When The Going Gets Tough, The Feds Take Your Money

Tyler Durden's picture

Submitted by Bill Bonner via Bonner & Partners, (annotated by Acting-Man.com's Pater Tenebrarum),

Cash is King

LONDON, England – “Cash is king.”

So sayeth the Wall Street Journal, reporting on the situation in Greece. The use of cash for everyday transactions has increased 44% in the last two months.

A brief update: The Greeks spoke on Sunday. “No,” they said. “We don’t want the government-spending cuts our creditors are demanding.”

 

CashIsKing_1

 

 

Then the finance minister resigned, riding off on a motorcycle. Today, the Financial Times reports that the Greeks are to be given one “last chance to avoid crashing out of single currency.”

Greek output is plunging. The banks are running out of money. And Greeks are lining up at ATMs. The government won’t let them take out more than a lousy €60 ($65) a day.

 

greece-gdp-growth

Greece: aborted recovery

 

greece-corruption-index

The only data point that is in an upward trend again since the change in government is the corruption index.

 

An Important Breakthrough

A fascinating article recently described how ride-sharing app Uber had “solved the major problem of capitalism.” What is the problem?

“Trust.”

There are millions of cars on the road. Most of them have four seats, but only one of the seats is usually occupied. And many of these private drivers would be happy to take you where you want to go, for less than what a taxi would charge.

But you don’t get into those cars. You were told as a child never to get into a stranger’s car. You don’t know which of them you can trust to take you where you want to go.

London’s black cabs solve the trust problem with a distinctive design and regulation. Drivers must pass the city’s legendary training course, “The Knowledge,” to get their license. When you get into a London cab, you have a high level of confidence that you will get where you are going in a professional manner.

Uber solves the problem of trust in a different way – with an Internet-based rating system. Riders rate drivers out of five stars. Drivers rate passengers the same way. Both avoid folks with poor ratings.

 

uber_screen_caps

Uber app screen capture: riders are invited to rate drivers, using a 5 star system. Drivers with a rating of less than 4.6 are at risk of deactivation. The vast majority of Uber drivers has ratings between 4.7 to 4.8

 

But capitalism made a much bigger breakthrough on the trust front thousands of years ago: It invented cash. Before modern money, transactions weren’t based on barter, as most people believe. Instead, they were based on a system of rudimentary credit.

Without cash, you could trade only in a small group. And you had to rely on memory to recall who owed what to whom. With the advent of coinage you could trade with people you didn’t know. You gave up something. You got something – cash – in return. You could then use this cash to trade for something else later.

This invention – money, usually based on gold or silver – was such a breakthrough, it made today’s elaborate market economies possible.

 

silver stater

One of the oldest coins in the world: a silver stater from the Kingdom of Lydia, led by the legendary King Croesus.

 

Trust Is Disappearing

But it’s only cash if you can put your hands on it. As the Greeks have just discovered, money in the bank is not cash. Cash is what you need when trust breaks down. With cash, you get optionality, as The Black Swan author Nassim Taleb puts it.

With cash in your pocket, you can buy a gallon of gasoline or a share in a public company. It’s yours. You can do what you want with it. But cash in the bank?

You don’t know. You have to trust that the system works… that the bank is solvent… and that it will give you back your money when you want it. Trust is rapidly disappearing in Greece. The Germans don’t trust the Greeks. The Greeks don’t trust the banks. Almost nobody trusts the government.

What a great show! And very instructive.

Cash is king in China, too. Chinese stocks paused yesterday after a three-week crash.  The government is doing all it can, say the state-run newspapers. But investors are wondering: Can they trust the Chinese feds to stem the bleeding?

A Hong Kong-based fund manager is quoted as saying: “I believe the Communist party still has the final say over the stock market, even nowadays.”

But wait, if government could stop market corrections, why do we ever have them? We don’t know. But there are times to trust… and times to distrust. There are times to own financial assets. And there is a time to own cash.

This seems like a good time for cash …

 

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The time of deflationary confiscation is coming closer for the remaining Greek bank depositors. Those who kept their cash in safe deposit boxes at banks are out of luck too: the government has decreed they may not take it out. This is something one needs to keep in mind – if one wants to keep cash outside the banking system, one cannot leave it in a bank safe deposit box either. The government will confiscate it when push comes to shove and the banks need to be rescued.

Photo credit: Reuters

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Hugh G Rection's picture

Just make sure to keep your cash in the banks... Wouldn't want to miss out on earning no interest.

