CASH IS KING

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May 2, 2013 by calamity3039

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I know the gold and silver lovers are going to get their panties bunched up, but there is still merit in cash. Cash is King reigned the land during the Great Depression. It may rule the land once again. After seeing the misery that Cyprus experienced last month, underestimating cash could be a mistake. Don’t get me wrong, hedging your bets is a good idea. Only if you have it in your possession. Though gold and silver does preserve purchasing power, it is one of the least acceptable forms of payment for goods.

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Despite the economic perils we face I still largely apply the cash hoarding practices my great grandparents used during the Depression. I don’t even have a bank account. After John Corzine robbed segregated accounts, there was no point, it would just be a matter of time. As the economy gets more dire, the possibility of a bank holiday is more present.

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Paper money is still limited. When people talk about hyperinflation they compare today to either the Wiemar Republic or Zimbabwe. Well there is a huge difference with the Federal Reserve’s actions. They aren’t expanding the paper supply. They are just expanding their digital supply. The velocity of the digital supply is also very slow. Very little has actually ended up in the real economy. What does end up in the economy has caused some inflation. I’m not denying that, I see it everyday in food and gas priced. But the Federal Government has been able to reel it back in through taxes. I find hyperinflation is unlikely mostly because the velocity of money isn’t there.

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However, another depression is very likely. The economy wants to contract, we see it at the slightest uneasiness on Wall Street. We see it with houses that have been unoccupied for a few years. We see it with stagnate wages. Everybody knows prices are way too high. Unfortunately, people forget that basic economic rule “Its only worth what somebody is willing to pay”. I see this with car and housing. Everyday people love to cling to blue book value and house appraisals as truth.

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