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The Central Banks' Assault On Savers

Tyler Durden's picture





 

From Bill Buckler's Privateer:

The Assault On Savers

The best and most basic proof that NO central bank anywhere has the best interests of the actual producing economy of their nation as their focus is the assault on savers and saving. Sustainable economic "growth" is only possible in a situation where more is being produced than is being consumed. This "surplus" is savings which are in turn the life blood of production. When savings are discouraged to the extent they have been over the course of the GFC, one can be sure that the goal of those in charge is not a REAL recovery.

In the UK, Bank of England governor Mervyn King has been apologising to British savers for years over the "necessity" to hold interest rates at non-existent levels. Apologies are all that has been forthcoming. In 2007, savings on call in UK banks attracted an already low average rate of 3.15 percent. The average rate since early 2008 has been 0.94 percent. Since the Bank of England reduced its rates to their present 0.50 percent in late 2008, that average rate has been much lower. According to a recent article in the UK Telegraph, these rates have reduced the interest on savings by at least 70 percent since 2007. This, according to the article, has been done - "to protect an enfeebled economy from outright collapse". What it has done instead is to bring about an all but outright collapse among those who took the definition of the word "economy" seriously. It has impoverished UK savers, especially those on fixed incomes.

The situation is similar everywhere. In the US, anyone who has chosen to live within his or her means over the past four years has paid a heavy price. As is the case everywhere else, the Fed gets things precisely backwards. Their contention is that borrowing is essential for economic "health". In reality, the ability to borrow is the RESULT of the economic health displayed by those who have savings to lend. But what the Fed and the other central banks want to "save" is not the economy, it is the financial system and the imaginary prices of financial assets which form its only foundation.

 


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Sun, 03/04/2012 - 12:17 | Link to Comment Racer
Racer's picture

And with inflation way higher than the interest savers are getting, they are in fact paying the banks to hold their money...

Put it in gold or keep as cash under the mattress instead... it will be far safer and the banks don't get to lend it out at massive rates of interest or gamble it away.

Sun, 03/04/2012 - 12:43 | Link to Comment Silver Bug
Silver Bug's picture

The Inflation war is raging all around us. It is amazing how many people can't see it through the flames.

 

http://ericsprott.blogspot.com/

Sun, 03/04/2012 - 13:30 | Link to Comment trav7777
trav7777's picture

Too bad there isn't a junk button for the fucking OP.  This article is utter GARBAGE.

Where in the HELL do these morons THINK that the money comes from to PAY the stupid coupon on savings?

What, 5% growth is an ENTITLEMENT because you have acquired some shit?  Gold doesn't pay a coupon and NEITHER DOES MONEY.  Unless things produce, they generate nothing.  The days of the compound interest lending ponzi are finished.

Sun, 03/04/2012 - 13:41 | Link to Comment devnickle
devnickle's picture

Trav......
Every post of yours on ZH confirms you are a troll and asshat.....

Sun, 03/04/2012 - 13:51 | Link to Comment devnickle
devnickle's picture

Trav...... Every post of yours on ZH confirms you are a troll and asshat.....

 

Sorry. Browser crash

Sun, 03/04/2012 - 14:07 | Link to Comment Popo
Popo's picture

Trav,

You're own argument is contradictory.   The ponzi consists of the repeated unbacked emission of currency and the creation of debt.   The "days of compound interest", as you call them, were actually a reflection of lower growth (ie: less of a ponzi) and a much more accurate valuation of risk.

The current interest rates do not accurately assess risk, and as such they are simply creating soon-to-be-obliterated bubbles, that will collapse the global economy as soon as the ponzi (ie: low interest rate money-pump) is turned off.   

IN A HEALTHY CREDIT MARKET, IT IS THE MARKET THAT DETERMINES THE COUPON.    NOT THE CENTRAL BANK.  And ONLY the market can accurately value risk.

What we have in America is not a market.  It's a circle-jerk of primary dealers, the Fed and the Treasury, all taking turns in the middle of the circle.

To take from savers is to *rob* the productive classes and give to the non-productive entities who represent a drag on growth.

My question to you is:  Where do *you* think the money for the coupon comes from?  The unbacked emission of currency???  God, you're an idiot.

Popo

Sun, 03/04/2012 - 14:29 | Link to Comment centerline
centerline's picture

While I agree with the principles you are pointing out in the context of the current system, they do not account for the fundamental problem that the basis of the system is that of perpetual growth.  It is by nature exponential, requiring a system reset or renumeration at some point.  Cycles, just like so many other things in this world.

This particular fiat run coincided with the industrial/technological age, fueled by cheap and abundant enery (oil).  Population growth charts illustrate the predicament quite well.  On top of this consider social complexity in the developed world... moving from somewhat weak (pre-industrial), to robust, and becoming fragile at the extremes of today (i.e. simply consider supply chain mechanics for a major city).

The inescapable truth is that the mathematics of the world economy do not allow for contraction because the nature of the compounding system is to progressively pull future earnings forward.  And the contraction that is being brought about by real world constraints isn't something that can be papered over (at least not permanently).  The current system has hit a debt saturation point, wherein no future earnings can conceivably be pulled foward and defaults can no longer be avoided.  Right now is nothing more than a state of limbo where CBs are essentially imploding in slow motion trying to avoid defaults.

 

Sun, 03/04/2012 - 15:32 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

yep. correct. the market was doing its job....rates were rising to combat excess money and inflation....but then comes the Fed/Tres....both knew it would be the end of their reigns if left unchecked....rates can and will not rise under the current system. the debt levels can not be sustained. markets will never prices interest rates again under this system.

buy assets, PMs, and maybe a ticket out of the US.....Singapore IS a beautiful place....and may have a real gold/silver exchange soon.

Sun, 03/04/2012 - 22:00 | Link to Comment trav7777
trav7777's picture

this is ABSOLUTE horseshit.

Rates went to infinity because the system became insolvent.  Nobody would lend nor borrow at prevailing rates.  Lockup.

The Fed is offering money at rates that it can find takers at.  It HAS NOBODY lining up to borrow at even ONE percent.

Japan hit this point 20 fucking years ago and you people still can't figure out wtf causes it?  Still bleating over demanding your ENTITLED interest on your stupid "savings"?

As if your money should just "make money" as a function of its existence?  News flash:  the banks have to find borrowers for your money at a rate HIGHER than what they can offer YOU to borrow YOUR money (which is what a fking savings account IS).  If they cannot find borrowers at 4%, how can you expect 5?

If you don't like it, FEEL FREE to advertise your money for loan at 5% and try to find creditworthy borrowers as takers.  You'll find NOBODY because there are people offering money at far lower rates. 

If ANYONE borrows money at 5%, they HAVE TO EARN more than that.  As a company, there simply ARE NOT enough opportunities out there to earn this type of ROI.  In the aggregate, the USA cannot support higher than 0% interest because there is nothing much left to DO that will earn a profit.

Sun, 03/04/2012 - 21:54 | Link to Comment trav7777
trav7777's picture

DUDE, are you fuckin STUPID?

The coupon for your stupid savings comes from LENDING IT OUT AGAIN AT INTEREST.

The entire SYSTEM of "money making money" that asshats like YOU and the OP think is some kind of fucking entitlement are the problem.

You morons seem to regard NOT GETTING your entitled 5% as some sort of egregious insult...never ever bothering to think about how the fuck the bank could afford to pay you to hold your goddamned savings.

What, just for the fuck of it, money should earn some big ass coupon?  Why don't you people with your stupid fucking savings GO LEND YOUR OWN MONEY and see if you can get 5% on it.  You won't have any takers.

The MARKET IS deciding the coupon; there are NO TAKERS AT ONE PERCENT, which is WHY the Fed LOWERED RATES to try to find more borrowers.  You go ahead and try to find takers at 2%; THE FED CAN'T EITHER.  You honestly think the banks are in the business of GIVING their product away? 

TAKE from savers?  WTF?  By NOT paying a coupon?  Savers would have been COMPLETELY wiped out already had it NOT been for the Fed's printing.  All their loans to insolvent institutions (savings accounts) would be VAPORIZED by now.

