Puerto Rico Without Electricity, Wifi, ATMs Shows Importance of Cash, Gold and Silver

– Puerto Rico without electricity, wifi, ATMs shows importance of cash, gold and silver
– Most of Puerto Rico remains in the dark and without power three weeks after storm
– With widespread power failures, Puerto Rico remains cash only with retailers only accepting cash and few consumer having cash

– Shortages of food, fuel and medicine with infrastructure repairs delayed
– Power could be ‘out for months’ as 85% of people remain off the grid
– Around 75% of ATMs disconnected
– Electronic forms of payment including bitcoin have been rendered non viable
– Puerto Rico’s accidental ‘cashless society’ shows risks of cashless society and importance of holding cash, gold and silver out of the financial and digital systems

Editor: Mark O’Byrne

Aerial photo of flooding in Puerto Rico. Washington Post

Puerto Rico has been destroyed by two savage hurricanes which have plunged the island into darkness and despair. The landscape of ruined homes and entire towns resembles Hiroshima after the man made disaster of a nuclear  bomb being dropped on the city.

More than three weeks since Hurricane Maria hit the island, 3.7 million American citizens are on the precipice of a humanitarian disaster.  The majority of these people are desperate for food, water, electricity and shelter. They are desperate for cash that will allow them to secure these basic necessities.

Over 84% of the island remains without power and 37% of people are without access to water. Without power, much of the population is does not have electricity to charge their phones and iphones. Very few have wifi and this is severely impacting their ability to communicate and conduct their lives.

Inevitably, the future of Puerto Rico now lies in the wrangling hands of government and financial organisations, all of which seem to be pointing the finger of blame at one another.

The territory’s government expects to run out of cash by the end of the month.  It has asked Congress for an immediate payment of $6 billion to $8 billion. This is to meet vital expenses including salaries, emergency repairs, and pension payments.

“We will run out of cash as of Oct. 31 of this year,” said Raul Maldonado, the territory’s treasury secretary. “As of November, we will not be able to operate as a normal government.”

Given the country’s dire electronic and communications situation, tax receipts are way down which will likely exacerbate the dire economic situation even further.

Problems are not just at a government level. Day-to-day life for Puerto Ricans is also obviously extremely hard and increasingly dangerous. The island is in a cash black-hole with little access to or means to buy essentials.

Not only is there a shortage of cash but the majority of ATMs are down. Even if cash was aplenty, few people are able to withdraw pay checks or access their digital savings and make payments electronically.

It is a stark reminder of how reliant our economies and day-to-day lives are on electricity. It is a stark reminder of how dependent  our modern digital currencies – whether they be public fiat or private crypto currencies – are on increasingly antiquated electricity and power infrastructures.

Today the faith we put in governments that basic utilities will continue regardless is unprecedented. Citizens in Western nations rarely (if ever) question how they would manage if they had no access to electronic money or bank accounts and could make digital payments online or by credit and debit cards.

Puerto Rico should be a warning to us all. No matter how wealthy your country, how “sophisticated’ your central bankers and central banking system and how technologically advanced your infrastructure,  we can all be rendered poor overnight by the power of Mother Nature.


‘You’re broke even if you have money’ 

‘Cash Only’ is reportedly a common phrase across many of the retailers on the territory. The majority of gas stations and grocery stores are only accepting cash payments. Citizens have little choice but to try and find cash.

However, shoppers have the same problem retailers do – they can’t get the cash they need. Reports the New York Times:

Fewer than half of Puerto Rico’s bank branches and cash machines are up and running, still crippled by diesel shortages, damaged roads and severed communications lines. Bank officials say they are struggling even to find employees who can get to work when there is no public transportation and gasoline is hard to find.

Across the island, people who have spent their last dollars on an $8 bag of ice or $15 for gasoline are waiting for hours outside banks and A.T.M.s in hopes of withdrawing as much money as possible.

“You’re broke even if you have money,” Mr. Jimenez told the New York Times.

But is there really a cash shortage? Zoime Alvarez, vice president of the Association of Banks of Puerto Rico told the New York Times that not only was there already enough cash on Puerto Rico but there was more arriving to meet what the New York Federal Reserve called “extraordinarily high demand.”

Does this matter though when there is electricity failure across the island? This isn’t the only problem – transport networks are down and organisations are struggling to deliver goods and services.

The infrastructure issues are unlikely to be fixed soon.

