Experiences from country living; self-sufficiency; Christian values; amateur-ham radio; a hard working good life; and Humor is the Essence of Survival.
Things To Read
▼
Wednesday, April 15, 2015
Negative Interest is Here
Hi Everybody, Frank here.
A couple of days ago I ran across a news story that I thought was very interesting. It didn't make big news, I doubt if most people have heard of it, and it didn't seem like news to me either. Then later on, it was like one of those light bulbs went off. But it didn't go off in the usual way, it went off and gave me a kind of different look at something. I'm going to share with you a slightly different take or perspective about this Swiss bank story. It's going to have a lot of rambling, and it's going to appear to be a somewhat partial rant. But the more I thought about it, it became more and more clear as to what was really happening. You see the Swiss National Bank has started to sell ten year bonds at a negative interest rate. Well, I'm going to tell you all this stuff again, and if you can or choose to, please follow along and see if you can see the perspective that I took out of this article. I would appreciate your comments.
Switzerland is selling ten year bonds at negative interest, therefore, put your money with them and only lose a little bit, guaranteed. Or, put your money with someone else and lose a whole lot more. What this is telling me is that the world bond market is about to spiral downward. Bonds have always been considered to be a safe investment with a small return. But it appears that Switzerland is making this available at a good rate, because soon other competing markets are going to move into greater negative territory. Now, they're also doing this publicly as a hedge against a larger deflationary move. What this means, as I see it, is like I said earlier, the world financial markets are about to spiral downward out of control. This is an unprecedented move by the Swiss Bank. Obviously, this downward spiral has already started. It's not going to happen in one day, it'll take weeks, months, maybe. But when your ATM quits working, and your bank doors are locked, that $0.35 of spending cash you have in your pocket will be the last currency you see.
I know people that buy everything on credit cards. Now I'm not talking about major purchases here, I'm talking about buying a burrito for breakfast, and it goes on a credit card. When they buy gasoline for their car, it goes on a credit card. When they do need cash, for some unforeseen reason, it comes straight out of the ATM. I know folks that go to the ATM multiple times a day. They carry zero cash.
Folks need to be paying attention. Switzerland just sent a huge message world wide. You might want to get two or three dollars stored away, because when the EBT cards quit working, banks are closed, ATM's don't work, that means no more burritos, no more gasoline, no more psychotropic drugs from the pharmacy, no more cigarettes, and the list goes on and on. That burrito is not going to feed a family of four for very long. That $0.35 that you have in your pocket will not go very far. And if you do have a little cash stored up, buried out in a jar in your yard, you'd better spend it as fast as you can, because within a day or two after the ATM's shut down, cash will be worthless.
We've talked for a long time now about what's coming. It may take a few more weeks, months or even years, but the move by the Swiss bank is a first time event. Think about it. They are offering you the deal of a lifetime. Put your money in one of the world's most stable banking systems, pay to put your money into this bond program, so they can help preserve your wealth. Any other system where you put your money is going to charge a greater loss. That's hard to conceive, isn't it?
You've heard of Austrian economics, right? Where growth goes on perpetually? And debt is good? Well, these folks are some of the same folks, the Swiss that is, that helped develop the Austrian economic system. Their negative interest ten year bond tells us that growth is not perpetual, and that the Austrian economic system has flaws. Just like our system has flaws. Perpetual growth is impossible. It has been known to be impossible since the beginning of our economic system's development. Blame it on
the Federal Reserve, blame it on coming off of the gold standard, or you can blame it on us being the reserve currency. And you can throw in the petrodollar if you need something to blame. Any one of the afore mentioned failures will collapse the system. Everyone of those mentioned is in the process of collapsing. Perpetual growth is unsustainable. Pick anything you want to blame, and we are well past the point of being there. Every world economy is in a downturn, that's why the Swiss did what they did. They're discouraging investors from leaving faltering economic systems and rushing to their known stable banking practices. But, investors are still hurrying to buy negative interest Swiss bonds. I don't care what the news media is telling the general public, the economic systems of the world are imploding, including China, and the Euro, and the U.S. dollar. World growth is grinding to a halt. What does this mean to you and I? It means that taxes are going to continue to rise. There is going to be more government intervention in every aspect of our lives. Ultimately, the government will reinvest your 401k, and they will do this for your own good, of
course. These are the types things are going to occur. We will probably go to a cashless society, because we all know that hoarding is bad and wrong. Try going down to the bank and withdrawing $5000.00 in cash. Even if you call ahead, a couple of days even, you will have to explain to the bank teller why you need the money, and you will have to fill out a federal form that you received that much money. This is nothing new, because if you want to buy, let's say loose diamonds, or you ran across a great sale on someone's antique silver coin collection, and this person wants cash. You're going to have to explain why you want that money.
