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What An American Bank Run Would Look Like

Tyler Durden's picture




 

Technically the title of this post is wrong: the truth is that nobody could possibly know or predict what a bank run would looks like in details suffice to say that it would have terminal and devastating results on the global economy. One needs only remember what happened when the Reserve Fund broke the buck and the $3 billion money market industry was at risk of unwinding (for those who do not, Paul Kanjorski does a good summary here). What we do, however, wish to demonstrate is the tenuous balance between physical money - yes, just like precious metals, there is actual "physical money", better known as currency in circulation - and more abstract, confidence-based, "electronic money." Now when it comes to talking about systemic instability, pundits often enjoy bringing up the case of the $600+ trillion (recently discussed here in a different capacity) in synthetic derivatives, whose implosion would "wipe out the world." While that may indeed be the case (the memory of the CDS-precipitated AIG implosion is still all too fresh), since nobody really can comprehend the side effects of the collapse of global derivative system, which by some estimates is over $1 quadrillion when combining exchange and OTC based derivatives, it is largely based on pure conjecture. And, as we demonstrate below, one doesn't even need to do get that high up in the pyramid of credit money. The truth is that should there be an American bank run, what would happen is the conversion of all electronic dollars into physical dollars, as retail Americans rush to empty their checking and savings accounts, exit their money markets, while institutional America converts all "shadow" liabilities into hard dollar assets (Zero Hedge has a specific methodology of defining what liabilities make up the shadow banking system). The truth is that should there be a D-Day in the American banking system and there is a global scramble for physical paper (ignore gold) the conversion ratio for binary dollars into hard ones could be as high as 30 to 1. Which begs the question: should one apply a 90% discount when evaluating their electronic dollar exposure? That, and many other questions too...

Physical dollars

When looking at actual "hard" dollars, there is just one place: the Fed's weekly H.6 statement which shows what the total amount of currency in circulation at any given moment is. The H.6 is the statement that breaks down the two forms of monetary stock tracked by the Fed: M1 and M2. Currency is at the very top. As a reminder, currency, together with Fed bank reserves are the only two actual forms of money "printed" into circulation. Yes, there is much polemic over the nature of bank reserves, but they, together with currency in circulation are the only two actual liabilities on the Fed's balance sheet, backed by such assets as Treasurys, Mortgage Backed Securities and, questionably, gold (questionably, because as Ron Paul has been crusading, the existence of gold on the Fed's asset side is taken on faith, and is based on promises by the Fed that it in fact exists, but nobody is allowed to actually see it).

So how many actual physical dollars are there? Well according to the H.6, as of June 27, there was $967.3 billion in currency currently circulating within the US economy, while the H.4.1 tells us that as of July 6 there was $1.66 trillion in bank reserves with the Fed, which if need be can be promptly released as currency to the wider public on demand (granted the dynamics of this release are completely unclear).This adds up to just over $2.6 trillion in "physical currency" (which also happens to be the "record" asset side of the Fed's balance sheet).

So that's what the the 'supply' side of money looks like in a dollar bank run. What about the demand. In other words, who will have the non-contractual "right" to pursue these $2.6 trillion in cold, hard cash?

Let's start with the M1, which is where the first tranche of electronic dollars is situated.

M1, in addition to currency in circulation, also contains demand and checkable deposits. The most recent number for these two is $982.9 billion. So far so good: if only demand and checkable deposits were pulled, the currency in circulation would be sufficient, although there would be a small impairment of just about 1.5%.

Next up, we go to the M2, which in addition to the M1 components, also contains such abstract concept as Savings Deposits, Small-Denomination Time Deposits and Retail Money Funds. The dollar values associated with these assorted claims on cash are $5,662.8 billion, $827.9 billion, and $698.7 billion respectively, or a total of just under $7.2 trillion. Add to this the roughly $1 trillion in non-cash M1 and you get $8.2 trillion. And this is where things start getting interesting. Because should every retail saver who has documented paper claims in America's checking, savings, time-deposits and money market pull their money, they would find that there is just $2.6 trillion in cash available to actually satisfy said claims.

But wait, there's more.

While the M2 conveniently ignores it, another major component of monetary aggregates is institutional money funds, which adds another $1.833.2 trillion in claims to physical fiat. Added across and we get just over $10 trillion.

But wait, there's more.

Remember how on March 23, 2006 the Fed discontinued the M3 because it was "too expensive" to keep track of all this "money." Well, courtesy of various replication loophole Zero Hedge has been able to track a far more comprehensive indicator of the broadest money stock in the US economy: the shadow banking system, which for all intents and purposes is the same as above: namely claims on actual money however more by institutional accounts than retail.

The breakdown, based on the most recent Z.1 (through March 31, 2011) is as follows:

  • GSE Liabilities: $6,577.8 billion
  • Agency Mortgage Pools: $1,166.3 billion
  • Asset-backed securities Issues: $2,280.6 billion
  • Securities Loaned by Funding Corporations: $709.0 billion
  • Liabilities in Fed Funds and Security Repo agreements: $1,263.3 billion
  • Total Outstanding Open Market Paper: $1,131.2 billion

Whipping out the calculator, and we get... $13.1 trillion in shadow banking system claims. Adding across with the M1 and M2 stock noted above and one gets $23.1 trillion. As a quick reminder, the physical money, in a best case scenario, is $2.6 trillion when adding reserves, and in a worst case, $967 billion. In other words, the paper to physical dilution is anywhere between 8.8 times and 24 times.

But wait, there's more.

Observant readers will recall that in our 2009 piece which before anyone else had even considered it, explained how the Fed bailed out the world with FX liquidity swaps, one of the key take home messages was that there was a synthetic short on the USD to the tune of about $6.5 trillion courtesy of the USD carry trade and other considerations. In other words, this is how many dollars would have to be conjured up into existence to satisfy existing electronic claims (and why the Fed had to scramble to implement the FX swaps when it did). One thing that is certain is that in an American (and thus global) bank run, all of the dollar shorts would cover in milliseconds as the carry trade would collapse instantaneously.

The take home is that courtesy of this latest and greatest demand on cash, there is up to another $6.5 trillion in potential claims on underlying hard dollars (and likely much greater as this BIS study was conducted at a time before ZIRP, and before the USD was the new, step aside JPY, carry currency of the world).

Summing it all up

Putting together all of the above, there are anywhere between $967.3 billion and $2.6 trillion in physical claim satisfying pieces of paper which everyone would scramble to grab if the sky was falling, and against these there are just under $30 trillion in paper claims on said hard paper. This can be seen visually on the indicative chart below:

Do readers see now why it is irrelevant to add X trillions or even quadrillions in derivatives? Because when just taking the plain vanilla electronic claims on circulating dollars there would have to be between a 11x and 31x haircut when everyone rushes to procure the suddenly all too precious pieces of paper with the picture of a dead president on the face.

