Time To Move Outside Of The Financial System?

Monday, Feb 09 2015 11:37 AM



  • How negative interest rates change the game.
  • How one safely stores cash privately.
  • How safely stored cash can be a better investment than negative interest rate bonds.

We are experiencing an unusual phenomenon in the financial world at present, that being negative interest rates. Professors in economics and finance were teaching students as late as 2007 that the absolute bottom for interest rates would be 0%. Yet at the height of the 2008 financial crisis, interest rates on 1-month T-bills fell below 0% for the first time in history. Now, negative interest rates are becoming more common. The extreme case as of the time of this writing is the 10-year Swiss bond, which peaked at -0.28%. With safe haven investment now costing the investor, options outside the conventional financial system become a viable option.

When people think of storing cash outside of the financial system, that includes banking vaults, it brings to mind images of storing cash in a mattress, cookie jar or other home hiding places. Having known someone who left a large amount of silver in an attic after selling a house, I'm not advocating this approach. One alternative worth considering is a safe deposit box. A box large enough to hold $1 million in $100 bills can be rented for a fee.

Today's unique financial environment of negative interest rates creates both the temptation and the opportunity for cash hoarding outside of the conventional financial system. Admittedly, in just about any other time in history, this would be an unwise financial strategy. Even now, this approach best fits those who need to protect amounts that are insurable by private insurance. However, if these negative interest rates are the indicator of a bond bubble, and some of the more dire predictions about the world's financial state come to pass, cash in a safe deposit box protected by private insurance might prove to be a critical and secure asset.

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