My response to economic pessimism

rich pockets My response to economic pessimismMy simple response to economic pessimism is to simply continue doing what I believe is the right thing with my finances. It isn’t a head in the sand approach, I do watch and think about the debate, I simply refuse to get all worked up and worried about Peak Oil and other crises because I think that my economic approach makes sense even in worst-case scenarios. I’d certainly think differently if I was a multi-billionaire. I’d have a lot more to lose.

That’s the argument that Abnormal Returns makes.

If we, or our readers, were in the same boat we would probably have exactly the same reaction to the world around us. Their wealth was largely derived under different economic conditions, while the world today has changed substantially. However well-reasoned their arguments might be, they are not infallible. The question is whether you should heed their advice?

Following the chain of references in the article back to the issue of Fortune which sparked the discussion, I find this quote:

An economic tsunami is about to hit the global economy as the world runs out of oil. Or a coalition of communist and Islamic states may decide to stop selling their precious crude to Americans any day now. Or food shortages may soon hit the U.S. Or he read on a blog last night that there’s this one gargantuan chunk of ice sitting on a precipice in Antarctica that, if it falls off, will raise sea levels worldwide by two feet[...]

All questions of paranoia or chicken-little syndrome aside, what steps can I actually take to protect myself from disasters of this magnitude? Well, I can start by asking myself, “will being in debt and being dependent on a single source for my income help or hurt matters?” Obviously, it will hurt. Debt and lack of diverse income streams are not a good idea in turbulent times. Can I do anything else to help protect my family? I can follow the advice I gave in my post on emergency kits, and I can enjoy the relative peace and prosperity my family is currently enjoying.

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1 comment to My response to economic pessimism

  • [...] The debate about private accounts proposed by the Republicans may be dead, but the essential problem is the same. With the current (negative) rate of savings in the U.S., it is difficult to see how we will grow the economy to the booming levels we’ll need to support the increasingly older and retired population. As I discussed before, I refuse to get all worked up about this issue, since I believe that I can’t personally do much to change society as a whole. What I can do is personally save, and teach my children to do the same. The article puts it very well: There’s not much we can do about dictating the work habits of people in 2020. They’ll choose their own work habits, and they’ll pass their own laws to try to influence each others’ work habits. That means the only thing we can do now to address the underlying crisis is to encourage saving, because saving means investment, and investment means that when 2020 comes around we and our descendants will have more and better machines and factories to produce more and better food and aspirin and television sets. [...]