> TEOTWAWKI Blog: Cypress Bank Failures: A Lesson in Having Cash



Cypress Bank Failures: A Lesson in Having Cash

So I haven't been following the Cypress meltdown closely, but did manage to read a news article today about the limited re-opening of some of the banks. They've imposed a 300 euro limit on cash withdrawals, and this is after a long while with their banking system essentially shut down.

Why did the banks close in the first place? Quick lesson--banks make money by lending out or investing the money deposited within them. Only a portion of the deposits are actually liquid and available for withdrawal at any time. If everyone decides they want to clear out their checking and savings account, the bank doesn't have enough cash on hand to pay out. Bank essentially goes insolvent and belly up. So, in fear of that happening to their entire banking system, the banks in Cypress closed their doors.

So the banking system was shut down, and is now re-opening on a limited basis. Meanwhile, society there is otherwise functional. And in fact, bills are still coming in, rent is still due and so on, and, with ATMs and teller windows closed, people are screwed.

So, just like food, guns and ammo, easy access to money can be knocked out of commission overnight. Even faster, actually.

Just another example of why it's wise to have a stash of cash on hand. A month worth of expenses is a good goal. Certainly count it as part of your emergency fund, but don't file it away in your savings account in order to earn that .05% interest rate. Keep it in cold, hard cash. Just in case.