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Ask YC: How bad is the economy?

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Re: Ask YC: How bad is the economy?

#11

Post by sant0sk1 »

bootload wrote: post #3

"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash.

While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today.

Investing in foreign currencies can build a nice hedge in times like these.

Re: Ask YC: How bad is the economy?

#12

Post by truebosko »

calvin wrote: post #10
truebosko wrote: post #7

This is kind of on topic but I was listening to a podcast earlier this week and one piece of advice given was: If you are part of a small company, or if you have a growing small startup/business, this is the time to grow. The big guys are going to be hurting by the downturn in the economy. Get your product out there, stabilize it, and use these years to get a level of safety for it. As for your assets. Like others sa…

Having hordes of actual cash won't protect you from inflation if it starts to become a problem. There's a reason gold is trading incredibly high right now.

Oh I understand this, but for most people doing any kind of trading is just out of their league. I'm sure most people will be happy to know the $50k they have in their ING Account will be safe from most things while the economy levels back up again over the years.

Re: Ask YC: How bad is the economy?

#13

Post by bokonist »

sant0sk1 wrote: post #11
bootload wrote: post #3

"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…

Almost every foreign currency has at least an informal peg to the dollar. The European and Chinese Central Banks are working hard to make sure that the dollar does not fall too much. The only truly foreign currency is gold. But the potential for a dollar crash is already factored into the price, so buying gold too is very risky. The safest place to put money would seem to be a combination of FDIC insured CD's, dividend paying stocks ( as opposed to non-dividend, purely speculative stocks), and gold.

Re: Ask YC: How bad is the economy?

#15

Post by palish »

truebosko wrote: post #12
calvin wrote: post #10

Earlier quoted context omitted.

Having hordes of actual cash won't protect you from inflation if it starts to become a problem. There's a reason gold is trading incredibly high right now.

Oh I understand this, but for most people doing any kind of trading is just out of their league. I'm sure most people will be happy to know the $50k they have in their ING Account will be safe from most things while the economy levels back up again over the years.

I truly hope so. I have $15k to wade through this thing, so I doubt I can last very many years. Luckily I don't have to travel much, so the rising cost of fuel doesn't affect my burn rate terribly. Health insurance is a different story though.

Re: Ask YC: How bad is the economy?

#16

Post by hugh »

steveplace wrote: post #4

Protect yourself from what, exactly? Your savings is protected by the FDIC up to 100k per acct. I honestly don't believe that the tech/info sector is going to lose that many jobs. If Cisco does consolidate, it (hopefully) will be non-core resources, such as HR, and internal operations. If you have a 401k, you're screwed either way since you have very few options on where to invest. If you have an IRA, you can hedge r…

Anyone know exactly how the FDIC thing works?

Supposing my bank goes under (which I sure as hell hope it won't, cuz it's Bank of America), I'm guessing it'll take some time for them to get their act together and I might not be able to access money in the short term. Is this correct? Or can they swing into action immediately to keep the money coming out of the ATMs?

In that case it might make sense to have stashes of cash in multiple banks, just in case (and hell, a thousand bucks under your pillow).

Re: Ask YC: How bad is the economy?

#17

Post by palish »

furiouslol wrote: post #2

In McCain's words, "the economy is sound". In my words, the economy is heading for a long-drawn recession due to a much needed deleveraging, albeit a drastic one. The world was too flush with credit in the past decade. The financial system is currently fubar with the credit market virtually frozen at this moment. Banks don't trust each other. The Chinese government has instructed their banks to stop lending to US fin…

Crucially bad. Let's not keep adding to our national debt and instead save the $700b. We'll be hurting for awhile, but at least it will be over afterwards. We'll be able to move on with our lives at that point.

A bailout will just postpone the inevitable and cause long-term pain.

Re: Ask YC: How bad is the economy?

#18

Post by electromagnetic »

sant0sk1 wrote: post #11
bootload wrote: post #3

"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…

That's because they pumped up inflation by like 15000% it wasn't the depression that caused the problem, it was the idea that making more money would help. The government isn't dumb enough to do that with inflation, the Bank of England has been stalling inflation for the last couple of years to ensure this doesn't happen and the federal institutions in the US are doing the exact same thing.

Re: Ask YC: How bad is the economy?

#19

Post by nradov »

sant0sk1 wrote: post #11
bootload wrote: post #3

"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…

In most recessions/depressions you are more likely to see deflation instead of inflation. This is driven by a drop in demand. The Federal Reserve has been increasing the money supply lately (printing) which by itself would be inflationary, but that action has been more than balanced out by reductions in credit. If customers can't get credit to buy things then demand drops and prices fall.

Re: Ask YC: How bad is the economy?

#20

Post by buffers »

sant0sk1 wrote: post #11
bootload wrote: post #3

"... I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen. ..." Haven't lived through a recession before? The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you…

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies…

Are you sure this episode happened during WW2 and not rather during the hyper inflation from 1921 to 1922?

edit: I've talked with somebody born in Germany in 1931. According to him there was no visible inflation during the war. Prices were dictated by the government. But money was basically worthless because people additionally needed government issued vouchers in order to be allowed to buy stuff and they got these only for what the government regarded as people's basic needs.

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