If the US dollar fails, are stocks safe?

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TranceLordSnyder
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If the US dollar fails, are stocks safe?

Post by TranceLordSnyder »

Lets keep political discussions out of this and purely talk facts and numbers. So I've been plugging away at saving as much money as possible in the form of stocks and bonds, as I'm sure the rest of you have been. Unfortunately, I have my doubts about the US economy with our National debt getting larger and larger. If the US dollar were to collapse or lose a large portion of its value because we print too much money, are stocks safe and bonds safe? Should I be considering more foreign exposure than a target date fund provides? What about gold and silver?

I get to listen to a lot of these doom and gloom stories from many of my family members, and it makes you think about the economy and what could happen. It's hard to imagine the US economy failing, but I think it's definitely possible. What investment options would be wise to go with to protect some of my assets? Or is this completely nonsense to even think about, because if the economy fails, would an institution like Vanguard even continue to exist? Thoughts and opinions are appreciated!
bhmlurker
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Post by bhmlurker »

First, you'll want to qualify what constitutes as a currency "failure". 50% loss of value? 75%? 90%? Once you have that definition, look at past examples of currencies that met that criterion - what happened then?
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fredflinstone
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Post by fredflinstone »

I think the market is better than you or me at judging the probability that some kind of financial catastrophe will occur. If that's the case, then we should just set our asset allocation and stick to it.

The fact that investors are willing to buy 30-year treasuries for less than 5 percent interest suggests to me that the market is not all that concerned about the risk of hyperinflation or a collapse in the dollar. I am skeptical of anyone who thinks he knows better than the market what the future holds.

Indeed, a few people think deflation is a greater threat than inflation. Who is to say that they are wrong. Not me.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
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Post by Sheepdog »

I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
Time is the school in which we learn, time is the fire in which we burn.~ Delmore Schwartz
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TranceLordSnyder
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Post by TranceLordSnyder »

Sheepdog wrote:I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
I thought of that a bit myself. What if this is just some ploy by a group of people to get gold and silver prices to fly through the roof, which seems to be happening, and then they sell, make a killing and laugh at all the fools who fell for their trap. Maybe I need to stop listening to these family members and just nod and laugh inside.
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Post by Alex Frakt »

If the US dollar fails, are stocks safe?
No.

OK, so let's get on to the actual question.

What are the chances of the dollar "failing" without warning within our investing lifetime?

Almost none and the scenarios where they would are so outlandish (alien invasion, massive asteroid strike, unstoppable plague, etc.) it's not worth talking about or can't be hedged against. Anyone who tells you differently is either selling you something, is ignorant of history and economics, or is letting their political ideology overcome whatever scraps of knowledge they do have.

Now you can, to some extent, hedge a long-term dollar decline against other currencies. If that is your concern, hold a healthy allocation to international stocks and non-dollar-denominated international bonds. Physical metals and commodity funds can also help. None of this is a straightforward solution. For example you have to decide what currencies will do better and, as we've seen recently, CCFs don't always follow spot commodity prices.
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Post by LazyNihilist »

Alex Frakt wrote: Almost none and the scenarios where they would are so outlandish (alien invasion, massive asteroid strike, unstoppable plague, etc.) it's not worth talking about or can't be hedged against. Anyone who tells you differently is either selling you something, is ignorant of history and economics, or is letting their political ideology overcome whatever scraps of knowledge they do have.
I have actually seen documentaries where a brave fighter pilot with the help of a scientist helped prevent a massive alien invasion. And coincidentally it was on the 4th of July.

And in another documentary, a bunch of oil rig experts had to land on an asteroid and blast it before it struck the earth. It was very moving that one of the old man actually sacrificed his life to save the earth. (Or the dollar in this case.)

How can you be dismissive of the impending disasters? :o
The strong do what they can and the weak suffer what they must -Thucydides
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TranceLordSnyder
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Post by TranceLordSnyder »

LazyNihilist wrote:
Alex Frakt wrote: Almost none and the scenarios where they would are so outlandish (alien invasion, massive asteroid strike, unstoppable plague, etc.) it's not worth talking about or can't be hedged against. Anyone who tells you differently is either selling you something, is ignorant of history and economics, or is letting their political ideology overcome whatever scraps of knowledge they do have.
I have actually seen documentaries where a brave fighter pilot with the help of a scientist helped prevent a massive alien invasion. And coincidentally it was on the 4th of July.

And in another documentary, a bunch of oil rig experts had to land on an asteroid and blast it before it struck the earth. It was very moving that one of the old man actually sacrificed his life to save the earth. (Or the dollar in this case.)

How can you be dismissive of the impending disasters? :o
I also saw those documentaries. Scary that we came that close to the end, isn't it?

:lol:


Thanks for the reality checks everyone. It's good to have an intelligent community here to talk to. Bogleheads forever!
zellballen
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Post by zellballen »

TranceLordSnyder wrote:
LazyNihilist wrote:
Alex Frakt wrote: Almost none and the scenarios where they would are so outlandish (alien invasion, massive asteroid strike, unstoppable plague, etc.) it's not worth talking about or can't be hedged against. Anyone who tells you differently is either selling you something, is ignorant of history and economics, or is letting their political ideology overcome whatever scraps of knowledge they do have.
I have actually seen documentaries where a brave fighter pilot with the help of a scientist helped prevent a massive alien invasion. And coincidentally it was on the 4th of July.

