Feb 282012
 
 February 28, 2012  Posted by at 11:41 pm Finance
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Detroit Publishing Co. Nôtre Dame de Montréal 1900 “Main altar, Church of Notre Dame, Montreal, Quebec.”

 

This is a Guest Post by long time TAE regular, El Gallinazo.

A subject that commonly comes up in TAE is what to do with your savings if you have too much to stuff in “that creative place” that Nicole often refers to. And what she suggests is that the safest place to put it is in short term treasuries. If you are a citizen or a legal alien in the USA, that means T-bills, and if your money is not tax deferred, the only sensible way to do it is via Treasury Direct. A couple of days ago one of my closer friends sent me the following piece by Robert Moore on Rick’s Picks:

T-Bills May Offer Boomers a ‘Safe’ Way to Lose

She sent it with the message, “What’s this mean?” She is never one for verbose emails. As you might imagine, the title of the article by Robert Moore, intrigued me, but as I read through it I became a bit irate, and I decided to reply with a comment. Well this comment got supersized and I thought it might have the makings of a feature on TAE. I haven’t done one for almost a year. Instead of interleaving my commentary with the offending article, I would like to present it in a continuous format. So may I suggest that you read the Moore article and perhaps some of the comments and then come back.

I found this article to be quite irritating, not because your ideas were ipso facto bogus, but that you should label anyone who might disagree with them to be a fool and ignoramus. The entire premise of your article is that we are headed into a period of immediate global inflation or hyperinflation. However, there are some very bright people, Nicole Foss (Stoneleigh) of The Automatic Earth comes first to mind, who believe that the collapse of the global Ponzi, which began in 2008, and which is slowly accelerating, will result in the short term, perhaps several years, in a global deflationary depression.

She maintains that this deflation is already under way, in the Austrian School use of the word, as a net reduction in the sum of money, credit, and velocity. Mish also believes this. The continuing collapse of the shadow banking system and consequent credit destruction are the current cause though it is soon to spread to the TBTF banks and sovereign treasury bonds. This will lead in the short term to a price deflation of paper and physical assets in terms of the USD, which can already be seen in regard to US residential real estate.

The inflationistas will counter that the Fed and the other central banks will never allow a deflationary collapse. They will “print” their way eventually into hyperinflation (HI). (I put print in quotations because expanding debt through a central bank is really quite different from actually printing paper currency for which there is no true debt holder, but simply a dilution of the currency value.) This assumes that first they would want to, and second that they can. As to the first point, probably only the Rockefellers and the Rothschilds have an accurate idea of what the cartel’s long term strategy is.

A severe deflation, which they would have prepared for as they have engineered it, would allow them to buy up the remaining physical assets of the globe for pennies on the dollar. And could they prevent it even if they wished to? The growth of the central bank’s balance sheets of the USA, ECB, UK, and Japan since the collapse started in 2008 is less than $5T. (I am leaving China out as their statistics are moot). The collapse in global real estate values alone is considerably larger, and when you include all asset classes and throw in the quadrillion dollar derivative market, it is many times that. There are many expert analysts who predict that when the defaults begin in earnest, Uncle Ben and Don Capo Draghi will be as helpless as the Wizard of Oz to stop it. They will be overwhelmed by the collapse of the Ponzi resulting in a tsunami of default.

But let me regress for a moment to contemplate the strategic plans of the NWO. Some might say that the capos of the global banking cartel have no long term strategy. That they do not even discuss this concept with each other and all their actions are based upon fear and greed with a time horizon of 72 hours. They might even argue that the Bilderbergers, like Wendy’s, simply wish to compete with McDonalds, and the Trilateral Commission and the CFR are just watering holes with good leather upholstery. But for those people who believe that the people who possess most of the world’s wealth and coercive power might deem it as useful to construct a long term business plan as a garage based entrepreneur, we might give it a little thought.

My conclusion is that the final goal is to subject the global 99% into permanent debt serfdom. But if they permit the currencies upon which those debts were structured to go into hyperinflation, then the potential debt serfs could divert a wheelbarrow full of said currency from their home heating systems and buy their way out of life long debt servitude into the bright light of freedom, if one of debt free poverty. Ah yes, as Janis wailed, “Freedom’s just another word for nothing left to lose.” So I must conclude that the NWO capos regard HI as a potential disaster to be avoided.

But any intelligent economist, meaning one of the Austrian School, will freely admit that the natural consequence of the world’s all time hugest bubble bursting is a deflationary collapse, as in deflation. And that the only way that could be conceivably avoided would be for the central banks to “print” stupendous amounts of offsetting credit. But this could lead to a global HI which are the bankers’ worst nightmare as it would essentially lead to a jubilee for the 99%.

In a severe deflationary collapse, most assets will drastically lose value in nominal terms. In my opinion, the S&P 500 is absurdly overpriced. Every time the Fed or the ECB expands their balance sheets, whether covertly (currency swaps) or openly, the so call risk assets surge. So what are the options of a person with some savings? We have the general risk assets of equities and commodity futures, physical assets such as land and buildings as well as assorted junk from China, bonds excluding the US Treasury, US Treasuries, and the precious metals.

So if deflationary collapse, which I predict, does come to pass, then all but the last two will be obvious losers in both nominal and real terms. As to precious metals, it is my opinion that they will maintain their real value over the longer term, as they have since the time of Rome. However, I believe that during the collapse, PMs will lose nominal value for two basic reasons. First, their current nominal value is artificially high because it is propped up by extreme margin leverage extended primarily by the commodity brokers (such as MF Global) and their backers (JPMC). What do you think the value of paper gold would be if there were no credit to buy it on margin? And I think we are rapidly entering a world where most credit is disappearing.

Second, I think that many during the collapse will be forced to sell PMs, particularly gold, to meet margin calls, trying to stave off insolvency. Gold may be the only thing that anyone might be interested in buying at that point in time, and it would become a buyer’s market. I do believe, however, that gold will be the first physical asset to recover.

