Okay, who knows if it’s time, but I know some people are making large savings withdrawals from their bank accounts and holding the cash.
The world (and the economy) seem to be getting more and more sketchy by the day. I’m going to buy a cheap, fireproof mini-safe, something just big enough to hold a few documents and cash. The banks are seriously starting to worry me, and the public’s potential response to what may be a nasty fallout concerns me even more. Will there be a run on banks with a subsequent government forced bank holiday?
Dunno, but if everyone went to the bank for cash today, there’s no way the banks could handle it. It’s like if everyone went out today and topped off their gas tanks. Every station would go dry. It’s like a self-fulfilling prophecy. Everyone fears a run, so everyone runs, thereby creating the run they feared.
I’m going to withdraw some of my savings. I recognize I could be part of the problem, but if I slap some cash in a box then I KNOW I’ll have access to it. I represent the fear driven run on the banks - lol. Is that wrong, am I part of the problem? Dunno, but read this from a CNBC article entitled “Brace Yourself (And Look to Cash)”:
Unless the banks are willing to step up to the plate and make loans to healthy business and worthy individuals, they will only add to an already dreadful situation. Right now the banks are hording their cash because they have no confidence in the value of the assets backing their existing loans.
That’s another way to look at it: the banks are hording cash. Translation: they’re holding OUR cash. I’d rather hold my own cash in this market - thanks. Here is another choice quote from the same article:
How long this state of affairs will last is a function of how long it takes the world to deleverage. And deleveraging is a deflationary event. That is not good for economies, for profits, for the prices of assets and that includes the price of one’s home. The stock market does not work well in a deflationary environment. The only thing that looks good in deflation is cash. And right now cash is looking pretty good to me.
Besides early childhood Soviet nuke juice exchange fears, this is the sketchiest time I’ve seen in my life.
Are YOU happy to read the doom and gloom at this blog? I sell fear for Paypal donations. Suggested donation: 5-10 bucks depending on how rich you are (also accepting Amazon shopping) :-).
There is one upside to this dramatic turn in the economy. Oil and energy costs are going down as there will be less demand in a recession. The recent rise in oil prices were due in part to investors flocking to crude and away from the dollar, but now many see the U.S. ahead of Europe in dealing with this crisis, so the euro is heading down against the dollar buck. A declining oil price will ease fears of inflation.
The Russian economy is also taking a major hit. Should oil prices keep dropping Russian, Venezuelan, and Iranian profits will tumble. So lets think about this mess a different way: should oil keep going down these countries take a hit and inflation will stay in check. So long as this isn’t TEOTWAWKI, you keep your job, you don’t need to borrow money, and you don’t need a 401k for retirement in the next few years, you could come out of this sitting just fine.
Are YOU happy to read the positive perspective at this blog? I sell hope for Paypal donations (also accepting Amazon shopping).
- Ranger Man
BTW: related links:
Crisis aside, many face other economic woes
As Global Markets Plungs, How Bad Can Crisis Get? - choice quote:
“We’ve got such an extreme amount of fear and angst in this market, you would expect we would see a bottom getting put in and we would move a bit higher for a period of time,” says Twibell of Colorado Capital Bank. “I’m not sure when we get that.”
Cramer says if you have money that you’ll need in the next 5 years, and it’s in the stock market, take it out now (video link)
Here is one more - a very good UK article - Germany takes hot seat as Europe falls into the abyss - choice quote:
Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.
14 responses so far ↓
1 Grist 4 Mill // Oct 6, 2008 at 4:42 pm
Having some cash on hand is a good idea.
Given the artificially low interest rates — thanks to the Fed — it’s not like you are being paid to keep it in the bank.
The government understates the rate of inflation [both to excuse loose monetary policy and to minimize cost-of-living adjustments.]
John Williams, of shadowstats.com, estimates the real rate of inflation at 9%, not the 5% official figure.
2 Fern // Oct 6, 2008 at 6:37 pm
Gosh, Cramer says if you have money in stocks that you’ll need in the next 5 years take it out. Whoop di do. That is STANDARD advice: only invest in stock if you have a 5+ year time horizon. He should have been saying that all along.
3 theotherryan // Oct 6, 2008 at 10:48 pm
Rangerman, I’ve been thinking a little bit about this myself. Keeping a months worth of cash on hand is sound advice and is reasonable for most people given a few months to set it aside. Even those with a real slim budget setting a weeks cash aside NOW is realistic.
Two months worth of wages (not cash expenses) would be about as far as I would go. If things get so bad that you need more then that it is going to either be precious metals (hyperinflationary scenario) or beans, bullets and bandaids (TEOTWAWKI-).
4 Mama Squirrel // Oct 7, 2008 at 5:34 am
What I keep hearing from the long-time survival gurus is to only keep enough money in the bank to get your bills paid. But even just a week’s worth of cash would help prevent the chaos that something as simple as a “bank holiday” would cause.
5 3rd Man // Oct 7, 2008 at 9:01 am
I took out cash equal to my 2 week paycheck. ATM must be running low gave me all my cash in Tens.
6 Angry Mike // Oct 7, 2008 at 9:28 am
I remember reading an article many years ago in the now defunct American Survival Guide magazine. It was truely a fantastic mag with numerous topics, included was one on just this very situation we Americans and the rest of the world find ourselves in.
Cash is King when SHTF. This has been proven over centuries, not decades. Other countries have experienced economic collapse and the citizens lost ALL of their savings. Think Russia circa 1985 with people on bread lines for hours if not days.
I dont know if I am fortunate or unfortunate but I have very few investiments anymore. Mainly due to a divorce and an injury that forced me to tap out what I had just to get by. What I have in my savings and checking accounts is pretty much it, spare a small investment in a 401k and an IRA.
