Under Jonathan Johnson’s leadership at Overstock.com, the company has socked away $10.9 million in gold and silver and has a three-month food supply for each employee, bracing for a financial crisis that the Republican gubernatorial candidate said is certain to come…
“We expect when there is a financial crisis, there will be a banking holiday,” Johnson, Overstock chairman of the board, told the group. “I don’t know if it will be two days or two weeks or two months. But we have $10 million in gold and silver in denominations small enough … that we can use it for payroll. We want to be able to keep our employees paid [and] safe and our site up and running.”
My wife is the Overstock user in the Mayhew household, but as I understand it, Overstock.com is a fairly typical business to consumer web portal that sells things to people and then ships orders from warehouses to people via either the US Postal Service or a number of private entities. An extremely large percentage of Overstock’s payments from customers are made via credit cards over the web.
Is that an accurate enough description of their business process?
If it is, how does having a Smaugian hoard help Overstock keep their site up and running in a bank holiday scenario?
A bank holiday would only happen if there is extreme doubt about the liquidity of the entire US banking system. It would come as all private short term (1 to 30 day) lending either comes to a halt or has credit card level interest rates attached to it. It would be a massive breakdown of social trust and every single entity that can grab cash is going to hold onto cash for as long as legally (and usually illegally) possible as the lawyers can fight later over contract breaches.
So in that scenario, who is actually going to go on Overstock.com and buy an expandable three piece luggage set? Sure, Overstock might give their ISP four pounds of gold to keep their connection on as their bank account would be frozen, but their ISP’s bank account would be frozen so the four pounds of gold would be insufficient to keep the ISP’s lights on (which are probably going off shortly anyways as the natural gas power plant is shutting down as their supply is not being delivered unless the power plant can supply physical cash in unmarked, non-sequential twenties instead of a line of credit).
How does having a gold hoard for an online retailer actually help that retailer stay open when the rest of the social and commercial network is shutting down due to the lack of credit?