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Tuesday, September 7, 2010

Drawbacks Of A Cash Economy

Very interesting article about what's going on in Argentina.

If you're not aware, in 2001, their economy essentially exploded.  Many people - including me - believe the events that led to Argentina's collapse are happening here in the US.  This is giving us a window to the future with regards to what may happen here if we continue on our current path.

After their economic collapsed, taxes went through the roof.  They seized all private retirement accounts.  Inflation is rampant (25% a year).

This article touches on one of the things people are doing to "stay under the radar" of government snooping - they buy as much as possible with cash.  The other criminals (not the government ones) are now targeting people in banks that are making large cash withdrawals -
Many victims don't even report being robbed, because they wouldn't be able to explain to tax agents where they got the money, says Vicat, who retired as deputy internal affairs chief of the Buenos Aires provincial police.

And yet cash on the table is simply the only way to do business - even when buying homes or entire companies - for many people in Argentina.

Transferring such money electronically would solve the problem in an instant. But in a society where income tax evasion runs about 50 percent and taxes eat up 65 percent of the money people do declare, many people are reluctant to use banks that way.
Take the time and read the whole article.

Unintended consequences galore.  Maybe.

Actually, the government would have very little incentive to stop these robberies.  If people think there is more risk in keeping cash than in paying their taxes, maybe they'll start putting their cash back into the trackable bank accounts.


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Copyright 2010 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


Anonymous said...

One very important point: In Argentina after the collapse and after the government allowed banks to open the people were restricted on the amount of money they could draw from their own accounts. This is significant because if/when we have a collapse they will close the banks without any notice. They may open the banks in a few days or a few months and even if you have plenty of money in the bank you may be restricted to withdrawing $300 a month. Plan ahead if you are depending on your savings to "save" you.

MikeH. said...

I would have to assume then that, being paid by an employer or a pension (for example) via direct deposit, would pretty much preclude any chance of sub level radar stealth. Provided of course, one still has a job or a pension to receive payments from, after the stuff hits the fan.

There are sooo many of us... and so few of them. Why do we continue to stand down?


Chief Instructor said...

Anon, I've long recommended a decent cash balance at home - 3 months of CASH expenses. Food, gasoline, etc. House payments, rent, utilities, no real need, as you can send them a check, which they can deposit. You're only screwed if your lease/contract says they can demand cash.

And have as much precious metals as you can afford close at hand. Well secured, but close at hand (NOT in a bank safe deposit box). Easily converted into cash, even if you have to go off-books to do it.

Mike, they are VERY good at what they do. It will be sold as being in our best interest, and enough people will swallow the bait.

Even if people protest, they'll still pass it, because it's "in our best interest". Just like TARP, Obama TARP and Obamacare.

Think about some of the things many people are now thankful our government does "for us".

"Show me your papers" DUI checkpoints. No probable cause - forget about that pesky 4th amendment - you are forced to stop and be interrogated by an agent of the state simply because you happened to be on the road. Refuse to cooperate with the interrogation, go to jail.

It's all in the name of safety, and we lap it up.

Not enough people give a damn. I recognize that, and that it will likely happen, so I'm planning accordingly. It may not happen, but either way, I'll have my retirement fund!

suek said...

Apparently there's a new virus out. There's info here: