If you don't have at least a year's worth of cash in home (i.e. physically stuffed in the mattress), the time is rapidly approaching when it will be too late. Preferably, several years of cash. Five years+ is better, because that could last 10 years+ after the full effects of deflation kick in.
By "a year's worth" of cash I mean enough to cover all expenses, from food to shelter to gas. Everything you must spend to survive.
By "in home" I mean physical green cash inside your four walls. "Money in the bank" is as good as gone. Safe deposit boxes have a history of being raided by the U.S. government in times of depression.
Exactly when it will be too late to obtain cash is anyone's guess, but we do know that when we know it will too late. There is about $750B in green paper cash circulating in the entire world, minus what has already been put away, which is most of it. Compare that to about $20T in U.S. dollar denominated bank accounts.
Remember the Fed's own words about the Federal Reserve's own effectiveness during the last depression:
At the slightest hint of trouble, depositors would run to the bank and line up to withdraw their money. All too often, only the first few people in line had any hope of ever seeing their money again; others lost everything. " - Federal Reserve Bank of BostonThe rest of your money should already be in U.S. Treasuries. Defund all revolving interest bearing Treasury Bills, Bonds, and Notes to your C of I account within the Treasury. Never redeem to a bank account, until the money is desperately needed, and only then, as much as you need to transfer and no more.
I've heeded your advice FDR. I have approximately 2 years worth of cash stashed away in my home. The only people that know this are my parents (in case something happens to me). My dad thinks I'm nuts however. He says that if the FDIC ever fails our cash will be worthless anyway. I told him that if our cash is ever worthless then our debts will be too since they're payable in dollars and not gold or Euros.
ReplyDeleteTake out less than 10K at at time or you will have to fill out some form that gets reported to the government. (Even it it's 9999 from what I heard. The law states the tellers must report it if it's 10K & above)
ReplyDeleteWhat size bills do you recommend, FDR?
The FDIC has already failed, what do people think TARP I and II are all about?
ReplyDeleteYou are right that the government will track the cash if you break a $10K withdraw threshold. Don't do it if you can avoid it.
ReplyDeleteI've never lived through a depression leading to another dark age, so I really don't know the best bill size. Maybe you can match bill size to your sleep number.
There are a lot of latecomers, like Soros, who are now calling for a worse depression than anything we've witnessed before, citing a irreversible comprehensive disintegration of the world banking system and production stopping across the globe.
This is a good sign that we are reaching a temporary bottom for a minor counter rally.
When Buffet an Soros cry Armageddon or Hallelujah, they will always be dead wrong. Such icons are kingpins of the mindless herd. When the herd population was growing by leaps and bounds, they were heroes for doing nothing more than being in the right place at the right time. All they know how to do is lead the mindless march, now it is to slaughter.
FDRAOA, Where do the Credit Unions stand in all of this.I thought that they were protected by a totally different Insurer. I have all my money in a CU,so what is your take on keeping money here? I have a jumbo cd getting 4.25% untill October of 09. Please give me your advice, I know others are in my boat too !
ReplyDeleteFDR: What about all the Printed Money coming out of the FED, surely that's a recipe for inflation down the road?
ReplyDelete"FDR: What about all the Printed Money coming out of the FED, surely that's a recipe for inflation down the road?"
ReplyDeleteAs I've said many times, the Fed can only print currency with 1:1 leverage to buy our bonds (money). If the commercial banks aren't lending, the currency supply implodes regardless of what the Fed does. We have 40:1 deflationary leverage collapsing against insignificant 1:1 inflationary Fed printing. Not to mention that every dollar the Fed does print pulls 1.5 dollars OUT of circulation due to 250% interest charged over the lifecycle of the debt.
This is by design, since the Fed wants deflation, not inflation anytime they decide to cause a depression in order to seize the peoples' assets.
See:
http://fdralloveragain.blogspot.com/2009/01/banker-bailouts-will-never-end.html
http://fdralloveragain.blogspot.com/2009/01/currency-scam.html
http://fdralloveragain.blogspot.com/2009/01/what-if-dollars-were-replaced-by_9757.html
So the answer is no, the Fed cannot cause inflation in an environment where banks are being run upon instead of lending. Nor does the Fed want inflation, so even if they could make it happen, they wouldn't.
