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.
Echevarria’s successor as president was Jose Lopez Portillo (1976-1982). In August, 1982, near the end of Portillo’s term, Mexico defaulted on its sovereign debt, due to government deficit spending, and a reduction in demand for Mexican oil (due to increasing prices worldwide). In September, the government nationalized Mexico’s private banking system in order to prevent bankruptcy of the private banking sector and imposed comprehensive exchange controls. So, the government now owns ALL Mexican banks, and, by extension, all the deposits, should they decide to use them.
The crippling blow, however, was when the government devalued the Peso by nearly 50% in relation to the dollar. Though this helped Mexican exports, it hit the poor and middle class hard, just like the 1976 devaluation. Of course, the elite Ricos again were warned by their government insider friends ahead of time, and pulled the American/Swiss bank switch, so they effectively sidestepped the crisis.
An Account Not Really in Dollars
I’ll never forget the day I heard about the devaluation. People were in an absolute panic. My first thought was to get to the bank. I had my money deposited in Banamex, or Banco de Mexico, the oldest and supposedly safest bank in the country. As I walked closer to the bank, I noticed a long line of people, all looking very nervous. Finally, I got to the teller and said, “I would like to…” and then she finished my sentence by saying “close your account.” I said, “Yes, I have my account in Dollars”, thinking I was safe from any problems related to the Peso. Wrong. She replied, “of course, you may withdraw your money, but first we will need to exchange your Dollars to Pesos at the NEW exchange rate, and then, we can give you your Dollars.” Wow. This is when the reality sets in that it doesn’t matter how secure you think you are, because a bank, or the government, or whoever is in charge, can do whatever they decide to do at any time, to change the rules to protect their interests.
Lesson #1: Rules can be broken. You think something like that couldn’t happen here in the good old U.S.A.? Think again (more on that later). Rules in banking and government are being broken all over the world. Something similar happened in the Cyprus “bail in” in 2013, when any depositor with an amount exceeding $130,000 lost 9.9% of their money. Just like that. Depositors with amounts less than $130k were clipped for 6.75% of their deposits, even if they were insured. The banks (and the government) needed the money to avoid going broke, so their board of directors sits around and writes a new rule, giving them the authority to charge whatever amount they choose. And the depositors can do nothing about it.
But back to Mexico, 1982. I walked away from that Mexican bank with about half my original deposit. Prices of groceries and gas almost immediately skyrocketed about 50%. Products imported from the U.S. were so expensive they were mostly out of reach for most people. My rent was jacked up by 50%. Everybody else was raising rents, leases, etc. My father-in-law had bought a Chevy Blazer a week before the devaluation for about $1,800 in dollars. The deal was done. The money had changed hands and the paperwork all signed. The lady who sold him the vehicle came back to him in a panic, demanding that he give her the vehicle back, because of the devaluation. He refused and told her it was a done deal. She finally went away, shouting in a fury.
And Then The Crime Rate Jumped
Before the devaluation, crime in Mexico was already a huge problem. Of course, we are all aware of the violence accompanying the drug cartels, which is getting worse all the time. I’m referring just to the average person, who is unemployed and sometimes gets to the point of stealing to feed his family or to support his drug or alcohol habit. In Mexico, after the devaluation, crime got worse. My in-laws in Mexico even had their plastic water tank stolen. They would even take the battery out of their vehicle to prevent it from being stolen. Their house was broken into a few times, even though they have bars on all the windows. Kidnapping for ransom is getting worse all the time. When some people are hungry or needy, they do desperate things. My own apartment was broken into and money stolen.
How did I survive this crisis? I tried to hang on for a while, teaching English lessons to private industry in addition to my low-paying University extension school job. By the end of 1982, though, I realized my only future was to move back to the States. I did so, completing my teacher’s credential and worked as a teacher for over 30 years until retiring a few years ago. But I will always remember the years I spent in Mexico, where the average citizen just wants to work without being surprised by a devaluation or some other broken rule, to benefit the elite, and step on the little guy.
In Part 2, I will discuss the lessons I learned from the Mexico devaluation, and how they can very well apply to a future economic collapse not only here in the United States, but worldwide.
Editor’s Note: Part 2 of this article will be posted on Wednedsay, January 30, 2019.