And in another documentary, a bunch of oil rig experts had to land on an asteroid and blast it before it struck the earth. It was very moving that one of the old man actually sacrificed his life to save the earth. (Or the dollar in this case.)

How can you be dismissive of the impending disasters? :o
I also saw those documentaries. Scary that we came that close to the end, isn't it?

:lol:


Thanks for the reality checks everyone. It's good to have an intelligent community here to talk to. Bogleheads forever!

On the other hand, we are entering a post-antibiotic world, a large solar storm could fry all of our electronic devices, the caldera in Yellowstone might blow, we are experiencing a massive species die-off, we don't have enough resources to give everyone on earth a middle class lifestyle (yet we are adding another billion people every ten years.) US/USSR very nearly started a nuclear holocaust. The nuclear threat is probably increasing. Luckily, I think we are good as far as asteroids for the next hundred years or so.
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Post by steve roy »

A little Devil Advocacy:

When I was at UC Irvine in 1970, I took a class that was all the rage:" The coming population bomb and worldwide famine." Summary of the class was, it was ALL OVER for Mother Earth no later than 1985. We were gonna have a complete melt-down, with worldwide riots and hundreds of millions starving, and governments collapsing right and left. Etc.

Funny. All I remember about 1985 was that it was Morning in America, we were in the front end of a market rally, and my wife was pregnant.

Moral: The End of Civilization is always around the next corner. Some day it might even be true. But if you're smart, you will heavily discount a lot of the Gloom and Doom.
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Post by zellballen »

steve roy wrote:A little Devil Advocacy:

When I was at UC Irvine in 1970, I took a class that was all the rage:" The coming population bomb and worldwide famine." Summary of the class was, it was ALL OVER for Mother Earth no later than 1985. We were gonna have a complete melt-down, with worldwide riots and hundreds of millions starving, and governments collapsing right and left. Etc.

Funny. All I remember about 1985 was that it was Morning in America, we were in the front end of a market rally, and my wife was pregnant.

Moral: The End of Civilization is always around the next corner. Some day it might even be true. But if you're smart, you will heavily discount a lot of the Gloom and Doom.
I've heard the 'population bomb' miscalculation argument many times before, but it is irrelevant. I'm glad some alarmist book got the time frame wrong, but since 1985, species continue to massively die off, human beings continue to replicate on an exponential path, we were a phone call away from nearly eradicating the earth's population over a political dispute, microbes are kicking our ass in the evolutionary arms race, the caldera in Yellowstone could explode, there are millions of people around the world who want a nuke to go off in NYC, a solar storm could wipe out our electronic infrastructure. It is reasonable to be somewhat concerned about these things.
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Post by digit8 »

I go back and forth on this with various....um, extremist viewpoints, and I've yet to hear a good counterargument to my original response. In a world where the dollar has no value, stocks are worthless, and bonds less so, why would I assume any other investment would in any way shield me?


"It all goes to h*ll" scenarios are unlikely to me. "It all goes to h*ll except this-or-that investment class" seems borderline impossible.
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The Recent History of the Dollar

Post by bobcat2 »

TranceLordSnyder writes.
If the US dollar were to collapse or lose a large portion of its value because we print too much money, are stocks safe and bonds safe?

Hi TranceLordSnyder,

Between early 2002 and late 2008 the dollar lost roughly 30% of its value. Did that bother you? If it didn't, why didn't it bother you? And if a roughly 30% drop in value didn't bother you at all then, why would a 40%-50% drop now bother you greatly? Since late 2008 the dollar has gone up and down in value, but is slightly higher now than it was in 2008.

Link to graph showing value of US$ from 1995 thru January 2011.
http://krugman.blogs.nytimes.com/2011/0 ... he-dollar/

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: If the US dollar fails, are stocks safe?

Post by grberry »

TranceLordSnyder wrote: If the US dollar were to collapse or lose a large portion of its value because we print too much money, are stocks safe and bonds safe? Should I be considering more foreign exposure than a target date fund provides? What about gold and silver?
May I rephrase the question? I will, because it could help you. A rephrasing of the question is:
Rephrased Question wrote: If the U.S. had massive inflation because we print to much money, are stocks safe and bonds safe? Should I be considering more foreign exposure than a target date fund provides? What about gold and silver?
1) Inflation Protected Securities (TIPS) are designed to be bonds that will largely overcome massive inflation (the taxes will be painful though). Other bonds will be about as valuable as cash - they will not be safe.
2) Some stocks will do well, others won't. Overall, their revenues, expenses, and earnings per share will probably rise with inflation. Overall, they will do OK.
3) International exposure will help.
4) Gold and silver may do fine, they are often thought of as an inflation hedge. I don't pay attention to them to really know.
Last edited by grberry on Sun Feb 27, 2011 12:11 am, edited 1 time in total.
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Post by Watty »

There are so many way that it can play out that about the thing that seems practical to me is diversification and rebalancing. this has the nice side effect in that if things don't get ugly, then you can still do well.