So here we are with US Treasury Bills as the last of the list. Let me state for the record that I am a retiree with modest savings; that most of my savings are in 13 week treasuries purchased through Treasury Direct, and that I am currently living in Mexico in very modest comfort on my Social Security checks. In short, I am one of Robert’s idiots.

Now let me direct my idiotic blather to several of his points as well as supporting commenters:

* When the currency of a country appears to be nearing collapse (most would regard this as imminent HI), then the yield on the bonds go into an exponential moon shot. This is because lenders would want to be compensated for the loss of real value as well as the probability of sovereign bond default. Greece is not a great example as it doesn’t have its own currency, but look at the current yield of their six month bonds. One might look at Argentina 2000-02 for a better example. So Robert is correct that only we idiots would invest in sovereign debt at 0 or negative nominal yields.

Say a currency does go into a deflationary collapse of 7% per annum in terms of general purchasing power, and you hold bonds with a minus 2% yield. While you are losing 2% in nominal terms, you are actually gaining a 5% yield in real terms. This appears strange to people simply because the Fed criminals have kept the country in inflation since 1913 with a few modest exceptions such as the Great Depression.

* Moore suggests that it would be smarter to kept your savings in currency under your mattress than in T-bills. First, the Fed and the NWO Banking Cartel frown upon currency. It is one of the few remaining areas of freedom and privacy in the money world. They would prefer to have every pack of gum you purchase recorded in their computers, complete with brand and number of pieces contained in the package. In order to villainize cash, anyone with large sums is ipso facto regarded by the “authorities” as either a drug dealer or a terraist. And this tends to be at the discretion of the Secretary of the Treasury or his minions. Recent “laws” in this regard deprive you of any judicial recourse, on the off chance that the courts are not totally rigged.

So anyone holding large amounts of currency is subject to it’s confiscation. Second, I challenge anyone to go to his bank, if you live in the USA, and try to withdraw, say $8000 in cash. See how easy and hassle free it is. First, they usually ask you, in writing, what it is for, like it is a loan and not your own money. When you tell them to go to hell, they tell you that Turbo Timmah made them ask it. For most, the only hassle free way to accumulate cash is to take out the daily max from your ATM. But I would imagine that the banks will shortly build a weekly or monthly limit into their ATM programs.

* Next we come to bank savings which includes CD’s. Legally your savings are a loan to the bank, and with the repeal of Glass-Steagall, your bank may go to the casino and gamble with it as it sees fit, or give it out as a bonus for their deserving traders to purchase hookers and snort. And with recent federal legislation, holders of derivative instruments are the first in line when a bank fails. Please note the transfer of $60T in derivative wagers from the Merrill-Lynch division to the BAC FDIC flagship. Wonder why they did that?

The segregated accounts at MF Global were legally more secure than any checking account, CD, or money market account. They were essentially virtual safety deposit boxes in which MFG was given the authority to take out money only upon the account holder’s explicit orders to purchase future contracts or cover margins. Yet Corzine and Dimon stole as much as $2B from these accounts without even a hiccup from Eric PlaceHolder, who was too busy running guns to the Zetas in Mexico. And you think your money in the bank is safe?

* And now we come to the FDIC. First, that Robert should accept the $250k limit at face value is bizarre. A joint account is insured up to $500k, and insurance goes by the account not by the person. So if some dude has five million bucks, he just opens up 20 accounts and puts $250k in each. No hay problema. But will the FDIC pay off on a systemic collapse of the banking system. Note that the C in FDIC stands for corporation. And it is basically broke as we breath. Are TPTB willing to monetize $5T to pay off account holders?

One may observe that the balance sheet of the Fed after all the illegal and quasi legal crap gone down over the last 4 years, including taking near worthless assets off the hands of their buddies at face value, stands at under $3T. So I don’t think so. The Boyz don’t put their money in checking accounts or CD’s and the Boyz run the show. As the late George Carlin put it, “It’s a club and you’re not in it.” I think it is far more probable that they will pay out the account holders a nominal sum, like $400 a month, until it is paid off in the 22nd century.

* As everyone interested in macroeconomics knows, since 1971 when Nixon closed the gold window, money is debt and nothing more. And the debt that supports the US currency is the Treasury debt. So the dollar is totally dependent on the confidence of the world in the US Treasury. The collapse of the Treasury would result in the dollar immediately becoming worthless, i.e. instant HI. There are some very intelligent people who believe that the NWO intends to collapse the dollar eventually and replace it with a global currency. I am one of them (though you may leave out the intelligent descriptive in my case).

And the easiest way to collapse the dollar is to collapse the confidence in the Treasury. However, in my opinion this is in the future and not the immediate future. And the advantage of buying T-bills through Treasury Direct is that you have no “private sector” broker in the middle (Jon Corzine for example) to steal them. The drawback is that you cannot use tax deferred funds to buy them. But the ominous future on tax deferred funds would be the makings of a rant for another day. It seems that people are becoming too irresponsible not to wait until after they die to withdraw them.

In a severe deflationary collapse, what appeared to be money during the bubble expansion (really credit) disappears with barely a trace as it is sucked into an alternate universe. Since the total sum of money and credit becomes a small fraction of what it was at the bubble’s peak, the vast majority of asset holders become losers both in nominal and real terms. With a few very rare exceptions, the ones who lose the least – win.

So, in summary, I remain “invested” in 13 week T-bills through Treasury Direct and have no intention of being forced into risk assets or using up my modest savings in a couple of years and then eating dog kibble.

