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In the Eye of the Storm, Get a Jump on Frugal Living and Start Saving Today

By: Steve Johnson

8/13/2009 - 62 Comments

Spotting a future trend before it happens is one of the best ways to make a lot of money.

As the markets appear to be stabilizing and the leaders give the ‘all clear’ signal as they encourage everyone to jump back into their spending ways, an eerie sense is still in the air.  If your senses are still working you will be able to sense the feeling, which is similar to being in an eye of a storm. 

Eye of the Storm

Sometimes the only way to tell if a storm has passed or if you are in the eye of the storm is to look at the weather radar.  In this case, the economic indicators are pointing in several different directions making it very difficult to determine if the storm has passed.

The way I see it is that the storm didn’t pass and we have just moved into the center of it.  If fact, from the looks of things the storm is gaining a lot of momentum as it sits over us.  The only economic indicator giving the ‘all clear’ is the stock market rally, but remember that is the same indicator that hit an all time high just two months before this recession stated - hardly an indicator of predicting the future. 

Feeding the Storm

As we begin moving out of the eye of the storm in the next few months, I expect things to get a lot worse. 

Everyone seems to think that the government has saved us from the worse of the storm, but there is really nothing the government can do to save us. The government actions will not stop the recession without returning to fundamental economics and sound money, which they will eventually be force to do

That said, their idea of saving us from the economic storm has been to increase the money supply, which is equivalent to feeding the storm and hoping it goes offshore.  Since most the dollars in circulation are used outside the US, increasing the money supply will create massive inflation abroad.

The only problem is the world does not like out strategy because they don’t want the storm moving into their land. China, India, Japan and even Europe are not happy with the policies of the US government to try to push the storm offshore. They want us to deal with it since we created it.  The only way to counter the storm from moving offshore and into the rest of the world is if the entire emerging world acts together to stop the US from inflating the dollar.

They can do that by selling their dollars. The weakening dollar will cause the inflation to stay in the US and force the building economic storm from moving offshore.  Of course that situation would be devastating for the US economy, which would be faced with rising prices of consumer goods and increasing interest rates - on top of the damand already caused by the first wave of the storm.

Frugal Living

The best way to manage the other side of the economic storm that the world is not going to let the US push offshore is for us to learn to live with less.  The storm is going to force the US public into a much lower standard of living then we have enjoyed for the last several decades. 

In the next few years, frugal living is likely to be a major trend to sweep the nation.  Now is the time to get in front of the trend and position yourself into the investments, careers and businesses that will be in high demand when everyone else realizes that they are still in the storm.

Ask yourself, what would be in high demand if prices were to increase by double digits for several years?  What would be in high demand if interest rates were to drastically increase?  I can think of a few like food, clothing, alternative medicines, basic utilities, low cost entertainment, etc.  These are the areas that will be growing in demand very quickly when we come out of the eye of the storm and realize that the government wasn’t able to push the storm offshore.

Savings rates will also drastically increase, for many reasons – and not just a few percent like they have, I’m talking 30-40%.  Now is the time to find creative ways to lower your fixed expenses in order to boost your rate of savings.  If you plan on keeping some of your assets (houses, cars, etc.) you may need several years’ worth of saved income.

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