Are you ready for the next collapse?

| May 07, 2012

For Diane and me, this means build cash while we can and be prepared to park our truck for a few months next year because already low freight rates may plummet. Freight rates may plummet because if the above mentioned negative conditions develop, the economy will tank. There is no way the economy will continue to grow if the government sucks hundreds of billions of dollars out of it with draconian tax increases and spending cuts. The economy will tank.

As with the Great Recession, truckers desperate for cash will beg shippers to haul freight at any price just to pay next week’s bills. Like the politicians they hate, these truckers will kick their own cans down the road and then succumb to the excessive debts they got themselves into with irresponsible spending and the lack of foresight. But before they wash out of the business, they will drive freight prices down to low if not money-losing levels for everyone else.

Sorry to be so gloomy but as a survivor of the Great Recession, and one who saw it coming , I’m here to tell you that you have to consider all possibilities and be prepared for every one. (I saw a recession coming but did not expect it to be as severe as it was).

Europe is shaky. The January 1, 2013 day of reckoning is in clear view. Do what you can today to prepare for a gloomy tomorrow.

Now, on the positive side, there is a ray of hope. It is called the Simpson-Bowles plan. It is the bipartisan product of of the Simpson-Bowles Commission which was set up by President Obama in 2010. Most observers agree that this plan provides the tough medicine — a blend of spending cuts and tax increases — needed to put the U.S. budget back on an economically sustainable path.

The problem is Obama dismissed the plan soon after it was published. He thanked the commission members for their good and important work and filed the document away, thereby taking it out of the spotlight. With congress, he then led America into the situation that exists today.

Simpson-Bowles supporters have not given up. While a bill based on Simpson-Bowles was defeated in the U.S. House in April on a 382 to 38 vote, optimists suggest that the Taxmagedon-fiscal-cliff-sequester realities will be so terrible and so repugnant to legislators of both parties and to the American people that Simpson-Bowles will be seen as the best alternative and adopted.

After it was dismissed, Erskine Bowles put a great deal of time into converting the 66 page Simpson-Bowles report into 800 pages of legislative language. Later this year, after congress has put off dealing with these issues until the last possible minute, the Simpson-Bowles document will be ready and waiting.

What our elected officials will do with it us anyone’s guess. The optimists point to the more severe alternatives and say Simpson-Bowles will be adopted (no picnic for Americans either, by the way). Pessimists look at the gridlocked and ineffective congress we have now and note that the people who produced that reality will be the same ones to deal with Simpson-Bowles, if they take it up at all.

I do not know what will happen between now and January 1, 2013. I do know that the best thing for individual truckers to do is focus on what you can control. For Diane and me, that means continuing our debt-free ways, continuing to live within our means, and building cash so we will have the option of parking our truck for several months next year.

If the worst case scenario develops, we’ll be ready. If not, we’ll be relieved and be able to keep the money in the bank that we would have spent to survive the killer drop in rates.

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