I watched Cramer on Friday and I listened to his talk, “One Year Later”, and I have to completely agree with him. But yet we have gone up and down, and on CBC comments like the following are written.
There is no recovery. the crash is imminent.
stock up on supplies and food.
the end is close
Move past the dead cat bounces, we are moving into the greatest depression. The western world is bankrupt. We are only going further into debt with all these taxpayer sponsered bailouts. This may be the biggest fraud in history
When I read such comments I just smile. My sister, who is a political scientist and economist, and I had a discussion on this topic. For those that don’t know my sister lives in Ecuador and has been there for the past decade. She has witnessed crashes, riots and just pure chaos. So I talked to her and asked if this was possible, because I sure did not believe it was.
Her opinion went along the following and I am paraphrasing and including my own opinions.
Riots, crashes and chaos are a reaction to people being unhappy regarding certain situations. The problem with people thinking about stocking up on supplies and food is that they are drawing the wrong conclusions and watching too much Hollywood. It is not rational.
Let’s say for the moment that a group of people decided to riot. The reaction would be that the police would immediately control the situation. Let’s say that the police are unable to control the situation, then the military will step in. And if there is one thing that has been shown time and time again, an adequate military can control a situation quite effectively. The military like in the Western world will have no problems putting a control on the entire situation.
Thus for argument’s sake lets say that the military is unable to control the situation, what results? Try Somalia. You get pure chaos and whatever you as an individual save will go to waste since you will not be able to fend off the masses. The idea that a single person can hamster and then fend of a population is absolutely ludicrous. In such a situation the more rational reaction is that the person who hamsters is taken out and shot on sight.
Ok now let’s go to the other side of the argument and consider that the military does get control. Will then there be the greatest depression? Maybe, maybe not. One can make the argument that dictators can get the job done, witness Pinochet. But the costs of that dictatorship can be very high and morally questionable. And in most cases with a dictatorship people suffer. So let’s say we have a dictatorship and you hamster away, you will most likely have everything taken away and if you were to struggle you would be shot on sight.
So in either case getting ready for the end and saving everything you have will result in you getting shot or having taken everything away anyways. The belief that you can somehow save yourself, while the rest of the world goes to hell in a hand basket is an illusion. And to believe that somehow buying gold is going to save you is yet another illusion because if the end is near and you have value it will be taken away from you in force.
Am I crazy? No, you need to read “The Wealth of Nations”, by Adam Smith and he talks about the need for taxes and justice:
Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and*23 extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary.
Adam Smith is very clearly saying that for one to posses, and keep those possessions you must have a civil society since it is that society that allows you to keep what you earned. If there is no civil society then you will not have protection and not own wealth. THUS, if the world is coming to an end you are going to loose everything you have since the civil society will come to an end as well. You can’t have one without the other.
So my suggestion to you readers who think the world is coming to an end. Get over it, no amount of planning is going to get you ready for it, because when it does come you have no idea what it will look like. And if see it coming, RUN! Run to the hills.
Otherwise when the market collapses, buy the stocks, wait and be happy!