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Time For Some Mattress Padding
Submitted by Bryce McBride via Mises Canada blog,
Can you imagine borrowing $1000 from the bank and receiving $10 per year interest from the bank? I didn’t think so. However, this is the happy situation facing some European countries and even a few Swiss companies. The Swiss, Swedish, and Danish governments and the food multinational Nestle are now borrowing money from lenders who are happy to pay them for the privilege. In what may signal the beginning of the end of the current financial system, we have moved beyond zero percent interest rates to negative interest rates.
Why are negative interest rates now making an appearance? They are a natural consequence of the rampant money creation undertaken by central banks in response to the global financial crisis. To look at Switzerland, as European savers lost confidence in the euro in 2010 and 2011 and started converting their euro into Swiss francs, the value of the franc against the euro began to rise rapidly. This increase in the value of the franc made Swiss-made products expensive compared to French- or German-made products. In order to keep Swiss companies in business (and Swiss workers in jobs) the Swiss National Bank committed to keeping the value of the franc at or below 83 euro cents.
In order to do this, it was necessary for the Swiss National Bank to do two things. First, it created billions of additional francs and exchanged them for euro on the foreign currency markets. Second, it set Swiss interest rates lower than European interest rates in order to make Swiss bank deposits unattractive to European savers and Swiss loans attractive to European borrowers. European companies and thousands of people in countries like Austria and Hungary, attracted by lower Swiss interest rates, took out loans and mortgages denominated in Swiss francs. These francs were then sold on the foreign exchange market in order to buy the euro needed to fund investment or buy property. The increased supply of francs courtesy of the SNB and European borrowers and the reduced demand for francs from European saver kept the value of the franc suppressed against the euro.
However, as the European Central Bank has responded to each new crisis with promises of additional money printing, last month the Swiss National Bank, no doubt alarmed at the prospect of having to accelerate their own program of money printing in order to keep pace, surprised investors by announcing that they would no longer intervene in the foreign exchange market to keep the franc’s value fixed against the euro. Almost instantly, the franc gained 30% against the euro before settling at around par.
This sudden policy reversal resulted in large losses. Perhaps the biggest loser was the Swiss National Bank, which saw its holdings of euro and euro-denominated assets lose 20% of their value in terms of Swiss francs. Similarly, European companies and individuals who had borrowed in francs saw the size of their loans increase significantly in terms of euro. Eager to prevent further losses, European companies who had borrowed francs began purchasing francs in order to allow them to make future loan payments.
However, while you or I might buy franc notes, corporations with billions of dollars in assets prefer to purchase and hold money using liquid instruments such as government bonds. Thus, the demand for Swiss bonds exploded last month. As more and more investors competed to lend money to the Swiss, they began to accept lower and lower rates until the rate on a one-year Swiss government bond fell to around negative 1%. Put another way, investors who bought a Swiss government bond for 1000 francs would only get back 990 francs a year later, which makes one wonder why buy bonds at all? Why not just buy Swiss currency notes and keep them under your mattress? Asking this question gives some insight into the future of the global financial system.
In Switzerland, so long as people had confidence that the Swiss National Bank would keep the franc pegged at 83 euro cents, they were happy to borrow francs (at a low interest rate) to finance speculation in Europe. However, the minute the peg was broken this dynamic was reversed. Suddenly people who had borrowed in francs became desperate to hold franc assets with which to service their loans. They became so desperate that they were willing to accept negative interest rates.
As Switzerland has gone, so too will go Japan, the EU, the US and every other country that has engaged in reckless monetary expansion since 2008. For the past 6 years, monetary authorities have created trillions of dollars, yen and euro in order to sustain an illusion of stability and recovery. However, the near-zero percent interest rates that have resulted have caused even the most prudent of savers to behave like speculators in search of decent investment returns. As a consequence, many stock market indices are at all-time highs and some individual stock market valuations are patently ridiculous – it was reported last week that a firm in California that operates four “gourmet” grilled cheese sandwich trucks was valued at over $100 million!
The fact is, though, that these valuations are almost entirely due to the efforts of central banks to, as Mario Draghi (the governor of the European Central Bank) put it a few years ago, “do whatever it takes” to bring stability to the financial markets. As investors know that whatever apparent stability that exists is dependent on central bank intervention, the minute that intervention ends (or is seen to be ending) there will be a rush to dump risky assets in favour of assets that will hold their value. The mania for yield irrespective of risk that has characterized markets for the past 6 years will instantaneously turn into a mania for safety irrespective of yield.