Your faithful idiot,

El Gallinazo

Home Forums When the Deflation Tsunami Hits, Losing the Least is a Winner

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February 28, 2012 at 11:41 pm #8608

el gallinazo

Detroit Publishing Co. Nôtre Dame de Montréal 1900 “Main altar, Church of Notre Dame, Montreal, Quebec.”   This is a Guest Post by long time TAE
[See the full post at: When the Deflation Tsunami Hits, Losing the Least is a Winner]

February 29, 2012 at 1:15 am #1097

Viscount St. Albans

Great article El G! Entertaining as always and very clearly written.
I hope you become a regular official writer for TAE.
I always look for your stuff and it would enrich TAE if your thoughts were regularly featured on the front page rather than tucked into comments here and there.

February 29, 2012 at 3:27 am #1100

backwardsevolution

El G – extremely well written. Thank you. Please write more. I like your humour too!

February 29, 2012 at 3:39 am #1101

Beguine

You may be faithful, El Gallinazo, but you’re not an idiot ..
You may have to come out of retirement and educate us a little more.. and yes, I like the humour, too!

February 29, 2012 at 4:32 am #1103

mrawlings

Well done El G. And I’m with those who would be glad to read essays by you. You are after all retired, so you have no excuses.

On a lighter note, here is a link to a short video of a waiter spilling beer on Angela Merkel. I suppose that this is what comes of serving beer in overgrown wine glasses.

http://www.youtube.com/watch?feature=player_embedded&v=D2mjas_LID0

February 29, 2012 at 4:34 am #1104

mrawlings

She flinched more when ol’ Bush jr tried to give her a shoulder rub.

February 29, 2012 at 4:44 am #1105

el gallinazo

Thanks to everyone for the kind words.

As to:

“She flinched more when ol’ Bush jr tried to give her a shoulder rub.”

I condemn her for many things, but that is not one of them. I too would prefer the touch of an honest German brew on my skin than the hands of a cognitively challenged mass murderer.

February 29, 2012 at 4:52 am #1106

Vortex

That was superb but misses the prime directive by a mile. T-Bill’s are still worthless IOU’s. Unfortunately, the deleveraging and deflation is precisely why there is going to be massive hyper-inflation. It is already underway.

The writing is on the wall, the USA NWO banking empire will either HI the currency and subsequent debts away or they will no longer be in power. These same power hunger banking freaks destroy nations everyday, and I’m suppose to buy their bloody deadly T-Bill’s to remain solvent. Get real.

These centuries old demonic banking parasite families will not relinquish power without the battle of the millennium. There will surely be deflation in crap and garbage you don’t need to survive and HI in everything else you must have to survive. That’s how they own everything of value.

Savings in T-Bill’s only assures that you will be eating dog food to survive much sooner than you ever thought possible.

This site just a few short weeks ago was trumpeting the ridicules notion that gold was a poor investment going forward, and now the disgusting fraudulent worthless FED Reserve T-Bill’s are the flavor of the day.

I am truly in the Twilight Zone when such incredibly smart people such as those at TAE think the well documented Ponzi Scheme of fraudulent and worthless paper instruments such as T-Bill’s is the savior for the impending collapse.

Scotty, beam me up!

February 29, 2012 at 5:35 am #1108

Reverse Engineer

I agree with most of your analysis EG, but I don’t like any financial instrument which depends on the intermediary of the financial markets to divest yourself of in a hurry. You want the most fungible stuff you can lay your hands on, which generaly speaking are Paper FRNs. They work just about everywhere, even Drug Dealers in Mejico take them no questions asked :-)

Though Inflation in some commodities is going to occur as long as the TBTF are issued ZIRP money to speculate with, HI is more a relative phenomena between currencies as weak ones get squashed. So the Euro is a ripe one these days for HI, but the Dollar is not yet, and until the Euro is flushed down the toilet, its not likely to devalue that fast.

So anyhow, I’m long on FRNs in the Bank of Sealy and buried in various locations along with some of the Gold I have panned up over the years, and I don’t concern myself with the idea of trying to conserve mega bucks worth of investments I cannot really extinguish for cash. If its a Long Emergency slow crash, I can dribble out liquidiations and exist in perpetuity. In a Seneca Effect style fast crash, just about everything except Guns, Ammo and Pint Bottles of Vodka will be quite worthless.

How do you get hold of FRNs under the Radar? You can’t take out $8K at once, you have to do it a couple hundred at a time, every paycheck. I started back in 2008 :-)

Will HI hit the Dollar at some point? Possibly, but unlikely before it takes out the Euro and the Yen, so you should have decent warning on that. When you see prices going up EVERY DAY in the Supermarket as was the case when I lived in Brasil back in the 60s, you dump your Cruzeiros for Hard Goods as fast as you earn them. Until then its the 3 Fs, Fungability, Flexibility and FOOD in the larder. Oh yea, don’t forget the Guns and Ammo and Pint Bottles of Vodka either!

RE

http://www.doomsteaddiner.org

February 29, 2012 at 6:54 am #1111

davefairtex

My two cents, for what its worth.

If your choices boil down to deposits in a bank, money market accounts, and Treasury Direct, its pretty clear to me that removing the middle men is likely the safest approach.

* Paper FRNs – safest cash vehicle. Legal tender for all debts public and private. Cash is ultimately safer than debt, since there is no counterparty risk. However, they can always catch fire and burn up, which is not ideal.
* Treasury Direct – safest electronic deposit; can’t be stolen, but could have maturities extended arbitrarily (as will happen in Greece).
* FDIC insured deposits – can’t be stolen, could be impounded “for a while” if your bank goes under, but ultimately are only as good as the FDIC’s ability to borrow from Treasury, which depends on the Fed’s ability to monetize in a serious crisis.
* Treasuries in an account – can be stolen as they were at MF Global
* Money Market accounts – could break the buck, can also be stolen as at MF Global

To me, its first cash, and then treasury direct for safer USD storage vehicles. And if I lived in Mexico, I think I’d pick Treasury Direct. I don’t think I’d want a big pile of USD cash lying around my villa…

If you are dead certain that hyperinflation comes next, then of course cash isn’t the right choice.

