Did RBS Hit the Greece Election Eurogeddon Bank Holiday Panic Button by Mistake?

Hi Nadeem.

What I don't get is if we are into the realms of money printing, perhaps to the extreme as you've written about here, why would you not put a much larger chunk of your holdings into oil companies and other index linked funds for protection?

Surely that makes more sense from an inflationary standpoint, especially if the danger is extreme. Otherwise your cash stands to lose a lot of value if pessimistic events pan out.

thanks.

Hi Johnny

Because the stock price oscilations around the Inflation mega-trend can be as high as 50% or more!

Since March 2009 many stocks have doubled, whilst inflation has been about 15%. Because stock markets are subject to sentiment, wheras Inflation is, well the mega-trend.

Best

NW

I was wondering the same thing. Might just be coincidence this 'technical issue' is occurring around the same time that a bank in Italy (whose name escapes me and it was not reported at all by the MSM, strangely) was unable to meet withdrawals and had to freeze customers' accounts. And of course the downgrades from Moody's. I think all the UK banks downgraded are owned by RBS and we all know what a disaster zone that is. I'm concerned this may not be so much of a 'technical issue' but rather a 'liquidity moment' - a tremor that precedes an earthquake. I hope I'm just paranoid, but I'll be moving any money I have with these banks out on Monday morning nevertheless. I hope no one else follows suit, though, I really do.

Hi Nadeem,

You have got me interested in the UK housing market with your articles over the past six months.

I have question with regards to BoE base rate. Given the situation as you see it, what do you reckon the base rate would be over the next 5-8 years?

To get the economy moving the BoE would have to keep it low. However, growth with low base rates will lead to high inflation. To protect the value of the pound, rates would have to rise. Given the contradicting scenario, what do you forsee happening.

Following on from that, would it be better to go for 5 years fixed motgage rate(which is higher) or to go for the tracker (which is lower but leads to uncertainty)?

Your work is much appreciated and held in high esteem. I have learnt much from your articles/website over the last 2-3 years. One of the biggest things I have learnt is to be curious and ask questions as a diligent student.

Thanks a lot.

Cheers,

AC

Re: Your comments about paypal - how safe/secure do you think Paypal is. I read at any one time they have something around 100 million dollars balance (customer's positive balances). If there is a financial meltdown, that's a considerable amount of money to keep safe. Presumably that sort of amount has to be kept in the markets.

"The price paid by the bulk of ordinary people for the continuous money and debt printing merry-go-round is INFLATION as illustrated by the CPI Index."

I see the cost to society in general much bigger than just fudged CPI numbers :) It has been noted that Banking creates inequality, it creates the haves and the have nots. If everything was free we'd all be rich!

Hi Terry

I condsider the root of all evil as being the public sector and welfare state, it acts like a cancer that eats the econcomy alive.

We have waste swaiths of the UK either permanently on benefits or where as much as 70% of workers are employed by the public sector.

Britian CANNOT recover until there is a real effort to put these people to productive use.

As an example NHS GP's most of the time just go through the motions of providing a health service without actually providign one of any real value, though at heavy tax payers expense!

The smart people know the government will print money / debt to pay for the unproductive so leverage themselves to the inflation consquences.

And the welfare state IS EVIL, the public sector is EVIL, because it effectively turns those that could have been productive into non productive zombies that waste their whole lives that act as a drag on the economy.

Best

NW

I don't know if there is any single root of all evil, but a good candidate for the root of all stupidity is one-sided thinking of the sort displayed by NW in his comment. We live in mixed economies. The public sector makes up about 50% of the US economy according to economist James Galbraith. The public sector is necessary -- nothing intrinsically evil about it. China, which has shown itself to be the most dynamically growing economy in the history of world -- the biggest miracle of all -- does almost all of its banking in the public sector and about half of its production. What is needed is a good balance between public and private sectors. Fast declining US and UK have the mix strongly in favor of the private sector, so that the private sector parasitizes the public sector, arguably the worst of all possible worlds. How's it working for us? Stats don't look too good, do they.

Hi Ernie

There is nothing miraclulous of China's growth, as I have written countless times, all they are doing is catching up and will likely hit a brick wall at about the half way mark (about $20k per capita).

We saw with the soviet union the damage the public sector can do.

Like I said it is more than just the public sector, but the whole socialist package when what we need is competition in every area of society, else the economy will DIE a slow painful death! Which is what we are observing in many western nations today.

You want to kick start growth, then get rid of everything thats holding it back thats the welfare state, big government and the public sector it promotes.

The public sector and welfare state are bankrupting britian which is one of the primary reasons why he have high inflation despite depression.

Best

NW

Nadeem,

I think you will find it's the Banks who have bankrupted Britain and when they did they were not in the public sector.

I don't know how you can still sing the praises of private sector when we have Barclays, G4S, Winterbourne nursing homes, Southern Cross Nursing homes, PFI and the rest. If Barclays get sued it will be the taxpayer carrying the can. So much for the private sector

Markets are boring these days...wonder ow many end up trading it just out of boredom???? which is eaxctly what one shouldn't do.

Hi Nadeem

You've opened a big can on this one, that's for sure!!

The optimal system is clearly where even for public services, we have a 'credit card' to spend where we like for a service in a competitive world. If the world was about TVs it would be a perfect world.

The problem is clearly that the private sector becomes parasitic with little encouragement, particularly where it's not possible to have as many choices as for buying TVs or cameras. Health care is like that.

You can't have a wide choice of niche or specialist areas and even routine services end up operating like a cartel. Just like the banks.

Then there's the lobbying. A stupidly large percentage of lords lobby for the finance industry, even offshore tax havens.

So the real question is how you stop the private sector becoming as parasitic as it always does.

There's nothing to really keep them honest as we are reminded on an almost daily basis.

G4S ignored qualified security personnel because it could make more govt money training fresh candidates. And so it goes on.

Hi Johnny and Dr Ray

Everything you refer to is the subversion of the free market private sector by the government which in effect turns them into public sector entities subject to unlimited tax payer bailouts. That is not the private sector, that is pseudo public sector.

Private sector must have a mechanism for those that cannot compete to go bust, for capital and resources to be reallocated. That is capitalsm ! Not what we see today! Which is why we are doomed economically to die a slow death until the next Maggie Thatcher comes along to apply commmonsense.

Labour Bankrupted Britain by bailing out the bankrupt banks. They should have let them go bust, this is nothign new for I have been consistent in my point of view for many years if not decades. Perhaps a decade from now, people will know the truth and point the finger firmly at Labour in the UK and Bush in the US.

You are not going to grow the economy by turning the private sector into a pseudo public sector.

Which is why I KNOW all the government can do is to print money and inflate, nothing else.

The biggest test of an econcomic system comes during the bust, how they handle the bust, the more socialist the response the weaker will be the recovery.

Best

NW