Dateline: Bucharest, Romania
Many of us have lived in a geographic location that is subject to some form of natural disaster.
Earthquakes, tornadoes, hurricanes, and even heavy rain or snowfall can cause a very serious disruption of basic services. Anyone who has been through a major event like this knows that it’s not just the immediate minutes or hours that are a challenge to survive. Electricity can be knocked out for days.
Water treatment plants can go offline so that drinking water needs to be boiled. Traffic lights can go out of synchronization or quit altogether. Public transit can be shut down.
It’s very common for families to practice some kind of preparedness for whatever emergency is likely in their community.
How do the kids stay warm in their bedrooms when the heat is off? How do you cook food? All the basic things. It’s a little like camping right in your own home. Fine.
Most of us know how we’re going to deal with that kind of trouble when it comes up.
What About a Financial Disaster?
Not many of us have been through a financial disaster. Not a real one, anyway. I’m not including losing a job or running out of cash before the end of the month. Most of us have been there at some point in our lives.
The trouble is that the countries with the largest economies are palpably close to serious financial trouble. The dollar, yen, euro, and pound are all underwritten by countries that are bankrupt by normal accounting standards.
They all print money and go deeper in debt to keep their economies going. Substantial swings in the value of currencies, stock markets and assets are commonplace. Long term financial stability is a fading memory.
It’s pretty hard to convince yourself that there is zero chance of a financial disaster in your lifetime, let alone in the next few years.
So What’s Your Plan?
If Cyprus in 2013 is any bellwether at all, you might have to deal with something like this:
The country is notified on a Saturday that Monday will be an unscheduled bank holiday. By Monday, it’s extended to Thursday. During that time you can’t draw more than $300 per week from any ATM. You also can’t log in to your online banking in order to transfer money. What’s your plan if that happens?
It’s revealed that your bank – Citi, Chase, CIBC, HSBC or whatever, never had enough cash on hand and overvalued the real estate assets they held. The politicians and their paid talking heads show up on TV and declare that “stakeholders” (ie. you!) should have realized the risks they were taking and should not expect to be bailed out by taxpayers.
A few weeks later, while your money was frozen the whole time, they determine that anyone with more than X-amount in an account should sacrifice a certain percent to the bank because of the shared blame. Poof, a big percentage of your personal money or your company’s operating capital is gone.
What’s your plan if that happens?
So far, both of the above are exactly what was done to people in Cyprus. And Cyprus is no backwater. It’s a European Union country that uses the same euro Germany and France use.
Overnight, 100,000 euros in a Netherlands bank was worth a lot more than 100,000 euros in a Cyprus bank. That’s like having $100,000 US dollars in a California bank worth a lot less than $100,000 US dollars in a Hong Kong bank.
Poof. Gotcha! It happened with euros in 2013, and it can happen with other currencies too.
Suppose this ripoff is the breaking point for many of your fed up countrymen. People start leaving the country in droves. The politicians and banks aren’t going to like people slipping under the fence and getting away.
What can they do about it?
Well, in 2012 the Moving Ahead for Progress in the 21st Century Act was proposed. It contains a section that says your passport will be revoked if the IRS says you owe $50K or more. So far the law has not passed.
But in a financial crisis? I’d bet it would pass overnight and with a lot lower number than $50K as the threshold. What’s your plan if that happens?
A major financial crisis, one that’s much larger than 2008, is going to hurt a lot of companies.
A company could be doing everything right, but if it’s owed a lot of money by some other company and doesn’t get paid, or if its bank seizes part of its liquid capital – well, there are going to be a lot of pink slips distributed.
Layoffs are the first line of defense for a company trying to survive a long term downturn in the economy.
What if you’re laid off? What’s your plan if that happens?
I’m not trying to encourage panic. I’m trying to do the exact opposite. People panic when they don’t have a plan.
Here’s the good news: none of these things has happened yet. Now is the time to think about making a plan in case it does happen.
Having all your assets, income and travel documents tied to one country is far less than ideal. Options exist. Don’t be the guy without a plan.
