I have no qualifications, so I cannot give you advice except the good old fashioned common sense variety. But I met a 19 year old guy recently who can. You see he, unlike me, has a piece of paper that tells you he can give (financial) advice. He works for (is paid by) a financial institution (a bank in fact) and, of course, his advice would not be in the least bit biased by the firm that pays his wages. :)
So, during our conversation I asked him what his views were on the possibility of a bail-in. After looking at me as if I had just fallen from the sky, he visibly hesitated and started to ramble a bit until I said "it's OK if you don't know or don't know what it is". He then confirmed that, whilst he thought he may have heard the expression before, he didn't know what it was.
Why is this important? Because you need to know where you stand with people, who you can trust (who you can't) and how rules and regulations (even when set up with the best intentions) can sometimes work against you.
I have no qualifications, as I said. I used to have qualifications. In the 1980's I was qualified and entitled to talk to anyone about independent financial advice. I have, in my time been authorised by organisations such as FIMBRA, LAUTRO and others who I barely remember. Don't worry if you haven't heard of them before. They evolved, one way or another, into the Financial Services Authority.
You see while I am not entitled or qualified to offer financial advice, I have worked in and around investment, finance and money one way or another since 1982. I used to train and teach people that used to also be licensed to give advise. I guess, because of this, I have always kept a thumb stuck firmly in the corner of the bigger financial pie.
I have advised on investment products in the UK and in other places around the world. I've worked business to business and business to consumer. I have dealt with nationalities from everywhere and what I know is this. Understanding what to do with your money, especially at times like this, has always been one of the most critically important skills you can ever have.
And the most useful rules about money and finance are the simple and intuitive ones that never change. To emphasise this point I would say that if you want to buy a fabulous (and simple) book on financial know-how then look for a book called "The Richest Man In Babylon" written in 1926 by a guy called George S Clason. It tells you everything you need to know about the basics of money, any money and the advice therein, never gets old.
Financial independence has always been about taking action to protect yourself at all times before any crisis occurs and knowing what to do when it has already happened.
One of the greatest dangers we currently face (apart from that bloody awful virus that is bringing the world to a standstill) is something called a bail-in (I touched upon it earlier). It is the total opposite of a bail-out. In 2008/2009 governments around the world bailed-out the banks. In 2020 IF (as is looking very likely) the steps being taken by governments around the world to keep the "economy" afloat fail, then there is only one place left for them to go.
Well, actually, there are two possible places but the second one (and I will come on to it) will frighten them and potentially allow the transference of power away from them. The first place for them to go is to give themselves the power to institute a bail-in. They may already have the power as there has been much talk in the last few days about new emergency powers that the UK Government (and others I guess) are bringing in.
There are few things that you can hold or possess that will overcome this new financial crisis and that is a hard but true fact. Self-sufficiency is one powerful thing. Being able to grow your own food being the most obvious form of that. Providing a product or service that everyone absolutely needs during such times is another thing but if you are not already doing that or cannot instantly gear up and re-purpose for it, that is hard to do after the event.
In terms of holding things with a monetary value, there are a few things that will keep you going. Gold is the best of them, other precious metals and, perhaps, jewels. Obtaining some of them can be hard if you do not already hold them but not impossible.
So to bail-ins...
This is where the banks, authorised by government, can literally dip into your bank account and help themselves. This happened in Cyprus a few years back when they took any account balances over $10,000 for a while. A different type of bail-in happened after the great depression in the USA when, in 1933, US citizens were told they had to sell (not, of course, at a fair price) back to the Government.
The point is simple enough. If you have excess funds in your bank account you may be in a bad place if bail-ins happen. Even if they do not (and I hope they do not) there could be measures that come in to avoid a run on banks. This has being happening in the US recently with some banks already restricting anything but fairly small withdrawals.
This isn't about scaremongering. Yesterday I sent out a warning about the possibility of people being scammed and defrauded. Today I just want to make you aware of where things could go if things do not improve and get back under control.
That's it except to briefly talk about that second possibility that could come about if the situation is extreme enough and that is for the governments of the world to simply give up on the current system and allow their currencies to die. As unlikely as this seems, imagine the impact already that we are going to see on the value of our normal currencies. With more quantitative easing happening now and even airdropping of money (in the US - and maybe soon here) how much value and spending power can be maintained in the long-term?
Enough about all that. Keep safe, keep your ability to maintain yourself financially intact and I will see you on the over side of this crisis. One way or another this current situation will pass but do not be surprised if life feels and looks a little different out there afterwards.
John
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