Gyroscopic Investing

Coming soon to a country very near to you? It's about time major Western governments clamped down on those pesky consumers who think they have a right to control their own money: 


http://www.zerohedge.com/news/2016-02-0 ... -euro-note

When I first heard about Sweden going cashless, it seemed like a good idea for a small progressive state to give it a try before the rest of the world.  Heck, I hardly ever carry cash anymore, so I hope it works for them, and am interested to see the results of the experiment.  If I were Germany, I'd wait and see how it plays out in Sweden before trying it, since Germany is so much bigger and important to the world economy.  I do wonder how they would cope with possibilities like solar flares or EMPs knocking all the computers off-line.  Maybe if you live in Europe, it's time to start stocking up on liquor and toilet paper, the stuff that has intrinsic value.

My favorite line from the article:
“if a European solution isn’t possible, Germany will move ahead on its own”.
Pretty much sums up why I don't invest in the European "Union".

Zero Hedge is always fun, I love checking out the comments section, it's like being tossed into a mosh-pit.  Yeah bitchez!!

The article really got into the scary horror-movie genre when it started talking about negative savings account interest rates:

Once negative rates are passed on to depositors - and trust us, that’s coming - people will simply start pulling their money out of the bank. The more negative rates go, the faster those withdrawals will be.

When you ban cash you eliminate this problem. In a cashless society with a government-managed digital currency there is no effective lower bound. If the economy isn’t doing what a bunch of bureaucrats want it to do, they can simply make interest rates deeply negative, forcing would-be savers to become consumers by making them choose between spending or watching as the bank simply confiscates their money in the name of NIRP.

What would you all do if that were to happen here?  I'd start by socking savings at home, then into gold coins and US savings bonds, assuming the latter are still around.  Then I'd pay off mortgages and other debt for myself and family.  The last thing I'd want to do is leave money in the bank and watch it dwindle.

I suppose you could also consider that the value of the money might not be decreasing that much, and that cash tends to have a negative real return even with high nominal interest rates.  But it sure would be hard to see savings balances going down every month.

sophie wrote: What would you all do if that were to happen here?  I'd start by socking savings at home, then into gold coins and US savings bonds, assuming the latter are still around.  Then I'd pay off mortgages and other debt for myself and family.  The last thing I'd want to do is leave money in the bank and watch it dwindle.

I suppose you could also consider that the value of the money might not be decreasing that much, and that cash tends to have a negative real return even with high nominal interest rates.  But it sure would be hard to see savings balances going down every month.

What's the difference between a negative savings rate and inflation? In either case, the purcashing power of your savings is being taken -- in one case in nominal terms (likely in real as well), in the other in real terms.

I have the same initial/emotional reaction as you, Sophie, but is it really that different?

drumminj wrote:

What's the difference between a negative savings rate and inflation? In either case, the purcashing power of your savings is being taken -- in one case in nominal terms (likely in real as well), in the other in real terms.

As  Rev. Goodasgold never tires of preaching, think I-bonds, I-bonds, and MORE I-bonds.

drumminj wrote:

sophie wrote: What would you all do if that were to happen here?  I'd start by socking savings at home, then into gold coins and US savings bonds, assuming the latter are still around.  Then I'd pay off mortgages and other debt for myself and family.  The last thing I'd want to do is leave money in the bank and watch it dwindle.

I suppose you could also consider that the value of the money might not be decreasing that much, and that cash tends to have a negative real return even with high nominal interest rates.  But it sure would be hard to see savings balances going down every month.

What's the difference between a negative savings rate and inflation? In either case, the purcashing power of your savings is being taken -- in one case in nominal terms (likely in real as well), in the other in real terms.

I have the same initial/emotional reaction as you, Sophie, but is it really that different?

Wouldn't inflation be where a lot of different parties all decide individually that they are going to be raising their prices due to other prices being raised? This would constrast negative savings rate where a few organizations (i.e. Federal Government, or Big Banks), start imposing it on everyone else. Now maybe this would be different if you have a choice in banks and some are less negative than others, but I feel like the prevailing trend might pull everything down, much like the tide brings down all boats.

Austen Heller wrote: Zero Hedge is always fun

It really is.
Never fails to put a smile on my face.

Greg wrote: Wouldn't inflation be where a lot of different parties all decide individually that they are going to be raising their prices due to other prices being raised? This would constrast negative savings rate where a few organizations (i.e. Federal Government, or Big Banks), start imposing it on everyone else. Now maybe this would be different if you have a choice in banks and some are less negative than others, but I feel like the prevailing trend might pull everything down, much like the tide brings down all boats.

I guess it's a function of perspective.  If you consider inflation = price of goods, then yes, it's a function of many people. If inflation = supply of money, then it's a function of the federal reserve, primarily (and I suppose fractional-reserve banks)

If the context is how your savings and investments are holding up/growing, then I agree with you. However, money supply (regulated by the Fed, US banks, and perhaps one could argue the US treasury based on their borrowing) is undoubtedly an input into this equation.

Supply of goods is one factor.  Supply of money is another.  No matter which way you are looking at it, it seems to me the Fed is the biggest individual actor.