Wise Accounts Blog

While you are bursting your guts to make a quid others are just printing money to make ends meet... Are we about to see the days of barter if we don't have any trust in our currency?

Not so long ago the US dollar was pegged to its value in gold according to the piles kept in Fort Knox. But of course Richard Nixon in 1971 thought that was a stupid idea and decided we could do away with that requirement.

The US budget deficit is forecast to swell to $US1.7 trillion. Now US Federal Reserve chairman Ben Bernanke has announced his answer: the central bank itself will buy $US300 billion of US Treasury bonds and pay for them by electronically printing the money. That in turns brings the interest rate to an all time low.

China is worried about its $US740 billion holding of US Treasury securities. I think they should.

Banks find it un-economical to lend money at such low interest rates and prefer to use the government help to rebuild their balance sheet rather than lending again. In the meantime non-banking lenders have been decimated by the CDO debacle. The net result is that while the governments think they can push a few buttons to get the economy rolling again - credit is much more difficult to find.

In the meantime forgery of currency has hit an all time high when in 2004, French police seized fake 10 euro and 20 euro notes worth a total of around €1.8 million.

But you say, we are an advanced society now and most transactions are done electronically...

Between July 2005 and mid-January 2007 a breach of systems at TJX Companies exposed data from more than 45.6 million credit cards. Albert Gonzalez is accused of being the ringleader of the group responsible for the thefts. In August 2009 Gonzalez was also indicted for the biggest known credit card theft to date - information from more than 130 million credit and debit cards was stolen at Heartland Payment Systems, retailers 7-Eleven and Hannaford Brothers, and two unidentified companies.

In Sydney some enterprising folks had the idea of injecting acetylene gas from a welding cylinder into an ATM in the wee hours of the morning. After ignition and a shattered retail banking outlet they helped themselves to the cash. They were professionals and repeated their deed 3 times in 8 days.

How long will this merry-go-round last? Will you find a chair to sit on when the music stops?

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