My views on currency

wyk747

Newbie
7 0
Currency
The concept of currency is very complex. Not the most intelligent professor, PHD or economist can understand the concept of currency. However, to understand investment, currency is a crucial basis. To further explain the concepts, I must ensure you know that currency is the medium of trade, measurement of wealth and a preservation of wealth. The entire following are just my personal opinion and I will not hold responsible for any decisions you make. It’s your choice!
There are numerous forms of currency, including cash, deposit, bonds forex and endless derivatives with relation to currency and interest rate… It’s very hard for me to name all of them. I will give you a dissection of currency in a few concept.

Mother Ship Currency:
Everyone has a home, and with a home comes a home country. Even if you are a world traveler like George Clooney in the movie <Up in the Air>, you would have a home or a place where your business, Ferraris, trophy husbands are located (Please don’t underestimate woman). This is where the concept of Mother Ship Currency takes place that is the currency which you utilize the most.

When we travel abroad for fun and leisure, we do have an automatic calculation of value using our mother ship currency, rupiah to dollars, and yen to dollars. In that case, dollar is your mother ship currency. In some cases if you can afford multiple families (I am not proposing polygamy, but in fact they are a crucial part of our economy), then there’s a possibility that you have multiple mother ship currency.

Therefore, for most people no matter what investment you make or what expenses you incur, the mother ship currency is your unit of account. As a result if you are helping most of your assets in mother ship currency you do not have appreciation nor depreciation. Armageddon can happen in which your country defaulted and your mother ship currency is worthless, that’s vaporization not depreciation.

To conclude, the Mother ship Currency is a very subjective concept, the most instinctive currency you use for calculation is your mother ship currency.

Solid Cash

Solid Cash by my standard is solid, which are the little pieces of paper and metal in your pocket with a clinging noise. That’s solid cash in its purest form. Key Points here.

“Cash” is a bunch of numbers printed in the bank book or on a website
“Solid Cash” is a piece of beautifully printed paper sometimes with traces of “cocaine” in it
“Solid Cash” is the most disgusting and most unsanitary item on earth even worse than toilet paper given the germs on it since it has changed so many hands.

Solid Cash is the purest form of currency and the basic value of currency. All solid cash has an anchor, which implies its underlying value. In the era of gold standard or silver standard or salt standard, Solid Cash represents a portion of the metal. However, in practice because issuing entities often cheat, the solid cash will face a liquidity issue when the holders want to exchange the solid cash back into the metals. Because the cheating methods are numerous, therefore if you read enough history, you won’t be fooled; Solid Cash depreciates forever in the long run.

Using USD (Greenback, almighty dollar, the all-seeing paper) as an example, prior to the Bretton woods agreement, the USD is a defacto gold standard currency, which means it’s anchored to a portion of the metal. However, most citizens cannot exchange it back to metal from the Federal Reserve, you will be lucky if you don’t get spyed on if you make such a request.

In theory the USD is a fiat money nowadays and with no anchor to any physical object. However, as I told you, any currency will have an anchor; the anchor of the USD is the supply of it, just like back in the days of metal standard. The more supply, the less desirable it gets and given the history, most solid cash holder will suffer because the issuer has the incentive to cheat.

Another example of cheat is the GBP(British pound, pound sterling) the oldest currency still in use, the origins of sterling lie in the reign of King Offa of Mercia who introduced the silver penny, in which 240 silver pennies is worth 1 pound of silver. 1 sterling pound for a pound of silver in the era of Anglo Saxon England, up until 1158 the reign of King Henry II which uses the excuse of wear and tear to turn the British Pound from a pure 999 purity metal into a 925 cheaper to make alloy, a direct jaw dropping 7.4% in silver content. Any compensation made to the public or holders of the pound? None.

So you might ask is the going rate of sterling pound to silver right now? Currently 1 pound of silver can be exchanged into 201.12GBP so in fact the holders of the British pound has lost more than 99.5% of their initial investment if they held it for 16 centuries. So you still want your solid cash eh?

How to deal with bank run?

