Cash Hypothetical

[don]

The parameters:

You have a cash reserve of $20,000, readily available for a drop in income, a large medical co-pay, an appliance or vehicle kaput, etc.

Rumors are running thick and fast that savers are to be given a 20% haircut to "save" the TBTFs.

What do you do?

Remember - you still need cash. Dumping in all into PMs won't cut it when you have your knee operated on. Besides, cash may be worth more after the haircut - psychologically for sure, most likely in selective areas of purchasing power.

So what do you do?

FIRE's Advice

[jiimbergin]

Re: Cash Hypothetical

get one of these?

http://www.guardian.co.uk/business/s...ith-confidence

[pianodoctor]

Re: Cash Hypothetical

1 oz Gold is quickly convertible to cash in the U.S. (coin and pawn shops). Not necessarily more time consuming than a trip to the bank. Of course your risk is you bought high & sold low. Or if gold hasn't budged in a while, you still need about a few % gain to break even and cover the spread between retail sell price and buy back price. So are you more afraid of the 20% haircut or missing the market timing of the gold?

[swgprop]

Re: Cash Hypothetical

I'm rather fond of this approach. Unlikely that someone will run through the house testing every outlet.

[Milton Kuo]

Re: Cash Hypothetical

A few ideas:

• Buy U.S Treasury Notes. No financial assets have been seized in any of the bank crises so far.
• Put the money into a stock such as Microsoft, which won't appreciate much but shouldn't crash unless there is another general stock market crash.
• Put it in a safe deposit box. Of course, this assumes the bank/government does not onfiscate the contents of safe deposit boxes.
• Keep it on your person. Steve Wozniak is rumored to always have $10,000 on him. If you're worried, drop a few hundred dollars on a handgun and get a concealed carry license.

[jiimbergin]

Re: Cash Hypothetical

I'm rather fond of this approach. Unlikely that someone will run through the house testing every outlet.

very nice!

[astonas]

Re: Cash Hypothetical

1 oz Gold is quickly convertible to cash in the U.S. (coin and pawn shops). Not necessarily more time consuming than a trip to the bank. Of course your risk is you bought high & sold low. Or if gold hasn't budged in a while, you still need about a few % gain to break even and cover the spread between retail sell price and buy back price. So are you more afraid of the 20% haircut or missing the market timing of the gold?

Have you checked this recently?

I recently learned that my local coin shop no longer will pay in cash - checks only. I can only assume that in a situation where access to cash becomes questionable, such an approach will quickly become nearly universal. I can't imagine that too many pawn or coin shops will stock huge hoards of 20's well before any restrictions would be put in place; in my experience, they're not more prescient about gold than any other institution.

Holding gold protects against a time when the dollar is sufficiently questioned to not be the preferred means of exchange. Holding paper cash is more liquid prior to that point.

[don]

Re: Cash Hypothetical

Have you checked this recently?

I recently learned that my local coin shop no longer will pay in cash - checks only. I can only assume that in a situation where access to cash becomes questionable, such an approach will quickly become nearly universal. I can't imagine that too many pawn or coin shops will stock huge hoards of 20's well before any restrictions would be put in place; in my experience, they're not more prescient about gold than any other institution.

Holding gold protects against a time when the dollar is sufficiently questioned to not be the preferred means of exchange. Holding paper cash is more liquid prior to that point.

If this practice accelerated, would the pawnshop owner's sell/buy margin increase?

[don]

Re: Cash Hypothetical

I'm rather fond of this approach. Unlikely that someone will run through the house testing every outlet.

Cut-in box, sheetrock knife, pencil, screwdriver - all good.

What's the lineman pliers, small screwdriver, nails and washers for?

[globaleconomicollaps]

Re: Cash Hypothetical

The parameters:

You have a cash reserve of $20,000, readily available for a drop in income, a large medical co-pay, an appliance or vehicle kaput, etc.

Rumors are running thick and fast that savers are to be given a 20% haircut to "save" the TBTFs.

What do you do?

Remember - you still need cash. Dumping in all into PMs won't cut it when you have your knee operated on. Besides, cash may be worth more after the haircut - psychologically for sure, most likely in selective areas of purchasing power.

So what do you do?

I'm not going to keep any $20,000 in the house. Do you really need $20,000 ready for an emergency? Plane tickets and gas will run you a couple of thousand at most. Are you making the argument that every bank everywhere will be in trouble all at once, or just that US banks will all be closed or inaccessible? You can keep the money in a bank in another country. Do you think that you will not be permitted to travel?

