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Tuesday, September 29, 2015

You had ONE job

If the central banks eliminate cash, people will no longer need banks:
It has long been believed that when it comes to interest rates, zero is as low as you can go. Who would choose to keep their money in the bank if they had to pay for the privilege?

But for the people who control the world’s money, this idea has recently been thrown out of the window. Many central banks have pushed their rates into negative territory and yet the financial system has still to come to an abrupt end.

It is a discovery that flips on its head the conventional idea of how authorities could respond to future economic crises; and for central bankers, this has come as a relief.

Central bank policymakers had believed they had run out of room to support their respective economies, with their interest rates held close to the floor.

Traditionally, it was thought that if you wanted to boost the economy, the central bank would reduce its interest rates. Normally, the rates offered on savings accounts would follow, and people would choose to spend more, and save less.

But there’s a limit, what economists called the “zero lower bound”. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.

What is happening now should not – according to conventional thinking – be possible.

As central bank rates have turned negative, the rates offered on bank deposits have followed. Yet rather than stuffing cash under mattresses, people have left their money in the bank or spent it.

Nowhere is the experiment with negative rates more obvious than among Nordic central banks. Sweden – the first to dabble with negative rates – is perhaps the prime candidate for such experimentation.

The country already has high savings rates, the third highest in the developed world according to the OECD and, despite growing at healthy rates, there appears to be plenty of slack left in the economy to prevent an overheat.

Unemployment is unusually high for an advanced economy at more than 7pc, still well above its pre-crisis levels of sub-6pc. Crucially, the Riksbank’s mandate suggests that such a radical experiment is necessary. Policymakers have battled with deflation since late 2012, and with inflation at minus 0.2pc in August, it remains well below the central bank’s 2pc target.

To a great extent, the Riksbank’s hand has been forced by the plight of the eurozone. A tepid recovery in the currency union has required the European Central Bank (ECB) to bring in ever-looser policy.

As the ECB’s actions have weakened the euro against Sweden’s krona, the cost of importing goods into Sweden has fallen, and weighed down on inflation. The Riksbank has had to cut its own rates in response in an attempt to avoid deep deflation.

Sweden’s flexible approach to monetary policy has won it the plaudits of leading credit ratings agency. Standard and Poor’s recently reaffirmed the country’s triple AAA sovereign rating, remarking on the benefits it derives from “ample monetary policy flexibility”.

Noting that the Riksbank had introduced both negative interest rates and quantitative easing, S&P said that “should inflation rates stay low or the krona appreciate materially, the central bank could lower the repo rate further”.

Many City analysts believe that the Riksbank will continue cutting, reducing its key interest rate to minus 0.5pc by the end of the year. Switzerland’s is already deeper still, at minus 0.75pc, while Denmark and the eurozone have joined them as members of the negative zone.
It shouldn't surprise anyone that people are willing to accept low negative interest rates. After all, banks began as institutions that charged people to hold their gold for them. It wasn't until they began creating money by handing out multiple certificates of ownership that they needed to start paying "interest" rather than receiving "fees".

However, banning cash will go too far; the reason people use "money" is that it is less of an annoyance than barter. In their desperate attempt to remain profitable in a deflationary environment, banks are taking the risk of rendering themselves irrelevant.

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59 Comments:

Blogger Robert What? September 29, 2015 4:36 AM  

The real reasons the government and the banksters want to eliminate cash are: (A) to be able to track every financial transaction of any kind for taxation and prevention of capital flight. (B) make it easy to "bail in" the too-big-to-fail banks to cover their gambling losses.

Blogger ScuzzaMan September 29, 2015 4:41 AM  

Deflation is the fruit of human progress. The reason bankers - and thus their shocktroops, central banker - hate deflation is that it reduces the value of financial assets (i.e. paper) and increases the value of real assets (physical things).

Since bankers are purveyors and manipulators of financial assets, they are highly allergic to deflationary pressures of any sort. They will go to any lengths to produce inflation, because any sustained period of deflation will destroy the narrative that they know what they're doing, that they're in control of the global economy, that they have the tools to right every macroeconomic wrong, cure all monetary ills, avoid another great depression, and so forth.

It is very interesting to chart the changing narrative with respect to inflation. Back in the 70's central bankers in the west were united in fighting inflation. Inflation was the ruinous bogey man that had to be contained if it could not be destroyed. So central bankers began to adopt inflation limits, typically around 2 to 3 per cent, above which they would be considered to have failed in their janitorial duties.

