Welcome to this week’s Survive The Coming Collapse newsletter, brought to you by Free Survival Cheat Sheets.com, a set of quick, actionable, and free preparedness and survival tips and tricks from the The Fastest Way To Prepare course as well as Cloud Hard Assets–the ONLY precious metals company that I endorse. Mention “David Morris” when you call 800-247-2812 for FREE insured shipping and the lowest markups I’ve found in the country.
Survival Diva here with an important question: If the banking system and U.S. currency is being kept alive on the blind trust of its citizens, then how do we protect ourselves financially when it all comes unraveled?
If there is ever a run on the banks, as there was at the start of the Great Depression, we might experience double-trouble because of our growing dependance upon charge cards and ATM cards. It’s for sure we no longer stuff mattresses with money, nor do most of us keep a slush fund in a cookie jar. In fact, the majority of us don’t even have cash in our wallets anymore!
This dependance on cashless transactions has the potential to bite us on the backside should a bank holiday be called as it was at the start of the Great Depression, which resulted in panicked depositors rushing to their banks to pull out their money.
The Fed Decides the Percentage Of Money That Must Be Available At Banks
The Board of Governors of the Federal Reserve determines the Reserve Ratio, which is the amount (percentage) of money that a bank must keep on hand and available for its customers, which is based upon the amount of reservable liabilities (like your deposits) in that particular bank. This is important for anyone who expects to pull out their money at the start of a crisis, because the alarming fact is…there is only a small fraction of depositors’ money available on any given day. The rest is in electronic form or is being loaned out which brings in income for the bank.
Here’s where the problem lies; Banks with reservable liabilities of $12.4 million or less have ZERO Reserve Ratio requirements. Another words, these banks are not required to have any cash on hand, but they can still, of course, loan it out. Banks with $12.4 million to $79.5 million worth of customer deposits are required to keep 3% physical cash on hand, and banks with more than $79.5 million of deposits are required to keep 10% physical cash on hand and available to depositors.
(David’s note: To keep things in perspective, banks with less than $100 million in assets make up about 1% of the total assets in the banking system. Banks with $100 million to $1 billion in assets make up another 8% of the total assets in the banking system and banks with more than $1 billion in assets hold the other 91% of the assets in the banking system. So, the zero reserve ratio requirements on micro/boutique banks don’t REALLY have as much of a negative impact on the system as one might think.)
The issue with fractional reserves was never clearer than during the bank runs at the start of the Great Depression which eventually led to 9,000 bank failures during the 1930’s. When Franklin Delano Roosevelt called a three-day bank holiday for a three day cooling off period, banks began to scramble for the cash their depositors were demanding. But at the end of those three days, most banks were no closer to a solution and bank failures kicked into gear at an astronomical rate and many depositors lost their money. (David’s note: Keep in mind that the banks were scrambling for cash even before the electronic banking system.)
Lessons To Be Learned
U.S. depositors might want to take a close look at what occurred to Cyprus depositors in March of 2013. President Nicos Anastasiades claimed his only recourse to bad, unpaid loans to Greece that threatened to fold the countries solvency and eject them from EU bailouts was to temporarily close banks and seize large depositors accounts with amounts greater than $100,000.
(David’s note: As a side note, Russians were one of the only groups of people to be able to get their money out of the country when currency controls were enacted. How? While banks in Cyprus were closed, their branches and/or subsidiaries in London and Moscow remained open with no limits on withdrawals. **Slick setup, if you had the right connections.**)
What We Can Do Now To Protect Our Cash
There are several ways to avoid becoming a victim of a sudden economic meltdown like what was experienced during the great Depression and in Cyprus, and the solutions will vary between individuals.
Food and Preparedness
I am asked for advice on this issue often; whether it is better to put the lion share of cash flow into food storage, preparedness goods and barter items or invest it in silver or gold. My answer is always the same for the 99% of us who do not have unlimited funds: start with food storage and preparedness goods first. The reason? Food and critical preparedness goods will be unavailable at any price if a crisis is of long duration. Would you part with commodities like ammo, fuel and medical supplies? It would be impossible! And besides that, we can’t eat silver or gold. So start there, and once food storage and preparedness goods have been provided for, silver and gold can follow.
