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In case you need more indicators that the fiat currency system is coming apart at the seams:

http://www.zerohedge.com/news/2014-01-31/why-harvard-economist-pulling-all-his-money-bank-america

A classicial economist... and Harvard professor... preaching to the world that one's money is not safe in the US banking system due to Ben Bernanke's actions? And putting his withdrawal slip where his mouth is and pulling $1 million out of Bank America? Say it isn't so...

From Terry Burnham, former Harvard economics professor, author of “Mean Genes” and “Mean Markets and Lizard Brains,” provocative poster on this page and long-time critic of the Federal Reserve, argues that the Fed’s efforts to strengthen America’s banks have perversely weakened them. First posted in PBS.

Is your money safe at the bank? An economist says ‘no’ and withdraws his

Last week I had over $1,000,000 in a checking account at Bank of America. Next week, I will have $10,000.

Why am I getting in line to take my money out of Bank of America? Because of Ben Bernanke and Janet Yellen, who officially begins her term as chairwoman on Feb. 1.

Before I explain, let me disclose that I have been a stopped clock of criticism of the Federal Reserve for half a decade. That’s because I believe that when the Fed intervenes in markets, it has two effects — both negative. First, it decreases overall wealth by distorting markets and causing bad investment decisions. Second, the members of the Fed become reverse Robin Hoods as they take from the poor (and unsophisticated) investors and give to the rich (and politically connected).

Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.

Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money.

[article continued at the link]

As much as I'm happy with the message, this is a total stunt. No one has 1mil in a single checking account, especially not an economist. You don't need that kind of liquidity on that much money, and the FDIC only protects a quarter of it so the risk for zero gain makes no sense.

 daedalus wrote:
As much as I'm happy with the message, this is a total stunt. No one has 1mil in a single checking account, especially not an economist. You don't need that kind of liquidity on that much money, and the FDIC only protects a quarter of it so the risk for zero gain makes no sense.

RTFA.

Yes, the Federal Government (via the FDIC) insures deposits in most institutions up to $250,000. But there is a problem with this insurance. The FDIC currently has far less money in its fund than it has insured deposits: as of Sept. 1, about $41 billion in reserve against $6 trillion in insured deposits. (There are over $9 trillion on deposit at U.S. banks, by the way, so more than $3 trillion in deposits is completely uninsured.)

It’s true, of course, that when the FDIC fund risks running dry, as it did in 2009, it can go back to other parts of the federal government for help. I expect those other parts will make the utmost efforts to oblige. But consider the possibility that they may be in crisis at the very same time, for the very same reasons, or that it might take some time to get approval. Remember that Congress voted against the TARP bailout in 2008 before it relented and finally voted for the bailout.

Thus, even insured depositors risk loss and/or delay in recovering their funds. In most time periods, these risks are balanced against the reward of getting interest. Not so long ago, Bank of America would have paid me $1,000 a week in interest on my million dollars. If I were getting $1,000 a week, I might bear the risks of delay and default. However, today I am receiving $0.

Its like you think money grows on trees or something

Hhhmmm I wonder how much money we save bu not printing, acquiring the material to make bills and coins and running the Mint will save us. Go to the Credit/Debit Check card...I rarely carry bills and cash...well not exactly...I have two "ten's" and a "five" in my wallet....two months running. Keep forgetting and using my plastic.

Scratching my head on how that seems to contradict any part of what I said.

Even if you're taking it on good faith that your money is going to be protected by FDIC, it makes zero sense to have four times what is protected amount in an account. Especially a zero interest account.

If you know that the FDIC is not sustainable, then you sure as gak don't.

EDIT: Oh, apparently there exist checking accounts that pay interest, for some values of interest.

I'm with daedalus - for someone who should know a lot about finance, he doesn't really seem to have too much of a clue by keeping that much money in the Bank of America.

Hell, even forgetting the insurance on the money up to $250k - I would want that money working for me, not just sitting there, essentially in an insured mattress...

ah daedalus my bad i misunderstood the point you were trying to make.