Slowly, these limits became targets, at the time a slight but now visibly crucial distinction.

Now that the consequences of their decades-long inflationary policies are coming home to roost (everything reverts to the mean eventually) and deflationary pressures are ravaging assorted financial assets in (to them) unpredictable storms of financial contagion, the pressure is 180 degrees reversed from what it was, and central bankers are considered failures if they do not produce inflation of at least 2 to 3 per cent per annum.

You can, of course, increase the volume of air you pump into a leaky balloon. As the leak spreads and grows, you can increase the flow even further.

But there are structural limits. You may not know them precisely. They may, in the specific, be unpredictable.

But that the balloon will eventually explode is inevitable.

Negative interest rates are survivable while nobody is creating new money too quickly. But when a crisis hits and the central banks go into their competitive deflationary cycle, each racing to the bottom to transfer wealth to their export sectors and the people who finance them, and pretend this equals economic recovery, the ballon is going to pop.

OpenID originalh September 29, 2015 5:00 AM  

Those Swedish economists aren't any saner than Krugman...

An op-ed yesterday in Svenska Dagbladet advocated for helicopter money -- large deposits into everyone's bank accounts.

They claim high savings rates at the same time that they have the highest individual debt levels in the world at an average of 175% of annual incomes. Most of these loans are interest only -- no principal payments.

Their housing bubble is still inflating.

Most local bank branches are already refusing to handle cash. People are directed to ATMs only for cash transactions.

Blogger Cinco September 29, 2015 5:44 AM  

"...large deposits into everyone's bank accounts." I give it less than 20 years before politicians running for office are promising this very thing, in return for votes of course.

Blogger Cataline Sergius September 29, 2015 5:51 AM  

The only prudent long term investment is canned food and shotguns.

Also learn how to brew all grain beer. I've been using mine as a barter good for a while.

Blogger ScuzzaMan September 29, 2015 5:52 AM  

An example from today's BBC news, about bank of India's recent rate reduction:

"The bank has been under pressure to boost growth after inflation hit a record low of 3.6% in August due to falling commodity prices."

Note the implicit false equivalence: inflation=growth.

Blogger Sherwood family September 29, 2015 5:59 AM  

Hmm...I know there was a large debate here at one time about deflation vs. inflation. I believe Vox came down on the side that saw deflation as the most likely outcome. That is bad and good. It is good for me because I have no debt and pretty good savings but the economy overall will suffer until the excess money and capacity are absorbed. I guess we will have to watch and see where things go.

Blogger Derek Kite September 29, 2015 6:19 AM  

The levers have always been only to make borrowing more or less expensive. That only works when there is an underlying economic vibrancy with lots of demand for borrowing.

Now the concern is what governments owe. A rational price of borrowing money that actually pays the cost would bankrupt or severely constrain national government's ability to continue funding their operations.

This sets up a perverse cycle; it is cheap for some to borrow, but that low cost money is also available to the multitudes of regulators allowing them to harass you out of existence. Unless of course you use that cheap money to buy yourself a few politicians.

This will not end well.

Blogger Stilicho #0066 September 29, 2015 6:44 AM  

It is very easy to "barter" with gold and silver. Ban those, and another medium will be used. Banning cash is akin to banning drinking water... an alternative WILL be found out of necessity.

Blogger Mint September 29, 2015 6:45 AM  

Recently, I attempted to explain some basic Economic 101 to a group of people. I finished it with the brief version history of money. I tried to explain how central bank hold the power of money creation.

I do not know what' so hard to grasp about the fact that in nowadays money there is no intrinsic value. It has value because people believe the system, believe government will make good of the banknotes, in short because the people TRUST the money issuer. Once that trust gone, they are nothing but a pile of printed paper or even now in this digital world-a digital number in your bank account. The amount of money created by all bank central in the world, electronic fund transfer, digital banking and what it means to the value of our own Rupiah. I gave out a pop quiz in the end of the session, and still some people could not grok this. I need a simple tools next time I have a chance to have a go at this again.

Blogger Hammerli280 September 29, 2015 6:50 AM  

I think people will be keeping bank accounts because they have no choice. Too many employers only pay with direct deposit, too many consumers pay bills with electronic funds.

OpenID basementhomebrewer September 29, 2015 6:54 AM  

@5 "Also learn how to brew all grain beer."

Now you are speaking my language

Blogger Mr.MantraMan September 29, 2015 7:02 AM  

If the ZH article yesterday is true the FED basically created the Obama bubble by balance sheet expansion. I guess the FED can put mortgage backed securities on its books and frankly that is one step above car loans to the homeless.

