How safe is money in the bank? options?

[sptrawler]

An interesting article that I saved a while back regarding the "safety" of cash held in our banks ...

https://www.ainsliebullion.com.au/g...s-your-cash-now-/tabid/88/a/1722/default.aspx

The Fiat monetary system is based on confidence.
Confidence that the money you tender, is accepted for the article or service you buy and the person who supplies that product or service expects to be able to transfer that money and recieve the same value.
Once that confidence is broken, your monetary system is broken.
That is why the 4 pillars are so important. IMO

 

[basilio]

1oz to 10oz gold coins or gold bars. 1oz is AUD 2500+ now. 10oz is 25k. so 10 of those buried in your backyard and bobs ur uncle.

With all the rate drops and helicopter money the gov is dishing out, AUD will just devalue and not worth a thing in the near future, especially during this coming recession. Bank deposits will be eaten up by negative rates.

Have you scored any 1920 Sydney gold sovereigns for your stash ?
Fascinating story.
https://jaggards.com.au/Pages/educa...ralias-rarest-coins-the-1920-sydney-sovereign

 

[aus_trader]

1oz to 10oz gold coins or gold bars. 1oz is AUD 2500+ now. 10oz is 25k. so 10 of those buried in your backyard and bobs ur uncle.

With all the rate drops and helicopter money the gov is dishing out, AUD will just devalue and not worth a thing in the near future, especially during this coming recession. Bank deposits will be eaten up by negative rates.

Agree with Dollar devaluation and further loss of savings by the current Zero Interest Rates (effectively -ve when you factor in inflation) or further cuts by RBA pushing it into -ve Interest Rates (Double -ve when you factor in inflation). So on the same page in terms of believing Gold as a means of preserving wealth.

I have thought about physically owning Gold extensively and explored all the options in an old thread here that I created with heading:

Storing Physical Gold - Coins etc.

In the end concluded safe storage at a vault can be quite costly and backyard burial is too risky to prevent against theft of your wealth.

So although not perfect I get Gold exposure via Gold related ETFs and via asx listed Gold miners.

As to the original post, I also have an over-weighting to cash which is held at a Big4 with similar thoughts about 'how safe it is' if banks get squeezed. In other words what happens if they experience asset write downs.

Note: Bank assets are Debt and Loans issued to individuals and businesses. So my concern is how much loan defaults (asset write downs) their balance sheet can take before the bank is in trouble...

 

[bluekelah]

Agree with Dollar devaluation and further loss of savings by the current Zero Interest Rates (effectively -ve when you factor in inflation) or further cuts by RBA pushing it into -ve Interest Rates (Double -ve when you factor in inflation). So on the same page in terms of believing Gold as a means of preserving wealth.

I have thought about physically owning Gold extensively and explored all the options in an old thread here that I created with heading:

Storing Physical Gold - Coins etc.

In the end concluded safe storage at a vault can be quite costly and backyard burial is too risky to prevent against theft of your wealth.

So although not perfect I get Gold exposure via Gold related ETFs and via asx listed Gold miners.

As to the original post, I also have an over-weighting to cash which is held at a Big4 with similar thoughts about 'how safe it is' if banks get squeezed. In other words what happens if they experience asset write downs.

Note: Bank assets are Debt and Loans issued to individuals and businesses. So my concern is how much loan defaults (asset write downs) their balance sheet can take before the bank is in trouble...

Gold miners are leveraged plays and have some execution risks. Gold ETFs are just ETFs. When **** hits the fan and stock exchange is halted, how are you gonna access your funds?

Physical gold is not for investment. Its a insurance policy you keep that tides you through bad times.

a 10oz bar is only the size of a car's remote control weighing ~311g and worth $25k. $250k (bank deposit guarantee) means you can get ten of those and hide them all around the house and backyard, under pavers etc... and if you buy 1oz gold coins you have 100 coins you can hide everywhere, just as in stocks you have just diversified your gold holdings at home I challenge any robber to find all 100 coins. But i am pretty sure that 250k will disappear from your bank account or be inaccessible when a banking crisis hits.

 

[basilio]

Gold miners are leveraged plays and have some execution risks. Gold ETFs are just ETFs. When **** hits the fan and stock exchange is halted, how are you gonna access your funds?

Physical gold is not for investment. Its a insurance policy you keep that tides you through bad times.

a 10oz bar is only the size of a car's remote control weighing ~311g and worth $25k. $250k (bank deposit guarantee) means you can get ten of those and hide them all around the house and backyard, under pavers etc... and if you buy 1oz gold coins you have 100 coins you can hide everywhere, just as in stocks you have just diversified your gold holdings at home I challenge any robber to find all 100 coins. But i am pretty sure that 250k will disappear from your bank account or be inaccessible when a banking crisis hits.

