The “bank account tax” is coming.
If you’ve been a Casey reader for long, you know the U.S. government has engaged in a long list of reckless acts since the 2008 financial crisis.
Supposedly, these extreme actions were for our own good. Bureaucrats insisted that these policies would restore economic growth. Other world governments followed the U.S.' lead, flooding the world with easy money.
These policies have been a miserable failure. The U.S. economy, the world’s largest, is growing at its slowest pace since World War II. China, the world’s second-largest economy, is growing at its slowest pace since 1990. Japan’s economy, the third-largest, hasn’t grown at all in 20 years.
Easy money policies did succeed at one thing. They sent asset prices soaring. Prices for stocks, bonds, commercial property, and fine art have all surged to record highs. Asset prices are now completely detached from the “real world” economy. We’re now in an “Alice in Wonderland” economy.
• Negative interest rates are the latest government scheme…
As we’ve explained, many of the world’s largest economies use negative rates.
Europe introduced them almost two years ago. Japan started using them in January. Denmark, Sweden, and Switzerland also have negative rates. According to Business Insider, more than 27% of the world’s government bonds already have negative rates.
The whole point of lending money is to earn interest. With negative rates, the lender pays the borrower.
Negative rates wouldn’t exist in a free market economy. They’re a perversion of capitalism. And the United States could be next. In November, Federal Reserve chair Janet Yellen said negative rates were “on the table” if the U.S. economy runs into trouble.
• Yesterday, Japan’s government sold a 10-year bond with negative yield for the first time…
Owners of these bonds must pay the Japanese government 0.024% a year.
Think about that. Japan is the most indebted country on the planet. Its debt-to-GDP ratio is 228%. That’s more than double the U.S. debt-to-GDP ratio of 101% (which is its highest since World War II.) Why would anyone pay to loan money to Japan’s government?
• Negative rates are a tool to get people to spend more…
Governments think if they penalize you for saving money, you’ll spend it instead. So, in theory, negative rates stimulate the economy.
As Doug Casey explains, this is a dangerous myth.
It’s part of the Keynesian view, in which spending and consumption drive the economy. This isn’t just wrong, it’s the exact opposite of what’s true. It’s production and saving that drive an economy. You have to save to build capital, and capital is necessary for…everything. What these people are doing is destructive of civilization itself. And when we go into the next crisis, governments will use the disastrous results of their own policies as excuses to enact even more destructive versions of the same things.
And like all government policies, negative interest rates will have side effects. Once banks start charging interest on savings accounts, people will pull their cash out. But there’s one big problem…
• There’s not enough paper currency…
Americans have about 11.1 trillion “digital” dollars in their checking and savings accounts. But there’s only about $1.35 trillion worth of “paper” bills in circulation, according to Zero Hedge. In other words, there’s only one “paper” dollar for every eight “digital” dollars in the United States.
If everyone tried to pull out their money, banks would quickly run out of cash.
• Governments are herding people into the digital financial system…
As we’ve explained, governments are working to eliminate paper cash. This way, people can’t pull cash out of the bank. You’ll have no defense against governments taxing your bank account via negative interest rates. You’ll be trapped in the digital financial system, defenseless against “digital confiscation.”
World governments are already taking steps to eliminate paper cash. Italy and France recently banned cash transactions over 1,000 euros. Spain has banned transactions over 2,500 euros. Uruguay banned cash transactions over $5,000.
In the U.S., try to withdraw more than $10,000 of your own money. Your bank will interrogate you, treat you like a criminal, or flat-out deny you.
• The $100 bill is under attack…
Last Friday, we explained how the government and its media lapdogs have stepped up their attack on cash. Just last month, Larry Summers, a former U.S. Treasury Secretary, called for the government to pull the $100 bill out of circulation.
According to the government, using big bills makes you a drug dealer or a terrorist. Get rid of large bills, there will be less crime.
This is propaganda. The government is using it to distract you from the real motive.
• We recommend moving money outside the digital financial system…
Hold enough paper cash to cover six months’ worth of living expenses. Store the cash in a safe or public storage unit. You could even bury it in a waterproof container in your backyard.
This may sound extreme. But when Americans realize that there’s not enough cash to go around, there will likely be a “rush to the exits.” People will hoard cash. The key is to get a significant amount of your cash out of the bank before that happens.
• We also recommend owning gold…
Gold is money. It’s held its value for thousands of years. Governments can’t create more gold from thin air, like they can with paper currencies. As Americans wake up and realize their bank accounts aren’t safe, many folks will likely transfer some of their wealth to gold.
If you only do one thing to protect yourself, own physical gold. Its value could double…triple…or even quadruple in the coming years.
We also encourage you to read our new report, “How to Protect Yourself from the War on Cash.” It features insights from Casey’s top analysts…including seven simple ways to protect yourself from the War on Cash. Click here to claim your copy now.
Chart of the Day
The banking system is set up for a disaster…
We mentioned earlier that Americans have about $11.1 trillion in their “digital” bank accounts. But there’s only $1.35 trillion of “paper” money in circulation.
According to Zero Hedge, $100 bills account for 80% of the “paper” money in circulation. If the government got rid of the $100 bill, there would be just $271 billion worth of “paper” money…or one “paper” dollar for every 41 “digital” dollars.
If you’re going move some cash outside the digital financial system, do it soon. If you wait until other folks catch on to the government’s War on Cash, it may be too late.
Delray Beach, Florida
March 2, 2016
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