Cash, are its days numbered?

Glue_Sniffer

Old-Salt
All through this thread you keep pointing out that cash isn't free at the same time implying that cashless transactions are somehow not paid for by the customer. You're wrong.



I gather from earlier posts you run your own business so I would imagine you may over the years have taken out loans from the banks. Where do you think that money came from? It's backed by the funds that the banks hold from customers in credit. The money you put in a bank doesn't sit there doing nothing.

It's basic economics, a labourer is paid for his work. He turns his efforts into money.

A bank loans out money and charges interest, the interest is how they make the money work for them and on the strength of having liquid assets they can lend the same sum several times. So the bank may have £1 million in funds from accounts in credit but they can lend many times that amount and collect the interest on it. As long as people leave their money in the bank all is fine. Remember what happened when Northern Rock went tits up and everyone wanted their money in hard cash not notes of credit.

To put it another way if banks make no money out of accounts in credit why don't you start a bank with nothing but accounts in debt and see how that plays out.

You need a banking licence from the government to start a bank.
The reason being that this is a licence to create currency. They aren't issued very often.
The assets of a bank mostly compromise its mortgage loans. So by extension, a bank's assets are the real estate the customers have borrowed against.

The downside to this banking licence, is that the bank effectively becomes a utility, controlled by the the government and pressurised in all sorts of ways to carry out unprofitable activities. For example, maintaining High Street branches, providing accounts to dodgy unreliable customers, just because they happen to be UK citizens, etc.

HSBC has recently been told by the UK government not to pay out dividends. Much to the annoyance of its shareholders in Hong Kong.
 
Yes, but the fact that oil is sold in USD, has led to the term petrodollar, implying that the requirement for oil acts to support the USD.
The Petrodollar status is protected by the US Military and is the reason why in recent years we've had several wars. The US will always use it's global reach to protect the status of the $ being the worlds reserve currency and anyone that doesn't understand that needs to wobble their head till they do. The same reason that the Federal Reserve is pumping trillions of dollars into the markets is another example of what the US will do to protect its status, if they didn't, then hundreds of huge US Companies would collapse and would then be bought up for a few cents in the Dollar by the Chinese.
 

Glue_Sniffer

Old-Salt
All through this thread you keep pointing out that cash isn't free at the same time implying that cashless transactions are somehow not paid for by the customer. You're wrong.



I gather from earlier posts you run your own business so I would imagine you may over the years have taken out loans from the banks. Where do you think that money came from? It's backed by the funds that the banks hold from customers in credit. The money you put in a bank doesn't sit there doing nothing.

It's basic economics, a labourer is paid for his work. He turns his efforts into money.

A bank loans out money and charges interest, the interest is how they make the money
work for them and on the strength of having liquid assets they can lend the same sum several times. So the bank may have £1 million in funds from accounts in credit but they can lend many times that amount and collect the interest on it. As long as people leave their money in the bank all is fine. Remember what happened when Northern Rock went tits up and everyone wanted their money in hard cash not notes of credit.

To put it another way if banks make no money out of accounts in credit why don't you start a bank with nothing but accounts in debt and see how that plays out.

I believe what you are describing, may be how banking previously worked, in the days of a gold standard. I believe this changed with the creation of a completely fiat currency system and the growth of the mortgage industry.

The major difference between a bank and a depository is that a customer is a creditor to the bank. A customer does not own currency in a bank, but a customer does own coins in a depository. So in theory*, if a depository goes into liquidation, the creditors of the depository cannot take the customers coins.

This is how "free banking" can exist, whereas "free depository" obviously cannot exist (unless the depository company makes money from some other means, such as selling you insurance or increased margins on coins, etc).

*unless the government changes the law, to whatever it wants to.
 

