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Thursday, December 18, 2014

Negative interest rates

One more check in the ICE box. Zerohedge cites Goldman Sachs concerning the surprise announcement of NIRP from the Swiss:
The Governing Board of the SNB surprisingly announced this morning that it will introduce a negative rate of -0.25% on sight deposit account balances at the SNB. The SNB's target range for the three-month Libor was also widened from 0.0% - +0.25% to -0.75% - +0.25%. In our view, today's rate decision simply underlines the determination of the SNB to enforce the minimum exchange rate target for the CHF against the Euro.

1. This morning, the SNB surprisingly announced that, on January 22, it will introduce a negative interest rate of -25bp on reserve holdings from banks at the SNB, above a threshold of 20 times the minimum reserve requirement. The SNB's target range for the three-month Libor was also widened from 0.0% - +0.25% to -0.75% - +0.25%. Over the last couple of days, the CHF has traded very close to the 1.20 level on the back of rising market volatility. The subsequent demand for safe investments attracted large capital inflows into Switzerland, eventually prompting the SNB to react.

2. According to the SNB, the measure is aimed at making investments into CHF less attractive. Although it is only banks that will have to pay the negative deposit rate, banks will pass on, to some extent at least, the negative rates to customers. It is noteworthy in that respect that some German banks - in response to the ECB's negative rates - have also started charging some clients negative deposit rates.

3. It remains to be seen how effective this measure will be and the SNB will continue to rely on FX interventions to defend the minimum exchange rate. But the measure in any case shows the determination of the SNB to maintain the lower bound for the CHF against the Euro.
When currencies are getting too strong and interest rates are going negative, this is a sign that the central banks are fighting against deflationary pressures. To fight inflation, you raise the interest rate, thereby encouraging people to save. To fight deflation, you lower it, thereby encouraging people to borrow and spend. Or, in this case, since the negative interest rate is only being applied to banks, it is to encourage them to lend. That points to the fundamental difference between fiat money and credit money. You can print paper, but you can't print borrowers.

The Swiss are trying to weaken their currency, which is strong against the Euro and the dollar, so they are trying to make it less attractive to investors in order to protect their domestic exporters. Russia, on the other hand, isn't trying to export, but is instead attempting to bring in capital that is frustrated at earning so little interest in the low-interest Western economies.

Widespread NIRP will dictate the eventual end of the credit money system as well as the banks. If you're being charged to save your credit money, you might as well pay someone to securely hold something more tangible.

Labels: ,

106 Comments:

Blogger automatthew December 18, 2014 12:08 PM  

Negative interest rates are like imaginary numbers. I can see how they're used to achieve certain goals, but they still frighten and confuse me.

Blogger automatthew December 18, 2014 12:11 PM  

If usury is evil, does that mean negative interest rates are good?

Say I'm a 17th century Dutchman borrowing money from Aaron de la Vega, this means I pay him back less than I borrowed. The longer it takes to pay back the loan, the less I have to pay, right?

This sounds much like a sneaky form of charity for those too proud to accept it.

Blogger Mindstorm December 18, 2014 12:13 PM  

^
Charity that is difficult to squander.

Blogger njartist December 18, 2014 12:17 PM  

This is theft: the banks can lend $1000 based on an $100 deposit and then turn around and call that $1k reserve upon which to lend $10,000; and so also with the $10K: in other words, fictional, electronic money. As has been covered - here? - a deposit is really an unsecured loan to the bank with which the bank can do as they please: since when does the lender pay interest on a loan to the borrower?

Anonymous NorthernHamlet December 18, 2014 12:19 PM  

Predictions on how Russia will fire back over the oil squeeze aimed at them? Do they have options outside of pushing further into the Ukraine?

Where's Nate when you want him to talk oil and gold?

Anonymous Stilicho December 18, 2014 12:21 PM  

Widespread NIRP will dictate the eventual end of the credit money system as well as the banks. If you're being charged to save your credit money, you might as well pay someone to securely hold something more tangible.

If they truly believed their own bullshit, they would force banks to make loans at negative rates. They're just playing with fire because they're cold and think that blankets are barbarous relics.

Blogger Josh December 18, 2014 12:22 PM  

Where's Nate when you want him to talk oil and gold?

Well...he read a mock draft this morning that had the titans taking the rapist qb from free shoes university...so I assume he's consoling himself with bourbon...

Anonymous praetorian December 18, 2014 12:45 PM  

Now more than ever you need to understand the importance of saving money... money... money...

GONE!

https://www.youtube.com/watch?v=4TlPo0yCSa4

Anonymous Stilicho December 18, 2014 12:48 PM  

With apologies to Ogden Nash...

He who is bounded by zero
Cannot play the Keynesian hero;
He without benefit of math
Soon harvests the grapes of wrath.

Anonymous Cheddarman December 18, 2014 12:48 PM  

"Where's Nate when you want him to talk oil and gold?" - Northern Hamlet

Y'all shut up asking for Nate, he is busy right now. Nate is the Director of Covert Operations for the CSA (Confederate States of America). He is working on a deep undercover operation with Russia to institute a gold oil, gas, grain and other natural resources backed Ruble, and dethrone the dollar. This will allow the South to succeed this time, as the Yankees will be bankrupt, and the South will be recognized as an independent sovereign nation immediately by Russia and China.

