Showing posts with label inflation. Show all posts
Showing posts with label inflation. Show all posts

Thursday, August 14, 2014

Is your money safe in the bank? - revisited

John Ward reports that some South African bank savers are now having their accounts raided to shore up a different bank, African Bank Investments Ltd. Even more disturbingly, the example he quotes is of a customer whose SA bank is part of the international Barclays group, so the link stretches back to the UK itself.

Almost exactly seven years ago, and over a year before the global banking crisis of 2008/9 hit us, I warned British readers that protection for their savings was limited. At that time (August 2007), you were guaranteed 100% of the first 2,000 in your account, and only 90% of the next £33,000. So the maximum compensation in the case of a bank wipeout, even if you had millions, was £31,700.

Now, and as a result of the crisis (and more importantly, to prevent a system-destroying general run on the banks) the "guarantee" has been increased to 100% of the first £85,000 per person (see FSCS here). That's per bank group, so if you have more than one bank account make sure they're not part of the same group.

But why is a guarantee needed in the first place? Surely the money you have deposited is yours, same as if you'd asked them to look after your house deeds.

Not at all. Here is the law as explained by Toby Baxendale on The Cobden Centre website in 2010:

The Current State of the Law


The key case is Carr v Carr 1811 (reported in Merivale (541 n) 1815 – 17). A testator in making his bequest said “whatever debts might be due to him…at the time of his death”, the key question in this case being whether “a cash balance due to him on his banker’s account” passed by this bequest. The Master of the Rolls, Sir William Grant held that it did. He reasoned that it was not a depositum; a sealed bag of money could be, but this generally deposited money could not possibly have an ‘earmark’. Grant concluded on this point, “when money is paid into a banker’s, he always opens a debtor and creditor account with the payor. The banker employs the money himself, and is liable merely to answer the drafts of his customers to that amount.” For the legal scholars among you, Vaisey v Reynolds 1828 and Parker v Merchant 1843 both affirmed this position.

In Davaynes v Noble 1816 it was argued in front of Grant that a banker is a bailee rather than a debtor. Rejecting that argument, Grant said “money paid into a banker’s becomes immediately a part of his general assets; and he is merely a debtor for the amount.”

In Sims v Bond 1833 the Chief Justice of the Queens Bench Division affirmed in judgement “sums which are paid to the credit of a customer with a banker, though usually called deposits, are, in truth, loans by the customer to the banker.”

The House of Lords, then the highest court in the land, had its say on the matter in Foley v Hill and Others 1848, duly reported in the Clerk’s Reports, House of Lords 1847-66 (pages 28 and 36-7). In summary, the appellant in 1829 opened a bank account with the respondent bankers. Two further deposits we added in 1830 and in 1831 interest was still added. In 1838 the appellant brought proceedings against the respondent bankers seeking recovery of both the principle and interest. The counsel cleverly tried to argue that it was the duty of the respondent bankers to keep all the accounts up to date at all times and thus there was more to this relationship than that of debtor and creditor.

The Lord Chancellor Cottenham said the following in judgement

Money, when paid into a bank, ceases altogether to be the money of the principal; it is by then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into a banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.
That has been the subject of discussion in various cases, and that has been established to be the relative situation of banker and customer. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor.

Thus the settled position of the law is that when you deposit, the bank becomes the owner of the money deposited and you become a creditor to the bank.

We have now established that you shouldn't have more than £85,000 in any group of banks.

Strictly speaking, it's not the government's guarantee, it's the FSCS's: "The Financial Services Compensation Scheme (FSCS) is backed by government" (my italics). The FSCS runs a fund and pays claims out of money it levies on UK financial institutions. In a bad - not the worst possible - situation it can borrow from the Treasury, and has done so, as this official attempt to reassure us says:

What if a giant goes bust? Is there enough cash?

The FSCS has paid out more than £26bn and helped more than 4.5m people since 2001. We are funded by the industry, but the FSCS can borrow money from the Treasury if the compensation costs of a major failure are more than the industry can meet. That is what happened when banks failed in 2008.