February 29, 2012 at 7:11 am #1113

Viscount St. Albans

@ Reverse Engineer.
Thanks for that comment above. I enjoyed it and your rationale. It’s a nice supplement to the themes introduced in El G’s article. I would love to hear more about the details of your experience in Brazil in the 60′s. I’m very interested in on-the-ground perspectives of folks who’ve lived through wholesale financial meltdown. How did it look and how did it feel? How did the daily acitivities and patterns of life devolve as instability grew around you? What did the neighbors say and when did they start to panic….that sort of thing. It would be a great feature article (IMO).

February 29, 2012 at 7:19 am #1114

Viscount St. Albans

@ vortex….
interesting thoughts. As many others have pointed out before, there are hedging strategies that don’t necessarily involve the investment portfolio. Skill development in the form of job training and or new business skills can be a mechanism to keep a foot in both worlds. I think it’s possible to invest with a mind towards deflation while preparing oneself for productive work in a world where very few things hold stable value for sustained lengths of time outside the black markets.
Examples of productive work: Micro-scale (i.e. broad generalist skills vs. hyper-specialized skills) in health care, repair, agrculture, food and beverage preparation, transportation, and construction. Pretty much everything that’s done today but with an eye towards the micro-local scale vs. the macro vertically integrated multi-national corporate scale. Friend of a friend of a friend is a bike mechanic, and that’s merely one example of a useful skill set to have in the future. Invest in T-bills while learning to build/repair bikes and bike paraphaneilia (tow-behind carts etc). By hook or by crook, whether you believe in HI or deflation, a growing fraction of the global population will be riding bikes vs. driving in the years ahead. It would be good to have the skill set to build/repair bike based transportation before it becomes a necessity for the upper 30% clerical/managerial class of the income scale.

February 29, 2012 at 7:44 am #1115

Viscount St. Albans

Re: on-the-ground perspectives of financial meltdown

Does TAE have any readers in Eastern Europe/Peripheral Western Europe who could supply us with personal stories of how the intense deflationary crunch is being experienced day-to-day?
Every so often the western flag-ship press (NYtimes, WSJ, Telegraph, Guardian etc) runs an anecdotal human interest story that intends to make the pain of deflation real for its readership. But a boots-on-the-ground perspective of day-to-day life of someone experiencing the evolving hardships in peripheral Europe would be enlightening.
I would greatly value real time reporting of the seemingly mundane, yet often revealing, observations of life on the ground in these nations most affected by the deflationary crunch — not from a schadenfreude perspective, but rather from the perspective of living and learning from the experiences and observations of others.

February 29, 2012 at 7:54 am #1116

Reverse Engineer

Viscount St. Albans post=711 wrote: @ Reverse Engineer.
Thanks for that comment above. I enjoyed it and your rationale. It’s a nice supplement to the themes introduced in El G’s article. I would love to hear more about the details of your experience in Brazil in the 60′s. I’m very interested in on-the-ground perspectives of folks who’ve lived through wholesale financial meltdown. How did it look and how did it feel. How did the daily acitivities and patterns of life devolve as instability grew around you. What did the neighbors say and when did they start to panic….that sort of thing. It would be a great feature article (IMO).

I’ve written some articles about my Brasil years in the past, but I was a Boy/Observer of the effects, not an Adult Brasileiro who had to deal with it. My family also was relatively immune from these effects, because my father was receiving his salary in Dollars.

For my friends whose families were paid in Cruzeiros, it was generally panic all the time and a struggle to keep ahead of the game. The military was out in the streets quite often in those days. However, even in Rio in those years the local farmers markets were operational and a good deal of barter went on. It would be quite a different situation today I think.

It also is much different in the sense of being a relative effect. See, when a local currency like the Curzeiro HIs, a currency like the Dollar still works and a Black Market flourishes, the economy essentially “Dollarizes” for a while. Same thing occured with the Rouble in Dmitri Orlov’s crashign Soviet Union.

This is not going to be the case when the cascade works its way back into the center of Fiat money creation, and it does not matter whether its the Dollar or an SDR substitute. There just will not be any functioning FOREX for trade, and the letters of credit will collapse. There really will not BE a Black market at all, not even for buying stuff with Gold Coins stored in your Basement Safe.

This kind of monetary collapse has not occurred since the time of the Roman Empire. Its been a constant build out from the Medici period onward. Many smaller relative collapses, but no COMPLETE collapse of a monetary system has occurred through this time period. In fact in the Historical Record there really are only two of such magnitude, that would be Rome and Babylon before that. This one is bigger than both of those because in fact they were localized to a relatively small portion of the globe being run under monetary principles of debt-credit issuance. In this case it is Global with 7B people participating in it, excluding virtually nobody except a few Amazonian Tribes, a few Bushmen in the Kalahari and a few Inuit up in Nunavut. When it fails, its going to be something to behold indeed, something never before witnessed in all of Human History, and you have a Front Row Seat for it on the 50 yard line. Count yourself lucky, very few people in history get to witness the complete collapse of a monetary system. Its Coming Soon to a Theatre Near You.

RE

http://www.doomsteaddiner.org

February 29, 2012 at 8:35 am #1117

alfbell

One thing that I have learned is life is that we live in a world mostly of hypocrisies and ironies. Truth tends to dive out of sight and hide… or more precisely, is hidden by those who desire control. There is always a veneer that the masses don’t see beyond, and it forms the reality that they operate off of and interact with. With important matters, things always seem to be the opposite… what appears to be white is actually black, what appears to be fiction is actually fact. (I’m a poet and I don’t know it.)

It seems that major inflation or HI would be detrimental to TPTB. It would cause interest rates to rise and then there would be no chance of the US govmt being able to service its debt. Plus, all the “debt slaves” would be able to get out of debt by paying it off with cheaper dollars.

Thus, inflation or HI—and the strategy of buying gold and silver, real estate and other tangibles to survive it—may be the veneer. What a perfect set up: Bernanke chases all savers out of savings accounts and treasuries and into the stock market, real estate and other risky investments (forcing them to take a risk to get a return and “protect their money from losing its purchasing power”) and also gets them more into debt with these “lowest mortgage rates in history” and “.99%, no down payment, 6 year loans on a new car” , etc…. and then WHAM! the deflation cycle starts to move fast and heavy and all assets go down in value to a LOW bottom. Those with assets and debt get creamed. Only those who saw through the veneer and stayed in cash are able to survive because in a deflation… CASH IS KING, because cash is scarce.

The power elite now move in and scoop up the assets for pennies on the dollar and increase their net worth again for the umpteenth time.

The best strategy may very well be to “be the bank”. Figure out the strategy of the power elite and do exactly what they are doing at the level you are capable of.

Personally, I’m fully liquid, no gold or silver, no debt, continuing to streamline my living expenses, strengthening my health and immune system, building skills and businesses so I can exchange services for value no matter what the economic climate, and looking for a self-sufficient community to join.

February 29, 2012 at 9:02 am #1118

Dig Dirt

The other ‘thing’ to invest in – as Stoneleigh has mentioned is to invest in building your trust horizon. Work hard, do what you say, be honest in your dealings etc. This has to go on within the parameters of a community of people who know each other. In a big old city it can be a waste of time. I lived in the same street in Melbourne Australia (pop 4 million) for 14 years and no one really knew each other and trust was okay at best. I then moved to a small town about 125 kilometres north and it is vastly different. In a big city if someone smashed a public asset like a toilet block it just gets deferred to the ‘authorities’ but in a small town it is everyone’s business. People actively want to do something about issues and people sort of keep each other honest – or you can go out of business.
I agree big time with the skills thing too. In an attempt to mitigate the disaster of financial shit going down, it is well worth the investment in reducing exposure to need money in what ever form. My current example is with a friend in a close town. I have worked for him for a few days and we are logging the hours so I have those days in the bank. The thing is if he never paid me back his name would be a bit crap and would be shamed a bit so it works as long as either party is not over extended. This can be done with so many things like baby-sitting etc. I still like the idea of a coupla grand in paper notes buried in the forest too. Oh and about 50 kg of rice and the rest as a buffer against a really nasty dive.
My two cents.
Great article El G!

February 29, 2012 at 11:53 am #1121

Coco

Excellent summation. Thank you!

February 29, 2012 at 1:44 pm #1123

Anonymous

Thank you for a very interesting article El G.

I’ve been following Nicole Foss and TAE for awhile now and decided very early on that I needed to secure my cash/build myself a lifeboat of sorts.

After reading about our own “FDIC” and the rest of the “guarantees” that the banks is supposed to give me as a saver I got a nice knot in my stomach. So the decision was made to look elsewhere for safety.

This is what I found:
Here, in Sweden, we got something called Riksgälden who administers our state debt. This government authority gives us citizens a way to escape the clutches of the banks by letting us set up an account directly with the Swedish Government.

This account works like a savings account and you get some interest from it also. It’s tied to you personally and you can access your account instantly (as in 6 working days to administer the withdrawal). The interest right now is 1,25% (our “fed” rate of 1,5 – 0,25).

Perhaps there are some from Sweden who reads this and thinks this is usefull for them also.

Best regards.

February 29, 2012 at 1:49 pm #1124

Alexander Ac

Hello Viscount,

I am from Slovakia and work in the Czech Republic. I do not think the full blown deflation has hit (as nowhere in the world, just yet), but right now we are having massive anti-corruption demonstration in our country and in the Czech Republic, students are protesting against new reforms. In Slovakia there have also been protests among the doctors who were protesting against privatization of hospitals etc… on the other hand, mortgage frenzy is ongoing… Alex

February 29, 2012 at 2:24 pm #1126

ashvin

Vortex post=704 wrote: The writing is on the wall, the USA NWO banking empire will either HI the currency and subsequent debts away or they will no longer be in power. These same power hunger banking freaks destroy nations everyday, and I’m suppose to buy their bloody deadly T-Bill’s to remain solvent. Get real.

Vortex,

Do you use fossil fuels? The banking-energy complex has been destroying nations and environments for many decades now, yet most us would still make use of the [steadily declining] energy returns afforded by these fuels if it was a matter of survival. That’s what T-bills may provide above many other assets – a way to make it through the short and medium-term and have a long-term to worry about. All of us “very smart” people here at TAE have carefully considered the HI arguments, and decided we would still be remiss not to warn of potential near-term consequences of holding PMs and the benefits of holding cash and cash equivalents.

February 29, 2012 at 3:19 pm #1128

mkschneck

Very interesting and concise analysis. The third to last paragraph interested me very much. Assuming your assets in your IRA are in 13 week T bills as you recommend, would you remove the assets from the IRAs, pay the taxes and then move them into Treasury direct. As you are aware assets in IRAs are through some Schwab etc. Any thoughts about closing IRAs now and paying taxes or waiting.

February 29, 2012 at 3:31 pm #1130

Franny

Thanks for the good analysis. I have been using Treasury Direct for a while and only in the past week discovered the danger of letting the government hold your savings: government agencies are inefficient and often very dumb. Last Fall TD changed it’s security procedures. Since then they have locked out tens of thousands of customers who couldn’t correctly answer the (very poorly designed) security questions. You can’t get back in without talking to a human customer service representative, and guess what? There aren’t enough of them. Surprise, surprise. I was locked out of my account for five days because they asked me what was the first car I bought and I answered the make and model instead of just the model. I strongly suspect that I would still be locked out if I hadn’t called my Congressman and emailed my Senator about the problem. My numerous phone calls and emails were ignored until then. Within three hours of calling/emailing my representatives, I received a call back from a very competent person who quickly had my account unlocked.
At this point, I have little confidence that I won’t be “locked out” of my TD account when I need it.