For all intents and purposes this has been more of a thought experiment than any indicative scientific evaluation as there are many other nuances when analyzing all of the above. However, for the sake of esthetic purity, the truth is that no matter how one slices and dices it, there will be an unimaginable scramble to get out of electronic dollars and into physical ones. The amusing thing is that there are many who are worried that physical silver claims may be diluted by outstanding paper. This is true, however, ironically, it is very true when dealing with the heart of the fiat system. And recall that we refused to look at the $1 quadrillion in credit money at the derivative level. We believe that for illustration purposes, knowing that at best 10% of electronic money is covered in a worst case scenario should be sufficiently enlightening. As for those who say that all the Fed would need to do is merely hit the print button and not stop, remember: this money would simply flow to bank reserves. How it gets from there to outright currency in circulation is something the Fed has been bashing its head over the past 3 years, so far, unsuccessfully. And any money paradropped into circulation directly, would not do anything to alleviate the dilution factor as it would add to both sides of the "claim" and "deliverable" ledger (not to mention that it would also leads to instantaneous hyperinflation).

So, in the loosely paraphrased immortal words of Troy Mclure, now that you know, roughly, what a bank run would look like, don't do it.

 

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Mon, 07/11/2011 - 00:47 | 1442674 baby_BLYTHE
baby_BLYTHE's picture

Can't wait.

a WHOLE NEW DEBATE will soon emerge, never mind this fake 'debt ceiling debacle'

when the event of which is described above, got PMs (for realz)?

Sad most fail to recognize the economic reality of history once again repeating itself.

Mon, 07/11/2011 - 01:15 | 1442734 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

I think I'm in love. Lol. Prep and wait for the soon-to-come fall. It's basically inevitable at this point

Mon, 07/11/2011 - 02:55 | 1442837 Vic Vinegar
Vic Vinegar's picture

I love your ID and avatar dude.  But keep in mind...and why not dance to this song tonight:

http://www.youtube.com/watch?v=WJiHp-2CmVY

Mon, 07/11/2011 - 03:55 | 1442852 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Glad to see ZH talking about Bank Runs.

They really do mean martial law at this point.

Like we were looking at in 2008 -- like always happens in every credit money system -- boom, bust, bank run.

Get out of the Ponzi and stay out.

And don't get out of the Ponzi, because everyone else in the scheme needs you to keep dancing.

http://www.zerohedge.com/article/chart-day-currency-devaluation-old-school-style#comment-1265536

(for all you mouth-breathers out there: this link means you click to go there and then be sure to see comment 1265536 -- or ctrl+F "5536" -- it's a very relevant anecdote)

Mon, 07/11/2011 - 04:51 | 1442889 Weisbrot
Weisbrot's picture

 

Looks like government corruption & inefficiencies will screw us every time

 

 

 

 

Mon, 07/11/2011 - 08:03 | 1443070 66Sexy
66Sexy's picture

Trade fiat digital currency, which can be taken away from you at any time, for a REAL precious metal: Platinum.

Or, silver if you like.

Like trading places: "Your debit card, please".

They can just 'turn off your chip'. SHut you down with one call from Joseph Lieberman.

Wake up, check your accoutns: $0.

"Sorry schmuck, we TOOK your money. whatcha gonna do about it? Sue us? HaHaHa"

Scary.

Mon, 07/11/2011 - 09:33 | 1443362 fallout11
fallout11's picture

You sure don't want to be in "physical" (lol) dollars, either. Look at every single currency revaluation of the 20th century, the old physical currency was either declared null and void after a short period of allowable trade in (at devalued levels, often as much as 10 old :1 new) or just declared null and void (or became that way via market forces).

Mon, 07/11/2011 - 10:40 | 1443640 knowless
knowless's picture

the only reason to hold dollars is for the short window where you can't get money out of the banks, but people still take dollars. think like, people are deer in headlights, well, you have a bunch of dollars (which are about to be worthless) you can topoff your reserves of food or gas or whatever from whoever is stupid enough to trade things to you for dollars even though the banks have halted electronic transactions.

Mon, 07/11/2011 - 16:29 | 1445272 XitSam
XitSam's picture

+1

Mon, 07/11/2011 - 10:59 | 1443758 mickeyman
mickeyman's picture

Save in nickels.

Mon, 07/11/2011 - 08:18 | 1443102 duo
duo's picture

I'll repeat:  When  the SHTF, cover your stash with shit and drive to Belgium

Mon, 07/11/2011 - 05:49 | 1442921 Yen Cross
Yen Cross's picture

 Hey Vic . +1 W/T/F has been out of the (tumble weed) far too long.

 

   This isn't a dating site. And Blyth is but a junior contributer...

Mon, 07/11/2011 - 10:13 | 1443472 Nacho.Libre
Nacho.Libre's picture

A couple of months ago I was at a luncheon where Fed Pres Fisher from the Dallas Fed gave a talk.  The numbers he threw out for physical cash that I was remembering was 906B, but billion here a billion there, you know.  Anyway, he called this "walking around money", money you have in your pocket.

What was very intersting that he said, that would be very relevant to this article, was that about 60% of all physical walking around money was outside the US.  Looking a the bank run scenario again with only 40% of the available cash now takes on different light.  And if you all remember, the recently printed up $100B of new $100 dollar bills were screwed up and they have to go physically sort through them which, even if they had a high speed sorter, would take over a year!

 

Mon, 07/11/2011 - 00:41 | 1442675 phungus_mungus
phungus_mungus's picture

What a bank run in the US would look like?

 

http://www.youtube.com/watch?v=rcPrt57EXRk

Mon, 07/11/2011 - 02:38 | 1442824 Tense INDIAN
Tense INDIAN's picture

Bend OVER ...ROLL OVER...and take it in the ASS....

Mon, 07/11/2011 - 05:04 | 1442891 Sudden Debt
Sudden Debt's picture

Pfft....the FED would just start printing 1000,10.000 and 100.000 bills. Maybe even 1000.000$ bills.

It would only take a week to supply the market with those "Hard" paper dollars.

GHUTENBERG HAS GOT THAT ONE COVERED MY FRIENDS!

 

The real problem starts AFTER a bank run. When there are so many paper dollars in ciruclation that everybody starts asking himself: is this paper or money?

And then real hyperinflation kicks in.

 

 

 

Mon, 07/11/2011 - 06:04 | 1442935 brodix
brodix's picture

Reagan on the thousand. Bush 1 on the ten thou. Clinton on the hundred thou. Bush 2 on the million. And at the rate it's going, Obama on the billion.

Mon, 07/11/2011 - 07:14 | 1442985 Sudden Debt
Sudden Debt's picture

I think they'd better use Disney characters which are international more know and respected than those presidents.

But if you want to stick to those characters, they can first make a cartoon of them.

Cirgar Clinton, Bomb Away Bush, Looney Bush Junior, Obama Dumbo and Dementia Reagan the Second generation... something in the line of X-men.

Mon, 07/11/2011 - 06:32 | 1442957 Yen Cross
Yen Cross's picture

 +1 YEN

Mon, 07/11/2011 - 08:14 | 1443093 css1971
css1971's picture

Ding, we have a winner.

 

Y'know, I bet they already have the notes printed.

 

Mon, 07/11/2011 - 08:32 | 1443132 WmMcK
WmMcK's picture

I (not John Marshall) will return on the $500.

It'll rhyme with '29, bitchez. (with security added)

$500: William McKinley
$1,000: Grover Cleveland
$5,000: James Madison
$10,000: Salmon P. Chase
$100,000: Woodrow Wilson

http://cgi.ebay.com/1934-500-MCKINLEY-FEDERAL-RESERVE-NOTE-LARGE-COPY-/2...

 

Mon, 07/11/2011 - 08:52 | 1443206 White.Star.Line
White.Star.Line's picture

Someone had some good coffee this morning, with an unusually valid point to make in the early AM.

