Tag: Jeff Thomas

Historically, when a nation’s debt exceeds its ability to repay even the interest, it can be assumed that the currency will collapse. Typically, governments exacerbate the situation by printing large amounts of currency notes in an effort to inflate the problem away, or at least postpone it.

The greater the level of debt, the more dramatic the inflation must be to counter it. The more dramatic the inflation, the greater the danger that hyperinflation will take place. No government has ever been able to control hyperinflation. If it occurs, it does so quickly and always ends with a crash.

Although there are observers (myself included) who frequently discuss what a reserve-currency crash would mean to the world, there is little or no discussion as to how this would impact people on the street level, and perhaps that discussion should begin.

When currencies crash, the state often tries to float a new currency. Sometimes, it’s accepted, sometimes not. Generally, the people of the country (and those trading within the country) move immediately to “the next best thing.” In 2009, when the Zimbabwe dollar crashed, several currencies were used, but the US dollar was the clear favourite, as it was the world’s reserve currency and therefore the most “spendable” currency.

Not surprisingly, the Zimbabwean government fought the use of the dollar, as they wanted to retain control of the economy and the people. People were therefore penalized for using the US dollar and other currencies.

Continue reading “What Will Happen to You When the Dollar Collapses?”

Most libertarians count Murray Rothbard as one of their mentors. They will know that Rothbard’s primary mentors were Ludwig Von Mises and Friedrich Hayek. But Rothbard dug deeper in his search for libertarian thinking. Here is a little-seen paper that he wrote in 1967:

The first libertarian intellectual was Lao-tzu, the founder of Taoism. Little is known about his life, but apparently he was a personal acquaintance of Confucius in the late sixth century BC and like the latter came from the state of Sung and was descended from the lower aristocracy of the Yin dynasty.

Unlike the notable apologist for the rule of philosopher-bureaucrats, however, Lao-tzu developed a radical libertarian creed. For Lao-tzu the individual and his happiness was the key unit and goal of society. If social institutions hampered the individual’s flowering and his happiness, then those institutions should be reduced or abolished altogether. To the individualist Lao-tzu, government, with its “laws and regulations more numerous than the hairs of an ox,” was a vicious oppressor of the individual, and “more to be feared than fierce tigers.”

Government, in sum, must be limited to the smallest possible minimum; “inaction” was the proper function of government, since only inaction can permit the individual to flourish and achieve happiness. Any intervention by government, Lao-tzu declared, would be counterproductive, and would lead to confusion and turmoil. After referring to the common experience of mankind with government, Lao-tzu came to this incisive conclusion: “The more artificial taboos and restrictions there are in the world, the more the people are impoverished… The more that laws and regulations are given prominence, the more thieves and robbers there will be.”

The wisest course, then, is to keep the government simple and for it to take no action, for then the world “stabilizes itself.” As Lao-tzu put it, “Therefore the Sage says: I take no action yet the people transform themselves, I favor quiescence and the people right themselves, I take no action and the people enrich themselves…”

Lao-tzu arrived at his challenging and radical new insights in a world dominated by the power of Oriental despotism. What strategy to pursue for social change? It surely was unthinkable for Lao-tzu, with no available historical or contemporary example of libertarian social change, to set forth any optimistic strategy, let alone contemplate forming a mass movement to overthrow the State. And so Lao-tzu took the only strategic way out that seemed open to him, counseling the familiar Taoist path of withdrawal from society and the world, of retreat and inner contemplation.

I submit that while contemporary Taoists advocate retreat from the world as a matter of religious or ideological principle, it is very possible that Lao-tzu called for retreat not as a principle, but as the only strategy that in his despair seemed open to him. If it was hopeless to try to disentangle society from the oppressive coils of the State, then he perhaps assumed that the proper course was to counsel withdrawal from society and the world as the only way to escape State tyranny.

It would seem that little has changed in 2500 years. The drive by some individuals to control others is clearly a permanent condition in every era. The only remaining question is how to deal with it.

In my belief, the number of libertarians will always be few. Just as there will always be those who will stop at nothing in seeking to control others, the great majority of people will always respond like Pavlov’s dogs to the empty promise of greater security, in trade for diminished freedom. Even a country that begins with a people determined to control their own lives and create their own destiny will, over generations, succumb to the empty promises. The deterioration may take one hundred years, two hundred years, or even longer, but historically, every culture eventually gives way, bit by bit, to the empty promises and becomes completely dominated. In the end, each country collapses in economic ruin—the people having lost the desire to produce, as the leaders have bled them dry.