February 29, 2012 at 5:10 pm #1133

Elle

SOS! Someone of you the smart guys out there, please teach me how to buy the 13 week (or so) T-bills IN CANADA so that they are in my name, as Nicole suggests. The housing bust here is nearing, but selling a house and park money on savings account or “creative place” seems even riskier than keeping the house. Thank you!!!

February 29, 2012 at 5:52 pm #1134

Joanna

Your comment about a payout taking place at $400/mo to infinity caught my attention.
My first thought was that all those tea-baggers who rail against welfare and unemployment ‘entitlements’ might jump at salvation by ‘payout’.
After enough hedonic adjustment in paychecks, getting your own money back (or whatever spin they’d want to put on mass bribery of the populace) via monthly check (Walmart cash card?) might seem oh so patriotic.

A politician/government who could throw a palatable bone to voters would be a shoo-in, and not many would look that gift horse in the mouth.

February 29, 2012 at 6:33 pm #1136

el gallinazo

First, let me express my admiration for the quality of the comments here on TAE. It makes the writing feel worth while. The article was also picked up on the front page of Business Insider (who knew?) as we New Yawkers would say. Haven’t read their comment section yet.

Franny. Yeah, they changed their security, and I feel for the worse also. I liked the old matrix card. A commenter here brought it up last month, I forget who, and he mentioned that you only get two strikes before they send you back to the dugout, and you better have that second cup of coffee before you log on. I also recommend that you keep all your td.gov security stuff written down exactly in a safe place. (Not on your computer. To large a chance that it can be commandeered over the broadband). Td.gov is a bit “stricter” than most “savings institution when you screw up your security, but most of them revoke your rights after a certain number of strikes.

Here’s a short story. When still in residence in St. John, I arrived in Cusco, Peru, and as usual, came down with a mild case of altitude sickness for three days (Zero to 11,250 feet in half an hour). My bank, Scotia, had branches all over Latin America, though none in the 50 states. I found one of their ATM machines, but I had my PIN in my head (which wasn’t hitting on all its cylinders) as a four letter word, and this machine only had numbers on the key pad. Well, I screwed it up trying three times and it ate my card. It was a Sunday when all the banks were closed, and I had to meet my girlfriend in Puno that night. Fortunately, I had enough dollar FRN’s stashed on my person to get by, as well as a credit card (which charged a usurious rate to extract cash). Two weeks later, I returned to Cusco, and went to the Cusco office of Scotia there. Interestingly, no one spoke English (well it’s a Canadian bank) though there must have been more than 20 staff, but I managed to get my question posed in my mangled Spanish. The manager pulls out a stack of ATM cards from his draw, flips through them, and there is mine. He says that he should have sent it to the head office in Lima long ago but they were running behind. But this is not the end of the story. The card no longer worked. Bank offices in Peru couldn’t trace the problem. I called Scotia in St. John by telephone, and they could not find any hold. When I got back, I tried the card in the cash cow outside the Scotia branch and it worked fine. The next time I was on Tortola, British Virgin Islands and about 5 km away as the albatross flies, it didn’t work. So there was some sort of international hold that didn’t apply locally. I finally solved the problem by demanding a new ATM card with a new number.

February 29, 2012 at 7:22 pm #1138

jal

El Gallinazo said …
In a severe deflationary collapse, most assets will drastically lose value in nominal terms.

alfbell said …

Only those who saw through the veneer and stayed in cash are able to survive because in a deflation… CASH IS KING, because cash is scarce.

The best strategy may very well be to “be the bank”. Figure out the strategy of the power elite and do exactly what they are doing at the level you are capable of.

Dig Dirt …
I agree big time with the skills thing too. In an attempt to mitigate the disaster of financial shit going down, it is well worth the investment in reducing exposure to need money in what ever form.

I might add,

Position yourself to be able to make a secondary cash flow that is not taxable.
Keep in mind that local gov. and all other levels of gov. will be wanting more of your income to meet the obligations of past promises which cannot be kept and of course to pay off loans that they made.

Learn the “Greek Way”!

February 29, 2012 at 8:16 pm #1141

krollchem

US Treasury Direct is one of the only way to save money for US citizens living in foreign countries now that the US government is forcing almost ALL foreign banks to limit bank accounts by US citizens and US resident aliens to less than $10,000 (including PM equivalents) under FATCA rules. This extends to accidental US citizens, who either took foreign citizenship (assuming they were renouncing their US citizenship), or had parents or in some cases grandparents who were once US citizens.

The FATCA rules also extend to family trusts where the trust includes one or more US citizens as is commonly done in Israel and among extended family clans such as East Indians in Canada.

As a start, European bank accounts, stocks and bonds of even European citizens living in the US are now being frozen by banks such as BNP and the proceeds being forceably transferred to US banks.

It will get exceedingly hard for US citizens to live abroad except under US government/corporate contract. The one exception are bank accounts with the Chinese National Banks which is exempt under FATCA. The IRS is setting up offices worldwide (including China) to enforce the FATCA rules.

February 29, 2012 at 9:12 pm #1142

el gallinazo

Joanne:

The original Tea Party supporters had a lot more in common with the Occupy movement before it was taken over by the Koch Suckers. Charlie McGrath of Wide Awake radio was an activist in the early movement and quit when it got co-opted by the fascists.

From my experience of a year in Argentina, the populace ten years later did not look back in gratitude toward the banker controlled politicians when their accounts were frozen down to a withdrawal trickle. People in the USA also still regard their money in the bank as their money. How childish of them.

http://www.youtube.com/watch?v=RAKsMnAM8vk

My feature was picked up by the Business Insider blog on the front page. I found the comments on TAE to be both brighter, more circumspect, and “more wholesome” than BI, and I am glad to be part of this virtual community.

