You don’t really need to sleep tonight, do you?

Money.  If you really think about it, money is the ultimate tool.  If you have money, you can obtain pretty much anything else you need.  You can buy land, a vehicle, food, a necessary service–all it takes is money.  Money may not be able to buy you happiness, but it can buy just about anything else.

Banks.  John Dillinger once said he robbed banks because “That’s where the money is.”  While not a completely correct statement, for certain segments of society, it is mostly correct.  I would hazard to guess that, despite the urgings of many in the preparedness culture, most of you who read this blog have more money in bank accounts than you do in cash or precious metals.  I do, and I’m not ashamed to admit it.  I prep as insurance.  My long term bet is that our society will somehow figure out some way to muddle through our current difficulties, so most of my money is in the safest place I currently know of–a credit union, which is sort of a bank.

Long term difficulties.  While I believe we will indeed figure out things over the long term, humans usually think and operate over the short term.  Most people have a difficult time thinking in the long term, traditionally defined in business as “5 years or more out”.  One year, perhaps two is about all most people consider when making decisions.

That is why The Lurking Crisis of Bank Deposits by George Friedman is something that you really need to read, re-read and re-re-read if necessary until you fully comprehend it.  Because it is about money, banks and long term difficulties.  Do you remember the banking crisis in Cyprus?  Come on, it wasn’t 3 years ago–surely you haven’t forgotten?  Where all those wicked Russian crime bosses had most of their bank accounts nabbed in a “bail in”?  Along with the bank accounts of an unknown but large number of businesses and retirees, none of whom have recovered.  Neither has Cyprus for that matter, and in my opinion they don’t deserve to do so.

Now it appears Italy is the next on the block for bank account holders to get a “Cyprus Haircut”.  It’s all the latest thing–if your bank is failing, why, take the depositors’ money to keep it afloat.  Of course, now that the depositors are wise to the game, they are going to be withdrawing their money sooner, creating the bank runs the government is trying to keep from happening in the first place.

Here in the US, the FDIC covers $250,000 in individual deposits.  You can do some structuring to leverage that into a larger amount.  And that’s all fine and good until the FDIC goes broke because too many banks have went belly up at the same time.  Or the government decides that “too big to fail” is a fail on its own.

The times, they are a-changin’.  Bob Dylan sang that line back in the 60s.  It’s as true now as it was then.  While the hippies thought the change was for the better then, it doesn’t appear to be so much so now.  Now, it’s time to think about how we, as non-big fat cat investors, as just little guys and gals, can preserve our capital in an increasingly hostile environment.  Fortunately for us, we don’t have to hurry just yet.  At least I think not.  I believe there will be warning signs long before bail ins become widely considered here.  However, I would start planning and definately make some first steps toward diversifying the places where my cash was stored.  Sure, you may lose some interest or incurr some costs.  But it’s better than losing almost all of it to a bad haircut.