So consumers can be reassured the FSCS will always have the money to pay compensation. No-one has ever lost a penny of protected deposits and no-one ever will.

What about "bail-ins", like the case referred to by John Ward above?

For example, in the event of a building society's insolvency, depositors' claims used to rank below other unsecured creditors and so were more likely than the latter to be required to accept something other than their money back. This is now changing:

"...the BRRD has been agreed and will require us to introduce a slightly different form of depositor preference. It will require a two tier preference, where:
  • eligible deposits from natural persons and SMEs have a higher priority ranking in insolvency than the claims of ordinary unsecured creditors
  • covered deposits have a higher priority ranking in insolvency than the part of eligible deposits from natural persons and SMEs that exceed the coverage limit
Covered deposits are defined as those that are protected by the FSCS, up to its limit of £85,000. Eligible deposits are defined as those which qualify for FSCS protection, without any limit on the amount (and deposits from such natural persons and SMEs that are made through foreign branches of EU institutions). Following these changes, if an individual had £100,000 deposited at a building society that is a member of the FSCS, £85,000 would be a “covered deposit” and have a higher priority ranking than the remaining £15,000 which in turn would have a higher ranking than ordinary unsecured creditors.

We anticipate that the Directive will come into force by May 2014. The transposition deadline is 1 January 2015."

The Government's general guiding principle is to reassure depositors that they won't be fleeced in a crisis:

"Section 60B [of the Banking Act] requires the Treasury, when making these regulations, to have regard to the desirability of “ensuring that pre-resolution shareholders and creditors of a bank do not receive less favourable treatment than they would have received had the bank entered insolvency immediately before the coming into effect of the initial instrument” (the first instrument made by the Bank in the resolution)."

Why are they doing this? Well, here's Oz comedy pair Clarke and Dawe on the effect of the Cyprus bank bail-in:




Still:

(a) I don't see anything that limits the power of the FSCS and others to alter or suspend their guarantees, if they feel they have to;
(b) a leading barrister has given his views (in 2011 on CityWire) on the potential case against the FSCS's fund-raising powers;
(c) the Emergency Powers Act of 1920 allows the Privy Council to do pretty much whatever it likes in the short run, if it determines that there is an emergency*;
(d) anything can happen, and in a very bad situation some of those things could be beyond the Government's power to control;
(e) theft by inflation is always a threat, and despite a long campaign by me my MP has so far refused to stand up at Prime Minister's Question Time and ask when the Government is going to restore National Savings Index-Linked Certificates.

Where does the Cabinet hold their own families' cash? Be useful to keep that under observation, maybe. It might not just be the Russians or tax-dodgers who want to shift money out of the UK, and Europe in general. And why is the Chinese government encouraging its citizens to hold gold?

_________________________
UPDATE: *I'm a bit behind the curve here - we now have what seems a much further-reaching and potentially sinister provision: http://en.wikipedia.org/wiki/Civil_Contingencies_Act_2004

READER: PLEASE CLICK THE REACTION BELOW - THANKS!

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Sunday, March 23, 2014

2014 Budget summary (pictorial edition)

What the new-style pound coin will resemble:
 
The flower is called "thrift"... (source)


What the modern pound is worth:
 
(There were 80 of these to the old pound)


What Osborne and the Coalition have done to guarantee savers against inflation:

http://img.tfd.com/wn/88/6C789-zilch.png

What will happen as a result of personal pension changes allowing the investor unlimited access to the fund:

(source)

What's going to happen long-term anyway:

(Source)

What the Government is planning for its own future:

Leading the way...


READER: PLEASE CLICK THE REACTION BELOW - THANKS!

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Wednesday, March 19, 2014

Osborne gives us the threepenny bits

Pic source: BBC
The proposed new-style pound coin is publicised on the day of UK Chancellor George Osborne's Budget speech to Parliament.

The 12-sided design resembles the pre-decimal brass threepenny piece first issued in the reign of Edward VIII. The resemblance is more than physical, as we shall see.

Before 1937, threepence coins had always been based on silver, but the silver content reduced over the years and the coin eventually became inconveniently small. Why? Inflation, the curse of the twentieth century.

