The Real National Bank of Panama

Recently there has been an air of concern about the banking system in Panama. The concern has centered on two main events, a new treaty between the United States and Panama. This new treaty, might if approved by the legislature here, allow the US government access to information on some or all bank accounts in Panama. This is of great concern to people who have hidden assets in Panamanian banks based upon the assumption they would be safe from prying eyes.

Surprise, all governments have one thing in common, they need money and will do what even is necessary to get money, so they can survive and grow. Governments regardless of rhetoric from politicians want to grow and want your money. They will do what ever is necessary to find money when they need it. With technology and treaties shrinking the world, if you want to hide money try your mattress, no other place will work over time. The money will of course decrease in value as it slowly rots in the mattress. Inflation is part of the post World War Two design for world economic stability.

The second concern is that the real National Bank of Panama, is the Federal Reserve of the United States. The fact that the US Dollar renamed the Balboa is the currency of Panama has helped to maintain the economic stability and historically low inflation rate of Panama. Panama does not issue it’s own currency, aside from coins. It must earn and use US dollars in the world market. Unlike the US Federal Reserve, Panama cannot print currency so it needs a flow of dollars in, to allow for a flow of dollars out for purchases; just like you and I.

As the US dollar has devalued against other commodities in world trade, oil and some other currencies in particular, inflation in Panama has increased. Some people have tried to blame price increases here on the influx of expats. Indeed expats have through ignorance, increased the cost of real estate in this area. Still we are too few in number to influence the broader increase in food and energy prices, these increases are due to US dollar devaluation; more against oil, a necessary and consumable commodity, than other currencies.

There has been a discussion of Panama abandoning the US dollar, something possible, but unlikely. Short of joining the European Union there is no other currency that could maintain Panama’s economic stability. Even Ecuador with a anti US government has maintained the US dollar as it’s currency, long term a safer bet than printing your own.

A couple of weeks ago a group of people listened to a speaker push gold vaulted in Switzerland. The pitch was purchase gold held in a remote vault and you will be saved from inflation. There is no arguing with the fact gold is selling for more now than at any time in the past. There is no arguing that gold seems to be a historic hedge against inflation. There is also no arguing that you cannot eat gold, it has that in common with currencies.

If you really believe the sky is falling, then after the dollar and euro crash, gold will follow. What is the intrinsic value of one ounce of gold if the currencies crash?

I prefer my ability to grow food and produce eggs, to investments in gold certificates backed by a promise that the gold will be there, in another country, in a vault, when I might want it. There is a movement among the very wealthy to buy farmland as a hedge against a world wide economic collapse or just a December 2012 Mayan calamity. That investment although also worthless in complete anarchy, makes more sense to me than paper currencies backed by the Federal Reserve, Bank of the EU or gold in Swiss vaults.

Personally I believe the euro will survive, the dollar will survive, the central banks of the world and the governments of the world have too much to lose if the world economy collapses. In reality those in power would lose power, not a bad thing, but since they do control the world economy, an unlikely thing.

It does not matter is the US Federal Reserve is a government agency, or as some claim a conspiracy of wild eyed zionists seeking world domination. Who ever is in control of the world economic system, whether they are in Bejing or Washington, want it stable. All governments and the people who run them are too tied together economically to allow it to crash. We are just pawns in their game, they plan to continue to be wealthy and dominate the world.

Watch things stabilize, inflation will return, it is planned, gold will peak and slide back and more middle class families will slide into poverty as the world economy settles into a new phase. Learn from history, it repeats with variations.

As for Panama, it will remain a great place to live and have a small farm. If thing really collapse and you are hungry, trade me an ounce of gold for a dozen eggs. Panama has seen a currency vacuum during the Noriega years; people survived on barter. Perhaps Melo owns the real National Bank of Panama, land, eggs and distribution, even if horses need to pull the trucks.


  1. Well written Lee and I think “right on the money”:). Thanks for prompting us to appreciate our efforts on our “farm” just a bit more than yesterday.

  2. Steve Jobs says:

    it’s = “it is”

    its = denotes possession

  3. Lee I suggest you read todays column by Paul Krugman in the New York Times before you start to worry about inflation and trading pears for gas. Krugman is a Nobel Laureate in economics. Gives him a little bit more crediblity in the field than some guy with a plan to buy gold.

  4. Bonnie Williams says:

    I have to second Mike’s comments. Homespun economic philosophy has a heartfelt appeal, but informed opinion carries a lot more weight.

  5. I am surprised to see Steve Jobs reading the BoqueteGuide. Since I have been told this really is your email I will accept your correction with grace and ask why you don’t let us buy unlocked Iphones?

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