It’s getting harder to pull your money out of the bank.
J.P. Morgan Chase, one of America’s largest banks, recently made a major change in how it handles cash. Noncustomers can now only withdraw $1,000 a day from its ATMs.
The change applies to 18,000 ATMs nationwide. It’s one of the first big U.S. bank to put this kind of restriction in place.
This begs the question: do you really own your money in your bank? If so, why can a bank say “no” when you ask for it?
• This policy is supposed to curb “suspicious transactions”…
The Wall Street Journal reported on Monday.
[T]he bank “felt it was prudent to set withdrawal limits on all of our ATMs” after identifying some large cash withdrawals from noncustomers…
J.P. Morgan found some customers of banks in countries such as Russia and Ukraine had used Chase ATMs to withdraw $20,000 in one transaction, people familiar with the situation said. Chase said those instances weren’t widespread.
According to The Wall Street Journal, the government is paying more attention to “large cash transfers that could be a sign of money laundering or other types of shady activity.”
• Dispatch readers know world governments are trying to get rid of large paper bills…
Italy, Spain, Mexico, and Russia have all banned large cash transactions. The European Central Bank (ECB) is thinking about getting rid of the €500 bill. Former U.S. Treasury Secretary Lawrence Summers wants the U.S. government to retire the $100 bill.
According to politicians, only drug dealers and criminals use big bills. If you get rid of big bills, you reduce crime.
Of course, the government won’t stop with big bills. It wants to eliminate all cash. The excuse of “fighting crime” is propaganda to distract you from its real motive.
• Governments want to herd everyone into the digital financial system…
If paper cash is eliminated, you’ll have to keep your dollars in the bank. Dollars in the bank are much easier for the government to monitor, track, and tax.
We’ve been warning Dispatch readers that a “bank account tax” is coming. It won’t be a normal tax on your income. Instead, governments will order banks to take money directly from your bank account using “negative interest rates.”
Negative interest rates are a controversial topic. After all, earning interest on your savings is a key feature of capitalism. With negative interest rates, you pay your bank to hold your cash. The more money you have, the more you pay.
Negative interest rates are a perversion of saving. They’re a perversion of capitalism. And they could only exist in a world run by idiot politicians.
• Negative rates are becoming the “new normal”…
Europe introduced negative interest rates in 2014. Japan began using them in January. Denmark, Sweden, and Switzerland also have negative rates. Today, more than a quarter of the world’s government bonds have negative rates.
And soon, the U.S. could, too. Fed chair Janet Yellen recently said negative rates are “on the table” if the U.S. economy runs into trouble. And as regular readers know, the Federal Reserve’s key interest rate is currently at 0.38%…far below its historic average of 5%.
The idea behind negative interest rates is this: If governments charge people to save money, people will save less and spend more. This would “stimulate” the economy.
But like all stimulus measures, negative rates are a product of bad economics. Casey Research founder Doug Casey explains:
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.
• The average person won’t pay to store their money in the bank…
Folks will pull cash out and store it at home. They’ll stash cash in a safe or under their mattress. This is already happening in Japan. The Wall Street Journal reported in February:
Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does. Cash languishing in safes could thwart the Bank of Japan’s move to get money circulating more vigorously in the economy.
According to The Wall Street Journal, one Japanese hardware store reported a 350% jump in safe sales during February. It even ran out of one popular safe model.
• Businesses are taking radical steps to avoid negative rates…
According to Bloomberg Business, giant German company Munich Re recently pulled €10 million ($11 million) out of a bank account because of negative interest rates. The company put the money into gold and other currencies. Munich Re is the world’s second-biggest “reinsurer,” meaning it insures insurance companies. It oversees about €231 billion.
Munich Re’s CEO, Nikolaus von Bomhard, said,
The side effects of the ECB policy are of course now having quite devastating consequences. I think they are solving the wrong problem with the wrong remedies.
Last month, Bloomberg Business explained what could happen if other companies follow Munich’s lead.
Munich Re’s strategy, if followed by others, could undermine the ECB’s policy of imposing a sub-zero deposit rate to push down market credit costs and spur lending. Cash hoarding threatens to disrupt the transmission of that policy to the real economy.
• Negative interest rates could trigger a massive bank run…
A bank run is when too many people try to pull their cash out of the bank at once. As regular readers know, banks don’t have anywhere near enough cash on hand to give even a small fraction of Americans their money back.
For every “paper” dollar in the U.S., there are eight “digital” dollars. In other words, if even ten percent of Americans tried to withdraw their cash, the U.S. financial system would collapse.
That’s why governments are trying to outlaw paper cash. The CEO of Deutsche Bank, Germany’s largest bank, expects all physical cash to be eliminated within a decade.
And if cash disappears, all your money will be trapped in the banking system. You’ll be helpless against the government’s bank account tax.
• To avoid this cash tax, people will go underground…
Gold is the ultimate underground currency. And as we often remind you, gold is money. It’s preserved wealth for thousands of years because it is easily divisible, easily transportable, has intrinsic value, is durable, and has consistent form around the world. Just as important, governments can’t create more out of thin air.
We recommend you own a significant amount of physical gold. It’s the best way to protect yourself from reckless government policies.
We also encourage you to read our new report, How to Protect Yourself from the War on Cash. It includes our best research on negative interest rates and the coming ban on cash. In it, we explain seven simple, effective ways to protect your money as governments try to outlaw cash. Click here to claim your copy.
Chart of the Day
Large stocks have crushed small stocks this year.
Today’s chart compares the performance of the Dow Jones Industrial Average with the Russell 2000. The Dow tracks 30 large U.S. stocks like Apple, Exxon Mobil, and Wal-Mart. The Russell 2000 tracks 2,000 small U.S. stocks.
You can see large stocks have done much better than small stocks this year. The Dow is up 0.8% while the Russell is down 3.4%. This represents a major shift in the market’s mood.
From March 2009 to July 2015, the Russell 2000 gained 271%. The Dow rose just 177% over the same period.
Today, investors want large, stable companies rather than small, unproven ones. In other words, folks are piling in to less-risky stocks. This typically happens near the end of a bull market, or in a bear market.
Delray Beach, Florida
April 7, 2016