E151: The Two Big Ways Recessions Impact Your Money and Personal Economics
In this episode, we discussed the two big ways recessions negatively impact your economy and how you can set yourself up to thrive during a recession.
- Recession indicators in the economy
- Selling of assets driving the stock market down
- Is cash really king in an economic downturn?
- Opportunities to watch for when the economy is down
- How Infinite Banking isolates and positions you better than cash
- The crazy ways IBC works even harder for you when the financial markets are in a tailspin
- The magic that is compounding interest
- Finding and exploiting positions of financial safety
- Gain access to our Beginner’s Course now FREE to listeners of the podcast here now
- What is Infinite Banking
- Who was Nelson Nash?
- CREDIT: Episode art background photo by Adam
Podcast transcript for episode 151: Two Ways Recessions Impact Money
Nate: In this episode, we discussed the two big ways that recessions negatively impact your personal economy and how you can set yourself up to thrive during a recession. She’s Holly and she helps people find financial freedom.
Holly: He’s Nate, he makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.
Nate: All right, well, welcome to the show. Today we’re going to talk a little bit about some things that Holly and I fear are coming down the pike. I don’t think we’re the only ones saying that a recession may be on the way. In fact, Holly, I’ve heard some people say that we may already be in a recession or in kind of a weird time where the typical indicators for a recession are kind of bouncing off the screen, there’s red sirens blaring everywhere, but it doesn’t seem to have set into a typical recessionary environment, which we will talk about kind of the hallmarks of a recession and how they impact the average person, that’s going to be the main gist. And then also how you can typically set yourself up to thrive during a recession and we’ll add a twist to it that we really feel having yourself set this way can impact your life beyond a recession as well.
So, Holly, I guess we could dive in. We’re not the only one saying that a recession may very well be on its way or may very well be here right now.
Holly: You’re a 100% right and I think if you look around, Nate, you’ll see what we’re going to talk about, those two big hallmark issues that lead to a recession and you should be asking yourself, “Are we in one right now? Are we going into one? Could one happen?” Because the reality is some will say we’re already in a recession, some will say we’re headed into a recession. I would tend to be, I think we’re in the midst of a recession, even though it’s not mimicking exactly what a total recession will have. You’re seeing those warning signs or hallmark issues start to take place in society.
Nate: That’s right. Maybe we can get out, but typically there’s a whole bunch of headwinds to the economy right now. There’s the Federal Reserve raising interest rates to combat severe, rampant inflation and so you have these two headwinds, an crazy inflationary period that we haven’t seen since the early 1980s, late 1970s. Then on top of that, we have the Federal Reserve raising rates more aggressively than they have since that period of time. Crazy time to be in, a whole bunch of headwinds for the economy, I think everyone sees that, but I guess if we go to the typical definition of a recession, what the typical cause of it or actually what a recession means, per se, is whenever production in the economy starts to slow down and go backwards, where instead of the economy growing and GDP increasing and businesses investing more money and growing their businesses, typically a recession is an environment where that’s not happening. A recession is when growth in the economy slows down and then turns negative where the economy starts to shrink and production starts to shrink. That, actually, is happening right now, Holly.
Holly: It is.
Nate: It actually is, but the two hallmarks, and this is really what we want to focus on today, the hallmark problems that that causes just for us as average people living our life in America. That’s the macroeconomic recession is when growth shrinks and goes negative and the economy starts to shrink and GDP starts to go down. That is actually occurring right now.
The two big problems to you and me that happen because of that as typically, the two main ones are unemployment starts to increase. Typically in a recession because production’s going down, that oftentimes means that businesses are not hiring nearly what they used to be, because they’re not able to produce the revenue that they used to produce and since they’re not able to produce the revenue, not only are they not hiring, but they’re also oftentimes letting their workers go. There’s major layoffs are oftentimes a hallmark of a recession, so that’s number one. It’s harder to find a job during a recession and it’s much more likely that you’re going to get laid off during a recession.