I can see a point here but I wonder how useful gold bullion will be if we have reached the stage of collapse of banks. ? Historically jewels and gold were ways to transform your physical assets into portable discreet units that you can use in another place to restart your life if you have to flee. For example from Germany or China. It assumes one is going into an economic system that is still robust and will value what is essentially a heavy pretty piece of metal.

 

[bluekelah]

I can see a point here but I wonder how useful gold bullion will be if we have reached the stage of collapse of banks. ? Historically jewels and gold were ways to transform your physical assets into portable discreet units that you can use in another place to restart your life if you have to flee. For example from Germany or China. It assumes one is going into an economic system that is still robust and will value what is essentially a heavy pretty piece of metal.

Well in the slim chance we reach the stage of collapse of banks, which has happened in some developing countries, physical gold would be very very useful. Look at countries like Greece. Had they defaulted, their currency would be useless now. Greeks owning gold would be laughing to the bank.

Its one of those situations that has almost no chance of happening but that you want to be prepared for in case it does, especially if you are a high net worth individual or have some significant wealth.

Historically jewels and gold were a store of wealth. Not just for fleeing. It was also the basis upon which currencies were based in order to give confidence .

In any case, usually we wont know how useful it will be until the day u need to use it. Just like facemasks and hand sanitizers

Would anyone have envisioned a day where we would get thousands and possibly millions dead from just a simple virus? or possible economic devastation , recession and a drawn out global depression? Its been a long time since the spanish flu, and its also been a long time since the USD was not backed by gold anymore...

 

[sptrawler]

I can see a point here but I wonder how useful gold bullion will be if we have reached the stage of collapse of banks. ? Historically jewels and gold were ways to transform your physical assets into portable discreet units that you can use in another place to restart your life if you have to flee. For example from Germany or China. It assumes one is going into an economic system that is still robust and will value what is essentially a heavy pretty piece of metal.

How much of your bar of gold do you give for your fuel, or your basket of groceries?
Do you carry a hacksaw to cut bits off, or do you sell it for cash? But you cant do that because there isnt any banks.
It all sounds like nonsense to me, but what do I know.

 

[sptrawler]

Well in the slim chance we reach the stage of collapse of banks, which has happened in some developing countries, physical gold would be very very useful. Look at countries like Greece. Had they defaulted, their currency would be useless now. Greeks owning gold would be laughing to the bank.

Its one of those situations that has almost no chance of happening but that you want to be prepared for in case it does, especially if you are a high net worth individual or have some significant wealth.

Historically jewels and gold were a store of wealth. Not just for fleeing. It was also the basis upon which currencies were based in order to give confidence .

In any case, usually we wont know how useful it will be until the day u need to use it. Just like facemasks and hand sanitizers

Would anyone have envisioned a day where we would get thousands and possibly millions dead from just a simple virus? or possible economic devastation , recession and a drawn out global depression? Its been a long time since the spanish flu, and its also been a long time since the USD was not backed by gold anymore...

Who do you sell your gold to and what do you get in exchange for it?

 

[bluekelah]

Who do you sell your gold to and what do you get in exchange for it?

depends on whatever currency is still surviving at that point i suppose. there will be some central banks surviving as their sovereign countries do not have any external debt that they could default upon such as Singapore or Switzerland

 

[aus_trader]

Great discussion but I think end of world scenario where people have to exchange physical Gold is unlikely. If you really believe that. it's probably OK to hold a few Gold coins as insurance and probably will sleep better having something physical tucked away.

As sptrawler said, paying for your goods and services using Gold bars or parts of it would be impractical and I wouldn't want to take the risk of being robbed of my wealth plus some on a few shiny bars.

I do believe a small % of your investments could be Gold related, as I do believe it could preserve wealth, but not necessary to have the stuff physically to hold on to, except for a couple of coins maybe.

Fun topic to discuss and you never know it may help you learn something new in the process in terms of wealth preservation, but I'll be taking no extreme measures. Not even with the current health situation in terms of hoarding, bunkering down etc. Yes it may affect day-to-day life but nothing extreme in terms of investments.

 

[bluekelah]

How much of your bar of gold do you give for your fuel, or your basket of groceries?
Do you carry a hacksaw to cut bits off, or do you sell it for cash? But you cant do that because there isnt any banks.
It all sounds like nonsense to me, but what do I know.

That's why u have some cheap but heavy and bulky silver bullion lying around. If u just have gold it's alright too, there's a heap of silver stackers happy to trade u some for gold..

