Bank account closures ‘unjust’

Another reason to learn how to barter and diversify into bitcoin and be your own bank.

From BBC News:

The chairman of a key consumer body has called for changes in the way banks deal with customers allegedly involved in fraudulent activity.

Banks currently close customer accounts without explanation and refuse to discuss their decisions.

Adam Phillips, who chairs the Financial Services Authority’s Consumer Panel, says current practices go against the rules of natural justice.

The banks say they are following anti-money laundering rules.

Radio 4′s Money Box programme first highlighted this issue when it reported how a six-month-old baby girl had her account closed in error following an incorrect allegation of fraud.

Once an account is closed, fraud prevention agencies put a flag against the customer’s name so they cannot normally then open an account with another provider.

You cannot find out what you’re accused of”

Adam Phillips FSA Consumer Panel

Mr Phillips said: “You cannot find out what you’re accused of, you cannot plead your case and you find yourself unable to open a bank account and nothing can be done about it. What’s happening goes absolutely against the rules of natural justice.”

“Fred”, a 20-year-old student, had his account closed last year by NatWest.

In December he was on holiday in France, when he received a call on his mobile. “It was a man who said he was from NatWest.

“He said cheques had been paid into my account in error. He said I should leave the money alone, and correcting balances would appear and the money would move out of my account.”

You feel like a criminal when you’re marched over and marched out the door”

“Fred” NatWest customer

Fred assumed it was being sorted out, but when he returned home, his NatWest debit card was swallowed by a cash machine.

When he contacted his bank, he was told his account was being closed: “I was made to go to the counter and clear my account in cash. You feel like a criminal when you’re marched over and marched out the door without being given any reason as to why your account is being closed.”

The fraud prevention service CIFAS told him that beside his name was now an entry submitted by NatWest which said he had committed “first party fraud”, which it described as the fraudulent misuse of a bank account.

Fred had no idea how this flag could have appeared. And as he could no longer access his bank statements, it was impossible for him to find out.

Banking error

When he went again to his local NatWest branch to demand to see a list of transactions on his account, he saw that payments totalling about £9,000 he had no knowledge of had been paid in.

I can confirm that our decision to close your account remains the same”

NatWest account closure team

So he wrote to NatWest’s fraud department saying the cheques had nothing to do with him and urging staff to investigate and clear his name.

In January, he received a reply from a member of NatWest’s account closure team: “I have thoroughly investigated your complaint and following a review of your case, I can confirm that our decision to close your account remains the same.

“The bank has made a commercial decision to close your account. I cannot enter into further correspondence with you on this matter.”

Fortunately, Fred then remembered the mysterious call he had received in France about payments made in error into his account.

Turning detective, Fred’s dad tried to discover who had made the call by looking at the log of received calls recorded in his son’s mobile phone. He managed to trace the number back to a branch of NatWest in Oxford.

Changes required

Finally, when Fred contacted the branch about the call, staff admitted that someone in the bank had mistakenly paid in eight cheques totalling £9,000.

The branch staff there immediately promised to contact their colleagues in the bank’s fraud department to sort things out.

The branch made an error and paid in cheques to the customer’s account.”

Natwest

It was not just Fred’s NatWest account which was closed. HSBC also closed his current account after it saw the fraud flag. And when Fred tried to open an account with Barclays so he had some banking facilities, within a couple of weeks that was closed for the same reason.

NatWest said: “The branch made an error and paid in cheques to the customer’s account. We did not pick this up in the first complaint.

“However, after he challenged the response to the initial complaint we picked up the error, overturned the decision, all credit default markers, and notified HSBC and Barclays. The customer was also offered £1,000 as well as reimbursements of costs £75.”

Mr Phillips has asked the FSA to look into how widespread the problem is.

He also believes that fraud prevention agencies must allow innocent victims like Fred the chance to challenge their records. He said: “There has to be a discussion about an appropriate appeals procedure to decide whether the reporting is fair and whether it can be lifted.”