Greg
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Post by steve roy »

I've heard the 'population bomb' miscalculation argument many times before, but it is irrelevant. I'm glad some alarmist book got the time frame wrong, but since 1985, species continue to massively die off, human beings continue to replicate on an exponential path, we were a phone call away from nearly eradicating the earth's population over a political dispute, microbes are kicking our ass in the evolutionary arms race, the caldera in Yellowstone could explode, there are millions of people around the world who want a nuke to go off in NYC, a solar storm could wipe out our electronic infrastructure. It is reasonable to be somewhat concerned about these things.
And the concern will get you what? A more restful night? Cause you to carry a picket sign in front of a big marble building somewhere?

European plagues removed large parts of that continent's population multiple times over a millenium. The Spaniards and French killed off most of the indigenous population of North America (Twenty million? Forty million?) with the diseases they brought from the Old World.

Stuff happens. It's not pretty, and I'm not arguing the stuff is good, but genocide and disease and species extinction have gone on for a long time. It's doubtful that they'll stop. It's great that you're pointing with alarm, but I'd like it if you'd offer some solutions. Otherwise, it's just fear-mongering.
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Re: If the US dollar fails, are stocks safe?

Post by alec »

TranceLordSnyder wrote:I get to listen to a lot of these doom and gloom stories from many of my family members, and it makes you think about the economy and what could happen.
That was your first mistake. :D :D I usually find that the family members that are the most doomy and gloomy are the most misinformed people I know.
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair
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Post by stratton »

If the dollar falls your typical foreign index fund will have a large percentage of its gains because of USD depreciation. At one point around the end of 2006 almost half of EM returns were from currency depreciation.

Paul
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Post by SP-diceman »

Look at the bright side, if its true, you may eventually
be able to invest in the US as an “Emerging Market”.


Thanks
SP-diceman
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Post by steve roy »

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Post by LazyNihilist »

The strong do what they can and the weak suffer what they must -Thucydides
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Collapsing dollar

Post by jackgoldman1 »

Probabilities is the answer. As the Soviet Union has fallen all types of forces have been unleashed in the world that increase the risk of interruptions. Some are man made and some natural. Banks have closed in America before. The dollar has collapsed to zero two or three times already in our past. Gold in circulation was defaulted on and debased 68% in 1932. Silver was defaulted on in 1964 and was $1.29 in 1964. Today silver is $33 an ounce. Is that a default? The US dollar has lost 90% of it's buying power since 1971. Is that a collapse? There is Katrina, Argentina, Iraq, 9/11, and the swine flue pandemic that stopped global trade, volcanoes, tsunamis, earthquakes, and blizzards. There is life insurance, car insurance, health insurance, identity insurance, FDIC insurance, SPIC insurance. Is reality doom and gloom? Are pessimists well informed optimists and Pollyanna's? The prudent recognize risk and insure.

We live in a riskier world than before the Soviet collapse. What are the probabilities of the event and how would it effect you? Would it be a life changing event if it happened or a mere inconvenience? That is the issue. This is why Harry Browne suggested 25% of your investments in gold bullion you personally control for your permanent, gotta have it to live on, part of your portfolio. Anything can happen. I know one thing. I am old enough (age 59) to know I don't know. It's all probabilities. Trouble is if you get that one in a million cancer, as I did, it happens to you 100%. Protect yourself from uncertainty and risk with insurance and back up plans. No one else can or will. I don't call insurance against problems a plan for doom and gloomers. I call insurance against probabilities prudent common sense. I am invested in gold and silver. You be the judge.
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William Million
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Post by William Million »

If people are asking these types of questions, it can only mean this is a buying opportunity for U.S. dollars. Flucuations are the friend of rebalancers.
wts
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Post by wts »

TranceLordSnyder wrote: What if this is just some ploy by a group of people to get gold and silver prices to fly through the roof....
Glenn Beck for one does this DAILY.
Blithly spreading fear uncertainty and doubt while being sponsored by GOLDLINE. http://www.goldline.com/testimonials-glenn-beck

No conflict of interest there.
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Re: Collapsing dollar

Post by Valuethinker »

jackgoldman1 wrote:sts and Pollyanna's? The prudent recognize risk and insure.

We live in a riskier world than before the Soviet collapse. .
Not.

Before the Soviet Union collapsed, we had in any given year a say 1% chance of an all out thermonuclear war due to accident or misjudgement. Even on a best scenario that would have left the US and its allies about the condition of a modern third world country for 50 years, and on a worst, the end of civilization or (nuclear winter) the human race.

Post that, although the 'Launch on Warning' status remains on both sides (the Russians built, and may still have, the literal doomsday machine, ie a system that, if it concludes the main Russian command bunkers have been destroyed, launches an automatic total retaliation against the presumed enemy ie US, UK, France) creating huge risks, nuclear arsenals are smaller and every person in the chain of command on both sides down to the launch officers in the silos and on the subs...

knows that we are not at war and are not generally hostile towards each other thus providing a human break on a misreading of data, action or intent.

