Financial Planning for a US default

[Clark Griswold]

I've considered what I could do personally in the event this happens and have come up with a few palatable options but I've started to consider trying to roll a fair amount of liquid savings in dollars to a foreign currency in the event the worst happens. Besides this and maybe putting it into my mortgage, buying gold/silver, or purchasing property; I can't think of any other way to protect this part of my investments. Has anyone else come up with any ideas if they (take your pick on whom to blame) trigger a default?

[Fuzz]

Which foreign currency? My limited understanding of the monetary markets, leads me to think if we default and the dollar tanks in value there's probably not going to be many that are still worth anything?

Edited October 9, 2013 by Fuzz

[Clark Griswold]

Thinking of a basket of currencies: Euros, Canadian Dollars, British Pounds, Japanese Yen, Swedish Krona, etc... probably thru an ETF or a foreign currency CD. This is only an ejection seat option as I agree that if we defaulted, it pretty much is the financial equivalent of a zombie apocalypse coupled with a Sharknado and it might only save some value but it might preserve more than just having dollars

Edited October 9, 2013 by Clark Griswold

[TreeA10]

Interesting question. My wife and I were discussing this last night. I'm not sure how bad you think the economy might get but whatever you decide on has to be considered to be of value to both parties if you want to exchange it for goods or services with another person. For instance, going full Mad Max here in the U.S., a chicken might be more desirable to another person than a wad of Krona. Gold is always a universal crowd pleaser.

[HeloDude]

I've considered what I could do personally in the event this happens and have come up with a few palatable options but I've started to consider trying to roll a fair amount of liquid savings in dollars to a foreign currency in the event the worst happens. Besides this and maybe putting it into my mortgage, buying gold/silver, or purchasing property; I can't think of any other way to protect this part of my investments. Has anyone else come up with any ideas if they (take your pick on whom to blame) trigger a default?

Explain to me how if the federal government did not raise the debt ceiling that this would automatically equate to default? There's more than enough tax revenue to pay for the interest payments on the debt. The government would just have to decide what to pay for with the tax revenue coming in less the amount we borrow. I'm not saying there wouldn't obviously be an ecominc hit (as both sides of the coin rely on us constantly spending/borrowing)...but default is not the correct word.

But really...if you're seriously worried about an economic meltdown right around the corner then I think you should stop worrying about currency and start worrying that you don't have enough guns, ammo, food, means to travel/bug out, etc. The folks that would be least affected by collapse are the guys living almost entirely on the land in remote areas/up in the mountains.

[TreeA10]

Maybe the house should pass a spending bill expressly to service the debt. Once again the Senate will not take it but it will certainly be another difficult position for the Democrats to justify.

[HeloDude]

I'm pretty sure there's already a law stating that the government must always pay our debt payments first. Then again, there is a law to deport illegals, so...

[Clark Griswold]

Explain to me how if the federal government did not raise the debt ceiling that this would automatically equate to default? There's more than enough tax revenue to pay for the interest payments on the debt. The government would just have to decide what to pay for with the tax revenue coming in less the amount we borrow. I'm not saying there wouldn't obviously be an ecominc hit (as both sides of the coin rely on us constantly spending/borrowing)...but default is not the correct word.

But really...if you're seriously worried about an economic meltdown right around the corner then I think you should stop worrying about currency and start worrying that you don't have enough guns, ammo, food, means to travel/bug out, etc. The folks that would be least affected by collapse are the guys living almost entirely on the land in remote areas/up in the mountains.

I don't think America will devolve into Bartertown run by Master Blaster but I think that a default, either by passing the deadline on the 17th and not being able to fulfill all obligations, not just interest on our debt, would cut the purchasing power of the dollar at least by a third. It would be a default in the mind of the market even if the interest would be paid. The day after for a default would be like others except with a 1000 point drop in the market and credit cards no longer being accepted but debit transactions still going thru. Basically, we're still functioning just operating with less money and credit no longer accepted, I just want to limit the damage that I am coming to believe is going to happen. I watched this movie a while ago, Collapse, and while I think the subject of the film, Michael Ruppert and his theories have to be taken with a big grain of salt, he addressed the idea of survival on the land following the collapse, basically if you're not already there it won't help. As I live in the 'burbs, I am thinking about preparing for the Great Recession part 2 and if it gets to Mad Max, it will be better to be in an area you know with people you know with strength in numbers, but I put the chance of that very very very low.

Edited October 9, 2013 by Clark Griswold

[El-Fist]

I think we are discussing some pretty extreme scenarios here. I agree, I can't point to a time in our relatively young history that the country has had such a distrust and lack of confidence in its government and elected leaders. Our elected officials have become so fundamentally divided that government has (literally) ceased to function. That is pretty scary.

I think it is extremely unlikely we will see ourselves fall into the Mad Max scenario. This country has seen some pretty horrible and uncertain days in the past. Historically, America has pulled together and plowed through the hard times and uncertainty to come out ahead. I think that will be the case here, as well. For better or worse, we are still a "free" society and not some third world primitive civilization.