Billionaire denies ‘criminal activity’ after trying to board plane with £700k in cash – cash confiscated

This is why bitcoin is better for crossing borders. See our Bitcoin for Beginners Resource Guide for more info.

From The Daily Mail:

A South African billionaire says he should not have been treated with suspicion for trying to board a plane with nearly £700,000 in cash – because that amount of money is peanuts to him.

Customs Officers seized £674,920 from Dr Christoffel Hendrik Wiese at London City Airport in 2009 and a judge later ordered the money be forfeited as ‘the proceeds of criminal activity’.

But Dr Wiese, who is South Africa’s third-richest man, has launched a High Court bid to claw back the cash, citing his entirely clean criminal record in the UK and abroad.

His barrister, Clare Montgomery QC, told the court: ‘The amount of money was consistent with Dr Wiese’s stated wealth, representing less than two weeks’ income and a minute fraction of his assets.’

Dr Wiese – worth an estimated £3billion – is the largest single shareholder in Africa’s biggest supermarket, Shoprite, as well as having investments in mining and wine companies, according to Forbes.

The High Court heard that on April 27, 2009 customs officials found £120,000 in his hand luggage as he went to board a flight to Luxembourg and more than £500,000 in two suitcases he had checked into the hold.

Dr Wiese explained the money came from diamond deals in South Africa in the 80s and 90s, and had been kept in a safety deposit box in the Ritz hotel because of foreign exchange restrictions in his homeland, lawyers for the UK Border Agency said.

More than £400,000 was in used notes, bundled together with elastic bands, nearly £7,000 was in Scottish currency and around £5,400 was in a ‘mutilated’ state, the court heard.

Suspicions aroused: Customs officials found £120,000 in Dr Wiese's hand luggage as he went to board a flight at London City Airport and more than £500,000 in two suitcases he had checked into the hold, the High Court heardSuspicions aroused: Customs officials found £120,000 in Dr Wiese’s hand luggage as he went to board a flight at London City Airport and more than £500,000 in two suitcases he had checked into the hold, the High Court heard

Dr Wiese told officials he was going to invest the money in Luxembourg and was due to fly back later that same afternoon.

However, District Judge Snow, sitting at Westminster Magistrates’ Court the following year, ruled the huge value of the cash and the insecure method of transporting it meant the money should be seized as the proceeds of crime.

Dr Wiese is now challenging that decision at the High Court, claiming the UK Border Agency had not a shred of evidence linking him to criminal activity, and his enormous wealth meant it was not suspicious for him to be carrying such a large sum in cash.

Miss Montgomery told the court: ‘Dr Wiese was a man of good character whose wealth could be traced to legitimate and extensive business activities. There was no evidence that he had any criminal associates in the UK or South Africa.

‘Dr Wiese told no lies to the Customs Officers. He answered their questions without recourse to legal advice. He assisted in the process of questioning without protest at any point.’

The UK Border Agency argue the judge was entitled to make the finding he did on the ‘startling’ facts of the case and considering Dr Wiese had no documentation backing up his account.

Mr Justice Underhill, who will decide whether to quash the ruling and hand back the money, reserved his judgment, which will be given at an unspecified date in the future.

 

Excellent Bitcoin Radio Interviews

These are radio interviews conducted by FreeTalkLive at this years PorcFest. Check them out here:

Interview with Roger Ver (bitcoin topic starts at 22:22 into the recording)

http://soundcloud.com/freetalklive/ftl2012-06-22/download

and with Erik Voorhees:

http://soundcloud.com/freetalklive/ftl2012-06-23/download

To learn more about bitcoin make sure to visit our “Bitcoin for Beginners” page here:

http://keepyourassets.net/?p=2693

Banker’s computer glitch blocks accounts for hundreds of thousands

Another reason why one should reduce his or her dependence on banks and use more cash, precious metals and bitcoin:

NatWest calls in 7,000 staff to clear backlog after accounts are blocked

Chief executive Stephen Hester apologises as angry customers remain unable to withdraw their own money

Stephen Hester, the chief executive of Royal Bank of Scotland, was forced to issue a public apology after the bank was unable to say how much longer it would take to clear the backlog of payments for hundreds of thousands of NatWest customers affected by a computer glitch.