But there is one saving grace to this historical pattern. After a collapse, it all has to start over. Parasitic leaders become anathema. The country begins anew. Those who are productive lead the way, and liberty becomes the byword.

This being the case, anyone who is inspired to believe in the libertarian principle has two choices if he lives in a country that is in the final, most oppressive stages: he can either remain there, swimming against an overwhelming tide, or he can vote with his feet. He can seek out other locations—those that are in the early stages of development, where the residents think as he does, where he is not a threat to “the system” but, by being a libertarian, is actually swimming with the tide.

Certainly, as we can see above, this is what Lao-tzu concluded over 2500 years ago (and that was before his government had the ability to fly a drone over his house.)

Of course, today, we have more options than Lao-tzu. Not only is transportation so good that we can fly anywhere in the world, but the Internet keeps us posted on the information we need to learn of locations in the world that might suit our liking better than the one we presently reside in. There are unquestionably those out there who prefer to be proles—to accept an Orwellian existence. For those who do not—those of a more libertarian bent—the good news is that there are choices—many of them. A better life elsewhere.

Here are a few closing comments from Lao-tzu that I’m fond of, taken from his Tao Te Ching. They further exemplify the fact that the problem of the libertarian is perennial. All that remains is whether we have the wisdom to effect the solution—to seek out those locations in the world that offer a better alternative.

Those in power are meddlesome …

The greater the restrictions and prohibitions,
The more people are impoverished.
The more advanced the weapons of the state,
The darker the nation …

Thus the virtuous attend to contracts
while those without virtue collect taxes …

Act before things exist

Manage them before there’s disorder

“Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” – Thomas Jefferson

Histories are generally written by academics. They, quite naturally, tend to focus on the main events: the wars and the struggles between leaders and their opponents (both external and internal). Whilst these are interesting stories to read, academics, by their very nature, often overlook the underlying causes for an empire’s decline.

Today, as in any era, most people are primarily interested in the “news”—the daily information regarding the world’s political leaders and their struggles with one another to obtain, retain, and expand their power. When the history is written about the era we are passing through, it will reflect, in large measure, a rehash of the news. As the media of the day tend to overlook the fact that present events are merely symptoms of an overall decline, so historians tend to focus on major events, rather than the “slow operations” that have been the underlying causes.

The Persian Empire

When, as a boy, I was “educated” about the decline and fall of the Persian Empire, I learned of the final takeover by Alexander the Great but was never told that, in its decline, Persian taxes became heavier and more oppressive, leading to economic depression and revolts, which, in turn led to even heavier taxes and increased repression. Increasingly, kings hoarded gold and silver, keeping it out of circulation from the community. This hamstrung the market, as monetary circulation was insufficient to conduct business. By the time Alexander came along, Persia, weakened by warfare and internal economic strife, was a shell of an empire and was relatively easy to defeat.

The Tang Dynasty

Back then, I also learned that the Tang Dynasty ended as a result of the increased power amongst the eunuchs, battles with fanzhen separatists, and finally, peasants’ revolts. True enough, but I was not taught that the dynasty’s expansion-based warfare demanded increases in taxation, which led to the revolts. Continued warfare necessitated increasing monetary and land extortion by the eunuchs, resulting in an abrupt decrease in food output and further taxes. Finally, as economic deterioration and oppression of the citizenry worsened, citizens left the area entirely for more promise elsewhere.

Is there a pattern here? Let’s have a more detailed look—at another empire.

The Spanish Empire

In 1556, Philip II of Spain inherited what was regarded as Europe’s most wealthy nation, with no apparent economic problems. Yet, by 1598, Spain was bankrupt. How was this possible?

Spain was doing well but sought to become a major power. To achieve this, Philip needed more tax dollars. Beginning in 1561, the existing servicio tax was regularised, and the crusada tax, the excusado tax, and the millones tax were all added by 1590.

