Who's planning to empty the bank account?

[touchring]

Stash it into a security safe or inside the mattress before they run out of bank notes?

http://www.zerohedge.com/news/2016-0...ys-panic-first


gnk: any thoughts on this since you live in a country where from my understanding, bank notes are in scarce supply?

[gnk]

Re: Who's planning to empty the bank account?

Greece is definitely a special case, in its own category. Before the crisis, and decades beyond, Greeks have always kept a large stash of cash at home. There is no 401K here, so imagine someone middle class and above, what do they do with their cash? They stash a lot, and before capital controls they had some in the bank.

Despite capital controls, I think the cash situation in Greece is still healthy. Remember, in the run up to capital controls, Greeks were already withdrawing large amounts of cash.

But, if you are unemployed, or make little money, the capital controls don't affect you as much. After all, no or little money whether in cash or bank deposit is the same thing.

However, I do see more people using credit and debit cards at the Supermarkets and elsewhere where sales tax is unavoidable. And it's not just the English pensioners but Greeks as well. They do this in order to withdraw their weekly 420 Euros in cash and stash it. Better off paying electronically and hoarding the real thing for security and other cash required expenses (fix the car, dentist visit, pay the contractor, etc....) Why not pay those folks with credit/debit? Because taxes (both sales - up to 23% and income) have spiked and if you want a receipt, you get quoted a different price, a much higher price, obviously.

[Southernguy]

Re: Who's planning to empty the bank account?

Maybe more interesting than that: suppose everybody withdraws cash from a bank, the CB has supplied all the cash and lent it to the bank against the bank's assets (mainly loans and it's corresponding waranties (mortgages, etc.) the only depositor left is the CB....curious situation...of course people holding the cash are, now, direct creditors of the CB. Instead of the bank being a creditor of the CB for the fractional reserve it usually holds there it is now a big net debtor of the CB for the money it has been lent in exchange for the cash it payed back to it's no longer existing account holders. Mind boggling, at least to my limited capacity.

[Milton Kuo]

Re: Who's planning to empty the bank account?

With all of the noise being made about eliminating cash, including a chime in by Dr. Evil, I've been thinking about if such a thing could happen in the U.S. and what I would do.

My conclusion, at least for the moment, is that negative interest rates are not going to be applied to individual depositors. It's more likely to apply banks to encourage them to work harder to find qualified borrowers although the Federal Reserve could encourage that by reducing the amount of interest it pays on excess reserves and tweaking the reserve ratio requirement.

But if I'm wrong and the Federal Reserve and U.S. government decide to once again rip off savers over letting the banks bear the brunt of the mess they created, there should still be plenty of time to minimize the damage that an individual depositor would suffer due to NIRP.

Now is probably the time to establish ACH transfer relationships between one's banks and brokerage accounts. If and when NIRP occurs, it would be relatively simple matter to transfer money from the bank to the brokerage and buy something like a U.S. Treasury money market fund or ETF; or even equities. However, if something like a bail-in occurs, there's plenty of time for the banking system to delay or halt ACH transfers in order to extract their cut. But I see that as an extremely unlikely scenario.

Even if NIRP occurs for depositors, urgency may not be required since the negative interest rate may be something like -1% per annum. A few days or weeks of negative interest is not going to be all that much money. At -1% per annum, the negative interest per day is $2.74 or about $20 for an entire seven-day week for a $100,000 deposit. Not too much money is being lost while a depositor makes arrangements to move the money somewhere else.

Finally, it's difficult to imagine a negative interest rate on non-interesting-bearing, transactional (checking) accounts. There are many small businesses that need to have large amounts of cash on-hand to meet payroll and other business expenses. A highly negative interest rate could be extremely disruptive to business. So perhaps that's another potential avenue for protecting one's money from NIRP: a business banking account and putting the money into the transactional account.

It seems more and more that a Permanent Portfolio holding of assets is required with all the cockamamie ideas (that either don't work or work but with very nasty side effects) that central bankers are attempting these days. Stocks, federal government-guaranteed bonds, real estate/commodities, and a slug of gold is about the best regular people without a significant investing or trading edge can do.

[shiny!]

Re: Who's planning to empty the bank account?

It's hard to imagine the U.S. banning cash, but that might just be my normalcy bias. What would it entail? Would they make it illegal to use, or just gradually remove it from circulation? If the former, then all the cash under the mattress wouldn't help.

Wouldn't the banning of cash lead to an expansion of a black market economy, or would cash be unacceptable and PMs be the favored currency?

One could put their cash into PMs but what's the exit strategy when it comes time to sell? Capital gains taxes for PMs are 28% now, plus whatever states charge. Before all this is over it could be 90%.

I feel like that guy in the movie No Exit.

[BK]

Re: Who's planning to empty the bank account?

Remember the 28% you pay is on the profit and remember how tiny the Gold market is. When buying a stock I can get long term capital gains rate after twelve months, but there is also a good chance the you invest in the wrong company and it goes to zero. Really hard to imagine a scenario where Gold goes to zero and if it does I'll have bigger problems. A Gold mutual fund would allow you to profit from Gold bull market and reduce taxes (but, again the Fund manager can make bad bets).

[shiny!]

Re: Who's planning to empty the bank account?

Remember the 28% you pay is on the profit and remember how tiny the Gold market is. When buying a stock I can get long term capital gains rate after twelve months, but there is also a good chance the you invest in the wrong company and it goes to zero. Really hard to imagine a scenario where Gold goes to zero and if it does I'll have bigger problems. A Gold mutual fund would allow you to profit from Gold bull market and reduce taxes (but, again the Fund manager can make bad bets).

I bought some silver on Thursday, being that the ratio to gold is 82:1. You all have me to thank for the lovely buying opportunity on Friday. When the gold:silver ratio shrinks I'll swap silver for gold. That would make my cost of gold whatever it's selling for at that time. Then if the Dow:Gold ratio ever shrinks to a point where it looks like stocks are undervalued and gold is overvalued, I'll sell the gold and invest the proceeds in stocks. That's the plan at least.

But I still worry about cash.