Knowing how a disaster unfolds allows you the opportunity to prepare for it. We can examine prior economic crashes in our country, but circumstances, policies, and means change over time, so they don’t give us a crystal clear picture of the future. There are too many unknown unknowns. We can examine the economic collapses of other nations in the present and the past, but foreign countries often have different morals, values, traditions, and means of fiscal operation. Though a 100% accurate picture can’t ever be achieved, when we examine other fiscal collapses and see how they unfold, we can often glean patterns and commonalities between them. That can provide us with a clear enough understanding of what we should prepare for.
This will be a 2 part blog. Part 1 will cover what you can expect when an economy crashes, and Part 2 will cover what you can do to prepare. There are everyday things that occur when an economy collapses. Not all of these things may directly reach your community, but you will feel their impact nonetheless. You may not suffer from a lack of farmworkers, for instance, but your store will be less stocked. Your community, cul de sac, or rural route neighbors may band together after your nation’s economic collapse, or they may turn on you altogether. The outcome of that will be determined mainly by your preparations today. All economies falter at some point, and sometimes those economies collapse entirely. Here are the signs to look for…
South Africa right now gives us a glimpse into how rapidly chaos can be unleashed in a once stable society. The unrest began on July 8 when former President Jacob Zuma started serving a 15-month prison sentence for contempt of court. Supporters in his home province of KwaZulu-Natal set up roadblocks on major highways and burned about 20 trucks.
After one week of chaos, the casualties included: 161 shopping malls, 11 large distribution warehouses, 8 factories, 161 liquor stores, 30 schools, 1400 auto bank machines, hundreds of thousands of tons of crops lost to fire, and about 90,000 micro and small businesses that may never recover. Seizing upon the breakdown of security forces and stoked by partisan ideologies and self-interest, mobs ransacked food, clothing, liquor, and electronics. Mobs attacked warehouses of major retailers and factories and set them ablaze to get the contents inside. The unrest was primarily limited to the KwaZulu-Natal and Gauteng provinces, accounting for nearly 50% of South Africa’s GDP.
South Africa is very different than many nations. Income inequality is much higher. According to South African government statistics, unemployment is more than 32%, and it is above 64% for those under the age of 35. More than half of the country’s 60 million people live in poverty, and more than 20% are food insecure. Still, it would be wise to note these precursors: high unemployment, income inequality, rising poverty levels, and more, as these are the kindling for civil unrest.
Civil unrest can spin out of control in hours, last for days, and has a chilling effect on recovery efforts as foreign investors seek safer countries for their investments. If you aren’t caught up in the violence or a victim of the violence, your ability to shop for anything you need ends with large-scale unrest. Gas stations and stores close, distribution channels are halted or disrupted, and businesses in and around affected areas shut down entirely and go in asset protection mode.
Looting mobs function from two perspectives: desperate need or greed. Whichever they do operate from, the results are the same. They put you on lockdown, high alert, and require you to be self-sustaining and self-sufficient. Crime increases exponentially along with high unemployment and civil unrest. The regular first-responder services you depend on like police, fire, and health services cease to function and neither contain the violence nor put out the fires.
From a macroeconomic perspective, each one-point increase in the unemployment rate results in an estimated 37,000 deaths. According to the economist Gregory Mankiw, 3,300 more people are sent to state prisons. There are 920 more suicides, 650 more homicides, and 4,000 more people are admitted to state mental institutions. The stress of unemployment, increased drug and alcohol abuse, and the huddling together of people in more concentrated domestic living arrangements creates the kindling necessary for minor altercations to combust into larger fires quickly. During the great depression, unemployment hit almost 25%. By Mankiw’s calculations, a 25% unemployment rate in today’s society would equate to roughly 925,000 deaths and 51 million people unemployed.
As we witnessed from the lockdowns, other service sectors are impacted. When there is no paycheck coming in, people turn to preparing their food or going hungry. Restaurants hire fewer workers. The travel and leisure sectors of the economy implode. Businesses scale back operations as product sales slump due to rising costs and demand. Companies adjust to the equilibrium price and the equilibrium quantity based upon the fluctuations in demand and price. When output drops, layoffs are inevitable. During a national financial collapse, lower aggregate demand means that firms reduce production and sell fewer units. So, unemployment rates can ripple across industries and jump by tens of points in just a few days. Unemployment rates can cause a skyrocketing demand in one area and a zeroing out of demand in another. Runs on some products with service demands bottoming out can result in dramatic oscillations in prices. It’s happened before, and it will be one of the first signs that we are in the early stages of a collapse.