Over a period of 39 years (between 1559 and 1598) taxes increased by 430%. Although the elite of the day were exempt from taxation (the elite of today are not officially exempt), the average citizen was taxed to the point that both business expansion and public purchasing diminished dramatically. Wages did not keep pace with the resultant inflation. The price of goods rose 400%, causing a price revolution and a tax revolution.

Although Spain enjoyed a flood of gold and silver from the Americas at this time, the increased wealth went straight into Philip’s war efforts. However, the 100,000 troops were soon failing to return sufficient spoils to Philip to pay for their forays abroad.

In a final effort to float the doomed empire, Philip issued government bonds, which provided immediate cash but created tremendous debt that, presumably, would need to be repaid one day. (The debt grew to 8.8 times GDP.)

Spain declared bankruptcy. Trade slipped to other countries. The military, fighting on three fronts, went unpaid, and military aspirations collapsed.

It is important to note that, even as the empire was collapsing, Philip did not suspend warfare. He did not back off on taxation. Like leaders before and since, he instead stubbornly increased his autocracy as the empire slid into collapse.

Present-Day Empires

Again, the events above are not taught to schoolchildren as being of key importance in the decline of empires, even though they are remarkably consistent with the decline of other empires and what we are seeing today. The very same events occur, falling like dominoes, more or less in order, in any empire, in any age:

1. The reach of government leaders habitually exceeds their grasp.

2. Dramatic expansion (generally through warfare) is undertaken without a clear plan as to how that expansion is to be financed.

3. The population is overtaxed as the bills for expansion become due, without consideration as to whether the population can afford increased taxation.

4. Heavy taxation causes investment by the private sector to diminish, and the economy begins to decline.

5. Costs of goods rise, without wages keeping pace.

6. Tax revenue declines as the economy declines (due to excessive taxation). Taxes are increased again, in order to top up government revenues.

7. In spite of all the above, government leaders personally hoard as much as they can, further limiting the circulation of wealth in the business community.

8. Governments issue bonds and otherwise borrow to continue expansion, with no plan as to repayment.

9. Dramatic authoritarian control is instituted to assure that the public continues to comply with demands, even if those demands cannot be met by the public.

10. Economic and social collapse occurs, often marked by unrest and riots, the collapse of the economy, and the exit of those who are productive.

11. In this final period, the empire turns on itself, treating its people as the enemy.

The above review suggests that if our schoolbooks stressed the underlying causes of empire collapse, rather than the names of famous generals and the dates of famous battles, we might be better educated and be less likely to repeat the same mistakes.

Unfortunately, this is unlikely. Chances are, future leaders will be just as uninterested in learning from history as past leaders. They will create empires, then destroy them.

Even the most informative histories of empire decline, such as The Decline and Fall of the Roman Empire, by Edward Gibbon, will not be of interest to the leaders of empires. They will believe that they are above history and that they, uniquely, will succeed.

If there is any value in learning from the above, it is the understanding that leaders will not be dissuaded from their aspirations. They will continue to charge ahead, both literally and figuratively, regardless of objections and revolts from the citizenry.

Once an empire has reached stage eight above, it never reverses. It is a “dead empire walking” and only awaits the painful playing-out of the final three stages. At that point, it is foolhardy in the extreme to remain and “wait it out” in the hope that the decline will somehow reverse. At that point, the wiser choice might be to follow the cue of the Chinese, the Romans, and others, who instead chose to quietly exit for greener pastures elsewhere.

Editor’s Note: Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

This is what Doug Casey’s International Man is all about: helping you cut through the smoke and mirrors while making the most of your personal freedom and financial opportunities around the world. The free IM Communiqué is a great place to start.

When I was growing up in Berlin, after the war (World War II), we lived in the American sector and the American soldiers were everywhere—on the streets, in the cafes. No one wanted them there, but whenever we made disparaging remarks, our own authorities tell us we must not do this. They tell us the Americans can do what they like and we just have to accept it. So, we stop using the words, “Yankee” and “American.” They are the occupying forces, just like the Romans were at one time, so, amongst ourselves, we refer to them as “the Romans.” So, we talk freely in the cafes about the “Romans” and the American soldiers don’t know that we mean them.

The snippet above was from taken from a conversation I had recently in a café with Klaus, a German who is now in his late sixties. He had a long career as a pilot for the German air force and had been stationed in many countries. In spite of his own career as an “occupier,” he never got over the resentment he had for the occupation of his homeland by American troops. (Berlin was occupied from 1945 to 1994.)

