I was referred by minus car to a great post today, and it was along the lines of something I was going to write about. I have the time and interest, I'm going to write. First, you should go read the original post that I read today, here.
So the stock market is tanking. That's fine, I'm 'in it for the long haul'. I know that the market has 'normal fluctuations' and I know that historically, 'the market has always been a good investment over time'.
I'm not a dooms-day sort of person, but I want to think a little. Almost everyone seems to think that this is a dip in the market. We can call it a recession and it may develop into a depression; that's fine. The final assumption that almost everyone makes is that in the end (whenever that is), the market will return to 'normal' and our stocks will increase in value and go back to how it once was. But what if it doesn't? I think we should think on that point a moment.
We have some money in retirement accounts. We have lost $10,000 so far this year. That's OK, I'm quite content without it. Honestly, I don't feel the impact of this financial issue. If it weren't for the news I get from NPR and the internet and the fact that I checked my stocks recently, I would have no idea that Americans are in financial turmoil. How is it that I'm an American, and this is a really big deal, but I haven't noticed?
Next question. We have some extra money lying around. Should we invest it? I know that the stocks are currently 'on sale'. The big index funds are currently available for ~30% off previous prices. What a bargain, I should buy. I should take the $10,000 out of my savings account and put it into a big mutual fund, it's bound to go up if I give it enough time. Just think of the money I could make.
From my understanding of the stock market, now is the time to invest and history shows that I'll be glad I did in the future. But, what if the stock market doesn't increase in value? What if things continue to decline? What if financial institutions as we know them cease to exist? Surely the financial system that we have now has evolved from an ancient financial system that at some point came to an end. Who is to say that this evolution isn't about to speed up?
This is the point that I wanted to make and also the point from the blog I referred you to at the beginning; I don't think anything is a sure thing. While I think that things will likely return to 'normal' at some point, I have this little thought at the back of my head saying that it is quite possible that HUGE changes are in store. What would I need if the financial institution as we know it dissolves into nothing? I would need just a few things. Top on that list would be a home and some land where my family could live. Next on that list would be more knowledge than I currently have on how to grow enough food for my family for a year. I'd probably also need some equipment to do that much farming.
Maybe instead of investing in the stock market I should invest in a house on a couple of acres of fertile land with sufficient rainfall. Boy would my family think I was a freak if I sold everything I have in order to buy a farm in preparation for a financial disaster. (Don't worry family, I won't be buying a farm anytime soon).
What is the sign that it's time to buy the farm? How bad does the financial system have to be? I feel like I'm trying to predict the future, and I'm not good at it.
Don't take the wrong message from this post. I don't think that everything is going to fail, and if it does, I think it will put up a long grueling fight before it's ultimate collapse. The point that I want to make is that we shouldn't assume that everything is going to return to 'normal' (does anyone else think it's odd that we refer to prosperity as normal). If peak oil is real and banks are in as bad of shape as some people say they are and there are other major issues in the economy, things could get ugly. I certainly don't hope for that, nor would I predict that, but I think it's a bad idea to neglect to recognize it as a possibility.
Then if you really want to get the meaning of this post, go back to the site I have referred to several times and read about things of value and things that have no value. It's thought provoking.
I hate it when I post on the economy, I'm far from an economist. Next time I'll try to post more about the conference I attended. I'll give you a little glimpse into what it was about. It was about obesity and everything they said could be generalized to be either about eating less or exercising more to prevent obesity.