Glue_Sniffer

Old-Salt
The Petrodollar status is protected by the US Military and is the reason why in recent years we've had several wars. The US will always use it's global reach to protect the status of the $ being the worlds reserve currency and anyone that doesn't understand that needs to wobble their head till they do. The same reason that the Federal Reserve is pumping trillions of dollars into the markets is another example of what the US will do to protect its status, if they didn't, then hundreds of huge US Companies would collapse and would then be bought up for a few cents in the Dollar by the Chinese.
Completely agree. A dollar has value because someone needs it, to buy oil or to pay the IRS etc.
A British pound has value, because someone needs it, to buy London property or to pay HMRC etc. Hence the value of a currency is dictated by fiat.

The question with the USD is how long this debasement can continue.
In the end, it is what often brings down empires.
 

Glue_Sniffer

Old-Salt
They were also told if they screw with our oil industry, they would be left to wither on the vine. I think Trump had a good “ heart to heart” with the Crown Prince and told him what would happen to him without American backing. It seems to have worked.
The shale industry has never really been profitable on a commercial basis. The shale break even price is higher than Saudi and other sources. Saudi Aramco is the most profitable company in the world.
Shale has been kept alive by subsidies, mostly in the form of cheap credit.
The U.S. government will probably want to keep the shale industry going for national security reasons, but that doesn't mean it has to be commercially viable. NASA was not commercially viable, but it was kept going as a government department.
 
The shale industry has never really been profitable on a commercial basis. The shale break even price is higher than Saudi and other sources. Saudi Aramco is the most profitable company in the world.
Shale has been kept alive by subsidies, mostly in the form of cheap credit.
The U.S. government will probably want to keep the shale industry going for national security reasons, but that doesn't mean it has to be commercially viable. NASA was not commercially viable, but it was kept going as a government department.


I do beleive the Saudi's need oil prices in the $80-85 dollar range to break even.

But you are correct, the shale industry is to important to be allowed to fail, hence the pep talk with the Prince. To many people out here work in the oil industry and they vote.
 

Glue_Sniffer

Old-Salt
Back to the subject of cash.
I believe it may be illegal to keep cash in a bank safety deposit box.
I don't know this for certain, but if it is true, it raises questions about why it would be the law.

I believe that when the banks shut in Greece and Cyprus, safety deposit boxes were also closed. i.e. the contents were "safe", but not accessible.

Then there's the issue of bank bail ins, rather than bail outs.

In a fiat currency system, there's no need for bank bail ins, as the government can always digitally create the currency needed to pay into the customers accounts. So why would the government want to forcibly convert customers debt into equity?

Well, presumably because the government doesn't want to hold that equity itself. But why not?

All very murky to me.

But if you want to see a truly free market banking industry, the best example is probably that of the USA in the 1800s. Back then banks survived on the trust and confidence of their customers.
 

Glue_Sniffer

Old-Salt

I do beleive the Saudi's need oil prices in the $80-85 dollar range to break even.

But you are correct, the shale industry is to important to be allowed to fail, hence the pep talk with the Prince. To many people out here work in the oil industry and they vote.
I believe that is the oil price needed to maintain the Saudi lifestyle and hence government survival.

Russia can survive a lower oil price, as their industrial base is more diversified. The Russian mining companies benefit from a low oil price. They can just use the cheap oil to dig up other stuff.
 
I believe that is the oil price needed to maintain the Saudi lifestyle and hence government survival.

Russia can survive a lower oil price, as their industrial base is more diversified. The Russian mining companies benefit from a low oil price. They can just use the cheap oil to dig up other stuff.
The Russians are also willing to accept a lower standard of living. The house of Saud has to bribe the populace and make them happy, which is a spendy proposition.
 
Completely agree. A dollar has value because someone needs it, to buy oil or to pay the IRS etc.
A British pound has value, because someone needs it, to buy London property or to pay HMRC etc. Hence the value of a currency is dictated by fiat.