The US is unique in the world with regard to occupation. It has been estimated that the US has over 325,000 military personnel in over 1,000 overseas military bases in more than 150 countries, but statistics are widely conflicting.

Generally, the American troops arrive to deal with some sort of conflict (either invited or uninvited), but unlike most other armies, they tend to remain for a long time beyond the stated “need.”

There are those who praise this policy, stating that the US “keeps the world safe for democracy;” however, the US is known (at least to us outsiders) as a country that typically routs elected governments, installs corrupt and ineffectual puppet leaders, and seeks to control the occupied country as a satellite state.

There are three major downsides to this policy:

1. Occupation Forces Are Always Resented

Most Americans, during the Cold War, perceived the Russian forces in Berlin to be hated by the Berliners, but assumed that Berliners were grateful to have American occupiers to “keep them safe.” The truth, as Klaus states, was that all occupiers were hated, not just the Russians. Long after the war was over and it was time for Berlin to return to normal, the Russians and Americans maintained a standoff in Berlin that did not end for another forty-nine years. Only in 1994 did Germans “get their city back.”

Not surprisingly, many Germans, even today, feel that neither the Russians nor the Americans can be trusted, as they are seen as “empire builders” who play out their ambitions in foreign lands. Although today, there is a fair bit of cooperation between the governments of the US and Germany, the German people themselves have, even recently, expressed their distrust by asking that the Bundesbank demand the return of their $141 billion in gold from the US Federal Reserve, and have additionally railed against NSA spies in Germany.

2. Occupation Is Extremely Costly

Two thousand years ago, the Romans created an empire by training its own people as troops, then invading other countries, stripping them of their wealth. They then left troops behind in each country as occupiers to maintain Roman control. Unfortunately, after the initial pillaging, there was little ongoing wealth to be taken, and the occupations became expensive liabilities. Eventually, the once-wealthy Rome sank into debt and relied more and more on mercenary troops—troops that had no real loyalties to Rome and would eventually turn on Rome, when the money ran out.

The US is now in a similar state. There is no more military draft in the US, and the majority of soldiers occupying the 150 countries are mercenaries (or, in today’s nomenclature, “defense contractors”). As the US is technically bankrupt, it is only a question of time before the cheques stop coming. As in Rome, it can be expected that the mercenaries will drop their “loyalty” with little or no warning at some point.

3. A Government that Believes in Occupation as a Policy is a Danger to its Citizens

The US Government clearly believes in the concept of occupation, as it is actually increasing the number of countries where it has troops in occupation.

In addition, in the last decade, the US has been dramatically ramping up its preparedness for war at home. Not since World War II has the US spent so much money building tanks, buying bullets, and training troops to get ready for a major conflict.

However, this time, it is not for a war overseas, but at home. The armaments are being deployed to localised law enforcement departments and the Department of Homeland Security (DHS), which is charged solely with domestic enforcement. Similarly, the training of police officers and other authorities has changed dramatically from the traditional “Protect and Serve” policy to one of riot control and combatting “domestic terrorism.”

Billions are being spent on this effort, and of the three downsides to occupation, this is the one that should concern American citizens most greatly, as, for the first time since 1865, the American continent itself is planned to be the occupied territory.

Indeed, under the National Defense Authorization Act, passed in 2011, the US was declared a “battlefield,” a legal term that allows a government to suspend habeas corpus and to authorise any authorities to act toward the people of the country as “enemy combatants,” should they suspect for any reason that this might be so.

In discussing post-war Berlin with Klaus, I asked him when he left his home city. He said, “As soon as I was old enough—I joined the service and got out. This is no way to live.”

As stated above, Klaus himself later became an air force pilot and an “occupier” of sorts. Still, he is correct in his view that to be the population that is occupied—that is, to be under the control of militaristic rule—is no way to live.

It would appear that, in the US, the clock is ticking. “Occupation” may be an inevitability, and we are now seeing the quiet before the storm—the time when each individual may assess his options.

One thing is certain: when the DHS troops are deployed, they will not be looked upon as the friendly neighbourhood cops of past generations. They will be seen as the Romans… the occupying forces.

