Many people might not ever know it, but Uncle Sam has a burning desire to poke his nose in just about every financial transaction. Travel with more than $10,000 in cash for instance, and you either have to declare it, or risk forfeiting it.
Or if you want to take that amount of money out of a bank. At the $10,000 level, your bank will have to fill out a report. Do it often enough, and the government might get suspicious that you’re doing it for criminal reasons.
But while $10,000 is the official limit, banks get inquisitive at lower amounts. An acquaintance of mine recently told me about the questions they started getting from their local bank teller for an amount closer to $7,000. Depending on where you bank, there’s no telling how low a withdrawal will be before an inquisitive banker starts acting as a proxy for the government.
The way I see it, this is all part of the government’s Cold War on cash. This story, while anecdotal and unscientific, follows on calls from current and former government officials to get rid of high denomination notes. The European Central Bank just announced this month that the 500 Euro note is going the way of the USSR. And there have been calls in the US to get rid of the $100 bill.
But there are more dots to connect. The Federal Reserve has asked banks to stress test their balance sheets for negative interest rates (while also saying they’ll continue to raise rates).
The signs are there. Governments are getting increasingly skeptical about “we the people” holding onto our own money.
That’s why, in part, the latest rally in gold is starting to seem like a genuine rally. And it’s also a reason to store some cash— until it’s illegal, you should always try and do what the government doesn’t want you to do.
What’s wrong with holding cash? For starters, if it’s not in a bank, it’s not as easily trackable to Uncle Sam. Too bad. But a bank can’t use that money to make loans or buy US Treasurys while only keeping a fraction on hand in cash.
This Cold War on cash could be a tinfoil hat theory of mine. But the facts keep moving in a clear direction: it’s going to be harder to hold cash going forward. The government will want to make it costlier to do so. At the same time, something like negative interest rates will make it more expensive to keep your money in a bank as well.
We’ll see how this plays out. I could be tilting at windmills. I hope I’m wrong. Because if I’m right, and this Cold War on cash heats up, we could start seeing major bank runs for the first time since the Great Depression as depositors rush to take money out of negative-interest bearing accounts for the relative safety of cash.
In this environment, both physical cash (small bills) and gold are the relative safety here.
is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and is managing editor of Financial Intelligence Report. To read more of his work, GO HERE NOW.
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