Yes, since when would a lack of paper and 0s keep a printer of usury notes from meeting demand?

Not that it really makes a difference.
Hyperinflation from too much money, or collapse from having none.

End result the same....

Mon, 07/11/2011 - 00:46 | 1442680 Bansters-in-my-...
Bansters-in-my- feces's picture

" as of July 6 there was $1.66 trillion in bank reserves with the Fed, 

Nice try....next joke.

Mon, 07/11/2011 - 00:50 | 1442688 zorba THE GREEK
zorba THE GREEK's picture

 A bank run is not going to happen because the treasury will just announce that all deposits

 in banks, money markets, and CD's will be backed by the full faith of the United States Treasury.

 That's the only thing that backs up paper currency as it is. So where's the problem? Now if 

 everyone wanted their money redeemed in Gold, now you got a problem. 

Mon, 07/11/2011 - 00:52 | 1442693 Tyler Durden
Tyler Durden's picture

The entire point of this post is that the thought experiment of the bank run would occur when said full faith is exhausted.

Mon, 07/11/2011 - 01:02 | 1442704 Spitzer
Spitzer's picture

I didn't think a physical Thai baht in 1997 was worth more then a virtual one but I never looked at the data.

Too much emphasis on quantity in this post. Quantity has little to do with it.

Mon, 07/11/2011 - 01:12 | 1442725 random shots
random shots's picture

This post is the equivalent of...I better not drive a car because I might get into an accident and die.

Tyler,

You are getting closer and closer to fear mongoring everyday that passes.

Mon, 07/11/2011 - 01:19 | 1442748 Spitzer
Spitzer's picture

You know nothing about basic economics.

Mon, 07/11/2011 - 01:29 | 1442757 TruthInSunshine
TruthInSunshine's picture
by random shots
on Mon, 07/11/2011 - 01:12
#1442725

This post is the equivalent of...I better not drive a car because I might get into an accident and die.

Tyler,


'Those who ignore history are destined to become roadkill at some point.'

- Author unknown

 

Do you really believe it's not possible many of us will see a bank run in the U.S. at some point in our lifetimes, especially given the trajectory that we're witnessing form?

$250,000 in FDIC insurance on deposits won't stop a stampede under an entire litany of scenarios.

While I'd never be able to hazard an accurate estimate of the odds of this happening, I will say that it's my humble opinion that it's far larger than most people suspect, whereas you at least appear to insinuate that it's almost impossible.

 

Mon, 07/11/2011 - 09:30 | 1443354 1100-TACTICAL-12
1100-TACTICAL-12's picture

Why any one would keep other than money to pay bills in the bank, is beyond me. And will fully deserve the hosing they someday will receive..

Mon, 07/11/2011 - 10:58 | 1443744 mickeyman
mickeyman's picture

In the event of a collapse the gov't will have no choice but to accept electronic dollars to pay your taxes. Likewise your mortgage and any bank debts would have to be accepted in order to maintain appearances. You would need cash for any nonessentials such as food.

Up here in Canada, due to the linking of the banks, there will be no such thing as a bank run. If one goes, they all goes. But I've often wondered--if all the banks fail, and then the government sends you a cheque for the total amount you had on deposit--where do you go to cash it?

Mon, 07/11/2011 - 18:07 | 1445598 Meatier Shower
Meatier Shower's picture

"You would need cash for any nonessentials such as food."

Erm....I am sure that even in Canada, food is not nonessential, eh?

Mon, 07/11/2011 - 06:11 | 1442943 Pondmaster
Pondmaster's picture

With all due respect to Tyler's work , I have to agree . I detest fear mongering . ZH should be above that .Its insulting to a persons intelligence . Use your scenarios in a movie script please , and not here . nuff said .

Mon, 07/11/2011 - 07:49 | 1443043 flacorps
flacorps's picture

It's more like "if this theatre caught on fire, could I make it to the exit?"

Mon, 07/11/2011 - 08:35 | 1443143 Calmyourself
Calmyourself's picture

The more you stumble about in the dark the closer you are to a nasty toe stubbing..

Mon, 07/11/2011 - 12:36 | 1444265 sasebo
sasebo's picture

Clearly TD is not saying that there is going to a bank run. He's just pointing out that there is not enough paper money to cover one. What you do about it is your business. And I might ask, who determines if there is a bank run? You?

Mon, 07/11/2011 - 01:20 | 1442733 narnia
narnia's picture

bank holidays.  that's what would happen.  

it's hard to imagine this whole thing unfolding without at least one physical currency panic. they'll just call a series of holidays, fire up the presses & purchase worthless debt so granny can pull out her soon to be worthless dead presidents.  

btw, the $23 trillion number is pretty close to my calculation of the REAL US national debt, excluding the NPV of entitlements & international alliances liabilities (IMF, World Bank, etc.). 

Mon, 07/11/2011 - 09:11 | 1443276 UgglyBetty
UgglyBetty's picture

Agree 100%. They may let some banks fall, but in the event of complete lost of credibility, no one will be allowed to take out the money from the bank. We know that very well down here in Latin America. That's why you know you cannot keep your savings in banks, every 8-10 years a new liquidity problem arises and the same thing again: bank holidays, deposit confiscation, extraction limits, currency exchange prohibitions, and so on, the same tune over and over again for decades now. That's why people keep dollars in bills, not electronic, "under the matress" or in safety boxes. Money in banks is just transactional, day to day operations; real savings are not there.

Mon, 07/11/2011 - 06:24 | 1442908 cranky-old-geezer
cranky-old-geezer's picture

A bank run is not going to happen because the treasury will just announce that all deposits in banks, money markets, and CD's will be backed by the full faith of the United States Treasury.  That's the only thing that backs up paper currency as it is.

"Full faith and credit of the US Government" has to do with the government paying its debts.  

It has nothing to do with the currency, which the US Treasury has no control over.

I don't foresee a bank run in America. If demand for physical currency suddenly skyrocketed, the Fed would declare a bank holiday, you can't get your money out, end of story.

The real threat is a dollar collapse, where the rest of the world suddenly loses confidence in the US dollar.

That's exactly what the growing CRIIPE alliance is quietly working on, taking the rest of the world away from the US dollar.

When (not if) that happens, OPEC nations will suddenly stop accepting US dollars for their oil. 

Not even Iraq.  America will be kicked out of Iraq (and Afganistan) instantly under threat of China / Russia / India / Iran / Pakistan nuclear attack. 

Forget Brent crude too, Britian will join the alliance (along with the rest of Europe) and back away from America.

America won't be able to buy oil anymore, at any price. Bernokio can print all the currency he wants, it won't matter, America won't be able to buy oil for any amount of dollars, those dollars won't be accepted by OPEC. 

Domestic oil production will be nationalized, fuel will be severely rationed.  It won't matter how much gold and silver you have, you won't be able to buy fuel except perhaps on the black market, and it won't matter, the American economy will collapse into chaos quickly, you won't have a job to go to, and store shelves will be empty.

That's when the US dollar collapses and America collapses in a few days or weeks.

By the way, Israel will be hung out to dry.  Sure they have nukes.  But Israel would be turned to glass if they tried to use them, so Israel will back down and go along.