 

[aus_trader]

That's why u have some cheap but heavy and bulky silver bullion lying around. If u just have gold it's alright too, there's a heap of silver stackers happy to trade u some for gold..

Probably not a bad idea to have some Gold and Silver coins if there is economic Armageddon. I would also ensure there is some AUD physically held as well if your funds are frozen at least for a short while, till they pump more liquidity into the system or work out some rescue package. It'll be easier to pay for goods and services or to trade with what is familiar.

Other than that, shouldn't really panic and make any drastic measures that could hurt you financially. It's business as usual, currently I have liquidated the stocks except for a couple of Gold ETFs (for long term wealth preservation purposes as I mentioned) and will start buying back stocks once things settle down again and will journal what I'll be buying in the Speculative Stock Portfolio.

 

[Sdajii]

If any of the big 4 banks fail, FIAT currency is worthless and society has collapsed. The main commodities would be food, anything relevant to survival (clothes, tools, etc) and weapons.

I don't think we're going to get to that stage, but to get to the stage where the big four banks die, the government would have to cease functioning, services like police etc stop operating, and in the short term physical gold is probably going to have little value.

The big banks are the safest place for your money. If they fail, money has no value anyway. If you actually think the banks may fall, convert your money into non perishable food, weapons, survival eequipment, etc.

 

[Dona Ferentes]

On Friday, the Reserve Bank provided a record $8.8 billion of short term financing to the money markets, which the banks tap for funding. That came a day after the Morrison government announced a $17.6 billion fiscal support package.

The Reserve Bank is also expected to roll out a funding facility, similar in nature to the Bank of England's term funding facility, that would encourage the banks to lend to small businesses and households even as interest rates fall to near-zero levels.

Westpac's acting chief executive Peter King says the big four banks are strong enough to withstand a sharp rise in bad debts and a freeze in credit markets but warned that the biggest issue was how long they can keep afloat business borrowers with no cash flow.

Throwing some of the burden back on to the federal government, Mr King said the crisis "was a real economy issue that needs to be dealt with as a real economy issue," as households and businesses would require unprecedented support.

Mr King said Westpac had ample 'liquidity' and he, along with the bank's treasurer Curt Zuber had issued long-term debt that does not need to be repaid for several years before the coronavirus induced market panics led credit markets to close.

“The GFC was about banks not being confident with each other – but that is not the case," Mr King said. "We can sit out for longer periods without dealing with each other. We are well prepared to stay out of the market.”

The big four banks are heading into coronavirus well prepared as regulatory changes have forced them to increase their capital levels whilst also upping their holdings of safe assets that can be sold into the market on short notice to fund deposit withdrawals. The banks have also been forced by regulation to spread the proportion of long-term debt they raise further into the future, reducing the amount they are required to re-finance in any given year.

Mr King said Westpac was thinking about fulfilling the critical capabilities to the economy, That includes “having branches open, ATMs working, internet and digital banking operating, making sure our cyber teams are focused on protecting data at critical points, and keeping lending going.

AFR

 

[PZ99]

In this thread scenario I would just pay all my bills a few years in advance and keep a record.

No one can devalue what you haven't got

 

[basilio]

In this thread scenario I would just pay all my bills a few years in advance and keep a record.

No one can devalue what you haven't got

Interesting idea. Perhaps things like Council Rates, Water charges maybe phone bills with a rock solid provider ?

Could be a problem pre paying future bills to a company that folds in 6-12 months. Same with insurance companies.

 

[againsthegrain]

In this thread scenario I would just pay all my bills a few years in advance and keep a record.

No one can devalue what you haven't got

hmmm and if the companies go bust you have credit with or some good investment opportunities arise in the future

 

[PZ99]

Well my strata fees, council and water are non discretionary so I usually pay them 12 months in advance from divvy payments. $7k a year. They won't go broke.

But if the whole system went down the toilet I'd probably go with 10 years.

At least I won't lose the house. My man cave has free power so that's all good.

And there's a planter box big enough to grow some of Ben Rickerts' seeds.

Who knows? I might even qualify for newstart if I have no money in the bank

 

[jbocker]

1oz to 10oz gold coins or gold bars. 1oz is AUD 2500+ now. 10oz is 25k. so 10 of those buried in your backyard and bobs ur uncle.

You watch out for that 'uncle bob' hanging around your front yard holding a baseball bat and metal detector.

 

[basilio]

You watch out for that 'uncle bob' hanging around your front yard holding a baseball bat and metal detector.

Something to think about.
The current COVID 19 virus is putting a huge strain on police resources. There will also be many people losing jobs and getting desperate. I think desperate, opportunistic theft could rise in the next few months and the police ill be unable to do much about it

On a similar note I think there will be sharp increase in internet scams and frauds.