Anonymous Stilicho December 18, 2014 12:55 PM  

Nate is the Director of Covert Operations for the CSA


"You may not know it but this man is a spy.
He's a undercover agent for the FBI
And he's been sent down here to infiltrate the Ku Klux Klan!"
...

I said, "Would you believe this man has gone as far
As tearing Wallace stickers off the bumpers of cars.
And he voted for George McGovern for President."

"Well, he's a friend of them long haired, hippy-type, pinko fags!
I betchya he's even got a commie flag
tacked up on the wall inside of his garage."

"He's a snake in the grass, I tell ya guys.
He may look dumb but that's just a disguise,
He's a mastermind in the ways of espionage"

Blogger Josh December 18, 2014 1:03 PM  

He is working on a deep undercover operation with Russia to institute a gold oil, gas, grain and other natural resources backed Ruble, and dethrone the dollar.

Operation Reverse Wanta?

Blogger Joshua_D December 18, 2014 1:07 PM  

What a great song. http://youtu.be/952h-AJ3Bcg

Blogger David December 18, 2014 1:07 PM  

It seems to me that the people with the most to lose in all this are the mega-wealthy. A man with $10,000 in cash savings may, if he chooses, pull his credit balance from the bank in banknotes, but a man with $100,000,000 is basically incapable of doing so, and must attempt to put his "savings" in a form that resists the larger trend toward decreasing value.

We live in a world floating on an ocean of "IOU-dollars." What happens if the consensus shifts from nearly universal "I trust your promise to deliver them to me" to "all those IOU's were pledged by con artists?"

Anonymous Daniel December 18, 2014 1:08 PM  

OT, but, uh, international: Josh, there isn't something you've been meaning to get off your chest, is there?

Anonymous Anubis December 18, 2014 1:09 PM  

Stilicho mind if I borrow :" He who is bounded by zero, Cannot play the Keynesian hero; , He without benefit of math Soon harvests the grapes of wrath"

"draft this morning that had the titans taking the rapist qb from free shoes university..." I guess we have to tell women if they want to hurt their rapists to give them a leg injury so they cant do the fast QB thing at all.

Anonymous N5 December 18, 2014 1:12 PM  

"If you're being charged to save your credit money, you might as well pay someone to securely hold something more tangible." Any tips on how to do this?

Anonymous jack December 18, 2014 1:15 PM  

Negative interest rates? If I understand all this; thats a big if, since I don't think even the university trained money types do, why would I leave anything in the bank? Better to stash in under the mattress or buy gold, lead, 25 year stored food, etc. No?

Anonymous Stilicho December 18, 2014 1:19 PM  

Anubis, go right ahead (it's derived from a Nash poem), but please change the final line to "Soon will harvest the grapes of wrath" ...it flows better.

Blogger Josh December 18, 2014 1:25 PM  

Josh, there isn't something you've been meaning to get off your chest, is there?

I can neither confirm nor deny that I was either involved or not involved.

Anonymous Stilicho December 18, 2014 1:32 PM  

Jack, it doesn't apply to you...yet. The idea is that banks won't leave their excess reserves stashed at the central bank if they have to pay to keep them there. Instead, the theory goes, those banks will lend out those reserves to borrowers who will spend the money and provide a keynesian stimulus to the economy by increasing aggregate demand. There are a couple of things wrong with this theory. One, as Vox points out, is that you cannot create willing borrowers ex nihlio. Another is that that we know that banks don't lend their reserves. Instead, they lend to willing, credit-worthy borrowers first (creating new credit money in the process), then they go looking for sufficient reserves to satisfy regulators (see Keen et al.). The reserves that banks keep at central banks have little to do with lendable funds, rather they are there as a capital substitute for times of financial stress when banks are under capitalized (like now).

Even if negative rates drive those excess reserves out of the central bank, the depositor banks will seek a similar "safe haven" to stash them in since they are a safety net of sorts for those banks. Where will they go? Perceived safe havens include Treasuries, German bonds, other, select European bonds, short term commercial paper, and gold. I don't know whether Swiss commercial banks still hold gold or not, but they may well move in that direction again before this is over.

Blogger JartStar December 18, 2014 1:35 PM  

Better to stash in under the mattress or buy gold, lead, 25 year stored food, etc. No?

Unfortunately it’s not that simple as you are placing a market timing bet on your savings. Not only do you have to be correct that the dollar as it is currently known will lose the majority of its value you also have to buy the correct assets with your current dollars, safely secure them, but more importantly not do it too early because of opportunity cost. Remember that things like guns, gold, and survival food offer no yield so if you are too early by 10 years you lost that money you could have made in relatively safe asset like a municipal bond fund, or if that is too risky for your taste short term treasuries.

TL;DR – You’d better time your mattress stuffing correctly and buy the right assets.

Anonymous ZhukovG December 18, 2014 1:39 PM  

So the Swiss are charging people for the privilege of loaning money to Switzerland.

