In a previous post, I discussed The Top 5 Most Likely TEOTWAWKI Scenarios. But this prepping and survival blog post is about the LEAST likely extreme SHTF scenarios. The list is merely my opinion, so if you disagree, sound off in the comments.
1. An immense asteroid strikes the earth.
Small meteorites are continually bombarding the earth, or more specifically its atmosphere. Most burn up in the atmosphere. The ones that make it through to earth often land in water. Those that make it to land are typically small 
in size. A large asteroid strike, the size of the one that killed the dinosaurs about 65 million years ago, is very unlikely. And if it did occur, there would be not much you could do to prepare. That would not be the end of the world “as we know it” (TEOTWAWKI), but the end of the world (TEOTW).
However, there is a group of scientists who theorize that comet and asteroid strikes of the earth, in the last 12 thousand years have been more common than previously thought. “The group posits one large impact (equivalent to a 10-megaton bomb) every 1,000 years.” (Holocene Impact Working Group). If they are right, then we are about due for a moderately-sized impact. But “end of the world” type impacts are rare, even in this theory.
Interestingly, a boulder-sized asteroid recently struck the moon, causing an explosion and burst of light that could be seen from earth with the naked eye. NASA Announces Brightest Lunar Explosion Ever Recorded. The speed of that asteroid is estimated at Mach 73; that’s 73 times the speed of sound (on earth).
2. Global thermonuclear war between the superpowers: U.S., Russia, China.
These three nations have enough nuclear missiles to destroy the planet many 
times over. But, in my humble opinion, an all-out nuclear war that involves two or three of these nations duking it out is highly unlikely. Fortunately, they all realize that the end result could only be the destruction of all three nations (and most of the planet).
Unfortunately, nuclear proliferation means that more and more small nations are getting nuclear bombs. Some of these are rogue nations who would not mind using one or more nukes on their enemies. The result is not a global nuclear war, but it would be very devastating. And it is much more likely than a nuclear attack from Russia or China.
3. Zombie Apocalypse!
Well, not exactly zombies, but a severe disease outbreak that would destroy the fabric of society, leaving the survivors in severe desperation. A disease outbreak on a par with the Spanish Flu Pandemic of 1918 to 1919 is possible, but not too likely. A moderate disease outbreak, greater than the seasonal flu, but significantly less than a pandemic, is very possible.
However, a much more severe outbreak would be needed to cause a collapse of society. This level of pandemic is very unlikely for a few reasons. First, modern communication will let everyone know about an outbreak and what to do to lessen your chances of contracting it. Second, modern medicine is capable of devising and manufacturing vaccines rapidly and on a large scale. Third, other types of medical care (supportive, though not curative) would help to lessen the fatality of almost any disease. Fourth, it is much easier today to obtain the good that you need without going out to stores and crowded public places to obtain them. You can order over the internet, and the box is placed at your doorstep.
4. Total economic collapse.
I know quite a few survivalist websites talk up our current economic problems 
as if total collapse were just around the corner. But I myself think that this scenario is very unlikely. There is a certain resilience to the U.S. economy and to the economies of many other developed nations, that makes total collapse very hard to achieve. Even a very badly mismanaged economy has extensive resources in the private sector to keep businesses going. The modern nation is, for better or worse, a thoroughly commercial nation. So the total collapse of commerce is a least likely SHTF scenario.
However, a partial economic collapse is, in my view, quite tenable.
5. A Political Collapse leading to Martial Law
I’ve read the warnings on some survival blogs saying that we are close to a 
state of martial law (or that it has already happened?!?). But I remain unconvinced. The U.S. political system, and that of other democracies, is deeply-woven into the fabric of our society. All kinds of political problems have struck this nation in the past, and yet it continues to function as a democracy. It has all the problems of other democracies, including political scandals, abuse of power, political demagoguery, and the bureaucratic mentality. But democracy also exists at every level of government, from small towns to big cities, in counties, States and at the federal level. So martial law and a complete break from democracy as the means of government is highly unlikely.
As you can see from the above list, I’m not a doomsday prepper. Instead, we here at Prep-Blog are non-doomsday preppers. We believe in Prudent Reasonable Emergency Preparedness (PREP).
- Thoreau
I agree with you about the Zombie Apocalypse.
