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The dollar is has been hovering in the low 500’s for a while now, despite the CR Central Banks buying up millions of dollars in order to create “fake” demand for the dollar. Now with Christmas time coming around, its hard to imagine the dollar not losing value. Because of all the additional payments due at the end of December, huge amounts of Colones are purchased to make those payments, and thus decrease demand for the dollar, so it normally goes down this time of year.
Its complicated though, due to a national banking regulation which attempts to keep the Colones value at no less then C500 =$1.00. Since the currency is not officially “pegged” to the Dollar, the only way the bank’s can really control the value is by purchasing dollars to keep them off the market. This may get harder to do, and less desirable to do, as dollars loose value.
To me it seems like for the government and the central bank, a much easier thing to do would be to change the regulations. Or remove it entirely.
And that would seem even more likely given the amount of dollars being “created” right now. The more dollars that are printed, means more dollars in Costa Rica, which means less value here and around the world. And its just getting started. Just wait for the inflation. Not only can you losing purchasing power in the dollar to colone exchange, but the costs of things in Colones could also go up.
Those high interest CD’s based in Colones, seem pretty attractive if your thinking like I am. Either that or Gold/Silver.
Opinions??
I have no doubt that the US dollar has very serious problems but what’s your personal strategy?
Are you selling dollars and putting a ton of colones in your safe? Changing as much as you can right now?
Those high interest CD’s based in Colones, seem pretty attractive if your thinking like I am. Either that or Gold/Silver.
What high interest CDs? The ones offering 7% with a yield of less than 1% after the devaluation, etc.?
Gold and silver present a transportation issue, but silver has been a good play lately. Your are safer buying the following currencies: Swiss Franc (still gold based), Australian and New Zealand dollars. Both of these currencies have gained 16% or better on the dollar in the last year. If one is gutsy play the Yuan against the dollar. The chinese have been deflating their currency for so long and the pent up demand of 1.4 billion people is bound to drive it up at least double in next 3-5 years. Food commodities will also be active. If you have not noticed, grocery prices in the states are going up at triple the rate of inflation.
EverBank has an attractive foreign currency CD that guarantees you will not loose your principal.you can buy gold shares and have it stored so there is no transport problems. i did that for awhile but then just started buying 24k gold jewelry — when it was below $200/oz.
[quote=”maravilla”]
What high interest CDs? The ones offering 7% with a yield of less than 1% after the devaluation, etc.?[/quote]
The 1 year CDs in Colones are offering up to 7-8%. If the colon goes to 400 in the next year, this is how the math would work out.
Put $10,000 into A colones CD @ 7% interest for 1 year right now. That buys you C 5,060,000 colones earning 7% interest.
After interest, at the end of the year you should have C 5,414,000 colones. When you trade those to dollars at a C400 exchange rate, it would then be $13,535.00; or a gain of approx. 35%. A lot better then a CD in dollars @ 1% that is losing value against the colon.
[quote=”Scott”]I have no doubt that the US dollar has very serious problems but what’s your personal strategy?
Are you selling dollars and putting a ton of colones in your safe? Changing as much as you can right now?[/quote]
Hey Scott. I would spread things out in a variety of things, which would be insurance against various different possible outcomes. Some would deal with a SHTF outcome, the other deals with Inflation/Hyper-Inflation outcomes, the other deals with business as usual outcomes. Depending on how you think events will be in the next 5 years; put more or less into the SHTF store of wealth;
To deal with SHTF: I would keep some wealth stored in goods such as seeds, clothes, shoes, candels, canned food, freeze dried foods, water, water purification tablets, and lots of colones in cash form, colones in coin form (500 and 100 colones mainly) some cash in dollars. Protection ( investment on property or personal protection). Alcohol, Wine and medicines.
To Deal with Inflation, HyperInflation: Gold/Silver (silver being the best), Colones in Cash, Colones in a CD in the bank earning interest, Trading international currencies.
Business as Usual: Pretty much the same as above, because “Business as Usual” always carries the “invisible killer of wealth” ie. Inflation.
After interest, at the end of the year you should have C 5,414,000 colones. When you trade those to dollars at a C400 exchange rate, it would then be $13,535.00; or a gain of approx. 35%.
Uh, i don’t think so. i was in BN the other day and while i was waiting for a bank officer i studied the board offering CD rates — yes, it said 7.8%, with a net yield of less than 1%, same as your investment in dollar CDs. there is no way in hell you are going to make 35% on a CD in colones. that would be better than any Swiss bank, Cayman bank, or Liechtenstein bank.
Um, Im not sure you understand. The 35% “gain” would be made mostly by keeping your money in colones instead of dollars, as if you hold colones and the exchange rate goes to 400/$1 anyone holding colones made 25%, (or kept from losing 25% by owning dollars), the rest would be from interest paid by the bank. Go to BCR or BN and have them show you the interest earned in one year with a 7% CD.
it was the rate board i was looking at quoting 7% on a one year colon CD with a net yield of less than 1%.
[quote=”maravilla”]… that would be better than any Swiss bank, Cayman bank, or Liechtenstein bank.[/quote]
Having worked in offshore investments for many years including in Grand Cayman, and speaking with Swiss bankers on a weekly basis (this morning in fact) there is no Swiss, Cayman or any other LEGITIMATE offshore bank that can offer you even 10% on a secure investment.
Caliskatari is referring to the gains made should the US dollar drop to 400 colones… He’s not referring to you getting 35% in a CD …
simple economics
transfer $1,000 dollars NOW for 500 colones = 500,00 colones
and if the dollar goes to 400 colones
500,000 colones divided by 400 = $1,250 dollars
you just made @ .25% profit
warren
out of 100% divided by 4 you have 25%
out of 1 divided by 4 you have .25
is .25 different than 25%
warren
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