Unemployment increases and that is essentially causing very often asset prices to decrease. Unemployment goes up and the prices of your assets oftentimes go down. Those are the hallmark symptoms of a recession. Those don’t cause the recession per se, those are a hallmark symptom of the recession on the you and me level because of the economy shrinking, that’s essentially causing those things and they go hand in hand. As unemployment goes up, less and less people have jobs, which means less and less money can spend money, which means businesses become less profitable, which means they have to lay off more workers because they’re not making money, and so it’s a cycle that bottoms out at some point, unfortunately, and because businesses aren’t able to produce as much revenue, almost every time in a recession, the stock market goes down in value because businesses are not as profitable. They’re losing money. Sometimes they’re going out of business more often, obviously. The stock market goes down, in a bad business environment, oftentimes commercial real estate will go down, some commodities may go down. Anything that’s really requires supply and demand functions, Holly, they often go down.
In other words, people start to sell assets because they need money so the supply of assets go up, that available for sale, but the demand for people to buy them goes down. No one’s buying during a recession, so supply and demand gets out of whack prices decrease, not across the board, but we’re talking the general rule of thumb. I hope I painted the picture well, Holly, but essentially the two biggest symptoms in a recession, our unemployment starts to go up, which means people are losing jobs, and businesses are making less money in general. Because of all of that, the prices of most assets start to shrink and that’s why everyone’s afraid of a recession. They don’t want to lose their job and they don’t want their retirement programs, their homes, their commercial properties, their commodities, all of these things, they don’t want those things to shrink in value either.
Holly: You can see that, Nate, happening today, if you look in the technology sector and things like that. There’s layoffs taking place because they basically are losing money and you’ll see that, we’ve seen that in the first two quarters of the economy, even with the stock market, how they’ve continually decreased entities and companies that were really big. We’re talking like Apple and Microsoft and all these technology-based companies where there’s stock, Netflix, different stocks are now going down and decreasing but it’s a direct result of the layoffs that have been taking place as well across the board because people tighten the purse strings, so you start fearing you’re going to lose your job so you don’t put money back into the economy because you’re saving that money in order to prevent if something happens in the future to have money to be able to use. The reality is it’s a cycle that eventually it does have to bottom out because you can’t continue the cycle or else nobody would have any jobs and there would be no money and there’d be nowhere to purchase anything because nobody would be producing.
Nate: Yeah, at some point assets get low enough, wages get low enough that things start to turn around. It’s never a never ending recession for the most part. But the one thing that kind of makes me wonder are we actually in a recession or not is because unemployment is still actually extremely low. The job market is still super tight. If that starts to turn around, then we are guaranteed that we will enter a recession and I would assume the cycle will start to fly more aggressively than it already has in a lot of ways. The only thing that’s kind of keeping us where we may or may not be in a recession right now, the economy is shrinking, we know that which would typically say we’re in a recession, but right now unemployment is still at historically low levels. But you are seeing it as, Holly brought up too. You’re seeing it, there are layoffs happening, but the job market is still super hot.
Nate: I guess if we want to keep plowing ahead, these are the big problems in a recession.
Nate: The whole point of the show though is to say, “How can we thrive in a recession?” There’s conventional wisdom for this. Most people would say that cash is king during a recession because cash-
Holly: Even if it’s not a recession, it’s always cash is king. But in a recession, cash is king.
Nate: Everyone would say cash is king during a recession, really for a couple of reasons because the symptoms of a recession, unemployment going up, people losing jobs, business is slowing down. Your actual asset price is decreasing. Because those are the two things that are happening that we feel as people during recession cash is one of the only answers to solve those problems. If you go lose your job due to a recession and businesses are laying people off and you aren’t able to work where you’re at, would it not be nice to have a large pile of cash sitting on the sidelines, ready to float you through this period of …
Holly: Money in your pocket.
Nate: Money in your pocket. We have emotional turmoil. We’ve got financial turmoil, no one wants to lose their job, and so would it not be nice to be flushed with cash as you enter a recessionary period so you can feel insulated? Cash insulates you from the symptoms, I guess that’s what you could say. Cash is the insulator for the symptoms. You lose your job, you have cash, we’re okay. If you own a business and business slows down because other people are losing their jobs and they’re not able to spend as much with you as they once did. That doesn’t happen every business, Holly, once again, this is a rule of thumb. Some businesses thrive in spite of a recession, but just the normal in business environment would mean it slows down. Would it not be nice in your business if it was flushed with cash entering a recession? Cash is king for that very reason and people see that, Holly. When people are worried about a recession, they start to sell their stuff. They start to sell assets for the most part.