The reason idiots are losing their asses is because THEY DON'T HAVE SAVINGS.  They have LOANS to INSOLVENT institutions (bank accounts) in the paper notes of a BANKRUPT STATE that they just THINK are savings!

Sun, 03/04/2012 - 23:48 | Link to Comment dcb
dcb's picture

I usually don't like to get involved is silly discourse, but you are so off the mark it is astounding. Perhaps it reaches the level of an illness.  you really have no understanding, as proof I shall put up something from the nytimes today by grechen morgenson. it's not all all that there aren't borrowers, it's that banks control the transmission mechanism and people can't get the rates the fed gives, but the banks get it and use it to buy assets. this is because the banks are insolvent, and the fed needs to cover it up so the value of the assets have to be inflated.

 

 

this is my comment:

Kudos for Ms. Morgenson for being one of the few writers on the NY times staff who doesn't give a free pass to the federal reserve. Ms. Morgenson does a great job writing about how the transmission mechanism of fed monetary policy does not get transmitted to the public. "“She blithely assumes that everyone who could refinance their mortgages at current interest rates has done so,” Mr. Todd said. “She ignores effects of credit scoring and outrageous fees banks are charging for those refinancings".

Lets be honest, Ms. Morgenson could have talked about credit card rates and fees as well, the difficulty getting small business loans, etc, etc, etc. I must voice a formal complaint to the nytimes editorial staff because when Mr. Krugman always points out how we need loose monetary policy I point out the transmission mechanism is where the flaw lies, but Mr. Krugman nor any other editorial writer addresses this issue. As usual economists think market structure is a topic beneath them that can be ignored, when it is in fact the single most important aspect of economics. Correct policy without proper structure to implement the policy fails

 

Summary: the article is about an officiual of the federal reserve explaining why these low rates are good for the economy, this is countered by the comments above from Mr. Todd.  the rest is my part. As you see the low rates don't get transmitted. the comment is so stupid, if there are no takers, how come I can't find a 5% credit card rate.

link to the article for everyone and yourself:

http://www.nytimes.com/2012/03/04/business/low-rates-for-savers-are-reason-for-complaint-fair-game.html?_r=1&ref=business

 

the rest of my letter.

Had Ms. Morgenson written the piece with a more critical eye, she could have pointed out why someone like Ms. Bloom Raskin in fact should not be in any official position of power, nor anyone like her.

"She said that less than 7 percent of household assets were held directly in certificates of deposit, savings bonds and the like. “Instead, the bulk of household wealth is held in stocks, retirement accounts, business equity and real estate,” she said. “For these other types of assets, rates of return depend primarily on the strength of the economy and how fast the economy is growing. Thus, these returns should be supported, over time, by the accommodative monetary policy that we have in place.”

40% of household wealth is held by the top 1% of wealthy, so her statement should prove to all that the wealthy receive the most benefit from accommodative policy. In addition, wealth is unevenly distributed, with the wealthiest 25% of US households owning 87%[2] of the wealth in the United States, which was $54.2 trillion in 2009.[3][4] While these assets are unequally distributed, financial assets are much more unequal. In 2004, the top 1% controlled 50.3% of the financial assets while the bottom 90% only held 14.4% of the total US financial assets.[6]
http://en.wikipedia.org/wiki/Wealth_in_the_United_S…

The above statistics clearly prove that the intent of federal reserve policy is to help the wealthy, If Ms. Bloom Raskin was interested in helping the majority her use of statistics would have clearly shown the flaw of her logic. Ms. Morgenson should have pointed this out if was aware of this statistic. Again a big thumbs down to Mr. Krugman the "economist" who always fails to mention that fed policy with the current flawed transmission mechanism benefits the wealthy much much more than the rest of the population.

I do no know what level of statistical data has to be given to the NYtimes in order for their editorial staff to point out the obvious, but at least allow someone the editorial space to point out the opposition view along with the data.

 

Mon, 03/05/2012 - 07:36 | Link to Comment Zero Debt
Zero Debt's picture

It may be you who are off the mark. Because if you think you are saving when you are making a deposit in a bank you are not. By making a deposit, or generally speaking, making a loan, you are a participant in the money market. The bank deposit is a loan to the bank. That is why it earns interest. As a compensation for providing the loan, the bank pays interest. Banknotes are not deposits and hence do not pay interest. And, they have no counterparty risk.

Now suppose that the Fed is there lending out money at 0% interest rate. Then, why should anyone who wants to make a loan do so at an expected 5% rate when the Fed only charges 1%, or even less. Of course you go to the Fed instead.

Why is that so? It is, because behind the Fed's newly created loans, there are no savings to back it. The Fed creates these loans without any backing of surplus wealth, e.g. gold. Obviously when economic actors do not believe the future will be greater than the past, demand for credit fades and you have fewer takers.

Also the point that a lot of money is in stocks etc has a lot to do with rates. There is a known crowding out effect in the sense that lower money market yields forces investor onto higher yielding money market instruments and stocks. So the picture gets distorted.

There is only one point of low rates: to keep expanding the money supply to pay the coupon on the outstanding debt. Nothing more. Otherwise those bonds would go into default and collapse the money pyramid.

Mon, 03/05/2012 - 08:57 | Link to Comment Gold Dog
Gold Dog's picture

Interest Rate = Time X Risk X Inflation

Bennie lending at zero ignores the above.

Mon, 03/05/2012 - 08:04 | Link to Comment Zero Debt
Zero Debt's picture

Not sure that this is relevant to Trav's argument.

Real hard (commodity) unencumbered money does not by itself pay interest. Or do you dispute this? Interest is only paid on loans. A deposit is a loan to the bank. Banknotes does not appear as loans on your balance sheet and they pay no interest. Unencumbered gold, which is not lent out or leased out, does not pay interest, nor does a barrel of oil, etc.

The coupon on savings must come from someone taking out a loan and generating a surplus elsewhere in the economy. This surplus may reflect the fact that the loan is paid back by money that appears to be coming from value added, but is in fact coming from systemic inflation of the money supply, or a genuine value added (or some blend of both). There is no clear-cut case in the sense that the coupon must come from either source or the other. In the case of the ECB, when a government is able to make its interest payments because ECB has bought its bonds, the coupon that those bonds are paying out indirectly comes from the inflation of the money supply, not from market participants who believe in the value of the bonds based on their fundamentals. So yes it is absolutely concievable that in many cases the coupon comes from central bank driven inflation, but not in all cases. Just to categorically refute that isn't accurate though.

Trav's argument contains an inconvenient truth which I think is the source of the emotional responses: Effortless sources of income will be drying up as more savers compete for yield, especially when central banks are flooding the system and thereby crowding out genuine savers that do generate a surplus in the physical economy. Ironically, lower rates rather imply that there is competition for good collateral. Good collateral would have to be some form of real, non ponzi quality value added business activity, not house flipping, leveraged bets, insolvent government bonds or funny Fed money.

 

Mon, 03/05/2012 - 11:39 | Link to Comment Yankee.go.home
Yankee.go.home's picture

+1 for the inconvenient truth.

Sun, 03/04/2012 - 14:25 | Link to Comment Ayn Rand
Ayn Rand's picture

777    WTF are you babbling about?

Sun, 03/04/2012 - 22:01 | Link to Comment trav7777
trav7777's picture

see above.

The planet is filled with idiots.

Sun, 03/04/2012 - 23:51 | Link to Comment dcb
dcb's picture

and you have managed to prove yourself one of the biggest. :-)

Sun, 03/04/2012 - 15:00 | Link to Comment tmosley
tmosley's picture

In a free banking system, the money comes from consumer spending.

Think about it before you start screaming and shouting.

Sun, 03/04/2012 - 22:05 | Link to Comment trav7777
trav7777's picture

where do the consumers get their money?

Mon, 03/05/2012 - 12:44 | Link to Comment tmosley
tmosley's picture

From their production.  But that's not the point.  

