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Consumers Take Money Out of Banks, Put It Into Crystal Dog Bowls

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Although its value has declined in recent months, gold prices have skyrocketed this year thanks to dwindling confidence in more traditional investments. According to the Financial Times, many experts believe that the metal could exceed $2,000 an ounce in 2012.

This week, precious metal investment spread to Germany where, according to Der Spiegel, people are looking in some very strange places to get their money out of banks. Along with gold, some Germans now think buying a Mercedes (DAI) is a better idea than opening a savings account.

Germans, long among the world’s more conservative investors, seem to have lost faith in the power of financial institutions. A capital market strategist quoted by Der Spiegel does a nice, if perhaps unintentional, job of summing up why: “No one can or was ever able, to guarantee the purchasing power of your money.”

Inflation fears have haunted Germany since long before the current financial crisis, and today worry one in two Germans. Worse yet, half of people with jobs admit to concerns about the efficacy of private investment.

These fears have manifested themselves in some weird ways recently. For example, a Hamburg soccer club managed to raise six million euros in four weeks because investors thought it was safer than a bank.

In Bavaria, one investor bought a 550-thousand euro Mercedes, not to drive, but as an investment. Swarovski crystal inlaid dog bowls have also become popular. Record prices are being paid at art auctions and luxury real estate has rebounded.

Some, perhaps savvier, consumers have put their savings into their homes in the form of better insulation and other improvements. And, of course, gold is still very popular.

Karl Lagerfeld summed up the attitude pretty well in saying that he hated people who hoard money. Banks are out; spending is in.

Of course, beyond the humor of luxury cars and fancy pet products being seen as wise investments there is the concerning fact that Germans, with their reputation for saving, seem to have given up on the financial system. Many believe that inflation will soon go up high enough that savings accounts lose money.

It remains to be seen whether this trend marks a substantial change in either German or European attitudes towards investment. The million-dollar, undriven Mercedes does, however, shed a little bit of light on the current mood.
POSITION:  No positions in stocks mentioned.