“Our customers rely on us day in and day out to get things right, and on this occasion we have let them down,” Hester said. “This should not have happened.”

Amid rising anger, he had spent Saturdayat RBS’s City headquarters overseeing efforts to process the mountain of transactions delayed by the IT problem, which began on Thursday. In total, 7,000 staff were coming in on Sundayto handle customers’ queries and tackle the backlog.

RBS said the technical hitch which caused the problem had been “identified and corrected”, but when asked whether the issues could continue, a spokesman said: “We can’t rule it out.”

In a separate message to his staff, Hester, who waived a £963,000 bonus earlier this year after a public outcry, said: “I know we’re not out of the woods yet and there is more hard work ahead. You have my support.”

NatWest, which is owned by RBS, extended the opening hours of 900 branches on Saturday to allow affected customers access to their cash, and will open them again today. Customers at Ulster Bank, part of the RBS group, have also been hit.

People who could show they should have received payments were offered emergency cash payouts to tide them over. “Where our customers are facing hardship or difficulty, we can and will help them,” Hester said.

The bank has also been forced to promise redress to thousands of other people, many not NatWest customers, who have failed to receive their salaries because their employers use the bank.

The RBS spokesman said the bank would refund overdraft charges or other costs incurred by customers who have slipped into the red or seen direct debits bounce as a result of the problems.

Louis Brook, of the Move Your Money campaign, which urges the public to switch from the big high-street banks to ethical or mutual lenders, said he expected a surge in support from disgruntled NatWest customers.

“People are incredibly loyal and have quite strong emotional attachments to their banks, but when that’s broken by something so fundamental as not being able to get access to your own money, it can be the last straw,” he said.

source

The Bitcoin Richest: Accumulating Large Balances

From Forbes:

by Jon Matonis

Everyone is familiar with Forbes 400 as the definitive list to wealth in America. But few people know about the world’s up-and-coming bitcoin richest and what motivates them to accumulate and maintain large balances.

The Bitcoin Richest ranks the top worldwide holders of bitcoin wealth on the blockchain. The caveats are that we cannot identify the affluent person or business (but you know who you are) and the same entity may hold the private keys to multiple bitcoin addresses. At the current exchange rate of $6.50 per BTC, the top address on the list holds control to an astonishing $2.85 million in total value (as of 6/20/12). Top ten balances are clickable to show dates with transaction history and my analysis follows:

BTC Balance                     Bitcoin Address (Hash 160-bit format)

438824.90216295             8bf24a18a58ab500d30c73bf21dbf4703d31ad2c

105555.00000000          582431b9e63d2394c8b224d1bc45d07ae95d2379

79956.00100000             a0b0d60e5991578ed37cbda2b17d8b2ce23ab295

59258.88000000              89a37004da17f792487bcc26f853c7722c56fd91

53000.00000000            3d9e561f21d312f9b8b46e74169263e2452d5591

50129.66980000              2004f419e735115cb2a42cbc76f5b0a20c9698f8

50000.00000000            863ec44fbf7c9ed0819b52f275006b22ba781794

50000.00000000            f1c87a5e8ff7d14e74b858089bf771c94b1b6db4

47457.46000000             6fbe1851f5d1de5477d147e93b3da5c0c98f4e8e

45000.00000000            f68212be6db427d4b30f01113920db0e9e457c8d

Source: Bitcoin richest addresses created on June 19, 2012 by znort987 via blockparser.