SHEEPFUKKER's picture

or negative(nominal) in some cases. 

J S Bach's picture

Were I a Greek entrepreneur, I'd be in the pitch fork business right about now.

CrazyCooter's picture

Safe deposit boxes are a great place to store valuables. ZH'ers have down voted me many times on this issue but I still think this is a good option as is Treasury Direct.

FACT: When property rights go out the window, you're fucked. Got it?

So, if they ban cash, then you are a criminal - regardless of where your cash is at ... if our Congress goes to the point of passing laws to do shit like confiscate safe deposit boxes, they will just as easily include safes at home and any other locale and likely place draconian sentences with it.

Regards,

Cooter

Boris Alatovkrap's picture

Hey you are again cast of down arrow because more safe is mattress interstitial.

Kirk2NCC1701's picture

The True purpose for SDBs (Safety Deposit Boxes) is to store Precious Documents* of high personal value, but no commercial value -- which you want to survive a fire, robbery or some natural disaster at your home.

Use your noggin to store Cashish and PM in some other place(s).

 

* E.g. Vital Documents, Insurance Policies, heirloom photos, Olympic Medals, Military medals...

Hugh G Rection's picture

I kept $1 in my savings accounts instead of closing them.  Make those fuckers send me a paper statement of my dollar every month.

GotGalt's picture

Most banks have caught onto that and have an endless array of fees to quickly put your account to zero or negative should you fail to keep a minimum balance, use your debit card so many times, blah blah blah.

Boris Alatovkrap's picture

For fun, Boris is put on nice suit clothing and shave, go to Moscow and spend entire day, bank to bank, drink coffee and apply for loan. Maybe some day Boris is get loan, but in mean time is many pen with bank logo for children school supply.

Hugh G Rection's picture

Fuck Sacha Zio Cohen and his Borat, Bruno bullshit.  We need a faux documentary on the life of Boris.

northern vigor's picture

Are you and Natasha still fucking Rockie and Bullwinkle?

ted41776's picture

all money belongs to the government. it is up to the individual to make sure that when the government gets desperate, they are not holding any "money" that can be taken away. if you get caught in the "haircut" and get "your" money taken away, it's your own damn fault

 

http://data2.whicdn.com/images/23289450/large.png

chrsn's picture

All your money are belong to us.

THE 4th Quadrant's picture

"Trust Is Disappearing".

Jews are in charge, nuff said.

Crash Overide's picture

If you don't hold it...              well you know the rest.

Kirk2NCC1701's picture

If you don't hold it... your wife owns it?

buzzsaw99's picture

i wouldn't keep money in a euro bank, that's for sure. the ecb et al will hold depositors ransom to get what they want politically. i hope those in portugal, spain, italy, france are paying attention. do not be deluded, your politics are now decided solely at the banker's discretion. play ball or your wallet gets robbed.

Closet Boy's picture

It's time for Mr. Auric Goldfinger to initiate operation "Operation Grand Slam."  Viva PMs!

Amish Hacker's picture

It's not difficult to imagine a scenario where in order for you to access your safe deposit box, an agent from the taxing authorities would have to be present. 

The next step after that would be to require that all boxes be opened.

nmewn's picture

In case you missed this...

July 6, 2015

"Last week the Greek government imposed capital controls to prevent cash from escaping from the Greek banking system, which is on the brink of collapse.  These repressive financial measures, which were invented by "Hitler's banker" Hjalmar Schacht in the 1930s, include the closing of banks,  limiting cash withdrawals from ATMs to 60 euros ($67) per day, and the banning of all money transfers via credit and debit cards to accounts held in foreign countries.

Despite these Draconian controls, Greek banks continue to hemorrhage cash and, after yesterday's referendum, it is probable that the daily limit on withdrawals from ATMs will be tightened.  Worse yet, the reeling Greek public suffered another shock yesterday when Deputy Finance Minister Nadia Valavani revealed to Greek television that the government and banks had already agreed that people would also not be allowed to withdraw cash from safe deposit boxes for as long as the controls were in place.  This may be part of a fallback plan if the ECB ends its bailout of the Greek banks.  The government with the banks' connivance would seize the cash euros stored in these boxes and compensate their lessees by crediting an equal sum of euros to their increasingly inaccessible checking deposits.  The cash would then be fed into ATMs to postpone the day of reckoning for Greece's zombie fractional-reserve banks."

https://mises.org/blog/lesson-greek-crisis-safe-deposit-boxes-are-not-safe  

In other words, the Greek government is conspiring with the banks to steal peoples cash if stored in a banks safety deposit box.

jaxville's picture

Thanks for posting this.  I thought that the article was exaggerating about safe deposit boxes.  It's only a matter of time before all safe deposit boxes in banks see the risk exceed the perceived security.

