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Banks, gangsters and the strange resurgence of cash

economist.com

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Re: Banks, gangsters and the strange resurgence of cash

#51

Post by dylan604 »

XorNot wrote: post #46
dylan604 wrote: post #35

Earlier quoted context omitted.

i've never understood how this would work in these doomsday scenarios. are people going to walk around with scales to weigh the gold for every transaction as well as test the purity of the gold? are they going to mint their own coins? I just don't see how it's supposed to work

Modern banking was also basically invented because of this very problem - gold was inconvenient so you had gold coins with insigna's which promised a standard weight of gold and could be reasonably trusted due to being hard to forge. Which gave way to IOUs from gold smiths, since carrying large amounts of coins was still hard. Which, well, everyone knows the rest.

Right, so again, what do these people think they are solving? There's plenty of logic flaws with the doomsday preppers, but returning to the gold economy is just where I draw the straw. Sure, store all the food, guns/ammo, fuel, water, etc you can, but if the world is that screwed up, we've all seen the movies on how well best laid plans workout.

Re: Banks, gangsters and the strange resurgence of cash

#52

Post by rsj_hn »

dylan604 wrote: post #35
posnet wrote: post #19

Earlier quoted context omitted.

I mean isn't that the reason preppers love gold/silver bullion?

i've never understood how this would work in these doomsday scenarios. are people going to walk around with scales to weigh the gold for every transaction as well as test the purity of the gold? are they going to mint their own coins? I just don't see how it's supposed to work

I think the idea is that gold is a universally desired good that can be exchange for money or anything of value in any situation or place.

So if you decide to flee the country, five pounds of gold is $150K and can easily be carried in a small backpack. Let's say you keep it in 1 troy oz pieces, so you have 80 of them worth about $1800 each. You can go to any nation on earth, and whatever currency they have, they will be happy to sell it to you for gold. Yes, only in $1800 pieces. That's fine, you can exchange it for whatever local currency is being used as you need it.

You can do this anonymously and privately. You don't need to worry about whether the US dollar has collapsed. Gold does go up and down, but it never goes to zero, and tends to do well in crisis situations and maintain value over the long term. It is not - or shouldn't be viewed as -- an "investment", it's insurance. It costs money.

Moreover even if you do not flee the country, having assets that you possess - true bearer assets -- is superior than assets others hold for you in a custodial account. How secure is your 401K? Secure until congress passes a law to take some of it. How secure is your bank account? It is as secure as someone who can convince the bank to freeze your account or close your account. So having a bit of gold or cash as a type of hedge for unlikely events makes sense to a lot of people.

You have to keep in mind that for a household living in Silesia, between 1880 and 2000, they would have lived through one hyperinflation, two world wars, two revolutions and three uprisings, and four foreign invasions. They would have been ruled by Prussia, Poland, Nazi Germany, Soviet-controlled Poland, finally free Poland. Each of these had their own currency regimes and currency reforms. That household would have been well off having a bit of gold tucked away. They would have been able to trade some of it for food during the Weimar collapse, and to transport some wealth through the dark days of communism -- maybe even bribing someone to let them escape the country with something more useful that worthless zlotys in whichever nation they landed.

Re: Banks, gangsters and the strange resurgence of cash

#53

Post by ptero »

Spooky23 wrote: post #41
posnet wrote: post #19

Earlier quoted context omitted.

I mean isn't that the reason preppers love gold/silver bullion?

Those are the folks schnookered by companies that sell gold. Aka suckers. The “real” gold and silver people use it to avoid taxation. The high spreads and illiquidity are less than what you owe the tax guy or your ex-wife.

I don't see either high spreads or illiquidity. At least in the US the spread from reputable dealers is under 1% for bullion; slightly more for coins. It is certainly a feasible (and, in current low interest rate scenario, inexpensive) hedge against catastrophic economic problems.

Re: Banks, gangsters and the strange resurgence of cash

#54

Post by dylan604 »

rsj_hn wrote: post #52
dylan604 wrote: post #35

Earlier quoted context omitted.

i've never understood how this would work in these doomsday scenarios. are people going to walk around with scales to weigh the gold for every transaction as well as test the purity of the gold? are they going to mint their own coins? I just don't see how it's supposed to work

I think the idea is that gold is a universally desired good that can be exchange for money or anything of value in any situation or place. So if you decide to flee the country, five pounds of gold is $150K and can easily be carried in a small backpack. Let's say you keep it in 1 troy oz pieces, so you have 80 of them worth about $1800 each. You can go to any nation on earth, and whatever currency they have, they will…

I understand the rational thinking of gold exchanges. You missed the detail about this being confusion on preppers. If the world has gone to shit (nuclear war, zombies, etc), then gold just isn't that useful. If it was silver, you could at least melt it down and kill the vampires with it.

