Economic Collapse

empty grocery store shelves
Empty grocery store shelves

The term “Economic collapse” is often used in conjunction with other terms to indicate a period of financial turmoil. But what exactly is an economic collapse.

Economic collapse is a situation of total financial meltdown, with the GDP of a country or region sinking to zero. The term is often used as a description for the Great Depression, which lasted from 1929 to 1939.

The Great Depression was one of the most severe economic downturns in history and it cannot be explained by only one factor. However, two major causes of this global economic recession were: 1) America’s stock market crash and 2) Germany’s reparation payments.

What is an Economic collapse?

Basically, economic collapse is any of several different bad economic situations, ranging from a brief, severe recession with high unemployment and high bankruptcy rates, to a complete breakdown in normal trade. Some economists use the term “financial crisis” to refer to economic collapse.

Causes of Economic collapse

Trade Collapse

There are a number of things that can cause economic collapse, but there are a couple of key factors that are most common in the United States and around the world. First, there is a general breakdown of trade. If a major country is experiencing an economic breakdown, many companies that deal in goods and services will cut back on their business, and if this is the case, the money needed to conduct trade and make loans becomes very difficult to get. At this point, credit is nearly impossible to obtain, and businesses are likely to close, reducing the supply of products and services available to consumers and lowering the prices they charge.

Political instability

Second, there is an economic collapse due to political instability, especially in the United States. A large number of businesses and government agencies may fail to meet their obligations, resulting in massive debt owed to financial institutions that have to be collected from the businesses. While this debt will most likely have to be repaid, it will also be much higher than usual, making it harder for companies to pay their debts.

Natural Disaster

economic collapse
Town destroyed by natural disaster

Third, there is an economic collapse due to natural disasters. In the case of a hurricane, pandemic or earthquake, people who lose their homes and their belongings will need to recover from these losses.

Long term effects

Long-term economic disaster is also caused by a breakdown of the money system, as the government fails to pay its bills or companies that fail to keep up with their payments. Because the money supply is limited and because interest rates are extremely high, the money supply cannot expand to match the rising demand for it, causing the value of the money to fall. This leads to inflation, which causes the price of goods and services to rise, and it also makes it difficult to obtain loans. The first sign of an economic collapse is the onset of inflation. After the price of commodities increases, more people and businesses are unable to purchase them. As the prices continue to rise, more people and businesses become unable to purchase the same goods.  As the prices rise, the scarcity that was once apparent disappears, and the supply of goods decreases. If the supply of goods is greater than the demand, people and businesses who have lost money because of the collapse will attempt to regain that money by selling off those goods to other businesses or individuals, which causes the process of inflation once again to increase, making the situation even worse.

Preparing for an economic collapse

  1. Start an emergency fund and don’t touch!  If you feel the collapse is immediate then an emergency fund may not be possible but for long-term preparedness, an emergency fund is a must.  Inflation will cause the funds to be worth less than before but any money is better than know.
  2. Stockpile essentials including food and necessary household supplies.  If the supply lines are interrupted then essentials like food, toilet paper, cleaners, etc will become scares and having a supply could mean the difference between surviving and not.
  3. Learn basic skills that can help you weather a crisis like growing your own food, basic carpentry, etc.  If you become unemployed and unable to find a job then you will have the free time to do these things.
  4. Diverse your financial portfolio.  We all hear about investing in gold and silver and for an economic collapse, this is a great idea.  First, because they often rise in value during a financial crisis, also because gold and silver that is something that can be kept at your home ready for immediate use versus stocks or bonds that needs to be sold.
  5. If your planning long term than getting rid of your debt is always a good idea for good advice keep up with the expert on this Dave Ramse and check out his youtube channel below.