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Friday, October 12, 2007

The hard stuff

Richard Greene in Financial Sense on Wednesday paints a very worrying, but credible picture of accelerating financial instability and official attempts to disguise the crisis. He looks at the worst case, and says that nothing beats holding the bullion yourself:

In this scenario you don’t accept futures, you don’t accept ETFs, you don’t accept any paper promises; you only accept the real physical gold and silver in your possession. It may take more time for this to occur in the US, but overseas this IS occurring right now, particularly in the Far East and the Middle East. This is exactly what has been necessary to break the fraud and suppression of the gold and silver price that has kept them from reaching a fair free market value. It is happening as we speak...

...if defaults and bankruptcies became prevalent the banks could easily cancel your credit cards, not have any of your cash on hand, and deny you access to your own assets. We don’t expect this worst case scenario to play out soon but then again we find it incredible how few are prepared; and it is a substantial risk. So again to play it safe: have some of that green funny money on hand, definitely have some gold and silver, and have a nice stockpile of canned foods on hand to deal with unexpected emergencies. Do it now! If these things come to pass don’t be surprised to see gold moving up hundreds of dollars per day.

The red highlight is mine - I've suspected for some time that the gold price is being held down by undisclosed releases of bullion onto the market, by central banks.

Meanwhile, I'm interested to test sentiment about the markets - please see the poll on the sidebar and have a go.


Anonymous said...

You know my methods, Watson; since my final-salary pension fund is 84% equities, I hold none.

Sackerson said...

Perhaps you would favour the 7% solution?

Nick Drew said...

It was lurid risks like this we were hoping to probe in our Stress Testing on CU - but everyone wanted to talk about house prices !

I am very interested in the proposition of a failure - or more likely a withdrawal - of 'functional' banking services. We depositors may find our system less robust than some of the Asian 'cash-credit' mechanisms, which seem to manage significant international transfers outwith the conventional banking set-up (and outwith regulatory scrutiny ...)

Sackerson said...

There's certainly signs that banks are looking at expenses and returns.

My local Lloyds has recently stopped Saturday opening; and since the recent ruling that overdraft penalties must be related to the bank's actual administrative costs, I can envision fee-charging for current accounts with more than 20 or 30 transactions per month. Somehow or other, the service has got to be paid for, or it won't be available.

This is a theme in other fields, too - look how regular-review personal financial advice has pretty much been withdrawn from the ordinary family.

Nick Drew said...

I was thinking even more apocalyptically. I can forsee a situation where the relentless assault from cybercrime (strongly aided and abetted by crooked insiders, because let's be clear that is the final link in many, probably most, of the bent chains) makes the type of banking we are accustomed to near-impossible.

Sackerson said...

Nick: war, rather than crime, I'd think - criminals would want to continue milking the system. Or some anarchist hacker.

What do you know about the recent alleged Chinese cyber-assault?