S-C-O.  That's the most frightening three letters to America's (criminal) leaders now.  They know what it means and they know America's time is almost up.  That's why they're looting America fast as they can now.  They know America doesn't have much time left.

Mon, 07/11/2011 - 06:34 | 1442951 Green Leader
Green Leader's picture

Doesn't USA (I mean, the FED) have plenty of Iraqi Dinars to buy oil with?

Wasn't that part of the plan? Invade, devalue currency, issue new bills, revalue tham years later, pay for the war and make a profit. Whether the plan works out or not that's a whole different story, but that could very well be the bankster's back door...

 

Mon, 07/11/2011 - 07:36 | 1443013 Yen Cross
Yen Cross's picture

 You are kidding? Green and red?

Mon, 07/11/2011 - 08:59 | 1443096 TruthInSunshine
TruthInSunshine's picture
by Green Leader
on Mon, 07/11/2011 - 06:34
#1442951

 

Doesn't USA (I mean, the FED) have plenty of Iraqi Dinars to buy oil with?

Wasn't that part of the plan? Invade, devalue currency, issue new bills, revalue tham years later, pay for the war and make a profit. Whether the plan works out or not that's a whole different story, but that could very well be the bankster's back door...

 

Aha!

You see clearly.

 

The U.S. has major bases in Saudi Arabia, Kuwait, U.A.E., Iraq AND QATAR, which together produce a big, big chunk of the global oil production. Iraq has the world's 3rd largest proven oil reserves (8%); that's larger than Iran, and almost as much as Canadian oil reserves (with Canada having much of that oil locked up in tar sands, which has a higher extraction cost).

China is fiddling around in Africa, "buying up dictators, land and oil," when Nigeria is the basic play there, and Africa produces 9% of the world's oil supply in totality (barely more than Iraq), while the U.S. has major military bases that control, directly or indirectly, about 40% of the global oil supply (subtracting Iran from the middle east producers), in the Middle East, alone (it can be argued Libya is already under our indirect control).

No one has outmaneuvered the U.S. in what is a dirty, dark chess game of oil real geopolitics.

Turning to our immediate neighbors who produce quite a bit, Canada and Mexico - are they really going to stiff the U.S., for a whole wide variety of good reasons to not do so (putting it mildly)?

 

Mon, 07/11/2011 - 17:14 | 1445438 Green Leader
Green Leader's picture

From what I've read, China has around 83% of new oil well leases in Iraq.

The plan is going on, whether it holds or not that's another story.

Thu, 07/14/2011 - 07:21 | 1455352 Henry Chinaski
Henry Chinaski's picture

What is the major U.S. base in Saudi Arabia? Check your facts.

Thu, 07/14/2011 - 09:19 | 1455631 fallout11
fallout11's picture

The US once had 8 bases in Saudia Arabia, as recently as 1996. However, as of 2003 all US forces have been moved to Qatar.

Thu, 07/14/2011 - 09:32 | 1455688 fallout11
fallout11's picture

Duplicate post, sorry

Mon, 07/11/2011 - 11:42 | 1444051 Bob Paulson
Bob Paulson's picture

The US will ramp up production of its own oil, of which it has plenty.

Domestic oil nationalized? Not in our lifetime.

Mon, 07/11/2011 - 12:31 | 1444246 sasebo
sasebo's picture

The treasury will what? Who's that, Geithner? What kind of meaningless crap is that? 

Mon, 07/11/2011 - 00:51 | 1442690 DoChenRollingBearing
DoChenRollingBearing's picture

The Bearing´s advice:

ALWAYS have six months worth of FRNs stashed away (or as near that as possible) AFTER you have accumulated whatever gold you are comfortable with.

Physical long green $ / FRNs are a part of Modern Survival Theory (MST, did I come up with that?), you will have to go to my blog for details.  Want to do that, send me a gmail at my name, as my blog is in my real name.  Tell me you will behave, some 170 ZH-ers can´t be wrong.  More blog articles after July 15 when I return from Peru.

Beat the rush!  Pull FRNs now!  Buy gold now!  Don´t forget OPSEC (buying guns & ammo, keeping quiet and food and water)!

Mon, 07/11/2011 - 01:17 | 1442738 RafterManFMJ
RafterManFMJ's picture

I agree with you and would like to meet for lunch close to your fortress or pillbox to discuss where I should hide my six months of FRNs and gold.  Come alone, and tell no one of your plans.

Mon, 07/11/2011 - 04:07 | 1442862 Harlequin001
Harlequin001's picture

ok, sounds like a plan...

and of course, I'll come unarmed...

Mon, 07/11/2011 - 07:51 | 1443046 Smiddywesson
Smiddywesson's picture

PMs and guns?

No way man. You need trade items for the apocalypse. Think Dark Ages. When the lights go out, people will reach for PPs, physical porn. Ditto for booze and smokes.

I have what it takes to recruit an army. I will rule the world and you will work for me when my army of reeling, wheezing, pervs gobble up the adjoining survivors.

Sin Army Rules

Mon, 07/11/2011 - 09:41 | 1443387 fallout11
fallout11's picture

Ask the Germans what value their "physical" marks were, or the Soviets/Russians (3 currency devaluations and replacements in the 1990's alone), or the Argentinans. Physical pre-1997 Thai bhats were not worth any more after 1997 than the electronic ones were.

Mon, 07/11/2011 - 09:54 | 1443430 TruthInSunshine
TruthInSunshine's picture

While I don't think I could ever be accused of being bullish on U.S. economic activity (an understatement), the biggest problem I have with your argument, which has become far too commonly accepted without robust rebuttal, is that not a single one of those failed currencies enjoyed global reserve status, nor did those nations possess the sole military superpower status the U.S. does today.

As for how things develop longer term, time will tell.

This is the big problem I have with G. Lira. His hyperinflation case rests on a sudden collapse in the confidence of the USD, and he actually draws comparisons between Argentina and the U.S.

Weimar Germany, when Germany was in a mega-Depression as a result of WWI reparations that make our present day (and massive) national debt look manageable?

Zimbabwe?

I don't think he's a fool, but I think those comparisons alone, without emphasis on the fact that it's not exactly easy to redraw a global reserve currency over a 50 year time frame, let alone in an instance, is completely foolish, bordering on insanity.

And without an existing world reserve currency in place and accessible, what provides the medium of exchange globally that's liquid and immediately 'usable?'

 

Mon, 07/11/2011 - 00:54 | 1442696 Spitzer
Spitzer's picture

wouldn't need to convert to physical dollars. Virtual ones will empty store shelves just as well as paper ones. Its all about confidence.

 

Mon, 07/11/2011 - 01:05 | 1442712 RockyRacoon
RockyRacoon's picture

We needed someone to state the obvious and you just did.  I hope your insight saves you.

It is all about confidence, and when that is dissipated there will be a bank run of sorts, or actual.   It snowballs.   Your statement was superfluous at best.

Mon, 07/11/2011 - 03:59 | 1442869 Harlequin001
Harlequin001's picture

Never in history have we had a financial bust like this...

with a nationwide system of ATM's...

Spitzer might just be right. When most people have no gold they will find something else to trade, like salt, soap or something that will hold its value against currency if only for a little while. We should not forget that the only thing that lost its value in Wiemar Germany was the Mark, other currency did fine as did investors that held any commodity, not just gold.

