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"Literally, Your ATM Won’t Work…"

Tyler Durden's picture




 

By Bill Bonner Of Bonner And Partners

Literally, Your ATM Won’t Work…

While we were thinking about what was really going on with today’s strange new money system, a startling thought occurred to us.

Our financial system could take a surprising and catastrophic twist that almost nobody imagines, let alone anticipates.

Do you remember when a lethal tsunami hit the beaches of Southeast Asia, killing thousands of people and causing billions of dollars of damage?

Well, just before the 80-foot wall of water slammed into the coast an odd thing happened: The water disappeared.

The tide went out farther than anyone had ever seen before. Local fishermen headed for high ground immediately. They knew what it meant. But the tourists went out onto the beach looking for shells!

The same thing could happen to the money supply…

There’s Not Enough Physical Money

Here’s how… and why:

It’s almost seems impossible. Hard to imagine. Difficult to understand. But if you look at M2 money supply – which measures coins and notes in circulation as well as bank deposits and money market accounts – America’s money stock amounted to $11.7 trillion as of last month.

But there was just $1.3 trillion of physical currency in circulation – about only half of which is in the US. (Nobody knows for sure.)

What we use as money today is mostly credit. It exists as zeros and ones in electronic bank accounts. We never see it. Touch it. Feel it. Count it out. Or lose it behind seat cushions.

Banks profit – handsomely – by creating this credit. And as long as banks have sufficient capital, they are happy to create as much credit as we are willing to pay for.

After all, it costs the banks almost nothing to create new credit. That’s why we have so much of it.

A monetary system like this has never before existed. And this one has existed only during a time when credit was undergoing an epic expansion.

So our monetary system has never been thoroughly tested. How will it hold up in a deep or prolonged credit contraction? Can it survive an extended bear market in bonds or stocks? What would happen if consumer prices were out of control?

Less Than Zero

Our current money system began in 1971.

It survived consumer price inflation of almost 14% a year in 1980. But Paul Volcker was already on the job, raising interest rates to bring inflation under control.

And it survived the “credit crunch” of 2008-09. Ben Bernanke dropped the price of credit to almost zero, by slashing short-term interest rates and buying trillions of dollars of government bonds.

But the next crisis could be very different…

Short-term interest rates are already close to zero in the U.S. (and less than zero in Switzerland, Denmark, and Sweden). And according to a recent study by McKinsey, the world’s total debt (at least as officially recorded) now stands at $200 trillion – up $57 trillion since 2007. That’s 286% of global GDP… and far in excess of what the real economy can support.

At some point, a debt correction is inevitable. Debt expansions are always – always – followed by debt contractions. There is no other way. Debt cannot increase forever.

And when it happens, ZIRP and QE will not be enough to reverse the process, because they are already running at open throttle.

What then?

The value of debt drops sharply and fast. Creditors look to their borrowers… traders look at their counterparties… bankers look at each other…

…and suddenly, no one wants to part with a penny, for fear he may never see it again. Credit stops.

It’s not just that no one wants to lend; no one wants to borrow either – except for desperate people with no choice, usually those who have no hope of paying their debts.

Just as we saw after the 2008 crisis, we can expect a quick response from the feds.

The Fed will announce unlimited new borrowing facilities. But it won’t matter….

House prices will be crashing. (Who will lend against the value of a house?) Stock prices will be crashing. (Who will be able to borrow against his stocks?) Art, collectibles, and resources – all we be in free fall.

The NEXT Crisis

In the last crisis, every major bank and investment firm on Wall Street would have gone broke had the feds not intervened. Next time it may not be so easy to save them.

The next crisis is likely to be across ALL asset classes. And with $57 trillion more in global debt than in 2007, it is likely to be much harder to stop.

Are you with us so far?

Because here is where it gets interesting…

In a gold-backed monetary system prices fall. But the money is still there. Money becomes more valuable. It doesn’t disappear. It is more valuable because you can use it to buy more stuff.

Naturally, people hold on to it. Of course, the velocity of money – the frequency at which each unit of currency is used to buy something – falls. And this makes it appear that the supply of money is falling too.

But imagine what happens to credit money. The money doesn’t just stop circulating. It vanishes. As collateral goes bad, credit is destroyed.

A bank that had an “asset” (in the form of a loan to a customer) of $100,000 in June may have zilch by July. A corporation that splurged on share buybacks one week could find those shares cut in half two weeks later. A person with a $100,000 stock market portfolio one day could find his portfolio has no value at all a few days later.

All of this is standard fare for a credit crisis. The new wrinkle – a devastating one – is that people now do what they always do, but they are forced to do it in a radically different way.

They stop spending. They hoard cash. But what cash do you hoard when most transactions are done on credit? Do you hoard a line of credit? Do you put your credit card in your vault?

No. People will hoard the kind of cash they understand… something they can put their hands on… something that is gaining value – rapidly. They’ll want dollar bills.

Also, following a well-known pattern, these paper dollars will quickly disappear. People drain cash machines. They drain credit facilities. They ask for “cash back” when they use their credit cards. They want real money – old-fashioned money that they can put in their pockets and their home safes…

Dollar Panic

Let us stop here and remind readers that we’re talking about a short time frame – days… maybe weeks… a couple of months at most. That’s all. It’s the period after the credit crisis has sucked the cash out of the system… and before the government’s inflation tsunami has hit.

As Ben Bernanke put it, “a determined central bank can always create positive consumer price inflation.” But it takes time!

And during that interval, panic will set in. A dollar panic – with people desperate to put their hands on dollars… to pay for food… for fuel…and for everything else they need.

Credit may still be available. But it will be useless. No one will want it. ATMs and banks will run out of cash. Credit facilities will be drained of real cash. Banks will put up signs, first: “Cash withdrawals limited to $500.” And then: “No Cash Withdrawals.”

You will have a credit card with a $10,000 line of credit. You have $5,000 in your debit account. But all financial institutions are staggering. And in the news you will read that your bank has defaulted and been placed in receivership. What would you rather have? Your $10,000 line of credit or a stack of $50 bills?

You will go to buy gasoline. You will take out your credit card to pay.

“Cash Only,” the sign will say. Because the machinery of the credit economy will be breaking down. The gas station… its suppliers… and its financiers do not want to get stuck with a “credit” from your bankrupt lender!

Whose credit cards are still good? Whose lines of credit are still valuable? Whose bank is ready to fail? Who can pay his mortgage? Who will honor his credit card debt? In a crisis, those questions will be as common as “Who will win an Oscar?” today.

But no one will know the answers. Quickly, they will stop guessing… and turn to cash.

Our advice: Keep some on hand. You may need it.

 

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Sun, 06/07/2015 - 00:56 | 6170912 VWAndy
VWAndy's picture

That still just keeps sounding better all the time.

Sun, 06/07/2015 - 01:21 | 6170921 Dre4dwolf
Dre4dwolf's picture

I would surely profit from a catastrophic event as described.

Bring it on.

But what I would rather see is a round of pardons and a re-structuring of the debt based currency as well as international debt jubilees taking place.

The world deserves a break, we have accomplished alot in the past 100 years there comes a time when the tribes should rest and pursue some artistic and spiritual endeavors, without time to sit back and reflect on our past, how can we make a better future?

 

Governments continue to "tax" what they did not earn.... when they dont even need the revenue to operate, its all a circle scam. . .  so nationalize the central bank, print debt free money, stop collecting taxes.... and put in place sensible spending limits . . . with strict penalties and a third party enforcer (another branch of govt) with elected officials... that control the purse , there should be strict academic requirements to hold office in these positions and strict laws against conflicts of interest . . .  

 

Such a system would let off a lot of socio-economic pressure and allow the citizens of the nations to most efficiently use capital.

 

 

The real problem is, that todays candidates for positions like "president" are all bought and paid for, its very hard to get an intelligent human being with a strong moral fiber in there. . .  no president (that hasnt been assassinated) has ever had the fortitude to just . . .  simply . . . "do whats right".

 

Take Obama for example...

-Pretty much has no basic understanding of economics from what I can tell.

-Pretty much doesn't care, just wants to smoke cigs and play golf.

-Promises one thing, delivers the exact opposite in the most horrific way possible.

-Pretends he did something great even though everything he did is completely backfiring.

 

I dont hold it against him personally (even though I should) , but it just goes to show you, that even if you managed to get someone like Obama to sit in a chair, and just... listen to reason, to a well thought out approach . . .  that would probably work to solve all our problems. . . he would never put such a plan into action (even if he believed it would work) because he has a vested self interest in maintaining the statusquo (because he knows if he just sticks to the script it will financially pan out for him in the end if he doesnt rock the boat).

 

Which is just sad, its just sad that there does not exist one candidate we can vote for (maybe with the exception of Rand Paul) that has a chance of winning and doing the right thing.