Awesome.

Also, I am informed that Confederate Intelligence is working on a cold resistant form of Kudzu, our vengeance weapon!.

Anonymous bob k. mando December 18, 2014 1:47 PM  

VD
You can print paper, but you can't print borrowers.



how is the incestuous Ouroboros of nations mutually holding each others Treasury bills NOT "printing borrowers"?

Blogger Joshua_D December 18, 2014 1:49 PM  

ZhukovG December 18, 2014 1:39 PM

Also, I am informed that Confederate Intelligence is working on a cold resistant form of Kudzu, our vengeance weapon!.


Surely no one would be crazy enough to take such a risk! Such hubris!

Anonymous Cail Corishev December 18, 2014 1:51 PM  

Negative interest rates? If I understand all this; thats a big if, since I don't think even the university trained money types do, why would I leave anything in the bank?

Why do people put money in the bank NOW? It sure isn't for the interest. All the banks around here advertise CDs, so I assume someone buys them, but the interest rate wouldn't pay for the gas you'll spend to go collect your money. I think a lot of it's just inertia -- you put money in the bank because that's what people do, and only crazies bury it in the back yard. But it's also for the convenience of online banking and checks and debit cards and all that. So I don't think it's impossible that they could eventually get people to pay a fee for keeping their money in a bank.

Remember when ATM machines were all free? Now people accept that it costs a few bucks to use one. I don't see why the same thing couldn't happen with bank accounts, if rates stay low long enough.

Anonymous Ralph December 18, 2014 2:03 PM  

How does this not lead to bank runs? Won't the first thought that crosses the mind of the average person be "If I leave my money in the bank there'll be nothing left eventually so I have to take it out now"?

Anonymous Stilicho December 18, 2014 2:06 PM  

Remember that things like guns, gold, and survival food offer no yield so if you are too early by 10 years you lost that money you could have made in relatively safe asset like a municipal bond fund, or if that is too risky for your taste short term treasuries.

This is a common misperception about money. Money, cash, has no yield. None. Zip. Nada. Never has, never will. Now you can invest your money in things like loans to banks (deposits), loans to governments (treasuries, munis, etc.), stocks, etc. But those ALL come with risk. Even insured munis, once considered safe, simply are not any longer. The reason it was considered safe to loan money to insolvent cities and states was because some insurance company promised to make good if (when!) the city or state defaulted. Those insurers don't have sufficient assets to pay more than a couple of such claims and the re-insurance/swap/derivative daisy chains have offloaded the systemic insolvency virus as well as some of the risk. It's no different than AIG in 2008. Except that such risk is even bigger than before.

At any rate, you were talking about investments, not savings. Hence, your comments about market timing were accurate, but not apt. For savings, the only alternative choices are tangible assets: land, gold, durable equipment, durable commodities, etc. Even then, you're taking on the risk that the dollar (for example) will not hold value better than those alternatives. So there is always some risk, the question becomes one of which risks and how much you are willing to tolerate.

Anonymous Noah B. December 18, 2014 2:08 PM  

Except... Nate doesn't even have a garage.

Anonymous Noah B. December 18, 2014 2:14 PM  

"How does this not lead to bank runs?"

Cops routinely confiscate cash when they find it, so there's no guaranteed safety there either. Consider this: who is to say that the banks couldn't provide the police with a list of people who have made large cash withdrawals? Property rights are under attack from every direction.

Blogger Joshua_D December 18, 2014 2:29 PM  

Cail Corishev December 18, 2014 1:51 PM

Remember when ATM machines were all free? Now people accept that it costs a few bucks to use one. I don't see why the same thing couldn't happen with bank accounts, if rates stay low long enough.


I tend to agree.

It wasn't too long ago that checking wasn't free. I remember opening my first checking account with Wachovia back around 1993. I was 16 or so, and was working my first real job. Getting a checking account was the thing to do. Anyway, it seems that Wachovia had just launched their first "free" checking account around that time. Before that, I believe that practically all banks charged a fee or required that you maintain a minimum deposit amount, which of course the bank used to generate profits. I remember picking Wachovia specifically becuase they were one of only a few banks that were offering free checking accounts. I mean, obviously they were making some money off it somehow, otherwise it wouldn't be free. Nothing is free.

But now banks seem to be having a harder time making any money of investments, given the ZIRP rates, so they'll start trying to charge customers once again, just like Bank of America tried to charge it's customers for their debit cards. But, they'll be backlash.

Of course, if banks start trying to charge average customers, we could see the rise of some new type of accounting system that provides the convenience of online payments without charging customers.

Blogger JartStar December 18, 2014 2:33 PM  

Stilicho, but a move into "tangible assets" (which besides gold I would argue aren't savings but another investment) is still one of timing as they offer no yield regardless of how they are defined.

Furthermore if you sell all "standard" asset classes like equities, corporate and government bonds, etc., you are saying that these things will be worth less than what you are buying in the immediate future. Immediate is key here once again because if you don't think they will be worth less for a few decades are you are fool to bail out now.

