Cash is the least safe investment right now.

We are making economic progress. Everyone is running but no one knows where they are running to. That is progress. They are running too fast to see where they are going; that is panic.

Over the past few days the financial markets are in turmoil. When you go to bed companies are worth so much, but when you wake up they are suddenly worth considerably less, because all of a sudden people think that very hard times are on their way.

The biggest companies are sitting on huge mountains of cash, too frightened to invest any money. They worry that no one will use products or services. Recently Siemens deposited half a billion Euros with the European Central Bank to add to the five and a half billions that the ECB hold for Siemens. Only a few companies can do this. I guess Siemens think ordinary retail and wholesale banks too unsafe. Siemens need not worry; the ECB is just as safe and just as unsafe as any other bank. As grand as it sounds the ECB is merely a central bank in charge of the Euro and tasked with maintaining the euro’s value and stability in euroland. Is that a safe haven in these times when some of the countries using the euro may default on their debts?

Fear has turned caution into panic. The ordinary people, whose savings and assets are at risk by the panic, are trying to understand who put us into this mess. Some think it is the fault of those governments who borrowed more than they could afford to repay; others blame governments for failing to regulate and others blame governments for seeking to repay what they have borrowed.

The cause of a problem is not always relevant to the solution of a problem. Simply those who are in panic should keep calm. Instead they gallop so quickly eyes fixed ahead that they cannot see properly. If they could they would know that bad times never last for ever just as good times never last for ever. When times are hard things are never as bad and when times are good things are never as good as they seem.

The panic serves no one but speculators who pick up the pieces as people convert assets into cash. So many people are converting more and more of their assets into cash.  The irony is that in the present condition of banks in most of the developed world cash is probably the least safe investment.

2 Responses

  1. The bank of England in their wisdom have just lent a further seventy five billion 75,000,000,000 to other private banks at 0.5% who now can lend us it back at 9 times that amount for 3.0% or higher, the least secure establishment akin to a gallon of petrol assests to put out the debt fire with, that is what they have just done.

    Or in other words the BOE has just cost every man women and child in the UK another £1247.00 pounds extra each year on top of the £3.333 pounds they stole from their pockets since 2008.

    So they have magically created £75 Billion to lend to the banks so they can lend it to business/industry and make money? Hmmmm I suppose it’s a form of oil to keep the cogs turning. The trouble with the UK is that we don’t make anything anymore. So everything is geared up towards the City of London. Until the city recovers the UK economy won’t recover.

    Why didn’t they lend £75 billion direct to Government at 0% nterest (because it’s our bank after all isn’t it?) with that idea that it be used for NEW national infrastructure projects that will create used for NEW national infrastructure projects that will create jobs? That can’t be any wose than loaning it to private banks, This country needs growth and the Government needs to drive it not the bankers or nothing will ever be achieved for at least another 10-15 years as seen in Japan since 1989 when their downturn officially began and is still running.

    We have not had a Government in the UK that believes in empowering workers by creating jobs for over 40 years now.

    The writing is on the wall, and Humpty is about to fall a little further than he bargained for.

  2. Hello Robertkyriakides,
    Thanks for your thoughts, There are a number of types of business and personal safes on the market, with varied degrees of security.

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