Regarding investing/putting your money to work for you, the whole point of the article is that he uses a bank for "safe storage" of money, not to make money, because the market is volatile and these investments are too risky and not safe. See

Under the impression he might have forgotten about the 1M in BoA. Temp storage for 1M, made more money, banked else where, remembered his 1mil and placed into another bank to collect interest...maybe...just maybe....what does the MX's say?

 daedalus wrote:
As much as I'm happy with the message, this is a total stunt. No one has 1mil in a single checking account, especially not an economist. You don't need that kind of liquidity on that much money, and the FDIC only protects a quarter of it so the risk for zero gain makes no sense.

Reminds me of the time I went to a Dave Ramsey economics seminar with my wife. The presenter said the time had come to get rid of our credit cards and invited us to join him in cutting them up on the spot. He declared that he would start the event, pulled a card out of his wallet and cut it up, sending the pieces flying. Part of it landed by by me,so I picked it up to look at it and noticed it had an expiration date that was over a year past. I then announced this to the assembled group, and strangely, no further credit cards were cut up.

 Noble713 wrote:
In case you need more indicators that the fiat currency system is coming apart at the seams:

In no way is the article you cited claiming "that the fiat currency system is coming apart at the seems". The guy even advocates keeping cash (read: fiat currency) on hand within your home.

He is a pretty dumb economist if he thinks that Bank of America is so small that his one million is going to be missed, let alone start a bank-run....

 d-usa wrote:
He is a pretty dumb economist if he thinks that Bank of America is so small that his one million is going to be missed, let alone start a bank-run....

Ssssh. Can't you see he's trying to indulge his own sense of self-importance?

 d-usa wrote:
He is a pretty dumb economist if he thinks that Bank of America is so small that his one million is going to be missed, let alone start a bank-run....

While I do not claim to understand economics (cuz I certainly don't), I am under the impression that a lot of economists don't understand economics, either.

 RatBot wrote:

 d-usa wrote:
He is a pretty dumb economist if he thinks that Bank of America is so small that his one million is going to be missed, let alone start a bank-run....

While I do not claim to understand economics (cuz I certainly don't), I am under the impression that a lot of economists don't understand economics, either.

It isn't a black and white field of study. Everyone has their own preferred set of economic indicators. There is no right or wrong way to approach it.

So its not that they don't understand it, its that nobody has figured out the best way to predict it yet. So people will end up contradicting each other.

 Noble713 wrote:
In case you need more indicators that the fiat currency system is coming apart at the seams:

http://www.zerohedge.com/news/2014-01-31/why-harvard-economist-pulling-all-his-money-bank-america
Before I explain, let me disclose that I have been a stopped clock of criticism of the Federal Reserve for half a decade. That’s because I believe that when the Fed intervenes in markets, it has two effects — both negative. First, it decreases overall wealth by distorting markets and causing bad investment decisions.

This right here made me disregard everything else he said. Wasn't it the lack of oversight and intervention that made over-greedy bankers and investors make bad decisions leading to the government being forced to intervene to prevent another 1929?

I'm confused as to why someone with a million bucks wouldn't want to have it in an account that generates interest, especially an economist.

My only thought is that maybe he has so much money that million sitting there is pocket change to him, making me care about his opinion even less, in the same way as the poster above described their experience with a seminar to cut up credit cards and the presenter's was expired anyway.

Next...

 whitedragon wrote:
I'm confused as to why someone with a million bucks wouldn't want to have it in an account that generates interest, especially an economist.

My only thought is that maybe he has so much money that million sitting there is pocket change to him, making me care about his opinion even less, in the same way as the poster above described their experience with a seminar to cut up credit cards and the presenter's was expired anyway.

Next...

Maybe he was planning on building a 40k army?

The first lesson to learn if you are to hope to understand the economic system is that it is built on lies and bs.

That is not a radical comment, or socialism or any other label, just an understanding that more money exists than actual value can be attributed to it, people are rich or poor largely on fiat and the entire system only exists because enough people say it does and the rest go along with it.

Those without lack the power to alter the system, those with have the self appointed authority to perpetuate it and the incentive to do so.

The system can only ber brought down from the outside and doing so will not improve matters or spread wealth elsewhere as the wealth in the monetary system is mostly illusory. This is also the system's greatest strength as being only a house of cards it can be assembled just as easily as it can be toppled and for this reason the lie is stable enough to build a social foundation upon.

