The following article refers to the US banking system, but the same issues exist here in New Zealand. In fact unlike the USA New Zealand has no bank deposit guarantee whatsoever. Once you’ve read this you might want to check out the below previous article outlining the system the Reserve Bank of New Zealand has put in place should a bank failure occur here:
By Justin Spittler
If you wake up tomorrow and your bank account is frozen… what will you do?
You probably remember when the financial crisis in Greece was dominating headlines a few weeks ago.
For years, Greece spent more than it took in. This led to a financial crisis that looked like it might destroy Europe’s financial system.
The Greek government closed all banks to prevent people from withdrawing all their money and crashing the banking system. Greek citizens could only withdraw €60 ($67) of their own money each day from ATMs.
European authorities eventually gave Greece a bailout… and the crisis dropped from the headlines.
But here’s something you probably haven’t heard from the mainstream media…
It’s now been two months and Greek people still can’t fully access their own cash.
Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe.
“Broad cash controls” means Greek banks are essentially frozen. Greek people can withdraw only €420 ($460) per week of their own money.
More from Reuters:
The longer it takes, the more critical the banks’ condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers’ ability to repay loans.
“The banks are in deep freeze but the economy is getting weaker,” said one official, pointing to a steady rise in loans that are not being repaid.
It’s a nightmare. I owe many people money now – gas stations and firms that service machinery. I have to go to the bank every single day, and the money I can take out is not enough.
• Short on cash, Greek people have resorted to bartering…
Reuters goes on to say:
A rising number of Greeks in rural areas are swapping goods and services in cashless transactions since the government shut down banks on June 28 for three weeks, restricted cash withdrawals and banned transfers abroad to halt a run on deposits and prevent a collapse of the banks.
“Bartering” means exchanging goods and services without using money. It’s how humans did business thousands of years ago.
Reuters reports how the Greek farmer is trying to survive the crisis:
Squeezed on all sides, the 41-year-old farmer began informal bartering to get around the cash crunch. He now pays some of his workers in kind with his clover crop and exchanges equipment with other farmers instead of buying or renting machinery.
Another farmer is trading cotton and wheat for bales of hay and machine parts, Reuters says.
This is a good reminder of something we stress often: the government controls any money you have in the bank. It can decide you’re not allowed to touch your own money at any time. Or it can put severe restrictions on how much money you can take out, like the Greek government is doing right now.
We began this essay with a question: what will you do if you wake up tomorrow and your bank account is frozen?
There’s no good answer. At that point, it’s too late. You need a plan in place before the government decides you can’t touch your own money.
• This is exactly why we wrote Going Global 2015…
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You may think the odds of such a complete financial disaster happening in the US are low. But even if that’s true, it still makes sense to prepare.
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