This year marks the centenary of the outbreak of the Great War of 1914-18. The Daily Mail's purchasing power calculator shows that one pound in 1915 was equivalent to £87 today. Coincidentally, under the old coinage system, there were 240 pence to the pound, or 80 "thrupenny bits". So a modern pound coin is worth much the same as a WWI threepenny bit.

The Chancellor introduced his Budget with the words, "Our country still borrows too much. We still don’t invest enough, export enough or save enough. So today we do more to put that right. This is a Budget for building a resilient economy. If you’re a maker, a doer or a saver: this Budget is for you. "

Actually, it's still not one for savers. I'm on Day 647 of my attempts to get my MP to ask questions in Parliament about NS&I Index-Linked Savings Certificates. All I've had so far is substandard, ill-informed guff in written answers from three different Treasury ministers (see right-hand sidebar on the Money blog).

In Cockney rhyming slang, the "threepenny bits" stands for "the shits". Funny how all these things link up.


READER: PLEASE CLICK THE REACTION BELOW - THANKS!

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Sunday, September 22, 2013

Defending savers: a letter to Mr Peter Hitchens

Mr Peter Hitchens
c/o Mail on Sunday
Associated Newspapers Limited
Northcliffe House
2 Derry Street
London W8 5TT


Monday, 16 September 2013


Dear Mr Hitchens


Inflation protection and government’s abandonment of its moral obligation to savers

I emailed you on 1st September in response to your Mail on Sunday article that day (the “Who do you think you are kidding, Mr Carney?” section on monetary inflation and savers). If you have seen it and are simply not responding, then that’s fine, because you must be very busy.

But in case the email has not been forwarded to you (and I also tried to follow up with a comment on your blog that may have been blocked), please find enclosed a copy of what I said.

In brief, it seems clear that when NS&I Index-Linked Savings Certificates were first introduced in 1975, both sides of the House in both Houses of Parliament accepted that protecting savers and pensioners from inflation was a social obligation.

Doesn’t this strengthen the case for restoration, and will you – with your high profile - help?


Yours sincerely

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Sunday, March 21, 2010

Bad news round-up

Jesse discusses recent comments by Japanese economist Yukio Noguchi, predicting national bankruptcy and hyperinflation (the IMF reckons the crisis could hit in 2019). Jesse thinks the UK and some of Europe will go first; even more worryingly, he turns to spiritual matters (which I respect, but it's a sign of how bad he feels the situation to be).

Speaking of the IMF, Richard Daughty rehearses his theme of reckless money multiplication, the inevitable bust and the wisdom (so he thinks) of investing in commodities such as gold, silver and oil. He castigates the IMF and its proposed imitator, the European Monetary Fund, for their part in the inflationary process.

Nathan Martin uses official statistics to show how as debt increases, the additional stimulus to GDP gets less. The break point on the graph seems to be 2015, after which extra debt will reduce GDP.

Warren Pollock delivers a punchy two minutes from the Metropolitan Museum of Art, comparing the past civilisations inside with the doomed one outside, currently enjoying sunshine, hot dogs and a cappella music.

I read all the above people frequently. Each has his own take, his own style, but all seem technically proficient in finance while retaining their integrity, their indignation and their hope that something can be done. Their views are echoed in this week's article by University of Montreal economics professor Rodrigue Tremblay, whose conclusion in part reads:

It seems to me that the U.S. financial system, and even the world financial system, have to be profoundly reformed, if they are to serve the real economy, rather than the contrary. If such a reform does not come about, however, I am afraid that we have entered a period of economic difficulties that may last many, many years. In fact, I think that the world economy stands today at the edge of a large precipice.

Friday, October 09, 2009

Two to note

1. Charles Hugh Smith reflects on something that's been nagging me for quite a long time, namely, the seeming impossibility of measuring "real" prices. Everything is relative to something else.

2. The Contrarian Investor's Journal fairly succinctly shows that the USA is fast approaching a debt level so high that Uncle Sam won't be able to service the payments. However, I think it may be time to separate actual here-and-now debt from notional debt in the form of medical and social security undertakings. Surely the latter will be revised radically, voluntarily or perforce.

