Economic collapse preparation: What should you expect?
In recent years, when the crisis is getting aggravated with every passing day, people are thinking how to prepare for economic collapse, which currency can help to save the money despite the inflation. Typically, the choice falls on the currency which belongs to a country with strong economy.
But can you really be sure that at least some part of your funds is absolutely safe? First of all it is important to understand that while any state has an access to your money, you can not be 100% sure that your savings will remain intact.
In fact, the value of fiat money is not buttressed by anything except the public trust in the government and economy of the country. For those in power, paper money is buttressed by an oral commitment to provide the opportunity to obtain material benefits in exchange for some piece of money with a specific nominal value. Money is a sort of promissory note, which can be no longer recognized after a while.
Here are the stories of some countries in XX-XXI centuries, which citizens, not having been prepared for economic collapse, experienced significant losses because of the policy of its government.
Cyprus, 2013In 2013, the population of Cyprus experienced a large-scale bank savings confiscation, which had no precedent.
When the economic situation got worse in Cyprus, the EU had offered $10 billion aid to Cyprus if the government of country would fulfill a requirement. Besides raising taxes to the minimum European tax rates, it was required to withdraw some part of money from the bank accounts of people: 6.75% (deposits up to 100.000 euros) and 9.9% (deposits more than 100.000 euros). Later, the parliament of Cyprus prohibited to fulfill the last part of the requirement, and it was decided to withdraw the funds only from the deposits with more than 100.000 euros.
It was hard to believe that in our time such kind of solution could be considered. Even taking into account the fact that the Parliament of Cyprus refused to fulfill the original version of requirement that would subject the most vulnerable social groups to abuse, it was a lot of those who suffered losses. And now we can not be sure that such scenario will not take place in any other country. In this case, the question "How to prepare for economic collapse?" can be considered as rhetorical.
Greece, 2015The whole world has tensely watched the recent events in Greece. The regular protests show the people’s position regarding the internal policy of the government.
The fact is, during the crisis escalation, it was decided to close all banks and to set a limit on cash withdrawals via ATMs (60 euros per day).
The reason for this is the work scheme of banks: they usually operate on fractional-reserve banking system. In practice it means that banks possess a much smaller amount of money than the one declared on the balance sheet. Almost all banks in developed countries work according to this principle.
During the crisis, when the panic-stricken people are trying to withdraw their savings from bank accounts, a bank can not meet all the requests physically.
There are two ways out to avoid the collapse of banks:
1) to emit the necessary amount of money, as America did in 2008 reaching the critical level of its debt;
2) to close the banks before they run out of money.
Since the money emission of Greece is controlled by the European Central Bank, the country has only the second option.
Perhaps, it was the only way for the government to somehow stop the increasing crisis. But it is difficult to say that such measures can be called fair concerning the ordinary people: just in one moment it was cut off the access to their savings without any guaranties to get it in the future.
France, 2015This year, the government of France has imposed restrictions on certain money transactions. Starting from September the citizens of France are prohibited:
- to pay for purchases worth more than 1,000 euros in cash;
- to withdraw more than 10,000 euros per month without prior approval;
- to exchange without ID more than 1,000 euros for another currency and vice versa.
Although these restrictions are quite similar to the ones put in Italy in 2011, which were directed against tax evasion, in this case the official reason for this decision is to combat the financing of terrorism.
Despite the fact that this case does not lead to awful consequences, as in the cases above, but it is clear that the urge to control the financial flows has nothing to do with protection of the people’s interests.
China, 2015Until quite recently, the Chinese stock market was considered as one of the most secure ways to save money and a good method of economic collapse preparation as well, even despite the fact that it does not have a long history. However the Chinese stock market has been falling for the last three months, and it was found out that share investing has its drawbacks.
The Chinese government decided to reduce the fall of the stock market prohibiting trade shares, whose price plunged significantly. Besides there are cases of putting a 10% limit on the stock market fall, and having reached this limit the trading is automatically suspended until the next day.
The senior management of the companies is forbidden to sell shares during six months. It concerns those managers who are holding 5% shares of the company and more. Since this kind of restriction has no precedent, the six-month term may be extended.
As a consequence, the actions of the Chinese government have made the stock market inefficient in terms of money saving, because investors are unable to sell their shares and to get the money for their own needs. Those who had invested most part of savings in shares of the Chinese stock market, lost the free access to money.
USA 1933Having seen all these events in the world, many people choose to rescue their savings with the help of gold. To be honest, gold investment is more secure way to save money than bank deposits, for example. But is it true the state absolutely can not control your personal gold reserves?
In 1933, the US President signed the order on the confiscation of gold from the citizens. It was obligatory to exchange gold for cash at a price of $20.66 per ounce. Otherwise you must pay off $10,000 fine (in terms of our time it is approximately $180,000) or be imprisoned for 10 years.
It might seem logical decision during the Great Depression. The government was trying to support the banking sector, and the cost of gold has been fully paid off to every person. But right after that a price of gold rose to $35 per ounce. But only foreigners were allowed to sell it at that price. And the folowing inflation reduced the purchasing power at all.
How to prepare for economic collapse?Today the best way out is to invest in Bitcoin. It is the most important step in economic collapse preparation. In our last article we described in detail, why it is better to invest in Bitcoin instead of gold. In the context of facts mentioned above, cryptocurrency is the only financial instrument, which can not be controlled by the government.
While the economic situation in the country is stable enough, most people do not worry about the access to bank deposits. When there comes a critical moment many people are trying to escape from problems with the help of cryptocurrency. The proof of this fact is the increase of bitcoin value, following after grave economic problems in different countries. Right after the mentioned Cyprus events, the price of Bitcoin has reached a record-high rate - over $1,000 per coin.
We hope that finally you have got the answer to the main question "How to prepare for economic collapse?". The final decision is yours. But having seen the difficult economic situation and its consequences in some countries, it makes sense to invest in Bitcoin at least part of your savings in order to avoid potential losses in the future.