26 December 2012

Finances: Cash, gold, & digital money

With all this talk of the coming financial crises I see people largely taking one of two viewpoints.

The first is to be stubbornly, pitifully oblivious. "Economics? Financial news? Who reads that? There's a post-holiday sale at the mall, let's go stand in line. I want a new iPhone, and pity the fool who gets in my way."

credit for photo
If that's your take on it, then I really have nothing to say to you. Sorry.

The second is to be aware, but overwhelmed by the problem. "What can I do? This is so much bigger than me. It's on a national, even global scale. Maybe I should buy some gold."

If this is you, I may have some words of advice. This is just my two cents, so use your own discretion, but there are some things to consider. First, look at history.

During the Great Depression, banks started closing at the first sign of trouble. Banks exist to protect themselves and their investors. The fact that they have your money is secondary. If all you have is money in the bank when they lock you out and limit your ATM deposits, you have nothing.

Argentina bank after collapse
Ask the people who lived in Argentina during their financial collapse in 2001. The banks closed and limited ATM transactions, the government seized private assets, and all sorts of other ugliness happened. Read what Ferfal of Surviving in Argentina wrote about the "corralito" and living in a country that went to hell almost overnight.

The lesson here is not to stuff all your money in the mattress and pray for the best. It's to have cash on hand. You know, that paper stuff we all used to pay our bills with before the invention of debit cards? "Digital" money can be created or deleted in an instant, but immediately following a crises the kind of money you can fold and put in your pocket can be priceless. Not a lot, just an emergency fund- maybe a month of expenses for you and your family.

My second suggestion is to invest in goods. This includes gold, but I wouldn't put too much emphasis on it. You want things that can be used for barter, or used by yourself in an emergency. Food, potable water, blankets, toilet paper, simple tools, medical supplies, etc. You may also want to invest in luxury items such as tobacco, alcohol and candy. Even if you don't use them yourself, they may come in handy for trade. . .or bribes, if it comes to that.

Just my thoughts.