 

Analysis

What can we learn from this list? First, it demonstrates that a broad group of people are comfortable enough with the bitcoin crypto to exit the traditional banking system and leave significant value on the blockchain for extended periods. I can only guess that they must have a rigorous onsite and offsite backup process for retrieving the private key or perhaps they rely on Brainwallet for the utmost in mobility.

Also with the exception of the top three addresses, the wealth is evenly distributed as 8,000 BTC is the cut-off to make the top 100 list. Incidentally, this has remained consistent with a similar list computed in December 2011 in which the cut-off to make the list was 6,925 BTC.

But why leave your wealth in a distributed proof-of-work system instead of a traditional bank? In a broad sense, bitcoin wealth offers protection from unpredictable political risk such as sovereign confiscation, excessive taxation, and capital controls at the border. In addition to preservation of value when compared to national fiat currencies, bitcoin wealth eliminates bank solvency risk and the risk of exogenous shocks to the uber-leveraged financial pyramid. Remember, a pyramid was not a monument but a tomb.

One of the challenges confronting bitcoin consultants in certain industries is how to transfer bitcoin value in amounts of $10 million or more for purposes of trade settlement and for the mitigation of jurisdictional bank risk. With the total bitcoin market capitalization at approximately $60 million and the largest single address holding merely $2.85 million, you can begin to see the obstacles. The bitcoin market is still too nascent and small for robust use in global trade settlement. Liquidity and depth would have to increase significantly to accommodate requests without severe price disruption.

Thanks to the excellent work of Blockchain.info, we can get an idea of current trade and settlement usage by looking at the 100 largest bitcoin transactions culled from the most recent 50,000 transactions. Bitcoin Days Destroyed also provides an indication of transaction volume that attempts to strip out transfers to oneself and account reorganizations.

Follow author on Twitter.

Are Bitcoins Becoming Europe’s New Safe Haven Currency?

For more information on Bitcoin visit our Bitcoin for Beginners page.

From Daily Finance:

By Ross Kenneth Urken

Posted 1:23PM 06/18/12

BitcoinJoerg Platzer, a German who owns the Room 77 restaurant in Berlin’s hip Kreuzberg section, has lost his appetite for euros. Instead, he has put a large fraction of his money into Bitcoin, an online currency.

“What the euro crisis and possible breakdown does is make people think about alternative [currencies] that can be used to maintain business and that cannot be manipulated by any central organization whatsoever,” he told DailyFinance.

And Bitcoin, as unorthodox as it may sound, was created in 2009 to be just such an alternative.

It’s not so surprising that a growing number of Europeans whose countries are in dire fiscal straits are moving their money from banks to Bitcoins. The eurozone is in end-of-times pandemonium over its debt crises; Greece is starring in its own economic tragicomedy; and Spain is scrambling for a major bailout. And just last week, the euro overtook the British pound as the second-most common currency that bitcoins are traded against (after the U.S. dollar, which has 72% of the market thanks to its large community of early adopters).

Euro hit 9% of the Bitcoin market thanks to an uptick in buyers from Greece, Italy, Spain and the Netherlands, according to Charlie Shrem, CEO of BitInstant, a New York company that allows clients to move money between Bitcoin and other currencies. Shrem’s firm attributes the recent rise in euros exchanged for bitcoins to the worsening crisis in Europe and people seeking financial asylum in digital form.

As reports increase that the European banking system is evaporating into the ether, will people increasingly find it high time to bank in the cloud.

Is Bitcoin a Panacea For the Euro’s Woes?

Quite simply, Bitcoins are an encrypted digital currency that can be freely exchanged between people or between consumers and merchants. Businesses like Bitcoin because it allows them to avoid paying credit card fees of up to 3% on transactions. Consumers get to dodge the costs normally associated with currency exchanges. It’s only available for use in a handful of physical locations in cities around the world (it’s mostly used via Internet), but a major use for it has been for conversions — you can buy Bitcoins and then exchange them for another currency at no charge.

