Thursday, July 4, 2013

Cyprus and Gold Forgotten

Remember 2008. The NZ government saved the banking system here from collapse.

Not from an old fashioned bank run, but from a lack of liquidity. Debt deflation was destroying the system quickly. To retain confidence, the nice government men needed a quick solution. They (with tax payer backing) took all the risk and guaranteed bank deposits.

Never again will this happen. The latest NZ Reserve Bank changes and the newly created bank recovery and resolution directive in Europe now means that banks once again need not care whom they screw. The first cab of the rank in the next 2008, will be Joe Blow creditor. The hard-working plumber or builder, will suffer the first loss. This without even the banks agreeing to any structural changes. If the situation warrants a quick confidence fix, then you as a innocent depositor will have a large percentage of your wealth confiscated to strengthen the banks capital base.

And like in Cyprus, the banks will close until you have confidence. Unless, like the wealthy Russians, you get a tip-off to withdraw your savings before the cataclysm hits. But that's not likely.

And 2008 will repeat, only next time with greater consequences. They think these new laws will stop bank-runs. Nope. Only likely to increase the possibility. Do such laws give you more confidence in your local bank?

You see nothing has changed. The system is still spewing debt by the truck load to wide-eyed house buyers and those that think house prices will go up forever. Is a five year time-frame so short that our collective memories are lost?

They are betting you will not care and will forget about 2008 and Cyprus and even gold's definition as money. Will you?

Gold in New Zealand dollars: $1611.35 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)
Low since previous high: $1532.30 (28 June, 2013)

Silver in New Zealand dollars: $25.37 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
Low since previous high: $23.51 (28 June, 2013)

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