Don't forget that in 1933, I believe, the Roosevelt administration confiscated all gold and silver from the rightful owners in the United States of America. But first they artificially lowered the cost of gold and silver, so they could steal it from the American public at a lower cost, then re-inflate the value, after they had confiscated everyone's wealth. If you chose not to participate in this redistribution of wealth program, you were then an immediate felon. If you don't think that they won't confiscate your 401k, and then pay you pittance on the dollar, then you do not believe the old saying about history repeating itself. They did it in 1933, and do not kid yourself, that the greedy politicians will not confiscate your wealth, in whatever form it is, to keep their blasphemous, never ending, spending orgy alive for a few more days. So you might want to consider having a little cash in hand. When that ATM, as mentioned before, quits working, and your credit card quits working, you might want to have a little bit of cash in your
pocket so you can buy food for your family. If you don't have cash, your family is going to starve to death. It will be too late to order food storage over the internet, it will be too late to go to the big box store and buy a few weeks worth of canned foods, and it will be too late to buy all of those seeds that you were going to plant. What it boils down to is that it will be too late. What I have read is that the average family has less than a three day supply of food in their house. Now most folks that read this already know everything I've just said. But it's nice to have a little reminder every now and then. Today your credit cards still work. The ATM's still have a little cash in them. The big box stores are still open, or they were as of this writing. But then, there is always the guy
that says, I don't have any extra money to buy things, while he's standing there sucking down a 44 oz. Slurpee, talking on his newest and most advanced smart phone, talking to his kid that is in the backseat of his overpriced SUV, and the kids is on his newest most advanced smart phone. The kid is in the backseat and the guy is in the front seat, and this is the only way they know how to communicate. Get the picture here? Way too many useless gadgets in an immediate gratification society. But they don't have time to stock up on something as useless and trivial as maybe a couple of bottles of water and some canned food.
This is where we are. This is not what is coming. But this is what is here. The Swiss banks just sent out a loud call to everyone on the planet, and I doubt very seriously if any of the major networks carried the story on their evening news. Just one more announcement. Dark clouds are on the horizon. They are getting closer everyday. And that Bozo I just described with the newest, most up-to-date cell phone? He's going to be coming to your house and wanting your food. Because he is still a father and he will do what is necessary to feed his family. More food for thought. Well folks it's time to go. We're going to go milk our goats, and pet our new babies a little bit because they are our next generation. Tomorrow we're going to make cheese again. We'll talk more later, Frank
Frank, I think you've got your Austrian and Keynsian economics switched. Keynes believed that growth could go on forever. Austrians believe that growth should be determined by a free market.
Also, in Austrian economics, only some debt is OK. Most of it is bad, bad, bad. In fact, the only money that should be available for lending should be the money in the bank, and then that money can be borrowed by someone for capital expansion projects, or business investment. Keynsians believe that only debt can fuel growth and inflation is inevitable.
What do I get out of seeing the negative Swiss interest rate and people's willingness to buy it? 1)They think that they'll lose less wealth by investing in negative interest Swiss bonds(backed by Swiss Francs) than they'll lose by investing in positive interest Euros.
2)It tells me that the independent Austrian economics based Franc is stronger than the Euro, Yen, or Dollar. In fact, so much stronger and resilient that people would rather pay to be invested in Francs than to get paid to invest in other currencies.
3) Switzerland is in a deflationary period. There is no need for them to devalue their currency(through forced inflation....QE) in order to pay off debts with currency that's worth less today than it was yesterday.
4) They probably used Austrian theory to determine their interest rates as prediction of and hedge against the future uncertainty. Just like many people did before the downturn in the US in 2008. Who were the people predicting housing growth forever? Paul Krugman, Bernanke...Keynsians. Who predicted the downturn? Tom Woods, Ron Paul....Austrian economists.
CB, thank you for reading and thank you for the correction. It does seem odd to me though, that many people would rather invest their money in a solid losing proposition, than to take a chance with an established market theoretically showing a positive.
Not mentioned in the article, but my true concern is the derivative market. This is just gambling into thin air, and this bubble is huge beyond any bubble we have identified or recognize. Since our banking systems are so intertwined, when this thing starts to falter (the derivative market), it will go quickly, because it has no foundation or support. It won't happen in just one country, it will be worldwide. I fear it the most, because when it stumbles, banks and governments worldwide will be closing down and locking doors within a matter of hours. This will be under the pretense of a cooling down period, but it will still be a shut down. That cooling period will actually be a scramble, because all of the major banks will be financially insolvent. This could happen in a matter of hours.
Thank you again for the comment and the correction.
Good morning Frank, N.W. here. Russia, China, India and others have been buying Gold at an unprecedented rate. That in itself says a lot about the near future collapse of "money" as we know it. If they are successful at toppling the "Dollar" as the reserve currency it's all over, not just for the U.S.A. but every country that holds those dollars immediately. It's a good idea to have cash on hand. When the SHTF happens rush out and buy all the goods you can. Because the day after will be too late.
