October 2018 has been a time of reflection about what happened 10 years ago that dovetails nicely into the American classic, “Long Black Veil.” Hurricane Michael disrupted my idea, but that’s how financial planning works. You plan, implement, then adjust as necessary. October 2008 was Hurricane Michael for the American economy.

Every few decades the financial system has a shock. We don’t know what will trigger the next calamity, when it will occur or its severity. Terrorists could use bio-chemical weapons in major cities around the world. Cyber attacks against large American banks would sow instability across the entire banking system. Either of these scenarios could trigger a chain reaction and bring financial activity to a halt similar to what happened 10 years ago. Technology is wonderful, but one break in the system puts you on the dark side of the moon.

Historically, debt causes financial manias and subsequent blowups. Three centuries ago the South Sea Bubble destroyed fortunes around the world mainly because of debt. Sir Isacc Newton, as brilliant a mind as the world has known, went broke during the debacle. In 1998, Long Term Capital Management, led by a pair of Noble Prize winners, almost collapsed when Russia defaulted on their debt.

There are warning signs on the road ahead. Student loan debt has more than doubled over the last 10 years. More worrisome is over 10 percent of loans are 90 days past due. Almost 50 percent of U.S. corporate debt has the lowest investment grade (BBB) above junk bonds. An economic downturn could trigger lower credit ratings and make it more expensive for companies to borrow or invest. Further muddying the financial water is the amount of debt held by hedge funds and private equity funds. Almost 50 percent of mortgages are held outside the traditional banking system. Plus the US deficit has soared in the last year.

A natural disaster could trigger a financial upheaval. Some historians blame the Panic of 1907, second only to the Great Depression during the last century, on the San Francisco earthquake of 1906. London insurance companies were liable for claims and the subsequent outflow of gold from England led to the Bank of England raising interest rates precipitously. The earthquake crippled the American economy more than the World Trade Center attacks did — damage estimates range from 30 to 80 percent higher. When America fell into recession, our rickety banking system couldn’t handle the stress. The good news is we got a modern banking system, The Federal Reserve, out of it.

With climate change models predicting more frequent hurricanes with higher intensity, imagine a Hurricane Michael storm hitting Miami directly then regaining strength and dead-centering Houston. The Galveston storm of 1900 followed a similar track, but then no one lived in Miami or Houston. Not so today.

Even though Buz Livingston is a fee-only certified financial planner this should not be considered personal advice. For specific recommendations visit online livingstonfinancial.net or at the office in Redfish Village, 2050 Scenic 30A, M-1 Unit 230.