The question with the USD is how long this debasement can continue.
In the end, it is what often brings down empires.
That's the Trillion Dollar question as huge forces are currently at work. Every time another several millions US job loses are announced the markets go up and precious metals go down, go figure. BTC has taken a hit over this three day weekend and is now in the area of 8750 but IT WILL go back up to 10,000 and beyond.

This morning two of my Silver CFD's hit TP returning a 7.61% and a 8.12% profits and my GE CFD has also just given me a very nice 27.22% return. It's a crazy time in the markets but this also presents opportunities and for the foreseeable future I believe that the market remains Long. How long this can continue obviously depends upon the Feds desire to continue printing money.
 
I believe that when the banks shut in Greece and Cyprus, safety deposit boxes were also closed. i.e. the contents were "safe", but not accessible.

Then there's the issue of bank bail ins, rather than bail outs.
Greece had a Bail Out but the Troika experimented with Cyprus and enforced a Bail In. As such, in Cyprus they took everything above €100k in any account that was held by anyone, in return you were issued a bond that over the last 7 years has been credited with a 1% interest return; the money taken will probably never be returned which is why my UK cash and PM's are held in a secure storage location as the same could happen here at anytime. The Bail Outs that Greece received were merely used to repay the previous ones and as such non of the bail out never actually went to Greece which was why the then finance minister, Yanis Varoufakis, and his leader Alexis Tsipras, led a newly elected government whose manifesto was to refuse further bail outs and instead renegotiate their debt repayments,. Unfortunately, the EU got to Tsipras and turned him as they were shit scared of Varoufakis as he threatened to pull Greece from the single currency. He was later used as a scape goat and tarnished with slanderous stories and hung out to dry. But his ever lasting statement, that still resonates, was that 'You can't negotiate with a creditor that doesn't actually want their money back'.
 
Last edited:

Glue_Sniffer

Old-Salt
The Russians are also willing to accept a lower standard of living. The house of Saud has to bribe the populace and make them happy, which is a spendy proposition.
Trouble in Saudi Arabia (either internal or external) could certainly spike the oil price.
Previously, this has not been in the interests of the USA. But these days, who knows?

Could be a Black Swan event that triggers a bout of true inflation.
But it's been predicted so often, that I'm sceptical it will ever happen....
 

Glue_Sniffer

Old-Salt
Greece had a Bail Out but the Troika experimented with Cyprus and enforced a Bail In. As such, in Cyprus they took everything above €100k in any account that was held by anyone, in return you were issued a bond that over the last 7 years has been credited with a 1% interest return; the money taken will probably never be returned which is why my UK cash and PM's are held in a secure storage location as the same could happen here at anytime.
Sorry, yes I remember now.
There was a fear in Cyprus that the bail in could include even those customers with less than €100k. The problem with that kind of bail in is market contagion, with loss of confidence.

One thing I considered at the time, was what exactly was on the balance sheets of those Cypriot banks? If they had mortgages secured against Cypriot real estate, then that's a pretty secure asset.
 
Trouble in Saudi Arabia (either internal or external) could certainly spike the oil price.
Previously, this has not been in the interests of the USA. But these days, who knows?

Could be a Black Swan event that triggers a bout of true inflation.
But it's been predicted so often, that I'm sceptical it will ever happen....
The Saudi’s for whatever reason decided to rock the boat in March. I don’t know why they thought they could do that and remain unscathed but they did. At a very inappropriate moment in time, I might add. I don’t imagine the House of Saud will ever try to repeat this mistake again. But hey the US, Russia, and Saudi Arabia are working together on this issue...
 
One thing I considered at the time, was what exactly was on the balance sheets of those Cypriot banks? If they had mortgages secured against Cypriot real estate, then that's a pretty secure asset.
That was what cause the Cypriot banking crisis as they were massively over leveraged.

- Stelios gets a mortgage to buy some land. Then he gets planning permission to build some villas and apartments that in turn increase the value of the land. Stelios then goes back to the bank to increase his debt so that he can start building.