Sadly for many investors, there is a lot more newly-created money floating around the financial system than there are safe places to put it. As has happened in Switzerland, this will push interest rates on safe investments negative. As negative interest rates become steeper, people will begin closing their bank and investment accounts in order to hold cash. However, if there are not enough safe government bonds in the world to soak up the trillions of dollars that have been created with computer keystrokes over the past 6 years, there are certainly not enough bills and coins. A run on the banks would therefore be a catastrophe in which banks and central banks would fail and the savings of a great many people would be lost.
Interestingly, today is the third anniversary of the meeting of European finance ministers where it was agreed to bail out Greece for a second time to the tune of 130 billion euro. As can be seen from the headlines, economic conditions in Greece have only gone from bad to worse since then. The ever-more likely possibility of Greece leaving the euro zone is already causing individual Greeks to empty their bank accounts. The fact of a Greek exit could very well be the signal for investors worldwide to dump their risky assets and flee to safety. As in the globalized world of international finance a bank run or financial panic anywhere can easily become a bank run or financial panic everywhere, it might be a good time to give your mattress a bit of extra padding.
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Let me see. Inflation at 7% and negative interest rates at 1% yielding -8% on your money. Why would you keep cash?
Because cash has 7% carry cost and leaving it in the bank costs 8%?
You are losing money either way to inflation. But since you aren't getting jackshit in interest, at least with cash you don't have to worry about waking up one day and finding out that your bank is now insolvent , and all your deposits are 'vaporized' ( or corzined) and you aren't going to get your money back. EVER, since you are nothing but an unsecured creditor to the bank. Granted, cash also has a risk of being stolen, and unfortunately the biggest thief you have to worry about are the uniformed kind who work for the govt, since if 'officer friendly' finds out you have a lot of cash, you will have your property stolen from you, and then attempt to prove to the govt apparatchik in a court room tha you aren't a criminal in order to get your property back. So nothing is without it's risks. Interesting times, my friends.....
I had been keeping min payments on mortgage, on the theory that inflation was increasing, and better to be in debt during inflation. Now reconsidering......all this discussion about where to put wealth neglects the obvious.....pay the mortgage down to zero for starters...gets cash out of the system and into real estate. (not that this doesn't carry its own risks, esp if you want to hold out for an eventual short sale...)
We're also considering buying up other properties as well, cash purchases, speculative land, etc. More diversification away from any form of cash.....
Thoughts?
Depends on how much cash you have, my biggest fear is not being able to put food on the table for my family, this is the sole reason i keep cash at hand. With cash also you have the ability to make a snap decision based on a number of any black swan events that land on your doorstep, for example if i was to put money into land and real estate living in the middle east, then that would be a disaster if the entire region goes up in flames.
All depends on your circumstances, for me its gold / silver, cash then real estate.
Bingo.
Don't forget fine art as well. Its easy enough to pick up and take with you, yet cannot be printed.
EDIT -- Another viable option -- and it sounds hippie-ish -- but is solar panels. You use them for the cash flow they generate, they take next to no maintenance, and if you put them on the roof of your house, you can always use them for your personal consumption. When you aren't at home, they are selling electricity into the grid. Much to Yellen Draghi, et al's dismay, solar panels cannot be printed out of thin air & its a fixed asset not cash.
EDIT 2 -- Also don't forget, in times of credit squeezes, lending institutions will discharge debt for pennies on the dollar just to maintain liquidity. With the subprime auto loan booming, wouldn't it be nice to get a phone call from your auto lender, willing to settle for $0.25 on the dollar if you pay in cold hard cash in the next 24 hours?
Desperate times makes people do interesting things. If I ever got that phone call I'd tell them sure, but it'll be $0.10 on the dollar.
http://www.debtcrash.report/entry/i-bought-what
The above post needs to be considered for anyone with a pension, 401k, IRA or brokerage account.
yea pays yer money and yer takes tha chance.
In the same boat, going to just keep paying the mortgage.
Have open land that's paid off. Just accumulating gold/silver & lead. Little cash under the mattress. Food for 30 days, water supply. And waiting.
Hang in there.
Good boat.
