Real estate is no sure thing either. We purchased a condo in south Florida back in 2006. Our timing could not have been worse. We bought at the peak of the market right before real estate prices crashed. Two years later, market value on that condo was about half what we paid for it. Fortunately, we paid cash have rented it out which covers our expenses and generates a little positive cash flow. Now here we are 10 years later and market values have still not recovered to what we paid for it. Real estate is probably the least liquid asset I can imagine. You certainly can't slice off a little piece of it to buy some food or fuel.
This is true. You often hear reports about how much money the government is "printing" these days. That suggests that the government is producing vast quantities of paper currency. There may be some of that but, more likely, someone sits down at a keyboard at the Federal Reserve computer system and types in a new amount to increase the amount of "money" in the system. These days the vast majority of financial transactions happen electronically. As dejapooh said, when I get paid it is simply an electronic transfer of "credits" (a.k.a. "money") from my employer's account to mine. I then use my debit/credit card to buy groceries, gasoline, etc. by transferring "credits" from my account to the grocery store's or oil company's account. My guess is that I do less than 5% of my financial transactions using paper currency.
All of this speaks to the real nature of "money". Money is all about perceived value. It doesn't matter what currency is being used (government paper, gold, cowrie shells, digits on your computer monitor, etc.), if the population believes the currency has value then it does. But if the population begins to believe the currency no longer has value (or sees the currency as significantly less valuable than it used to), look out below! This is, I believe, one of the great dangers of these "quantitative easing" programs the government has instituted. These programs simply add more money to the system. When something becomes too common, it tends to lose value. If people lose confidence in government currency, they will begin to look for an alternative. Historically, this alternative has often been precious metals, primarily gold and silver.
Isn't a bank running out of cash (whether metal or paper currency - whatever was in circulation at the time) the very definition of "not liquid"?