Life has thrown me a few hardballs that I subsequently caught with my teeth and I have experienced my own little self absorbed TEOWAWKI twice. I guess Im ahead of the curve in that respect.
I find myself back on my feet with a new plan of action and a jaded, however educated perspective on the financial system. Aside from a mortgage that we are trying to refinance, a car payment that will be finished in 6 months, a few credit cards with next to nothing on them and an Amex card, I really do not depend on Banks for anything.
All of these can fall through and I will probably walk away with very little financial damage as it stands. As long as I am employed and business keeps building I will be OK. If I should fall the Mrs. can pick up the slack as her business is booming. I will work for her in a worst case scenario.
All of these are precisely why I do not ask for or offer lines of credit in my business. Many of my suppliers want me to take lines of credit and many companies I supply ask for a line of credit. Neither are ever going to happen. It has hurt business a bit but not nearly as bad as having $50,000-$100,000 of outstanding credit lines open when banks fold.
I am considering accepting credit cards to increase business. It may take place in the next 2 months. I did accept them at one time and the percentages I was being charged ate my profits. I work on very, very small percentages and I was often robbed of 2/3’s of the profit. Charging an additional percentage for the use of credit cards will be the only way for me to do it and honestly, it is almost more of a hassle than its worth.
And then what happens if business is booming and I have 30 orders on credit cards and the banks fold before I recieve the funds for the goods? Back to the last scenario. I may be paranoid, maybe even crazy but we live in uncertain times that can change even faster than the internet can report.
Visit my site at www.mresource.net for nearly anything you could want if you have a check, money order, wire transfer or cash.
-Mike
7 Bill in NC // Oct 7, 2008 at 10:00 am
Deflation?
Don’t think so (from andrewtobias.com):
” I doubt we will have any sort of sustained deflation. We’ve learned a lot since the 1930s and have mechanisms in place like FDIC insurance and the various social safety nets that we didn’t have then. We’ve also gone off the gold standard and are printing massive amounts of new money to fund what will continue to be massive deficits for several years to come. None of that spells prolonged deflation to me.”
A trillion dollars (probably several more) worth of stimulus monetized into circulation is going to do wonders for increasing general price levels.
Dump enough money into the economy and you can indeed stop price declines in housing and other asset bubbles.
Though I’m not looking forward to paying $12 for a gallon of milk at Costco.
8 SurvivalTopics.com // Oct 7, 2008 at 10:55 am
How about putting aside 10% of you income every week as cash at home?
9 gott_cha // Oct 7, 2008 at 4:15 pm
Back right before Y2K I got most all my outstanding bills paid off,..mostly credit cards and small time loans like Auto and home improvements. I also stopped my direct deposit on my pay check.
Since then, we (my wife and I ) have operated mostly on a “cash and carry” basis. I only deposit enough monies in the bank to pay bills and to keep the account open.
It was hard to get used to at first but after a cpl months it became very easy to manage our budget. For us cash was easier to monitor than Credit cards,..Debit cards and Checks.
We only buy what we need,…much like the prior generations of Hard working Americans who lived without “credit”.
It can be done and done quiet easily……..in these times buy only whats needed. Do you really need to eat out 2 to 3 times a week? Do you need another cell phone,..or Plasma TV?
Hell wash the car you own and put on some tires,…..dont indebt yourself to another bank….make do!!
Its all about survival……you know….the thing that Americans have done since the days we landed on this continent……
IN GOD WE TRUST,.ALL OTHER PLEASE PAY CASH
10 Montana // Oct 7, 2008 at 4:21 pm
I would say put your extra money into food and items you would normally buy in the next few months/year. That will get you great money on your investment. Way more than stocks or savings.
11 Montana // Oct 7, 2008 at 4:42 pm
As an example of how placing money in tangables rather than the bank pays off, I will show you a few items I purchesed several months ago, and the prices they are today.
Wheat 50 lb bag Paid 13.00 price now 26.00
Plastic tarps I use in my business and for my green houses. Paid 5.95 price now 9.25
9 mm ammo paid 12.95 price now 18.95
Those prices have jumped that much in less than a year, before we had all the troubles now unfolding!
Having some cash on hand is good. However it will not keep it’s value in the comming day’s and months. You will see great savings and it will help ease the pain of the collapse to have tangable everyday items in the closet rather than dollars, and not have to pay the huge inflated prices as the dollar collapses, and you need $100.00 just to buy a pair of socks. That is if you can even find a store that is open where they have socks! Think that sounds crazy? That is where we seem to be heading. I hope I am wrong, but I have seen this comming in my business for the last 4 years. I can track the price inflation through my quarterly books.
Get stuff you need while it is still at a “cheap” price, and doom on you if after all you have seen in the last few months, you still leave money in the bank.
Hang on tight the dollar is in a free fall.
12 3rd Man // Oct 7, 2008 at 5:26 pm
Hey Angry Mike check this site out. Same guy who published American Survival Guide magazine. He now publishes it online.
www.modernsurvival.net
13 Vagabond // Oct 8, 2008 at 12:56 am
Rangerman, you can’t possibly be ‘part of the problem’ for taking YOUR money out of a bank that you have entrusted to hold it for you. Its not your fault or problem that they’ve been running a con-job in which their house of cards is about to come crashing down. Get your money out if you can and be grateful you got to it in time. JMHO
14 Dick // Oct 14, 2008 at 4:00 pm
Ranger Man — I’ve found that my local Kroger grocery store will give me as many food grade icing buckets as I want. You have to clean out some nasty looking icing (blue, yellow, etc), but that’s pretty easily done. Lids come with the buckets.
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