I was having breakfast with my friend this past weekend (at Tom Sawyer’s, a nice little place off the beaten path) and she was telling me about her trip to Italy and what she did there. As the conversation ranged, she told me about something that staggered me, both in its unbelievable nature and chilling foreboding.
Apparently, due to the continued decline in the Italian financial structure, among the many devices they have enacted to try to curb their plummeting currency is to require citizens who wish to withdraw $1,000 or more from their bank accounts to detail in writing what their plans are for using the money.
I cannot imagine anyone here in America not finding that idea incredibly offensive, not to mention invasive of our privacy. After all, it is our money. We should be able to do with it anything we want. The bank benefits from (mostly) free use of all our collective cash. I think the right to withdraw what we want is little to ask in return.
The change in Italian policy (in fact, the threshold will be reduced to $500 withdrawals later this year) reminds us of the differences between America’s original democracy and free market system with those that followed later in Europe and elsewhere. For all Americans’ complaints about government intrusions, we are so much freer than many other countries.
The chilling part of this incident is that the ill-conceived policy has been triggered by the massive and beyond repayable debt Italy (and other countries) have amassed. If citizens lose confidence in their country’s ability to protect their money, there would be a “run” on the banks as people would want all their cash, most of which is not physically present in the bank. Once a run starts, the dominoes fall (see: America, circa 1930s).
We have just “survived” the so-called “Great Recession”. The economy still stands on a precipice, with tepid worldwide demand and slashed consumer spending. During this period, the combination of massive government spending and reduced tax revenue from lower incomes (corporate and personal) puts America in a scary spot.
While I’m not suggesting we’re likely to see draconian measures as that of Italy (there are plenty of “pundits” who “know” what’s coming and are eager to tell you), still we are not strangers to catastrophic economic conditions even in our own past.
Do I suggest we all pull our money out from the banks now and stuff our mattresses? Ridiculous. You would do well to bank on America’s natural resiliency to figure a way out of this mess (though it could get uglier before it gets prettier). Still, it couldn’t hurt for you to be more aware of where your money is and where it should be.
At the very least, you might want to sleep on it.