I have read a lot about bank holidays, limits on withdrawals and the
like in Argentina. And I know that the financial collapse in Argentina
happened over a decade ago when perhaps debit cards and online banking
were not as prevalent. Having said that, can you tell me what method you
and others used to pay for your rent/mortgage and utilities? There has
been a lot written on paying for food and other physical purchases at
the market, but not so much about basic housing expenses.
Our paychecks arrive in our accounts via direct deposit and we pay
our mortgage and utilities using online banking. Very little of our
money actually touches our hands. We rarely even visit our bank unless
we need cash or have a check to deposit. In fact we hardly use cash at
all but favor making purchases with our debit cards.
Please help me to wrap my mind around how financial conditions will
most likely change in this regard. Will we not be able to pay or
mortgage using online banking? Do you think there will be limits or
problems with that? What about paying for utilities such as power, water
and heating gas? Are financial limits limited to just cash withdrawals?
Will online banking continue to function as it does now?
Thank you for your insight
Hi Stephen, even though the Argentine collapse took place a decade
ago credit cards and online payments where much in use. Most people had
credit cards as they do now and well, used them a lot too!
The problem is that they stopped being accepted as things went down.
With bank accounts frozen the economy falling apart within minutes you
saw “Cash only” signs going up everywhere. Even now you can see those
signs in many stores, especially gas stations.
How did you get by? Using cash. You looked for it, tried to find a
more secluded ATM that wasn’t out of money or waited in line early in
the morning to get you money allowance, what little they allowed you to
get of your own money per day.
This is why “cash is king” is especially true sometimes during the
first stages of a collapse when credit cards are no longer accepted by
many stores. If people are hungry for cash you can even land a few good
deals taking advantage of the scarcity of cash. I landed a pretty good
deal on a queen size bed because I had the cash for it at a time when
most people didn’t. (I was getting married and needed to buy it anyway).
Helping you wrap your mind around this, a possible scenario would be:
*Accounts are frozen. You are no longer allowed to move your money around, especially not out of the country.
*You are allowed to make on line payments for mortgages and other bills, but theres a limit to how much cash you can get out.
*Some companies may not accept online payments and there may be
problem on a per case basis. Maybe a guy can pay his power bill online
or with his debit card, but another power company may demand cash only.
*You may still use your cards on certain brick and mortar stores too,
but many stores may prefer to go for a cash only policy. In this
scenario you’ll see clear discounts for paying in cash, money that can
be kept out of the frozen banking system.
*Check in general may not be accepted due to a general fear of bouncing checks. Most banks will probably freeze those too.
*The basic idea here is, find a way of stopping the bank run, keep
the money in the system and stop the flight, especially out of the
country. Under these circumstances, inflation will increase
significantly as the economy becomes weakened and the trust in the value
of money decreases.
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