In your place, I would work on getting that food supply up. It does not take that much space, you can do it for yourself if money is an issue. There are decent videos out there on the topic, mylar bags, 02 absorbers, vacuum pack, seal in food grade pails (pails can be obtained for free often at restaurants, where they throw them away). Water purification too. I think of it all as insurance. Quite a bit of what I have is good for 20-30 years. The rest roates regularly, but I buy out way ahead, lets me exploit "sales" when they happen.
Garbage bags, paper goods,... I like this list a whole lot.
http://www.thepowerhour.com/news/items_disappearfirst.htm
Thank you for this. Have a lot so far, live in a good area for nature to provide, too. Honestly, the biggest hurdle was Mrs. BandGap buying in, which happened months ago. The extended family is also arriving at the same conclusions. Not that I was ever called a nut case, but having people confirm what you are seeing helps.
We will try and plant a big garden this year too. Deer magnet, if nothing else.
The whole prepping scene just won't work, even though I do it to a degree. Go check out an EBT store the 1st week of the month. No one returns a cart, everyone eats something like it's a prize in their car before leaving while tossing the trash on the ground. Think their floorboards are clean?
I don't care where you live, for the most part they will get your stuff and you. There numbers are great. There is a reason the .Gov stocks food and supplies deep under ground behind thick steel doors.
To survive, you must blend in, be mobile, be smart, be hidden until they die off. Then go dig up your cache.
Your only asset is the mush between your ears.....
Gold Bitchez.....I pick up pennies
I have great neighbors in a faith based comminity who, along with me, own shitloads of firearms.
The only ones not blending in will be the raiders and they wii be dealt with appropriately.
Please don't live in a fantasy world, they have guns too and matches. When you walk outside they can take you down from 1000 yrds too or smoke you out so those caches burn up or you are going to have running water when they cut the electricity.
You can't stop mass numbers in a fortified position. Not losing weight, teeth brushed, smell of shampoo, they know you got the cache and they is HUNGRY.
Great list MsCreant! I might also suggest UNtreated bulk seeds for sprouting. Things like peas, onions, broccoli, radishes, alfalfa, lots of things. Popcorn makes a surprizingly tasty sprout. Sprouted seeds are much higher in vitamins and give badly needed fresh crunchy greens in winter or when cooped up. Don't forget that flowers like nasturtiums are tasty as are cattails and the entire plant is edible. Even "weeds" are handy (some are fun!). Also large shrubs or small trees that develope sprouts when heavily pruned can be maintained close to the ground. The prunings dry quickly and are easier to manage. Learn about rocket stoves. When running a large greenhouse I found that many critters can actually chew through heavy plastic pails so galvanized protect the filled food containers. Old fridges could work also.
Yep, only I have food for maybe 12 months. Spring is coming, time to get the garden back in. Cash, silver, brass and lead in safe: 1 year plus food under pantry - need to get the booze supply up though...
I think this is a stage thing. We go into deflation first. But how long will that last? Like the "when will it crash?" question, I don't know so I have to plan for that to go on a while. It is first and in my face. So out of debt is a good thing for this stage.
Then we go into hyper-inflation as the dollar dies. In both cases being prepared with "things" is a good idea because scarcity will be an issue. Deflation, no one can afford anything (good to have the elusive cash to get stuff). Then Hyperinflation, you can't spend it fast enough to retain value. Best to have stuff before that kicks in. The debt game for me is like going after nickels when I know a steamroller is due. I am too conservative for that. How nimble can you stay? I don't have the time to pay enough attention, so I won't play.
Going down the middle means not trying to game anything. Get what I need, take care of my own, don't get greedy or need too many things.
Winter is coming. If it does not hit me, it will get my kid. Maybe he will inherit something that will get him through it. I am always right on my calls, I am always too fucking early.
MizCreant, you are a lady after my own heart, if you are indeed a lady (who the fuck knows on the internet) - You on the west coast?
I was sorry to hear about your wife on the other thread. I don't even want to imagine what you went through. She would want you to be happy, I would want that for my husband. Glad you are getting a chance to stretch your wings some. It might make her jealous, but my best self would want that for my husband too.
I am open about my being female, there are many women who post on here who stay gender neutral in their presentation of self, (being female is not a salient identity for this forum for them, a wise move I suspect, I have thought of "rolling up another character" and doing that), or actively impersonate men. I would never out them in 10,000 years and I am sure I don't know them all.
I don't have a lot of "favorite things" but this is my favorite poem, by Mary Oliver.
http://www.rjgeib.com/thoughts/geese/geese.html
Thanks for the kind words.
