Updated: Jul 15
Why will this be a long, rough summer? Reason number one, recession looming. A few weeks ago, I published an article discussing the possibility of a recession and what that means for our financial stability. To prepare for a recession see: Let’s Talk Recession.
It’s time to review. Recessions generally come after a decline in confidence, a sense among businesses and consumers that times won’t be as good as they have been. Some leading indicators a recession has arrived are reduced hours worked, fewer new orders of capital and consumer goods, lower level of building permits, increased interest rates and for the last 50 years all recessions have been preceded by greatly increased fuel prices.
According to surveys this month by news organizations and national and international organizations who monitor trends, consumer confidence is down worldwide. Much of this is due to the war in Ukraine, COVID, inflation and lack of confidence in the government. A decline in confidence is already here.
We are seeing the second indicator, reduced hours worked, as many large companies are reducing their employee base thru layoffs, firings and not replacing those retiring. Much of this comes due to fewer orders for consumer goods.
Building permits are down and gas prices are now the highest ever recorded. Reason number two, inflation continues. According to Longwoods International, consumers are spending 32% less on retail goods, 31% less on entertainment, 22% less on food and beverages and 17% less on lodging. The national average gas price is now over $4.61 per gallon for regular, a year ago it was $3.03 per gallon. Some experts have forecast prices as high as $8.00 by the end of summer, most expect price to be over $6.00 by summer’s end.
With this in mind it is time to seriously consider a stay-at-home vacation. There are so many fun and interesting places to visit near your home. A staycation does not mean never leaving the house it is more about spending less on fuel by keeping trips short and sleeping at home. Even that can be fun. Set up camp in the yard and camp out, watch a movie outdoor, make homemade ice cream and Smores. Review On the Road to Debt Freedom: Taking a New Kind of Vacation
Reason number three, drought. Severe and extreme drought is affecting most of the southwestern states, California and Oregon. This is not a problem in the U.S. alone. Africa, South America, Australia, the Middle East and smaller areas in many other countries are also suffering. Droughts account for 15% of natural disasters globally, and 59% of the total deaths caused by extreme weather events. A significant impact of a reduction in water supply causes increases in diseases such as diarrhea, conjunctivitis, and scabies. We know food prices rise during a drought and supplies and variety of foods are reduced. A reduction in availability and the rising costs cause a reduction in nutrition. When canned and frozen fruits and vegetables are on sale, stock up. Plant a garden no matter how small. Many vegetables and strawberries grow well in pots on a patio.
Reason number four, war in Ukraine. Ukraine produced about 80 MMT of grain (a category that includes wheat, corn and barley) in 2021, and is expected to harvest less than half of that this year. The country produced about a fifth of the world’s high-grade wheat and 7 percent of all wheat. Russian troops have closed the ports used to export food from Ukraine. Crops have been destroyed. At this time no food is being exported. There is a domino effect as grains are used not only for food but also as feed, to create fuel, and seed for next year’s planting.
According to the UN Comtrade database, Benin and Somalia obtained all of their wheat from Ukraine and/or Russia. The dependency of Egypt on Ukrainian wheat was 82 percent, according to the data. Poorer countries in northern Africa, Asia and the Middle East that depend heavily on wheat imports risk suffering significant food insecurity because of Russia’s war in Ukraine. The conflict is poised to drive up already soaring food prices in much of the world as crops will need to be imported from other countries to make up the loss and prevent starvation.
Do you remember “The time will come that gold will hold no comparison in value to a bushel of wheat. Gold is not to be compared with it in value.” ? (Brigham Young) Whether you look to him as a spiritual leader or just an insightful man this quote is chilling. That time has come.
Reason number five, electric grid. The North American Electric Reliability Corporation warns two-thirds of the United States could experience blackouts this summer. The transition to green energy is putting a strain on the grid. Combine this with drought and hydropower reduction adding to the strain. Wind and solar power cannot make up the difference as distribution is lacking. Are you prepared to cook off grid? Are you prepared to remain cool with no power during the hot summer?
There is no more time to wait to prepare. It is never too late but the longer you wait the more difficult and expensive it will be. Expensive vacations, bigger homes, new furniture, eating out, new clothes, big Christmases may all be fun but will they make up for the feeling of regret when you can’t care for your family’s needs?
This article contains excerpts from Pack Your Bags We're Staying Home