So the risk of accidental World War III or WWIII by confrontation/ misreading of intention a la The Cuban Missile Crisis is just not as great.

http://en.wikipedia.org/wiki/Able_Archer_83

read that one and shudder.

http://en.wikipedia.org/wiki/Stanislav_Petrov
On 26 September 1983, Stanislav Petrov, a lieutenant colonel in the Soviet Air Defence Forces, was the officer on duty at the Serpukhov-15 bunker near Moscow which housed the command center of the Soviet early warning system, code-named Oko.[5] Petrov's responsibilities included observing the satellite early warning network and notifying his superiors of any impending nuclear missile attack against the Soviet Union. If notification was received from the early warning systems that inbound missiles had been detected, the Soviet Union's strategy was an immediate nuclear counter-attack against the United States (launch on warning), specified in the doctrine of mutual assured destruction.[1]

Shortly after midnight, the bunker's computers reported that an intercontinental ballistic missile was heading toward the Soviet Union from the U.S.[6] .....

Had Petrov reported incoming American missiles, his superiors might have launched an assault against the United States, precipitating a corresponding nuclear response from the United States. Petrov declared the system's indications a false alarm. Later, it was apparent that he was right: no missiles were approaching and the computer detection system was malfunctioning. It was subsequently determined that the false alarms had been created by a rare alignment of sunlight on high-altitude clouds and the satellites' Molniya orbits, an error later corrected by cross-referencing a geostationary satellite.[8]

If you ever pray, say a thanks to God for giving us Colonel Petrov. A decent man, on the other side, who did his duty to the human race.

There remain other risks of nuclear war: India and Pakistan came close in 2002, for example. Such a war could have devastating regional, and even global, consequences-- the latest models of nuclear winter (using advanced climate research models) suggest it's very real, and an India-Pakistan war could cause a global freeze of 2-3 years, leading to complete destruction of food supplies (the world holds about 120 days stocks of major foodstuffs).

But the world is just a safer place than it was in 1990.
Valuethinker
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Re: If the US dollar fails, are stocks safe?

Post by Valuethinker »

alec wrote:
TranceLordSnyder wrote:I get to listen to a lot of these doom and gloom stories from many of my family members, and it makes you think about the economy and what could happen.
That was your first mistake. :D :D I usually find that the family members that are the most doomy and gloomy are the most misinformed people I know.

The media focuses on salient and bad news financial and economic stories.

The reality is, every bull market in history, people were worried about something and climbed the 'wall of worry'.

When everyone who comments on TV thinks everything is going great (spring 2000, early 2007) that is the time to get really worried.
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Post by Leesbro63 »

Larry Swedroe address this very question:

http://moneywatch.bnet.com/investing/bl ... blog-river


"I first discussed the dollar’s status as the world’s reserve currency nearly two years ago. I noted that prior to the dollar taking that role, the British pound was the world’s reserve currency, a status it lost shortly after World War II. Not only that, but Britain’s industrial capacity was devastated because of the war. Given these conditions, you’d think that U.K. stocks would have done poorly relative to U.S. stocks. And you’d be dead wrong.

We have data on the FTSE All-Share Index going back to February 1955. From February 1955 through December 2010, the FTSE All-Shares Index returned 10.9 percent, outperforming the S&P 500 Index, which returned 10.0 percent."
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TranceLordSnyder
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Re: The Recent History of the Dollar

Post by TranceLordSnyder »

bobcat2 wrote:TranceLordSnyder writes.
If the US dollar were to collapse or lose a large portion of its value because we print too much money, are stocks safe and bonds safe?

Hi TranceLordSnyder,

Between early 2002 and late 2008 the dollar lost roughly 30% of its value. Did that bother you? If it didn't, why didn't it bother you? And if a roughly 30% drop in value didn't bother you at all then, why would a 40%-50% drop now bother you greatly? Since late 2008 the dollar has gone up and down in value, but is slightly higher now than it was in 2008.

Link to graph showing value of US$ from 1995 thru January 2011.
http://krugman.blogs.nytimes.com/2011/0 ... he-dollar/

BobK

In 2002, I was a sophomore in High School, investing wasn't even on my mind. I actually started my first investments right before the crash in 2008. Despite the crash and watching a lot of my initial investments lose a good portion of their value, I continued investing. I'm very happy that I did. I have many years to invest yet and I'm very happy with the returns I've gotten since those initial investments. I'm not worried about a 40 or even 50% loss of my investments. The concern was really if the dollar collapsed completely. This is unlikely though.

I think all the talk from the family and thinking about it too much worried me more than was necessary. These family members are not investing advocates and I do think that their views are sometimes extreme.
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TranceLordSnyder
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Re: Collapsing dollar

Post by TranceLordSnyder »

Valuethinker wrote:
jackgoldman1 wrote:sts and Pollyanna's? The prudent recognize risk and insure.

We live in a riskier world than before the Soviet collapse. .
Not.

Before the Soviet Union collapsed, we had in any given year a say 1% chance of an all out thermonuclear war due to accident or misjudgement. Even on a best scenario that would have left the US and its allies about the condition of a modern third world country for 50 years, and on a worst, the end of civilization or (nuclear winter) the human race.

Post that, although the 'Launch on Warning' status remains on both sides (the Russians built, and may still have, the literal doomsday machine, ie a system that, if it concludes the main Russian command bunkers have been destroyed, launches an automatic total retaliation against the presumed enemy ie US, UK, France) creating huge risks, nuclear arsenals are smaller and every person in the chain of command on both sides down to the launch officers in the silos and on the subs...

knows that we are not at war and are not generally hostile towards each other thus providing a human break on a misreading of data, action or intent.