Nate: Especially the wel-
Holly: And hoarding their money.
Nate: And hoarding money. That’s right, because they’re like, “Hey, we don’t know what the economic environment’s going to be, we’re going to sell our assets.” That’s what actually causes, by the way, the second problem of asset prices going down in value. People are afraid of the recessions, when they sell their stuff, that’s what you’re seeing in the stock market right now. It’s over 20% down from its all time highs. That’s because people are consolidating and becoming liquid and they’re selling off because they’re afraid of a recession. We haven’t seen that in all different areas of the economy yet, commodities are still really high, real estate values are still really high, but that’s because we haven’t hit the unemployment phase of the recession yet if it’s going to happen. That’s when those things would start to be really a concern.
Nate: When people sell assets because they are afraid of recession, that leads to what talked about, assets losing value. Whether it’s stocks, which we’ve already seen commodities, which have a long way to go down, by the way, due to the crazy inflationary environment that we’re in, commercial real estate as well, that would be something that during a recession can cause some downturns in commercial real estate. It doesn’t have to, but it can because there may be less businesses looking to lease space from commercial properties and so forth. These assets can lose their value and that’s why people also say it’s great to have cash during a recession because we’re going to jump in and buy all these things that everyone else is selling at deep losses, we’re going to go buy them for cheap. That’s why you have people like Robert Kiyosaki and other people saying, hey, they’re excited for the next recession because they know that there’s going to be a whole bunch of really cheap assets available for sale that are going to be really valuable but people are having to offload them because they can’t make the payments on it and all these different things. There’s huge opportunity for people who have cash during a recession.
Holly: Yep, because you can buy the assets.
Nate: You buy the assets for cheap.
Holly: At reduced prices. It’s the vicious cycle. They have to sell it in order to get cash, you have cash, so you’re able to buy it at a very reduced rate, and it benefits you because you got the asset cheap.
Nate: That’s right. Then the recession’s going to end and things are going to get better. This is why people say cash is king. The problem is it’s a bit of a gamble because nobody really knows when the top of the market is and when the bottom of the market is, so if we understand that cash is nice to have during a recession because it insulates you from unemployment going up, business slowing down, and also insulates you from asset prices going down, and gives you the ability to buy cheap assets when they do go down, that’s all great. The problem is cash typically sucks at almost all times unless you’re in a recession. That’s the biggest problem, that if you’re sitting on cash and you end up not getting into the recession or you end up not losing your job and you end up sitting on the sidelines for too long, where if all you have is money sitting in a bank account or a money market, this is what people are trying to do.
They’re trying to get cash in, but they’re worried that if they do that, then they’re going to miss out on a whole bunch of gains if they miss out on these opportunities by just sitting on cash. The problem is cash sucks at all times pretty much unless you’re in a recession. Cash can be nice to have at some level, but certainly not at the recessionary level. That’s really where I believe the solution, which believe it or not I think we’ll talk about Infinite Banking again today, Holly, for those of you listening.
Holly: Yes, absolutely though.
Nate: That the solution for this problem truly is the Infinite Banking Concept, using dividend paying whole life policies as your cash reservoir at all times, because I believe that the solution of Infinite Banking can actually allow you to thrive. There is no other asset in the world quite like whole life insurance during a recession. It’s the only asset in the world that has never gone down in value, ever, especially during recessionary times. It’s the only asset that exists like this. It’s this one of a kind thing that never has, yet, to have any issues in any of the recessionary environments that we’ve been in or depressions that we’ve been in and it allows you to have complete liquid control of all of your money, just like cash would, which will allow you to insulate yourself from the symptoms of a recession, the unemployment going up, the assets going down, the price of assets going down. It is unaffected by any of that happening and it can help you buy through that. It can also help you purchase cheap assets when they become for sale at deep discounts, but, Holly, it’s actually not something that sucks to own if you’re not in a recession. You can do great during a recession and the growth of the policies are very competitive even if you’re not in a recession. It’s a win-win situation, which is why we love it so much.
