March 4, 2014
By: Bobby Casey, GWP Managing Director
Russian lawmaker, Mikhail Degtyarev, proposed a bill to ban the use or possession of American currency in Russia.
His rationale? He predicts the imminent collapse of the dollar system due to the massive growth of US national debt.
This bill would partially revive the Soviet-era ban on the dollar, prohibiting Russians from holding the currency in the country’s banks, and thus banks would be unable to carry out US dollar transactions.
He warned that the Russian government would need to bail out its own citizens holding the US dollar if it collapses, however they would exempt the Russian government and its central bank from this rule due to its necessity to carry out US dollar transactions on a larger scale.
Obviously, there are myriad implications if this bill were passed. And considering Russia’s recent moves in Ukraine, it seems the lawmakers there are clearly on a path toward protectionism, but that is beside the point for the purposes of this article.
Whether this bill passes or not, is irrelevant. The point is, the tides are turning. People can see the writing on the wall. The US dollar is no longer the bastion of monetary safety it once was.
Clearly, the US doesn’t have a monopoly on currency controls. Take a look at history. Even more importantly, take a look at recent history.
Just in the past few weeks, Kelly and I both wrote articles about Italy imposing a 20% withholding tax on all income wires from abroad. You can read those here, “Money Grabbin’”, and “Italy Steals 20% of All Incoming Bank Wires – Opportunity?”.
Kelly also wrote an article titled, “What is Going On with China?” talking about what is happening right now in China as it relates to US money supply.
Already Russia is trading energy commodities directly with China outside the US dollar and Turkey is buying its oil from Iran and paying in gold.
Now we have the young upstart, Bitcoin, offering a free market solution to fiat currencies and its popularity is growing on a daily basis, regardless of Mt Gox’s massive failure.
I don’t want to get on the fear-mongering bandwagon, but I do want to make our readers aware of what is happening on a global level. Now is not the time for complacency. Now is the time to take action.
Take a look at the graph below (you can click on it to enlarge it):
This is the graph of the M2 money supply (M2 money supply definition from Investopedia) in the US from 1980 until today. Notice any trend?
If you understand a bit about fractional reserve banking, you will know that all money today (fiat money) is merely debt. Every penny in circulation is nothing more than debt. In order for money to be created, the US Treasury sells bonds. The Federal Reserve buys those bonds.
But where does the money come? You guessed it… out of thin air. The Fed prints money (or adds 0’s to an electronic register) to buy those US Treasury bonds.
This money (debt) then flows through commercial banks into our hands for consumption and investment.
Now go back and look at that graph again. See the trend? That trend is the growth of money, or in other words, the direct increase in the growth of US national debt.
We are at the point of no return. This ship cannot be turned around.
Again, I will repeat: I don’t want to get on the fear-mongering bandwagon. I would much rather take an opportunistic approach and find solutions.
So what to do?
I’ve written about this many times, but I will keep hammering the point:
· Diversify your wealth both geographically and in asset classes
· Buy real estate overseas where it cannot be confiscated (see, “Layers of Protection”)
· Invest in your own business, create your own personal cash flow machine
· Invest in other high quality businesses that pay dividends
· Keep a portion of your savings in precious metals
· Keep a portion of your savings in a basket of foreign currencies
· Establish residency overseas
· Get a 2nd passport
If you are already a member of GWP Insiders, you are enjoying the information and connections that lay out the real world solutions mentioned above. If you are not a member, I suggest you click here and join today, before my business partner decides to raise the price.
Until next time, live well.
One Response
You write good articles that make for interesting discussion, but you should have published this one at a better time. Russia has no choice but to use the USD as its own money is diving in value. If the ruble goes any lower, Monopoly money will soon be worth more.