The Bush bubble was popped with a year left in his reign of idiocracy and it appears the banksters are going to pop Erkel's Bubble with a year left.

Blogger CM September 29, 2015 7:02 AM  

Also learn how to brew all grain beer. I've been using mine as a barter good for a while.

Moonshine!

I think people will be keeping bank accounts because they have no choice.

I've toyed with maintaining a $20 balance in my account and removing all cash. Its easier to budget and stick with it with cash in hand. But you are right, current practices make going bank-less difficult.

OpenID simplytimothy September 29, 2015 7:12 AM  

John Robb had an article on a local non-fiat currency backed by a five gallon bucket of beans. I did a quick search and could not find it, maybe somebody with some time will.

It works like this.

A bucket of beans is kept somewhere safe.
Scrip is issued against it
The crip is used in the local economy
The scrip can be redeemed for its beans at any time.

This means vidad (?) is not only a radical gardener, but a bankster.

Yes, there are the obvious problems. However, the several states of America have had several currencies in our system. The chutzpah that this paper dollar is to rule us will not hold.

Blogger Michael O'Duibhir September 29, 2015 7:12 AM  

The purpose of the 1910 Jekyll Island meeting was to achieve five primary objectives:
1. Stop the growing influence of small, private banks and ensure that control over the nation's financial resources would remain in the hands of those present at the meeting.
2. Make the money supply more elastic in order to reverse the trend of private capital formation and recapture the industrial loan market.
3. Pool the meager reserves of all the nation's banks into one large reserve so that at least a few of them could protect themselves from currency drains and bank runs.
4. Shift the inevitable losses from the owners of the banks to the taxpayers.
5. Convince Congress that the scheme was a measure to protect the public.
(from "The Creature From Jekyll Island" -- G. Edward Griffin)

The endgame of the financial cartel is the acquisition of hard assets (real estate, capital equipment, takeover of companies, repossession of financed assets and so forth, i.e., real wealth).
US money is fiat money. The so-called "reserve requirement" of bank-loaned money is laughable--it's fiat based as well. It's a Ponzi scheme. We've been lied to.

Blogger FALPhil September 29, 2015 7:52 AM  

This comment has been removed by the author.

Blogger FALPhil September 29, 2015 7:53 AM  

@2 ScuzzaMan, that is the best explanation I have seen. Thanks!

Blogger Cataline Sergius September 29, 2015 8:01 AM  

@9 Stilicho

The key of course is liquidity.



(*You may groan. There is no shame*)

Blogger James Dixon September 29, 2015 8:21 AM  

> As the ECB’s actions have weakened the euro against Sweden’s krona, the cost of importing goods into Sweden has fallen, and weighed down on inflation. The Riksbank has had to cut its own rates in response in an attempt to avoid deep deflation.

We couldn't possibly allow peoples' savings to actually become worth more, now could we?

> Note the implicit false equivalence: inflation=growth.

Basic Keynesian economics, which was totally disproved by the stagflation of the 1970's. But if they admit that it would mean they either have no idea what they're doing, or that they're pushing inflation for other reasons. Admitting either would cause them problems.

Blogger bob k. mando September 29, 2015 8:58 AM  

3. originalh September 29, 2015 5:00 AM
An op-ed yesterday in Svenska Dagbladet advocated for helicopter money -- large deposits into everyone's bank accounts.



and other people are also talking about "bail ins", in the case of a banking crisis.

so, what's the effect of doubling ( for instance ) all bank accounts ...
and then raking 40% of the balance off the top of the accounts a year or so later in a bail in?

gosh, i wonder who winds up with all of that 'new' wealth?

it almost enough to make you think that the banksters know EXACTLY what they're doing.


6. ScuzzaMan September 29, 2015 5:52 AM
Note the implicit false equivalence: inflation=growth.



but inflation IS growth ... in the money supply.

what it is not, is growth in useful excess productive capacity.


10. Mint September 29, 2015 6:45 AM
I need a simple tools next time I have a chance to have a go at this again.


while not helpful for your purpose ... MPAI is a very simple tool.

and then, you've also got the problem that many believe that it's in their best interest to not believe that fiat money is, you know, fiat. mostly because that's the way everyone else is behaving ...

it's amazing how well the primary education level indoctrination of people to believe that gold / silver ( or other commodities ) are not 'money' works.