The one thing I do not understand is why these countries want to shoot themselves in the foot. If they are successful at toppling the U.S. Dollar as the worlds reserve currency, all commerce as we know it grinds to a halt worldwide. Although I believe those Dollars would still be viable in our own Good Ole USA for some time.
But just in case all theories are wrong, STOCK UP TODAY!
N.W. before the United States became the reserve currency, it was the British Sterling. After World War II, London like several European cities, was devastated. The United States industrial base had not been devastated, but actually, was operating at 100% and was helping the rest of Europe, and Japan for that matter, to rebuild. Our industrial base is now showing some wear. Even Europe has a newer industrial base than we do.
China is the largest emerging market. It's direct competitor, Japan, is in the same boat as Europe. If I were making some long term guesses and bets, I would say that China will probably hold the next reserve currency. If there is one. Everything comes to an end. We still have many years to wind down, but look at what happened to Europe about 70 years ago. There isn't anything that says it can't happen here. We have seen relative peace for a long time. Things have changed a lot over the last six or seven decades. Sure hope I'm wrong, but it really looks like this is where our government is taking us. We'll see. Thank you for the thoughtful comment.
Good morning Frank, Thanks for your remarks. I believe our U.S. banking/financial system is teetering on the edge of a financial precipice . The event in Switzerland is a big warning to us all . Like you mentioned , the larger percentage of our population is "out to lunch" and unaware of the calamity about to occur in their lives . Since the Federal Reserve took control of our money supply 100 years ago our U.S. dollar has gone from $1.00 in value to about a nickel in value . The "banksters" rule, which is very unfortunate for us. The wealthy control the politicians who in turn are trying to control us and doing a pretty good job of it . Our political system is exactly like Mexico' s, they call it bribery , we call it lobbying , same thing . What to do is the tough question for us .I have a high level banking friend who strongly recommends to GET OUT OF DEBT and to get out of the stock/bond market and to invest in tangibles . Tangibles usually consist of food, clothing and shelter . I urge folks to think outside of the box and consider tools , spare parts,shoes,vegetable seeds, gas cans, books, matches,fencing materials ,ammunition , sewing materials , canning supplies ,meds , just about anything that you use on a regular basis . I suggest a cash stash, but not too much , maybe a little gold and silver . I think our biggest problem in the future is going to be the declaration of martial law and then the constitution will be null and void .I think the powers that be will revert back to FDR's time and the confiscation of gold& silver from citizens to solidify their control of the buying and selling of goods . We are well on our way to a one world government that is described in the book of Revelation . I am a believer in Jesus Christ and I believe that most of what is going on around us and to us is forecast in the Bible . These are not pleasant times for us and our children, but I know all will work towards the glorification of the Lord . In the meantime , keep your powder dry and drink upstream from the herd .
Your last paragraph said it all. Foretold, forecast, and all for the glory of our Lord, who will take care of us all in His own way and His good time. :)
You cover many points that deserve attention on their own. Your advice to buy tangibles is one of our mottoes in this house. You're right about shoes, clothes, there may come a day when these items are not available. We've been stocking up on good hand tools, rakes, shovels and hoes, and garden seeds. We are planting seeds from 2008 to 2010 right now. There are just so many things that we can use the rest of our lives. Why not get them now?
If you want to invest, buy some first class garden tools. Give them to your relatives for Christmas. The price is not going down, the price will only increase. This is one way to avoid inflation, and in a round about way, show a positive return on your investment. And if and when the day comes we live in a barter society, you will have things that people really need.
Don't forget knowledge. Knowledge is a true tangible asset. Then don't forget to share knowledge. Thank you for your comment. May God be with you.
So, people are buying bonds at a guaranteed loss? That makes no logical sense. Seems to me it would be better to hide it under the mattress and take no loss. Unless, of course, they don't have cash, but only numbers on a computer screen, and they have to account for those numbers somewhere.
Leigh, I don't understand it either. My original answer didn't make any sense at all. I guess there was a reason why some of my forefathers buried their money in a jar, or put it under a mattress. Maybe they were more sensible people. Thank you for participating. Take care.
Frank, I see it too. This time reminds me a lot of the time just before the dot com bubble burst. I was in my early twenties and working for Nortel. The company was buying up all kinds of little internet companies for gobs of money even though the small companies had never made money and only had a few good ideas. Everyone in the company was investing. The stock market was on a roll. It was exciting and being young I thought it would go on forever. There were, however, naysayers, old foggies, on the chat boards, who said it couldn't continue and companies actually had to make money to be worth their stock price. I knew deep down they were right, but the hype was too tempting to not go along with. My 401(k) was devastated and Nortel is no longer in business.
It's happening again but on a much larger scale and now I am the old foggie. Our economy is a bug in search of a windshield. It's going to be a blood bath in the stock market.
