1. Authorities in India Break Down Doors to Confiscate Private Gold

    Confiscate Private Gold

    We’ve warned investors for a while that the war on cash would lead quickly to the war on gold. Now it’s happening in India.

    On  November 8 , Prime Minister Modi declared that popular 1,000 Rupee and 500 Rupee notes were illegal. Those denominations are roughly equal of $20 and $10 bills in the U.S. Holders were required to bring the “illegal” money to a bank where it could be deposited to a digital account or converted to other denominations.

    Of course, the real purpose was to flush out the cash and slap tax liens on anyone who did not have a satisfactory reason for having cash in the first place. The entire Indian economy was thrown into chaos.

    Of course, many Indians did not trust the cash system or the government already, and had converted their cash into gold, which is the best and most reliable form of money. Once the government realized this, they began going house-to-house and breaking down doors to confiscate gold.

    That can’t happen in the U.S. because of Fifth Amendment protections against government seizures of property. But, the government could outlaw new sales of gold or slap on onerous reporting and custody requirements that don’t currently exist.  Click here to read why the best strategy for defending against the global war on cash is to get some gold today before it’s too late, and keep it in a safe jurisdiction.

    -Jim Rickards, Chief Global Strategist, Meraglim™

  2. China is Fighting the “Impossible Trinity” and Losing

    Impossible Trinity

    The “Impossible Trinity” is an economic concept developed by the great economist Robert Mundell in the early 1960s. Mundell said that a country could not have an open capital account, fixed exchange rate, and an independent monetary policy all at the same time without causing a reserve crisis.

    The idea is that if you have interest rate differentials (due to independent monetary policy) and peg your currency, then capital will flow from the low-yield to the high-yield country. At some point, these outflows will cause a reserve crisis or cause the pegged exchange rate to break resulting in a foreign exchange crisis. There are various other outcomes under Mundell’s framework including precautionary capital flight.

    The point is that trying the impossible trinity is bound to fail. China is proving this again today. They are trying to run an open capital account, maintain independent monetary policy (Chinese rates are significantly higher than U.S. rates), and peg the yuan to the dollar within a range. This policy is failing in multiple ways.  Capital outflows are huge, and downward pressure on the yuan is relentless all in anticipation of a maxi-devaluation.

    China may have to slap on capital controls (see story below), but this will upset the IMF, which recently included the yuan in the SDR as one of the big five global reserve currencies.  China is heading for a reserve crisis or a foreign exchange crisis, or both. Read why this will once again prove that the impossible trinity is indeed impossible  in this article .

    -Jim Rickards, Chief Global Strategist, Meraglim™

  3. U.S. and Russia Are in A Full-Scale Cyberwar. Collateral Damage is Coming.

    US and Russia

    This article explains that cyber-financial warfare is not a futuristic scenario; it’s happening now. After the Russian invasion of Crimea in 2014, the U.S. imposed economic sanctions on Russia. These sanctions were regarded as an act of war by Russia. The Russians retaliated by launching large cyber-attacks on major U.S. banks, which temporarily shut down many banking services early in 2016. Russia also allegedly hacked into the computer systems of the two major U.S. political parties and then weaponized the hacked information to discredit Democratic party operatives.

    The U.S. has threatened retaliation, and now Russia is warning of expected cyber attacks on its financial institutions coming from the U.S. and its allies. It seems likely this tit-for-tat escalation in cyber-warfare between Russia and the U.S. will continue. There are no agreed “rules of the game” to encourage de-escalation as there were in the Cold War with regard to nuclear threats.

    Meanwhile, the greatest danger may not be intentional infliction of harm, but an accidental attack. This could arise while one party probes the systems of another party and tries to plant sleeper computer viruses for activation at a later time.

    Such probes can result in accidental launches unforeseen by both adversaries coming at inopportune times. Such accidental attacks could easily wipe out any wealth that you hold in digital form at banks and brokers. The best solution is to convert some of your wealth into non-digital form such as gold, silver, land, fine art, water and other natural resources.

    -Jim Rickards, Chief Global Strategist, Meraglim™

  4. Don’t Take Any Wooden Nickels. And Don’t Take Any Zimbabwe “Bond Notes”

    Don’t Take Any Wooden Nickels

    In the Great Depression (1929 – 1940), money was so scarce that local communities made coins out of wood with various denominations and the names of local merchants stamped on them. These could circulate in exchange for goods and services at participating merchants. It was really a form of credit, but it served to keep economic activity going when it might otherwise have ground to a halt. Yet, it was a non-sustainable system, and the phrase, “Don’t take any wooden nickels,” came into parlance as a warning.

