Financial Education and Survival – Is the United States Federal Reserve Dying?

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I have written on this subject before. Here is my prior post on this subject from July 2020 if you haven’t come across that yet on my website. This post will give you a good bit of background on this topic.

At the time that I am writing this, it is just after the Labor Day weekend of 2020. We are less than 2 months away from the Presidential Election that happens on November 3, 2020.

I have personally not been on this planet for very long, but I don’t recall seeing such an atmosphere in this country. Some that I know that were in NYC during the race riots and other issues in the 1970s say it is similar to that – possibly worse. Right now, there are headlines stating that the Democrats will riot and protest if they don’t win – essentially throwing a nationwide tantrum until they get what they want, despite the outcome of the elections. Maybe it is me, but that doesn’t sound like a Constitutional Republic – I could need to refresh my memory on that though. To me, it sounds more like bullying.

I was trying to keep my personal politics out of this. If you are not of my same political affiliation or beliefs, that is fine – you are still welcome here (I would like to request though that any disagreements are done in a respectful manner of the other person’s perspective though). However, I think that considering the things happening in the USA today I can’t really stay away from it any longer.

It seems whether one is Republican or Democrat, no matter who wins the White House in November will have the other side fearful of their future. Seeing the videos and headlines and other things across the main stream media and social media, it isn’t difficult to see why.

I am a Republican and a millennial, which makes me different from the majority of the generation. As I understand it, my generation is primarily Democrat and far left, socialist level of democrat.

I believe in capitalism. Is it perfect? Certainly not.

I believe in my freedoms provided to me by the US Constitution and the Bill of Rights.

I believe big government is dangerous and that Ronald Reagan was right when he said the scariest sentence is: “I’m from the Government, I’m here to help.”

I believe that the Patriot Act that passed in Congress after the 9/11 attacks was a way to chip away at our privacy in the name of “security”. Clearly the words of Benjamin Franklin weren’t considered in that. The quote I am referring to is: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

I believe in the second amendment. I believe that regarding this, the citizens should have access to everything the US Government does. The reason why is because I believe the second amendment is what allows the citizens to overthrow a corrupt government and the military personnel that protect it. I believe that was the intention of the second amendment. However, I believe that one should know how those weapons work.

I sort of believe the Qanon group. I don’t have the time to fully investigate it on my own. I am at the point where I think it could be legit or crap. So I continue to watch and monitor. As far as I have seen, it seems that there is too much that can’t just be coincidence, but time will tell.

All that said, I believe that the result of the Presidential election in 2020 is essentially a vote for freedom or socialism – moreso than it was in the 2016 election.

I think there is the possibility that no matter who wins the White House in November 2020, there will be some kind of riots or uprising leading to another Civil War or Revolution – honestly, we are apparently due I think by 2026 for a Revolution according to that cycle.

What does this have to do with Financial Education and Survival?

I am glad you asked. I am getting to that, but felt the above “background” will help with the perspective I am coming from.

My college major was business. I graduated in December 2009 – the low of the 2008/2009 Great Recession as I recall, with something like $75k-$80k in student loan debt. I watched the stock market news channel(s) all day to see what was moving the markets. At this time, it is normal to see swings of multi-hundred point swings, if not thousand point swings in the DOW in either positive or negative direction on any given day. From what I have seen since the Great Recession, the majority of those swings are based on unicorns, smoke, mirrors, and warm-and-fuzzy feelings instead of actual valuations, hard numbers and financial health of the company itself. Depending on who sneezes that day, the DOW can move up or down by those levels on “anticipation” of something good or bad.

The Quantitative Easing programs used by the Federal Reserve to decrease the impact of the Great Recession added to the monetary supply, all of which went to the companies that essentially caused the crash of the stock and housing markets. Since then, the Federal Reserve decreased the Fed Funds rate to practically 0% with 0.25% interest as the top of that range. Therefore, the only place that normal people can get a return is in the stock market.

I personally disagreed with the Quantitative Easing programs utilized by the Federal Reserve. Essentially, I believe all that these programs did was kick the can down the road to make it “the next guy’s problem”. These programs were like a drug dealer (the Fed) giving the junkie (Wall Street) their next hit so they didn’t suffer the withdrawals of going clean. The problem is that the higher you go, the more significant the crash.

If you take out a $1 bill from your wallet – what guarantees its value?

