European Bank Runs Under Way

Analysts:  European Bank Run is Under Way

 

As brought up in The Case For Keeping A Little Extra Cash Around, withdrawals from European banks continue at noticeably higher rates.   The press has been largely reluctant to call it a “bank run”, but it’s been a little more common to see it referred to as such.   I understand the hesitancy because saying there’s a bank run will undoubtedly lead towards more withdrawals and create even more problems from already-marginal banks.

At this point there’s nothing really to comment on as far as the bank runs/increased withdrawals go other than to note their existence, but I think it’s important to be able to read the writing on the wall for ourselves instead of accepting the mainstream media’s assessments at face value.    Perhaps even more important than being able to come to our own conclusions is being proactive with having our ducks in a row well in advance of calamity.   If you find out about something through CBS, odds are you’re already too late.   It’s best to have some cash on hand, food stored, finances secured, supplies, bug-out plans, home security, etc. in place well in advance of actually needing it.     If I were in Greece, Spain, Portugal or Italy right now, I’d rather be at home watching this unfold on TV, knowing that I have all I need to make it through instead of tracking down an ATM to withdrawal my life savings and stuff it in my mattress.   Things happen that are out of our control, but we have the ability to control how we prepare for these things.

Best of luck to our brothers and sisters over there in the Eurozone – I’m pulling for you.

The Case For Keeping A Little Extra Cash Around

Greek Cash Withdrawals Raise Fear of Run on Banks

Is This What a Run on Greek Banks Looks Like?

 

As the once-unmentionable prospect of Greece leaving the Euro becomes more frequently acknowledged as a possibility by mainstream media, Greeks have been falling all over themselves to withdrawal their euro-denominated savings out of Greek banks in order to have their savings in on-hand euros, as opposed to a new currency which would presumably be the drachma and of possibly substantially less value than the euro.   The likelihood of a bank holiday where the banks convert all of their euro holdings to a new currency is high and the Greek citizens sleep a little more comfortably on euro-stuffed mattresses than knowing that their savings could lose a lot of value (I’ve heard estimates of 30%-70% if Greece leaves the Euro) left in the banks.   No one knows for sure what will happen in Greece and right now average citizens are trying to play it safe and preserve what they have.    This is a good case for investing some of your money into precious metals, by the way.

Watching this unfold in Greece made me think about the idea of keeping some cash on hand as part of preparedness.      We have had bank runs in our past as well as recent brushings with bank failures – there’s nothing that says that this can’t happen here.   The FDIC insures deposits up to $200,000 but they’re not in the business of making sure it gets to you in a timely fashion.    The possibility of some sort of glitch in the banking system is definitely within the realm of possibility.    Should something like that happen, one of the last places I would want to be is standing in lines while ATM’s and banks get depleted and/or having to scour town for an untapped ATM machine.     Hell, even if everything goes fine but the power goes out and you can’t pay for things with credit cards or use ATMs, you’ll be well served to have some cash squirreled away at home.

At a more mundane level, it’s good to have some small bills around to be able to take advantage of certain deals where cash is still involved in our increasingly-cashless society.   For instance, there’s some kids down the block that come around looking to mow or shovel snow for a few dollars.   They do not accept Visa, Mastercard or Paypal.   It’s nice to know that I can go grab a $10 from the stash and pay them.   There’s been times I’ve needed to get a haircut and didn’t have cash around so I either had to drive out of my way to get to one of my bank’s ATMs or pay a fee at a more convenient one if I was pressed for time (which I often am).   With some bills stashed away, I know I can just grab one of those if I don’t have enough day-to-day cash on me.      I also like to keep at least one $10 bill in my truck, which has come in handy a few times.

The issue of whether or not it’s safe to keep cash in your home is a valid one but then again, as we’re beginning to see in Greece and we’ve seen in Argentina, sometimes money in banks is just as vulnerable.   By keeping some cash around you’re covering all of your bases.    You have to use some discretion when keeping cash around the house.   I wouldn’t keep that much around and what I do I would not but in the same spot or the most obvious spot.   There’s probably all kinds of places around your house you can stash a few things and reduce the likelihood of an intruder finding them.    One thing I’ve seen that looks kind of cool are these safes:

Completely inconspicuous if placed among other similar items – most criminals aren’t going to go through your cleaning supplies.   Use your imagination.

As far as how much you should keep around, that’s up to you and varies from person to person, but I would keep in mind that you might someday have to sustain yourself for several days or even a week or more on your own cash, should there be some sort of interruption in power, economic collapse or whatever.

As far as denominations go, I like smaller bills.  They give you a little more flexibility.  In the event of the electronic banking system going down there might be some issues making change and being able to pay an exact amount gives you a little more leverage in bargaining, i.e. if someone wants $75 for something and you’re rebutting with $60, your offer is a little less firm when you offer a $100 expecting $40 in change.    Plus many of our day-to-day expenses are small and you don’t want to end up like this guy:

If I had no cash on hand and was going to start with $100, I think I would choose three $20s, three $10s, a $5 and five $1s.     With my next $100, I’d take a $50, a $20, a $10, three $5’s and five $1’s.    After that it’s up to you.   I feel this combination would offer me the most denominational flexibility for most common transactions that would tide us over for a week or so should we need it.

