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Guest Post: Why You Always Want Physical Everything
Submitted by Simon Black of Sovereign Man blog,
On the way from San Marino yesterday, I had to stop for some gas near Rimini, a beautiful beach town on Italy’s Adriatic coast. As an aside, Italian gas prices are among the highest in Europe… and the world… at €1.77 per liter (almost USD $8.50 per gallon).
Naturally, the vast majority of this is due to taxes. From the € 1.77 per liter, only about € 0.48 can be attributed to the price of oil. Profit margin and distribution costs run about € 0.28. The rest of it (just over 1 euro) is tax. This amounts to an effective tax rate of over 130% on fuel.
Anyhow, when I pulled in to the gas station, I whipped out my American Express card and asked the attendant in broken Italian to turn on the pump. He acted like I had just punched him in the gut, wincing when he saw my credit card. “No… cash, only cash,” he said.
I didn’t have very much cash on me, so I drove to the next station where a similar experience awaited me.
This is a trend that is typical when economies are in decline– cash is king. Businesses often won’t want to spend the extra 2.5% on credit card merchant fees… but more importantly, distrust of the banking system and a debilitatingly extractive tax system pushes people into cash transactions.
You can’t really blame them. In Italy there’s massive distrust of the local banking system. Most of the banks are insolvent, and the government has already started imposing capital controls by limiting withdrawals in some cases to 1,000 euros.
As a result, many bank customers are facing substantial difficulty in accessing their funds; it’s easy to understand why they want to deal in physical cash– the counterparty risk is much lower.
Nobody gives these issues much thought… right up until they get shut out of their account. But these are the real consequences of counterparty risk: anytime your asset is simultaneously someone else’s liability, you might have a big problem when tough times arise. This is when physical cash becomes a premium asset.
It’s the same thing with gold and silver when you think about it. In the early days of the post-Lehman financial crisis, precious metals prices were tanking. At least, on paper.
Gold and silver contract prices may have been plummeting in futures exchanges around the world, but simultaneously, premiums for physical gold and silver coins were skyrocketing. The US mint was unable to keep up with demand for physical coins, and premiums hit double digits by December 2008.
It was an obvious example of the huge disparity between the paper price and the physical price. And in tough times, the paper price is irrelevant. Physical is all that matters.
Cash is in the same boat. When you look at the numbers, the amount of physical currency in circulation is dwarfed by the digital money supply.
In the EU, the M2 money supply is 8.77 trillion euros, of which only 861 billion is in physical cash… about 9.8%. In the US, the proportion is similar– $10.02 trillion M2 money supply, $1.1 trillion in physical cash. The rest is all digits in a database.
It’s a prudent idea to heed this lesson from Italy, for as the banking malaise in southern Europe spreads, cash is likely going to be a premium asset in the rest of the world as well. And it certainly makes sense for individuals to have some holdings of cold, hard cash in addition to physical metal.
After all, if you’re only generating 0.0000001% interest in your bank account anyhow, what difference does it really make to hold physical cash? You’re not worse off for it, but you’ll be a lot better prepared in case something goes wrong.
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"1. gold and silver
2. lots of food
3. firearms and ammo
4. antibiotics
5. good red wine and some other shit
"
Sorry for your sores, you might want to leave all other
shit as in 5) and 2) and your list is down to four :-)
No preference for physical cash whatsoever...they do it for tax purposes!
I prefer my money the way I prefer my women............Digital!
Simon (and ZH): if you were a US state trooper, certified bomb tech with a Master's degree in good shape but with a back that would require surgery in a couple of years, where would you go overseas and what kind of job would you recommend? thank you
That's kind of limited information my friend, if we are to counsel you on your most important choices in life. But here goes:
Leave law enforcement as the laws as written are wrong and corrupt all over the world. Get a job as some kind of skilled tradesperson or a corporate job if you can stand it. Try to start your own business. Travel around the world and see where you like it before you settle.
ty I am asking on behalf of a partner. He's finally realizing how flawed the system is and I think he feels trapped in his career but I'm trying to help him see he has options
I'm a ESL teacher so I could get a job anywhere I was wondering if y'all had any recs for what he could do, like a security consultant or something?
