I Survived an Economic Collapse by Siempre Listo – Survival Blog
There is corruption at the highest levels of the government: The president, along with key officials in the government, financial institutions, corporations and the military, quietly move their money out of the stock market and banks and transfer their assets into gold and Swiss bank accounts. Once the members of the elite have safely parked their money away, the president suddenly announces a devaluation of nearly 50% of the currency.
The move stuns the stock market, which plunges to epic lows. There is a run on the banks as panicked depositors withdraw most, if not all of their money. The government steps in and takes over the banks. The devaluation hits the average citizen hard. Prices at the supermarket and gas stations almost immediately rise by 50%. Many businesses go bankrupt and shut down. Rents rise by 50%. Many people can’t afford the increase, get evicted, and are homeless. Many people go begging for food on the streets. Violent crime skyrockets. Vigilante groups form to protect neighborhoods from criminals.
IT HAPPENED IN MEXICO
A future scenario? No. All this actually happened, in 1982, but not in the United States. It happened in Mexico, where I was living at the time. Some commentators speculate about what might happen in a future economic collapse. We hear many different theories about how the banks might react, how the government might respond, and what panicked investors might do. Well, 36 years ago, I survived an economic collapse. Not a total collapse, but it was bad enough. Following is my story of what actually happened before, during and after an economic collapse, how I survived it, and lessons I learned from it.
I moved to Mexico in 1979, with the idea of supporting myself teaching English as a second language (ESL). This actually worked well for a while, as I worked not only for a university extension school, but also taught ESL lessons to several companies in private industry, including employees at factories, businesses and even the military sector.
Things were going well until 1982. The economy was more or less normal, businesses were more or less thriving, and many people were prospering. Of course, this is Mexico, so the standard of living is lower than the United States, or else we wouldn’t have the steady parade of people crossing our border, looking for a better life. For the Mexicans living at poverty level, conditions are always difficult. But for the middle class in Mexico, most of these people are able to get by, get an education, and a profession. There is a large and growing middle class in Mexico. Now, for the upper class, life is generally always easy, at least financially.
1982 was an election year, but back then, the Partido Revolutionario Institucional (PRI Party) was firmly entrenched, and it was a foregone conclusion that every new president was going to be a PRI member, and for a single six-year term. The president of Mexico in 1970-76 was Luis Echeverria, and just before the end of his term, there was a massive devaluation of the Peso. It went from 12.50 to the Dollar to 22.69, for a loss of 82% of buying power. Prices for food, gas, rent and everything else skyrocketed.
A DEVASTATING DEVALUATION
The devaluation devastated the middle class, and especially, the poor. No wonder people flee to the U.S. It’s impossible to support a family on wages that range from $1-$2 a day, which is what a farmworker earns there. But the devaluation didn’t affect the very rich, especially those who were part of the elite. Yes, we’ve all heard of the elite, and they are worldwide, and they are in Mexico. According to many reports I read and heard at the time, what happened was that the so-called “Ricos” (the rich elite) were warned by the outgoing president and his cronies that a devaluation was coming, and to prepare for it. So, what did they do? They immediately yanked out most or all of their money from Mexican banks, and deposited their cash into American and Swiss banks. Then, after the devaluation was over, most of them promptly withdrew most of their money from the American and Swiss banks and re-deposited their money in the Mexican banks again, where it earned a very attractive 20% interest.
So, there was a history linking devaluation to the end of a president’s term based on that 1976 “partial” collapse. Therefore, when 1982 came along, a LOT of people were fearful that history might repeat itself. So many people were fearful of a devaluation, that they switched their accounts in Mexican banks from the Peso to the dollar, an option the banks were offering that seemed at the time to be the wise, safe choice.