Thursday, December 30, 2021

Cash Is King....

...until it is not.

A comment on my post about incoming price changes for our stuff made the point that cash will be useless in a SHTF situation. In short that you are better off converting extra cash into tangible assets while you can. 

I don't disagree. Much. I am a big advocate of tangible assets over intangible assets like "money" and "investments" that only exist in a computer somewhere. My post from 2019 still holds true today: The Four Gs Of Investing In 2020. The four Gs in question are guns (and ammo), gold (precious metals in general), grub (long term shelf stable foods) and ground (real estate property). What makes them all similar is that you can touch them for real. Silver coins are not going to disappear when the internet shuts down, unlike your checking account or cryptocurrency. They can't create new ground like they do money. You get the idea.

So what about cash? 

Cash, paper money, is only valuable insofar as everyone agrees that it is. The full faith and credit of the U.S. is the punchline to a bad joke right now and when it goes tits up? Cash will be useful for wiping your hind end or as a firestarter and not much else. You are much better off having stuff that has intrinsic value.

But....

When the shit hits the fan, there will likely be a period of some length between the beginning of the collapse and things going completely sideways. Maybe a week, maybe a month or more. During that time I imagine that we will see a gradual deterioration of services like credit/debit card processing, banking in general, and the EBT/food stamp system. Especially for smaller, local merchants, this might be a time when they will stop taking electronic payment either because the system won't be working or they don't trust that they will be able to access those funds readily from their bank. But people are still deeply conditioned to see cash as having value. Prices will go up rapidly, you might need to offer $200 to fill up your vehicle but again people are psychologically conditioned to assume things will go back to normal, whatever the evidence might say otherwise. Many of them will, at least initially, be willing to take cash even if they won't take your card. 

Imagine some sort of scenario where things are deteriorating in the cities in a hurry and the banking system is largely shut down. Your local Bubba at the gas station still has fuel but it is going in a hurry. If you want to top the fuel off in all of your vehicles and gas cans, you would be well advised to have some cash to work with because Bubba the rural gas station owner won't be quite to the point of considering precious metal or barter. At least not right away.

So I recommend having some stacks of cash on hand, at least $500 but better to have more if you can afford it. This shouldn't take the place of the 4 Gs but rather be a supplement to it. If you have to choose between having cash and having ammo, have the ammo. But if you can swing it, set some cash aside periodically and don't touch it. Ten bucks here, twenty bucks there, and it adds up in a hurry. 

It is all part of a strategy of not having all of your eggs in one basket and preparing for any eventuality because no one knows what will happen exactly or how. Get some cash on hand, have the 4 Gs, stock up on stuff for barter like extra toilet paper and bottles of booze. 

The more you diversify your preps, the better off you will be when you eventually need them and having some extra cash on hand just makes sense.

12 comments:

  1. We've always kept a relatively modest cash hoard (a few thousand dollars) on the premises, going back decades. Mainly because I have long worked a side gig well out of sight of Uncle, and did a lot of cash transacting. Now it's mainly just habit.

    But your excellent post puts me in mind of another issue that may prove relevant when SHTF. Just as gold bars are inherently indivisible, large bills may be unwieldy, too. Not everyone is going to be able to make change for your Benjamins, and unless you are okay with parting with $100 for a few loaves of bread, you will probably want to have a supply of smaller denominations. Personally, I like $10 bills best, and it has irked me forever that you can't get anything but twenties from the ATM.

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    1. At that point in time a C note may be what is required to procure 2 loaves.

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    2. Yep, the atm I frequent is trying to get me to take $50 bills. I always reset to twenty, but I also would like $10 bills.

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    4. I share your and Fred's affection for 10-spots. Sometimes I ask for them at the bank.
      Modern silver dollars might be useful too, even as debased as they are. Metal might remain attractive a little longer than paper currency.

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    5. The $20 thing in ATMs is just a matter of convenience for the bank, they load stacks of usually brand new 20s into the dispenser, it is easier than having multiple denominations to mess with.

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  2. Good points.
    The learning curve is gonna be steep.

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  3. Another consideration. After we, ahem, liberated Iraq, the old Saddam currency was still used. Since it was no longer printed, it wasn't being inflated. So it took some value from the fixed supply. Not saying the dollar will end up similarly used during a civil war, but it could. Don't bet on it by trading hard assets, but don't use it for toilet paper, either. Hold on to it just in case. On a barely related note, Sirius Report says that China is doing a soft opening to the foreigners coming to the Olympics with their new digital currency. Hence our feeble attempt at a Not Quite A Boycott. Oopsie, already a replacement of the PetroDollar!

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    1. Once things get started I expect cash will be hoarded at home by lots of people once they figure out they can't get it from the banks, which will have a run on cash withdrawals like nothing we have seen for a century. Since most banks have very little cash on hand, it will run out quickly and that will really accelerate the panic.

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  4. I agree that cash will still be useful for a period of time after SHTF, especially if the SHTF is a grid down event, when plastic and EFT are impossible to use. I try to keep a couple of hundred in assorted small bills that can be used immediately after SHTF, before most people realize what is happening. I also keep twenties, and hundreds, for a little later into SHTF while cash is still accepted, but inflation has kicked in.
    However, I am in the very small minority of people who doesn't accumulate precious metals like gold and silver. That is because I myself would never accept them. I am not capable of determining the purity of precious metals, and would be afraid of being cheated by somebody passing off gold covered lead, impure gold, or something similar. These crooks are already out there doing this, and a SHTF event will likely make it easier for them to be successful. I believe food, toilet paper, feminine hygiene products, bandaids, matches, butane lighters, OTC drugs, etc. would be better items to stock up on, as they would actually be of use to somebody after SHTF than precious metals.

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  5. Yup - this is probably my next Wednesday post . . .

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