So the risk of accidental World War III or WWIII by confrontation/ misreading of intention a la The Cuban Missile Crisis is just not as great.

http://en.wikipedia.org/wiki/Able_Archer_83

read that one and shudder.

http://en.wikipedia.org/wiki/Stanislav_Petrov
On 26 September 1983, Stanislav Petrov, a lieutenant colonel in the Soviet Air Defence Forces, was the officer on duty at the Serpukhov-15 bunker near Moscow which housed the command center of the Soviet early warning system, code-named Oko.[5] Petrov's responsibilities included observing the satellite early warning network and notifying his superiors of any impending nuclear missile attack against the Soviet Union. If notification was received from the early warning systems that inbound missiles had been detected, the Soviet Union's strategy was an immediate nuclear counter-attack against the United States (launch on warning), specified in the doctrine of mutual assured destruction.[1]

Shortly after midnight, the bunker's computers reported that an intercontinental ballistic missile was heading toward the Soviet Union from the U.S.[6] .....

Had Petrov reported incoming American missiles, his superiors might have launched an assault against the United States, precipitating a corresponding nuclear response from the United States. Petrov declared the system's indications a false alarm. Later, it was apparent that he was right: no missiles were approaching and the computer detection system was malfunctioning. It was subsequently determined that the false alarms had been created by a rare alignment of sunlight on high-altitude clouds and the satellites' Molniya orbits, an error later corrected by cross-referencing a geostationary satellite.[8]

If you ever pray, say a thanks to God for giving us Colonel Petrov. A decent man, on the other side, who did his duty to the human race.

There remain other risks of nuclear war: India and Pakistan came close in 2002, for example. Such a war could have devastating regional, and even global, consequences-- the latest models of nuclear winter (using advanced climate research models) suggest it's very real, and an India-Pakistan war could cause a global freeze of 2-3 years, leading to complete destruction of food supplies (the world holds about 120 days stocks of major foodstuffs).

But the world is just a safer place than it was in 1990.

Interesting info, I never knew this had even occurred.
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Re: Collapsing dollar

Post by Jeff Albertson »

updating a 2011 thread:
Valuethinker wrote: Mon Feb 28, 2011 12:33 pm read that one and shudder.

http://en.wikipedia.org/wiki/Stanislav_Petrov
https://paleofuture.gizmodo.com/man-who ... 1818501062
On September 26, 1983, Soviet military officer Stanislav Petrov received a message that five nuclear missiles had been launched by the United States and were heading to Moscow. He didn’t launch a retaliatory strike, believing correctly that it was a false alarm. And with that, he saved the world from nuclear war. But now reports have surfaced that Petrov died this past May. He was 77 years old.
Rest in peace, Stanislav Petrov. You may not have gotten the recognition you deserved in life, but hopefully you’ll be remembered in death. Those of us living in the 21st century owe you a tremendous debt. And the best most of us can do is hope that the nuclear powers of the world learn something from your heroism.
Also http://www.bbc.com/news/world-europe-41314948
Last edited by Jeff Albertson on Mon Sep 18, 2017 9:41 pm, edited 1 time in total.
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Earl Lemongrab
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Re: Collapsing dollar

Post by Earl Lemongrab »

TranceLordSnyder wrote: Mon Feb 28, 2011 1:12 pm Interesting info, I never knew this had even occurred.
Then there was this time:

Image

https://xkcd.com/1834/
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Re:

Post by z3r0c00l »

zellballen wrote: Sat Feb 26, 2011 9:40 pm
I've heard the 'population bomb' miscalculation argument many times before, but it is irrelevant. I'm glad some alarmist book got the time frame wrong, but since 1985, species continue to massively die off, human beings continue to replicate on an exponential path, we were a phone call away from nearly eradicating the earth's population over a political dispute, microbes are kicking our ass in the evolutionary arms race, the caldera in Yellowstone could explode, there are millions of people around the world who want a nuke to go off in NYC, a solar storm could wipe out our electronic infrastructure. It is reasonable to be somewhat concerned about these things.
All true, however investing in the financial sense can't prepare for these problems. Invest in food and guns for this kind of stuff.
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Re: If the US dollar fails, are stocks safe?

Post by Johnnie »

Responding to the OP, and sidestepping the definition of "failed," I have reported this personal experience before:
As a young teenager I lived in Europe in 1968-69. I remember German and Swiss marks were worth about 25-cents US.

Back in the U.S. I was busy for the next 10 years, and the next time I noticed FX rates was around 1980, when a dollar could only buy one German or Swiss mark, not four.

That bothered me and I never forgot it.
I'm 40 percent international stocks now and that gives me some comfort. (Although these days I have less faith in most currencies that are not the dollar - but see my signature below.)
"I know nothing."
OkieIndexer
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Re: If the US dollar fails, are stocks safe?