In a non-corrupt system, the money for interest payments comes from consumer spending.  Think about the limit cases.  If everyone saves every penny in the bank, then interest rates go to zero, because there is a great deal of suply, and no demand.  If everyone spends their money as fast as they can, then interest rates would be arbitrarily high because there is no supply of money to be lent.  Between is a sliding scale based solely on whether society as a whole has a preference for spending or saving at that time.

You keep harping on "exponential functions" as if that meant anything.  If people kept their money in the bank forever, interest rates would just go down until they hit zero.  There is no explosion.  No extinction.  No inevitable systemic destruction.

Sun, 03/04/2012 - 18:52 | Link to Comment Urban Redneck
Urban Redneck's picture

The mentally challenged majority and the intellectually incapable 99% seem to have difficulty grasping the concept that those who have no savings and live deposit to deposit fare WORSE under central bank monetization.  The savers at least have a cushion of safety and relative comfort next to those who must wait for their next iHandout to meet basic needs- that is the sad truth of pointless wars, cult pseudo-science energy & GDP substitutes and Obama paying some fool's mortgage... Thank God the US isn't a democracy.

Sun, 03/04/2012 - 12:46 | Link to Comment malek
malek's picture

I wonder why Bill Buckler leaves out the prologue, at least in the cited passage.

When savings are discouraged to the extent they have been over the course of the GFC

Savings have been massively discouraged long ago, as for more then 10 years people were lured into accumulation of debt purely for consumption - the ultimate dissaving.

Now as we here all know the debt has piled so high it can never be paid back and the way central banks are attempting to solve the issue is by devaluating all the remaining real savings.

Sun, 03/04/2012 - 16:29 | Link to Comment thatthingcanfly
thatthingcanfly's picture

"Savings have been massively discouraged long ago, as for more then 10 years people were lured into accumulation of debt purely for consumption - the ultimate dissaving."

Exactly. I've never taken a loan to pay for a car, electing to save up and pay cash for my vehicles. But even a stalwart stick-in-the-mud such as I cannot deny being tempted by the low interest loans advertised in America these days. My bank, USAA (a fairly reputable one), is offering me 2% on a car loan. Good grief, with 9% inflation (Shadowstats, not BLS), I can take the loan today and pay it back over the next 60 months with less valuable future dollars - just like the Federal government is doing internationally with its debts. Why the hell not?

Because it's morally objectionable? That's sound enough a deterrent for me; but less so for seemingly all of my peers.

Everyone I know lives paycheck to paycheck, saving nothing. There's no incentive for it.

Sun, 03/04/2012 - 17:07 | Link to Comment eddiebe
eddiebe's picture

You got it padner, I'm buying a house with property somewhere where the growin's good on a 30 year fixed...I figure in 10 years I'll be paying 30 cents on the dollar and by the 29th year a nickle. But then the bastards will probably change the rules long before then. I've ordered an industrial jar of vaseline with my last order of ammo.

Sun, 03/04/2012 - 17:51 | Link to Comment Errol
Errol's picture

eddie, you are making the unwarranted assumption that your income will at least partially keep pace with inflation.  Unless you are one of the cronies of the government, you will be enjoying the 'benefits' of global wage arbitrage.

Peak oil means that everyone's standard of living must decline; winners will be defined as those who lose the least.

Sun, 03/04/2012 - 18:21 | Link to Comment eddiebe
eddiebe's picture

Agreed, Errol. I'm betting as inflation continues to follow the money supply upwards, inflation rates will rise, which will cause wages and colas to rise. It's all a throw of the dice, but buying producing land with a dwelling at low financing seems to me as good a bet as any, including gold.

Sun, 03/04/2012 - 18:36 | Link to Comment barroter
barroter's picture

Agreed.  Being a born skinflint Yankee I've saved and used cash instead of credit for over 90% of purchases.  Although saving generates nothing now.

I can remember people touting their new SUV, home or home theater system and I nearly had to say, "Do you own it or are you paying the bank back for it?" 

At least I outright own what I have, whatever that's worth now. Ah, it is worth something, I don't have the overseer slashing my back to work harder, as I have NO debt to pay back.

Sun, 03/04/2012 - 22:30 | Link to Comment CuriousPasserby
CuriousPasserby's picture

I don't save any dollars either. All the money that's left over each month I spend on gold or silver. Paycheck to paycheck, the dollars are gone.

Sun, 03/04/2012 - 17:13 | Link to Comment smb12321
smb12321's picture

Malek - Very astute.  The transformation has occurred in my lifetime.  As a boy I regularly saved & bought things once I had enough money. Now it's instant consuming via debt.  After all, you want to be happy like the grinning dunces on TV maxing their credit cards.

The switch from strong $/savings/low debt to weak $/consumption & massive debt has led to worldwide disaster.   I fear this will lead to loss of liberty, calls for "action" from the government, money printing and even tighter monetary control. 

Sun, 03/04/2012 - 22:22 | Link to Comment trav7777
trav7777's picture

yeah, the usurers have pretty much convinced everyone to behave like post-emancipation sharecroppers

Sun, 03/04/2012 - 13:03 | Link to Comment Caviar Emptor
Caviar Emptor's picture

It's just another word for slavery of the debt kind: never being able to buy your way out of the trap. Or in this case, never being able to keep up with the cost of living, working and doing business no matter how fast the hamster wheel flies. 

That's a story that goes back thouands of years. 

Biflation makes it all the worse: when you're standing in quicksand even the ground will eventually look high. In other words, even mild inflation has a high impact when your net worth, real income and return on savings are all sinking

Sun, 03/04/2012 - 13:20 | Link to Comment Racer
Racer's picture

and if you are lucky enough to make a 'capital gain' most of it is in reality inflationary gains and they don't give you enough of an allowance to compensate... so they can tax you again through inflationary gains... either capital gains tax or inheritance tax after you have snuffed it and your children get to pay more tax instead

Sun, 03/04/2012 - 17:39 | Link to Comment JohnKozac
JohnKozac's picture

racer, 5 Stars for that one!

Sun, 03/04/2012 - 12:18 | Link to Comment Seasmoke
Seasmoke's picture

OWN AND SAVE NOTHING COMRADES !!

Sun, 03/04/2012 - 12:19 | Link to Comment fonzannoon
fonzannoon's picture

What is so hard about understanding that the Fed, and by extension most central banks MUST keep rates at zero? They must do this to limit the interest payments on their ballooning debts? How do so many smart people miss this simple thought?

Sun, 03/04/2012 - 12:42 | Link to Comment Conrad Murray
Conrad Murray's picture

And why do people still think there is a need to pay taxes? The Federal Reserve Corporation's confetti can be printed at will. Taxes are a way to keep the poor poor, and the middle class from moving anywhere but down.

When one pays taxes, he or she is agreeing with the way government operates. It is sending the message, "Yes, I agree with the warfare/welfare state and I fully support it. Here is my financial contribution to the promotion of of these policies."

Stop paying taxes. Stop paying mortgages owned by the DC/NY Axis of Evil. Stop buying "things". Take all of your money out of the markets and banks. Run up as much debt as possible and default. Help bring about the collapse.

Sun, 03/04/2012 - 13:46 | Link to Comment oldman
oldman's picture

Conrad,

Plus 1 million-1!!!!

You only missed one thing:

Stop voting and thereby paying homage to the myth of a rep[resentative government that only represents those few who pay for all of the drama that the sheeple are so addicted to----it keeps us out of the streets and that is the reason for the 'free elections' of our 'democracy' which might better be spelled 'DE MOCK RACY'.

yeah,

ONE MILLION minus one                         om

Sun, 03/04/2012 - 12:50 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Nobody has missed it. Everyone knows why rates must be kept low. However this is punishing savers and the prudent at the expense of poor lending and borrowing decisions. The wrong people are being made to pay for excessive credit expansion. Lenders and borrowers should be the ones paying for their own mistakes. The moral hazard in a system that rewards bad lending and borrowing decisions and punishes savers will lead to huge problems down the road, not the least of which include apathy, cynicism, low productivity, and encouragement of criminal behavior in people who tried to olay by the rules.

