Economics: Recession, Depression, or Total Collapse?

It’s a frequent theme on survival blogs, what to do when the economy totally collapses. Often various sources and news stories are cited, as if they indicate that the collapse is imminent. I don’t completely disagree. The world economy has very grave problems, which could conceivably lead to economic collapse, in the long term.

But I don’t completely agree either. My view is that economic collapse is very unlikely to occur suddenly, all at once. What is more likely, in the short term, is that the economy will get worse gradually, in stages. The current recession may get worse for a while. Then there may be some improvement, followed by some worsening. Over time, this is may become more of a depression than a recession. And then there may be some recovery, perhaps followed by some worsening. I don’t think that the influences on the economy are so severe and so entirely negative as to lead to a quick and utter collapse.

I would use the analogy of a company’s stock. Rarely does the stock simply drop down to nothing. More typically, even when the company is experiencing great difficulties, there is only a general downward trend. There may be frequent up-ticks in the stock price. At times, the stock might improve in price for days or weeks at a time. A stock chart showing a downward trend will usually have some upward improvement in price along the way. So I would suggest that, even if the economy continues a downward trend, we can reasonably expect to see some improvements at times, even if these improvements are followed by a resumption of the downward trend.

Instead of prepping for sudden complete economic collapse, it might be more prudent and reasonable to prepare for economic difficulties of a lesser variety. All this may well lead, in the long term (if we don’t all come to our senses) to a near total economic collapse. But the types of preparations for worsening recession and for a depression are different than for a collapse.

If the economy totally collapses, then money would be worthless. I’m not even sure if gold and silver would have value in that situation. Food, water, agricultural equipment, gardening seeds, water purification equipment, medical and first aid supplies, ammunition and guns, etc. would all seem to have greater immediate practical value than precious metals. If the economy totally collapses, unemployment would be extremely high and food would be largely unavailable for purchase.

By comparison, if the economy only worsens, even to the extent of a depression, money will still have value. Gold and silver will probably go up in value (rather than down as in a total collapse). You will still be able to buy supplies even in a depression. So the types of preparations needed are different.

For example, to prepare for a strong economic downturn, you might increase your savings in your bank account. The banks will not suddenly collapse. Inflation will not skyrocket overnight. To counter a moderate increase in inflation, you might buy and store some 1 oz. silver coins in a bank safety deposit box.

I know that many preppers think that gold is better, but gold is presently over $1700 an ounce (spot price as of this writing — this changes continually!). And if there is a strong economic downturn or a depression, gold may go much higher. But what can you do with a gold one ounce coin, IF it is worth a few thousand dollars? You would be hard-pressed to find anyone with a few thousand dollars worth of food, who would trade it for one coin. Silver is more practical, since it has a lower value per ounce. But all this is just my own slightly-informed opinion.

Another example of prepping for a downturn, rather than a collapse, concerns food. It is not practical to store 10 or 20 years of food (though I’ve heard some have tried). In an economic downturn, even a severe one, food will be higher priced, but largely available. There may be some food rationing, but you will still be able to obtain food. You won’t need to store a vast quantity of food. You could store a few months worth of food, in case the situation worsens temporarily. It might be prudent to have a large backyard garden and some gardening skills, so that you can grow some food also. But buying food will also be an option.

The same thinking can be applied to other types of preparations. If you only prepare for total disaster or total economic collapse, you might end up less well prepared for lesser events. Just a few of my thoughts on this complex topic. Add your own views in the comments below.

– Thoreau

2 Responses to Economics: Recession, Depression, or Total Collapse?

  1. Personally, I look at gold as a savings/retirement investment more than a survival preparation. It wouldn’t be of much use during most SHTF events. Following an economic collapse, after a return to some normalcy, then it should hold it’s value well in purchasing power as it always has. I look at it as a method to diversify risk in the event of a currency crisis/collapse (unlikely), or just to offset price inflation 30 years down the road (much more likely). I wouldn’t keep it in a bank however, they’ve been known to declare holidays until the worst is over and the “new laws” are in place.

    IMO, one of the few uses for gold during a true SHTF would be for bribes. Trouble with the law? Need an extra fuel ration card? Crossing a checkpoint/border without the proper paperwork? Need to jump to the head of the line? Situations like that. Other than bribes, it might only be needed for buying very expensive items, maybe on the black market? Better to be self-sufficient for an extended period and just lay low until everything blows over. Some silver for smaller purchases maybe, in case a direct trade/barter isn’t possible. Just my .02.

  2. You may or may not be old enough to remember the Savings and Loan scandal in the 80′s – all happened within 72 hours…pretty much overnight in the world of finanace/savings. During the last Depression – you had to be escorted to your own Safety Deposit Box by a government employee…. What happens when food is available but a loaf of bread is $20 bucks? $15 milk? Gas = $10 a gal? Inflation is a variable today. One key indicator will be our nation declaring a “Bank Holiday”….once that happens you are gonna wish you spent more $$$ on beans/biscuits/bullets….it takes 240 tractor trailers to haul 1 Trillion dollars of 100 dollar bills….we’re over $15 Trillion in debt. Have you purchased a steak lately? Milk is already at $5. Skip the gold – buy lead and prepare to defend yourselves.