But hasn't that been obvious since Bernanke first pledged to pull out all the stops to defend Dow 14,300?
COMPLETELY disagree FDR. If you need 5-10 years of cash in your home that would mean that the entire system has failed and your cash is worthless. Better yet. before that would happen there would be massive crime waves and riots. You would quickly be physically separated from your cash.
ReplyDeleteHaving that much cash at home is therefore probably more dangerous than having it in the bank.
FDR: me again. "This is by design, since the Fed wants deflation, not inflation anytime they decide to cause a depression in order to seize the peoples' assets."
ReplyDeleteRegarding buying assets cheap. Why bother printing any money, why not let the defaults happen sooner?
"Regarding buying assets cheap. Why bother printing any money, why not let the defaults happen sooner?"
ReplyDeleteBecause they don't print money, they print paper debt. The more debt they print, the more assets they are owed.
"Having that much cash at home is therefore probably more dangerous than having it in the bank."
ReplyDeleteTell that to the people who filled their mattress with roaring 20's inflated cash and didn't see the same price levels again until the mid 1950's. Our depression is at least one larger Elliott degree, possibly bigger.
Cash in the mattress returned 100% last year. Got a better zero-risk rate of return?
Cash is not static during deflation, it is your very BEST trade. The question is how to protect it. Banks can't hold it, so it is either in home or in the U.S. Treasury. Since the Treasury pays about 0% and must feed you though a bank, the additional layers of risk are hard to justify, especially during the opening decade when chaos could take hold out at any moment.
The website is great, makes me think outside the box. This is my first post. My question is this: The bulk of my $$ is in my self-directed IRA, in a cash (non-margin) account with a well-known brokerage firm. If I want to remain in cash within that account, what risks are there that I can lose everything?
ReplyDeleteI appreciate your comments about hoarding cash, I'm just saying it is very difficult psychologically to poof away 10% for an early withdrawal penalty (to the government, no less) along with the top-level tax bracket ramifications of a total liquidation so that money can be removed and stashed away safely within my own 4 walls. But if I'm gonna lose it all...
"Cash is not static during deflation, it is your very BEST trade. The question is how to protect it."
ReplyDeleteThat is precisely my point FDR. Hoarding cash at home may be a GREAT trade, but it is immensely dangerous. Even before the system collapses, your entire neighborhood will know you have money, and they will get to it. They will get it, even if it means getting to you or your children. Just see what happens in developing nations that are ravaged through kidnappings.
An analogy. In England periodically, they unearth silver and gold hoards that were hidden by post-Roman Empire citizens. Yes, their wealth was well protected, but that still did not protect them from the Vikings.
The best investment in case of collapse is starting a street gang, NOT hoarding cash for other people to come pick it up.
If we're talking about as significant a catastrophic deflation event as I think, then I would think that even cash wouldn't help you, because we're talking about a situation in which essentially all currency-based trade has broken down (why would currency itself have any real value, anyway? By your own statements, it doesn't, even now). I'm not sure what would represent the best "investment" given that kind of situation. I'd think it would be something like equipment and supplies that you can use to make/manufacture things that would be of use to others, so that you'll have something you can trade in such an environment.
ReplyDeleteIn other words, why would cash itself retain the value you think it will? Yes, it will do so for a while, at least (indeed, it will increase in buying power since we're in a deflationary environment), but if it gets hard enough to come by then people will simply use something else as a medium of exchange, because they won't have any other choice.
You can expect black markets to grow large during a catastrophic deflationary event...
"In other words, why would cash itself retain the value you think it will? Yes, it will do so for a while, at least (indeed, it will increase in buying power since we're in a deflationary environment), but if it gets hard enough to come by then people will simply use something else as a medium of exchange, because they won't have any other choice."
ReplyDeleteI'm making an assumption that our heart keeps beating. We've had a lot of extremely severe deflationary depressions in our short history (1812, 1837, 1864, 1874, 1929) and during all of them holding cash was tremendously profitable. Then again, those people were more rugged and better educated.
There is no way to be certain FRN cash will be honored at the pit of despair, or that the US won't quickly cede her sovereignty in a continuation of the current coup d'état, but I'm an eternal optimist, as you all know.
LoL ... eternal optimist ;-)
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