It appears your opinion of financial collapse is based on life experiences and not on a financial analysis of our current situation. This is understandable given the poor financial education Americans receive (even at the graduate level) and the difficulty in finding reliable data on which to make an informed opinion.
I cannot provide a detailed list as it takes me an hour just to present the financials in front of a live audience, but I can provide a couple of facts that show it is mathematically impossible to avoid a financial collapse.
The unfunded liabilities of the social insurance programs is enough to sink our ship. Using trustee report estimates that understate inflation and overstate income give us a figure of over $120 trillion. Prof. Kotlikoff uses the Alternative Fiscal Scenario from the CBO in his annual update which now stands at over $220 trillion. Either figure is more than all the money in the world.
These are present value amounts meaning that given the expected income and expenses, this is what we would have to invest today, earning interest (the minimum rate appears to be 5%) in order to pay our promises in the future.
At this point most people think we can fix this by just raising taxes to cover the promises. The problem is that (depending on which number you want to believe) it would take $6-$11 trillion a year just to keep the unfunded liabilities from getting worse.
This brings up the second point, we cannot even keep from going further into debt. We might stand a chance if we eliminate the social insurance programs now, but doing so would likely start civil unrest destroying the country anyway.
Based on IRS stats (2008 for business and 2010 for personal - the most recent available) we have a total income of about $9.2 trillion. As you can see if we use the more reasonable estimate of our social insurance liabilities, we couldn’t even keep the liabilities from increasing if we taxed 100% of ALL income.
Currently (all levels of) government spends $6.6 trillion a year and rising. Even with historically low interest rates, we spend over $3 trillion just on interest on our collective private debt (the public interest is included in the government spending).
That’s right, government spending and interest alone amounts to more than our collective income. That leaves nothing for fixing the social insurance programs, paying anything against our collective national debt of $60 trillion, Obamacare, the un and under funded liabilities of public an private pensions, and little things like food and shelter for the population.
If our wage and salary income were TRIPLED, and we maintain the same 100% tax rate, that would just give us enough for government spending, interest, and keeping the social insurance programs from falling further in the hole (assuming the additional funds were invested and not spent).
When the Great Depression started, most of our money was still backed by gold and silver, and we had about 20% of Americans working in agriculture (and many more with their own gardens or chickens). Today we have money backed by imagination and maybe 1% working in agriculture (and most of our farmers are over 50). People no longer know how to raise their own food and most of those that raise our food do so with a lot of assistance from technology and a working global supply chain.
When it becomes clear that pieces of paper (and their electronic equivalent) are backed by imagination and nothing else, I believe the global just-in-time supply chain will collapse. The results will be catastrophic. What we see happening in Europe is just a foreshadowing of what is to come.
If you have a solution, please offer it up. I believe if such a solution exists that it would be deserving of a Nobel Prize. Otherwise, to say a total financial collapse is unlikely is just wishful thinking.
John R Ragan, MBA, MS
Author, The Financial State of the Union
John,
Thanks for the info. Let us know when the book comes out. I’m looking forward to reading it.
Thanks, will do.
I have the draft back from the editor, so I’m expecting to get the Kindle version out this week. The print version takes a bit longer to format.
Just a comment regarding the last paragraph of the article.
You make the “prudent / reasonable” point frequently in your writings, but what is reasonable and prudent is subjective for each individual. Is spending a dollar to buy food a more reasonable/prudent use of money than buying a PowerBall ticket? I think so, but then I’d guess that more people in the US win multimillion lottery jackpots each year than die of true starvation too. By the odds, a prepper is much more likely to die during a trip to Costco to buy more preps than their odds of dying by not having whatever they bought.
Don’t get me wrong, I enjoy reading your blog - but whenever you make the “reasonable/prudent” comments I’m reminded of the George Carlin joke that anyone driving slower than you is an idiot, and anyone driving faster is a maniac. No one likes to be called a maniac, especially if it’s by an idiot :)
Good point, Walt. Thanks.
I have a solution: First the SS system is self funded. It has been sabotaged by politicians but it is self funded and should not be “scrapped”. The simple solution to SS is first to make it a retirement system and not a welfare system. That is you only get SS payments in proportion to what you paid into SS. Second vary the payments such that the payout never exceeds the payin. Like a racetrack the payout never exceeds the money bet into the system. That way while individual SS payments may go up or down a little they would never go away. Also make the SS system a “private” system run by a non-political board of governors, that is take it away from the politicians and the general budget.