(David’s note: This is as much a portability issue as anything for most people. If you know you’re going to scoot when the balloon goes up and will need the ability to travel fast and light, precious metals and/or jewels may very well be a better choice for you than having more preparedness supplies than you can take with you. Again…the answer to this question is a an individual one and not a blanket one.)
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There will be certain items in huge demand during a long-term crisis. Items like bleach, salt, matches/lighters, water containers, batteries, flashlights, and candles are just a few.
You’ll also be able to name your price for things that are hygiene and cleaning related—most of which can be purchased at Dollar Stores. Remember, people will be desperate for these items and name brands won’t matter much! Can you imagine what it would be like to be without toothpaste, a toothbrush, shampoo, deodorant, Vaseline, laundry soap, or dish soap…and the list just keeps going!
One reader shared that she went out and bought a gross of reading glasses at the Dollar Store. Good for her! Many people will be desperate for reading glasses. Your barter potential will increase as long as you take the time to think through what people will need post-collapse. And these items don’t necessarily come with sticker shock. .
Try this experiment; write down what you use throughout the span of one day; which of these items couldn’t you live without? Now imagine a long term crisis and consider what would be your must-have items. (The 2 lists will have items that overlap, but will be distinctly different.) This list alone will give you a good idea of what would be popular barter items.
As you begin to stock bartering goods, remember to set aside extras of key items! I use a can opener as an example frequently because it is a must-have item that is cheap today, but may not be available tomorrow. A prepper with canned goods will want to have at least three quality can openers on hand, but any extras from there would be great for barter.
(David’s note: If you can find them, buy a few dozen P-51 or P-38 can openers. They’ll probably set you back about .50 apiece.)
Currency vs. Silver or Gold
Most preppers prefer to invest in silver or gold because the fiat currency of today has no backing, other than the value of the paper it was printed on. Should trust in our banking system evaporate, U.S. currency could be worth precisely… nothing.
A good example of a downward spiral of a nations currency was experienced with the German Mark. In 1914, Germany abandoned the gold backing of the Mark. Prices of goods and services doubled between 1914 and 1919, followed by Germany’s being forced to make reparations at the end of WW1, and soon their once strong nation began to experience an economic tsunami. Prices doubled again in just 5 months in 1922 and the situation continued to erode and in a fairly short time frame, the exchange rate between the U.S. Dollar and the Mark was one trillion Marks to one Dollar. At that point, a full wheelbarrow full of Marks was not enough to purchase a simple newspaper!
(David’s note: There is a theory in play that if there was a situation where electronic banking collapsed that US Currency would still be used as a means of readily identifiable trade for a time. Will things play out that way? Who knows…but I do know that after disasters like what’s happening in Boulder, cash is still king.)
There are differing views on whether it is better to invest in silver or in gold. Silver coins have one advantage over gold coins–since silver is $23.09 per ounce and gold is $1365.10, they are much more practical for day-to-day purchases. Having said that, silver bars or gold coins would come in handy for larger purchases.
Whatever strategy you use to protect your finances, it should be made while the state of the economy continues to hold on by its fingertips, rather than after it takes a tumble into oblivion!
David’s Note: If you think that now might be a good time to put some money into gold and silver, I suggest you contact Tom Cloud at Cloud Hard Assets at 800-247-2812 and ask him about the commodities he provides from Junk Silver to Gold Bullion or visit his site at Cloud Hard Assets. I am a customer of Tom’s and promotional consideration has been made for this referral, so please let them know that David Morris referred you for a special discount.
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What do you believe will hold the most value during a protracted crisis; bulk food, preparedness goods, medical supplies, and bartering goods, or silver and gold? Are you concerned about an economic collapse and are you preparing for it?
If you’re in a position to do larger investments, what are you looking at? Food production? Private security? Foreign loan arbitrage? Micro and pico power production? Other investments? Share your ideas and thoughts by commenting below:
Chapter 22 of “Implant”, Diva’s Christian novel dealing with RFID implants is available. You can Click Here to continue reading.
God bless and stay safe,
David Morris and Survival Diva