GUALFIN, Argentina – September is here. As expected, market volatility is increasing. The Great Zombie War is intensifying. And investors are getting scared.
Yesterday, the Dow lost 470 points – a nearly 3% drop. Bloomberg:
Yes, investors are losing confidence…
They’re probably losing confidence in corporate managers, for instance.
Who wants to own stock in companies run by numskulls who buy back shares in their companies at record prices just before a major sell-off?
Or maybe they’re wondering whether the world’s $200 trillion in total debt (roughly 300% of total output) can possibly be paid back?
Or maybe they’re beginning to puzzle out how scammy and fraudulent the Fed’s policies are.
But watch out! Reeling from the jabs of the last two weeks, expect a strong counterattack from the zombies and their allies.
Some Fed governor will come forth – maybe even Janet Yellen – and tell us not to worry about a return to more “normal” interest rates anytime soon.
We’re way too far into the weird to get anywhere near normal now. And surely Wall Street shills will be in the news explaining how markets become unreasonably fearful from time to time. They will tell investors that it is time to hunt for bargains.
Dow 25,000! Why not?
And they may be right. There’s bound to be an inflationary blow-off waiting somewhere ahead.
Stocks will soar. But not before they crash.
Retiring Another “Barbarous Relic”
In the meantime, watch your rear: There’s a serious counterattack coming.
It will be an attack on our supply lines. The cronies and the feds will attempt to cut off our finances and our line of retreat, trapping us between the anvil of the market’s deflation and the hammer of the Fed’s inflation. There will be no escape, no way out.
Last week, the influential Financial Times newspaper ran an article calling for the abolition of cash. It was titled “The case for retiring another ‘barbarous relic.’” And it claimed that cash causes “a lot of distortion in the economic system.”
Can you believe it?
Cash causes economic distortions! From the FT:
It also repeated the familiar claims that cash also is what finances terrorism, tax evasion, and the black market. Making cash illegal, it says, would “make life easier for a government set on squeezing the informal economy out of existence.”
You see where this is going, don’t you, dear reader?
If the feds are able to ban cash, they will have you completely under their control. You will invest when they want you to invest. You will buy when and what they want you to buy.
You will be forced to keep your money in a bank – a bank controlled, of course, by the feds.
You will say that you have “cash in the bank,” but it won’t be true. All you will have is a credit against the bank. (Bank deposits are nothing more than IOUs from your bank to you.)
A Tax on Your Bank Deposits
As it is now, your bank will have some cash on hand in its vaults, but not nearly enough to satisfy all the claims against it.
If this new attack succeeds, by law, it will have no access at all to cash. And neither will you…
You will be completely surrounded. If the feds want to force you to spend… or invest… your money, they will simply impose a “negative interest rate.” They will do this by simply imposing a fee, or tax, on deposits greater than the interest rate you receive on your savings.
In 2001 in Argentina, they closed the banks. When they reopened, dollar holdings had been converted to pesos, with a loss of roughly two-thirds!
In 2013 in Cyprus, they whacked large accounts with a 50% tax to help recapitalize the banks.
And in the U.S., JPMorgan Chase recently sent a letter to its large depositors telling them that, as of May 1, it would start charging what it called a “balance sheet utilization fee” of 1% a year. This pushed the net interest rate those depositors were earning into negative territory.
As stocks decline, you can expect more and more people to want to hold cash. If stocks go down 10%, the “opportunity cost” of holding cash goes down by the same amount.
People will want to hold cash. But if this encirclement maneuver works, you will be unable to get your hands on it. All you will have is a claim against some of the most insolvent debtors in the whole economy.
Cut Off from Cash
In 2008, almost every major U.S. bank was on the edge of bankruptcy.
But if the feds succeed in cutting us off from cash, that will never happen again. Because the banks will just whack us all – with the full approval of the Fed, the cronies in Congress, and zombies everywhere – to make themselves whole again.
Already, several Diary readers have reported that they have had trouble getting cash from their own accounts. (You can read the most recent account in last Friday’s Mailbag.)
Banks stall. They impose withdrawal limits. They want you to come in person, etc., etc.
Right now, being unable to get cash promptly is merely a nuisance. But just wait… It won’t be long before new initiatives are announced to “stimulate demand.”
Perhaps negative interest rates will do it. Maybe a more general tax. But sooner or later, the next credit crisis will hit hard…
Then your inability to get cash will be more than a nuisance. It will be a deathblow. You will be locked into a bank account with a bankrupt institution.
And the feds and their bank cronies will tell you when and how you can have access to your own money.
The feds will announce a “bank holiday.” They may ban transfers to gold sellers or foreign currency accounts. Or maybe it will just take time – while your money loses value rapidly – to get your money out.
If this new campaign succeeds, it will be almost impossible to protect yourself.
Investors no longer expect a smooth ride for stocks…
Today’s chart is of Wall Street’s so-called fear gauge – the CBOE Volatility Index, or VIX.
How this index is put together is a little wonky. But it basically measures the price of “insurance” against stock market volatility in the options market.
A rising VIX reading means investors see more dramatic price swings (aka volatility) ahead for the S&P 500. A falling VIX reading means investors see a calmer market ahead.
As you can see, yesterday the VIX closed at just under 32 points. That’s the highest level it’s been since 2011, when ratings agency Standard & Poor’s rattled the markets by downgrading U.S. sovereign debt.
The World Economy Is Slowing… but Not as You Might Think
The world economy is slowing. But we could be seeing early signs of longer-term changes – changes have the potential to upend a lot about how the world works today.
How Much Portfolio Diversification Do You Need?
The choices these days for building a diversified portfolio are nearly endless. And a traditional stock-bond split probably won’t do the trick. Here are three simple rules to follow…
Where to Stash Your Cash (Legally)
Ted and Bob Bauman have published a controversial guidebook for moving your money outside the U.S. It shares the same secrets used by George Soros, Warren Buffett, and Mitt Romney.
Lots of letters today about Bill’s account of the Fiesta de San Ramón at the ranch in Argentina. (You can catch up here.)
But first… Have you had trouble accessing your cash in the bank, like some of our other readers have?
Bill and the team would love to hear from you. Write to[email protected]
Thank you for a wonderfully written essay on the Fiesta de San Ramón. It was so well written I felt as though I was there sharing in the experience. It was a refreshing escape to “real life” from the hustle of life here in the States.
– Todd C.
Thank you for sharing the word pictures of Argentina. The feast reminded me of tobacco-cutting days on a barley/dairy farm in Kentucky, where my mother prepared a feast to be served under the shade near the barns for the workhands.
– MaryEllen R.
I carefully read, and enjoyed, today’s article. My two overriding thoughts on how you described the fiesta on your Argentine ranch are as follows:
- Mr. Bonner has more difficulty receiving than giving. The fiesta allowed the community to express their gratitude and love for all that you have provided them through your ranch. For many of us, giving is easy. Receiving is the real challenge.
- Mr. Bonner has been blessed with an amazing wife.
So does a free market ensure justice? Not necessarily. Free markets provide opportunity. Justice is reserved for those individuals who give of their bounty absolutely and expect nothing in return.
Your writings provide hope (even for us old duffers) to “keep on keepin’ on,” as we attempt to provide for our own families and communities.
– Robert R.
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