20. James Dixon September 29, 2015 8:21 AM
or that they're pushing inflation for other reasons.



this, ever so much THIS.

just as i've talked previously about the deceitful personality using the magician's trick of distraction, that's what the cover story is. in most cases, they know EXACTLY what they're doing. the trick lies in finding a 'narrative' that you will accept whilst they go on about their business.

Rush explained the purpose of the Corker bill yesterday: Iran has some $150 billion in assets that the USG seized.

IF the US releases those funds back to Iranian control

THEN the expectation is that Iran will use a lot of that money to buy new jetliners for their national airline ... from Boeing / Airbus.

THEREFORE Boeing is the major domestic impetus leveraging the Congress to get this treaty done ... regardless of what the treaty actually says.

and, oddly, the Corker bill has not merely inverted the treaty adoption process, it has *already* removed the sanctions ...

Blogger njartist September 29, 2015 9:00 AM  

My eyes literally do not read bureaucratese - I have no idea where that disability comes from: once the lies become obvious, my eyes refuse to focus on the words.

A people with no options has to use the banking system; especially, if the overall system penalizes those who do not. And in a cashless society, the intent is to have us maintain bank accounts in order to transfer funds electronically: The System would then control all but the least significant economic activity; and it could charge what ever it wanted to the customer.

The great irony here is that bank deposits are unsecured loans to banks; yet, the lender is the one paying interest on the loan.

Blogger Tom Nichol September 29, 2015 9:28 AM  

Bail in. The Mafia calls it skimming.

Blogger rycamor September 29, 2015 9:45 AM  

Meanwhile watch for the rise in cryptocurrencies, along with attempts by governments and bankers to hijack it.

Blogger Were-Puppy September 29, 2015 9:45 AM  

@10. Mint
Recently, I attempted to explain some basic Economic 101 to a group of people. I finished it with the brief version history of money. I tried to explain how central bank hold the power of money creation.

I do not know what' so hard to grasp about the fact that in nowadays money there is no intrinsic value. It has value because people believe the system, believe government will make good of the banknotes, in short because the people TRUST the money issuer. Once that trust gone, they are nothing but a pile of printed paper or even now in this digital world-a digital number in your bank account. The amount of money created by all bank central in the world, electronic fund transfer, digital banking and what it means to the value of our own Rupiah. I gave out a pop quiz in the end of the session, and still some people could not grok this. I need a simple tools next time I have a chance to have a go at this again.
---

Maybe you could use Monopoly money for an example. If you are playing the game, you can use those $500 bills to buy the property. But if you take a big stack of that money to somebody not playing the game, it's worthless.

People playing the game - see the value.
People not playing the game - see no value.

Blogger Were-Puppy September 29, 2015 9:49 AM  

@11 Hammerli280
I think people will be keeping bank accounts because they have no choice. Too many employers only pay with direct deposit, too many consumers pay bills with electronic funds.
---

Yes. I have been trying to keep money out of the bank for some time now. But you still need some place to convert checks into cash.

For the electronic payments, you can buy those various cards (green dot, vanilla visa, amex) that allow you to put cash on them when you buy them. They work most places i've tried online. Sometimes an international payment will be a problem.

Blogger Were-Puppy September 29, 2015 9:52 AM  

@14 CM

I've toyed with maintaining a $20 balance in my account and removing all cash. Its easier to budget and stick with it with cash in hand. But you are right, current practices make going bank-less difficult.
---

Try it. You want to be part of a bank or credit union that isn't charging you to have an account, or it won't work.
They also like to see some kind of activity every 3 or so months, so put in an extra $1 or so and it' counts as a transaction.

Blogger Nate September 29, 2015 9:56 AM  

People keep money in the bank now because of the services provided by the bank. The debit cards... that sort of thing.

people in general won't mind paying for those things. In many cases we already are.

But dropping into the negative... this is like diving deeper into the water to save yourself from drowning.

Blogger Quadko September 29, 2015 10:26 AM  

People also have a "behavior momentum" where they keep doing what worked for their good in the past even if it's no longer for their good, so immediately after a dip into the materially negative I'd expect an adjustment period of behavior.

But it works both ways; once trained to get the money out of the bank, even if interest rates are set positive again, there will be a period of adjustment before people return, and trust will have been damaged with longer term consequences.

That's best case if everything else is held constant, of course. Much worse cases exist.

