Friday, October 11, 2019

The Cash Conundrum

Let's say you are a German retiree and, prudent as you are, have saved a little nest egg to augment your pension. Being extra careful, you have avoided risky investments and kept most of the money in bank accounts and government bills and bonds.

Up until recently, you only spent the interest and kept rolling over the principal as it matured - after all, you have grand-kids. But your 5 year German Government "Bobl" just matured and to your utter shock you discover that if you want to replace it the rate is negative 0.72%.  Not only do you get no interest to boost your income, but you are forced to dig into your principal and get nothing for it!!  Extending to a 10 year Bund is just as bad, at a still negative 0.50%.

What are you to do? 

Your banker tells you that things are just as bad with all safe EUropean bonds.  Only the US still has positive rates - but, of course, you are exposed to currency risk.  And, by the way, the US Dollar is near a 15 year high - and, really, Donald??

What are you to do?

Obviously, it is better to just keep the cash under the mattress and crimp down on extras. 

Cash... CASH???? Your remember your oma's stories about hyperinflation in the Weimar Republic.  Once, she was carrying her day's pay home (inflation was so bad, people got paid daily and sometimes twice a day) and saw a man selling eggs...the wheelbarrow-full was just enough for a couple of eggs.  But... you can't eat money. Eggs it was.

You are torn, and not a little philosophical about how History's wheel turns.

Image result for wheelbarrow money buy egg


  1. The bulk of cash, (wealth, assets) seems to be accumulating to a shrinking percentage of the population. Hopefully we find a "democratic" solution before the situation gets dire.

    I do like your idea (ideal) of national push towards clean energy production. There are so many good arguments for such national (worldwide) projects. Maybe these projects could be coupled with an international "debt elimination" agreement to stimulate the investments?

    1. A Green Debt deal... interesting! Unfortunately, the history of international financial cooperation is not a happy one. Then again, Climate Change affects everyone on the planet so this may be an excellent opportunity.

      You got me thinking... 😀😀