 

 

Lets say for example if Rand Paul somehow against the biased media, poor reporting, propaganda etc... managed to get into office as president . . . 

I dont believe that he would change anything that matters . . . 

 

He would get up there, talk the talk, and not deviate from the script more than say 10~15%.

1) He would continue to tax us

2) He would continue to borrow money from the Fed

3) He would not attack banks or their fraudulent debt system (everyone is still going to wake up , work a dead end job to pay a mortgage they have no hopes in 10 life-times of ever paying off).

 

So in the end, for the average American . . . what would change?

 

Nothing

The poor will still be poor

The rich will still be rich

The president will pretend like they always pretend

Knowing this is pretty much the case, we still gather every few years and pretend that we are voting for something great, when deep down inside we all know its only going to get progressively worse no matter who wins.

Sun, 06/07/2015 - 01:59 | 6170970 gonetogalt
gonetogalt's picture

The only person I would vote for as POTUS is David Duke.

Sun, 06/07/2015 - 08:07 | 6171292 headhunt
headhunt's picture

aside form the obvious racist bullshit, Duke is a moron.

Sun, 06/07/2015 - 08:08 | 6171294 headhunt
headhunt's picture

Never give the banks to government, the banks are F'd up now but government would turn us in to a stupider version of Greece

Sun, 06/07/2015 - 10:14 | 6171450 Coke and Hookers
Coke and Hookers's picture

"Never give Government to the banks" would make more sense.

Sun, 06/07/2015 - 01:43 | 6170955 pcrs
pcrs's picture

Most people in Europe pay with debit cards . I can't imagine they give a special preference to physical bills.

They also know the inflationary tsunami is coming 

Sun, 06/07/2015 - 02:09 | 6170976 Serenity Now
Serenity Now's picture

This article describes a deflationary spiral pretty well, but the economy isn't going to run out of money completely.  It's just going to continue to shrink back to a new norm.  Probably around a 1970 standard of living, which is when the credit bubble began.  

The "ATM" that will stop working is credit.  ATMs to dispense cash will still be around, because they are much cheaper than paying a teller to sit behind a counter to dispense cash.  

People might start "hoarding" money, but it will first take the form of not using credit.  Then it will take the form of spending less money.  But there won't be a huge run on cash.  90% of people don't have anything in the bank to begin with.

Sun, 06/07/2015 - 02:32 | 6170995 honestann
honestann's picture

That's fairly accurate.  But another difference today is... far fewer percentage of individuals in the USSA produce something of value.  And so, the collapse in standard of living will be reduced below the 1970s, at least for those who do not produce [enough].

The likely result is... the debtors and slackers in the USSA will become like a cloud of locusts, stealing and consuming everything they possibly can from savers and producers, all backed by the force of the predators-DBA-government.

Sun, 06/07/2015 - 04:15 | 6171076 cherry picker
cherry picker's picture

I was thinking about your response.

I think you are right to some degree.  Those who work for government will find themselves in the same place government workers in Greece find themselves.  Come to think of it, probably a lot of the government debt has probably occurred for them and this anti austerity bullshit( living within your means) is probably loudest in their quarters.

Anyone who has ever owned a business which failed (me) realizes there are no hand outs or anti austerity or borrow, borrow, borrow til it isn't possible anymore.  Somewhere along the line you go broke and be thankful you have life and another day and forget about pension and other perks.

There are a lot of people in the US dependent on .gov's printing presses, including the war machine, teachers, health care workers, drug companies, you name it.  A lot of legitimate private business time and money is also taken by .gov for regulation etc. to support .gov.  In essence, the USA is now not much different the the USSR except the homes people own are a lot nicer and the Yugo is replaced with 84 month pay till you drop iron.

When people say the next one will be worse, I think they be right.

It will be life or death and the days of watching television and snacking will be over for many.

 

Sun, 06/07/2015 - 04:56 | 6171115 inorganic
inorganic's picture

Yes.  And one of the key questions is this.  Will the frugal, responsible savers successfully defend themselves from the overwhelming onslaught of locusts?  Or will the government and on-the-dole locusts pretty much strip all saved assets clean?

If frugal, responsible savers continue to behave as they do now, almost none of them will have two pennies to rub together after the locusts clean everyone out.

Which means, the people with the "right stuff" won't be able to rebuild effectively after the disaster.  Which is what the elites want... a world in which they and only they hold all the cards, and all the power.

95% of mankind will then be eliminated.

Sun, 06/07/2015 - 02:24 | 6170986 Steel Magnolia
Steel Magnolia's picture

Hope AGXIIK from Silver Doctors doesn't mind me sharing this.. This is his exact post: Too good not to share:

I strongly recommend that all you watch the movie, The Gambler, starring Mark Wahlberg and John Goodman. In the movie, Mark is a compulsive gambler who gets into hock to the tune of $260,000; $60,000 of which is to someone who would kill Mark just for fun.

Mark ends up going to Goodman, another loan shark, who tells Mark he will lend him the money, with conditions. If Mark does not pay, Goodman will have his relatives bank accounts siphoned off by mobsters in Russia and then he will kill Mark’s family back through 3 generations and sell the children into white slavery

Goodman’s threat reminds me of what is happening in Greece. Greece’s children, its citizens, are being sold into debt slavery, all three generations of them by some of the worst of the bankster breed including the most dangerous evil woman in the world, Christine LeGard.

Goodman also gave what has become my most favorite rant. It’s call the FU rant

Google the movie The Gambler and Goodman to say what he has to say about people who get into hock to the banksters and loan sharks, one in the same breed, in my opinion

It goes something like this—I pretty much memorized it.
Goodman asked Mark how much he was up at his best. $2,500,000 said Mark

Goodman responded.

“Any moron who’s up $3,000,000 knows that you buy a free and clear house with a 25 year roof, an indestructible Japanese S*** box car and invest the rest at 3-5% to pay the taxes and that puts you at the position of:

F*** You

That’s your fortress of solitude. That is your position of f*** you

Boss tells you do do something

F*** You

Someone wants to borrow money from you

F*** you

Government tells you do pay your taxes

F*** you

Do you think Greece is at a Position of F*** you?

They are in the position of some poor schmuck who’s gotten themselves into hock with the loan sharks. They are at a Position of F*** me

How do you get to a position of F*** you.

No, you won’t need $3,000,000. But it helps to have precious metals. Get yourself enough gold and silver and you can tell the world

F*** you—Blow me.

That’s where I am. And that doesn’t mean I’m some sort of big deal. It just means that if someone tells me to do something I am at a position of F*** you.

I recommend anyone who can get there, get there and get there soon. There is a time coming where you must be at a position of F*** you. Or someone will F you.

Sun, 06/07/2015 - 04:01 | 6171063 honestann
honestann's picture

Good post, and good analogy to that movie.

Sun, 06/07/2015 - 07:13 | 6171239 J Mahoney
J Mahoney's picture

Maybe I am just a dummy--- while reading the post, did anyone else subliminally replace the word Goodman with Goldman (of the Saks type)

Sun, 06/07/2015 - 02:34 | 6170997 Shibboleth
Shibboleth's picture

It's the same with the Greeks. They owe us 300bn of fake money created out of thin air. So what's the problem?

Sun, 06/07/2015 - 10:16 | 6171452 ZH Snob
ZH Snob's picture

it's true.  they can also play the war reparations card until the germans find a way to write it off and save themselves any more embarrassment.

Sun, 06/07/2015 - 02:42 | 6171006 smacker
smacker's picture

Bonner: "In the last crisis, every major bank and investment firm on Wall Street would have gone broke had the feds not intervened. Next time it may not be so easy to save them."

We will all be forced to use debit cards to pay for everything.

We all know this is on its way already in a number of countries. Upper limits on use of cash for purchases over Euro X has already been introduced by many EU governments and is just the beginning. This will ultimately lead to banning cash altogether. There won't be a cash liquidity crises. Physical cash may have a black-market value but since it will be illegal to use it for most purchases, I can't see it gaining a lot of value.

For sure, the current monetary system is teetering on the brink but I have little idea on how it's gonna play out and how it will end. Not too sure Bonner does either.

 

Sun, 06/07/2015 - 02:45 | 6171009 pupdog1
pupdog1's picture

So I'm guessing that a very grumpy EBT Stuff Army is going to be showing up at my door at this point.

Sun, 06/07/2015 - 02:50 | 6171013 Batman11
Batman11's picture

This guy hasn’t got a clue.

We moved away from a gold backed monetary system in 1971 because that system wasn’t working.

People preferred gold to dollars and kept exchanging their dollars for gold. The US realised it would run out of gold the way things were going so it changed the rules.