Monday, September 28, 2009

Inflation and the money supply

Interesting graph from Eric Janszen - he ignores the velocity of money (which can change quickly) and concentrates on money supply. He sees our situation as akin to that in 1981; I'm still thinking we're in the mid-70s, because round about 1982 was when we started to see real (post-inflation) returns on investments.

Sunday, September 20, 2009

The coming tide

Thanks to Tyrone for his comment directing us to a YouTube presentation by W E Pollock, someone I've viewed with interest before. The comment was in response to an FTAphaville piece that asked why the Dow was rising so strongly.

Pollock, whose presentations are useful to the layman because he is at pains to be clear and calm, notes that the volume of trade is low, which may mislead us as to the value of the market as a whole. It is as if, in a slow-moving housing market, your neighbour suddenly manages to sell his house for much more than expected, because the purchaser has certain private reasons to get in.
He also notes that the gains on the Dow are counteracted by the fall in the dollar's value, and this is a theme I've touched on many times. You have to look at real gains; and even when you think you're beating the present rate of inflation in your country, currency exchange movements may be the early indicators of higher future inflation. This is why, comparing where we are now to the period 1966 - 1982, I think we may yet see the real-terms equivalent of Dow 4,000 and FTSE 2,000.

Pollock goes on to consider gold, over which he puzzles (but then, there's a lot of dirty work and hugger-mugger in that market); and oil - if foreign economies begin to recover and industrial production rises, increasing the demand for oil, then if the dollar continues to be weak the price of energy in the USA will become so high as to damage growth prospects there.

So, where are we with all this?

Even academic economists are beginning (very belatedly) to question the validity of their models. Across the world, the games are so weighted and rigged, the rules so suddenly variable, that we are talking about how things ought to work, rather than how they really do. This is why it's now a fertile ground for conspiracy theorists: there really is a lot of conspiracy. Trouble is, we don't know all of the plots, all of the players, and all of the details.

What I think we can do, is look at the ocean tide, and not at the individual waves.

Historically, Western countries became wealthy on technological advances and were able to sell goods not just to each other, but to undeveloped countries in exchange for cheap resources. Then the latter countries began to industrialise, and goods could be carried at low unit cost in vast bulk across oceans and continents. All that remained was to break down political barriers to trade, as Nixon began to do with his visit to China in 1972.

Trouble is, controlling the rate of change. It's one thing to turn on your oil-fired central heating, another if your fuel storage tank catches fire. We want to carry on as we are (or as we used to be), but poor people are in a hurry to attain our wealthy lifestyles, and are disinclined to progress more slowly. Vast international businesses and globe-trotting billionaires stand to do very well out of facilitating this trade; national politicians are under pressure from their voters to resist it - but on a personal level, will know how rich they themselves will be when they leave office, so long as they don't try too hard for the people who elected them.

So, while I don't quite subscribe to the Dick-Dastardly-and-Mutley view of politician's summits (G-name-a-figure, Bilderberg, et al.), I can see the natural attraction for them of a world (or at least supranational) government. It means being further away from the Great Unwashed, mixing with all the Right People, fine wines and yachts etc; it means going with the flow, helping wealth and power to gather into certain centres, and organising dole handouts to regions that lose out as a result. Only the fools will try to play King Canute.

Imagine the world economies as a series of canal locks descending a steep hill. We are in the top section, the poor countries lower down. Now if all the gates are opened at once, there will be a destructive gush of water; the narrowboats in the top lock sink into the mud; the ones at the bottom float on a higher tide; a brave soul on a surfboard (the international trader) rides a thrilling wave down the hill.

Free-traders will argue that trade brings mutual benefits; but I don't think the argument works when world income disparities are so great. A Dutchman bought Manhattan from the occupying tribe for $24, but I doubt they'd get it back for that price now, not even with 400 years' interest.

It's coming, it's coming fast, it's coming destructively; and the people we pay to stop it are telling us the lies we want to hear and planning their personal advancement*. Let us return the favour.