To be honest, if I were him I would just start fresh and not follow the LE path at all. Global security personnel largely come from the military. Don't mean to be negative, but I'm not sure security is what I would recommend.
See Divine Winds comment below for some out-of-the-box suggestions. I mean there are a million things. Locksmithing? Will always be useful, here in Australia at least they can make decent money. Go work on an oil platform? Write a novel? The world is a vast adventure!
Thank you for the advice. He's still kind of in the THIS IS MY CAREER CHOICE HOW CAN I DEVIATE FROM IT UNTIL THEY LET ME RETIRE IN 20 YEARS stage but I'm working on it. Locksmithing sounds very smart. What's the best way to get into that? http://www.locksmithvideoschool.com/Advanced-Plus.html ?
Yeah well its scary to make such a radical change. Hope you succeed in encouraging him. I have no idea how to start in locksmithing, there might be night school classes? Might be easier to gradually change?
I'm checking out the local votech school I'm thinking welding for me. thanks Dr B.
That's a good skill to know. You will make friends you didn't know you have.
Long oxy-acetylene & 7018.
If I could interject:
Try and get your own gig going. Something net based will allow you to move.
Base the biz in one country, host it in another and clear payments in a third.
I have a buddy from my university days who blew off school half way through and learned how to tend bar and cut hair.
He has traveled the world since then. Never a problem finding a job or generating cash.
If not inclined to do da InterWebs thing, look for gigs that are timeless.
Bartender and barber are two. Easy to learn and most use both services regularly.
gunsmithing?
Excellent.
With/without it, I think you have more than a foot in the door to many opportunities with the LEO/bomb tech background.
Consider exploring opportunities with the larger private contractors, potentially as an instructor or, as you suggest, working in the gun cage / loadout room.
Lots of smaller outfits around the country teaching specialized skills to Tier 1 operators.
One of my business partners does exactly that.
In his situation, he teaches everything about battlefield power systems. Best batteries for this and that, how to power a laptop with a radio battery, familiarization with NATO/foreign batts/power systems, which ones blow up when you shoot them, how to cache a sat phone and batteries for two years... This type of shit.
Except in your case, take the gig abroad.
Perhaps form a small company and pimp yourself out as a police / bomb tech trainer overseas.
Offer the services as a class or under longer term contract to a foreign police department wherever you choose to settle.
Clear your desk. Take a sheet of paper and a pen and write down your skills. Break down the broad items like State Trooper and Bomb Tech.
Go deep. Think of your training. Individually list the skills acquired and practiced.
Your answers are right there, brother.
It is in this list that you will find massive opportunities to take you offshore with a sense of stability.
thank you!
In my storage business, I accept Visa & Mastercard. The money posts to my bank account at midnight.
I will not accept American Express. Why, you might ask?
Seven days! It takes a week before the money is in my account.
mr. simon black. why does he post here? he's a right cnt, he is. and fairly self-righteous on it.
has cash never been king? what a joke. afraid of getting robbed? want 'bonus miles?'
when you spend cash you do a few things. you become aware of your spending. you limit the fees tbtf charge you and your counterparty. you limit the audit trail.
man up. carry cash. spend what you is yours. and if you can't afford it, don't spend. problems solved, macro and micro.
i'm really tired of this guy here. trust fund brat telling us how we can move to costa rica with our xx million euros/dollars/pounds and be fine.
Simon does not post here. Simon is smarter than that. Simon writes a piece and it is then syndicated across dees here InterWebs, as well as sent to all of the customers that are paying for his premium service.
His work appears on this site because Mr. and Mrs. Durden selected the piece (from a vast collection of syndicated material) as it conveys some idea or concept they feel is of value.
Mrs. ?
Haven't heard that one before.
You can't mean Marla, right? Been gone a very long time now.
Oh yes....
Welcome back.
card tranmsaction fees (banks are asking from businesses) are also part of the problem
Being born in Italy and having lived in Rome all my life, I have to say that anyone who does not speak Italian will not have an easy time paying for fuel with a credit card as Italians always want cash for the reasons Simon mentioned (at least half of what self employed people make is supposed to be thrown down the drain because of income, real estate and who knows how many other damn taxes). I always pay by credit card no matter what I buy and I make sure I ask the right question before buying. Basically I do not go where don't accept credit cards (one McDonald's in downtown Rome doesn't accept them). At gas stations, usually after 7 or 8 pm the station has no staff on duty so you may pick up a discount but it's not given that during those hours all stations will give you a chance to pay by credit card. I certainly find Simon's post entirely possible. In Italy anyone does things his way. That's why there is that tiny little public debt in this Banana Republic (who cares.....Gold, bitchez!). Best regards to all ZH readers.