The dollar could no longer be exchanged for gold and the problem was solved.

Banks create money from loans, this is a well hidden fact (even economists aren’t taught the truth about money) but the BoE decided to come clean and tell the truth last year.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf 

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Banks have even come up with a way of creating money with no reserves at all, mortgages with fees. The reserve is in the fee and the money they lend you is just created out of nothing by typing it into a keyboard. The bank gives you your mortgage money, plucked from thin air, but they own the asset of the house; all is square. Eventually, you pay off your mortgage and the bank gets its money back plus interest and you get your house. At the end of the transaction the house is yours and the bank has made money from the interest. If you default, they seize the house and get their money back by selling it.

Why do banks fear deflation?

All the assets they hold as security against the magic money they created from thin air lose value. Defaults cannot necessarily covered by seizing the asset.

In the housing boom leading to 2008, massive money creation was taking place and feeding into the economy causing that to boom. In the bust, the sub-prime properties no longer could be sold to replace the banker magic money; wholesale money destruction takes place. Their toxic derivative assets become worthless over night and the money created to buy them is destroyed.

The ATMs stopping working very nearly happened in 2008. In the US there were massive outflows of money and the US nearly went bankrupt; the banks were rapidly becoming insolvent. Who would keep the ATMs running when the Government and banks have gone down?

Gordon Brown had planned to put troops on the streets to deal with the chaos that would ensue if a solution wasn’t found. People losing their life savings; the ATMs no longer working; with credit and debit cards useless.

They did have a solution last time massive bailouts from global tax payers and Central Bank injections of money.

This time the Central Banks and Governments are maxed out; they can’t save the incompetent financial sector.

But, there is an answer.

Just change the rules ..... the positive money web site has some ideas.

 

Sun, 06/07/2015 - 03:10 | 6171023 Batman11
Batman11's picture

The current monetary system requires prudent lending from bankers.

Bankers seem to be incapable of prudent lending; hence the constant boom and bust cycles.

As we know the FED can never see a bubble forming and this seems pretty much true of all bankers.

They always start lending crazily into booms, eg:

1929 - stocks

2008 - housing and derivatives

You get the initial money creation phase that feeds out into the general economy making that boom to.

Then the money destruction phase where banks suck money out of the general economy to cover their debts.

With the world maxed out on debt, it is time for a new system.

We could never get competent bankers, capable of prudent lending that would have made the old system work.

 

 

Sun, 06/07/2015 - 04:08 | 6171071 Batman11
Batman11's picture

Japanese bankers currently hold the world record for the world's most ridiculous lending with the Japanese real estate bubble before 1989.

Though there has been stiff competition from almost every other nation on Earth, the US with it's sub-prime NINA mortgages (no income no asset) was a lesson in abject stupidity.

Banking is the first industry to be globally incompetent.

 

Sun, 06/07/2015 - 07:50 | 6171282 headhunt
headhunt's picture

The incompetent banking is driven by the Keynesian politicians, the banks where forced to lend to people who never should of had a loan, granted the banks used that excuse to blow up the entire system with the stupidest investment in the world - derivatives. Slices of who knows what sold as quality when it was really slices of shit.

Sun, 06/07/2015 - 08:39 | 6171323 lakecity55
lakecity55's picture

I think it is the bankers who create the boom and bust.

Review the fight between Jackson and Biddle.

Sun, 06/07/2015 - 08:53 | 6171343 shovelhead
shovelhead's picture

"We moved away from a gold backed monetary system in 1971 because that system wasn’t working."

Was that the fault of Gold?

No. The fault, as usual, was counterfeiting dollars against the value of that gold. France got wise and made a very public issue of it.

Sun, 06/07/2015 - 04:32 | 6171092 cherry picker
cherry picker's picture

A big problem is education.

People are so educated, dependent on spread sheets, financial instruments no one can make sense of, psychological bull shit, that they do not know what it is to be outside on the sidewalk, no home to go to, no place to shower, nothing in their wallet to purchase with.  They don't have the education to survive in a different world, a world which may require physical exertion, risk taking, sharing what you have so others may live.

They continue on, throwing arguments about this and that out and it is all irrelevent when it comes to surviving.

Sun, 06/07/2015 - 05:35 | 6171151 kchrisc
kchrisc's picture

First rule of surviving what's coming is: "If you don't have it, you don't got it."

What you should have: Gold, guns, grub,, ground, and guillotine.

Are you ready?

Liberty is a demand. Tyranny is submission..

Sun, 06/07/2015 - 07:40 | 6171275 headhunt
headhunt's picture

...and rope

Sun, 06/07/2015 - 08:24 | 6171304 Winston Churchill
Winston Churchill's picture

Piano wire.

Sun, 06/07/2015 - 10:08 | 6171442 Calmyourself
Calmyourself's picture

How Gestapo of you Winston...

Sun, 06/07/2015 - 11:42 | 6171566 OC Sure
OC Sure's picture

 

 

So much propensity for vigilante justice among those who understand the injustice.

The present course for Justice is still via the courts and per Article V of the constitution if necessary.

The question is does one honor the reign of terror in France's 1793 rolling of the guillotines across the countryside or does one honor the greatest anomaly that ever occured in the history of politics in Philadelphia's 1787 convention of states? It is by the design of the underlying principles that each of these opposing courses of action necessarily lead in two opposing directions.

 

If vigilante "justice," then what comes next? ...Of course, a new-Napoleon.

If courts, and or a 2nd convention of states, then what comes next? 

 

 

Sun, 06/07/2015 - 12:15 | 6171632 Boxed Merlot
Boxed Merlot's picture

what comes next? ...Of course, a new-Napoleon...

 

And the greatest beneficiary of that chapter?  Why Rothchild banker savvy.  Who knows what and when to scalp the participants will continue to remain safe behind the tsunami and well out to sea. 

A fisherman running to high ground?  Forget that, set to sea while you can and ride the sucker out on the other side.

 

jmo.

Sun, 06/07/2015 - 05:43 | 6171161 q99x2
q99x2's picture

My ATM works so rarely now that I've had to get 4 different debit cards to increase my hope that one of them will work.

Sun, 06/07/2015 - 07:26 | 6171191 shouldvekilledthem
shouldvekilledthem's picture

Bitcoin is the only true exit from the fiat clusterfuck.

Fiat currencies, be it digital or physical are the biggest scams in the history of humans.

Sun, 06/07/2015 - 09:37 | 6171397 Stevious
Stevious's picture

Amazing that you got -2.  Our currency has zero bounds or limits.  Bitcoin is very defined with very finite limits.  If nothing else it is an honest currency.

(Honest because like the old silver/gold currency more cannot be added without the actual 'work' of mining the metal (or in this case the bitcoin)).

Still, Bitcoin has its own problems like accepability and security.  Though I watch it, in the near future I may buy some.

I do agree: fiat currencies, eventually, turn into scams.

Sun, 06/07/2015 - 06:29 | 6171195 Sheikh Djibouti
Sheikh Djibouti's picture

Credit may still be available. But it will be useless. No one will want it.

This is the statement I don't quite follow, logically. Why wouldn't anyone want credit? Certainly House of Cards Financial would be loading up on credit during a deflationary cycle, even moreso if they foresaw a hyperinflationary exit strategy.

If banks and institutions are being seized up left and right, then I can imagine no one would want credit since there'd be no reliable way of spending it. I guess more accurately we could say "Credit may still be available. But it will be useless. No one will be able to use it."

Granted I get the basic premises and agree with the cash principle, but I don't know that lack of credit is going to be as clean cut as this.

It also comes down to microeconomic choices and availability of goods. So many goods are already in a major deflation cycle: used electronics, cars, anything produced in large quantity and sold at a high price initially.

There will be a flight to quality and reliability of consumer products and this is where the value will be found, and exchanged for cash when the seller is willing to accept it.

Sun, 06/07/2015 - 09:15 | 6171370 Stevious
Stevious's picture

Agreed.

Should such a scenario happen cash wil be squelched.

Either a new currency, or more likely "you have two weeks to deposit all currency in banks, after that time all currency will become worthless."

 

So really only nickels are worth holding.

Gold/silver:  Crime to sell/buy in other than electronic means and 50% capital gains tax.

Buckets of old copper pipes..........golden.

 

 

 

 

Sun, 06/07/2015 - 09:34 | 6171394 NoBillsOfCredit
NoBillsOfCredit's picture

your question shows that we really don't know what is going to happen. this is because what we are seeing has never happened before. the British had the United States Australia and other countries who would continue to accept there paper notes. This time around the money is not really money. We have never been in a situation of worldwide irredeemable script use and collapse. people try to compare to past times when circulating banknotes were redeemable. we are using words we do not understand. Like cash. cash used to mean gold or silver coin or copper in some cases. banknotes we're not called cash but we are manipulated through the redefinition of words so that the law is no longer understood. when talking money and rights and history one needs to have consistent meaning in words. So as I see people talk who don't know the meaning of the words historically their conversation is confused which is the whole point. my voice to text does not capitalize properly.