When you still have “faith” in your solid cash but have lost “faith” in banks or governments, you have to hold solid cash. In the height of the financial crises of 2008, the Landsbankiin has suffered bank run, in case you face rumors of bank run it in your country, home or second home, what should you do?

My suggestion to you is to follow the herd, reasons are simple, what you are losing out in deposits are just interest rate which is minimal at the time of writing and when banks really fail or bank run really occur, your loss can be catastrophic. Because of the asymmetry of risk and reward, go to your bank and maxed out your accounts period. An extra protection is when bank run rumors soar, there are more police on the streets patrolling to protect you, what a great time to withdraw.

Why do we need solid cash?
Holding solid cash is the worst thing you can do with your money. You can get robbed and mugged. In the long run, most of the value will be gone. However, there are still a number of reasons we need solid cash.

When you are a millionaire, you must have a certain amount in cash. My suggestion is 1% of your total asset. If you have a million put 10 grand in your save in solid cash. Prepare for the worst, even if you are the most law abiding citizen, the government at times will confiscate cash from your accounts or froze it. The most recent example being Cyprus, the government “robbed” savers out of their account to fill the pot hole. The following are also reasons you need “solid cash”,

Bank Run:

Don’t argue with me, bank run do happen and will happen. If you are aged 60 or above, you have seen a bank run in the developed world. If I need examples to convince you, here are a few.

On 16 March 2013, a bank run began in the Republic of Cyprus after a proposed 'tax' was to be imposed on 19th March 2013. 6.7% of all assets under €100,000 were to be seized and 9.9% of all those above. Many members of the public decided to remove their money rather than pay for an economic crisis they had not caused.

On 6 October 2008, Landsbanki, Iceland's second largest bank, was put into government receivership. The Icelandic government used emergency powers to dismiss the board of directors of Landsbanki and took control of the failed institution. Prime Minister Geir Haarde also rushed measures through parliament to give the country's largest bank, Kaupthing, a £400m loan. In addition, Iceland pleaded with Russia to extend 3bn in credit as western countries refused to help With over 5bn in savings held by Britons in Landsbanki, the Icelandic collapse threatens private citizens in the United Kingdom as well as companies in Iceland

On 26 September 2008, Wachovia, the fourth-largest bank in the United States, lost $5 billion in deposits—about one percent of its total deposits—when several large customers (mostly businesses and institutional investors) drew down their accounts below the $100,000 limit for FDIC deposit insurance. This practice is known in banking circles as a "silent run." The Office of the Comptroller of the Currency and the FDIC were both concerned that Wachovia wouldn't have enough short-term funding to open for business on 29 September—which would have resulted in a failure dwarfing that of WaMu just a day earlier. They pressured Wachovia to put itself up for sale over the weekend. Initially, Wachovia was to sell its commercial banking operations to Citigroup, but eventually the entire company was sold to Wells Fargo.

Even if they are FDIC guaranteed or secured, the day the bank “runned” and the day you get paid by the government can be years, if not decades. How are you paying the rent in the window period? Answer
“Solid Cash”.

Conviction:

For some criminal acts such as drug related or corruption related criminal acts, your accoutns will be frozen, even if you are law abiding citizens, you can be connected to such crime. IN case of emergency you will not have the money to pay the lawyer and protect yourself, in this case, “solid cash” can help and soothes your pain.

Debt:

If your business gone south and you don’t have enough money to cover debt, your best bet is to hide your “solid cash” as a preservation of wealth and to sustain a minimal standard of living, “solid cash” is your savior.

Taxes and IRS:

There are a lot of reasons you can mess with the government about taxes, trust me they can froze your assets until you resolve your dispute with them. And don’t forget, government always wins in tax disputes and you will pay.
Conclusion about “Solid Cash”

Remember this saying; a bird in hand is worth two in the bush. The poor has not choice but to put all his savings into investment. Yet as a rich man you should not risk a penny not to allocate some “solid cash”. You do not treasure the value of “Mac and Cheese” when you can have tartar stake and caviar but when times are rough, a little bit of “Mac and Cheese” makes the difference.
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock