Guest Post by Doug Casey
It’s well-known that you have to make a declaration if you physically transport $10,000 or more in cash or monetary instruments in or out of the US, or almost any other country; governments collude on these things, often informally.
Gold has always been in something of a twilight zone in that regard. It’s no longer officially considered money. So it’s usually regarded as just a commodity, like copper, lead, or zinc, for these purposes. The one-ounce Canadian Maple Leaf and US Eagle both say they’re worth $50 of currency.
But I’ve had some disturbing experiences over the past couple of years crossing borders with coins. Of course, crossing any national border is potentially disturbing at any time. You might find yourself interrogated, strip searched, or detained for any reason or no reason. But I suspect what happened to me crossing a few borders in recent times could be a straw in the wind.
I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile not long ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.
What really got my attention was a few weeks later when I was leaving Mauritania, one of the world’s more backward countries. Here, I was also questioned about the silver coins. A supervisor was again called over and asked me whether I had any gold coins. Clearly, something was up.
I haven’t seen any official statements about the movement of gold coins, but it seems probable that governments are spreading word to their minions. After all, $10,000 in $100 bills is a stack about an inch high; it’s hard to hide, and clearly a lot of money. But even at currently depressed prices, $10,000 is only nine Maple Leafs, a much smaller volume. Additionally, the coins are immune to currency-sniffing dogs, are much less likely to be counterfeit, and don’t have serial numbers. And if they’re set aside for a few years, they won’t be damaged by water, fire, insects, currency inflation, or the complete replacement of a currency. Gold coins are in many ways an excellent way to subvert capital controls. And I think they’ll become much more popular in that role.
That’s because, all over the world, paper cash is disappearing. People are moving away from paper cash. That’s partially because there are fewer and fewer bank branches where you can cash a check, and ATM machines are costly to use. And partially because everybody has a cell phone and they’re starting to use them for even trivial purchases, like a cup of coffee. Governments are encouraging this because if all purchases, sales, and payments are made electronically, they’ll know exactly what you’re doing with your money.
From their point of view, the elimination of cash will have several major benefits: It decreases the opportunity for tax evasion, it decreases the possibilities of “money laundering,” it eliminates the expense of printing currency, it obviates counterfeiting, and it gives the state instant access to all of any individual’s cash. From an individual’s point of view, however, the safety and freedom offered by a stack of paper cash will disappear.
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Much of the safety and freedom offered by foreign banks and brokerage accounts has already disappeared. Few people seem aware of the fact that not so long ago, there was no limit to the amount of cash you could transfer in or out of the US without reporting. Or that you didn’t have to report the existence of offshore bank or brokerage accounts (although you did have to report taxable income from them).
That changed in 1970, first with the passage of USC 3156, and then the perversely-named Bank Secrecy Act. The 1986 Tax Reform Act made it highly inconvenient, and largely uneconomic, to invest in passive foreign investment companies (PFICs). In 2010, the Foreign Account Tax Compliance Act (FATCA) required every foreign financial institution in the world to report info on US persons to the US government. The enormous regulatory burdens and potential penalties it imposes now make it very hard to find a foreign institution that will even open an account for an American.
These are all de facto capital controls. In the US, banks are starting to notify customers that they’re not responsible for the storage of cash, or gold, in their safe deposit boxes. When I was in New Zealand a while back, I was surprised to see that the suburban branch of a major bank was closing down its substantial safe deposit box department.
When I inquired why, the manager only knew that it was a new policy and if I wanted a box, I’d have to go to the main branch. This seems to be another worldwide trend. If there isn’t a safe place to store paper cash or gold, then people will be less likely to possess them.
But it’s getting worse. In recent times, a bill was passed that allows the US to deny issuance, or cancel, the passport of anyone who is simply accused of owing $50,000 or more in taxes. After all, it clearly states on your passport that it’s government property and it must be turned in on request. People are actually the most valuable form of capital. Emigration has always been nearly impossible from authoritarian regimes.
So what’s next? I expect, as the subtle war on both cash and the transfer of capital across borders gains momentum, that gold coins are going to become the next focus of attention. So I suggest you act now to beat the last minute rush.
Have a meaningful percentage of your net worth in gold coins.
Have a significant number of those coins stored outside the country of your citizenship.
Concentrate your future purchases in small coins that are indistinguishable from loose change. Things like British sovereigns (.23 oz of gold) or their continental equivalents (French, Swiss, German, Danish, Russian, etc., pieces of generally .18 oz of gold). Not only is gold cheap now, but all of these are currently at only a few percent above melt. Happily, they have collectible value, and they resemble common pocket change to an X-ray machine.
Also, do this: Put a bunch of silver Eagles in your brief case the next time you travel internationally and let me know if your experience resembles my own.
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“Have a significant number of those coins stored outside the country of your citizenship.”
Good idea, dumb ass.
Instead of fighting for your assets and making them pay for it in blood, just run off to some Third World country assuming they don’t confiscate your Precious as well. This poor financial advice assumes your destination doesn’t have metal detectors, flags on foreign travel, or ties to a central banking system that doesn’t report foreign assets.
Yeah, somebody else will pick up your slack with lead and steel so you can come home with your gold when the smoke clears.
Bitch.
What’s wrong with having a plan B? It pays to be flexible.
If you live in most of the rest of the world, your chances of being armed are pretty low. And if you’re going to fight for the Motherland, at least you can get your loved ones out. I’m sure the folks trapped in Sarajevo, for instance, would have been happy to leave it all behind for some peace. Ultimately, your stuff is just stuff. You can leave it and probably get more. Like my in-laws in Eastern Europe. When Stalin decided to cull the Kulaks, their family had to flee their mansion and business, lest they be murdered or shipped East. Would you rather be dead with your stuff, or safe in a neighboring country? Despite losing everything, they survived the Soviets, then the Nazis, then the Soviets again, 50 years of Communism, and they’re still here and thriving. The mansion, on the other hand, is a pile of ruins.
Or, you might opt to find a quiet piece of hill ground and lose your coin collection in the pond with us the guns.
Forget border walls. Just establish good relationships with neighbors and keep an eye on who comes and goes. Make sure you show off your new “old” truck purchased for cash (literally hundreds, fifties and twenties) this past week. Yes, we know a form will be filed for the cash purchase, but we figure it was a small enough amount to be explainable to the tax masters, should they enquire. A lot of our purchases were in cash. Between us and the contractor. Is how it works out here.
I am glad we have the insurance we have, purchased in one ounce rounds and bars a decade ago now at a decent price which offset the next purchase at the mid-point of the big run-up to almost 40. But, like the writer said, I am also glad we retired early and with some forethought. We are divesting ourselves of cash, expecting to have trouble using it in large quantities very soon. The silver and gold… that can just stay underwater with the boat that sank in the pond.
I was leaving Nepal about five years ago, my vacation was over, and the x-ray guy asked if the black discs on the x-ray was gold. I said yes and he wanted to see them. He had never, it appeared, seen or held two ounces of gold. A maple leaf and standing liberty. He called his boss over to look. Neither of them had that much “money” in their hands probably ever. When asked why I carried them I said “emergency cash” adding that their wives had gold jewelry that was really emergency money. By the way, it is easiest to sell 999.9 gold coins then others, like the U.S. $50 piece. A small butane torch shows up the silver or whatever in the standing liberties.