Sun, 06/07/2015 - 06:43 | 6171205 fiftybagger
fiftybagger's picture

 

 

50% silver

25% cash

15% gold

10% crypto

Sun, 06/07/2015 - 07:38 | 6171273 headhunt
headhunt's picture

For me...

 

10% Silver

10% Gold

30% Cash

30% Guns and Ammo

20% Food

F' cryto - that is bank and government controlled

Sun, 06/07/2015 - 07:45 | 6171278 Seasmoke
Seasmoke's picture

70% Gold

15% Silver

15% Cash.

ATM Machine. What's That ???

Sun, 06/07/2015 - 08:58 | 6171347 FreeNewEnergy
FreeNewEnergy's picture

0% gold

80% silver

30% cash

20% guns/ammo

20% food

I'm 150% sure I'll survive.

Sun, 06/07/2015 - 09:23 | 6171381 NoBillsOfCredit
NoBillsOfCredit's picture

It's an Automated Teller Machine Machine! Don't you know anything? :-)

Sun, 06/07/2015 - 08:01 | 6171288 LawsofPhysics
LawsofPhysics's picture

A "cashless" society is impossible.  Trade will occur one way or another.

Look folks, once money creation no longer requires real collateral, hyperinflation and the death of your fiat follows...

Sun, 06/07/2015 - 08:31 | 6171311 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

You can't print food and even the most zombified still has to eat. Hunger has a way of simplifying and clarifying things. They will forage and trade for food aka barter if the cashless food distribution sites can't keep up with demand.

Cashless is going to include a mass population reduction so the question is do they phase out the baby boomers slowly or all at once. The demographic imbalance of old vs young is not a flaw but a transitory feature if you want to usher in a new system.

Sun, 06/07/2015 - 09:01 | 6171353 OC Sure
OC Sure's picture

 

 

This is true.

However, you will be "punished" for not obtaining "permission" to facilitate the trade.

Again and as always, the monetary system is an 'a' point ruse. 'The' point is, is trade voluntary or not? Is the purpose of a governing body to remove compulsion from human interaction or to initiate and establish compulsion?

Sun, 06/07/2015 - 09:32 | 6171392 Stevious
Stevious's picture

I'm sad to say that it is quite possible and definately in the cards for the future.

Let's say I own chickens and have a cooler by the end of my driveway: "Fresh, organic eggs: $2.50/dozen"

You have a cell phone and so do I.  If cash becomes banned you can still buy the eggs.

Scan the (bar/or other) code on the cooler.  An image comes up: Eggs, $2.50 enter units: ____, press transfer button when finished.

It WILL be that simple.

Sun, 06/07/2015 - 14:41 | 6172030 Dragon HAwk
Dragon HAwk's picture

Will trade Eggs for Canned goods, Bullets or silver,  ring bell for rates

 

Sun, 06/07/2015 - 08:15 | 6171297 rushjob
rushjob's picture

While I agree with most who say Dollar will loose it's value, I don't think anything resembling Weimar, Yugoslavia or Zimbabwe will happen. The closest historical thing was decline of British Empire which went from holding 20% of World's population and 22.6% of land mass back in 1920's to Great Britain. It was a long process but you can put a milestone at 1947 when India became independant.

What actually happened was that GBP which was the World's reserve currency priorly went through inflationary period. Average inflation was 7% with spikes going as high as 24.2 in 1975.

Same will likely happen to USD which will loose much of it's value over a few decades.

GBP went from 0.20 GBP/USD in 1930 to 0.43 GBP/USD in 1985 with worst decades being 1940's and 1970's (WW2 and end of gold standard in 1971).

While USA has difficulties, still they make a lot of stuff that no one else in the World (or just once competitor) is making (CPUs, operating systems, planes, weapons) and they still have a lot of tangible economy.

So the crysis will more resemble the British inflationary years and strikes of 1970s than Weimar: barells of cash, massive barter, running for the hills won't happen.

Sun, 06/07/2015 - 22:57 | 6173142 TheAnswerIs42
TheAnswerIs42's picture

"Same will likely happen to USD which will loose much of it's value over a few decades."

 

The US dollar has lost 96% of it's value since 1913...

 

Sun, 06/07/2015 - 08:32 | 6171314 OC Sure
OC Sure's picture

 

 

 

This is one of the better pieces from Bonner in a long time. Three things:

1. The tusunami metaphor is excellent. It conjures images of James Clavell's Taipan when Dirk is caught in the eye of the storm. 

2. Wealth acquired by theft is not profits.

3. The article is too long for so many bullet-pointed sentences. 

Sun, 06/07/2015 - 08:39 | 6171322 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

There won't be a long term shortage of paper or coins. You'll see the Treasury and Mints turn on their paper and coin machines into overdrive. I'd be long cheap coin metals like the ones they use in the new dollar coins if anything. They will just change the face values on the coins and use the content of the metal in those coins as the peg if fiat goes tits up.

Sun, 06/07/2015 - 09:03 | 6171339 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Here is something to consider. How much is a dollar really worth well you need to consider it's production cost not face value.

http://www.federalreserve.gov/faqs/currency_12771.htm

They say 4.9 cents per $1 printed

Take a 2007 Presidential Dollar coin

http://www.coinflation.com/coins/basemetal_calc.php

It's scrap value is 5 cents rounded up actual value is .0463

Take a Sacagewea Dollar coin

http://www.coinflation.com/coins/basemetal_calc.php

It's scrap value is 5 cents rounded up actual value is .0463

Notice how they all cost almost the same to produce. That is your real cost regardless of materials. A fiat bill is a product like a tampon or toilet paper. The illusion is the faith it is something more.

Those metals in a dollar coin in that ratio are your peg for true price discovery.... They have to rig the commodities market to keep that ratio to no more than 5 cents or else the US Mint has a competitive advantage over the Federal Reserve.

The FED has the advantage on $5 bills and up. They production cost on average is between 10 to 12 cents for $5 - $100 bills. That is where your fractional reserving comes in and how to calculate the true leverage on physical money in circulation.

Sun, 06/07/2015 - 09:11 | 6171360 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

You see how the scam works now. They are taking a commodity like a piece of toilet paper and charge different prices for the same thing just because one has different ink on it than the other.

The leverage is in the mark up.

Sun, 06/07/2015 - 09:16 | 6171371 OC Sure
OC Sure's picture

 

Not quite. THE fundamental principle of the scam is the compulsion.

If there were not a monopoly on the banking system and demand was voluntary instead of involuntary the scam would not exist. 

Sun, 06/07/2015 - 09:25 | 6171380 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

That is where the propaganda matrix comes in. You have to believe also. Monopoly's spend more energy and effort on psychology than on the actual goods and services they are trying to trick you into thinking you are accepting from them voluntarily.

Sun, 06/07/2015 - 09:27 | 6171386 OC Sure
OC Sure's picture

PropaBRANDa is the master's whip. 

Sun, 06/07/2015 - 09:13 | 6171366 OC Sure
OC Sure's picture

 

 

That is interesting to consider. However, I prefer to measure the price of any object by the primary determing factor. What determines the price of anything is Demand. Especially, voluntary demand. 

Sun, 06/07/2015 - 09:19 | 6171373 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

The demand determines mark up from production cost, always has and always will. What this does is gives you a way to figure out just how overpriced forced consumption items really are and what is economically feasible to produce yourself instead, based on personal skills, resource, etc.

Sun, 06/07/2015 - 09:24 | 6171385 OC Sure
OC Sure's picture

Yes, I agree. The production cost is the best objective starting point and as such is to be factored into one's reasoning of the price that they would voluntarily offer for a good. That paper is so cheap to produce, double-ditto for binary blips, and natually so simple to replicate is a primary reason why metals are voluntarily chosen as the preferred method of representing value. 

Sun, 06/07/2015 - 09:39 | 6171395 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

That is the next level of leverage how many dollars in 1s and 0s they can produce vs the same time period it costs to produce a paper dollar. If it costs 4.9 cents to produce a paper dollar how much does it cost in electricity to produce the same. Scam still works the same $1 or $5 or $100 it all costs the same production wise.

I don't know what those numbers are but this is how you determine the production cost of running the electric money printer, USD 1s and 0s, Euro 1s and 0s, bitcoin 1s and 0s, etc.

wattage x hours used ÷ 1000 x price per kWh = cost of electricity

You just need to know the hours used to produce a single electronic dollar.

