Yo, heads up....Something big with the $ is about to happen

[Raz]

Re: Yo, heads up....Something big with the $ is about to happen

This is essentially the argument for buying gold at BV, and paying them to hold on to it for you versus paper gold.

But what if you are a small business with $100k's to $M's and really wanted to have the cash readily available? Perhaps a better counter-party risk would be to pay the bank to keep your money for you not a deposit (loan) to the bank, but rather a Safety Deposit Box where you pull money out of your deposit account (except $250k FDIC insured), and immediately putting the cash in the lock box, for which you pay the bank to keep safe your property? (Effectively negative interest).

This is probably not reasonable for B's of $, but for most of us who own small businesses that need to have cash on hand for bills and payroll, having $250k-$2M in the bank is not unusual. I for one, have multiple bank accounts to spread the risk, but still, that becomes hard to manage.

Not that I think a bank would be too keen about handing over several hundred thousand dollars of cash for me to turn around and put into the safety deposit box....I can imagine the scene now: "But sir, don't you want to make interest on that money?....I'll have to get a manager for that much money, and I don't know if we have it, yada yada yada...."

Uncle Samuel can declare a "national emergency", have the IRS show up at your box,
declare your ca$h to be contraband and seize it, can they not? :confused:

[sunskyfan]

Re: Yo, heads up....Something big with the $ is about to happen

Uncle Sam can but UC does it with inflation, taxes, and fees. It is easier that way.

[pescamaaan]

Re: Yo, heads up....Something big with the $ is about to happen

Uncle Samuel can declare a "national emergency", have the IRS show up at your box,
declare your ca$h to be contraband and seize it, can they not? :confused:

plus, i think you're opening yourself to a number of other risks:

fire, theft, flood, bombs, etc....

and if the bank goes under, you may have trouble getting access to your cash.

[sunskyfan]

Re: Yo, heads up....Something big with the $ is about to happen

Anytime there is money destruction cash is king if only in a relative way. Dubai was one of those events.

Another way to look at things is that there is a reduction of complexity going on in the economy. You would rather own a railroad than an airline, a Honda over a BMW, a Mac over a PC, a broom over a robot sweeper, and a T-Bill over share of Bank of America.

[rjwjr]

Re: Yo, heads up....Something big with the $ is about to happen

Yep -- and for a company (any small/medium sized company's payroll likely blows through the limits) that would be a serious concern.

This is not as big of a concern as you might think...up to a point...because...

1] The FDIC has never allowed a single depositor dollar to be lost, even if the balance exceeded the $250,000 published limit. (I understand the argument that you may get paid back in devalued dollars, but it doesn't change the primary fact that not a single dollar of deposit has been lost since the creation of the FDIC.)

2] You can buy private insurance on deposits greater than $250,000 if you so desire.

...I qualified this with "up to a point" because, if you start talinkg Billions in deposits rather than Millions, then I agree with Cow and others that parking your money with the US Treasury (even at 0% interest) is a better option than parking it at your local Citi or BOA (FDIC had done a nice job to date, but I wouldn't want to test their upper deposit protection limits).

[tmicou]

Re: Yo, heads up....Something big with the $ is about to happen

For a long time I've wondered why put one's money in Treasuries at such low interest. Why not just keep the cash?

But a small light bulb went on in my cow-brain today. For small timers of meager wealth, such as myself, the choice of cold hard cash, FDIC insured bank deposits or Treasuries is a reasonable choice, all of similar risk, with the Treasuries being the least liquid and convenient.

But if I had a few billion dollars, instead of the paltry sums I do have, then cash isn't practical (physically difficult to manage and a security problem), and bank deposits are not FDIC insured. Bank deposits are rather essentially a loan to the bank on very liquid, very low interest rate, terms.

What matters in these choices (cash, bank or T-bills) is who is the counter party. That determines the risk. The counter party for cash is the security company I hire to guard my stash; the counter party for cash is the bank in which I deposit the funds; the counter party for T-bills is the United States government.

None of these three counter parties are perfect. Our local star, the sun, will easily outlast them all. But of the three, assuming all three are paying essentially zero percent, I'll take the United States.

The conspiracy theorist in me came out today with another possible explanation:

What about a Quid pro quo situation that works like this: Govm't gives GS a big bailout. GS "invests" those $B's in stock market, running up the market (for no apparent reason). In exchange, GS agrees to fund the treasury for a while in short spurts at 0% interest. Both parties win! Treasury gets to live a little longer, GS makes money, govm't takes credit for big stock market rise. What's not to like (at least until the scheme ends)?

Is something like this even possible? Plausible? Crazy? Anyone got opinions on this?

[ASH]

Re: Yo, heads up....Something big with the $ is about to happen

The conspiracy theorist in me came out today with another possible explanation:

What about a Quid pro quo situation that works like this: Govm't gives GS a big bailout. GS "invests" those $B's in stock market, running up the market (for no apparent reason). In exchange, GS agrees to fund the treasury for a while in short spurts at 0% interest. Both parties win! Treasury gets to live a little longer, GS makes money, govm't takes credit for big stock market rise. What's not to like (at least until the scheme ends)?

Is something like this even possible? Plausible? Crazy? Anyone got opinions on this?

Goldman Sachs only borrowed $10B, and they paid it back much earlier this year.

Rather than getting money directly from the government, I'm pretty sure that the banks in general benefitted more from (A) relaxation of mark-to-market rules to value the junk on their books, (B) the opportunity to borrow from the Fed using junk as collateral, (C) the Treasury making good creditors of AIG and Fannie Mae/Freddie Mac, and (D) an "accommodative" federal funds rate.