* “It is a totally wrong notion of people to assume that the government does anything for the people; the government is there to do something for itself, and not for the people”Marc Faber on GoldSeek, 12 September 2009

Sunday, September 13, 2009

20:20 hindsight and the coming stock collapse

Look at this fascinating interactive graphic from the New York Times, about the shrinking and swelling of the major US financial firms. They may not have seen it coming, but boy can they see clearly in the rear-view mirror. (htp: Barry Ritholtz)

So, is all well again?

Denninger thinks not. To get back to where we were in 2000, either debt has to be slashed (this isn't the path chosen by the powers-that-be over the last couple of years) or GDP and incomes have to soar (how? Who are we suddenly going to sell loads more to?).

Given a choice of the impossible and the merely unpleasant, it looks as though there must be a large-scale default sometime - either of actual debt, or of current and/or future government-provided benefits (or both).

In the meantime, the monetary pumping may erode the dollar's value and cause a highly misleading leap in nominal stock prices. Like I said yesterday, I think we could be looking at a re-run of the mid-70s to 1982. I remember an old financial adviser colleague reminiscing about the stockmarket "boom" of 1974, but he didn't mention the inflationary context, which is what concerns Marc Faber - the fundamentals are still all wrong.

Saturday, September 12, 2009

Another collapsist


Last month, Marc Faber used the word "collapse"; now, Max Keiser says the same: the dollar will halve, gold will leap 50 - 100%, import prices will soar. In this interview, Keiser is a bit less gonzo and correspondingly more credible.

The question is, how bad is it for other countries (e.g. the UK) and what will trading partners do to stop their export markets being hit? If all major countries try to devalue their currency, then maybe only certain commodities will be worth holding on to while the winds blow.

And Keiser says the wealthy have been shifting their capital out of America since 9/11. He's been choosing defensive stocks, ones that will survive high unemployment, consumer boycott and anti-American sentiment. One big and possibly vulnerable name he mentions is Coca-Cola (remember Qibla Cola?) - a staple of Warren Buffett's portfolio.

Monday, August 31, 2009

Marc Faber - total breakdown ahead





... in my view, the big crisis is ahead of us. It may come in 4 or 5 years' time, maybe only in 10 years' time, but the total breakdown of the system is ahead of us and it will devastate the global economy. (4:18 on)

You have to decide whom to believe. Including Steve Keen, it's said that only 12 professional economists worldwide foresaw the crunch, although there are 10 - 15,000 practising in the US alone. So the majority verdict is useless. To me, Faber has the ring of truth.

The good news, such as it is, is that we may have a few years to prepare.


As to perceived turning points, I looked at this last December:

Tuesday, August 25, 2009

Debt, unemployment and escape routes

Interesting observation by Steve Keen: unemployment correlates closely with the amount that debt contributes to demand in the economy.

Let me try to reason out the consequences, however inexpertly.

So, as everyone scrambles to cut spending and get out of debt, unemployment will soar. Since there is a great deal of international trade, the hit will be felt internationally.

Then government finances will come properly unravelled, especially in countries that have generous social welfare provisions. Worldwide, sovereign states will look for anyone who has real money to lend.

This should result in higher interest rates, but that would make the cost of debt, and its sustainability, extremely difficult, both for states and for corporations (and the burden on the latter will tend to result in even more unemployment and more claimants on the government). A rise in rates would also hit holders of long-term government debt, which may be one of the reasons the Chinese have been swapping that for shorter-dated Treasuries. A collapse in bonds will affect the capital value of pensions and investments, oh dear.

Another way out is default on debt. But who will be hit by that? Not just foreigners, but our pensions and managed investment funds.

A third way, which given that we have history to learn from doesn't seem likely, is the true hyperinflation approach. Germany in 1923, Hungary, Argentina, Zimbabwe... do you really see this happening here?

Then there's the downgrading of debt, with corresponding falls in the traded value of the currency. We've seen some of that - what, 20% off the pound? - so maybe there's more to come from that direction. Except other countries may follow suit. In 1922, if you were a far-sighted German, I suppose you might have sold marks and bought dollars; what currency would you buy now?