Dr. Mom, I've only been paying attention to the financial world for approximately 30 years, and I really started paying attention right around 10 years ago. But in my short stint of awareness, I have watched the 401k group collapse twice. Lots of retired folks that were living high on the hog, let's say, were scrambling to try to find a way to feed themselves. And then they turned around and did the same thing again. I believe you're right. It's funny how greed causes people to ignore simple logic. My fear this time is a collapse of the derivative markets. If that happens, it will happen very quickly. Very quickly. Thank you for your comment.
You're right. Most people don't know that when they give their money to the bank for safe keeping, it becomes the bank's property. Everybody thinks that the F.D.I.C. protects their money. That's just not true. Thank you for bringing that point out.
The banking system is built on trust. Do you remember when Penn Mutual went under? A number of small banks went under with them. The bigger banks that bought those little banks demanded immediate payment, in full on the outstanding loans. Thousands of people lost their homes and everything they had worked for all of their lives, because they couldn't find other institutions to refinance the loans that were now due. Thanks for reading.
Kathy, you made me chuckle. Fern and I have been reading a book at bedtime about a collapse situation. I asked Fern if we could read something else, or maybe read it during the daytime because it keeps me awake. Thanks for the laugh.
We keep just enough money in the bank to pay our regular bills every month. The rest goes towards tangibles and a little extra for emergencies. Being country folks, we have a different idea of what tangibles are than urbanites. Tools, tractor, food, canning supplies and things like that are like gold to us. I wonder how many people did not turn in their gold in 1933. I would not have. Junk pre 1965 silver is good to have around, too. Since the banks now consider our deposits their money, they are getting as little as possible of our money. It is going to get very ugly.
Tewshooz, Fern and I follow a very similar plan. You might want to consider looking into have more than a couple of bank accounts. It's easier to exchange funds without raising eyebrows that way.
Let me give you my investment tip for the day. Ball canning lids. You can't have too many, of course, that is if you have enough jars. Yep, canning lids. Don't leave the store without them.
Think about having a couple of different bank accounts. And you're wrong, Tewshooz, it's not GOING to get ugly, it already is ugly. This is just the beginning of ugly. As always, thank you.
Ralph and I get a lot of our financial news from RT.com. Their people have been discussing negative interest rate for quite some time. Banking has changed so much from when a bank was a hometown bank and made loans and held saving for people in that town or area. These new banks are as "Max Keiser" of the Keiser Report calls them Banksters! It is scaring us as we wait for out money issues with the land sale to be resolved. WE have so little real control over what is supposedly our own money! Great thoughtful and do not read at bedtime post!
Hi Fiona. It is scary. Even a little town American bank is connected to all the world banks. Our federal government has their fingers securely in place, whether it's the medical system, educational, banking, or etc., etc.
I like Max Keiser, he just has an interesting way about him. Did you know that he used to be a stand up comedian? But I still like him and I think he does a good job. He gets 'out there' every now and then, but who doesn't? Every now and then.
I can't read vampire or pirate stories or anything about snakes at bedtime. That's just the way it is. Thank you for the comment.
Frank, what is your opinion of storing some junk silver? Do you think that it would be useful currency if the dollar collapses, or would it be better to invest in barter items?
Chipmunk, I am not qualified or licensed to give financial advice, but I do not own any silver or gold. If I did own precious metals, it would be in the form of brass and lead.
I believe your idea about barter items, would be the way that I would recommend, especially durable shoes, clothes with multiple sizes for growing children.
And I would also recommend that every adult member of the household should know how to defend their home adequately. Because #1 might not always be #1, and #2 might have to step up and take #1's place. A person can heal, mend or grieve later, but at the time there is no substitute for not being prepared. Running is not always an option, especially with children.
Frank, thanks for bringing this to our attention. I daily read numerous news sites, & this is the first I've seen this. My initial reaction is: WOW! This is actually happening. Other reports have told how China is setting up their regional/international bank that will compete with IMF. So it looks like the USD is going to be hit. But negative interest!? That would have been unimaginable to previous generations, but it is here. THanks for this & for for ur blog. God bless.
I don't know whether we can believe the financial news out of China. I know we can't believe the financial reports out of the U.S. of A. China's economy is also faltering at this time, and their system of reporting is not met with the same standards that other financial markets are evaluated by. China is basically a one party system and they have a very controlled, quasi free enterprise type system. Then it's only allowed in certain sectors of the country.
If you would like to do a very interesting study, research the technique that Mao Tse-tung used to get his country into the world economic markets. By many he was considered to be a genius among financial strategists. What you will find is that he starved millions of his own people so there would be ample grain to sell on the world market. Millions of people died and he is considered by many to be brilliant. The ultimate pragmatist. The end justifies the means, or the means justifies the end. We're not talking about 1000 years ago, this is modern history. Look it up.
While I usually don't contribute to various blogs, I usually just read them.
