Russell Napier Declares November 16, 2014 The Day Money Dies

Jon Alternative Media, Banking, Blogosphere, Economy, Government, Market Commentary

From Russell Napier of ERIC
It is with regret and sadness we announce the death of money on November 16th 2014 in Brisbane, Australia
‘A mark, a yen, a buck, or a pound A buck or a pound A buck or a pound Is all that makes the world go ’round; That clinking, clanking sound Can make the world go ’round.’
‘Money’ from Cabaret by Kander & Ebb
In the musical Cabaret, Sally Bowles and the Emcee sing about money from the perspective of those witnessing its collapse in value in real terms in the great German hyperinflation of 1923.
Less than a decade later, and a continent away, a young lawyer from Youngstown, Ohio noted on July 25th 1932 how money’s value could also fall in nominal terms:
“A considerable traffic has grown up in Youngstown in purchase and sale at a discount of Pass-Books on the Dollar Bank, City Trust and Home Savings Banks. Prices vary from 60% to 70% cash. All of these banks are now open but are not paying out funds.”
The Great Depression – A Diary: Benjamin Roth (first published 2009)
In Youngstown the bank deposit, an asset previously referred to as “money”, had fallen by up to 40% relative to the value of cash. The G20 announcement in Brisbane on November 16th will formalize a “bail in” for large-scale depositors raising the spectre that their deposits are, as many were in 1932, worth less than banknotes. It will be very clear that the value of bank deposits can fall in nominal terms.
On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a “bank run.”

This post was published at Zero Hedge on 11/12/2014.