I wrote earlier that it might be a good idea to start hoarding cash. If there is to be a run on the banks, and cash is to start trading at a premium to its face value, you might as well be ahead of the game. But if you do, what are you going to do with it?
You can buy a safe and keep it in your basement. You can stuff it in the freezer (a very common place to keep cash, apparently) or under your mattress. But beyond that, it’s tricky (particularly as safes aren’t cheap and you have to insure their contents just in case).
The good news is that for proper entrepreneurs, all this could constitute something of a business opportunity. Russell Napier of eri-c.com took up the idea in his Solid Ground strategy letter.
“Consider that the standard pallet measures 1 metre by 1.2 metres and will take 84 piles of €500 banknotes. The UK’s Health and Safety Executive recommends that the height of a pallet should not exceed the widest side of its base. A 1.2 metre high pile of banknotes contains 11,000 notes, and thus each pallet can safely hold 84 piles of 11,000 banknotes. A pallet of safely stacked 924,000 €500 banknotes is therefore worth €462m.
“There is a small warehouse for rent near Newry, at the foot of the Mourne Mountains in Northern Ireland. Given its dimensions (16.5m x 9.0m x 5.6m) one could stack 468 pallets of €500 notes representing €216bn. At the current bank deposit rate of minus 50bp per annum, the cost of carry to have €216bn on deposit with a commercial bank would be €1,081m. The annual cost of the warehousing space is around €7,000!”
Now, clearly this warehouse will need significant private security, but, as Napier points out, there is an “over supply of such security in Northern Ireland due to a structural change in market conditions.”
Anyway, if you charged your cash-hoarding clients 0.2% a year on the cash, you’d make a good €400m, and they’d still save €600m or so all in. Napier isn’t, I don’t think, even half joking. Time to buy warehouses and make friends with security guards?