Economic Theory – Tomislove.com

When your microwave becomes your new bank…

admin — Sat, 07 Nov 2015 22:47:43 +0000

If you are born before the year 2000 you grew up with one rule: save money and earn interest. Especially our German fellows are very committed to saving money in ordinary savings accounts. They stashed away €2 trillion or 55% of GDP, in ordinary bank savings and term deposits. The krauts are saying no to stocks and real estate.

Savings accounts are the way to go in most European countries. The Dutch stashed away 335 billion euro in savings accounts.

This is good news you might think. It is good that people save money. It earns interest and compound interest. Just one catch since the central banks began their qunatative easing war – the interest rates hit an all time low. And they are below the inflation rate. That means that your money does not compound – it is actually getting less.

Germany inflation is currently 2,2 – the interest rate on your savings account is 0,4%. Every year you are losing 1,8%. That means the Germans are losing thirty-six billion every year. Gone forever.

It gets worse when the central bank is declaring war on the people like in Sweden. They lowered the interest rate to -0,35% (MINUS 0,35%). No mistake here. The current Swedish interest rate Riksbank (base rate) is –0.350 % Riksbank. The Swedish central bank is the oldest bank in the world and is also called Sveriges Riksbank or the Bank of Sweden.

The current inflation rate in Sweden is about 0,1%. That would mean if you are saving in Sweden – you would be losing 0,45%. Still better than the Germans, but in Sweden banks will start charging you for storing money save in bank accounts. That is why Swedes will start hording cash.

That is why people in Sweden are starting to hoard money in cash at home. You can’t combat inflation but at least you are not paying the banks to hold your money. Crazy times. I am very curious how “The Great Negative Rates Experiment” in Sweden will turn out. In the end, it is just money and nowadays it is only 0 and 1 stored somewhere in computers.

James Turk: We’re Living Within A Money Bubble of Epic Proportion

admin — Tue, 28 Jan 2014 20:51:38 +0000

James Turk believes the time we live in now will be studied by future historians for generations to come. Just as we today marvel at the collective madness that resulted in the South Sea and Dutch tulip manias, our age will be known as the era when society lost sight of what money really is.

And as result, the wrong kinds of wealth — today, that’s mostly financial assets — are valued and pursued. And just like those bubbles from centuries ago, when the current asset boom goes bust, the value of paper wealth will vaporize.

In contrast, those holding tangible productive assets or real money will fare much better on a relative basis.

James and co-author John Rubino (of DollarCollapse.com) have recently published a new book covering the details of this prediction called The Money Bubble: What To Do Before It Pops. Within it, they delve into the reasons for why the world is destined for what Ludwig von Mises termed a “crack up boom”.

Inequality – some recent comments from the pope, Obama & Paul Krugman

admin — Thu, 12 Dec 2013 00:25:37 +0000

First watch this video, a discussion between Paul Krugman (Professor of Economics and International Affairs at Princeton University, a 2008 Nobel laureate, and an Op-Ed columnist for the New York Times) and Sir Tony Atkinson, Professor of Economics at the University of Oxford,

Then read this very powerful statement of the pope about inequality here. Some for the inpatient.

And then President Obama on the issue of inequality.

Where are the actions if a spiritual leader and the most powerful world leader and great economist/ Nobel laureate agree we have a problem?

Wealthiest family in America by Jamie Johnson and Nick Kurzon

admin — Fri, 06 Dec 2013 20:08:26 +0000

The One Percent is a 2006 documentary about the growing wealth gap between America’s wealthy elite compared to the overall citizenry. It was created by Jamie Johnson, an heir to the Johnson & Johnson fortune, and produced by Jamie Johnson and Nick Kurzon. The film’s title refers to the top one percent of Americans in terms of wealth, who controlled 42.2 percent of total financial wealth in 2004.

negative interests rate – winter is coming

admin — Wed, 20 Nov 2013 19:00:05 +0000

If you have been following the economic news, you might have heard about Larry Summers speech at the IWF. He essentially says that to reach full employment we need a negative interest rate. Yes, you read that right. People hoarding money on bank accounts should be punished for saving. His argument makes a lot of sense. We have been living in a bubble economy and the bubbles have been providing us with the capital for growth. If those bubbles are gone, we must replace that capital influx and to accomplish this we need all the savings to be released. Makes sense?

The keyword is secular stagnation because the natural rate of interest equals the rate of population growth (Samuelson consumption-loan model). If this is true we are entering into a very, very long period of economic stagnation. What is the population growth of your country?

Paul Krugman supports Larry Summers view here.