMO is that the numbers are unsustainable, even given increasing productivity, and that the numbers are trending in the wrong direction.

They will be coming for individual wealth, and the floor will be quite low, maybe $100k like in Cyprus.

Means testing will come to include not only income, but assets, and/or delayed contribution recovery as is currently done with Medicaid:

http://aspe.hhs.gov/daltcp/reports/estaterec.htm

The next, and easiest step, is to not wait to receive contribution until there is an estate, but to go after the assets while the recipient is still alive. IMO, fair enough, I am not judging the morality of such a move, but if done, it should be applied to everybody fairly, in a temporal sense. What I am suggesting is that this next step is coming, and coming fast and hard, and that it will affect people like and you and me while we are still alive.

The "paranoia", as many call it, arises where I perceive that the transfer of wealth to satisfy claims against the individual based on benefits conferred upon that individual, is the prelude to the transfer of wealth to satisfy claims against the individual based on benefits conferred upon the citizenry.

Right now, I know of people living in million-dollar homes, in which they have, say, a minimum of 750k in equity, who have business interests structured such that they have been showing a loss every year on their taxes. They have a real estate empire that includes something like 80 rental units, and a huge building which they own and are paying for, and trying to find development partners to work with.

They are sitting on a ton of wealth, yet their kids qualify for school lunch and every other type of subsidy available, including not having to pay for sports leagues/camps to the tune of thousands a year. How do they manage this? They aren't willing to sell their residential property to realize the gains.

Eminently economic behavior, you may say. What is their economic incentive to sell? The amount they might save on interest costs is probably easily offset by the benefits they receive, and as anybody in business knows, one of the first rules is to never sell an asset if you don't have to.

Chances are pretty good that they will really do well with the huge building that is currently a drag on their finances, and that their business revenues now go to support. Should they be required at that time to pay back the benefits that they have realized in the interim?

This is one example of how you and I are paying for millionaires' kids to receive a free lunch. While I agree with including assets in means-testing, I think that if those assets are post-tax, the result should only apply to benefits conferred upon the individuals and their legal dependents.

Like all government, it won't stop there, however. Use whatever hackneyed metaphor you find most appropriate--the slippery slope, the camel's nose in the tent, the thin edge of the wedge--it is coming, and it is inevitable, and the time for implementation is accelerating.

I will read more carefully and hope to have something interesting to say, but the first thing that came to mind is this:

The fed deficit is falling very fast and is rather small right now as a percent of gdp. And interest rates are low, the stock market is high and the unemployment rate is plunging. How does that, particularly the shrinking deficit, square with your observation that there are more 'takers' than 'makers'?

Seems like if we truly had a crisis there, the deficit would be growing, not falling like a rock.

just read that cns article. While I do not have the knowledge or inclination to do so, it is so full of numbers and adjustments, I am 95% sure that a person who actually knows the material could tear it apart savagely with a plastic butter knife. The article sounds full of hack stat work.

So I will repeat - if there were a genuine crisis, I think it would show up in the fed deficit #s. But the fed deficit #s show the opposite.

Ah yes, the "fundamentals" that the technicals guys love.

Meanwhile as we continue to run deficits, the cost of debt service continues to rise. Although the pace of that rise might currently be dented slightly, there is still a MASSIVE rise, especially when it is considered how deficits have risen incredibly over the past few years.

It is a bit disingenuous of you to say that a small decrease in the market doesn't really matter, but that a small decrease in the deficit (if there indeed is one) does matter.

Interest rates are low because they are a response to the artificially-low rate of inflation as reflected in the CPI and PPI (yes I know that some believe that the CPI over-estimates inflation), and because the housing market is the only thing left that is perceived able to sustain bubble-type growth.

Stock market high does not reflect the value, this is generally agreed-upon.

Unemployment rate is bogus, look to workforce participation rates and under-employment.

The whole thing is a house of cards, propped up by optimism. So far it has worked, but you know what? At some point, the big investors (those with significant "retirement investments") are going to begin withdrawing, rather than contributing, and in a big way. Where will we find new investors? Foreign money?

And yes, I believe that it takes investors (capital) to generate jobs, and economic activity. I have believed this since my very first grunt job, a very long time ago.

Here's more information on the federal deficit trend:

http://www.fitsnews.com/2014/04/16/us-debt-check-stormy-skies/

I know some of these articles are just full of invective, piss and vinegar. They are sometimes useful, however, in illustrating the big picture.

My long post was meant to illustrate how it is increasingly important to be on the receiving side of some of these benefits, while finding a way to preserve wealth that has already been taxed.

Real estate investing in publicly-supported "development zones" is one way.

I have always believed that "farming" was another way, but given what has been happening in Nevada, that could go either way, and get either better or worse. It's more uncertain now than it was a month ago, however I think it's still a good bet, especially if the Democrats don't do so well in the fall elections.

Maserati wrote:

I know some of these articles are just full of invective, piss and vinegar. They are sometimes useful, however, in illustrating the big picture.

My long post was meant to illustrate how it is increasingly important to be on the receiving side of some of these benefits, while finding a way to preserve wealth that has already been taxed.

Real estate investing in publicly-supported "development zones" is one way.

I have always believed that "farming" was another way, but given what has been happening in Nevada, that could go either way, and get either better or worse. It's more uncertain now than it was a month ago, however I think it's still a good bet, especially if the Democrats don't do so well in the fall elections.

I probably won't disagree with anything you say here - except milking the gov't is just one way to get money - you seem to imply that is the way to go for most people.

fact is, if people invested better they could all get rich. It isn't that hard to get 8% on your money over decades - think about how great it would be if young people invested from their 20s on...they would be wildly rich. With no gov't subsidy.

Interesting article:

http://www.telegraph.co.uk/finance/markets/10965052/Bank-for-International-Settlements-fears-fresh-Lehman-crisis-from-worldwide-debt-surge.html

Fact is, historically you could have gotten 8%, which says nothing about the situation going forward.

What I said earlier was that that was the way MANY people have gone, and that it has become a system that you are either in or out--and if you are out, you will still bear the burden of that system not performing, while you will receive none of its benefits if and when it does perform.

Maserati wrote:

Assume a huge crash is coming--markets 50% down, dollar seriously devalued, inflation taking over.

I mean serious. Disruptions in supplies and delivery of energy, communications, water, food.

What are your opinions on how to prepare for this? Seriously. What would be a smart thing to do?

a year after this post went up and

a) US markets are at an all time high - up 15% since the thread went up

b) dollar is seriously soaring

c) inflation is seriously in danger of going to zero

fear is a carp way to invest. Usually.

It's all carp.