We buy gold because it is the ultimate store of value in that you can store a great deal of wealth in a very small place, indefinitely, and it has a value that is global, but other localised systems of barter will emerge and through it all we will have worthless paper dollars and worthless electronic dollars as well, and some people will still have no choice but to accept both of them in ever increasing quantities.

You'll just need a wider screen...

It's difficult to see how paper dollars will become worth more than virtual ones...

Mon, 07/11/2011 - 05:13 | 1442902 jmcadg
jmcadg's picture

Except if the virtual system stalls. If you can't use debit/credit cards, if atm macines are turned off. Then initially only cash will be accepted, then once that becomes worthless we're into barter territory.

Mon, 07/11/2011 - 07:13 | 1442982 Harlequin001
Harlequin001's picture

I hear what your saying but to me it's like nukes; you can't uninvent them. Whilst the electronic system might fail it is certain that banks and others will run out of paper dollars long before computers do, but that doesn't mean that they will become more valuable, or that your paper dollar will become worth more than my bag of sugar.

So whilst it makes sense to keep some dollars on hand this idea that it should be 10% in cash to me is a bit OTT. I can't see anyway that ATM's will fail once the govt accepts that it has to make good on everyone's electronic claims...

To that I keep my store house full and my money in gold safely stashed overseas...

 

Mon, 07/11/2011 - 05:27 | 1442907 wandstrasse
wandstrasse's picture

...in Weimar Germany...

but but but Weimar is crisis-proof! 'krisenfest'

http://www.weimar.de/nc/de/wirtschaft/startseite/aktuelles/newsanzeige/a...

Mon, 07/11/2011 - 10:02 | 1443454 mick_richfield
mick_richfield's picture

Es ist ja jetzt krisenfest.

Mon, 07/11/2011 - 01:14 | 1442732 HungrySeagull
HungrySeagull's picture

Food Stamps are just swiped once a month.

Suppose the entire Population swipes the credit card to the max seeking delivery of Silver and Gold right frigging this week?

The next problem is logistical. The Fed has several locations around the USA. Each location distributes and takes currency (Bad dollars and issue new dollars) backed by a alterate location sufficently far away to survive a problem.

Payroll, Western Union and associated secondary providers of money/credit such as Pawn Shops which has historically functioned as a banking system long before the US Banking system was chartered back in the 30's Those will also be cleared out.

I don't know exactly how many armored trucks can move at a moment's notice versus how many bank branches in each of the states... the people do know where these buildings that contain cash are.

ATM couriers are next. Once those are stripped bare as locusts strip a field.

Then the service industry on through retail malls will be stripped as the night deposits are intercepted as managers are killed after closing with the little brown bag.

By the end of the week the actual locations of the factories and mints will probably have military deployed in active security.

What happens next is every house, apartment and dwelling will be methodically searched for any remaining cash by the growing hordes who are angry that they cannot get cash.

But before all of that happens, a war will be fought electronically. It is possible to say within the hour the entire electronic holdings of those who deposited US Dollars in any legal form and held as binary in records could be drained. Or deleted.

Anyone left alive and actually seen with a green us dollar will be killed on sight as dogs would fight over meat. The rest will sort of "Disappear the best they can"

In this vision of a mega run, one must ponder this question.

Do you hold physical into the multiplier waiting for the new currency to be issued? or do you sell as to get rid of the dead weight and convert to cash.

What is cash?

I suppose my banking is mostly virtual in the form of auto drafts and incoming direct deposits. The total failure of the 12 or so banks that control the operation of the "Fed Wire" that makes this kind of banking happen will probably render the entire exercise of being a good citizen who pays the bills on time irrevelant.

At some point in time there will again be a money issue. They did when the Continentail Money failed. They did when the various banks across the west had thier own money and all were brought into line with the fed government and ultimately the greenback was brought to war to make payroll.

To use a toll ferry at the end of the Civil War, it will cost you 5 dollars Union or 40 dollars confederate.

Which is it?

Mon, 07/11/2011 - 01:29 | 1442758 Spitzer
Spitzer's picture

dp

 

 

 

Mon, 07/11/2011 - 01:29 | 1442761 Spitzer
Spitzer's picture

There will be no demand for physical cash. Why do you think computers will stop working ? Is this Y2K all over again ?

Physical US cash will go the same way every other basket case economies physical cash. Simply a peasant medium of exchange that nobody stores value in. The Jamaican dollar for example.

 

 

Mon, 07/11/2011 - 09:23 | 1443320 Max Hunter
Max Hunter's picture

Not so sure about this.  >95% of the "cash" is digital.  If the digital cash goes boom, the physical will still be good to have for the immediate weeks/months after a bank run.. This is until they get all of the trillions in printed form and distributed.. Then, (if not sooner) silver and gold coins will make a few people very wealthy..

Mon, 07/11/2011 - 10:15 | 1443504 mick_richfield
mick_richfield's picture

The run will begin with digital money going dark, because it can be turned off from central locations.  The ATMs are dark.  And the cashiers say "I don't know what's wrong with all the credit card machines!"

The run is not initiated by individuals.  It is precipitated from central locations.

Fri, 07/15/2011 - 17:10 | 1460946 Carl
Carl's picture

Spitzer,

I applaud your blind faith and trust in the electronic currency system that is based upon a bank's promise to pay FRNs upon demand.  Keep your debit card handy and good luck...

Mon, 07/11/2011 - 01:18 | 1442741 FeralSerf
FeralSerf's picture

Yes, there are ATM cards.

Mon, 07/11/2011 - 01:35 | 1442768 oldman
oldman's picture

Spitzer,

You are right on the money with this.

It will be the interfacew between the virtual reality and the old reality. Been waiting for theis confrontation for decades. I don't have an opinion on it, however; I came back to the US just to see what happens.

I believe that I will have a few dollars, francs, and euros, just in case you have overestimated the good will of human beings-----zerohedge includes physical fiat.

I want to be in a position to do nothing.

Mon, 07/11/2011 - 07:24 | 1442996 Counterfiat
Counterfiat's picture

Thank you for your input Spitzer

Mon, 07/11/2011 - 07:53 | 1443050 Smiddywesson
Smiddywesson's picture

All kidding aside, the shelves in Japan were empty in 3 days. If you don't have food on hand, you have nothing. That would still be true if the USD was rock solid.

Mon, 07/11/2011 - 00:58 | 1442703 vainamoinen
vainamoinen's picture

and this is precisely why some of us keep a "substantial" amount of "green paper" (say about 2 years living expenses - at existing prices) close at hand.

 

It is not an investment and does not replace PM's - just another (hopefully)insurance policy in the event that things get a little too squirrely - - -

i.e. - - - defationary

Mon, 07/11/2011 - 01:18 | 1442740 bakken
bakken's picture

Amen!  Holding actual physical cash these days loses almost nothing as most ROR are close to zilch.

Cash, like PM needs guarded though.  Still, I have 10% in real, physical US$.

Mon, 07/11/2011 - 04:05 | 1442872 Harlequin001
Harlequin001's picture

so why don't you just spend your physical (or virtual for that matter) dollars now and buy a store room full of canned food?

Mon, 07/11/2011 - 07:10 | 1442979 equity_momo
equity_momo's picture

He probably has that too.   You dont want to get into too much of a bunker mentality though. Being able to move town/state/country is going to be an important survival tool. So storing 2 years worth of food and water in 1 location isn't necessarily smart. Another reason not to own a home - it just ties you down.