Post by OkieIndexer »

There was a 13% sudden plunge in the S&P 500 in October 1978 that was blamed by the media at the time on a big drop in the dollar, but I'm guessing the stock market was pricing in future higher inflation expected rather than just reacting solely to the drop in the dollar. Maybe I'm wrong.
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Re:

Post by Valuethinker »

Sheepdog wrote: Sat Feb 26, 2011 3:41 pm I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
[Sorry did not realize this was a restarted thread from 2011. Have edited down my comments]

Like you I remember all these gloomy predictions. For example Watergate, or the Iran Crisis and the "malaise" inflicting America at the time.

Things get worse, then they get better. For What It's Worth, America is not now as divided as it was during the period of the Civil Rights riots and the Vietnam War protests at the end of the 1960s (Ken Burns' upcoming documentary may be an important part of healing that last divide). That is definitely my feeling-- this peaked in the early 1970s and then subsided.

Economically, with Stagflation, I remember the 1970s as a far more troubled time. We can argue to the cows come home about winners and losers, but the US currently has both low inflation and low unemployment. When I studied economics (late 70s/ early 80s) that would have seemed impossible.

There's no sign of a coming hyperinflation nor of economic depression and mass unemployment.


The long history of the United States of America, possibly the world's oldest continuing Republic, shows that there are big sweeps and waves in its history, and we get over-fascinated with the personalities and issues of the moment.

So far, the Republic has endured. A testament to the wisdom of its Founders in its construction, and the people who carry that forward.
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Re: Re:

Post by OkieIndexer »

Valuethinker wrote: Tue Sep 19, 2017 4:11 am
Sheepdog wrote: Sat Feb 26, 2011 3:41 pm I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
[Sorry did not realize this was a restarted thread from 2011. Have edited down my comments]

Like you I remember all these gloomy predictions. For example Watergate, or the Iran Crisis and the "malaise" inflicting America at the time.

Things get worse, then they get better. For What It's Worth, America is not now as divided as it was during the period of the Civil Rights riots and the Vietnam War protests at the end of the 1960s (Ken Burns' upcoming documentary may be an important part of healing that last divide). That is definitely my feeling-- this peaked in the early 1970s and then subsided.

Economically, with Stagflation, I remember the 1970s as a far more troubled time. We can argue to the cows come home about winners and losers, but the US currently has both low inflation and low unemployment. When I studied economics (late 70s/ early 80s) that would have seemed impossible.

There's no sign of a coming hyperinflation nor of economic depression and mass unemployment.


The long history of the United States of America, possibly the world's oldest continuing Republic, shows that there are big sweeps and waves in its history, and we get over-fascinated with the personalities and issues of the moment.

So far, the Republic has endured. A testament to the wisdom of its Founders in its construction, and the people who carry that forward.
The UK had it worse in the 70s, apparently. MSCI says the UK stock market lost 75% real including dividends :shock: from Aug '72 - Nov '74. Unemployment eventually peaked at 11.9% in 1984. Here was the UK inflation rate from 1970-81:

1981 11.90%
1980 18.00%
1979 13.40%
1978 8.30%
1977 15.80%
1976 16.50%
1975 24.20% :shock:
1974 16.00%
1973 9.20%
1972 7.10%
1971 9.40%
1970 6.40%

http://www.whatsthecost.com/historic.cpi.aspx
Last edited by OkieIndexer on Tue Sep 19, 2017 8:20 am, edited 1 time in total.
Valuethinker
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Re: Re:

Post by Valuethinker »

OkieIndexer wrote: Tue Sep 19, 2017 5:50 am
Valuethinker wrote: Tue Sep 19, 2017 4:11 am
Sheepdog wrote: Sat Feb 26, 2011 3:41 pm I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
[Sorry did not realize this was a restarted thread from 2011. Have edited down my comments]

Like you I remember all these gloomy predictions. For example Watergate, or the Iran Crisis and the "malaise" inflicting America at the time.

Things get worse, then they get better. For What It's Worth, America is not now as divided as it was during the period of the Civil Rights riots and the Vietnam War protests at the end of the 1960s (Ken Burns' upcoming documentary may be an important part of healing that last divide). That is definitely my feeling-- this peaked in the early 1970s and then subsided.

Economically, with Stagflation, I remember the 1970s as a far more troubled time. We can argue to the cows come home about winners and losers, but the US currently has both low inflation and low unemployment. When I studied economics (late 70s/ early 80s) that would have seemed impossible.

There's no sign of a coming hyperinflation nor of economic depression and mass unemployment.


The long history of the United States of America, possibly the world's oldest continuing Republic, shows that there are big sweeps and waves in its history, and we get over-fascinated with the personalities and issues of the moment.

So far, the Republic has endured. A testament to the wisdom of its Founders in its construction, and the people who carry that forward.
The UK had it worse in the 70s, apparently. MSCI says the UK stock market lost 65% real including dividends :shock: from Aug '72 - Nov '74. Unemployment eventually peaked at 11.9% in 1984. Here was the UK inflation rate from 1970-81:

1981 11.90%
1980 18.00%
1979 13.40%
1978 8.30%
1977 15.80%
1976 16.50%
1975 24.20% :shock:
1974 16.00%
1973 9.20%
1972 7.10%
1971 9.40%
1970 6.40%

http://www.whatsthecost.com/historic.cpi.aspx
Indeed it did. Second in the G8 only to Italy in economic misery (inflation + unemployment).

