The Necessity of Liquidity in an Increasingly Cashless Society
By Matt Sevald, The Prepper Journal
I was taught all the values of saving money but it wasn’t exactly modeled for me. Consequently, I had to overcome some hurdles as I grew up learning to budget, and more importantly, to stick to it (I still trip from time to time). My wife and I are now teaching our children about the value of their dollars and I am proud to say they are more miserly than I at their age. When they ask for a toy or a special treat and we feel it is appropriate we tell them they can have it if they pay with their own money. Our daughter is better at this than our son, but they look at their piggy banks, count the money, and more often than not are reluctant to part with their treasure for something fleeting. Financial expert Dave Ramsey says,
“There’s something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you’ll be less likely to over-spend or buy on impulse.”
So when was the last time you counted a wad of cash and had to make some decisions as to how much went where? You might do this regularly if you own a small business, but if you’re like the majority of debit card-swiping, electronic bits and bytes-spending, you probably haven’t in a very long time.
The benefits of liquidity
As it applies to you and me, liquidity is the amount of spendable cash on-hand such as in a piggy bank or hidden stash or cash that is readily accessible through ATM/bank withdrawal, or the quick sale of belongings. To most preppers cash on-hand is obviously the better choice for your money because you physically have it. Does the adage “a bird in the hand is worth two in the bush” sound familiar? The preppers who are involved in collecting precious metals (I am not one of them) will tell you quite correctly “if you don’t hold it, you don’t own it” (link includes good warning on dangers of holding valuables). Liquidity doesn’t have to be money as we know it. In a SHTF grid down scenario money will be whatever gets you something you want or need à la bartering. But for now, greenbacks and coins are the money we use and they’re still legal tender everywhere so having some on-hand mitigates your risk of being unable to buy what you need. It’s the same idea behind why we store any supply – we know we will need it later.
So why don’t we keep money accessible?
Despite the common sense and relative ease of having accessible supplies of needed items millions of Americans do not prepare in even the slightest way. We have discussed the concept of normalcy bias as a large reason behind failing to prep. When it comes to money, our society revolves around instant gratification and “efficiency” so we use credit and debit cards, electronic fund transfers, and online shopping – all made possible by a digital fiat currency system not backed by anything, which further removes us from cash as the marketplace ceases to resemble anything from even 15 years ago. In 2015, for many Americans, liquidity is limited to what sits in the bank account between bi-weekly direct deposits that isn’t automatically withdrawn due to electronic bill payments.
Three examples of why cash (use and acceptance) is still a necessity
The following examples are from my own life. They only involve human error by one or two people yet significantly impacted my family negatively. Imagine a scenario where the grid goes down or the government seizes digital wealth and you have a problem hundreds of millions of times worse.
- June, 2014: My wife ordered new checks and paid a bunch of bills. We shortly thereafter discovered the account number was incorrectly printed and were hit with late fees due to the delay in us having to run out and get cash from the bank which was closed. After going in to our water utility and advising them of this problem the clerk assured me there was no problem on our account. I offered to pay cash anyway as a safeguard but she refused due to a policy about the dangers (robbery and money laundering) of cash payments. Several days later I came home from work at 3pm to hop in the shower for my next job at 4pm only to discover our water had been shut off for “non-payment”. I showered with a gallon jug of water I had left over from a road trip, rushed to the utility office, and had to pay extra fees – in cash, mind you – because I was a deadbeat and didn’t pay my bills on time. The next day I started prepping (water storage) thanks to The Prepper Journal I discovered a few weeks prior.
Moral: Cash payment would have eliminated use of checks and this problem. Acceptance of cash would have resolved this problem before it escalated.