As a kid growing up in a border city in 1982, I remember this week. The devaluation hit both sides of the border. I also remember local TV reports about huge upticks in illegal migration as well as how the wealthy were somehow immune. I also remember Americans streaming across the border south to take advantage of the deals to be had. It was interesting times.
A good article from one who was on the ground at the time.
I recall the peso devaluation at that time. I live in exterme south Texas, hard up against the border along the Rio Grande River and can recall the devastation of having the currency lose most of its value nearly overnight. The RGV is tied to how well Mexico is doing, there is a huge NAFTA influence here. Mexican and American companies with factories using low cost border workers – very profitable for them,.
So try and imagine a single $100 bill purchasing $10 of material in about a two week period. Savings accounts were devastated and the bills remained at same level – you just had to pay about 10 times as much for it.
Most people in the U.S. assume that the banks will always be open, as will gas stations, grocery stores, pharmacies, etc. And until some panic hits they are always stocked as well. But when a hurricane or blizzard is forecast, the shelves and gas tanks may very well be emptied and the ATMs shut down. And these happen during normal but unusual circumstances! Imagine banks being closed for a week or if the government enforces a “haircut” on depositors. We here tend to prepare for such events but we need to do what we can to spread the word to the unthinking masses around us.
Andy in AL – you are spot on. Folks are so unprepared it is astounding! Oct 22/23 2018- The city of Austin TX issued a “boil water notice” due to major flooding (silt pouring into the lakes that supply the water). Before daybreak, long lines were forming at all the major grocery stores for bottled water. They quickly sold out. Stores said it would be at least 24 hours before they could get more. I heard of liquor stores charging crazy prices for water they had in stock. Soon, people were driving 50 miles in either direction of Austin just to buy bottled water!
I mean, come on! How much room does it take to store a case or two of bottled water?
When it really hits the fan, I shudder to think what it will be like in the big cities.
I guess the big consolation is what happens here happens everywhere, meaning if the empire falls, most, if not all, of the free world will follow it. When everyone owns a big piece of the pie, they all lose if the pie falls on the floor. When that happens here, it won’t be as neat and tidy as what happened in Mexico. That big flushing sound will be the whole world economy going down the drain. Small consolation to the average American who finds himself broke and without all the comforts of a semi-socialist society anymore. But we’ve been long past the time for a reset anyways, and those with their head in the sand sort of deserve what’s coming for them, don’t they?
No, they don’t deserve it. No one can possibly know, or be prepared for, all of the things that are likely to happen. Did you know that that cell tower down the street will give you cancer some years from now? Stupid you. You deserve to have cancer. Did you know that most of the rice you eat contains mercury? Stupid you. You deserve to be sick and debilitated. Are you following the statistics about the increase in incurable STD’s? No? Sorry your fun isn’t fun any more.
There are more dangers than anyone can possibly know about, and most people, especially young adults, are putting their energies into working, changing the baby, and trying to move into a decent school district.
Tell who you can, help who you can, and pray for the others. Be of good cheer, my soul, for my barns are full, and I have enough for years…now Who was it who warned us about the consequences of saying that? Oh yeah, Him.
wow but that was well said
As an elderly Yankee, I remember well the “Recession” of the early 80’s. My husband (his 2nd marriage) had a 14% inflation clause in his divorce degree for 2 children he loved. Lucky for us, he had very useful degree, found a job in the Midwest, and I left my Office Manager position and secured a position for president of a non-profit within 3 weeks of moving to the Midwest State. The New England state in which we were born and lived was a disaster. It was the “Rust Belt” Recession for much of America. When jobs dried up, before we left the East, we were both working 7 days a week, but it was NOT enough to cover mortgage, taxes and pay his child support. We did what we had to. While the marriage did not last long, we had “no quit” in us insofar as WORKING at whatever we had to do. Today’s welfare state, addicted people of all ages, and the “oh poor me” mentality leaves those of us with “get up and go” bearing the burden for those that the Founding Fathers, especially Ben Franklin, warned us against us. Do I feel like a BEAST OF BURDEN??? You bet your whatever I do! Glad my parents are long since gone, as I know that they would be horrified of what had happened to America! I am not surprised, but saddened. The good, hard working people have become DEBT SLAVES and MOST politicians at ALL levels have become Socialists even though they label themselves Democrats or Republicans. This is what happens to a Nation when the people do NOT understand where $$$ REALLY comes. Read Ayn Rand’s books “The Fountainhead” and especially “Atlas Shrugged”, read Ludwig Von Mises. LEARN a bit about what REALLY creates $$$$. Am so glad I discovered Rand in the 1960’\s, though I was already a Capitalist thanks to my hard working, hard headed, no nonsense Dad, and our kitchen conversations at the end of the dad in the farm house kitchen when I was 9 or 10. It rubbed off! There also was NEVER any quit in ME!
