Are you prepared? This is a simple question which begs another question. Prepared for What? Well….. Lets say you get up early on a Saturday morning and are greeted with headlines in both the print media and on Television that there is a Bank Holiday. First off do you know what a Bank holiday is? The one I am referring to is not what you think. Infrequently, a bank holiday can also refer to a day where there is an emergency bank closure to avert a bank run. This type of bank holiday occurred as a result of the Emergency Banking Act of 1933 during the Great Depression in the United States. (Read more: http://www.investopedia.com/terms/b/bank-holiday.asp#ixzz1dJO8buNL)
One of the questions I get all the time is, “Hey, you sell gun parts why are you always talking about financial problems?” The reason I talk about them all the time is, we are are in a very precarious situation today and no one….well almost no one, seems to want to speak about this. So let me go back to the question above. What would you do if there was a bank holiday declared. I really like the words Bank Holiday. It makes it seem like we will have the day off and get to spend time with the family. In any case, let me also tell you, this holiday will be announced on the week end. Why the Week End? Most intelligent people know that when you don’t want to call a lot of attention to something, you get the bad news out over the week end because a large percentage of the people are off doing other things and not paying attention to what is going on.
So they announce the bank holiday and initially tell you, this will be for a week while they sort things out. Probably the next question that will arise is, why is there a bank holiday in the first place? Well whether you know it or not most of our big banks today are insolvent!!! Yes,…… that’s right,…….. insolvent, as in broke. They have played all kinds of games to obscure this but at the end of the day, they are flat out busted. Our government treats them as, Too Big To Fail, but fail they will unless the government continues to prop them up.
Now I am sure some of you will probably say, that can’t be right. If they were so bad off the SEC. would have closed them down. If you think that your the one who is in dream land. Last week we had the implosion of an investment bank Called MF. Global. MF Global will end up being the 8th or 9th largest bankruptcy in the history of the USA. (It certainly won’t be the last) What brought MF. Global down? Exposure to sovereign debt (i.e.) Greek and possibly Italian Debt. You have to be living in a cave if you have not been seeing or hearing about this but I digress. The point being,……. there was very little warning before the bank busted out. Even the people who were watching this bank draw down their credit line and called to close out their accounts, were told a check was being mailed to them only to receive the check several days later and have the check bounce.
I mention all of this only because what I am asking above is not beyond the realm of possibility. While the government has been propping up the To Big To Fail Banks, there are those Black Swan events (See Nassim Taleb’s Book Black Swan) which come out of the blue and blow the bank up, such as MF Global. So…. getting back to my question what would you do if you could not access your money in the bank, what would you do? You need to logically think this through and then take some prudent precautions and Oh….by the way….the bank Holiday may not be just a week, it may be three weeks. How would you live? what would you do to buy Food, or Gas?
Now, this is not Mad Max nor do I wish to come off as a doom and gloomer. If the Big Banks Fail, Good. They will be replaced by banks that will survive, after all, this is what used to make America Great. Allowing those who are foolish to fail. Something we have not seen in awhile except, when it comes to you and me. If my company can’t survive, I then must cease business. There would be no one to bail me out. This is as it should be and I would have it no other way.
So….let’s sum this up. As the Boy Scout Motto states, Be Prepared!!! We can see the possible danger on the horizon. What are you going to do?