Just noticed in the Weekend Australian.
The article mentions the infamous Financial Stability Board and the use
of "Loss Absorption".
On page 25 then continued on Page 35 and article in which the term
"Loss Absorption" is used in association with "Bail In".
There are low key comments that its usage may cause a run on other banks.
They would have to be kidding, wouldn't they ?
I think a gallop may be more likely.

That such an important procedure as seizing customer deposits does
not get BIG headlines in the media, rather it gets page 25, has to tell you a story itself.

That's just reality raising its ugly head again, Bazz.

>>That such an important procedure as seizing customer deposits does not get BIG headlines in the media, rather it gets page 25, has to tell you a story itself.<<

The reason is of course that it is not a "story" at all.

We seem collectively to have persuaded ourselves that money can somehow be "safe". It cannot. Period.

There are no guarantees, and never have been any guarantees, that the money you deposit with a bank is secure, and that you can remove it any time you like because it will still be there. Banks have been losing their customers' cash for centuries. There are countless stories throughout history of banks failing. In the US, seventy banks failed every year of the 1920s. Nine thousand failed during the 1930s. Around $140 billion of depositors' money disappeared in that time. Only in recent years, with artificial constructs such as the FDIC, has there been an effort to protect depositors funds from bank failure.

If you have any understanding whatsoever of the role of Banks in the economy, you will realise that this is the only way it can realistically work. Your money is at risk when you put it in a bank, there can be no alternative to this fact.

Unless you can suggest one, of course. There will be many people eager to hear how you can pull off such a trick.

(Incidentally, keeping your cash under your bed is not such a great idea either. Think Weimar Germany's hyperinflation. Or more recently, Argentina's.)

So what is the answer then?

When a person tries to be prepared for their
old age and is putting money away for their
retirement - where are we supposed to put that
money to ensure that we're provided for in our
old age if not in banks? Buying property is not
always an option and investments are risky again.

Pericles, this is different.
Previously they would have used other classes of assets first and then
may have touched the cash depositors.
Previously the bond holders would have suffered along with depositors.
However, and these are the changes that have been under discussion at
the last few G20s. Now they take, ah la Cyprus, the depositors money
to pay out the bond holders. Even the shareholders have priority over
depositor.
The depositor is the first resort.

Foxy,
Well as I have said before land is the ultimate holding.
There maybe others, gold has always been a fundamental, but you cannot eat it.
The Chinese are stocking up on copper the last I heard.
I agree property is only useful as a shelter. In that sort of scenario
its value would plummet as no one would be able to borrow to buy it.
Same with shares. Food production, buying & selling must continue.
Find a niche there.

I am guessing, I likewise have no real idea.
Start digging up your backyard. Ah err hummm I don't have one now !

Not different at all, Bazz.

>>Pericles, this is different. Previously they would have used other classes of assets first and then may have touched the cash depositors<<

Where do you think the money in the bank comes from? Surely you have heard of the fractional reserve process, whereby your deposit is not a contract for safe-keeping, but effectively a loan to the Bank. They invest your money, and the money they create from keeping yours as a "fractional reserve", and keep the economy moving along. So if you give the bond-holders a haircut first, the cost of money (yield) will rapidly rise, and you will effectively be accelerating the bankruptcy of the whole box and dice.

Don't like it? Tough. That's the way it is, and will stay until someone comes up with a better way that does not drive us all down the gurgler at the same time.

Maybe you can suggest how it can be done?

Dear Bazz,

Thanks for that.

Excellent advice.

My husband and I are thinking about buying
some land or an apartment on the Gold Coast
as an investment - but we've still got a bit
more to save up. Actually who am I kidding -
quite a lot. But its a goal that I'm squirreling
away for. ;-)

Well Foxy, don't take too much notice of me, I am like the rest of us,
scrambling to see a way through if the worse happens.
To go the way of buying arable land with a view to at least feeding
yourself you need to be below a certain age.

Still, it may well not come to that.
There will be an adjustment of some sort, that is inevitable.
Trouble is the politicians are all still talking as though growth is
just a matter of manipulating money.

Pericles, I do understand the marginal deposit system, but by attaching
the cash deposits first they will distribute the agony far wider.
The effect on the economy would be more depressing.

From the government's point of view an enormous number of people would
immediately apply for pensions or an increase in pension.
What the bail in does is take the highest security rated funds first.

It is basically a method of protecting bond holders and shareholders.

Foxy be very careful of apartments on the gold coast sweetie. There are a number of specialist rip off merchants, still who make a living flying southerners to the Gold Coast for a weekend, & tying them up with an apartment without letting them see comparisons of value. They are real experts at doing this so smoothly that the victim doesn't see it happening.

It is getting harder for them, as many can do some homework on the net, & I'm sure you would be one of them, but people are still falling for it.

Why the Gold Coast? Unless you are thinking of retiring here, an apartment here is harder to manage than one near home, & is more risky for that alone. Then add that you have little knowledge of the place, & you are much easier to trick than you would be at home.

One trick is holiday lettings. They swing buyers with the thought of holidays for free. It can work, but often it doesn't.

My son in law's parents sold the farm, & bought management rights to an apartment complex on the coast. That property is a good one, but they still have owners who were lead to believe their returns would be greater than was ever likely, or even possible.

