4 ms·

If I were in Greece, Italy, Spain, or Ireland, I think I would pull out all my bank deposits but the bare minimum cash needed to cover obligations.

dougk16 14y ago
I've been thinking about this lately, and, at the risk of sounding like a doomsday kook, this seems to make sense to me (perhaps in a milder sense) no matter where one lives. My plan is, if I ever get over $X in my account, where X is some reasonable buffer to pay bills, etc., that I'll just buy gold with the overage[1]. Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me. Even then, all these charges and penalties and sales pitches every time I enter a bank are really turning me off. [1] I acknowledge some logistical challenges with my plan if I become a millionaire.
- khuey 14y ago
  If you think gold is a predictable and low-volatility store of value you really should look at inflation adjusted gold prices from 1980-2000.
  - deleted 14y ago
    [deleted]
  - dougk16 14y ago
    I didn't mean to imply that I would expect to make money from buying gold (if that's what you mean). Even if gold prices were expected to drop, I'd still be interested in buying it as an insurance policy. No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.
    - deleted 14y ago
      [deleted]
      - moe 14y ago
        So, what do you propose he should do with his money? I have a hunch your little smarty-pants speech didn't help him one bit.
        khuey 14y ago
        Yeah, you're right, the tone is unhelpful. My point is that there's nothing you can do with your money to ensure that it always has value, regardless of the magnitude of the crisis. There's always some risk. You can store your money in insured bank accounts, but we can see how well that's working out in Cyprus. You can store cash under your mattress, but high inflation will destroy its real value. You can buy gold and hoard it in your home, but there's no guarantee gold will be worth much, or that you'll even be allowed to keep it (see Executive Order 6102). You can buy land and if the state fails and thugs with bigger guns decide they want it more you're screwed. There's nothing you can do to eliminate all risk, and we're seeing now that risks we though were minimal (failures of deposit insurance schemes in the western world) aren't so minimal after all.
        seanmcdirmid 14y ago
        Exactly, swapping a fiat paper currency for fiat metal is not useful. If you are a pessimist, buy guns, bullets and non perishable food, or invest in a secret mountain farm/retreat. Or you could just work within the system and try to help keep it from failing by running on the bank.
        wintersFright 14y ago
        'fiat' metal = metal by government decree?? fiat currency is intrinsically overvalued as it is valued by decree - by the threat of legal violence if you don't use it. There are no fiat metals. Your pessimist view is at the extreme end of the spectrum. Individual fiat currencies have eventually failed ever since they were invented. Each time a currency dies there are winners and there are losers, but it doesn't go all Mad Max - a new transactional currency is used (Zimbabwe) or they lop a few zeros off and keep going.... Well maybe the dog food eating bit of Mad Max is true for the losers whose wealth was stored in the currency that failed.
    - bitcartel 14y ago
      A few things to consider: Central banks are buying gold. http://www.bloomberg.com/news/2013-02-10/putin-turns-black-gold-into-bullion-as-russia-out-buys-world.html http://www.bloomberg.com/news/2013-02-10/putin-turns-black-g... Central banks are repatriating gold reserves held overseas. http://www.forbes.com/sites/afontevecchia/2013/01/16/germany-repatriating-gold-from-ny-paris-in-case-of-a-currency-crisis/ http://www.forbes.com/sites/afontevecchia/2013/01/16/germany... The LIBOR rigging scandal has turned the spotlight to the gold market, where it has long been claimed that the price of gold has been manipulated. http://www.guardian.co.uk/business/2013/mar/13/london-financial-sector-gold-market http://www.guardian.co.uk/business/2013/mar/13/london-financ... It has also been claimed there is a ponzi scheme in paper gold, i.e. instruments may not actually be physically backed, so when things go pear-shaped and you ask for physical delivery, you will have to fight other investors over legal ownership. http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-global-brokerage-over-850-000-worth-of-gold.html http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-glo... Given recent banking scandals, anything is possible. Caveat emptor!
      - tatsuke95 14y ago
