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Monday, October 19, 2015

Your Last Warning

Ahh, there's panic in the air....

The frequency with which various US and foreign officials are discussing - and enacting - "anti-cash" legislation is increasing.

I've discussed before the techniques that will be employed to restrict the use of, then eventually outlaw cash.  Some updates by governments instituting capital controls on its citizens:

Greece:  The headline says it all - Greek Cash Ban Escalates: 'Permanent' Stricter "Capital Controls" On 3 Million Pensioners, Civil Servants Imposed - Instead of the "Soup Nazi", they've got the "Cash Nazi"  -  "No Cash For You!"

If you work for the government or you're getting a pension in Greece, you are now limited in how much cash you can withdraw each month -
A shock-measure: civil servants and pensioners will be subject to stricter capital controls than the rest of the Greeks. They will be able to withdraw only €150 per week – with the cash withdrawal cap being €420 per week – that is a total of €600 per month. The rest of their wage or pension they will have to spend by using debit or credit card.
Why?  Tax collection, of course.  Or lack thereof.

USA:  Here in 'Merica, the Money Chiefs are now openly discussing Negative Interest Rates - and more.  What are negative interest rates?  Well, you give the bank $100 and must pay for the privilege of them holding your money.  Such a deal, right?
“Some of the experiences [in Europe] suggest maybe can we use negative interest rates and the costs aren’t as great as you anticipate,” said William Dudley, the president of the New York Fed, in an interview on CNBC on Friday[10/09/15].
In fact, Narayana Kocherlakota, the dovish president of the Minneapolis Fed, projected negative rates in his latest forecast of the path of interest rates released last month.
Well isn't that special?  Two of the Federal Reserve presidents think negative rates are a good thing.

 ..."the costs aren't as great as you anticipate," - well thanks, sport, for letting me know that the money being taken from me isn't costing me very much.

But wait, there's more!  These wasculy wabbits know that everyone would just pull their bucks from the banks - causing bank runs - and that's just not a very good thing.  You must be punished for getting cash.  From the same article -
But to get a big impact of negative rates, a country would have to cut rates on paper currency, he pointed out, and this would take some getting used to. 
For instance, $100 in the bank would be worth only $98 after a certain period.
There has been talk of adding "timer chips" to new currency so that you can tell how long it's been since a customer took it out of a bank.

I think that's too clumsy.  I believe what they'll do is to charge a surcharge - like an ATM fee - whenever you ask for cash from a bank - even for over-the-counter transactions.  It's much cleaner getting their cut up front!

And if you're not aware, many banks currently charge businesses for cash deposits.  With my one of business banks, any cash deposits we make in excess of $5000 per month incur a 3% fee!  Another of my business banks (actually a credit union) doesn't do this.... yet.

And it's all for the same reason:  Tax collection.  Make it painful to use anything other than (traceable) plastic to make purchases.


I've been talking about this, literally for years.  Dig through the archives to see this progression.  When the Fed and the Propaganda Media start talking about what a great idea this is, it's time to start doing something about it.
Although negative rates have a “Dr. Strangelove” feel, pushing rates into negative territory works in many ways just like a regular decline in interest rates that we’re all used to, said Miles Kimball, an economics professor at the University of Michigan and an advocate of negative rates.
[In a calm, soothing, trustworthy, albeit snooty "Frasier Crane" voice] Nothing to see here.  Come on, sheeple, this is for your own good.  It's for the greater good!

Y'all know I'm an advocate for precious metals.  This kind of activity only strengthens my position.

I want to give a couple of updated warnings, though.

First off, when I wrote, "The Beginner's Guide To Precious Metals", I discussed buying collectible (numismatic) coins.  It is actually the very first topic!

Because of this increased market value, counterfeits are becoming more and more common. Not only are fake coins being produced, some are being placed in fake PCGS or NGC slabs!
The downside to numismatics keeps me away from personally buying them. For the coin to have numismatic value, someone else must share your opinion of value. I fear that if we head where I think we're headed - to an Argentina-like economic crash - the numismatic market will be seriously hurt. There will be fewer people available to spend their money on "frivolous" purchases such as rare coins. If they buy coins, it will be because of the market value of the base metal.
God Bless collectors buying high-priced coins from my store, but they're not for preparedness-minded folks.

We recently came across an excellent forgery.  It was not detectable until the protective "slab" was cracked open and the coin was removed.

This little trick only works with coins that have the date on one side of the coin, and the mint mark on the other side.

In this case, it is a 1901 Morgan Silver dollar, minted from the Philadelphia mint.  In this grade (mint state 62) it is worth in the neighborhood of $8,000 to $12,000.

1901 Philadelphia Mint - Obverse

1901 Philadelphia Mint - Reverse


1901 Philadelphia Mint - Not so much!

What the counterfeiters did was, they married the obverse of a 1901 Morgan that was very inexpensive - likely the 1901 from the New Orleans mint (worth around $50) - with the reverse side of a Morgan from the Philly mint (these do not have a mint mark) that was also inexpensive.

Slice them down the middle, add some super glue, then put them into one of the big-name coin grader "slabs", and bang-zoom! you've got an expensive coin.

The key is the slab.  The older versions masked the edge of the coin.  The buyer did not have the ability to see the edge - thus they couldn't see the slice!  Genius!

Here's the kicker:  It was a real slab from this grading company.  Apparently, they had had a number of these older-style slabs stolen.


The second warning has to do with the sudden marketing push for "Gold IRAs".  My personal opinion is that I don't like them at all.

First off, one of the beauties of owning physical gold and silver, is that if you pay cash for it (as you should be doing), you have effectively masked a source of wealth for governments to grab.  They can't take it if they don't know you have it!

With a Gold IRA, you do have the ability to buy your physical coins with pre-tax dollars (if you're eligible for a self-directed IRA).  But, now your gold is being reported to all flavors of government every single year.

While these self-directed IRAs are perhaps better than traditional IRAs - in that you have physical control of the assets - you've given up a huge benefit:  anonymity.

YMMV - just know what you're doing, and consider the consequences down the road.  Ask questions, be sure you understand the answers, and get them in writing.  You've become the custodian for the IRA, and aren't being compensated for the risk of not following the letter of the (ever-changing) law.

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Copyright 2015 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.

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