Blogger maniacprovost September 29, 2015 10:46 AM  

Information technology will eventually make barter feasible. I think it will still primarily be carried out with lower grades of money such as stocks and commodity futures. The corporate model means that people don't really have anything to trade. Even if you take your salary in potatoes you will simply end up bartering potato futures for everything.

Blogger Geoff September 29, 2015 10:51 AM  

For better or worse, we have a credit based monetary system in which banks create virtually all the money. They also dominate the payment system. If you want to participate in today's economy, you pretty much need a bank account.

For banks to become irrelevant, it would take a massive upheaval. Not sure if negative rates is enough to do it.

OpenID b1bae96e-6447-11e3-b6bb-000f20980440 September 29, 2015 11:18 AM  

Wow my youthful addiction of sitting in the East Commons tunnel in Everquest for hours a day bartering/buying/selling virtual crap on my way to billionaire status won't be wasted in the new world order.

I should start scouting out a location for warehouse space so I can store all the goods I will trading between the local residents all for a small commission of course.

Will Best

Blogger justaguy September 29, 2015 11:35 AM  

The increases in productivity when compared to hours worked at median wages have resulted in deflation for most basic goods. As our productivity continues to increase (assumption), and trade stays as it is or grows (assumption) then it should become easier and easier to satisfy a family's basic needs. However, what was a middle class living in 1955 is not considered middle class now.

Expectations grow, and with a combination of wage stickiness and network winner effects in the modern era, a larger and larger portion of the population gets left behind. Add political redistribution, fiat money unevenly distributed, and forced tribal diversity and instead of the "libertarian nirvana" where everyone easily satisfies their needs and has labor to spare, we get dying societies all across the globe.

Blogger RobertT September 29, 2015 11:54 AM  

That would be a good result. No banks. Now all we need is a new money. Yes Bitcoin's erratic. But if all the dollars moved to bitcoin, that would stop simply because the population is so large. You wouldn't have 30% or 40% swings. It would be at least as reliable as the stock market. Which is considerably more stable than bitcoin right now. And in the final analysis, going forward, we really can't expect anyone or any government to guarantee there will be no swings in value. We'll have to get over that.

Blogger BunE22 September 29, 2015 12:12 PM  

@26

What do you do with the cash you would have put in a savings account if it was worth having one? Buy gold and silver?

We gave up credit cards in 2000. When bettering our business we don't get bank loans we use a private lender. We don't keep anything in a savings account. Our checking balances only have enough to pay bills month to month. But if paper money could reach no value what good is having it stuffed in a mattress?

Should I do like the Jews and buy diamonds? I've been prepping but don't know what do to with my savings.

Blogger Res Ipsa September 29, 2015 12:20 PM  

What is happening now should not – according to conventional thinking – be possible.

There are multiple aspects that should be considered. The first being that this could be a short term phenomenon and not an indication of consumers long term preferences. Another reason is that consumers see loosing a small percentage of their savings as preferable to loosing a larger percentage in some other venue, like the stock market. Never underestimate a bankers desire to have a predictable income stream, or their ability to convince themselves that they have the "right" answer.

Blogger Danby September 29, 2015 12:29 PM  

@BunE22
There is no such thing as an asset that cannot lose value. Gold and silver have fluctuated pretty strongly just over the last year.
The best bet is always eliminating debt. Debt is only thing that can force you into bankruptcy.
Next best investment is yourself and your family. Learn new productive skills. Like Cataline says above, being able to brew a good batch of beer will NEVER lose it's value. Being able fix a car engine, or repair a pump, whatever it is, it needs to be useful at a pretty fundamental level.
Third is productive assets. Machine tools, a large garden or even farmland and the equipment to use them, etc. The key here is to ask yourself "If I had to go without cash for a year, what would I need to be able to stay productive? What could I produce to barter for the things I couldn't make for myself?
After that, inventory and things like precious metals.
Production of value first, then reducing expense, then storage of value.
And finally, a way to protect what you have.

Blogger Aeoli Pera September 29, 2015 1:00 PM  

In their desperate attempt to remain profitable in a deflationary environment, banks are taking the risk of rendering themselves irrelevant.

Good. The idea that you can own something you can't defend with force is silly and the sooner it goes away, the better.

OpenID corvinus333 September 29, 2015 1:39 PM  

The reason banksters want inflation is because that's how they get usury from the rest of the population. But if debt levels are too high and population growth levels too low (or at least, productive population growth, i.e., among people other than Africans and Muslims), then the banksters can't make their usury any more.

And about how they're regressing into a business that stores money for other people and charges a fee: I never heard that's what banks were originally, but it's supremely ironic.