Second eliminate all the federal welfare. There are in fact 2400 seperate welfare programs. The recipients do not contribute to this it is pure gravy. Simply end it. It is unconstitutional and counterproductive.
Third: Medicare is partly self funded. Either increase the portion of the payroll taxes that funds Medicare or decrease the benefit or perhaps a little of both. Make it a true insurance program and not a “welfare” program. Probably the best way would be to farm this out to private insurance companies who generally do this much better then government does.
This solution may have worked a few decades ago, but it does nothing to address the situation we find ourselves in. Even if we awoke in the morning to find our governmental offices filled with followers of the Constitution, they could not prevent a financial collapse (again, short of eliminating the social insurance programs).
It’s been a long time since the Constitution has mattered and I’d say the last 3 presidential elections shows that most voters in this country are willing to sacrifice freedom for promises of security and believe that they can get a free or semi-free lunch without ramifications.
Most people believe there are “trust funds” that are on the way to running out of money. In reality the politicians have spent all the cash and replaced it with special Treasury IOUs that can only be redeemed by the government. Before they can get cash to pay benefits, they must first raise the cash to redeem the IOUs. Since these IOUs are owed to the government (vs. the public), they use that to mislead the public on the debt to GDP ratio.
While the unfunded liabilities of the SS program are small compared to medicare, it would still require more than all the money the USA has to pay future promises (using the broad definition of money - $12 trillion cash vs. a present value $16 trillion liability).
I go through an example in my book showing how this upfront investment (present value) requires the least amount of cash as opposed to making installments or waiting until the amount is needed. If we can’t afford the least cash option, how can we afford more expensive options?
The reason they say SS can’t go broke is that they are always collecting taxes for it. They do admit that once the “trust funds” are exhausted, that benefits will be cut back to what they bring in. In that regard it already works as you suggest - limit system payouts to what’s collected.
Cutting other “benefit” programs wouldn’t even free up enough spending to get rid of our deficit. As stated, the social insurance programs alone have led to an unrecoverable situation.
The common answer I get from politicians on Medicare is to raise taxes and implement means testing. Right. Since a 100% tax wouldn’t raise enough money, that option is useless. Means testing? The wealthy are paying for the best care they can afford - they’re not using Medicare anyway. Makes me think they won’t be happy until we’re bankrupt. Or is that the goal of Obamacare? (Wait for the outrage this fall when people learn what their new premium rates are going to be.)
All insurance is gambling. You are betting thousands of dollars a year that your going to have your house burn down, have a car wreck, die, etc. The insurance company is betting you’re not. The problem with “health” insurance is it’s covering routine events vs. a rare catastrophic event.
Imagine how expensive car insurance would be if it included gasoline and maintenance.
The underlying problem in healthcare is the allopathic paradigm and that would require more explanation than what I’ve done for our financial position.
It’s tough just trying to educate a public that suffers from a short attention span. As it stands, we have 50 year olds that are too young to remember the last time we had real money in circulation. We have 70 year olds that are too young to remember the austerity of WW II and the Great Depression. We have 100 year olds too young to remember a time before the Federal Reserve and the income tax.
Even if we could come up with the $222 trillion right now, there is the additional issue of how to invest the funds to earn the required interest on that $222 trillion.
“As you can see from the above list, I’m not a doomsday prepper. Instead, we here at Prep-Blog are non-doomsday preppers. We believe in Prudent Reasonable Emergency Preparedness (PREP).”
We’re with you. #SemperParatus
How can Zombie Apocalypse not be number 1 on this list as a zombie has never been found. This would be like saying there might be a vampire, unicorn or hobbit apocalypse.
I also am very surprised about your take on a financial collapse. This has happened many times over the course of mankind. As it might not happen now just think about the great depression which is not even 100 years away. This would have been very important scenario to prep for.
Where’s EMP, whether natural or man-made, in this list or would it be counted in the “2. Global thermonuclear war between the superpowers: U.S., Russia, China.” category?
I agree we are facing a collapse. I don’t agree that the SS system cannot be saved. Two points: 1. The federal government has borrowed massively from the SS system which now is about $4 trillion. Obviously they owe the system this money and if they begin paying it back the SS system can stay solvent for a very long time even by today’s rules.