  I thought the content of boxes was private.  Clearly Greek boxes are having contents examined when the owner requests access.

  I have told my clients that boxes were safe for the time being but that would change.  Time to secure your property if it is in bank safe box.

two hoots's picture

The invention of coin/cash made it easier to go shopping in the old days.  Instead of taking 2 cows, 3 goats, 5 chickens, a bushel of turnips for trade when you went shopping one could take just some coin, now plastic. 

cowdiddly's picture

I'd take the 2 cows to town and I mean right now, these people are nuts. Just sold a load of heavy bred (no not heavy as in weight dummie, 6 months pregnant) fancy heifers to a guy for $2600 per head you can keep your plastic. Ran an add on craigslist with that price and the word "fancy". They were nice but nothing super special. I was figuring I would be lucky to get 21/$2200 and the crazy fool paid it without batting an eye. All the sudden you got thes new cowboys riding around with brand new trailers and big wide brim cowboy hats and they don't even know how to put a bend in it. Heck, Ive been a cattleman for 40 years and all I ever had was a flying corn ball cap the seed company gave me.That't how I found this site, I thought it would be a place I could learn about hedging a crop.

Sorry about the OT: report on the cattle bubble

northern vigor's picture

The only fancy cow is between two pieces of bread with gravy poured over top of it

Kprime's picture

with a fancy cow you can make a fancy feast

birddog27's picture

Trust paper? Is this an Onion piece?

44_shooter's picture

1) Safes are cheap.

2) Safes are esay to bolt down to your floor, to beams in the wall, to hide etc.

3) Safes are cheap

 

Why would ANYONE keep their cash in a bank these days?

Legally the bank owns a depositor’s funds as soon as they are put in the bank and your money then becomes the bank’s- you become just an unsecured creditor.

Did I mention safes are cheap?

 

 

 

GotGalt's picture

A high quality safe that is very durable and hard to break into while being fire resistant (to a point) is anything *but* cheap.  They can run into the 10s of thousands.  I would also submit that installing said safe is anything *but* easy.  Quite a pain in the rear actually.  Professional install costs a lot, and a DIY'er will need lots of help wrangling the darn thing in place plus all the work to find a safe and secure spot for it.  It's all worth it in the end though.

TheAnswerIs42's picture

You can get by with a "cheap" safe (ie less than $500 w/1 hr fire rating) if you hide it in the right place.

Yes, I'm talking security by obscurity.

Just put it under several feet of acquired clutter and I can assure you that after a few months, not even the owner will be able to find it.

 

cornflakesdisease's picture

A coffee can with 1/3 coffee power and your money in a ziplock sandwich bag is cheap and effective enough in any pantry.

booboo's picture

I have installed many a floor safe in concrete floors, it ain't that damn difficult. 20x20 square opening, the below grade material is plastic since it is encased in concrete with a high grade steel top rim and door with combo and floor plate. 400 bucks, couple of bags of Sakcrete to fill the around the fluted plastic box and over excavation. www.haymansafe.com is a good source for floor safes.

Duc888's picture

My buddy got city sewers about 12 years ago.  Has not used the shit tank busied in the back yard since...they never made him crush it and back fill it, don't know why

 

Well, ctually, he uses it now.  Makes for a pretty good "safe".  Small craftsman plumbers tool box that he epoxied the handle in the upright position.......got a 8 FT galvanized piece of conduit that he bent the end over like ahook and there ya go.

 

Who's gonna look in the shit box in a back yard?

44_shooter's picture

*roll_eyes*

Who do you think is going to be robbing your suburban home?  The Oceans 11 team?  Sorry to burst your bubble - but you're more likely to be robbed by the teenage neighborhood meth-head, looking for whatever he can shove in his backpack and GTFO without being caught.  I only need to deter him as a real professional isn't going to be detered by anything if you're hiding 2 million in gold bars in your safe.

Fire rated?  Check what your chances are of having your home catch on fire is- in 2013 369,500 homes burned, out of 116,290,974 homes that existed in the US, thats a .32% chance your home will be in a fire.  You need a $10k safe for .32% - I'll take my chances with a 1 hour fire rated safe.