Holly: It is cash, it’s just in a policy and it’s your cash value, Nate, that you’re able to use if you go into a recession, you can access it, if you lose your job, you can access it to buy assets. But the other thing is is that if you don’t go into a recession, you didn’t have to pull the cash out and it continued to grow in the policy whether you had to take the cash out to float yourself during the recession or to buy assets. Either way, the growth still is sustained within the policy so you’re having your dollar not just sit somewhere doing absolutely nothing. Your dollar is continuing to grow for you every single day that it’s in a policy versus in a bank or in a safe or under your mattress where that cash is doing you no good.
Here’s the thing. Once you spend it from the safer that it is gone, when you’ve used it from your cash value of your policy and you’ve borrowed it out, it’s still earning interest so it’s doing more than that and you’ve made money now. You’re making money buying assets or floating yourself. The money is still compounding uninterrupted tax free and that’s why Nate and I … The Infinite Banking Concept, I think is one of the only ways, if not the only way during a recession to thrive. If you don’t have it, in my opinion, you can’t thrive. You’re either going to buy the asset at a reduced price, and yes, you have to wait for the recession to go away and then you can maybe sell it or offload it. But once again, that money’s gone. It didn’t do anything for you, Nate. You spent it, it’s gone, and all you do is have the asset or you kept your money to float yourself during the recession and you had to spend the money and once you come out of the recession, you start to work again, all the money that you spent during that time that you just had to yourself or in your bank didn’t do any good other than it floated you, but basically that’s all it did.
Nate: Yeah. It can’t actually help you become richer.
Announcer: Is the money in your bank account losing value instead of growing? Are inflation in taxes, going to get better or worse? Conventional banking makes the bank rich using your money and pays you little to nothing in return. We believe in challenging the status quo. After all, most of those conventional tools only seem to make someone else rich. Let us show you how to beat the banks and inflation. Visit livingwealth.com/beatinflation. You’ll receive instant access to what we call the Beginner’s Course. This in depth and easy to follow course teaches people how to create and profit from Infinite Banking. You can become debt free, in control, and achieve financial security and significance. Stop letting the banks and Wall Street dictate your financial future. Go to livingwealth.com/beatinflation today to instantly receive free, no obligation access to this priceless course on Infinite Banking. Again, that’s livingwealth.com/beatinflation. Now back to Nate and Holly.
Nate: We’ve talked about this concept kind of before, Holly, that there’s just something about living life, if I want to use a term being like well capitalized. Banks are already storing capital in this thing called BOLI or bank owned life insurance at crazy levels, billions and billions of dollars because they actually have to, they’re regulated, they have to be very well capitalized to avoid any issues coming down the pipe. I think there’s something about living life and practicing the becoming your own banker concept, where you’re using that same tool and building up capital that’s deployable and safe and is just rock solid in itself and then off shooting for other asset purchases and investments from that place of being well capitalized. There’s something about it that you really become almost impenetrable. Nothing can come your way that can really just destroy your situation, which is what a lot of times happens during recession.
People lose their jobs, they sell their assets at losses, and it just sucks all the way around. There’s an insulation ability from policies that you can easily access that allows you to be well capitalized and ready to thrive during a recession because you don’t have to worry about, “Well, what happens if I lose my job?” Well, if you have $100,000 of cash value or more hopefully sitting aside ready to go, you won’t be nearly as concerned as you could be and certainly won’t be as emotionally unstable event. You can access all the opportunities that will come guaranteed during a recessionary environment but even if you’re not in one, you’re able to still build wealth through the system at all times, good or bad. It’s one of the few things that does that. It’s awesome during a recession and it’s awesome even if you’re not in a recession. That can’t be said for almost every other asset that exists.
Holly: I don’t know of another asset that does this thing, that truly is an asset during a recession, whether you’re not laid off but you’re buying assets or whether you are laid off and you’re trying to float yourself during that period of time. It literally is the only thing, in my opinion, that actually benefits you as the individual and the owner like you and I. Some businesses are going to thrive and I’m going to just say this, the wealthy are still going to be wealthy, but most recessions affect the middle to lower class in our cash flow and what we have to use. This resource of Infinite Banking Concept is the only thing that actually can sustain you and actually works for you as the owner like that. Your dollar is able to do more than one thing. It’s not just sitting there doing absolutely nothing or making somebody else rich.
