Economy

It’s Your Money But You Can’t Have It: EU Proposes Account Freezes To Halt Bank Runs

EU states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed.

The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble.

The proposal, which has been in discussion since January, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender.

Spooking Customers

Charlie Bannister of the Association for Financial Markets in Europe (AFME), says “We strongly believe that this would incentivize depositors to run from a bank at an early stage.”

Why Might Customers Want to Run?

Here are a trillion reasons: Over €1 Trillion Nonperforming EU Loans: EU vs US Percentages.

 

Germans “Lose Faith In Banks”; Rush To Buy Safes

According to the WSJ, German savers are leaving the “security of savings banks” for what many now consider an even safer place to park their cash: home safes.

“It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,” said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344), including part of his company pension that he took as a pay-out.

Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump in sales of home safes in the first half of this year compared with the year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”

As the WSJ adds, in a country where few people buy stocks, the possibility of having to pay fees on deposits has turned savers’ world—and their piggy banks—upside down.

“The moment the bank tells me I have to pay interest on my deposit I’ll take my €50,000 or whatever it is and put it under my pillow, or buy a safe and stick the money inside,” said Dagmar Metzger, a 53-year-old entrepreneur in Munich.

Why Do Smart People Make Dumb Decisions?

One of the most successful basketball players of all time was Wilt Chamberlain [60’s/70’s]. However he was a terrible free throw shooter, preferring like many, to put the ball above his head to throw. However, when he did underhand shots, his success rate increased from 38% to 61%. But because he regarded these as “sissy” shots, he abandoned underhand shots, sacrificing many points.

In a similar vein, there is no means of avoiding a final collapse of a boom brought about by credit expansion via ongoing Quantitative Easing ie printing money out of nothing. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.

To ‘voluntarily abandon further credit expansion’ means letting natural market forces bring down stock, bond and real estate prices from their current bubble highs — thereby vaporizing a lot of paper wealth. It means widespread layoffs as inefficient companies that have been kept alive by nearly free access to nearly unlimited credit have to start actually generating profits if they can. It means living below our means today, so that we can sustainably live within them tomorrow.

Instead, they simply double down on the policies that got us into this mess in the first place, claiming that their efforts to date just haven’t been big enough yet to succeed. And they do this with the full support of our politicians, who want to avoid any unpopular austerity measures because they care much more about getting re-elected than the hard work of actually addressing our nation’s structural problems. So interest rates go even lower, asset bubbles grow even higher, the wealth gap extends even wider, and the risks of a “total catastrophe of the currency system” become even more extreme.

We will continue to see more wrong choices being made for the wrong reasons until the entire systems fails.

Zero Hedge

The Essence of Propaganda is Repetition

Advertisers will tell you that the essence of propaganda is repetition.

If you tell a small lie, people will see through it but if you tell a great big lie over and over again, people will believe it.

The government puts this to good use by promoting the myth over and over again that Britain is a low tax country while at the same time increasing most taxes relentlessly & cutting subsidies.

For example, Income Tax & NI account for 52% of government revenues and in the last budget he increased taxes significantly on dividend income [treating directors/entrepreneurs more like PAYE].

Then in a slight of hand, he reduces CGT which only accounts for 1% of revenues. The reason is simple: Government debt continues to increase at £300,000 per minute.

The more things change; the more they remain the same.

It’s Now Cheaper To ‘Buy’ A Dry Bulk Freight Tanker Than A Starbucks Coffee

With the Baltic Index at record lows due to a  slump in global trade,Goldenport, one of the last shipping companies left on the LSE, has now delisted from the market and sold off six of its remaining eight vessels for $1.

John Dragnis, the chief executive of Goldenport, said “Dry bulk vessels generally have fallen in value by around 60% over the last year partly because of extreme oversupply and partly because of low demand for coal as China moves towards renewable energy to curb [carbon] emissions,” adding that “The prevailing market conditions are probably the worst of the last 30 years.”

Zerohedge

Safes Sold Out in Japan: Customers Hoard Cash in Response to Negative Rates

In a surprise move, Japan joined the negative interest rate club on January 29th. The Bank of Japan expected the move would force consumers to spend some of their money. Instead, it has had the opposite effect.

The only surge in sales has been for safes, a place where the interest rate is always zero [not negative], no matter what the central bank does.

Wall Street Journal 22/2/16

Bank “Bail-Ins” Begin…Watch Your Bank Accounts

Your Life Savings Could be Wiped Out

Four Italian banks collapsed last month and depositors lost any savings in excess of €100K. The rescue of the four banks was a “bail-in” – meaning bondholders & depositors suffered losses – unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros.

If your too-big-to-fail (TBTF) bank is failing because they can’t pay off, for example the derivative bets they made [which are off balance sheet] and the government refuses to bail them out, under a mandate titled “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” approved on Nov. 16 2014, by the G20’s Financial Stability Board , they can take your deposited money and turn it into shares of equity capital to try and keep your TBTF bank from failing.

Protect your wealth NOW.

What’s that sound of breaking glass?

The Chancellor, has characterised himself as the pensions champion with his “pensions revolution”, but the truth is that the Tories are just as bad as everyone else in targeting saving for retirement as a source of revenue to fund the ever onwards and upwards march of government spending.

Both the “lifetime limit” and the annual limit on what you can save have been cut twice under the present Government. All three main parties now plan to go a stage further. The lifetime limit is to be cut again to just £1m next year.

Yet the reality is that progressive removal of tax breaks is for the better off just another form of disguised tax increase. The new lifetime limit means that it is now virtually impossible for a private sector worker to buy himself the same pension in retirement as can be “earned”in the public sector.

It doesn’t have to be this way. Call for an initial consultation.

Next Stop: Deflation

Published on 18/11/2014

The Yen currently trades circa 115 to the US$. At the end of 2011, the Yen was about 77 to the $. That is a decline of roughly 33%.
Yet, Japan’s inflation barely budged. Japan’s prime minister Shinzō Abe is not pleased.
On October 31, the Bank of Japan pledged “Unwavering Determination” to Get 2% Inflation.

What’s Next?

To quote Yogi Berra, “It’s tough to make predictions about the future.” Nonetheless, via email, SocGen’s Albert Edwards expects a “Tidal wave of westward deflation” and “The Yen @ 145 to the US$ by March.”

China has suffered a record 32 successive months of deflation at the producer price level. Do investors really think China can cope with a devaluation of the yen from here? They simply can’t tolerate this and they won’t. They will devalue.

Deflation Shock Wave Thesis:

1 Next phase of currency wars is underway

2 Japan will do whatever it takes to produce inflation

3 Yen sinks to 145

4 China devalues the Yen in response

5 Tidal wave of deflation heads West

6 US brands China currency manipulator

7 Gold soars

Protect Your Wealth NOW.

Albert Edwards & Mish’s Global Economic Trend Analysis

Alan Greenspan: QE Failed To Help The Economy, The Unwind Will Be Painful; “Buy Gold”

Published on 18/11/2014

Alan Greenspan: ” Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.” … “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner . … “Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked. Just some of the startling observations by AG in a recent speech. Does he know something we don’t?

Protect your assets NOW.

Federal Reserve Chairman for 19 years to 2006 i n comments to the Council on Foreign Relations.

10th October 2014