In Portugal Gas stations require a fee around 1€ for crdit card payments, in Portugal for over 5 yearsnow. This week the biggest retail shop anounced it will stop accepting credit or debit cards for payments under 20€.
Any well traveled world person worth his or her salt knows that in Europe you either pay with a (European) direct debit card, or with cash.
It's always been like that, and I guess it won't change anytime soon. Trying to pay with an AmEx card in Europe is even worse, it's like trying to pay with casino chips.
I guess this Simon Black is just a big morron.
All of his travel experiences ("weaving in and out of Italy") are seen through the eyes of a bloody dumb tourist and are completely taken out of context. It appears that Simon only draws the conclusions that he WANTS to draw, not hindered by any FACTUAL knowledge.
Why does this Muppet even post on ZeroHedge?!?!
Its just fantasy- its all made up.
No person in their right mind would want to travel non stop 365 a yr for years, the fact that he has "friends" everywhere is shows this complete bullshit. Really? Do you want to see your investors over and over and over again, with investor diners getting new clients, more investor dinners, then more drinking all the while you are at work and you cannot tell these people they are so fucking boring. Then do the whole thing over again giving new presentations, setting them up, making copies, emailing to follow up, looking at new companies to invest in, doing proformas, valuations, monitoring other investments, exiting them, re balancing portfolio, and on and on- bull fucking shit.
Even ed Norton was tried and he had 2 personalities and was an insomniac in the movie.
Anyone who had to carry a bag for a living and travel alot (business) is:
1. fucking nuts - airline food, time changes, airports, TSA, crazy cabbies, hotel rooms, eating out all the time, living out of a suitcase, always having to meet new people, setting up presentations and giving them over and over, language barriers.
2. Totally ineffective, as opposed to staying put and focusing on the big picture and using skype and delegating. Farther away from HQ, the farther away from promotion. Every CEO who I see gallivanting around like this- I fucking run.
3. is fat or gets fatter
4. has no life
I know, because at one time I was all of these, it was fun for about 2 weeks. Black grabs my goat because it is totally not realistic, the cost vs efficiency ratio of living/ doing business like this is outrageous, if he was actually..... he could live in HK, singapore, london or nyc and get all his financing done and delegate his "investments" to the employees.
People just buy into this romantic, world traveler, above it all guy- I see him as a time share salesman or pool hall hustler getting run out of every town he sets foot in.
Cash....... you can spend it just like money (Yogi)
and.........
Money..... it's a hit. Don't gimme your goody good bullshit. (Waters or Gilmore; Pink Floyd at any rate)
What's the name of that upside down pyramid that has gold just below cash? Meaning gold is primo and cash is second to primo. Forms of credit are stinko..... always have been. Gas stations in Italy won't take an AmEx? STOP THE PRESSES!
John Exter's famous flight to safety inverted pyramid with Gold at the bottom:
http://fofoa.blogspot.co.uk/2009/03/all-paper-is-still-short-position-on...
I'm afraid the thought police will get someone if I say what I'm thinking. Oh those are my thought police. Ok then. I'm going to check my scottrade to see if they charge more here in California. I usually pay cash but I got lazy.
A local restaurant deals in cash only. It's quit a popular eating place too. They were busted by revenue canada and fined but the restaurant continues to be cash only.
Tom Cruise was denied in England paying his $350 restaurant bill with his AMEX card or US dollars. Someone else had to pay in Euros.
Man, this is one of the best posts I've seen of ZH in a long time. I'm still laughing at "whipped out my American Express". That's some funny shit there.
if you like shit like this, you have a treasure trove in simon black.
'whipping out his amex', 'the impossibly blond female private banker flashing a seductive smile at him', etc
it all reads like cheesy dime store fiction
i think simon black has a bromance with assange the jet setting womanizing 'not really a banker but wish i was' james bond without a gun kinda guy...