I happen to love women MsCreant. Women have admirable strengths that men do not have...and likewise. It is just the way that nature has intended it.
Women are much more intuitive than men generally.
A man's joke is that you cannot live with a woman but you sure cannot live without them.
I have seen that it can be used to your advantage here on ZH because we will kick other's asses for screwing with you.
I prefer and applaud your courage and your honesty. That quality, alone, gives you a much greater impact to what you write than most...
And even if I tease you, as you know that I will, I will always have your back. And that is to your advantage.
(BTW...They were my best instructors. I would go out of my way and put a special emphasis on performing in class just in order to impress them.)
It is surprising how a litte love goes a long way. A good instructor takes student love and uses it for the student's benefit. Some bad ones use it to get their own needs met.
The intuitve thing has bio science to back it up. Brain studies show that men tend to be more compartmentalized in terms of brain activity. This can make them superior in many specialized tasks. Women have more left right cross brain activitiy. They don't tend to go as deep into the specialization (though certainly many individual women can and do) but they "put it all together" a lot faster. We "know" quicker. But there are also men who do great at this too. But that is the intuition thing you reference.
Enjoy your posts. Thanks for having my back.
yes. yes. yes. yes on all points.
always right, always too fucking early.....boy, if that doesn't wrap up my investing history in a nutshell.....
At this point there is no too fucking early. In some ways I wish I had started earlier.
It's past 1 and I'm typing this worried about the world my kids will face.
In all things balance.
Some of us fools have been waiting for this shit to collapse a long time!! We have even coined a term called "collapse fatigue" to talk about it. You become sick of living on the precipice, expecting disaster with each bit of news. It is no way to live, and so you stop being so worried, rejoin your life, but stay up with things. Lead a more integrated life, less so a double life. Hope that made sense.
I first started to be worried in 2004-5. I saw the housing crisis coming, got out of stocks 2006. Missed the hit everyone else took in 2007-08. I did not get back in, so I did not get to participate in the so called recovery. You may be worried, and it is good to prep but don't be paralyzed. It could be a while or it indeed could collapse Monday. Do your best, be steady. I sure would have liked not being worried all the time I have been worried. I do like being out of debt and prepped a bit.
But more than once I have looked at the news and thought, "This is it." Greece is the latest one for me...
We are all around. Lots of perspectives here, great people.
People I know are paying down debt given what they thought was a good idea maintaining low interest loans looks like throwing money away now. My concern about putting cash in real estate is the bankrupt nature of government and their desperation for cash makes titled property an easy target. The challenge for anyone with savings is where best to keep it. Yield versus safety. Low interest rates are herding us into ever greater risks. I think they have us well trapped. The fiat currency backed only by their good faith and their omnipotent recourses of forces leave us with very few options.
I think the best gift ZH gave me was the realization my cash did not reside in a bank. In fact, it was simply a loan, a " promise" to pay me back. Once that concept was grasped, all fell into place. I ran to others and shared this with everyone I could so they would be free as well. All I got back was " well, you're insured by the FDIC" so I told them that would cover less than 3% of all deposits. My confidence was shattered when they just shrugged their shoulders, changed the subject and cast me in the role of chicken little.
I think if I ever see fish flapping on the beach, I'm just going to run for high ground.
Miffed
Little do they know that in reality, there is no statutory “upper limit” for when they have to pay you back by. Instead, the Federal Deposit Insurance Act states that the FDIC is required to pay insured depositors “as soon as possible.”
THAT is a major point that I mention to folks as often as possible. Example, the early '90s S&L crisis saw several S&L hit the dirt. Depositers were made good through FDIC, but in some cases it took six months to a year before they saw a nickel....totally locked up before that. If you have one bank and everything is in it, you can be in real trouble. My wife thinks I'm nuts & paranoid, but we're spread among four banks and three brokerages, plus stacked metals and cash.
And a small percentage in Bitcoin? Stored in a paper wallet (IE... literally under your direct control)
Like physical gold, Bitcoin only has systemic risk, not counter party risk. And the price discovery process seems to have made the exchange rate about as stable as the gold 'price' for the last few months.... still has volatility, but that can be both up and down changes ..
Also, if done right, it is easier to secure than cash or gold in the house. Certainly no risk of counterfeiting ... OR that nasty govt trick of deeming old notes invalid ...
