Local economy implies you have a Plan B as crisis builds

In this economy, you need to have a Plan B. (Graphic Oftwominds.com)

Many charts about national economy suggest it is not sustainable. (Graphic Oftwominds.com)

[Local economy is an idea that bears closer investigation because it carries along the idea that each of us must have a backup plan if national economy buckles and drags down our current mortgaged comforts and routines. My argument is that we should divest from national economy and invest in local, primarily in something we personally know and in which we perhaps are already invested by way of a knowledge base. No, local economy does not mean “going back to school.” Plan B implies having multiple income streams, each of which starts small, maybe at home, and always THINKING OF THE OTHER. — DJT]

By Charles Hugh Smith

We’ve put all our hopes, dreams and chips on Plan A, as if security flows from institutional promises rather than from being adaptable, resilient and able to create value in a variety of circumstances.

Setting aside monsters under the bed, the Ebola virus and fanatical terrorists bent on our destruction — what are we so afraid of? It must be something, because fear is the ever-present backdrop in America.

If you don’t get a college degree, it’s widely assumed that you’re doomed to a life of involuntary poverty of part-time toil in a coffee bar or big-box retailer — if you’re lucky enough to find a job at all.

Who has a Plan B?

Fear drives students and their families to borrow immense sums for mostly marginal college educations: here are Federal student loans — is anybody on this debt-rocket-ride to the moon asking if there is a Plan B or C that doesn’t require a life of debt-serfdom/indentured servitude?

But the fear of being inadequate to the Darwinian scramble for security starts much earlier than college. The anxiety starts in kindergarten, as ambitious parents sweat the application process to prep schools, knowing that getting their little darling in at age 5 is easier than trying to get them through the even more brutal competition at age 8, 10 or 12.

The undergraduate anxiety is soon replaced by an even more costly fear: that the graduate won’t ascend the academic ladder and gain acceptance to a prestigious law, medical or graduate school.

Alas, the fear of insecurity doesn’t end with a graduate degree. In many cases, the deeply indebted graduate finds thousands of other job seekers have equivalent degrees and equally carefully groomed resumes.

Those who secure corporate-government jobs that qualify them for home ownership discover new sources of fear: for example, that home valuations might not keep rising. That the value of their house might decline or even collapse strikes terror in the hearts and minds of mortgage holders.

Then there’s the fear surrounding that proxy of prosperity, the stock market. If stocks crater enough to return to reasonable valuations, countless retirement plans will be turned to ash. The other supposed bulwark of financial security, corporate and government bonds, generate their own high levels of anxiety: should interest rates return to historic levels from the current near-zero rates, the value of long-term bonds will tank.

I’ve been told that some college students exit with degrees in hand and are lost when a secure, high-paying job doesn’t manifest. It seems these graduates had no Plan B or Plan C: they gambled tens of thousands of dollars in student loan debt and 4+ years on Plan A with no thought to their future should Plan A fail.

National economy — our only hope?

This seems to be apt analogy of America as a whole: we’ve put all our hopes, dreams and chips on Plan A, as if security flows from institutional promises rather than from being adaptable, resilient and able to create value in a variety of circumstances.

Fear is the backdrop of experience in America because we’re terrified of the prospect that Plan A — the status quo promises of secure lifetime employment and early retirement funded by endlessly rising wealth — will fail. Beneath the surface of this ever-present fear lies the real source of our insecurity and terror: In our heart of hearts, we already know that Plan A has failed, but we’re too afraid to face the consequences of this systemic failure.

It seems to me that durable security arises from embracing insecurity and contingency and building a wide spectrum of skills and human, social and real-world assets rather than seeking the illusory security offered by an institution whose promises rest on phantom wealth and claims on future taxpayers.

Used by permission. Charles Hugh Smith is the author of the oftwominds.com blog, No. 7 in CNBC’s top alternative financial sites, and seven books on our economy and society, including Get a Job, Build a Real Career, Defy a Bewildering Economy, Why Things Are Falling Apart and What We Can Do About It and The Nearly Free University and the Emerging Economy: The Revolution in Higher Education.  His work is published on a number of popular financial websites including Zero Hedge, Financial Sense, and David Stockman’s Contra Corner. Here is our review of Resistance, Revolution, Liberation: A Model for Positive Change.

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