When the government plays elevator music, it’s time to panic

Don’t go outside. Things are getting strange out there…

Spain has banned the practice of renting out pets for walks to skirt quarantine rules.

The mayor of Campania in Italy threatened to send police “with flamethrowers” to any graduation parties. Presumably to kill off the virus.

French authorities in Aisne, France, have banned the sale of alcohol to stem violence amongst families. How asinine.

The Chinese stockmarket is trading higher than it was in February. Even my colleague Kit Winder is sending me the conspiracy theories this suggests.

The New York Times claims that six US states have declared marijuana dispensaries exempt from the lockdown.

The Financial Times reports that nine eurozone countries are trying to use the Covid-19 crisis to create eurobonds:

France, Italy and Spain and six other euro area governments have called for the issuance of joint European debt to finance the fight against coronavirus, setting up a clash with capitals including Berlin that believe the move is premature.

In a joint letter to European Council president Charles Michel, leaders from the nine countries said the EU needed “to work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all member states”.

Shutting borders but sharing debts seems like an odd combination. Clearly the Europeans haven’t seen my urgent warning on the merits of financial distancing. Although the Germans follow one of my recommendations famously well.

But there’s one bit of news which takes the cake.

The US’s bank deposit insurance provider, the Federal Deposit Insurance Corporation (FDIC), is out with a video. It should terrify you. And I’m not just talking about the choice of background music.

In the video, chairman Jelena McWilliams of the FDIC says this to try and reassure the public:

Your money is safe at the banks. The last thing you should be doing is pulling your money out of the banks now, thinking it’s going to be safer someplace else.

I’d like to interrupt this message with a list of seven places your money could be safer than at the bank. Not to mention a detailed warning of why exactly, under current UK law, your money is not safe from confiscation by the banks and you should take some of your wealth out now to diversify.

Back to the FDIC’s message.

You don’t want to be walking around with large wads of cash and you certainly don’t want to be hoarding cash in your mattress. It didn’t pan out well for so many people.

Erm, who exactly? At 0% interest rates, who misses out when they hold cash?

Now Jelena should know better. She hails from Yugoslavia, a place where cash was certainly preferable to money in the bank given the amount of financial crises. Perhaps that’s why she mentions large wads of cash and mattresses specifically. She remembers well why people did just that. And how it evaded government crackdowns during crises.

Ask the Greeks about all this and they’ll tell you precisely why keeping some wads of cash under your mattress is a very good idea. Ask the Cypriots about keeping your cash in the bank and they’ll shudder.

In fact, it’s their advice which I’m recommending you follow for a few of my seven financial system escape hatches. Lessons learned the hard way by Greeks and Cypriots from the EU legislation which now sits on British books too.

So what is the chairman of the FDIC doing, reassuring people to keep their money in the bank? Well, the bank she worked for before becoming chairman of the FDIC needed a $3.4 billion bailout in 2008. I wonder why. Perhaps because people took their money out?

Not to mention the fact that the FDIC exists precisely because money in the bank is not safe. Banks fail. That’s why the FDIC was created. For it to claim that your money is safe in the bank is bizarre.

To be honest, I think it’s safer to have your money in the stockmarket than the banks. That was the original Dr Doom, Marc Faber’s advice over the years too. He pointed out that, historically speaking, shareholders tend to survive crises better than bank account savers. Especially when the money printing starts.

But what about the stockmarket’s volatility? That’s what I’m writing this month’s issue of The Fleet Street Letter Monthly Alert about. At least, the beginning of the issue points out something odd is going on in stocks.

On the day the Federal Reserve announced its unlimited buying spree, US stocks dropped. On the day the US Senate passed its $2 trillion stimulus, stocks dropped. At least futures are down as I write this.

The FTSE 100 hit its lowest point since 2012 two days after the Bank of England announced its own rate cuts and quantitative easing.

What does this suggest about the ability of governments and central banks to save the financial system? What does it suggest about the financial system itself?

My report “The Big Stop” explains the measures governments will eventually have to take to preserve the system. They’re quite similar to the Covid-19 response so far – lockdowns and quarantine. But the financial version. “Escaping the Financial System: A Survival Guide” explains how to prepare for and escape the coming Financial Martial Law.

You can get those two reports here. But even The Fleet Street Letter Monthly Alert subscribers will have to wait another week to find out where all this leads next.

Best wishes, 

Nick Hubble
Editor, Southbank Investment Research

Category: Commodities

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