If you leave it in the bank, it’s making the bank rich. If you put it in your safe at home, it’s doing nothing for you or your family. The reality is those are really your only two choices, unless you’re going to pursue an Infinite Banking Concept and have it in a whole life insurance policy that’s mutual and dividend paying so you can access it and use it should you need to. But if you don’t need to, Nate, then you’ve got what we call windfall, right? When you come out of the recession, if you didn’t need to use it, you still have cash to buy stuff or do stuff with now and in the future.
Nate: It will be far more capital than if you had just been in the bank. And that just goes back to the very genesis of the Infinite Banking Concept, which is mainly there is value to having capital deployable at all times. The problem is the only solution we knew about how to really have that exist was through banking. The banking world is not set up to benefit its customers, it’s set up to benefit the owners of the banks, which is mainly the guys over on Wall Street, which are manipulating the world as best they can to produce profit for them. The problem is you and me just get whatever breadcrumbs fall off the table when we deal with actual banks. We understand the banks produce a value to the world of being able to store up liquid capital that’s accessible, the problem is it’s not a very good situation for you, the value’s not very great. If you can figure out a way to become your own banker and profit in the same way they can, then you can thrive whether you’re in a recession or not and we really believe that the answer to the biggest symptoms of a recession is found very nicely in becoming your own banker.
There may be other ideas out there that are really great during a recession too. I’m not saying we own the only solution to insulate you from the problems and to help you actually not only be insulated but thrive during it where you can actually take advantage and get extremely wealthy during a downturn. But this is an awesome way to do it that’s been tried and true and has worked for 150 years during recessions. There may not be a reason to go search for another idea that will work because hey, we’ve got one that we know works.
Holly: I think that pretty much sums it up, Nate. If you’re considering we’re in a recession, if you think we’re going to go into a recession, and you’re one of those people starting to pull money, you really need to ask yourself, where are you going to put that money if you’re selling assets or you’re hoarding it? Really for Nate and I, the best and one of the only solutions to help you thrive during a recession is to put it in the Infinite Banking Concept and to actually have control of your money even in a recession.
Nate: I would say, we’re pretty biased, Holly. I think we can agree with that. We’re a little biased. We’re putting huge amounts of premium into policies and we’re loving it the whole way and we’re in the business of coaching other people how to do exactly what we’re doing. I understand that we’re biased, but I am saying see through our bias to understand the reality of what we’re saying, that if there is a different solution that you think insulates people from recessions in the same way, you should really tell us. We’re not blind by our bias. We’re happy to learn new ideas. All we are saying though, is that the solution that we’ve been practicing collectively, me for about 10 years, Holly for even longer than myself, you go way back to the eighties when Nelson Nash went created, the concept started to practice it. Then you go even further back without everyone who’s been using life insurance for centuries. All this to say it works great whether or not you’re biased or not.
We’re just simply here to say Infinite Banking, this concept actually gains steam during recessions, because people realize dividend paying whole life policies are one of the few areas that tend to thrive in any environment, that it’s great to own during a recession, it’s great to own even after the recession, it allows you to tap into so much security that nothing else can really provide. See through our biases and take our word for what it really is saying to us, that there’s two big problems in recessions. The hallmark problems are the symptoms of a recession to you and me, unemployment goes up, asset prices go down, we are worried about losing our jobs, we’re also worried about losing the value of all the assets we’ve built up. We panic, we sell out, we go to cash because everyone knows cash is king during a recession so that if we lose our job, we can float it through. If other people start selling their stuff, then we can buy in it at a fire sale price.
The problem is cash sucks all the time, except for during a recession. Enter Infinite Banking. One of the only solutions we know of that allows you to insulate yourself and profit during a recession and thrive during a recession, just like a typical cash position. However, it’s also far more beneficial even after the recession to continue having capital built up in the system. Well, thanks for joining us today, everyone. This has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.
Holly: For free transcripts and resources, please visit livingwealth.com/e151.
Announcer: Listeners, one last thing before you go start your journey towards financial security and wealth today. Visit livingwealth.com/beatinflation. You’ll gain instant free access to the beginner’s course Ray, Nate and Holly made just for you. Again, that’s livingwealth.com/beatinflation.
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