7 ms·

So, if some country (and as you say Europe) where still primary mode of parking your earnings is banks what are other options to play safe in case such a seizur

by fakeer 14y ago

So, if some country (and as you say Europe) where still primary mode of parking your earnings is banks what are other options to play safe in case such a seizure happens? Real estate is one I can see. What else? Gold, you will have to keep in a bank in the end. What about shares, aren't they somehow related to sth deposited in a bank? I mean, how do you safeguard your savings then?

fennecfoxen 14y ago
You can always hold cash... of course, that's got its own risks (theft), and you're not immune from inflation... Using something a store of value is essentially anticipating that someone will give you something valuable in the future. This holds whether that store of value is a promise from a bank (in your deposit account), or a government bond, or a commodity. You can never be completely sure of the future. But some entities are much better about it than others.
qdog 14y ago
There seems to be some confusion as to what a bank is on this board. Every time you deposit say $1 with a bank, they lend out $.90 of it at interest for mortgages, payrolls, etc. It's these investments the bank makes that can (and do) wreck money. The government of the US and EU recognize this risk for most people is detrimental and offer insurance on the first 100,000 deposited. The phrase "seized account" does not appear to be correct, more correct would be "The Cypriot banks lost something like 40% of all deposits and all depositors over the 100,000 insured mark have lost their investment." Any deposit in a bank is still an investment, even if they don't pay interest, because banks don't just put all your coins and bills in a vault, they just mark you down as a number in their books. The risk you take is that government backing the deposit insurance AND the bank don't do something dumb. Banks are usually much more highly regulated than hedge funds, but a quick look at how often banks fail (the US has something like 800+ banks on the unnoficial FDIC watch list) should sober anyone up. Hold physical money is the only not to be at risk of losing a deposit, and then you have to provide for security, and you sure aren't going to earn interest. I'm not really enthusasiastic about bitcoins, but one could argue they solve the problem of trying to keep a bunch of wealth out of the risk of banks, without having to have a huge pile of physical currency/valuables.
- bayesianhorse 14y ago
  Most of the talk I've heard on Bitcoin is BS. I'm enthusiastic on Bitcoins and their uses, but I don't see it replacing other investments on a large scale soon. I don't even want to see that. From an investment point of you, all deposits are investments, so putting 700k into some undercapitalized bank is almost as stupid at converting it to BTC... Only almost as stupid because these banks have historically had less risk than BTC, surprisingly...
- roel_v 14y ago
  "Every time you deposit say $1 with a bank, they lend out $.90 of it at interest for mortgages, payrolls, etc." Actually, when you deposit $1, they loan out about $9 (maybe a bit less nowadays, but still a multiple of the $1 being put in). That's what the 'fractional' in 'fractional reserve banking' comes from.
  - kbolino 14y ago
    That doesn't make any sense. You've mixed up macroeconomics and microeconomics. A single bank cannot lend more than it has in deposits. However, in an economy with many lenders and borrowers, a deposit (or really any kind of expenditure) can be reinvested fractionally many times, enlarging the money supply by more than its nominal value. Also, the multiplier "rule" of taking the reciprocal of the reserve rate is more of a rough estimate, since individual borrowers may not spend all of the money they have borrowed.
    - roel_v 14y ago
      You're right, I did mix them up.
rayiner 14y ago
The idea of "safeguarded savings" is a conceptual abstraction. Think of a barter economy. I trade you a loaf of bread I baked for a haircut. Where did we get the idea that I should be able to bank that haircut, and come to you 10, 20 years later and still get that haircut? It's a view that comes from seeing money as something of intrinsic value, rather than what it really is: a proxy that decouples transactions in what would otherwise be a barter economy. In nature, "savings" are subject to loss and decay. You "save" by building a house to live in or storing away grain--all those things are subject to deterioration, disaster, etc. Financializing it doesn't change that underlying fact.
- chii 14y ago
  you can put it more simply by just realizing that money is essentially a promise for some goods or services made by somebody, to be delivered at some point in the future. I.e., keeping money is a liability. If a society (or a large number of individuals/institutes, incl gov'ts) fails to deliver on their promise of goods and services, then the money looses its value. And this is what seems to be happening a lot more everywhere - more and more money is promised (or printed), but the amount of goods and services hasn't really grown in proportion, and so at some point this is gonna have to fail somewhere...
auctiontheory 14y ago
> how do you safeguard your savings then? If your savings are legal, and you don't mind paying taxes on them, you have many obvious choices. If your savings are not legal, or if you want to escape paying taxes, then you have different choices and greater risk. Finance is about one thing: risk versus reward, and in this case, the tradeoff was very clear. Any non-Cypriots who lost money in Cyprus are not as naïve as they would have us believe.

