If you are rather speculating a situation where ALL banks are insolvent and there is zero liquidity in the system, then the federal government has presumably ceased to exist. Fiat money is backed by the faith into the federal government, if that money (including digital money in the banks) disappear, so does the government. If this situation is not resolved within hours, the entire financial system will seize up. If it is the US going through this - the entire world financial system will be dead before you cross the weekend.
No. This isn't the argument I was making. Yet another straw man. I agree that it is unlikely for everything to collapse. Nevertheless, even in your straw man you haven't shown how gold would not be helpful.
Instead the argument I am making and continue to make is that it can be helpful to have something else to sell when markets are not functioning properly or an individual does not have access to assets or credit that they normally do. This can happen for any number of reasons:
1.) Spouse dies, and the surviving spouse has credit cards cut-off and all or part of a their bank balance frozen temporarily (depending how the account is titled). Investment accounts cannot be easily accessed.
2.) Market for a type of asset that is supposed to be "cash" or "cash-like" seizes. I.e. auction rate securities.
3.) Client funds are stolen or simply never really existed. In the case of MF Gobal, client funds were invaded. And Madoff was a ponzi scheme.
4.) Bank receives a court order seizing assets. The order is improper and can be contested. Or it is applied to the wrong account. But bank applies order until it receives another court order correcting mistake.
5.) Someone erroneously reports to SSA that a person has died.
6.) Market for liquid asset seizes or becomes wildly inaccurate. Mortgage backed securities, so folks who needed cash from investments were required to sell other assets where the markets still functioned.
7.) War or civil unrest breaks out and people (although liikely not in the U.S.) need to leave with whatever they can carry, right now (yes, this still happens around the world).
This is not an exclusive list. I'm sure there are many other circumstances where there could be temporary disruption or interference with a person accessing their assets or in a market for a type of assets. Further most of these problems are solvable and the individual will eventually have access to their assets. But that doesn't help someone who has been frozen out of the "system" for the time being.
You *were* making a total loss argument, possibly without realizing, when you were invoking the seizing up of the the markets and the pricing mechanism.
No I wasn't. Total loss means the value goes to zero and there is no hope of recovery. This is not the argument I am making.
I've written disaster recovery plans for banks and financial institutions in a professional capacity. So the above is not just empty blather. Banks design critical systems with utmost degree of redundancy possible, as well as an extreme degree of disaster recovery tolerance, for this reason. Walk into any bank and every 1 GB of "system of record" data creates 40-100 GB of direct physical backups, and backups of backups and so on. Last time I was a consultant working on a disaster recovery plan for a banking system, the partner gave me a hard time for not including a section of how that plan will work in case of a Carrington Event (https://en.wikipedia.org/wiki/Solar_storm_of_1859) that has destroyed all production data centers.
Thank you for this. I'm glad the powers that be have thought of everything and employed talented individuals like yourself to make sure there will never be another financial crisis again.
@ctuser1, look, no one is going to tell you that you are wrong for avoiding gold. Do whatever you like. I'm sure you will be fine. But, you are participating in a thread that explores the nexus between gold, capitalism, and mercantilism. So there are going to be pro-gold comments. Instead of dismissing them all as laughably out-dated or trying to stuff other peoples mouths with cooky straw man arguments perhaps you could take a step back and look at the modern economic climate.
Fiat currency removes complete settlement from purchases that are made in cash. Fiat cash is just a promise. Under a gold standard, it was linked to promise to deliver gold. Since 1971 that has no longer been the case. When a seller is paid cash through a credit transaction, this is obviously use of a promise. When you pay by check this is your bank taking their promise to you and promising it to someone else; and your promise balance is deducted accordingly. When you hand someone paper cash, this carries a promise that they can use it to pay debts ("good for all debts..."). And that person can take the paper cash and pay forward the promises. In all of these transactions there needs to be either an implicit or explicit underwriting by a third party, be it the government that requires fiat cash is accepted for settlement of debts, or a third party credit card processor who extends credit and agrees to accept transfer of promises from a bank later, or a bank which maintains a balance which is a promise to the account holder. Financial assets too are promises. Either promises to deliver a certain number of dollars on a fixed schedule (bonds) or a promise to divide profits (stocks).
And it is this way for in every fiat currency system... But, the system works until it doesn't. When people get it in their heads, for whatever reason, that a person or group of people are not entitled to the promises they have normally been afforded, then either an entire portion of the system will grind to a halt. Or in the case of an individual, the individual will be froze out of the system and might not have an ability to participate in economic transactions, be it selling financial assets they own, or withdrawing cash from a bank, use using a credit card to buy gas, or paying by check.
Gold does not needing a third party to implicitly underwrite transactions settled in gold. The parties to the transaction can agree themselves on the quality, fineness, and amount of gold to be delivered at a future date and can easily verify that this has been delivered. And because of this, an amount of gold can be very easily sold and converted to fiat currency at any point in the future. I agree it's not the prettiest solution. (And just to be sure, I do not think people are going to start walking around with leather coin purses holding their gold wealth in the future.) But when the going gets tough, it is nice to be able to reach into a safe and have the ability to sell something of value at a reasonable price to make it through a rough patch.
