Preparedness for when

Frugalsod

jk0 wrote: »

I have a theory that the reason YV folded to the Troika's demands last week was that the ECB told him that unless he played ball, they would stop topping up the Greek cash points.

I have been thinking badly of him all week until today I saw this, and another idea occurred to me:

http://www.zerohedge.com/news/2015-02-28/greece-scrambles-end-its-bank-run-jpm-throws-wrench-says-deposit-outflows-continued-

I really can't see that Greece can accomplish much in the four months grace they have been given. Except that one thing they can probably do is empty their remaining (Euro) deposits from the Greek banks.

The banks are all bust anyway. What's the problem with making them 'more bust'?

Then they can default on the Euro loans and recapitalise the banks with printed Drachmas, safe in the knowledge that all the Greek people at least have their money out of the Bank. Those Euros in people's wallets will probably be worth several Drachmas, so will keep the economy running for the time being.

Any thoughts?

Since banks make money by making more loans than they have deposits they may have no more deposits anyway. Also in some places like Denmark they are telling customers to take their money elsewhere because of negative interest rates.

I suspect that the Greeks will be using the time to print their own currency. Zero hedge highlighted that there is state of the art currency print works in Greece currently printing 10 euro notes.

http://www.zerohedge.com/news/2015-02-19/meet-ieta-greeces-state-art-euro-printing-facility

They also have a range of Drachma designs.

http://www.zerohedge.com/news/2015-02-22/if-troika-says-nein-tomorrow-heres-what-new-drachma-will-look

So maybe they will use the time to print currency?

There are some who think that the euro will fail caused either by an exit of Spain or Italy first. I do not think it matters who is first the fact that a nation leaves will only open the question who is next? They may have been playing for time and if the euro collapses for other reasons then they will have maintained the Greek populations desire to stay in the currency.

The problem is that the core issue has not been fixed that being the insolvency of the private banks. They lent recklessly all over the place, and are probably all insolvent. Greek banks have as much as 40% of its loans as non performing ie no one is paying them back. German and French banks dumped all their debts on the French and German tax payers so they are laughing except that if the German government suddenly has hundreds of billions of junk debt on its books will it really deserve its AAA credit rating?

If the euro collapses then those who took their money out could be left with worthless notes unless they converted them into US dollars. In the end it is a matter of who has to suffer the losses.

That is also going to be a problem in the UK as well thanks to our banks lending everywhere. I suspect that banks will collapse and need customer bail ins. I am fortunate that I do not have to much money to worry about and will simply use excess funds to prep. More food and keeping more cash at home. If things do collapse then cash will be king as the financial squeeze will be deflationary.

Doveling

What will happen if Germany doesn't get it's AAA rating? And how can Greece allow non-repayment of loans? Are people having their homes and businesses re-possessed to cover them?
I find finance and economics difficult and so have just stuck my fingers in my ears and sung la,la,la for most of my life but times they are a-changing and I really am trying to learn about things.
Any help and advice gratefully received.:)

[Deleted User]

Watching the 'CLICK' programme on the television this morning I saw the most sensible idea I've seen for a very long time. A wind turbine that is sailed to 600 feet or so by a helium filled wing so it can harness the upper winds and is tethered to the ground securely. It will apparently supply enough free electricity (after the purchase price, not mentioned) to run 15 energy heavy homes or a small village in the third world with electricity for light use for everyone. No ground stack for it and it's a really useful idea the programme said would be very much applied to disaster areas etc for instant electricity in a crisis.

moneyistooshorttomention

Re bail-ins = you don't want to know just who it was (but the position they are in means they should know if anyone does.....) that was assuring me most categorically recently that a bail-in couldn't happen because any political party would have to put it in their manifesto that they would/might do that and they would, as a consequence, never get elected.:eek: I could not convince them that election manifestos don't come into it...and if they decide to have a bail-in they will have a bail-in (regardless of it not having been in their manifesto). Yep...they weren't just trying to sell me on the idea of "Shut up...you elector you", as they obviously really believed it themselves...

