The Approaching Cash-Only Economy

I was walking around main street, in the small town next to mine, and I noticed a sign: “Cash Only”. It was some type of eatery. Over time I began to notice several other places with the same type of sign, in these two adjacent towns. Now your guess is as good as mine as to why this trend has taken place: high credit card processing fees, rampant credit card fraud, or the ability to report a lower income when all payments are in cash. But another reason for cash-only transactions looms on the horizon: a partial economic collapse.

Many preppers and survivalists have written about economic collapse as a possible or probable future SHTF disaster. Yes, it’s possible for our currently-insane economy to utterly collapse. The national debt is so high, over $18 trillion dollars, we will never pay it off. Congress can’t resist overspending. Many States are in a similar situation. Consumer debt (credit card, mortgage, student loan) totals over $11 trillion dollars. Our economy is becoming ever more tightly entwined with the economies of other, far less stable, nations. We import too many good and services, and export too few. Etc. Etc.

But my opinion is that a partial economic collapse is the more likely short-term scenario. In this type of economic disaster, credit becomes highly devalued and check/credit fraud is rampant. This leads to an increasing number of brick-and-mortar businesses that refuse to take checks and credit cards. Maybe they will allow debit cards. But bank fees for debit transactions might push them toward a “Cash Only” policy.

Why is that so bad? Well, there simply is not enough cash in existence to match all of the “money” in existence. In other words, if everyone had to pay for everything in cash, there would literally not be enough physical cash to make those payments. You would have the money, theoretically, in your bank account. But the banks would run out of physical cash. And if the treasury foolishly were to print enough cash to meet the need, money would be greatly devalued.

According to the U.S. Census Bureau, U.S. sales at food service businesses and at all retail stores (any/all goods) combined exceed $440 billion dollars per month, and exceed $2.5 trillion dollars per 6-months. That’s over $5 trillion dollars per year in food and retail sales in the U.S. And how much cash is available? The Federal Reserve says there is $1.37 trillion dollars in physical currency in circulation. But a portion of that cash is located overseas.

So an almost-all-cash economy would be a serious problem. Employers would be under pressure to pay their employees in cash. Banks and ATM would regularly run out of cash. The government or the banks might put a limit on cash withdrawals per day, just as recently happened in Greece. You might theoretically have enough money to buy what you need, but lack the physical cash to pay for it.

This situation would be worse for online retail businesses. They can’t expect you to mail them cash. And if credit collapses, or credit card fraud become rampant, they will have no easy way to collect payments from customers. Maybe PayPal will survive and remain useful; maybe not. But the inability to pay with a credit card could cause online businesses to have a sudden sharp downturn in sales.

Many people do not realize this, but when Greece had its recent economic problems, the banks were restricting cash withdrawals, and the government prevented money from leaving the country. As a result, some citizens turned to cryptocurrencies, such as Bitcoin and Litecoin. The value of those currencies is still up, due to that influx of money. (People usually buy cryptocurrency directly from a bank account.) It is impossible to say, though, whether a trend toward cryptocurrency would result from a partial economic collapse. The situation is unprecedented.

What can preppers do?

First, keep a fair amount of cash in a home safe. You’ll need to decide how much. Making change may become difficult for many stores, since cash will be in short supply. So the money on-hand should be ones, fives, tens, and twenties. Many stores will be unable to break a fifty or hundred, or unwilling, since they cannot use it to give change.

Second, consider buying some silver coins. With cash in short supply, the value of silver coins will likely jump higher. Yet compared to gold, a silver coin is more liquid — it is easier to spend. If gold jumps in value, a single gold coin may be worth much more than you want to spend. But silver will be much closer to the value of retail goods. The spot price of silver is currently near its 5-year low (as of this writing, according to this chart). Coin prices and values are always a little higher than the spot (bullion) price, as the coins are more liquid. By the way, “ounces” when applied to silver coins is the “troy ounce”, which is heavier than the regular ounce (the ounce used in food weights).

Third, get a cryptocurrency account (such as Coinbase). It takes weeks to set up this type of account and have it “verified”, before you can do much in the realm of bitcoin and litecoin. I’m not recommending that you buy cryptocurrency. We can’t be sure what will happen with the crypto-economy once the SHTF. But having an account might prove useful.

In my opinion, most cryptocurrencies (there are hundreds) are not worth buying at all, and never will be. The only cryptocurrencies that I would pay any attention to are bitcoin, litecoin, and nextcoin. This is not a recommendation to buy or sell or trade any cryptocurrency, just my personal opinion of the leading candidates, if cryptocurrencies even survive the approaching fairly-inevitable economic disaster.

Fourth, store physical items that will be of value when the SHTF, to use for bartering. My top picks: gardening seeds, nuts, coffee, canned meat/fish, vegetable oil, ammo, first aid supplies, fish antibiotics, water purification equipment, and whatever else might seem to you to be good for bartering.

Fifth, start a survival garden, or enlarge your existing garden. I’m currently renting some gardening space at a local farm, as my yard is not suitable for a large enough garden (too shady and the soil is far from ideal).

As a prepper, I love hate to be the bearer of bad news. But an economic disaster is probably the most probable of all the severe long-lasting disasters we discuss. The writing is on the wall. It’s just a matter of when, not if.

– Thoreau

3 Responses to The Approaching Cash-Only Economy

  1. You forgot the biggest cause is the looming new regulations for accepting credit cards. They are a pain in the Butt. Plus the new smart “chip”credit cards require new machines to accept them we are also considering to go cash only in a month or two because of now government regulations for accepting credit cards.

  2. The idea that stores may need small bills, or even correct change is good but stores may also need large bills to pay there suppliers. Also if the government does print a lot of money and we end up in a Zimbabwean situation small bills may be just TP.

  3. Not sure I can buy into your theory of the trend going to cash only. The banks have far too much to lose without credit. I see them pushing just the opposite direction- cashless. In a partial collapse the banking network, along with its fraud prevention tools, will still be available to minimize rampant fraud…. Again the banks have far too much to lose to let that happen!

    However, we the people and business stand to gain with cash only, which is the more likely cause of what you observed. I personally know people who’ve completely removed themselves from banking as most of us do. My family is not there yet, but we have managed to eliminate most of our debt. We’ve migrated from big banks to small credit unions, anticipating that big banks will likely be the first to slam the ATM door shut.

    I do agree that, with a major economic crash, hyperinflation will come and what cash we have on hand will quickly lose value. I also agree with your recommendation to have silver coins (1964 or earlier) on hand to hedge against this scenario, also solving problems the small increment concern (I wouldn’t bother with small bills in my stash). From there, as you point out, bartering will take over – black market if necessary.