You Must Be Prepared for the Next Financial Crisis

  You Must Be Prepared for the Next Financial Crisis

An interview with Bill Bonner, editor, The Bill Bonner Letter:

Porter Stansberry: So, I was just getting ready for this interview, and I came across a very ominous recording where you talked about ATMs not working, gas stations closing, people not being able to get into their banks to cash or deposit checks—sort of the apocalyptic scenario of an end-of-the-world banking crisis. What makes you think this is something people should be worried about now?

Bill Bonner: Now is now. Now is where we are, but nobody knows when this sort of thing will happen. And when it does happen, it’s inconvenient. I mean, if people were fully prepared for something like this, it wouldn’t happen at all.

But things like this don’t happen that way. They always come as surprises to most people. And so it’s hard to say…

The “now” question is tough because I don’t know why “now” and why not in 10 days or 10 years.

We’re in a situation where there’s more and more debt in the world. The response to the authorities of the crisis of 2008-2009 was simply to add more debt to a situation already caused by too much debt. And so the problem we had in 2008 was not resolved at all. It was made worse and postponed.

What we’re going to see at some point is a re-enactment of the crisis of 2008-2009, but worse… because there’s more debt. And the interest rates are already at zero now, so they can’t lower rates much more.

So, the next time this occurs, it’s going to be much worse, and people have to be prepared for what almost happened last time, which was that the banks closed… and they were ready to shut the ATMs down, when, meanwhile, people needed cash.

And so that’s what I keep saying: Make sure you have some cash on hand.

Porter Stansberry: Yeah, I had a hard time explaining that message, as well. It’s not contradictory to say we fear a collapse of the dollar and then suggest you have some in reserve… Because, in the immediate days and weeks following a run on the dollar, that paper currency is going to be very important.

Bill Bonner: Well, yes. In all fairness, there are not that many instances of it, so it’s hard to form an average. But in a banking crisis—which is what we had in 2008 and what we expect now—the banks seize up because they’re going broke.

And people realize it. So, their reflex is to get their hands on something they can hold on to, and that is cash. You’ve got a bank account, you’ve got money in it, you want to run to the ATM and get that cash out before the ATMs run out of money.

And they will run out of money, because there’s not enough cash in all of the United States to cover the obligations and the needs people will have.

Porter Stansberry: There’s not enough cash in the United States to cover the liabilities of two banks: Bank of America and J.P. Morgan.

Bill Bonner: No, no, there’s not much cash because the country has shifted to credit. The whole story of the last 50 years has been the expansion of credit, and credit is what people use.

You’ve got to stand in line at a grocery store, and often, the person in front of you is paying with credit. Maybe you are, too. And so, when the credit stops, the whole economy comes to a stop.

I think people have to get a lot more sophisticated about money because we are so used to an economy and a society where the money is fairly reliable, and you can say, “Oh, I’ve got cash. I’m not worried about anything. I’ve got cash.”

We’d say, “Where is the cash?”

“Well, it’s in the bank.”

But having money in the bank is not the same as having cash.

When you have cash, you have what they call “trustless money.” That means you can go and buy stuff with it. But when you have an account in a bank, it means the bank owes you money.

Now, you’ve got a counterparty. You’ve got somebody on the other side, and if you study the statements of these banks, the balance sheets of these banks… these banks are all in danger of going broke because they’ve lent so much money to so many flimsy, flaky projects.

And all of that collateral they’ve got on houses and the money they’ve lent to companies for mergers and acquisitions… the equity… it disappears.

And so, all of a sudden, the bank—which has very little in real reserves—is illiquid. It’s illiquid and bankrupt, so you have a credit.

Your bank account is not cash. It’s what you have as a credit against a bankrupt institution.

So, you’re going to be in big trouble.

Reeves’ Note: Bill’s told his subscribers exactly how to prepare for the credit crisis he’s predicting. They know the exact steps to take to protect their wealth and their families.

If you’re as concerned about our future as Bill is, consider signing up for a risk-free trial subscription to The Bill Bonner Letter. He recently told his subscribers how the crisis will affect them personally… which household items will become valuable… how to go “off the grid” without moving out of their homes… and more. Learn more here.