Editor’s Note: Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

This is what Doug Casey’s International Man is all about: helping you cut through the smoke and mirrors while making the most of your personal freedom and financial opportunities around the world. The free IM Communiqué is a great place to start.

“A government that robs Peter to pay Paul can always depend on the support of Paul.” – George Bernard Shaw

“Since the beginning of recorded history, the business of government has been wealth confiscation.” – Ron Holland

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” – Vladimir Lenin

On 16^th March 2013, the banks of Cyprus, with the approval of the Cyprus Government, the European Commission, the European Central Bank, and the International Monetary Fund, confiscated private savings of accounts exceeding €100,000.

At the time, there were two readings of the unanimous approval by four bodies. As the confiscation was presented to the public, the unanimous approval implied that the confiscation was above board. To those who looked a bit deeper, however, the unanimous approval meant that, not only had the four bodies clearly been working on the plan for some time, behind closed doors, but it also demonstrated that all four bodies colluded to steal a significant amount of privately owned money.

For those of us who took the latter view, the confiscation meant that there would be more to come—that Cyprus was being used as a test case. If successful—that is, if the world did not immediately express outrage over the theft—a precedent would be set whereby the EU, the IMF, and presumably any of the banks and governments of the world could assume that it was alright to confiscate private funds, so long as there was an “emergency.”

As it turned out, they got away with it. There was no great outrage—very possibly because so few people in the world were directly impacted, so they were not especially bothered.

However, the precedent had been set, and at the time, I predicted that this was a test case and that the Cyprus model would spread.

I subsequently wrote a follow-up article, when Canada wrote into its 2013 budget that the Canadian banks could perform their own bail-in, should they find themselves in a state of “emergency.”

But, in fact, this did not begin with Cyprus. It began in November of 2010 in a meeting of the G20 countries, all of whom agreed to the concept of a bail-in. Since then, under the UK Banking Act 2009, legislation allowing bail-ins was passed in the UK. The US followed with the Dodd Frank Act of 2010. Switzerland followed in 2013 with a revision of the 1934 Banking Act. Other countries followed—some having completed legislation, some still in the works.

Now, on 4^th July, Spain announced that it would impose a blanket taxation on all bank accounts at the rate of 0.03% for the purpose of “Harmonizing tax regimes and generating revenues.”

Spain may defend its decision by pointing out that it has one of the lowest tax takes in the European Union, which is true. However, what should be the issue here is not the amount of tax being imposed, but the principle upon which the tax is being taken. Let there be no doubt about this bail-in or any other—it is pure theft.

There will be those who are shortsighted, who may point to the tax rate of 0.03% being low. But history shows us that, over time, once a taxation concept is accepted by those being taxed, the rate tends to be increased over time. (All taxes start out small.)

The measure in Spain is also an advance on the concept that, as long as an emergency is perceived to exist, confiscation is justified. In Spain, no emergency situation is being pretended; they simply want the money and have decided to take it.

There are a number of points that the reader may wish to consider, even if he does not reside in Spain:

• Since the initial confiscation in Cyprus attracted the approval of the EU and the IMF, it should not come as a surprise if the EU passes bail-in legislation. (Indeed such legislation is now in the works.)

• It is unlikely that people who bank in any G20 country are safe, even if they do not as yet have bail-in legislation, as they may be next.

• Should the US and /or the EU replace their paper currencies with plastic debit cards, as has been suggested, those who live in those jurisdictions will have no choice but to rely on banks as the clearing houses for all monetary transactions, once paper currency is eliminated. This, coupled with bail-in legislation would render all personal and corporate funds open to confiscation.

It does appear as though the table is being set for the citizens of all the G20 countries to be subject to legalised theft by their banks and/or governments. The question then to be asked would be, “How can I steer clear of this outrage, either in whole or in part?”

First, it might be wise to establish banking in another jurisdiction where, at the very least, confiscation legislation does not appear to be under discussion.

Second, it might be wise to establish a home base of some sort in another jurisdiction, in order to further diversify your risk.

Third, should you choose to remain in your present jurisdiction either full or part time, it might be wise to retain only three months expense money in banks in that jurisdiction, to minimise the possible loss-level.

Fourth, it might be wise to move a significant portion of your cash into investments that would be difficult, if not impossible, to confiscate. (Those who advise on internationalisation tend to recommend real property and precious metals as the two safest choices. Such investments should be outside of the endangered jurisdictions.)

