In the U.S. – We have seen mother natures wrath from fires in the west-coast to Hurricane’s Harvey and Irma in the east-coast. Irma and Harvey have estimated damage costs of over $280 Billion Dollars… that is Billion with a “B”. Even now experts are predicting California, US, could be hit with an even more devastating wrath of nature of a Mega-Quake. The magnitude 8.2 earthquake that ravaged southern Mexico on Thursday was the largest to shake the country in nearly a century.

Like California, Mexico is a seismically active region that has seen smaller quakes that have caused death and destruction. But Thursday’s temblor is a reminder that even larger quakes — while rare — do occur.

Scientists say it’s possible for Southern California to be hit by a magnitude 8.2 earthquake. Such a quake would be far more destructive to the Los Angeles area because the San Andreas fault runs very close to and underneath densely populated areas.

So if or when that does happen, the US could see damage costs putting them in a ball park range of $600 Billion Dollars. What does this all mean?

Well, it is modern memory to most that suffered the economical crashes between 2006-2009. As Kimberly Amadeo, writer from Thebalance.com stated:

“The first sign that the economy was in trouble occurred in 2006. That’s when housing prices started to fall. At first, realtors applauded. They thought the overheated housing market would return to a more sustainable level.

Realtors didn’t realize there were too many homeowners with questionable credit. Banks had allowed people to take out loans for 100 percent or more of the value of their new homes. Many blamed the Community Reinvestment Act. It pushed banks to make loans in subprime areas, but that wasn’t the underlying cause.

The Gramm-Rudman Act was the real villain. It allowed banks to engage in trading profitable derivatives that they sold to investors. These mortgage-backed securities needed mortgages as collateral. The derivatives created an insatiable demand for more and more mortgages.

The Federal Reserve believed the subprime mortgage crisis would only hurt housing.

It didn’t know how far the damage would spread. That’s because it didn’t understand the true causes of the subprime mortgage crisis until later.

Hedge funds and other financial institutions around the world owned the mortgage-backed securities. The securities were also in mutual funds, corporate assets and pension funds.

The banks had chopped up the original mortgages and resold them in tranches. That made the derivatives impossible to price.

Why did stodgy pension funds buy such risky assets? They thought an insurance product called credit default swaps protected them. A traditional insurance company known as AIG sold these swaps. When the derivatives lost value, AIG didn’t have enough cash flow to honor all the swaps.

Banks panicked when they realized they would have to absorb the losses. They stopped lending to each other. They didn’t want other banks giving them worthless mortgages as collateral. No one wanted to get stuck holding the bag.  As a result, interbank borrowing costs (known as LIBOR) rose. This mistrust within the banking community was the primary cause of the 2008 financial crisis,

Costs

In 2007, the Federal Reserve began pumping liquidity into the banking system via the Term Auction Facility. Looking back, it’s hard to see how they missed the early clues in 2007.

The Fed’s actions weren’t enough. In March 2008, investors went after investment bank Bear Stearns. Rumors circulated that it had too many of these by-now toxic assets. Bear approached JP Morgan Chase to bail it out. The Fed had to sweeten the deal with a $30 billion guarantee.

Wall Street thought the panic was over.

Instead, the situation deteriorated throughout the summer of 2008. The Treasury Department was authorized to spend up to $150 billion to subsidize and eventually take over Fannie Mae and Freddie Mac. The Fed used $85 billion to bail out AIG. This later rose to $150 billion.

On September 19, 2008, the crisis created a run on ultra-safe money market funds. That’s where most companies put any excess cash they might have accrued by the end of the day. They can earn a little interest on it before they need it again. Banks use those funds to make short-term loans. Throughout the day, businesses moved a record $140 billion out of their money market accounts into even safer Treasury bonds.  If these accounts went bankrupt, business activities and the economy would grind to a halt.

Treasury SecretaryHenry Paulson conferred with Fed Chair Ben Bernanke. They submitted to Congress a $700 billion bailout package. Their fast response reassured businesses to keep their money in the money market accounts.

Republicans blocked the bill for two weeks. They didn’t want to bail out banks. They didn’t approve the bill until global stock markets almost collapsed. For more details, see 2008 Financial Crisis Timeline.

But the bailout package never really cost the taxpayer the full $700 billion. The Treasury Department only used $350 billion to buy bank and automotive company stocks, when the prices were low. By 2010, banks had paid back $194 billion into the TARP fund.

The other $350 billion was for President Obama, who never used it. Instead, he launched the $787 billion Economic Stimulus package. That put money directly into the economy instead of the banks. For more, see 2009 Financial Crisis Timeline.”

This is BAD BAD NEWS folks. So how can you start to protect your wealth and hedge against inflation when all kinds of investment vehicles like Roth IRA, Stocks, Life Insurance, Realestate are all connected to that dollar fiat currency? If the recession hits, they will all lose value too… My Recommendation? START ACQUIRING PHYSICAL GOLD NOW. If  the 1% do it to protect their wealth, then the 99% should too!

Start thinking for the bigger picture. What is Next? Are you going to be part of the depressed in a depression, looting, starving, struggling with your family? or will you be as prepared  as the 1% and have stability in the hard times.

Author: Luxury79au | Michael Monod De Froideville