OpenID Steve September 29, 2015 1:49 PM  

deposits into everyone's bank accounts." I give it less than 20 years before politicians running for office are promising this very thing

Democrats have been pandering to welfare recipients for decades. Zero Hedge did the math and showed that a single mom with 3 kids costs taxpayers over $1 million in benefits over 10 years.

I do not know what' so hard to grasp about the fact that in nowadays money there is no intrinsic value

Its a lost cause, like trying to explain when people get money back at the end of the year from their taxes that its not a good thing. "You see all that money on your paystub taken out for taxes, that went to Latrina and her 21 illegitimate crack babies, all you are getting back is a zero interest loan you gave the govt"

A bucket of beans is kept somewhere safe.Scrip is issued against itThe crip is used in the local economy The scrip can be redeemed for its beans at any time.

This brings us back to 100+ scrips written but only one bucket of beans stored.

@16The endgame of the financial cartel is the acquisition of hard assets

All of world history has been a cycle of elite loooooooooters with a stunningly simple MO that they repeat seemingly non-stop. Destroy a nation and its economy, and then swoop in and collect hard assets on the cheap usually with easy money due to proximity to central bankers. The goal that these connected money men want is a publicly sanctioned private looting.

Should I do like the Jews and buy diamonds?

Diamonds are vastly overpriced because one jewish family owns 80+% of the worlds supply making a monopoly with a few other families.
_BGS

Blogger Danby September 29, 2015 2:37 PM  

This brings us back to 100+ scrips written but only one bucket of beans stored

The Sumerians has the very first currency. Farmers were taxed 10% of their grain crop and the proceeds were stored in the royal granaries. Soldiers and other employees were issued tablets which authorized the withdrawal of grain as a form of salary. Literally, within weeks, the tablets became money,in that they could be traded for goods or services. They had an exchange value in sliver and the court began paying debts in them. Within a year the court began issuing more tablets than there was grain to back them up. This began the first inflation, produced a bubble which popped after about 2 more years, and the first currency crash, leading to an economic depression.
The whole sorry episode is recorded in cuneiform on baked clay tablets.
Literally every single step in the process was seen a nd described almost 5000 years ago.

Blogger Red Jack September 29, 2015 2:52 PM  

Swedes, or at least this generation of them, are rather conservative people. Try this with Italians and you would have a barter market in weeks.

For those who are trying to go all cash, remember to keep it in small bills. I know of many who tried the Dave Ramesy thing and got burned by having to much cash on hand, and having the cops seize it. There is no recourse when they do.

If we are at this point, it means we are nearing a down phase of the Usury cycle. Kind of wonder if there will be another "up" phase, or TEOTWAWKI for the bankers.

Blogger Were-Puppy September 29, 2015 3:14 PM  

@35 BunE22
@26

What do you do with the cash you would have put in a savings account if it was worth having one? Buy gold and silver?

We gave up credit cards in 2000. When bettering our business we don't get bank loans we use a private lender. We don't keep anything in a savings account. Our checking balances only have enough to pay bills month to month. But if paper money could reach no value what good is having it stuffed in a mattress?

Should I do like the Jews and buy diamonds? I've been prepping but don't know what do to with my savings.
---

I don't have an answer in regards to savings. I have bought silver in the past, and still have it. But it's kind of a roller coaster, so I pretty much leave it be.

I'm not sure of the value of diamonds outside a jewelry store. I one time took a ring to a pawn shop, and they were willing to pay for the gold but didn't give a damn about the diamond.

Blogger Were-Puppy September 29, 2015 3:18 PM  

@37 Danby

Thanks for bringing clarity to the way to approach getting out of the banks.

Blogger Were-Puppy September 29, 2015 3:24 PM  

@42 Red Jack
For those who are trying to go all cash, remember to keep it in small bills. I know of many who tried the Dave Ramesy thing and got burned by having to much cash on hand, and having the cops seize it. There is no recourse when they do.
---

Besides that, I have found some places have trouble changing a $100 early in the day.

I also don't like the idea of leaving a $100 or big bill with some guy in a gas station if i want to fill up my car.

Blogger Were-Puppy September 29, 2015 3:25 PM  

I wonder what somebody like Trump does with all of his money? For instance, if you had a million dollars, you probably wouldn't stick it all in one bank, even if just for the FDIC limit.

Blogger Danby September 29, 2015 3:38 PM  

I also don't like the idea of leaving a $100 or big bill with some guy in a gas station if i want to fill up my car.

