I wrote yesterday about the economic situation and the problems that afflict us. It seems to me that there are a number of logical conclusions that you can draw from the present economic position that exists in the world and following those conclusions only certain behaviour is rational. Here are the premises:-
- Banks are untrustworthy. It is unwise to deposit more of your money in a bank than absolutely necessary. Therefore deposit only money that you wish to withdraw within the next month and which you can afford to lose.
- Currencies are untrustworthy. The euro is in a mess and there seems to be a great deal of suspicious activity by governments in relation to currency. They are printing more and ultimately if they can they will devalue currency, which acts as a tax on savings and a boost on borrowed money which is put to good use.Inflation is the thief of savings.
- Taxes are likely to rise in so far as those who pay taxes now are concerned. Also it seems that governments will try to dream up new taxes or variations on old taxes. Wealth will likely be taxed at greater levels than they are now as governments try to bridge the gap between what they raise from taxation and what they spend.
- If you save your savings will be gambled by the institution with which you save. You may win, but like all gambles you will most likely lose. The Bank, as bookmaker, will rarely lose but when it does it will lose big and go bust.
What then is logical behaviour?
- Buy useful assets. It is better to buy assets which you need or will need or will enjoy than lose your money in the bank. Remember “wealth” may be taxed but you will be able to buy things that do not constitute wealth and which are useful to you.
- Do not borrow more than you can sensibly repay.
- If you buy stocks and shares then beware of cash rich companies sitting on piles in tax havens. Sooner or later and in one form or another the chickens will come home to roost. Better buy shares in companies that make things that people need.