In something I was reading recently it posed firstly some facts and then a question that has actually haunted me since I read them. Sometimes little things can get in there and just eat away. The important thing with such information is its relevance, its authority and its reasonableness. Why are such things meaningful, well because there are many these days that are trained to attack your subconscious to convince you to either do something, as it is to their benefit, or not do something because it is to your detriment.
So what was the information? According to the article (published by Port Philip Publishing), in a direct quote from the Peruvian Times dated 8th October 2015 states that “the US Government has named Peru as the top counterfeiter of US Currency over the last 10 years having printed some $US105 Million over that time.” This represents about $US10.5 Million per year; less than a decent lotto win really, but worthy enough to draw US Governmental comment. So you say why is this relevant? Well further into the article , but not quoted from the Peruvian Times, they point out that “in the past 6 years the US Federal Reserve has printed some $US4 Trillion.” That represents an annual printing of some $US666.7 Billion per year. The overall question the article raises is “Will the real counterfeiter please stand up?”
We have numbers quoted at us every day in the news, at work, in the paper even when dealing with our own finances or others and many of them slip through to the keeper because the number we hear is simply ‘relevant’ to the issue in question. It is not until some realistic relationship is struck between one number and another that a more real meaning can be gleaned. This was the case above, the amount of fake money being produced by the leading counterfeiter is miniscule, if at all noticeable, in comparison to the total value of US dollars being printed, i.e. it represents some 0.0016 per cent and an even more miniscule portion of the total US dollars afloat.
Often in financial situations we know what the answer is before we ask the question; or at least we think we do. It is always the creditor who is correct and the debtor wrong, when the money is not paid back. It is the gambler who is the problem, not the device they use and so on.
There are many examples in our war chests of situations where the actual cause was not the one that would have been front of mind nor that hawked by the majority involved. In one case many years ago a group of creditors were almost obsessively out-raged that a particular director had been so quickly able to reinvent himself in the market and be so significantly re-established that they immediately blamed the liquidator and his staff. The meeting was blunt and the lynch mob had done its job. The only task left was to kick the horse out from underneath the liquidator and let the rope do its job. Common-sense prevailed, at least briefly, and an opportunity was granted to investigate the source of these new funds; time was given, the sniffing done and a new meeting was ultimately summoned.
With baited breath, the creditors waited the briefing of the location of all the located funds that had been unearthed from hidden caches from here to there to everywhere! The meeting opened and it was stated that the director had re-established himself with funds of just over three quarters of a million dollars which he had pulled together in less than a week. There was a hush, and then the source of the money was put up on the wall; – yes there for all to see was a proud list of creditors, including the majority of the room that had provided this “Rogue” (a creditor’s term actually used) with all he needed to restart. In addition to this cache there was, at the time, also the almost unlimited access to the monies that would be owing to the Australian Taxation Office over time. Amazingly and very openly the director had cooperated fully with our investigation. Our fees were finally approved and the meeting finished and dissipated rather promptly.
Now I’m no financial expert but I’m still not sure that all this printing is actually going to the heart of the problem. It is a timely reminder to those in business that they must be in control. They must properly review, assess and react if they wish to remain sustainable. If you are using borrowed funds, it’s because it’s part of your plan not because some clown offered it to you unless of course your plan is to fail.
In the market, we will be able to watch the Reserve Bank pull the rates down, whilst the banks put them up. There just seems to be something screwy about all this? But we in business can and must act far more rationally.