Shoulda thought of the fact at the time that I don't suppose any political party had it in their manifesto that they were going to revise womens State Pension Age to put it up gradually to the mens one....but, as we know, it is now in process of happening:(

Me = I'm just making mental notes "Looks like I might have got the rate of sliding towards "Who Knows? (because its uncharted waters)" about correct. Must make sure I get last expensive job on house that I have money for done at time I decided I'd get it done, ie pretty soon". There'll still be three expensive jobs left to do on the house at that point...but I don't know when I'm going to have got together the money for them anyway...so it cant get stolen off by me by a bail-in.

GreyQueen

Afternoon all.

I'm reading When Money Dies; the nightmare of the Weimar hyper-inflation by Adam Fergusson. I'd recommend it to others.

It's salutory to see how quickly things went wrong for ordinary people, and how even the formerly comfortable middle-classes were reduced to destitution. The diary of Frau Anna Eisenmenger of Vienna is a jaw-dropping read. She was a widow who headed a household of the halt and the lame; a war-blinded son, a tubercular daughter, a SIL with amputed legs, a hungry grandson and another son who took up with the Communists.

She had investments in gilt-edged government securities which in 1914 brought her the equivalent return of £200 sterling (a lot of money in those days). In October 1918, she resolved to encash 20,000 kronen worth for immediate use as prices were running so high. Her bank manager advised her to turn the remainder into Swiss francs immediately. She decided not to, as private dealing in foreign currency was illegal, and she was already uncomfortable enough in dealing with black marketeers to get food and fuel.

Two months afterwards, in Dec 1914, she had to take all her money into the bank to have the kronen notes overstamped as part of a government directed anti-infationary measure She then found out to her horror that she had lost three-quarters of her fortune to the inflation in two months.

If I was a Greek, I'd want my money out of the banks and into something which wasn't Euro-fiat, whether groceries or portable valuables like jewellery or precious metals. I hear the Greeks are rather fond of the British sovreign as a store of value. Get out of a sinking from of fiat and into something more stable, and aim to get back into a functional fiat at a later stage, once the rubble has stopped bouncing.

I still have my 500 million dollar 2008 Zimbabwean banknote........the £2 it cost me was worth every penny as a lesson in the insanity of paper money.

Doveling

GQ - you will realise how bad I am at this stuff when I tell you I had to just look up the meaning of euro-fiat. I couldn't understand why anyone in financial trouble would be bothering getting anything other than a small fuel efficient car!
(And I am not joking )

Frugalsod

Doveling wrote: »

What will happen if Germany doesn't get it's AAA rating? And how can Greece allow non-repayment of loans? Are people having their homes and businesses re-possessed to cover them?
I find finance and economics difficult and so have just stuck my fingers in my ears and sung la,la,la for most of my life but times they are a-changing and I really am trying to learn about things.
Any help and advice gratefully received.:)

A drop of the credit rating is not so serious until it falls to a level that is no longer investment grade. Many insurance schemes are restricted to only AAA credit rated bonds, so they will be forced sellers. This can happen with many investment groups who will not be allowed to hold anything other than AAA rated debt. The banks can still hold it as did the Greek banks hold Greek government debt as it was still rated as investment grade of the very lowest order.

As for the non performing loans in Greece that is a consequence of the austerity policies. Wages have fallen 40% and property values 25%. They simply do not have enough money to cover the repayments. Banks are also allowed to keep them valued at full value because otherwise they would have to raise billions of capital in what is really an insolvent bank. It is all a charade as to who is solvent. So an unsecured loan for a few thousand euros may be worth nothing especially if the person is unemployed and has no means to pay it back. A car loan might also be worth a fraction of its face value though if they repossessed the car and tried to sell it in a depressed Athens they may get 10% of its value. Same for a home, they might repossess it but in a weak property market they might only get half its loan value and the moment they realise that they would have to accept any losses at that point. So by doing nothing they can pretend that the assets are still worth something. If things improve they might actually repossess the factory or business when they can get their money back. Actually doing something will mean that they have to record the loss. It is what has kept some banks from foreclosing too aggressively.