2. As I described the solution to SS it requires that total payouts never exceed total payins. I.e. it cannot go broke. The payments can go down and that would certainly make everyone unhappy but under that system it could never go broke.
Yes I could prevent a economic collapse today (even though I agree it is inevitable because politicians are too gutless to do what must be done. Here is how to do it: 1. Eliminate all federal welfare. 2. Cut employment in every civilian department by 10% immediately and cut the non-payroll budget of every civilian department by 10% immediately. If this is not enough to balance the budghet to revenues then cut another 10%; repeat as necessary. 3. Most of our debt is owned by us but a considerable amount is not. Lets say that is $5 trillion (doesn’t matter how much). Print the $5 trillion and pay it off. Pay off China, the banks, the big investors, everyone. Yes it will cause inflation but we are going to have inflation anyway without the benefit of having paid off the debt. 4. From this day forward no borrowing and cut civilian departments to balance the budget. 5. Completely eliminate entire federal departments; Dept. of Education, Department of Energy, Labor, HHS, HUD, transportation, etc.
Taht’s it! Then begin actually governing and making the hard decisions.
Repeating what won’t work does not qualify as a solution.
Nowhere do you address the civil unrest that would result from the austerity you suggest. Look at what’s going on in Europe as an example (and much of that is still in the early stages).
How do you propose the government pay SS back when we’re running trillion dollar deficits? Yes benefits are going to go down and that will also lead to civil unrest. Keep in mind the unfunded liabilities I reference actually count the trust funds even though they have no money.
You fixate on SS and ignore Medicare. The Medicare problem is much larger than SS.
You also seem to be fixated on the Federal Government. In terms of actual debt, they are just a fraction of the problem. The collective debt is about $60 trillion. If it weren’t for the low interest rates, we’d already be in default. As it stands, interest alone is equal to a third of our total business and personal income.
The government would have to issue treasury securities (debt) in order to print currency. But printing money is not an answer, it’s a last resort taken right before a collapse.
If printing money were the answer, why borrow to begin with and pay all that interest? If printing money were the answer, why have taxes? If printing money were the answer, why have poverty? We could make sure that everyone makes $100k a year. The fact is printing money can’t work and monetizing the debt (something Bernanke said he wouldn’t do before he did it) is a bad idea.
Nowhere do you consider what is going to happen to the market. When interest rates rise, the bond market is going to collapse.
We have severe un and underfunded public and private pension liabilities. A significant part of these funds’ investments are in bonds (especially “safe” government bonds). When the bond market crashes, these funds will become even more underfunded.
I could show you with the FY2012 budget that we could cut 100% of the Federal Government discretionary spending (everything but interest and entitlements) and still not balance the budget.
What you suggest probably would have worked if implemented in the 1960s. It might still have worked (with considerable pain) in the 1980s.
What is different today vs. the Great Depression is that we have fiat currencies worldwide (which has helped prolong the inevitable) and a global economy/supply chain (with just-in-time inventory).
I know it’s a difficult topic, especially for those without a financial, economic, logistic, and technical background. I was fortunate that a local group let me present at their weekly meeting for four weeks in a row. This amounted to 16 hours of presentations and Q&A and was just enough to lay a foundation on which to have a discussion of our current situation.
A real solution to avoiding a collapse must address:
1. Our $60 trillion public and private debt.
2. Our $220+ trillion in unfunded liabilities in the social insurance programs.
3. How you would avoid civil unrest in the reduction/elimination of programs with nearly half the country receiving some or all of their income from the government without resorting to a Communist/Police State.
4. How to handle the collapse of the bond market when interest rates rise.
5. The derivatives tsunami when interest rates rise.
6. Other funding issues including Obamacare and pension programs.
7. Physical constraints including energy and resources/commodities.
8. Accomplish all the above with business and personal income of roughly $10 trillion.
It’s much like a car speeding towards the edge of a cliff. There comes a point of no return when no matter how hard you hit the brakes, or how sharp you turn the wheel, nothing will stop you from going off the cliff.
If we took 100% of our income and invested it at 5% interest. it would not be enough to keep the social insurance unfunded liabilities from going further in the hole.
All this does not begin to address the effect the robots and artificial intelligence is going to have on our job market over the next few years. From low level jobs like flipping hamburgers and truck driving, to educated professions like physicians and librarians.
