Steephie, unless you have some unknown inherence, you should be keeping most, if not all, of your assets liquid. You will need them to pay for college, car, girls, etc. You won't have your money long enough to be impacted by inflation.

Not sure what Jeff's talking about. Bank interest rates have almost always been greater than inflation in my experience. I get 2% above inflation after accounting for tax on my current account. You can do far better elsewhere though, if you're prepared to take more risks

@abgemacht:
I believe I said it already, but I'm doing that already and I'm not planning to change it. The only 'investing' I did/do was allowing foreign clients (often starting entrepreneurs who can use the money) to stall the payment against interest (in terms of conditions, it might be best compared to me putting money on a bank account except it isn't a bank; I decide when I receive my money) since the value of the euro is dropping.
Combining interest, the reduce of value of euro's and the fact that I don't have to exchange euro's to pounds for a price first, I end up with a very nice profit for a very low risk. To me, it just seems like such a convenient opportunity, especially for my situation, that it's hard to not take advantage of.. Feel free to tell me if it's bad business though. It's also freshly earned money, so I haven't grown attached to it if that makes sense.
Now I just need to figure out when is the right time to cash in of course.

@Octavious: Is it a fixed deposit or something? In the Netherlands, I haven't seen a saving option that gives 2% interest in ages, let be 2% more than inflation..

If it's a fixed deposit, the asset is no longer liquid, right?

he's move likely talking about CD's

@ steephie

They insist that it's your main account, which in their terms means there are at least 3 direct debits linked to it and your monthly pay goes into it. However if you want that can come straight back out again. My bank insists that at least 3k sits in the account to achieve the top rate, which is fine for me, but there are plenty of similar accounts that don't require that.

Sounds perfect, but if that's possible in the Netherlands I must be really blind..
If someone knows of something like that, let me know!

steephie - if you have the option to denominate your savings account in pounds or francs, I would advise doing so. Also, Octavious that sort of thing just doesn't exist over in the States right now. Well, I haven't looked at rates in a while, so I could be wrong. I don't really keep any savings account besides what I need in my checking account. The rest goes to the stock market.

Also, regarding the question asked a little while ago, the banks absolutely should not have been allowed to fail. Yes, it would have hurt the rich, but they can weather it. It would have overwhelmingly hurt the average worker. That these banks have been allowed to grow too large is undeniable (imo). But they are quite literally too big to fail. What if Citibank had gone under? That's nearly $2 trillion in assets that bankruptcy courts would have to sift through and restructure. Meanwhile, since Citi would have been insolvent, it couldn't process the claims of its clients. That means Burger King (making it up, don't know who they use) couldn't take out the money needed to pay their workers. That means millions of Americans go without a paycheck in the middle of a recession. Pension funds would have had to suffer dramatic cuts on their already battered ledgers, meaning less money for those in retirement.

So yes, it keeps the rich safe. But a lot of the rich use private firms such as Blackrock, Lazard,etc. instead of the big shops. Those banks going under would have made the recession many times worse.

@ gold

Does the US government not give a savings safety net? If a British bank goes under the government ensures everyone gets their money back up to 80,000 or so. If a British bank fails the average worker who uses it is largely unaffected.

"if you have the option to denominate your savings account in pounds or francs, I would advise doing so."

Not for free, that's for sure... Would you do it anyway? I try to avoid the kind of investments where the transaction itself costs extra, if that makes sense.

@Octavious, I think the US has the FDIC. In Canada, we have the CDIC, which insures deposits up to $100 000. However, that's not what goldfinger is talking about.

He's saying that if the banks had gone under, then there would be no income for many workers because corporations would not be able to process payments. That's not the same as them losing their savings in a run on the banks, which is what the FDIC/CDIC exist to protect against.

Also, he rightly points out that pension funds and their ilk would take a huge hit, which only really harms the workers.

"That's not the same as them losing their savings in a run on the banks, which is what the FDIC/CDIC exist to protect against."

Sorry, I mis-typed. The CDIC exists to protect existing savings against bank failures. A run on the banks is what it's trying to prevent.

@Octavious - most banks are FDIC insured, which guarantees deposits up to $100,000 I believe. When I was talking about the individual banks accounts, I was mostly referring to the interest rates you're getting not being available in the US.

the FDIC insures back accounts for $250,000 per

Bank^

Thanks for the correction ssorenn

I have issues with the absolute ringfencing of pensions anyway. The fact that the elderly are more likely to vote, and thus pensions are never cut in any way whatsoever, irks me. It's not "We're all in this together" if some of us get off so lightly in comparison to others.

I think the banks should have been allowed to fail because in the long run, it was necessary to stop it happening again. Yes, I agree, it would've made things worse in the short-term. But right now, the banks have just gone straight back to their old tricks and we'll have the same crisis again, on a probably even larger scale based on the Chinese bubble popping, in 15-20 years, because no structural reforms to the Global financial sector have really taken place. They needed major heads to roll and institutions to fall to really get the element of risk back in, because if you know "if it all goes tits up I will be bailed out" then you're going to take more risks than if you know "if it all goes tits up I'm a corpse".

The only reason the banks were kept around was because the feds new they'd need a vehicle for quantitative easing. Unfortunately, QE just saved the banks and didn't "trickle down" as much to the rest of the economy as it was intended to.

*knew

QE was never supposed to trickle down. It was always supposed to be of the Feds balance sheets.

As noted, the reason you can't just instantly print enough money to clear off all your debt is because of inflation. However, I'm yet to see anyone advocating that.

However, when you are experiencing deflation (i.e. Greece), there is absolutely no need to be concerned with balancing anything. Just pay your workers to provide services, and if your balance sheet goes negative, so be it. there's no inflation worries, so no need to borrow anything to fix it.

Ooooo, Mendax for head of IMF

QE was a very ineffective tool for the "trick down" effect. The "Helicopter Payment" proposals were a much better one, but far too radical for anyone to implement.

QE purchases by the fed were for the feds balance sheet, it devalues the US currency and gave an underlying bid to hard assets. The good faith and credibility of the US govt back stopped this and even with a Fed balance sheet the US currency soars as the rest of the world plays catch up

That's not the case in the UK's QE, nor indeed the Eurozone's.

No,i dont know as much about the UK situation but the eurozone shall be interesting. the basket of countries are all on the hook for the debt, but its really the germans. they are quite unhappy about this, and i dont blame them. 12 of the 17 countries that make up the euro dont have high standing international credit, and some are quite poor

we had 3 rounds of QE in the state for a total of 4+ trillion dollars, the IMF and germans and buying about 1 trillion dollars(780 billion euros)over a year and a quarter, and it wont probably be enough

So.. Is it advisable to convert euro's to a different valuta as an investment, converting back later, or will that not be beneficial enough compared to risk, given the margins of banks?