The boy scouts motto – Be Prepared – should be drilled into every man, woman and child in this country, for the very good reason that, sometimes, inevitably, unexpected things happen.
All unexpected things are not serious, of course. Locking yourself out of the house is not a disaster, but it is very inconvenient if you haven’t left a set of keys with a neighbour (or two, as in our case.)
Few people were prepared for the first bout of disruption caused by the Icelandic volcano, Eyjafjallajokull; nor were the airlines or the aviation authorities.
There is very little excuse, if you are travelling this summer, for not making some preparations for more disruption:
* Check the terms of your travel insurance policy
* Make sure you have an overland travel route mapped out
* Check out hotels or guesthouses near the airport from which you are departing and bring extra money, prescription medicine, a spare book, a blow up pillow, etc
* Familiarise yourself with your rights. Details are on the National Consumer Agency website: http://www.consumerconnect.ie/eng/
The Icelandic volcano is known as a ‘black swan’ in some circles, a completely implausible, rare event that can have very serious consequences, as this one is having for airlines and the tourist trade.
However, the blow-up of our economy and that of much of the rest of the indebted countries of Europe is not such an event.
It was entirely predictable once property prices soared many multiple of ordinary salaries, and in the case of the state debt crisis, once countries like ours became so reliant on the tax take from that bubble.
The reason why so many commentators believe this latest €750 billion/$1 trillion debt plaster from the ECB and IMF will not work is because the degree of cutbacks that the Greeks must undertake to get access to their loans is so drastic that it will most likely result in an even greater loss of income and tax collection.
Very simply, you can’t pay a rising debt bill, with less income. This applies to us, as well.
So how can you protect yourself in the short term against the fall in the value of the euro and plan against the longer term consequences of so much more national debt being created to try and solve a problem that was already created by too much debt and credit?
First, consider what is happening to your savings. Not only is it now subject to 25 per cent DIRT (it was just 20 per cent two years ago) but I suspect this tax rate will rise.
Why? Brian Lenihan is going to be scrambling around to find new sources of income by means other than imposing a higher top rate on income tax, which, when all the levies are included is already 56 per cent for self-employed higher earners.
Deposit interest is falling in most banks as they continue to try and shore up their capital ratios.
The interest you get on your savings will stay low so long as the banks keep having to borrow money at lower rates on inter-bank markets than it is being lent out – mainly for very low cost trackers and fixed rate mortgages.
Next, if the euro in your bank account and pocket continues to deflate it means that the cost of goods that we import will keep going up, especially the cost of oil. Your euro will also buy much less when you leave the eurozone.
Every time I appear at a public seminar, or address the crowds at the popular Over 50s Shows, I meet individuals with large amounts of cash – their life’s savings, the proceeds of a sold business or property, an inheritance.
Usually, this money is sitting in a low yielding, DIRT account with a single Irish institution.
Aside from buying some real money with your paper currency – gold and silver – you should also consider, spreading your money into a number of banks, including those that are not subject to either DIRT, like An Post’s DIRT free savings products or taxpayer bailouts, like RaboDirect, NIB, Nationwide UK and Leeds Building Society.
If you have a large sum of euro, and you are determined to keep your wealth in fiat currency, then perhaps you should look at transferring ome euro into a more reliable fiat currency such as Canadian dollars, Norwegian kroner, Swiss franc and Singaporean dollars.
However, do some research of your own before you undertake such a transfer.
You should be able to open such an account at your bank, but you will of course incur a currency exchange cost. Most high street banks prefer that you not use such an account as your day-to-day account, because of the exchange costs you will incur.