Sun, 03/04/2012 - 22:27 | Link to Comment trav7777
trav7777's picture

again, this is WRONG.

There is NO MAGIC fucking source of interest out there to PAY the idiots who think they're "savers"!

If you don't like the rate your bank pays, FIND your OWN borrower who can/will pay you the coupon you want!

It's as simple as that.  Go do it and come back and talk to me.  There are NO TAKERS of credit at higher rates.

Mon, 03/05/2012 - 12:47 | Link to Comment tmosley
tmosley's picture

Yes, there is.  Money to make the interest payments comes from consumer spending.  If there is no consumer spending, then the loans at interest rates that are too high default, and new ones are made at lower rates.

Only a cretin like you would think something so simple is "magic".

Sun, 03/04/2012 - 23:28 | Link to Comment oldman
oldman's picture

@Hugo

Compadre,

What is this 'moral hazard' I keep seeing at ZH?

It seems more to me like simple 'crony capitalism': one version of a criminal act----what is it called----- collusion?

I don't even know what this means either                om

Sun, 03/04/2012 - 13:37 | Link to Comment Shibumi2
Shibumi2's picture

sure, keep the rates at zero to make deficit spending easier for the political spineless political class.

 

THEN start raising the rates!

 

What is so hard to understand about that? Kind of like adjustable rate mortgage scam.

Sun, 03/04/2012 - 14:39 | Link to Comment DosZap
DosZap's picture

fonzannoon

How do so many smart people miss this simple thought?

 

Who are you referring to?, I wager 95% of ZH'ers KNOW this.

Doesn't take a rocket scientist to know that if there Fed increases rates, the intake of taxes and funds to the Gov, will not be enough to make just interest payments on the debt.

Sun, 03/04/2012 - 14:52 | Link to Comment Sean7k
Sean7k's picture

Well, at least you were nice enough to explain it to him. I'm sure he felt it was a real epiphany.

Sun, 03/04/2012 - 17:19 | Link to Comment smb12321
smb12321's picture

Fonzannoon - You hit the nail on the head!! It is the skyrocketing interest payments no one is willing to discuss.  Citizens already avoid Treasuries - the biggest buyer being the FED.   Of course, it's killing pension funds and the like, forcing them to enter riskier and riskier investments. 

What is it when the government sells bonds to another government entity at interest rates set by that entity and the bonds are then "lent" to the government that will pay interest (borrowed, of course)?  Great post

Sun, 03/04/2012 - 22:26 | Link to Comment trav7777
trav7777's picture

fonz, you're wrong.

The Fed is a bank like any other...and credit is a supply and demand instrument like any other commodity.

Interest is paid by borrowing

Mon, 03/05/2012 - 12:48 | Link to Comment tmosley
tmosley's picture

lol, so the fact that the central bank can print infinibux at any time has no effect on supply and demand?

Sun, 03/04/2012 - 12:21 | Link to Comment stopcpdotcom
stopcpdotcom's picture

Picking your brains:

If you were to ask a UK government Treasury minister ONE question, what would it be?

Sun, 03/04/2012 - 12:31 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

Would you prefer the guillotine or the gallows?

Sun, 03/04/2012 - 12:47 | Link to Comment Manthong
Manthong's picture

Custom dictates that common thieves get the gallows.

The question should be "Do you want the bag over your head or not"?

Sun, 03/04/2012 - 12:50 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

+1. Excellent.

Sun, 03/04/2012 - 13:07 | Link to Comment Hugh G Rection
Sun, 03/04/2012 - 13:27 | Link to Comment Don Birnam
Don Birnam's picture

Stilton or Double Gloucester ?

Sun, 03/04/2012 - 14:14 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

White American.

Mon, 03/05/2012 - 12:49 | Link to Comment tmosley
tmosley's picture

Death by public vivisection it is.

Sun, 03/04/2012 - 13:08 | Link to Comment reload
reload's picture

I would ask for a full break down of all the PFI deals outstanding, who are the counterparties (yes all government cronys) what is the cost to the taxpayer, how much more interest is the taxpayer paying than the equal duration Gilt yield etc etc.

What exactly was the tender proccess by which the government chose its counterparties?

This off ballance sheet financing and accounting gimmick is proving massively expensive. Private enterties are making out like bandits with zero risk. It is a scandal from top to bottom and as ever the ignorant tax payer picks up the tab.

So a full disclosure of ALL documentation relating to every PFI deal would shed some light into some currently dark places.

Sun, 03/04/2012 - 13:38 | Link to Comment Shibumi2
Shibumi2's picture

"Do you swallow or spit?"

Sun, 03/04/2012 - 14:13 | Link to Comment LongBallsShortBrains
LongBallsShortBrains's picture

Do you have a favorite lamp post?

Sun, 03/04/2012 - 19:00 | Link to Comment debtandtaxes
debtandtaxes's picture

I would ask:

why is government borrowing money at interest when you have the authority to borrow from a nationalized central bank for free?

are you being blackmailed or bribed?

 

Sun, 03/04/2012 - 12:23 | Link to Comment ZeroPower
ZeroPower's picture

What's an acceptable price to pay above spot for gold bars? Looking at the 10oz specifically... is there any difference in premiums between 1oz and 10oz? And is silver the same? Am looking into bullion to complement paper holdings.

Sun, 03/04/2012 - 12:53 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'Am looking into bullion to complement paper holdings.'

I'll overlook the fact that that sentence has it backwards and just go ahead and say that if you're in Canada you should look into the BMG group and Nick Barisheff. Unless you go with ten ounce bars the premium won't change between those two amounts unless you really look around the local coin shops.

Sun, 03/04/2012 - 15:20 | Link to Comment ZeroPower
ZeroPower's picture

Thanks for the info. My current investments aren't risk-averse due to my profile and thus my foray into bullion began just recently.

Sun, 03/04/2012 - 20:05 | Link to Comment stacking12321
stacking12321's picture

looks like apmex.com silver premium over spot is at best case 1.49 / 1.29 / 1.19 for 1oz / 10oz / 100oz bars

gold is $35 / $30 per oz over spot for 1oz / 10oz

not sure if apmex sells to canada though

you may want to consider silverdoctors.com, they are starting to sell bullion starting tomorrow, grand opening sale, .79 over spot for 100oz silver bars, i might pick up a couple myself.

and i think they will ship to canada too.

 

Sun, 03/04/2012 - 12:54 | Link to Comment MsCreant
MsCreant's picture

You should pay a lower premium per oz for a larger size item. Sometimes they won't though (like if it is flying out their door hand over fist). Helps if you get a relationship with your dealer. Mine has given me "breaks" on premiums before because I have known him for years.

Sun, 03/04/2012 - 14:58 | Link to Comment DosZap
DosZap's picture

Buying Gold in 10oz + increments, is not what I would do.Buy 1oz bars,JIC you need to move them fast.

And prems are lower on them.

Personally I would not own any bars,even if they are Major Mints.

People are not going to trust them as easily as they will Sovereign coinage.

Eagles,Maples,Aussie,Krugs............................want no part of anything else.

Sun, 03/04/2012 - 17:06 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Zero, I completely agree with DosZap.  Stick with the 1 oz coins, they are more recognizable, and no one will ask you to have them assayed if/when you sell ($50 - $100).

Canada's own Maples are very pretty coins.

Mon, 03/05/2012 - 02:35 | Link to Comment zebrasquid
zebrasquid's picture

Absolutely the right advice..coins are what you want.

Sun, 03/04/2012 - 15:40 | Link to Comment ZeroPower
ZeroPower's picture

Yes those were my thoughts as well regarding buying larger for a larger discount, but i've found some places where the discount is negligable. 

Sun, 03/04/2012 - 12:59 | Link to Comment kill switch
kill switch's picture

Gainesville coins has them for $18.99 over spot,,,that seems resonable.