Yes that was some stock market crash-- I knew people who were involved in it. It was a difficult time. People panicked out, and never had the confidence to go back in. Thus, they missed the huge run up 1989 - 2000 (roughly 10x returns).

It is a sobering warning that stocks can go down a *lot*. And you don't need a war nor a revolution.

Of course, straight gilts (UK government bonds) did badly too. Anything but cash did badly (and that did not do well). However in 1980 the UK Treasury introduced the Indexed-Linked Gilt (ILG). About 20-25% of all debt outstanding now. So, in a reprise, there would be a safe asset.
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Re: Re:

Post by OkieIndexer »

Valuethinker wrote: Tue Sep 19, 2017 7:51 am
OkieIndexer wrote: Tue Sep 19, 2017 5:50 am
Valuethinker wrote: Tue Sep 19, 2017 4:11 am
Sheepdog wrote: Sat Feb 26, 2011 3:41 pm I've read and heard those doom and gloom stories recently and 50 years ago as well. Now it is the devalued dollars or when the dollar is no longer the world's currency...when the dollar is not a currency which can buy oil...when the dollar will not be good enough to pay for our bond debts...when the dollar will be worthless to buy the world's goods that we need to buy and use...that gold and silver will be the only world currency....that all savings will become worthless unless it is in hard currency....that we will have riots in the next couple of years in the streets thoughout America because of no food, heat, gasoline, shelter.. Yeah, I have read those before and now. I'm tired of these doom and gloom things which thrill the teller and scares the listener. How about the world ending 12/21/2012? Why not worry about that? No, not me. Let the doomsayers go ahead...let the sheep follow their lead, buy gold and push the price of gold higher and higher until the day those who started these stories, sell their gold and that bubble blows. Not me.
Jim
edit: I didn't know there is a website for 12212012. I only glanced at it. See what I mean? http://www.december212012.com/ Is this stuff meant to be comedy or serious stuff? It has to be comedy. It's like someone wants to believe this stuff?
[Sorry did not realize this was a restarted thread from 2011. Have edited down my comments]

Like you I remember all these gloomy predictions. For example Watergate, or the Iran Crisis and the "malaise" inflicting America at the time.

Things get worse, then they get better. For What It's Worth, America is not now as divided as it was during the period of the Civil Rights riots and the Vietnam War protests at the end of the 1960s (Ken Burns' upcoming documentary may be an important part of healing that last divide). That is definitely my feeling-- this peaked in the early 1970s and then subsided.

Economically, with Stagflation, I remember the 1970s as a far more troubled time. We can argue to the cows come home about winners and losers, but the US currently has both low inflation and low unemployment. When I studied economics (late 70s/ early 80s) that would have seemed impossible.

There's no sign of a coming hyperinflation nor of economic depression and mass unemployment.


The long history of the United States of America, possibly the world's oldest continuing Republic, shows that there are big sweeps and waves in its history, and we get over-fascinated with the personalities and issues of the moment.

So far, the Republic has endured. A testament to the wisdom of its Founders in its construction, and the people who carry that forward.
The UK had it worse in the 70s, apparently. MSCI says the UK stock market lost 65% real including dividends :shock: from Aug '72 - Nov '74. Unemployment eventually peaked at 11.9% in 1984. Here was the UK inflation rate from 1970-81:

1981 11.90%
1980 18.00%
1979 13.40%
1978 8.30%
1977 15.80%
1976 16.50%
1975 24.20% :shock:
1974 16.00%
1973 9.20%
1972 7.10%
1971 9.40%
1970 6.40%

http://www.whatsthecost.com/historic.cpi.aspx
Indeed it did. Second in the G8 only to Italy in economic misery (inflation + unemployment).

Yes that was some stock market crash-- I knew people who were involved in it. It was a difficult time. People panicked out, and never had the confidence to go back in. Thus, they missed the huge run up 1989 - 2000 (roughly 10x returns).

It is a sobering warning that stocks can go down a *lot*. And you don't need a war nor a revolution.

Of course, straight gilts (UK government bonds) did badly too. Anything but cash did badly (and that did not do well). However in 1980 the UK Treasury introduced the Indexed-Linked Gilt (ILG). About 20-25% of all debt outstanding now. So, in a reprise, there would be a safe asset.
Actually, I was wrong. -65% was the nominal UK stock market loss including dividends according to MSCI. The inflation-adjusted loss was -75% including dividends during Aug '72 - Nov '74. The inflation adjusted USA market loss with dividends during Sep '29 - June '32 was "only" -79% due to the deflation, so the UK was pretty close in '72-'74 to the U.S. Depression market.
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in_reality
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Re: If the US dollar fails, are stocks safe?

Post by in_reality »

If the US dollar fails, am I safe?

Anyway, I will take my chances and pass on this opportunity to build and stock a remote bunker. If society goes, so do I.
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Re: If the US dollar fails, are stocks safe?

Post by aristotelian »

Bitcoin, anyone?
Valuethinker
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Re: If the US dollar fails, are stocks safe?

Post by Valuethinker »

in_reality wrote: Tue Sep 19, 2017 8:25 am If the US dollar fails, am I safe?