Get a big truck or van with a 40-gallon tank. No worries B)

I would recommend joining a small credit union. At least there you have a vote in electing the officers, and so some say in policies.

Blogger James Dixon September 29, 2015 3:52 PM  

> There is no such thing as an asset that cannot lose value.

This cannot be restated too often or too forcefully. Stocks can go down in value, bonds can go down in value, land can go down in value or be taken, dollars can go down in real value, gold and silver can go down in value or be seized, banks can fail, governments can fall, guns and ammo can be stolen or seized. There is no lasting certainty in this world, Everything is a risk/reward tradeoff.

That said, precious metals have historically been the best options for holding their value. Stocks have historically (though for a relatively much shorter history) been the best at increasing in value. And I don't think we really need to detail the benefits of guns and ammo with this readership.

Blogger Danby September 29, 2015 4:20 PM  

For stability, the best investments are things that are not viewed as investments. For a long time, that included farmland, but with the corporatization of American farming, that is no longer so. For a long lime, that included you home, but that hasn't been so since the 1970s at least.Once upon a time it included things like art, baseball cards, toys and stamps. No longer.
Once people get the idea that it's an investment, that make the value a matter of mass psychology, and thus open to manipulation.*

All of which makes the price volatile, and the article worthless for wealth storage.
Ultimately, they want all wealth into the markets they control. That way they can pick winners and losers, and they can skim their percentage off the top.

*It also makes it a channel for money laundering. Virtually all of the multi-tens-of-millions dollars high-value art sales you see are simply off-the record payoffs or money laundering. After all, who's to say that some canvas that Jackson Pollack ejaculated on isn't worth $40,000,000?

Blogger Joseph Maroney September 29, 2015 4:32 PM  

This comment has been removed by the author.

Blogger Joseph Maroney September 29, 2015 4:33 PM  

People are getting so worn down by various asinine bank fees that they're going to start seeing a low flat negative interest rate as being a "bargain."

OpenID Steve September 29, 2015 4:49 PM  

Since this is an econ thread it shouldn't be too off topic to mention the horrible economy of green when taxpayers are not paying for most of it. Its bad enough that green power has high environmental costs to create
http://finance.yahoo.com/news/germany-now-faced-thousands-aging-220356991.html
"Beyond a period of 20 years, the guaranteed tariffs that are set for wind power are terminated, thereby making them unprofitable"

"However, it is not very easy to dismantle an existing turbine and, while there are companies like PSM that specialize in dismantling of wind turbines, the costs of decommissioning can run upwards of $33,500 per turbine."

Blogger luagha September 29, 2015 5:47 PM  

Gems and jewelry have a 100-200% markup at every stage in the process. If you buy a ruby pendant for $10,000 from a jewelry store, you'll be lucky if they would be willing to buy it back from you for $3000. Your only recourse at recouping your value is to try to sell it yourself, which takes its own time and expertise.

The diamond cartel is fairly well busted at the moment. Between the artificial diamonds, the small Russian diamonds, the supposed conflict diamonds, and the DeBeers diamond cartel diamonds, you really shouldn't bother except for artistic reasons - a stone you like the look of, one that calls to you from across the room.

Blogger ScuzzaMan September 29, 2015 8:59 PM  

@7

What we have at the moment is both deflation and inflation. We have deflation in real things (which is good for people who need to buy real things, i.e. food) and we have inflation in paper things (which is good for rich people because rich people hold most of their wealth in paper things.

Normally - i.e. in a sane and honest system - the value of paper things is somehow dependent on the value of real things, but the whole point of the recent innovations in money manipulation, gold price suppression, and other chicanery, is to divorce the price of paper from the price of real stuff, so that the governments of the world can continue to pay off their business sponsors with value stolen from the general public.

So if you look around at the amazing economic recovery of the last 5 years you find that commodity prices are tumbling, jobs are disappearing, what jobs remains pay less than they did 40 years ago, and paper (stocks and bonds) is hitting record highs.

That's not a bug, that is THE feature.

That's the point. That's why the people who hold the vast majority of their wealth in paper, i.e. already rich people, are getting richer. And making rich people richer is the object of the exercise, the single over-riding design criteria of the entire system.

And when the rich get richer - proportionately - then the poor get ... ???

You guessed it - poorer!

Blogger ScuzzaMan September 29, 2015 9:01 PM  

So falling commodity prices would be good for the poor if they still had jobs to buy food with, or the jobs they have still had the same value as the jobs their fathers had 40 ears ago.