 

http://www.gainesvillecoins.com/products/158453/10-oz-gold-bar-pamp-credit-suisse.aspx

Sun, 03/04/2012 - 13:23 | Link to Comment Larry Dallas
Larry Dallas's picture

BullionDirect.com too.

Sun, 03/04/2012 - 13:24 | Link to Comment Larry Dallas
Larry Dallas's picture

BullionDirect.com too.

Sun, 03/04/2012 - 15:16 | Link to Comment DosZap
DosZap's picture

BullionDirect.com too.

 

Read the "FINE" print all the way through there.(VERY important, for ANY of the so called Physical HOLD sellers,you will find a snake in all of them, ALL).

Also, if you can put your hands on it, you do not own it.

Sun, 03/04/2012 - 14:16 | Link to Comment Uber Vandal
Uber Vandal's picture

Another angle may be to buy high grade (MS63+) slabbed gold coins from reputable grading companies and sellers.

Reason is that while the bullion bar will fluctuate, many gold coins in MS63 or higher grades remain rather stable even with drastic downward movement of metal prices.

Another reason for gold coins is if things really come unglued, the coin is already in a 1/10, 1/4, 1/2, 3/4 or 1 ounce size. You may have a better chance of getting some "change" back from a 1/10 ounce coin vs. a 10 ounce bar.

For silver, you may want to pick up a bunch of dimes, quarters and halves.

Of course, you can also go the Kyle Bass way and just pick up a truck load of nickles, too.

 

 

Sun, 03/04/2012 - 15:30 | Link to Comment ZenOps
ZenOps's picture

Thumbs up on nickels.  People tend to forget history.

The nickel is the same nickel it was back in 1866, before 1933 you could have had an easier time trading a ten roll bundle of nickels for a $20 near one ounce gold double eagle - than by trying to trade a $20 paper FRN for it.  Same thing in the early 1960's, noone thought twice about trading five 25% nickels for one 90% silver quarter.  In 1970, you could have bought 40 barrels of oil for 20 pounds of pure nickel.  How much is 20 pounds of nickel?  Exactly a $100 box worth of Canadian nickels (Canadian nickels before 1981 are all pure)

In 2007, nickel peaked at $23/pound on LME default.  How much would one cubic meter be worth then?  $450,000 US.

Unless you actually intend to run out of the country with your money and need the transportability of gold, a bathtub full of nickels is the better bet as it protects against both inflation and deflation (we are arguably in a massive deflation, but only appear to be inflationary because of money printing)

Sun, 03/04/2012 - 17:05 | Link to Comment DosZap
DosZap's picture

ZenOps,

 then I suggest you get all the 75%/25%'s you can, because grapvine has it this is last year for the tradional nickel.

Bank raids commence Mon.

I tried to order a $1k worth from my bank, and they were unable to even get them from the mint.

 

Sun, 03/04/2012 - 17:10 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Yes, I read that the Mint has put out the call for ideas on replacing the nickel and the penny with cheaper metals.

I got strange looks when I looted 5 banks here (twice each) asking for $20.00 in nickels.  I also separate my change, nickles into the milk jugs, copper (1981 and before) pennies into 1 liter Acquafina bottles.

Sun, 03/04/2012 - 17:39 | Link to Comment ZenOps
ZenOps's picture

Yup, probably one year left before they must debase the US nickel.

145 years of the same composition will finally come to an end.  $8 worth of nickels for every person (approximately 50 billion nickels produced in 145 years)  Truth be known, if spread out all the monetized copper and nickel and spread it out evenly among 311 million people, you could actually clump it all into a ball and fit it easily in one hand.

I think the powers that be fear going back to a metal standard - It might be embarassing to some to realize that they really only own a grapefruit sized ball of copper, zinc and a fraction of nickel.  If they aren't in debt - which most people are.

Sun, 03/04/2012 - 17:23 | Link to Comment smb12321
smb12321's picture

As a coin collector I strongly suggest NOT paying extra for good grade coins.  The numismatic value of gold (and silver) has been dissipating for some time as intrinsic value rises.  In fact, in most gold coins intrinsic has replaced numismatic value.   In a crisis, nobody cares if you;ve got a MS63 or a MS45.

Sun, 03/04/2012 - 14:38 | Link to Comment Chaffinch
Chaffinch's picture

Price over spot isn't the thing to focus on here - a tiny percentage isn't going to matter very much. What is more important to think about is what is going to be easier to sell when you eventually come to sell. I am in the UK and I would buy a gold sovereign from you because I could recognise it and measure it and weigh it to be able to know it was real, but I would not trust your one ounce bar, and especially not your 10 ounce bar. If in Canada, a maple might be easier to sell. Another angle is that if you want to buy 10 ounces you could buy, say, 100 tenth ounce coins, and you ought to be able to get a discount for bulk.

Sun, 03/04/2012 - 15:11 | Link to Comment DosZap
DosZap's picture

100 tenth ounce coins, and you ought to be able to get a discount for bulk.

It will get you sky high premiums........................................even at 100.

Reasons for this is the dies for the smaller coins cost far more to make and replace when worn out.

Due to the miniaturization process,plus the smaller the coin, faster the dies wear out.

Then you have Dealer Prems.

Sun, 03/04/2012 - 17:15 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

tulving.com sells 1/10 oz coins, minimum purchase is 200 of them (I think, it's all there at their website).  I have a few of them as they are a nice "intermediate value" between 1 oz Gold Eagles and 1 oz Silver Eagles.

Also, if you have young loved ones, they are a GREAT gift!  Their eyes light up when you tell them how much that little coin is worth...

EDIT:

I have been able to get 1/10 oz coins at the same place I buy my gold (coin shop).

Sun, 03/04/2012 - 14:55 | Link to Comment Sean7k
Sean7k's picture

Just dicking with everybody Zeropower? You know this stuff...

Sun, 03/04/2012 - 15:27 | Link to Comment ZeroPower
ZeroPower's picture

Not dicking around at all!

Having recently been gifted a 1oz gold Maple, my love affair with physical has begun. Looked into buying some gold bars but considering any paper gold i bought was always "at the market" i cant seem to justify extravagant premiums for a sizeable purchase of the physical.

Sun, 03/04/2012 - 16:56 | Link to Comment DosZap
DosZap's picture

ZeroPower

If your portfolio is not at least 10% physical Au you are more than DICKING.

Any insurance you pay for, I do not care what its for, is subject to insolvency..................Au is not.

Your smart enough to carry Term Ins,Car,home,etc etc but not smart enough to pay PREMS for wealth insurance??.

Now where should your priorities lie?.

Sun, 03/04/2012 - 17:18 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ Zero

Physical gold in your own possession is King.  Forget about GLD and futures, etc.  That's all paper.  Your coin shop may sell a scale as well (to weigh the thing).  Ask them if they will give you the plastic tubes of twenty they come in (here in the USA anyway), that way you know the outerdiameter is right, and twenty Eagles fit JUST RIGHT into each tube.

You should definitely be buying gold...

Sun, 03/04/2012 - 17:27 | Link to Comment smb12321
smb12321's picture

I am concentrating in silver for one reason - future price.  I don't want to have to pay $5,000 for a loaf of bread when I can't get change but don't mind giving up a silver quarter, half or dollar.  When most economies collapse, folks talk about gold but the real barter is silver since gold is so rare.

Sun, 03/04/2012 - 17:54 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Silver IS a good place to start.  And you SHOULD have enough silver to spend your way through a SHTF.  Once you have that much, however, gold is KING for wealth preservation.  Spend your silver, save your gold.

Sun, 03/04/2012 - 12:26 | Link to Comment selectricity
selectricity's picture

Looks like that LTRO may not have done so much to alleviate tail risk after all:

Soc Gen: LIBOR dispersion surging post-LTRO, funding conditions “may not be as healthy as they seem”

http://www.dailycollateral.com/2012/03/04/soc-gen-libor-dispersion-surging-post-ltro-funding-conditions-may-not-be-as-healthy-as-they-seem/

Sun, 03/04/2012 - 12:41 | Link to Comment BliptoP3
BliptoP3's picture

I've seen this movie before. Everyone around the world needs to close their eyes and say: "I believe in fairies."  Come on people, get on board!  We need to save central-wanker land.

