MY ASSETS (Is My bank safe?)
For those lucky enough to still have Assets, here are some
• Risk Factor 1: Inherent Risk in Cash
Bank deposits take on the individual company risk of the
bank. You are also taking on government risk, as all cash
is a promise from and a belief in the government.
• Risk Factor 2: Global Bank Run
Many countries around the world are currently in the process
of guaranteeing bank deposits. This would seem to indicate
that in these countries, cash deposits should be “safe”.
However, there is significant fear globally of a mega bank
run on deposits. How the system would hold up in the event
of a global bank run is uncertain, and many believe it will
result in the shutting down of the global banking system
for a period of time. For this reason, many are recommending
that people hold an amount of cash on hand equivalent to
3 months requirements, in order to ride out any period of
• Risk Factor 3:Hyper-Inflation.
Even if deposits remain safe, there is the danger that savings
will be wiped out by hyper-inflation. Hyper-inflation is
basically caused by the various governments printing too
much money in an attempt to stabilise the economy. Prices
of goods go up on an almost daily basis, and the value of
savings rapidly approaches zero. Precious metals such as
Gold and Silver are an excellent hedge against Hyper-Inflation.
However if Deflation occurs (where prices decrease due to
lack of money circulating), then the price of precious metals
could fall sharply. A balanced approach is probably most
sensible, whereby a percentage of wealth is invested in
Gold, and possibly other precious metals, and a percentage
of wealth is retained in other forms, such as cash deposits,
treasury bills, physical bank notes etc.
• We believe one of the safest way of preserving wealth
is through investment in physical equipment used in the
production of essential items. These “useful things”,
such as industrial plant and equipment, farming equipment,
generators etc. will hold their value regardless of turbulence
in the economy, whereas wealth in the form of cash or gold
could be wiped out.
• Lower cost items, such as hardware, tools, camping
equipment, matches etc. will also retain their value and
could be bartered for needed goods and services.