- Further long the line people start buy the properties and as Stelios is getting commission for referring people to his lender for mortgages, he sends them there and they issue mortgages upon the properties.

- Stelios is doing well so he goes back to the bank to borrow more money as he wants to buy another piece of land and as they're all doing so well the bank lends him more money.

- Stelios then starts on his next development whilst his first one is still ongoing. But then there's a problem, a worldwide financial meltdown (2008) and the buyers dry up.

- Cue, over leveraged banks that now have loans against property and land that no one wants to buy!

Times that by several thousand and those assets are highly toxic and largely worthless as no one wants them. I mean, who in their right mind would put large sums of money into a banking system that at the-drop-of-a-hat can close the banks and plunder all the money and all under the instruction of the EC, ECB and IMF?
 

Glue_Sniffer

Old-Salt
That was what cause the Cypriot banking crisis as they were massively over leveraged.

- Stelios gets a mortgage to buy some land. Then he gets planning permission to build some villas and apartments that in turn increase the value of the land. Stelios then goes back to the bank to increase his debt so that he can start building.

- Further long the line people start buy the properties and as Stelios is getting commission for referring people to his lender for mortgages, he sends them there and they issue mortgages upon the properties.

- Stelios is doing well so he goes back to the bank to borrow more money as he wants to buy another piece of land and as they're all doing so well the bank lends him more money.

- Stelios then starts on his next development whilst his first one is still ongoing. But then there's a problem, a worldwide financial meltdown (2008) and the buyers dry up.

- Cue, over leveraged banks that now have loans against property and land that no one wants to buy!

Times that by several thousand and those assets are highly toxic and largely worthless as no one wants them. I mean, who in their right mind would put large sums of money into a banking system that at the-drop-of-a-hat can close the banks and plunder all the money and all under the instruction of the EC, ECB and IMF?
Falls in real estate prices have long been a problem for banks.
That's why the UK government has been doing all it can to prop up UK house prices.
A falling property market has often been bad news for the government in control at the time.
 

philc

LE
Greece had a Bail Out but the Troika experimented with Cyprus and enforced a Bail In. As such, in Cyprus they took everything above €100k in any account that was held by anyone, in return you were issued a bond that over the last 7 years has been credited with a 1% interest return; the money taken will probably never be returned which is why my UK cash and PM's are held in a secure storage location as the same could happen here at anytime. The Bail Outs that Greece received were merely used to repay the previous ones and as such non of the bail out never actually went to Greece which was why the then finance minister, Yanis Varoufakis, and his leader Alexis Tsipras, led a newly elected government whose manifesto was to refuse further bail outs and instead renegotiate their debt repayments,. Unfortunately, the EU got to Tsipras and turned him as they were shit scared of Varoufakis as he threatened to pull Greece from the single currency. He was later used as a scape goat and tarnished with slanderous stories and hung out to dry. But his ever lasting statement, that still resonates, was that 'You can't negotiate with a creditor that doesn't actually want their money back'.
If I recall correctly there were some very upset Russians with money in Cyprus who some how got dispensation, odd that.
 

Glue_Sniffer

Old-Salt
The Saudi’s for whatever reason decided to rock the boat in March. I don’t know why they thought they could do that and remain unscathed but they did. At a very inappropriate moment in time, I might add. I don’t imagine the House of Saud will ever try to repeat this mistake again. But hey the US, Russia, and Saudi Arabia are working together on this issue...
Perhaps the Saudis had an agreement with the Russians?
The Russians get to damage the U.S. shale industry and the Saudis get to damage the Iranian oil industry, which has a higher break even price.
 
Perhaps the Saudis had an agreement with the Russians?
The Russians get to damage the U.S. shale industry and the Saudis get to damage the Iranian oil industry, which has a higher break even price.
Who knows, but it backfired. It seems some people forget that the US security umbrella can be withdrawn.
 
Top