        Central banks are known buyers at the highs and sellers at the lows. Part of their mandate is "financial stability", and up to and including backstopping out-of-favour assets (like, say, mortgages). I see central banks buying gold as a way to stop a precipitous decline in gold as money rotates sectors. Then again, this theory happened before this Cyrprus thing, so who knows for sure. Guess we'll see what kind of carnage happens next week.
    - lttlrck 14y ago
      Unless it becomes illegal to own gold bullion again, as happened in the Great Depression. http://www.the-privateer.com/1933-gold-confiscation.html http://www.the-privateer.com/1933-gold-confiscation.html
    - fexl 14y ago
      No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand. The reasons is simple: gold has specific physical characteristics which many people for a very long time have regarded as suitable for use as physical money: principally, it's durable, rare but not too rare, recognizable, and easily divisible. That widespread subjective assessment is unlikely to change.
- caf 14y ago
  This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be either), so it's an attractive option if you have a mortgage.
  - DJN 14y ago
    That sounds really interesting. Can you provide a link to an example or source of additional info. Thanks
    - wintersFright 14y ago
      offset accounts are common in Australia http://www.news.com.au/money/banking/offset-accounts-help-lower-costs/story-e6frfmcr-1226449028274 http://www.news.com.au/money/banking/offset-accounts-help-lo...
      - caf 14y ago
        Likely anywhere that variable-rate/variable-term mortgages are common (ie. partially funded by short-term securities).
  - seanmcdirmid 14y ago
    Sounds similar to America's interest exemption.
- tatsuke95 14y ago
  >"Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me." Back in what day? You mean, like, 5 years ago? We're still amidst one of the worst recessions ever and rates are at all time lows. No, you don't get riskless real returns right now. But you can also borrow at exceptionally low rates. That will change in the future. Hording physical gold outside of diversification is a bad idea. You have storage costs, pay a premium over spot when you buy it and eat a spread when you sell it. And, as another commenter said, look at its real returns; not spectacular. Want to know what was a good buy? The stock market, 4 years ago. When everyone was screaming about the world imploding and it was at irrationally low levels. But that's just the thing: you have to be willing to zig when others are zagging.
  - dougk16 14y ago
    As I said below, it would be more of an insurance policy than an investment, but I'm still willing to believe it's a bad idea for that reason as well. I don't plan on buying enough gold that it becomes a logistical challenge to store though...basically just as a buffer if things go south. Something disturbs me, especially as a hacker, knowing that the physical manifestation of a good chunk of my life's work is just bits on a bank's computer.
- gasull 14y ago
  With bitcoins you don't have to worry or pay for storage like you do with gold.
- crag 14y ago
  " I'll just buy gold " This only works if you physically have the gold. Having a note stating how much gold you own, which is housed someplace beyond your reach isn't security. You are still relying on the market/bank. And even if you did have the gold, this presents a slew of other problems; security and storage are two that come to mind.
omgyeah 14y ago
But if everybody keeps thinking like that, in a few years time in the place of "Greece, Italy, Spain, or Ireland" you will read "Germany, France and UK". It's just a worldwide poker game, the banks are winning and the small guys are being forced out of the table.
- Evbn 14y ago
  Eventually the small guys get so desperate and bored that the only way to pass the time is to violently attach the big guys.
- pinaceae 14y ago
  just posted this in the other thread (the economist one): BCG Study, September 2011: Back to Mesopotamia? The Looming Threat of Debt Restructuring http://www.scribd.com/doc/130778664/BCG-Back-to-Mesopotamia http://www.scribd.com/doc/130778664/BCG-Back-to-Mesopotamia The concepts and numbers are already there, Cyprus is a small test bed for this.
rwallace 14y ago
Where else would you put your money? Keeping large sums of cash in your home is stupid and dangerous, commodities are volatile (bitcoin behaves like a commodity in this regard), real estate has high associated costs, stocks can go down as well as up.