As mentioned, businesses scale back operations as product sales slump due to rising costs and demand. Companies adjust to the equilibrium price and the equilibrium quantity based upon the fluctuations in demand and price. Runs on some products with service demands bottoming out can result in dramatic oscillations in prices. In a stable economy, many prices are said to be sticky. That is to say that they make minor, sluggish adjustments in response to supply or demand factors. However, in a faltering economy, prices can rapidly increase on some products while staying the same or sticking on everything else.
The cost of one product may hold steady even while another product increases dramatically and the currency is worth less. As the money decreases in value further, eventually, all prices rise. Farmers and manufacturers find that they can neither sell their product at higher prices nor afford to bring it to market. During the Great Depression, factories closed at specific periods, and farmers let their crops rot in the field rather than give it away for free. The price of toilet paper or staple foods could shoot up overnight.
You will see this in your wallet. Prices for staple goods will rise. Sales to attract customers will become more common, but they won’t actually reduce the price. You will start to see people panic, and the inventory of some categories of consumables will dwindle.
America already has a homeless problem. We see the homeless in pictures, huddled together in makeshift tent and tarp cities, and there are homeless people that we don’t see who couch surf or sleep in their cars. As the economy collapses and unemployment skyrockets, there will be evictions. Local, State, and Federal efforts to curtail or stave off those eviction numbers will be too late for many and not lasting enough for others.
Already there is no state, county, or city in the country where a full-time, minimum-wage worker working 40 hours a week can afford a two-bedroom rental, a report from the National Low Income Housing Coalition showed. A full-time minimum-wage worker can afford a one-bedroom rental in only 7% of all US counties — 218 counties out of more than 3,000 nationwide.
People will move in with families and friends in some cases. This will strain community resources when a three-bedroom house now houses a dozen or more people. Owning land is the only insulation against homelessness, but most people are not in a position to do this. Only 37% of people own a home without a mortgage, and having a mortgage is not ownership when you no longer have the means to pay it.
Government programs that halt evictions or support homeowners or renters can only last a few months into a nation’s economic collapse. When the country’s credit line evaporates, the first things to go will be programs that support people. The occurrences of squatting will increase. Some buildings and homes will be largely vacant at the same time tent cities will spring up near public water resources. Legal, legitimate enforcement of evictions for non-payment will also stop, so many will be living in their homes or apartments without paying rent or mortgage. Sherriff’s departments will be elsewhere deployed to protect assets and the further unraveling of infrastructure. Despite many staying in their homes or apartments, homelessness will increase. Large-scale migrations are probable as people seek out resources and work.
You will know when homelessness will be a problem in a few months by the number of programs established to try and keep people in their homes and apartments. All of those programs have an expiration date, and they merely attempt to stretch out the process of systemic failure to lessen the critical blow.
The onset of the Great Depression after 1929 left many U.S. farmers in financial ruin as prices dropped along with the dollar’s value, and they were left with vast surpluses of stock. In California alone in 1932, farmers unable to shift their stock lost nearly 3 million watermelons and left 22.4 million pounds of tomatoes to rot in the field. Unemployment and poverty soared. Even with a growing hunger crisis, farmers could not afford to bring their harvests to market, and the people could not afford the sticky or increasing prices. So, it isn’t necessarily that the production of food decreases. It is more that people can no longer afford the food produced, and it becomes not worth it to force the product to market because of rising costs.
Shortages or rumored shortages in any food group will cause runs on the stores. This will drop inventory levels and lead to additional deficiencies of a substitute or alternate food. A run on beans may lead to a run on rice, leading to a run on flour, sugar, cooking oil, or some other staple product. There is seldom a run on just one product. It’s more of a wave of runs that drop inventory levels and spike prices as price gouging and hoarding behaviors occur.
Your ability to find and purchase anything at the store will halt, at least for the near term. Though you may have money in the bank labeled and set aside for emergencies, it will be of little use to you. Any garden plants, fruit, or nut trees on your property or balcony will eventually be targeted if hunger levels rise too much. Your supplies may also be targeted, so it’s always essential to have your prepping supplies distributed in different places in your house and kept a well-guarded secret. Assumably, anyone who has seen your jars and cans is a trusted friend or family member that you have let into your house at some point. If that is the case, you may want to consider assisting them to strengthen your security. Even if you don’t, they’re less likely to turn on you or sell you out than a total stranger will. With food shortages come looting, theft, and raiding.
Highly publicized runs on stores precede food shortages. By the time you hear of the run on rice, you will probably be too late to get any. Still, it is an indicator of a wave of runs about to occur, and it’s the precursor to a more significant collapse in the food supply system.