That plus we have no better alternative.

well if he would have transfered his money from the BOA checking account, to a BOA savings account he would have earned some interest on the cash

 Orlanth wrote:
The first lesson to learn if you are to hope to understand the economic system is that it is built on lies and bs.

That is not a radical comment, or socialism or any other label, just an understanding that more money exists than actual value can be attributed to it, people are rich or poor largely on fiat and the entire system only exists because enough people say it does and the rest go along with it.

Those without lack the power to alter the system, those with have the self appointed authority to perpetuate it and the incentive to do so.

The system can only ber brought down from the outside and doing so will not improve matters or spread wealth elsewhere as the wealth in the monetary system is mostly illusory. This is also the system's greatest strength as being only a house of cards it can be assembled just as easily as it can be toppled and for this reason the lie is stable enough to build a social foundation upon.

That plus we have no better alternative.

https://bitcoin.org/en/

Yeah, this is stupid. Really fething stupid.

Thing is, a while ago a lot of economists claimed with great confidence that the Fed's QE program would lead to rampant inflation and even hyper-inflation. They believed this because they seemed to have absolutely no idea about the very basics of Keynesian macroeconomics (which is not surprising, as macroeconomics is barely taught in many freshwater schools, but disappointing as you'd think maybe professional academics would pick up a book like Keynes' General Theory just out of curiousity). Those economists were completely wrong, as inflation has remained very low.

The response of those economists, outside of a few notable cases, was not to admit they were wrong and that there were important economic concepts of which they oblivious, but instead to just invent new reasons to complain the Fed's money printing. Claims that the money printing was creating a new bubble have been the most common, and not limited in any way by the complete and utter absence of any kind of evidence of a bubble in any group of asset prices. The claim by the guy in the OP, that a bank might suffer a run because basic accounts pay no interest is just another variation on that same theme - he's just invented some other imaginary problem to get him to his pre-determined conclusion that the Fed and QE must be wrong. And this effort isn't even imaginative, with little effort made to claim exactly why a transaction account that historically has never paid interest would suddenly become a problem that would drive people to withdraw their funds, particularly given the generally low interest rates and low inflation in the economy.

Bonus points for attempting to blame Argentina's problems on the Fed, because I guess as long as you're making up politically convenient bs, you might as well go all the way.


Oh, and please no-one read the website the OP's article is from, Zero Hedge. It is perhaps the single worst place for investment advice on the net right now. The people there are crazy, but more than that they are foolish, there is simply no recognition of basic trading fundamentals in the stuff put up on their site. If you follow the things posted there you will lose money.

 Grey Templar wrote:
It isn't a black and white field of study. Everyone has their own preferred set of economic indicators. There is no right or wrong way to approach it.

So its not that they don't understand it, its that nobody has figured out the best way to predict it yet. So people will end up contradicting each other.

Sure, there's a lot of subjective elements and grey areas in economics, the field lacks the ability to conduct controlled experiments in the way that hard sciences like physics and chemistry can and so it is very hard to properly test a lot of arguments.

But the bigger problem is that when things are well established by evidence, plenty of economists will still claim the opposite is true simply because there are a lot of fools and liars working in economics. Take this fellow Burnham in the OP's article, who was a fool for having no idea how inflation operated in an economy with low aggregate demand, and a liar for continuing to pretend he knows what he's talking about after his claims had been wrong for five years.

But whatever, this guy has books to sell and a place on the pundit tour to claim, and so making claims that goldbugs and moneyed interest want to hear will only help him, even if those claims are stupid and factually wrong. Keep on lying for money, Mr Burnham, it will help you get another million in the bank.


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 Orlanth wrote:
The first lesson to learn if you are to hope to understand the economic system is that it is built on lies and bs.

That is not a radical comment, or socialism or any other label, just an understanding that more money exists than actual value can be attributed to it, people are rich or poor largely on fiat and the entire system only exists because enough people say it does and the rest go along with it.

Well, to the extent that an economy is a social contruct, and therefore is built around individuals personally buying in to some part of the system for personal benefit, then you're right. But note that that system isn't designed, but is emergent as a result of the way in which each individual chooses to interact with that system, and then realise how you're wrong.