You're attempting to use logic in a place where there is none.

Re: Banks, gangsters and the strange resurgence of cash

#55

Post by vl »

tobyjsullivan wrote: post #18
anonporridge wrote: post #9

Earlier quoted context omitted.

The precautionary savings of physical cash may even be on the rise as people realize how easily their economic lives could be switched off in an instant in the increasingly digital world, whether by being intentionally targeted or accidentally disabled with a lot of bureaucracy slowing down the correction. Having enough cash under your mattress that authority figures can't easily take from you is a psychological comf…

Pseudo-relevant anecdote: I wanted to buy a used car a few months ago off someone on Facebook. We were meeting up same day so the easiest method seemed to be cash. I went to the bank to withdraw $7000 and was informed, much to my surprise, that it is impossible to withdraw more than $3000 without 48 hours notice. Suffice it to say, I've been seriously considering the tradeoffs of hoarding cash under my mattress.

There was underreported shortage of cash since the start of pandemic. My branch for a while wouldn’t give out more than a $1000. Before the pandemic $10000 were fine.

Re: Banks, gangsters and the strange resurgence of cash

#56

Post by vl »

anonporridge wrote: post #25
dv_dt wrote: post #20

Earlier quoted context omitted.

But there is also a record level of natural disasters in term of flood and fire. I wonder if an unusual level of cash was destroyed

Fire/water proof safes aren't terribly expense. Also, safe deposit boxes are an option, which have different security tradeoffs from a safe in your home.

Banks close first, for emergency supplies safe deposit boxes are basically useless.

Re: Banks, gangsters and the strange resurgence of cash

#57

Post by astura »

tobyjsullivan wrote: post #18
anonporridge wrote: post #9

Earlier quoted context omitted.

The precautionary savings of physical cash may even be on the rise as people realize how easily their economic lives could be switched off in an instant in the increasingly digital world, whether by being intentionally targeted or accidentally disabled with a lot of bureaucracy slowing down the correction. Having enough cash under your mattress that authority figures can't easily take from you is a psychological comf…

Pseudo-relevant anecdote: I wanted to buy a used car a few months ago off someone on Facebook. We were meeting up same day so the easiest method seemed to be cash. I went to the bank to withdraw $7000 and was informed, much to my surprise, that it is impossible to withdraw more than $3000 without 48 hours notice. Suffice it to say, I've been seriously considering the tradeoffs of hoarding cash under my mattress.

I've always heard the best way to do this transaction is for buyer and seller to meet at buyers bank. Buyer obtains cashier's check with seller watching and hands it over to seller before leaving bank. This way seller knows cashier's check is real, you don't have to deal with large amounts of cash, and nobody's at risk of getting robbed.

Downside is you have to go during banking hours and you have to make an extra trip.

Re: Banks, gangsters and the strange resurgence of cash

#58

Post by Ralo »

Waterluvian wrote: post #12

I have like $200 cash just sitting in my room for years in case I need it for something that doesn’t take debit or credit like a carnival trip (I haven’t carried cash, ever, in years). I wonder how many others do the same? It adds up I imagine.

Wouldn't that be accounted for already? You withdrew that from a bank.

Re: Banks, gangsters and the strange resurgence of cash

#59

Post by vl »

Spooky23 wrote: post #41
posnet wrote: post #19

Earlier quoted context omitted.

I mean isn't that the reason preppers love gold/silver bullion?

Those are the folks schnookered by companies that sell gold. Aka suckers. The “real” gold and silver people use it to avoid taxation. The high spreads and illiquidity are less than what you owe the tax guy or your ex-wife.

How exactly is it going to work out if all purchaser of gold are tracked? You can’t buy any amount of gold without id.

Re: Banks, gangsters and the strange resurgence of cash

#60

Post by inopinatus »

rsj_hn wrote: post #6

There is a lot of rumor and speculation about very benign things. 1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missin…

> There is a lot of rumor and speculation about very benign things.

There is certainly misrepresentation and rumour-mongering in these comments, but not in the article, and there's nothing benign about international money laundering, or more precisely, nothing benign about the people it enables.

> $50 Billion in cash is basically nothing. It's like 2% of currency in circulation.

This is very far from the numbers quoted in the article, which shows two thirds (£50bn) of all British pounds sterling banknotes (£75bn) being unaccounted for, and then similarly one-half of all Euros apparently circulating outside the eurozone.

This article wasn't written by, or from the perspective of, Americans. There's a brief mention, though - $7,000 per US citizen is in circulation. Somewhere.

> this whole article is complaining

There are no complaints registered in the article, unless you count the cash mule's plaintive wail about how heavy the suitcase was.

This article is a careful discussion about folks in authority seeming unburdened by the discrepancy.

> raise interest rates and increase law and order

Parochialism doesn't solve global issues.

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