That’s the thing about financial markets: no one can predict the buggers. But there are things you can do to prepare for harder economic times than normal. Here’s how I’m thinking about it (copy, borrow, steal).
Don’t piss your pants
The seriousness of this crisis far outweighs anything else I’ve ever seen.
Interest rates went to zero in 2020 to help solve the bat virus problem. Governments gave out lots of free funny money. So everyone had one big party and spent the cash as if it was unlimited.
Inflation went through the roof. A random war in Europe started and created supply shortages. Then interest rates started skyrocketing in 2022 to help murder inflation.
Now we’re at a crossroads.
Keep raising interest rates and crash the economy, plus destroy the banks? Or, lower interest rates again and print way more money which leads to more inflation? Higher inflation will only further increase the gap between rich and poor. It’s the price I believe we’ll most likely pay as a society.
The key is to remain calm. Yes, it’s bad. But you’ll make it through if you don’t make any sudden and crazy decisions.
The US dollar’s dominance is being challenged for the first time
There’s no global currency. And it’s definitely not Bitcoin lol.
But the US dollar is the closest thing we have. So much of global trade happens in US dollars. I have an Australian business, yet I trade in US dollars more than my own currency. This is common.
Only days ago Russ!a, Ch!na, Saudi Arabia, and a few other countries started to talk about moving away from the US dollar.
If this happens, and it looks like it will, the foundation that’s kept the US dollar from collapsing after all dollars created out of nowhere by the Federal Reserve, could collapse. This shouldn’t surprise you.
The hidden privilege the US has had with the dollar has been unfair for decades.
Only when the war broke out in Europe and the US started confiscating money and yachts from oligarchs did we see the true control the dollar has. And I guess a few countries didn’t like it, so they created an alternative.
The US dollar probably won’t collapse.
But it can definitely become a wounded bull licking its wounds for a few years while the rest of the world overtakes the dominance of the US.
That’s why I’m making sure not all my assets are in US dollars. Otherwise I could be left holding a hot potato that goes down in value.
Stacking crypto like I just don’t care
Crypto looked like a scam for a moment in this crisis.
Then as the banks have started to collapse people are realizing “wait, hold up, so the bank owns my money and not me? And the government only bails me out up to a certain point?
And they create money out of nowhere via the central bank to pay for the bailout? And that leads to inflation and devalues any dollars I have like a melting ice cube? Holy sh*t.”
Who would have thought Bitcoin and Ethereum may have been seen as safe havens. I’m kind of speechless. Still, I’ve been buying crypto through all of this. It has a place in our financial system no matter what.
Even though the US government keeps stuffing it up and pushing crypto projects to succeed in other countries. I predict London will become the new financial center of the world again — and crypto will be the reason.
Anyone who doesn’t understand decentralized money that’s self-custodied needs their head checked. Middlemen institutions have lied for centuries. The internet has tanked the trust in them to record lows.
Don’t ignore crypto. Think about small regular investments as a hedge against the dinosaur banks.
Protect those who work with you
I run an online business.
My number one priority in this financial crisis is making sure I can pay the people I work with who help me do what I do.
Since the start of last year I’ve put away some cash for a rainy day so that we can trade through any crisis and never stop paying the bills.
What matters isn’t how much money you lose by stacking cash with high inflation. What matters is whether you go bankrupt because you run out of money and can’t pay the bills.
Survival is the aim of the game. Then as the recovery happens you can buy up assets for cheap and make up for any losses.
Less cowboy tactics
During the 2021 market boom I became a cowboy.
I bought anything that had a website. And I made some crazy investments that went up 100x. I also had some huge failures too.
The one thing that’s saved me is I’ve always invested more in proven blue chip investments like Amazon, Bitcoin/Ethereum, than risky new startups or cryptos that listed three days ago and are promoted by Kim Kardashian.
Diversification is crucial.
Think beyond the crisis
Everywhere I look right now people can’t stop talking about ChatGPT.
While the economic crisis worsens, I don’t want it to distract me from the future opportunities. There’s no doubt artificial intelligence and projects like OpenAI are going to do well.
My goal right now is to make sure I have adequate exposure to leading AI companies to make money off the opportunity.
Invest in what you believe in and use
Newsletter platform $ubstack just announced creators can become investors in their next round of funding. I use their platform and know it well, so I immediately invested a small amount.
- To support them
- To share in the upside of their success
If they go broke and fail then the money I invested won’t be missed.
But if they go on to succeed, like I believe they will, the money will help make my life a little bit easier — and more importantly, I’ll feel like I’ve supported the community of creators I love who’ve always supported me.
Everyone should have an investment they believe in.
Bringing it all together
That’s how I’m thinking about this financial crisis.
It’s a mix between seeing the opportunity and making sure not to take any big risks that could wipe me out.
We’re in uncharted territory. No one knows what will happen.
Make sure to keep up to date with the situation and adjust your strategy as new information appears. And whatever you do, don’t have all your money with one bank or ever trust a government promise.
Bailout promises only work if the government can bankroll it. There comes a point where high enough losses can’t be funded with free money and taxpayer dollars. Be smart.
This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.