Already in a bad way

It’s no secret that prior to Hurricane Maria, Puerto Rico was already in a poor financial state. Private creditors were circling looking for the $74 billion that has been lent to the island in recent years. Now the cash situation is set to get even worse.

A federal government bill is set to increase the island’s liabilities by a further 14%.

In addition to the country’s $74 billion in bond debt, there is also a further $49 billion in pension obligations.

With this sorts of liabilities its unlikely creditors are going to put much faith in the future of the island. Whilst Congress is likely to agree some funding, it will not help the territory with its long-term finance issues.

This will no doubt exacerbate increasing unemployment numbers and criminal activity.

Cash and electricity shortages are forcing some residents into a bartering and others into borderline criminal activities as they seek out ways to find more cash.

Mr. Jimenez, who waited in line outside Scotiabank, said the cash shortage forced him to get creative and tiptoe into the black market. Here in his eastern hometown, Fajardo, he was able to use his credit card to buy several packs of Newport cigarettes from a big-box retailer before the store ran out of diesel and had to shut down.

He and his wife traversed their neighborhood, selling packs of cigarettes for $10 each. Mr. Jimenez said he was not trying to make money — just to stockpile cash to use at the gas stations and markets that now accepted nothing else.

“I’m like a drug dealer,” he joked.

Prior to the hurricane residents were warned to stock up on all essentials, but few could have realised just how important cash would become.

Few people appreciate this. In times of disaster like this, cash becomes king. Followed closely by gold and silver which can be traded for cash or used as deposits or for payment for life’s necessities.

Most shopkeepers who are struggling to sell their merchandise as they cannot take electronic payments and whose potential customers do not have cash will gladly accept small gold and silver coins and bars as payment in lieu of cash.

Coin dealers, jewellers who buy from the public and pawnbrokers in Puerto Rico have been very busy since the crisis as people exchange gold and silver jewellery and bullion coins and bars for cash.

Ironically, less and less governments want us to have access to cash, let alone to gold and silver, and this is making us more fragile financially.

Our economies are more vulnerable than ever in this regard and the modern drive to embrace all forms of digital currencies and the cashless society is setting ourselves up for an even bigger fall.

No cash transactions means no transactions

The Puerto Rico problem will only get worse. Not only are ATM and banking networks down but employers and government cannot make payments they need to make to individuals’ accounts.

In the long-term this is a problem likely to be faced by many nations that rely solely on electronic systems for all payments.

We have previously discussed the push by governments and banks to a cashless society. In the United Kingdom, 89% of the total value of consumer payments are non-cash payments. In Canada, it’s 90%.

Disasters such as Puerto Rico do not appear to be considered by banks and governments who claim cashless societies are better for all. Reasons for going cashless include clamping down on tax evasion, illegal cash activities and increased spending.

However, when an electricity and overall infrastructure crisis hits (as we see in Puerto Rico) the ‘convenience’ of a cashless society quickly falls flat on its face.

This is also the situation for anyone who was hoping bitcoin (or ‘insert another cryptocurrency’) might be the answer when banking systems can’t operate. However bitcoin transactions require electricity, a lot of it, and wifi. As with cashless fiat transactions they are as problematic when there is no power.

This is why in times of such crisis there is such demand for not only hard cold cash but also for gold and silver. None of them can suddenly become inaccessible thanks to power shortages or the inability of a government to sort out local infrastructure.

Too late for cash?

For now the Puerto Ricans are ‘fortunate’ that their currency is the U.S. Dollar. This means the value of the cash in their accounts is unlikely to be majorly affected by Hurricane Maria and the resulting crisis.

But if Puerto Rico were an independent nation then it would almost certainly be experiencing a fall in its currency. At this point all of the goods and services it needed to import in order to help it to recover would be increasingly expensive – as seen in the UK after Brexit.

Meanwhile gold and silver would be accepted as they are borderless currencies that do not operate within the confines of a government, central bank or electronic system.

Gold and silver often get a bad rap when it comes to discussions about their role as money. Both are pushed to the bottom of the pile when you consider the convenience of spending them compared to the likes of electronic cash, paper notes and bitcoin.

But one thing that is guaranteed with them is that you know you can use them in times of crisis. They are highly durable and highly desired. That is not the case with fiat or bitcoin when it comes to the crunch as seen in Puerto Rico in recent days.

No matter the town, city or country you find yourself in, times such as these pose multiple threats whether military or natural.

We all assume that governments are competent and will look after us. We cannot bring ourselves to imagine electricity systems and our banking systems including ATMs going down and not having access to our hard earned savings.