Sun, 06/07/2015 - 10:08 | 6171429 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Doing some digging a 1 euro coin in scrap metal value is about 6 cents US which is about what one would expect. If the USD is the reserve currency then no other currency should be able to be produced cheaper than a single USD dollar which costs about 4.9 cents to produce.

More interesting concerning China and the Euro. An older story but the implications are simple enough for anyone to understand.

http://www.spiegel.de/international/germany/precious-metal-scrapped-euro...

...

The scam was not complicated. Every year, tons of damaged euro coins are taken out of circulation, "destroyed," and then sold as scrap metal. Often, however, one and two euro coins are merely separated into their component parts -- the inner core are outer rings -- prior to delivery to scrap metal dealers in China.

A group in China would simply reassemble the coins.

...

The scrap metal recyclers need to be controlled also to enforce dollar dominance if production cost is what matters. If too much scrap or too little is recycled it will throw the production costs off. It is not just about skim but controlling flow. This is where your 'elites' really reside, the Central Banks are just fronts. Why do you think Goldman Sachs, JPM etc were chased out of the metal warehousing business.

Sun, 06/07/2015 - 09:10 | 6171362 OC Sure
OC Sure's picture

I agree. There was a very good Casey article here a while back ( or at least a link to the Casey site fotr the article ) that described the Mexican Libertad as a very good coin since its "decreed value" was not stamped on the coin. Instead, only the weight is noted (if i recall correctly, i think that was the gist). You don't hear much about Mexico in the MSM other than the immigrant and drug gang stories. This Libertad event is so underrated. 

Sun, 06/07/2015 - 08:45 | 6171330 Know shit
Know shit's picture

Since we 'all' know where we are or have been.....
We 'all' willingly bent over to be raped by the fiat system.

Lets look at the future....
Will we 'all' willingly bent over to be raped by the next system ?

I'm still not convinced a large enough part of the population is ready to stand up and will do what is needed te regain our freedom.

Freedom sounds fine , especially when others bring offers to enable it for us. But for most, realizing what effort it takes to be able to take care of ourselves will instantly make them want to go back to a system currently in place, were 'we' are being raped but not nearly as brutal as all those other people being exploited to enable our way of living.

We all shut our eyes not willing to see what happens to others.
What it takes to live our lives.
And at the moment tptb comes knocking on our doors, since all other doors are fully robbed of everything, most still expect others to help us out.

Just to be able to 'take care of ourselfs' we will first have to go through a radical time where we have to take care of tptb.
That time will be much harder than the hard time just 'taking care of ourselves'

Interesting times ahead for sure.

Take care.
K a n s

Sun, 06/07/2015 - 08:46 | 6171332 aqualech
aqualech's picture

Shortage of paper cash would not have anything to do with people's confidence that a credit card charge would clear. It's not like cash in the vault reserves have anything to do with solvency. Sort of a confused mixed scenario.

Sun, 06/07/2015 - 08:49 | 6171336 Mr Kurtz
Mr Kurtz's picture

It is alreadty starting in Kansas. ATM withdrawals limited to folks on public assistance:

http://www.bloomberg.com/politics/articles/2015-06-05/cash-strapped-kans...

Sun, 06/07/2015 - 09:08 | 6171361 Stevious
Stevious's picture

Kansas' action is for a totally different reason, and has nothing to do with availability of fiat.

" people on the dole will be limited to a single ATM withdrawal of no more than $25 per day. The law also prohibits spending public-assistance cash at movie theaters, swimming pools, and video arcades. Nail salons and tattoo parlors are out, too."

In my book, it's about time!

I work, admittedly it's only 24 hours a week but I make decent pay and have zero government income, no snap, nothing...

I cannot afford to go to a theater and those living on public assistance shouldn't either.

Sun, 06/07/2015 - 08:49 | 6171338 Grumbleduke
Grumbleduke's picture

the rats are abandoning ship, in escape velocity it seems:

 

http://www.wsj.com/articles/deutsche-bank-co-ceos-to-announce-resignatio...

Sun, 06/07/2015 - 09:00 | 6171352 sudzee
sudzee's picture

For a ponzi to continue it requires that everyone is all in. China and Russia along with many other countries are undermining the situation by switching credit money for real money. Many of the public are doing the same thing. Physical gold and silver (real asset) is limited by production. Physical cash, an IOU, is limited by c/b's because it is a call on confidence and limiting supply seems to give it value. Serial numbers on banknotes give us added confidence that supply is limited. Credit, on the other hand, is mostly annonomus and has no limits to its production nor cost of inputs. Credit money printed out of thin air, handed over freely to a precious few who don't have any productive use for it, just to keep the con going is a fraud on the entire world. The US defaulted on its US$/gold  obligation in 1971 because it didn't have any gold left in inventory. France only wanted a tiny fraction of the supposed US hord. US propaganda vilified France in the ensuing years for creating the situation and bad feelings toward France continue to this day. The US has now defaulted on Germany's request for its gold in storage because not only does it not have its own hord but has sold off other countries assets. The cupboard is bare.

So we have the US gov't defaulting first on the gold standard and now facing default on US$ because there are no assets only debt. China, Russia and many other countries have been slowly trading worthless credit dollars for real money. The ponzi no longer has everybody all in. First out is the victor. Rogue gov't, financial fraud, deceit, undeclared wars, murder of millions, invasion of soverigns all comin to an end. 

The "new normal" is quickly turning into the old normal.

 

Just sayin.

 

Sun, 06/07/2015 - 09:11 | 6171364 roadhazard
roadhazard's picture

I have never used an ATM in my life. I can keep my shit together better than that. Besides when 90% of my money is at home I'm never short of cash.

Sun, 06/07/2015 - 09:19 | 6171378 CHX
CHX's picture

The current market cap of ALL physical gold out there is ~7 Trillion dollars. That's all, good day.

Sun, 06/07/2015 - 09:36 | 6171398 deerhunter
deerhunter's picture

Federal gas tax per gallon, .17.  Illinois State tax per gallon .38 .  Just received my license plate sticker in the mail for 101.00 for the year which enables me to drive on toll ways where they bill  me per mile.  Does anyone here really think that regardless what happens to the dollar or cash will effect the parasites that make our lives miserable with all the taxation and regulations imposed on us?  Read up on Whiskey Rebellion.

I don't know when.  I don't know how.  I don't have an inkling what the spark will be but I believe there has to come a day where government employees at all levels are paid in parity with the private sector.  NO lifetime benefits.  No retiring with pensions after 20 to 25 years of service.  No high school principals making 300K a year.  My property taxes on a 180K house are 500 a month.  Back before Mrs Deerhunter showed up I rented a fine two bedroom apartment in a complex with a swimming pool, tennis, and health club heat includes for 400 a month.  That was 1976.  My property taxes are more than I paid in rent 36 years ago.

Cash.  Meaningless unless you don't have any.  Gold meaningless.  You can't eat it.  One day maybe the American Public will have had enough.  Will it happen in my lieftime?  I doubt it.  Paper for food?  We do it only because the store clerk will give us something in exchange for it.   Earlier someone wrote about an Australian banker who was asked to put together a plan on how long it would take to close his bank?  Who cares.  I don't .  If we all stop paying everything all at once the whole system would collapse.  We can only hope.  Know your neighbors.

Sun, 06/07/2015 - 09:51 | 6171418 22winmag
22winmag's picture

If you lived in my town, your property tax would be around $4,000!

 

The teenage animals posing as "students" were granted a 30 million dollar gymnasium last year and someone has to pay for it.

Sun, 06/07/2015 - 10:10 | 6171445 cherry picker
cherry picker's picture

When I was a kid I attended a six room school teaching grade 1 - 12 and for a year a two room school with grades 1 - 8.

No gym in either one, just a big yard with grass.  We were outside in the winter playing soccer in the snow.  I don't remember seeing obese kids in those days.  Walked to school in -20 weather.  They finally got school buses and had to force me to get on them as I preferred walking than getting on one.

I would say we were all pretty damn healthy and in good physical shape and it didn't cost $30 million.  When we moved to town I rebelled at going to phys ed, having to put on shorts and prescribed clothing to listen to some guy telling us to jump, sit, squat and so on.

Got kicked out in grade nine, never got my diploma or a degree but did all right anyway as I was a top student till we moved to 'civilization'

Sun, 06/07/2015 - 10:21 | 6171456 Calmyourself
Calmyourself's picture

Is this Fred??

Sun, 06/07/2015 - 15:59 | 6172266 Village-idiot
Village-idiot's picture

If enough people would just stop borrowing money, switch from credit cards to debit cards, the banking system would wind down.

Take cash out of the ATM to buy your day-to-day purchases and groceries. This will reduce "service fees" that the banks charge.

Starve the monster before it destroys you.

