[PlannerBee]

My friend said something that alarmed me the other day in reference to the devaluation of the dollar. Lets say I have $5,000.00 in the bank and things get ugly. She said that if I wanted to take out that $5,000.00 that they might not actually give me $5,000.00. That they might dispense it back to me at a reduced rate. For instance, for every dollar bill I have in my pocket today they may only give me .50 in a year. If that is the case, then I might rather pay off all my bills and not sit on much cash. I hope I am making myself clear. She said they might print up new one dollar bills and for every two of the current ones I have I get back one new dollar. Is this true? Is this likely?

[foodnotlawns]

I buy silver coins (about 8 bucks each) and when I can get up the money, gold coins (about 440 a coin). that's your best bet against money devaluation -- you might even get rich off it.

[some_guy282]

Well, the essence of the dollar losing value isn't that they'll give you less back at the bank, they'd give you the same amount but the dollars will have less purchasing power.

Now if you're talking about mass runs on banks and everyone demanding their money back at the same time, that might be something different. In that case I think some people would get all of their money back, but once the bank ran out of cash on hand everyone else would get none (still FDIC insured of course). The money would still be in the bank account, just no physical paper to hand out. Are there any precedents from the great depression anyone has to offer?

I second the whole gold/silver thing. I'm buying some coins myself. If you have a significant amount of cash savings, you're better off spending it on precious metals now before it loses its value.

[mgibbons19]

$this->bbcode_second_pass_quote('foodnotlawns', 'I') buy silver coins (about 8 bucks each) and when I can get up the money, gold coins (about 440 a coin). that's your best bet against money devaluation -- you might even get rich off it.

[Leanan]

When TSHTF, whether due to peak oil or dollar collapse, trust no one. The government could issue new currency, the time-honored way of dealing with inflation, and screw you over just the way your friend said.

The bank could also go belly-up, leaving you with nothing. A lot of people think that can't happen any more. There's FDIC insurance now! What happened in the '30s can't happen now.

Don't count on it. One, FDIC covers only $100,000. Two, even if you're under that, you're not safe if TSHTF. The federal government does not have the resources to pay up all the claims if there are widespread bank failures, or even just one or two big ones. (If Morgan-Stanley and/or CitiBank go down, there's no way the feds can cover all the depositors' losses.)

I'm not saying you should put all your money in the Bank of Serta. But spreading it around - diversification - might be a good idea. Use different banks, put some in real estate, some in gold, some in stocks or bonds, etc. And if inflation starts heating up, spending it may be a good option. Buy food, tools, clothes, etc., now, because tomorrow they'll be more expensive.

You know, we could really use some peak-oil aware financial planners...

[mizzou]

My advice is to keep the minimum amount of money in the bank as possible to run your daily life (i.e checking account). If you don't want to buy silver and/or gold coins, then put the remainder of the money in a US Treasuries only Money Market account. I would suggest Vanguard just because Vanguard is structured so that the company is owned by the people who have invested in their funds (kind of like a co-op).

My reason for this is simple. Banks really don't have your money, maybe only 2-3% of the banks assests are in cash. FDIC insurance is only good if only a few banks go under and if one of the larger banks (Citibank, Chase, etc) went under, I don't think you are going to get your money back. The government will not be able to make all the deposits whole.

[aahala]

If you're really concerned about insurance of accounts, then you
should get out of all financial assets--if FDIC is no good, neither
is the government and therefore your currency is worthless.

So in this scenario, you don't want stocks, bonds, IRAs, bank
accounts etc, because if you cash those, you will be getting
paper money of no value.

[RdSnt]

$this->bbcode_second_pass_quote('foodnotlawns', 'I') buy silver coins (about 8 bucks each) and when I can get up the money, gold coins (about 440 a coin). that's your best bet against money devaluation -- you might even get rich off it.

[Yavicleus]

I've bought over $3k of silver on ebay. Gotta be careful from who you buy though. I have mostly bought bullion grade, since when it comes down to it, most people don't know the difference between the various coins. To pawnshops, an oz of silver is an oz of silver.