    Today’s version is found in Zimbabwe. Most readers are familiar with the 2008 hyperinflation in Zimbabwe that led to the introduction of the “$1 Trillion” note, which was not enough to buy a loaf of bread. Zimbabwe then moved to a U.S. dollar based economy because it had no trustworthy currency of its own. Now that dollars are in circulation, the government is trying a bait-and-switch scheme in which Zimbabwe “bond notes” will be introduced as “equivalent” to dollars on a 1-to-1 basis.

    Locals aren’t falling for it and are pulling their hard currency out of banks as fast as they can.  Click here to see  how the government is fighting back by going to a “cashless society” and limiting the amount that can be withdrawn from banks and ATMs.   This trend will spread as governments realize the only way they can confiscate their citizen’s money is by outlawing cash, and forcing citizens to use digital money at approved banks.

    – Jim Rickards, Chief Global Strategist, Meraglim™

  5. Turkey’s President Urges Citizens to Convert Dollars into Lira…and Gold

    Convert Dollars into Lira

    The Turkish lira is another currency that has collapsed in recent months. Citizens of Turkey have dumped lira in exchange for dollars and stuffed the dollars under their mattresses exactly as some U.S. citizens did during the Great Depression.

    President Erdoğan has taken a slightly different approach than India, Zimbabwe, and others who have declared war on cash.  Click here to read  how Erdoğan has urged his citizens to convert dollars and euros into lira and also into gold. At least gold is real money and exists outside the digital monetary roach motels run by the banks.

    Erdoğan is more comfortable with gold than he is with dollars. That’s another straw in the wind that reveals both the global dollar shortage and the search by developing economies for an alternative to the global dollar-based monetary system.

    – Jim Rickards, Chief Global Strategist, Meraglim™

  6. Now the “Cashless Society” Bandwagon Comes to Australia

    Cashless Society

    We’ve seen the movement toward a cashless society take root in India, Sweden, other parts of Europe and the United States. Now the call is being heard in Australia. The Australian Broadcasting Corporation (ABC), the leading media channel in Australia, features an in-depth interview with Harvard Professor Ken Rogoff, author of the new book,  The Curse of Cash, and a leading voice calling for the elimination of cash. You can read an  overview of the interview here .

    As usual, those calling for the elimination of cash point to drug dealers and tax evaders as a main reason to ban large-denomination bills. It’s true that some criminals use cash, but they also use precious metals, art, bitcoin and other techniques to evade detection.

    Meanwhile, honest citizens use cash everyday out of simple preference or convenience. In particular, many poor people use cash because they don’t have bank accounts and don’t qualify for debit or credit cards. Since when has the presence of criminality been an excuse to snuff out liberty? Our legal system is specifically designed to protect the rights of the innocent even if it means a few criminals go free.

    Rogoff’s war on cash turns this principle on its head and treats honest citizens like criminals merely because they prefer cash. Hopefully, the anti-cash disaster unfolding in India will be a wake-up call for Australia before they succumb to the arguments of the cashless snake-oil salesman from Harvard.

    – Jim Rickards, Chief Global Strategist, Meraglim™

  7. Greece Says If You Can’t Kill Cash Outright, Maybe You Can Tax It to Death

    Tax It to Death

    Governments are relentless and highly creative when it comes to taking your money. India has shut down the banks. Zimbabwe has offered worthless “bond notes” for hard currency (see story above). Turkey urges citizens to hand in their hard currency for local currency, but does suggest gold as an alternative.

    Other approaches to seizing citizen accounts include negative interest rates, inflation, and devaluation. Now Greece has discovered another way.  Click here to see how  Greece will let you have cash, but they will tax you every time you withdraw some from the bank.

    There’s no special tax on credit and debit card transactions, but they propose to tax you whenever you take cash from your ATM or bank. Of course, if you move your money in and out of the bank often enough, eventually the tax will eat up all of your cash.

    The war on cash is now in full swing all over the world. Confiscation, taxation, freezes, involuntary conversions and other techniques will all be used in the end as governments become desperate for more money and try to steal it from you.

    – Jim Rickards, Chief Global Strategist, Meraglim™