Back in the 1980s, the typical bank checking account earned you about 5% in interest income a year.
And a certificate of deposit (CD) could earn you up to 17%.
But for the last seven years, deposit rates have been hovering around 0%.
That may sound like a bad deal. And it is. It’s the greatest rip-off of savers in history.
But as I (Chris) will show you in today’s dispatch… an even bigger rip-off is on the way.
And unfortunately, it’s going to make you wish you could find an interest rate of “just” 0% on your savings.
That’s because interest rates are going negative in the U.S. before this crisis is over.
This is terrible news if you have dollar savings in a bank. But it’s incredibly bullish for two alternative ways to save – bitcoin and gold.
Our mission is to identify profit trends – early on – so you can take advantage of them.
We do that by plugging you into the latest big ideas from Teeka Tiwari, Jeff Brown, Dan Denning, Dave Forest, Nick Giambruno, and the rest of the Legacy Research team.
We also keep an eye out for threats on the horizon – especially when it comes to your financial freedom.
It’s one of our founding principles at Legacy that there’s no point being wealthy if you’re not also free.
And as I’ve been doing my best to warn you about, your financial freedom is already in retreat. If you don’t believe me, you’ve never tried as an American to open a bank account overseas… or transfer money in and out of the U.S.
The Foreign Account Tax Compliance Act (FATCA) has made those things impossible.
And now, your financial freedom could be nonexistent by the time the coronavirus threat is in the rearview mirror.
News broke this week that Germany’s biggest bank, Deutsche Bank, is slapping a negative interest rate on deposits of €100,000 ($109,500) or more.
Right now, that rate will be -0.5%. For every €100,000 folks have on deposit at Deutsche Bank, they pay €500.
At a rate of -1%, it costs $1,000 a year to keep $100,000 in savings. At a rate of -2%, it costs $2,000… and so on.
This is European Central Bank (ECB) policy. It’s Europe’s equivalent of the Fed. And the geniuses that run it believe taxing folks’ savings will make them rush out and spend.
The only problem for central banks is that physical cash is an “escape hatch” against this kind of wealth confiscation.
A bank can charge a negative rate only on deposits… not on cash in a safe deposit box at your home.
As I’ve been showing you in these pages, they’re waging a War on Cash.
They’re getting rid of cash in favor of purely digital currencies.
These will be based loosely on the technology used in bitcoin and other cryptocurrencies.
For example, you’ll send and receive them through a “wallet” app on your phone. And you’ll use barcodes known as QR codes for all transactions.
You’ll soon use QR codes like this for all transactions. Source: Encyclopedia Britannica
Already, Canada, Britain, Norway, and Sweden are looking into purely digital versions of their national currencies.
And as I showed you yesterday, China has started rolling out the e-RMB. It’s a crypto-inspired digital version of China’s national currency, the renminbi.
Already, physical cash in China is an endangered species. A recent Ernst & Young survey revealed that 87% of Chinese transactions rely on money-transfer and payment apps. Just 13% of all transactions occur via physical banknotes and coins.
The e-RMB will wipe out cash entirely.
It’s well known that governments are quarantining roughly 3 billion people worldwide.
What’s less well known is that some governments have also been quarantining cash.
They say banknotes and coins – which get handled a lot – can spread COVID-19.
As we showed you back in February, China’s central bank cut off the transfer and allocation of old banknotes across provinces and cities the virus most affected. Then it sanitized them.
Here’s Fan Yifei, the central bank’s deputy governor…
Money from key virus-hit areas will be sanitized with ultraviolet rays or heated and locked up for at least 14 days, before it is distributed again.
Other governments will take their cue from China.
At The Bonner-Denning Letter, Dan Denning has been raising the alarm on this stuff for years. As he warned…
When cash becomes a vector for disease, when the contagion is viral, not financial, then the use of cash becomes a public health hazard. Its urgent removal becomes a matter of public safety and security. And the grounds for a wholesale currency substitution are in place.
We borrowed the term from currency expert Jim Rickards.
It will be one of the biggest challenges you face as a wealth builder over the coming years.
Here’s Jim with more on that…
When pigs are going to be slaughtered, they are first herded into pens for the convenience of the slaughterhouse. When savers are going to be slaughtered, they are herded into digital accounts from which there is no escape.
You probably already do most of your spending digitally, on a debit or credit card. But you still have the option of using physical cash. That will soon disappear.
And it gets worse.
When governments replace physical cash with crypto-like digital money, they can program it to do whatever they want it to do.
Want a negative interest rate?
The issuer (the government) can program one in…
Want 2% inflation?
The government can program that in too…
Want to hand out pandemic relief cash to everyone in the country?
Instead of mailing out checks… the feds could just drop digital money into everyone’s digital wallet.
Most folks think of gold and bitcoin as rivals. But our resident crypto expert, Teeka Tiwari, disagrees.
He sees them as complementary instead. And he recently dedicated an issue of The Palm Beach Letter on the case for owning gold. (Paid-up subscribers can catch up here.)
Gold and bitcoin are both outside of the banking system. So central banks can’t hit them with negative rates.
Unlike your savings on deposit in a bank, you can keep gold and bitcoin in your possession.
That means you don’t have to worry about going on a bank run… or even worse, a bank going to the wall.
And that’s a real risk right now with the world in lockdown… and the economy in deep freeze.
Remember, deposits are just IOUs from your bank. If there’s no bank anymore, its IOU isn’t much good.
Hold some of your savings in gold and bitcoin and you not only shield yourself from a negative tax rate on your savings…
…you also get extra protection if the banking system goes down in this – or the next – crisis.
If you want to take a deeper dive into how new digital currencies will change our financial world forever, make sure to check out this presentation our tech expert, Jeff Brown, put together.
He’s identified a number of tech stocks that will benefit from this shift from paper to digital money. You can find all the details here.
Regards,
 |
Chris Lowe
April 30, 2020
Dublin, Ireland
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