Could it happen that you go to the bank and find that they are out of money?
Although doubtful, anything is possible in these dark days.
It is possible, in circumstances say where Spain left the eurozone, that you could go to your bank and find that they have had to take an enforced holiday. And when they open you would find that the international value of your deposit is significantly less than what it was before.
The possibility of Euro breakup was put at 50:50 yesterday. What happened in Argentina and more recently Iceland is a a guide to devaluation/currency collapse.
At first there will be EITHER a bank run as people attempt to get their money out or government announces a sudden closure of the banking system and capital controls. Transferring money in or out of the country is impossible (Greece has seen much of it wealth fly oversea already).
Banks, ATM’s, credit card systems stop working. Cash is still accepted but foreign exchange is impossible to get or at a very high level. How long this period lasts is difficult to say and depends on the government’s organization skills and the state of the rest of the world ensuring a new currency is available. Printing new notes will take time, especially as there maybe a dozen other countries trying to print simultaneously.
Having a foreign currency account in a local bank won’t help. In Argentina the USD accounts (many people had them) were converted to local currency and devalued by 75%. In Iceland they were frozen for months and then very restricted.
As time goes on a preference for real hard currency such as USD and GBP and precious metals becomes to the fore. High value items such as Rolex watches became popular in Iceland as they were the best way of getting cash out of the country.
Credit and debit cards will be rejected at home and abroad, eventually debit cards start working first then, slowly credit cards.
Foreign travel is restricted as converting local currency into hard currency requires special permission, proof of taxes paid and be limited based on requirement and daily spending limits, say £50/$50 per day. Iceland still has these limits three years later and Argentina 10 years later has just re-imposed them.
The lesson from these two collapses are;
Ensure that you have a ready supply of cash in local and foreign currency to tide you over when the banks are shut; try and encourage your family to keep enough cash too
Long term –
- Spread your risk and have a source of foreign income (hence the boom in buying London property by the Greeks etc).
Put your money into hard assets (property in Argentina is basically worth the same as before in USD, based, however its directly proportional to wages. Holiday homes are pretty useless)
Ideally convert a part of your wealth to precious metals.Personally I’m not so sure about this, its too late now.
Obviously, even if you think its extremely unlikely to happen, have a stash or hard cash that will allow you to function until banks start operating, if its in a foreign currency like the £,$ or Euro even better. This should be enough for a week or longer.