dougk16 14y ago

I've been thinking about this lately, and, at the risk of sounding like a doomsday kook, this seems to make sense to me (perhaps in a milder sense) no matter where one lives. My plan is, if I ever get over $X in my account, where X is some reasonable buffer to pay bills, etc., that I'll just buy gold with the overage[1]. Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me. Even then, all these charges and penalties and sales pitches every time I enter a bank are really turning me off. [1] I acknowledge some logistical challenges with my plan if I become a millionaire.

khuey 14y ago
If you think gold is a predictable and low-volatility store of value you really should look at inflation adjusted gold prices from 1980-2000.
- deleted 14y ago
  [deleted]
- dougk16 14y ago
  I didn't mean to imply that I would expect to make money from buying gold (if that's what you mean). Even if gold prices were expected to drop, I'd still be interested in buying it as an insurance policy. No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.
  - deleted 14y ago
    [deleted]
    - moe 14y ago
      So, what do you propose he should do with his money? I have a hunch your little smarty-pants speech didn't help him one bit.
      - khuey 14y ago
        Yeah, you're right, the tone is unhelpful. My point is that there's nothing you can do with your money to ensure that it always has value, regardless of the magnitude of the crisis. There's always some risk. You can store your money in insured bank accounts, but we can see how well that's working out in Cyprus. You can store cash under your mattress, but high inflation will destroy its real value. You can buy gold and hoard it in your home, but there's no guarantee gold will be worth much, or that you'll even be allowed to keep it (see Executive Order 6102). You can buy land and if the state fails and thugs with bigger guns decide they want it more you're screwed. There's nothing you can do to eliminate all risk, and we're seeing now that risks we though were minimal (failures of deposit insurance schemes in the western world) aren't so minimal after all.
        seanmcdirmid 14y ago
        Exactly, swapping a fiat paper currency for fiat metal is not useful. If you are a pessimist, buy guns, bullets and non perishable food, or invest in a secret mountain farm/retreat. Or you could just work within the system and try to help keep it from failing by running on the bank.
        wintersFright 14y ago
        'fiat' metal = metal by government decree?? fiat currency is intrinsically overvalued as it is valued by decree - by the threat of legal violence if you don't use it. There are no fiat metals. Your pessimist view is at the extreme end of the spectrum. Individual fiat currencies have eventually failed ever since they were invented. Each time a currency dies there are winners and there are losers, but it doesn't go all Mad Max - a new transactional currency is used (Zimbabwe) or they lop a few zeros off and keep going.... Well maybe the dog food eating bit of Mad Max is true for the losers whose wealth was stored in the currency that failed.
  - bitcartel 14y ago
    A few things to consider: Central banks are buying gold. http://www.bloomberg.com/news/2013-02-10/putin-turns-black-gold-into-bullion-as-russia-out-buys-world.html http://www.bloomberg.com/news/2013-02-10/putin-turns-black-g... Central banks are repatriating gold reserves held overseas. http://www.forbes.com/sites/afontevecchia/2013/01/16/germany-repatriating-gold-from-ny-paris-in-case-of-a-currency-crisis/ http://www.forbes.com/sites/afontevecchia/2013/01/16/germany... The LIBOR rigging scandal has turned the spotlight to the gold market, where it has long been claimed that the price of gold has been manipulated. http://www.guardian.co.uk/business/2013/mar/13/london-financial-sector-gold-market http://www.guardian.co.uk/business/2013/mar/13/london-financ... It has also been claimed there is a ponzi scheme in paper gold, i.e. instruments may not actually be physically backed, so when things go pear-shaped and you ask for physical delivery, you will have to fight other investors over legal ownership. http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-global-brokerage-over-850-000-worth-of-gold.html http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-glo... Given recent banking scandals, anything is possible. Caveat emptor!
    - tatsuke95 14y ago