As we lose more jobs to machines, our income will continue to decline leaving our financial position even worse off.
Here’s the harsh reality:
1 Our business and personal income totals about $10 trillion a year (based on IRS stats and allowing for some growth as those stats are not for 2012).
2. If we froze government spending and interest rates, and invested enough to keep the social insurance liabilities from increasing, we’d need over $21 trillion a year.
Let’s say we wanted to get serious about eliminating our $60 trillion in debt and $222 trillion unfunded liabilities over 30 years at a 5% interest rate. That works out to about $18.5 trillion a year and this takes government spending out of the equation.
We’ve promised much, much more than what we can deliver. Sooner or later we must default. When that happens, the global supply chain also collapses.
Even if politicians had the will, there is no longer a way out.
I also point to the lessons of history - severe economic times lead to war. Not the puny conflicts we’re experienced over the last 60 years, but a fight for your life kind of war. And we have much better toys to do so with than we did in WW II.
I hope The Financial State of the Union will wake up some people and that they will take the steps to protect their families from what’s coming. I do view this as a life or death situation.
A friend of mine that serves as the FEMA liaison for his local sheriff’s office told me that government studies show the fatality rate over the first 180 days will be between 83 and 94% (and the time frame for the inner city is two weeks vs. 180 days).
Currently, very few people live off grid. Of those that do, very few do not rely on the global supply chain for equipment and supplies. Even the Amish are not ready for what’s coming and they have a close, multi-generational, faith based community with good low-tech skills.
Be ready.
Austerity is necessary and preferable to total economic collapse. Would there be civil unrest from those who live off the government teats? probably, does that mean we should continue giving massive welfare?? Surely you are aware that you are suggesting we pay the masses welfare to keep them quiet in limit their aggresive tendencies. Wouldn’t you prefer a system where we encouraged them to work? Would you as a parent teach your children to take advantage of welfare and to live a life of free stuff and drugs, have as many little welfare kids as you can to keep the free stuff coming in? Is that your model for our citizens and our children?
Yes I am concentrating on SS. It is the ONLY fully paid for system in the government where the beneficiaries paid into the system and then they are paid out from those SS taxes. This is not true for any of the 2400 welfare programs the federal government supports. It is a self paid system and the government has a legal and binding contract with those who funded it. The government has taken vast sums from the SS system with the promise to pay it back. If the economic situation is SO BAD that they cannot pay it back then before that happens all of the “free stuff” must end.
You use the term “social insurance” which you probably mean to inculde all the welfare programs. If You instead MEAN SS the say so! Because the claims you make about the social insurance programs would not be correct if only applied to SS. I think you are hiding behind the data using it sometimes to support your ideas and other times to refute others.
The solution is actually quite simple:
1. Balance the budget. That is if our total federal revenues (not counting SS) is about $2 trillion then cut our budget until the two are equal. Do this by ending all welfare, period. Then eliminate most of the federal departments.
2. The debt cannot be paid and it is getting difficult to even continue to service it. The Feds QE program essentially prints money to shore up the economy with little positive result. Instead print the damned money and pay off all the debt. Yes it will create inflation (just as QE creats inflation without the benefit of reducing the debt). Then borrow no more money!!
3. Seperate the SS from the budget and take the system out of the hands of congress.
4. Medicare? Hmmm. You are hung up on Medicare and say nothing about Medicaid or Obamacare. Medicare is partially paid for by those who benefit from it while Medicaid and Obamacare are funded by the general fund. Why would you discriminate against a insurance system where the recipients are paying into it. Fix Medicare: 1. Increase the portion of the payroll tax used to pay for it. 2. Increase the payment the beneficiaries pay when they use the system. 3. Increase the payment retirees pay into Medicare from their SS income. Would you prefer to eliminate it while keeping Medicaid and Obamacare???
Robots and artificial intelligience??? What are you a luddite? Sure we need to fix our economy but you aren’t going to do that by returning the buggy whips industry or sticking your head in the sand. Our federal taxing and regulation policies along with our unions are forcing jobs offshore. THAT is the problem not robots and artificial intelligience. End taxes on corporations and businesses. Reduce or eliminate most of the government regulation and bureaucracy. Level the playing field between unions and employers. Then you will see jobs flood into this country.
Yes you are right that we are in deep economic trouble but Keynesian economics and political pork and corruption got us here and more of the same won’t make it better.