It has happened before. And it will happen again.
We didn’t expect it to happen now. But it did, in Germany earlier this month.
We’ve seen it before. People standing in lines that snake around the block, that is, waiting for their turn to buy gold. Hoping that they’ll get their turn before it’s too late.
It happened here in the United States, during the Carter presidency as inflation screamed along at double-digit rates and gold raced higher and higher every day. People began standing in line to exchange their dollars for gold. With every trip to the grocery store, people could see that their paper dollars were losing value. Maybe they didn’t know anything about money printing, central banking, or the Federal Reserve. But they knew they were going broke with dollars. And they wanted gold.
So they stood in line waiting. Hoping that there would still be gold for sale and that it wouldn’t be too much higher when it was their turn.
This has happened in the not-too-distant past. In 2013, thousands of people in China waited in line to buy gold.
But when it happened in Germany the other day, it wasn’t just because people were desperate to exchange their Euros for gold before prices went higher. No, the people stood in line because they wanted to protect their financial privacy. They stood in line because of Germany’s war on cash.
Just days ago, the German government implemented new restrictions on its citizens’ buying of gold. It added strict new reporting requirements on the people, whose otherwise legal activity – buying gold – now demands new intrusive reporting to bureaucrats. The measure requires dealers to record identification for buyers of precious metals in amounts of 2,000 Euros or more and includes criminal background checks for businesses.
A measure of this type is always represented as anti-crime provisions. In Germany, the reporting requirements are called “anti-money laundering” provisions. But they never really reduce crime. Instead, they are intended to suppress the efforts of people to protect themselves from intrusive government and bizarre monetary schemes like negative interest rates.
For a negative interest rate regime to be effective, people must be forced to keep their wealth institutionalized, so that it can be automatically taxed at the negative rate.
Imagine making a bank deposit of $10,000 dollars. When you go to withdraw it, you are given only $9,800 dollars. Forget earning an interest return! You are charged for the privilege of making a deposit with the bank.
That’s negative interest rate policy.
You may well ask yourself why anyone would deposit money with a bank only to be charged for doing so. You are right. Few people would willingly cooperate. Unless they have to because cash is no longer allowed and all money must be held by banks.
Because negative rates are the latest enthusiasm of central bankers, and likely headed for the US soon, a war on cash is picking up steam in the US, just as it is in Germany.
During the 2008 economic panic, a photo captured a line wrapped around the building of the Indy Mac Bank in Pasadena. You’d think they were giving away free money, but in fact, it was a run on the bank as account holders desperately raced to withdraw the money from their accounts.
Watch the following video originally aired at the time in 2008:
There will be a run on gold again, perhaps sooner than most people expect, because of failing banks and because of the dollar’s collapse. But the growing war on cash is just one more good reason to include gold and silver in your portfolio now.