But, they dont. Real incomes are falling amongst the middle and lower classes, and have been since 1973. So while commodity deflation is a good thing, it isn't happening in isolation from income deflation, and it isn't happening as ubiquitously or as severely.

Blogger Kevin Blackwell September 29, 2015 10:33 PM  

I already pay the bank to use my money when I don't keep a minimum balance.

Interestingly just today the bank teller tried to tell me direct deposit is a good idea, and the bank account is under my control. Gee the bank wants me to put the money I earn directly into *my* account, aren't they helpful?

Blogger Artisanal Toad September 30, 2015 12:36 AM  

@35

The greatest investment you can make is in children, but it requires a serious commitment. After children, the most profitable “investment” of time, energy and money is in agriculture and permaculture.

Since so many people live in suburbia or outer suburbia, I suggest a very good investment would be building a greenhouse and learning all about aquaponics. A good aquaponics setup, a flock of chickens (no rooster!), some rabbits and a large garden could literally feed a family year-round with very little outside food purchased, all on a 3/4 acre lot. The neat thing about food production is you can't be taxed on what you produce and consume, but if you had to buy it you'd have to do so with post-tax dollars. Food is one of those things you'll consume every day for the rest of your life.

Once you're producing food you should get canning equipment so you’re able to can your garden produce that isn't immediately consumed. There was a time when my family canned over 800-1000 quarts of garden produce (veggies, stew, applesauce, pie filling, spaghetti sauce) and 200 quarts of chicken each year. We'd go in with another family and each buy half a beef (~350 pounds) from a local cattleman and pick it up from the slaughterhouse already cut, packed and frozen for about $2.50 per pound. We ate very well for very little money.

If your business is such that you have discretion as to where you live, a homesteader lifestyle offers the greatest ROI you can get, tax-free. I’m speaking here of living on a small farm and working it as a farm, but not trying to make a living from the farm (although that’s possible, long term). There was a book written a long time ago called "5 Acres and Independence" and the concept is even more relevant today than it was then. Best of all, technology has made it even easier. Another good one is Dr. Whatley’s book “How To Make $100,000 Farming 25 Acres.” UTube videos by Joel Saladin are great in terms of ideas and possibilities. A farm is (in my opinion) the best place to raise children, especially if you’re homeschooling them.

If you figure the cost of feeding pre-processed frankenfood to a family of 4 at somewhere between $1200 and $1500 a month, producing 80% of the food you eat would save you $960 to $1200 a month. Figure a capital investment of $15k with a monthly operating cost of $200 (includes depreciation) and you've got an "investment" that post-tax savings of $760 to $1000 a month, but it doesn't take into consideration the family is now eating organic food, which costs a lot more. Anyway, complete cost recovery (Return OF Investment) in less than 2 years and after that a return on investment of between 60% and 80% per annum on the original amount. The savings can be reinvested in more land, improvements and livestock up the point you no longer have time and energy to maintain it. Which brings us back to children.

The best long-term investment is also in agriculture: wild-simulated ginseng. If you can get 10 acres planted and hold on for 10-12 years, you can retire. Estimate 200 lbs dried weight per acre if planted correctly and 10 year old roots sell for about $1000 a pound. The biggest drawback is it requires the right terrain and forest cover and it isn't easy to purchase just the right land in small amounts.

Blogger bob k. mando September 30, 2015 1:11 AM  

56. Kevin Blackwell September 29, 2015 10:33 PM
Gee the bank wants me to put the money I earn directly into *my* account, aren't they helpful?



it's BETTER than that.

if you check your direct deposit agreement carefully, i'm sure that you'll find a clause allowing your employer to DEDUCT directly from your account.

why would this be in the agreement?

because, sometimes the payroll dept makes errors ... and they need to be able to "correct" said errors. and they certainly don't want to hassle you every time they do so.

do you trust your employer to never take money out of your account?

do you trust EVERY SINGLE FELLOW EMPLOYEE who works in payroll to never take money from your account?

no?

too fucking bad.

Blogger BriarRabbit October 24, 2015 6:01 PM  

In regards to comment #58 and giving direct deposit to an employer: Never EVER give an insurance company - such as one you might be drawing disability benefits from - direct deposit authorization. They can and will use it to wipe out your account if you ever get a sum of money they define as an "overpayment". But if you do not give them the authorization to deposit, they can't touch your account. They will try VERY hard to get you to direct deposit.

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