Mon, 07/11/2011 - 08:03 | 1443072 Smiddywesson
Smiddywesson's picture

I disagree

In a SHTF scenario, the roads will not be passable in the first few days. Heck, they are not passable now on holiday weekends. Worse, they will be unsafe in a week.

You cannot possibly carry enough food to see you through this. It could take months to put things in order. You just have to put all your eggs in one basket and hunker down, not run around in cammo.

The big enemy is starvation, not zombies, harriers, or looters. Looting is a secondary consideration. Of course, if you move around and look like you have food, looters will be a problem.

Starvation isn't a possibility, it is a given. When the intricate dance that feeds 380 million Americans crowded into concentrated areas far removed from farms, people will begin to starve in one week.

Food is the ultimate problem because our society is too efficient and fragile. Nothing can go wrong under these conditions without a extreme result.

Mon, 07/11/2011 - 08:45 | 1443180 Oh regional Indian
Oh regional Indian's picture

Absolutely smiddy.

just in time delivery and food and many millions of humans dependent on it is a tinder box indeed.

In India, what are called Farmer's markets are daily, pervasive and usually excellent. India is one giant, teemeing, constant maretplace. But int he cities, it's changing fast.

Shiny, neon lit mega-stores and waxed apples. Very bad sign, especially in such an in-efficient country.

ORI

http://aadivaahan.wordpress.com/2011/07/08/july-15th-aug-15th-month-long...

Mon, 07/11/2011 - 13:01 | 1444357 equity_momo
equity_momo's picture

Fair points. I shall re-evaluate - im currently mobile and liquid looking to put roots down.

Mon, 07/11/2011 - 15:58 | 1445143 Geoff-UK
Geoff-UK's picture

Good points all, except for that last.  Food isn't nearly as critical as clean water.  And if the city water shuts down because the operators decided to stay home with their families, anyone without stored water dies.  In, like, a week.

 

Water first.  Then food.  Then ammo.  THEN PMs and maybe some FRNs.

Mon, 07/11/2011 - 01:20 | 1442744 HungrySeagull
HungrySeagull's picture

There was a television special that gripped the Nation during the cold war when I was a young adult.

A family fled the city in the station wagon (Minivans of the day) and made it far enough into the mountains to escape the nuclear hellstorm sure to fall. They stopped to get gas at a really tiny place among the trees.

Attendant: Howdy!

Car: Fill up please

Attendant: 10 dollars per gallon please.

Car: OMFG THAT IS ROBBERY!

 

Keep in mind gasoline was around 95 cents to the gallon on up to 1.10 at the time.

Mon, 07/11/2011 - 01:37 | 1442772 azusgm
azusgm's picture

What year was that? Gas in Texas ran ~$0.30/gal until Carter.

Mon, 07/11/2011 - 01:46 | 1442786 knavechild
knavechild's picture

"OMFG" goes as far back as the cold war, eh?

Mon, 07/11/2011 - 01:51 | 1442792 HungrySeagull
HungrySeagull's picture

It was "The Day After" or something like that.

OMFG is simply a abbrevation in netspeak the resulting diaglogue.

I was on the east coast and lost the .29 cent gasoline after 1969

Mon, 07/11/2011 - 10:49 | 1443699 cgbspender
cgbspender's picture

Sounds like Panic In Year Zero!

http://en.wikipedia.org/wiki/Panic_in_Year_Zero!

 

Mon, 07/11/2011 - 10:20 | 1443526 mick_richfield
mick_richfield's picture

If it all happens, your cash will work for, at most, 24-48 hours longer than your plastic.

You would do better to find ways of stocking up on the stuff that you want to buy with your cash.  I.e. go all the way to the bottom of the abstraction pyramid.   Water, then food, then heat (depending on where you live). 

If you live in a place that is not livable without electricity  ( Phoenix! ) personally -- I would say to leave that place in the clothes you are now wearing.

Mon, 07/11/2011 - 01:09 | 1442716 snowball777
snowball777's picture

Fuck paper. Wire transfer to APMEx. Done.

Mon, 07/11/2011 - 01:19 | 1442743 RafterManFMJ
RafterManFMJ's picture

Wire transfer to gainsville coins. Better prices.

Mon, 07/11/2011 - 01:22 | 1442752 Seasmoke
Seasmoke's picture

ditto

Mon, 07/11/2011 - 01:40 | 1442778 knavechild
knavechild's picture

How long is it taking to get deilvery of coins ordered on Gainesville, provided they have em in stock at the time you order?  Last time I tried it took a month and I almost chewed off my hand in anticipation.

Mon, 07/11/2011 - 02:30 | 1442819 HungrySeagull
HungrySeagull's picture

Consider that further restrictions on delivery may happen and many will willingly chew the paw off to get out of the liquidty bear trap they got caught in.

Mon, 07/11/2011 - 01:39 | 1442767 knavechild
knavechild's picture

One day these globalist fuckers are gonna come on television and tell everyone that currecy, gold, silver, etc are all illegal, and that everyone gets the same amount of carbon credits that they can use toward food and energy consumption. Bet on it.

Mon, 07/11/2011 - 04:03 | 1442870 Harlequin001
Harlequin001's picture

and it won't make any difference at all to gold held offshore...

and especially if it can be sold offshore, and the money repatriated at whatever value through an ATM.

Mon, 07/11/2011 - 05:22 | 1442906 jmcadg
jmcadg's picture

Would that be illegal for governments too? Why are they stocking up? Holders of genuine physical PMs are tiny in the scheme of things. Even more so once you strip out the tungsten ;)

Mon, 07/11/2011 - 11:27 | 1443968 Smiddywesson
Smiddywesson's picture

I don't think this time gold will be made illegal. Last time, they had to somehow get gold out of the hands of the populace because money was made of gold. This time, almost all the gold is in the hands of the wealthy. They don't need to make it illegal to hold, they already hold it.

Mon, 07/11/2011 - 06:08 | 1442940 wandstrasse
wandstrasse's picture

...these globalist fuckers are gonna come on television and tell everyone that currecy, gold, silver, etc are all illegal...

alongside with restrictions to withdraw / use money... 'transitory' orders will be issued, like: only xyz $ per month, and only for daily consumption etc, real estate or investment goods purchases have to approved by xyz. When a bank run is imminent, such orders will prevent the said bank run.

Mon, 07/11/2011 - 01:13 | 1442726 Nate H
Nate H's picture

30 trillion only?

what about stocks and bonds held that can be converted to cash electronically? If someone sells their corporate or treasury bonds and gets $1 mil in their brokerage account, that adds to the $30 trillion, no?

Mon, 07/11/2011 - 01:28 | 1442759 Tyler Durden
Tyler Durden's picture

This post looks only at money stock equivalents in various levels of abstraction, and their relationship to the top of the money claims pyramid. No asset transposition was assumed as in the scenario presented above, it is highly likely that the dollar value of all assets would go bidless, as everyone scrambles to procure dollars in lieu of dollar equivalency.

Mon, 07/11/2011 - 02:37 | 1442822 pitz
pitz's picture

Since the physical cash supply couldn't satisfy such a run, wouldn't they go for the next best thing, and that is, alternative currencies issued by non-government issuers, and not denominated in terms of government-backed denominations,  ie: stocks? 

Dollars and cash becoming so valuable....is so 2008/2009, ie: old fashioned. 

