How Can My Family Protect Itself in Case of Total Economic Meltdown?

BY Paul Solman  February 7, 2011 at 10:52 AM EDT

Paul Solman answers questions from NewsHour viewers and web users on business and economic news most days on his Making Sen$e page. Here’s Monday’s query:

Name: Kimberly Foster

Making Sense

Question: I am scared. My impression of our country’s economic situation now is that we are bumping along the bottom of the ocean.

Neither my husband nor I have any faith in this economy. What is also troubling is that our friends and coworkers (of differing ages and financial stages) all seem to take this stuff with a grain of salt and don’t believe collapse is possible.

Am I just crazy? Assuming I’m not, how can my family protect itself in case of total economic meltdown?

Paul Solman: Crazy? I’d have to know more about you. Right? Maybe. Then again, maybe not because, when it comes to the future of so complex a mechanism as the world or even national economy, I’m pretty sure it’s unknowable. The Great Recession and the housing crisis might demonstrate as much. So too the price of oil after 1979 and again after 2007, the collapse of the Soviet Union, the flash crash and a million other economic events, great and small.


Photo by Flickr user calignosus

In short, there’s some probability of total economic meltdown. Unfortunately (or perhaps luckily), I don’t happen to know what it is.

That said, your question is a fair one, Kimberly: Assuming a worst case scenario, how does your family protect itself?

The best answer I can give is our own family behavior. At the first level, we diversify investments across assets and asset classes so a crash in any one of them — stock market, bond market (long-term and short), currencies — doesn’t break us. I even diversify across financial institutions, for the same reason.

I keep some water at home. Some canned goods. I carry a modest inventory of Tums, aspirin and the like. I cultivate trusting relationships with my neighbors.

At the next, quasi-survivalist, level, to which we’ve never gotten, you buy a home generator and enough fuel to run it for awhile; a fallback refuge far from others; hardware to protect yourself when the less prudent come calling.

But you know, the problem with answering a question like yours is that preparing aloud for social breakdown can become a self-fulfilling prophecy. What is social breakdown but a breakdown in our mutual trust? So my real advice is to do all you can to inspire trust and generosity in others by being trustworthy and generous oneself. While maintaining a degree of vigilance with respect to others taking advantage of you.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._