Or there's "more of the same" again - talking up the economy and pumping in cash until you spend because you daren't leave it to rot in the savings account.

Which way will it go? Where will it all end?

Friday, July 24, 2009

Turning point; hiatus

Reading around in the wisdom of others, I predicted Dow 9,000 here, here and here. Now it's happened. Good for you day-traders, but a fraidy-cat like me is staying away.

Since Marc Faber and others have been saying for some considerable time that they can't see anything worth getting into, and now the dollar is getting closer to having the carpet yanked out from under its feet, and the British pound may follow suit thanks to the miserable state of the British economy, and China is busy blowing an inflationary bubble to maintain its vampire trading relationship with the West, and the gold-bugs are chirruping ever louder (though the US Government might not only seize gold as it did in 1933, but for those smarties who invest in overseas gold stores the bad news may be that Uncle Sam will also seize US citizens' title to those stores), the question is... where to hide your stash?

For the private investor, maybe part of the answer is to look at the currency market, for a country that isn't over-dependent on international trade, has enough natural resources to survive if the world system goes down, and is reasonably stable by second or third world standards. Sadly, I have even less expertise here than elsewhere, but any thoughts on e.g. the Thai baht?

HIATUS

We're going on holiday now, to a place where cellphones don't work (and it's in the UK) and our place has no broadband. Best wishes to you all, hope to be back in touch soon.

Sunday, July 19, 2009

Locking the doors

The dethroning of the US dollar as the international trading currency is under way. New bonds issued by the International Monetary Fund in the form of "Special Drawing Rights" are related to a basket of currencies, thus diluting the dollar element and reducing America's opportunity to cheat the world by devaluation.

The same article describes a Chinese proposal to start issuing bonds denominated in renminbi, so that if the dollar does drop against the Chinese currency, all that will happen is that the dollar cost of the capital debt will increase.

It occurs to me that such extra security for lenders may help interest rates to remain lower than they otherwise would be. So the threat to borrowers is not that interest rates will increase, but that debt outstanding will continue to feel heavy, since inflation won't lighten the burden. In fact, the burden of foreign debt could get worse, if the dollar weakens in this new foreign-currency-mortgage era.

Another factor, which may be a deliberate strategy with an eye to the above, is China's own expansion of credit. If monetary inflation goes global - including in the East - then there's less hope that Western businesses could use relative currency devaluation to increase the demand for their goods and services. Manufacturers here will still be unable to compete and debt will grow. Our creditors will own us - we'll "owe our soul to the company store".

It's time to grasp the nettle - bust the banks who got us into this, have a tremendous clearout of debt from the system, reset wages and prices at lower (more internationally competitive) levels, get the people back to work and shrink the dead weight of government and its dependants.

That, or see what's left of our wealth leak away, and then suffer all the above as well - at even lower levels of per capita assets and income.

Doubtless the politically-favoured option is the latter - "Let it all happen on someone else's watch, after we've made ourselves into the New European Aristocracy and gone to our country estates." This would be a mistake. The palace of Versailles didn't protect Louis XVI, nor Waldsiedlung the East German communist elite.

Thursday, July 02, 2009

Faber: correction, then inflation

Cash for now, while we wait for the second half selloff; then stocks and gold to hedge against inflation, says the good Doctor.

Tuesday, June 23, 2009

Inflation, not deflation

Jesse today, maintaining that inflation can indeed happen...

Our own view is that a serious stagflation with further devaluation of the US dollar as it is replaced as the world's reserve currency is very likely, after a period of slackening demand and high unemployment. A military conflict is also a probable outcome as countries often go to war when they fail at peace.

Tips?

From my own readings in this area, the people who tended to survive the Weimar stagflation the best were those who:

1. Owned independent supplies of essentials including food and shelter and were reasonably self-sufficient.
2. Had savings in foreign currencies that were backed by gold such as the US dollar and the Swiss Franc
3. Possessed precious metals
4. Belonged to a trade union and/or had essential skills or government position which guaranteed a wage
5. Were invested in foreign equity markets, and even in the domestic German stock market for a time

A gold brick in the wind

Truly a sign - gold by machine dispenser.