Fires, illegal hijacking of power and water, and the inability to perform maintenance and repair will lead to wide-scale utility failures. When the power stops, so do the water and natural gas pumping stations. When the power stops, so does the trucking supply chain. Gas can’t be had, and deliveries can’t be made. If you’re running a noisy generator, you can expect every person in proximity to be peeking over your fence wondering if you have fuel or how they might ask you to plugin for a bit. At least one person is likely thinking of how they might take your power resource of a generator for themselves.
People will be desperate for food and water within the first week of an extended outage. You should be able to stay indoors for at least two weeks of an extended outage. If you live in a multiunit housing structure, you should be vigilant against potential accidental fires from neighbors being careless. You should also expect that they may come to your door seeking help. If you live in the suburbs or exurbs, you can expect neighbors might be wanting to pool resources. If you live in a rural setting, you can expect people to leave more populated areas and come your way to set up camp or simply pass through.
While the entire nation’s power grid might not fail, the failure of even one part of it will force millions of people into a frantic search for clean water and food. This will be exponentially larger if any natural disaster strikes during the same period. You will know when you are on the cusp of more extensive and extended outages when the utility failures begin to happen with greater regularity. When they are also compounded with failures resulting from natural disasters, a little push is all it will take before things fall over the edge.
Expect that the relative value of currency declines. Money in the bank is worth far less than goods, services, and skills. If you know how to hunt, fish, sew, repair, and so forth, those skills will be worth far more than currency. Rising costs will result in paper currency not being worth the paper it is printed on, quite literally. Cash is not king in a fallen kingdom.
History has many well-documented examples of people with a wheelbarrow full of worthless currency. Goods and services will increase in value. Most people’s emergency plan amounts to money set aside in a hidden place in their home or, even worse, in a bank account. In a bank or electronic account, the funds will be non-withdrawable. Even that stack of bills in your home will be of little value when the cost of food and water spikes to all-time highs.
While precious metals and jewels may assist you in a recovery phase, an ounce of gold or even a diamond doesn’t hold much value to a starving and desperate person. They might rob you of it for later, but they will have the same difficulty trading it for goods.
Finally, with the stores all closed and deliveries suspended indefinitely, you wouldn’t have anywhere to spend money during an economic collapse anyways. It might as well be under your mattress, as it will have little real value in a massive economic collapse. Even during the recovery phase, it could be replaced by a new currency backed by a new government. It may retain a fraction of its value if any.
You will know currency devaluation is on the horizon when banks or governments try to slow the withdrawal rate while prices are rising. You will know most obviously when people won’t take your money in exchange for essentials like food, water, or fuel.
A WORSE RECOVERY
After every economic collapse, some form of recovery comes. The government that emerges may look nothing like what you know now, and often they are more authoritarian and nationalistic, but some new form of government will emerge. Nations rise, and nations fall. Then they rise again. Their second iteration is never as grand as their first, and there is neither a guarantee that things will return to normal nor is there an assurance that things will be better. The calls for peace and a cessation of the mobs can lead to nationalistic, militaristic, or even totalitarian rules. In some areas, an almost feudalistic power emerges. Crime lords and warlords, and community leaders arm themselves and call the shots. They are not organized beyond their boundaries. Afghanistan is an example of the period after a collapse. Tribal lords rule within their borders, but there is no overarching national-level cohesive control.
In a post-recovery era in the U.S. where government, police, and military lose total control of some areas, expect citizens to band together in their makeshift militias. Laws on the books are largely ignored out of ignorance of them. Rights and protections are relinquished. That isn’t to say that they won’t one day return, but you shouldn’t expect them to be fully restored even in the recovery phase of a nation’s collapse.
Fortunately for us, history paints a clear image of what the economic collapse of a nation looks like. It breaks in very specific ways. As dismal and hopeless as currency collapse, unemployment, homelessness, and the rest of the aspects of a nation’s economic collapse may be, there are ways you can survive and even thrive comparatively to others. Likewise, the tales of how people survive and what they did to make it through provide us with a clear path to follow to enhance our own ability to survive.
Prepping for a non-natural disaster is slightly different than prepping for natural disasters. There is much more community-building work involved, which I will touch upon in the next video in this two-part series. In part two of this series on surviving a nation’s economic collapse, I will tell you solutions you can plug in today to make a difference in the future. I’ll give you practical advice on what you can do to survive and possibly even emerge from the collapse stronger and more self-sufficient.
Subscribe to this channel for that video, and please let us know if you have ever survived a nation’s economic collapse. What did you do to survive?
As always, please stay safe out there.