It is essential to spend a week or more looking privately if you are thinking seriously.

It is nice up here, but many have been ripped off, rather than enjoyed buying in.

Bazz I have 6 acres of black soil flats by the river, & an irrigation licence. However the river is 70 Ft down to the water, from the paddock. If you are right about fuel, with no pump, getting water to crops would be way beyond me. I would need some muscle bound morons to carry it up the bank. Are you a volunteer?

A neighbors windmill can produce only a couple of thousand gallons a day, & as it takes 26,000 gallons to put an inch on an acre, that wouldn't do much.

When I was serious I found you had to put at least 3" of water on the black soil, in a dry spring like this one, to get the Lucerne, [or grass] to start growing. To get the whole 6 acres producing anything, that requires almost half a million gallons of water.

Just to keep one acre productive all year we are talking about half a million gallons in this climate, in a dry[ish] year.

Makes you wonder how we would get on, if the energy runs out doesn't it. Money might be the least of our worries.

Dear Bazz,

I appreciate the advice but I've still got
a way to go before deciding what to do.
At the moment all I'm trying to do is save
as much as I can - and then we'll see.
I work hard and I'd hate to lose my life
savings nad not be able to look after myself
in my old age. I was raised with the ethics
to be responsible for yourself - and make
provisions for a rainy day. It never occurred to
me that it can all be lost in a flash despite
whatever we do. Anyway your discussion is a
real-wake up call, and now I'll have to give
it some more serious thought. So Thanks.

Dear Hasbeen,

I love the Gold Coast - and would move there
gladly. However my husband can't take humidity
and may not be persuaded to leave Melbourne.
So it's all just conjecture at the moment.
Also it depends how much I can manage to squirrel
away in funds. Nothing is set as yet. And as I stated
earlier - I've got to save up first. We may not be able
to afford as much as I'd like.

Hasbeen,
have you thought of using a small steam engine ?
A three or four horse power engine would I think move a lot of water
on a small amount of wood.
With your engineering knowledge the maintenance of such plant would be a doddle.
I wonder sometimes just how long solar cells can be kept going if
replacements become unavailable/too costly ?
If they can be kept going NIFE battery and cells might be able to pump
enough water.

Foxy;
My wife's brother on the Gold Coast has a strata title unit and
they have their own manager who handles maintenance and sales.
I do not know how many are like that but it could be of interest.

The humidity is not that bad. My brother in law has a unit that faces
towards the ocean and he does not even have an air conditioner.
He does not need it.

Hasbeen, just had a google search on stationary steam engines.
Stacks of them but nearly all models.
Did see a photo of an air compressor that had been converted into a steam engine.
Plenty of ideas there.

Dear Bazz,

A strata title unit facing the ocean would
be my dream come true.

Persuading my husband - a different story.
But well worth a try.

Bazz a 5 horse power motor has to be in good condition to drive a fire pump well enough to pump water up to the flat, & 180 meters across to the damn. One that is a bit tired can't manage it. That is through a 3" line from the pump to the top, & a 2" the rest of the way. Even in perfect condition such a pump can only manage about 5,000 gallons an hour.

I used to take a 15 horse power diesel powered pump down to fill the damn, but a flood washed the roadway I'd had built, & it is not worth replacing it now I don't produce anything.

With 400 meters of river front, in real necessity I could probably build a ram pump system to pump a similar amount to a windmill.

The place was a turf farm when I bought it, no trees. In 23 years I have managed to get some growing, but they are still just saplings. It is only about one year in 7 that conditions over a few years allow seedlings to survive. I doubt I could grow enough timber for fire wood, let alone steam pumping, on less than about 10 acres of serious timber farming.

Hasbeen, well could your scavenge wood from bush around the area ?
Could be impractical I guess.
There is probably a law against it anyway !
Well when it hits the fan a lot of laws will be forgotten about.

Needing that sort of power probably rules out solar cells & batteries.
Does the river run fast enough for a turbine ?
Probably not. I was on a Rhine & Danube cruise a few years ago and I
was standing at the rail watching the river flowing fast.
A couple of West Australian farmers were there and said;
"I wish we had a few rivers like this."

I have a 2000 acre paddock across the river from me Bazz, but I doubt they would give firewood away. Apart from when their cattle break our fences, they wouldn't give anyone the time of day.

Although it has had us flooded in a few times, for up to 5 days, the river is mostly just a trickle. You can sometimes jump across it, & in 93/94 it stopped running for 9 of the 24 months.

Some of this was due to up stream irrigators pumping it dry, but there wasn't much to pump.

As the dam had dried, we kept deepening a bedroom size hole in the 15 Ft deep sand in the bottom to get stock water. We could get about 20 minutes pumping about every 3 hours from the underground flow.

It is not that bad today, as the farmers sons are not stupid enough to follow their fathers. 8 of the 10 dairy farms have got out, as have many turf & Lucerne farmers. I don't think there are any market gardens left at all.

I guess if things got really bad, we could reinvent the wheel, & use horses to drag water carts. I wonder if there is anyone left who knows how to make heavy horse harness today? A working horse is only as good as the harness he works in.