Mon, 07/11/2011 - 01:14 | 1442727 Flatchestynerdette
Flatchestynerdette's picture

OMG! I come to ZH for a little light reading at 10pm pacific time on Sunday and I'm about to PUUUUUUUUUUUUUUUUUKKKKKKKKKKKEEEEEEEEE.

 

I'm now sitting here shellshocked - do I run tomorrow to the bank and get the cash from my accounts knowing that they'll take DNA as I have $10,010.50? Wil the bank even have the cash after the weekend as its a monday? If I get mine will anyone else get theirs after me for Monday before a delivery of cash to the bank?

OMG!!!!!!!!!!!

I'm about to hurl.

Mon, 07/11/2011 - 01:17 | 1442739 mt paul
mt paul's picture

you might be too late...

Mon, 07/11/2011 - 01:24 | 1442754 FeralSerf
FeralSerf's picture

They might not give you more than $2,000 a day -- new money laundering rules.

You weren't planning on opening a laundry?   So solly.

Mon, 07/11/2011 - 01:58 | 1442801 HungrySeagull
HungrySeagull's picture

Cost you 100 dollars to generate 5 wires.

5 wires to 5 banks.

Visit each one a few hours later. All done.

Mon, 07/11/2011 - 05:25 | 1442909 jmcadg
jmcadg's picture

+1. Then go and get some gold and silver coins, and some food etc. Why wait for the stampede.

Mon, 07/11/2011 - 01:24 | 1442755 Nate H
Nate H's picture

if you really think about it - the whole picture - you'll come to the uncomfortable but profound conclusion that to really save yourself you have to save everybody (basically).  What good will having 10k be when 90% of people have nothing?  Bank run like described above, with no precautions by govts and trade stops overnight and all the components, supply chains for medicine, food, waste removal, electric utilities stops within days.

 

Having more green or gold than the next guy will be a Pyrric victory...

Mon, 07/11/2011 - 05:27 | 1442910 jmcadg
jmcadg's picture

Live in a small town, village, and look after your neighbours. Share your resources, knowledge, skills and build up from the ground.

Mon, 07/11/2011 - 08:50 | 1443202 Nate H
Nate H's picture

something like that, but we are so dependent on international trade that your plan needs to run in parallel to some govt mitigation efforts (or at least institutional re food supply chains etc)

Mon, 07/11/2011 - 11:43 | 1444059 Smiddywesson
Smiddywesson's picture

In the event that the financial system crashes.

People will still show up to work if they trust their employer's promise to pay. But when that employer is not trusted because it is a big corporation, or their continued existence is in question? That's where your supply chain breaks down.

In the Great Depression, grocers extended credit to known and trusted neighbors. My great grandfather lost his store that way. Even if companies didn't know this, they don't have that type of relationship with their customers.

Mon, 07/11/2011 - 08:09 | 1443085 css1971
css1971's picture

OMG! I come to ZH for a little light reading

Well that's your mistake right there.

Mon, 07/11/2011 - 10:25 | 1443552 mick_richfield
mick_richfield's picture

OMG! I come to ZH for a little light reading

Um, dude.  This is the light reading! 

 

Mon, 07/11/2011 - 01:14 | 1442730 gdogus erectus
gdogus erectus's picture

He forgot about the $400 billion or so of actual printed FRN's tied up in drug trafficking and laundering running around through the drug cartels, CIA, Wells Fargo and B of A.  You'll have to back that out of the $967 billion because the 2.whatever is a bullshit number and we know they aren't going to step in with that cash in case of a bank run.

Mon, 07/11/2011 - 01:14 | 1442731 RafterManFMJ
RafterManFMJ's picture

I withdrew all of my money from my 401k and bought beanie babbies.  I will be comfortable in my retirement.

Mon, 07/11/2011 - 02:03 | 1442806 pitz
pitz's picture

You may very well preserve value better than the elderly motherfuckers who leave it all in CDs, that's for sure.

Mon, 07/11/2011 - 02:49 | 1442832 oldman
oldman's picture

The mothers of the elderly are dead---leave'em be please.

And besides, most of us have not put money into CD's since 1993 or so----we're old but we are not stupid.

Respectfully---we do nothing

Mon, 07/11/2011 - 09:40 | 1443388 snowball777
snowball777's picture

Only if you turn them into a beanie bag chair.

Mon, 07/11/2011 - 01:15 | 1442735 mt paul
mt paul's picture

good evening

to polish

some gold...

Mon, 07/11/2011 - 01:16 | 1442736 Seasmoke
Seasmoke's picture

under the bed for the past 14 years ......what seems to be the problem

Mon, 07/11/2011 - 01:19 | 1442745 TruthInSunshine
TruthInSunshine's picture

Given that a mere 3% or so of total USD exists in physical form, in circulation, in the U.S. financial system, at any given time, I would expect the price of the particular components necessary for the fabrication of paper USDs to skyrocket (as the race to convert digital dollars into paper ones is undertaken) in the event of a bank run.

Mon, 07/11/2011 - 01:21 | 1442749 bigwavedave
bigwavedave's picture

we are already at "peak print". after the recent debacle of the misprint of the last $100 replacement round there just is not enough time (or perhaps cotton) left to helicopter anything other than MRE's 

Mon, 07/11/2011 - 06:06 | 1442937 Prometheus418
Prometheus418's picture

Don't forget that anyone with a checkbook has the ability to create their own debt notes.

Yes, many places currently do not accept checks, but if the need was dire, a seller could accept them and require the person writing it to "sign" it with a thumb or fingerprint.

Mon, 07/11/2011 - 08:28 | 1443117 Harlequin001
Harlequin001's picture

and he could of course, always cut the thing off if it bounced...

Mon, 07/11/2011 - 16:26 | 1445265 Geoff-UK
Geoff-UK's picture

$10,000 bills.  Prob solved.

Mon, 07/11/2011 - 01:20 | 1442751 What_Me_Worry
What_Me_Worry's picture

Why keep physical dollar bills when you could accumulate millions of nickels?  Still not quite sure how one could go about even doing that.

I also have a ton of Dave and Busters points/tickets, however they are all currently digital.  I will need to convert them into physical at some point.  I'm guessing they will be the new bitcoin.

On a serious note, if there is a bank run and any sort of "bank holiday" is announced then all digital credits become worthless temporarily anyways.  The Fed has the ability to print dollars in any denomination it chooses, correct?  They have already proven they will do whatever it takes to keep liquidity flowing.  If they need to print million dollar bills to prove their point I am guessing they will.  For the good of the country, of course.  

China wants to cash in $1T of its savings, here's your trillion dollar bill with slick willy's face on it.  Good luck getting change for that before its only worth 3 eggs.  Thanks for all the fish!

Mon, 07/11/2011 - 10:30 | 1443588 mick_richfield
mick_richfield's picture

Why keep physical dollar bills when you could accumulate millions of nickels?  Still not quite sure how one could go about even doing that.

There's a place called Portland Mint that will sell you nickels $300 face or $10,000 face at a pop. 

 

BTW -- I like how the new nickels have Jefferson's face getting closer and closer.  Pretty soon we'll just be able to see his nose or something.

Mon, 07/11/2011 - 18:47 | 1445729 Meatier Shower
Meatier Shower's picture

Yep.

Nickels will from then on be called nostrils.