The same applies here with our banks. Though it is currently a little more credible with the rising property prices. Though once that reverts to mean and prices fall back to levels that people can actually afford then the banks will on paper be insolvent again. They will have had plenty of money to pay depositors and on the surface they would look solvent because of the huge additional liquidity that the bank of England has pushed into banks. So they will not revalue their assets to their real value unless that absolutely have to. Bonuses depend on being able to keep those profits up. Having to write down loans to their real worth will mean that they will struggle to get a bonus.

GreyQueen

Doveling wrote: »

GQ - you will realise how bad I am at this stuff when I tell you I had to just look up the meaning of euro-fiat. I couldn't understand why anyone in financial trouble would be bothering getting anything other than a small fuel efficient car!
(And I am not joking )

I once lifted a Fiat 500 (with several other people) as some numpty had blocked us in. There's a lot to be said for small cars.;)

No one's born knowing stuff; you took the time to look up fiat currency and now know something which most of your contemporaries never understand. Plus your post made me smile (and not in an unkind way, I hasten to add).

I believe that every single fiat currency has deteriotated into worthlessness over time, there have been no exceptions. No reason to think that the euro, the US dollar or the pound sterling will be the exceptions, either.

:mad: Gordon Bennett, a century ago an English Pound was 240 silver pennies of 92.5 pure silver and now it's an ugly chunk of base metal or a scrap of printed paper in Scotlandshire. And our metal fiat money is still goldy-coloured or silvery-coloured so we can have the cultural memory of when it was actually worth something.


Just had to restart my 'pooter thrice in a row due to hanging and crashing. M0zilla ain't happy today for some reason. Grrr.

Between cursing my browser, I'm busy melting candlewax to turn candle-ends into brand-new candles in Prungle tubes. I have a cache of these tubes as it's a one-way ticket for them when they serve as molds for my pillar candles. Akshully, just checked and I tell a lie, the tube-of-the-day is a RustyChips one, a Prungle knock off from the shop the Mums go to, I do believe.

Frugalsod

MrsLurcherwalker wrote: »

Watching the 'CLICK' programme on the television this morning I saw the most sensible idea I've seen for a very long time. A wind turbine that is sailed to 600 feet or so by a helium filled wing so it can harness the upper winds and is tethered to the ground securely. It will apparently supply enough free electricity (after the purchase price, not mentioned) to run 15 energy heavy homes or a small village in the third world with electricity for light use for everyone. No ground stack for it and it's a really useful idea the programme said would be very much applied to disaster areas etc for instant electricity in a crisis.

There are a couple of problems with that idea. Helium being so light floats away, its molecules are so small that they can over time leak through any material so you will need to replace the helium in the balloon or it will simply drop in altitude until you refill. It is also considered a strategic resource and helium supplies could be cut off at any moment. You still need a big concrete base to tether it to. So you could use that concrete base for a conventional windmill which will be easier to maintain.

There are similar idea that use kites instead of balloons but you need to get them up to an altitude that there is constant wind i.e. jet streams. Then it becomes a hazard to flights, because of all the cable.

Windmills are great solutions but they are best suited to remote areas where they can supply local energy far from a regular power station. I have stood right underneath a 100 m windmill in Sweden. The normal wind noise pretty much covered much of the noise, so as you moved further away you could not hear the windmill over the wind. It was bought by the locals. In some communities like Netherlands they have community windmills and you invest in them, get a credit for any electricity that you use and any surplus is sold to the grid and is used to finance the replacement of the windmill at the end of its life.

Karmacat

GQ, can I ask (you or anyone else, actually) - when people buy sovereigns as a hedge against financial nightmare, how do they eventually get their money? Do they sell them back to dealers? I'm trying to write something about it at the moment, and I keep stumbling on this last step. Obviously, buying costs, and selling costs, so maybe they get back 85% of what they paid ... but in the meantime, if their currency had gone kablooey, they'd have *lost* 85%? Is that the maths of it, more or less?