Mish's Global Economic Trend Analysis

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"Wise Men" Propose Theft to Bail Out Banks Posted: 14 Apr 2013 08:01 PM PDT Far be it from bondholders or banks that caused the debt crisis to be punished for their sins, German 'Wise Men' push for wealth seizure to fund EMU bail-outs. Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy. Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, said arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. "The rich must give up part of their wealth over the next ten years," said Prof Bofinger. The two economist are members of the Germany's Council of Economic Experts or "Five Wise Men", a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies. Prof Feld said a new survey by the European Central Bank had revealed that people in the crisis countries are richer than the Germans themselves. "This shows that Germany has been right to take a tough line of euro rescue loans," he said. Study Details Supposedly the median or midpoint wealth level, stripping out the super-rich is as follows: Spain €183,000 for Spain Italy  €172,000 for Italy Portugal €102,000 Cyprus €671,000 Austria €265,000 Germany €195,000 Holland  €170,000 Finland €161,000 One look at the data is all it takes to conclude the report does not pass the "sniff test". A closer look shows the study was also undertaken before the Spanish property bubble imploded and that it ignores pensions. Yet, the "Wise Men" embraced the study. Why? The answer is simple. The study gave them the incentive to propose what they wanted to propose all along: theft to bail out failing banks that made stupid loans. As Ambrose Evans-Pritchard points out in his article "Any serious move to a wealth tax could the erode the pro-euro ardour of South Europe's uber-rich." Indeed. So just how wise are the alleged "wise men"? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Five Alternatives to FDIC "Insured Deposits" Posted: 14 Apr 2013 11:09 AM PDT In the wake of capital controls in Cyprus and statements by the Dutch finance minister Jereon Dijsselbloem that brought into question the entire notion of deposit insurance in the eurozone, readers are wondering where to safely keep their money. Concerns heightened when people discovered New Zealand banks have no insurance (see Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand?). Reader Sam asks ... Hey Mish What alternatives to "FDIC insured deposits" are out there so we can protect our money?  I'm a daily huge fan and thanks for all your wonderful work. Sam P In the US, I do believe deposit insurance will be honored, but it shouldn't be, at least on interest bearing accounts. And the only way deposit insurance could realistically work on non-interest bearing accounts was if there were regulations that banks could not lend deposits available on demand (checking accounts). Keeping money under the mattress is one obvious answer, but not one that I recommend. Here are some better choices to consider. Five FDIC Alternatives Treasury Direct:  You can safely buy short-term US treasuries directly. Short-Term Treasury Funds: The iShares Short Treasury Bond ETF (SHV) holds Short-term U.S. Treasury bonds with remaining maturities between 0 and 1 year. Brokerage account at places that hold excess cash in treasuries. Not all brokerages hold client cash safely. Interactive Brokers is one of the better ones in my opinion. ETrade nearly went under because of risks it took. See E*Trade Heads For Bankruptcy? Physical gold or silver in your possession GoldMoney, Bullion Vault, and other places that store precious metals for you.  I prefer GoldMoney to other precious metal holding companies but that is an admittedly biased opinion as I have a relationship with them. Anyone wanting additional information on GoldMoney: Please Email Mish Again, I do believe deposit insurance will be honored, whether or not it should be, but you certainly do not want to exceed the FDIC limit at any one bank. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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