Bitcoin is in some senses a financial island removed from the vicissitudes and consequences of a traditional banking system. It’s neither controlled by central banks nor governments, and thus not vulnerable to larger-scale shifts like changing interest rates or the rampant inflation of countries in decline.

But Bitcoin’s isolation from geopolitical turmoil has been its true selling point for those in Europe.

“I have Greek friends who fear that Greece will drop out of the euro, and all of their money will be converted to the drachma,” Shrem said. “And then even a cup of coffee would get pretty expensive for them, because inflation will skyrocket like what we saw in Zimbabwe.”

Bitcoin was trading at about $5.26 in on Jan. 1, and bolstered by fears about the euro, its value had risen 19% to $6.28 on Monday. The euro, by contrast, dropped from $1.29 on January 1 to around $1.25, a 3% decline. In fact, Bitcoin performed better than any major asset class in the world in 2011, up 1,700%.

Jon Matonis, a Bitcoin consultant and digital currency specialist, believes moving toward Bitcoin is a smart strategy, advocating any exit from fiat currencies as a step in the right direction.

“It’s like musical chairs,” he said, “And when the music stops playing, the mad rush out of fiat will begin because a ‘paper’ con game can turn on a dime.” That uncertainty in the value of a fiat currency, especially in the euro, stands in contrast to Bitcoin, which Matonis describes as “an open-source neutral method of going from paper euros to a nonpolitical unit of value in electronic form.”

The Risks in Bits

But is a digital currency safe? Hackers have tapped into Bitcoin exchanges, exacerbating fears that the fully-online currency might not be such a sure bet.

Last June, Mount Gox, a major Bitcoin exchange, was compromised, and a cyber attack this May against the Bitcoin exchange Bitcoinica resulted in 18,000 stolen bitcoins (about $90,000). These events have further reinforced some security experts’ preference for traditional banking, according to Marc Vael, director of the Information Systems Audit and Control Association: Even though the eurozone is experiencing turbulent times, all EU governments guarantee banks deposits and savings accounts for up to 100,000 euros.

“The existing banking system, including online banking possibilities, still protects citizens even when money gets stolen out of their account,” Vael said. “Keeping money under EU-regulated financial institutions is the safest option for EU citizens.”

But as the euro’s problems deepen, people are putting less faith in it, and hoping the security technology of Bitcoin exchanges is enough.

“It’s as safe as the cryptography,” Matonis said. “And the cryptography has been peer-reviewed, and it currently enjoys the mathematical trust of the cryptography community.”

“These individuals moving their value from euros to Bitcoin are trusting the cryptographic algorithms,” Matonis said. “If they store the private keys themselves, then they do not even have to trust a third-party entity.”

The Future of Bitcoin

Though Matonis believes that traditional banking is “in decline” and that Bitcoin possesses important advantages for Europeans at the moment, the digital currency hasn’t necessarily proven itself as a fully universal platform.

“What is disputed is the efficiency of a distributed system and perfect application to a scaleable monetary or payment function,” Matoris said.

Currently, for example, Bitcoin’s current market cap is only the equivalent of $50 million — a drop in the ocean of the world’s money supply.

But even as its future — not just as a monetary escape route but also as a common currency — remains uncertain, the digital trend has gained at least some traction. Consumers are using “linden dollars,” the currency used in the online game Second Life, across the Internet as a true digital currency, according to the Financial Post. The Canadian Mint earlier this year also instituted MintChip, its digital form of money.

Platzer, the German restaurateur who has moved his money to bitcoins, views this change an inevitable part of our digital world.

“Cryptocurrency not only does not have the disadvantages of centralized currencies which led to the current crises,” he said, “It also suits the requirements of an information society much better than the money from the Industrial Age.”

New Bitcoin service enables local, person-to-person cash exchanges

From BitcoinTalk.org:

In keeping with the spirit of decentralization we are proud to introduce another tool to help you find local trading partners to facilitate your bitcoin exchanges and improve liquidity.

The benefits are many:

  • Build your local bitcoin trading network
  • Trade for cash
  • Stay away from centralized exchanges
  • Avoid the banking system entirely
  • Maintain your privacy – No ID required!
  • Faster exchanges

What makes TradeYourBitcoin.com different?

  • Simplicity of use
  • Only sellers need create a listing (consisting only of an email address)
  • Buyers just enter their zip code to find local sellers
  • Nothing complicated to configure or calculate
  • Language translation into 65 different languages
  • Negotiate directly with the seller via email and trade in person for cash

Check it out – it’s FREE. Start building your local trading network today!

http://TradeYourBitcoin.com

What happens to bitcoin if the government shuts down the internet?

I get this question a lot. Here is the short answer:

The internet cannot be shut down – it is decentralized by nature. Yes, they can kill many of the main hubs but the network can work around them. Search the web for “wireless mesh networks” and see bitcoincard.org to get an idea of what I mean. Bitcoin can even work via sms on your cell phone without the need for a data plan.

Here is a great radio interview that addresses some of these issues (somewhat technical but worth listening to all the way to the end):

http://agoristradio.com/?p=347

If governments were able to shut down the entire internet they would crash the global economy and they would be strung up by a rope and hung in public by the masses. Think about how dependent the global economy is on the internet. Shutting down the global economy would do much more harm to them than letting bitcoin operate at some level.

Yes, governments will try to thwart bitcoin, and even cause temporary damage, but they will have about as much success as they have had in fighting the drug war.

To learn more about bitcoin click here.

20 Reasons Why America’s Next Bank Holiday Will Be a Nightmare

The following post from SurvivalBlog.com illustrates the challenges that lie ahead for financially bankrupt governments like Greece and the United States. Having backup systems and strategies like bitcoin and barter will help you make it through the coming hard times. If you aren’t a member yet, please consider joining our private members area for more survival ideas like these.

20 Reasons Why America’s Next Bank Holiday Will Be a Nightmare

The world is on now on the brink of a global credit crisis that could be far worse than the tumultuous events of 2008. The ongoing sovereign debt crisis in the southern reaches of the Eurozone indicate that bank runs in the region will continue, and that more bank closure “holidays” will be declared. Under a bank holiday, virtually all deposits could be frozen and irredeemable for days, weeks, or even months. The key question is: Will this crisis spread to the rest of Europe and then even to the United States? I urge SurvivalBlog readers–particularly those in Europe–to be proactive, to stay “ahead of the power curve.” While the Generally Dumb Public (GDP) wakes up some morning to hear news of a bank holiday, you will have long hence prepared yourself.

Digits Lost in the Ether–Redeemable Mañana?

Most people don’t realize that printed U.S. currency and minted coins amount to less than $800 billion, worldwide. That is just a small portion of the aggregate Money Zero Maturity (MZM) money supply that now exceeds $7 Trillion. So what is in your bank account is just electronic money, and there is absolutely no way that even a fraction of depositors could get physical cash to redeem the digits in their accounts. If there is a bank holiday declared, there will undoubtedly be severe restrictions on cash withdrawals when banks re-open. Given the precedent of the limits on withdrawals of a few institutions during the Savings and Loan crisis of the 1980s and 1990s, I predict that withdrawal restrictions could go on for many months.

