Citizens begin to feel the heat

Today, we bring you a commentary piece from The Real Asset Company, supporters of the brilliant Buy Britain’s Gold Back campaign. We suspect we will begin to hear of even more results of surveys showing disgruntled citizens as the year goes on.

Results of various surveys released this week showed both economic confidence and faith in the Bank of England have continued on their downward path.

A study released this week, and reported by CityAM, showed just 11% of those surveyed were satisfied with the Central Bank’s performance, a drop of 9% since February. This is not helped by the fact that 36% of those surveyed did not know the primary aim of quantitative easing programme.

This study shows that despite the recent announcement that the inflation rate has fallen in the last month, members of the public are still feeling worse off as a result of the financial crisis and the MPC’s actions. Since 2005 prices have increased 22.8%, and 9.6% since the end of 2009. Perhaps the public are finally realising that despite positive numbers from the central bank, this data isn’t doing much to help the value of the money in their pay checks and pockets.

YouGov also found that economic confidence amongst UK consumers has taken another turn for the worst showing a negative trend. Gloom in the workplace was the largest contributor to the downward trend alongside low confidence of those who earn under £50,000. This is the group which is likely to be feeling the effects of monetary easing the most. They will have the lowest levels of disposable income and are likely to be part of the generation which has both student debt and a mortgage. Whilst their savings may be minimal and the interest rates on their debts are at all-time lows, they are not able to embrace things thanks to the devaluation of their hard-earned cash.

Meanwhile, across the channel and over the pond, confidence in the prospect of a Eurozone recovery is waning. The Ipsos Mori survey found just 3% of Spaniards and Italians would describe the state of the economy as ‘good’, not much worse than in France and Great Britain where only 9 and 10% of citizens respectively would describe their countries as such.

At least it seems that the majority of people in each of these countries have a realistic viewpoint as to the health and potential of their countries to recover should they continue down the same path. This is in contrast to the Americans of whom a significant 25% forecast ‘improved growth’ in the next 6 months.

Unfortunately we’re not here to make you feel any better.

Tough love

Sometimes in the world where fiat money is an inherent structural flaw in the system, (and we are awaiting its demise with some anticipation), people can get a bit carried away with how a monetary unwind could happen.

For some, society is destined to sink into the depths of human depravity, riots and anarchy. Financial systems, as we know them, will collapse entirely, markets will have to be reformed and international relations will look entirely different.

This might not be too difficult to imagine what with riots in both London and Greece, politicians making swipes at one another at the G20, the state of the Eurozone and the weakening wall of ‘statistics’ with which both the US and UK are currently protecting themselves.

However, will it all be so ‘apocalypse now’?

We suspect not. Life will still go on, just slightly differently. However things will get worse before they get better.

It seems that even the Germans have seen this, where 69% of them believe that whilst the economy is good at the moment, the future does not look particularly bright. This was before it was announced, today, that the country has seen the steepest drop in manufacturing since 2009.

As Ipsos Mori stated, “Clearly there is a great deal of economic gloom around Europe and the developed world. As all eyes are trained on Greece and the eurozone, so countries are concerned about the effects it will have on them. Britain has fallen back into recession and people are worrying about their own personal finances.”

The face of the global economic system and how we perceive it is certainly changing.

Blind faith

It is interesting that we hear of bank runs in Greece and yet little news of where this money is going. One has to ask – is it flowing towards gold? Or, more towards German and Swiss bank accounts?

We recently heard of European finance officials discussing the implementation of capital controls on Greece due to concerns citizens would be moving funds from Greek bank accounts into the ‘safe havens’ of Germany and Switzerland. In some anticipation of this there has been a ‘slow motion’ bank run which many suspect is not temporary.

Commentators believe that this movement of money into German banks may see the onset of capital controls ‘ranging from bank closures…to expropriation of bank accounts…to restrictions on the movement of wealth across borders,’ says John Rubino.

But we are surprised that there is even any money left in either Greece or Spain, or Italy for that matter. The surveys quoted above demonstrate the feelings of concern across the Eurozone. And, if they are moving their money, how strange it seems to move it out of the country, but within the same currency system; It seems the contagious nature of this crisis has been missed by many.

Yet the movement of money across borders, no matter what state the economy is in, is no easy matter. One reader of points out that the language, cultural, age and regulatory barriers play a major factor in the ability to move money.

But how did people in previous financial crises look after their wealth? They bought other currencies such as gold. The purchase of physical gold is still the easiest and safest way in which to store your wealth, and technology today makes it even easier. For example – the internet allows a Greek investor to quickly open an online gold account, fund it in euros, and buy gold outside of Greek borders. The need to carry gold on our person has partly diminished. This process can be far easier than owning a foreign bank account.

However, news of capital flows into gold in Greece, Spain, Italy… etc etc. seems limited.

For now confidence remains in the dominant managed currencies of the world. We see strength in both the British pound and, of course, the US dollar as their economies present slightly less fragile figures. Greeks and Spanish are, for now, moving euros out of their collapsing local banking system, into other perceived havens elsewhere in the European banking system.

One comment on “Citizens begin to feel the heat

  1. James
    June 29, 2012 at 6:47 pm #

    I do get the ever-so-slight feeling that I’m being sold a product reading this blog, but nevertheless, there are some interesting conversation pieces.

    A question I am interested in at the moment is how the average person – or someone of limited means – is able to prepare for and survive a depression. I mean the sort of person who can’t just move overseas, might not own a house, might not have much in savings – or might even have debts.

    Any thoughts on that question?

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