But it happens, all too many times as this last hurricane season has demonstrated. Prudent savers who like to be prepared should consider the magnitude of disasters such as Hurricane Maria – food runs out and electricity goes down.

You think you are wealthy and then suddenly, you have nothing.

You need cash and means of exchange in order to survive.

Diversifying your emergency funds should be a priority, this means hold some cash and gold and silver coins and bars to ensure you can survive and thrive with or without government’s help.

Best to hope for the best but be prepared for less benign scenarios.

The people of Puerto Rico would attest to the power of this today.
Source: Zero Hedge

Important GuidesFor your perusal, below are our most popular guides in 2017:

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Mark O’Byrne
Executive Director

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keep dreaming America, you will get nothing

Authored by John Mauldin via MauldinEconomics.com,

In the US, we have two national programs to care for the elderly.

Social Security provides a small pension, and Medicare covers medical expenses.

All workers pay taxes that supposedly fund the benefits we may someday receive.

The problem is that’s not actually true. Neither of these programs is comprehensive.

The End of Government Entitlements

Living on Social Security benefits alone is a pretty meager existence.

Medicare has deductibles and copayments that can add up quickly. Both programs assume people have their own savings and other resources (I wrote about this in detail in my previous issues of Thoughts from the Frontline). Despite this, the programs are crucial to millions of retirees, many of whom work well past 65 just to make ends meet.

This chart from my friend John Burns shows the growing trend among generations to work past age 65:

Having turned 68 a few days ago, I guess I’m contributing a bit to the trend

Limited though Social Security and Medicare are, we attribute one huge benefit to them: They’re guaranteed. Uncle Sam will always pay them – he promised. And to his credit, Uncle Sam is trying hard to keep his end of the deal.

Uncle Sam’s Debt Nightmare

In fact, Uncle Sam is running up debt to do so. Actually, a massive amount of debt:

Federal debt as a percentage of GDP has almost doubled since the turn of the century. The big jump occurred during the 2007–2009 recession, but the debt has kept growing since then. That’s a consequence of both higher spending and lower GDP growth.

In theory, Social Security and Medicare don’t count here. Their funding goes into separate trust funds. But in reality, the Treasury borrows from the trust funds, so they simply hold more government debt.

Today it looks like this:

  • Debt held by the public: $14.4 trillion
  • Intragovernmental holdings (the trust funds): $5.4 trillion
  • Total public debt: $19.8 trillion

Total GDP is roughly $19.3 trillion, so the federal debt is about equal to one full year of the entire nation’s collective economic output. That total does not also count the $3 trillion-plus of state and local debt, which in almost every other country of the world is included in their national debt numbers.

Including state and local debt in US figures would take our debt-to-GDP above 115%… and rising.

Just wait. We’re only getting started.

$210 Trillion Worth of Unfunded Liabilities

An old statute requires the Treasury to issue an annual financial statement, similar to a corporation’s annual report. The FY 2016 edition is 274 enlightening pages that the government hopes none of us will read.

Among the many tidbits, it contains a table on page 63 that reveals the net present value of the US government’s 75-year future liability for Social Security and Medicare.

That amount exceeds the net present value of the tax revenue designated to pay those benefits by $46.7 trillion. Yes, trillions.

Where will this $46.7 trillion come from? We don’t know.

Future Congresses will have to find it somewhere. This is the fabled “unfunded liability” you hear about from deficit hawks. Similar promises exist to military and civil service retirees and assorted smaller groups, too.

Trying to add them up quickly becomes an exercise in absurdity. They are so huge that it’s hard to believe the government will pay them, promises or not.

Now, I know this is going to come as a shock, but that $46.7 trillion of unfunded liabilities is pretty much a lie. My friend Professor Larry Kotlikoff estimates the unfunded liabilities to be closer to $210 trillion.

Pensions Are a Lie

Many Americans think of “their” Social Security like a contract, similar to insurance benefits or personal property. The money that comes out of our paychecks is labeled FICA, which stands for Federal Insurance Contributions Act. We paid in all those years, so it’s just our own money coming back to us.

That’s a perfectly understandable viewpoint. It’s also wrong.

A 1960 Supreme Court case, Flemming vs. Nestor, ruled that Social Security is not insurance or any other kind of property. The law obligates you to make FICA “contributions.”

It does not obligate the government to give you anything back. FICA is simply a tax, like income tax or any other. The amount you pay in does figure into your benefit amount, but Congress can change that benefit any time it wishes.