Sun, 03/04/2012 - 13:25 | Link to Comment selectricity
selectricity's picture

Which is why dispersion is probably a better indicator if one assumes price-fixing?

Sun, 03/04/2012 - 12:30 | Link to Comment RaymondKHessel
RaymondKHessel's picture

For conservative savers there are good options like PTTRX. I've been extremely pleased with it as a money market alternative. As far as investments tough to beat gold in hand and rental real estate.

Sun, 03/04/2012 - 14:34 | Link to Comment narapoiddyslexia
narapoiddyslexia's picture

Agreed, but where I am lots of people also agree at least with respect to rental property and more and more is being built. At some point there will be too much.

Sun, 03/04/2012 - 12:30 | Link to Comment cherry picker
cherry picker's picture

Don't kid yourself, every time the economy tanks fuel prices go up to help fund government excess and banks will raise their interest rates as they are now doing in Europe to attract depositors.  I don't care what the experts say, this will happen, increasing inflation.  This time the Fed has got itself into a jam beecause if it raises its rates, the Government will be a whole lot broker than now and those six figure salaries and benefits will disappear.

There will be some major pain unless a person is involved in the shadow economy

 

Sun, 03/04/2012 - 13:50 | Link to Comment oldman
oldman's picture

The shadow economy is the true economy                 om

Sun, 03/04/2012 - 12:31 | Link to Comment maxmad
maxmad's picture

National bank of Serta!!!  Sterns and Foster has come out with cash slot on their beds!!! 

Sun, 03/04/2012 - 12:36 | Link to Comment Sandmann
Sandmann's picture

What is worse, much worse is how the British Government treated savers BEFORE 2007. In the USA the FDIC had $100,000 Deposit Insurance limits in 2007. In Great Britain it was £2000 or $3,200.  So all those people with SMEs or who had sold a house or saved a deposit found that Nothern Rock was failing and their money was locked inside. On 14. September 2007 it had to get liquidity from the Bank of England because its business model required a flow of Securitisations through its offshore SIV ('Granite' in Jersey) to generate Cashflow and as securitisation dropped off it had no operating income.

So the first Bank Run in 150 years took place in Britain and the Government was frozen in fear. That was because Thatcher had deregulated The City in 1986 and passed laws to facilitate De-Mutualisation of S&Ls but not bothered to increase Deposit Insurance. The UK is Scandal Ridden - Equitable Life, Endowment Scams, Personal Pension Scams, PPI Scams - but a complete contempt for Savers who are there to be fleeced.

 

Oh, and just so you don't forget. When Pensioners apply for Credits the Government imputes an Interest Rate on their Savings of 8% so it can deny them any Welfare Benefits

 

Sun, 03/04/2012 - 12:54 | Link to Comment i-dog
i-dog's picture

This "deposit insurance" of which you speak ... is it "real" insurance, where either the bank or the depositor pays a recurring premium for the insurance, or is it simply a taxpayer-funded bailout, where "the government" simply transfers taxpayer funds to the depositor in the event of a bank failure?

A short answer will save me from having to google-research this quaint term. Thanks.

Sun, 03/04/2012 - 13:05 | Link to Comment Bam_Man
Bam_Man's picture

Yes, it is a "real" insurance fund and the banks pay premiums into it.

BUT, it is far too small to cover the losses that would occur if a single large Money Center Bank like Bof A or Citi were to fail. That is why we have seen the big banks get bailed out again and again. It is not just the bondholders who are being kept whole, but the depositors as well.

Sun, 03/04/2012 - 14:14 | Link to Comment xela2200
xela2200's picture

It is not REAL insurance. It is in the fact that the savers get their money back up to $250,000, but it is not in that all banks pay the same amount. In other words, banks who take more risk get to pay the same percentage than a more conservative bank or rather the depositor gets a chunk of its interest income taken away to pay insurance. It takes the incentive for banks to be prudent (No moral hazard), and, as some mention above, it transfers the risk to the government and by default the taxpayers.

If it was a REAL insurance banks that were deemed riskier would pay more. When I was a bank auditor, all banks were rated (CAMEL) based on their financial health. Depending on CAMEL rating (1 through 4), the banks would have to carry a larger reserve at the fed, more interest on FED funds and more government auditors. Government knows which banks are in bad shape. However, it doesn't translate into anything when it comes to FDIC insurance of deposits or at least not back then. This rating is mentioned by NOBODY and it seems to be the industry's dirty secret. It was intended to fix the problems that led to the S&L crisis of the 90s. Furthermore, Timie's stress test is a joke since the industry has been doing this for 2 decades now. The only thing that He added was the S component (Sensitivity to Market Risk) to the CAMEL rating. He never mentions the rating because they don't want people to know the financial shape of the bank they have their money in. That creates the illusion that all banks are the same and your money is safe. FDIC insurance is the equivalent of a CDS on savings and an off the books liability for the government which cannot allow the banks to fail because of it. The same thing that Europe has going on with sovereign debt. Yeap, we are all screwed because governments make really bad insurance companies.

http://en.wikipedia.org/wiki/CAMELS_ratings

Mon, 03/05/2012 - 03:59 | Link to Comment i-dog
i-dog's picture

Thank you both for your detailed responses. That makes the situation perfectly clear ... moral hazard rears its ugly head in yet another corner of the banking system.

Sun, 03/04/2012 - 15:00 | Link to Comment Sean7k
Sean7k's picture

The fund has been operating in the negative for awhile and has needed "additional funding". In Insurance parlance, they are broke with a taxpayer backup...

Sun, 03/04/2012 - 15:05 | Link to Comment DosZap
DosZap's picture

Bam_Man

True, and most DEPSOSITORS do not know that the FDIC has up to 12 MONTHS to make you whole.IF the bank that folds is not bought by another asap.

Sun, 03/04/2012 - 14:48 | Link to Comment DosZap
DosZap's picture

Sandmann

In Great Britain it was £2000 or $3,200. 

Anyone ignorant enough to keep ANY amounts over these pitiful guarantees deserved to lose it.

I am sure they sell safes in the UK.

Sorry for your people though.

The FDIC is totally  insolvent here, less than 7 Billion to back up approx 12 Trillion in deposits.So the FDIC increase to $250,000 is,was nothing but a SUCKERS move............................to keep from having bank runs.

Sun, 03/04/2012 - 17:21 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Bank runs will be happening soon.  Beat the rush!

Sun, 03/04/2012 - 12:36 | Link to Comment Old Poor Richard
Old Poor Richard's picture

This is a deliberate war on ordinary people, families, a plan to coerce surrender all assets, to own nothing, so that bankers can own everything.  Western civilization climbed out of serfdom, empowered people by giving everyone (meaning giving the lower classes) property rights.  And that is being destroyed by allowing the banks to destroy property, destroy value by printing fiat money and making saving impossible.

It's not that governments have "no choice."  The governments need to protect savers by issuing high-paying bonds to individuals, making them void if held by a bank (or any business).  The US Treasury should be borrowing from the American people at a rate that protects people from inflation. 

Sun, 03/04/2012 - 13:18 | Link to Comment AgShaman
AgShaman's picture

People don't "own" property in the USA

Sun, 03/04/2012 - 14:11 | Link to Comment Hugo Chavez
Hugo Chavez's picture

I dont know of any place in the world where property is owned.

If you fail to pay your annual rental fee to the government they will kick you out.

The only property that is truly owned is property that can be hidden and is anonymous.

Cash, metals, ivory carvings, baseball cards, bearer bonds, etc.

Sun, 03/04/2012 - 14:19 | Link to Comment xela2200
xela2200's picture

Yeap, you got it.

Is there any wonder why government provides incentives for people to "own" their house?

As an interesting note, Japanese feudal lords encouraged the farming of rise. This meant that peasants would be tied to the land and taxation was as simple as an inspection of the rice growing in the field.