I wish to add just a few things...In short, my understanding, as a bit of history, is that the Swiss franc, b/c of its perceived "stability and value" (and lack of devaluation), has always been a "strong" currency. Originally, there were no issues with surrounding trading countries (which operate in Euros). However, as with nearly all fiat currencies, a devaluation was/is occurring, with the Euro at a greater rate than the Swiss franc. Appropriately, people noticed rate difference and began investing in Swiss franc/bonds. This merely served to accelerate the rate difference. To try to combat this, the Swiss Bank, "pegged" the franc to the Euro, in effect stating, "no need to invest in Swiss franc's, they are now at the same devaluation rate as Euros". However, as the Euro continues to rapidly devalue (their own version of Quantitative Easing), the Swiss, in order to remain pegged, were having to purchase large amounts of Euros. In fact the Euro devaluation, in order to stay pegged, was requiring more Swiss francs than the small country was willing to put forth (both politically and economically). This "cost" would require them to come "unpegged" (something they stated they would not do.....and as usual, they all lie). However, unpegging does not solve the problem of Swiss franc valuation becoming too strong (and thus, in a Keynsian economic world view, inhibiting the ability of Swiss companies to export, even to neighboring countries).
Thus, while the system is entirely "fragile", and the end value of all historical fiat currencies is 0, I perceive the decision to offer bonds at a negative rate to be totally internal to the Swiss, not necessarily as a "world bond market is about to spiral downward". This is not, we have the best long term bonds (even at a negative rate), but a "don't buy Swiss bonds" (and raise Swiss franc value) at all or if you do, at least we will use that money in order to compensate for the increase in value. In short, I believe the purpose is to actively discourage people from buying Swiss franc bonds...
However, of course, that is not to say that Switzerland and the Swiss franc are not good, stable investments (indeed it can be inferred that they are by the fact that they have to actively discourage investment). Just don't do it in bond form. Goto your local bank and ask to exchange your dollars for Swiss francs (tell them you are going to visit Switzerland, it may take a couple of days, but easily done). Forget about buying a Swiss bond and paying negative interest rates, just keep your tangible Swiss francs at home, next to your dollars and hedge against a devaluing dollar versus a perceived future strong Swiss franc.
Thank you for your thoughts, and maybe you should contribute more often to various blogs. Your insight and perspective is appreciated and valued.
As you are aware, our bond market is being propped up by the Federal Reserve through quantitative easing. Conceptually, it ceased a while back, and is not the $86 billion monthly, that is was for a few years. I just don't see any way out of this situation. Yes, the U.S. bond market does appear to be strong and stable. Anytime there is instability in the world, foreign investors run to the U.S. markets. But the markets and the bonds are fragile.
I genuinely appreciate your comments. Please do so anytime.
Switzerland is selling ten year bonds at negative interest, therefore, put your money with them and only lose a little bit, guaranteed. Or, put your money with someone else and lose a whole lot more. What this is telling me is that the world bond market is about to spiral downward. Bonds have always been considered to be a safe investment with a small return. But it appears that Switzerland is making this available at a good rate, because soon other competing markets are going to move into greater negative territory. Now, they're also doing this publicly as a hedge against a larger deflationary move. What this means, as I see it, is like I said earlier, the world financial markets are about to spiral downward out of control. This is an unprecedented move by the Swiss Bank. Obviously, this downward spiral has already started. It's not going to happen in one day, it'll take weeks, months, maybe. But when your ATM quits working, and your bank doors are locked, that $0.35 of spending cash you have in your pocket will be the last currency you see. 
Frank, I think you've got your Austrian and Keynsian economics switched. Keynes believed that growth could go on forever. Austrians believe that growth should be determined by a free market.
ReplyDeleteAlso, in Austrian economics, only some debt is OK. Most of it is bad, bad, bad. In fact, the only money that should be available for lending should be the money in the bank, and then that money can be borrowed by someone for capital expansion projects, or business investment. Keynsians believe that only debt can fuel growth and inflation is inevitable.
What do I get out of seeing the negative Swiss interest rate and people's willingness to buy it?
1)They think that they'll lose less wealth by investing in negative interest Swiss bonds(backed by Swiss Francs) than they'll lose by investing in positive interest Euros.
2)It tells me that the independent Austrian economics based Franc is stronger than the Euro, Yen, or Dollar. In fact, so much stronger and resilient that people would rather pay to be invested in Francs than to get paid to invest in other currencies.
3) Switzerland is in a deflationary period. There is no need for them to devalue their currency(through forced inflation....QE) in order to pay off debts with currency that's worth less today than it was yesterday.
4) They probably used Austrian theory to determine their interest rates as prediction of and hedge against the future uncertainty. Just like many people did before the downturn in the US in 2008. Who were the people predicting housing growth forever? Paul Krugman, Bernanke...Keynsians. Who predicted the downturn? Tom Woods, Ron Paul....Austrian economists.