I look forward to the rest of the article. My wife is from Peru and she witnessed firsthand the same theft during various banking crises that have occurred there in the last 40 years. Her father worked hard all his life and built a decent retirement, like many Americans, only to have it disappear overnight when a 1000% devaluation occurred. This meant that if you had $10,000 in the bank you now had $10 in the new currency. It devastated him and slowly took his life.
I was married there and remember vividly walking down the streets of Miraflores, an upper class district of Lima, and seeing paper blowing around everywhere. I soon realized that it was freshly minted “money” that had quickly become worthless. I scooped up $400,000 in Peruvian intis, which was worth less than 10 cents in American money!
I know, “this will never happen in America.” For the record, every single country in history, large or small, that has used a fiat currency based economic system, like ours, has crashed . . . without exception. Because of the vigorous enforcement of the 1944 Bretton Woods Agreement, which gave the American dollar top dog status in world trade, it has taken many decades for the dollar to die, but it is now very close and soon to be abandoned as the chief currency for world trade. Do you realize that the last time a paper dollar had the same purchasing power as a silver dollar was in 1941. Today the “paper” dollar has less than 2% of the same purchasing power. No, it will never happen in America!
Know your history! The greatest murderers and thieves throughout history have always been tyrannical governments, which “legalized” their reigns of terror and theft in the name of equality, fraternity, justice . . . blah blah blah. Heads up folks, for we are most certainly facing a far more grievous economic crash here at home, since it has been building for many decades. Anything and everything you have in paper — investments, 401k’s, pensions, savings, cash under the mattress, stocks, bonds, etc. — that is denominated in dollars will become worthless. The Lord emphatically declares that fiat based economic systems, such as ours, are an abomination and rightly so since they have been instrumental in the enslavement and plundering of millions of people. “Diverse weights and diverse measures, They are both alike, an abomination to the LORD.” (Prov 20:10 ) You might ask what weights and measures have to do with money?
As money has been measured by weight since mankind began to trade, like in Israel under the Old Covenant, so at one time American money was measured by weight, that is, by a unit of measurement known as the dollar, originally based on a specific weight of pure silver patterned after the Spanish Milled Dollar. This is how the popular American “silver dollar” came to be. The “gold dollar” was based on a different weight since gold had a different worth in the marketplace, about 15 times that of silver. In other words, if it took one ounce of gold to buy a horse, it took about 15 ounces of silver. The term “dollar” was a measurement of money by weight, never the money itself, as it was the gold or silver content of the coin.
Now by comparison, take a five dollar bill of today. It states, “Federal Reserve Note –The United States of America – Five Dollars – This note is legal tender for all debts, public and private”. Now, although there are certain familiar phrases on the “note,” such as “Federal Reserve Note,” “The United States of America,” “Five Dollars,” and “This note is legal tender,” critical wording is missing which is absolutely necessary to make it a lawful and true note. Since it makes no mention at all of a promise to pay anything to anyone, as there is no maker, no payee, no amount or mention of lawful money, and no due date, this “official” looking piece of paper is neither lawful money nor a lawful note, but is a fancy paper token which wording is nothing but duplicitous legal-speak.
We are, nonetheless, forced to use this fancy form of literal monopoly money (the Federal reserve is a private banking monopoly) by the bayonet of “legal” tender laws, enforced by a massive central government. Though “legal,” the American dollar of today clearly violates the Constitution as it mandates gold and silver coin (Article 1, Section 10).
While one still can, one should get out of paper into land and a means of production, followed by gold and silver as a means of savings. Get out of debt , become productive, and most of all fear the LORD and not man. May He have mercy upon America.
Wow. Thank you all for some great comments and article today, everyone.
