It's Official - do not keep your money in a European bank

[doomsday surprise]

http://www.telegraph.co.uk/finance/...positors-could-bear-cost-of-bank-failure.html

Ollie Rehn has stated that anything over 100 000 isn't safe. But once everyone spreads their money over a multitude of banks, or pulls it out altogether to avoid any loss over 100 000, do you think they won't come after the smaller depositors? Personally I wouldn't keep anything over 1000 in a European bank. Your money isn't safe in the bank.
It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

 

[bordsilver]

It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

This is the most disturbing issue. The business accounts are the conduits. Hence when push comes to shove the ECB may allow a few scapegoat banks to be hit but they won't let too many go the same way as Cyprus. However, like central planners everywhere they well wait on the sidelines too long.

Repeating myself (and others) - bail-ins need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

 

[Clawhammer]

It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

As I posted in another thread, I was surprised by the number of businesses that rely on short-term credit to 'make payroll' and pay suppliers. Not dodgey mum & dad backyarder's either. I mean large, mainstream successful businesses... it was the main weak link exposed in part of the Lehman Bros debacle.

However it may be a tactic to shield busisness' capital from captial controls. Keep minimal cash in your business acct... run everything on credit (i.e. Debt) that way they have to come after you... not you chasing after them. By always staying in debt and hiding your capital whereever you can outside of the banks.

It's not ideal as you have to pay interest.. but you'd be paying a lot more in "haircuts/bail-ins" etc. But it's better than losing your business without a fight.

 

[Big A.D.]

It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

As I posted in another thread, I was surprised by the number of businesses that rely on short-term credit to 'make payroll' and pay suppliers. Not dodgey mum & dad backyarder's either. I mean large, mainstream successful businesses... it was the main weak link exposed in part of the Lehman Bros debacle.

However it may be a tactic to shield busisness' capital from captial controls. Keep minimal cash in your business acct... run everything on credit (i.e. Debt) that way they have to come after you... not you chasing after them. By always staying in debt and hiding your capital whereever you can outside of the banks.

It isn't a tactic to guard against capital controls, it's how successful mainstream businesses become successful mainstream businesses.

Businesses get a better return on their capital using it within the business (if the business got a better return keeping the money in the bank, they'd shut down their operations, fire everyone and keep the money in the bank instead).

If the businesses can get 7 or 14 or 30 day payment terms from suppliers, they get free money for that period of time that they can churn though their business and make a profit on.

If the business can borrow money for 90 days at 5% and generates a return of 10%, the business still makes a 5% profit.

If a business doesn't do this, it's competitors probably will.

Being competitive basically requires businesses to leverage up as much as they can and squeeze out the extra profit available from the borrowed money.

Yes, it's incredibly risky, but that's the nature of free market capitalism.

 

[bordsilver]

Although I agree with what your saying, it strongly depends the circumstances of the business (and on the CFO's). (Besides outright debt) unless churning the scarce capital (cash) through new inventory has some sort of benefit, many businesses not funding current capex would have a positive cash balance with the line of credit being used to smooth volatility in income versus expenses.

Many (most?) professional service firms for example would not have any benefit in trying to leverage cash in the way you describe as they are essentially at the end of the chain and the main outflow is paying wages and taxes. The ideal position for these sorts of firms is therefore to be holding cash and not drawing on their line of credit. Once a large enough cash buffer is built up any excess will most likely be paid out as dividends (or used to initiate a new capex of some sort).

 

[renovator]

It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

As I posted in another thread, I was surprised by the number of businesses that rely on short-term credit to 'make payroll' and pay suppliers. Not dodgey mum & dad backyarder's either. I mean large, mainstream successful businesses... it was the main weak link exposed in part of the Lehman Bros debacle.

However it may be a tactic to shield busisness' capital from captial controls. Keep minimal cash in your business acct... run everything on credit (i.e. Debt) that way they have to come after you... not you chasing after them. By always staying in debt and hiding your capital whereever you can outside of the banks.

It isn't a tactic to guard against capital controls, it's how successful mainstream businesses become successful mainstream businesses.

Businesses get a better return on their capital using it within the business (if the business got a better return keeping the money in the bank, they'd shut down their operations, fire everyone and keep the money in the bank instead).

If the businesses can get 7 or 14 or 30 day payment terms from suppliers, they get free money for that period of time that they can churn though their business and make a profit on.

If the business can borrow money for 90 days at 5% and generates a return of 10%, the business still makes a 5% profit.

If a business doesn't do this, it's competitors probably will.

Being competitive basically requires businesses to leverage up as much as they can and squeeze out the extra profit available from the borrowed money.

Yes, it's incredibly risky, but that's the nature of free market capitalism.

I agree somewhat with parts of your post bigad for some companies but i know quite a few businesses that run a lot closer to clawhammers post any cream usually go into toys ,RE ,fun, other investments or just into the safe away from prying eyes . There comes a point in time where theres no upside tp ploughing more money into a business &/or you want to use that money for other things as i mentioned above .Why use your own money when you can use someone elses is a common saying with a lot of business people i know .Especially true when the business is at a point where its self supporting

 

[nowaydude]

i just moved my money out of ING direct - was that overkill? (considering it is the aussie line)

how many aussies will have euros in an euro bank?

