Friday, August 12, 2011

Worst case financial Scenario

Hi! A reader just asked me what to do to prepare for a worst case situaiton in the next 48hs, what would you do this Monday if you knew that the roof wont rise in August 2nd? An interesting article could be, what would you do if you knew USA will default next week?

Hi Ferfal:
In any event a possible default of a Government, generally does not mean instant disaster. In recent years Turkey and Argentina declared default on their debt and the consequences for the population were very bad but not immediate.
The case of the USA is slightly different since it will imply the lack of salaries payment to public sector  employees.  Certain essential services like health, police, air controllers, firemen and the like, would have practical consequences and a striking effect on the population´s perception of safety and coverage.
The medium term effects  in the economy could be dramatic since the cost of financing (debt) would increase. All prices will go upwards. The subsequent deterioration of the economic situation would be inevitable. I would like to elaborate on this aspect in future comments.
Al in all and although this is not the first time that financial collapse is alarmingly near in the USA, the psychological aspects and impact, are worrisome for the American public.
In order to answer  your question, if a financial major problem is near, try to keep as much cash as you might get…. just in case.
If you have health problems, build up an inventory of medicines you need and keep back up of essential goods for every day consumption. Electricity generation is crucial. In February 2010, the hearthquaqk in Chile left hundreds of thousands of people “incomunicados” when their cell phones run out of batteries. Of course there was no electricity for days in certain areas.
In countries like Argentina gas and energy shortages could be a consequence of disrupted distribution services.
For the time being and as we anticipated a few days ago, this will not happen, an agreement was reached today (August 2nd) by the two major US political parties so, relax….and enjoy it, at least for the short run
A new world order is in preparation hopefully it will not be done by organizations like the Bildelberg Conference Group.

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