10A105 Don't Bank on It by Jim Davies, 12/18/2010    

Banks are not safe places to keep money. It's a great shame, because they have some quite clever and very convenient services for making it available at a distance with debit cards, and can transmit it, for a fee, irrevocably to someone else's account which is very handy if you need to buy something big like a car but can't be present in person. But all US and most other banks have violated their "fiduciary responsibility" to their customers - us - by agreeing to surrender to the government whatever it requests, whether information about your account or even its contents, without even the formality of a court order! Placing money in a bank is therefore the same as trusting it to government; and if you do that, call me about a bridge for sale in Brooklyn.

Additionally since they work with ersatz or fiat money that has no intrinsic value, they are at the mercy of the money printers in their professional association - the Federal Reserve - which in turn follows government policy in such things; the result is what we have seen since 2008, ie banks teetering on the edge of insolvency. Over 300 have failed so far, and the rate is increasing; that's out of a total of 8,430 and so is 3.6%, far too high for my comfort.

It's okay to borrow money from a bank, if one can be found to lend, because then the bank is trusting you and not the other way around. For a home mortgage that's fine and as Scrambled Notes observed, it may become better yet. But they aren't trustworthy as borrowers.

Doing without banks has two aspects: where to keep money, and how to manage cash, for current spending. Keeping it safe is a matter of choice; perhaps one can invest in a reliable company, so that the funds have dividends added, or perhaps play the stock, options or futures markets so as to gain as well as keep it safe. Those may all be trustworthy, but come with other kinds of risk, such as a collapse of the Dow and the possibility that such assets will be simply confiscated by government as it descends into total chaos. Commodities, on the other hand, are likely to keep their value, and gold and silver are current star performers. If those are chosen, the next question is where to hide them. This is not too hard: America has 225 million acres of "national forest" in which to bury the stash, using a GPS for exact coordinates, and there's a certain poetry about hiding wealth on government "property" and using government satellites to log its position. Beware metal detectors, however; I've heard a good plan is to dig more than one meter deep and enclose the metal in plastic tubing such as plumber's pipes - sealed, of course, at the lower end and capped at the top. Then leave the top meter empty and close to the surface so that it can be located easily when you want to access the wealth, by pulling up the whole pipe.

Cash handling is for now simple enough with LTNs (Legal Tender Notes, or "dollar bills") but ready for when a hotter meltdown occurs, a most useful article on Thursday in LewRockwell.com explained that "junk silver" is particularly suitable because coins made of silver keep their value. Currently, it says, they are worth about twenty times their face value; hence a silver dime is worth $2.00 today. Worth buying a few bags at a coin store, ready for when paper money reverts to its true value.

After government has evaporated, banks will serve as trustworthy depositories for real money, and so be useful members of society. Until then, it's a good idea to steer clear.

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