 

[thatguy]

Repeating myself (and others) - bail-ins need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

+1
bail ins are also deflationary, which for a world based on usury will cause collapse. As debt MUST exceed currency to allow repayment of said debt unless interest rates become severely negative. My conclusion is the EU feels like it is in position to phoenix out of a global collapse i.e. has enough gold. China is also well place and Japan and USA are terribly placed (Australia too). We are going to see a massive pole type shift in world power. Well played EU well played

 

[hawkeye]

It isn't a tactic to guard against capital controls, it's how successful mainstream businesses become successful mainstream businesses.

Businesses get a better return on their capital using it within the business (if the business got a better return keeping the money in the bank, they'd shut down their operations, fire everyone and keep the money in the bank instead).

If the businesses can get 7 or 14 or 30 day payment terms from suppliers, they get free money for that period of time that they can churn though their business and make a profit on.

If the business can borrow money for 90 days at 5% and generates a return of 10%, the business still makes a 5% profit.

If a business doesn't do this, it's competitors probably will.

Being competitive basically requires businesses to leverage up as much as they can and squeeze out the extra profit available from the borrowed money.

Yes, it's incredibly risky, but that's the nature of free market capitalism.

Not free market interest rates. You distort the interest rates and you distort these calculations. Businesses will borrow money when they shouldn't, because the natural market rates are manipulated down through open market operations by the central bank.

The true market rates are not visible, and hence the true state of the market is not visible, but they always assert themselves in the end, usually quite painfully. Best to accept the facts as they are at the time, than to be in denial and have nature eventually force them on you.

 

[boston]

Repeating myself (and others) - bail-ins need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

Another word for bail-in, is theft. If you or I did it, we would be in jail.

Let substitute bail-in with theft.

Repeating myself (and others) - theft need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

 

[hawkeye]

Repeating myself (and others) - bail-ins need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

Can you explain this one to me? I'm guessing there's an angle that you are looking at it from that gives you some insight into it, but I'm not seeing it right now. But suspecting that you might have a point. Maybe my brain just isn't working atm.

 

[bordsilver]

Repeating myself (and others) - bail-ins need to and should happen, the issue is the transition which takes time (but also needs people to get a few kicks in the pants).

Can you explain this one to me? I'm guessing there's an angle that you are looking at it from that gives you some insight into it, but I'm not seeing it right now. But suspecting that you might have a point. Maybe my brain just isn't working atm.

Essentially that the natural insolvency of fractionally reserved banks means that they can either be:
1. naturally allowed to go bust periodically (in which case unsecured deposits will be overtly lost like in Cyprus) or
2. Governments and central banks can insure the deposits leading to moral hazard and covert losses imposed on the general population through taxes and/or inflation.

People have been suckered into thinking the unsecured deposits are actually secure (eg Cyprus deposit guarantees) and we need to go back to people recognising the insolvency and be willing for bank runs to happen. Unfortunately unless we allow a liquidation of the central banks and removal of legal tender laws (my preferred option) I think all other methods of increasing the reserve ratio back to something where bail-ins won't be necessary or as onerous will take time.

Any significant short-term bank run will probably cause a very significant amount of disruption as the world economy loses the major proportion of the current money stock.

A good place to pick up the previous posts is possibly here: http://forums.silverstackers.com/message-497183.html#p497183

Edit: grammar

 

[nonrecourse]

http://www.telegraph.co.uk/finance/...positors-could-bear-cost-of-bank-failure.html

Ollie Rehn has stated that anything over 100 000 isn't safe. But once everyone spreads their money over a multitude of banks, or pulls it out altogether to avoid any loss over 100 000, do you think they won't come after the smaller depositors? Personally I wouldn't keep anything over 1000 in a European bank. Your money isn't safe in the bank.
It really sucks to own a business where you need to keep large amounts of fiat in the bank to run it.

Its not just the European banks.... Your money is not safe in any bank period. If you have a business you'd be better off having an overdraft and use the business income in reserve outside the banking structures to purchase gold bullion. Tip money into your overdraft as required from cashflow so you don't pay too much interest.

For two decades we did that with property and have never had large lumps of cash sitting in bank accountants earning a pitance while inflation chewed away at the underlying value.

Kind regards
non recourse

 

[hawkeye]

Essentially that the natural insolvency of fractionally reserved banks means that they can either be:
1. naturally allowed to go bust periodically (in which case unsecured deposits will be overtly lost like in Cyprus) or
2. Governments and central banks can insure the deposits leading to moral hazard and covert losses imposed on the general population through taxes and/or inflation.

Somewhat agree with that. Coming from the libertarian side that doesn't think FRB is necessarily bad, I think a well-managed FRB bank doesn't need to go bankrupt. I think establishing a position of trust with customers though is crucial to this and not running to the govt and getting them to ostensibly protect you.

People have been suckered into thinking the unsecured deposits are actually secure (eg Cyprus deposit guarantees) and we need to go back to people recognising the insolvency and be willing for bank runs to happen. Unfortunately unless we allow a liquidation of the central banks and removal of legal tender laws (my preferred option) I think all other methods of increasing the reserve ratio back to something where bail-ins won't be necessary or as onerous will take time.