The people I ask tend to say it is gold. They are wrong. Gold hasn’t backed the value of the US Dollar since Nixon “temporarily” took us off the Gold Standard in 1971. Hint: we are still “temporarily” off the Gold Standard.

So, if it isn’t gold, what guarantees it’s value? The value is guaranteed by the faith and good credit of the United States. This should terrify you if it doesn’t. Here is why:

The United States has a AAA credit rating. At the time of writing this sentence, the United States has a national debt of:

To put this into better perspective, because most don’t understand these terms or these very big numbers. This is like saying that a minimum wage worker has a credit card with no limit and about $1 million already charged on the balance of that card with the highest possible FICO credit score (800-850) across all credit rating agencies – and they keep adding to that $1 million balance on their credit card on a daily basis.

Beyond this, the United States became the reserve currency of the world after World War 2. All the “power” countries (UK, France, Germany, Japan, China, etc.) hold US Dollars.

What happens in the global financial world if the US dollar fails? As in, the paper it is printed on becomes worth more than the face value ($, $5, $10) printed on it?

In the 2012-2013 time frame I believe, Greece had banking issues. The banks had extended bank holidays that were announced last minute on a Friday just before closing (how convenient), and those with funds in those banks were only allowed to get 50 Euros out via ATM per day. People were lined up all day to get their 50 Euro allotment for the day. If the ATM ran out of Euros, you were out of luck for that day and you would have to try again tomorrow. Those that had safety deposit boxes weren’t able to access whatever was in those as I recall as a result of these bank holidays.

Eventually, the depositors (the people with checking and savings accounts) at those banks were given bank stocks in place of the funds in those accounts – those stocks were unable to be changed into Euros and those stocks slowly went to 0 Euros until the banks failed…..then you had 0 Euros.

But that won’t happen in the USA right? We have the FDIC and NCIA guarantees on deposits at banks and credit unions, respectively – right?

Well, what happens to that if the US Dollar becomes worthless? Due to being off the Gold Standard, we can’t go to the bank with a $1 bill and say convert this into the gold bar equivalent.

I believe in owning the hard metals of Gold and Silver – the physical metals, not the stock market ETFs.

I know you may be thinking: What about the crypto-currencies like Bitcoin?

I don’t fully understand the cryptos. I haven’t been able to fully investigate it. What I do know, it isn’t the crypto-currencies themselves I don’t trust, it is the exchanges I don’t trust.

Beyond this, let’s just consider for a moment that the US Dollar fails and the world is thrown into chaos. The way we conduct business completely falls apart. Would the internet still be working? If not, and you are fully into crypto-currencies, I don’t know how one can utilize those without the internet. That is why I trust physical gold and silver more than the cryptos, but that is me and what I am comfortable with at this time.

How do I know these things? I learned it in college for my business degree, but I also continue to read and learn about the economy and how money and the financial system works.

Am I an expert? I don’t think so. There are plenty that know far more than me. I learn from them through their books, YouTube videos, or whatever else I can find. I am sharing what I know with you. But the way I see it, you also need to learn how the economy and the financial systems work for you to make the best decisions for you and your family or survival teams.

Many things are difficult to explain in this written format, so the things that I can make more “universally understood” in this format, I will and have used earlier in this post. I have personally learned that one learns and understands more based on one’s own discoveries. Like the saying goes: “Great teachers tell you where to look, but not what to see.” My hope is that I provide enough information to peak your interest and help you to do more research on your own to find your own truth.

Before the Coronavirus pandemic that literally shut down the world through global lockdowns for about 2 months, we knew that the majority of the population – at least in the United States – had little to no savings. Those that did have savings didn’t have a way to access an emergency $1,000.

I don’t remember if this was the case before the 2008/2009 housing crash and Great Recession. If this was not the case, I think that the 2008/2009 crash was part of it as college students graduating moved back in with their parents with epic student debt (which has continued to grow). This crash also caused the loss of value in retirement accounts and pension funds, affecting those already retired. Those at the tail end of their careers continued to work to maintain their household costs and the additional members of the family that moved in (like supporting aging parents and debt-ridden young-adult children). In some cases, I have heard that the young adult children got married and started having children in that household.

I have no animosity toward the graduated college students that moved back in with their parents. I was one of them. I am sure there were many that were the adult child in the basement playing video games all day and not doing some kind of job to pay any bills. I wasn’t one of them. I was working. I was working an average of 60 hours a week.

