Friday, January 22, 2016

Where to Invest?

Mish asks where to invest, but he himself is not so sure... 
Target2 is a measure of capital flight between eurozone countries. For example: A depositor in a Greek, Spanish, or Italian bank does not trust their bank so the depositor opens up a new account and transfers the balance to a bank in Germany, the Netherlands, or Luxembourg instead.
The recipient banks then park the money at the ECB at negative interest rates instead of  buying Greek, Spanish, or Italian bonds. 
Money parked at the ECB at a negative rate of 0.3% hit a new high at the beginning of 2016.
Better to lose a bit of your credit-tally totals than lose it all...  such is capitalism.
In December, only bondholders were at risk. Starting 2016, depositors are at risk, but allegedly only on amounts that exceed €100,000.
Don't kid yourself into believing smaller deposits are safe. There are other problems, like capital controls. Greece and Cyprus both have them.
Capital Controls in Greece
In 2015, the ECB imposed Capital Controls on Bank Accounts limiting withdrawals to €1,800 a month.
On October 19, 2015, Bloomberg proclaimed A Quick End to Greek Capital Controls? Economists Don't Think So.
Even if your money is not stolen, you may not have access to it for quite some time. 
No access for a time is tantamount to stealing, at least for that duration, for what about opportunity costs?

I ask "Why Take Chances?"
Renzi wants to create a "bad bank". Under new rules, effective 2016, bondholders and depositors are liable for any losses transferred to the "bad bank".
Why is the ECB reluctant to approve a bad bank for Italy? Could it be the losses will be massive? 

OK, so after this flood, we separated the waterlogged from the dry.  But we do not remove the dry from the flood zone?  Making this "good bank" just buys time to form a bigger bubble.
Don't be seen Standing in Line hoping for your money when withdrawals are 'limited' via capital controls or outright confiscated by bail-ins.
Avoid the rush. Get out now.
Where? Think carefully.
The only place is to "hide (invest) is  self employment, where every actor creates his own benecredit.  
 Order wheat flour.  Get 30 days to pay.  Sell bread, give thirty days to pay.  Workers get paid end of month.  There is all the credit, at zero interest, an economy needs. It is what this economy is missing.  We had it.  We lost it.  Can we get it back?  Only if all those now reading Mish, Stockman, Grant, etc would go start businesses to fill in the vacuum created by the big box failures...

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