Sun, 03/04/2012 - 14:40 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

I dont know of any place in the world where property is owned.

That may be true but you get someone else to pay the Taxes or price of Ownership.  They are called Tenants.

Sun, 03/04/2012 - 16:56 | Link to Comment Ricky Bobby
Ricky Bobby's picture

From the Seven Samurai:

"What do you think of peasants? You think they're saints? Hah! They're foxy beasts! They say, "We've got no rice, we've no wheat. We've got nothing!" But they have! They have everything! Dig under the floors! Or search the barns! You'll find plenty! Beans, salt, rice, sake! Look in the valleys, they've got hidden warehouses! They pose as saints but are full of lies! If they smell a battle, they hunt the defeated! They're nothing but stingy, greedy, blubbering, foxy, and mean! God damn it all! But then . . . who made them such beasts? You did! You samurai did it! You burn their villages! Destroy their farms! Steal their food! Force them to labour! Take their women! And kill them if they resist! So what should farmers do?"

 

Sun, 03/04/2012 - 12:37 | Link to Comment withnmeans
withnmeans's picture

I have to agree with Mr. Buckler whole heartedly, however now it is a game of chicken. Who will fail first, I believe they all know it is going to fail, but they "our central banks" think that if they go last, they will have a greater chance of come out of this unscathed or "perhaps just slightly damaged". Due to being naive, they don't really know how much this is going to unravel the best of nations.

Sun, 03/04/2012 - 12:37 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

This hits the nail on the head, full stop.

Consumption increases with lending, lending increases with consumption, consumption increases with lending ... ad infinitum.

And the BANK said, "Let there be money!". And it was good (if you were a banker).

Savers? What for, it's money from the void.

Sun, 03/04/2012 - 12:40 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Borrowing, whether measured in gold or shell bracelets, is a measure of deferred consumption transferred to someone else for a fee.

When the system gets out of balance so that the borrowed current consumption cant be paid back, then we start blaming people for saving too much (deleveraging is a form of savings, voluntary if it comes from a person foregoing immediate consumption to pay down debt).

The blame belongs to the parties who created unpayable debts in the firs place. Immediate consumption or use of the loaned money took place, but too many claims are out there now for future consumption or spending than can be satisfied.

We shouldnt steal from savers. Bad debt needs to be extinguished and the parties involved in that bad debt should pay the consequences instead.

Eventually current consumption and spending and current claims on future consumption and spending will be balanced out but the current attempt to inflate away future claims is immoral.

Sun, 03/04/2012 - 12:42 | Link to Comment Chartist
Chartist's picture

This is a tired story....They're pushing folks out the risk curve, but the fed is back stopping the markets...Moral hazard?  Maybe....But it's the only game in town.

Sun, 03/04/2012 - 13:21 | Link to Comment dwdollar
dwdollar's picture

It will be a tired story after the Ponzi blows up and everyone finally realizes it wasn't sustainable. Until then, it will be one of the most relevant stories around.

Sun, 03/04/2012 - 12:43 | Link to Comment ISEEIT
ISEEIT's picture

Spend an hour of your day looking into the 'technocratic elite', origins, 'progress' to date ( Hi Monti!!), and the envisioned future of human existence. I suggest that the primary reason that people like me can appear to be so 'crazy' is because we notice that which eludes you. Humanity is being systematically caged and prepared for slaughter. No sugar coating it ( well fine, but that is but one small aspect). Society is clearly being managed toward an end determined to be a point of victory long ago.

Little barry's documentation issue?

Likely different than most suspect. The fraud ( and only a zombie/drone retard would fail to conclude that his 'documentation' is any thing other than a crudely manufactured hoax) was likely long ago plotted to further separate us from our previous understanding of reality. We have over time been conditioned to accept false as true, fake as real, deception as truth ect............................

Hey, want a good laugh? Go to the link I will provide and zoom all the way down to the 'attending physicians' signature. You will find it in the lowest right hand corner. Zoom into the A in Alvin. I dare you.

If you take the challenge, what you will find is the attitude of the beast.

Funny stuff huh?

http://www.whitehouse.gov/sites/default/files/rss_viewer/birth-certifica...

Sun, 03/04/2012 - 13:08 | Link to Comment Seasmoke
Seasmoke's picture

:)

Sun, 03/04/2012 - 13:10 | Link to Comment mkhs
mkhs's picture

The upper left hand corner looks like the page was copied from a book.  What strikes me as strange is the background green design extends beyond the paper.  Clearly an addition after the fact.

Sun, 03/04/2012 - 12:59 | Link to Comment Downtoolong
Downtoolong's picture

Bravo. Best thing I’ve read on ZH all week. Sometimes it helps to stand back and look at the absurdity of our most basic assumptions about how the financial system needs to be and the most basic things that are missing. Like the fact that savers don’t have a single investment option that simply guarantees and preserves the purchasing power of their money after inflation and taxes. This hypothetical investment should exist and it should be the foundation against which all other investment yields and risks are compared; not T-Bills and Bonds, not TIPS (they don’t do the job either unless you hold them in a Roth IRA), not even gold (although this is probably the next best alternative). Ideally, this simple guarantee of purchasing power should be a property of money itself. Barring that, the least the financial industry and their government minions should do is come up with an investment alternative which provides savers with the same result. Don’t tell me these masterminds of complex derivatives and financial products can’t figure it out. Don’t tell me the government and their central bank guarantors of everything from CDO’s to MBS can't guarantee this. This product doesn’t exist because the banks and investment industry don’t give a shit about doing anything that doesn’t make a fortune for them and that shows just how badly this so-called service industry has failed to serve its most important class of customers.

Sun, 03/04/2012 - 13:44 | Link to Comment RSloane
RSloane's picture

This government does not want people to save. It wants people in debt, dependent, and insecure financially. If such a financial instrument existed, the government would quickly make it illegal and destroy it. Its for this reason that CNBC trotted out Warren Buffet for three hours who stomped on people who buy gold and silver. IMO, the closest thing we can do to 'saving' in the unconventional sense is to buy PMs outright. Because of this, I fully expect the US government to eventually confiscate both as they have done so before. My tinfoil moment for this day. 

Sun, 03/04/2012 - 14:05 | Link to Comment oldman
oldman's picture

RSloane,

This government does not even admit that there are people and the next will be even more remote

This is surprising in a 'democratic society', is it not?                       om           

Sun, 03/04/2012 - 17:18 | Link to Comment blindman
blindman's picture

i am so sorry to hear about your boating accident/incident.

Sun, 03/04/2012 - 13:59 | Link to Comment Conor
Conor's picture

Downtoolong,

firearms and ammunition

Sun, 03/04/2012 - 13:11 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

of course! the mark-to-unicorn "valuations" of the "paper instruments" is the primeMotive!

however, overall, i fail to see how this "harms" those who hold "paper wealth"

i know!  they can't get any decent "return" on their "savings"!

tuffNugieZ!  after these last crime waves, people are "lucky" they have a pot in which to piss

thxz, billB!

Sun, 03/04/2012 - 13:00 | Link to Comment Belarusian Bull
Belarusian Bull's picture

Why even hold your money in a bank?

The scam is so obvious, that only stupidity keeps people from preserving their wealth via the most traditional way - Precious Metals.

Sun, 03/04/2012 - 13:13 | Link to Comment sun tzu
sun tzu's picture

Most people do it to pay their bills. It's easier than driving there to drop off cash or money orders. 

Sun, 03/04/2012 - 13:56 | Link to Comment AgShaman
AgShaman's picture

You can't convince Gram and Gramps to get outta their banks and CD's and get into the precious metals. They've been "programmed" by the fatherly Warren Buffet Banking Conglomerates to provide 'slave capital' for the "Corzinians".

There are no evil banksters....just good 'ol boys that are real smart at "managing" our money.

When Junior and baby sister get hit up to supplement their living expenses and threaten to send them off to the "Shady Acres" assisted living complex....then they'll be interested in getting some group 11 exposure.