Sun, 06/07/2015 - 09:42 | 6171404 northern vigor
northern vigor's picture

The bankers want to abolish cash and put everyone on a type of debit card. Perhaps...just saying perhaps the future credit meltdown is planned to force everyone to accept the new plastic fiat card. When the water is cut off, and no one can buy groceries...the  masses will accept the card...he//, they'll even accept an implanted micro chip.

I can see one  the elite bastard's finger prints all over this.

Sun, 06/07/2015 - 10:03 | 6171415 Hannibal
Hannibal's picture

We dont need the Fed and it should be abolished. Just as the Fed creates money out of thin air the US Treasury Dept has the constitutional authority and infrastructore to pay for all Govt expenditures,.. interest free.

Sun, 06/07/2015 - 10:11 | 6171446 d edwards
d edwards's picture

i wouldn't have any bills larger than a 20-lot's of stores already won't take anything larger.

Sun, 06/07/2015 - 10:06 | 6171435 sam site
sam site's picture

 

This article is vital to understanding the cascade of events in the 2008 financial crisis and also why it’s likely to repeat.  In 2008 large amounts of money vanished, cash became scarce and the banking system froze up as a result. 

 Understanding how this happened is critical to surviving the next similar financial crisis and helping to reform the next money system. 

 As the author says, “Our current money system began in 1971”.  When we left the gold backed money system. 

 

In the 2008 financial crisis nothing was fixed.  It was just temporarily papered over. 

 

These two quotes describe what happens to the money supply when banks start defaulting due to losses in the risky derivative markets as occurred in 2008 with the Mortgage “Liar Loans” derivative meltdown.

 

Good quotes

here is where it gets interesting… In a gold-backed monetary system prices fall. But the money is still there. Money becomes more valuable. It doesn’t disappear.  

imagine what happens to credit money [like in today’s paper dollar system]. The money doesn’t just stop circulating. It vanishes. As collateral goes bad, credit [or money] is destroyed.

 

This highlights the need for a gold-backed money system

The collateral backing a loan, as in Mortgage “Liar Loans”, in a gold backed money system is still backed by gold but in a paper money system, the collateral has no backing so the loan defaults and no collateral assets survive the loss.

So the ultimate constant collateral is the gold itself backing the currency and assets like land, bonds, stocks and other assets also can't fluctuate because there can be no credit-fueled bubbles causing collapsing prices. 

 Everything is anchored to gold protecting against undue excessive valuations or losses.

Therefore since loan collateral in a gold backed system can always be converted to gold, the money doesn't vanish as it does in a paper money system when the loan defaults and the paper collateral is not redeemable with anything.

It all comes down to the collateral having value or not and not being dependent on confidence as a paper currency system is - that can vanish overnight.

There is a continuity in the currency that exists in a gold backed system that protects lenders from vanishing collateral with paper-backed loans.

This analysis also points out the necessity of having 100% gold backed money to protect collateral with the ability of the public and nations to redeem paper gold

warehouse receipts or dollars in this case into gold on demand as existed prior to 1914 when the European-controlled, criminal, Fed Central Bank took over America. 

It also shows the necessity of establishing a constant money supply in gold and not to allow any additions after it's inception. 

Adding to the gold money supply is the equivalent of counterfeiting and undermines the value and purchasing power of gold money currently held.

The money supply should not have to adjust to increases in population mostly through immigration, when quite the opposite is true. 

Varying populations must compete for a portion of a static and constant money supply. 

Prices will reflect productivity gains as they did during 1895 through 1905 when purchasing power doubled and prices were cut in half because of greater productivity in an ideal constant 100% gold-backed money supply. 

This rare ideal period of time demonstrates the stability, honesty and productivity that can result with honest money. 

The only insurance to establishing and maintaining such a system is a healthy, independent, vigilant and informed public and that’s why pure food, air, water and natural medicine are so important to achieve this delicate balance and to make

the public aware of all the scams, fear mongering, fake enemies, wars, fake government-based charities and entitlements and the long list of scams, deceptions and tricks used by the rich to manipulate the unwary, vulnerable and those with an impaired ability to think critically and clearly.     

 

 

 

Sun, 06/07/2015 - 10:10 | 6171443 MonetaryApostate
MonetaryApostate's picture

I have a small request Tyler, can you ensure that a picture of some sort is always used in your articles, that way we can having something pretty for the air heads on social to click on?  It would help in advertising your articles more, because when you post a link to the article all you see is text...  =/

Sun, 06/07/2015 - 10:25 | 6171458 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Most of the cash in circulation, by the way, is in the hands of organized crime syndicates that do business with the CIA. 

Former members of armed forces and law enforcement agencies will have families to feed, and after they desert because Uncle Sugar can no longer pay them, they'll be glad of work with drug gangs and white slave traders.

"Even without a Fed?" you say? Sure. Somali shilling was widely accepted in trade even after its central bank disappeared along with its government.

I'll let you decide whether a failed narco-state would be an improvement on what we've got now. 

Sun, 06/07/2015 - 11:00 | 6171509 the grateful un...
the grateful unemployed's picture

this is why hoarding cash is a bad idea, it stigmitizes the owner. you have to prove your right to hold the cash. if you cant they take it, (which they already do at border checkpoints and airports) and if you want to use that cash to pay for an attorney to get you out of jail, guess again. they can freeze your assets. cash is a crime, but with a measure of discretion a little bit will go a long way.

Sun, 06/07/2015 - 12:31 | 6171663 DarthVaderMentor
DarthVaderMentor's picture

Nothing protects you from illegal seizure, but if there is any law left, then that's why you keep the withdrawal record (slip) with the cash and a picture of you withdrawing it and the serial numbers......next to your gun.

Sun, 06/07/2015 - 12:49 | 6171700 the grateful un...
the grateful unemployed's picture

nothing protects you from illegal seizure..........

Sun, 06/07/2015 - 14:31 | 6171994 TeethVillage88s
TeethVillage88s's picture

Today I have this idea that cards given to kids or credits given to kids by their parents will become a favorite crime target.

seems like tennis shoes, basket ball shoes, leather jackets, sports jackets, cell phones, gold jewelry, wallets, EBT cards, credit cards are already targets.

Without cash kids would become targets, kidnappings, flash kidnapping, forced ATM Withdrawals, flash mob robberies, car jacking, chop shops, sexual slavery, piracy.

Poor people can't get management jobs. They will lose it.

Sun, 06/07/2015 - 11:08 | 6171518 the grateful un...
the grateful unemployed's picture

a run on cash isnt really a problem unless your ATM/CC is no longer functioning. as long as your electronic banking works having cash is a secondary problem, the real problem is what happens when the electronic banking system has a hiccup, first thing is your automatic deposits arent placed in your account, second thing is your autopays keep working. suddenly you are in arrears, through no fault of your own. so make sure you have some balance in your account. the crisis in currency is volatility, the BIS may find that it cant make the cross border payments, if the dollar is moving too fast and too far in short periods of time. just a few days of backup in BIS will cause havoc.

in many ways the $100 bill is better than a gold coin. it is certifiable by the layman. gold can be forged, the new bills not so easily. and if you arent sure what $100 is really worth theres a good chance you wont be able to price gold accurately either. if you hoarde cash make sure you get the NEW $100 bills. its hard to keep them in the house because everyone wants to get paid in cash. and bottom line we are heading toward a cash economy, so you might as well get used to it.

Sun, 06/07/2015 - 12:00 | 6171598 KingTut
KingTut's picture

You have this wrong, gold cannot be forged (unles you mean pounded into another shape).  Paper money can ALWAYS be countefeited. 

Perhaps you are thinking that gold plated tungsten bars are countefeit gold?  These are easily detected  with a low tech sonagram. Tungsten has nearly the same denisty as gold, but a wildly different speed of sound, and shows up instantly.

Now at 10,000 / oz gold certainly will be an impractical medium of exchange, but an incredible store of value at time when nothing else is.  If the credit system is faltering they will try to make cash and gold illegal, but that won't work.  There will be a black market so fast your head will spin.  Of course, " the authorities" will try to bust it it up, but it will go low tech, no cell  phones or email etc.  Gold & cash dealers will have the sonograms, and vaults and guns.

When the credit system falters further municipalities won't be able to pay cops, but black market cash deealers will.  They will purchase protection from "the authorites " themselves.  This will go very fast, because without confidence there is no banking system.  A bank is nothing more than a set of books: there is no money in the banking system, only credit which is like Peter Pan, he's only there if you believe.

 

Sun, 06/07/2015 - 12:47 | 6171695 the grateful un...
the grateful unemployed's picture

bullion can be shaved, coins can be altered. no special process is needed, the bill does not have to be assayed, or verified by an expert. gold is highly impractical, since there are few minted coins available, this is why silver is better, the coins are recognizable, verifiable. i appreciate the value of gold, but as an everyday commodity youre better off with clam shells.

