reply to post by mappam
Please excuse me if I make this too simple. Some folks asked for simple.
I am not a stock wizard, but I have worked in finance over 25 years.
The bank holiday is not for the Fed to revalue your money.
That is the effect of the global currency market that does that.
We will divide the two issues to get clarity.
Imagine a Bank holiday is called on say a Thursday afternoon.
Now you stop at the gas station to fuel up.
You try to write a check at the counter. Denied.
You try your credit card or debit card. Denied.
You have some cash and get your gas. Success = cash is good.
You try to go to the bank for some more cash. Closed for holiday.
Now you must survive for an unknown amount of time cashless.
Happily, though you squirreled away $10,000 cash at home for emergencies. Cash is king on the streets.
Good thing you did not buy gold bars. People like cash.
Those few with gold cannot really spend it like your cash.
However, it will be their hedge against the second part, the devaluing of your cash.
Now the demise of your wealth happens. As word shoots across the world that the banks have collapsed, people try to get out of US dollars. The FDIC
goes bust because it does not have enough funds to cover even two of the major banks let alone the hundreds that will fall. Check out the "stress
test" results to "whiten" your hair a little.
Now we print (Fed Reserve) and borrow (Fed Gov) money to get into the hands of the people. Fed Gov now enters and takes over the banks and fills them
with newly minted (borrowed) dollars. More money equals less value. In the meantime, those countries that buy our debt and dollars start unloading
their holdings, because they are devalued. Negative feedback loop starts, more selling dollars and fewer buying dollars.
Banks reopen after a Seven-day holiday and all your money is there, and cash is in the bank just in case you want to pull it all out. Whew, that was
scary! But, hey I did not lose my money! Green shoots really do happen!
However, when you go to buy anything you notice the prices have suddenly all gone up 100%.
Your dollar does not buy what it used to. Your $10,000 only buys ½ of what it should, but you think on the good side my mortgage did not change.
And, I can pay for it with cheap dollars!
But wait, this sucks! I still earn $20 an hour but everything costs double! It is as if I earn $10 an hour and still have a family of five!
Somebody help me. Starts thinking about Hamburger helper as main course.
All your cash is now used to buy staples at twice the price, can you still make the loan payment on said mortgage?
Back to our people with gold. After the bank holiday, because of fear gold has more than doubled in price. Now they can sell the gold they bought at
$10,000 for say $20,000 and places cash back into bank. They will not suffer as much because they have more money, worth less in value but more is
You have just been squeezed.
Welcome to the Greatest Depression.