Lastly - I installed both my gun safe and my home safe, it required nothing more than hand-eye coordination, a run to Home Depot and ownership of an electric drill.

As far as hiding my safes - well the gun safe is a little hard to hide as its over 6' tall and 4 feet wide. but the small safe fit nicely into a closet with one of those closet world type systems, a few extra panels and it looks like a simple sitting bench for putting on your shoes (just with a safe inside it).  Panels come one and off with velcro. 

 

Don't over thing things.

shouldvekilledthem's picture

Cash is the same fiat scam and prone to devaluation.

44_shooter's picture

Rich or Poor its always good to have fiat cash on hand.  PMs won't be accepted for a while after the fiat crashes.

northern vigor's picture

When breaking into a home, the first place the governemnt looks is your safe.

 

jaxville's picture

A small pickle jar will easily hold sixty one ounce gold coins.  Wrap the jar completely in electrical tape just to ensure it sort of stays together if you break it while digging it up.

  ...somewhere in the great outdoors.

northern vigor's picture

I like used tupperware from yard sales, or PVC pipe with ends glued. Jar lids can rust out

wow...sixty oz of gold...I'd even buy new tupperware.

 

 

 

who cares's picture

Next step: the elimination of cash and the government will control the new money, digital currency. Bye, Bye!

neilhorn's picture

Bitcoin, for when you have so much money you need someone to steal it.

disabledvet's picture

"King Midas it is!"

Nothing more ironical than Coinage...and no one ever dis it better than the Greeks.

Just my view but if GREECE flames out here Jamie Dimon and his brethren will never live that down.

I AM FROM NEW YORK AND THIS IS THE NEW YORK WAY!

You do what you can for "your people" and that is that.

As far as coinage "a priori the Greeks" only the Americans have ever done it better.

I will support SpaceX to my last breathe because he and his cohort "think American."

METAL IS MONEY...everything else is bullshit.

And if you really are launching rockets into Outer Space...

RMolineaux's picture

I recall a conversation I had with a distant relative more than ten years ago.  She was a long-time bank employee and was in charge of the safe-deposit vault.  On a confidential basis, she advised me that she had been given secret instructions to close the vault whenever told to do so, regardless of the day or hour.

fromthinair's picture
fromthinair (not verified) Jul 9, 2015 8:43 PM

zerohedge... now you have added yourself to the list of people who do not understand the concept around cash. So keep an eye on the comments section on my blog for the post in progress. Yes, the Death of Capitalism is still in progress. I want all the world reknowned economists to pitch in so that you would know why you want to fight this battle anonymously. 

Simple! zerohedge, you are not sure what you belive in. Had you been sure there were no reason for you to hide. 

Like, I do nothing wrong. So If President Obama tweets, then I generously respond to that tweet too.

http://just-a-thought-from-thinair.blogspot.com/

AllMightyDollar's picture

It is illegal to keep green cash in a safety deposit box.  Unenforceable perhaps, until a divorce or IRS tax problem locks it down, then generates a court order to peek inside.  I was told this in the 1980s when I rented one.  I have been told a few times since then.

silverer's picture

I'd shear stacks of blank paper, then print phony bills for each end of the stack, printed one side only.  When they crack the safe deposit box, they'll think they hit the jackpot.  Would be great to get that on video.

northern vigor's picture

Citie, JP Mprgan and probably many more by now, have depositors sign a paper that they will not keep cash in safety deposit boxes....The banks will be chaanging that rule next week after watching the Greeks clean out boxes.

honestann's picture

TO EVERYONE IN A WESTERN NATION:  Remove all paper wealth from banks and financial organizations ASAP.  You may be a bit early, but you will definitely not regret.

The swarm of locusts (governments, banksters and freebee-voters) will soon confiscate ALL paper wealth.  Everyone who has been honest, ethical, frugal, prudent, productive, benevolent and SAVER will be COMPLETELY WIPED OUT.

This may sound alarmist, because the signs have been obvious for years.  However, the countdown to t-minus-zero is getting very close to zero.  Just because none of us can read that timer, doesn't mean it isn't close.  And it doesn't mean you'll be able to wait until the last minute.  If you try, you will almost certainly lose.

Pension and retirement plans are most vulnerable, because they're easiest to confiscate and your desire not to pay the penalties is greatest.  So expect those accounts to be converted to 30-year government bonds that will become worthless before you are allowed to sell them.