To some, the main event of the new Australian Financial Year was the RBA’s continued commitment to 0% interest rates for borrowers and -% for depositors.

We agree this is important. Before we get to commentary around Aussie rates we’d like to make sure you didn’t miss the move of the Systemically important Global behemoth, Deutsche Bank (DB) last weekend.

After 10 long years of can-kicking, they revealed their plans to “fix it”

The plan to fix their woes is to shed workforce, put bad “stuff” in bad bank and wind back global operations to focus on “strengths”, whatever they are.

To think this is just a “restructure” with job losses is a failure to connect the dots. It’s highly relative to unresolved systemic financial “issues” left over from the last crisis.

Below are some very simple numbers to help.

DB market cap – 13.58BILLION

DB crap moved to new Bad Bank – €74 – €233BILLION

DB notional derivative exposure – circa 40TRILLION

DB notional derivative exposure moved to bad bank – 0

DB notional derivative margin for error – ****all

Amount AurumPlanning would deposit in DB – 0

Amount of deposit Global Investors would keep in DB – unknown

Amount of effort ECB, Bundersbank and other Central Banks putting in to avoid global bank run – Maximum.

So, the preferred way to deal with the DB “situation”, for now, is a controlled burn.

Wind direction – unknown.

This from DB “management” to balance the argument.

“Deutsche Bank management intends to fund its transformation from its existing resources without requiring additional capital. This reflects the bank’s current strong capital position as well as management’s confidence in the high quality and low risk nature of the assets, which it is exiting.”

Absolutely nothing to see here, move on.

So, belated Happy New Financial Year.

Your present, if you’re retired, is a record low benchmark interest rate of 1%, as well as the invitation to take on more risk to obtain more income as rates go even lower.

On the other hand, if you’re one of the indebted that has helped bring on the record low interest rate, well done, you can now get some more cheap debt.

And if you’ve been lucky enough to be “fully” invested in the stock market, we assume you simply wake up hoping for more bad news on the slowing globally economy, because the worse it gets the more they’ll print and it’ll just keep going up.

Until, one fine day… it doesn’t. 

So aggressive has been the RBA’s (Reserve Bank of Australia) comments on rate cuts since January, you’d be forgiven if you thought there was, in fact, something really wrong.

Naturally, according to most G7 central bankers, there isn’t. They’re just making sure nothing goes wrong – especially on their watch!!! Ahead of the curve kind of stuff.

So, RBA Chief Banker, Mr Lowe says:

“Given the circumstances, the board is prepared to adjust interest rates again if needed to get us closer to full employment and achieve the inflation target in a way that supports the collective welfare of all Australians”

What are the “circumstances” he is referring to here? FFS, share markets are at an 11-year high, and interest rates are almost 0. Is this not great??

And let’s face it, if Japan and Europe are benchmark Central Banking, the RBA has a few stops to make before, if ever, the inflation genie rears its ugly head. 

As regards inflation, we say this genuinely: they want inflation and they will get it, one way or another. This, you need to pay attention to.

But we need not concern ourselves with this now because, apparently, it’s not happening.

Yes, a “Few more stops” on the inflation train line. This comes with a definite safety warning: the inflation train can speed up anytime, and it has proven to be very, very difficult to stop.

Next Stop: Infrastructure Spending (on the way to 0 interest rates)

Last Stop: Helicopter Money

Final Destination: Inflation, currency debasement (against what, should be your question)!

Although there can really be no doubt above the above scenario panning out, what remains unknown is the timing!!

So, what the hell do you do in the meantime?

If one stays “head in the sand, thinking you’re hidden” approach, you might just continue to be successful. We like this.

However…. you may wish to include some strategies to protect the following:

  1. Your capital.
  2. Your currency being debased.
  3. Debasement of all currencies.

Finally, couldn’t help but throw this in for the Gold Bugs, enjoy!!

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平和あれ。