Back to the original thread topic and investing:

I don't think that much in investment strategies should change. I think the basics still remain. It is never wise to put all of the eggs in one basket. Identify what risk you are willing to accept and invest accordingly. I think most financial experts would recommend staying diversified, even in uncertain times. Occasionally, opportunity arises during times of uncertainty.

Also, if the dollar collapses, foreign currencies and markets will fall as well.

[Fuzz]

I'm pretty sure there's already a law stating that the government must always pay our debt payments first. Then again, there is a law to deport illegals, so...

Yes the 14th Amendment say the public debt won't be questioned. So discussing this with a friend we came to the conclusion that a default is possible in the scenario we are going through. From what I remember, in years past, whenever the debt ceiling has come up there has always been a budget or CR that extended past the debt ceiling date, therefore the President was authorized to continue spending money but under the 14th Amendment, he would have to prioritize the debt so it was paid first then what ever was leftover from revenue would fund the rest of the government. Today however there is no CR or Budget therefore the President can only spend money on the things the Congress has authorized him to continue spending on (i.e. Pay Our Military Act ect.). So when the debt ceiling comes and he can no longer borrow money and isn't authorized to spend any of the tax revenue what happens?

We also came to the conclusion that since the 14th Amendment says the public debt will not be questioned that Congress is obligated to either A) pass a bill authorizing the President to spend the tax revenue or B) in the event revenues aren't enough to cover the debt (we are really fucked if we get to here), they must authorize the debt ceiling to be raised to continue paying the debt.

[MilitaryToFinance]

There is a key component to the debt limit that most people overlook, it applies to the face value of the debt issued. So theoretically you could issue a new bond at a crazy high interest rate and take in far more revenue than face value to pay off debts and roll existing obligations. For instance issue $50B of 10-year bonds at 15% coupon. Since the 10-year yield right now is around 2.68% your $50B in face value bonds would actually get sold into the market for somewhere north of $250B. You can then use that money to pay existing obligations and roll $50B of expiring bonds out. Obviously the downside to this method is the government incurs a large interest burden in the out years but that is arguably better than the ramifications from a default.

[Clark Griswold]

Restart on thread.

Only tangental to the original topic of this thread (USA gov debt default) but I feel sorry for the Greek people (everyday man on the street) having to wait and see if their money and personal wealth is about to evaporate via freeze & seizure of deposits made in Euros.

Greeks Line Up at Banks and Drain ATMs as Tsipras Calls Vote

Slow motion run on the banks.

Minor edit.

Edited June 28, 2015 by Clark Griswold

[billy pilgrim]

I am no financial expert - however I was under the impression that real estate was an excellent hedge for market instabilites. The weak to sometimes negative correlation between the two should lead to real estates gains when the market goes down. (From Random Walk Down Wallstreet).

The United States is the largest country economy with a GDP that equals 20% or so of the world. If it gets THAT bad, I think you will find yourself better off with firearms vice a stack of gold bricks.

[Clark Griswold]

I am no financial expert - however I was under the impression that real estate was an excellent hedge for market instabilites. The weak to sometimes negative correlation between the two should lead to real estates gains when the market goes down. (From Random Walk Down Wallstreet).

The United States is the largest country economy with a GDP that equals 20% or so of the world. If it gets THAT bad, I think you will find yourself better off with firearms vice a stack of gold bricks.

True if we go under or get really really bad it could bad: crime spike - riots - mass refugee movements - political instability . Thankfully, not happening and while I think Greece deserved a haircut on their debt for more reforms, they bit the bullet and didn't default which would have been very disruptive.

Real Estate can be a good investment but it has its ups & downs too, my house value is down around 10% and the neighborhood is stable just lost value, I think there is certain real estate now, commercial - farm land - waterfront - etc... that is where you can safely store your money via equity but residential is a crap shoot now

[sky_king]

Weapons, ammo, water, MREs and medical supplies. If the US defaults, that's where the value is going to be. Everything else will be in Chaos. Your beachfront home will only have value if you can defend it.

[Clark Griswold]

Weapons, ammo, water, MREs and medical supplies. If the US defaults, that's where the value is going to be. Everything else will be in Chaos. Your beachfront home will only have value if you can defend it.

True but let's face it one man and his family defending his patch of dirt will not last against the roving hordes of sociopaths cut loose when or if the shit hits the fan. If it does go zombie apocalypse your only hope is in a group of like minded people, armed to the teeth in a defensible position with access to resupply. If not, no matter how much you have you will just get worn down. But the chances of this are slim to none, what I think is likely is you and/or your neighborhood could be own your own for a few days while order is restored so planning for that (not to a tin foil hat degree) is appropriate.

What exactly that level of preparation is anyone's guess but my plan has always been be able to survive for a week without help, keep adequate ammo for the 9mm and AR-15 handy with some real cash on hand and enough gas for a full tank so the family truckster can get the hell out of dodge to a safe place at least 100 miles down the road if you have to abandon the house or city.

