A recession is coming soon at least to the United States. Many experts are expecting one over the next two years. Recessions are a natural consequence of government intervention with the free market.
The Federal Reserve artificially lowers interest rates which causes the economy to boom because people and businesses can borrow money at a lower interest than the appreciation value of the assets they purchase with these loans.
So the stock market, companies, real estate, and other physical assets increase in value because the demand increases and supply decreases. That’s what causes a financial bubble to expand. The Federal Reserve creates the bubble and then pops it.
When the Federal Reserve lowers interest rates, it also pays lower interest rates on the bonds issued. The low interest rates cause demand to increase and supply to decrease which naturally causes the prices of assets, good and services to rise. They are able to do this because they sell bonds to foreign countries.
The U.S. dollar used to be backed by gold. So for every dollar printed, the government had an equal amount of gold as a reserve. Because of the fiscal policies employed by the government, they could no longer meet the reserve.
They wanted more economic stimulation, so they started giving stimulus. The stimulus however, wasn’t backed by anything. It is backed by a promise to pay back or an “IOU”. Many countries were happy to by the bonds, because many see the U.S. as the most valuable country in terms of economics.
With the prices being so high, naturally the value of the dollar decreases. That’s what has caused the inflation. So, in order to make prices more affordable for Americans, they need to increase interest rates. That would cause businesses to scale down because they can’t borrow money at such a low interest rate and therefore they reduce their workforce and stop expanding.
This takes out a lot of money in the stock market because people can’t borrow for less than the appreciate of the stocks. The result is that prices begin to lower.
Buy Precious Metals
Gold has been a safe haven asset for centuries. It has never lost its value and it has utility. No one will stop needing gold no matter what happens because of the utility of its physical properties. Silver, platinum and palladium are the same.
When a recession happens, your retirement savings will be wiped out. There are many tax advantaged retirement accounts like an IRA, but the tax advantages won’t matter if the value drops more than the taxes you’d have to pay.
You can actually buy a precious metals IRA which allows you to have the same tax advantages, but you’ll hold physical gold and other metals in the account. So the worst that could happen is you keep the same value of the metals because they never drop like the stock market or real estate.
There are many precious metal IRA companies but you shouldn’t just go with any company. Do some research and read the reviews of different companies to make sure you go with one that has a proven track record and many years of experience.
The value of a gold IRA can be taken with hidden fees and scammy contracts. Some notable companies are Birch Gold Group and Goldco. They have decades of experience, have served tens of thousands of customers, and delivered billions of precious metals.
Stock up on non-perishable foods
There will be a food drought when the recession comes and the prices of the food available is going to skyrocket. So you should stock up on foods that won’t go bad for a few years. We don’t know when the recession is coming and for how long. So having at least a years worth of food is recommended.
You can buy 100lb bags of rice and beans. There are large containers to store water as well. You should buy canned foods that don’t go bad as well like beans, Chef Boyardee, and also nuts. Nuts don’t go bad for a long time and are very nutritious.
Don’t forget to get batteries if electricity becomes too expensive.
Reduce Your Overhead
When preparing for a recession, you should reduce your overhead. That means anything that you pay for on a monthly or yearly basis should be reduced. Lots of people pay for many luxuries through subscription, so you can start there.
Start with your basic necessities: shelter, food, HVAC, gas, electricity, and transportation. If you have more automobiles than you really need to transport, then sell the rest.
Cancel the tv subscriptions, lay off the pay-per-views, massages, and eating out. Eating out at restaurants is very expensive.
Real Estate
Real estate tanks during recessions so it can be a great investment if you have the extra money. You can buy very low and then rent or sell when the prices rise. You should consider living somewhere that’s comfortable but skip out on all the extras.
If you have extra rooms and amenities that aren’t necessary, consider selling the real estate you have and downsize to one home that is comfortable for your family. Sell any rental properties you have now while they’re selling high, and you can always purchase when they’re low again.
Conclusion
A recession is coming and you need to prepare. The most important things for you to do is stock up on food and water, reduce your overhead, downsize, and purchase precious metals. Gold bullion is the best gold to buy, which you can buy in coins or bars. But don’t forget that you can hold precious metals in an IRA and many other retirement accounts.