How to Protect Your Savings

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 6 May 2020

⏱️ 30 minutes

🔗️ Recording | iTunes | RSS

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Summary

How to protect your savings from monetary threats like devaluation. Why high yield savings accounts exist, and are they worth it.

Topics covered include:

Why Lebanon defaulted on its national debt and announced it will devalue its currency by 57%.
Why some depositors in Lebanon will probably lose some of their bank savings.
What investors can do to protect themselves from currency devaluations.
What are stablecoins and why are they useful.
Why some online banks pay above-average interest rates on savings accounts.
Why banks need to attract new deposits even though they create deposits when they make a loan.

Thanks to Mint Mobile and Policygenius for sponsoring the episode.

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Transcript

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0:00.0	Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to
0:07.4	invest it and how to live without worrying about it. I'm your host David Stein. Today's
0:12.0	episode 297. It's titled How to Protect Your Savings.
0:17.0	On this show we spend a lot of time talking about money. What is it? How is it created? What is the role of commercial banks? Central
0:26.5	banks, federal governments? We need to understand how money works and how to
0:31.6	invest it in order to protect ourselves against monetary
0:35.2	threats like inflation, deflation, hyper-inflation, or currency devaluation.
0:42.6	If there's anything that we've learned from this pandemic
0:45.8	is nothing is certain.
0:47.8	Anything can happen.
0:50.3	That doesn't mean we need to be alarmist or overly fearful, but it does mean we need to consider our exposures.
0:58.0	That we have allocated our assets in a way to avoid ruin. That includes our monetary assets. In an episode earlier this year titled Money is Debt, we discussed how cash is a perpetual non-interest-bearing liability
1:16.7	issued by the Central Bank. It is debt. Money is debt backed by debt. A couple episodes ago in episode 295 can Central Banks go insolvent
1:28.0	I quoted Ricardo Reese. He's a professor at the London School of Economics. He said insolvency of the Central Bank is not just theoretically possible.
1:39.0	It is also frequent in practice across the world as attested by the multiple currency reforms that have taken place.
1:48.0	Central Bank insolvency is equivalent to hyper-inflation, which happens often all over the world.
1:54.8	Insolvency then means that reserves and currency denominated in the old unit of account becomes
2:01.1	worthless or that there is hyper-inflation and or currency reform.
2:06.8	I didn't give really any examples of that as we kind of walk through the process, but I thought
2:11.7	it would be helpful to share an example of a country. kind of
2:13.4	the process but I thought it would be helpful to share an example of a country where the
2:15.6	Central Bank is effectively insolvent.
	...

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