This chart suggests that Swiss banks at least will be stable and unlikely to impose deposit haircuts:


If you hold an American passport of course you will be S.O.L.


It seems like a small step from capital controls to controls on free travel. I was just thinking that if Cyprus wants to prevent capital outflow from the country, they will need to stop outflows of capital equipment from the country. If I was a gas station owner right now, I would sell the pumps and cash registers on eBay ASAP. Anybody with a car that they can sell on the continent has a source of ready capital. The state really needs to block all travel back and forth of people and equipment to stop capital outflow.

[swgprop]

Re: Cash Hypothetical

Cut-in box, sheetrock knife, pencil, screwdriver - all good.

What's the lineman pliers, small screwdriver, nails and washers for?

Ha! Good question. The author must've borrowed a photo from another project.

[GRG55]

Re: Cash Hypothetical

...It seems like a small step from capital controls to controls on free travel. I was just thinking that if Cyprus wants to prevent capital outflow from the country, they will need to stop outflows of capital equipment from the country. If I was a gas station owner right now, I would sell the pumps and cash registers on eBay ASAP. Anybody with a car that they can sell on the continent has a source of ready capital. The state really needs to block all travel back and forth of people and equipment to stop capital outflow.

LOL. There is no government bureaucrat anywhere in the world that can foil the really wealthy...that's why they are wealthy and not bureaucrats

Years ago a friend of mine was selling a lot of oil and gas equipment into Argentina, when the times there were good. His agent in country anticipated the depreciation of the peso and the capital controls. He bought the most expensive helicopter he could find, stationed it near an oil project in Tierra del Fuego, 15 minutes flight from the border of the Chilean province with the same name. That's how you preserve the value of your savings and get your money out of the country. Not in the helicopter, but as the helicopter.

All the silly controls and restrictions the EU or Cypriot politicians will place on the citizens of that island will only further damage whatever is left of real commerce and tourism, and hurt the "average" person there. The economy is going to implode. And that means another bailout is almost inevitable.

We have an iTuliper who is located in Greece, on one of the Ionian Sea islands I think...he has been fairly silent of late, but would be interesting to get his take on things...

[globaleconomicollaps]

Re: Cash Hypothetical

You can keep the money in a bank in another country. Do you think that you will not be permitted to travel?

This chart suggests that Swiss banks at least will be stable and unlikely to impose deposit haircuts:


If you hold an American passport of course you will be S.O.L.

It is funny that we are talking about capital controls as a hypothetical. They are not hypothetical if you are an American citizen. If you are a US citizen then you will not be permitted to open a bank account in Switzerland. This is a real, current, capital control that is in effect right now. If you do succeed in opening a bank account ( by subterfuge, because the bank will not normally talk to you if you have an American accent. ), it will be closed as soon as they find out you have an American passport.

[don]

Re: Cash Hypothetical

I'm not going to keep any $20,000 in the house. Do you really need $20,000 ready for an emergency? Plane tickets and gas will run you a couple of thousand at most. Are you making the argument that every bank everywhere will be in trouble all at once, or just that US banks will all be closed or inaccessible? You can keep the money in a bank in another country. Do you think that you will not be permitted to travel?

In the house? Me neither.

$20K in a money market account, up to now, is hardly excessive.

No, not every bank, just the one that counts.

Permitted to travel? (Hi Ho Silver, away!)

[Sharky]

Re: Cash Hypothetical

The parameters:

You have a cash reserve of $20,000, readily available for a drop in income, a large medical co-pay, an appliance or vehicle kaput, etc.

Rumors are running thick and fast that savers are to be given a 20% haircut to "save" the TBTFs.

What do you do?

Remember - you still need cash. Dumping in all into PMs won't cut it when you have your knee operated on. Besides, cash may be worth more after the haircut - psychologically for sure, most likely in selective areas of purchasing power.

So what do you do?

Given the parameters, banks are out. That rules out safety deposit boxes, too. Since you're concerns sound relatively urgent in nature, or in response to a crisis scenario, that would rule out financial instruments as well. That leaves cash itself and/or some other kind of very liquid assets; ideally, something that could be used as barter.

Dumping it all into PMs may not be practical, but diversifying out of cash to some degree would also be prudent.

How about this: 25% in silver coins, 25% in small denomination gold coins, and 50% in cash.

Silver is nice because it's usable in smaller transactions. Gold is nice because it's easier to carry or conceal large amounts. Cash is the most flexible, but also the most vulnerable.

In an emergency, it's likely that you will be able to find a doctor who will take PMs in payment, or someone who will sell you a car or an appliance for PMs only.