Weather the Storm…Keep Some Cash in Your Back Pocket

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Posted by The Savvy Retiree on August 7, 2017 in Money Saving Strategies, Personal Finances

Tom Kerr writing on cash…

Visa believes that you and I want the “freedom” of not paying for things in cash.

The credit card giant just launched a major push to coerce mom-and-pop restaurants to go cashless. They are even offering a $10,000 incentive to business owners who go along for the ride.

But there is more at stake than your ability to decide for yourself whether you want to pay for tacos and burgers with cash or plastic.

The Visa initiative is just one obscure example of how global financial institutions and governments are actively waging a war on cash.

About a year ago, India’s Prime Minister voided 86% of the currency that was in circulation there. People panicked, causing a run on banks. The banks reacted by restricting how much of your own money you could withdraw.

India’s a long way from me, here in Appalachia. But when I went to my small town bank a few months ago – to buy euros for a friend headed overseas on vacation – the teller shared some juicy gossip.

“Some rich doctor came in here last month and bought Indian rupees,” she whispered in her southern drawl.

“I reckon you don’t get a lot of requests for those,” I whispered back.

“Nope, we had to special order “em. But the weird part was that doctor dude bought a million dollars’ worth.”

Why on earth would you exchange a fortune in relatively stable and strong dollars, for frighteningly unstable rupees?

My bank teller didn’t know, and neither do I. But my guess is that the fellow has relatives back home and is worried that they are going to have their money frozen by India’s banking system.

If that happens he can keep them supplied for as long as necessary, without having to depend on banks. If that’s his plan, well…I may not agree with his investment strategy, but I do like how he thinks outside the bank.

Within months of India’s crisis, the Sydney Morning Herald newspaper ran a story about how Citi Bank was removing cash from some of its Australian branches. France initiated a policy that residents who deposit or withdraw more than 10,000 euros in a single month will be flagged by the government’s money-laundering task force. The limit for all-cash transactions there used to be 3,000 euros. Now it’s only 1,000.

Buy a case of good champagne or cognac and you will easily exceed your legal limit.

Keeping a Supply of Cash is Wise

Supporters of limits on cash say it keeps money out of the hands of criminals. Great. But when it leads to treating loyal bank customers like you and me as crooks, that sounds criminal to me.

Speaking of criminals, you’d be hard-pressed to name even one who was held accountable for the credit crisis that triggered the Great Recession. That catastrophe happened because so many sketchy investments, leveraged to the hilt and not backed by actual cash, imploded.

The truth is, we’re getting squeezed on all sides. Governments want to phase cash out of existence…while a system entirely based on credit is, by nature, more unstable. And when people panic – and there is always a next panic around the corner – banks can legally deny you access to your own money.

But under those circumstances, you’d be foolhardy to walk to the corner store and try to hand the cashier gold bullion. Your best bet will always be cash. Not cash locked away in an ATM, or hidden as digits on a computer screen. Cash in hand.

Gold sounds reassuring in theory. But recent history tells another, more practical and streetwise story. There were short-term runs on banks in India… and Greece…and Latvia, Bulgaria, and China…all within the past few years. Cash in hand was the best and easiest way to securely weather the storm.

So, save gold or other failsafe monetary instruments for the apocalypse. Meantime, hurry yourself to the bank and grab enough Ben Franklins to last you at least a week or two. You will sleep better just knowing they are under your proverbial mattress.

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