The years 1982-4 were hard times for us in Wyoming. George Bush and Aramco oil put many folks out of work, iron and steel industries shut down, 40 homes repo-ed or given back to the bank in our little town of 2,100 people, people had to leave to find work in other states.
I just had the “I’ve lived through 4 downturns, so I’m advising you to be ready for the one that has already started now” talk with my adult son, last weekend.
We made it through the past four decades because we stayed with God Almighty, His Son, and sought the Holy Spirit in our lives.
“The Spirit of God came upon Azariah, the son of Obed…….hear ye me, The Lord is with you, while ye be with him: and if ye seek him, he will be found of you, but if ye forsake him, he will forsake you.” 2d Chronicles 15.
I would add to the wisdom others have shared here, that a means of production, skills and labor to provide others a product in return for barter or income, or items of value (probably not precious metals) are critical to add to your arsenal right now. Networking with others to discover LMP this week is probably the most important activity in the coming months.
God Bless.
These points stood out to me: The govt defaulted on its debt. The currency was devalued. The elite were forewarned to avoid it, but the poor & middle class were lost much of their savings. The govt nationalized private businesses. The crime rate jumped. It can also happen here in the USA.
Thanks for this article.
Yes, I have a strong feeling the high falutin donors to the various campaigns will also be forewarned beforehand by the politicians. Because donating millions of dollars has to come at some price and an early notice of change in US financial strategy would be one such condition. Think about it, political donors pay lots of money to have a sex scandal buried. Paying money so a donor can save money is just another part of the game.
It is being reported on conservative talk radio that Mexico is spiraling into the same oil trap that is killing Venezula. The national oil/gas pipeline has been found to have in excess of 1500 taps that siphon off fuel on a regular basis. A massive explosion occured in the past two weeks that killed dozens and injured several hundred more at one of these taps.
So the Mexican president declared the pipeline be shut down and all fuel moved thru the country would be by truck. This is failing because there are not enough trucks and the costs are extremely prohibitive. This is causing a rash of gasoline stations to close, businesses are shutting down because workers cannot afford the gas to get to work all because of the pipeline shutdown.
It would seem the domino effect is pervasive in that a black market is developing for gas, food, medicine and all other life needs.
Mexico is circling the drain now in the early stages of economic collapse and following the Maduro game plan that has devastated one of the most oil rich countries in the western hemisphere. How soon will the peso be devalued to almost worthless again?
If you think we have a border crisis now just wait until the Honduran/Guatemalan caravans are outnumbered by the Mexican people storming the border by the tens of thousands DAILY ! And where will the money come from to provide the humanitarian aid required to house, feed, doctor and lawyer all these folks trying to escape the desperation caused by an out of control, corrupt, tyrannical gov’t?
I’ve been through a few downturns as well. 2008-2009 was really bad for us. Had we planned we could have been in a much stronger position to weather that storm and prosper. The next will be worse. Over the past few years it’s been on my mind to get out of paper investments and into more tangible assets. You never know what the government will tax excessively and real estate is where most local governments will turn when they re trying to make up for shortfalls. So we are selling off “stuff”, my wife has voluntarily gone to work (she’s awesome in my humble opinion) and we’re diversifying into other assets with a good mix of smaller, high value items and proven tangibles like PMs and antique firearms. I’m not a wealthy guy by the world’s standards but it is my responsibility as a husband and father to make sure my family is taken care of. Slow and steady wins the race – making these investments adds up over time especially if you can swing it on a monthly basis.
Understand that the theft didn’t (just) occur when the money is revalued or inflation happens or recessions or bank crashes. It is occurring all the time, right now, in the foreseeable future. It is just that a crash or revaluation makes it seem real. Pay attention to what the “radical” Democrats are saying(in quotes because they are all radical now). Free health care for all including illegals, free college and day care, open borders, unfettered immigration. This is the Venezuelation of America. I can’t predict the winners of the 2020 elections but the Democrats in congress are right now changing the voting laws so they can more easily steal elections. So it’s gonna happen. What then?