Basically agree with that. Inflation has been used to cover over the gaps, but that game has just about ended. I think the politicians will only do the right thing when the right thing is in their best interests. Right now it isn't and who knows how long we will have to struggle along before it is. It's time for us (the market) to start looking for other solutions before it gets there.

Any significant short-term bank run will probably cause a very significant amount of disruption as the world economy loses the major proportion of the current money stock.

A good place to pick up the previous posts is possibly here: http://forums.silverstackers.com/message-497183.html#p497183

Edit: grammar

I had a quick skim through there. So what you are saying is that depositors need to get their money taken so that they understand it isn't safe? But won't that cause the disruption you are seeking not to have? Inflation or printing money has, so far, been the gentle way out. We have a herd mentality don't forget.

 

[bordsilver]

That's why I'm a stacker

The system has been on the edge for a while now. A slow retreat may be possible but unfortunately I don't think a slow retreat will result in significant change in government control and bankster profiteering. Because of the herd mentality, we will not move to a new currency system until the herd wakes up and does things differently. I (currently) believe the central bank liquidation method is actually the least painful and easiest of all. The problem is that it is in the interests of the average person but it is not in the interests of the Governments and current bankers.

They are screwing every single person daily through their grip on the monetary system so as painful as a disruption event is it can hopefully turn out better than the continuous pain and loss of civil liberties currently being inflicted on us every day. Think back to the gazillion pre-Cyprus posts - particularly those from the Auspm eras - and remember the rage and constant wingeing about the "evils" and distortions inflicted by the current system. Taking steps and encouraging others to break out of that is itself a reason to stack.

People like NR take steps to roll with the punches within the existing system but people like Bernard von NotHaus (of the Norfed Liberty Dollars) were actively trying to break the system by creating true alternatives.

Sound money is fundamentally about restoring civil liberties. It always has been and always will be. Everything else is fluff and consequences around the edges of that central truth. The awakening of people to the realities of "bail-ins" have the potential to be a first step but could equally lead to even worse financial repression if people hand greater control to the current powers that be through their fear.

 

[hawkeye]

Oh, OK, so to boil that down, you are saying they are necessary because it's the only way to wake people up to the reality of the system. Yeah, I can see that. And I think it is happening too. At least to some degree. The world seems different post-Cyprus although that might be just my bias.

The question is, can government run a sound money system? I would argue not.

The other thing to notice is that so many more people have learned of the system. In the past, it was basically just "trust us, we are the experts, we know what we are doing". In the age of the internet the curtain has been peaked behind and is gradually being pulled back. If we think about all the traditional forms of media I'm pretty sure I would have never come across this stuff. I would have been as much in the dark as the average drone who watches his 3 hours of TV after work and reads the weekend newspapers.

 

[bordsilver]

Oh, OK, so to boil that down, you are saying they are necessary because it's the only way to wake people up to the reality of the system. Yeah, I can see that. And I think it is happening too. At least to some degree. The world seems different post-Cyprus although that might be just my bias.

+1

The question is, can government run a sound money system? I would argue not.

+1000. No Government can that's why the legal tender laws etc need to be abolished. A free market monetary solution is the only way sound money can survive (and like we've discussed previously, people may stray from truly sound money but I, and many others, would bet that any straying won't go too far under a truly free market solution - especially if the original common law "money as a bailment" treatment comes back).

The other thing to notice is that so many more people have learned of the system. In the past, it was basically just "trust us, we are the experts, we know what we are doing". In the age of the internet the curtain has been peaked behind and is gradually being pulled back. If we think about all the traditional forms of media I'm pretty sure I would have never come across this stuff. I would have been as much in the dark as the average drone who watches his 3 hours of TV after work and reads the weekend newspapers.

+1. The skepticism seems to be coming back. At the same time however, there is a plethora of propaganda and indoctrination (especially through the school system) that until given cause to question or being constantly barraged by people like me, the majority of my friends/family/colleagues seem to just happily go with the flow and ignore thinking about the world around them.

The fact that I have seen a couple of mainstream reporters like Alan Kohler make an obvious transition over the past few years and yet not get attacked by the standard ABC-blogger is promising. That people like Dan Denning and Kris Sayce manage to have tens of thousands of regular readers (and many tens of thousands of subscribers who probably only skim read or delete) from humble beginnings less than a decade ago speaks volumes about the changing face of the way people get their information and general dissatisfaction.

 

[Pirocco]

This 100000 guarantee is like this:
1000 people own 10 giving a total of 10000.
9000 gets stolen and consumed.
1000 people receive 10 guarantees.
1000 is left to guarantee this total of 10000.
The first 100 people can consume this guaranteed 1000
The remaining 900 people will consume nothing when they try.
This makes clear that that 100000 is just an arbitrary number. They could as well guarantee 50000 as 200000. Because the 0,5x halving/2x doubling means little compared to the 10 factor of the theft.
Insurances only work when a few of the population are affected, not when 90% is affected lol.
Yet, this scam seems to be King nowadays.