And I am not positive that HI is impossible in the near future, it just seems much less likely to me. I think that the game plan of the CB capos right now is to aim for “moderate” inflation to reduce sovereign debt and bail out the banks. While Uncle Ben says he would like to see 2%, he is of course a pathological liar and is probably aiming for around 6 or 7%. But so was the Bank of Japan in the early 90′s and look how successful they have been. They have had over 20 years to circle down the HI drain with their massive QE and ZIRP. As a matter of fact, they are printing like crazy in order to keep their currency worth less than 76 to the dollar.

What all the goldbug hyperinflationistas claim (and I am not anti-gold; I just don’t see it as a panacea) is that the central bankers will hyper print to save the banks which will lead to HI. This reminds me of the old Vietnam War saw, that we destroyed the village to save it. When you point out that HI will certainly not save the banks, they fall back to the position that Ben and Mario and their puppet masters are too stupid to know that. I, for one, certainly do not think Ben and Mario are stupid. Scumbags yes, but not stupid scumbags.

But Yogi, certainly the greatest Zen philosopher of the 20th century, summed it up with:

Prediction is very hard, especially about the future.

The BI guys always refer to Weimar, but there were a lot of other things going on in Weimar. First you had alternate currencies including the Dollar and the British pound banknotes floating around, and this changes everything compared to a HI where this is no alternate currency. Same deal in Zimbabwe. Reverse Engineer points out in an excellent comment that this hasn’t happened since the collapse of Rome. And that was much slower. As with size, speed does matter :-) And Weimar had a vengeful purpose to devaluating their currency as they wished to pay off their war reparation banksters in toilet paper.

And I don’t mean to imply in my article that maintaining the purchasing power of savings is the primary focus for surviving the apocalypse. However, if one is officially in old age and/or has physical or medical problems that make the likelihood of physical, backbreaking work to be productively unlikely, and have accrued enough savings that they would have seen one through to the grave in less larcenous times, then paying special attention to this aspect of the apocalypse may have its advantages.

February 29, 2012 at 9:18 pm #1143

seychelles

Very nice summary article and good to see El G posting again.
It is imperative in this politico-legal environment to have as few intermediaries between savers and their money as possible. This means closing down retirement accounts to preempt their legalized theft by authorized fiscal intermediaries. How can anyone who understands MF Global not come to this conclusion? Also, as the monetary situation deteriorates, retirement accounts, because of their “tax-privileged status” will be among the first to be forced into losing investments for the “good of the nation” and/or restricted payout timetables.
While it is taking Treasury Direct some time to dig out from the mess that they created from themselves, it is much easier to contact them than it was a month or so ago. Last week, I needed to speak with a representative on two different occasions and each time after phoning (304) 480-7711, I was able to speak with a courteous and helpful clerk after less than five minutes. It is MOST important to log into your TD account carefully and correctly to avoid a temporary lockout, as
they are grossly understaffed for direct interaction and the situation will be much worse (than recently) in a financial crisis.

February 29, 2012 at 9:21 pm #1144

el gallinazo

Joanne:

The original Tea Party supporters had a lot more in common with the Occupy movement before it was taken over by the Koch Suckers. Charlie McGrath of Wide Awake radio was an activist in the early movement and quit when it got co-opted by the fascists.

From my experience of a year in Argentina, the populace ten years later did not look back in gratitude toward the banker controlled politicians when their accounts were frozen down to a withdrawal trickle. People in the USA also still regard their money in the bank as their money. How childish of them.

http://www.youtube.com/watch?v=RAKsMnAM8vk

My feature was picked up by the Business Insider blog on the front page. I found the comments on TAE to be both brighter, more circumspect, and “more wholesome” than BI, and am I am glad to be part of this virtual community.

And I am not positive that HI is impossible in the near future, it just seems much less likely to me. I think that the game plan of the CB capos right now is to aim for “moderate” inflation to reduce sovereign debt and bail out the banks. While Uncle Ben says he would like to see 2%, he is of course a pathological liar and is probably aiming for around 6 or 7%. But so was the Bank of Japan in the early 90′s and look how successful they have been. They have had over 20 years to circle down the HI drain with their massive QE and ZIRP. As a matter of fact, they are printing like crazy in order to keep their currency worth less than 76 to the dollar.

What all the goldbug hyperinflationistas claim (and I am not anti-gold; I just don’t see it as a panacea) is that the central bankers will hyper print to save the banks which will lead to HI. This reminds me of the old Vietnam War saw, that we destroyed the village to save it. When you point out that HI will certainly not save the banks, they fall back to the position that Ben and Mario and their puppet masters are too stupid to know that. I, for one, certainly do not think Ben and Mario are stupid. Scumbags yes, but not stupid scumbags.

But Yogi, certainly the greatest American philosopher of the 20th century, summed it up with:

Prediction is very hard, especially about the future.

The BI guys always refer to Weimar, but there were a lot of other things going on in Weimar. First you had alternate currencies including the Dollar and the British pound banknotes floating around, and this changes everything compared to a HI where this is no alternate currency. Same deal in Zimbabwe. Reverse Engineer points out in an excellent comment that this hasn’t happened since the collapse of Rome. And that was much slower. As with size, speed does matter :-) And Weimar had a vengeful purpose to devaluating their currency as they wished to pay off their war reparation banksters in toilet paper.

And I don’t mean to imply in my article that maintaining the purchasing power of savings is the primary focus for surviving the apocalypse. However, if one is officially in old age and/or has physical or medical problems that make the likelihood of physical, backbreaking work to be productively unlikely, and have accrued enough savings that they would have seen one through to the grave in less larcenous times, then paying special attention to this aspect of the apocalypse may have its advantages.