Again, to make this clear: Your Social Security benefits are guaranteed under current law, but Congress reserves the right to change the law. They can give you more, or less, or nothing at all, and your only recourse is the ballot box.

Medicare didn’t yet exist in 1960, but I think Flemming vs. Nestor would apply to it, too. None of us have a “right” to healthcare benefits just because we have paid Medicare taxes all our lives. We are at Washington’s mercy.

I’m not suggesting Congress is about to change anything. My point is about promises. As a moral or political matter, it’s true that Washington promised us all these things. As a legal matter, however, no such promise exists. You can’t sue the government to get what you’re owed because it doesn’t “owe” you anything.

This distinction doesn’t matter right now, but I bet it will someday. If we Baby Boomers figure out ways to stay alive longer, and younger generations don’t accelerate the production of new taxpayers, something will have to give.

If you are dependent on Social Security to fund your retirement, recognize that your future is an unfunded liability a promise that’s not really a promise because it can change at any time. 

*  *  *

Get one of the world’s most widely read investment newsletters… free. Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.


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United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Image result for pics of gold

An Arizona bill that would eliminate state capital gains taxes on gold and silver specie, and encourage its use as currency, passed an important House committee this week. Final approval of the legislation would help undermine the Federal Reserve’s monopoly on money.

Rep. Mark Finchem (R-Tucson) introduced House Bill 2014 (HB2014) on Jan. 9. The legislation would eliminate state capital gains taxes on income “derived from the exchange of one kind of legal tender for another kind of legal tender.” The bill defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.” “Specie” means coins having precious metal content.

In effect, passage of the bill would “legalize the Constitution” by treating gold and silver specie as money.

HB2014 passed the House Ways and Means Committee by a 5-0 vote, with four members abstaining.

Under current Arizona law, gold and silver are subject to capital gains tax when exchanged for Federal Reserve notes, or when used in barter transactions. If the purchasing power of the Federal Reserve note has decreased due to inflation, the metals’ nominal dollar value generally rises and that triggers a “gain.” In most cases, of course, the capital gain is purely fictional. But these “gains” are still taxed — thus unfairly punishing people using precious metals as money.

A STEP FORWARD

Passage of HB2014 would allow Arizonans to deduct the amount of any net capital gain derived from the exchange of one kind of legal tender for another kind of legal tender or specie (gold and silver coins) from their gross income on their state income tax. In other words, individuals buying gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state taxes on the exchange.

Passage into law would mark an important step towards currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by HB2014 would allow Arizona residents to secure the purchasing power of their money.

“This isn’t going to end the fed’s monetary monopoly overnight, but it sets the foundation and opens the door for more market activity by the people,” Tenth Amendment Center executive director Michael Boldin said. “This is an important part of the overall strategy, and activists in Arizona should continue working to get both bills passed.”

BACKGROUND INFORMATION

Currently, all debts and taxes in Arizona must be paid with either Federal Reserve Notes (dollars), authorized as legal tender by Congress, or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.

But the United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”

The Arizona bills take a step towards that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly or the Federal Reserve by introducing competition into the monetary system.

Professor William Greene is an expert on constitutional tender and said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.

Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.

Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state by state level is what will get us there.

UP NEXT

HB2014 now moves to the House Rules Committee where it must pass by a majority vote before moving forward in the legislative process.


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Are You “Living In A Death Spiral”? These 6 States Will Collapse During The Next Recession

Submitted by Mac Slavo via SHTFPlan.com,

Being on the hook is not going to be pretty when interest rates are raised back up, and debts come due. At a personal level, it will mean more stress and juggling to make ends meet. For the larger economy, it will mean cities and states unable to meet obligations or balance their budgets – ending in bankruptcy, and bailouts. Meanwhile, millions of people are relying on that money to keep coming in order to survive. Something is going to go very wrong.

Relying upon government to function and send you money is not a secure plan.

The mathematics are terrifying and dismal, and so is being caught up in these collapsing states.

In the next phase of the financial crisis, the debt supercycle will become the most defining feature of the big hurt that will fall on nearly everyone.

That’s the dire warning that Goldman Sachs issued about what they termed the Third Wave of the global collapse. But it hasn’t come, at least not yet:

This wave is characterised by rock-bottom commodities prices, stalling growth in China and other emerging-markets economies, and low global inflation, Goldman Sachs analysts led by Peter Oppenheimer said in a big-picture note.

