July 12, 2013
Nicosia, Cyprus
It’s been said that goldfish have the shortest memory of any animal– only about three seconds.
But a few years ago, scientists from Israel’s Technion Institute of Technology conducted an experiment which put to rest this erroneous myth.
Based on their research, it turns out that goldfish have a memory closer to FIVE months… which seems to be quite a bit longer than most fund managers, bankers, and politicians.
I say this because it wasn’t even FOUR months ago that banks in this country forcibly locked people out of their bank accounts.
This single event, perhaps more than anything else, highlighted the rot within Europe: a bankrupt government was being compelled by supranational powers to bail out an insolvent banking system at depositor expense.
Of course, this move was quickly followed by capital controls, which are still in place today. Yet based on this summer’s financial euphoria, it’s as if none of this ever happened.
It’s the same thing in Greece, where I just spent a few days checking out distressed asset deals (i.e. the entire country).
It wasn’t even a few weeks ago that the terminally insolvent Greek government was about to go bust yet again, and begging for another bailout like some repugnant doggy treat.
And it was only about six months ago that United States breached its debt ceiling in an extraordinarily humiliating public squabble.
Nevermind that the US government is about to breach its debt ceiling once again in less than two months. Or that Greece will soon be out of cash again. Or that Cyprus is still broke and has never lifted its capital controls (as we learned trying to send a wire today).
These issues aren’t going away. They get shuffled under the rug for a few months, but the problems are only escalating despite all the market excitement.
Financial minions who operate within the system never seem to miss an opportunity to demonstrate their total failure to learn important lessons from the recent past.
These are the same guys who have fiduciary responsibilities to safeguard people’s life savings. Yet their memory spans are shorter than the average goldfish.
This should concern any rational individual, especially at a time when all four major economies (US, China, Japan, Europe) are simultaneously showing signs of desperation.
I was having this discussion last night with a colleague who argued– “But why should any of this matter? Those who control the system would never let things get bad.”
Come on, man, pick up a book some time. History is full of examples of entire societies who thought the exact same thing. And yet, it happened.
Besides, the guys controlling the system make a lot of money during crashes. Often they’re the ones leading the way, stoking crises, conflict, and revolution. Each of these provides a great opportunity to go bargain shopping and eliminate competitors.
To throw caution to the wind and say, “In bankers we trust” is a foolish course of action… and presumes quite a bit upon the character of an entire industry that has consistently proven itself to be morally dysfunctional.
I strongly urge people to distance themselves from this system. Lighten up on paper assets that are controlled by a tiny elite. Own real, physical assets… like precious metals, productive land, and operating businesses.
And look overseas to diversify your sovereign risk. If your nation is bankrupt, it’s dangerous to hold the preponderance of your savings and assets there. Just ask the locals here in Nicosia.
Hold assets in financially stable jurisdictions that have low debt and strong private property rights, like Singapore.
If the trend continues and the worst happens, such tactics could literally make a generational impact in saving your family’s livelihood.
Yet if these goldfish keep swimming along without consequence for another 2, 5, or 10-years, you won’t be the least bit worse off for moving some assets abroad.