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 whitedragon wrote:
https://bitcoin.org/en/

It absolutely blows my mind that people think bitcoin is a response to fiat currency.

What in the hell do people think bitcoin is?

What kind of dumbass keeps $1mm in a checking account? Do not take advice from such a guy...

 sebster wrote:

 whitedragon wrote:
https://bitcoin.org/en/

It absolutely blows my mind that people think bitcoin is a response to fiat currency.

What in the hell do people think bitcoin is?

Honestly, I don't think bitcoin is a bad thing, but it's a total fiat currency, as per the "create your own cryptocurrency" websites that do all the hard math for you to make your own bitcoin-alike.

I really enjoy twitter's gak /r/bitcoin says. https://twitter.com/s h i t_rbtc_says

Remove spaces in url to view.

 sebster wrote:
Those economists were completely wrong, as inflation has remained very low.
.......
Claims that the money printing was creating a new bubble have been the most common, and not limited in any way by the complete and utter absence of any kind of evidence of a bubble in any group of asset prices.

The government has been "moving the goal posts" by massaging the inflation calculations in ways that are not in line with actual American spending habits, for one thing. Much like the unemployment rate the bobbleheads on TV keep pushing doesn't include "discouraged workers".
http://www.forbes.com/sites/davidmarotta/2013/04/16/big-mac-index-shows-official-cpi-underreports-inflation/
http://dailybail.com/home/chart-the-real-inflation-rate-is-11-according-to-cpi-calcula.html
http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/

As for asset price bubbles, how about:
Fed's Lacker Admits "Asset Bubble", Reluctant to pop it
Student loan bubble starting to burst
http://www.forbes.com/sites/steveodland/2012/03/24/college-costs-are-soaring/

You could also look at classic collector car prices (a Ferrari 250 goes for ~$40 mil these days) or real estate near Central Park ($10mil condos are a great way for Russian billionaires to launder their money) or Miami (Porsche Design Tower).

Oh, and please no-one read the website the OP's article is from, Zero Hedge. It is perhaps the single worst place for investment advice on the net right now.

Bill Gross reads ZeroHedge.

ZeroHedge has also repeatedly accurately predicted bad news/economic indicators/etc. usually months in advance, contrary to mainstream pundits. The overall quality of the articles has declined compared to about 2 years ago.

Still, if you read the *comments* at ZeroHedge and filter out the whackos (yes, they are numerous) you find a common trend of good advice:
1. Buy firearms.
2. Invest in yourself, particularly productive technical skills like robotics.
3. Own land, preferably outside the United States or arable land in a remote US area.

If the objective is long-term self-sufficiency of your family it's hard to argue with those things. I've got #1 covered via stateside family members, #2 WIP now, just missing #3....but a good friend has a house (and an anchor baby) in the Philippines so I'll be watching how his example proceeds.

If you follow the things posted there you will lose money.

Every minute of every day you are losing money anyway....through theft aka inflation.

But the bigger problem is that when things are well established by evidence, plenty of economists will still claim the opposite is true simply because there are a lot of fools and liars working in economics.

Much like how Keynesians ignore the failure of every fiat currency debasement.....ever.

 whitedragon wrote:
https://bitcoin.org/en/

It absolutely blows my mind that people think bitcoin is a response to fiat currency.

What in the hell do people think bitcoin is?

To me it's an incredibly flexible, real-time, near-zero-cost payment medium. Do central banks need to worry? Maybe. But VISA should be terrified. If a business can sell me a product on the other side of the planet without having to pay 10% or whatever in some credit card company's "processing fees", that should be a big deal.

 Noble713 wrote:
ZeroHedge has also repeatedly accurately predicted bad news/economic indicators/etc. usually months in advance, contrary to mainstream pundits. The overall quality of the articles has declined compared to about 2 years ago.

Well I'd say that's because they have a free market, meaning bearish, lean in this Central Banker "managed" economy. They, much like Drudge Report, serve as a useful aggregator. Unless you're independently duplicating all of the research that appears on their website, simply ignoring them or dubbing ZH 'useless' is rather self-limiting.