....by that time, their moniker becomes late-to-the-party 'bagholder' 

Sun, 03/04/2012 - 14:06 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Slave capital.

Perfect description of a CD or a savings account.

Free your capital. Fuck the banks.

Sun, 03/04/2012 - 13:03 | Link to Comment Dermasolarapate...
Dermasolarapaterraphatrima's picture

Who needs savers?

All they need is a fast printing machine ... lots of eager spending consumers.

GDP = G + C.......now

Sun, 03/04/2012 - 13:06 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Right! Savers are the Devil! 

How dare they act in a self-interested way and not put their money at risk to make a fat pay day for some guys who work on WS, and for Uncle Warren!

It's un-American to save

Sun, 03/04/2012 - 13:16 | Link to Comment s2man
s2man's picture

You've been listening to MDB, haven't you?

 

That last sentence in the article is spot on.

Sun, 03/04/2012 - 14:03 | Link to Comment Hugo Chavez
Hugo Chavez's picture

Its not unamerican to stack precious metals. You can call it consumption if you want. Seems to be very little depreciation in this consumption item, versus a chevy volt or a designer suit. Also it is a bit more fungible.

Sun, 03/04/2012 - 13:32 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.' --POTUS 2009

Sun, 03/04/2012 - 13:47 | Link to Comment RSloane
RSloane's picture

'Debt is good' - POTUS all day long

Sun, 03/04/2012 - 15:01 | Link to Comment Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Since Consumer = American, those who don't consume are anti-American.

People who save are probably terrorists!  They hate us for our shopping!

Sun, 03/04/2012 - 13:31 | Link to Comment AnAnonymous
AnAnonymous's picture

Savings are consumption.

And indeed who needs savers when you play a consumption game and that you know that debt boosts consumption level better than savings?

Sun, 03/04/2012 - 13:55 | Link to Comment VelvetHog
VelvetHog's picture

Debt comes with interest and inflation.  You are fogetting that part of the equation.  Jobs are not formed out of debt either.  People are hired using economic surplus, not through leverage.  More people working = more consumption.

Sun, 03/04/2012 - 13:58 | Link to Comment Hugo Chavez
Hugo Chavez's picture

So why shouldnt every person be allowed to borrow a million dollars?

Or is there a limit to your debt based nirvana?

Could we already be at that limit in certain parts of the world?

Sun, 03/04/2012 - 14:32 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

To be honest with you anyone can borrow and owe a Million Dollars.

I did.  At one point I owed over a Million Dollars.  It felt like a Badge of Honor.  Hard to believe even for myself.  And it is true what Donald Trump says.  Why worry the Bankers will worry for you.  I never lost any sleep over it as well.

Finally, have it down to about $100,000. but it was quite a journey.

Sun, 03/04/2012 - 14:43 | Link to Comment blindman
blindman's picture

the savers were needed to maintain the facade of
the ponzi scheme of printing money out of nothing
and giving it to yourself to spend on global resource
extraction and central planning.
who will buy the bonds if not the savers?
cntrl^ print, the central banks themselves and then
put the debt onto the sovereigns. drain the swamp of
individual savings, net all the little fish and process
the flesh, can it, then play vigilante
on the bonds with the fresh debt money from central
banks and force austerity and privatization of the resources
of the sovereigns, the meat grinder of usury manifest globally
as a shadow banking/ shadow economy/ shadow government system
generally unknown to the people and working within its own
set of standards to be announced when and if it becomes
useful.
so now if it were not for fraud in the "economy" there would
be no "economy", we've come a long way baby.
we are practicing economic terrorism on ourselves !
or having it practiced on ourselves as we accept it.
maybe we are practicing it on each other/ourselves?
oh joy, and it just gets worse as no one is capable of
stopping anything because in our delicate deflationary circumstance
anything that currently functions at all cannot be altered for
fear of further destabilization?
.
some links ....
0.2% Interest? You Bet We’ll Complain
By GRETCHEN MORGENSON
Published: March 3, 2012
STOP your bellyaching.
http://www.nytimes.com/2012/03/04/business/low-rates-for-savers-are-reas...
.
Study: All of Western US and most of East Coast, Midwest, Canada covered with airborne particles at various altitudes on March 20, Fukushima plume model shows — Based solely on Reactor No. 1 explosion (PHOTO)
http://enenews.com/study-all-western-east-coast-covered-airborne-particl...
.
regarding savings are consumption. it depends on the form the "savings" take,
the structure of the monetary system.

Sun, 03/04/2012 - 13:15 | Link to Comment blindman
blindman's picture

@ stopcpdotcom, the one question/s....

" if there is a limit to wealth creation through leverage
and debt what is the limit? and if there is no limit why do we not
experience more ubiquitous wealth and increased standards
of living? "
or
" do you believe there is an ethical basis for the de-facto
jubilee for the criminal class of financial engineers versus
austerity for the debt swamped commoner?"
or
" do you like irish music?"
1st July 1916 -- The Englishman's Betrayal (rare footage)
http://www.youtube.com/watch?v=RsLUZCJ6OeM&feature=youtu.be

Sun, 03/04/2012 - 13:29 | Link to Comment AnAnonymous
AnAnonymous's picture

Sustainable economic "growth" is only possible in a situation where more is being produced than is being consumed.

________________________________________________

Made me laugh. Another US citizen die hard.

Once again, the old canard of producing more than consuming.

This can not be done, other than through stuff like value.

You might produce stuff with more value (on the point) than what you have consumed.

That is all.

Savings are the result of a human activity and thus consumption.

Savings are simply another form of consumption. And in terms of generating consumption, other forms like debt are much better. That is why savings were dropped.

It is quite funny, with US citizens, they work in pair.

This guy is the ideological partner of the US citizen advocating a credit based system. Both advocate for consumption.

Sun, 03/04/2012 - 13:39 | Link to Comment Catullus
Catullus's picture

What you produce less what you consume is called savings. How is that a canard?

Sun, 03/04/2012 - 13:32 | Link to Comment VelvetHog
VelvetHog's picture

The only "policy" the central banks have is to blow bubbles.  Capital formation (through work and production) must be too old school for them.  After all its always "differnent this time". 

 

Our country and economy exist only for the TBTFs and the TPTB.  We have been sold out for over 30 years and its working great for those at the top of this pyramid.  That's all that matters.

 

Not only is the government/monetary system not "For The People" it is the enemy of The People as it actively subverts, supresses and removes our wealth.  Its a PERFECT system for the Warren Buffets of the world.

 

Have you had enough yet, America?

 

 

Sun, 03/04/2012 - 13:32 | Link to Comment Catullus
Catullus's picture

It's unnecessary to apologize to capital. It will go where it wants no matter what the authorities do. What's sad is the best to get capital to flow back into your country is to allow for defaults to occur. The prices collapse and magically capital comes out of the woodwork to purchase businesses and resources that still have value.

The real boner about bailing people out is that in the process of diluting out savers, you also hold capital assets hostage to what otherwise should have been surrendered. If GM goes bankrupt, even Chapter 7 style, it's not like those plants and equipment disappear along with it. They sell it off and someone else then owns them and figures out what to do with the assets. And they probably got it on the cheap so they're not stuck with a ridiculous fixed cost structure.

What's worse is that because consumers did not demand whatever company that was bailout was selling for the prices offered, the consumer already voted on the issue. So when some blowhard politician pronounces to the world that they're representing the people in bailing a company out, it can only be total bullshit. The voters and consumers are the same. Theyve already directly voted on the issue and decided that whatever being sold to them was not worthy of being purchased.

So it's not just an assault on savers, its an assault on consumers. We have to continue to be offered crap by people that we otherwise would have lost control of the assets. And that's what central banking does for the elite: keeps their grip on assets that they would have otherwise been forced to give up.

Sun, 03/04/2012 - 16:21 | Link to Comment goodrich4bk
goodrich4bk's picture

+1.  Greater financial wisdon has never been spoken.

Sun, 03/04/2012 - 17:45 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 to you for recognizing a great written statement by Catullus.

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