AGXIIK: Stuck in a Burning Barn

fire contagionLast Friday, June 26, was D Day.  That was the last day a person in Greece, for all intents and purposes, had the banking freedom we take for granted here in the US.  Today the Greek people are now stuck in a burning barn, finding out that the system they relied on is broken.  If there is not even a small reset, sometime within a week or two, there will be riots when food and gasoline are gone.
The Greeks had many options before June 26 2015. 

One day the stores and gas stations were full: The next day they were empty.
Systems fail slowly at first and then very quickly. You must be aware of the warning signs of systemic failure.
Being 6 months early beats being 1 day late.

By SD Contributor AGXIIK:

A couple more things crossed my mind as I got to thinking about how one would deal with what the Greeks are grappling with right now.  

Simon Black’s column today caused me to consider what happens if we see the almost unthinkable; banks closed for a week or more, ATMs either off line or piddling out meager little stacks of cash, grocery stores stripped bare and gas stations on empty. What do we buy on a daily basis? Food and petrol.  This has happened in the US in the middle of regional or local disaster like a tornado, hurricane or blizzard. Hurricane Sandy and Katrina were classic examples of being in the wrong place at the wrong time. I’m not suggesting that every one run out in some frantic effort to buy up the grocery store or deplete bank accounts in the fear that the world will end tomorrow. Steady action to stack is the best policy in my opinion.

Two weeks ago a Greek could go to the bank and take out thousands of euros, empty their account and drive across the border to another country with their capital  That went for their gold and silver too.

A week ago they could have done the same.

Last Friday, June 26, was D Day.  That was the last day a person in Greece, for all intents and purposes, had the banking freedom we take for granted here in the US.  Today the Greek people are now stuck in a burning barn, finding out that the system they relied on is broken. If there is not even a small reset, sometime within a week or two, there will be riots when food and gasoline are gone.
 

The crash of 2011 should have alerted them to the fact that their system was broken, insolvent and running on fumes. Normalcy Bias is extremely strong, especially so for people living way beyond their means.  Whether the Greek people knew they were living on borrowed time or not is moot. That ship sailed 5 years ago.
 

Any insolvent person,  company or country that is living beyond their means will use any lie, ruse or story line, first to convince themselves they are in decent financial shape because they have a creck book with a positive balance and credit still available, and then spend uncountable hours convincing everyone else they are financially sound as they bleed cash and light speed. I’ve seen this syndrome hundreds, maybe even thousands of times in my 40 years of credit and finance.

In reality, it’s those people who are financially sound that are quiet and even self effacing when it comes to their position of financial strength. Think about the book The Millionaire Next Door. I joked about the John Goodman rant in the movie The Gambler, talking about a person being in the Position of F.U. It’s true that when a person is financially sound, they don’t make a big deal about it. There is no need to sound off. At best, it draws unwanted attention.

It is a matter-of-fact situation that does not require much explaining.  A person is highly liquid, with solid reliable income and a healthy investment in tangible assets that either produce income or can be converted to cash quickly.  I’m not talking just about gold and silver or market equities. Those can be liquidated quickly if the markets are normal. The Greek people don’t have a stock market at this time so they are stuck. We still do.

I refer to those items that can be used when the need is pressing, hold their value in good times and bad and are not subject to extreme manipulation. From a price stand point precious metals are insanely corrupted but their value will nearly always be more than zero.  Bond and stock values are even more corrupted. Their value can go to zero or even worse if there is a margin call and the market for that paper asset is zero.   You can’t eat those paper assets no matter how much A-1 sauce you use. If there is no market for your paper assets no matter what you do you’ll find no buyers.

The Greeks had many options before June 26 2015.  Bugging out was one. Moving to a safer location was eminently possible.  Liquidating all bank accounts was another. Selling stocks into a functioning market was possible. Filling their home, garage, storage space and closets with food and other items was another refuge from the coming storm  

One day the stores and gas stations were full: The next day they were empty. Even Venezuela, a country going through some really tough times, their systems failed very slowly.  People in the know could have done something to help themselves through their tough time. Today millions are on the edge of desperation. Systems fail slowly at first and then very quickly. You must be aware of the warning signs of systemic failure. Being 6 months early beats being 1 day late.