The question around the whole QE experiment specifically and the 'Central Banker Technoconomy' generally has been "what happens in the endgame?", i.e. when QE tapers and when you run out of partners to deflate against.

Although we're declining from near record highs, reality is still that for CY2014, most major indices in the US are down 5%+ and the emerging markets are a mess, and this still with an artificially low interest rate in the US. The market is essentially bludgeoning the US Fed to continue stimulus, because of how bad it threatens to get if all stimulus ends.

I like how people who advocate that we should get rid of all federal regulation and intervention are also the same people who demand that the federal government provide public protection and fire services. Or would get mad there sick because there meat wasn't inspected.


Also If the economy really does collapse the last thing that will save you will be a crapzillion buttcoins or a couple bars of gold.

You cannot eat buttcoins or barter with them and you cannot eat bars of gold or barter with them.

Actually, you can barter with bars of gold. Gold was the standard of exchange for thousands of years, empires rose and fell with precious metal currency. If fiat currency collapses we'll go right back to gold, or silver, or copper, etc...

Paper money on the other hand will literally be worthless. As will bitcoins of course.

 Grey Templar wrote:
Actually, you can barter with bars of gold. Gold was the standard of exchange for thousands of years, empires rose and fell with precious metal currency. If fiat currency collapses we'll go right back to gold, or silver, or copper, etc...

Paper money on the other hand will literally be worthless. As will bitcoins of course.

Actually, far far far far far far more empires fell because they could not FEED their people.

No matter what, GOLD will not help you survive, at all, invest in solar panels, a fuel efficient car, a garden, a nice basement .

All of those things are a million times a better long term stability investment than fething gold. Gold cannot power your house, gold can not move you around, gold can not feed you, gold can not protect you.

Gold in the end is just a fething worse than paper, why? Because Paper you can at least BURN.

Bitcoins are even more worthless than paper currency. Paper currency has inherent value as a legal tender backed by a government for use in trade, and thus so long as that government stands will carry value.

Cryptocurrency only has value because people are willing to use it. It isn't backed by anyone, hence the inevitable pop of the cryptocurrency bubble that will happen at some point in the future, assuming that stuff ever makes it out of being used by any business that don't have credit ratings and legal credibility so low banks will never do any business with them, which is where most of the value in Bitcoins is right now. The rest is in people botnet farming them to sell to those companies, so really cryptocurrencies as they stand are artificially inflated and carry no real value at all (anyone heard of that story about Tulips and Denmark?).

 Alexzandvar wrote:

 Grey Templar wrote:
Actually, you can barter with bars of gold. Gold was the standard of exchange for thousands of years, empires rose and fell with precious metal currency. If fiat currency collapses we'll go right back to gold, or silver, or copper, etc...

Paper money on the other hand will literally be worthless. As will bitcoins of course.

Actually, far far far far far far more empires fell because they could not FEED their people.

No matter what, GOLD will not help you survive, at all, invest in solar panels, a fuel efficient car, a garden, a nice basement .

All of those things are a million times a better long term stability investment than fething gold. Gold cannot power your house, gold can not move you around, gold can not feed you, gold can not protect you.

Gold in the end is just a fething worse than paper, why? Because Paper you can at least BURN.

You clearly didn't understand my post at all.

1) You can use gold to buy stuff you need if the existing economy tanks.

2) "empires rose and fell with precious metal currency" does not mean that the reason they fell was because of their coinage. No, it means that they used it.

Gold is the original currency.

Granted, it won't be as valuable as solar panels, a garden, or food storage if we have total collapse. But a partial collapse(which is far more likely to occur) will still see a need for an exchange medium.

And in the event of total collapse, your fuel effecient car and garden will still be of little use. You'd need several acres to feed your family if you needed to be totally self-sufficient, and a car is useless without fuel(which requires infrastructure) It doesn't matter if it gets 100 MPG.

Nobody is claiming that gold is all you need, far from it, but it will be useful to have. It would need to be in coin form though, bars are simply too large for the smaller transactions you'd need it for.



Automatically Appended Next Post:

 LordofHats wrote:
(anyone heard of that story about Tulips and Denmark?).

I thought it was the Netherlands and Tulips?