The Upcoming Depression

I knew that title would get your attention. We’re all suckers for sensational stories, and I’m just as guilty as the next guy.

Is a Dirty Thirties replay in the cards? Not likely, but possible. So are nuclear war, the Big Asteroid, and the Next Big Pandemic. There are lots of horrifying “what ifs” out there. But unless you’re Scaredy Squirrel and want to spend the rest of your life under the bed, you have to base your life on reasonable probabilities.

A recession downturn, however, is definitely in the cards. When? Well, in a recent survey of economists, about one in five said it would happen this year, about one in five said next year, and one in five said 2024, and two in five said “Who knows?”. Take your pick.

But “when” is not really the important question. The more important issue is to survive any recession with, as they say in the Ottawa Valley, “a whole skin”.

As with almost everything in life, it’s best to avoid an emotional response. And avoiding emotional responses is always easier when you know the facts and are prepared. So here goes with a handful of factoids and pointers:

1. Recessions don’t last forever. They average eleven months, and very, very rarely extend to more than two years.

2. Lot’s of us old geezers have been through seven or eight recessions in our lifetimes, and we’re all here to tell the tale. These things can cause individual unpleasantness, but they won’t kill you.

3. Put off spending you can avoid until the storm clouds go away. Build up whatever reserves you can.

3. Trim your debt, or at least move it from high interest to lower interest (eg a home equity line of credit) before you get caught short.

4. Have a well-considered Plan B to ride out any storm. The home equity line of credit, again, is a good thing to have in place long before you need to draw down on it.

5. If things do become dark, speak to creditors early and often. Mostly they would prefer to work with you rather than tank you and end up with pennies on the dollar. But don’t do it alone– have someone experienced and calm at your elbow so you won’t get stampeded.

6. If you are actually in a good cash position, recessions can present investment opportunities if you have steady nerves and get good advice.

7. Markets invariably rebound and then more than make up for lost ground.

As they say up in the Valley, “Keep your shirt on!”