Cheerfully,
CB, thank you for reading and thank you for the correction. It does seem odd to me though, that many people would rather invest their money in a solid losing proposition, than to take a chance with an established market theoretically showing a positive.
DeleteNot mentioned in the article, but my true concern is the derivative market. This is just gambling into thin air, and this bubble is huge beyond any bubble we have identified or recognize. Since our banking systems are so intertwined, when this thing starts to falter (the derivative market), it will go quickly, because it has no foundation or support. It won't happen in just one country, it will be worldwide. I fear it the most, because when it stumbles, banks and governments worldwide will be closing down and locking doors within a matter of hours. This will be under the pretense of a cooling down period, but it will still be a shut down. That cooling period will actually be a scramble, because all of the major banks will be financially insolvent. This could happen in a matter of hours.
Thank you again for the comment and the correction.
Frank
Good morning Frank, N.W. here. Russia, China, India and others have been buying Gold at an unprecedented rate. That in itself says a lot about the near future collapse of "money" as we know it. If they are successful at toppling the "Dollar" as the reserve currency it's all over, not just for the U.S.A. but every country that holds those dollars immediately. It's a good idea to have cash on hand. When the SHTF happens rush out and buy all the goods you can. Because the day after will be too late.
ReplyDeleteThe one thing I do not understand is why these countries want to shoot themselves in the foot. If they are successful at toppling the U.S. Dollar as the worlds reserve currency, all commerce as we know it grinds to a halt worldwide. Although I believe those Dollars would still be viable in our own Good Ole USA for some time.
But just in case all theories are wrong, STOCK UP TODAY!
N.W. before the United States became the reserve currency, it was the British Sterling. After World War II, London like several European cities, was devastated. The United States industrial base had not been devastated, but actually, was operating at 100% and was helping the rest of Europe, and Japan for that matter, to rebuild. Our industrial base is now showing some wear. Even Europe has a newer industrial base than we do.
DeleteChina is the largest emerging market. It's direct competitor, Japan, is in the same boat as Europe. If I were making some long term guesses and bets, I would say that China will probably hold the next reserve currency. If there is one. Everything comes to an end. We still have many years to wind down, but look at what happened to Europe about 70 years ago. There isn't anything that says it can't happen here. We have seen relative peace for a long time. Things have changed a lot over the last six or seven decades. Sure hope I'm wrong, but it really looks like this is where our government is taking us. We'll see. Thank you for the thoughtful comment.
Frank
Good morning Frank,
ReplyDeleteThanks for your remarks. I believe our U.S. banking/financial system is teetering on the edge of a financial precipice . The event in Switzerland is a big warning to us all . Like you mentioned , the larger percentage of our population is "out to lunch" and unaware of the calamity about to occur in their lives . Since the Federal Reserve took control of our money supply 100 years ago our U.S. dollar has gone from $1.00 in value to about a nickel in value . The "banksters" rule, which is very unfortunate for us. The wealthy control the politicians who in turn are trying to control us and doing a pretty good job of it . Our political system is exactly like Mexico' s, they call it bribery , we call it lobbying , same thing .
What to do is the tough question for us .I have a high level banking friend who strongly recommends to GET OUT OF DEBT and to get out of the stock/bond market and to invest in tangibles . Tangibles usually consist of food, clothing and shelter . I urge folks to think outside of the box and consider tools , spare parts,shoes,vegetable seeds, gas cans, books, matches,fencing materials ,ammunition , sewing materials , canning supplies ,meds , just about anything that you use on a regular basis .
I suggest a cash stash, but not too much , maybe a little gold and silver . I think our biggest problem in the future is going to be the declaration of martial law and then the constitution will be null and void .I think the powers that be will revert back to FDR's time and the confiscation of gold& silver from citizens to solidify their control of the buying and selling of goods . We are well on our way to a one world government that is described in the book of Revelation .
I am a believer in Jesus Christ and I believe that most of what is going on around us and to us is forecast in the Bible . These are not pleasant times for us and our children, but I know all will work towards the glorification of the Lord .
In the meantime , keep your powder dry and drink upstream from the herd .
Your last paragraph said it all. Foretold, forecast, and all for the glory of our Lord, who will take care of us all in His own way and His good time. :)
DeleteYou cover many points that deserve attention on their own. Your advice to buy tangibles is one of our mottoes in this house. You're right about shoes, clothes, there may come a day when these items are not available. We've been stocking up on good hand tools, rakes, shovels and hoes, and garden seeds. We are planting seeds from 2008 to 2010 right now. There are just so many things that we can use the rest of our lives. Why not get them now?
DeleteIf you want to invest, buy some first class garden tools. Give them to your relatives for Christmas. The price is not going down, the price will only increase. This is one way to avoid inflation, and in a round about way, show a positive return on your investment. And if and when the day comes we live in a barter society, you will have things that people really need.