This brings me to the point of this essay.
 What can you do to give you and your family some reasonable assurance that you will weather all but the worst of storms? We see the clear fact that debt kills people, companies and countries. That begets supply chain shut downs.  The ‘What’ of the expedient ways to help yourself when your entire country, state or community shuts down is one important matter. The ‘When’ of it is just an important. Short of moving to another country, something that 99% of us cannot or will not be able to do? Being self aware, with good situational awareness, not giving into doom porn, putting a plan in place, sticking with the plan and moving towards your goal of self preparedness is one very good policy. Most of us on these boards has been doing this for months if not years. There is still time left but it grows short.

Being out of debt is very wise, thus reducing your counterparty risk. Paying off one credit card on a monthy basis is a prudent action. Mortgage debt is another matter, one not solved easily unless you have a large cash war chest that can be used for that purpose or you rent. If things go TU, your mortgage debt will probably be the least of your worries since you are the one protecting the asset the bank has liened for your mortgage. Ask people who have lived in homes for 5 years without making payments. They protect that asset for the bank and the bank knows that. Stock cash that’ll allow you to bring your mortgage current once the crisis ebbs.

The typical monthly obligations are one matter that you can handle easily. Prepay your phone, utilities, dues, and other monthly bills 3-6 months in advance, using the cash savings you’ve set aside. Pay these obligations forward. You’ll not only save the time spent writing out your bills, you’ll save on stamps. No one likes to support an another insolvent federal agency. Auto debits are not a good solution to prepaying since they are just-in-time systems. If the banks are on ‘holiday’, auto debit probably won’t work. Paying forward means you can judge how much you have on account with your phone, gas and electric companies. Maybe you think you are giving them a small advance loan but given the return on your checking account, just the savings on stamps is better than writing out monthly bills.

 

The Greeks are finding out quite quickly that having bundles of cash won’t buy them food or gas. Food will get you through times of no money better than money will get you through times of no food. This is a hard lesson that the Greeks are now learning.
The international banker war on cash is ill-defined but becoming quite apparent in Europe. Being in cash prevents your savings from being bailed-in. If you hold it, you own it. Having cash is infinitely preferable to the undesireable state of no cash. But cash has its limits. It’s not the be-all and end-all to preparedness. If part of the grid goes down, as is happening in Greece, it’s doubtful that people are worried about the next manicure or some new handbag in a high end store in downtown Athens. They are just now coming to grips with the fact that their “La Dolce Vita’ lifestyles are coming to a hard, screeching halt. The last 5 years of austerity are nothing when compared what faces the Greeks over the next few weeks and months.
The piggy bank is out of cash.
This is the first time a country has ever defaulted on an IMF loan This makes it a big deal and even bigger given that bankrupt Greece and its $150 billion GDP is a real peril to the entire European system and its common currency.
When you owe a bank 320 billion Euros, the bank has a problem.

 

There are ways out of this, all of which are painful. There is no standing in place, hoping for the best. Either the Greeks goes back to the Troika, hat in hand, and beg for more debt to stave off their bankruptcy and thus remain slaves to an unelected unaccountable banker thugocracy. Bankers are notoriously loath to give a debtor a break. All wars are banker’s wars.
The Greeks could exit the Euro and go it alone, taking the heat and pain like did Iceland when it went bankrupt in the global credit crisis 7 years ago.

 

There is no more muddling along, in the hopes that cash will buy something of value, something that sustains life and that the pensions and paychecks continue rolling in. That’s not going to happen. My post written on last Saturday outlined each item that is happening today. Not that the predictions were any great shakes given the unfolding drama could lead to one inevitable conclusion two days later.
The conclusions were drawn from the fact that the entire world lives in a DEBT/FIAT/PONZI PARADIGM. That means that every person who lives in the world of debt-fueled illusions of prosperity can find themselves in a world of hurt within 48 hours. Not that there weren’t months and years of warning that every Greek could see and hear. They just chose to ignore them and did so at their peril.

That said, we’ve had plenty of warnings laid at our doorsteps, from draconian financial and currency regulations to threatened bail-ins to bankruptcies of entire cities to regional disasters that make one’s home town life style untenable.
Having cash is good because that will buy pretty much anything, so long as the stores are full and shelves are stocked.

Having a back up to this is wise as well because it insures your well being when inventory is not forthcoming.

1 oz OPM Rounds 65 Cents Over Spot ANY QTY!

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