If we have a repeat of 1929-1941 can you survive it? If it starts out as a crash or revaluation and gets worse and becomes more like 1861 can you survive that? Will Russia and China sit by while we go through a social and economic disaster and not step in? It’s coming, they are right now setting the stage for genocide against those with white privilege. They MUST take guns first. Armed citizens will refuse to load themselves into cattle cars. I suspect that the millennials will go willingly either way but not most of us born before that. Time will tell
@OneGuy
Probably the best comment I’ve seen in while. Spot on! Most Sheeple don’t understand that the Communist worlds are advancing whereas the Western worlds are on a dramatic decline. My wife is Chinese and we have recently talked about moving to China to raise children and have a life (I’m white privilege as LIB-TARDS would use racism). These countries in the Communist world are going to overrun America. There is so much pride in China today about their Space program and their military (though they’ve stolen everything from America) that these dunderhead Americans (especially the Millennials) don’t even know what is about to come about America. Remember America is not in the Bible (Revelation), it will be gone.
It is best to relocate now to the American Redoubt and store/hide/stock weapons until you have a small armory. If you give up your guns, you will be annihilated in the near future. Plain and simple.
@Jefferson Davis, I believe you are wrong about America not being mentioned in the Bible. I actually believe the Bible references America quite clearly in Revelations as the Beast. Our government has three branches or heads (executive, legislative, and judicial), and all the other descriptions in the Bible of the beast and its actions only fit America and no other nation.
Yes, the millennials will go. All you have to do is tell them that they will each get a free I-phone when they arrive at the ‘destination’. Hehe
Very interesting! Ah, a Chevy Blazer owned free and clear of debt. Thank you.
Article is informative. Makes me rethink what I need to do now that I’m retired. Anything can happen with all that is happening worldwide.
“She replied, “of course, you may withdraw your money, but first we will need to exchange your Dollars to Pesos at the NEW exchange rate, and then, we can give you your Dollars.” Wow.”
I think the author meant OLD exchange rate. The old exchange rate is what would result in a loss in this situation.
I have heard of people with foreign bank accounts where the money is deposited in dollars and the balance is listed as dollars (not local currency). When a withdrawal takes place, the US dollars are converted to local currency and are not able to receive US dollars in a withdrawal. That is just what I have been told.
Good point, Matt. Yes, I should have phrased it, “…but first, we will need to exchange your dollars to pesos at the OLD exchange rage, and then exchange your pesos to dollars at the NEW exchange rate.” Wow, so that’s TWO rules they broke! Yes, “rules can be broken,” and frequently, MULTIPLE rules are broken!
Thank you for a great article . Your first hand experience is invaluable to share .It didn’t take long for things to fall apart. It is interesting that so many people put their trust in the banking system, pension system and Wall street investments. No record that I am aware of where a fiat currency like the U.S. uses has ever succeeded. That should at least be somewhat of a heads up to people .
I am looking forward to part 2 .
In any economic system one should have many asset classes like Solomon mentioned in Ecclesiastes.
However one should know your home is not safe due to Supreme Court Decision that allows government to take your property and not for public good.
As for tangibles of gold and silver they are limited due to 3rd party. Who are you going to sell it to or for how much and in what form, depreciated dollars. Gold and silver work well in a functioning society but in chaos of currency collapse, maybe not as much as people think.
One thing I see coming that could be a precursor to devaluation is a ban on cash. It’s stunning how many people I see that do not have any money at all but pay via their smart phone or credit card. That will indeed be a Black Swan.
I too look forward to part 2 to see real solutions when such an event takes place here
Correct, Skip, some countries are already attempting to impose at least partial bans on cash. India in 2016 banned large notes such as the 500 and 1,000-rupee bills, supposedly to fight against counterfeiting and terrorism. But the move created major hardship for most people. At first the government said people would be able to deposit the old notes for new ones in a certain time frame. Then they limited the quantity of deposits. Then they closed down the time frame. Rules can be broken.
According to Wikipedia, “Prominent businessmen stated after the announcement of demonetisation that they had received prior warning of the move, allowing them to convert their money into smaller denominations.”
Sound familiar?
I find it rather insane that our government, of by and for, can write laws that allow them to confiscate the peoples property, lock stock and barrel…… given there is only 545 of them at any given day, and three [hundred and] fifty million of us, give or take. I don’t think they will win that battle. People who know the truth of the globalists who have control of our government and work toward world government, will not just give it up. That’s theft, we shoot thieves, right? This is not going to go well, but it does end well, thanks to Jesus, who is on the near horizon. Appreciate the article and the comments. We follow a basic framework, and it’s been laid out here.