Advice my father brought home after travelling Europe: always carry a small stash of Wrigley's chewing gum, Camel cigarettes, Hershey chocolate bars, and silk stockings in your pack. That seemingly useless shit can save your life.
I'm guessing your pappy was with the American Expeditionary Force?
How's it going over there anyway? It just seems to drag on forever, and this rationing really makes it difficult to plan a decent dinner party.
That was funny.
“No… cash, only cash,”
wait until it's
“No… gold, only gold,” or “No… silver, only silver,”
Keep on stackin'
Rodger that....:
http://www.youtube.com/watch?v=vWz9VN40nCA
I have played poker in almost every casino east of the Missippi, and I often carry several thousand in cash. I can tell you that cash has always been king, and you would be amazed at the discounts you can get almost anywhere on anything by noticing "damage" to the product and flashing cash. I furnisehd my ex-wife's house this way (everything "magically" damaged and discounted 30%.
Simon Black posts are always really funny. I can't tell how much of it is utterly made-up bullshit, and how much of it just seems like bullshit because of his "Dear Penthouse. I never thought this would happen to me, but..." style of writing. But if he's in Europe without Euro cash, he's a fool. Yes, the Visa and AmEx usually work, but not always, and would anyone the least bit savvy, traveling in Europe right now, think to himself, "Self, would there be any reason the locals might not be as trusting as usual of the global abstract currency racket right now?"
I don't travel as much as I like, but when I do, I call my local Credit Union and tell them where I'm going, and it's worked in ATM's across Europe, Asian and North America; with never a fee. Maybe Simon needs to open a share account at a Credit Union. There's some advice I'll give him for free.
With all that has occured recently, if anyone is dumb enough to have a 3rd party hold their gold then they deserve to have it stolen.
Simon should get a recycling award.
I agree that cash is king. After the MASS ARRESTS occur, the little guys holding legitimately-earned Federal Reserve Notes (physical FRNs and to a reasonable amount, digital FRNs) will get a 1:1 exchange for the new Treasury Dollar, while the banksters and crooks will get pennies on the dollar and prison time. Yeah, that's right, your local firefighter, brick mason, or tow truck driver will be about as rich as a financial services CEO after the great reset and the restoration of the Constitution and legitimate money. The MASS ARRESTS are coming... sure as the sun will cross the sky, they are coming... http://tinyurl.com/cd5cyjo/
I don't know about all of that, but I do know that digital money is a whole new thing... about 20 years old... and makes obsolete almost anything that economists think that they know. The average Joe pays no mind to these things and will recognize cash as money even if the credit card machines have "technical glitches" for several days... and the guy who doen't have cash... well that guy is gonna need some and will likely give me more than a 30% discount on whatever he has to sell.
Huge cash economies in Spain and Italy. If 50% youth unemployment figures were real you'd have civil war. People eat and live well in many parts of both countries regardless. Vast majority of 200 and 500 euro notes in circulation are in Spain and italy, used by business for all kinds fo major transactions. If you pay with card you pay VAT and are therefore some kind of idiot. Take those big notes out of circulation and you'd improve the tax situation overnight - either that or light the fuse on that civil conflict ......
Can anyone recommend where in Europe to buy gold? I'll travel anywhere in Europe.
Can one enter Switzerland via airport with alot of cash and exit with Gold and not be accosted by Swiss authorities? Anyone have any experience?
Can anyone recommend storage options? I don't plan on keeping my stash all in one place.
www.goldmoney.com or www.bullionvault.com
You really need to do better due diligence on the legal situation than asking ZH comment posters. It will vary by country how much you can legally move across borders without declaring. Google Don Johnson if you wanna know how not to do things lol
cash is since ever the king. Only idiots use credit cards when you dont have to.
When you buy in a shop an item with a higher value say, 200 or 300 Euros. Its not a problem to pay with a credit card. But when you say that you are paying cash and that you want a discount of 5% you get it in most cases. In smaller shops always. Its not the tax the shop owners want to cheat. Its the fees of the credit card plus the time till the money is on their account. And they when paid in cash they can still decide if they want to declare this sale or not.
American Express is anyhow exotic. Visa or Mastercard is much more recognized