 

This triple whammy has its roots in the response to the first two waves of crisis — the banking collapse and European sovereign-debt crisis — and it is all part of the so-called debt supercycle of the past few decades.

Unfunded liabilities for pensions and other state benefits are threatening the security and future of an entire generation of retiring, hardworking Americans.

The debt will be shifted for as long as possible… but eventually, someone will have to come to terms with it. The black hole totals up to huge sums of money; no one can pay; and the system is bankrupted, or services rendered become inadequate and farcical.

Forbes contributor William Baldwin describes the acute problem of “death spiral states,” which could actually be as bad as it sounds. It affects dozens of cities and municipalities as well.

Does your state have more takers than makers? Check it out.

 

California has a powerful economy, with 14 million private-sector jobs. It also has burdens: welfare recipients (12.6 million), generously paid government employees (2.1 million) and people collecting government pensions (1.3 million).

 

Add up the numbers. There are 114 clients drawing from the government for every 100 people chipping in by working outside the government and paying taxes. We’re calling this the Feedme Ratio. Six states have a number over 100.

 

These states are at risk of going into a downward spiral in the next recession. The burdens will remain but too many of the providers—employers in the private sector—might shrink or decamp.

Right now, the biggest risks for a bankruptcy or collapse is in the these states, based upon the ratio between what Baldwin terms “makers” and “takers.” Basically, the socialist state is enveloping all prosperity:

• New Mexico – 148 dependents per 100 private sector workers

• West Virginia – 116 dependents per 100 private sector workers

• California – 114 dependents per 100 private sector workers

• Mississippi – 111 dependents per 100 private sector workers

• New York – 108 dependents per 100 private sector workers

• Arkansas – 103 dependents per 100 private sector workers

Detroit and Chicago top the lists of cities who wouldn’t be healthy in the ratio of makers/takers either, and would crumble in a debt crunch.

You can check on your state via this interactive map, though it is dated slightly to 2015.

A score under 100 means that the state has a net number of providers, and is theoretically on more solid ground. However, the pressures are endemic in the system, and no state is immune. For instance, Texas has a healthy score of 66.7; yet, the city of Dallas just announced that it is suspending pensions payments to city rescue workers and employees. There’s a serious disconnect.

Once things go downhill, violence, crime, looting, riots and the like become chronic problems. The police state presence is also an issue, and society goes on edge.

Everyone can feel the sinking depths, and order is about to implode. When things go primal, you do not want to be around to get caught up in it.

Being inside a major city on the day that the ATMs stop spitting out cash, or EBT cards don’t work will be an incredibly dangerous day. Relying upon government bureaucracy and functioning technology to meet your vital needs is never a good position to be in during an emergency situation – be it economic crisis, hurricane, power grid failure or something else.

Joel Skousen described in great detail how to avoid the urban areas that will become completely dysfunctional nightmares at the first sign of a major emergency.

Your retreat should be strategically chosen to lay outside of certain regions, military targets and fragile climates. Knowledge of the back roads is essential to planning a route that won’t leave you stranded on the highway in endless gridlock.

Above all, it is advisable to avoid mass populated areas, especially big cities on the East and West Coast. People that are prone to panic, and will be easily cut off from essential services become desperate. There are far too many bad apples in that ratio for any good to result.

Avoidance is key – and that is why living in a “death spiral” state like California or New York could be a major liability during a crisis, or alternately a prolonged collapse.

CalPers pension… a massive black hole that is merely carving a path for many failed states to come.

The future is austere if this equation isn’t balanced out:

Tom Chatham warns about the abrupt change that is coming home to roost in America. Things can get really bad, really quick.

But really, most of us don’t know how bad it will get:

Americans that have only known the post WWII prosperity are ill equipped and educated to deal with depression level living. Easy credit and instant gratification have created a nation of whining, self absorbed, entitlement minded people with no moral or mental toughness.

Doug Casey believes we are headed for what he calls a super depression created by the ending of a debt super cycle. The bigger the debt cycle the bigger the depression that follows. That’s how reality works and most people are not prepared for reality.

When this depression, which has already started, gets momentum, it will overwhelm the plans of a society that is expecting to get things like social security, pensions and payouts from retirement plans they have paid into for many years. All of those things will disappear almost overnight and leave society gasping and stupefied over what to do.

The big reveal is coming: inside that great big old lock box… is just another I.O.U.

Are you prepared for the future, and all the economic uncertainty it could bring?


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