Our country — and by extension, your finances and mine — is in deep trouble. We are about to inaugurate as President a man whose mental stability is questionable; who announces his petulance in wee-hours tweets; who gropes women and brags about it; who exploits hatred and fear to gain power; who is at odds with the country’s intelligence agencies; who denigrates the disabled, the female, and the brown-skinned; and who “owes one” to the corrupt, thuggish leader of a nation that has been our enemy since shortly after the end of World War II. He is backed by a phalanx of extremists who want to reverse not just the ACA but the entire New Deal, which has been in place for almost 80 years.
The New Deal, we might point out, came into being in response to the Great Depression. Part of its purpose was to prevent a repeat performance of the Depression.
I believe that, in the near future, we are going to see a recession that will make the Bush Recession look like a cakewalk. The reason is that the dominant economic thinking among the doctrinaire right wing riding Mr. Trump’s coat-tails is simply wrong. It was proven wrong by the Great Recession, as it was proven wrong in earlier recessions.
Since 1948, this country has seen 11 recessions. Seven of them — 63.6% — were presided over by Republicans (Eisenhower, Nixon, Ford, Reagan, Bush the Elder, Bush the Younger). Some of the economic downturns were precipitated by factors over which we had little control, such as rises in oil prices. Others correspond with rises in interest rates by the Federal Reserve or with monetary tightening in pursuit of a balanced national budget. Most egregious, from a political point of view, was the Great Recession, which was brought about by deregulation of financial institutions (a mainstay of voodoo economics). The Great Depression of 1929-33 was largely aggravated by “extensive new tariffs and other factors [that] contributed to an extremely deep depression.”
The pendulum swings. As we all know, things go one way for awhile, and then they turn around and go back in the other direction. For the past few years, we’ve seen a roaring economy. We can expect that it, like any hot economic period, will cool down. But I think the pendulum is going to swing, all right: waaayyyy in the opposite direction.
It would be good to position your investments in a balanced portfolio to include variable rate bonds and variable rate preferred stocks that pay decent income and aren’t as sensitive as stocks are in a downturn. In addition, some financial planners make it a policy to sell certain exposure to the market should it turn down below a certain level. This doesn’t protect from losses should the market sell-off, but should help cushion further losses in a market meltdown. Now is the time for you to speak with a financial planner about steps to take in managing your savings.
Additionally, you should be prepared for a period of unemployment. During the Great Recession, 10% of Americans were put out of work, a rate beat only by the Reagan recession (10.8%), the Great Depression (24.9%) and the subsequent 1937/38 recession (19%). That means having at least six months’ worth of living expenses in cash savings and possibly taking on a side gig now, not later, so that you’ll have something to fall back on should you lose your main livelihood.
Remember that many of us were never able to get jobs comparable to the ones we had before the Bush recession — large numbers of Americans are still unemployed or underemployed. After you become discouraged enough to give up seeking full-time work, you no longer register in the government’s unemployment figures, and so most of us in that category are simply not counted.
In addition to building cash savings, pay down debt and avoid racking up new debt, especially on credit cards.
Now more than ever is the time to live not just within your means but below your means. Good luck to you, folks. We’re all gonna need it.