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naraburns  nihil supernum  1yr ago (text post)   4039 thread views

Small-Scale Question Sunday for March 26, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

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I have a dumb question that I thought of while reading an article about the SVB thing. Say you have $50 million in a savings account. You are really smart (or an idiot) and after doing your research you expect the entire banking system to collapse in a few weeks, and you want to take your money out and figuratively “stuff it under your mattress” (as in not just wire it to a different bank account). Is it possible to even do this? I know you can’t just walk into a bank branch and ask for your $50 million dollars, but say you informed them ahead of time, will they actually be able to give you $50 million in 100 dollar bills? If they can, will they deliver it to you in an armored car, or is it your problem to figure out what to do with it? Is there some way of dealing with this where the Fed will hold it for you in something like a “bank account”, or you can get some sort of government IOU so you don’t need to take it out of the banking system in cash?

I say okay, and ask how I am supposed to close the account and transfer the remaining balance. He said I can close the account and withdraw the remaining balance only in cash. Cash? At this point, I literally asked: "like, green paper money cash?" He says yes. The balance in the account is somewhere around $1M.

[...]

This manager is very helpful, if not a bit gruff. He explains to me that each local branch has some sort of performance metric based on inflows and outflows at the given branch. Therefore, funding a $1M cash withdrawal was not attractive to them. I'm learning a lot in a really condensed period of time at this point. I don't even know if what he's telling me is true, or legal, all I hear is "this is going to be hard to do if you want it all at once."

But we do want it all at once. And we want to close the account. Now. He is not happy, but he says he'll call me back in 24 to 48 hours. True to his word, he calls me back the next day. He says that he had to coordinate to ensure his branch had the proper funding to satisfy this transaction, and that the funding would be available at a specific date a few days hence. He said I have to do the withdrawal that day because his branch will not hold that amount in cash for any longer.

He also subtly suggested I hire personal security or otherwise deposit those funds somewhere with haste. I believe his exact words were "if you lose that check, I can't help you." Again, this was a one time event, and I don't know how true that all is, but it was said to me.

A few days later, I walk into the branch (I did not hire personal security). I tell the teller my name and there is a flicker of immediate recognition. The teller guides me to a cubicle, the account is successfully closed, I'm issued a $1M cashier's check, and I walk out the door.

https://mitchellh.com/writing/my-startup-banking-story - Interesting story about a startup founder's interaction with the world of banking.

The problem with your hypo is that if the entire banking system collapses, so does society, so the dollar bills themselves are worthless. The economy based on attenuated supply chains will break down. Center City apartments will become charnel houses under the strain of the famous trope about society being three meals from anarchy.

So the first thing you're looking for is to buy a ready-made isolated cabin with its own water supply and a relatively off-the-grid setup as far as electricity, heat, etc. You need a quick closing, cash offer, two weeks. Then see how many pallets of these CostCo will deliver in a hurry. You're going to overpay, because you need this done now, don't haggle over $100k and lose the whole $50mm. I recommend the North, far North, if you're handy with a chainsaw (buy a bunch of those too, electric will actually be easier to keep fueling than gas at a certain point) you can heat your house with wood, and a depression will see hordes wandering South where it's warm as it becomes harder to heat your home on broken supply chains.

The most practical way to cash out the rest of your $50mm is to buy something with it. Gold, for example, but anything else physical and storable and useful, is going to be better than literal banknotes in an emergency. Personally, ammo in a mix of 9mm, .223, and 22lr would be my first pick for a diversified "The Entire Fucking Banking System Collapses" portfolio. Ideally, take your weeks, and bury the gold and ammo in big plastic bins throughout your newly acquired woods.

Assuming the banking system, for some reason, doesn't collapse, you're probably going to take a big haircut if you have to get that stuff back to cash. Certainly the rush/freight shipping is going to brutalize you. What do we think, team, 20%? 25%? I don't think more than a third.

At first I thought this was a pretty inane question, but after thinking about it for a bit, I found it rather interesting. Taking your question 100% literally, how does one withdraw millions of dollars in cash? Based on this Reddit post/comment it does seem like it’s possible:

https://old.reddit.com/r/NoStupidQuestions/comments/n3mbyl/could_someone_withdraw_a_million_dollars_from/

Who knows if that’s true, but it sounds pretty reasonable to me. I have to imagine this is an incredibly rare occurrence.

Thanks, that pretty much answers it, seems like they bank will arrange the cash order with the government for you but it’s your responsibility to take delivery

government IOU

Bonds? That's assuming the government won't become insolvent along with the banks. But if that does happen, your dollars will probably be worthless anyway, no matter their format.

Alternatively, $50 million is right around the price of a tonne of gold.

See my answer below. The gist of my question is basically- is it possible for an individual to actually turn his $50m bank deposit into $50m worth of 100 dollar bills to keep in a vault at his house (or under his mattress or whatever), and how would it logistically work if someone wanted to do that

That government IOU is called a T-bill.

How do you ultimately get the cash out though when the t-bill matures without interacting with the banking system again? By IOU I meant like can the bank just give you some certificate that says you are owed $50m in cash from the Fed/treasury (idk which), and then make it your problem to try and get the actual cash from them? Since I assume the bank would need to order the $50m in 100 dollar bills from the government anyway

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