Money talks: it says ouch!

A protester burns an European Union flag as others throw watermelons outside the International Exhibition Center in the northern Greek port city of Thessaloniki, Saturday, Sept. 8, 2012. Greek Prime Minister Antonis Samaras says the final round of austerity measures contains painful and unjust cuts but is necessary to restore Greece's credibility and continue to receive funding from creditors. (AP Photo/Nikolas Giakoumidis)
A protester burns an European Union flag as others throw watermelons outside the International Exhibition Center in the northern Greek port city of Thessaloniki, Saturday, Sept. 8, 2012. Greek Prime Minister Antonis Samaras says the final round of austerity measures contains painful and unjust cuts but is necessary to restore Greece's credibility and continue to receive funding from creditors. (AP Photo/Nikolas Giakoumidis)
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PAUL Knott is a business turnaround specialist. It makes him adept at handling cash in a crisis.

PAUL Knott is a business turnaround specialist. It makes him adept at handling cash in a crisis.

But it’s nothing to the crisis the economy faces right now, warns the Blackpool-born mathematician.

Paul’s not in the finance industry. He is, he stresses, “one of us.”

“Ask yourself what you now get with a fiver – in real terms it buys about £3 worth of goods,” he says.

He fears we’re a whisker away from the hyperinflation of the old Weimar 
Republic – when people had suitcases of cash, but couldn’t buy food with it.

His troubleshooting role in companies has prompted him to urge others to protect their hard-earned cash before it’s too late.

Paul explains: “Since 2006 I have been investing in gold or silver.

“The repudiation of debt and devaluation of currency has happened before, but precious metals retain value.

“There’s more intrinsic value to silver as it has alternative uses – sterilisation of medical products and in smart phones; silver’s uses are expanding.

“Gold is a speculation, but a speculation on a certainty, the devaluation of currency.

“Both are a barometer of the Emperor’s New Clothes worth of paper currency.”

Paul fears that Euro contagion from Greece and other beleaguered states is inevitable. “We are already affected by it,” he adds.

If money could talk he reckons it would say ouch right now – the title of his new book. Ouch! is published by the world’s leading learning company Pearson whose portfolio includes the Financial Times.

Paul, who now lives at Whitstable, adds: “I want people to see the ouch so they don’t feel it. It’s time to wake up or get wiped out. Most of us are too busy, bored or bewildered to learn how money really works.

“Remember, money deposited in a bank by you legally belongs to the bank but is registered as a liability. It’s like lending a friend money and receiving an IOU in exchange. It is no longer owned by you, the saver.

“It’s only when bankers get caught or we check our pockets, or pension plans, that we get nasty surprises. It’s going to get nastier – for us all.”

Paul reckons the educational system “abdicates responsibility” when it comes to teaching people about finance.

“It has become more important people know, but ignorance seems to becoming greater. It’s like living under the Money Matrix. People don’t understand and don’t question it.

“Back in 2006, pre-Northern Rock, I read warnings it was all going to end badly from those in a highly specialist 
financial niche. Most of us were kept in the dark, including by the mainstream media. The more I dug the more I found.”

Paul was born and raised in Marton Moss. “My mum and dad still live there. I was lucky because they instilled in me early not to take anything out on credit. You have to when you’re buying a house, but for many it’s all about instant gratification. See, want, get on tick. Back in the 1930s debtors who defaulted were social pariahs. People have lost sight of how socially revolting it was. I also became very good at maths. Few mathematicians mess up finances.”

He’s concerned at the impact of the worsening crisis upon tomorrow’s world. “The western world’s great weakness is short term thinking. I like the Iroquois Indians in America who ask ‘what effect will this have on the seventh generation of our children?’

“We need to see beyond propaganda spewed out. But people can’t deal in abstracts. They don’t, for instance, do the maths on payday loans.

“This highly dubious market has grown in the present economic climate and causes misery for many.

“In Roman times they restricted the amount of interest charged. We are in the same cycle again, borrowing far too much, not being able to pay it back, having to default on debt, outright or technically.

“Printing yet more money is like having elastic knickers. You may have a lot of fun stretching them but eventually they snap and you’re left embarrassed.”

Paul says blaming bankers is “lazy.” He adds: “I give bankers a kicking, but the problem is threefold: central bankers, fractional reserve banking, and fiat currency: that’s currency a government declares as legal tender despite it having no intrinsic value and is not backed by reserves.

“Most currencies were based on physical commodities such as gold or silver. But fiat money is based solely on faith.

“Voltaire once said that paper always returns to its intrinsic value which is zero. We’re nearing that today. There are echoes of the hyperinflation of the Weimar Republic.

“We have a banking system which creates money out of nothing and charges you interest on it and if they screw up they get a bail out. The rich get a bail out, the poor a hand out, the middle classes are left out. We haven’t got capitalism any more, it’s cronyism.”

n Ouch! by Paul Knott (Pearson, £12.99)

jacqui.morley@blackpoolgazette.co.uk or tweet her @jacquimorley