U.S. Economy Collapse: What Will Happen, How to Prepare

Your Survival Guide to an Economic Collapse

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If the economy collapses, there won't even be food in the grocery store. Photo: andiepantz/Getty Images

If a U.S. economic collapse occurs, it will happen quickly. No one would predict it. That's because the signs of imminent failure are difficult to see.

For example, the U.S. economy almost collapsed on September 17, 2008. That's the day the Reserve Primary Fund broke the buck. Panicked investors withdrew a record $140 billion from money market accounts where businesses keep cash to fund day-to-day operations.

If withdrawals had gone on for even a week, the entire economy would have halted. That meant trucks would stop rolling, grocery stores would run out of food, and businesses would shut down. 

Fortunately, the Federal Reserve Chairman and U.S. Treasury Secretary noticed the signal and knew what it meant. Ben Bernanke was a Great Depression scholar. Hank Paulson was a Wall Street veteran. Their bailout plan supplied enough cash to prevent a total collapse. The 2008 financial crisis did plenty of damage, but it could have been much worse.

Another example occurred during the Great Depression. On Thursday, October 24, the 1929 stock market crash began. By Tuesday, the market had lost 25 percent. Many investors lost their life savings that weekend. The Dow didn't recover until 1954. That's how close the U.S. economy came to a real collapse, and how vulnerable it is to another one.

What Will Happen If the U.S. Economy Collapses?

If the U.S. economy collapses, you would not have access to credit.

Banks would close. Demand would outstrip supply of food, gas and other necessities. If the collapse affected local governments and utilities, then water and electricity would no longer be available. As people panic, they would revert to survival and self-defense modes. The economy would return to a traditional economy, where those who grow food barter for other services.

A U.S. economic collapse would create global panic. Demand for the dollar and U.S. Treasurys would plummet. Interest rates would skyrocket. Investors would rush to other currencies, such as the yuan, euro or even gold. It would create not just inflation, but hyperinflation as the dollar became dirt cheap.

When Would the U.S. Economy Collapse?

Any of the following six scenarios could create an economic collapse.

  1. If the U.S. dollar rapidly loses value, it would create hyperinflation.
  2. A bank run could force banks to close or even go out of business, cutting off lending and even cash withdrawals.
  3. The internet could become paralyzed with a super-virus, preventing emails and online transactions. 
  4. Terrorist attacks or a massive oil embargo could halt interstate trucking. Grocery stores would soon run out of food.  
  5. Widespread violence erupts across the nation. That could range from inner-city riots, a civil war or a foreign military attack. It's possible that a combination of these events could overwhelm the government's ability to prevent or respond to a collapse.
  6. Some believe the Federal Reserve, the president or an international conspiracy are driving the United States toward economic ruin. If that's the case, the economy could collapse in as little as a week. That's because it's run on confidence that debts will be repaid, food and gas will be available when you need it and that you'll get paid for this week's work. If a large enough piece of that stops for even several days, it creates a chain reaction that leads to a rapid collapse.

    Will the U.S Economy Collapse?

    The U.S. economy's size makes it resilient. It is highly unlikely that even these events could create a collapse. The Federal Reserve's contractionary monetary tools can tame hyperinflation. The Federal Deposit Insurance Corporation insures banks, and the Treasury can print all the money needed to make sure depositors get their funds. Homeland Security can address a  cyber threat. If not, the economy can always return to how it functioned before the internet.

    The president can release Strategic Oil Reserves to offset an oil embargo. The U.S. military can respond to a terrorist attack, transportation stoppage or rioting/civil war. In other words, most federal government programs are designed to prevent just such an economic collapse. 

    How to Prepare for a Collapse

    Protecting yourself from a U.S. economic collapse is difficult.

    A catastrophic failure can happen without warning. In most crises, people survive through their knowledge, wits, and by helping each other. Make sure you understand basic economic concepts so you can see warning signs of instability. One of the first signs is a stock market crash. If it's bad enough, a market crash can cause a recession.

    Second, keep as many assets as liquid as possible so that you can withdraw them within a week. In addition to your regular job, make sure you have skills that you'd need in a traditional economy, such as farming, cooking or repair. 

    Make sure your passport is current in case you'd need to leave the country on short notice. Research target countries now and travel there on vacation, so you are familiar with your destination.

    Keep yourself in top physical shape. Know basic survival skills, such as self-defense, foraging, hunting, and farming. Practice now with camping trips. If you can, move near a wildlife preserve in a temperate climate. That way, if a collapse occurs, you can live off the land in a relatively unpopulated area.

    As for cash, it's almost pointless to have it in a real economic collapse because its value might be decimated. Gold isn't much help because it's heavy to transport and useless in an actual survival situation. But it would be good to have a stash of $20 bills and gold coins, just in case. During many crisis situations, these are commonly accepted as bribes.