      Central banks are known buyers at the highs and sellers at the lows. Part of their mandate is "financial stability", and up to and including backstopping out-of-favour assets (like, say, mortgages). I see central banks buying gold as a way to stop a precipitous decline in gold as money rotates sectors. Then again, this theory happened before this Cyrprus thing, so who knows for sure. Guess we'll see what kind of carnage happens next week.
  - lttlrck 14y ago
    Unless it becomes illegal to own gold bullion again, as happened in the Great Depression. http://www.the-privateer.com/1933-gold-confiscation.html http://www.the-privateer.com/1933-gold-confiscation.html
  - fexl 14y ago
    No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand. The reasons is simple: gold has specific physical characteristics which many people for a very long time have regarded as suitable for use as physical money: principally, it's durable, rare but not too rare, recognizable, and easily divisible. That widespread subjective assessment is unlikely to change.
caf 14y ago
This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be either), so it's an attractive option if you have a mortgage.
- DJN 14y ago
  That sounds really interesting. Can you provide a link to an example or source of additional info. Thanks
  - wintersFright 14y ago
    offset accounts are common in Australia http://www.news.com.au/money/banking/offset-accounts-help-lower-costs/story-e6frfmcr-1226449028274 http://www.news.com.au/money/banking/offset-accounts-help-lo...
    - caf 14y ago
      Likely anywhere that variable-rate/variable-term mortgages are common (ie. partially funded by short-term securities).
- seanmcdirmid 14y ago
  Sounds similar to America's interest exemption.
tatsuke95 14y ago
>"Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me." Back in what day? You mean, like, 5 years ago? We're still amidst one of the worst recessions ever and rates are at all time lows. No, you don't get riskless real returns right now. But you can also borrow at exceptionally low rates. That will change in the future. Hording physical gold outside of diversification is a bad idea. You have storage costs, pay a premium over spot when you buy it and eat a spread when you sell it. And, as another commenter said, look at its real returns; not spectacular. Want to know what was a good buy? The stock market, 4 years ago. When everyone was screaming about the world imploding and it was at irrationally low levels. But that's just the thing: you have to be willing to zig when others are zagging.
- dougk16 14y ago
  As I said below, it would be more of an insurance policy than an investment, but I'm still willing to believe it's a bad idea for that reason as well. I don't plan on buying enough gold that it becomes a logistical challenge to store though...basically just as a buffer if things go south. Something disturbs me, especially as a hacker, knowing that the physical manifestation of a good chunk of my life's work is just bits on a bank's computer.
gasull 14y ago
With bitcoins you don't have to worry or pay for storage like you do with gold.
crag 14y ago
" I'll just buy gold " This only works if you physically have the gold. Having a note stating how much gold you own, which is housed someplace beyond your reach isn't security. You are still relying on the market/bank. And even if you did have the gold, this presents a slew of other problems; security and storage are two that come to mind.

omgyeah 14y ago

But if everybody keeps thinking like that, in a few years time in the place of "Greece, Italy, Spain, or Ireland" you will read "Germany, France and UK". It's just a worldwide poker game, the banks are winning and the small guys are being forced out of the table.

Evbn 14y ago
Eventually the small guys get so desperate and bored that the only way to pass the time is to violently attach the big guys.
pinaceae 14y ago
just posted this in the other thread (the economist one): BCG Study, September 2011: Back to Mesopotamia? The Looming Threat of Debt Restructuring http://www.scribd.com/doc/130778664/BCG-Back-to-Mesopotamia http://www.scribd.com/doc/130778664/BCG-Back-to-Mesopotamia The concepts and numbers are already there, Cyprus is a small test bed for this.

rwallace 14y ago

Where else would you put your money? Keeping large sums of cash in your home is stupid and dangerous, commodities are volatile (bitcoin behaves like a commodity in this regard), real estate has high associated costs, stocks can go down as well as up.