Here's a tiny gift for ZH readers willing to experiment with bitcoin: 5K3Hs9KPD8UwZS8DFJ6Xb9BCvMnUY4RYqMtH33onUdrSuuZ9ira
Enjoy.
Oh, that was quick.
Bitcoin wouldn't have much value in a crash scenario.
BINGO!
Tonight Wifey and I had dinner with a former patient of hers along with his wife and youngest son. His wife is from Uzbekistan and has been here for about 15 years now I think. She said that she had about $16,000 in the bank in Uzbekistan when the accounts were frozen some years back, I do not recall when or why this was done now. She said that at the time the money was enough to purchase a small, cheap farm I think. Two years later, when the money was released to her, it was worth 1/10 of what it was.
You can buy land with money today, hoping the government won't tax it or regulate it to death. You can keep the cash at home or hidden somewhere and hope that it will be safe from thieves and get you buy (yep - buy. I did that on accident and then saw it and liked it) when TSHTF. Exchange it for metals - same deal. As most of us agree, everyone should have a sufficient food supply to get through a stretch of bad times, some form of protection from bad guys and some bartering/purchasing materials. You can have a back door escape plan to another country but things are ugly everywhere it seems, and moving to an entirely new culture is just additional stress. But this option is worth considering.
We are full time RVers with no home to return to at this point. We are able to locate ourselves almost anywhere we wish but do not have a place to garden and make a stand etc. Yet. The sense of freedom we have found during this adventure is quite nice and we are now planning on an extended stay in a warm, subtropical climate to see if we will make it our home base. Rig will stay here on the mainland for now. At least in the subtropics we can keep from freezing, can easily grow, find and even catch (fish) food and will be away from the hoardes of hungry people who will be desperate if/when the EBT* system fails.
I am grateful to ZH, Simon Black, Doug Casey, MISH, Chris Martenson, Lew Rockwell, Jon Rappaport, Dr. Mercola and many others - especially the often brilliant commentors and contributors here on ZH - for the heads up they have provided me over the years. None of this is easy and things don't look good from this perspective here and now. But carry on we shall and we will continue to let others know what we have learned and thereby at least add to the numbers of awakening people.
Best wishes all and keep on keeping on...
*
EBT has many benefits!Cause the pimp and the coke dealer don't take bitcoin... yet.
Some coke dealers are asking for training sessions in Bitcoin - in a rough local pub - astonished me.
I get your point, but even cash in your hands is worth 100% more than in a bank that may have a "holiday" or subtract 10% for a "stability levy" which will go to buy a Bankster's punk kid a new Beamer for their 16th birthday.
I've been stuffing the mattress with cash, Gold, Silver, Firearms, and other tangible assets out of the reach of the criminal kleptoligarchy of Washington/Wall Street since 2008.
Those fuckers are shameless.
Gold makes my mattress lumpy but I sleep better.
I think that cash in the matress makes it easier to land a mistress in the matress and the mistress is the thing that comes between the master and the matress.
Theres a movie JOHN WICK where all the bad guys take gold coins. Thats how they roll. No currency in the whole movie.
JOHN WICK burned the paper money in the Church Vault. Great Movie!!!
I can think of better places.
Thanks
Don't worry Draghi is about to extend and pretend for a few more years.
Physical forms of value of any kind are looking better and better each day.
Got nickels?
War nickels. Indeed.
De-pegging.
Drop that strap-on.
I think it's appropriate that such a well written article would receive so little attention (judging by the number of comments here). Economics has become IRRELEVANT. There is the real world and the central bank/bank/government world. One has little to do with the other.
If money printing actually flowed, even modestly, into the "real world" we might actually have inflation worries. But it does not.
The debts of sovereigns have been firewalled off from the rest of the economy and travel in a closed loop (central bank to bank to government and back to central bank) where exponential interest compounding is irrrelevant because they can always create more imaginary currency to cover current refinancing and interest repayment needs.
Woe be to those sovereigns who are not in posession of their own printing press.
Of course, there is one little downside- the guaranteed "closed loop" of financing insolvent sovereigns slowly crowds out the private sector where there is actually risk involved. Why would you risk loaning to any real world institution when you could take lower guaranteed yields and just lever up to infinity to make up for that lack of yield? You woldn't.
And now I'm hitting the rack. I've done enough thinking for today.
