SOME BANKS are now charging customers to keep money in their accounts – can you believe it?
Money has suddenly become a liability – so much of it floating about and nobody wants it. Investors are running scared and hanging on to what’s left of their dosh in the hope banks will start lending again and interest rates will rise.
The rule of thumb 20 years ago was that borrowers paid two per cent above bank rate, which is bearable when the bank rate is around three or four per cent. But with central bank rates on the floor, borrowers cannot be blamed for accusing banks of blatant theft when charged anything up to nine per cent. No wonder most banks are claiming 2009 first quarter profitability.
Many investors survive on investment bonds, last year offering up to seven per cent interest on an annual fixed rate bond deposit above £50,000. Several Iceland banks at the top end went broke and took investors deposits with them, Landsbanki returning only 30p in the pound to bond holders.
Most British and European bank deposits were then guaranteed by their respective governments, who have all but nationalised the banks. But last year’s round of bonds are about to mature and many savers are wondering where to place the capital.
Baird & Co. (established in 1967 dealing in numismatic gold and a member of the London Bullion Market Association) sell gold bars to anyone. Investors and traders are offered un-allocated trading in gold or silver where metal may be held on account and traded in a running market or on the fixings with no storage or transfer charges.
The value of gold (its price) has risen by 37 per cent in the past year – as much as the FTSE 100 has fallen. Many investors have been running to it as a safe haven in these difficult times. Gold is priced on the commodity markets in dollars.
Gold bars (the size of a chocolate bar and a kilo in weight) sell for an astounding £22,000 a bar. Of course, one mustn’t forget the fluctuating pound/dollar exchange rate; anything from 137 cents to 149 during the same period.
Then why not deal in foreign exchange-Forex? The world’s major currencies are fluctuating in value almost weekly. Anything from five to nine per cent can be made on a regular basis given good judgement and a certain amount of luck. Gambling you say – but all investment has become increasingly risky no matter what. Just ask losers with Landsbanki.
During the 1981 stock market crash the price of gold doubled overnight. Gold coins became fashionable – who remembers the South African rand coin (buy a dozen and keep them in a safety deposit box and watch their value rise)?
But gold then crashed and hung back for years. During the 91 stock market crash gold didn’t markedly move-nor again during the 2000 dotcom fiasco.
The difference today is that money is becoming worthless. The Fed and others are quantitatively easing (printing), pushing trillions into their economies. This is causing another gold rush.
The FTSE 100 share, Randgold Resources (a mining company in rand land) stood at 2,600 at Christmas. It is now quoted around 3,600. You do the maths.
But what happens when you want to cash in your gold?
If paper has devalued by 30 per cent as it has with sterling over this past year, then you’ve made nothing and risked a lot. Some investors are borrowing to buy gold. Many borrowed here in Cyprus during the 1999 bubble and bought Bank of Cyprus shares priced at £12. The share now hangs between €2 and €3 and many borrowers went bankrupt.
The Treasure of the Sierra Madre, a novel by B.Traven made into a movie by John Houston, is a masterpiece about greed. During the 1920s gangs of bandidos (bandits) terrorised the Mexican countryside.
The newly established post-revolution government relied on the effective but ruthless Federal Police, commonly known as the Federales, to patrol remote areas and dispose of the bandits.
Foreigners, like the three American prospectors who are the protagonists in the story, were at very real risk of being killed by bandits if their paths crossed. The bandits, likewise, were given little more than a last cigarette (el ultimo cigarillo) by the army units after capture, even having to dig their own graves first.
The three gringos band together and set out to strike it rich in the remote Sierra Madre mountains. Once out in the desert, Howard (Walter Houston, the old-timer of the group) quickly proves to be the most knowledgeable; he is the one to discover the gold they are seeking. A mine is dug, and much gold is extracted, but greed soon sets in and Fred C. Dobbs (a superb Humphrey Bogart) begins to lose both his trust and his mind, lusting to possess the entire treasure.
The bandits then reappear, pretending, very crudely, to be Federales, which leads to the now-iconic line about not needing to show any “stinking badges”. After a gunfight, a real troop of Federales appear and drive the bandits away. But when Howard is called away to assist local villagers, Dobbs and third partner Curtin have a final confrontation, which Dobbs wins, leaving Curtin lying shot and bleeding. Dobbs continues on alone but is soon confronted and killed by three drifters. The drifters, thinking the gold is just worthless sand, scatter the paydirt. They are later captured and executed by the Federales. Curtin and Howard hear the story and can do nothing but laugh.
But who’s laughing now? Just substitute Federales with The Fed, bandidos for bankers and gringos for investors and you’ll get what I mean.
“Stinking badges,” on the other hand could be ascribed to the Madoffs and Stanfords of this present crisis; many more of their kind have yet to be indicted. And when they are, they deserve to be given el ultimo, wouldn’t you agree?
Give us ’yer money! (caption to this week’s photo) Maybe the right size this time!!