Blogger JartStar December 18, 2014 2:42 PM  

On a related note: Russia is selling its gold!

No doubt part of Putin's double secret plan to make a gold backed rubble which will topple the other world currencies like a toddler pushing over a pile of blocks.

Blogger stats December 18, 2014 3:17 PM  

"Russia is selling its gold!"

Story seems to be bullshit.

Anonymous ZhukovG December 18, 2014 3:29 PM  

@JartStar

Your link title is misleading. Until the next report from the Russian central bank we won’t know what direction Russia’s gold reserves are headed.

Also the originator of the report, SocGen, is in a vulnerable position due to Russian economic woes. This may be an attempt to, by way of rumor, prevent the selling off of their stock.

That said, a gold sell off would not be out of the realm of possibility. Russia is currently the world’s number three producer of gold, so another thing to watch for is some effort to nationalize the gold mines.

Anonymous WaterBoy December 18, 2014 3:35 PM  

Joshua_D: " so they'll start trying to charge customers once again, just like Bank of America tried to charge it's customers for their debit cards. But, they'll be backlash."

They've already been doing so for a couple of years. They call it a "paper statement fee" in some cases, forcing customers to go to an electronic-only statement or pay the price for paper.

Funny how they seem to have enough money to send out advertisements, but not to send statements.

Anonymous dh December 18, 2014 3:40 PM  

Yup. The best part is the "paper fee" is 10-12x the cost of sending out a statement. Meaning, it's just a revenue source.

Anonymous Stilicho December 18, 2014 3:55 PM  

JartStar, Jack was talking about savings alternatives. Savings have no yield unless you lend them out, at which point, they are no longer savings. If you want to talk about investments (and obviously you do), timing is an important consideration, but risk is even more important.

Timing involves one of two issues: 1) taking the profit (in dollars which have their own separate risk of inflation/debasement); and 2) what is commonly referred to as the time value of money. This second issue is part of the systemic risk of a fiat or credit based monetary system where the issuer pursues inflationary policies. In short, it is the question "what will my unit of currency buy at some point in the future?" (it can also involve opportunity cost, but I'm not going into that here). If you want to stay ahead of inflation, you have to invest your money in something that has a rate of return greater than the rate of inflation. This is where you've brought in stocks, bonds, etc. However, and here is my point, those investments have huge risks these days. Especially when compared to the nominal, much less the real, rates of return. Not the least of these risks are the counterparty risks attributable to the financialization of everything.

You think you own 100 shares of IBM in your brokerage account, but your broker has lent out those shares to someone else who shorted them and the purchaser in that secondary transaction now holds them in his brokerage account where his broker lent them out....rehypothecation ad nauseum if not actually ad infinitum. Loans you make in the form of bonds or otherwise are even worse. Sure you get a defined nominal return, but the risk of defaults are increasing exponentially and the attempts to lessen the risk of individual issuers through derivatives has only spread the contagion to the point where the whole edifice is at risk when any single player defaults. Now you may be willing to accept such risks to some extent, but the problem is that no one can reasonably quantify such risks due to numerosity, complexity, and opacity.

This isn't your father's stock market or bond market. It isn't even young JartStar's stock market or bond market any more. Analysis and prediction have become much more difficult and complex. Which brings us back to the first issue with timing: taking profit--you'd better be nimble and lucky to make sure you get off the carousel before it flies apart. If you think it will not crash, then you keep your money on the table; if you think it will, then you remove any money you cannot afford to lose.

So, what to do with the money you remove? Try to remove it from the risks you are avoiding. Gold, land, guns, food, commodities all carry risks as well, but they are different risks from the monetary and counterparty risks discussed above. If you think they are lesser risks or that they are more controllable risks, then you'll be comfortable putting money into them. Many people do. And it is perfectly reasonable to hedge your risks by putting some money in the markets or other alternatives (e.g. a privately held business venture).

Anonymous Stilicho December 18, 2014 3:59 PM  

hmmm... my reply to JartStar keeps getting eaten

Blogger Nate December 18, 2014 4:02 PM  

Dammit people! Putin and I are drunkin' buddies. He appreciates a southron's perspective on firearms and alcohol and we also both happen to enjoy MMA.

There is nothing more to it than that. It only gets wierd when Dr Who is around because he keeps taking his shirt off.

Blogger automatthew December 18, 2014 4:07 PM  

hmmm... my reply to JartStar keeps getting eaten

Blogspot doesn't like your voluminous style.

Blogger automatthew December 18, 2014 4:10 PM  

Regarding Stilicho's list of assets above:

Land is good for producing food. Guns protect the food and the gold.

Good tools can be passed down through generations.

Blogger Nate December 18, 2014 4:12 PM  

"how is the incestuous Ouroboros of nations mutually holding each others Treasury bills NOT "printing borrowers"?"

That's the fallacy.

You only need 1 borrower... the Government. The government dumps the money into whatever bullshit spending scheme it dreams up... and the machine keeps moving. The government just lends money to itself then spends the money. Then services the debt with the tax money it collects... or just borrows more from itself to cover it.

That goes on until the rest of the world decides it has seen enough and stops using your money.