I agree about the well written article and the lack of interest on here, and it's a shame. I always thought this was supposed to be an Austrian economics type blog, and it's good to see a couple regular posters still appreciate this kind of stuff, but the sad fact is that this place has gotten very 'click-bait-y' lately, and seems to cater a lot to the team red types who can always be counted on to come out of the woodwork for certain types of headlines, as well as all the people who like to argue about rather Putin is the savior of us all or the anti Christ. Articles such as this aren't why all the newer people come here.
I came to find others who like myself realize
d the world economy has become a mass delusion Fueled by fear and near Infinite c/b debt creation
I came here years ago to learn. Have to gleen what I need at times but it has been worth the effort. I understand far more than when I started. And it all fits into my analytical/statitical training.
Check it out for info, entertainment and timing for when the first wave hits. Also to catalog how all this shit went down. I was blind in the 80s & 90s.
Comrades in arms.
Hey Carl, these kind of articles are technical, and require a certain grasp of monetary and fiscal policy, so they ain't for everybody, and cerrtainly are not for the MSM crowd. But for those that have been around, ZH has certainly stretched the hell out of my brainpower to get HFT first, and monetary policy second, and I appreciate it. Trust that some of the newer people will come around - this place IS kind of weird when you first check in...
NANEX was a revelation...
And the first rule of Fight Club is ...
Well ~ That & the article came out at 22:45 EST
On Sunday...
I just wandered in because I was drunk and looking for trashy women.
I stayed because I'm lazy and I figure the trashy women will turn up sooner or later.
If you see this tommorrow I will look for an answer to this question.
If they really have it walled off in a closed loop, why are they doing "bail-ins" like Cypress? Why are we hearing talk of taking pensions from folks? Print Euros and solve it, right?
Of course I also ask questions like "Why make us pay taxes if they can just print?"
This was a smart post. So are many of yours.
I have a developing theory about some of this, not deep, not particularly well thought out, but here goes...
Baby boomers are the largest generation of folks who were prepared to retire en masse. What would a large group of fairly well educated (nevermind the public system indoctrination center training we all got), semi- affluent people do with their remaining time on Spaceship Earth? Leisure - sure. Volunteer - yes. But many of us who gather at places like ZH are pretting f*cking mad about the way things have been going under the thug rule of our so-called representative government - no? OK. What if millions of people with the time and wherewithall to look into and challenge the staus quo did just that? Wouldn't this be a very serious threat to THEM?
So what to do if you are THEM? Take away our wherewithall!
Voila! No significant, organized challenges to the rulers as we must now concentrate on keeping body and soul alive. Other things like GMO, systemic poisons, fluoridation, cellular ( as in phones) tracking systems and many other other assaults upon our natural rights may be deployed against a dangerously awakening group.
Keep us broke, sick and afraid and we are mere herd animals.
Grey Panthers Baby!
GEEZER POWER
I think the central planners are just like the rest of us. They know where this is going but don’t know when we are going to get there. They get up and go to work every day hedging their personal bets and going with the flow. I know I should pull all my money out of the bank and hide it in the back yard. I don’t do it because of normalcy bias and fear that my neighbors will see me dig the hole.
Indeed, normalcy bias can be a fatal condition. Let your neighbors see you unloading boxes labeled Mossberg & Ruger, etc. and then you don't much care what else they see.
It's a fair question. The bail-ins are happening where individual countries don't have a printing press- Europe, the Euro Zone in particular.
Why not just print what's needed and forget about the tax side? The flip answer would be "force of habit," and I would caution against dismissing this answer out of hand too quickly. The real answer is that they need both an accelerator (govt spending) and a brake (taxes). Its how they keep the "real economy" from getting too hot while they play their closed loop sovereign debt thing with the banks and central banks.
Remember that the REAL game being played is always about power and control. Money/economics is only one projection of that power. Any view that looks at only money or the economy lacks perspective of the full picture.
They don't neglect the tax side because:
1) The printing press ain't for you, Jack.
2) Collecting taxes perpetuates the myth that the system is still alive.
Not sure how this got posted under another thread further down the first time but here goes:
<edit> Damn! Happened a second time. This was supposed to be a reply to MsCreants question to me, above. It keeps dropping in here for some reason. Sorry.
It's a fair question. The bail-ins are happening where individual countries don't have a printing press- Europe, the Euro Zone in particular.
Why not just print what's needed and forget about the tax side? The flip answer would be "force of habit," and I would caution against dismissing this answer out of hand too quickly. The real answer is that they need both an accelerator (govt spending) and a brake (taxes). Its how they keep the "real economy" from getting too hot while they play their closed loop sovereign debt thing with the banks and central banks.