Mon, 06/08/2015 - 08:27 | 6173697 mastersnark
mastersnark's picture

"These are easily detected with a low tech sonagram"

Oh, is that all?

Sun, 06/07/2015 - 11:46 | 6171579 NoWayJose
NoWayJose's picture

Lot's of interpretations here on ATMs being out. We saw a short term version of this at a couple Walmarts where cartfuls of free stuff went out the door to EBT holders (this is the government's backup plan). But really, as long as there is electric power and communications and banks, the ATMs and EBTs will work. Unless it happens on a colossal scale, FEMA and Red Cross and others will come in rescue people. We have seen this scenario unfold after hurricanes, floods, etc. There may be some looting, but things stabilize pretty quick. So in such cases, gold is not worth pulling out of hiding.

But what happens in a total grid knockdown (EMP?), or what happens when the government and banks collapse such that they cannot issue electronic money? Beans and bullets become the most valuable items and bullion is still not a necessity. But once some kind of new monetary system comes into play, your gold and silver can be converted into whatever new currency is created - thus preserving your wealth.

But the most likely scenario is that the government will simply keep creating massive amounts of electronic money to pay its bills, while clobbering savers, decaying buying power, and under reporting inflation -- sort of Luke now!

Sun, 06/07/2015 - 12:00 | 6171599 MEFOBILLS
MEFOBILLS's picture

From Root, criticism against me:

"You keep spouting your Ellen Brown-like Greenbacker "sovereign money" nonsense with as much slobbering earnestness as Krugman defends his Keynes-insanity."

My answer:  Ellen Brown pushes state banks.  She is not a Greenbacker near as I can tell.  So, you are confused.

Your reaction indicates that perhaps a nerve is exposed?  

Your right in that there is an iron triangle, where government is subordinated to money power.  I point that out often.

Sorry that the truth hurts.  The plain fact of the matter is that the highest form of money is law.  It always has been, even Aristotle knew it long ago.

Krugman who defends fiat credit is the liar. And, one has to ask why he is a liar when all monetary history and historical evidence proves Krugman wrong.  And, of course, all historical evidence proves gold bugs wrong.

Sun, 06/07/2015 - 12:19 | 6171630 DarthVaderMentor
DarthVaderMentor's picture

If credit goes to hell because of a Feral Reserve action or policy, what makes you think that anyone will honor giving up their goods for a "FEDERAL RESERVE NOTE"? It may be good to have some cash on hand, but I think some gold, silver or other tradeable commodity on hand is also prudent, plus some guns and ammo to protect it and your loved ones.

In any case, the ATMs running out may not be so bad....it's the eventuality of EBT cards running dry that I'm preparing for

 

Sun, 06/07/2015 - 12:17 | 6171638 MEFOBILLS
MEFOBILLS's picture

Prior to 71 the Gold standard existed for international trade.  

The war in Asia mean that the U.S. deficit spent dollars overseas.  These dollars found their way to central banks, especially French central banks (indochina still had French involvement).  

The French would take the dollars and buy Gold.  The French did not buy mainstreet American goods.

Gold then became drained from the American economy.  So, here is a case, where American's prosecute a war the French started, to then get screwed over by the French...just for Gold.

Nixon went off the Gold standard, and then dared France, Britain and others who now had stored dollars in their central banks, to then by GOODS from American mainstreet.

Foreign trading partners of America then decided to NOT BUY GOODS, but instead buy T-Bills.  So, in 71 the Gold standard for international trade died, and the DEBT based TBill economy came into being.

Within the U.S. economy, the credit that was issued already was based on TBills.  Banks held TBills in their reserve loops, not Gold.

Look, I wade here into ZH often and try to disabuse many of you of your confusion.  I know that many are hypnotized and object to hearing it straight.  But, you have been lied to most of your life, and the shiboleths that you hold dear are part of you hypnotic brainwashing.  It is a hard thing to let go of preciously held beliefs, as it un-moors one and that is unsettling.  The thing is, one has to be intellectually honest and deal with things.  

Gold as money always was a money power operation.  There are only two times in history where it worked, and that was in the Hanseatic league, and for a period during Venice.  In both of those cases, the law forced Gold into circulation.

Sun, 06/07/2015 - 12:26 | 6171653 DarthVaderMentor
DarthVaderMentor's picture

Excellent point. That's why diversity, not a blind belief in any one store of value, is key to survival. You never know if the next time will be the one time when gold works. If it does, you're prepared. If it doesn' then hold it until you can cash out and then use another stored value like cash, real property (without debt) or stored goods and as a last resort, guns and ammunition.

Sun, 06/07/2015 - 12:43 | 6171686 Government need...
Government needs you to pay taxes's picture

ZH is all about precious metals, but they cant be eaten or used to produce life's necessities.  If we enter a Mad-Max period, it wont be gold or silver that is used for trade. It will be necessities, including sex and whiskey.  We'll all need guns, too.

Sun, 06/07/2015 - 15:45 | 6172229 PresidentCamacho
PresidentCamacho's picture

silver is great medicine and it also can be used for sanitation.

Sun, 06/07/2015 - 15:45 | 6172230 northern vigor
northern vigor's picture

I'll use  my gold to buy sex and whiskey...I used to have guns until that freak boating accident happened.

Mon, 06/08/2015 - 00:22 | 6173285 tarabel
tarabel's picture

 

 

I'm afraid I have to disagree with your point, although I see what you are trying to say.

Where I think you are mistaken is in an assumption that the interests of the State are at all times congruent with the interests of the individual citizen.

The purpose of money is to provide a universally recognized store of value that can be counted upon to serve as a reliable intermediary that is tradable across a wide, even all-inclusive, series of transactions that would otherwise need to be done on a barter basis-- possibly between parties that have nothing in their own inventories that the other party wants to trade for.

It is therefore a lubricant for trade as much as it is a store of value in and of itself.

Because governments have large appetites and fixed resources for satisfying those appetites, they have always eventually found it in their interest to debase money so that it appears to retain the original value in the minds of the general public while actually representing something entirely different (and, needless to say, less valuable than the original connotation thereof).

This serves as a secret confiscatory tax on the capital of the general public that redounds to the advantage of the rulers of society.

War and large public works projects cannot be undertaken without either an opportunity for severe plunder from the loser or throwing dust into the eyes of a peaceably-minded population.

Chain the governments of the world to an immutably fixed value of money and their ability to embark on extravagant domestic or foreign adventures is noticeably constrained even as the public is enabled to lay long-term plans for the future based on their confidence that what was will continue to be in the future. 

The only real exception that comes immediately to mind is that of the rapacious Spanish Empire that blundered into a gigantic and totally unearned mass of specie, which they promptly squandered to their own societal ruin.

 

Sun, 06/07/2015 - 12:42 | 6171684 MEFOBILLS
MEFOBILLS's picture

I am not against holding gold and silver as a hedge. It is the smart thing to do.

 

However, it really shouldn't be the money of a country.  It has been tried before....the experiment has been done.  It didn't work.  

If we humans cannot learn, we don't deserve civilization.

 

If we cannot learn, then we need bullets and gold, because we are just animals.

Mon, 06/08/2015 - 03:38 | 6173439 bunnyswanson
bunnyswanson's picture

CFR:  There is no sensible reason to...not to own gold...unless you do not know .... economics of history.

https://www.youtube.com/watch?v=o5SJyMrqeVo

10 min

Mon, 06/08/2015 - 04:18 | 6173458 TeethVillage88s
TeethVillage88s's picture

Well lets assume that there are many assets & funds & Equities for Bankers to Target in phases.

They have power, secrecy, control over US Congress, control over regulators, they make it their business to control all businesses through a network of people in all industries.

- Farmland, Good Farmland, is a historical Store of wealth
- Ranchland same but not so much
- Ranching, Farming, and Railroad Lines where an early kind of wealth
- Industry of all kinds, Steel, Oil, Trading, Agriculture, Textiles, Manufacturing of all kinds
- Private Businesses can be made Corporate Assets
- Corporate Mergers, Leveraged Buyouts, Stock buybacks
- Federal Wars, Regional Wars, Funding for World Wars
- Capture of Slave Labor in poor countries with no Labor Rights
- Use of US Military to enforce Corporate Holdings, Produce Businesses overseas, suppress unions or worker strikes
- Fiat, unlimited Federal Budgets, Target becomes contracts of all kinds, Federal Contracts, Military Contracts, Energy Businesses called Utilities, any Industry in which the Federal Government funds or has part guarantee of, including core functions on military installations, BRAC
- Federal Home Guarantees, VA Home Loans, HUD Funding, Sub-prime Mortgages
- US Household Pension Funds & Retirement Funds, 401Ks, University Trust Funds, Municipal Trust Funds, Municipal Projects, Firemen, Police, teachers, State Investment Funds
- Federal Bailout Responsibility

Today, what wealth is left to take from the USA??