That said, what you describe could happen without any formal collusion. If banks no longer have a recognized capitalization problem but consumer and business lending looks risky, then running up the stock market on low volume is a decent strategy for entities which by no means "buy and hold" themselves but live to trade. Only long-term buy-and-hold investors need be terribly concerned about value and the long-term prospects of the economy. Running up asset prices with easy money was the banking game before the music stopped. Why would GS or any of the banks not return to this game when able, independent of any direct government influence?

There are other reasons why folks would make short term loans to the Treasury at no interest, covered adequately elsewhere in this thread. However, I don't rule-out some back-scratching.

[Fiat Currency]

Re: Yo, heads up....Something big with the $ is about to happen

Goldman Sachs only borrowed $10B, and they paid it back much earlier this year.

Rather than getting money directly from the government, I'm pretty sure that the banks in general benefitted more from (A) relaxation of mark-to-market rules to value the junk on their books, (B) the opportunity to borrow from the Fed using junk as collateral, (C) the Treasury making good creditors of AIG and Fannie Mae/Freddie Mac, and (D) an "accommodative" federal funds rate.
...
There are other reasons why folks would make short term loans to the Treasury at no interest, covered adequately elsewhere in this thread. However, I don't rule-out some back-scratching.

Well said. However ...

Gibbs.png

[Camtender]

Re: Yo, heads up....Something big with the $ is about to happen

Even though Weiss may have had deflation wrong, good post here on the subject at hand.

http://www.moneyandmarkets.com/citig...possible-28325

Short-Term U.S. Treasury Securities

True safety has two elements. The first is capital conservation — no losses, no reduction in your principal. But it’s the second element that most people miss: Liquidity — the ability to get a hold of your money and actually use it whenever you want to, without waiting, penalties, bottlenecks, shutdowns or disasters of any kind standing in your way.

Absolute perfection is not possible. But on both of those aspects — capital conservation and liquidity — the single investment in the world that’s at the top of the charts is short-term U.S. Treasury securities. These enjoy the best, most direct, and most reliable guarantee of the U.S. government, over and above any other guarantees or promises they may have made in the past, or will make in the future.

I know you have questions. So let me do my best to anticipate them and answer them right here.

Question #1. You might ask: “The FDIC is also backed by the U.S. government. So if I have money in an FDIC-guaranteed account at my bank, what’s the difference? Why should I accept a lower yield on a government-guaranteed 3-month Treasury bill when I can get a higher yield on a government-guaranteed 3-month CD?”

Without realizing it, you’ve answered your own question. If the yield is higher on the bank CDs, that can mean only one thing — that, according to the collective wisdom of millions of investors and thousands of institutions in the market, the risk is also higher. Otherwise, why would the bank have to pay so much more to attract your money? Likewise, how can the U.S. Treasury get away with paying so much less and still have interested buyers for its securities?


It’s because the risk is higher for CDs, but much lower for Treasury securities. It’s because even within the realm of government guarantees, there’s a pecking order.

• The first-priority guarantee: Maturing securities that were issued by the U.S. Treasury department itself.
• The second-priority guarantee: Maturing securities that were issued by other government agencies, such as Ginnie Mae.
• Third: The Treasury’s backing of the FDIC.

This is not to say the Treasury is not standing fully behind the FDIC. Rather my point is that, in the event of serious financial pressures on the government, the FDIC and FDIC guaranteed deposits will not be the first in line.

[ER59]

Re: Yo, heads up....Something big with the $ is about to happen

What about brokerage houses like TDAmeritrade or Schwab?
Are they any safer than a regular bank?

[Raz]

Re: Yo, heads up....Something big with the $ is about to happen

What about brokerage houses like TDAmeritrade or Schwab?
Are they any safer than a regular bank?

About eleven years ago a friend from my stockbroker days in the 1980s researched six different firms to act as custodians for his client's funds and securities. (He's a money manager and a real "stock jockey".)

He said that only two were conservative enough to suit him: TD Ameritrade and Charles Schwab & Company. Because of the trading desk and account services he decided to go with Schwab. I'm very comfortable and pleased with Schwab.

Ameritrade is a subsidiary of Toronto Dominion Bank. Schwab is a straight brokerage and custodial firm that has also owned a commercial bank for many years. To my knowledge these firms don't do underwriting or sell their own manufactured products, thereby greatly lowering their risk.

[runlikehe11]

Re: Yo, heads up....Something big with the $ is about to happen

Just FYI about Ameritrade This is why I closed my account for Security reasons.
Ameritrade Hack Settlement: $2 Per Victim, $1.8 Million for Lawyers


http://www.wired.com/threatlevel/200...eritrade-hack/

Ameritrade is a subsidiary of Toronto Dominion Bank. Schwab is a straight brokerage and custodial firm that has also owned a commercial bank for many years. To my knowledge these firms don't do underwriting or sell their own manufactured products, thereby greatly lowering their risk.

[friendly_jacek]

Re: Yo, heads up....Something big with the $ is about to happen

...........trouble is am not bright enough to understand:-
http://www.zerohedge.com/article/29-...ll-prices-0000

It means?????
Mike

Not expert on 1 month bills but 3 month T bills are also record low and bottoming. Last time we had an analogous situation was 2004 when rates started to climb and dollar strengthened. I believe in one more meltup in gold before that happens.