Anonymous Stilicho December 18, 2014 4:12 PM  

Blogspot doesn't like your voluminous style.

Brevity is the soul of...something

tldr version: JartStar, it all depends on how much of which risks you are willing to accept.

Blogger JartStar December 18, 2014 4:15 PM  

And it is perfectly reasonable to hedge your risks by putting some money in the markets or other alternatives (e.g. a privately held business venture).

I totally agree which is why I think the 100% gold/guns people are as wrong as the 100% equities people. There are two simple rules for investing:

1. Never put your money into anything you don't understand reasonably well or are uncomfortable with.
2. Diversify.

Blogger Nate December 18, 2014 4:16 PM  

"No doubt part of Putin's double secret plan to make a gold backed rubble which will topple the other world currencies like a toddler pushing over a pile of blocks. "

I don't know of anyone that has suggested it would be a gold backed ruble. I suspect if they were going to do that they'd use a new form of currency entirely. And given that its russia we're talking about.. it may make more sense to back it with platinum.

But they could back it with anything at all and it would be better than a bullshit debt instrument.

Anonymous Stilicho December 18, 2014 4:23 PM  


But they could back it with anything at all and it would be better than a bullshit debt instrument.


Back the ruble with vodka? Fully convertible, of course. Naturally, economists will then be hired by distilleries to determine how much to water down the alcohol.

Blogger Nate December 18, 2014 4:26 PM  

"2. Diversify. "

This is a bullshit buzzword for chumps. This really means "Taking less money out of something good and putting into something bad. because scary".

A better idea: Don't put money into something bad. Period.

Blogger Nate December 18, 2014 4:27 PM  

"Back the ruble with vodka?"

...

Yep. I'm good with it.

Blogger JartStar December 18, 2014 4:40 PM  

A better idea: Don't put money into something bad. Period.

My crystal ball stopped working. Can I borrow yours?

Blogger Aquila Aquilonis December 18, 2014 5:02 PM  

Jart - Are you still using a permanent portfolio strategy?

Blogger Nate December 18, 2014 5:05 PM  

"My crystal ball stopped working. Can I borrow yours?"

You don't need a crystal ball. Diversity is for chumps.

You need to put your money into things that will make you money and in 2015 that will mean things that actually produce. it means being able to make something tangible. Equities are a shell game that you will always lose.

Go buy rental properties. Go buy a garage and hire a mechanic. Hire a welder. Put them to work.

Blogger Nate December 18, 2014 5:16 PM  

"When currencies are getting too strong and interest rates are going negative, this is a sign that the central banks are fighting against deflationary pressures."

I would also point out that the fact that they are defending against deflation doesn't mean that deflation is the real threat.

That assumes they have the ability to perceive the real threat.

I see no reason to make that assumption. I have argued long that they do not understand inflation at all (hense their 4...5.. 6?) definitions of it.

I am reminded of Sadam moving his whole army to defend at again US attack from the sea in Desert Storm 1... just before the tanks ran up his rear flank.

Anonymous cheddarman December 18, 2014 5:23 PM  

Far be it from this here Yankee to call our honorable Nate a stretcher of the truth, but Nate and Vlad being mere drinkin' and shootin' buddies sounds like pure maskirovka to me.

Blogger JartStar December 18, 2014 5:25 PM  

Jart - Are you still using a permanent portfolio strategy?

I'm not going to divulge particulars of my investments, but I still say it's a great place to start.

Blogger JCclimber December 18, 2014 5:34 PM  

Nate, the government can (and *is*) do that, spending their money on Obama phones and contracts, 44 million Americans on food stamps, shovel ready projects here and there, research grants over the stupidest stuff....

The problems is that slowly, more and more of the producers of real product are finding ways to shelter their shrinking income from the beast. And getting more and more pissed off at the FSA and their enablers. The velocity of money continues to decrease, which is probably what has Yellen soiling her Depends more than any other news.

Blogger Nate December 18, 2014 5:41 PM  

"Nate, the government can (and *is*) do that, spending their money on Obama phones and contracts, 44 million Americans on food stamps, shovel ready projects here and there, research grants over the stupidest stuff...."

They are. What you're assuming is that they can't keep kicking the can down the road. They can. Japan has done it for 20 years now.

There is no limit on what a government can lend itself. There is no limit on what a government can spend or lend away.

if there was... hyper inflation never would have happened.

but it does. It has.

It has happened in credit money systems over and over again.

OpenID simplytimothy December 18, 2014 5:46 PM  

Except... Nate doesn't even have a garage.

Pole-barn, probably.

Blogger Nate December 18, 2014 5:54 PM  

"Except... Nate doesn't even have a garage."

just a quote from a song...

Nate has a whole compound that third parties often refer to as a castle. Its big and imposing and very very defensible.

And has multiple garages.

Blogger Nate December 18, 2014 6:00 PM  

and yes.. Putin likes it.