by fakeer 14y ago

fennecfoxen 14y ago

You can always hold cash... of course, that's got its own risks (theft), and you're not immune from inflation... Using something a store of value is essentially anticipating that someone will give you something valuable in the future. This holds whether that store of value is a promise from a bank (in your deposit account), or a government bond, or a commodity. You can never be completely sure of the future. But some entities are much better about it than others.

qdog 14y ago

There seems to be some confusion as to what a bank is on this board. Every time you deposit say $1 with a bank, they lend out $.90 of it at interest for mortgages, payrolls, etc. It's these investments the bank makes that can (and do) wreck money. The government of the US and EU recognize this risk for most people is detrimental and offer insurance on the first 100,000 deposited. The phrase "seized account" does not appear to be correct, more correct would be "The Cypriot banks lost something like 40% of all deposits and all depositors over the 100,000 insured mark have lost their investment." Any deposit in a bank is still an investment, even if they don't pay interest, because banks don't just put all your coins and bills in a vault, they just mark you down as a number in their books. The risk you take is that government backing the deposit insurance AND the bank don't do something dumb. Banks are usually much more highly regulated than hedge funds, but a quick look at how often banks fail (the US has something like 800+ banks on the unnoficial FDIC watch list) should sober anyone up. Hold physical money is the only not to be at risk of losing a deposit, and then you have to provide for security, and you sure aren't going to earn interest. I'm not really enthusasiastic about bitcoins, but one could argue they solve the problem of trying to keep a bunch of wealth out of the risk of banks, without having to have a huge pile of physical currency/valuables.

bayesianhorse 14y ago
Most of the talk I've heard on Bitcoin is BS. I'm enthusiastic on Bitcoins and their uses, but I don't see it replacing other investments on a large scale soon. I don't even want to see that. From an investment point of you, all deposits are investments, so putting 700k into some undercapitalized bank is almost as stupid at converting it to BTC... Only almost as stupid because these banks have historically had less risk than BTC, surprisingly...
roel_v 14y ago
"Every time you deposit say $1 with a bank, they lend out $.90 of it at interest for mortgages, payrolls, etc." Actually, when you deposit $1, they loan out about $9 (maybe a bit less nowadays, but still a multiple of the $1 being put in). That's what the 'fractional' in 'fractional reserve banking' comes from.
- kbolino 14y ago
  That doesn't make any sense. You've mixed up macroeconomics and microeconomics. A single bank cannot lend more than it has in deposits. However, in an economy with many lenders and borrowers, a deposit (or really any kind of expenditure) can be reinvested fractionally many times, enlarging the money supply by more than its nominal value. Also, the multiplier "rule" of taking the reciprocal of the reserve rate is more of a rough estimate, since individual borrowers may not spend all of the money they have borrowed.
  - roel_v 14y ago
    You're right, I did mix them up.

rayiner 14y ago

The idea of "safeguarded savings" is a conceptual abstraction. Think of a barter economy. I trade you a loaf of bread I baked for a haircut. Where did we get the idea that I should be able to bank that haircut, and come to you 10, 20 years later and still get that haircut? It's a view that comes from seeing money as something of intrinsic value, rather than what it really is: a proxy that decouples transactions in what would otherwise be a barter economy. In nature, "savings" are subject to loss and decay. You "save" by building a house to live in or storing away grain--all those things are subject to deterioration, disaster, etc. Financializing it doesn't change that underlying fact.

chii 14y ago
you can put it more simply by just realizing that money is essentially a promise for some goods or services made by somebody, to be delivered at some point in the future. I.e., keeping money is a liability. If a society (or a large number of individuals/institutes, incl gov'ts) fails to deliver on their promise of goods and services, then the money looses its value. And this is what seems to be happening a lot more everywhere - more and more money is promised (or printed), but the amount of goods and services hasn't really grown in proportion, and so at some point this is gonna have to fail somewhere...

auctiontheory 14y ago

> how do you safeguard your savings then? If your savings are legal, and you don't mind paying taxes on them, you have many obvious choices. If your savings are not legal, or if you want to escape paying taxes, then you have different choices and greater risk. Finance is about one thing: risk versus reward, and in this case, the tradeoff was very clear. Any non-Cypriots who lost money in Cyprus are not as naïve as they would have us believe.