Fri, 07/15/2011 - 18:19 | 1461080 Carl
Carl's picture

Not correct.  The Fed must back each FRN they put into circulation with an asset of equal value to the face value of the note.  If congress took back control of the money supply the Fed must surrender the FRNs as well as the assets they used to back them, and the values must match or the Fed (the banks that comprise the Fed) must continue surrendering assets until they do.  This is the primary reason the Fed will not physically print the government out of its debt and the reason they are working so feverishly to save their system of credit.

Also, the credit that constitutes 98% of the current "money supply" has no legal standing as money; only the debts incurred through its use are legally binding.  The Government only guarantees "money" held in deposit accounts (which is $0.00) through the FDIC, which primarily re-digitizes credited accounts and will only pay out FRNs (which it must Buy at face value from the Fed) as a last resort.

 

Fri, 07/15/2011 - 18:25 | 1461099 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Not correct.

Not one single word.

Fri, 07/15/2011 - 18:58 | 1461115 Carl
Carl's picture

never mind

Mon, 07/11/2011 - 01:30 | 1442762 zorba THE GREEK
zorba THE GREEK's picture

 "When the full faith of the U.S. is exhausted" Then paper money with pictures of dead 

 presidents will be worthless and there would be more pressing issues for people to deal with

 other than obtaining Zimbabwai-like currency relics. If necessary, the treasury could just

 issue debit cards like they do for food stamps in place of currency.

Mon, 07/11/2011 - 01:35 | 1442763 dwdollar
dwdollar's picture

My wife works at a credit union.  They barely have enough cash for a regular day of business.  When it's low they order more from the distribution center but it can take two days for delivery.  When there's no more they issue Cashier's Checks.  LOL...  So...  even if you are the first in line during a panic don't expect anything.  Not unless you know someone working there.  You really think those bank / credit union employees are going to selflessly help everyone before themselves?  Keep dreaming.  You'll have to wait for the next delivery, if it comes.

Mon, 07/11/2011 - 01:36 | 1442769 HungrySeagull
HungrySeagull's picture

I try to stay within my Courier's delivery. I have learned his schedule pretty well. It is not  too difficult to go in 20 minutes later and take out whatever it is you want.

 

But getting it in anything other than 100's and 50's take time because they have to enter the vault and crack a few paper bands.

Mon, 07/11/2011 - 01:42 | 1442780 dwdollar
dwdollar's picture

As far as I know, the vault is a joke at most places.  Not much there.

Mon, 07/11/2011 - 01:54 | 1442797 Dre4dwolf
Dre4dwolf's picture

Thats why people should keep as much cash on hand as possible.

 

I for one don't like leaving money in the bank, you give the bank a dollar and then you gota fight tooth and nail to get it back... what kind of business is this that they run nowadays.

 

Mon, 07/11/2011 - 01:32 | 1442765 Milton Waddams
Milton Waddams's picture

As a patriotic American, I decided to donate

Mon, 07/11/2011 - 01:42 | 1442781 narnia
narnia's picture

derivatives are a zero sum game.  

Mon, 07/11/2011 - 11:56 | 1444123 Bob Paulson
Bob Paulson's picture

Gordon Gekko: It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.

Mon, 07/11/2011 - 02:01 | 1442796 AUD
AUD's picture

Isn't this just a rehash of Sandeep Jaitley's article that you published twelve or so months ago?

Incidently, doesn't it also explain why central banks are bailing out their 'clients'? There is no chance that commercial & investment banks can satisfy their dollar (or euro etc) obligations in physical cash, if the banks are left to hang so will the depositors, big & small.

The effect would be nothing short of catastrophic as all bank payments would stop as the value of bank assets fell to zero in a wholesale liquidation, plunging the world into depression.

Mon, 07/11/2011 - 06:37 | 1442961 Yen Cross
Yen Cross's picture

 You caught that eur/gbp move? I respect your input... YEN

Mon, 07/11/2011 - 02:20 | 1442814 Paul Thomason
Paul Thomason's picture

There was a post on here a while back about inciting or being seen to be seen to be contributing to a resultant bank run as illegal.  I know it's not the same thing but the US government seems to operate on some pretty loose intepretations of late.  

We all know they are reading.

 

Here is the link to well, here;

http://www.zerohedge.com/article/guest-post-legislation-proposed-criminalise-calls-run-bank

Mon, 07/11/2011 - 02:39 | 1442823 virgule
virgule's picture

This post is odd.

Appart from telling us that there is a lot more electronic money than paper money, it doesn't tell us why people would want to abandon the convenience of worthless electronic money for the burden of worthless paper money, ie going back to Weimar-style shopping with bags of physical currency?

Does this story imply that somehow paper dollars would be worth more than the electronic dollars, hence pushing everyone to pull out their electronic money?

Or does it imply that the only way to pull out your money from a failing institution would be to carry physical out, and to deposit it with the institution next door?

I'm assuming there is one viable one next door, otherwise it doesn't make much sense to carry physical if there is no institution left.

Or does it? A life with paper dollars but no banks? LOL.

Mon, 07/11/2011 - 02:49 | 1442831 HungrySeagull
HungrySeagull's picture

You may have something here.

Suppose there was no cash necessary? Swipe your cell, have a transmitter on card or some other form. Email the money via Paypal. Whatever.

I have a feeling within a generation a great effort will be made to phase out cash.

Mon, 07/11/2011 - 08:35 | 1443145 Harlequin001
Harlequin001's picture

It is odd. It seems to be telling everyone to hold paper dollars because they will be valuable???

I'll stick to my pm's and well stocked pantry thanks...

Mon, 07/11/2011 - 08:56 | 1443218 cat2
cat2's picture

+1  I think that paper money will likely go worthless with the electronic and will not decouple unless there is some fightclub type breakdown of the computers that store the info.  That is possible, but again I'm not sure if people will honor paper if that is the case.  I think having a true alternative to the dollar is more advised like other currencies or small value commodities to do daily trading like silver or bullets or coffee.

Mon, 07/11/2011 - 16:44 | 1445322 Geoff-UK
Geoff-UK's picture

Trading bullets would be a fool's game in a TEOTWAWKI scenario--you're basically broadcasting that you have so many bullets that you're willing to trade some away.  Not smart.

Fri, 07/15/2011 - 18:32 | 1461110 Carl
Carl's picture

And where do you believe the people will be getting those bags of physical currency?

Mon, 07/11/2011 - 02:44 | 1442825 headless blogger
headless blogger's picture

It's just too bad if there is a bank run. Everyone should have known by now (after 10 years) that you can't wage wars across the planet for free. It'll cost ya.

The military, besides being the Elite's very own attack unit, is just a massive welfare program to keep young guys busy and off the streets. But they tell you they are in it to

protect our freedoms. Last time I checked I don't have as many freedoms as I did

10 years ago.

I would suspect a bank holiday would put a halt to a bank run. By the time

the banks opened up again, a new currency would make its debut

 

Mon, 07/11/2011 - 02:53 | 1442835 Dre4dwolf
Dre4dwolf's picture

If everyone went to the bank to pull out their money, only like 1 - 3% of the population would recieve anything.

Not a question of if it will happen, simply when? it always happens, FDIC is just a front cover to promote "trust" in the banks.

 

Like you will ever see a dime from FDIC.... by the time you get your money it will be worthless.

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