Anonymous jack December 18, 2014 6:04 PM  

@ Stilicho and Jartstar; above

I know what you mean. What to do? the burning question of the era. Gold won't rust away, though, it can be stolen. I sorta like Nate's idea, figurative speaking, of buying a service station and hiring a few folk. A risk, but, then, most anything is a risk these days. I might consider that though. probably, not a service station. But the theme is there. Something that people need regardless of the economic situation in the country and world. Preferably, something that lends itself to a transition into the black market. I suspect the logical way to go would be to get together a group of trusted neighbor's [if any] and do something like this. After all, you may well need the extra gun slingers around. You know, just for the warm feeling of somewhat more security.

Blogger Sean Carnegie December 18, 2014 6:24 PM  

he read a mock draft this morning that had the titans taking the rapist qb from free shoes university...so I assume he's consoling himself with bourbon...

Holy crap, that's two cultural resets with an Ilk reference in bourbon. Well done, sir.

@Cail

Most Canadians already have this issue where bank accounts cost you money. Barring some sort of minimum deposit that most paycheck to paycheck folk can't afford (Say 5k-10k) with which the bank will waive all fees, the rate of interest cannot possibly cover the charges. My former bank would let you use your account through debit and bill payments for $13 a month. Basically, almost an entire week of pay net at minimum wage for an entire year of banking.

Blogger Sean Carnegie December 18, 2014 6:25 PM  

Sorry, should read "Let you use your account through unlimited debit and bill payments".

Anonymous bob k. mando December 18, 2014 6:38 PM  

Stilicho December 18, 2014 4:23 PM
Back the ruble with vodka?



*Russians* back their currency with *vodka*?

that's madness, madness i say.

you want to see currency deflation, you back it with vodka and then watch the Russkis drink each other under the table.

otoh, Markku would probably also be spending a lot of quality time drunk ... this could be fun.



Nate December 18, 2014 4:12 PM
That goes on until the rest of the world decides it has seen enough and stops using your money.


exactly so. the day China starts demanding the US clear it's current account balance in Yuan, Rubles or commodities is the the day i piss my pants laughing.

wait, wut? i live here ... oh shit.

also, it's hard to pick out the deleterious effects of credit fiat money when every single other currency on the planet is ALSO credit fiat.

Blogger James Dixon December 18, 2014 7:13 PM  

> You think you own 100 shares of IBM in your brokerage account, but your broker has lent out those shares to someone else who shorted them

Supposedly you have to authorize that. And we know all the brokers follow the rules, right?

> A better idea: Don't put money into something bad. Period.

Well, yeah. But no one is 100% at predicting what is good and what is bad. Wise men always allow for the fact that they may be wrong. Me, I'm lousy at it. The only thing I know for certain is bad is government debt. And I'm not sure on the timeline for it.

> ...but I still say it's a great place to start.

Well, as my occasional links to the source indicate, I can hardly argue.

Blogger James Dixon December 18, 2014 7:14 PM  

> ...also, it's hard to pick out the deleterious effects of credit fiat money when every single other currency on the planet is ALSO credit fiat.

Which is why the first mover to a commodity backed currency will either be a radioactive wasteland or the only remaining superpower.

Anonymous buh bye Bear December 18, 2014 7:26 PM  

Gold and Oil are both heavily manipulated in the commodities market.
These are simply paper bubbles wielded as weapons by governments.
Follow the investment money. Is someone going to outlaw comm trading?
For second time in 8 years Oil dropped like a stone. It's called a paper bubble sell off.
And it is a weapon. It's called Regime Change in Russia.

Anonymous zen0 December 18, 2014 7:41 PM  

and yes.. Putin likes it.

I hope you don't make him watch Titans games. He might be tempted to slip some polonium in your Maker's.

Anonymous zen0 December 18, 2014 7:54 PM  

> And it is a weapon. It's called Regime Change in Russia.

And Britain (North Sea Oil) and the US (Shale oil)

Anonymous Viidad December 18, 2014 8:06 PM  

Nate: "You need to put your money into things that will make you money and in 2015 that will mean things that actually produce. it means being able to make something tangible. Equities are a shell game that you will always lose.

Go buy rental properties. Go buy a garage and hire a mechanic. Hire a welder. Put them to work."

Spot on. Heck, buy an acre and plant it with Japanese persimmon trees, then advertise U-Pick at your local Asian market. Those puppies can sell for $1.00 a fruit and need almost no care. I don't even water my trees and the only fertilizer they usually get are the weeds I chop and drop around their trunks.

Plant black locust and then later sell fence posts.

Plant black walnut and pass the acreage on to your children.

Plant a variety of fruit and nut trees, grow them organically, then sell the results to SWPL markets.

Heck, you can grow over 50 fruit trees in a 2500 ft2 backyard:

http://thebrillianthomestead.com/gardening/much-space-need-orchard-less-think/

Anonymous bob k. mando December 18, 2014 8:08 PM  

buh bye Bear December 18, 2014 7:26 PM
And it is a weapon. It's called Regime Change ...


so, you're saying Obama is going to be impeached?


someone upthread said that the US produces more oil than Russia, wiki disagrees ( ymmv ).

https://en.wikipedia.org/wiki/List_of_countries_by_oil_production#Countries

wiki says that as of 2013, Russia produces more BPD than Saudi? i dunno about that.

