- Why hope alone is a terrible fiscal strategy
- The false security of shifting baselines
- The key indicators of a currency crisis
- Plan A (and Plan B) for surviving a currency crisis
Part I: Why Our Currency Will Fail
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: Surviving a Currency Crisis
The Biggest Risk
The biggest risk here is not a sudden collapse of the currency that catches everyone off guard some Tuesday afternoon in a matter of minutes. The biggest risk is not believing that the collapse is underway. Most people are going to lose most of their wealth simply because they could not mentally and/or emotionally grasp what was actually happening.
Consider that in Greece the banks are under a tremendous run losing up to 25% of total deposits. Sounds extreme but let's look at it the other way, just what are the 75% of remaining depositors thinking? How could they leave their money in a Greek bank for another minute? What are they thinking? Probably that somehow things will get better, or some other rationalization that supports their decision to hunker down and hope.
In reading When Money Dies, an historical account of the events leading up to and through the Weimar hyperinflation in Germany, one hears anecdote after anecdote of families and individuals impoverished by their own disbelief and inaction. Most just sat numbly by waiting for the currency to come back, or buying government bonds because they were asked to as a matter of patriotism, or just trusting that the government would figure something out, hoping that things would soon turn around.
In Argentina the same dynamic happened. We've heard in detail on this site from Fernando "FerFAL" Aguirre how those who lost most we the ones who hestitated to acknowledge the reality of what was happening until it was too late.
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