I could have easily gotten my student loans to reflect my income, but I didn’t. Like I said in a prior blog post, my student debt was a big number for me – somewhere around $75k – $80k when I graduated, with the lions share with a Sallie Mae loan that had daily compound interest. I paid my parents what I could toward my living at home – usually about $500 a month. Not a lot, but I wasn’t there much except to sleep, shower and do a load of laundry every now and then. The rest of my money went toward other bills, mostly my student debt, which was easily the equivalent of a mortgage payment. Over time, I paid higher rent as finances allowed.

I never looked at the total balance – it was too overwhelming and made it seem impossible to conquer. So I focused on one loan at a time. When I graduated, I had one loan that was about $1,200. I had that saved up, so I paid that one off in full before it gathered more interest. One down, and I think at that point there were about 6 more to go. The ones that remained, I paid the minimum payment. However, the next lowest total value, I added an additional $20 to the payment. If I was able to put more into that payment, I did. When I got a tax return, the full amount was paid toward that Sallie Mae loan with the daily compound interest – always, no exceptions. It was the same if I got a bonus check from work – it always went toward paying down my student debt.

Since the Sallie Mae loan was considered a private loan, I was able to re-finance it at my bank. It went from 8.75% daily compound interest to about 3% simple interest. That simple interest was variable, and I got it just before the Fed started to increase interest rates after the Great Recession. Once I got that loan re-financed not only at a lower interest, but at simple interest, it was SO MUCH EASIER to get that loan to go away.

When all was said and done, I paid my last student loan in June 2018 – 9.5 years after I graduated.

When the Coronavirus pandemic hit, many were laid off or furloughed. How much money do you need to maintain your standard of living each month?

I try to live as simply as I can. Yes, there are conveniences I have for my enjoyment – like streaming services. But that is mostly it. I try to keep my rotating debt low. Right now, it’s basically my mortgage. I treat that similarly to my student loan debt – I turn it into my personal game: “How fast can I pay it off”.

The less debt you have, the more free you are. You don’t have those debt obligations to meet every month. As I said, I am not completely debt free, but I am working toward that as fast as I can. I setup my budget to get me debt free as fast as possible.

Debt Free Survival

For many, being debt free seems so far away it seems impossible. I have been there, and that was why I focused on one student loan at a time. Those amounts broken down were easier to focus on reducing in a more possible way – at least in my mind.

Part of my budget is setup toward investments. I do have money in the stock market – it’s the only place to get a decent return on investment by comparison to the bonds and other saving account modalities.

Do I trust the stock market? No.

I haven’t trusted the stock market since the 2008/2009 crash and the Federal Reserve started their Quantitative Easing programs. I don’t understand the small nuances of what is happening in the stock market, but my gut has been screaming “Danger Will Robinson” and red flags have been flying ever since. Everything I see in the stock market to me is smoke & mirrors, creative finances, and based off of warm-and-fuzzies instead of the financial health and capability of the companies themselves.

I believe the Federal Reserve’s actions to avoid a crash was a mistake. I believe that they made the issue worse. As bad as the crash would have been if the Fed let the economy crash in 2008/2009, if the Fed allows the economy to crash and purge as it should, (which I personally doubt they will to the best of their ability), it will be many times worse than it would have been if they allowed it to run its course in 2008/2009.

Because I believe this, I do what I am able to do to prepare myself and my survival group to live in the event of such a reality. The way I plan for it, I prepare for worse case scenario. In my case, I believe that would be that the US Dollar goes belly up and becomes worthless, creating a global collapse in fiat currencies and mass company failures globally with the internet and all modern conveniences of technology and other creature comforts being unavailable.

Considering the millennial and younger generations dependence on technology, that is pretty terrifying on its own. However, if the worse case scenario I prepare for was the case, what do you have readily available – food, supplies, etc. – that you can live off of? How long would it last you? Do you have skills or items to barter for things that you need? Do you have weapons or other forms of protection and security?

We got our answers during the Coronavirus pandemic. However, I don’t think people have used that information to help them build reserves and prepare for a potentially worse case scenario.

No one (I don’t think) wants that worse case scenario to happen. However, I think it’s possible. Perhaps it will not happen. Perhaps it will.

But let’s suspend current reality for a moment: If my worse case scenario was to happen right now, are you ready for that?

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