Anonymous Sarcophilus December 18, 2014 8:16 PM  

Think of it as a CDO-squared, but backed by imaginary assets. With a siner and a cosiner. Money can be complex in more than one way.

Anonymous zen0 December 18, 2014 8:44 PM  

Thanks for the link, Viidad.

I specially liked the How to butcher a psychotic rooster article. I had one once. Vicarious satisfaction ensued

Anonymous zen0 December 18, 2014 8:46 PM  

Sarcophilus December 18, 2014 8:16 PM
Think of it as a CDO-squared, but backed by imaginary assets. With a siner and a cosiner. Money can be complex in more than one way.


Thread win.

Blogger Nate December 18, 2014 9:06 PM  

"Spot on. Heck, buy an acre and plant it with Japanese persimmon trees, then advertise U-Pick at your local Asian market. Those puppies can sell for $1.00 a fruit and need almost no care. I don't even water my trees and the only fertilizer they usually get are the weeds I chop and drop around their trunks."

Preach.

In other words... DO ACTUAL ECONOMIC ACTIVITY.

I can't tell you what exactly to do in your exact situation. That's up to you. But the idea is to create systems that create something you can trade and sell that people want.

Anonymous Viidad December 18, 2014 9:11 PM  

@zen0

You're welcome. The first time I butchered some chickens I was a total wuss about it. Never lived outside the city before, so when I moved out to the REAL South I felt like it was time to grow up and learn to slaughter and butcher... you know, the kind of thing even little old ladies used to know how to do.

I could barely eat the first chicken I slaughtered. I look back on that previous version of myself and think... whoa... was I really that weak?

Now I've done it so many times it's like pulling carrots.

Blogger Nate December 18, 2014 9:14 PM  

its a disservice that old generations have done to their kids. Teaching a kid to kill and butcher is a right of passage. Learning that being scarred or squeamish about it is actually cruel is a huge lesson in life and its one that is widely applicable to many areas.

Teach them to kill. Teach them to butcher. Teach them how to do both properly and you'll be on your way to producing functional adults.

Anonymous Viidad December 18, 2014 9:14 PM  

Nate: DO ACTUAL ECONOMIC ACTIVITY

Yeah. Or you can just throw milk jugs on the floor in the grocery store, pretend to slip on them, then post it to YouTube... get a million hits... collect Adsense revenue...

NO - GET BEHIND ME!!!

Actually, a lot of this sort of "creating value" work, i.e. REAL work, is discussed in Victoria. I just finished it this morning. Brilliant. Totally brilliant. Worth every penny.

Anonymous Viidad December 18, 2014 9:15 PM  

@Nate

Yeah, totally agree.

If your three-year-old isn't chasing your two-year-old around with the severed claw of a freshly-butchered rooster and growling... they really ain't living.

Anonymous Viidad December 18, 2014 9:25 PM  

And... by the way... I know it's Thursday, but:

A: Cheap tequila
T: Rocky Patel Maduro
F: Vintage (Belgian) Browning A5 12-Gauge

Blogger Nate December 18, 2014 9:28 PM  

a5!!! nice!!!

Blogger Nate December 18, 2014 9:28 PM  

cool old guns are never off topic

Anonymous Viidad December 18, 2014 9:29 PM  

Dude... I picked up so many nice pieces since we last talked...

Blogger Nate December 18, 2014 9:30 PM  

A5... Auto 5... John Browning's much loved Humpback.

Anonymous Viidad December 18, 2014 9:32 PM  

My wife took one look at that shotgun when I brought it home and said it was a totally sexy piece. A man's gun.

Blogger Nate December 18, 2014 9:36 PM  

auto shotty's just don't get enough love. everyone talks pumps... but man the autoloaders are just sexy. I love my CZ.. I love the Winchester SuperX.. and don't get me started on the berettas. You don't stay in business for 500 years by making shitty products.

Blogger RC December 18, 2014 10:10 PM  

I have an ancient Remington Model 11 Humpback, scarred up, shot up, but I still love the balance of that old shotgun.

Anonymous Godfrey December 18, 2014 10:26 PM  

Anyone have any opinions of the Sig P232 and the 38 ACP?

Blogger automatthew December 18, 2014 11:10 PM  

A: Sazerac rye whiskey. First time it's been available in years.
T, F: Nuthin.

Anonymous Jack Amok December 18, 2014 11:20 PM  

Stilicho et al are absolutely right. There's no 100% safe thing to do with your wealth. Every mechanism to even save - let alone invest - your money carries risks. Especially given how fragile so many aspects of our society are right now, you can't flee risk, you can only choose which ones you think are most tolerable.

I think the reason the banking and stock market systems haven't completely crashed already is that a majority of people find almost any financial risk to be intolerable so refuse to see anything wrong with the system. They keep putting their money in banks, 401(k)s and mutual funds because the alternative is too frightening for them to face.


Go buy rental properties. Go buy a garage and hire a mechanic. Hire a welder. Put them to work.

See, Nate just gave you a blueprint for a diversified portfolio. Real Estate, auto repair, and fabrication. If that's not diversified enough, add a plumber, an electrician and maybe a handyman.