Remember that the REAL game being played is always about power and control. Money/economics is only one projection of that power. Any view that looks at only money or the economy lacks perspective of the full picture.
I think this article lacked a little depth. "Printing money" does not really describe the process adequately. Credit based currency creates more debt than credit when created. It is that debt creation through which the Swiss were able to expand their base. People taking out debt in another currency that they don't have revenue or income in should never have been allowed.
Negative interest rates mean than currency can be created without a interest obligation. It still leaves the bank as debt. It is not enough for the financial authorities who are desperate to find a means that allows current debt to continue to be serviced. The current system is incompatible with the financial well being of the citizens who live under it. Nothing less than a major "reset" can create the currency that is needed to ensure most debts are serviced.
"Printing money" is only significant if they spend it into existence rather than lend it (even at negative rates) into existence.
Printing money is a misnomer, although obviously it does occur, is only a fraction of the credit created. The credit simply flows from holder to holder and only the profit retained from the transaction may work it's way into the general economy, much of which may, in fact, be used to service other debt obligations as well, thereby reducing the amount of money avalible to create velocity in the system. While it can be argued that the credit money is 'spent' by the transfer of credit, it's work value is locked up by remaining in a banks credit or debit column working for Wall St. and their associates rather than the tiny fraction of which makes it to Main St. to run the general economy as the rest of us know it.
Negative interest rates, in a manner of speaking, is a bank telling you that they don't need your deposits to fund their operation because they have a cheaper source of funds available to them and now they will charge you to hold and transfer your deposits.
The financial engineers have got the train going full steam in reverse.
That can't be good for the passengers in the cheap seats.
I've been telling my friends this for some time. From your accounts, liberate cash, some, most, or all, (but what you may need for day to day banking activities). Possession is nine tenths of the law. Hold your own cash, bury it, do what ever you want. Just don't leave all of it to the trust of the banks. To allow it to the others in today's wonky world, especially receiving little or no interest in return, in my opinion is down right reckless.
One winter morning we just might wake up to mile long line ups. Bank doors locked and vaults empty. And if that day comes, for those of us a bit prepared, the day may not seem as bleak. At least we won't be left freezing in the cold.
Custodial Banks got a liitle wobbly in 2008. They are publicly traded however. Bank of NY Mellon opens at the AM, 9:30 to be precise.
Good luck finding that anywhere else in the world. Who knows what "deals" are being made here. Japan missed its growth target (again.) France just had another drone fly over.
Pentagon requesting a 200 billion dollar "supplemental"?
I pulled $40k in cash out of my bank last year to "invest" in a classic car. It represented a fraction of my savings. You would of thought I was draining the National Treasury! The bank himmed and hawed and tried to discourage me at every turn. They practically begged me to wire the funds. It took the bank a week to order the $$ and I had to sign forms releasing them of liability if I got robbed on the way out the door! I assured them I could defend myself and my money just fine. The whole experience was surreal. How pray tell do you think they would respond if I went in asking for $400k? I got news for every one, capital controls are already alive and well in the USSA.
Similar [vein] story here... Going back to 2010, I would go into the bank and simply wanted to buy $100 in nickles and had to get grilled as to why I needed them... I finally settled on faking a story that I volunteered to call a Bingo & casino night each week at a local retirement home & needed the small change for that...
Apparently it didn't dawn on anyone that I could have just used POKER chips, but the story worked.
6-1-15 ????
6-1-15 ????
Can you give a little more on that? I have my own thoughts and I was wondering about you.
While I admire y'all's willingness to put yourself out there by calling a date, I don't think it's coming just yet. We have been underestimating their ability to kick the can for years now, and I don't think this year will be any different.
I agree that it is folly to call a specific date. The markets are so contrived that relying on charts or statistical data to identify some sort of inflection point is a waste of time.
I am surprised they have kept things together this long and you may be right about them getting through this year. Then again something can come out of left field and we could wake up to a very different financial landscape overnight.
Too risky having too much with brokers, banks or insurers. Just hope we can all stay ahead of the "can".
The white bass run should be over by then, so I'm cool with that.
Don't have a mattress. Just a cot
A couple plastic mayonase jars filled with cash in the yard are far better than a mattress for stashing money. Plastic is detectable with a common metal detector. The mattress is an almost infamous place to put your money. Even a beer can in the fridge is better.