Fifth, other types of confiscation are planned by some jurisdictions—notably with regard to retirement funds, through the demand that retirement funds be invested in government treasuries and/or bank debt. (It might be wise to move these funds elsewhere internationally as well.)

Sixth, it might be wise to resolve all of the above issues as soon as possible. Once legislation is in place, exiting from confiscatory laws may become impossible. Certainly, as in Spain, there will be no warning offered by governments. One day, you will own your deposit, the next day you may not.

One last note: In robbing Peter, the individuals performing the robbery will not be dressed like the individual in the photo above. They will be wearing suits, and they will present themselves as legitimate authorities, carrying out the law. Unlike a customary robbery, there will be no authority to complain to; there will be no means of recourse. Your wealth, however large or small, will be lost.

Editor’s Note: This story is not surprising. In fact, we predicted it here. And don’t expect this to be the end of bank deposit “taxes” (i.e. confiscations) either. This is only the very beginning. As governments in the EU and throughout the world sink deeper into bankruptcy expect measures like this to increase in frequency and intensity. This is yet another great illustration why you need to have a bank account in a jurisdiction with sound finances. More on that here.

The article I Owe My Soul—Why Negative Interest Rates Are Only the First Step was originally published at caseyresearch.com.

Years from now, we may well look back on this period as being the turning point.

For over a decade, we’ve predicted that the Great Unravelling would take place in phases: there would be initial crashes followed by a false recovery, then a series of major crashes followed by a long, painful trip to the bottom.

Along the way, the entire order of power around the globe would change dramatically. In addition, fiat currencies would ultimately collapse, and the period would be marked with tyranny and turmoil, dramatic inflation, a gold mania, currency and migration controls, confiscation of assets, and food riots. Quite a list.

Doug Casey has described the false recovery period as “the eye of the hurricane,” a term that he first began using in 2010. Most of us who have shared his view (Doug included) believed that the turning point—the point at which we exited the eye and re-entered the hurricane—would have occurred sooner than now. But we were premature. He has said, “I often confuse inevitable with imminent.” He’s not alone. Each of us who have made similar predictions have been premature with regard to the timing.

So, why should I now suggest that the turning point may be imminent? To answer that, let’s have a look at some recent events.

• Russia announced that Western sanctions will force them to use the ruble for international trade, demonstrating that the West have dramatically shot themselves in the foot with the imposition of sanctions.

• Europe confirmed that it does not endorse sanctions against Russia, as they will cause more damage to Europe than Russia.

• Russia has announced its refusal to comply with US FATCA demands.

• In Europe, elections indicate that EU citizens are moving away from the EU concept. In the UK, the UKIP party, running on a platform of removing the UK from the EU altogether, took over as the #1 party in England—the first time in modern history that neither Tories nor Labour won a British election.

• A new leader has been elected in India—a free-market thinker and the first leader not to be from the family that has ruled India since it became a nation in 1947.

• Glenn Greenwald, who chronicled the Edward Snowden leaks, stated that he is ready to publish an even greater revelation: the names of those Americans targeted by the NSA, very possibly revealing that the “war on terrorism” is actually a “tyranny over the citizenry.”

• Several Wall Street insiders went on record as predicting a 98% chance of a crash in the stock market this year.

• One of the world’s biggest bond fund managers, Jeffrey Gundlach, predicts market damage that will “far exceed the damage of 2008.”

• Insider Jim Rickards has stated that his predictions of disastrous developments to take place in 2015-2016 in his just-released book, The Death of Money, are coming “faster than I would have expected… Some of these catastrophic outcomes may come sooner than I wrote about.” (When insiders begin to acknowledge the death knell of the markets, the end cannot be far off.)

And of course, all of the above come in the wake of the biggest bombshell of all: the $400 billion gas supply agreement between China and Russia that threatens to end the US dollar as the petro-currency and the world’s default currency.

As predicted, all the seams of the dirigible are giving way, all at the same time.

Just prior to 2008, when Doug Casey began regularly referring to the coming “Greater Depression,” he was often dismissed. The term he coined was just a bit too accurate to be digestible by most people: a depression like the Great Depression, only of greater magnitude. Ridiculous; impossible… yet it is coming to pass.