More Federal Funds apparently.

Insight: I would guess the Joos are working with the Chinese and Russians to set them up with new banking power. I would guess the big Western Bankers are now planning the Demise of the USA since Debt has reached Critical Levels and the Public doesn't want to go to War. I would predict that the Chinese needed expertise, US Technology, Military Technology, and Financial Guidance that the Joos provided them... they are positioning themselves for Economic & full War.

Bankers always win. The war on Culture in the USA has crept into the Military, Government, Accounting, and Finance. It is the End. Education is not real. Control is complete.

Maybe Israel protection is a priority, or maybe the use of the USA as a Utility is at an End. Strip the Wealth. Join the Chinese who understand as well as anyone the value of power, wealth, control, low classes, Information Control, Data Control, Secrets, Oligarchy, and Organized Crime.

Mon, 06/08/2015 - 04:59 | 6173473 bunnyswanson
bunnyswanson's picture

Maybe you are wrong. Maybe Jade Helm is in place to corral Chinese immigrants and dual citizens who have betrayed their oath when the day comes.  Isolation, recycling to a whole new level, and place the US military forces on the borders. 

Greg Hunter with Warren Pollack today (30 min)  Things are not as they seem.

https://www.youtube.com/watch?v=1GCEb20i9Es

American people hold trillions in personal wealth.  Some may be in the Ponzi scheme and lost.  America is a country that is self sustainable.  The people are, as I have worked with them in many different work places over the years, a determined bunch and of high integrity, perfectionists and able to recover their country if the bankers and foreigners get the hell out of their way. 

Mon, 06/08/2015 - 05:20 | 6173487 TeethVillage88s
TeethVillage88s's picture

Not as Disciplined as Honnestann, not as scientific, not as well read or accomplished... I just rely on my openness to new ideas.

You kind of just blew me away. I like Greg Hunter. So I will have to check him out (he is a little wedded to conservative thinking and the establishment, but a great reporter)

Thanks for the Reply.

Late Edit: And there are Americans who moved wealth off-shore like Romney!

Mon, 06/08/2015 - 07:14 | 6173561 bunnyswanson
bunnyswanson's picture

You flatter yourself.

Mon, 06/08/2015 - 11:22 | 6174336 TheGreatRecovery
TheGreatRecovery's picture

The experiment HAS been done, and it DID work.  For the citizens.  I wonder what history book describes where it "didn't work".

Sun, 06/07/2015 - 13:16 | 6171747 Condor96
Sun, 06/07/2015 - 13:44 | 6171821 Herdee
Herdee's picture

ATM's spitting out money in the Ukraine:

http://journal-neo.org/2015/06/02/yemen-practical-nuclear-survival/

http://rt.com/news/232627-banks-hacked-russian-expert/

What will the next scam possibly be?Governments will get rid of cash imo.Gold and Silver will be the black market for barter.China and Russia lead the world in accumulation.

https://www.youtube.com/watch?v=qM5xX3R6chA

https://www.youtube.com/watch?v=B92SncG4UrM

Sun, 06/07/2015 - 13:45 | 6171826 Chuck Knoblauch
Chuck Knoblauch's picture

Do it.

I dare you.

Sun, 06/07/2015 - 14:23 | 6171973 TeethVillage88s
TeethVillage88s's picture

Just a Symptom of the Problem maybe.

Lawyers and Bankers have corrupted the System, made everything complicated and part of a Racket that makes their own Careers.

- Saudi supreme court upholds jail, lashes for blogger... NRA: Gun blogs, videos, web forums threatened by new Obama regulations...
- REPUBLICANS PUSH POWERS FOR PRESIDENT...
- OBAMATRADE NEARS FINISH LINE...
- Rand demands White House release text immediately...
- WIKILEAKS: Deal sidelines national laws...
- Similarities with European Union...
- Congressman Kevin McCarthy's journey from IN-N-OUT Burger to millions in fundraising...

Simplify, Streamline, Standardize and get rid of lawyers.

Then get money & gifts out of politics, government, medicine, and court justice training. Then end personhood for corporations and foundations and allow auditing of these two to see what they are doing. Then get rid of the FED and limit powers of TBTF, Break them up, put limits on the size of corporations.

Sun, 06/07/2015 - 14:34 | 6172003 Alpacanio
Alpacanio's picture

Once the dollar goes away and if they try to install electronic currency, underground transactions will be in Yuan, not the dollar, for it will be useless or gone. 

Sun, 06/07/2015 - 15:43 | 6172222 apocalypticbrother
apocalypticbrother's picture

Cash will be second best to diamonds, precious minerals and toilet paper.

Sun, 06/07/2015 - 16:25 | 6172309 DarthVaderMentor
DarthVaderMentor's picture

Amen about the toilet paper. Having been recently to Venezuela and Cuba and in Russia in the 70's and 80's, I have first hand experience with the absolute need for good toiletpaper! At least in Iraq and Afghanistan we had good PXes that had toilet paper......Good toilet paper is a top prize among spies and special forces dudes! I personally keep at 2-month supply at home now.

Mon, 06/08/2015 - 01:00 | 6173337 northern vigor
northern vigor's picture

 I was in Poland for a visit in 1970...tp was rare and rough.

You and Mrs Vigor both store tp. She has a closet full...she lets me worry about everything else, and she just fixates on  having tp in a crash.

Sun, 06/07/2015 - 15:56 | 6172255 DosZap
DosZap's picture

Well,supposedly according to the Founding Docs, ONLY Congress has the right to coin and print money.And assign value to it.And Gold & Silver are the only REAL form of money supposed to be recognized by the US Gov't.And has been recognized as such for close to 6000yrs.( I do realize other countries/tribes,etc) recognize barterable goods as money.

And have for eons,but here, the LAW of the land states WHAT real money is.Alan Greenspan, even stated it himself and is on record.As you all well know.

Since fiat is fiat(i.e.) worthless,in reality(a mere digital entry).

Could not they theoretically, (the Federal Reserve) mint ONE coin,or bill,stating the value at 67 Trillion dollars and say Debt payed in Full, correct?.

 

Sun, 06/07/2015 - 16:53 | 6172366 robobbob
robobbob's picture

your article sounds like a sales pitch for that cashless society crap the BOE eggheads floated out last week.

Sun, 06/07/2015 - 17:35 | 6172460 directaction
directaction's picture

About once a month I pull $400 in fast cash from the same cash machine.

Went to do it yesterday and the fast cash button had dropped from $400 to $300.

Now I gotta go every three weeks.

I get the feeling they don't want us taking us much cash out as before.

Good thing I don't pull $1,000 out each month or I'd have to complete an 8300 form. 

Sun, 06/07/2015 - 18:33 | 6172599 Mepaulus
Mepaulus's picture

In the doomsday scenario painted it doesn't matter a fig if you have a millon in cash, gold, silver, eggs, flour or whatever, if you're not strong enough to fight off the hordes of hungry people with a wallet full of useless credit cards you'll soon be dead or at best broke and hungry like them.

That's the way nature works.

Sun, 06/07/2015 - 21:50 | 6173006 TheGreatRecovery
TheGreatRecovery's picture

No problem.  I remember when there were no ATMs.  In fact, I think that, during all of human history except for the last 20 or so years, there were no ATMs.

Mon, 06/08/2015 - 00:55 | 6173331 northern vigor
northern vigor's picture

I remember when I needed a bank book for the bank teller to write my deposits in and initialled it. Then she took my card out of a filing cabinet and wrote on it.

Today everything is on line. When the system melts down, everything is lost..."Oooops, sorry Mr Vigor".

 

Mon, 06/08/2015 - 01:21 | 6173350 onmail
onmail's picture

Mabbe most of the cash is with American police

Who loot anyone & everyone on street.

What has become of America.

Mon, 06/08/2015 - 01:37 | 6173362 dojufitz
dojufitz's picture

Hyperinflation occured a few times in history to a few small time Governments...

So to ZH commentators that means it has to happen the USA Govt.

I would like to see what banning the USA cash dollar (which is the World's reserve currency).....would look like......

I doubt that will happpen.

 

But good luck with banning it.

 

 

Mon, 06/08/2015 - 07:02 | 6173544 Sauerkraut-Opinion
Sauerkraut-Opinion's picture

From 2016 on the Central Bank of Denmark will stop printing cash money. Small shops, restaurants and cafes are instructed not/not obliged ...to take cash any more.

Fri, 06/12/2015 - 19:28 | 6191832 wilson34
wilson34's picture

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