Here are 20 Reasons why America’s next bank holiday will be a nightmare:

  1. A bank holiday will create a virtual blackout of information on not just checking and saving accounts, but also automated mortgage payments, CDs, and more. Our presently quite transparent banking system will suddenly become opaque. Your bank balance will become invisible. Your handy-dandy online banking web page will be replaced by a “Service Temporarily Unavailable” notice. The willingness to accept checks will evaporate in less than a day. The FUD factor (Fear, Uncertainty and Doubt) will be overwhelming.
  2. Most businesses will no longer honor personal checks, corporate checks, or bank money orders. Showing a merchant your most recent bank statement isn’t likely to sway him. Again, the FUD factor will rule.
  3. All checks in the U.S. are cleared through the automated clearinghouse (ACH) network. Most of this network is inside of banking system firewalls. Many Federal, State, and local tax payments are also handled through ACH. (A similar network exists for European banks–the Pan-European Automated Clearing House (PE-ACH), under the Single Euro Payments Area (SEPA) system).
  4. Credit cards might not be accepted. The FUD factor will dictate that anything even peripherally related to the banking system will be suspect. (Even though the credit card companies have their own credit clearing mechanisms that are only attached to the banking milieu.)
  5. Except for a few grandfathered recipients, Social Security payments are now made exclusively via bank direct deposit.
  6. Military monthly pay, housing allowances, and ration payments are now made exclusively via bank direct deposit, in CONUS. That is true virtually across the board (Active component, Reserve, and National Guard.) Ditto for monthly military retirement payments.
  7. Many State and Federal employees no longer get physical paychecks. They too, are trapped in the “direct deposit only” world.
  8. Many Americans are now very dependent on bank debit cards (also known as a bank cards or check cards.) In fact, many people don’t even carry more than a few dollars in their wallets. If our world suddenly goes “cash only” most people will suddenly be out of cash.
  9. ATMs, debit card transactions, and online banking can be shut down in minutes. This huge vulnerability of banking customers has already been evidenced by a few minor glitches.
  10. Online payment systems like PayPal will be sharply degraded, because they rely on their ability to move funds to and from banks. More importantly, online payments are inextricably tied to credit card processing. If credit card processing is suspended, then online payments will be “dead in the water.”
  11. Many regular monthly payments such as mortgages, insurance premiums, and some utilities are automatically debited from checking accounts. These will all come to a screeching halt.
  12. SWIFT wire transfers will probably be suspended, freezing a good portion of global commerce. Similarly, International ACH transactions (IATs) will also be shut down, since they access the U.S. ACH network.
  13. The ability to process credit card payments will be dubious, at best. Many merchants will wisely “just say no” to credit cards, even if their countertop POP terminals are still functioning and show available credit. And the fact that many credit cards are now just debit cards in disguise will only add to the reluctance of merchants to take any credit cards.
  14. Point of purchase (POP) processing of credit and debit cards at gas stations has become ubiquitous. Nearly everyone now uses the “pay at the pump” option. Gas and diesel could become “cash only” transactions.
  15. Most American families keep less than $300 in cash at home at any given time, including their kids’ piggy banks. For most families, that wouldn’t cover even one month’s rent.
  16. Formerly distributed as “Food Stamps”, the USDA‘s Supplemental Nutrition Assistance Program (SNAP), provides benefits to low income families through Electronic Benefit Transfer (EBT) card payments. These cards look much like credit cards. And like checks, EBT payments are all routed through the ACH network. Again, this is a network that is inside banking system firewalls. If the banking system goes into holiday mode, then it may take days or even weeks to get EBT processing back on line. If the EBT payments stop, we can expect riots in metropolitan areas in less than a week.
  17. Gift cards will be “iffy.” There are now two types of gift cards: “open loop” (or “network”) cards and traditional “closed loop” cards. Open loop cards are issued by banks or credit card companies and can be redeemed many places. It is likely that only closed loop cards will be honored by the issuing stores, because merchants will fear that open loop cards might have been zeroed out elsewhere. (If they can’t confirm the available balance, the card will be refused.)
  18. Most Internet vendors are almost entirely dependent on credit card processing. If that processing system is disrupted, then mailorder firms will either have to cease operations, or have them slow to a snail’s pace, and be restricted to only non-bank money orders.
  19. Reversion to U.S. Postal Service money orders (commonly called “PMOs“) will only be partially viable solution. This is because many small town and rural post offices don’t keep enough cash in their tills to be able to hand you $1,000 when you go to cash a PMO. You may be thinking, “Oh well, I’ll just ask them to write me a blank PMO, in exchange. Nope. A recent change to postal regulations designed to curtail money laundering banned money order-for-money order issuance. Bummer. And if you are considering using “Forever” postage stamps, hold your horses. Under a hygiene regulation published in the Domestic Mail Manual (DMM), postal clerks are not allowed to cash out (“buy back”) stamp booklets unless they are still in their sealed clear plastic master packages. So it might take decades to use up your Forever stamps, or you will be forced to liquidate them on the gray market at a slight loss.
  20. Bank safe deposit boxes will probably be inaccessible. Plan accordingly.