I saw the LA riots from a nice safe house across the country then saw watched Baltimore again from safety and comfort, I think it's good to be prepared but instability leading to disorder in America tends to happen (unfortunately) in concentrated communities of disaffected people that get antagonized then encouraged by rabble rousers, punk college kids looking for action, gangs and some media outlets.

Edited July 26, 2015 by Clark Griswold

[Jaded]

You are worried about "punk college kids looking for action"? Your best investment might be buying some time with a psychologist.

[Fud]

True but let's face it one man and his family defending his patch of dirt will not last against the roving hordes of sociopaths cut loose when or if the shit hits the fan. If it does go zombie apocalypse your only hope is in a group of like minded people, armed to the teeth in a defensible position with access to resupply. If not, no matter how much you have you will just get worn down. But the chances of this are slim to none, what I think is likely is you and/or your neighborhood could be own your own for a few days while order is restored so planning for that (not to a tin foil hat degree) is appropriate.

What exactly that level of preparation is anyone's guess but my plan has always been be able to survive for a week without help, keep adequate ammo for the 9mm and AR-15 handy with some real cash on hand and enough gas for a full tank so the family truckster can get the hell out of dodge to a safe place at least 100 miles down the road if you have to abandon the house or city.

I saw the LA riots from a nice safe house across the country then saw watched Baltimore again from safety and comfort, I think it's good to be prepared but instability leading to disorder in America tends to happen (unfortunately) in concentrated communities of disaffected people that get antagonized then encouraged by rabble rousers, punk college kids looking for action, gangs and some media outlets.

One thing that caught my eye in this post was being prepared for a week. I'm not a "prepper" (not sure if I'm spelling that correctly) but I would follow what my Mormon AF brethren are already doing. Most of them I knew had plenty of guns and at least a year's supply of food. There are numerous companies who cater to this market and they have food that will last a very long time. I don't think the economy will get that bad, but if it did, I'd head to my family's land as soon as possible should the need arise.

[Clark Griswold]

One thing that caught my eye in this post was being prepared for a week. I'm not a "prepper" (not sure if I'm spelling that correctly) but I would follow what my Mormon AF brethren are already doing. Most of them I knew had plenty of guns and at least a year's supply of food. There are numerous companies who cater to this market and they have food that will last a very long time. I don't think the economy will get that bad, but if it did, I'd head to my family's land as soon as possible should the need arise.

Yeah - I think economic meltdown leading to total chaos is very low however it cost about $200 for my "prepping" so I figured I spent an amount appropriate to the chance for what I think could happen

Have a life preserver not a life boat if you think things are generally ok but could get bad for short periods of time

Sent from my iPhone using Tapatalk

[Clark Griswold]

You are worried about "punk college kids looking for action"? Your best investment might be buying some time with a psychologist.

Not worried about them, they're just playing radical revolutionary while in college before they move on to their upper middle class life via family connections and most likely the accidental privilege afforded by their birth, they are annoying and obnoxious but they themselves are not harmful, it's the bullshit they spew out to people born into horrible circumstances and grow up and are pissed for a variety of reasons, some valid but most not, at "the system", that concerns me. They infantilize them, tell them lies, half-truths and propaganda to make them angry, jealous, aggrieved and distracted from actually doing something about their own lives.

The West or America is not being destroyed from outside but inside, these are the cancers eating away at us.

[Jaded]

What.

[Clark Griswold]

Somewhat stream of consciousness and off topic but what the hell.

[HeloDude]

True but let's face it one man and his family defending his patch of dirt will not last against the roving hordes of sociopaths cut loose when or if the shit hits the fan. If it does go zombie apocalypse your only hope is in a group of like minded people, armed to the teeth in a defensible position with access to resupply.

What exactly that level of preparation is anyone's guess but my plan has always been be able to survive for a week without help, keep adequate ammo for the 9mm and AR-15 handy with some real cash on hand and enough gas for a full tank so the family truckster can get the hell out of dodge to a safe place at least 100 miles down the road if you have to abandon the house or city.

If you're going to say you have a plan, then I would say you need more supplies...and I imagine you could probably use a few more firearms and a few thousand more rounds of ammunition. But I definitely agree that the trick is be surrounded with other like minded/prepared people vs not.

As for bugging out, nutnfancy did a pretty good video on this topic not too long ago:

https://www.youtube.com/watch?v=vjK38SmrGSw

Edited July 29, 2015 by HeloDude

[Clark Griswold]

If you're going to say you have a plan, then I would say you need more supplies...and I imagine you could probably use a few more firearms and a few thousand more rounds of ammunition. But I definitely agree that the trick is be surrounded with other like minded/prepared people vs not.

I plan on not a total loss of order but spikes and concentrations of riots, criminality, etc. with my assessment that where I live now of that being low but be prepared to an appropriate level, flamethrowers and hand grenades are overkill but light arms are not. Just my opinion. Not a prepper just trying to be prepared.

Referencing the LA riots of 92 earlier and seeing the Korean neighborhoods and business defend themselves was an example to be learned from, don't start shit but certainly don't take it either.

Edited July 30, 2015 by Clark Griswold

[HeloDude]

Not a prepper just trying to be prepared.