As Dave Ramsey says, “cash is king”.    Don’t overlook this aspect of your preparedness.

 

China’s Rise and Competiting For Resources

Source:  Time To Wake Up:  Days of Abundant Resources and Falling Prices Are Over

I just started reading  “World Right Side Up: Investing Across Six Continents (Agora Series)” by Christopher Mayer last night and came across this chart taken from Jeremy Grantham’s “Time To Wake Up: Days of Abundant Resources and Falling Prices Are Over” from his April 2011 newsletter.   The chart is pretty straight forward – it names a commodity in the left hand column and then lists China’s percentage of total world consumption of that commodity in the right hand column, i.e. China consumes 53% of the world’s cement production.

First, I want to say that I don’t think we (the United States) should paint China out to be a boogeyman or take any sort of antagonistic stance towards the Middle Kingdom over their economic rise, so I’m not trying to fan those flames.   I know they do some sketchy things over there (and we do as well), but I think some of the crying about them using “our” resources is a little undignified.   Let’s beat them fair and square (and peacefully!) instead of stomping our feet and demanding that they stop using as much oil or whatever.   After all, can you really blame the Chinese for wanting a better standard of living, especially considering the disparity between the average Chinese citizen and American citizen?

Anyways, I have a few thoughts about this chart:

–  Although the news has lately been touting a slowdown in China’s economy, it’s not exactly coming to a screeching halt either.   China’s consumption of commodities will most likely continue to rise.

–   While commodities can certainly be nationalized within a state, on a global level these inanimate objects do not have loyalties or choose sides.   They go to whoever is willing to pay for them.  Oil in Iran, Copper in Chile, Nickel in Kazakhstan and all of the world’s other commodities aren’t inherently “ours” and they’ll ultimately go to whoever is in the best position to purchase them.   Some political arrangements can (and are) made to dictate the flow of commodities, but as the balance of power between the West and China (and others) begins to tip, maintaining these arrangements will become difficult (see:  Petrodollar System).   In other words, we’re losing carte blanche over the world’s markets.

– The figures are just for China – what about Brazil, India, Russia, Turkey, Indonesia, Taiwan, Korea, Mexico, Thailand, Vietnam or any other place in the world where things are happening, not to mention the EU, Japan and other developed economies?   Standards of living are rising in many parts of the world for a large segment of the world’s population and commodity usage tends to go up correspondingly.  Increased world demand for finite materials means we’ll pay a higher cost for what we have.

–  China is roughly one-fifth of the world’s population and they consume a greater percentage of the world’s output in all of these commodities except the bottom six.   Factoring in China’s projected economic growth and as previously mentioned and the many other places in the world that are emerging, one can logically conclude that certain resources might get a little tight around the world.

–   Not trying to sound racist or anything, but I thought China’s rice consumption was going to be higher than that  :::shrugs:::   Soy consumption was a little lower than I thought too.

–  Scarcity often leads to conflict.   This is true between individuals, communities and governments.

Now let’s kick over some thoughts on addressing the issue:

– Reduce, recycle and reuse.   Might as well get on board now.

–  This might be a good time to make investments in commodities, one way or another.  Mining, energy or agricultural-themed stocks, ETF’s, precious metals investment or anything else.

–  Self-reliance in energy efficiency, food production or anything else that involves consuming commodities might be an even better investment.   Grow a garden, explore alternative energy and increasing energy efficiency, learn skills and do things for yourself.

– Rising prices of commodities on the world markets and increased shipping costs could force us to look to source things locally .  Personally, I think there is a bit of a silver lining here in that there’s a possibility to see something of a revival in local businesses and farms as increasing costs abroad make it more viable to produce close to home.   I think it would be a good idea to at least begin to get an idea of what is available (and when it’s available) from your local area in the way of food, goods and services.   I think it’s an even better idea to begin to establish relationships with local merchants and farmers now.

Odds are that if you’re reading this (and other similar blogs around the internetz), you’re already of the mindset of DIY, preparedness, thinking locally, sustainability and  self-reliance and probably already taking measures to combat scarcity and add some security to your life.   I think that instead of letting fear get the best of us when we look at the cold, hard facts I think that they should just serve as a bit of reinforcement to why we live the way we do and some motivation to continue to improve our lot in life.   As individuals we cannot change the course of the world, but we can certainly take action as individuals to determine how the change of the course of the world affects us.

 

Also, I think it’s a good idea to talk to people you know about these sort of things and more importantly, share the solutions.   Feel free to share this blog, comment below and/or contact me at Ryan@AmericanOikos.com


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