Make or doing stuff people need. What a concept. The whole notion of making money by being a middle-man between the guy making something and the guy using it is not only rotten, it's highly dependant on excess productivity (which it also works to destroy).

Anonymous Jack Amok December 18, 2014 11:23 PM  

Anyone have any opinions of the Sig P232 and the 38 ACP?

I have a high opinion of Sig, but a low opinion of .38 caliber. It makes a 9mm look almost masculine by comparison.

Anonymous Johnny Caustic December 19, 2014 12:22 AM  

So you can't print borrowers. But can someone tell me why no central bank has ever tried sending each citizen a $10,000 check? Is it just because the commercial banks would object to being unable to skim off a share?

Anonymous rho December 19, 2014 1:57 AM  

My economics shorthand is to turn everything related to money into goats, as any money is just a store of value. Goats are awesome, and widely useful, so money == goats. Goatflation? A lot of kids running around eating all the grass. Degoatflation? Too many old, useless goats wandering around eating the house insulation.

will introduce a negative rate of -0.25%

Great. Thanks a lot. Now in my mind there's a rogue Crip driving around shooting goats and tossing the carcasses into ravines.

Anonymous Jack Amok December 19, 2014 2:26 AM  

rho, you should switch from goats to deer.

Anonymous Discard December 19, 2014 2:31 AM  

As long as we're talking useful activity, think about hairdressing. Women will always pay for a good hairdo. It's easy to do it at home or in the customer's house, for cash. And there's no need for a lot of expensive equipment. Very little investment, except for the time it takes to learn.

I'm serious. I don't care about my hair, but my wife sure cares about hers. No, it's not essential like farming or fixing transmissions or making furniture, but it's not investment banking or carjacking either.

Anonymous rho December 19, 2014 2:39 AM  

rho, you should switch from goats to deer.

Deer taste better, sure, but I'm not eating deer cheese.

(The less said about deer curry the better.)

Anonymous 0007 December 19, 2014 5:57 AM  

.38ACP is a totally different deal than the .380ACP. .38ACP is the forerunner of the .38Super which is a serious 9mm platform.

Blogger Nate December 19, 2014 7:51 AM  

'See, Nate just gave you a blueprint for a diversified portfolio. Real Estate, auto repair, and fabrication. If that's not diversified enough, add a plumber, an electrician and maybe a handyman. "

No. I gave a list of possibles. I am not suggesting you should do all of those things. I am suggesting you evaluate your area, figure out what the market you live in needs, and provide it.

Blogger Nate December 19, 2014 7:55 AM  

".38ACP is a totally different deal than the .380ACP. .38ACP is the forerunner of the .38Super which is a serious 9mm platform."

While you are correct that 38 acp is not the 380... it still fits firmly between the 380 and the 9mm. Its significantly less powerful than the 9mm and therefore is unfit.

Blogger James Dixon December 19, 2014 8:29 AM  

> Actually, a lot of this sort of "creating value" work, i.e. REAL work, is discussed in Victoria.

For anyone who doesn't have them, the Foxfire books (at least the first several of them) are extremely useful.

Anonymous bob k. mando December 19, 2014 9:55 AM  

VD
You can print paper, but you can't print borrowers.



i'm still interested in Vox's explanations as to how something like this ( which is even worse that Italy-owns-French-debt-who-owns-Dutch-debt-who-owns-Italian-debt ):
http://cnsnews.com/news/article/fed-now-largest-owner-us-gov-t-debt-surpassing-china

how is the above NOT "printing borrowers"?

Anonymous Stilicho December 19, 2014 10:32 AM  

A5... Auto 5... John Browning's much loved Humpback.

I took mine to a sporting clay shoot recently and outshot the weekend warriors with their expensive over/under trap guns. They were amazed that A) a semi-auto made in 1960 worked better than their new, expensive guns (two of them failed to fire at at least one station) and B) how fast I could bust the clays on a true pair. If you don't have an A5, get one. You won't regret it.

Anonymous Jack Amok December 19, 2014 11:43 AM  

No. I gave a list of possibles. I am not suggesting you should do all of those things. I am suggesting you evaluate your area, figure out what the market you live in needs, and provide it.

It's a joke son, you're supposed to laugh.

Blogger Nate December 19, 2014 1:29 PM  

Stil
the primary complaint with the auto guns is the over all length. folks think it makes them hard to swing... but I have never found that to be the case. They are lighter and that makes up for the difference to me.

Anonymous patrick kelly December 19, 2014 1:31 PM  

"It's a joke son, you're supposed to laugh."

If you want Nate to giggle start talkin' about Booker's, 1911's, and Gurkhas....(cigar or sword I suppose)

Anonymous Jack Amok December 20, 2014 12:23 AM  

If you want Nate to giggle start talkin' about Booker's, 1911's, and Gurkhas....(cigar or sword I suppose)

Now, I can understand laughing at Johnnie Walker, 9mms, and, well, Quaddafi's Grrl power body guard I guess. But Bookers and M1911s? Let alone Gurkhas...

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