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Sunday, January 25, 2009

You've had your warning

Lord Myners has been criticised for telling the truth too early, i.e. 3 months after the general public could have done anything to save themselves. On October 10, "major depositors" in the USA and Japan were preparing to withdraw their money, and were willing to paying any attached penalty to do so.

For the rest of us, the corralito: "The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals."

Even if they had caught wind of it, would we have learned anything of this from the mainstream media? (Scornful laughs) But what were MPs doing with their own money? Perhaps they'd have abandoned us to our fate, like Lord Jim. (I have often thought that the main reason for getting into politics is the opportunity to trade - in all sorts of ways - on inside information and networking).

Do you think the banks have been saved? Mish doesn't think so. Is the pound safe? Jim Rogers doesn't think so (though this business associate of the sterling-busting George Soros may be playing a nasty little game of market manipulation - which is, scarcely credibly, not an incarcerable crime but merely a civil offence.)

Within the past 12 months, the pound has gone from USD $2.12 to $1.43 and Euros 1.40 to 1.06; to put it another way, imports now cost 48% more from the States , and 32% more from Europe. (O&A typical cash rates)

At least you can still get your hands on your money; but for how much longer? It may be that the crisis is over; but it may be that we are in the eye of the storm. Personally, after settling debts I intend (a) to draw extra cash, keep the slip to prove it's been legally obtained, and store it safely away from a bank; (b) to keep at least some of my money in foreign currencies - perhaps the Yen* and Euro*; (c) to look for a variety of non-cash stores of value - and not all of them with Government guarantees, either.

My trust in banks, politicians and journalists is broken. My faith in them is gone, because they did not keep faith with me.

*Though The Big Picture thinks Japan will move to weaken the yen and the Euro-zone is struggling to hold its members together. So, US dollars?


Anonymous said...

I think I mentioned the possibility of banks being closed to withdrawals on one of your posts some time ago. Its scarey when one finds out some of ones apocalyptic predictions are closer to reality than one would like!

I have come to the same conclusions as you. I have been putting it off, but this will be the week. Withdraw a chunk of cash, speak to someone I know in the jewellery trade about buying some gold, and get down to the cash and carry & stock up with tins.

Whats the worst than can happen - I put my cash back in the bank (no interest lost with current rates), I lose some money on my gold, and I have to eat canned food for a while to get rid of my stock. But if things do go pear shaped I'll be in a much better position than most people, and therefore one step ahead. Its a sort of insurance policy really I guess. The loss I may incur if things are OK is the premium.

Anonymous said...

S: "keep the slip to prove it's been legally obtained, "

Yes, ABSOLUTELY necessary. The state has so many ways to relieve you of your money. Not least money laundering accusations, or accusations of drug dealing, one simply cannot be too cautious.

Anonymous said...

Will tungsten-filament lightbulbs be the new currency? A bit fragile, I'd have thought.

Sackerson said...

When I lived in Cyprus, there were 1,000 mils to the pound. Perhaps the new unit of currency will be a tin of baked beans - the "Heinz". There are about 550 beans in each tin, so each baked bean would be worth two milli-Heinz. This should allow for subtle gradations in pricing, and the currency would certainly have intrinsic value.

Anonymous said...

I've been taking $ out slowly but methodically now for about a year. I'm stunned and scared by the thought that I might someday have to prove how I got it. I have not been keeping receipts, but I'll be going back and printing out all my bank statements now -- oh joy.

Anonymous said...

"imports now cost 48% more from the States , and 32% more from Europe"

Not true, because defaltion in a major economy like the UK has a deflationary impact on prices of imports. Put another way, if Mercedes wants to sell me a new car next year they had better be offering me a really good deal!

Also, you are a bit of a glass half empty kinda guy aren't you? The £ going back to its long term average against the $ is good for exporters and the 1st step to rebalancing our books.

Sackerson said...

Glass half empty... No, angry but haven't given up. I warned clients and friends about this downturn, ever since the late 90s, and it's turned out worse than I thought, so I guess that makes me a mild optimist.

The UK has had a long time of destroying its manufacturing base and so the exchange rate isn't going to improve our condition much; we turned ourselves into a financial services economy and that is now imperilled. Our overall indebtedness in proportion to GDP is greater than that of the US and there are cultural and political factors militating against a revival in enterprise based on real things.

Even though the wonderful US Constitution reflects the outlook of 18th century Englishmen, the UK's own democratic traditions have been undermined by our political elite; the US has the possibility of a return to the principles of its founding document, if it so chooses. America also still has a can-do mentality, instead of a what-did-you-expect as is so common here.

America will have a very difficult time, but will pull through, and I'm heartily glad my brother is an American. There is a tremendous challenge facing us Brits now and we'll need a Churchillian bloody-mindedness to sweat it out.