Don't forget knowledge. Knowledge is a true tangible asset. Then don't forget to share knowledge. Thank you for your comment. May God be with you.
Frank
So, people are buying bonds at a guaranteed loss? That makes no logical sense. Seems to me it would be better to hide it under the mattress and take no loss. Unless, of course, they don't have cash, but only numbers on a computer screen, and they have to account for those numbers somewhere.
ReplyDeleteLeigh, I don't understand it either. My original answer didn't make any sense at all. I guess there was a reason why some of my forefathers buried their money in a jar, or put it under a mattress. Maybe they were more sensible people. Thank you for participating. Take care.
DeleteFrank
Frank, I see it too. This time reminds me a lot of the time just before the dot com bubble burst. I was in my early twenties and working for Nortel. The company was buying up all kinds of little internet companies for gobs of money even though the small companies had never made money and only had a few good ideas. Everyone in the company was investing. The stock market was on a roll. It was exciting and being young I thought it would go on forever. There were, however, naysayers, old foggies, on the chat boards, who said it couldn't continue and companies actually had to make money to be worth their stock price. I knew deep down they were right, but the hype was too tempting to not go along with. My 401(k) was devastated and Nortel is no longer in business.
ReplyDeleteIt's happening again but on a much larger scale and now I am the old foggie. Our economy is a bug in search of a windshield. It's going to be a blood bath in the stock market.
Dr. Mom, I've only been paying attention to the financial world for approximately 30 years, and I really started paying attention right around 10 years ago. But in my short stint of awareness, I have watched the 401k group collapse twice. Lots of retired folks that were living high on the hog, let's say, were scrambling to try to find a way to feed themselves. And then they turned around and did the same thing again. I believe you're right. It's funny how greed causes people to ignore simple logic. My fear this time is a collapse of the derivative markets. If that happens, it will happen very quickly. Very quickly. Thank you for your comment.
DeleteFrank
Your bank deposits are now considered investments in that bank. As with any investment risk, you stand to lose your capital that uou have "invested".
ReplyDeleteYou're right. Most people don't know that when they give their money to the bank for safe keeping, it becomes the bank's property. Everybody thinks that the F.D.I.C. protects their money. That's just not true. Thank you for bringing that point out.
DeleteThe banking system is built on trust. Do you remember when Penn Mutual went under? A number of small banks went under with them. The bigger banks that bought those little banks demanded immediate payment, in full on the outstanding loans. Thousands of people lost their homes and everything they had worked for all of their lives, because they couldn't find other institutions to refinance the loans that were now due. Thanks for reading.
Frank
I have got to stop reading you at bedtime!!!....sigh.
ReplyDeleteKathy, you made me chuckle. Fern and I have been reading a book at bedtime about a collapse situation. I asked Fern if we could read something else, or maybe read it during the daytime because it keeps me awake. Thanks for the laugh.
DeleteFrank
We keep just enough money in the bank to pay our regular bills every month. The rest goes towards tangibles and a little extra for emergencies. Being country folks, we have a different idea of what tangibles are than urbanites. Tools, tractor, food, canning supplies and things like that are like gold to us. I wonder how many people did not turn in their gold in 1933. I would not have. Junk pre 1965 silver is good to have around, too. Since the banks now consider our deposits their money, they are getting as little as possible of our money. It is going to get very ugly.
ReplyDeleteTewshooz, Fern and I follow a very similar plan. You might want to consider looking into have more than a couple of bank accounts. It's easier to exchange funds without raising eyebrows that way.
DeleteLet me give you my investment tip for the day. Ball canning lids. You can't have too many, of course, that is if you have enough jars. Yep, canning lids. Don't leave the store without them.
Think about having a couple of different bank accounts. And you're wrong, Tewshooz, it's not GOING to get ugly, it already is ugly. This is just the beginning of ugly. As always, thank you.
Frank
Ralph and I get a lot of our financial news from RT.com. Their people have been discussing negative interest rate for quite some time. Banking has changed so much from when a bank was a hometown bank and made loans and held saving for people in that town or area. These new banks are as "Max Keiser" of the Keiser Report calls them Banksters!
ReplyDeleteIt is scaring us as we wait for out money issues with the land sale to be resolved. WE have so little real control over what is supposedly our own money! Great thoughtful and do not read at bedtime post!
Hi Fiona. It is scary. Even a little town American bank is connected to all the world banks. Our federal government has their fingers securely in place, whether it's the medical system, educational, banking, or etc., etc.
DeleteI like Max Keiser, he just has an interesting way about him. Did you know that he used to be a stand up comedian? But I still like him and I think he does a good job. He gets 'out there' every now and then, but who doesn't? Every now and then.
I can't read vampire or pirate stories or anything about snakes at bedtime. That's just the way it is. Thank you for the comment.