Anyway, I will take my chances and pass on this opportunity to build and stock a remote bunker. If society goes, so do I.
One needs to (re)read Lucifer's Hammer-- the remote bolthole won't save anyone, because the refugees and the predators will follow you there. That's a point all the Doomsday preppers seem to miss. Even New Zealand is only a safe bolthole if its government and some sort of economy hold up. And NZ is a small country crucially dependent on world trade.

I have heard second hand of someone in British Columbia in the 70s who, concerned about nuclear war, plotted likely fallout patterns and moved to the safest and most remote place with a stable government he could find -- the Falkland Islands ;-). Or the Malvinas as they were briefly known under Argentine rule ;-).

And also, at further remove, of someone who foresaw WW2 and moved to the remotest place in the South Pacific he could find -- a British plantation island called Guadacanal ;-).
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in_reality
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Re: If the US dollar fails, are stocks safe?

Post by in_reality »

aristotelian wrote: Tue Sep 19, 2017 8:35 am Bitcoin, anyone?
Would electricity will be flowing and the internet up and running?

If a main pillar of the global economy crumbles, I'd expect fragmentation in current services.

If the internet and bitcoin networks gets fragmented, wouldn't the it be easier for someone to organize a group of miners to take control at the 51% threshold or employ the Selfish-Mine strategy at the 25% level?

https://www.technologyreview.com/s/5215 ... e-control/
https://learncryptography.com/cryptocurrency/51-attack
gd
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Re: If the US dollar fails, are stocks safe?

Post by gd »

I have heard second hand of someone in British Columbia in the 70s who, concerned about nuclear war, plotted likely fallout patterns and moved to the safest and most remote place with a stable government he could find -- the Falkland Islands ;-). Or the Malvinas as they were briefly known under Argentine rule ;-).

And also, at further remove, of someone who foresaw WW2 and moved to the remotest place in the South Pacific he could find -- a British plantation island called Guadacanal ;-).
Sorry, but unless you're making the point that people are spectacularly dumb about judging risk (both areas had well-publicized instabilities) I won't believe these until I see them referenced in an internet quote by Mark Twain, Lincoln or Einstein.
Serje
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Re: If the US dollar fails, are stocks safe?

Post by Serje »

TranceLordSnyder wrote: Sat Feb 26, 2011 3:09 pm Lets keep political discussions out of this and purely talk facts and numbers. So I've been plugging away at saving as much money as possible in the form of stocks and bonds, as I'm sure the rest of you have been. Unfortunately, I have my doubts about the US economy with our National debt getting larger and larger. If the US dollar were to collapse or lose a large portion of its value because we print too much money, are stocks safe and bonds safe? Should I be considering more foreign exposure than a target date fund provides? What about gold and silver?

I get to listen to a lot of these doom and gloom stories from many of my family members, and it makes you think about the economy and what could happen. It's hard to imagine the US economy failing, but I think it's definitely possible. What investment options would be wise to go with to protect some of my assets? Or is this completely nonsense to even think about, because if the economy fails, would an institution like Vanguard even continue to exist? Thoughts and opinions are appreciated!
Agree with the above comments - NO. It's hard to predict whether the greenback fails or not. As per USD Index we are now in the decsending channel therefore falling down :dollar
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Re:

Post by roflwaffle »

zellballen wrote: Sat Feb 26, 2011 9:40 pm
steve roy wrote:A little Devil Advocacy:

When I was at UC Irvine in 1970, I took a class that was all the rage:" The coming population bomb and worldwide famine." Summary of the class was, it was ALL OVER for Mother Earth no later than 1985. We were gonna have a complete melt-down, with worldwide riots and hundreds of millions starving, and governments collapsing right and left. Etc.

Funny. All I remember about 1985 was that it was Morning in America, we were in the front end of a market rally, and my wife was pregnant.

Moral: The End of Civilization is always around the next corner. Some day it might even be true. But if you're smart, you will heavily discount a lot of the Gloom and Doom.
I've heard the 'population bomb' miscalculation argument many times before, but it is irrelevant. I'm glad some alarmist book got the time frame wrong, but since 1985, species continue to massively die off, human beings continue to replicate on an exponential path, we were a phone call away from nearly eradicating the earth's population over a political dispute, microbes are kicking our ass in the evolutionary arms race, the caldera in Yellowstone could explode, there are millions of people around the world who want a nuke to go off in NYC, a solar storm could wipe out our electronic infrastructure. It is reasonable to be somewhat concerned about these things.
It's doubly reasonable to prepare for any natural or man-made disaster and, at least in my opinion, to reduce conspicuous consumption such that you aren't making other people's lives more miserable.

I know some people on the forum aren't a fan of MMM, but I also think that minimizing costs and maximizing savings is a worthy effort. The really neat part about it is as you get better at minimizing costs, you technically don't have to be as good at maximizing your savings, although people tend to be because they both come from the same pot/salary. As those two values diverge, you will move towards "financial independence".

I also like that the idea of independence is subtlety expressed in something as mundane as parts of the tax code, where saving more, taking less, and doing things for yourself are explicitly rewarded. Or to put it another way, the rate the government taxes an individual's income is a function of their consumption of that income as well as how much they rely on others to do things for them.
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