Jill Kerby

Safe havens give peace of mind over euro fears

AW writes from Dublin: I have an instalment savings and a deposit savings account at An Post that I use to pay for my son studying in Britain.  I am a single mum - working hard to keep my job and just about hanging on.  I was horrified to read your reply.  Please could you advise where would be the safest place for my meagre savings?

It certainly wasn’t my intention to horrify anyone but if Ireland were to stop using the euro or the eurozone broke up, reverting to individual national currencies again would almost certainly result in devaluation of euro savings in Irish financial institutions. 

The difficulty for everyone who has their ‘precious’ savings here in Ireland, or in Greece, Portugal and other weaker, peripheral eurozone countries is that no one knows for sure if the euro is going to survive or not, or exactly if a country may exit the eurozone club.

Only you can decide the amount of risk you are willing to take with your money in An Post, which is under state guarantee. However, it is possible to open a euro deposit account in another eurozone country.  Germany is considered the strongest one of all, and if the eurozone were to break up, the new deutschmark is still likely to be the strongest new currency.  With your son going to college in the UK you could also move your money to Northern Ireland or the British mainland and not have to worry any more (after the initial currency exchange transaction) about the up and down movement between the euro and sterling.

Moving your savings to any new institution, and especially if you are a non-resident depositor is subject to their terms and conditions and to money laundering regulations. You could end up sacrificing a higher deposit return. Also, you are obliged to declare any foreign account on an annual tax return here and to pay Irish deposit interest retention tax on any return you earn.

Silver lining

TF writes from Navan: I wonder what is your opinion about investing in silver. Are there any silver dealers in Dublin? And how can one be sure if the silver is genuine?

Silver is both an industrial and precious metal. Like gold, it has a very long history as money, as well as having widespread use in jewellery and fine tableware production.  It also has many industrial uses and this is why its price tends to be more volatile than the price of gold.

The euro price of silver has fallen by over -14% in the past year, a reflection of the slowing demand for the white metal, whereas the euro price of gold – while also volatile - is nevertheless up over +16% in the past year. Gold, unlike silver is seen as more of a hedge against the growing uncertainty about the strength and sustainability of the euro, dollar and pound. All three are being intentionally debased and devalued by central bankers in order to prop up failing financial institutions and repay their country’s enormous debts.

Do your research carefully before buying silver and gold. Check www.goldprice.org for live and historic prices of an ounce of silver (and gold) in various currencies. Compared to its brief, all time euro price high of €32.71 on April 22, 2011, silver, at €22.62 as I write (28/05/12), a fall of 33%, looks like a bargain.  But if the global economy keeps slowing it could keep falling in price, perhaps even returning to the c€10 an ounce it cost five years ago.

Neither silver nor gold are the bargains they were at the peak of the paper money credit boom. It takes an extra €13.09 or 136% more euros to buy an ounce of silver now than it did in 2007 and an extra €764, or nearly 157% more euro to buy an ounce of gold.

The goldprice.org price charts tell us absolutely nothing new about the precious metals themselves, whose intrinsic nature never changes. They are what they are. But they do show how many extra paper euro, dollars or pounds that it now takes to buy an ounce of these rare and precious metals.

Finally, only buy silver and gold from reputable bullion or coin dealers. Goldcore.com are well known bullion dealers in Ireland and are the European franchise-holders for the Perth Mint Certificate programme of Western Australia. I purchased gold and silver certificates from them in 2006.

Crash Course

MMcI writes from Dublin: I read with interest your recent article with on dividing assets across banks. I have a large amount on deposit in one bank following the sale of a house in 2004. I naively thought the deposit was covered by the ELG. I have been renting since, so I am terrified now that if the event of a crash I could lose "my house"!  I am arranging to move funds now but would welcome your advice on moving over €100,000 to Rabobank. I am desperately trying to figure out the credit ratings schemes but these do appear to have the highest at present. Also, what about moving some money to KBC Luxembourg, Deutsche Bank and/or DZ bank.

The Eligible Liabilities Guarantee Scheme covers specific short and long-term eligible bank liabilities, including on-demand and five year term deposits, but you need to check to make sure that your deposit and your Irish bank qualify to participate in the scheme before you commit your funds. Under the current scheme, which lasts until end December 2012, a three year deposit made on June 1, 2012, for example, will be extended to June 1, 2015.

RaboDirect bank is not one of the ELG participating banks listed here: http://finance.gov.ie/viewdoc.asp?DocID=7049&CatID=78&StartDate=1+January+2012 . However, all deposits up to €100,000 in RaboDirect are covered by the Dutch deposit guarantee scheme.  Luxembourg and German banks also offer a €100,000 deposit guarantee.

European banks are being regularly downgraded by the main credit agencies.

Rabobank’s long term rating, which was AAA up until last year, is now an AA from Standard & Poor’s and Fitches and Aaa by Moody’s. Deutsche Bank’s long term rating from the three agencies is now A+, A+ and Aa3. KBC, a Dutch bank is rated A-, A- and A1 from S&P and Fitches while KBC Bank Ireland only has a Baa3 and BBB-rating from Moody’s and S&P.

In the event that Ireland were to go off the euro, having some of your savings on deposit in the ‘strong’ core eurozone members like Germany, Austria, Holland and Luxembourg would shelter you from the inevitable devaluation of any new Irish currency.