Is There Such Thing as a “Too-Good” Economy?

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Everybody likes how the current economy is going. Though there are still questionable numbers regarding employment, earnings, and home sales, the macroeconomic trends are positive. During the past month, we’ve seen the stock market surge past the highest points it ever reached in the past. Today, with the Dow honing in on 21,000 points, it seems like the sky is the limit. But is it possible for the economy to be too good? What should we be preparing for?

When considering large-scale economic trends, it’s important to consult history. At the same time, history never repeats itself exactly. Instead, it has been said, history rhymes. When we look at economic collapse and economic expansion, it’s easy to see how these two different tendencies alternate one another in American history. Most often, economies grow. But occasionally, they all slip out of control for awhile, before recovering and growing once more.

America is no exception. People who invest in the stock market know this very well (at least those who have studied history, or have been investing long enough to have lived through one or more recessions). It is times like these, when the market is rising and everybody is happy, that seem to prelude economic downturns. Whether it happens tomorrow or three years from now, it has been so long since the last economic recession, that we have good reason to believe that another one is going to be on its way soon enough.

It’s impossible to know when an economic downturn will hit, but there are good ways to prepare, so that when the time comes, you will be ready. Here are a few suggestions.

Eliminate Debt and Save. It might not feel like it, but debt is a luxury. An expensive one. Debt is the responsibility you carry for having spent someone else’s money. Borrowing money on credit is a really cool thing to be able to do, but doing it too much can cause people to go broke. Being broke is always hard, but it’s especially dangerous when the economy is disrupted. Prepare for the hard times by paying off your debt and saving enough cash to pay for you and your family’s expenses for at least six months.

Invest in Recession-Proof Securities and Commodities. Historically speaking, gold prices today are very high, but they’re not as high as they were five years ago, or as high as they would be if we entered another economic crash. Gold has value in itself, due to its usefulness and rarity. It is recession-proof for these reasons. Buying gold and securities like government bonds will put assets in your possession which won’t lose much value in the event of a downturn. During negative economic times, gold tends to gain value.

There is no way to completely prepare for an economic recession, but you can prepare something to catch your fall. It’s important to prepare yourself for the loss of work and personal difficulty, even in good economic times like these. With the possibility of choppy waters in the not-too-distant future, you’ll be glad you prepared.

Anne Lawson is a British writer who keeps her eye on business and trending issues that affect us all. She loves to delve into the real story and give us interesting tidbits we might otherwise miss.