Powell Jumps on the Recession Train – Are you Ready?

After a big finance meeting in Jackson Hole at which Jerome Powell said fighting inflation will “bring some pain,” the headlines proclaimed we are heading for a recession.

My readers should have seen that coming; I’ve been predicting it for months. In fact, with two consecutive quarters of negative GDP, everyone not in the Biden Administration would argue that we are already in a recession.

However, it looks like the mild recession we are experiencing will get worse. The Fed will intentionally throw the country into a deeper recession because it is the only way to stop inflation. That’s not a bad call, but it would have been better if they’d made that call a year ago. Inflation wasn’t as bad, and the recession wouldn’t have been as deep. It will take a serious recession to fight 9 percent inflation, which is probably twice that if you look at real data instead of government numbers.

While Powell has finally decided to fight inflation, Biden’s decision to forgive up to $20,000 in student loan payments is going to add to inflationary pressures. While one hand of the government is trying to fight inflation, the other is adding to it. The answer is likely to be stagflation, or high inflation with higher unemployment, which means the misery index will get worse.

Can the Country Handle a Recession?

While there is no good time for a recession, this winter looks to be a particularly bad time.

High energy costs and outages will be a recurring theme this winter. Approximately 20 percent of American households are already behind on their electric bill. The Farmers Almanac predicts excessive cold with extra snow in all but the Western third of the country. The war in Europe will rage on, and food supplies will continue to tighten. Inflation will persist for some time. The midterm election results are sure to piss off one half of the country, raising passions even higher. Lower gas prices are probably turning around.

Can You Handle a Recession?

The biggest threat to individuals during a recession is becoming unemployed because of your employer failing, shutting down, cutting back, or laying off staff. Restaurants and other small businesses, as well as their owners and employees, are more at risk than those at large companies which are better capitalized.

One reason unemployment is such a danger is that it can result in losing your home and becoming homeless. You want to avoid homelessness at all costs.

If you work at a large company and you see people being offered early retirement, consider this a warning that layoffs could be coming. Common offerings include adding X number of years to your years of service to determine your retirement benefit, adding free healthcare for X years, and continuing to pay your salary through the end of the calendar year or for one month per year of service. If you are within ten years of retirement, explore the incentive plan they are offering and see what you can negotiate for yourself. It may be worthwhile to take early retirement rather than wait to be laid off. You then have the option of getting another job or consulting for your old employer.

Crashing home values are also common during a recession. If you bought at or near the peak of the real estate market, you could be in trouble if you have to sell after the market crashes. You may end up owing the bank more than the house is worth. If you lose your job and cannot afford to make your payments, you may have to make a short sale or go into foreclosure. If you end up in this situation, negotiate with the bank before it is too late. They probably don’t want to own your house and may be able to work out an arrangement, even if it extends the term of your mortgage.

How to Prepare for Recession

The best way to prepare for a recession is to have money in the bank. If you have six months of living expenses in an account, then you know you will be OK for at least six months if you get laid off. That gives you time to look for a job or make alternate plans.

What are alternate plans? That depends on you. Here are things to consider:

• Find another job or jobs. Unpopular jobs often pay decently and need people. One that comes to mine is jailers and detention officers.
• Take on a few gigs or side jobs to keep income flowing.
• Turn a hobby or skill into a side gig, like small engine repair or cabinetry.
• Rent out your house and move into a smaller, less expensive apartment, or out to the country. Then live on the difference.
• Move in with family or have them move in with you and share costs.
• Rent out a room.
• Sell personal items and “toys” like watercraft that you don’t rely on for work.
• Move to your bugout property.
• Start a business.
• Live in your RV, if you have one.

You get the idea. Desperate times call for desperate measures. Try to avoid being desperate, but don’t be afraid, embarrassed, or put off by the need to do things during a recession you might not otherwise choose to do during the good times. It’s called survival.

Your Preps will Help

Let’s imagine you get laid off and are struggling to find a job. Don’t resist eating your prepper food. It’s there for an emergency, and gettign laid off is an emergency. If you lose your house, you won’t have anywhere to put your preps, so eat your prepper pantry and use the money you save not buying food to remain in your house a little longer. Likewise, sell your guns and ammo if that is what it takes to keep your head above water. I am unlikely to sell my last gun (OK, my last three or four), but I’d part with quite a few before I lost my house. I also consider my ammo to be a precious metal. Remember, you can purchase physical goods again after you and the economy recover.

We all prep to survive the end of the world and come out the other side in decent shape. No one said the end of the world has to be a nuclear bomb. A bad recession can wipe you out, and they happen much more frequently. If your preps help you live through a massive recession and stagflation, then they did their job.