Frank
Frank, what is your opinion of storing some junk silver? Do you think that it would be useful currency if the dollar collapses, or would it be better to invest in barter items?
ReplyDeleteChipmunk, I am not qualified or licensed to give financial advice, but I do not own any silver or gold. If I did own precious metals, it would be in the form of brass and lead.
DeleteI believe your idea about barter items, would be the way that I would recommend, especially durable shoes, clothes with multiple sizes for growing children.
And I would also recommend that every adult member of the household should know how to defend their home adequately. Because #1 might not always be #1, and #2 might have to step up and take #1's place. A person can heal, mend or grieve later, but at the time there is no substitute for not being prepared. Running is not always an option, especially with children.
Thank you for your questions.
Frank
Frank, thanks for bringing this to our attention. I daily read numerous news sites, & this is the first I've seen this. My initial reaction is: WOW! This is actually happening. Other reports have told how China is setting up their regional/international bank that will compete with IMF. So it looks like the USD is going to be hit. But negative interest!? That would have been unimaginable to previous generations, but it is here. THanks for this & for for ur blog. God bless.
ReplyDeleteI don't know whether we can believe the financial news out of China. I know we can't believe the financial reports out of the U.S. of A. China's economy is also faltering at this time, and their system of reporting is not met with the same standards that other financial markets are evaluated by. China is basically a one party system and they have a very controlled, quasi free enterprise type system. Then it's only allowed in certain sectors of the country.
DeleteIf you would like to do a very interesting study, research the technique that Mao Tse-tung used to get his country into the world economic markets. By many he was considered to be a genius among financial strategists. What you will find is that he starved millions of his own people so there would be ample grain to sell on the world market. Millions of people died and he is considered by many to be brilliant. The ultimate pragmatist. The end justifies the means, or the means justifies the end. We're not talking about 1000 years ago, this is modern history. Look it up.
Thanks for the comment.
Frank
While I usually don't contribute to various blogs, I usually just read them.
ReplyDeleteI wish to add just a few things...In short, my understanding, as a bit of history, is that the Swiss franc, b/c of its perceived "stability and value" (and lack of devaluation), has always been a "strong" currency. Originally, there were no issues with surrounding trading countries (which operate in Euros). However, as with nearly all fiat currencies, a devaluation was/is occurring, with the Euro at a greater rate than the Swiss franc. Appropriately, people noticed rate difference and began investing in Swiss franc/bonds. This merely served to accelerate the rate difference. To try to combat this, the Swiss Bank, "pegged" the franc to the Euro, in effect stating, "no need to invest in Swiss franc's, they are now at the same devaluation rate as Euros". However, as the Euro continues to rapidly devalue (their own version of Quantitative Easing), the Swiss, in order to remain pegged, were having to purchase large amounts of Euros. In fact the Euro devaluation, in order to stay pegged, was requiring more Swiss francs than the small country was willing to put forth (both politically and economically). This "cost" would require them to come "unpegged" (something they stated they would not do.....and as usual, they all lie). However, unpegging does not solve the problem of Swiss franc valuation becoming too strong (and thus, in a Keynsian economic world view, inhibiting the ability of Swiss companies to export, even to neighboring countries).
Thus, while the system is entirely "fragile", and the end value of all historical fiat currencies is 0, I perceive the decision to offer bonds at a negative rate to be totally internal to the Swiss, not necessarily as a "world bond market is about to spiral downward". This is not, we have the best long term bonds (even at a negative rate), but a "don't buy Swiss bonds" (and raise Swiss franc value) at all or if you do, at least we will use that money in order to compensate for the increase in value. In short, I believe the purpose is to actively discourage people from buying Swiss franc bonds...
However, of course, that is not to say that Switzerland and the Swiss franc are not good, stable investments (indeed it can be inferred that they are by the fact that they have to actively discourage investment). Just don't do it in bond form. Goto your local bank and ask to exchange your dollars for Swiss francs (tell them you are going to visit Switzerland, it may take a couple of days, but easily done). Forget about buying a Swiss bond and paying negative interest rates, just keep your tangible Swiss francs at home, next to your dollars and hedge against a devaluing dollar versus a perceived future strong Swiss franc.
Just some thoughts
Thank you for your thoughts, and maybe you should contribute more often to various blogs. Your insight and perspective is appreciated and valued.
DeleteAs you are aware, our bond market is being propped up by the Federal Reserve through quantitative easing. Conceptually, it ceased a while back, and is not the $86 billion monthly, that is was for a few years. I just don't see any way out of this situation. Yes, the U.S. bond market does appear to be strong and stable. Anytime there is instability in the world, foreign investors run to the U.S. markets. But the markets and the bonds are fragile.
I genuinely appreciate your comments. Please do so anytime.
Frank
While I certainly am no prognosticator......
Deletehttp://thephaser.com/2015/04/the-war-on-cash-migrates-to-switzerland/