As far as money in the bank, I'd say try to stagger your accounts. Say, hold some money in metals, hold some in the bank, maybe hold some government I-bonds (inflation indexed).

Most important thing is to get out of debt. If you're going to invest in stocks or real estate, be real careful about over-valuation.

Consumer Reports has a section on housing costs across the US. It's a good place to see if your local market is overvalued relative to income levels.

After all, the crash could be tomorrow, or it could be 10 years from now. We really don't know.

[pup55]

$this->bbcode_second_pass_quote('', 'A')re there any precedents from the great depression anyone has to offer?

[Grimnir]

$this->bbcode_second_pass_quote('mizzou', 't')hen put the remainder of the money in a US Treasuries only Money Market account.

[mizzou]

You conviently left the first part of the sentence off where I said "If you don't want to buy silver and/or gold".

The US governement will be the last to default on their obligations since they can raise taxes and/or print money to cover their obligations. Most Money Market accounts contain short term debt of corporations. No one ever thinks that these corporations could default even on their short term debt, but if things get really bad, it will happen.

A person needs some money in the bank to function in the society we have now. Keep it at a minimum to function in your life, whatever amount that may be. The rest of your money should be in a safe place. You decide what is safe.

The most likely scenario that I see coming in the next 10 years is a very bad recession and/or depression. Two things can happen in regards to money in a depression, either you have hyperinflation (Weimar Republic in Germany during the 1930's) or deflation (US during the 1930's or Japan during the 1990's). Hyperinflation you should invest in commodities and other hard assests. For deflation, cash is king and each year the same amount of cash will purchase more goods.

No one is smart enough to know which one will occur, so prepare for both. Buy gold and silver for the possibility of hyperinflation and have cash and no debt for deflation.

[charperus]

Hello ALL,

in case the Government changes currency: let's say TWO old Dollars for ONE new Dollar, what will happen to Gold/Silver; i.e.

* presently, one Oz of gold is about $US 428.00; thus in the new Dollar, will it be $US 214.00 ? that's the simplest reasoning, right?

* or Gold may cost more , (even in the New Dollars) ...when Fiat money is no longer trusted!

Charperus

[blackaddr]

just reading up on gold. Doesnt seem like a half bad investment to me.

http://www.gold-eagle.com/gold_digest_0 ... 40105.html

silver looks good as well, just get a 600 year perspective

http://goldinfo.net/silver600.html

[linlithgowoil]

im pretty lucky in that hyperinflation/economic collapse will actually improve my financial position as it will annihilate all my debt. i have no savings. its great not having savings - you don't have a constant worry about losing them all

[Free]

Be careful with putting everything into precious metals. I have the strong suspicion that, after a big dollar crisis, the US-government will issue a "new dollar", backed by gold again, and for this purpose could confiscate all gold/silver again, like they did before.

They will just offer you "new dollars" for your precious metals, at a very bad price. Of course you could hide it, but what purpose has it to you if you can't trade it? Would you trust your fellow citizen not to blow the whistle on you if you try to barter something in gold?

Probably the best investment in the future is fertile soil....

[Leanan]

I think the best investment is in yourself. Learn skills that will be useful, in a long, slow slide or a sudden collapse. They can never be taken away from you, as everything else - cash, metals, guns, land - can. Organic gardening, solar technology, bicycle mechanics, living off the land, spinning, weaving, sewing and knitting, nuclear engineering, hunting, leatherwork, carpentry and stonemasonry, nursing, etc. Having useful skills to trade will be more valuable than gold.

[JoeW]

$this->bbcode_second_pass_quote('mizzou', '
')No one is smart enough to know which one will occur, so prepare for both. Buy gold and silver for the possibility of hyperinflation and have cash and no debt for deflation.

[Sgs-Cruz]

$this->bbcode_second_pass_quote('JoeW', '
')Isn't preparing for both the equivalent of preparing for neither?
It's kind of like playing roulette and placing similarly-sized wagers on RED and on BLACK.
Each wager is a hedge against the other.

[Grimnir]

$this->bbcode_second_pass_quote('mizzou', 'Y')ou conviently left the first part of the sentence off where I said "If you don't want to buy silver and/or gold".