Why use banks?

I was reading this article about a young man who had a savings account with less than $5 in it who racked up over $200 in banking fees. With a balance of $4.95, he was charged a $9.95 account maintenance fee, and this caused the account to overdraft, thus triggering a $28 per day overdraft fee. By the time he was notified by mail of the problem a week later, he had racked up $229 in fees.

This got me to looking at my own account. Banks used to be an excellent way to protect your money. You placed your money there for safekeeping, and the bank paid you a small amount of interest for the privilege of being able to lend your money to others. Checking accounts, not being available for lending, typically charged a small fee for the convenience of keeping your spending money safe.

Not any longer. At prevailing interest rates, you are only earning about $1.50 a month on a $10,000 savings account. So at the end of a year, you have exposed your ten grand to the risk of being stolen by the government via inflation, and by the very company that you have entrusted your hard earned money with through the use of fees and charges, all for the token sum of $18.  An account of $10,000 earns $18 in interest in a year, but loses hundreds of dollars in value from inflation.

What I have done instead is to leave operating funds in my checking account, which being direct deposited at a credit union, lets me avoid banking fees. I keep one month's expenses in a savings account at the same credit union, which gives me a measure of insurance against overdrafts and small to medium unexpected expenses on short notice, and I invest the rest.

Now remember that gold typically holds it value against inflation. That is, an amount of gold will hold its value when measured against inflation, with the exception of small, short term variation and broker fees. It is those fees and variations that must be accounted for. For example, I bought gold when it was $1370 per ounce in September of 2010. There is a small premium for my preferred form of gold, and along with broker's fees, I paid $5400 for 4 ounces of gold.At today's price, I could sell that 4 ounces for roughly $8900- a profit of $3400, which is an annual return of nearly 200%.

Now today is a down fluctuation time- time to buy more. Gold has fallen almost $150 per ounce in the last 30 days. That is not a bad thing. As I write this, gold is down to $1580 an ounce, as the dollar increases in strength due to the impending collapse of the European Union. This means that we can buy gold at rock bottom prices. I am thinking of grabbing a few ounces this week or next, and catching it near the bottom.

Once the United States crashes in similar fashion (which is inevitable, considering the way we are emulating the out of control spending of Europe) people left with dollar denominated assets (stocks, bonds, savings accounts) will find their savings evaporated by inflation, while those holding assets like metals, oil, and durables will find that they have held their value.

The big downside here is physical security. I have a large, heavy safe, a cell phone connected burglar alarm, motion activated security lights, and numerous other security measures. Add to that the fact that there is an armed guard residing on the premises (me), and this is a pretty secure facility.

Use banks for short term liquidity, hold hard assets for long term savings. So here is my advice:
1 Get rid of all of your debt.
2 Establish a short term emergency fund of 1-2 month's expenses (not income).
3 Have at least one month's worth of food and needed supplies in the house.
4.Go easy on the luxuries like dining out, video games, expensive electronics, etc.
5.Save money in hard assets. (Things that hold their value that you can readily sell or trade for things you need)
6.Pay for a place to live in full. If you are making payments, you don't own the house, the bank does.