So, if, indeed, we are right at the tipping point, what will that mean in practical terms?

Over the years, I’ve stated repeatedly that, as we enter the third and most catastrophic phase of the Greater Depression, “Events will increase in both velocity and magnitude.”

I cannot overemphasize the importance of this statement.

As we move back into the hurricane, the events will be of greater velocity and magnitude than they have been, as governments become ever-more desperate and the tension between governments mounts. As each jurisdiction announces each desperate move to save it from drowning (severe tariffs, military interventions, currency devaluations, etc.), other jurisdictions will provide knee-jerk reactions in order to survive. The ball will get bounced back and forth, ever more violently, until the point of collapse is reached.

And, at the bottom, what is the world likely to look like?

Well, for a start, there will be great turmoil. As some jurisdictions lose a portion of their power (over both other jurisdictions and their own people), we can expect extreme unrest, disorder, and violence. Martial law will most certainly be proclaimed in several jurisdictions.

As currencies fail, new ones will be created quickly, but may not be accepted. Black markets are a virtual certainty. Food and fuel will be in short supply in some countries for brief periods, and possibly for extended periods. Riots are likely to occur spontaneously, like popcorn, across the map, with food riots being the most critical.

Lines on maps are likely to change as sovereign nations fragment. Turf wars are likely to become common. Changes in the leadership of countries is likely to occur frequently as opposing groups vie for control. (Think: Argentina in December of 2001, when there were five presidents in the course of one month.)

And what does this mean to the individual? It means that, in many countries, life could be very unpredictable and very dangerous. The wisest course of action might be for those who feel that they will be close to the fray, to have a “Plan B,” in case it becomes necessary to be elsewhere for a time.

To do so would mean that since, by that time, capital controls are likely to be in place, an emergency stash would already need to be in place in a jurisdiction that is well away from the turmoil. And a place to stay would need to have been researched and made available, should it become necessary.

Should the reader believe that he presently lives in a risky location, he would want to be prepared to the extent that all he need do in the case of sudden dramatic change would be to stuff some clothes into a carry-on, lock the door, and say goodbye until the emergency period blows over.

The time we have been predicting for the last decade or so appears to be quite close now. As any farmer in Kansas would attest, when the twister is on the horizon and clearly heading his way, it is time to prepare—to bring in the lawn chairs, shutter up the house, and get some provisions down into the root cellar. If the twister passes by, little will have been lost, but if the twister indeed hits, the preparation could prove essential.

Editor’s Note: Things can change quickly. New options emerge, while others disappear. This is why it’s so important to have the most up-to-date and accurate information possible when formulating your international diversification strategy. That’s where International Man comes in.

Be sure to get the free IM Communiqué to keep up with the latest on the best options for offshore banking, second passports, foreign real estate, storing physical goal abroad, and more.

In 1946, an American singer, Merle Travis, recorded a song called “Sixteen Tons.” The song told the story of a poor coal miner in Kentucky, who lived in a small coal mining town. The town’s economy revolved entirely around the mine.

The mining company owned a “company store,” which had a monopoly on the sale of provisions. It charged rates that were designed to use up the weekly paycheque of the miner, so that the miner, in effect, was a slave to the mining company. As the song states,

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

Negative Interest Rates

Let’s put the song aside for the moment and have a look at a concept that has been bandied about by the European Central Bank (ECB) for a while now. Since the collapse of the central banks would doom the world (their claim, not mine), it is essential that the banks be saved no matter what else must be sacrificed. Efforts to “save” the situation have been implemented through quantitative easing (QE) and the setting and continuation of low interest rates.

Unfortunately, in spite of record profits by banks and staggering bonuses handed out to senior bank executives, somehow the QE and low interest rates have not created the prosperity desired. The economy is still in the tank. What to do?

A solution being considered is to create “negative interest rates.” Sounds logical, doesn’t it? If low interest rates have kept the economy from crashing but haven’t fixed it, surely, negative interest rates can only be more positive.

And what are negative interest rates? Well, it simply means that, if you keep your money in a bank, instead of the bank paying you interest, you pay the bank to hold your money.

No central bank has ever done such a thing, so, not surprisingly, it sounds like a bitter pill to swallow. However, the ECB will present it as an “unfortunate necessity.”

