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Disasters and Money

Natural disasters like the one in Kashmir are yet another reason why financial assets are superior to physical ones

The disaster that the people of Kashmir are facing as a result of the floods is unprecedented. Or perhaps I'm just using the word 'unprecedented' out of habit. Natural disasters on similar scale regularly strike various parts of the country. And indeed, given the degradation that the environment has faced, such disasters are likely to occur at higher frequencies. In any case, even if it's not floods and storms, disasters like earthquakes can strike at any time.

However, watching the tragedy in Kashmir unfold, I can't help thinking how financial assets fare differently from physical ones during such disasters. In the entire discussion on financial inclusion, one fact that's often not highlighted strongly is the fragility of physical assets. Whatever part of your wealth is held as cash in your pocket, and as gold or other stuff in your cupboard, may or may not survive a large scale natural disaster.

For people who have fled their homes in floods, or other disasters, there is no certainty as to how many of their possessions that have been left behind will survive and in what condition till they get back. Moreover, even if they manage to take along some wealth with them when they flee their homes, there are no guarantees of the safety of what they are carrying.

Besides everything else, financial assets are far superior to physical ones when disaster strikes. However, there's a flipside to this. Money that is needed in an emergency should actually be in one's physical possession. When an earthquake strikes or the flood waters rush in, then trying to find a functioning ATM would be a dangerous distraction.