Some Observations and Mitigation Steps:

Because so many pay and retirement benefit systems are now handled via bank direct deposit only, we could easily live through a frustrating “Roach Motel” period of several months when “Dollars check in, but they don’t check out.” Be prepared to ride through that period.

If the European credit spreads to the United States, then immediately visit your company’s payroll office, and ask to be removed from their direct deposit system. This change might take a couple weeks. With a paper paycheck, you can probably cash it elsewhere, even if you own bank closes its doors–perhaps even at your local grocery store.

Keep plenty of well-hidden cash at home. Since it won’t be earning interest, some of this cash might as well be in $2 rolls of nickels. That method will also give you a hedge on inflation, and also serve as insurance against a currency reform. (Where a zero could be lopped off the Dollar, overnight.)

Be prepared for times for when anything other than greenback cash or perhaps silver coins will be eyed with suspicion, or rejected outright. Even USPS PMOs and drug store money orders may be refused. In the era of bank holidays, cash will talk. Keep plenty of it on hand. Oh, and needless to say, don’t store your cash in a bank safe deposit box. You probably won’t have access to it during a bank holiday.

Be wise and circumspect in storing cash at home. Don’t tell anyone other than your spouse about that cash. See the SurvivalBlog archives for suggestions on building secret hiding places, like this one.

A good portion of your “stash of cash” should be in the form of $1 and $5 bills. This is because during a banking crisis, many people will not be able make change for small transactions. And if your local power, water, and phone companies refuse checks, then you will need to be able to pay them the exact amount of your monthly bill. (They probably won’t have much “change”, either.)

Apply for at least one gasoline station chain charge card. In turbulent times when they won’t take your check or your VISA card, they might still take their own chain card.

If you have to pay your utility bills in in cash or by PMO, do you know where their business offices are located? And consider the sort neighborhood where those offices are located. (Unless you live in a free state for open carry or Constitutional Carry, do you have your CCW permit, and plenty of pistol practice?) For safety, it might be wise to form a neighborhood posse to go pay those bills in a group of of six people once a month.

Your local supermarket may declare “cash only.” This is yet another reason why it it is vitally important for every family to have a comprehensive food storage program. By the same token, fuel storage also makes sense, if your local fire code allows it.

At the tail end of a banking crisis–when the bank doors do re-open–the Federal Reserve will certainly have to crank up the printing presses. Even people that never had “mattress money” will want some. All this new cash will increase the velocity of money, locally. This will be inflationary, even at the same time that a the macro level, we will witness a huge dollar deflation. (This is because the multiplier effect of every dollar on deposit will work in reverse, as withdrawals are made.) These will be strange times, indeed. If you start to see any evidence of mass inflation kicking in, then be ready to spend your dollars as quickly as possible to parlay them into practical, barterable tangibles. Don’t be the last one standing in the game of Dollar Musical Chairs.

Conclusion
The threats of credit crunches, bank runs, and bank holidays are not new. No society is immune from them. We’ve been fortunate here in the United States to have not suffered any limits on bank withdrawals since the Savings and Loan crisis of the 1980s and 1990s. But don’t expect this stability to be permanent. We live in a dynamic world with rapidly changing threats to our lives and livelihoods. Prepare for the worst and hope for the best.