February 29, 2012 at 9:47 pm #1149

Vulcanelli

I have some funds in Treasury Direct but am wondering about how it might play out to redeem them in the midst of a banking crisis. Assuming as it has been suggested that we get into a severe deflationary depression with commensurate bank closures, bank runs and even a bank holiday. At some point you find it necessary to convert your treasury bill into cash in hand. When the term of your t-bill ends it is going to be deposited to the institution where the funds were drawn from which is your bank. Suddenly there is $50,000 showing in your checking account but if the banks are in trouble because they never had the actual funds to cover what people had showing in their accounts how are going to be able to withdraw your cash?

February 29, 2012 at 10:14 pm #1153

seychelles

Vulcanelli
First of all, either reinvest the matured proceeds or direct then to your C of I (Certificate of Indebtedness) file. Since you can transfer
from C of I to your linked bank acccounts within 24-48 hours, you only transfer to institutions that seem safe and preferably early in the week.
Second, you link to multiple banks, the safest-rated, hopefully at least
B+, that you can find in your area. With any luck, at least one of them will be functional when you need to transfer. You also have at least a three month stash of cash to tide you over any exceptionally rough periods. The idea is to minimize your risk in advance, but of course the
scenario will never be entirely risk-free.

February 29, 2012 at 10:48 pm #1155

Golden Oxen

Top Shelf and so lucidly written! Encore!! Encore!!!

February 29, 2012 at 10:57 pm #1156

el gallinazo

Vulcanelli,

All of Seychelles advice is good. The last thing you want to do is transfer funds into a bank that is wobbling on the edge, as it may be the last thing. Since wire transfers from td.gov to your bank are without charge, don’t transfer more than your bank will let you pull out in currency. The less time your money spends in the bank, the better. Consider it to be a three minute egg.

Also, note that the default of what to do with your money at maturity is to send it back to a bank, so whenever you put in for an auction purchase, be very careful to direct it to C of I upon the maturity. Along with the famous cash in a creative spot, I keep a little in C of I all the time. With 13 week T-Bills so close to zero, it doesn’t make much difference except that having your money in actual bills may be marginally more secure.

February 29, 2012 at 11:05 pm #1157

el gallinazo

Money for nothing and your chicks for free

February 29, 2012 at 11:06 pm #1158

craig_slater_nl

Surely a compelling position on why TPTB (1%) will allow the Hyperflationary collapse. I’ll go with FOFOA.

http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html

http://www.rickackerman.com/2011/04/at-last-a-hyperinflation-argument-that-persuades/

“One of them, debated endlessly, questions whether the Powers That Be would “allow” a hyperinflation to occur, since that would render their financial assets worthless. FOFOA prepares us for his counterintuitive answer by recalling the joke about how, if you want to survive, you don’t actually need to outrun the bear that is chasing you and your friend. This could be said of the Masters of the Universe: They won’t have to outrun hyperinflation — only to outrun the madding hoards who will be as eager as they to unload dollars in exchange for real things.”

February 29, 2012 at 11:18 pm #1159

Reverse Engineer

I’m going to have to sort out one of my Speedy Gonzalo Demolition posts :-)

The folks fixating on Gold, HI and relative price valuations between fiat and gold simply don’t understand how money accrues value.

Anyhow, be sure you go read “Energy-Money Equilibrium: The Value of Money in the Age of Oil” on DD. I got Part I up yesterday, probably will get Part 2 up tomorrow.

http://www.doomsteaddiner.org/blog/2012/02/28/energy-money-equilibrium-the-value-of-money-in-the-age-of-oil/

RE

February 29, 2012 at 11:26 pm #1161

el gallinazo

Regarding the danger of a forced extension of maturity of Treasuries as an earlier commenter raised. This is equivalent to a default. That is what all the hoopla is about with the upcoming Greek default triggering CDS’s. Some of the Boyz are maintaing that if it is voluntary (as in I make you an offer you can’t refuse, Mario), then it is not a CDS “event.” However, in relationship to having your savings parked at td.gov, a maturity extension is part of the end game, and there should be quite a bit of warning before that happens. That is why short term is good. You can get out at face value when the posse is coming around the corner and not have to sell into a seething secondary market.

February 29, 2012 at 11:32 pm #1162

el gallinazo

Speaking of endgames, Kramer’s last show?

March 1, 2012 at 12:21 am #1165

Nassim

It is always fun to read what el g has to say. Thank you. :)

However, I could not help asking myself this time why he was doing this great favour to Mr Bernanke. Treasury Direct reminds me of the corral outside the slaughter-house through which the sheep are made to file for their one-way trip:

“Behavioural Principles of Livestock Handling”
http://www.grandin.com/references/new.corral.html

http://qurban4lifesg.files.wordpress.com/2011/10/sheep21.jpg?w=300&h=300

Nothing is simpler than putting limits on withdrawals from Treasury Direct. I mean, they can pin-point an awkward individual and say “not him”. It is like handing the executioner the pistol. The mind boggles.

Personally, I have had the misfortune of having been through a bank crisis and having had my account frozen – like everyone else in Iran at that time. By the time I was able to return to reclaim my cash, under a year later, it must have devalued by 80%. As a kid, my dad once had an account frozen on him due to a court-case – most painful. Luckily, not all of it was in that account as he had no income. However, drastic spending cuts had to be made.

I also used to live in an African country where 20 piastres was the pay for one labourer working hard for one day. Last time I was there, it would not pay for a single cigarette.

The fact that they are making it so difficult for Americans to keep their money abroad legally strongly suggests that they want to be able to pick and choose who gets to be able to access his savings – and who is left out in the cold. It is a typical totalitarian move and I can offer plenty of examples of that happening in the past. Do you think the Jews who were lucky to get out of Germany after 1933 were allowed to take their savings with them?

By all means put most of your money in Treasury Direct. However, it would be foolish to not keep at least 10% of it in cash and 10% in physical gold.

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