Electronic Currency

Let’s once again change subjects for the moment. Readers of this publication will be conscious of the threat of the collapse of fiat currencies, such as the euro and the dollar. Should they collapse (as I believe is all but inevitable), the EU and US are likely to immediately come up with an alternate currency (or currencies) ASAP, since if an alternate is not made readily available, people will turn to whatever currency is handy in order to be able to continue to purchase goods and to trade.

We are in the electronic age. We are also seeing the EU and US heading in a direction that is marked with increasing controls on the capital held by their citizens. Therefore, the ideal currency would be an electronic one. No more paper notes in the wallet, no more coins in the pocket; just a plastic debit card to take care of all purchases.

All purchases. Whether the purchaser buys something as major as a car or as insignificant as a Cadbury bar, the card would be used for every monetary transaction.

This, of course, is a handy solution to the fuss of dealing with what was formerly regarded as money. But there is an extra advantage—quite a major one, in fact—to the government. It now has a record of every single transaction that you make. There could be no “under the table” transactions, as only the debit card would represent currency.

Of course, a bank would be needed to handle the transactions. The bank would receive your electronic paycheck directly from your employer, and you would spend what you had in your account. The bank would be the central clearing house though which all your financial transactions took place.

An extra advantage to the government would be that they would no longer need to chase their citizens for taxation. Since they had a full record of every penny you earned and spent, they could advise you of the amount of your tax obligation and simply deduct it periodically. If you presently pay tax annually, the deductions could be broken up—say, monthly, or even weekly.

And the tax need not be under one heading. Just as your bank now lists a host of confusing charges on your credit card, so the government may have a wide variety of confusing and even redundant taxes that it deducts on a regular basis. Just as with the bank, the rates for each tax might go up or down (but mostly up) without explanation. (The more numerous the tax categories and the greater the frequency of deductions, the more confusion and, therefore, the fewer the complaints.)

How Does All This Fit Together?

Let’s go back to the ECB. If a negative interest rate exists, the bank no longer pays you interest to encourage you to keep your money with them. They now control all your monetary transactions, and you cannot function without them. The servant has become the master. Therefore, it would not be possible to cease to use the bank for your transactions, should their “negative interest rates” start to climb.

At this point, the government and the bank would, between them, control your money totally. You would find yourself, in effect, “owned by the company store.” It’s even possible that bank fees and tax rates could be increased as your income increased, so that you might never be able to truly save money, invest, or indeed, act independently of your “owners.” The flow of your money would have become centralised, and you could not function without them.

Of course, this is all theory. Surely, this could not come to pass, because people inherently do not wish to be enslaved.

And yet it happened on a wholesale basis in Kentucky and other mining areas in the US. So the question really is, “How did it become possible that people in mining towns volunteered for their own slavery?”

First there was a depression. Many people lost their jobs and their incomes and were prepared to do anything in order to feed their families. So they signed up for the only game in town: the mines. It was dangerous work, there were no benefits, and the coal dust would kill a miner after a time. But as long as he lived, his family had enough to eat. He accepted the deal, because (again) it was the only game in town.

So, back to the present day, where the Greater Depression will soon be on us in full force. A large percentage of jobs will be destroyed, but in addition, this time around, the currency will also be destroyed. In order to pay for goods, particularly food, people will do whatever they have to, to obtain currency. Desperate times, indeed.

But there’s a light at the end of the tunnel! The government has chosen to eliminate bank notes and coins, as they ultimately proved to be so destructive. Never again will this be allowed to happen. The new Electronic Currency System will assure that all money is centrally managed.

The press will declare the new system brilliant, and the harder an individual has been hit by the Greater Depression, the more quickly he will jump on board. The greedy rich have all but destroyed his life, and his government, like a knight in shining armour, has come to save him. Like the miner, he will not be musing on how this will all play out over the decades; he will opt for the promise of relief for his family now.

If this all plays out as described above, it will not be just Kentucky, but entire nations.

Editor’s note: The day after this article was written, the ECB announced the introduction of a negative interest rate: 0.1% on deposits. As predicted, the media have already begun to the praise the measure.

Unfortunately there’s little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

This is what Doug Casey’s International Man is all about: helping you cut through the smoke and mirrors while making the most of your personal freedom and financial opportunities around the world. The free IM Communiqué is a great place to start.