I have cans of mixed nuts in my food stockpile. There actually ARE some mixed nuts on top.
Cash rolls fit nice in plastic pipe. An old weed dealers trick to stash cash.
Most 1oz. gold and silver coins stack perfectly in a 2" pvc pipe. It can be stored in a basement as a dummy drain or vent pipe, or buried right on top or beside a 4" sewer line and remain undetected if it is cast iron on older homes or a gas line on newer homes that use pvc sewer pipe.
A 2" pvc pipe will also fit in 2-1/2" rigid electrical conduit pipe or a chain link fence corner post will do the trick if you screw the cap on with one way screws.
One of the perennial arguments against gold is that it doesn't earn any interest. Cross that off the list now. True, gold can be stolen, but the thieves that work in banks and government offices and police stations are much more likely to empty your bank account.
If you keep cash at home, the government can print new currency one day and declare all the old bills null and void. They can't do that with gold and silver coins.
If you keep cash at home, the government can print new currency one day and declare all the old bills null and void. They can't do that with gold and silver coins.
Actually, they can, but it does not mean it will work when you have a real silver dollar (declared null and void) in the face of a local trying to deal with a government that had just said all his savings are shit.
Bring on barter (and Silver coins).
Hey, what do you guys think of safe deposit boxes? Are they at all safer from bank runs? I know the bank still has it, but I don't have a safe place to put it at home at the time. I asked them if I could get at it even if the bank collapses, and they said yes. Although we were speaking Chinese, and my Chinese ain't too good...
No bank teller or manager has sufficiently explained how I would retrieve my possessions from a safe deposit box in the event the bank shutters their doors due to insolvency, a bank holiday, bank run, etc., and bank regulators may or may not take control of safety deposit boxes in such instances.
Gold is money, and nothing else.
If you can't hold it, you don't own it. Period.
What do you keep in safe deposit box? BBC 2011
http://www.bbc.com/news/uk-12248666
ABC news ran a piece on a scam by the banks and the State governments in early 2009. Here is the link to the story.
How safe is your safety deposit box? ABC News 2009
http://www.youtube.com/watch?v=ZdHLIq0qH...
My suggestion is Gamma Lids, five gallon buckets, Ziplock or Mylar bags for any contents, and a shovel.
Pay the extra price for the Gamma lids. Wrestling a standard lid off of a five gallon bucket is tough, and to do so, the bucket would have to be brought out of the ground. With Gamma lids it's easy in, easy out.
I think that an intermediate step we'll see will be a "reconsideration" of the rules for retirement savings. The government will decide that IRAs and 401(k) accounts are too important to leave to the whims of investors, and require all or part to be invested in T-bills.....it is an easy way to enforce a whole new set of buyers for US debt.
Yeah, I'm waiting for the "Executive Order" for that - who the fuck needs Congress anyhow?
Obama already started that rolling with myRAs. He talked about it in a speech but we haven't heard much about it since -- but you know they are setting it up and will launch it when they want to.
If you get the negative interest rates, the best thing to own is highly levered FCF positive equities that borrow money to buy back shares. They get paid to buy their own equity back. F the dividend.
The thing is..... the central banks will never pull back because they cannot pull back... and they will never raise interest rates because they cannot raise interest rates... if they do either --- the collapse begins.
That said --- we will of course collapse...
Conclusions and article information do not have anything related. If all CB are printing money with negative interest rates, this IS the time to SPEND money, not padd the matrass with it. The time to do that is when all CB printing ends!
its easy - they are getting richer, we are getting poorer. It's like having most smaller coin bill - you can't buy anything with it
My old college roommate from the Sixties (yes, I'm old) has lived and worked in Venezuela for over 40 years. He was a highly paid scientist. He retired with an excellent pension not long ago. Then the Bolivar was devalued by half. Then half again. Then prices went crazy with the shortages. His pension is genteel poverty now.
Reminds me of the South Park epidode. "It's gone!"
Cash won't save anyone.
PM and bitcoin for the win.
Another story. About 1985 I had a female friend who was Vietnamese. Her father was an officer in the Vietnamese Army during the war. He had invested all the family's money into farmland and rental property. His wife always argued with him that they should buy gold instead, but she was overruled.
When the last helicopter left Saigon in 1975, the three of them came to America, dead broke. Too bad he didn't listen to his wife. They could have arrived rich.
Mobility is an asset.