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

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3/28/13

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.

14 comments :

  1. You know better. In the event of economic collapse, cash is worthless.
    Guns, ammo, food, antibiotics...things to have in excess as barter items will get you farther.
    As well I always said if you have extra money invest in firearms: You can use them while they appreeciate, and they liquidate easily when needed. Guns have gone up in value more in last 30 years than stock market, gold, or any other.
    I can't ay with gold or stocks while they mature, but i can with the ole trusty....

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    1. Nope. Most disasters do not immediately knock society back to a barter economy, but they will knock out the grid and the modern banking system with it. Good luck buying groceries or a tank of gas with guns and gold.

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  2. There are situations short of a total collapse in which this tip would come in handy. A temporary communications breakdown, such as that caused by a hurricane or earthquake, a bank's computer error, or a freeze of assets could happen to one person or region without causing complete economic collapse. Cash on hand for supplies or travel could be indispensable in such a scenario.

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  3. DiabloLocoMarch 29, 2013

    No offense Alex, but you are pretty far behind the curve when it comes to economic, political, scientific.....etc....etc...news. I have been wondering when you were finally going to post something about Cyprus. You're great with the guns/gear type stuff, but when it comes to the "causes" of a TEOTWAWKI event.....well.....much is left to be desired.

    All of that aside, I agree with the cash reserve comment, but there is more to it than that. Cash is king in the initial phases of a disaster/emergency. After that, goods/barter. Silver and gold will only begin to be valuable again in the rebuilding phase, so precious metals should only be considered for purchase after EVERYTHING else has been taken care of (beans/bullets/bandaids/barter goods).

    I recommend only leaving enough money in the banking system to cover your monthly expenses, as you mentioned. Perhaps you (Alex) should touch on the importance of multiple hidden cache locations, as well as hidden storage....etc.....in a future post.

    I hope that I have not offended you. I come to this site on a daily basis and appreciate all that you post here, but there is much more to preparing for disaster than gear/goods/skills. Being able to recognize what causes certain types of disasters, being able to see the warning signs, and knowing what the aftermath of certain disasters will be, is just as important.

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    1. Not offended...This blog isn't about current events, headlines or specific threats to society or safety. The "causes" are not particularly of interest to me as they tend to not materialize and invite in the tinfoil hat/sky is falling crowd. That's never really been the intention and it won't be changing any time soon.

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    2. DiabloLocoMarch 29, 2013

      Understood. You write for those that are still drowsy, those that are newly awakened, and those that perpetually hit that "snooze button". They like the counter-culture that comes with preparedness, but can't seem to overcome the brainwashing. Gotcha.

      Hopefully, your writings will inspire people to seek the truth about how things really are, and who really is pulling the strings.

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    3. I honestly write about whatever interests me at the time, and try to write that to appeal to the largest audience. Long time survivalists, newbie survivalists, concerned moms, etc.

      The mass media/political brain washing comes into play sometimes, but not usually. If folks want to read up on that kind of stuff, there's plenty of it out there. And honestly, I don't subscribe to a lot of the deep-end conspiracy stuff to begin with.

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    4. Maybe T-Blog isn't offended but I kind of am--DiabloLoco is kind of a d-bag.

      Btw, DiabloLoco I noticed in your comment you didn't provide any economy, political, or scientific news. You sure seem to be behind the curve when it comes to that stuff. You're great when it comes to whining about stuff but when it comes to the "causes" of a TEOTWAWKI event.....well.....much is left to be desired.

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    5. And only leaving 1 month worth of expenses in the banking system? Sounds like pretty terrible advice to me. Sure trusting the banking system has certain risks (everything does) but what are you going to do--keep $20,000 under your mattress? Are you ever going to buy a house or a car? Are you going to pay for your retirement with boxes of 9mm and canned spam? I'm all of preparing for the worst but not of the complete expense of my current survival.

      And what if your house burns down or floods or someone breaks in when your not there to protect your giant horde of cash. Bye bye life savings I guess. There is a reason banks exist--despite the risks they are extremely safe and convenient places to put your money. Hording tons of cash has plenty of risks that banks do not. Of course banks aren't perfectly safe and have risks (again, everything does) so I agree with T-blog in that you should have some cash on hand, but the idea that you should never keep more than a month worth of money in the bank is more than a little crazy.

      You need to adjust your tin foil hat dude--I think the FBI's alien mind beams might be making there way through.

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    6. DiabloLocoMarch 30, 2013

      LMAO! You are clueless. I didn't post any "news" because this is not my blog. It is Alex's. I am WAY smarter than you give me credit for. I know that I am tooting my own horn here, but my IQ is over 160. I am not some kind of "tinfoil hat" whack-job. I'm just well informed.

      Alex-

      This will be my last post here, as well as my last visit to this site. Sorry Alex. You have just lost a regular visitor. I have outgrown this site. Good luck to you in the future.

      KingHoju-

      I hope that you will eventually quit sipping the kool-aid. I know that "ignorance is bliss", but there is a whole lot of reality out there for those who seek it.

      I will leave you with these words of wisdom-

      *The true enemy hides behind a "red shield"......Laughing.*

      I challenge you to extensively research that. You will see that you may own me an apology.

      Keep your powder dry,
      DiabloLoco

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    7. KingHoju -

      Please avoid personal attacks and keep things civil, even if you disagree with someone or feel they are off base.

      DL -

      T-Blog can't be everything to everyone, and it's sure never been and never going to be about conspiracy theories, the Rothschilds, the UN taking over the country or whatever. Not sure why, with your long readership, you'd expect that kind of content here. Hope you find what you're looking for elsewhere.

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  4. What is really interesting about the Cyprus affair is that the shops and businesses are operating on a cash only basis. Delivery drivers are demanding cash before they'll unload.

    Now if you live there and haven't prepped yet it's pretty much too late. I saw a clip on supermarket shopping and the reporter was saying that whilst people are using cash, the shops are almost out of the basic long term foods like beans, pasta, etc. The staples are selling out. Candles, matches, etc, all sold out.

    Without doubt we all need cash on hand. No society will go from normal running to barter overnight. In my walk out bag I keep $200 in small denominations just so I can buy as I go if I need to.

    Those poor Cyriots may lose up to 80% of their savings. The E300 they can with draw daily is of little use if there's nothing worthwhile to buy. They've effectively been gagged and hog tied.

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    1. It's pretty ridiculous what's happening--the bailout happening by confiscating deposited savings.

      Cypress is also in a somewhat unique situation, as they are a part of the EU and the Euro is still a valid currency outside of the country. If Cypress had its own currency, said currency would probably be next to worthless at this point.

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  5. Good post! This Cyprus event has been very interesting and quite an eye-opener. Many of your readers may not know that US banks went into crisis mode when the banks closed over there. Our banks haven't done that since Lehman and Bears collapsed. This is still a big deal and anyone reading this should keep a enough cash on hand to cover crucial expenses from now on.

    Too bad you had to deal with the negative comments and criticism. Thanks for the work you do here on your blog.

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